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670 So.2d 1236 (1996)
STATE of Louisiana
v.
Mark Anthony JOHNSON.
No. 96-K-0082.
Supreme Court of Louisiana.
March 29, 1996.
*1237 Denied.
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Matter of Dziubkowski (2020 NY Slip Op 00412)
Matter of Dziubkowski
2020 NY Slip Op 00412
Decided on January 22, 2020
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 January 22, 2020
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
LEONARD B. AUSTIN, J.P.
COLLEEN D. DUFFY
VALERIE BRATHWAITE NELSON
LINDA CHRISTOPHER, JJ.
2018-13772
[*1]In the Matter of Sophie Dziubkowski, deceased. Lucius Tyrasinski, petitioner-respondent; Barbara Hunter, objectant; Edwin I. Gorski, nonparty-appellant. (File No. 1114/16)
Edwin I. Gorski, New York, NY, nonparty-appellant pro se.
Solomon & Bernstein, New York, NY (Gloria Goldenberg of counsel), for petitioner-respondent.
DECISION & ORDER
In a probate proceeding, nonparty Edwin I. Gorski appeals from an order of the Surrogate's Court, Kings County (Margarita Lopez-Torres, S.), dated June 19, 2018. The order denied the motion of nonparty Edwin I. Gorski, in effect, for leave to renew his prior cross motion for an award of attorneys' fees and a hearing on the validity of a retainer agreement entered into with successor counsel, which had been denied in an order of the same court dated March 5, 2018.
ORDERED that the order dated June 19, 2018, is affirmed, with costs.
In this probate proceeding, nonparty Edwin I. Gorski represented the petitioner, Lucius Tyrasinski. Tyrasinski moved to relieve Gorski as counsel and substitute successor counsel, and Gorski cross-moved for an award of attorneys' fees and a hearing on the validity of the retainer agreement entered into between Tyrasinski and successor counsel. In an order dated March 5, 2018, the Surrogate's Court granted Tyrasinski's motion and denied Gorski's cross motion.
Gorski then moved, in effect, for leave to renew his prior cross motion. Tyrasinski opposed the motion. In an order dated June 19, 2018, the Surrogate's Court denied Gorski's motion, and Gorski appeals.
A motion for leave to renew "shall be based upon new facts not offered on the prior motion that would change the prior determination" (CPLR 2221[e][2]), and "shall contain reasonable justification for the failure to present such facts on the prior motion" (CPLR 2221[e][3]; see Deutsche Bank Trust Co. v Ghaness, 100 AD3d 585, 586; Jovanovic v Jovanovic, 96 AD3d 1019, 1020). "Although the requirement that a motion for renewal must be based on new facts is a flexible one, a motion to renew is not a second chance freely given to parties who have not exercised due diligence in making their first factual presentation," and the court "lacks discretion to grant renewal where the moving party omits a reasonable justification for failing to present the new facts on the original motion" (Jovanovic v Jovanovic, 96 AD3d at 1020 [citations omitted]).
Here, the Surrogate's Court providently exercised its discretion in denying the motion for leave to renew. Gorski raised for the first time facts that were known to him at the time of his prior cross motion without demonstrating a reasonable justification for failing to submit such facts at that time (see id.). Moreover, Gorski failed to demonstrate that the newly-raised facts he submitted would change the court's prior determination (see id.).
The parties' remaining contentions either are without merit or need not be reached in light of our determination.
AUSTIN, J.P., DUFFY, BRATHWAITE NELSON and CHRISTOPHER, JJ., concur.
ENTER:
Aprilanne Agostino
Clerk of the Court
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369 B.R. 512 (2007)
In re Scott J. SOBCZAK, Debtor.
Russell A. Brown, Chapter 13 Trustee, Appellant,
v.
Scott J. Sobczak, Appellee.
BAP No. 06-1397-BrMoPa, Bankruptcy No. 06-00030-RJH.
United States Bankruptcy Appellate Panel of the Ninth Circuit.
Argued and Submitted March 23, 2007.
Filed May 11, 2007.
Scott A. Lieske, Esq., Phoenix, AZ, for Appellant.
Michael Reddig, Esq., Flagstaff, AZ, for Appellee.
*514 Before BROWN[1], MONTALI and PAPPAS, Bankruptcy Judges.
OPINION
BROWN, Bankruptcy Judge.
This appeal arises from the bankruptcy court's order granting Debtor-Appellee's motion to dismiss his chapter 13 case.[2] For the reasons set forth below we REVERSE the bankruptcy court's order granting Debtor-Appellee's motion to dismiss.
I. FACTS
Appellee filed a voluntary chapter 7 petition on March 12, 2006. He scheduled a single parcel of real property, his residence, located in Kingman, Arizona (the "Property"). Appellee valued the Property, which was subject to two liens totaling $113,724.00, at $200,000.00. Appellee claimed a $150,000 homestead exemption in the Property pursuant to Arizona Revised Statute § 33-1101(A). In response to Question 15 on his Statement of Financial Affairs ("SOFA"), which required Appellee to list all previous addresses if he had moved in the three years preceding the filing, Appellee checked "none."
On May 25, 2006, the chapter 7 trustee for Appellee's case filed an Objection to Property Claimed Exempt in which he objected to all of Appellee's claimed exemptions on the grounds that he had not resided in the state of Arizona for 730 days as required by § 522(b)(3)(A).[3] As a result, the chapter 7 trustee contended Appellee was required to use the exemptions provided under Ohio law, the state in which Appellee had resided for more than 180 days prior to moving to Arizona. The homestead exemption in Ohio is only $5,000.00. Ohio Rev.Code Ann. § 2329.66(A)(1)(b). On June 8, 2006, Appellee filed a Motion to Convert to Chapter 13 Case. The court entered an Order Converting Case to Chapter 13 that same day. On June 8, 2006, Appellee also filed a Response to Former Trustee's Objection to Property Claimed Exempt. In his response, Appellee contended that there was a factual question as to his place of residency during the 730 days preceding the filing of his bankruptcy petition. Specifically he contended that because he intended to reside in Arizona as of March 2004 and began seeking employment in Arizona at that time, his residence should be determined to be in Arizona as of March 2004. In addition, he argued that § 522(b)(3)(A), which provides that a debtor's exemptions are governed by applicable law at the place in which his domicile has been located for the 730 days immediately preceding the date of the filing of the petition, applied only to the equity brought by a debtor from a former state's exempt homestead. Finally, he contended that while residing in Ohio he held his homestead jointly with his wife as tenants by the entirety and could have exempted the entire amount of the equity in the home under Ohio law. Consequently, he contended, if his exemptions were determined based on Ohio law, he was entitled to exempt all of the equity in his Arizona property.
On June 8, 2006, Appellee also filed amended Schedules A, I, and J and an amended SOFA. On his Amended Schedule *515 A Appellee valued the Property at $180,000.00. Appellee did not file an amended Schedule C Property Claimed as Exempt. In response to Question 15 on his amended SOFA, Appellee indicated that he had lived in Ohio "through March 2004."
On June 20, 2006, Appellant, the chapter 13 trustee for Appellee's case, filed his Chapter 13 Trustee's Objection to Claims of Property as Exempt, joining in the objection filed by the Chapter 7 Trustee. On June 29, 2006, Appellee filed a Response to Chapter 13 Trustee's Objection to Property Claimed Exempt. In his response, Appellee raised the same arguments that he had previously raised in his Response to Former Trustee's Objection to Property Claimed Exempt.
On June 29, 2006, Appellee also filed a motion to dismiss his chapter 13 case. In that motion, he stated that "[a]lthough debtor believes that no non-exempt assets exist, both the Chapter 7 and Chapter 13 trustees have taken contrary positions. Debtor asks this matter be dismissed to avoid a potential twisted application of the new bankruptcy law which would unfairly deny him his homestead under either Arizona or Ohio law." He indicated that if his motion was denied that he wished to remain in chapter 13.
On July 7, 2006, Appellant filed Trustee's Objection to Motion to Dismiss. In his Memorandum of Points and Authorities in support of that objection Appellant stated:
Debtor filed a Motion to Dismiss his case on June 29, 2006, without stating any statutory authority for his request. However, the Trustee notes that Debtor does not possess the right to dismiss his case pursuant to 11 U.S.C. § 1307(b). Debtor's absolute right to dismiss is absent when the case was previously converted from another chapter. Therefore the Court must not dismiss the case.
Rather than Dismissal, the proper result should be/ reconversion back to Chapter 7th the Chapter 7 and Chapter 13 Trustees believe that Debtor may have nonexempt assets which a Chapter 7 Trustee should administer for the creditors of this estate.
Because Debtor has significant nonexempt assets, and because he does not have an absolute right to dismiss their [sic] case, the Chapter 13 Trustee objects to the Dismissal of this case.
The bankruptcy court held a hearing on the Appellee's motion to dismiss on October 25, 2006. During that hearing, the parties discussed, at length, their respective positions with respect to Appellee's right to claim exemptions under Arizona law as well as the effect on the estate if the court determined that Appellee was not eligible to claim exemptions under Arizona law. Appellant contended that he believed that there was significant equity in the Property and that the bulk of this equity, none of which could be reached by creditors if Appellee were eligible to claim Arizona exemptions, would be available to creditors if Appellee were required to use Ohio exemptions. At one point during the oral argument when addressing Mr. Lieske, Appellant's attorney, the court stated:
THE COURT: On the other hand though, you know, if assuming you're correct and in effect the well, I was going to say that if he doesn't have an exemption in the Arizona homestead then creditors could resort to it outside of a Chapter 7, but that's not the case. If he didn't have a Chapter 7, he would be entitled to the full Arizona exemption in his Arizona Homestead, vis-à-vis his creditors, outside of bankruptcy.
MR. LIESKE: Well, I what I
*516 THE COURT: So in effect, doesn't keeping, him in a 7 or a 13 create a windfall for his creditors that they would not be entitled to outside of bankruptcy, because outside of bankruptcy he's entitled to his Arizona exemption?
MR. LIESKE: Right. And what I suspect might happen is that the debtor may may re-file a new Chapter 13 case after he's after this case is dismissed he can take advantage of the Arizona exemptions now because he has lived in Arizona for the 730 days and not have to pay anything to his unsecured creditors, not have to pay anything to those creditors that would in this case receive a distribution.
THE COURT: I'm not sure that responded to my question. Your argument was it would be unfair to creditors to dismiss the case. And the question I raised is well, why is it unfair? He's not hiding assets. He's got an Arizona asset that any creditor could locate, but under Arizona law he'd be entitled to exempt it.
So how can you say that it would be unfair to the creditors to allow a dismissal? Isn't it really the other way around? He may have made a mistake by filing a case, and in effect, disqualifying himself from the Arizona homestead exemption that he would've been entitled to if he hadn't filed at all. So doesn't the maintenance in the of the case in effect create a windfall for creditors?
Ultimately the court granted Appellee's Motion to Dismiss Case. In doing so it stated:
Well, I agree that that when it comes to a motion to dismiss a 13 in a case that has been converted from Chapter 7, it is the best interest [of] creditors test, but I don't know that anything in the Code or particularly [BAPCPA] has suggested that that should be measured by the basis of what I have to conclude, was an unintended benefit to creditors by the [BAPCPA] changes that they would not have had under state law. . . .
II. ISSUES
Did Appellee have standing to seek voluntary dismissal of his chapter 13 petition under § 1307(c)?
Did the bankruptcy court err in granting Appellee's motion to dismiss?
III. STANDARD OF REVIEW
We review the issue of standing de novo. Arakaki v. Lingle, 477 F.3d 1048, 1056 (9th Cir.2007), citing Bruce v. United States, 759 F.2d 755, 758 (9th Cir.1985).
We review an order dismissing a chapter 13 bankruptcy case for abuse of discretion. Armstrong v. Steppes Apartments, Ltd. (In re Armstrong), 303 B.R. 213, 218 (10th Cir. BAP 2004). "A bankruptcy court necessarily abuses its discretion if it bases its ruling on an erroneous view of the law. The Panel also finds an abuse of discretion if it has a definite and firm conviction the court below committed a clear error of judgment in the conclusion it reached." Lopez v. Specialty Restaurants Corp. (In re Lopez), 283 B.R. 22, 26 (9th Cir. BAP 2002) quoting Palm v. Klapperman (In re Cady), 266 B.R. 172, 178 (9th Cir.BAP2001), aff'd 315 F.3d 1121 (9th Cir.2003) (citations and quotation marks omitted).
IV. DISCUSSION
I. Standing
Appellant contends that the bankruptcy court erred in granting Appellee's motion to dismiss because Appellee lacked standing to request such relief. Dismissal of a Chapter 13 case is governed by § 1307 *517 of the Code. This section provides, in relevant part:
(a) The debtor may convert a case under this chapter to a case under chapter 7 of this title at any time. Any waiver of the right to convert under this subsection is unenforceable.
(b) On request of the debtor at any time, if the case has not been converted under section 706, 1112, or 1208 of this title, the court shall dismiss a case under this chapter. Any waiver of the right to dismiss under this subsection is unenforceable.
(c) Except as provided in subsection (e) of this section, on request of a party in interest or the United States trustee and after notice and a hearing, the court may convert a case under this chapter to a case under chapter 7 of this title, or may dismiss a case under this chapter, whichever is in the best interests of creditors and the estate, for cause. . . .
Appellee's Motion to Dismiss did not cite the statute under which Appellee sought dismissal. However, because his case had been converted from a chapter 7 case, Appellee concedes he was not entitled to automatic dismissal under § 1307(b). Consequently, it appears that Appellee sought dismissal under § 1307(c), which allows the court to dismiss or convert a case, after notice and a hearing, on request of the United States Trustee or "a party in interest."
Appellant argues that Appellee is not a "party in interest" and has no standing to seek dismissal of his case under § 1307(c). As a preliminary matter, it does not appear that Appellant raised this issue at the trial level. In his memorandum in support of his objection to Appellee's Motion to Dismiss, Appellant noted that Appellee had not cited any statutory authority in support of his motion and that he did not have an absolute right to dismiss under § 1307(b). This same issue was raised in oral argument before the court. However, Appellant did not challenge Appellee's right to seek dismissal under § 1307(c). Nonetheless, this matter is properly before the Panel as standing is a "jurisdictional issue[] that may be raised at any time, even for the first time on appeal." DBSI/TRI IV Ltd. P'ship v. United States, 465 F.3d 1031, 1038 (9th Cir.2006).
In support of his argument that the Appellee lacks standing to bring a motion under § 1307(c) Appellant reasons that "[a]lthough 11 U.S.C. § 101 fails to define a `party in interest,' the lack of specific inclusion in § 1307(c) eliminates the debtor as an eligible party. The debtor is specifically included in those other subsections of § 1307 that he has standing to invoke." Appellant's Opening Br. at 8. Although not clearly stated, his argument is, presumably, that because the debtor is specifically listed as a party who may seek dismissal or conversion under § 1307(a) or (b), the fact that the debtor is not specifically listed in § 1307(c) is evidence of the fact that Congress did not intend that a debtor have authority to seek dismissal under this subsection.
Appellant's argument ignores the fact that the debtor is the only party who may bring a motion under § 1307(a) or § 1307(b). Therefore, the debtor would necessarily have to be specifically listed as a party who could bring a motion under either of those two sections. By contrast, a request to dismiss or convert under § 1307(c) may be made by any party in interest or by the United States Trustee.
Although the term "party in interest" appears many times in the Bankruptcy Code, it is not defined in § 101. It has been described as "an expandable concept depending on the particular factual context in which it is applied." In re River Bend-Oxford Associates, 114 B.R. *518 111, 113 (Bankr.D.Md.1990). In various contexts, a "party in interest" has been held to be one who has an actual pecuniary interest in the case, Kapp v. Naturelle, Inc., 611 F.2d 703, 706 (8th Cir. 1979); anyone who has a practical stake in the outcome of a case, In re Amatex Corporation, 755 F.2d 1034, 1041-44 (3rd Cir.1985); and those who will be impacted in any significant way in the case, In re Johns-Manville Corp., 36 B.R. 743, 754 (Bankr.S.D.N.Y.1984).
In re Cowan, 235 B.R. 912, 915 (Bankr. W.D.Mo.1999). Clearly, the debtor has a pecuniary interest and practical stake in whether his own bankruptcy case should be dismissed and is, accordingly, a party in interest in that proceeding.
Appellant contends that allowing a debtor in a case converted from chapter 7 to bring a motion to dismiss under § 1307(c) would contravene the Code. He argues that "[a] debtor should not be permitted to do in two steps (conversion, then dismissal motion) that which the debtor could not accomplish in one step (motion to voluntarily dismiss a Chapter 7 case)." Appellant's Opening Br. at 9. Appellant is correct in his assertion that a chapter 13 debtor in a converted case should not be able to accomplish that which he could not accomplish in a chapter 7, that is, automatic dismissal of his case without court intervention or oversight. However, allowing a debtor to bring a motion to dismiss under § 1307(c) does not guarantee dismissal as such motion may only be granted after notice and a hearing. See Collier on Bankruptcy, 15th Ed. ¶ 1307.03[2] page 1307-9 ("There is no absolute right on the part of the debtor to obtain a dismissal of a case converted to chapter 13 from chapter 7, chapter 11, or chapter 12. Instead, the debtor, or any other party in interest, may request dismissal or conversion of the chapter 13 case pursuant to section 1307(c) or (d). The court, after notice and a hearing, may either dismiss, convert the case to chapter 7 or convert the case to chapter 11 or chapter 12 prior to confirmation of a chapter 13 plan.")
Appellee is a "party in interest" within the meaning of § 1307(c) and had standing to bring a motion to dismiss his case under that section.
2. Did the Court Abuse its Discretion in Granting Appellee's Motion to Dismiss Case?
Section 1307(c) provides that upon request of the United States Trustee or a party in interest, the court may, for cause, dismiss or convert a chapter 13 case "whichever is in the best interest of creditors and the estate." In this case the equity in the Property might have been available to Appellee's creditors had his Motion to Dismiss been denied. That equity would not be available to the creditors outside bankruptcy. Further, if the Appellee were to file another bankruptcy, the equity that may have been available in this case would no longer be available, at least up to the $150,000 Arizona homestead exemption. The court nonetheless granted Appellee's Motion to Dismiss because it found that compelling Appellee to remain in bankruptcy would result in "an unintended benefit to creditors by the [BAPPA] changes that they would not have had under state law." The issue before this panel is whether the bankruptcy court should have considered this factor in deciding whether to grant Appellee's Motion to Dismiss.
"When interpreting a statute, [o]ur first step . . . is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case.' Robinson v. Shell Oil Co., 519 U.S. 337, 340, 117 *519 S.Ct. 843, 136 L.Ed.2d 808 (1997). This court's inquiry must end if the statutory language is unambiguous and the statutory scheme is coherent and consistent.' United States v. Ron Pair Enters. Inc. 489 U.S. 235, 240, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989)." Cellular 101, Inc. v. Channel Commnc'n Inc. (In re Cellular 101, Inc.), 377 F.3d 1092, 1098 (9th Cir. 2004) (Brunetti, J., concurring). "If the statutory language is unambiguous, in the absence of a clearly expressed legislative intent to the contrary, that language must ordinarily be regarded as conclusive." United States v. Buckland, 289 F.3d 558, 564-65 (9th Cir.2002) (en banc) quoting Reyes v. Ernst & Young, 507 U.S. 170, 177, 113 S.Ct. 1163, 122 L.Ed.2d 525 (1993).
Section 1307(c) provides that when making the determination as to whether to grant a motion to dismiss or convert under this subsection, the bankruptcy court must be guided by what is in the best interest of the estate and creditors. This language is clear and unambiguous. Moreover, the statute does not instruct the bankruptcy court to consider the best interests of the debtor in deciding whether to dismiss a chapter 13 case. The bankruptcy court was not, therefore, free to look behind that language to determine whether, in his opinion, the result reached by application of the plain language was consistent with the intent of the statute.
It is clear that Appellee's creditors may fare better if Appellee's case remains open. It is equally clear that the timing of Appellee's filing of his bankruptcy case was flawed. However, Appellee voluntarily sought the protection of the bankruptcy court. In doing so he pledged all of his non-exempt assets toward payment of his unsecured pre-petition debts. While Appellee may have made a tactical error in filing his petition before he had resided in Arizona for the minimum time required to enable him to claim exemptions available under Arizona law, there is nothing in the language of § 1307(c) or the legislative history of BAPCPA that indicates that the benefit afforded Appellee's creditors under § 522(b)(3)(A) was unintended.
Under § 1307(c) it is not the province of the court to shield a debtor from the consequences of his own actions, however unfortunate, at the expense of his creditors. Section 1307(c) unambiguously required that the trial court consider only the interests of creditors and the estate in determining whether to grant Appellee's motion to dismiss. It did not. The trial court therefore erred in granting Appellee's Motion to Dismiss.
V. CONCLUSION
As the debtor, Appellee had a pecuniary interest in whether his bankruptcy case continued or was dismissed. Appellee was, therefore, a "party in interest" for purposes of § 1307(c) and had standing to request dismissal. However, the bankruptcy court erred when it granted Appellee's motion, since dismissal was not in the best interests of Appellee's creditors or the bankruptcy estate. As a result, we REVERSE.
NOTES
[1] Hon. Trish M. Brown, Bankruptcy Judge for the District of Oregon, sitting by designation.
[2] Unless otherwise indicated, all Code, chapter and section references are to the United States Bankruptcy Code, 11 U.S.C. §§ 101-1532.
[3] Debtor disputes that assertion, but no determination of that disputed fact was made by the bankruptcy court before Debtor's case was dismissed.
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463 F.2d 375
72-2 USTC P 9536
Friedy B. HEISLER, M.D. and Francis Heisler, Plaintiffs and Appellants,v.UNITED STATES of America and Joseph M. Cullen, DistrictDirector of Internal Revenue Service, etc., etal., Defendants and Appellees.
No. 26121.
United States Court of Appeals,
Ninth Circuit.
June 21, 1972.Rehearing Denied July 17, 1972.
Francis Heisler (argued), Richard M. Silver, Patricia Lane, of Heisler & Stewart, Carmel, Cal., for plaintiffs-appellant.
Gary R. Allen (argued), Meyer Rothwacks, Thomas L. Stapleton, Johnnie Walters, Asst. Atty. Gen., Washington, D. C., James L. Browning, U. S. Atty., Gary K. Shelton, Asst. U. S. Atty., San Francisco, Cal., for defendants-appellees.
Before CHAMBERS, BROWNING and KILKENNY, Circuit Judges.
PER CURIAM:
1
In this tax case the district court had jurisdiction over the refund claim under 28 U.S.C. Sec. 1346(a) (1). The appellants, however, do not fit within the statute. Their bodies and skills are not among the "other natural deposits" for which the Internal Revenue Code allows a deduction for percentage depletion.
2
On the claim that 26 U.S.C. sections 611 et seq. are unconstitutional, the Heislers lack the requisite standing to raise this issue. Flast v. Cohen, 392 U.S. 83, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968).
3
The appellants style their lawsuit a class action. However, there is no showing that any other members of the purported class filed the requisite demands for refund. 26 U.S.C. Sec. 7422.
4
The judgment is affirmed.
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TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
JUDGMENT RENDERED MAY 8, 2014
NO. 03-12-00012-CR
John Malcolm Nordstrom, III, Appellant
v.
The State of Texas, Appellee
APPEAL FROM THE 427TH DISTRICT COURT OF TRAVIS COUNTY
BEFORE CHIEF JUSTICE JONES, JUSTICES ROSE AND GOODWIN
MODIFIED AND, AS MODIFIED, AFFIRMED -- OPINION BY JUSTICE GOODWIN
This is an appeal from the judgment of conviction signed by the trial court. Having reviewed the
record and the parties’ arguments, the Court holds that there was no error in the trial court’s
judgment of conviction requiring reversal. However, there was error in the judgment of
conviction that requires correction. Therefore, the Court modifies the trial court’s judgment of
conviction to correctly reflect appellant’s name as “John Malcolm Nordstrom, III.” The
judgment, as modified, is affirmed. Because appellant is indigent and unable to pay costs, no
adjudication of costs is made.
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265 U.S. 315 (1924)
LYNCH, EXECUTRIX OF LYNCH, COLLECTOR OF INTERNAL REVENUE, DECEASED,
v.
TILDEN PRODUCE COMPANY.
No. 139.
Supreme Court of United States.
Argued January 25, 1924.
Decided May 26, 1924.
CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE EIGHTH CIRCUIT.
*316 Mrs. Mabel Walker Willebrandt, Assistant Attorney General, with whom Mr. Solicitor General Beck was on the brief, for petitioner.
Mr. George W. Peterson, with whom Mr. William H. Oppenheimer, Mr. Frederick N. Dickson and Mr. Frank C. Hodgson were on the brief, for respondent.
*317 MR. JUSTICE BUTLER delivered the opinion of the Court.
This action was brought in the United States District Court for Minnesota by the Tilden Produce Company against petitioner's testator, E.J. Lynch, Collector of Internal Revenue for the District of Minnesota, to recover *318 $936 stamp taxes, which it was compelled to pay on 9360 pounds of butter seized as adulterated by the Commissioner of Internal Revenue. At the trial, a verdict was directed in favor of the company, and judgment was entered for the amount paid with interest. The Circuit Court of Appeals affirmed the judgment. 282 Fed. 54. The case is here on certiorari under § 240 of the Judicial Code. 260 U.S. 718.
The question for decision is whether the butter was adulterated within the meaning of the Act of May 9, 1902, c. 784, 32 Stat. 193.
In 1918, the company manufactured in its creamery at Saint Paul, 350 tubs of butter, which it shipped to Chicago. At the time it was made, the company tested the butter and found the moisture content to range between 15 and 16 per cent., and the average to be 15.68 per cent. Samples were taken at Chicago, and tested under the direction of the Commissioner of Internal Revenue. It was found that the moisture content of the butter in 156 tubs was 16 per cent. or more, that the range was between 16 and 17.93 per cent., and that the average was 16.76 per cent. The butter was made by the company by methods generally followed in the manufacture of butter in creameries. It was shown by the evidence that the moisture content in butter varies greatly; that the variation ranges from 9 to over 20 per cent., and that there is no fixed standard. The moisture content of milk is over 90 per cent. and of cream over 60 per cent. The making of butter involves the segregation of the fat and the elimination of water. After churning and draining off buttermilk, it is the general practice of buttermakers to use water to wash out curd and liquids remaining in association with the butter. While some of the water used for that purpose may remain, washing usually lessens the total moisture. Within certain limits, buttermakers are able to control water content. It is tested while the butter *319 is in the churn. It may be reduced by manipulation, or water may be incorporated into or mixed with the butter so as to increase the water content, by working the butter under conditions calculated to accomplish that purpose. In practice, makers sometimes reduce or increase moisture content in order to meet competition in the market.
Adulterated butter, as defined by § 4 of the Act of May 9, 1902, includes: (1) a grade produced by treatment of different lots of butter to which a chemical or other substance is added to deodorize it or to remove rancidity; (2) a butter product with which is mixed a foreign substance to lessen its cost; and (3) "any butter in the manufacture or manipulation of which any process or material is used with intent or effect of causing the absorption of abnormal quantities of water, milk, or cream."
In 1907, the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, promulgated Regulations No. 9, which contain the following: "Adulterated Butter Defined: The definition of adulterated butter as contained in the act of May 9, 1902, embraces butter in the manufacture of which any process or material is used whereby the product is made to `contain abnormal quantities of water, milk or cream,' but the normal content of moisture permissible is not fixed by the act. This being the case it becomes necessary to adopt a standard for moisture in butter, which shall in effect represent the normal quantity. It is therefore held that butter having 16 per cent. or more of moisture contains an abnormal quantity and is classed as adulterated butter."
Petitioner contends that the promulgation of this regulation is authorized by § 20 of the Act of August 2, 1886, c. 840, 24 Stat. 209, 212, and Rev. Stats., § 251. It is provided by § 20 that, "the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, may make all needful regulations for the carrying into effect of this act." To a limited extent, this section *320 was made applicable to the Act of May 9, 1902, by § 4 thereof, which provides that it "shall apply to manufacturers of `adulterated butter' to an extent necessary to enforce the marking, branding, identification, and regulation of the exportation and importation of adulterated butter." Revised Statutes, § 251, authorizes the Secretary of the Treasury to "prescribe . . . rules and regulations, not inconsistent with law, to be used under and in the execution and enforcement of the various provisions of the internal-revenue laws;" and to "give such directions to collectors and prescribe such rules . . . as may be necessary for the proper execution of the law; . . ."
The mere fact that the butter contains 16 per cent. or more of moisture does not bring it within the terms of the statutory definition of adulterated butter. Under the definition in § 4, there must be something in the manufacture or manipulation of the butter causing the absorption of abnormal quantities of water, milk or cream. This must result from the use of some material or process. The use must be with intent to cause such absorption, or must be calculated to produce that result. "Absorption" should be read to include the introduction of moisture from the outside and the incorporation of water into the butter, whether it is technically an absorption or not. Obviously, it does not include moisture originally contained in the cream or butter. The act does not prescribe the amount of moisture permissible or fix any rule or criterion by which to determine the amount that is deemed "abnormal" or that lawfully may be absorbed and incorporated.
The regulation makes water content the sole test of adulteration, without regard to other provisions of the act. In support of its validity, it is said that, in declaring 16 per cent. of moisture in butter is abnormal, the regulation does no more than to establish a scientific fact. But *321 it goes beyond that, and declares such butter to be adulterated. It omits essential elements of the statutory definition: namely, the use of a process or material in the manufacture of the butter, and the causing of absorption, i.e., the incorporation or taking in from the outside, of abnormal quantities of moisture.
Congress has not delegated power or authority to make such a regulation. Section 20 of the Act of August 2, 1886, does not apply. It is made applicable only in respect of the marking, branding, identification and regulation of exportation and importation of adulterated butter; it does not authorize a regulation establishing what shall be deemed to constitute excessive moisture or the "absorption of abnormal quantities of water, milk, or cream"; it grants no power to add to or take from the statutory definition of adulterated butter. Section 251 of the Revised Statutes confers upon the Secretary of the Treasury authority to make certain rules and regulations, but it grants no power to the Commissioner of Internal Revenue alone. To make any regulation by him on the subject effective, it must be approved by the Secretary, in which event it really becomes a regulation of the latter. Moreover, the rules and regulations authorized by § 251 are required to be "not inconsistent with law." The regulation prescribes a standard which Congress has not authorized the Commissioner or the Secretary to fix. It sets up a definition of adulterated butter which conflicts with that contained in the act. The two cannot be read in harmony. If given effect, the regulation would eliminate from the definition of adulterated butter the conditions specified in the act and strike out words and phrases and substitute others for them. In effect, it would depart from and put aside the statutory definition. In some of the lower courts the regulation has been held invalid. United States v. 11,150 Pounds of Butter, 195 Fed. 657, affirming 188 Fed. 157; Baldwin Co-operative Creamery Association v. *322 Williams, 233 Fed. 607; Henningsen Produce Co. v. Whaley, 238 Fed. 650. But in Coopersville Co-operative Creamery Co. v. Lemon, 163 Fed. 145, it was held valid. We think that decision fails to take into account and give proper weight to the conflict between the act and the regulation. See Field v. Clark, 143 U.S. 649; United States v. Eaton, 144 U.S. 677; In re Kollock, 165 U.S. 526; Buttfield v. Stranahan, 192 U.S. 470; Williamson v. United States, 207 U.S. 425; United States v. Grimaud, 220 U.S. 506. It must he held that the regulation is invalid.
The act does not prescribe any standard for moisture in butter. In its manufacture, the variation of moisture ranges above as well as below the quantities found in the butter in question, and its moisture content cannot be said to be "abnormal". It was made in the usual way. There was no process or material used with intent or effect of causing absorption of abnormal quantities of moisture. It was not adulterated within the meaning of the act.
Judgment affirmed.
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J-S45003-19
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
COMMONWEALTH OF PENNSYLVANIA, IN THE SUPERIOR COURT
OF
PENNSYLVANIA
Appellee
v.
ODELL JOHNSON,
Appellant No. 2823 EDA 2018
Appeal from the PCRA Order Entered September 21, 2018
In the Court of Common Pleas of Philadelphia County
Criminal Division at No(s):
CP-51-CR-0009190-2010
CP-51-CR-0009191-2010
BEFORE: BENDER, P.J.E., MURRAY, J., and PELLEGRINI, J.*
MEMORANDUM BY BENDER, P.J.E.: FILED OCTOBER 17, 2019
Appellant, Odell Johnson, appeals from the post-conviction court’s
September 21, 2018 order dismissing his first, timely petition under the Post
Conviction Relief Act (PCRA), 42 Pa.C.S. §§ 9541-9546. After careful review,
we are constrained to quash.
The facts of Appellant’s underlying case are not necessary to our
disposition of his appeal. The PCRA court summarized the procedural history
of this case, as follows:
On March 15, 2013, following a jury trial before this [c]ourt,
[Appellant] was convicted[, in two separate, but consolidated
cases,] of one count of first-degree murder (18 Pa.C.S. §
2502(a)), one count of third-degree murder (18 Pa.C.S. §
____________________________________________
* Retired Senior Judge assigned to the Superior Court.
J-S45003-19
2502(c)), one count of carrying a firearm without a license (18
Pa.C.S. § 6106(a)(1)), one count of carrying a firearm on a public
street or public property in Philadelphia (18 Pa.C.S. § 6108), and
one count of possessing an instrument of crime (“PIC”) (18
Pa.C.S. § 907(a)). The [c]ourt immediately imposed the
mandatory sentence of life in prison for the first-degree murder
charge (18 Pa.C.S. § 1102(a)(1)) and the mandatory sentence of
life in prison for the third-degree murder charge (42 Pa.C.S. §
9715(a)), to run consecutive to one another.2 The sentences on
all remaining charges were to run concurrent to the murder
sentences. [Appellant] was represented at trial, sentencing, and
on appeal by Michael E. Wallace, Esquire. On May 23, 2014, the
Superior Court affirmed the judgment of sentence, and on
November 18, 2014, the Supreme Court denied allocatur.
2 Section 9715(a) provides for a mandatory sentence of life
imprisonment for any person convicted of third-degree
murder who had previously been convicted at any time of
murder or manslaughter at the time of sentencing. See
Commonwealth v. Morris, 958 A.2d 569, 581-82 (Pa.
Super. 2008), appeal denied, 991 A.2d 311 (Pa. 2010).
On August 4, 2015, [Appellant] filed a pro se petition under the
… []PCRA[]. Stephen T. O’Hanlon, Esquire was appointed to
represent [Appellant] on November 23, 2016. On May 31, 2017,
Mr. O’Hanlon submitted an Amended Petition, claiming that trial
counsel, Mr. Wallace, was ineffective for failing to call Shomari
Betancourt as a witness. On May 25, 2018 and May 31, 2018, the
[c]ourt held a bifurcated evidentiary hearing on the issue. In
addition, at the May 31, 2018 hearing, the [c]ourt allowed
[Appellant] to present evidence for an additional claim, that is,
trial counsel’s failure to call Carla Hayes Dantzler as a witness, as
she had only come forward in the days following the first hearing.
N.T. 5/31/18 at 4. On September 21, 2018, after issuing its
findings of fact and conclusions of law, the [c]ourt entered an
order dismissing [Appellant]’s PCRA petition.
PCRA Court Opinion (PCO), 11/19/18, at 1-2 (one footnote omitted).
On September 21, 2018, Appellant filed a timely notice of appeal listing
the two docket numbers of his underlying cases. That notice of appeal was
apparently photocopied and filed in both cases. The PCRA court ordered
-2-
J-S45003-19
Appellant to file a Pa.R.A.P. 1925(b) statement, and he timely complied. The
court filed its Rule 1925(a) opinion on November 19, 2018. Herein, Appellant
states one issue for our review:
1. Did the PCRA court err in dismissing Appellant’s PCRA Petition
because trial counsel was ineffective for failing to call an available
witness at trial, because this witness was credible and would have
allowed Appellant to present compelling self-defense and
voluntary manslaughter defenses at trial and would have shown
that Appellant faced serious provocation and was not the primary
initiator of provocation?
Appellant’s Brief at 4.
Before we may review this issue, we must address whether Appellant’s
notice of appeal listing two docket numbers requires us to quash under
Commonwealth v. Walker, 185 A.3d 969, 971 (Pa. 2018) (holding that, for
any appeal filed after June 1, 2018, “where a single order resolves issues
arising on more than one docket, separate notices of appeal must be filed for
each of those cases”). In response to a rule to show cause order issued by
this Court on January 3, 2019, Appellant’s counsel argued, in pertinent part,
that “[q]uashing the present appeal would lea[d] to extensive further litigation
potentially including a Petition for Allocatur, a further PCRA Petition, or even
future federal filings.” Response, 2/24/19, at 2. Appellant’s counsel asked
“that the filed appeal be considered on its merits in the interests of judicial
-3-
J-S45003-19
economy.” Id. at 3.1 On February 27, 2019, this Court discharged the rule
to show cause order and deferred the Walker issue to the present panel.
In Commonwealth v. Williams, 206 A.3d 573 (Pa. Super. 2019), we
explained:
Pennsylvania Rule of Appellate Procedure 341(a) directs
that “an appeal may be taken as of right from any final order of a
government unit or trial court.” Pa.R.A.P. 341(a). “The Official
Note to Rule 341 was amended in 2013 to provide clarification
regarding proper compliance with Rule 341(a)....”
Commonwealth v. Walker, 185 A.3d 969, 976 (Pa. 2018). The
Official Note now reads:
Where ... one or more orders resolves issues arising on
more than one docket or relating to more than one
judgment, separate notices of appeals must be filed.
Commonwealth v. C.M.K., 932 A.2d 111, 113 & n.3 (Pa.
Super. 2007) (quashing appeal taken by single notice of
appeal from order on remand for consideration under
Pa.R.Crim.P. 607 of two persons’ judgments of sentence).
Pa.R.A.P. 341, Official Note.
In Walker, our Supreme Court construed the above-
language as constituting “a bright-line mandatory instruction to
practitioners to file separate notices of appeal.” Walker, 185 A.3d
at 976-77. Therefore, the Walker Court held that “the proper
practice under Rule 341(a) is to file separate appeals from an
order that resolves issues arising on more than one docket. The
failure to do so requires the appellate court to quash the appeal.”
Id. at 977. However, the Court tempered its holding by making
it prospective only, recognizing that “[t]he amendment to the
Official Note to Rule 341 was contrary to decades of case law from
this Court and the intermediate appellate courts that, while
disapproving of the practice of failing to file multiple appeals,
seldom quashed appeals as a result.” Id. Accordingly, the
Walker Court directed that “in future cases Rule 341 will, in
____________________________________________
1Appellant’s counsel also filed an application to amend his notice of appeal,
which we denied on February 21, 2019.
-4-
J-S45003-19
accordance with its Official Note, require that when a single order
resolves issues arising on more than one lower court docket,
separate notices of appeal must be filed. The failure to do so will
result in quashal of the appeal.” Id. (emphasis added).
Id. at 575-76.
In light of the bright-line mandate set forth in Rule 341 and Walker,
and applied by this Court in Williams, we cannot grant Appellant the equitable
relief of overlooking his non-compliant notice of appeal. Additionally, we must
quash despite the fact that the notice of appeal was filed in each case. See
Commonwealth v. Creese, -- A.3d ----, 2019 PA Super 241, *2 (Pa. Super.
filed Aug. 14, 2019) (“We read our Supreme Court’s decision in Walker as
instructing that we may not accept a notice of appeal listing multiple docket
numbers, even if those notices are included in the records of each case.
Instead, a notice of appeal may contain only one docket number.”) (footnote
omitted).
Consequently, because Appellant filed a single notice of appeal
containing multiple docket numbers after Walker was issued, we are
constrained to quash his appeal.2
Appeal quashed. Jurisdiction relinquished.
Judge Murray joins this memorandum.
Judge Pellegrini files a dissenting memorandum.
____________________________________________
2Nevertheless, even if we did not quash, we would affirm the order denying
Appellant’s petition for the reasons set forth by the PCRA court in its Rule
1925(a) opinion. See PCO at 3-14.
-5-
J-S45003-19
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 10/17/19
-6-
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NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with
Fed. R. App. P. 32.1
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted March 26, 2008*
Decided March 27, 2008
Before
RICHARD A. POSNER, Circuit Judge
DIANE P. WOOD, Circuit Judge
TERENCE T. EVANS, Circuit Judge
No. 07‐3547
JOHN L. LERCH, United States District Court for the
Plaintiff‐Appellant, Eastern District of Wisconsin.
v. No. 06‐C‐454
CITY OF GREEN BAY, et al., William C. Griesbach,
Defendants‐Appellees. Judge.
O R D E R
This lawsuit presents the second case in which John Lerch—a landlord who owns
numerous low‐cost rental properties in Green Bay, Wisconsin—has alleged that the city of
Green Bay (“the city”) and several of its building inspectors violated his equal protection
rights by arbitrarily enforcing housing codes against him and not against similarly situated
*
After examining the briefs and the record, we have concluded that oral argument is
unnecessary. Thus the appeal is submitted on the briefs and the record. See Fed. R. App. P.
34(a)(2).
No. 07‐3547 Page 2
property owners. In his first suit Lerch complained that the defendants cited him for,
among other things, having an unpaved driveway apron and litter on his property. Here
Lerch argues that the defendants treated him unequally when they razed buildings on two
of his properties for code violations that he says are similar to violations committed by other
property owners whose buildings were not razed. In both cases, the district court
concluded that Lerch could not prevail on his class‐of‐one equal protection theory because
he had not shown that he was similarly situated to other property owners who were treated
more favorably. We affirmed the district court’s judgment in the first suit, see Lerch v. City of
Green Bay, 218 Fed. App’x 502 (7th Cir. 2007), and we affirm here as well.
Because Lerch did not respond to the defendants’ motion for summary judgment in
the manner required by Local Rule 56.2(b), the district court adopted the defendants’
proposed findings of fact. See E.D. WIS. LOC. R. 56.2(b)(2), (e). On appeal Lerch argues that
he complied by filing an affidavit and his own proposed findings of fact, but neither of
those documents provide the specific responses to the defendants’ proposed findings that
the local rules require. See id. Accordingly, our de novo review will rest on the defendants’
version of the facts. See Koszola v. Bd. of Educ. of the City of Chicago, 385 F.3d 1104, 1109 (7th
Cir. 2004).
Lerch has owned rental properties in Green Bay for approximately 30 years, and his
tenants often have complained to the Green Bay Inspection Department about the
conditions of their homes. In the past 15 years, he has received numerous citations for code
violations. Lerch’s current allegations arise from actions that the city took with respect to
properties he owned on Crooks and Klaus Streets. In January 2005 Lerch bought the Crooks
Street property knowing that it had been condemned and that the city had issued to the
previous owners a notice to raze or repair. After Lerch received a notice to vacate the
property in June 2005, the city razed the building on the Crooks Street property. As for the
Klaus Street property, following a November 2004 inspection the city sent Lerch a notice of
code violations giving him until December 6, 2004, to bring the property into compliance.
When Lerch did not fully comply with the notice by the deadline, the city issued him a
citation. Five months later, a city alderman complained that work was being done at the
Klaus Street property without a permit. The city conducted a second inspection and
confirmed that Lerch was violating a municipal code by making repairs and remodeling
without a permit. After the city issued him a raze or repair order, Lerch agreed to obtain
the necessary permits by January 31, 2007. When he failed to comply with the deadline or
request an extension, the city razed the building on the Klaus Street property.
Lerch argues that the defendants violated his equal protection rights by enforcing
housing codes against him, and not, he says, against the owners of properties with similar
code violations. It is difficult to succeed on a class‐of‐one equal protection theory; to prevail
No. 07‐3547 Page 3
Lerch must show that the defendants intentionally treated him differently from others
similarly situated, and that there is “no rational basis for the difference in treatment or the
cause of the differential treatment is a totally illegitimate animus.” See Maulding Dev’t, LLC
v. City of Springfield, 453 F.3d 967, 969‐70 (7th Cir. 2006) (quotation marks and citation
omitted); see also Vill. of Willowbrook v. Olech, 528 U.S. 562, 564‐65 (2000). Lerch must
demonstrate that the property owners the city treated differently from him were not just
similar, but “‘prima facie identical in all relevant respects.’” See Lauth v. McCollum, 424 F.3d
631, 634 (7th Cir. 2005) (quoting Purze v. Vill. of Winthrop Harbor, 286 F.3d 452, 455 (7th Cir.
2002)). The similarly situated test is a particularly high bar because “[v]arious factual traits,
circumstantial nuances, and peculiarities can set entities apart, rendering them, by virtue of
their differences, amenable to disparate treatment.” Racine Charter One, Inc. v. Racine Unified
Sch. Dist., 424 F.3d 677, 681 (7th Cir. 2005).
Lerch argues that the defendants violated his equal protection rights when they
razed the building on his Crooks Street property without giving him an opportunity to
correct the code violations, while they did provide such an opportunity to Dan Laes, the
owner of another condemned property. Laes submitted an affidavit stating that he bought a
property on Third Street knowing that it was condemned but that the city gave him time to
bring his property into code compliance. But as the district court found, Laes bought his
property from owners who had timely challenged the condemnation order, while the
previous owners of the Crooks Street property had not challenged its condemnation order.
This distinction alone is sufficient to show that Lerch and Laes were not similarly situated,
and gave the defendants a rational reason to treat their properties differently. See Ind. State
Teachers Assoc. v. Bd. of Sch. Comm’rs of the City of Indianapolis, 101 F.3d 1179, 1182 (7th Cir.
1996) (noting that the equal protection clause is inapplicable where “the government is
treating unequally two persons that are prima facie unequal in a rationally relevant
respect”).
Lerch also argues that his Klaus Street property is the only one that the city had ever
razed while work was underway to correct code violations. But the only property owner he
identifies as similarly situated is Lloyd Larscheid, who averred that the city has always
allowed him time to make repairs after issuing him raze or repair orders and has never
razed any of his buildings. Again, this assertion is insufficient to show that Larscheid and
Lerch are similarly situated; there could be any number of differences in the number or
nature of their respective violations that would justify their disparate treatment. See, e.g.,
Racine Charter One, Inc., 424 F.3d at 681.
Finally, Lerch argues that by submitting photographs of other properties that he says
were in worse condition than his own he has shown that he was not treated the same as
other property owners. We are in no position to determine from these photographs whether
No. 07‐3547 Page 4
the properties shown are “prima facie identical” to Lerch’s. See Lauth, 424 F.3d at 634. In
any event, the equal protection clause does not require “[c]omplete equality in
enforcement,” see id. at 633; Albiero v. City of Kankakee, 246 F.3d 927, 932 (7th Cir. 2001), and
Lerch has pointed to nothing to show that he was unfairly singled out for enforcement other
than his own unexplained and unsupported assertions that the city does not like him.
Accordingly, the district court correctly concluded that Lerch cannot prevail on a class‐of‐
one equal‐protection theory, and we AFFIRM its grant of summary judgment for the
defendants.
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ORI GINA
]n tbe Wniteb ~tates Ql:ourt of jfeberal Ql:Iaims
No. 14-229 C
Filed: December 5, 2014
NOT PUBLISHED FILED
****************************************
* DEC - 5 2014
*
MICHAEL HARRIS, * U.S. COURT OF
FEDERAL CLAIMS
*
Plaintiff, pro se, *
*
v. *
*
THE UNITED STATES, *
*
Defendant. *
*
*
****************************************
Michael Harris, Lake City, Florida, Plaintiff, prose.
Anna Bondurant Eley, United States Department of Justice, Civil Division, Washington, D.C.,
Counsel for the Government.
MEMORANDUM OPINION AND ORDER DENYING RECONSIDERATION
On August 22, 2014, Michael Harris ("Plaintiff') filed a Motion For Reconsideration
("Pl. 59(a) Mot.") of the July 30, 2014 Memorandum Opinion and Final Order in Harris v.
United States (Docket No. 7). For the reasons discussed herein, Plaintiffs Motion For
Reconsideration is denied.
I. RELEVANT BACKGROUND. 1
On December 1, 2000, Plaintiff filed a Complaint against Corrections Corporation of
America ("CCA") and Prison Realty Trust ("PRT") in the United States District Court for the
Middle District of Florida, Jacksonville Division ("District Court"), alleging that his employer,
CCA, engaged in employment discrimination in violation of Title VII of the Civil Rights Act of
1964, 42 U.S.C. § 200e et seq. See Harris v. Corr. Corp. of Am., No. 3:00-cv-1297 (M.D. Fla.
2004).
Prior to trial, the United States District Court required both parties to proffer stipulations,
in lieu of offering evidence at trial. Am. Comp!. 2. The District Court explained that the
proposed stipulation process to Plaintiff, who initialed the document to "show [his] approval."
Am. Comp!. 2. The Stipulated Agreement ("Agreement") contained background factual
information concerning Plaintiffs employment at CCA and the chronology of events leading up
to his termination. See generally Am. Comp!. App. 2. After both parties initialed the
Agreement, the District Court read the stipulations to the jury. 3/10/2004 Dist. Order 2. On
November 5, 2003, the jury returned a verdict for Plaintiff, finding that CCA "had retaliated
against Plaintiff for exercising his rights under Title VII of the Civil Rights Act of 1964," 42
U.S.C. § 2000e-5. 3/10/2004 Dist. Order I. On November 6, 2003, the District Court entered
judgment on the jury verdict.
On November 24, 2003, CCA filed a Renewed Motion For Judgment As A Matter Of
Law, pursuant to Fed. R. Civ. P. 50(a)(l), or, in the alternative, a Motion For New Trial or a
Motion To Alter Or Amend Judgment. On March 10, 2004, the District Court granted CCA's
November 24, 2003 Renewed Motion and found that Plaintiff failed to adduce admissible
evidence sufficient to establish the elements of an unlawful retaliation claim entitling to
damages, so the jury award was "based upon pure speculation." 3/10/2004 Dist. Order 6, 8, 12.
Consequently, the District Court vacated the November 6, 2006 Judgment for the Plaintiff.
3/10/2004 Dist. Order 14. On March 11, 2004, the District Court entered Judgment in favor of
CCA.
On April 9, 2004, Plaintiff filed a Notice Of Appeal in the District Court. On April 22,
2004, the District Court granted Plaintiffs April 9, 2004 Notice Of Appeal. On June 15, 2005,
the United States Court of Appeals for the Eleventh Circuit affirmed the District Court's
judgment in favor of CCA, as a matter of law. Harris v. Corr. Corp. of Am., 139 F. App'x 156
(11th Cir. 2005).
1
The relevant facts discussed herein were derived from: the April 8, 2014 Amended
Complaint ("Am. Comp!."), including appendices attached thereto ("Am. Comp!. App. 1-2");
the April 8, 2014 Notice Of Directly Related Cases ("Pl. Notice"); Plaintiffs December 1, 2001
Complaint filed in the United States District Court for the Middle District of Florida ("Dist.
Comp!."); CCA' s November 24, 2003 Renewed Motion For Judgment As A Matter Of Law or,
in the alternative, a Motion For New Trial or a Motion To Alter Or Amend Judgment
("11/24/2003 CCA Dist. Mot."); and various United States District Court for the Middle District
of Florida Orders ("_ _ Dist. Order").
2
In the seven to eight years that followed, "Plaintiff [] filed numerous post-trial motions
unsuccessfully seeking to reinstate the jury verdict." 7/23/2013 Dist. Order 1. 2
II, PROCEDURAL HISTORY.
On March 25, 2014, Plaintiff filed a Complaint in the United States Court of Federal
Claims, together with two Appendices: (1) the Pretrial Stipulations ("Comp!. App. B"); and
(2) verification that the Agreement was and part of the District Court's record.
The Pretrial Stipulations contained the following agreed-upon facts:
• Plaintiff is an African-American and a member of a protected class under Title
VII. Comp!. App. A 'i[ A.
• Plaintiff was employed by CCA at its correctional facility in Lake City,
Florida and supervised by Chief of Security Steve Lister from January 6, 1997
until his employment was terminated by Warden David Eads on April 17,
2000. Comp!. App. A 'i['i[ B, C, E.
• Plaintiff was promoted to Shift Supervisor in late July 1997 and remained in
that capacity until his termination. Comp!. App. A 'i[ I.
• From September 8, 1999 to May 8, 2000, Plaintiff filed "at least three"
discrimination claims against CCA with the United States Equal Employment
Opportunity Commission ("EEOC"). Comp!. App. A 'ID.
2
On August 22, 2007, Plaintiff filed a Motion For Relief For Fraud ("8/22/2007 Pl. Dist.
Mot."), alleging that CCA and the District Court Clerk's Office conspired to back-date CCA's
11/24/2003 post-trial motion to ensure that it was timely. 8/22/2007 Pl. Dist. Mot. 2-3. On
October 26, 2007, the District Court also denied Plaintiffs August 22, 2007 Motion For Relief
For Fraud ("10/26/2007 Dist. Order"), because the "record clearly and unequivocally establishes
that no fraud was perpetrated on the [District] Court and Plaintiff[.]" 10/26/2007 Dist. Order 2.
On June 26, 2013, Plaintiff filed a Motion To Compel Enforcement Of Court Order.
Therein, Plaintiff argued that, although the District Court's 3/10/2004 Order ruled in favor of
CCA on the Title VII retaliation claim, it ruled in Plaintiff's favor with respect to his Workers'
Compensation retaliation claim. On July 23, 2013, the District Court denied Plaintiffs June 26,
2013 Motion To Compel Enforcement Of Court Order for lack of jurisdiction. 712312013 Dist.
Order.
On August 8, 2013, Plaintiff filed a Motion For Reconsideration And Enforcement Of
Stipulated Fact Agreement challenging the District Court's July 23, 2013 Order and argued, for
the first time, that CCA violated the 11/3/2003 Pre-trial Statement when it filed the November
24, 2003 post-trial Motion For Judgment As A Matter Of Law. On October 10, 2013, the
District Court denied the Plaintiff's amended August 8, 2013 Motion for lack of jurisdiction, as
the case was on appeal.
3
• On September 16, 1999, Plaintiff was injured during his employment, was put
on leave from September 19, 1999 to March 13, 2000, and received "medial
and wage loss benefits from CCA's workers' compensation insurance carrier."
Compl. App. A if L, M.
• On December 27, 1999, while on leave, Plaintiff"went to work for the Florida
Department of Corrections" as a corrections officer, intending to "complete a
one-year probationary period of employment with the Florida Department of
Corrections and to thereafter quit his employment with CCA." Compl. App.
A ifif N-P.
• On March 13, 2000, Plaintiff returned to work at CCA. Compl. App. A if R.
• Over the following month, Warden Eads repeatedly attempted to discuss
Plaintiffs employment with the Florida Department of Corrections, but
Plaintiff refused to discuss the matter, because it was a "workers' comp
issue." Compl. App. A iii! R-U.
• On April 17, 2000, Warden Eads terminated Plaintiffs employment, because
of his unwillingness to provide the information requested. Compl. App. A
if V.
The March 25, 2014 Complaint alleges claims for: breach of contract; a violation of the
Seventh Amendment right to a jury trial; and a violation of the Fourteenth Amendment right to
due process. Compl. 1. The Complaint also alleges that CCA retaliated after he filed
discrimination claims and engaged in "fraud on the [c]ourt." Comp!. 1. Plaintiff seeks: a jury
trial to adjudicate a breach of the Pretrial Stipulations; enforcement of the Pretrial Stipulations;
and payment of damages for pain and suffering caused by CCA's and PRT's breach and for
"misleading the [District Court] into [taking] actions against [Plaintiff]." Comp!. 4.
The March 25, 2014 Complaint also alleges that CCA violated the Pretrial Stipulations by
filing the November 24, 2003 Renewed Motion For Judgment As A Matter Of Law, or in the
alternative, a Motion For New Trial or a Motion To Alter Or Amend Judgment. Comp!. 2. The
District Court also breached the Pretrial Stipulations by granting CCA's post-trial motion.
Comp!. 3-4; see also 3/10/2004 Dist. Order. The Complaint further alleges that the breach by
CCA and the District Court violated Plaintiff's Seventh Amendment rights and his right to due
process of law under the Fourteenth Amendment to the United States Constitution. Compl. 3. In
addition, the Complaint alleges that Plaintiff suffered considerable harm to his reputation for
appearing in court. Compl. 3-4. Finally, the Complaint alleges that the statute of limitations
does not apply in this case, because the District Court's judgment never became final, and CCA
remains in violation of the Pretrial Stipulations. Comp!. 4.
On April 8, 2014, Plaintiff filed an Amended Complaint ("Am. Compl.") to: correct a
citation; further clarify the breach of contract claim; and request appointment of counsel. On the
same day, Plaintiff filed a Notice Of Directly Related Cases, pursuant to Rules of the Court of
Federal Claims ("RCFC") 40.2, to inform the court of the prior litigation in the United States
District Court for the Middle District of Florida.
4
On May 20, 2014, the Government filed a Motion For Summary Dismissal ("Gov't
Mot.") pursuant to RCFC 12(b)(l), arguing that the United States Court of Federal Claims does
not have jurisdiction to adjudicate claims alleged in either the March 25, 2014 Complaint or
April 8, 2014 Amended Complaint. On July 30, 2014, the court granted the Government's
Motion and dismissed Plaintiffs case.
On August 22, 2014, Plaintiff filed a Motion For Reconsideration, pursuant to RCFC
59(a) ("PL 59(a) Mot."), and a Motion To Transfer to local district court in Florida ("PL Transfer
Mot."). On September 29, 2014 the Government filed a Response To Plaintiff's Motion For
Reconsideration. On November 21, 2014, the Government filed a Corrected Response To
Plaintiff's Motion For Reconsideration And To Alter And Amend Judgment ("Gov't Resp.").
On October 24, 2014, Plaintiff filed a Reply And Motion To Strike Defendant's
Response ("PL Reply").
III. STANDARD OF REVIEW FOR MOTION FOR RECONSIDERATION.
A motion for reconsideration must be supported "by a showing of extraordinary
circumstances which justify relief." Fru-Con Constr. Corp. v. United States, 44 Fed. CL 298,
300 (1999). The decision to grant or deny a motion for reconsideration lies within the discretion
of the court. See Yuba Natural Res., Inc. v. United States, 904 F.2d 1577, 1583 (Fed. Cir. 1990)
(holding that "the decision whether to grant reconsideration lies largely within the discretion of
the [trial] court"). A movant cannot prevail by "merely reasserting arguments which were
previously made and were carefully considered by the court." Id.; see also Bishop v. United
States, 26 CL Ct. 281, 286 (1992) (holding that reconsideration "is not intended to give an
unhappy litigant an additional chance to sway the court") (internal quotation marks and citation
omitted). To prevail on a motion for reconsideration, a movant must show that: an intervening
change in the controlling law has occurred; new evidence is now available; or, the motion is
necessary to prevent manifest injustice. Id. at 286.
IV. DISCUSSION.
A. Plaintiff's Argument.
Plaintiffs August 22, 2014 Motion For Reconsideration argues that the Stipulated
Agreement actually was a Title VII settlement agreement and that the United States Court of
Federal Claims has jurisdiction to entertain claims alleging breaches of Title VII settlement
agreements under Holmes v. United States, 657 F.3d 1303 (Fed. Cir. 2011) and VanDesande v.
United States, 673 F.3d 1342 (Fed. Cir. 2012). Pl. 59(a) Mot. at 3. According to Plaintiff,
Holmes held that a suit against the government alleging a breach of a settlement agreement is
"fundamentally a suit to enforce a contract" and therefore within this court's jurisdiction. PL
59(a) Mot. at 4. In addition, VanDesande held that a settlement agreement is a contract '"within
the meaning of the Tucker Act."' Pl. 59(a) Mot. at 4 (quoting Vandesande, 673 F.3d 1351).
Thus, Plaintiff argues that this court has jurisdiction over his breach of contract claim. PL 59(a)
Mot. at 5-6.
Plaintiff also claims that the court erred in dismissing his Seventh and Fourteenth
Amendment claims. PL 59(a) Mot. at 9-12. According to Plaintiff, McBryde v. United States,
5
299 F.3d 1357, 1361 (Fed. Cir. 2002) held that the use of the word "shall" generally makes a
statute money-mandating. Pl. 59(a) Mot. at 11. Since the Seventh and Fourteenth Amendments
contain the word "shall," they are money-mandating and the court erred in dismissing Plaintiffs
Seventh and Fourteenth Amendment claims. Pl. 59(a) Mot. at 11.
Next, Plaintiff argues that the court should reconsider its decision, because the district
court's judgment was not final. Pl. 59(a) Mot. at 13. According to Plaintiff, because "there was
never any pre-judgment interest added to the judgment in this [cJase[,]" the court "did not have
jurisdiction over the post-trial motions in this [c]ase." Pl. 59(a) Mot. at 12-13.
In addition, the Government violated RCFC 11, because the Government's attorneys
failed to sign the Government's September 29, 2014 Response. Pl. Reply at 9-10. Moreover,
electronic signatures are not allowed where the Government "cannot forward any e-mails to the
[c]ourt" and where the Government "[has not] made any notifications to [Plaintiff] to do so." Pl.
Reply at 10. Thus, Plaintiff argues that the court should strike the Government's September 29,
2014 Response. Pl. Reply at 10.
Finally, if the court does not reconsider its dismissal of Plaintiff's case on jurisdictional
grounds, Plaintiff requests that the court transfer this action to a court of competent jurisdiction
'"in the interest of justice.'" Pl. Transfer Mot. at 2 (quoting 28 U.S.C. § 1631); Pl. 59(a) Mot. at
14-15.
B. The Government's Response.
The Government responds that Plaintiffs breach of contract claim has no merit, because
"the Stipulated Agreement that forms the basis for [Plaintiffs breach of contract] claim is not a
Title VII settlement agreement." Gov't Resp. at 6 (emphasis omitted). The Stipulated
Agreement is "bereft of any language suggesting that [Plaintiff] and CCA have agreed to any
sort of settlement"; the stipulation was read to the jury at trial "so that the jury could determine
the outcome of the Title VII dispute between [Plaintiff] and CCA." Gov't Resp. at 6. The
Government adds that even if the Stipulated Agreement were a Title VII settlement agreement,
Holmes and VanDesande are not applicable, because these cases "do not stand for the
proposition that the Court of Federal Claims possesses broad jurisdiction to adjudicate any and
all contractual breach claims that might be related to Title VII settlement agreements." Gov't
Resp. at 6. "[B]oth cases still require, as a prerequisite to Tucker Act jurisdiction, that the
United States be a party to the alleged agreement." Gov't Resp. at 6 (emphasis omitted) (citing
Holmes, 657 F.3d at 1309). The Government was not a party to this contract, because "the
Stipulated Agreement is between Plaintiff and CCA only." Gov't Resp. at 8 (emphasis omitted).
"The district court's only role was to read those facts to the jury, which it did." Gov't Resp. at 8.
The Government then argues that the cases cited by Plaintiff in support of his Seventh
and Fourteenth Amendment claims do not stand for the proposition that the word "shall" makes a
statute money-mandating. Gov't Resp. at 8. These cases actually hold that "the use of the word
'shall' or similar language in connection with acts obligating the Government to pay money, has
a money-mandating effect." Gov't Resp. at 8 (citing McBryde, 299 F.3d at 1361). Because the
Seventh and Fourteenth Amendment do not use the word "shall" "in connection with acts
6
signifying any payment obligation on the part of the Government[,]" the court correctly held that
the Seventh and Fourteenth Amendments are not money-mandating. Gov't Resp. at 9.
The Government next claims that "[a]ny finality, or lack thereof, with respect to the
district court's decision ... has absolutely no bearing on the question of whether this [c]ourt
possesses subject matter jurisdiction to entertain [Plaintiff's] [C]omplaint." Gov't Resp. at 9.
The real issue is whether Plaintiff has any claim against the United States Government "based
upon any money-mandating source of law, or based upon any express or implied contract with
the United States." Gov't Resp. at 10. Because Plaintiff does not have such a claim, the court
correctly dismissed Plaintiff's Complaint. Gov't Resp. at 10.
Finally, the Government argues that transferring Plaintiff's case to any other venue is not
warranted. Gov't Resp. at 10. Under 28 U.S.C. § 1631, this court may transfer a case "when
three elements are met: (1) The transferring court lacks subject matter jurisdiction; (2) the case
could have been filed in the court receiving the transfer; and (3) the transfer is in the interest of
justice." Brown v. United States, 74 Fed. Cl. 546, 550 (2006). According to the United States
Court of Appeals for the Federal Circuit, the phrase '"if in the interest of justice' relates to claims
which are nonfrivolous and as such should be decided on the merits." Galloway Farms,
Inc. v. United States, 834 F.2d 998, 1000 (Fed. Cir. 1987). Here, Plaintiff "has not stated a
colorable breach of contract claim against any entity," he has not brought any claims that are
legally viable, and his defamation and fraud claims would be untimely under Florida law. Gov't
Resp. at 11-12 (citing FL. STAT. ANN. § 95.11(4)(g) (two-year statute of limitations for
defamation) and FL. STAT. ANN. § 95.11(3)0) (four-year statute of limitations for fraud)).
Transferring the case would not be in the interest of justice. Gov't Resp. at 10-11.
C. The Court's Resolution.
Plaintiff's August 22, 2014 Motion For Reconsideration argues that the Stipulated
Agreement was actually a Title VII settlement agreement and that the United States Court of
Federal Claims has jurisdiction to entertain claims alleging breaches of Title VII settlement
agreements. Pl. 59(a) Mot. at 3. As discussed in the July 30, 2014 Memorandum Opinion and
Final Order in Harris v. United States (Docket No. 7), the Stipulated Agreement was between
private parties: Plaintiff and Plaintiff's former employer, CCA. See Am. Comp!. App. 2. Even
assuming, arguendo, that the Agreement is a contract between the Government and Plaintiff, his
contract claim must still be dismissed for lack of jurisdiction, because the Agreement cannot
"fairly be interpreted as contemplating money damages for breach." Holmes, 657 F.3d at 1315.
The Agreement does not provide for payments, and nothing in the language contained therein
indicates money damages were contemplated as a remedy for breach. See Am Comp!. App. 2.
Plaintiff argues that the word "shall" found in the language of the Seventh and Fourteenth
amendments makes them money-mandating statutes. Pl. 59(a) Mot. at 9-12. Plaintiff is
incorrect, because the use of the word "shall" in the cases cited has a money-mandating effect
only in connection with acts obligating the Government to pay money. See McBryde, 299 F.3d
at 1361. Because the Seventh and Fourteenth Amendments do not use the word "shall" in
connection with the Government's obligation to pay money, the Seventh and Fourteenth
amendments are not money-mandating.
7
Plaintiffs October 24, 2014 Reply and Motion To Strike Government's Response argues
that the Government violated RCFC 11, because the Government's attorneys failed to properly
sign the Government's September 29, 2014 Response. Pl. Reply at 9-10. But, the RCFC does
not state that electronic signatures are disallowed for pro se cases. Appendix E of RCFC
prescribes the procedures governing electronic filings of cases to the court's system; it does not
prohibit electronic signatures on otherwise properly filed documents. See RCFC App. E. Thus,
Plaintiff fails to establish a legitimate ground for striking the Government's Response.
Finally, Plaintiff requests that the court transfer this action to a court of competent
jurisdiction "in the interest of justice," in the event that the court does not reconsider its dismissal
of Plaintiffs case on jurisdictional grounds. PL Transfer Mot. at 2. Under 28 U.S.C. § 1631,
this court may transfer a case "when three elements are met: (I) The transferring court lacks
subject matter jurisdiction; (2) the case could have been filed in the court receiving the transfer;
and (3) the transfer is in the interest of justice." Brown, 74 Fed. CL at 550. According to the
United States Court of Appeals for the Federal Circuit, the phrase '"if it is in in the interest of
justice' relates to claims which are nonfrivolous and as such should be decided on the merits."
Galloway Farms, 834 F.2d at 1000 (quoting 28 U.S.C. § 1631). "Frivolous claims include
'spurious and specious arguments' and 'distortion and disregard of the record and opposing
authorities, [which] indicate plainly that the present appeal does not rest on the razor's edge of
frivolity, but falls clearly on the side of the frivolous."' Id. (quoting Devices for Med,
Inc. v. Boehl, 822 F.2d 1062, 1068 (Fed. Cir. 1987). Here, Plaintiff's claims are frivolous,
because his Seventh and Fourteenth Amendment claims and his RCFC 11 claim concerning
electronic signatures are unsupported by case law or the RCFC. Plaintiff also fails to establish a
breach of contract--or that there is even a contract between him and the Government.
Therefore, transferring the case would not be in the interest of justice, and Plaintiffs Motion For
Transfer Of Case must be denied.
V. CONCLUSION.
For these reasons, the court has determined that Plaintiff did not establish a manifest error
oflaw or mistake of fact. See Bishop, 26 Cl. Ct. at 286. The court also has considered Plaintiffs
arguments in his Motion To Strike and finds them to be frivolous. Accordingly, Plaintiffs
August 22, 2014 Motion for Reconsideration and Octo 2014 Motion to Strike are denied.
IT IS SO ORDERED.
s
Judge
8
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678 F.Supp. 213 (1988)
FELLOWSHIP BAPTIST CHURCH, et al., Plaintiffs,
v.
Robert D. BENTON, et al., Defendants.
Civ. No. 81-546-C.
United States District Court, S.D. Iowa, C.D.
January 28, 1988.
Craig Hastings, Ames, Iowa, David Gibbs, Parma Heights, Ohio, for plaintiffs.
Thomas Miller, Atty. Gen. of State of Iowa, Merle Fleming, Asst. Atty. Gen. of State of Iowa, for defendants.
ORDER
STUART, District Judge.
On September 26, 1985, this Court held that the term "equivalent instruction" in the Iowa compulsory education statute and regulations governing nonpublic education is unconstitutionally vague and may not be used as a compulsory education requirement without further definition. Fellowship Baptist Church v. Benton, 620 F.Supp. 308 (D.C.Iowa 1985). The defendants appealed that ruling. While that appeal was pending, the state promulgated regulations entitled "Equivalent Instruction Standards," which became effective February 6, 1986. Iowa Admin.Code 670-63.1 to 63.4. These standards specify the minimum curriculum to be offered in grades one through eight, including for example courses in English, Mathematics and Science. Id. The state argues that these regulations render the vagueness challenge moot; plaintiffs contend that the statute is still unconstitutionally vague. The Eighth Circuit, 815 F.2d 485 (1987), remanded the action to this Court for further consideration in light of the newly adopted standards. On December 7, 1987, the Court gave the parties thirty (30) days within which to file briefs on the vagueness issue. The matter is now ready for ruling.
DISCUSSION
In order to determine whether a statute is unconstitutionally vague the Court must consider: (1) whether it gives a person of ordinary intelligence fair warning of what is prohibited, and (2) whether it provides explicit standards for those who enforce it. State v. Moorhead, 308 N.W.2d 60 (Iowa 1981). See also Grayned v. City of Rockford, 408 U.S. 104, 108, 92 S.Ct. 2294, 2298, 33 L.Ed.2d 222 (1972). "Literal exactitude or precision is not necessary. Due process requires no more than a reasonably *214 ascertainable standard of conduct." Knight v. Iowa District Court, 269 N.W.2d 430 (Iowa 1978).
In Fellowship Baptist Church v. Benton, supra, we held that the term "equivalent instruction" failed to give adequate notice to the ordinary man of what is prohibited by the statute. At that time, the Iowa Code, after imposing school attendance on children over seven and under sixteen years of age, provided an alternative:
In lieu of such attendance such child may attend upon equivalent instruction by a certified teacher elsewhere.
I.C. § 299.1 No further definition of "equivalent instruction" was provided. This Court accordingly found that the statute provided insufficient guidance to anyone wishing to comply with it and held the statute to be unconstitutionally vague.
Since that time, state regulations have become effective setting forth standards which define "equivalent instruction." These standards specify that the children must be taught by a certified teacher, must be taught the minimum curriculum as listed, and must fulfill specified minimum attendance requirements. The standards further provide that the teacher shall allocate institutional time as appropriate to the needs of the pupil. The local school board shall have the annual duty of determining whether these children are in fact receiving equivalent instruction by reviewing course work, test results, or by any other reasonable method. See Iowa Admin.Code 670-63.1 to 63.4.
In determining whether a state law governing private school attendance is constitutional the Court must apply a balancing test. "There is no doubt as to the power of a state, having a high responsibility for the education of its citizens, to impose reasonable regulations for the control and duration of basic education." Wisconsin v. Yoder, 406 U.S. 205, 213, 92 S.Ct. 1526, 1532, 32 L.Ed.2d 15 (1972). But before a school can be required to submit to these regulations, the state must place private schools on notice of the nature and extent of the necessary minimum standards. Johnson v. Charles City Comm. Schools Bd., 368 N.W.2d 74 (Iowa 1985). Additionally, the First Amendment entitles parents to educate their children at private religious schools they have established. See Johnson, supra at 76. "The same guarantees accord them the right to operate the school with minimal necessary supervision by the state." Id.
As the sensitive area of freedom of religion is involved, state regulation must not be so vague that uncertain meanings lead citizens to steer far wider from the unlawful zone than if the boundaries were clearly marked, Gravned v. City of Rockford, ibid 408 U.S. at 109, 92 S.Ct. at 2299, nor so extensive that the free exercise of religion is unduly burdened. See e.g. State v. Whisner, 47 Ohio St.2d 181, 351 N.E.2d 750 (1976) (regulation allocating instructional time almost to the minute held to unduly burden free exercise of religion). The new regulations avoid both of these constitutional prohibitions.
After considering the State's role in regulating private schools, the Court finds that the new standards provide sufficient notice to private schools of how to comply with the minimum regulations and provide sufficiently explicit standards for those who enforce it. Whatever vagueness may inhere in the statute as now defined by the regulations appears "reasonably necessary to embrace all its legitimately intended objectives without creating any encyclopedic and unwieldy" statute. Fantasy Book Shop, Inc. v. City of Boston, 652 F.2d 1115, 1123 (1st Cir.1981). Accordingly, the Court holds that the statute is no longer unconstitutionally vague.
IT IS SO ORDERED.
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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
June 20, 2007
No. 07-10041 THOMAS K. KAHN
Non-Argument Calendar CLERK
________________________
BIA No. A77-384-704
KIKI TURINO HANCOCH RUNTU,
Petitioner,
versus
U.S. ATTORNEY GENERAL,
Respondent.
________________________
Petition for Review of a Decision of the
Board of Immigration Appeals
_________________________
(June 20, 2007)
Before BLACK, CARNES and MARCUS, Circuit Judges.
PER CURIAM:
Under 8 C.F.R. 208.16(b)(2), an immigrant seeking a withholding of
removal need not provide evidence that he would be singled out individually for
persecution if he establishes: (1) that there is a pattern or practice in his home
country of persecution of a group of persons similarly situated to the applicant on
account of religion, and (2) his inclusion in such a group of persons will make it
more likely than not that his or her life or freedom would be threatened upon return
to that country. Id.
The Board of Immigration Appeals denied Kiki Turino Hancoch Runtu’s
request for asylum because Runtu failed to demonstrate that extraordinary
circumstances or changed country conditions justified his untimely filing. We do
not have jurisdiction to review that determination. Chacon-Botero v. U.S. Atty.
Gen., 427 F.3d 954, 957 (11th Cir. 2005). The BIA rejected Runtu’s request for
withholding because the Immigration Judge found that his testimony of past
persecution was not credible. The determination that Runtu was not a credible
witness is supported by substantial evidence. See Forgue v. United States Att’y
Gen., 401 F.3d 1282, 1286 (11th Cir. 2005).
However, neither the BIA nor the IJ addressed Runtu’s alternative argument,
which he claims is supported by various institutional reports and news articles, that
there is a pattern or practice in Indonesia of persecuting Christians. Runtu’s
credibility is not relevant to the question of whether the information contained in
those reports is accurate or sufficient to satisfy the high burden of demonstrating
2
that a Christian is more likely than not to face persecution on return to Indonesia.
For that reason, we grant Runtu’s petition for review with respect to the
withholding of removal claim based on a pattern or practice of persecution. On
remand, the BIA should address the limited question of whether Runtu has
satisfied the requirements of 8 C.F.R. 208.16(b)(2)(i)–(ii).
PETITION DISMISSED IN PART, DENIED IN PART, GRANTED IN
PART, AND REMANDED FOR FURTHER PROCEEDINGS.
3
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FILED IN
1st COURT OF APPEALS
HOUSTON, TEXAS
12/29/2014 10:35:32 AM
CHRISTOPHER A. PRINE
Clerk
EXHIBIT 1
NO.Ol-14-00904-CV
IN THE FIRST COURT OF APPEALS
HOUSTON, TEXAS
GRAMERCY ADVISORS LLC, ET AL, Appellants
vs.
R.K. LOWRY, JR., ET AL., Appellees.
Interlocutory Appeal from the so" Judicial District Court, Harris County, Texas
Cause No. 2008-74262
DANIEL M. HIBSHOOSH'S MOTION FOR ADMISSION PRO HAC VICE
TO THE HONORABLE mDGE OF SAID COURT:
I, Daniel M. Hibshoosh, file this Motion For Admission Pro Hac Vice before
this Court, under the authority of the Rules Governing Admission to the Bar of
Texas, Rule XIX.
I. FACTS
1. I am associated with David C. Mattka, who will personally participate
in the trial of this case. David C. Mattka is a practicing attorney and a member of
the State Bar of Texas. His State Bar of Texas card number is 13231500 and his
office address, telephone number, facsimile number, and e-mail address are:
DANIEL HIBSHOOSH'S MOTION FOR ADMISSION PRO HAC VICE PAGE 1
MHDocs 5824829_1 10862.1
Munsch Hardt Kopf & Harr, P.C., Frost Bank Tower, 401 Congress Avenue, Suite
3050, Austin, Texas 78701; 512-391-6100; 512-391-6149; and
[email protected].
2. The cases and causes in which I have appeared or sought leave to
appear in Texas courts in the last two years are: Cause No. 2008-74262, the
underlying case for the appeal now before this Court.
3. I am licensed to practice law in the following jurisdictions: the Bar of
the State of New York (2004); the United States District Court for the Southern
District of New York (2004); the United States Tax Court (2013); and the United
States Court of Appeals for the Second Circuit (2012). I am in good standing in
each of those jurisdictions.
4. I have not been the subject of disciplinary action in the last five years
by the bar or courts of any jurisdiction in which I have been licensed, and no
discipline has ever been imposed against me in any jurisdiction.
5. I have not been denied admission to the courts of any state or to any
federal court in the preceding five years.
6. I am familiar with the State Bar Act, the State Bar Rules, and the
Texas Disciplinary Rules of Professional Conduct governing conduct of members
of the State Bar of Texas. I will at all times abide by and comply with those rules,
and I have not withdrawn as counsel from the proceeding.
DANIEL HIBSHOOSH'S MOTION FOR ADMISSION PRO HAC VICE PAGE 2
MHDocs 5824829_1 10862.1
7. My office address, telephone number, and facsimile number are:
Daniel M. Hibshoosh
O'Shea Partners LLP
521 Fifth Avenue, zs" Floor
New York, New York 10175
Tel.: (212) 682-4426
Fax: (212) 682-4437
8. The Non-Resident Acknowledgement Letter dated December 10,
2014, from the Board of Law Examiners is attached to this Motion as Exhibit A.
II. PRAYER
9. For these reasons, I ask this Court to grant my Motion For Admission
Pro Hac Vice and allow me to appear before this Court until the conclusion of this
case.
DANIEL HIBSHOOSH'S MOTION FOR ADMISSION PRO HAC VICE PAGE 3
MHDocs 5824829_1 10862.1
Dated: December 15,2014
Respectfully submitted,
O'SH~R~:LP
By: ~
Daniel M. Hibshoosh
521 Fifth Avenue, 25th Floor
New York, New York 10175
Email: [email protected]
(212) 682-4426 (telephone)
(212) 682-4437 (facsimile)
MUNSCH HARDT KOPF & HARR, P.C.
BY:~-
David C. Mattka (TSB No. 13231500)
401 Congress Avenue, Suite 3050
Austin, Texas 78701
Email: [email protected]
(512) 391-6100 (telephone)
(512) 391-6149 (facsimile)
Attorneys for Appellants Gramercy Advisors
LLC, Gramercy Asset Management LLC,
Gramercy Local Markets Recovery Fund
LLe, Gramercy Financial Services LLC
DANIEL HIBSHOOSH'S MOTION FOR ADMISSION PRO HAC VICE PAGE 4
MHDocs 5824829_1 10862.1
VERIFICATION
STATE OF NEW YORK§
§
NEW YORK COUNTY §
BEFORE ME, the undersigned notary, on this day personally appeared
Daniel M. Hibshoosh, who being by me first duly sworn, upon his oath stated that
the Motion For Admission Pro Hac Vice was made based on his personal
knowledge and that the facts contained therein are true and correct.
FURTHER AFFIANT SA YETH NAUGHT.
Signed this 15th day of December 2014.
Daniel M. Hibshoosh
SUBSCRIBED AND SWORN TO BEFORE ME, the
this 15th day of December 2014.
Notary Public - State of New York
0)&1-; i
NO. 01DE6255959
Qualifled in Kings
My Commission Expires
coun~1
vt -
~/b)
My commission expires:
DANIEL HIBSHOOSH'S MOTION FOR ADMISSION PRO HAC VICE PAGE 5
MHDocs 5824829_1 10862.1
CERTIFICATE OF SERVICE
As required by Texas Rule of Appellate Procedure 6.3 and 9.5, I certify that
I have served this document on all parties, which are listed below, on December
1/L, 2014 as follows:
David R. Deary via e-filing and email
[email protected]
W. Ralph Canada, Jr.
[email protected]
Wilson Wray
[email protected]
Tyler Simpson
[email protected]
Lowsinsohn Flegel Deary, LLP
12377 Merit Drive, Suite 900
Dallas, Texas 75251
David C. Mattka
DANIEL HIBSHOOSH'S MOTION FOR ADMISSION PRO HAC VICE PAGE 6
MHDocs 5824829_110862.1
EXHIBIT A
12-10-2014 04:12pm From- T-614 P.001/001 F-145
Board of Law Examiners
Apponned by the Supreme Court oft I!JQlJl
Nan-Resident Acknowledgment Letter
December 1O~2014
DANIEL M HlBSHOOSH
O'SHEA PARTNERS LLP
521 5TH AVENUE 25TH FL.
NEW YORK NY 10175-
Application Received: 12/9114
Cause/Texas Court of Record: Ol-14-00904-CV FIRST COURT Ol~APPEALS
FROM: Angus Tilney, Licensure Analyst. 512-463-5409
This letter acknowledges receipt of your Application for Pro Hac Vice admission and serves as
your Proof of Payment of Fee.
Filing the Application for Pro Hac Vice Admission and fee is the mandatory first step in your
request for permission to participate in proceedings in a Texas Court. The next step is to file a
sworn motion, in compliance with Rule XIX of the current Rules Governing Admission to the.
Bar of Texas, in the Texas Court in which you request to participate, which must be
accompanied by this acknowledgment letter. The decision to grant or deny your application is
ultimately made by the Texas Court in which you request to participate.
Majljns Addrs;S$ Street Address
PQS~Office ao>: 134S6 ".I.p~on.: 5 12-46l·16~1 F.cslmil~:511-463-5300 W.b5i'.: w_.bl.,$l~'.,IX."' 2.01 Wes~ 14th ScrCCI, 5th FI or
Austin, TelCltS7871 hHS6 Austin, Texas 78701
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IN THE COURT OF CRIMINAL APPEALS OF TENNESSEE
AT KNOXVILLE FILED
JULY 1998 SESSION
April 28, 1999
Cecil Crowson, Jr.
Appellate C ourt Clerk
STATE OF TENNESSEE, )
)
Appellee, ) No. 03C01-9711-CC-00502
)
) Rhea County
v. )
) Honorable Buddy D. Perry, Judge
)
ROBERT PATTON ) (Assault)
a/k/a RED PATTON, )
)
Appellant. )
For the Appellant: For the Appellee:
Philip A. Contra John Knox Walkup
District Public Defender Attorney General of Tennessee
and and
Jeffrey Harmon Clinton J. Morgan
Assistant Public Defender Assistant Attorney General of Tennessee
200 Betsy Pack Dr. 425 Fifth Avenue North
P.O. Box 220 Nashville, TN 37243-0493
Jasper, TN 37347
James Michael Taylor
District Attorney General
and
Will Dunn
Assistant District Attorney General
265 Third Avenue
Dayton, TN 37321
OPINION FILED:____________________
AFFIRMED
Joseph M. Tipton
Judge
OPINION
The defendant, Robert Patton a/k/a “Red” Patton, appeals as of right
following his conviction by a jury in the Rhea County Circuit Court for assault, a Class A
misdemeanor. He was originally sentenced to eleven months and twenty-nine days
confinement, however the trial court modified the sentence to six months confinement
in the Rhea County Jail, with the remainder suspended. On appeal, the defendant
contends that (1) the trial court erred by allowing into evidence irrelevant and prejudicial
testimony regarding the reaction of young children who witnessed the altercation in
issue and (2) the trial court erred by not complying with the sentencing statutes and by
not ordering a sentence alternative to confinement. We affirm the judgment of
conviction.
The defendant’s conviction stems from events occurring at Teddy Smith’s
home. The defendant went to Mr. Smith’s home in search of his girlfriend, Janie
Douglas, in order to retrieve keys to his trailer from Ms. Douglas. When Mr. Smith
asked the defendant to leave, an altercation ensued. The defendant claimed that Mr.
Smith started the altercation, however witnesses for the state testified that the
defendant started the altercation. In any event, a fight ensued, and the defendant was
arrested. At trial, four witnesses testified that the defendant hit Mr. Smith.
I. ADMISSION OF IRRELEVANT AND
PREJUDICIAL TESTIMONY
The defendant first contends that the trial court erred by allowing into
evidence testimony from state’s witnesses regarding the reaction of several small
children who witnessed the altercation. He contends that the evidence is irrelevant and
prejudicial. See Tenn. R. Evid. 401, 403. The state argues that the defendant did not
2
properly object to the testimony at trial and that the admission of the evidence is
harmless in light of the other proof against the defendant.
According to Rule 401, Tenn. R. Evid., evidence is relevant if it has “any
tendency to make the existence of any fact that is of consequence to the determination
of the action more probable or less probable than it would be without the evidence.”
Relevant evidence may still be excluded “if its probative value is substantially
outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the
jury . . . .” Tenn. R. Evid. 403. The trial court has discretion in determining whether
evidence meets the test for relevancy. State v. Forbes, 918 S.W.2d 431, 449 (Tenn.
Crim. App. 1995). Assessing the probative value and danger of unfair prejudice
regarding the evidence also falls within the trial court’s discretion. State v. Burlison, 868
S.W.2d 713, 720-21 (Tenn. Crim. App. 1993). This court will only reverse a trial court’s
decision if the trial court abused its discretion. State v. Williamson, 919 S.W.2d 69, 78
(Tenn. Crim. App. 1995).
The evidence the defendant contests relates to the testimony of state’s
witnesses regarding the reaction of several small children who witnessed the fight. The
state asked three witnesses to describe the reaction of the children, and the witnesses
stated that the children were screaming and crying and were scared. The record
reflects that the defendant’s attorney objected to the testimony on the basis of
relevance, but the trial court overruled the objection.
We agree with the defendant that the evidence is irrelevant. In fact, the
trial court acknowledged as much during the motion for a new trial. However, the error
is harmless in light of the other evidence presented against the defendant, which
included four witnesses testifying that the defendant attacked the victim. T.R.A.P.
36(b); Tenn. R. Crim. P. 52(a).
3
4
II. SENTENCING
The defendant contends that the trial court did not comply with statutory
sentencing procedures and that the trial court erred by denying sentencing alternatives.
Specifically, he argues that the trial court did not state on the record its consideration of
relevant sentencing principles, including enhancement and mitigating factors. He also
argues that a sentence ordering him to pay a fine or restitution, a suspended sentence,
a split sentence or work release would be more appropriate. The state contends that
the defendant was properly sentenced.
Appellate review of misdemeanor sentencing is de novo on the record
with a presumption that the trial court’s determinations are correct. T.C.A. §§ 40-35-
401(d), -402(d). As the Sentencing Commission Comments to T.C.A. § 40-35-401(d)
note, the burden is now on the appealing party to show that the sentence is improper.
We note that the law provides no presumptive minimum for misdemeanor sentencing.
See, e.g., State v. Creasy, 885 S.W.2d 829, 832 (Tenn. Crim. App. 1994). However, in
misdemeanor sentencing, the trial court must consider the purposes and principles of
the Criminal Sentencing Reform Act of 1989. T.C.A. § 40-35-302(d).
At the sentencing hearing, the defendant testified that he was employed
by Straight Line Masonry Company and Goodman’s Air Conditioning. He testified that
he had not had any trouble with the victim since the offense. He assured the trial court
that if he received probation, he would meet with his probation officer and comply with
any requests made of him.
A presentence report was introduced into evidence. It reflects that the
defendant has nine prior misdemeanor convictions for such offenses as public
intoxication, disorderly conduct, marijuana possession, driving on a suspended license,
and driving on a revoked license. At the conclusion of the sentencing hearing, the trial
5
court sentenced the defendant to eleven months and twenty-nine days confinement. At
the motion for new trial hearing, however, the trial court modified the defendant’s
sentence to six months confinement with the remainder suspended.
Upon a review of the record, we believe that the trial court complied with
the sentencing statutes. See State v. Troutman, 979 S.W.2d 271, 274 (Tenn. 1998)
(“while the better practice is to make findings on the record when fixing a percentage of
a defendant’s sentence to be served in incarceration, a trial court need only consider
the principles of sentencing and enhancement and mitigating factors in order to comply
with the legislative mandates of the misdemeanor sentencing statute”). The record
shows that the trial court considered the defendant’s lengthy criminal history, which
included nine misdemeanor convictions. This criminal history more than justifies the
defendant’s sentence and the manner in which it is to be served. We believe that the
defendant has failed to demonstrate that the trial court’s sentence is erroneous.
In consideration of the foregoing and the record as a whole, the judgment
of conviction is affirmed.
__________________________
Joseph M. Tipton, Judge
CONCUR:
_________________________
Gary R. Wade, Presiding Judge
_________________________
David H. Welles, Judge
6
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976 F.2d 737
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.Daniel SILVA, Petitioner-Appellant,v.B.J. BUNNELL, Superintendent; James Rowland; DanielLungren, Respondents-Appellees.
No. 90-56313.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted June 1, 1992.Filed Sept. 23, 1992.Decided Sept. 23, 1992.As Amended Dec. 7, 1992.
1
Before D.W. NELSON and DAVID R. THOMPSON, Circuit Judges, and PANNER, District Judge.*
2
MEMORANDUM**
3
Petitioner, Daniel Silva, appeals a district court judgment dismissing his petition for a writ of habeas corpus. Petitioner contends that the evidence presented at his 1976 murder trial was insufficient to sustain a conviction. He also assigns as error the state trial court's refusal to grant a new trial based on (i) newly discovered evidence and (ii) police and prosecutorial misconduct. As an alternative to the issuance of a writ of habeas corpus, petitioner requests a new trial or an evidentiary hearing. We affirm the judgment of the district court.
FACTS AND PROCEDURAL HISTORY
4
I. The murder conviction.
5
On the evening of Sunday, February 1, 1976, Stella Chavez was celebrating her birthday with friends in the living room of her home in Bell, California. As a favor to her friend, Bertha Medina, Chavez was babysitting the child of Edward Garcia, petitioner's co-defendant. Shortly after 9:00 p.m., two men came to Chavez's house and asked for someone named "Yolanda" or "Yoli." They then proceeded through the screen door and fired several shots into the room. During the shooting, one of the attackers went briefly into a bedroom in the back of the house. Chavez was hit by gunfire and died on February 6, 1976. The murder was witnessed by Mary Briones, Connie Estrada, Chavez's 11-year-old sister (Connie), and Henry Estrada, Sr., Chavez's father (Estrada).
6
The shooting was apparently the result of gang violence. Petitioner and Garcia were members of the 18th Street Gang. Medina was also a member of the 18th Street Gang. Medina testified that Chavez had been a member of The Hazards, a rival gang.
7
Following the shooting, petitioner and Garcia were arrested and charged with one count of first-degree murder with use of a firearm (Cal.Pen.Code §§ 187, 12022.5) and two counts of assault with a deadly weapon (Cal.Pen.Code § 245(a)). The three eye-witnesses to the shooting, Briones, Connie, and Estrada, were shown photographs of suspects and attended police line-ups. Briones was shown police photographs on two occasions, but picked out petitioner's photograph only on the second occasion. She attended two line-ups, but identified petitioner only at one line-up. Connie attended a line-up, but was too scared to make an identification. She did, however, identify petitioner at the preliminary hearing. Estrada attended a line-up, but did not identify petitioner. Briones, Connie, and Estrada each identified petitioner at the trial as the killer.
8
Medina's testimony at trial placed petitioner at the Chavez home at or near the time of the shooting. She stated that, shortly before the shooting, she accompanied petitioner and Garcia to Chavez's house to retrieve Garcia's child. Medina further related that petitioner and Garcia had remained in the car while she went to get the baby, after which they all returned to her house without incident. Witnesses at the Chavez house, however, indicated that Medina picked up the child at approximately 9:00 p.m., and that the killers arrived shortly after she left.
9
On July 23, 1976, a jury convicted petitioner and Garcia on all counts.
10
II. Petitioner's motion for new trial.
11
Following petitioner's conviction, Mario Borge and Nicholas Avila went to the office of petitioner's attorney, Earl Siddall, and confessed to the murder. Siddall tape recorded the confessions. He then moved for a new trial on the grounds that the confessions constituted newly discovered exculpatory evidence. The motion was supported by the signed declaration of Borge admitting his responsibility for the murder.
12
The hearing on petitioner's motion began on October 1, 1976. Borge was called as a defense witness and, against the advice of his attorney, authenticated the tape-recorded confession he had made at Siddall's office and identified the murder weapon. On cross-examination, Borge testified that petitioner and Garcia belonged to his gang and were his "home boys." He further testified that he did not expect a harsh sentence because he was only 15 years old at the time of the shooting. Borge also indicated that he did not hear anyone ask for "Yolanda," nor did he or Silva enter the back of the house during the shooting.
13
The court adjourned following Borge's testimony and the hearing was continued until the following week. At the request of the prosecutor, Deputy District Attorney Wheeler, the court admonished all parties that Borge could not be questioned further without his lawyer present.
14
Borge soon recanted his confession under somewhat unusual circumstances. On October 7, 1976, Detective Marvel of the Los Angeles Police Department informed Wheeler that he was investigating another gang incident in which petitioner was a suspect. Wheeler informed him that Borge had confessed to the Chavez murder, but that he believed the confession was fabricated. Detective Marvel decided to question Borge, indicating that he would share with Wheeler any information he learned about the Chavez case. Wheeler provided Marvel with Borge's address.
15
Marvel met with Borge and told him that the weapon used in the Chavez murder had also been used in a another murder committed in October 1975. Marvel further explained that, because Borge had confessed to the Chavez murder, he would also be held accountable for the October 1975 murder. Although Marvel's statements about the murder weapon and the impending prosecution against Borge were false, his tactics were effective. Borge promptly recanted his confession.
16
Marvel arrested Borge on a perjury charge and brought him to Wheeler's office. Notwithstanding the court order restricting attorney access to Borge, Wheeler met with Borge to discuss his recantation. Wheeler told Borge that Marvel had lied to him, and assured him that he would not be prosecuted for the October 1975 murder. Following his discussion with Wheeler, Borge understood that Marvel had deceived him, and that the Chavez murder weapon had not been used in a previous murder. Borge nevertheless maintained his innocence. Wheeler tape-recorded Borge's recantation.
17
Additional proceedings on petitioner's motion for new trial were held on October 8, 12, 15, and 18, 1976. At the October 8 session, Borge took the stand and denied killing Chavez. Regarding his confession, Borge testified that he thought he would do less time on a murder charge than petitioner or Garcia. Avila, Borge's compatriot, was also called to the stand. Avila refused to testify about the Chavez murder on Fifth Amendment grounds. Avila's tape-recorded confession was played in court.
18
Petitioner also presented testimony about the murder weapon. On September 30, 1976, a youth named Frank Villareal, acting at the direction of Borge, brought a .38 caliber revolver to the office of petitioner's attorney. Villareal testified that the gun was buried in the basement of the Avila home. The parties stipulated that the .38 revolver was the murder weapon.
19
The court denied petitioner's motion for new trial on the grounds that petitioner had failed to establish that his newly-discovered evidence would have altered the outcome of the trial.
20
III. The California appeals.
21
Petitioner appealed the trial court's decision to the California Court of Appeal. He argued that the denial of his new trial motion was erroneous in light of (i) Borge's confession and (ii) police and prosecutorial misconduct surrounding Borge's recantation. On October 27, 1977, the Court of Appeal affirmed petitioner's conviction in a lengthy, unpublished opinion.1 Petitioner then filed a petition for hearing with the California Supreme Court raising the same issues which had been presented to the Court of Appeal. Petitioner, in pro per, filed a supplemental brief reiterating the arguments of his attorney and challenging the sufficiency of the evidence to support his conviction. The petition for hearing was denied on December 22, 1977.
22
IV. Federal habeas proceedings.
23
On November 14, 1989, petitioner filed a petition for a writ of habeas corpus in the United States District Court for the Central District of California. He alleged that his federal constitutional rights had been denied when his motion for a new trial was denied and when he was convicted of murder based on insufficient evidence. Magistrate Judge Joseph Reichman filed a Report and Recommendation in which he recommended that the district court deny habeas relief.
24
On May 23, 1989, United States District Judge Harry L. Hupp adopted the magistrate judge's recommendation and entered a judgment dismissing the petition. The instant appeal followed.
STANDARD OF REVIEW
25
The decision whether to grant or deny a petition for habeas corpus is reviewed de novo. United States v. Popoola, 881 F.2d 811, 812 (9th Cir.1989); Norris v. Risley, 878 F.2d 1178, 1180 (9th Cir.1989). "To the extent it is necessary to review findings of fact, the clearly erroneous standard applies." Norris, 878 F.2d at 1180.
26
In reviewing a district court's grant or denial of a habeas corpus petition, state court factual conclusions are entitled to a presumption of correctness under 28 U.S.C. § 2254(d), unless it appears that the state court proceeding was flawed for one of the reasons set forth at § 2254(d)(1)-(7). Sumner v. Mata, 449 U.S. 539, 550 (1981). This presumption does not attach, however, to a state court's resolution of mixed questions of fact and law. See Hamilton v. Vasquez, 882 F.2d 1469, 1471 (9th Cir.1989).
27
"A habeas petitioner is entitled to an evidentiary hearing if he has alleged facts which, if proven, would entitle him to relief and he did not receive a full and fair evidentiary hearing in state court." Norris, 878 F.2d at 1180. The decision to deny an evidentiary hearing is reviewed for abuse of discretion. United States v. Watts, 841 F.2d 275, 277 (9th Cir.1988).
28
When a reviewing court must consider the sufficiency of the evidence to support a verdict, "the relevant question is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Jackson v. Virginia, 443 U.S. 307, 319 (1979) (emphasis in original); Gordon v. Duran, 895 F.2d 610, 612 (9th Cir.1990).
29
A trial court is not required to grant a motion for a new trial based on the mere existence of newly discovered evidence. Instead, the proper standard is the "probability of acquittal" standard--that is, "whether the new evidence would probably produce an acquittal." Quigg v. Crist, 616 F.2d 1107, 1112 (9th Cir.) (citation omitted), cert. denied, 449 U.S. 922 (1980). Petitioner carries a significant burden to show that the trial court abused its discretion in denying the motion for a new trial. United States v. Shaffer, 789 F.2d 682, 687 (9th Cir.1986).
DISCUSSION
30
I. The evidence at trial was sufficient to sustain a conviction.
31
Petitioner contends that the three eye-witnesses to the murder, Briones, Connie, and Estrada, failed to make a reliable identification of him as the killer. Accordingly, he argues that the evidence was too weak to support a conviction under Neil v. Biggers, 409 U.S. 188 (1972).
32
In Neil, a case involving the reliability of an allegedly suggestive identification procedure, the Supreme Court set forth several factors to be considered in evaluating the reliability of identification testimony. Those factors include:
33
the opportunity of the witness to view the criminal at the time of the crime, the witness' degree of attention, the accuracy of the witness' prior description of the criminal, the level of certainty demonstrated by the witness at the confrontation, and the length of time between the crime and the confrontation.
34
Id. at 199-200. The Court did not discuss the relative weight to be accorded each factor, but observed that the central question before it was whether the identification evidence could be considered reliable under "the totality of the circumstances." Id.
35
When examined in light of the Neil criteria, the identification testimony of Briones, Connie, and Estrada passes muster. All three individuals witnessed various portions of the shooting incident from close range. Briones identified petitioner at a police line-up; Connie identified him at the preliminary hearing. At the trial all three witnesses made an unequivocal identification of petitioner as the killer. Reasonable jurors could regard the fact that petitioner was identified by three witnesses, rather than by one or two, as enhancing the reliability of the identification testimony. That the identification testimony was consistent with other evidence presented at the trial, such as Medina's testimony that petitioner and Garcia were at the Chavez home shortly before the murder, similarly enhanced its reliability. Finally, petitioner has presented no compelling evidence that the identification procedures employed by the police before the trial were unduly suggestive. Therefore, there is no merit to petitioner's contention that the identification evidence was so unreliable as to offend due process.
36
The bulk of petitioner's argument focuses on various weaknesses in the identification testimony. Such questions of credibility are reserved for the trier of fact, not the reviewing court. Viewing the evidence in the light most favorable to the prosecution, reasonable jurors could have found beyond a reasonable doubt that petitioner and his co-defendant were responsible for the Chavez murder. Jackson v. Virginia, 443 U.S. 307, 319 (1979).
37
II. The state trial court was not required to grant petitioner's new trial motion because of newly discovered evidence.
38
Petitioner contends that the trial court was required to grant his motion for new trial based on newly discovered evidence; namely, the confessions of Borge and Avila. Petitioner discounts the effect of Borge's recantation arguing that a recantation, of testimony must be viewed with suspicion, particularly where it is the result of police and prosecutorial coercion. Petitioner also points out that Avila never recanted his tape-recorded confession.
39
The state trial court found that the confessions of Borge and Avila, when viewed in light of Borge's recantation and the other evidence presented at the hearing, did not establish the probability of an acquittal. Quigg, 616 F.2d at 1112. The trial court was within its discretion in denying petitioner's motion.
40
The record contains significant evidence that the confessions of Borge and Avila were fabrications. Both were members of the 18th Street Gang and considered petitioner and Garcia to be their "home boys." Borge testified that he thought he would get a lighter sentence than petitioner or Garcia because of his youth. Finally, Borge's recounting of the shooting conflicted with the testimony of several trial witnesses. The trial court reasonably could have concluded that the confessions of Borge and Avila, when considered in light of all the evidence, were not credible. Because there has been no showing that the state court proceedings were inadequate for any of the reasons set forth at 28 U.S.C. § 2254(d)(1)-(7), the trial court's factual determination is presumptively correct. 28 U.S.C. § 2254(d). See also Marshall v. Lonberger, 459 U.S. 422, 434 (1983) ("Title 28 U.S.C. § 2254(d) gives federal habeas courts no license to redetermine credibility of witnesses whose demeanor has been observed by the state trial court, but not by them.").
41
Petitioner's assertion that the trial court erroneously permitted evidence of Borge's recantation is without merit. There is little doubt that Borge's initial recantation was, as petitioner contends, the product of Detective Marvel's deception. However, Borge stood by his statement even after Wheeler had assured him that he would not be prosecuted for the October 1975 murder. At the continuation of the hearing on the new trial motion, Borge testified to his understanding that he would not be charged with two murders. Under the circumstances, it was not unreasonable for the trial court to conclude that any coercive influence resulting from Marvel's misrepresentations was dispelled following Borge's discussion with Wheeler. As both parties regard this conclusion as a determination of fact, it too is presumed correct under § 2254(d).
42
Based on the foregoing, the state trial court's finding that petitioner's newly discovered evidence did not warrant a new trial was based squarely on its determination of factual issues. The trial court's factual findings are not clearly erroneous. Petitioner has not established that the new evidence presented at this hearing would probably have produced an acquittal. Petitioner has not met his burden. Therefore, the district court correctly denied habeas relief.
43
III. The state trial court was nor required to grant petitioner's new trial motion because of police and proseccutorial misconduct.
44
Petitioner contends that Detective Marvel committed misconduct when he lied to Borge about the October 1975 murder, and that prosecutor Wheeler committed misconduct when he violated the trial court's order by meeting with borge without other counsel present. Petitioner argues that the misconduct of Marvel and Wheeler rendered Borge's recantation inherently untrustworthy. He concluses that the coercive influences brought to bear on Borge were not dispelled by subsequent events and, for this reason, it was error for the trial court to consider Borge's recantation.2
45
Petitioner's argument differs little from that raised in support of his second assignment of error. As before, he challenges the state trial court's factual determination that Borge's recantation was reliable. As before, the argument fails.
46
It was entirely appropriate for the trial court to consider Borge's recantation in determining whether petitioner's newly discovered evidence would have resulted in an acquittal. Moreover, there is evidence in the record to support the trial court's finding that Borge's recantation was genuine. The trial court's factual findings are presumptively correct absent convincing evidence to the contrary. 28 U.S.C. § 2254(d). Petitioner has not carried his burden of proof. Therefore, the district court properly dismissed the habeas petition.
47
IV. Petitioner has not established an entitlement to an evidentiary hearing.
48
In the event the dismissal of his habeas petition is affirmed, petitioner requests an evidentiary hearing. There is no evidence that petitioner's new trial motion did not receive a full and fair hearing at the state court. Therefore, petitioner has not established grounds for an evidentiary hearing. Norris, 878 F.2d at 1180.
CONCLUSION
49
The judgment of the district court is affirmed.
*
The Honorable Owen M. Panner, United States District Judge for the District of Oregon, sitting by designation
**
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
1
Petitioner asks that we take judicial notice of the California Court of Appeal proceedings. We do so. See United States v. Wilson, 631 F.2d 118, 119 (9th Cir.1980) ("a court may take judicial notice of ... the records of an inferior court in other cases" (citations omitted)). Because respondent has not objected, judicial notice is mandatory pursuant to Fed.R.Evid. 201(d)
2
Petitioner maintains that detective Marvel and prosecutor Wheeler acted in concert to coerce Borge into recanting his confession. the evidence does not support this. Marvel lied to Borge in questioning him, but Wheeler did not. Wheeler set the record straight. There is no evidence of a conspiracy between Marvel and Wheeler
It is clear, however, that prosecutor Wheeler spoke privately with Borge in direct disobedience of the district court's order. Although this prosecutorial misconduct does not require a new trial, the prosecutor is admonished that his conduct was improper. We leave to the district court how it may wish to deal with the violation of its order.
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901 N.E.2d 1090 (2005)
358 Ill. App.3d 1186
PEOPLE
v.
MACKEY.
No. 2-04-0692.
Appellate Court of Illinois, Second District.
August 16, 2005.
Affirmed.
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} |
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
08/03/2018 09:08 AM CDT
- 296 -
Nebraska Supreme Court A dvance Sheets
300 Nebraska R eports
STATE v. WELLS
Cite as 300 Neb. 296
State of Nebraska, appellee, v.
A nthony L. Wells, appellant.
___ N.W.2d ___
Filed June 22, 2018. No. S-17-359.
1. Jury Instructions: Appeal and Error. Whether jury instructions are
correct is a question of law, which an appellate court resolves indepen-
dently of the lower court’s decision.
2. Jury Instructions: Proof: Appeal and Error. In an appeal based on
a claim of an erroneous jury instruction, the appellant has the burden
to show that the questioned instruction was prejudicial or otherwise
adversely affected a substantial right of the appellant.
3. Jury Instructions: Appeal and Error. All the jury instructions must
be read together, and if, taken as a whole, they correctly state the law,
are not misleading, and adequately cover the issues supported by the
pleadings and the evidence, there is no prejudicial error necessitat-
ing reversal.
4. Convictions: Evidence: Appeal and Error. In reviewing a criminal
conviction for a sufficiency of the evidence claim, whether the evidence
is direct, circumstantial, or a combination thereof, the standard is the
same: An appellate court does not resolve conflicts in the evidence, pass
on the credibility of witnesses, or reweigh the evidence; such matters
are for the finder of fact. The relevant question for an appellate court
is whether, after viewing the evidence in the light most favorable to the
prosecution, any rational trier of fact could have found the essential ele-
ments of the crime beyond a reasonable doubt.
5. Effectiveness of Counsel: Constitutional Law: Statutes: Records:
Appeal and Error. Whether a claim of ineffective assistance of trial
counsel can be determined on direct appeal presents a question of law,
which turns upon the sufficiency of the record to address the claim
without an evidentiary hearing or whether the claim rests solely on the
interpretation of a statute or constitutional requirement. An appellate
court determines as a matter of law whether the record conclusively
- 297 -
Nebraska Supreme Court A dvance Sheets
300 Nebraska R eports
STATE v. WELLS
Cite as 300 Neb. 296
shows that (1) a defense counsel’s performance was deficient or (2)
a defendant was or was not prejudiced by a defense counsel’s alleged
deficient performance.
6. Motions to Dismiss: Directed Verdict: Waiver: Appeal and Error. A
defendant who moves for dismissal or a directed verdict at the close of
the evidence in the State’s case in chief in a criminal prosecution, and
who, when the court overrules the dismissal or directed verdict motion,
proceeds with trial and introduces evidence, waives the appellate right
to challenge correctness in the trial court’s overruling the motion for
dismissal or a directed verdict but may still challenge the sufficiency of
the evidence.
7. Effectiveness of Counsel: Appeal and Error. When a defendant’s trial
counsel is different from his or her counsel on direct appeal, the defend
ant must raise on direct appeal any issue of trial counsel’s ineffective
performance which is known to the defendant or is apparent from the
record. Otherwise, the issue will be procedurally barred.
8. Effectiveness of Counsel: Records: Appeal and Error. The fact that
an ineffective assistance of counsel claim is raised on direct appeal
does not necessarily mean that it can be resolved. Such a claim may be
resolved when the record on direct appeal is sufficient to either affirm
atively prove or rebut the merits of the claim. The record is sufficient
if it establishes either that trial counsel’s performance was not defi-
cient, that the appellant will not be able to establish prejudice, or that
trial counsel’s actions could not be justified as a part of any plausible
trial strategy.
9. Effectiveness of Counsel: Proof. To prevail on a claim of ineffective
assistance of counsel under Strickland v. Washington, 466 U.S. 668, 104
S. Ct. 2052, 80 L. Ed. 2d 674 (1984), the defendant must show that his
or her counsel’s performance was deficient and that this deficient per
formance actually prejudiced the defendant’s defense.
10. ____: ____. To show deficient performance, a defendant must show that
counsel’s performance did not equal that of a lawyer with ordinary train-
ing and skill in criminal law.
11. ____: ____. To show prejudice, the defendant must demonstrate a rea-
sonable probability that but for counsel’s deficient performance, the
result of the proceeding would have been different.
12. Words and Phrases. A reasonable probability is a probability sufficient
to undermine confidence in the outcome.
13. Effectiveness of Counsel: Presumptions. The two prongs of the test
under Strickland v. Washington, 466 U.S. 668, 104 S. Ct. 2052, 80 L.
Ed. 2d 674 (1984), may be addressed in either order, and the entire inef-
fectiveness analysis should be viewed with a strong presumption that
counsel’s actions were reasonable.
- 298 -
Nebraska Supreme Court A dvance Sheets
300 Nebraska R eports
STATE v. WELLS
Cite as 300 Neb. 296
14. Postconviction: Effectiveness of Counsel: Records: Claims: Appeal
and Error. In the case of an argument presented for the purpose of
avoiding procedural bar to a future postconviction proceeding, appellate
counsel must present a claim with enough particularity for (1) an appel-
late court to make a determination of whether the claim can be decided
upon the trial record and (2) a district court later reviewing a petition
for postconviction relief to be able to recognize whether the claim was
brought before the appellate court. A claim insufficiently stated is no
different than a claim not stated at all.
Appeal from the District Court for Lancaster County: Darla
S. Ideus, Judge. Affirmed.
Michael J. Wilson, of Schaefer Shapiro, L.L.P., for
appellant.
Douglas J. Peterson, Attorney General, and Stacy M. Foust
for appellee.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, and Funke,
JJ., and H arder and Noakes, District Judges.
Miller-Lerman, J.
I. NATURE OF CASE
Anthony L. Wells appeals his convictions in the district
court for Lancaster County for first degree murder, use of
a firearm to commit a felony, possession of a firearm by a
prohibited person, and unlawful discharge of a firearm. Wells
claims, inter alia, that he was prejudiced because the court’s
instruction regarding transferred intent incorrectly stated the
law and that trial counsel provided ineffective assistance. We
affirm Wells’ convictions and sentences.
II. STATEMENT OF FACTS
The charges against Wells arose from the shooting death
of Joshua Hartwig. A group of residents had gathered out-
side Hartwig’s apartment building after hearing a disturbance.
Hartwig joined the group after the disturbance appeared to
have ended, but several minutes later a man walked up and
fired shots at the group. Hartwig was struck by a bullet and
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STATE v. WELLS
Cite as 300 Neb. 296
died from the gunshot wound. Testimony of witnesses at Wells’
trial established the following:
In the early morning hours of January 31, 2016, Wells and
Rhani Henry, the mother of Wells’ daughter, got into a physi-
cal and verbal altercation outside Henry’s apartment building
in Lincoln, Nebraska. Both Wells and Henry appeared to be
intoxicated. Various residents of the apartment building heard
the disturbance, and some residents came outside while the
fight between Wells and Henry was ongoing. Certain residents
separated Wells and Henry, and some residents told Wells
that he needed to leave. Wells briefly argued with the resi-
dents, but then he got into his vehicle to leave. Before Wells
left, some residents heard him say words to the effect that he
would be back.
After Wells left, Hartwig and his father, Douglas Hartwig
(Douglas), who were residents of the apartment building,
joined the residents who remained outside. The group talked
about the incident that had just happened. Approximately 10
to 15 minutes later, members of the group saw or heard a man
approach and say some words to the group. The man then fired
several shots. Witnesses generally agreed that the man was
wearing a dark hooded sweatshirt with the hood pulled up and
possibly a bandanna across his face. Although the man’s face
was obscured, certain witnesses identified the man as Wells
based on his voice and physical features.
Douglas testified that he heard the man yell “‘hey mother
fuckers’” before he began shooting. Douglas turned and told
Hartwig to run for cover, and the two ran toward their apart-
ment. Douglas tripped and fell beside a car parked in front of
the apartment; when he fell, he saw and heard a bullet hit the
bumper of the car. Douglas testified that he heard “[a]t least
a half dozen” shots, then a pause, and then “at least a half
dozen more.” After the shooting stopped, Douglas got up and
heard one of the other residents say that Hartwig was “down.”
Douglas found Hartwig lying face down in front of their
apartment door. Douglas went inside to call for emergency
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services, and when he returned to Hartwig, Douglas observed
what appeared to be a gunshot wound to Hartwig’s upper
shoulder. When emergency responders arrived, they attempted
lifesaving procedures on Hartwig, but after a short period they
declared him deceased.
Other testimony presented by the State included the testi-
mony of Artesia Holmes, a friend of Henry. Holmes testified
that she, Henry, and Wells went to a bar on the evening of
January 30, 2016, to celebrate Henry’s birthday. Before they
went to the bar, Holmes and Henry had drinks at Holmes’
apartment. When Wells arrived to pick them up, Holmes
observed that Wells was in possession of a silver and black
handgun. Henry also testified at trial, but she stated that she
did not remember anything from that night after Wells arrived
at Holmes’ apartment. Other witness testimony is discussed in
the analysis below as it relates to Wells’ claims of ineffective
assistance of trial counsel.
Physical evidence presented by the State indicated bullet
damage to various areas of the apartment building, as well as
to vehicles parked near the building. Law enforcement officers
collected 13 shell casings, 1 bullet fragment, and 2 bullets
from the scene. They found a third bullet inside a window of a
house two blocks from the scene. A firearms examiner testified
that the shell casings were all fired in the same firearm and
that they matched the caliber and manufacturer of an unfired
cartridge found in a search of Wells’ bedroom. Due to damage
to the bullets, the examiner could not determine whether the
bullets had been fired from the same gun.
Video from surveillance cameras in the area of the apart-
ment building recorded around the time of the shooting indi-
cated the following: Video from a nearby apartment complex
showed a vehicle similar to Wells’ leaving the apartment
building at 1:16 a.m. A surveillance camera at a business
near the apartment recorded the sound of 13 gunshots at 1:26
a.m. A camera located several blocks from the apartment
showed a vehicle similar to Wells’ driving by at 1:28 a.m.
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When that video was enhanced, it appeared to show an object
being thrown from the vehicle. Law enforcement officers who
searched that location found a black hooded coat with a face
mask in the pocket. Testing of DNA on the inside of the mask
included Wells as a major contributor.
The State also presented evidence that Wells had a prior
conviction for possession of a firearm by a prohibited person.
After the State rested its case, Wells moved for a directed
verdict on the count of unlawful discharge of a firearm. The
court overruled Wells’ motion for a directed verdict, and Wells
proceeded to present evidence in his defense.
In his defense, Wells presented testimony by two women
who testified that Wells picked them up at a location in Council
Bluffs, Iowa, after they finished work at around 2:05 a.m. or
2:10 a.m. on January 31, 2016. He also presented evidence that
two of the State’s witnesses were unable to identify Wells from
a police photographic lineup and that one of the two identified
another person in the photographic lineup. Both witnesses had
identified Wells as the shooter based on his voice.
The court instructed the jury on the elements of the offenses
with which Wells was charged, including first degree murder
and the lesser-included offenses of second degree murder and
manslaughter. The court also gave an instruction, over Wells’
objection, regarding transferred intent. The content of the rel-
evant instructions and Wells’ objections thereto are discussed
in the analysis below.
The jury found Wells guilty of all four counts charged—first
degree murder, use of a firearm to commit a felony, possession
of a firearm by a prohibited person, and unlawful discharge of
a firearm. The court sentenced Wells to consecutive terms of
imprisonment for life for first degree murder, for 20 to 30 years
for use of a firearm to commit a felony, for 20 to 40 years for
possession of a firearm by a prohibited person (which was a
second offense), and for 10 to 10 years for unlawful discharge
of a firearm.
Wells appeals his convictions and sentences.
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III. ASSIGNMENTS OF ERROR
Wells claims that the district court erred (1) when it gave an
instruction regarding transferred intent which incorrectly stated
the law and (2) when it overruled his motion for a directed ver-
dict on the count of unlawful discharge of a firearm.
Wells further claims that his trial counsel provided ineffec-
tive assistance when counsel (1) failed to object to testimony
regarding prior bad acts involving his assaults on Henry, (2)
elicited and then failed to object to hearsay testimony regard-
ing Henry’s fear of Wells, (3) failed to move for a mistrial
based on the State’s comments during closing arguments to the
effect that a witness feared Wells, and (4) failed to adequately
investigate various aspects of his defense.
IV. STANDARDS OF REVIEW
[1-3] Whether jury instructions are correct is a question of
law, which an appellate court resolves independently of the
lower court’s decision. State v. Schwaderer, 296 Neb. 932,
898 N.W.2d 318 (2017). In an appeal based on a claim of an
erroneous jury instruction, the appellant has the burden to show
that the questioned instruction was prejudicial or otherwise
adversely affected a substantial right of the appellant. State v.
Hinrichsen, 292 Neb. 611, 877 N.W.2d 211 (2016). All the jury
instructions must be read together, and if, taken as a whole,
they correctly state the law, are not misleading, and adequately
cover the issues supported by the pleadings and the evidence,
there is no prejudicial error necessitating reversal. Id.
[4] In reviewing a criminal conviction for a sufficiency of
the evidence claim, whether the evidence is direct, circum-
stantial, or a combination thereof, the standard is the same:
An appellate court does not resolve conflicts in the evidence,
pass on the credibility of witnesses, or reweigh the evidence;
such matters are for the finder of fact. The relevant question
for an appellate court is whether, after viewing the evidence in
the light most favorable to the prosecution, any rational trier
of fact could have found the essential elements of the crime
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beyond a reasonable doubt. State v. Cotton, 299 Neb. 650, 910
N.W.2d 102 (2018).
[5] Whether a claim of ineffective assistance of trial coun-
sel can be determined on direct appeal presents a question
of law, which turns upon the sufficiency of the record to
address the claim without an evidentiary hearing or whether
the claim rests solely on the interpretation of a statute or
constitutional requirement. We determine as a matter of law
whether the record conclusively shows that (1) a defense
counsel’s performance was deficient or (2) a defendant was
or was not prejudiced by a defense counsel’s alleged deficient
performance. Id.
V. ANALYSIS
1. R eading Instructions as a Whole,
We Determine the Instruction R egarding
Transferred Intent Did Not Misstate
the Law and Was Not M isleading
Wells first claims that the district court erred when it
gave its instruction regarding transferred intent. He notes
that although the instruction referred to “intent,” it did not
contain a reference to “‘deliberate and premeditated mal-
ice.’” Brief for appellant at 11. He argues that the instruction
incorrectly stated the law as to first degree murder because it
conflated “intent” with “‘deliberate and premeditated malice’”
and “relieved the State of its burden to prove that Wells acted
with malice toward at least one of the people in the group” at
which he allegedly fired shots. Id. at 10. We conclude that the
instructions read as a whole correctly stated the law and were
not misleading.
In instruction No. 3, the court instructed the jury on
“Count I,” first degree murder, by setting forth the elements
as follows:
The elements which the State must prove beyond a
reasonable doubt in order to convict . . . Wells of Murder
in the First Degree are:
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1. That . . . Wells killed . . . Hartwig; and
2. That . . . Wells did so purposely; and
3. That . . . Wells did so with deliberate and premedi-
tated malice; and
4. That . . . Wells did so on or about January 31, 2016,
in Lancaster County, Nebraska.
Instruction No. 3 continued by instructing on the lesser-
included offenses of second degree murder and manslaughter,
each of which included an element that Wells killed Hartwig
“intentionally.”
Over Wells’ objection, the court also gave instruction No. 7,
a transferred intent instruction, which stated as follows:
With respect to the charge in Count I, if you find that
. . . Wells intended to kill a specific person, and by mis-
take or accident killed . . . Hartwig, the element of intent
is satisfied even though . . . Wells did not intend to kill
. . . Hartwig. In such a case, the law regards the intent
as transferred from the original intended victim to the
actual victim.
Instruction No. 11, regarding intent, instructed the jury
that “[i]n deciding whether . . . Wells acted with intent (pur-
pose, knowledge, wilfulness, premeditation, deliberation) you
should consider his words and acts and all the surrounding
circumstances.”
At the jury instruction conference, Wells objected to
instruction No. 7, the transferred intent instruction, on the
basis that it was not supported by the evidence. He asserted
that the evidence showed that the shooter fired into a crowd
but that there did not appear to be a specific intent focused on
a single individual. In contrast, the State argued the jury could
find Wells guilty of first degree murder based on transferred
intent if the jury found that Wells had the requisite intent to
kill one or more of the people who had been outside during
the earlier altercation with Henry and who had traded words
with Wells but that instead he shot Hartwig. The State also
argued in the alternative that the jury could find that Wells
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had the requisite intent to kill any or all of the people, includ-
ing Hartwig, who were standing outside the building at the
time he fired the shots, regardless of whether they had been
present at or involved in the earlier altercation.
Although Wells’ objection to instruction No. 7 at trial
focused on whether the instruction was supported by the evi-
dence, he argues on appeal that the instruction incorrectly
stated the law and was misleading. He notes that in order to
convict him of first degree murder, the jury needed to find that
he had killed Hartwig both “‘purposely’” and “with ‘deliberate
and premeditated malice.’” Brief for appellant at 14 and 16.
He argues that the phrase “the element of intent” in instruction
No. 7 refers only to the “‘purposely’” element of first degree
murder and not to the “‘malice’” element. Id. at 14 and 15. He
contends that instruction No. 7 conflated “intent” and “malice”
and allowed the jury to find him guilty of first degree murder
if it found that he intended to shoot another person without
requiring the jury to also find that he shot at another person
“with ‘deliberate and premeditated malice.’” Id. at 16. The
State generally maintains that the jury instructions as a whole
did not prejudice Wells.
As we read their arguments, both Wells and the State do not
dispute that the concept of transferred intent is applicable to
first degree murder, including where, as a general proposition,
a defendant shoots into a group of people with intent “to kill
at least one person in the group,” reply brief for appellant at
3, “even if [the defendant] did not intend for [the] specific”
actual victim to be killed, brief for appellee at 14. In this
regard, reference is made to State v. Gutierrez, 272 Neb. 995,
726 N.W.2d 542 (2007), disapproved on other grounds, State
v. Britt, 293 Neb. 381, 881 N.W.2d 818 (2016), a first degree
murder case, in which we approved of a similar transferred
intent instruction where the victims were not the intended
target. See State v. Morrow, 237 Neb. 653, 467 N.W.2d 63
(1991) (considering instruction similar to Gutierrez instruc-
tion in second degree murder case). So the disagreement in
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the instant appeal is limited to whether the jury instructions
herein satisfactorily conveyed the applicable law to the jury.
As explained below, we conclude that the instructions, taken
as a whole, were adequate.
Given the nature of Wells’ challenge, we must read the
instructions as a whole to determine whether they correctly
state the law and are not misleading. See State v. Hinrichsen,
292 Neb. 611, 877 N.W.2d 211 (2016). Doing so, contrary to
Wells’ urging, we do not read the instructions in this case as
having relieved the jury of the duty to find all the elements
of first degree murder. Instead, we note instruction No. 3 sets
forth all the elements of first degree murder, including that
Wells killed Hartwig and that he did so both purposely and
with deliberate and premeditated malice. Thus, the jury clearly
was instructed that in order to find Wells guilty of first degree
murder, it must find that the killing was committed both pur-
posely and with deliberate and premeditated malice. We read
nothing in instruction No. 7 that relieves the jury of finding
any part of these requirements.
Instruction No. 7 does not purport to substitute or eliminate
any required element of any offense charged. Instead, instruc-
tion No. 7, the transferred intent instruction, provides that if
the jury finds that Wells intended to kill another person but
by mistake or accident killed Hartwig, then “the element of
intent is satisfied” and “the law regards the intent as trans-
ferred from the original intended victim to the actual victim.”
Instruction No. 7 is not intended as a reiteration of the ele-
ments of a crime. Instead, it serves as an explication solely
regarding “intent.”
As noted above, Wells maintains that “the element of intent”
in instruction No. 7 refers only to the “‘purposely’” element
of first degree murder and not the “with ‘deliberate and pre-
meditated malice’” element. Brief for appellant at 14 and 16.
Contrary to Wells’ assertion, the language of instruction No. 7
provides no basis upon which jurors would read “the element
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of intent” as referring to purpose but believe they had thereby
been instructed to ignore the element of deliberate and pre-
meditated malice. Instead, “the element of intent” refers to the
intent required for the specific crime charged.
Our reading of instruction No. 7 is bolstered by instruc-
tion No. 11, noted above, in which the court instructed the
jury that “[i]n deciding whether . . . Wells acted with intent
(purpose, knowledge, wilfulness, premeditation, deliberation)
you should consider his words and acts and all the surround-
ing circumstances.” Instruction No. 11 communicates to the
jury that “intent” includes, inter alia, “purpose,” “premedita-
tion,” and “deliberation” when those are required elements of
a charge.
We note that Wells compares the wording of instruction
No. 7 to the wording of transferred intent instructions given in
cases such as State v. Iromuanya, 272 Neb. 178, 719 N.W.2d
263 (2006), and State v. Gutierrez, 272 Neb. 995, 726 N.W.2d
542 (2007), disapproved on other grounds, State v. Britt, 293
Neb. 381, 881 N.W.2d 818 (2016). He particularly notes that
the instruction in Gutierrez refers more generally to “‘the
crime’” committed rather than to the “element of intent.” Brief
for appellant at 15 and 16. See, also, State v. Morrow, 237 Neb.
653, 467 N.W.2d 63 (1991). Our analysis in this case is spe-
cific to the entirety of the instructions given in this case, and
we make no comment on whether the instruction given in this
case or the instruction given in another case is the preferable
form of an instruction on transferred intent. Our conclusion is
merely that the specific instructions given in this case, when
read as a whole, correctly state the law, are not misleading, and
are supported by the evidence, and there is no prejudicial error
necessitating reversal. See State v. Hinrichsen, 292 Neb. 611,
877 N.W.2d 211 (2016).
Because we conclude that the district court did not err when
it gave instruction No. 7 over Wells’ objection, we reject Wells’
first assignment of error.
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2. Evidence Was Sufficient to Support
Conviction for Unlawful
Discharge of a Firearm
[6] Wells next claims that the district court erred when it
overruled his motion for a directed verdict on the count of
unlawful discharge of a firearm. The record indicates that
after the court overruled Wells’ motion for a directed verdict,
he proceeded to present evidence in his defense. A defendant
who moves for dismissal or a directed verdict at the close of
the evidence in the State’s case in chief in a criminal pros-
ecution, and who, when the court overrules the dismissal or
directed verdict motion, proceeds with trial and introduces
evidence, waives the appellate right to challenge correctness
in the trial court’s overruling the motion for dismissal or a
directed verdict but may still challenge the sufficiency of the
evidence. State v. Olbricht, 294 Neb. 974, 885 N.W.2d 699
(2016). Wells assigns error to the overruling of his motion for
a directed verdict, but he argues the error as a challenge to
the sufficiency of the evidence to support his conviction for
unlawful discharge of a firearm. We consider Wells’ assign-
ment of error as a challenge to the sufficiency of the evidence,
but we conclude that there was sufficient evidence to support
the conviction.
Wells was charged with unlawful discharge of a firearm,
in violation of Neb. Rev. Stat. § 28-1212.02 (Reissue 2016),
which provides that a person is guilty of the offense if the
person “unlawfully and intentionally discharges a firearm at[,
inter alia,] an inhabited dwelling house, occupied building,
[or] occupied motor vehicle.” Wells argues that the evidence
in this case showed that none of the vehicles that were hit by
bullets were occupied and that there was no evidence of bullets
hitting doors or windows of specific apartments in the build-
ing. He contends that the evidence showed that the shooter
was aiming at the people gathered outside the building rather
than at the building itself. He notes that a bullet was found
inside a window of a house two blocks from the scene but he
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argues there was no evidence that the shooter intended to fire
at that house.
The State in its response does not rely on the bullets found
either in the vehicles or in the house two blocks away as
establishing this offense. Instead, the State relies on evidence
that bullets were found in parts of the apartment building
structure, including the rafters and supporting beams, and con-
tends such evidence establishes that a firearm was discharged
at the building. The State asserts that Wells does not dispute
that the apartment building was occupied at the time the shots
were fired.
The evidence noted by the State supports a finding that
Wells fired shots at the apartment building and that the build-
ing was occupied at the time. The evidence was also such that
the jury could reasonably infer that Wells intended to shoot at
the building. The statute requires a finding that the defendant
intentionally discharged a firearm at an occupied building; we
do not read the statute as requiring that the firearm be aimed
at a specific part of the building such as a specific apartment
or at a door or window. Evidence that Wells discharged a fire-
arm at the building, that he did so intentionally, and that the
building was occupied at the time was sufficient to support
the conviction.
We conclude that viewing the evidence in the light most
favorable to the State, a rational trier of fact could have found
the elements of unlawful discharge of a firearm beyond a rea-
sonable doubt. We reject this assignment of error.
3. Wells’ Claims of Ineffective Assistance of
Trial Counsel Either A re Without Merit
or Cannot Be Determined Based
on R ecord on Direct A ppeal
Wells claims that his trial counsel provided ineffective
assist
ance in various respects. He specifically claims that
counsel (1) failed to object to testimony regarding prior bad
acts involving assaults on Henry, (2) elicited and then failed
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to object to hearsay testimony regarding Henry’s fear of Wells,
(3) failed to move for a mistrial based on the State’s comments
during rebuttal closing arguments to the effect that a witness
feared Wells, and (4) failed to adequately investigate various
aspects of his defense. We first set forth applicable standards
and then consider each of these specific claims below.
[7] On appeal, Wells has counsel different from his trial
counsel. When a defendant’s trial counsel is different from his
or her counsel on direct appeal, the defendant must raise on
direct appeal any issue of trial counsel’s ineffective perform
ance which is known to the defendant or is apparent from the
record. Otherwise, the issue will be procedurally barred. State
v. Cotton, 299 Neb. 650, 910 N.W.2d 102 (2018).
[8] The fact that an ineffective assistance of counsel claim is
raised on direct appeal does not necessarily mean that it can be
resolved. Id. Such a claim may be resolved when the record on
direct appeal is sufficient to either affirmatively prove or rebut
the merits of the claim. The record is sufficient if it establishes
either that trial counsel’s performance was not deficient, that
the appellant will not be able to establish prejudice, or that
trial counsel’s actions could not be justified as a part of any
plausible trial strategy. Id.
[9-13] To prevail on a claim of ineffective assistance of
counsel under Strickland v. Washington, 466 U.S. 668, 104 S.
Ct. 2052, 80 L. Ed. 2d 674 (1984), the defendant must show
that his or her counsel’s performance was deficient and that
this deficient performance actually prejudiced the defendant’s
defense. State v. Cotton, supra. To show deficient performance,
a defendant must show that counsel’s performance did not
equal that of a lawyer with ordinary training and skill in crimi-
nal law. Id. To show prejudice, the defendant must demonstrate
a reasonable probability that but for counsel’s deficient per
formance, the result of the proceeding would have been dif-
ferent. Id. A reasonable probability is a probability sufficient
to undermine confidence in the outcome. Id. The two prongs
of this test may be addressed in either order, and the entire
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ineffectiveness analysis should be viewed with a strong pre-
sumption that counsel’s actions were reasonable. Id.
(a) Testimony Regarding
Prior Bad Acts
Wells claims that he received ineffective assistance when
trial counsel failed to object to testimony regarding prior bad
acts involving assaults on Henry. One witness who observed
the altercation between Wells and Henry testified that he said
to another witness that “[Henry’s] baby daddy is outside beat-
ing her up again.” Another witness who observed the alterca-
tion between Wells and Henry on January 31, 2016, testified
that in the summer of 2015, she had witnessed an altercation
between Wells and another woman and that at that time, Wells
put his hand around Henry’s mouth and throat when Henry
tried to hold him back from the other woman. Wells’ trial coun-
sel did not object to either witness’ testimony.
Wells claims on appeal that trial counsel was ineffective
for failing to object to what he asserts was inadmissible prior
bad acts evidence. He argues that failure to object was defi-
cient performance because in order for the court to admit the
evidence, the State would have been required to articulate
a proper purpose, other than showing Wells’ propensity for
violence. He argues that even if the evidence were admitted
for some proper purpose, the jury should have been given an
instruction limiting use of the evidence to such proper purpose.
He argues that trial counsel’s failure prejudiced him because
the jury was able to consider the evidence as showing that he
committed the charged crimes because he had a propensity
for violence.
We conclude that whether or not counsel’s performance was
deficient in this respect, Wells was not prejudiced, because
there is not a reasonable probability that the result of the pro-
ceeding would have been different if counsel had objected
to this testimony. Indeed, an objection and limiting instruc-
tion might have highlighted the testimony. In any event, the
testimony noted by Wells was minor in the context of all the
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evidence that was presented by the State. In this regard, we
specifically note that there was other properly admitted testi-
mony regarding Wells’ violent behavior toward Henry on the
night of the shooting. Given all the evidence, it is not reason-
ably probable that the testimony noted by Wells significantly
affected the jury’s verdict. We reject this claim of ineffective
assistance of trial counsel.
(b) Hearsay Testimony
Wells next claims that he received ineffective assistance
when his trial counsel elicited and then failed to object to
hearsay testimony regarding Henry’s fear of Wells. Wells’
trial counsel asked one of the State’s witnesses on cross-
examination whether he had talked with Henry about Wells,
and the witness testified that he “heard some comments about
[Henry’s] wanting to get away from” Wells and that Henry said
“she loved him and that she was also scared of him.”
On appeal, Wells contends that trial counsel was ineffec-
tive for eliciting this testimony and for failing to object to
the testimony as nonresponsive and as hearsay. He argues
that the line of questioning could not be justified as a reason-
able strategic decision and that the error was compounded
when counsel failed to ask the court to strike the testimony
as nonresponsive or as hearsay. He argues he was prejudiced
by this testimony because it further portrayed him as having
a violent nature.
We conclude that no prejudice was shown because this tes-
timony, like the testimony discussed above, was minor in the
context of all the properly admitted evidence and that there
is not a reasonable probability the result of the proceeding
would have been different if trial counsel either had not elic-
ited the testimony or had objected to it. We reject this claim
of ineffective assistance of trial counsel.
(c) Mistrial
Wells next claims that he received ineffective assistance
when trial counsel failed to move for a mistrial based on the
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State’s comments during rebuttal closing arguments regarding
a witness’ alleged fear of Wells. One of the State’s witnesses
testified that she knew Wells and had seen him a few times
with Henry. The State asked the witness whether she saw
Wells in the courtroom, and she replied that she did not. In its
closing argument in rebuttal, the State referred to that witness
and said:
I said do you see . . . Wells in the courtroom? What did
she do? She sat there and she looked at all of you and
looked over here and then she looked up and she was
looking at the ceiling. I asked her if she saw . . . Wells
in the courtroom. And she would - really? Was he up on
the ceiling, or was she for some reason afraid of identify-
ing him?
Wells’ trial counsel objected to the prosecutor’s statement.
The court sustained the objection, struck the comment, and
instructed the jury to disregard it. Wells’ counsel did not there-
after move for a mistrial.
On appeal, Wells claims trial counsel was ineffective for
failing to move for a mistrial because, given other improp-
erly admitted evidence regarding Wells’ violent nature, the
court’s instruction to disregard the State’s comment could not
“‘unring’ the bell.” Brief for appellant at 26. He argues that
his defense was prejudiced because a defense motion would
have been sustained and a mistrial would have been granted.
Wells relies on the proposition that a mistrial may be warranted
where unfairness has been injected into a jury trial and so per-
meates the proceedings that no amount of admonition to the
jury can remove the unfairness to a party. State v. Pierce, 231
Neb. 966, 439 N.W.2d 435 (1989).
We disagree with Wells’ assessment that a mistrial would
have been granted. The court’s sustaining Wells’ objection and
admonishing the jury were a sufficient response to the State’s
comment, and we do not think the comment injected unfairness
that so permeated the proceedings that admonition to the jury
could not remove it. There was not a reasonable probability
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that a mistrial would have been granted if counsel had moved
for it, and we therefore reject this claim of ineffective assist
ance of counsel.
(d) Cumulative Effect
Wells argues that even if each of the preceding alleged fail-
ures is insufficient in itself to establish ineffective assistance
of counsel, the cumulative effect of all the alleged deficiencies
amounts to ineffective assistance. We determined above that
none of the alleged deficiencies prejudiced Wells’ defense, and
we likewise conclude that the cumulative effect of the alleged
deficiencies did not prejudice Wells’ defense.
(e) Investigation
Finally, Wells claims that trial counsel was ineffective for
failing to adequately investigate various aspects of his defense.
He asserts that the record is not sufficient to review these
claims of inadequate investigation on direct appeal but that
he is raising the claims in order to preserve them for collat-
eral review.
[14] In the case of an argument presented for the purpose
of avoiding procedural bar to a future postconviction proceed-
ing, appellate counsel must present a claim with enough par-
ticularity for (1) an appellate court to make a determination
of whether the claim can be decided upon the trial record and
(2) a district court later reviewing a petition for postconviction
relief to be able to recognize whether the claim was brought
before the appellate court. State v. Cotton, 299 Neb. 650, 910
N.W.2d 102 (2018). A claim insufficiently stated is no different
than a claim not stated at all. Id.
Wells set forth the following claims in his brief:
Wells’ trial counsel provided ineffective assistance when,
despite Wells’ requests, he failed to independently inves-
tigate or present the following defenses, and he failed
to interview, depose, or subpoena each of the following
entities and potential witnesses who would have provided
evidence helpful to Wells’ defense:
- 315 -
Nebraska Supreme Court A dvance Sheets
300 Nebraska R eports
STATE v. WELLS
Cite as 300 Neb. 296
• Trial counsel received information from . . . Henry that
an acquaintance’s boyfriend committed the shootings,
but [counsel] failed to investigate;
• Trial counsel failed to impeach [a police witness] when
he testified that . . . sight of Wells’ vehicle [was lost
in] the [video] recordings when Wells’ vehicle, after
leaving the . . . apartments following the argument with
Henry, went eastbound . . . , despite trial counsel’s pos-
session of police reports in which [the police witness]
and/or other officers stated that the video showed Wells
traveling eastbound . . . , then Southbound . . . , a route
that took Wells to . . . Council Bluffs;
• Trial counsel failed to subpoena cell phone records that
would have demonstrated (1) pinging locations making
it impossible for him to commit the shooting, and (2)
that Wells’ regular calling pattern was very similar to
the calling pattern relied upon by the State to argue in
support of Wells’ guilt;
•
Trial counsel failed to introduce into evidence a
photograph of Wells at the time of the shootings to
demonstrate that his hair did not match the witness’
descriptions;
•
Trial counsel failed to subpoena or otherwise obtain
video evidence from businesses along the route from
the . . . apartments to . . . Council Bluffs that would
have shown he was not present at the . . . apartments at
the time of the shootings;
• Trial counsel failed to consult or engage a voice rec-
ognition expert to contest the State’s witnesses’ claims
that they recognized the voice of the shooter as Wells[’]
despite having very little, if any, exposure to the sound
of Wells’ voice;
•
Trial counsel failed to consult or engage a firearms
expert to evaluate and contest the testimony of the
State’s firearms expert, whose testimony overstated the
likelihood that it was a gun like the one Wells allegedly
- 316 -
Nebraska Supreme Court A dvance Sheets
300 Nebraska R eports
STATE v. WELLS
Cite as 300 Neb. 296
set on Holmes’ bed that fired the bullets and casings
found at the scene of the shootings;
• Trial counsel failed to move for testing of swabs taken
from Wells’ hands that, had they been subjected to gun-
shot residue testing, would have shown that Wells did
not fire a gun at the time of the shootings.
Brief for appellant at 33-34.
We agree that these claims cannot be determined on direct
appeal, because the record on appeal does not disclose what
steps trial counsel took in regard to these avenues of investiga-
tion, what would have been found if the various actions had
been taken by counsel, and whether the findings would have
helped Wells’ defense. We include this listing so that a dis-
trict court reviewing any petition for postconviction relief that
Wells might bring in the future will be able to recognize what
claims were brought before this court on direct appeal.
VI. CONCLUSION
We conclude that instruction No. 7, the transferred intent
instruction, when read with all the instructions, did not mis-
state the law; that there was sufficient evidence to support
Wells’ conviction for unlawful discharge of a firearm; and that
Wells’ claims of ineffective assistance of trial counsel either
are without merit or cannot be determined based on the record
in this direct appeal. We therefore affirm Wells’ convictions
and sentences.
A ffirmed.
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NUMBER 13-12-00497-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI – EDINBURG
SALOME MORENO DEPAULA, Appellant,
v.
STRIPES L.L.C., SUCCESSOR
BY MERGER TO SSP PARTNERS, Appellee.
On appeal from the 94th District Court
of Nueces County, Texas.
MEMORANDUM OPINION
Before Chief Justice Valdez and Justices Benavides and Longoria
Memorandum Opinion by Justice Longoria
By four issues, which we have re-ordered, appellant, Salome Moreno DePaula,
appeals a final summary judgment entered in favor of appellee, Stripes LLC, successor
by merger to SSP Partners. We affirm.
I. BACKGROUND
In December 2009, DePaula filed a legal malpractice suit against attorneys David
Burkett, Veronica Garza, and Benito Garza. According to DePaula’s malpractice suit,
she was “involved in an accident on January 18, 2007” and sustained severe personal
injuries. DePaula filed her malpractice suit alleging that her attorneys failed to file her
personal injury suit before the applicable two-year statute of limitations had expired.
See TEX. CIV. PRAC. & REM. CODE ANN. § 16.003(a) (West Supp. 2011).
In response to the suit, defendants Veronica Garza and Benito Garza filed a
motion to designate “SSP Partners, Inc.” as a responsible third party. See id. §
33.004(a) (West Supp. 2011). On July 1, 2011, the trial court signed an order
designating “SSP Partners, Inc.” as a responsible third party. DePaula then filed, within
60 days, her second amended original petition naming “SSP Partners, Inc.” as a
defendant, as provided by former section 33.004(e) of the Texas Civil Practice and
Remedies Code.1 SSP Partners, Inc. filed a verified answer denying liability.
Subsequently, on December 9, 2011, DePaula obtained a $1.5 million default judgment
against “SSP Partners,” a different entity which had not been sued. On January 4,
2012, Stripes, as successor by merger to “SSP Partners” (henceforth “Stripes”), filed a
motion to set aside the default judgment and for new trial, which was granted.
Finally, on February 9, 2012, DePaula filed her third amended original petition,
naming Stripes as a defendant and asserting claims against Stripes for the personal
injuries she sustained on January 18, 2007, when she tripped and fell on a sidewalk
1
See Acts 1995, 74th Leg., ch. 136, § 1, amended by Acts 2003, 78th Leg., ch. 204, §§ 4.03,
4.04, 4.10(2), repealed by Act of May 30, 2011, 82nd Leg., R.S., ch. 203, § 5.02, 2011 Tex. Sess. Law
Serv. 203.
2
owned by Stripes and located at 4433 Baldwin Boulevard in Corpus Christi, Texas.2 On
February 14, 2012, Stripes filed its original answer and asserted an affirmative defense
based on the applicable two-year statute of limitations. See TEX. CIV. PRAC. & REM.
CODE ANN. § 16.003(a). On March 20, 2012, Stripes filed a traditional and no evidence
motion for summary judgment in which it argued the following:
[T]here is no genuine issue as to any material fact on Stripes’ affirmative
defense of the statute of limitations and Stripes is entitled to summary
judgment on [DePaula’s] claim because its defense of limitations is
established as a matter of law. Alternatively, there is no evidence which
supports [DePaula’s] premises liability claim and gross negligence claim
and summary judgment is proper on the issue of liability as to Defendant
Stripes arising from [DePaula’s] claims alleged herein; as such, [DePaula]
should take nothing from Stripes by reason of this action as a matter of
law.
On July 19, 2012, the trial court entered an order granting Stripes’ traditional and
no evidence motion for summary judgment. The trial court did not state the basis for its
ruling. This appeal ensued.
II. SUMMARY JUDGMENT
In her first issue, DePaula argues that the trial court erred in granting a traditional
summary judgment because Stripes “failed to carry its summary judgment burden to
negate the doctrine of misnomer.”
A. Summary Judgment Proceedings
As set forth above, Stripes sought a traditional summary judgment based on the
applicable statute of limitations. See id. In its motion, Stripes argued that DePaula’s
claims accrued on January 18, 2007, when she sustained personal injuries in a trip-and-
2
Stripes was the only defendant named in DePaula’s third amended original petition. Therefore,
the claims pending against all other defendants were effectively nonsuited. See FKM P'ship v. Bd. of
Regents of the Univ. of Houston Sys., 255 S.W.3d 619, 632 (Tex. 2008) (“In civil causes generally, filing
an amended petition that does not include a cause of action effectively nonsuits or voluntarily dismisses
the omitted claims as of the time the pleading is filed. No hearing is necessary to effect the nonsuit.”).
3
fall accident, as alleged in her third amended original petition. Stripes further argued
that DePaula’s claims were barred by the statute of limitations because she did not file
suit against Stripes until February 9, 2012, well after the two-year limitations period had
expired on January 18, 2009. See id.
In her response to Stripes’ motion for summary judgment, DePaula argued that
her claims against Stripes were not time-barred because the trial court had designated
“SSP Partners, Inc.” as a responsible third party on July 1, 2011, and she had timely
filed her second amended original petition naming “SSP Partners, Inc.” as a defendant
on July 11, 2011, within 60 days of the trial court’s order, as provided by former section
33.004(e). See id. § 33.004(e).
In its reply, Stripes argued that “[t]he summary judgment evidence conclusively
established SSP Partners, Inc., not Stripes, was designated as a responsible third party;
accordingly, [DePaula] had no basis upon which to circumvent the statute of limitations
defense of Stripes.” Stripes further argued, “It would clearly be an absurd result if
[DePaula] was allowed to bypass Stripes’ statute of limitations defense by implementing
§ 33.004(e)’s joinder provision when Stripes was never designated as a responsible
third party in this case and the order authorizing the responsible third party claim never
applied to Stripes.”
B. Standard of Review
We review summary judgments de novo. Alejandro v. Bell, 84 S.W.3d 383, 390
(Tex. App.—Corpus Christi 2002, no pet.). In a traditional motion for summary
judgment, the movant has the burden of showing both that there is no genuine issue of
material fact and entitlement to judgment as a matter of law. TEX. R. CIV. P. 166a(c);
4
see also Swilley v. Hughes, 488 S.W.2d 64, 67 (Tex. 1972); Ortega v. City Nat’l Bank,
97 S.W.3d 765, 772 (Tex. App.—Corpus Christi 2003, no pet.). In deciding whether
there is a genuine issue of material fact, evidence favorable to the nonmovant is taken
as true, and all reasonable inferences are made, and all doubts are resolved, in favor of
the nonmovant. Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex. 1997).
Summary judgment is proper if the movant disproves at least one element of each of
the plaintiff’s claims or affirmatively establishes each element of an affirmative defense
to each claim. Id.
C. Applicable Law
Under section 33.004(a), “[a] defendant may seek to designate a person as a
responsible third party by filing a motion for leave to designate that person as a
responsible third party.” TEX. CIV. PRAC. & REM. CODE ANN. § 33.004(a). Former section
33.004(e) of the Texas Civil Practice and Remedies Code provides as follows:
If a person is designated under this section as a responsible third party, a
claimant is not barred by limitations from seeking to join that person, even
though such joinder would otherwise be barred by limitations, if the
claimant seeks to join that person not later than 60 days after that person
is designated as a responsible third party.
Id. § 33.004(e).
D. Discussion
DePaula argues that summary judgment was improper because section
33.004(e) allows her to assert claims against Stripes that would otherwise be barred by
limitations. See id. We disagree. Stripes was never designated as a responsible third
party. See id. Therefore, the savings clause in section 33.004(e) does not apply and
5
DePaula is not authorized to assert claims against Stripes that would otherwise be
barred by limitations. See id.
Despite this, DePaula argues that, pursuant to the doctrine of misnomer, she is
authorized to assert claims against Stripes that would otherwise be barred by limitations
because the defendants designated SSP Partners, Inc. when they should have
designated SSP Partners (referred to herein as “Stripes”). See In re Greater Houston
Orthopaedic Specialists, Inc., 295 S.W.3d 323, 326 (Tex. 2009) (“Typically, misnomer
cases involve a plaintiff who has misnamed the defendant, and a petition involving this
type of misnomer is nonetheless effective, for limitations purposes, when filed, with any
subsequent amendment relating back to the date of the original filing.”). Again, we
disagree. First, there is no precedent for applying the doctrine of misnomer to section
33.004. See id. § 33.004. Second, even if the doctrine were applicable, it would not
give DePaula the authority to designate a responsible third party under section
33.004(a). See id. § 33.004(a). If the wrong party is designated by a defendant, any
party can file a motion to strike the designation. See id. § 33.004(j). However, the
statute does not authorize a claimant, such as DePaula, to designate a different
responsible third party. See id. § 33.004(a).
Only a defendant is authorized to designate a responsible third party. See id.
The defendants in this case did not designate Stripes. Nor did they seek to designate
Stripes after it became clear that SSP Partners, Inc. is a completely different entity that
had nothing to do with the events giving rise to this suit. However, even under these
circumstances, the statute simply does not authorize DePaula, as a non-defendant, to
request that Stripes be designated as a responsible third party. See id. Although
6
DePaula was authorized to file a motion to strike, she could not compel the defendants
to designate Stripes or do so herself. See id. § 33.004(j).
In sum, section 33.004(e) does not apply because Stripes was never designated
as a responsible third party. See id. § 33.004(e); Jay Miller & Sundown, Inc. v. Camp
Dresser & McKee, Inc., 381 S.W.3d 635, 641 (Tex. App.—San Antonio 2012, no pet.)
(“Section 33.004(e) provides that limitations does not bar the joinder if (1) the person
was designated under section 33.004 as a responsible third party and (2) joinder was
sought within sixty days of the designation.”). If the defendants had intended to
designate Stripes but mistakenly designated SPP Partners, Inc., as DePaula contends,
they had until on or before the 60th day before the trial date to file a motion to designate
Stripes, see TEX. CIV. PRAC. & REM. CODE ANN. § 33.004(a); however, they did not do
so. Nor did DePaula file a motion to strike the designation of SSP Partners, Inc., as she
was authorized to do. See id. § 33.004(j). Although DePaula named Stripes as a
defendant in her third amended original petition, she did so without the benefit of section
33.004(e). See id. § 33.004(e). Accordingly, because section 33.004(e) is inapplicable
and because there is no dispute that DePaula’s claims are otherwise barred by the
statute of limitations, the trial court did not err in granting Stripe’s motion for summary
judgment based on the statute of limitations. See TEX. R. CIV. P. 166a(c). Therefore,
DePaul’s first issue is overruled.3
III. DEFAULT JUDGMENT
In her fourth issue, DePaula contends that the trial court erred in granting a new
trial after a default judgment was entered against Stripes. “Except in very limited
3
Furthermore, because we have already upheld the summary judgment based on limitations, it
is unnecessary to address DePaula’s second and third issues challenging the other grounds for summary
judgment. See TEX. R. APP. P. 47.1.
7
circumstances, an order granting a motion for new trial rendered within the period of the
trial court’s plenary power is not reviewable on appeal.” Wilkins v. Methodist Health
Care Sys., 160 S.W.3d 559, 563 (Tex. 2005). The only exceptions are “when the trial
court’s order was void and when the trial court erroneously concluded that the jury’s
answers to special issues were irreconcilably in conflict.” In re Columbia Med. Ctr. of
Las Colinas, 290 S.W.3d 204, 209 (Tex. 2009). The parties do not contend that either
of those circumstances exists. As a result, we conclude that the trial court’s order
granting Stripes’s motion for new trial is not reviewable on appeal. See id. Accordingly,
DePaula’s fourth issue is overruled.
IV. CONCLUSION
The trial court’s summary judgment is affirmed.
_______________________
NORA L. LONGORIA
Justice
Delivered and filed the
19th day of September, 2013.
8
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FILED
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS October 30, 2008
FOR THE TENTH CIRCUIT Elisabeth A. Shumaker
Clerk of Court
DELLA LOWBER,
Plaintiff-Appellant,
v. No. 08-6070
(D.C. No. 5:07-CV-00713-M)
CITY OF NEW CORDELL, (W.D. Okla.)
a municipal corporation,
Defendant-Appellee.
ORDER AND JUDGMENT *
Before HARTZ, BALDOCK, and GORSUCH, Circuit Judges.
Della Lowber appeals from the district court’s grant of summary judgment
in favor of the City of New Cordell (“City”) on her claim of sex discrimination in
violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2(a)(1).
Exercising jurisdiction under 28 U.S.C. § 1291, we reverse and remand for further
proceedings in the district court.
*
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and
collateral estoppel. It may be cited, however, for its persuasive value consistent
with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
* * *
Ms. Lowber’s discrimination claim stems from the City’s failure to hire her
as its animal-control officer in July 2005. She had previously held that job from
1990 until the position was eliminated by the City in 2004 for budgetary reasons.
When the City opened a new animal-control position in 2005, Ms. Lowber applied
for the job but was not hired. She filed a charge with the Equal Employment
Opportunity Commission (“EEOC”) claiming gender discrimination based upon
the City’s hiring of a lesser-qualified-male applicant. She later filed this action in
district court.
In January 2008, Ms. Lowber claimed for the first time that she had refused
a sexual proposition by the City’s mayor. At her deposition she testified that she
met privately with the mayor in 2005 regarding the new animal-control position.
She claimed that during that meeting he put his hands on top of hers, telling her,
“Della, I can assure you you can get your job back.” R., Doc. 25, Ex. 1 at 39.
She interpreted this statement as suggesting that he would hire her in exchange
for sexual favors. She drew her hands away and said, “[N]o, thank you, I will get
it back on my own.” Id. Ms. Lowber testified that she told no one about this
exchange with the mayor until two weeks before her deposition.
The City moved for summary judgment, contending that Ms. Lowber could
not show that the City’s proffered reasons for not hiring her were a pretext for
discrimination. The City also argued that she had failed to exhaust her
-2-
administrative remedies with respect to a sexual-harassment claim based upon her
refusal of the mayor’s alleged sexual proposition. 1 The district court granted the
City’s motion, holding that she failed to exhaust her administrative remedies
because she did not include her allegation regarding the mayor’s sexual
misconduct in her EEOC charge. Ms. Lowber contends that the district court
erred in holding that her gender-discrimination claim based upon the City’s hiring
of a lesser-qualified male was not administratively exhausted.
* * *
“We review the district court’s grant of summary judgment de novo.”
Young v. Dillon Cos., 468 F.3d 1243, 1249 (10th Cir. 2006). Summary judgment
is appropriate “if the pleadings, the discovery and disclosure materials on file,
and any affidavits show that there is no genuine issue as to any material fact and
that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c).
“In conducting our analysis, we view all of the facts in the light most favorable to
the non-movant and draw all reasonable inferences from the record in favor of the
non-moving party.” Young, 468 F.3d at 1249.
1
Neither the district court nor Ms. Lowber explicitly refer to her allegation
regarding the sexual proposition as supporting a claim for sexual harassment, but
we note that “[q]uid pro quo harassment occurs when submission to sexual
conduct is made a condition of concrete employment benefits.” Hicks v. Gates
Rubber Co., 833 F.2d 1406, 1413 (10th Cir. 1987).
-3-
In her EEOC charge, Ms. Lowber claimed that the City discriminated
against her based on her gender by hiring a lesser-qualified male for the
animal-control-officer position. She first raised a claim of quid pro quo sexual
harassment during her deposition, which was taken in January 2008–two and a
half years after the alleged proposition occurred. The City argued in its
summary-judgment motion that Ms. Lowber’s allegation regarding the sexual
proposition was wholly unrelated to the claim she made in her EEOC charge and
therefore she did not administratively exhaust any sexual-harassment claim with
the EEOC before she filed her action. In its ruling on the motion, the district
court attributed to Ms. Lowber the statement that “her refusal of defendant’s
sexual advances is the reason she was not hired,” R., Doc. 34 at 1, and held that,
because her EEOC charge failed to include that allegation, she had not exhausted
her administrative remedies as to any sex-discrimination claim. 2
On appeal, Ms. Lowber does not contend that she exhausted her
administrative remedies with respect to a discrete claim of quid pro quo sexual
2
In reaching its holding, the district court cited Seymore v. Shawver & Sons,
Inc., 111 F.3d 794, 799 (10th Cir. 1997), for the proposition that a judicial
complaint “may encompass any discrimination like or reasonably related to the
allegations of the [EEOC] charge.” R., Doc. 34 at 3. We note that proposition,
often called the “continuing violation” theory, was rejected by the Supreme Court
with respect to discrete discriminatory acts in National Railroad Passenger Corp.
v. Morgan, 536 U.S. 101 (2002). See Martinez v. Potter, 347 F.3d 1208, 1210-11
(10th Cir. 2003). Under Martinez, “a claimant must file a charge within the
appropriate limitations period as to each such discrete act that occurred.” Id. at
1211 (quotation and ellipses omitted).
-4-
harassment. But she asserts that the district court erred (1) in construing her
claim to be based solely on her refusal of the alleged sexual advance, and (2) in
failing to consider the gender-discrimination claim that she did set forth in her
EEOC charge. We agree. Ms. Lowber never characterized her testimony
regarding the alleged sexual proposition as supplanting her claim that the City
discriminated against her by hiring a lesser-qualified male. She presented the
latter claim in her EEOC charge and the district court erred in dismissing it as
unexhausted along with her quid pro quo sexual-harassment claim.
The City argues that the district court’s holding should be upheld because
Ms. Lowber failed to act in good faith when she withheld her allegation of the
sexual proposition from her EEOC charge. But the cases the City relies on are
inapposite. In Shikles v. Sprint/United Management Co., 426 F.3d 1304, 1307
(10th Cir. 2005), the EEOC dismissed the plaintiff’s charge after he cancelled
three interviews and failed to provide further information. We held that dismissal
of his complaint for lack of jurisdiction was proper because he failed to cooperate
with the EEOC in order to exhaust his administrative remedies. Id. at 1318; see
also Khader v. Aspin, 1 F.3d 968, 970 (10th Cir. 1993) (presenting similar facts
constituting failure to cooperate with the EEOC). Here there is no question that
Ms. Lowber sufficiently cooperated with the EEOC with respect to her
gender-discrimination claim based upon the hiring of a lesser-qualified male. As
we stated in Shikles, “we expect that it will be rare for a charging party’s
-5-
non-cooperation to be a basis for the defendant to challenge the court’s
jurisdiction.” 426 F.3d at 1311-12. This is not that rare case.
The City urges this Court to affirm the district court’s grant of summary
judgment on an alternative ground, namely that Ms. Lowber failed to show
material facts in dispute regarding whether the City’s proffered reasons for hiring
someone other than her were pretextual. Although the City raised this issue in its
summary-judgment motion, the district court did not rule on it. Rather than
examining and resolving the merits of the City’s contentions, we remand to the
district court to address them in the first instance. See Evers v. Regents of Univ.
of Colo., 509 F.3d 1304, 1310 (10th Cir. 2007).
* * *
The district court’s grant of summary judgment in favor of the City of New
Cordell is reversed and remanded.
Entered for the Court
Neil M. Gorsuch
Circuit Judge
-6-
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955 S.W.2d 181 (1997)
330 Ark. 158
Billy Edward WELCH, Appellant,
v.
STATE of Arkansas, Appellee.
No. CR 97-378.
Supreme Court of Arkansas.
October 9, 1997.
*182 Norman Mark Klappenbach, Fordyce, for Appellant.
Winston Bryant, Attorney General, C. Joseph Cordi, Jr., Assistant Attorney General, Little Rock, for Appellee.
BROWN, Justice.
Appellant Billy Edward Welch was convicted of possession of a controlled substance with intent to deliver, felon in possession of a firearm, simultaneous possession of a controlled substance and a firearm, and possession of drug paraphernalia. He was sentenced as a habitual offender to two terms of life in prison for the possession-with-intent charge and the simultaneous possession charge, six years for being a felon in possession of a firearm, and ten years for the drug paraphernalia. All of Welch's convictions arise out of a traffic stop and the subsequent impoundment and search of his vehicle. On appeal, he raises the issues of sufficiency of the evidence, speedy trial, and suppression of the evidence seized from his vehicle. We affirm.
On the evening of July 28, 1995, the Dallas County Sheriff's Department conducted a safety inspection at the intersection of State Highways 8 and 9 in Dallas County. Deputy sheriffs stopped all vehicles and checked the drivers' licenses and other documentation relating to ownership of the vehicle and insurance. Welch came upon the deputies while driving his Chevrolet El Camino with a friend. He was approached by Deputy Bill Still, an Auxiliary Deputy Sheriff for Dallas County.
Deputy Still later testified that Welch was unable to provide a legible driver's license, proof of insurance, or proof of ownership of the vehicle. Deputy Still reported this situation to his supervisor on the scene, Deputy Sheriff Kenneth Seale. The deputies then checked Welch's license plate and found that it was registered to another vehicle. Both deputies also testified at the suppression hearing that the initial computer report on Welch indicated that there was a warrant out for his arrest for failure to appear in court in a different county.
Welch was asked if he had any weapons, drugs, or alcohol in his vehicle. According to the deputies, he initially denied having any drugs or weapons. Later, however, he surrendered a nine millimeter handgun from behind the seat of his El Camino. The deputies then asked if they could search the vehicle, whereupon Welch became angry and refused to allow them to do a search and insisted that he be allowed to go home. Welch was then arrested for the traffic violations, and his car was impounded.
Before impounding the vehicle, the deputies took an inventory of its contents. At trial, the law enforcement officers, including Auxiliary Deputy Still, Deputy Seale, and Arkansas Game and Fish Wildlife Officer Mike Knoedl, testified about their involvement in the search. Officer Knoedl testified that he occasionally assisted the Dallas County Sheriff's Department in investigations. On this occasion, Deputy Seale asked Officer Knoedl to assist in the search of Welch's vehicle because the El Camino was extremely cluttered. Deputies Still and Seale testified that other law enforcement officers brought them items from the car, and they recorded on a log sheet everything that was found in the vehicle and where it was found. Both of the deputies testified that the purpose of the search was to keep Welch from later claiming that something was missing from his vehicle. Deputy Still also stated that he was searching the vehicle to determine if there were more guns.
*183 While conducting the inventory search, the law enforcement officers found several syringes, a bag containing more than thirtythree grams of methamphetamine, a set of scales, and several spoons. Most of these items were found in an ammunition box that was located in the bed of the El Camino. The officers also found Welch's proof of insurance and proof of ownership of the vehicle in the ammunition box with the drugs. Prior to trial, Welch moved to have all of the items found in the search suppressed. The motion was denied, and Welch was tried by jury, convicted, and sentenced as set out above.
I. Sufficiency of the Evidence
We first consider Welch's argument regarding sufficiency of the evidence because the double jeopardy clause precludes a second trial when a judgment of conviction is reversed for insufficiency of the evidence. King v. State, 323 Ark. 671, 916 S.W.2d 732 (1996); Jones v. State, 323 Ark. 655, 916 S.W.2d 736 (1996).
After the State rested its case, the following exchange took place:
COUNSEL FOR DEFENSE: Your Honor, the State has rested and at this point the defense would move for a directed verdict.
THE COURT: Is that all you've got to say?
COUNSEL FOR DEFENSE: Yes, sir, that's all I'm saying. (The court then gave the State a chance to comment after which the following took place.)
THE COURT: The motion for directed verdict is denied.
COUNSEL FOR DEFENSE: Your Honor, then the defense would now rest and we renew our motion for a directed verdict and I would like to say that the defense is resting without calling the defendant, or a witness, after discussing that with my client and he is in agreement, is that right, Mr. Welch?
The court then denied the renewed motion. At no time did defense counsel state any grounds for his motion, which violates Rule 33.1 of the Arkansas Rules of Criminal Procedure. See also Dixon v. State, 327 Ark. 105, 937 S.W.2d 642 (1997); Smallwood v. State, 326 Ark. 813, 935 S.W.2d 530 (1996). Thus, the trial judge had no opportunity to rule on specific grounds with respect to any of the charges. We hold that Welch is procedurally barred from raising this issue on appeal.
II. Suppression of the Evidence
Welch's next point concerns the items seized by the Dallas County Sheriff's Department while conducting a warrantless search prior to impoundment of his vehicle. When reviewing the denial of a suppression motion, this court makes an independent examination of the evidence based on the totality of the circumstances, and we will not reverse the trial judge's decision unless it is clearly against the preponderance of the evidence. Brunson v. State, 327 Ark. 567, 940 S.W.2d 440 (1997), reh'g denied, 327 Ark. 567, 940 S.W.2d 440 (1997).
We initially examine the general law relating to inventory searches. Inventory or administrative searches are excepted from the requirement of probable cause and a search warrant. Florida v. Wells, 495 U.S. 1, 110 S.Ct. 1632, 109 L.Ed.2d 1 (1990). The purpose of an inventory search is to protect the property, the police, and the public. Id. The rationale is that police officers can better account for the property if they have an accurate record of what is contained in a vehicle when it is impounded. Moreover, the police and the public are protected by ensuring that the vehicle does not contain explosives or other harmful items. As part of an inventory search, the police are permitted not only to search the vehicle, but also the containers within the vehicle. Id. Colorado v. Bertine, 479 U.S. 367, 107 S.Ct. 738, 93 L.Ed.2d 739 (1987); Snell v. State, 290 Ark. 503, 721 S.W.2d 628 (1986), cert. denied, 484 U.S. 872, 108 S.Ct. 202, 98 L.Ed.2d 153 (1987).
In order for a search of a properly detained vehicle to fall within the inventory search exception to the search warrant requirement, there must be standard operating procedures established by the law enforcement agency conducting the search. Florida *184 v. Wells, supra; Colorado v. Bertine, supra; Snell v. State, supra. The procedures must be followed and the inventory search must not be conducted solely for investigative purposes. Id. There is no requirement that the procedures for the inventory search be in writing. United States v. Lowe, 9 F.3d 43 (8th Cir.1993). See also United States v. Skillern, 947 F.2d 1268 (5th Cir.1991), cert. denied, 503 U.S. 949, 112 S.Ct. 1509, 117 L.Ed.2d 646 (1992); Snell v. State, supra.
Absent a showing that the true intent of the police officers was to conduct an evidentiary search, the testimony of police officers that they always take inventory of impounded vehicles and that they always search containers is sufficient. Id. The fact that police officers have some idea or expectation of what they might find does not invalidate the purpose of the search. Indeed, the police are not required to weigh the individual's privacy interest against the probability of finding hazardous materials before opening a container in the vehicle. Colorado v. Bertine, 479 U.S. at 374, 107 S.Ct. at 742.
a. Standard Procedures.
Turning to the case at hand, Welch argues that the Dallas County Sheriff's Department did not follow normal procedures for an inventory search because the Department did not have written procedures and the deputy sheriffs could not be specific as to what the procedures were. In Snell v. State, supra, this court relied on the testimony of law enforcement officers to prove the inventory search, which included opening a container, was standard procedure. Accordingly, we turn to the testimony of the law enforcement officers to determine whether standard operating procedures were in place. Deputy Sheriff Seale testified that he always searches vehicles that are impounded:
Q. as far as the Dallas County Sheriff's Department is concerned what does inventory mean?
A. Well, it's part of our policy, as far as I know, that in case, you know, if we impound a vehicle we got everything listed and documented then the subject can't come back later on and say that such-and-such is missing
. . . .
Q. Okay. Do youMr. Seale, have you participated in other inventory searches?
A. I have.
Q. Yes, sir. Is this the the way y'all did this any different than your normal procedure?
A. No.
. . . .
Q. Now, what were you looking for when you were searching the vehicle?
A. Weren't looking for any certain thing, we was just documenting each and every item that was in the vehicle before we impounded it.
In addition, Game and Fish Officer Knoedl testified at trial:
Q. And is that your standard procedure to open a box like that?
A. Yes, sir.
Q. Who told you to do that, Mike?
A. Well, basically I work under the same procedure that the Game and Fish follows, which we have a written policy that says, "All containers locked, or unlocked, will be searched," you know, "or inventoried when a vehicle is stored."
Q. Okay. Does the Dallas County Sheriff's Office have a written policy like that?
A. Sir, I couldn't say for sure. I know that there is supposed to be a verbal policy. I know from being here seven years and working with the Dallas County Sheriff's Department, that that's normal operating procedure that is done.
The trial court cited the Eighth Circuit's decision in United States v. Lowe, supra, for the proposition that standard procedures do not have to be in writing and made the following findings in its order:
The Courts have ruled that an inventory search must be based upon standardized procedures to prevent rummaging. The officers testified at the hearing that upon impounding the vehicle it would be taken to the Sheriff's Office so that a written *185 inventory of the contents of the vehicle could be made in accordance with their policy. They acknowledged that they had not seen a written policy but do this all the time.
The Courts have not required that for inventory searches to be valid they must be based on written standardized procedures or written standard police policy. These procedures may be written, but established unwritten procedures are also sufficient. The officers in this case were following what they had been trained to do when the vehicle was impounded after a valid arrest, perform an inventory for the protection of the owner, the police and the public.
These findings are a proper statement of the law and the facts. While we have no doubt that written procedures are preferable to oral procedures, neither our caselaw nor federal caselaw requires that the standard policy be in writing for the inventory search to pass constitutional muster. The essential points appear to be that the practice be uniform and that no discretion be left to the police officers to decide the boundaries of the inventory search. See Colorado v. Bertine, supra.
Welch makes a specific argument that doing an inventory of the ammunition box was clearly violative of the Fourth Amendment. We disagree. Though Game and Fish Officer Mike Knoedl was not a member of the Sheriff's Department, he testified that he knew the department's procedures on opening containers, having worked in conjunction with the Department for seven years. Deputy Kenneth Seale further testified that the inventory search, which would include search of the ammunition box, was according to normal procedure. Thus, there was evidence of a standard policy, unlike the case of Kirk v. State, 38 Ark.App. 159, 832 S.W.2d 271 (1992), where the Court of Appeals concluded there was no evidence of a policy regarding closed containers.
Certainly, the circumstances surrounding the search were suspicious with no proof of ownership of the vehicle, a warrant outstanding for Welch's arrest, and a weapon in the vehicle. We are further persuaded by the Supreme Court's reasoning in Colorado v. Bertine, supra:
Even if less intrusive means existed of protecting some particular types of property, it would be unreasonable to expect police officers in the everyday course of business to make fine and subtle distinctions in deciding which containers or items may be searched and which must be sealed as a unit.
Bertine, 479 U.S. at 375, 107 S.Ct. at 743, quoting Illinois v. Lafayette, 462 U.S. 640, 648, 103 S.Ct. 2605, 2610, 77 L.Ed.2d 65 (1983). There was no abuse of discretion by the trial court in refusing to suppress this evidence.
b. Pretextual Search.
Other than the testimony of Deputy Still that he was also looking for guns, there was no evidence that the search was anything other than an inventory search. Deputy Still and Deputy Seale both testified that they were doing an inventory search. The United States Supreme Court has observed that the fact that a police officer is also aware that he might come upon pertinent evidence in the course of an inventory search is not fatal to that search. Colorado v. Bertine, supra.
To suppress an inventory search, a defendant must show that the police officers were conducting the inventory search in bad faith for the sole purpose of collecting evidence. Id. See also South Dakota v. Opperman, 428 U.S. 364, 96 S.Ct. 3092, 49 L.Ed.2d 1000 (1976)(plurality opinion). Here, the trial court did not find that there was an ulterior motive on the part of the Dallas County Sheriff's Department. We decline to superimpose our view of the testimony over that of the trial court's when the law enforcement officers are following standard procedure and in the absence of proof that the sole motivation for the search was to collect evidence. See Ryan v. State, 303 Ark. 595, 798 S.W.2d 679 (1990).
III. Speedy Trial
Welch next claims that the trial court erred because it did not dismiss the charges against him after the time for speedy trial *186 had expired. The State answers that Welch waived his right to a speedy trial because he failed to raise the issue in the trial court.
Welch was arrested on July 28, 1995. The defense requested and was granted a motion for a continuance on August 19, 1996. The attorney requesting the continuance explained that he would not be ready for trial on that day because Welch failed to attend any of their scheduled meetings and he had not met with the defendant until August 13, 1996. The continuance was granted and time was charged to the defendant. The defense later made a motion to suppress and a hearing was held on November 25, 1996. At the end of the hearing, the court, the prosecutor, and defense counsel attempted to set a trial date, and the following exchange took place:
THE COURT: Is there really a speedy trial problem? If I remember correctly I think Mr. Welch walked out of this courtroom and left and we were trying to resolve this matter and he was gone a good long time, was he not?
PROSECUTOR: Yes, sir. I would ask, so as to avoid any further problem, I'd ask that we go ahead and try this case this year, depending, of course, on what the Court rules. If the Court rules
THE COURT: Well, I'm not going to do anything until I rule on this [suppression] motion
PROSECUTOR: Yes, sir.
THE COURT: and if you get me that in a week then I will set it and right now I told you I would set it preferably on the 12, that day's open
PROSECUTOR: Yes, sir.
THE COURT: do either of you have any problem with the 12th?
DEFENSE COUNSEL: No, sir, that'd just give me time to drive back from St. Louis and rest a day before I try a jury trial.
This is the only time that speedy trial was discussed at the trial court level before the current appeal.
In criminal cases, even constitutional issues must be presented to the trial court to preserve them for appeal. Henry v. Eberhard, 309 Ark. 336, 832 S.W.2d 467 (1992). A defendant's failure to move for a dismissal of charges for a lack of speedy trial constitutes a waiver of his rights under the rules. Summers v. State, 292 Ark. 237, 729 S.W.2d 147 (1987). The defense had plenty of opportunity to object to the trial date, but instead consented to it even after the trial court referred to a potential speedy-trial problem. The trial court is not required to make the motion for him. This issue has no merit.
IV. Cumulative Error
For his final point, Welch contends that all of the rulings against him, when considered together, constitute reversible error. In response, the State correctly points out that the cumulative-error argument was not raised to the trial court. This court has specifically held that not only must each of the negative rulings be objected to individually, a defendant must also raise the cumulative-error objection to the trial court and obtain a ruling in order to argue the point on appeal. Witherspoon v. State, 319 Ark. 313, 891 S.W.2d 371 (1995). Because Welch did not raise the cumulative-error objection in the trial court, he is barred from raising it on appeal. Id.
The individual objections by Welch and the record on appeal have been reviewed for prejudicial error in accordance with Supreme Court Rule 4-3(h), and none has been found.
Affirmed.
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In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 06-3273
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
PETER FRANCO-FERNANDEZ,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 06 CR 130—James F. Holderman, Chief Judge.
____________
ARGUED MAY 2, 2007—DECIDED JANUARY 2, 2008
____________
Before EVANS, WILLIAMS, and SYKES, Circuit Judges.
SYKES, Circuit Judge. This appeal requires us to
decide whether the Illinois offense of “putative father”
child abduction, 720 ILL. COMP. STAT. 5/10-5(b)(3), is either
a crime of violence or an aggravated felony for purposes
of the increased offense levels specified in U.S.S.G.
§ 2L1.2(b)(1)(A)(ii) and (b)(1)(C) for the crime of illegal
reentry after deportation. We hold that it is neither, and
therefore vacate Peter Franco-Fernandez’s sentence and
remand for resentencing.
I. Background
Peter Franco-Fernandez pleaded guilty to illegal reentry
by a removed alien in violation of 8 U.S.C. § 1326(a). His
2 No. 06-3273
Presentence Investigation Report (“PSR”) recommended
an advisory sentencing guidelines range of 70-87 months’
imprisonment based in large part on a 16-point increase
in his offense level premised upon his removal having
followed a conviction for a felony that is a “crime of vio-
lence.” U.S.S.G. § 2L1.2(b)(1)(A)(ii). The predicate of-
fense for this enhancement was Franco-Fernandez’s
2005 Illinois conviction for so-called “putative father”
child abduction, which is committed by one who:
Intentionally conceals, detains or removes the child
without the consent of the mother or lawful custodian
of the child if the person is a putative father and
either: (A) the paternity of the child has not been
legally established or (B) the paternity . . . has been
legally established but no orders relating to custody
have been entered.
720 ILL. COMP. STAT. 5/10-5(b)(3) (2004).
Two less significant offense-level enhancements were
also possible under section 2L1.2(b): an 8-level increase
if the conviction was for an “aggravated felony,” section
2L1.2(b)(1)(C), or a 4-level increase if the conviction was
for “any other felony,” section 2L1.2(b)(1)(D). Franco-
Fernandez objected to the PSR and maintained that his
“putative father” child abduction conviction did not
qualify for the 16-level increase for a crime of violence.
The government argued that the Illinois offense was
either a crime of violence or an aggravated felony and
Franco-Fernandez should receive the 16-level enhance-
ment applicable to the former or at least the 8-level
enhancement applicable to the latter. The district court
concluded that the 16-level increase was appropriate
and sentenced Franco-Fernandez to 70 months’ imprison-
ment, the bottom of the advisory range.
No. 06-3273 3
II. Discussion
Franco-Fernandez argues the district court erroneously
applied the 16-level enhancement for a crime of violence
under section 2L1.2(b)(1)(A)(ii) based on his Illinois
conviction for “putative father” child abduction. The
classification of a prior conviction under the sentencing
guidelines is a legal question subject to de novo review.
United States v. Golden, 466 F.3d 612, 613 (7th Cir. 2006).
The illegal reentry guideline, section 2L1.2, sets a
base offense level of 8 and then specifies five possible
offense-level enhancements if the defendant was de-
ported after being convicted of a crime. U.S.S.G.
§ 2L1.2(b)(1)(A)-(E). The size of the enhancement gen-
erally corresponds to the severity of the crime the alien
committed; the guideline instructs courts to apply the
greatest applicable enhancement. U.S.S.G. § 2L1.2(b)(1).
Three enhancements are at issue in this case: a 16-level
increase for a “crime of violence,” section 2L1.2(b)(1)(A)(ii);
an 8-level increase for an “aggravated felony,” section
2L1.2(b)(1)(C); and a 4-level increase for “any other fel-
ony,” section 2L1.2(b)(1)(D). Franco-Fernandez main-
tains his Illinois conviction for “putative father” child
abduction is simply “any other felony” and therefore only
the 4-level enhancement should have been applied. The
government contends that child abduction by a putative
father under Illinois law qualifies for either the 16-level
crime of violence enhancement or the 8-level aggravated
felony enhancement.
A. Crime of Violence
While the term “crime of violence” is used in various
contexts in the federal code and sentencing guidelines, the
illegal reentry guideline contains its own definition:
[M]urder, manslaughter, kidnapping, aggravated
assault, forcible sex offenses, statutory rape, sexual
4 No. 06-3273
abuse of a minor, robbery, arson . . . or any offense
under federal, state, or local law that has as an ele-
ment the use, attempted use, or threatened use of
physical force against the person of another.
U.S.S.G. § 2L1.2 cmt. n.1(B)(iii). The government urges
us to treat child abduction as a species of kidnapping
and hence a specifically enumerated crime of violence
under this guideline. The government asserts that kidnap-
ping under Illinois law, see 720 ILL. COMP. STAT. 5/10-1(a),
shares some of the same elements as child abduction by
a putative father under section 5/10-5(b)(3), and therefore
the latter crime should be considered a form of kidnapping
for purposes of the foregoing definition. We reject this
argument for two reasons.
First, child abduction does not appear as one of the
specifically enumerated offenses in the definition of a
crime of violence in section 2L1.2 cmt. n.1(B)(iii). That
some variations of child abduction may resemble kidnap-
ping does not bring the crime within the list of enumerated
offenses that explicitly qualify as crimes of violence. See
United States v. Jaimes-Jaimes, 406 F.3d 845, 849 (7th
Cir. 2005) (explaining that the first part of the crime of
violence definition in section 2L1.2 only applies to con-
victions for any of the specifically enumerated offenses).
Second, we question whether child abduction by a
putative father is indeed analogous to kidnapping under
Illinois law. Kidnapping in all its statutory forms re-
quires either actual or intended confinement of the
victim against the victim’s will. See 720 ILL. COMP. STAT.
§ 5/10-1(a)(1)-(3), (b). In contrast, child abduction by a
putative father does not require confinement against
the victim’s will, but is committed when the defendant
has the status of a putative father within the meaning of
the statute and either “conceals, detains, or removes the
child” without the consent of the mother or legal custodian.
No. 06-3273 5
See § 5/10-5(b)(3). Confinement against the victim’s will
is not required. See § 5/10-5(a)(2) (“ ‘Detains’ means taking
or retaining physical custody of a child, whether or not
the child resists or objects.”). Historically, biological
parents were excluded from the reach of kidnapping
statutes; Illinois enacted the parental child abduction
statute to punish conduct the kidnapping statute did not
cover. See People v. Algarin, 558 N.E.2d 457, 462 (Ill. App.
Ct. 1990) (“[T]he child abduction statute was not de-
signed to be coextensive with the kidnapping statute
but rather to open as a new frontier the area of parental
abduction which the kidnapping statute was not in-
tended to reach.”). In short, the Illinois offense of child
abduction by a putative parent is distinct from kidnap-
ping in name, origin, and definition.
This brings us to the more general definition of a crime
of violence, which encompasses any crime “that has as
an element the use, attempted use, or threatened use of
physical force.” U.S.S.G. § 2L1.2 cmt. n.1(B)(iii). Under
this definition force must be an element of the crime
and not simply a possible byproduct of it; section 2L1.2
thus adopts the “charge offense” approach to classifying
prior offenses. See Flores v. Ashcroft, 350 F.3d 666, 670
(7th Cir. 2003). Under this approach the focus is on the
statutory definition of the crime. See id. (confining inquiry
to Indiana’s statutory definition of battery to determine
whether alien was removable based on conviction for a
crime of violence under 18 U.S.C. § 16); cf. United States
v. Gilbert, 464 F.3d 674, 678 (7th Cir. 2006) (looking to
charging document to ascertain under which version of
Indiana’s criminal confinement offense defendant was
convicted for purposes of the enhanced penalties in the
Armed Career Criminal Act). The statutory definition of
“putative father” child abduction does not require force
(either actual, attempted, or threatened); it only requires
that the putative father conceal, detain, or remove the
6 No. 06-3273
child without the consent of the mother or legal custodian.
Because the use, attempt, or threat of force is not an
element of child abduction by a putative father,
Franco-Fernandez’s child abduction conviction is not a
crime of violence. See Gilbert, 464 F.3d at 679 (force is
not an element of criminal confinement because re-
moval of the victim can be accomplished with or with-
out force). The 16-level enhancement under section
2L1.2(b)(1)(A)(ii) should not have been applied.
B. Aggravated Felony
The government argues in the alternative that Franco-
Fernandez’s child abduction conviction qualifies as an
aggravated felony under section 2L1.2(b)(1)(C). While
section 2L1.2 contains its own definition of crime of
violence, it defines “aggravated felony” by reference to
the definition of that term in section 101(a)(43) of the
Immigration and Nationality Act, 8 U.S.C. § 1101(a)(43).
U.S.S.G. § 2L1.2 cmt. n.3(A). In relevant part, that
definition includes “a crime of violence (as defined in
[18 U.S.C. § 16] . . .) for which the term of imprison-
ment [is] at least one year.” 8 U.S.C. § 1101(a)(43)(F). The
result of this cross-referencing is that we must decide
whether child abduction by a putative father is a “crime
of violence” for the second time in this appeal. Only
instead of applying the narrower definition of that term
specified in section 2L1.2, we now apply the broader
definition found in 18 U.S.C. § 16. Jaimes-Jaimes, 406
F.3d at 849. That section defines “crime of violence” as:
(a) an offense that has as an element the use, at-
tempted use, or threatened use of physical force
against the person or property of another, or (b) any
other offense that is a felony and that, by its nature,
involves a substantial risk that physical force against
No. 06-3273 7
the person or property of another may be used in the
course of committing the offense.
18 U.S.C. § 16. We have already explained why child
abduction by a putative father does not meet the criteria
established in subsection (a); we move on to consider
whether it falls within the definition in subsection (b), that
is, whether it “involves a substantial risk that physical
force against the person . . . of another may be used.”
The government maintains that all child abductions
involve the risk of physical force. In support the govern-
ment relies primarily on United States v. Bryant, 310
F.3d 550 (7th Cir. 2002), and United States v. Wallace,
326 F.3d 881 (7th Cir. 2003), though neither case ad-
dressed child abduction. Bryant involved the federal
offense of escape and Wallace involved the Illinois offense
of unlawful confinement, both of which we concluded
were crimes of violence.1
The offense of escape is simply too dissimilar from child
abduction for Bryant to be persuasive here. See United
States v. Franklin, 302 F.3d 722, 724-25 (7th Cir. 2002)
(concluding that escape is a crime of violence due to the
potential violence inherent to a scenario in which an
1
Bryant addressed the definition of “crime of violence” in
U.S.S.G. § 2K2.1, and Wallace addressed the definition of “violent
felony” under the Armed Career Criminal Act. The relevant
definition in both cases required a “serious potential risk of
physical injury.” United States v. Bryant, 310 F.3d 550, 553 (7th
Cir. 2002); United States v. Wallace, 326 F.3d 881, 886 (7th Cir.
2003). The “crime of violence” definition in 18 U.S.C. § 16
requires a “substantial risk that physical force against the per-
son . . . of another may be used.” Our decision here need not
resolve whether there is any difference between a “serious
potential risk of physical injury” and a “substantial risk [of]
physical force against the person . . . of another.”
8 No. 06-3273
escapee feels threatened by police, citizens, or fellow
escapees). Wallace hits closer to the mark insofar as the
elements of unlawful confinement in Illinois more
closely resemble those of child abduction. See 720 ILL.
COMP. STAT. 5/10-3(a) (“A person commits the offense of
unlawful restraint when he knowingly without legal
authority detains another.”). But we premised our hold-
ing in Wallace on the fact that in committing criminal
confinement, “one person restrains another against his
or her will.” 326 F.3d at 887; see also People v. Bowen,
609 N.E.2d 346, 361 (Ill. App. Ct. 1993) (“The detention
must be wilful, against the victim’s consent, and prevent
movement from one place to another.”). Detaining a
person against his will involves a substantial risk of
force, “whether it be in the initial restraint or the
possible resulting confrontation between assailant and
victim if the victim attempts to leave.” Wallace, 326
F.3d at 887.
Child abduction by a putative father, on the other
hand, does not contain a similar requirement of restraint
against the victim’s will. The offense is committed when
a putative father simply “conceals, detains, or removes”
the child without the consent of the mother or legal
custodian.2 “Detains” is specifically defined in the
statute as “taking or retaining physical custody . . .
whether or not the child resists or objects.” 5/10-5(a)(2). In
Gilbert, we declined to apply Wallace to a subsection of
Indiana’s criminal confinement statute that similarly
lacked an against-the-victim’s-will requirement. 464 F.3d
2
It appears that Franco-Fernandez was charged and convicted
for the “concealing” version of the offense. We say “appears”
because the copy of the charging document in the record is
almost entirely illegible. Both parties’ briefs state that he was
convicted of concealing his ten-month-old son by taking him
from his babysitter without notifying the mother.
No. 06-3273 9
at 682 (holding that IND. CODE. § 35-42-3-3(a)(2), which
outlaws “remov[ing] another person, by fraud, enticement,
force, or threat of force, from one (1) place to another,” is
not a crime of violence); see also United States v. Hagenow,
423 F.3d 638, 644 (7th Cir. 2005) (“[C]riminal confine-
ment under Indiana law does not necessarily involve
conduct that presents a serious potential risk of injury
to another.” (quotations omitted)). We reach the same
conclusion here.
Aside from citing Wallace and Bryant, the govern-
ment makes no other attempt to explain why child abduc-
tion by a putative father involves a “substantial risk” of
physical force. Unlike the offense of unlawful restraint,
child abduction by a putative father necessarily involves
parties who stand in a familial relationship to each other;
the offense specifically targets nonforcible conduct by a
putative noncustodial father without regard to the
victim’s resistence, consent, or acquiescence. We con-
clude that the Illinois offense of child abduction by a
putative father does not involve a “substantial risk that
physical force against the person . . . of another may be
used.” See Dickson v. Ashcroft, 346 F.3d 44, 52 (2d Cir.
2003) (holding that a similar New York offense, unlawful
imprisonment of an incompetent person or child under
16 in violation of N.Y. PENAL LAW § 135.00(1) (McKinney
2003), did not involve a substantial risk of force and
thus was not a crime of violence). Accordingly, Franco-
Fernandez’s “putative father” child abduction conviction
is not an aggravated felony under section 2L1.2(b)(1)(C).
Franco-Fernandez’s 2005 child abduction conviction is
neither a crime of violence nor an aggravated felony, and
therefore neither the 16-level nor the 8-level enhancement
in section 2L1.2(b)(1)(A)(ii) or (b)(1)(C) applies. Because
Franco-Fernandez is only subject to the 4-level enhance-
ment in section 2L1.2(b)(1)(D) for “any other felony,” we
10 No. 06-3273
VACATE his sentence and REMAND this case to the dis-
trict court for resentencing in accordance with this opinion.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—1-2-08
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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
RICARDO MALLOY,
Plaintiff,
v.
Civil Action No. 15-1499 (RDM)
WASHINGTON METROPOLITAN AREA
TRANSIT AUTHORITY and
AMALGAMATED TRANSIT UNION
LOCAL 689,
Defendants.
MEMORANDUM OPINION AND ORDER
Ricardo Malloy, proceeding pro se, brings this suit against his former employer,
Washington Metropolitan Area Transit Authority (“WMATA”), and his former union,
Amalgamated Transit Union Local 689 (“Union”). The complaint includes allegations of
conspiracy, treason, slavery, and numerology, but at its core it alleges a dispute over Malloy’s
termination from WMATA and the alleged failure of his union to represent him adequately
during that process. Both WMATA and the Union have moved to dismiss. As explained below,
the Court concludes that Malloy’s most substantial claims are barred by the statute of limitations
and that his remaining claims are unsupported by plausible, factual allegations. The Court will,
accordingly, GRANT the Defendants’ motions and dismiss the complaint.
I. BACKGROUND
For purposes of resolving Defendants’ motions to dismiss, the Court accepts the
following allegations contained in the complaint as true. 1 See, e.g., Hishon v. King & Spalding,
1
All citations to the complaint are to the amended complaint found at Dkt. 3.
467 U.S. 69, 73 (1984). Malloy was employed by WMATA as a train operator for fifteen years.
Compl. ¶ 1. On January 5, 2013, he was operating a train that closed its doors on the arm of one
of Malloy’s supervisors, Rachael Corbie. Id. ¶ 26. According to a report Corbie filed, which
Malloy quotes in his complaint, Corbie immediately contacted Malloy on the train’s emergency
intercom, identified herself, asked that Malloy identify himself, and asked if Malloy “realized
that he held [Corbie] in the door?” Id. ¶ 27. The incident rapidly degenerated into a verbal and
physical confrontation. Rather than respond to his supervisor’s question, Malloy asked Corbie
whether she had heard the “chimes,” indicating that the doors were about to close. Id. When
Corbie indicated that she was not given ample time to avoid the doors, Malloy “cut [her] off,”
and once again asked, “did you or did you not hear the door chimes!” Id. Corbie then informed
Malloy that she was taking him “out of service,” and, at the next stop, she walked down the
platform and entered the “operating cab.” Id. ¶ 28. As Malloy was leaving the cab, Corbie
instructed him not to leave. Id. Disregarding Corbie, Malloy left the cab, “bumping the right
side of [Corbie’s] body,” and told Corbie that he was “out of service” and that she should operate
the train. Id. After the train arrived at the Greenbelt Terminal, Malloy once again approached
Corbie and again asked whether she “did not hear the door announcement.” Id. ¶ 29. Corbie
asked Mallory “to leave [her] alone.” Id. The transit police were summoned and took statements
from both Malloy and Corbie. Id. ¶ 30.
Six days after this incident, WMATA superintendent Edwin Harris emailed Lisa Cooper-
Lucas, who was apparently the point of contact for WMATA’s Employee Assistance Program,
and asked how he “could get [Malloy] . . . some type of (mental) fitness for duty evaluation.”
Compl. ¶ 43. Harris described Malloy as “an employee who has been displaying some very
erratic and irrational behavior” and recounted two incidents in the recent past. Id. ¶ 42. One was
2
the episode with Corbie; the other occurred several weeks earlier when Malloy was also “taken
out of service,” this time for “operating his train with a safety switch unsealed.” Id. ¶ 42. The
email further explained that following the incident involving the safety switch, Malloy became
irate and began “screaming in the hallway and the office of [Harris’s] assistant and demanded a
letter” addressing certain problems with Metro. Id. Harris added that “[t]hese are just two in a
string of incidents with [Malloy] and each time there is [an] event, he always writes long reports
describing a conspiracy theory that the Authority/Union is out to get him.” Id. ¶ 43. Finally,
Harris wrote that he did not believe that Malloy could “operate a train safely.” Id.
Although the complaint does not recount Cooper-Lucas’s response, Harris told Malloy to
report to the Employee Assistance Program for a medical exam on January 15, 2013. Compl.
¶ 44. When Malloy asked why this was necessary, Harris allegedly stated that he was “not going
to argue with” Malloy and that “because of his relationship with the Freemasons,” neither “the
arbitrator[] nor the public would hear of [Malloy’s] grievance.” Id. ¶ 44. Malloy then contacted
a union officer and explained that he had been instructed to undergo a medical examination and
that Harris had refused to provide any reason for this direction. Id. ¶ 45. In response, the union
officer allegedly told Malloy that Harris could indeed require him to undergo a medical exam
without offering an explanation. Id. Malloy then signed a form acknowledging that he had to
submit to the exam but wrote on the form that he did “not understand the purpose or the goal of
this examination,” but he was complying because he had “been instructed to make the
appointment o[r] lose [his] position as a train operator.” Id.
Malloy arrived for his evaluation the next day and began by filling out a questionnaire.
Compl. ¶ 48. At that point, he alleges, “Dr. Thomas, whom [Malloy] had never met, led [him] to
her office wearing an inappropriately tight, fuchsia, or light purple dress.” Id. Malloy then
3
began to record their conversation with a mini-recorder. Id. The contents of that recording are
not part of the record. Malloy alleges that Dr. Thomas explained that he had been referred to her
for evaluation because of his aggressive behavior during the two incidents mentioned in Harris’s
email. Id. Malloy alleges that he “answered all of Dr. Thomas’s questions” and provided “full
explanations.” Id.
According to the complaint, WMATA extensively investigated the incident involving
Corbie. Corbie and others submitted reports to WMATA, as did the transit police. Compl.
¶¶ 37–40, 58. Following this investigation, Malloy received a letter from Harris recounting
WMATA’s findings and its conclusion that Malloy was “disrespectful, rude and threatening” in
his encounter with Corbie. Id. ¶ 58. Based on this “deplorable” conduct, Malloy was suspended
for 22 days without pay and was directed “to attend a Workplace Violence class and anger
Management counseling.” Id. Malloy was further informed that “[a]ny future serious
operational violations of the rules or policy will result in your immediate termination from
WMATA.” Id. ¶ 59.
Malloy filed a grievance regarding this suspension on February 22, 2013. 2 Compl. ¶ 66.
The following day, he received a letter from Dr. Thomas explaining that she was recommending
that he “seek treatment with a licensed psychologist, therapist, and/or psychiatrist” due to the
“significant concerns” she had regarding “the escalation of [Malloy’s] aggressive behaviors at
work.” Id. ¶ 67. The letter further informed Malloy that he would remain on medical leave
“during this phase of [his] treatment” and that he would not be allowed to return to work until (1)
Dr. Thomas was provided with a letter from Malloy’s “treatment provider(s)” detailing his
2
Malloy had earlier filed a grievance on January 14, 2013, see Compl. ¶ 46, but had to re-file it
for technical reasons, id. ¶ 65. That procedural issue is irrelevant to the result in this case.
4
“diagnosis, . . . treatment, prognosis [and] any [appropriate work] limitations and/or medication
regimens,” and (2) Dr. Thomas approved his return to work. Id. ¶¶ 68–69. Malloy was
permitted to use his “paid time off” during this period, and was informed that other options,
including short-term disability, might be available after Malloy exhausted his paid time off. Id.
¶ 69.
Over the next several months, there was a constant back-and-forth among Malloy, the
Union, and WMATA concerning his grievances and various other issues. See, e.g., Compl.
¶¶ 70–154. In the meantime, WMATA sent Malloy a letter on June 10, 2013, reminding him
that he would remain on medical leave while he obtained the treatment that Dr. Thomas
recommended and that he was required to submit a letter from his “treatment provider(s)”
describing his “diagnosis, . . . treatment, and prognosis” before he could return to work. Id.
¶¶ 167–68. WMATA then wrote to Malloy again on September 5, 2013, noting that he had yet
“to provide the requested information” and that, if he failed to do so by September 16, 2013,
WMATA would “begin administrative action to discharge” him. Id. ¶168–69. Although Malloy
did provide some documents to the WMATA medical office, WMATA concluded that those
documents failed to comply with the request contained in Dr. Thomas’s letter. Id. ¶ 169.
WMATA, accordingly, concluded that Malloy had failed to timely provide the requested medical
information and fired him on that basis on September 19, 2013. Id. ¶¶ 170–71.
Malloy filed a grievance on October 4, 2013, contesting his termination. Compl. ¶ 177.
After WMATA denied that grievance, the Union agreed to arbitrate it on his behalf. Id. ¶ 265.
The Union hired Douglas Taylor of Gromfine, Taylor, and Tyler, P.C., to represent it (and thus
to advance Malloy’s interests) in the arbitration proceeding. Id. ¶¶ 276, 279. Dr. Thomas was
the lone witness at the November 19, 2014, arbitration hearing. Id. ¶ 280. She testified about
5
her evaluation of Malloy and that she never received the verification of treatment she had
directed he undergo. Id. She also appears to have offered a diagnosis of Malloy, id. ¶¶ 280, 284,
although the complaint does not specify that diagnosis. 3 At some point, it appears that Malloy
revealed that he had recorded the session with Dr. Thomas and asserted that the recording would
prove that her testimony was false. Id. ¶¶ 281, 283–84. It also appears—although the complaint
is vague on this point—that the arbitration proceeding was scheduled to continue on a future day
so that Malloy could produce the recording. Id. ¶ 284, 286–88.
Taylor emailed Malloy on December 10, 2014, to go over the status of the arbitration
proceeding. Compl. ¶ 284. He explained that Malloy’s case came down to attacking Dr.
Thomas’s diagnosis, which Malloy alleged was based on false reports about his work and a false
account of what happened at his medical evaluation. Id. Taylor continued that the Union
“need[ed] to use [Malloy’s recording] to prevail” in the proceeding and that the arbitrator was
prepared to exclude the recording altogether because the Union had still not produced it despite
an apparent promise to do so. Id. As a result, Taylor instructed Malloy that he “must produce a
copy of the tape” before the second arbitration hearing and that if he did not, Taylor would
“conclude that [he was] not cooperating” and would “recommend that the Union cease
arbitrat[ing] [the] case.” Id. ¶ 286.
Based on what appears to be a transcript that Malloy personally prepared of the second
arbitration hearing and attached to his opposition to the motions to dismiss, Malloy argued at the
second session of the hearing that the tape was unnecessary because he was not fired based on
his diagnosis but based on his failure to provide the necessary paperwork to Dr. Thomas. See
3
The complaint elsewhere suggests that at some unnamed time Dr. Thomas had diagnosed
Malloy with Intermittent Explosive Disorder. Id. ¶ 98.
6
Dkt. 15 at 21–24. That hearing concluded with Malloy refusing to produce the tape and Taylor
stating he would have to consult with the Union about how to proceed. Id. at 23–24. A couple
of weeks later, Malloy emailed Taylor to ask if the Union had dropped his grievance from
arbitration. Compl. ¶ 289. Taylor responded that his “advice to the local and their direction to
me are confidential, privileged communications,” that he understood that Malloy was no longer a
“qualified” member of the Union, and that his grievance had been dropped. Id. ¶ 290. In light of
Malloy’s stated intention to sue the Union, Taylor also explained that his communications with
Malloy were now “adversarial” and that he “must preserve the intents and confidentiality of [his]
client.” Id.
Malloy then sued WMATA and Local 689. At the time he originally attempted to file
suit, Malloy sought leave to proceed without paying the filing fee—known as proceeding in
forma pauperis. See Case No. 15-mc-1112, Dkt. 1-1. That application, which was dated July
19, 2015, id. at 2, was denied by Judge Jackson on August 21, 2015. See Case No. 15-mc-1112,
Dkt. 1. Malloy paid the filing fee on September 15, 2015, and his original complaint was
docketed at that time. See id. After the Union moved to dismiss, see Dkt. 2 (Case No. 15-cv-
1499), Malloy filed an amended complaint, see Dkt. 3. WMATA filed a motion to dismiss two
days later, see Dkt. 6, but that motion was in response to the original complaint, which had been
superseded by that time. Both WMATA and the Union have now moved to dismiss the amended
complaint. See Dkts. 8, 9.
Malloy’s complaint is 79 pages and 301 paragraphs long. It contains multiple accounts
of the incidents in this case, including what appears to be language taken verbatim from various
documents submitted as part of the grievance and arbitration processes. Many of the allegations
in the complaint, for example, use the first person but are from the perspective of someone other
7
than Malloy. The complaint also contains a great deal of material that does not bear a clear
connection to Malloy’s suspension, termination, or grievance, including references to
numerology, the Masons, the Illuminati, conspiracies, treason, and slavery. Compl. ¶¶ 24–25.
Omitting repetition, the complaint asserts ten counts. The first is against WMATA for
breach of the collective bargaining agreement between the Union and WMATA. Compl. at 75. 4
The second is against Local 689 for breach of the duty of fair representation, taking issue with
how the Union represented him in the arbitration process. Id. These same claims are then
repeated as counts eight and nine, respectively. Id. at 76. Other counts allege “police
misconduct,” wire and mail fraud, due process violations, intentional infliction of emotional
distress, defamation, and mental health malpractice. Id. at 75–77.
Before the Court now are Defendants’ motions to dismiss the complaint under Federal
Rule of Civil Procedure 12(b)(6). Malloy responded to those motions with a “motion to deny”
them, Dkt. 15, which the Court will construe as his opposition. He has also filed a motion to
disqualify the Union as opposing counsel. See Dkt. 13.
II. STANDARD OF REVIEW
A party moving to dismiss a complaint under Rule 12(b)(6) bears the burden of showing
that the complaint “fail[s] to state a claim upon which relief can be granted.” Fed. R. Civ. P.
12(b)(6); see also Cohen v. Bd. of Trs. of Univ. of D.C., No. 15-7005, slip op. at 7 (D.C. Cir. Apr.
22, 2016). “To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’ A claim has facial
4
The amended complaint contains two pages with the number “75” at the bottom. The Court
will refer to the page that corresponds with the actual number of pages in the document, so that it
will refer to the second page labeled as “75” as page 76, the page labeled as “76” as page 77, and
so on. This affects only a handful of pages, as the amended complaint is 79 pages long.
8
plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 570 (2007)
(citation omitted)). The Court need not accept as true any legal conclusions disguised as factual
allegations, “‘naked assertions’ devoid of ‘further factual development,’” or a “‘formulaic
recitation of the elements of a cause of action.’” Id. (quoting Twombly, 550 U.S. at 555, 557).
The plaintiff, however, is entitled to “the benefit of all inferences that can be derived from the
facts alleged.” See Am. Nat’l Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C. Cir. 2011).
III. DISCUSSION
A. Breach of Collective Bargaining Agreement and Duty of Fair Representation Claims
Malloy’s first two claims are closely related. The first count alleges that WMATA
breached the collective bargaining agreement it had with the Union by suspending and
eventually firing him “without cause,” and the second count alleges that the Union breached its
duty of fair representation stemming from the arbitration process. Compl. at 75–76.
The Supreme Court addressed claims of this type in DelCostello v. Int’l Bhd. of
Teamsters, 462 U.S. 151 (1983). There, the Court explained that in the ordinary course a union
member who wants to sue his union or his employer must exhaust “any grievance or arbitration
remedies provided in the collective bargaining agreement.” Id. at 163. The employee is then
typically “bound by the result according to the finality provisions of the agreement” and entitled
to only “very limited” judicial review. Id. at 164. Review is available, however, “when the
union representing the employee in the grievance/arbitration procedure acts in such a
discriminatory, dishonest, arbitrary, or perfunctory fashion as to breach its duty of fair
representation.” Id. In those circumstances, the employee “may bring suit against both the
9
employer and the union, notwithstanding the outcome or finality of the grievance or arbitration
proceeding.” Id. Claims of this type, which are known as a “hybrid § 301/fair representation
claims,” thus involve two distinct causes of action—one against the employer under § 301 of the
Labor Management Relations Act, the other against the union for breach of the duty of fair
representation, which is implied under the National Labor Relations Act. Id. But “the two
[claims] are inextricably related,” because “to prevail against either” defendant, the employee
“must not only show that [his] discharge was contrary to the contract but must also carry the
burden of demonstrating a breach of duty by the Union.” Id. at 165 (internal quotation marks
omitted).
In addition to describing the requirements for alleging hybrid claims, like those alleged
here, DelCostello also addressed the statute of limitations applicable to such claims. While
stressing that it was not abandoning its “prior practice [of] borrowing limitations periods for
federal causes of action” from analogous state-law provisions, the Court concluded that the six-
month statute of limitations “for making charges of unfair labor practices to the NLRB” provided
“a closer analogy than available in state statutes.” Id. at 169, 171–72. The Court, accordingly,
adopted from the National Labor Relations Act a six-month statute of limitations for hybrid
§ 301/fair representation claims. Id. at 172. It is thus clear that Malloy had six months to bring a
suit on his hybrid claims.
What is less clear is when that clock began to run. Had Malloy received a final
determination from the arbitrator, his time to bring suit would have run from that adverse
decision. See DelCostello, 462 U.S. at 172. Here, however, his grievance never made it that far
because the Union concluded that it could not proceed without the tape recording of Dr.
Thomas’s evaluation, which Malloy declined to provide. Like an adverse decision, the Union’s
10
decision to drop Malloy’s grievance effectively ended his bid for administrative relief and
triggered the time to bring suit. The relevant question, then, is when Malloy “knew or should
have known,” Emory v. United Air Lines, Inc., 720 F.3d 915, 930 n.29 (D.C. Cir. 2013), that his
grievance had been withdrawn.
According to the Union, the grievance was withdrawn on January 6, 2015. See Dkt. 2-1
at 3. The complaint, however, alleges that Malloy was not informed of this fact until January 20,
2015, when he emailed Taylor to ask whether the Union had made a decision whether to “pull”
the grievance, and Taylor responded that the grievance “has been dropped.” Compl. ¶¶ 289–90.
Taking the allegations of the complaint as true, and assuming that Malloy’s original complaint
was filed on the day that it is dated, see Malloy v. WMATA, 15-mc-1112 (complaint dated July
19, 2015), Malloy would have met the statute of limitations—if only by a day. The problem he
faces, however, is that his original complaint was not filed because, in lieu of paying the filing
fee, he moved to proceed in forma pauperis, and that motion was denied on the ground that he
earned in excess of $41,000 a year and reported no debt or inordinate expenses. See id. at Dkt. 1.
Although the Court did not deny Malloy’s in forma pauperis motion until August 21, 2015,
moreover, Malloy then waited until September 15, 2015, to refile his complaint with the required
fee. By that time, he was well beyond the six-month statute of limitations.
This does not end the inquiry, however, because the statute of limitations does not pose a
jurisdictional hurdle, and it is thus subject to equitable doctrines, including tolling. See Norman
v. United States, 467 F.3d 773, 775 (D.C. Cir. 2006); see also Zipes v. Trans World Airlines,
Inc., 455 U.S. 385, 395 n.11 (1982); cf. Arbaugh v. Y&H Corp., 546 U.S. 500, 516 (2006)
(holding that a statute is not jurisdictional unless the “Legislature clearly states” so). The lone
equitable consideration that Malloy raises is a contention that the Union never gave him “actual
11
notice of the status of his grievance.” Dkt. 15 at 5. But Malloy’s complaint alleges that Taylor
emailed him on January 20, 2015, and told him, among other things, that his “grievance has been
dropped.” Compl. ¶ 290. The Union has also provided a copy of this email, see Dkt. 2-5, which
the Court may consider because Malloy’s complaint incorporated it by reference, see EEOC v.
St. Francis Xavier Parochial Sch., 117 F.3d 621, 624 (D.C. Cir. 1997). As a result, the Court
cannot credit Malloy’s argument that he did not receive notice of the withdrawal of his grievance
and must conclude that he “either knew or should have known,” Emory, 720 F.3d at 930 n.29,
that the time to file his claim began no later than January 20, 2015.
Although Malloy has not asserted any other basis for seeking to toll the statute of
limitations, see Dkt. 15, the Court deems it appropriate—particularly in light of Malloy’s pro se
status—to consider how his initial efforts to file a timely complaint bear on the statute of
limitations defense. In particular, courts often toll statutes of limitations during the period of
time an application for leave to proceed in forma pauperis is pending. See, e.g., Johnson v.
Interstate Mgmt. Co., 871 F. Supp. 2d 1, 4 (D.D.C. 2012); Kone v. District of Columbia, 808 F.
Supp. 2d 80, 83 (D.D.C. 2011). Some decisions, moreover, go a step further and accord
applicants an additional grace period to ensure that they have received actual notice of the denial
of their applications. As Chief Judge Howell explained in Nkengfack v. Am. Ass’n of Retired
Persons, 818 F. Supp. 2d 178, 182 (D.D.C. 2011), “the weight of authority supports tolling the
statute of limitations not only for the pendency of an [in forma pauperis] application, but also for
a reasonable period thereafter to account for receipt of notice of the court’s decision.” Id. at 183.
Based on that precedent and on notions of “basic fairness,” Chief Judge Howell concluded that
the statute of limitations at issue in that case should be tolled for “an additional five-day
12
presumptive notice period to account for notice of the Court’s ruling on the plaintiff’s [in forma
pauperis] application.” Id. at 184.
Even granting Malloy all of these allowances, his complaint is still untimely. At best, he
filed his in forma pauperis application with just one day left on the statute of limitations. After
the Court denied that application, another twenty-five days passed before Malloy actually filed
his complaint with the required fee. Because Malloy has failed to offer any justification for this
significant delay—which was far longer than necessary to ensure that he received notice of the
Court’s denial of his in forma pauperis application—and because the Court can discern none,
Defendants’ motions to dismiss Malloy’s claims for breach of the collective bargaining
agreement and the duty of fair representation are GRANTED.
B. Remaining Claims
The remaining claims in Malloy’s complaint fail as well. He alleges claims for “police
misconduct,” wire fraud, mail fraud, extortion and violations of his right to due process. See
Compl. at 75. As an initial matter, the Court notes that it is unclear whether these claims were
included by error. The first four of these claims include no substantive allegations but merely
cross-reference other allegations in the complaint, none of which bears a discernible relationship
to the alleged torts. Id. And the last of these claims is followed by allegations, including a
fragment of a sentence, that have nothing to do with due process and appear to have been
misplaced under that count. Id. at 75–76. In addition, after reciting these claims, the complaint
repeats the first two counts and labels the last five counts as counts “one” to “five.” Id. at 76.
But even assuming that Malloy intends to allege claims for police misconduct, wire and mail
fraud, extortion, and violations of his right to due process, the complaint fails “to state a claim to
relief that is plausible on its face.” Twombly, 550 U.S. at 570. Stripped of “labels and
13
conclusions,” each of these counts lacks any factual allegations that would permit “the [C]ourt to
draw the reasonable inference that the defendant[s] [are] liable for the misconduct alleged.”
Iqbal, 556 U.S. at 678. To the contrary, the Court cannot even discern the legal theory upon
which Malloy seeks to proceed with respect to these claims.
Malloy also alleges claims against WMATA for intentional infliction of emotional
distress, defamation and mental health malpractice. Compl. at 76–77. In response, WMATA
argues that it is immune from suit under Section 80 of the WMATA Compact. See Dkt. 9 at 10.
The Court agrees.
When Maryland, Virginia, and the District of Columbia signed the WMATA Compact,
they “conferred upon WMATA their respective sovereign immunities.” Beebe v. WMATA, 129
F.3d 1283, 1288 (D.C. Cir. 1997). Section 80 of the Compact, in turn, “waives this immunity for
torts ‘committed in the conduct of any proprietary function,’ while retaining immunity for torts
committed by [WMATA’s] agents ‘in the performance of a governmental function.’” Id.
(quoting D.C. Code Ann. § 9-1107.01(80)). “The D.C. Circuit has held that the question [of]
whether [a particular] function in question is governmental or proprietary under Section 80 is one
of federal law, and has developed two alternative tests for identifying governmental functions
under the WMATA Compact.” Turner v. WMATA, 701 F. Supp. 2d 61, 67–68 (D.D.C. 2010)
(internal quotation marks and citations omitted) (first alteration in original). Under this
approach, the Court first considers “whether the activity amounts to a quintessential
governmental function, like law enforcement,” and, if not, the Court must go on to consider
whether the activity is “discretionary,” and thus “shielded by sovereign immunity,” or
“ministerial,” and thus subject to the waiver set forth in Compact. Beebe, 129 F.3d at 1287
(internal quotation marks omitted). Of particular relevance here, the D.C. Circuit has also held
14
that “decisions concerning the hiring, training, and supervising of WMATA employees are
discretionary in nature, and thus immune from judicial review.” Burkhart v. WMATA, 112 F.3d
1207, 1217 (D.C. Cir. 1997); see also Jones v. WMATA, 205 F.3d 428, 432 (D.C. Cir. 2000)
Applying this standard, the Court concludes that WMATA’s actions in suspending and
removing Malloy from his position, and then defending that position in arbitration, are immune
for suit in tort. The Compact grants WMATA the power to “provide for the qualification,
appointment, [and] removal . . . of its . . . employees” and to “[e]stablish, in its discretion, a
personnel system based on merit and fitness.” D.C. Code § 9-1107.01(g), (h). Taking the
allegations of the complaint as true, that is just what WMATA did here. Malloy may disagree
with the decisions that were reached, but the complaint includes no basis to doubt that WMATA
was exercising its discretion to set the qualifications for operating a train and to remove an
employee who purportedly lacked the necessary qualifications. Indeed, more than most
employment decisions, the actions alleged in the complaint bear the hallmarks of governmental
action to the extent they were focused on protecting the safety of the public. WMATA is thus
immune from the tort claims Malloy alleges.
While Malloy does not allege that the Union is liable for defamation or mental health
malpractice, he does assert his intentional infliction of emotional distress against it. Compl. at
76. This claim, however, fails to allege a claim upon which relief may be granted under Rule
12(b)(6). 5 Malloy alleges that the “damages” that he suffered as a result of these alleged torts
stemmed from a conspiracy between WMATA and the Union “to commit treason, the death
5
Even if WMATA were not immune from suit, the Court would similarly dismiss Malloy’s tort
claims against WMATA because they fail under Rule 12(b)(6). As with his claim for intentional
infliction of emotional distress against the Union, his claims for that tort and for mental health
malpractice and for defamation against WMATA are not facially plausible. See Iqbal, 556 U.S.
at 678; Twombly, 550 U.S. at 570.
15
embedded in the email, and encoding the numbers 666 in the date of his termination.” Id. This
claim plainly fails to satisfy the requirement established in Twombly and Iqbal that a plaintiff
plead “a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (quoting Twombly,
550 U.S. at 570).
Finally, to the extent that Malloy alleges both in his complaint and in his opposition that
Defendants have committed multiple criminal acts for which they should be held liable, see
Compl. at 75; Dkt. 15 at 8, those allegations are not properly before the Court. As the Supreme
Court has explained, “a private citizen lacks a judicially cognizable interest in the prosecution or
nonprosecution of another.” Linda R.S. v. Richard D., 410 U.S. 614, 619 (1973). Malloy thus
lacks standing to press criminal charges here, see id., and this Court lacks Article III jurisdiction
over those claims as a result.
Defendants’ motions are therefore GRANTED and the complaint is DISMISSED.
C. Other Outstanding Issues
Malloy has also filed a motion “to disqualify the Amalgamated Transit Union Local 689
as opposing counsel.” See Dkt. 13. The entirety of the motion consists of a single sentence
merely asserting that the basis for the motion is “set forth in the accompanying memorandums,”
which presumably refers to Malloy’s opposition to the motions to dismiss, see Dkt. 15. Nothing
in any document Malloy has submitted explains why the Union (or its attorney) should be
disqualified. Cf. Ethical Issues in Representing Multiple Plaintiffs or Defendants: Special Issues
for Union Counsel, American Bar Association 15–17 (Aug. 9, 2005), http://apps.americanbar.
org/labor/lel-aba-annual/papers/2005/039.pdf (explaining that attorneys who represent a union
during a member’s arbitration grievance are not typically disqualified from representing the
16
union if the grievant sues for breach of the duty of fair representation, and collecting cases). The
motion to disqualify is, accordingly, DENIED.
IV. CONCLUSION
For the reasons explained above, the Defendants’ motions to dismiss the amended
complaint, Dkts. 8, 9, are GRANTED and the complaint is DISMISSED. Because Defendants’
earlier-filed motions to dismiss addressed the superseded complaint, see Dkts. 2, 6, those
motions are DENIED as moot. Malloy’s motion to disqualify opposing counsel, Dkt. 13, is
DENIED. His motion to deny the motions to dismiss is DENIED. A separate order will issue.
SO ORDERED.
/s/ Randolph D. Moss
RANDOLPH D. MOSS
United States District Judge
Date: May 20, 2016
17
| {
"pile_set_name": "FreeLaw"
} |
Citation Nr: 1702633
Decision Date: 01/31/17 Archive Date: 02/09/17
DOCKET NO. 05-03 656 ) DATE
)
)
On appeal from the
Department of Veterans Affairs Regional Office in Winston-Salem, North Carolina
THE ISSUE
1. Entitlement to individual unemployability.
2. Entitlement to an initial compensable evaluation for hepatits C.
REPRESENTATION
Appellant represented by: Disabled American Veterans
ATTORNEY FOR THE BOARD
C. Ryan, Associate Counsel
INTRODUCTION
The Veteran served on active duty from December 1985 to November 1989. He served in the Army Reserve from November 1989 to September 2001, including periods of active duty for training (ACDUTRA) from April 1990 to July 1990 and from February 1996 to February 1997.
This matter comes before the Board of Veterans' Appeals (Board) on appeal of a July 2003 rating decision by the Department of Veterans Affairs (VA) Regional Office (RO) in Winston-Salem, North Carolina, that denied service connection.
In January 2014, the Board referred this case to the RO for further evidentiary development for the issue of TDIU. In January 2014, CAVC modified the Board's TDIU referral to a remand, and the RO provided the Veteran with VA Form 21-8940.
In October 2015, the Veteran submitted a statement requesting new medical examinations for his service-connected disabilities and for all disabilities, past and present, that are currently before the Board of Veterans' Appeals or the RO.
In January 2016, the Board remanded this case for further evidentiary development.
The appeal is REMANDED to the AOJ. VA will notify the appellant if further action is required.
REMAND
The Veteran contends that he is entitled to a total rating for unemployability, as well as a compensable rating for hepatitis C. For the following reasons, the Board finds remands warranted for both claims.
Concerning the Veteran's claim for TDIU, the Board previously remanded this claim in January 2016 so that the Veteran could undergo up-to-date examinations for all of his claimed conditions, as the Veteran claimed all of his conditions had worsened, and the Veteran was not eligible for consideration of a TDIU on a schedular basis at that time. See 38 C.F.R. § 4.16(a). The Board also remanded the claim, as the Veteran had requested but not received a hearing. 38 C.F.R. § 20.700 (2015).
Unfortunately, a review of the record indicates that the AOJ did not comply with these directives. Following the Board's January 2016 remand, no VA examination reports are of record, and there is no documentation indicating that the Veteran was ever scheduled for an examination, per the Board's instructions. A remand confers upon the Veteran, as a matter of law, the right to compliance with the remand instructions, and imposes upon VA a concomitant duty to ensure compliance with the terms of the remand. See Stegall v. West, 11 Vet. App. 268, 271 (1998). Thus, the Board has no alternative but to remand the matter for action in compliance with the prior remand.
As for the Veteran's claim for a compensable evaluation for hepatitis C, the Board notes that the Veteran has alleged that his condition has worsened, so he must be provided with a current Compensation and Pension (C&P) examination.
Lastly, the Board notes that in January 2017, the Veteran submitted new medical records and evidence, while also asking that the RO re-assess his conditions pursuant to the new medical evidence and requested more time to submit more evidence before the Board re-adjudicated his claim.
Accordingly, the case is REMANDED for the following action:
1. The AOJ should take appropriate steps to schedule the Veteran for a hearing in accordance with this request. After the hearing is conducted, or if the Veteran withdraws the hearing request or fails to report for the scheduled hearing, any indicated development should be undertaken.
Thereafter, if indicated, the case should be returned to the Board for the purpose of appellate disposition.
2. The Veteran should be provided with up-to-date examination to assess the nature and severity of his current service-connected condition of hemorrhoids.
Specifically, the examiner is asked to address:
(a) if the Veteran experiences large or thrombotic, irreducible, with excessive redundant tissue, evidencing frequent occurrences OR
(b) if the Veteran experiences external or internal hemorrhoids that cause persistent bleeding and with secondary anemia, or with fissures.
3. The Veteran should be provided with an up-to-date examination to assess the nature and severity of his hepatitis C.
Specifically, the examiner is asked to address:
(a) The frequency of the Veteran's fatigue, malaise, and anorexia;
(b) The frequency of the Veteran's incapacitating episodes (with symptoms such as fatigue, malaise, nausea, vomiting, anorexia, arthralgia, and right upper quadrant pain);
(c) The frequency and amount, if any, of the Veteran's weight-loss and hepatomegaly; and
(d) If there is any evidence that the Veteran suffers from serologic evidence of hepatitis C infection.
4. The Veteran should be provided with an up-to-date examination to assess the nature and severity of his lumbar and cervical spine degenerative arthritis.
Specifically, the examiner is asked to address:
(a) Identify all lumbosacral and cervical spine pathology found to be present.
(b). Provide the range of motion of his lumbosacral and cervical spine in degrees in active motion, passive motion, weight-bearing, and nonweight-bearing and indicate whether there is objective evidence of pain on motion. If the examiner is unable to conduct the required testing or concludes that the required testing is not necessary in this case, he or she should clearly explain why that is so.
(c). Indicate whether his lumbosacral or cervical spine exhibits weakened movement, excess fatigability, or incoordination during flare-ups or upon repetitive use. Indicate whether there is any additional limitation in range of motion or functional impairment during flare-ups or upon repetitive use. To the extent possible, express any functional loss in terms of additional degrees of limited motion of the Veteran's lumbosacral spine.
(d). State whether the Veteran's lumbar or cervical spine disease has been productive of any incapacitating episodes, and IF SO, the frequency and duration of those episodes, categorized by year.
5. The AOJ should adjudicate the issues remaining on appeal before it, to determine if the Veteran's schedular ratings will increase.
6. After adjudicating all other issues remaining on appeal, the AOJ should thoroughly review the Veteran's submitted VA Form 21-8940 and accompanying evidence. Subsequently, readjduciate the claim on appeal in light of all the evidence of record. If any benefit sought on appeal remains denied, the AOJ should furnish to the Veteran a fully responsive supplemental statement of the case.
The appellant has the right to submit additional evidence and argument on the matter or matters the Board has remanded. Kutscherousky v. West, 12 Vet. App. 369 (1999).
This claim must be afforded expeditious treatment. The law requires that all claims that are remanded by the Board of Veterans' Appeals or by the United States Court of Appeals for Veterans Claims for additional development or other appropriate action must be handled in an expeditious manner. See 38 U.S.C.A. §§ 5109B, 7112 (West 2014).
_________________________________________________
BRADLEY W. HENNINGS
Veterans Law Judge, Board of Veterans' Appeals
Under 38 U.S.C.A. § 7252 (West 2014), only a decision of the Board of Veterans' Appeals is appealable to the United States Court of Appeals for Veterans Claims. This remand is in the nature of a preliminary order and does not constitute a decision of the Board on the merits of your appeal. 38 C.F.R. § 20.1100(b) (2015).
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652 F.3d 172 (2011)
NML CAPITAL, LTD. and EM Ltd., Plaintiffs-Appellees,
v.
BANCO CENTRAL DE LA REPÚBLICA ARGENTINA, Interested Non-Party-Appellant,
The Republic of Argentina, Defendant-Appellant.
Docket Nos. 10-1487-cv(L), 10-1488-cv(CON), 10-1493-cv(CON), 10-1507-cv(CON), 10-1510-cv(CON), 10-1524-cv(CON), 10-1529-cv(CON), 10-1545-cv(CON), 10-1603-cv(CON), 10-1629-cv(CON).
United States Court of Appeals, Second Circuit.
Argued: August 25, 2010.
Decided: July 5, 2011.
*174 Jonathan I. Blackman (Carmine D. Boccuzzi, Christopher P. Moore, Rahul Mukhi, on the brief), Cleary Gottlieb Steen & Hamilton LLP, New York, NY, for Defendant-Appellant The Republic of Argentina.
Joseph E. Neuhaus (Laurent S. Wiesel, Michael J. Ushkow, Taly Dvorkis, on the brief), Sullivan & Cromwell LLP, New York, NY, for Interested Non-Party-Appellant Banco Central de la República Argentina.
Theodore B. Olson, Gibson, Dunn & Crutcher LLP, Washington, DC (Matthew D. McGill, Jason J. Mendro, Gibson, Dunn & Crutcher LLP, Washington, DC; Robert A. Cohen, Dennis H. Hranitzky, Dechert LLP, New York, NY, on the brief), for Plaintiff-Appellee NML Capital, Ltd.
David W. Rivkin (John B. Missing and Suzanne M. Grosso, on the brief), Debevoise & Plimpton LLP, New York, NY, for Plaintiff-Appellee EM Ltd.
Michele Kalstein, Counsel and Vice President (Thomas C. Baxter, Jr., General Counsel, on the brief), The Federal Reserve Bank of New York, New York, NY, for amicus curiae The Federal Reserve Bank of New York in support of Appellants.
John D. Clopper, Assistant United States Attorney (Preet Bharara, United States Attorney, Benjamin H. Torrance, Assistant United States Attorney, United States Attorney's Office for the Southern District of New York, New York, NY; Tony West, Assistant Attorney General, Douglas N. Letter, Sharon Swingle, United States Department of Justice, Washington, DC; George W. Madison, General Counsel, Department of the Treasury, Washington, DC; Harold Hongju Koh, The Legal Adviser, Department of State, Washington, DC, on the brief), for amicus curiae United States of America in support of Appellants.
Hal S. Scott, Program on International Financial Systems, Harvard Law School, Cambridge, MA, amicus curiae in support of Appellees.
Before: MINER, CABRANES, and STRAUB, Circuit Judges.
JOSÉ A. CABRANES, Circuit Judge:
The question presented is whether certain assets held in the United States in an account of interested non-party-appellant Banco Central de la República Argentina ("BCRA") at the Federal Reserve Bank of New York ("FRBNY") are immune *175 from attachment and execution under the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. § 1602 et seq. ("FSIA").[1] For ease of reference, we refer to those assets as the "FRBNY Funds."
In order to decide whether the FRBNY funds are immune from attachment or execution, we must first decide two questions of first impression in this Circuit: (1) does the exercise of sovereign immunity for "property ... of a foreign central bank or monetary authority held for its own account" pursuant to 28 U.S.C. § 1611(b)(1)[2] depend upon whether the central bank or monetary authority is entitled to a presumption of independence under First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983) ("Bancec"); and (2) what is the proper meaning of the phrase "property ... of a foreign central bank or monetary authority held for its own account" in § 1611(b)(1)?
BACKGROUND
This is the parties' second appearance before this Court to litigate whether the FRBNY Funds are immune from attachment under the FSIA. See EM Ltd. v. Republic of Argentina, 473 F.3d 463 (2d Cir.2007) ("EM I"). We assume familiarity with the facts and procedural history of the dispute as recounted in EM I, as well as knowledge of the preeminence of the Republic of Argentina ("Argentina" or the "Republic") in the sorry history of defaults on sovereign debt. Id. at 466 n. 2 (recording Argentina's "many contributions to the law of foreign insolvency through its numerous defaults on its sovereign obligations, as well as through ... a diplomacy of default").
A.
In December 2001, the President of Argentina declared a temporary moratorium on principal and interest payments on more than $80 billion of public external debt that is, money the Republic had borrowed from foreign creditors. Since the 2001 default, Argentina has not made principal or interest payments on its non-performing debt. Plaintiffs-appellees EM Ltd. and NML Capital, Ltd. are beneficial owners of debt instruments on which the Republic has defaulted. The Republic has *176 waived its right to assert its sovereign immunity from suit in any claims arising under those instruments.[3]See Part C(v) at 195-96, post.
Plaintiffs chose not to participate in restructuring proposals in which the Republic offered to exchange debt instruments on which it defaulted in 2001 for new debt instruments with modified, and generally less favorable, terms.[4] Instead, plaintiffs have sought to recover their investments through litigation against the Republic in the federal courts of the United States;[5] they now hold unsatisfied final judgments in the United States District Court for the Southern District of New York for nearly $2.4 billion.[6] Plaintiffs seek to attach and *177 restrain the FRBNY Funds in a BCRA account at FRBNY in aid of execution of those judgments.
As its name suggests, BCRA was founded in 1935 as "[t]he Central Bank of the Argentine Republic," see Law No. 24,144/92, Ch. I, § 1 (Oct. 22, 1992, as amended) ("BCRA Charter"); JA Vol. V at 763. It is, by statute, "a self-administered institution of the [Argentine] State," charged with acting as the Republic's financial agent and as depository and agent for the Republic before international monetary, banking, and financial entities, as well as with regulating the Argentine banking system and financial sector. BCRA Charter, Arts. 3-4, 17-18, 21-22, 25, 28-29; JA Vol. V at 763, 767-68, 770-71. Pursuant to its "primar[y]" responsibility to "maintain the value of legal tender" in Argentina, BCRA Charter, art. 3, BCRA is "exclusively entrusted with the issuance of banknotes and coins in the Argentine Nation," id. at art. 30, and authorized to "invest a portion of its external assets in deposits or any other interest[-]bearing transaction with any foreign banking institution ... [,]" id. at art 33.
Like many central banks around the world, BCRA maintains a foreign central bank account at the FRBNY in which, among other things, it manages dollar-denominated reserve holdings.[7] The FRBNY Funds at issue in this case refer to the funds held in BCRA's account on December 30, 2005. By stipulation, the parties have provided a detailed account of the sources of those funds.[8]See generally EM Ltd. v. The Republic of Argentina, 720 F.Supp.2d 273, 289-92 (S.D.N.Y.2010) (discussing the sources of the FRBNY Funds).
Over the course of the three month period preceding December 30, 2005, BCRA transferred approximately $2.1 billion from its account at the FRBNY to its account at *178 the Bank for International Settlements ("BIS").[9]Id. at 290. This followed a general trend during the period between 2001 and 2005, in which wholly apart from the intra-day transfers necessary to effect transactions performed out of its FRBNY account BCRA held more and more of its U.S. dollar-denominated foreign exchange reserves outside of the United States, i.e., beyond the jurisdictional reach of the District Court.[10]
This reduction was attributable to two principal causes. First, as economic conditions in Argentina deteriorated leading up to and in the aftermath of the 2001 default, large quantities of U.S. dollars in excess of $20 billion were withdrawn from the Argentine banking system. In an effort to increase liquidity and prevent further economic damage in Argentina, BCRA spent billions of U.S. dollars buying Argentine pesos to defend (i.e., prop up) the value of the peso. This policy depleted BCRA's dollar-denominated foreign exchange reserves. For example, at the beginning of 2001, BCRA's dollar-denominated international reserves totaled $25.1 billion; two years later the reserves totaled $8.3 billion. Basco Decl. ¶¶ 13-14 (March 14, 2005); JA Vol. V at 256.
Second, BCRA transferred the majority of its remaining dollar-denominated reserves out of the United States to "more protective jurisdictions" in the view of BCRA like the BIS "as a preventive measure against possible wrongful attachment efforts by creditors of the Republic." Basco Decl. ¶ 18 (March 14, 2005); JA Vol. V at 258. BIS deposits are protected from attachment under The Hague Convention of 1930, 104 L.N.T.S. 441 (Jan. 20, 1930) (available at http://www.bis.org/about/convention-en.pdf) (establishing the BIS); the Protocol Regarding the Immunities of the Bank for International Settlements, 197 L.N.T.S. 31 (July 30, 1936) (available at http://www.bis.org/about/protoc.pdf); and the Agreement between the Swiss Federal Council and the Bank for International Settlements to determine the Bank's legal status in Switzerland, Feb. 10, 1987, amended Jan. 1, 2003 (available at http://www.bis.org/about/headquart-en.pdf). According to the BCRA official responsible for open market operations, in light of temporary attachments by U.S. federal courts, which were ultimately vacated in 1999, the protections offered to BIS account holders were deemed by BCRA to be more secure in circumstances in which "an attachment of any significant portion of BCRA's international reserves ... would quite literally have caused the collapse of the Argentine peso with incalculable effects on the Republic's economy, social order and political stability." Basco Decl. ¶ 19 (March 14, 2005); JA Vol. V at 257-59.
As a result of the transactional activity in BCRA's account at FRBNY and the transfers out of the FRBNY account to the BIS, at the close of business on December 30, 2005 when plaintiffs moved, for the first time, to attach the FRBNY Funds BCRA maintained approximately $105 million in its account at the FRBNY. See EM Ltd., 720 F.Supp.2d at 303.
We now turn to the procedural history of plaintiffs' attachment efforts over those funds.
*179 B.
On December 30, 2005, plaintiffs sought ex parte orders of pre-judgment attachment and post-judgment restraint over certain BCRA assets, including the FRBNY Funds. In their motions (the "2005 motions"), plaintiffs argued that two Emergency Decrees of Argentine President Néstor Kirchner (the "Kirchner Decrees"), designed to facilitate the repayment of the Republic's debt to the International Monetary Fund ("IMF"), had the effect of transferring ownership of certain BCRA assets, including the FRBNY Funds, from BCRA to the Republic.[11] That is, plaintiffs claimed that title to the "Unrestricted Reserves" had been transferred from BCRA to the Republic when the Republic rendered them available to repay the Republic's debt to the IMF, pursuant to the Kirchner Decrees. Because, according to plaintiffs, the Kirchner Decrees subjected to attachment "any portion of the reserves held by [BCRA] anywhere in the world ... unless and until the attachments became so large that they exceeded the Unrestricted Reserves," the FRBNY Funds, which were not explicitly excluded from the Unrestricted Reserves, were allegedly subject to execution. See EM I, 473 F.3d at 475. As we noted in EM I,
[e]ven though only $8.4 billion in reserves were reclassified as Unrestricted Reserves pursuant to the [Kirchner] Decrees, under plaintiffs' theory, all $26.8 billion in the various BCRA accounts around the world would be subject to attachment (until the attached funds reach $8.4 billion) because all that money would be potentially designated as Unrestricted Reserves i.e., because it is unclear which $18.4 billion would be classified as that necessary to back the monetary base, and which $8.4 billion ($26.8 billion minus $18.4 billion) would be classified as "Unrestricted Reserves."
Id. at 475 n. 11 (emphasis in original).
Plaintiffs obtained attachment and restraining orders from Judge Barbara S. Jones, sitting in Part I. See Standing Order of the Southern District of New York Setting Forth Rules for the Division of Business Among District Judges, at Rule 3(b)(ii) (Mar. 23, 2011) (available at http://www.nysd.uscourts.gov/rules/Final_-_March_2011.pdf) (last visited July 1, 2011) (motions for "emergency matters in civil cases" presented to the district judge sitting in "Part I"); see also EM I, 473 F.3d at 468-9 (discussing the procedure for execution under New York law and the FSIA).
*180 On cross-motions by the parties to confirm and vacate the attachments and restraints, Judge Thomas P. Griesa, to whom these cases had been assigned in the normal course, vacated the amended notices.[12] In a January 12, 2006 opinion from the bench, the District Court concluded that the issuance of the Kirchner Decrees had no legal effect on the ownership of the FRBNY Funds. Moreover, the District Court concluded that FSIA § 1611(b) rendered the FRBNY Funds immune from attachment and execution because the waiver in the terms and conditions of the Fiscal Agency Agreement governing the bonds did not explicitly waive BCRA's immunity as required under the FSIA. See EM I, 473 F.3d at 470-71 (discussing the District Court's order vacating the attachment and restraining notices). The District Court certified the January 12, 2006 order for appeal pursuant to 28 U.S.C. § 1292(b).[13]Id.
In EM I, we held that "the [Kirchner] Decrees did not alter property rights with respect to the FRBNY Funds," 473 F.3d at 475, and affirmed the order of the District Court vacating the amended notices entered by the Part I judge. Both before and after the Kirchner Decrees, the FRBNY Funds were held in BCRA's account at FRBNY and therefore were entitled to the presumption under New York law that BCRA has title to that property. Id. at 473-74 (citing Karaha Bodas Co., 313 F.3d at 86 ("Under New York law, the party who possesses property is presumed to be the party who owns it. When a party holds funds in a bank account, possession is established, and the presumption of ownership follows.") (citations omitted)); see also Kolodziejczyk v. Wing, 261 A.D.2d 927, 689 N.Y.S.2d 825, 825 (4th Dep't 1999); Perkins v. Guar. Trust Co., 274 N.Y. 250, 261, 8 N.E.2d 849 (1937). We therefore rejected plaintiffs' argument that the Kirchner Decrees had the effect of changing the legal status of the FRBNY Funds, much less the entire Unrestricted Reserves. EM I, 473 F.3d at 473-74.
Having concluded that plaintiffs' arguments had run aground, we paused in EM I to note that "[t]o the extent that plaintiffs' claim on the FRBNY Funds is based on the Republic's control over BCRA, as demonstrated by the [Kirchner] Decrees, plaintiffs have failed to avail themselves of well-established legal principles that might permit attachment." Id. at 476 (internal citation omitted). That is, we suggested that, under Bancec, if plaintiffs were to argue that BCRA is either "so extensively controlled by [the Republic] that a relationship of principal and agent is created" or that recognizing its separate juridical status would "work fraud or injustice," Bancec, 462 U.S. at 629, 103 S.Ct. 2591, all of BCRA's assets might be considered attachable *181 interests of the Republic. Nevertheless, we observed that "[t]he separate juridical status of BCRA is not disputed by plaintiffs, and plaintiffs expressly elected not to argue in support of attachment that BCRA's separate juridical status should be disregarded because BCRA is the alter ego of the Republic." EM I, 473 F.3d at 479.
Finally, after holding that plaintiffs' claims also failed because the FRBNY Funds were not "used for commercial activity" within the meaning of the FSIA and were thus immune from attachment under 28 U.S.C. § 1610(a),[14]EM I, 473 F.3d at 481-85, we turned to the application of § 1611(b)(1) to the facts of the dispute as presented at that point in the litigation. Recognizing that the parties had asked us to resolve competing interpretations of the phrase "held for its own account" in 28 U.S.C. § 1611(b)(1), we observed that because "plaintiffs have not established their right to attach the FRBNY Funds," whether those funds were immune from attachment under § 1611 was irrelevant. EM I, 473 F.3d at 485. We nonetheless intimated that, inasmuch as acting as the Republic's fiscal agent in the repayment of its IMF debt was a traditional central bank activity, the plain meaning and legislative history of § 1611(b)(1) supported the proposition that funds used or held in connection with traditional central banking activities were considered to be "held for BCRA's own account" under § 1611(b)(1). Id. at 485 n. 22 (citing H.R.Rep. No. 94-1487 ("FSIA House Report") at 31 (1976), reprinted in U.S.C.C.A.N. 6604, 6630, 1976 WL 14078) (quotation marks omitted). Thus, we concluded, "even if BCRA had decided to use the FRBNY Funds to repay the IMF, the funds would continue to be held for BCRA's `own account,'" and thus would be immune from attachment under FSIA § 1611(b)(1). Id. (quoting § 1611(b)(1)). We therefore affirmed the order of the District Court vacating the amended attachment and restraining notices. Id. at 486-87.
C.
In September 2006, while EM I was pending before our Court, plaintiffs commenced this action seeking a declaratory judgment that, pursuant to Bancec, BCRA was liable for the debts of the Republic. Specifically, plaintiffs argued that the Republic's consistent disregard for BCRA's independence had vitiated any presumption of separateness to which BCRA was entitled, transforming the BCRA into an alter-ego of the Republic. Indeed, according to plaintiffs, the Republic had "exploited the legal fiction of [that] independence unjustly and fraudulently to avoid paying creditors like [plaintiffs]." Complaint at ¶ 18, EM Ltd. v. Republic of Argentina, No. 06 Civ. 7792 (S.D.N.Y. Sept. 25, 2006); JA Vol. I at 616.[15]
*182 Rather than seek new orders of attachment and restraint on the FRBNY Funds under their new theory of liability, plaintiffs agreed to an amended Stipulation and Consent Order of September 28, 2006, pursuant to which the terms of the January 9, 2006 Stipulation and Consent Order would remain in effect while plaintiffs' new claims were pending in the District Court and the earlier orders were considered by the Court of Appeals. Under the September 2006 Stipulation, the District Court agreed to consider plaintiffs' previous motions for attachment and restraint under their new legal theories (the "Bancec motions"); that is, the District Court agreed to apply the restraining and attachment notices underlying the 2005 motions which were the subject of our decision in EM I to the Bancec motions without requiring plaintiffs to file new requests for attachment and restraining notices. After concluding that plaintiffs' new claims were not barred under the doctrine of res judicata, the District Court granted the Bancec motions on April 7, 2010. See EM Ltd., 720 F.Supp.2d at 304; see also Order, EM Ltd. v. Republic of Argentina, No. 03 Civ 2507, Docket No. 380 at *3 (S.D.N.Y. Apr. 16, 2010) (granting plaintiffs' attachment motion).
The District Court drew four conclusions with respect to the merits of plaintiffs' claims. First, the District Court held, under the test established in Bancec, that the Republic's disregard for BCRA's independence justified the conclusion that BCRA was not entitled to a presumption of juridical separateness. EM Ltd., 720 F.Supp.2d at 300. In Bancec, the Supreme Court explained that "where a corporate entity is so extensively controlled by its owner that a relationship of principal and agent is created, we have held that one may be held liable for the actions of the other." Bancec, 462 U.S. at 629, 103 S.Ct. 2591. As the District Court explained,
BCRA did the Republic's bidding in two important respects. First, BCRA issued the pesos in sufficient amounts to purchase billions of U.S. dollars. Second, BCRA took [those dollars] and paid the Republic's debt to the IMF.
This demonstrated that the Republic could draw on the resources of BCRA at will. The Republic ignored the mandate of BCRA's charter, which provided that BCRA would not be subject to any order or instruction of the National Executive in connection with the implementation of monetary and financial policy. The management of BCRA posed no obstacles *183 to the Republic's use of the resources of BCRA exactly as the Republic wished. The Republic's control in this regard was complete.
EM Ltd., 720 F.Supp.2d at 300. Accordingly, the District Court determined that "[a]s of the end of 2005, when the attachments and restraints in this case were issued, the funds of BCRA were in effect the funds of the Republic." This was, the Court cautioned, not the result of a formal change of title as plaintiffs had previously argued, but the result of the kind of control referred to in Bancec. Id.
Second, the District Court concluded that although the terms and conditions governing the bonds held by plaintiffs gave assurances that the rights of the bondholders that is, plaintiffs "may be enforced" in the event of a default, by ensuring that it had no assets within the jurisdiction of the District Court, the Republic had created "a path to the judgments, [but with] nothing approaching an accessible path to payment enforcement." Id. at 301. Indeed, focusing specifically on BCRA's immunity, the District Court observed that "[w]hat the bonds do not say is that the law of this jurisdiction the Foreign Sovereign Immunities Act imposes severe restrictions upon the ability of a creditor of the Republic to obtain an attachment or execution." Id. at 301. Accordingly, the District Court held that with specific regard to the FRBNY Funds the Republic had perpetrated precisely the sort of "fraud and injustice" that the Supreme Court in Bancec said warranted setting aside the presumption of juridical separateness that might otherwise immunize certain funds. Id. at 302.
Third, the District Court held that the FRBNY Funds were property used for commercial activity in the United States within the meaning of 28 U.S.C. § 1610(a) and (d) because they were used for traditional banking purposes that are clearly "the type of actions by which a private party engages in `trade and traffic or commerce.'" Id. at 303 (citing Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 614, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992)). It therefore did not matter "what purpose BCRA was using the funds for," only that the "type of activity" maintenance of a bank account with deposits and withdrawals, with the ability to earn a certain amount of income on balances was "commercial" in nature. Id.
Finally, the District Court held that FSIA § 1611(b)(1), see note 2, ante, did not prohibit the attachment of the FRBNY Funds. Although the District Court recognized that the FRBNY Funds fell within the explicit terms of § 1611 because "the account at the FRBNY was in the name of BCRA, and there was no specific waiver of immunity as to this account by BCRA or the Republic," EM Ltd., 720 F.Supp.2d at 303, it reasoned that "if there are weighty and sufficient reasons to conclude that the funds in the account were in reality the funds of the Republic, as this court has held, it would be entirely anomalous to hold that the funds belonged to BCRA and were `held for its own account,' within the meaning of § 1611." Id. at 303-04. In other words, the District Court concluded that a determination under Bancec that the BCRA is not entitled to the presumption of juridical separateness from the Republic overrode the immunity that might otherwise be afforded under § 1611(b)(1). Accordingly, the Court concluded that the FRBNY Funds were "the property of the Republic," and that "the provisions of the FSIA, when properly applied, permitted [the] attachment[] and restraint [of the Funds]." Id. at 304.
Following the April 7, 2010 opinion in which the District Court announced its conclusions, the District Court issued an order of April 16, 2010, granting the Bancec motions and attaching and restraining *184 the FRBNY Funds. EM Ltd. v. Republic of Argentina, No. 03 Civ. 2507, Docket No. 380, at *3 (S.D.N.Y. Apr. 16, 2010). The Republic and BCRA appeal from that order and all associated orders of the District Court.
DISCUSSION
A.
As in EM I, we have appellate jurisdiction because this appeal was certified by the District Court pursuant to 28 U.S.C. § 1292(b). We agree that the District Court's ruling involves unresolved controlling questions of law and that an appeal would advance the termination of the litigation. EM I, Ltd., 473 F.3d at 471; see also Klinghoffer v. S.N.C. Achille Lauro Ed Altri-Gestione Motonave Achille Lauro in Amministrazione Straordinaria, 921 F.2d 21, 23-25 (2d Cir.1990) (discussing the criteria for accepting jurisdiction in an appeal pursuant to § 1292(b)). We therefore grant plaintiffs' motion to hear the appeal pursuant to 28 U.S.C. § 1292(b).
Having accepted jurisdiction under § 1292(b), we need not consider whether jurisdiction would also be proper under 28 U.S.C. § 1292(a)(1), which grants appellate courts jurisdiction under the collateral order doctrine. See Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 545-47, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949); see also Karaha Bodas Co., L.L.C., 313 F.3d at 81 n. 11 (considering appeal of orders related to attachment of assets of Indonesian national government and instrumentality under § 1292(b) without determining whether jurisdiction would also be proper under collateral order doctrine).
B.
The threshold question on appeal is whether consideration of the September 2006 Bancec motions to attach the FRBNY Funds is barred under the doctrine of claim preclusion or issue preclusion. Stated differently, we first ask whether the vacatur of the 2005 notices in EM I prevented plaintiffs from asserting a different theory of execution in the 2006 Bancec motions. The District Court held that it did not. EM Ltd., 720 F.Supp.2d at 296. We agree.
(i)
Whether or not a prior federal court judgment has preclusive effect in a subsequent action is a question of federal common law, Taylor v. Sturgell, 553 U.S. 880, 891, 128 S.Ct. 2161, 171 L.Ed.2d 155 (2008), which we review de novo, "accepting all factual findings of the district court unless clearly erroneous." Chartier v. Marlin Mgmt., LLC, 202 F.3d 89, 93 (2d Cir.2000).
(ii)
The doctrine of claim preclusion "bars `repetitious suits involving the same cause of action' once `a court of competent jurisdiction has entered a final judgment on the merits.'" United States v. Tohono O'Odham Nation, ___ U.S. ___, 131 S.Ct. 1723, 1730, 179 L.Ed.2d 723 (2011) (quoting Commissioner v. Sunnen, 333 U.S. 591, 597, 68 S.Ct. 715, 92 L.Ed. 898 (1948)). The doctrine is intended to proscribe "every matter that was offered and received to sustain or defeat a cause of action, as well as to any other matter that the parties had a full and fair opportunity to offer for that purpose," Manhattan Eye Ear & Throat Hosp. v. N.L.R.B., 942 F.2d 151, 155-56 (2d Cir.1991) (citing Montana v. United States, 440 U.S. 147, 153, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979); 18 C. Wright, A. Miller & E. Cooper, Fed. Practice and Procedure § 4402, at 7 (1981)). In this circuit, we have laid out a four factor test for claim preclusion, which examines whether the earlier action "was (1) a final judgment on the merits, (2) by a court of competent jurisdiction, (3) in a case involving the same parties or their privies, and *185 (4) involving the same cause of action." In re Adelphia Recovery Trust, 634 F.3d 678, 694 (2d Cir.2011) (quoting EDP Med. Computer Sys., Inc. v. United States, 480 F.3d 621, 624 (2d Cir.2007)).
As we observed in Dayco Corp. v. Foreign Transactions Corp., "an order confirming or refusing to confirm an attachment is in no way final," and therefore the denial of "an application to confirm will not preclude a subsequent attachment proceeding where there has been an intervening change of circumstances." 705 F.2d 38, 39 (2d Cir.1983). Indeed, it is well-settled that judgment creditors can file successive attachment motions before final judgment has been entered in the underlying suit. See Ladenburg v. Commercial Bank of Newfoundland, 5 A.D. 219, 39 N.Y.S. 119, 120 (1st Dep't 1896); accord Marvel Characters, Inc. v. Simon, 310 F.3d 280, 286 (2d Cir.2002) ("no discernible difference" between the way in which New York courts apply claim preclusion principles and the way in which federal courts apply those principles). The District Court therefore correctly determined that the 2005 motions vacated by this Court in EM I were not final judgments on the merits. In the terminology of the common law that federal courts have supposedly retired, without a valid and final judgment into which plaintiffs' cause of action can be "merged," plaintiffs are not "barred" from bringing a successive claim under the same cause of action. See Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 77 n. 1, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984) ("Claim preclusion ... encompasses the law of merger and bar."); see also Restatement (Second) of Judgments § 18 (1982) (discussing the effect of merger and bar).
(iii)
Issue preclusion bars "successive litigation of an issue of fact or law actually litigated and resolved in a valid court determination essential to the prior judgment." New Hampshire v. Maine, 532 U.S. 742, 748-49, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001). It "encompasses the doctrines earlier called `collateral estoppel' and `direct estoppel,'" Bobby v. Bies, ___ U.S. ___, 129 S.Ct. 2145, 2149 n. 1, 173 L.Ed.2d 1173 (2009) (quotation marks and alteration omitted), and generally applies if: "(1) the issues in both proceedings are identical, (2) the issue in the prior proceeding was `actually litigated and actually decided,' (3) there was `a full and fair opportunity for litigation in the prior proceeding,' and (4) the issues previously litigated were `necessary to support a valid and final judgment on the merits,'" Ali v. Mukasey, 529 F.3d 478, 489 (2nd Cir.2008) (quoting Gelb v. Royal Globe Ins. Co., 798 F.2d 38, 44 (2d Cir.1986)).
BCRA argues that the same four issues whether the Republic had an attachable interest in BCRA's reserves; whether the FRBNY Funds were being used for commercial activity under FSIA § 1610(a); whether the FRBNY Funds were immune from attachment under FSIA § 1611(b)(1); and whether the Republic's wavier of sovereign immunity in the Fiscal Agency Agreement included BCRA are the subject of the 2005 motions and the Bancec motions and that plaintiffs had a full and fair opportunity to litigate these issues before the District Court. BCRA Br. 26. We disagree.
In disposing of plaintiffs' 2005 motions, the District Court considered whether the FRBNY Funds were attachable because the Kirchner Decrees had transferred title from the BCRA to the Republic. See EM I, 473 F.3d at 470 (discussing the District Court's oral decision of January 12, 2006). In the Bancec motions, on the other hand, the District Court was asked *186 to consider whether the FRBNY Funds were attachable because plaintiffs' had overcome the presumption of juridical separateness to which BCRA is ordinarily entitled under Bancec. While the ends may be the same that is, both sets of motions ultimately asked the District Court to determine whether the FRBNY Funds are attachable interests of the Republic the legal and factual issues presented in the two cases are very different. See EM Ltd., 720 F.Supp.2d at 295 ("[B]oth the legal and factual issues involved in the [Bancec motions] go far beyond the legal and factual issues posed by the [2005 motions]."). As a result, because the issue at the heart of the Bancec motions was not litigated, much less decided, in EM I, 473 F.3d at 480, we cannot say that the Bancec motions raise issues "actually litigated and decided by a court of competent jurisdiction," Ali, 529 F.3d at 489, and would therefore be barred under the doctrine of issue preclusion.
* * *
In sum, we therefore hold that the Bancec motions are not barred under the doctrines of claim preclusion or issue preclusion.
C.
We now turn to the merits of this appeal: whether the FRBNY Funds are immune from attachment and execution under § 1611(b)(1).
(i)
We review a district court's order of attachment or restraint for abuse of discretion. Aurelius Capital Partners, LP v. Republic of Argentina, 584 F.3d 120, 129 (2d Cir.2009). A district court has abused its discretion if it has (1) "based its ruling on an erroneous view of the law," (2) made a "clearly erroneous assessment of the evidence," or (3) "rendered a decision that cannot be located within the range of permissible decisions." Sims v. Blot, 534 F.3d 117, 132 (2d Cir.2008) (citations and quotation marks omitted). We review a district court's legal conclusions under the FSIA de novo. See Robinson v. Gov't of Malaysia, 269 F.3d 133, 138 (2d Cir.2001); see also EM I, 473 F.3d at 472.
The FSIA "provides the sole basis for obtaining jurisdiction over a foreign state in the courts of this country." Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989). Because "subject matter jurisdiction ... depends on the existence of one of the specified exceptions to foreign sovereign immunity," a court may not exercise subject matter jurisdiction over the property of a foreign state defendant unless that property is subject to attachment under the FSIA. Verlinden B.V. v. Cent. Bank of Nig., 461 U.S. 480, 493, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983); see also Weinstein v. Islamic Republic of Iran, 609 F.3d 43, 48 (2d Cir. 2010) (discussing a district court's subject matter jurisdiction over a foreign state pursuant to 28 U.S.C. § 1605).
(ii)
The statutory framework for the attachment, arrest, and execution of foreign state property under the FSIA is relatively straightforward. Unless the property of a foreign state, as defined in § 1603(a),[16] is *187 subject to one of the exceptions set forth in FSIA § 1610, it is immune from attachment, arrest, and execution pursuant to FSIA § 1609.[17]See Saudi Arabia v. Nelson, 507 U.S. 349, 355, 113 S.Ct. 1471, 123 L.Ed.2d 47 (1993). Moreover, even if § 1610 would otherwise bring foreign state property within the jurisdiction of a court, § 1611(b)(1) "overrides [the] exceptions" in § 1610, see Banque Compafina v. Banco de Guatemala, 583 F.Supp. 320, 321 (S.D.N.Y.1984), and provides that "the property of a foreign state shall be immune from attachment and from execution, if (1) the property is that of a foreign central bank or monetary authority held for its own account." 28 U.S.C. § 1611(b)(i); see generally De Letelier v. Republic of Chile, 748 F.2d 790, 793 (2d Cir.1984) ("[U]nder [FSIA] § 1609 foreign states are immune from execution upon judgments obtained against them, unless an exception set forth in §§ 1610 or 1611 of the FSIA applies.").
(iii)
The District Court's holding was predicated on the conclusion that immunity under § 1611(b)(1) is dependent on a central bank's independence. That is, if a central bank lacks sufficient independence to preserve the presumption of juridical separateness under Bancec, our analysis under the FSIA must, according to plaintiffs, "stop at [§] 1610," see Transcript of Oral Argument 40, because the property of the Republic in the present matter is not entitled to the immunity conferred in § 1611(b)(1). As a result, after "disregarding the formal separateness of the Republic and BCRA and treating the [FRBNY F]unds in the hands of BCRA... as the funds of the Republic," EM Ltd., 720 F.Supp.2d at 302, the District Court determined under § 1610 that (1) the Republic had "made the requisite waivers of immunity as to its property ... [which] includ[es] the [FRBNY Funds]," id. at 302 (emphasis supplied); and (2) the FRBNY Funds should be considered "property [of the Republic] used for commercial activity in the United States," id. at 303. The District Court declined to conduct an analysis of the FRBNY Funds' immunity under § 1611 because "the [FRBNY Funds were] in fact not the property of BCRA held for its own account, but [were] the property of the Republic." Id. at 304.
We think that the District Court misread the FSIA when it concluded that a court facing the question of whether the assets of a central bank are attachable property under the FSIA must first decide whether the central bank is entitled to the presumption of independence from its parent state under Bancec. We hold that the plain language, history, and structure of § 1611(b)(1) immunizes property of a foreign central bank or monetary authority held for its own account without regard to *188 whether the bank or authority is independent from its parent state pursuant to Bancec. If foreign central bank property is immune from attachment under § 1611(b)(1), the fact that "a relationship of principal and agent [has been] created" between the foreign state and its central bank under Bancec is irrelevant, see Bancec, 462 U.S. at 629, 103 S.Ct. 2591. As discussed below, foreign central banks are not treated as generic "agencies and instrumentalities" of a foreign state under the FSIA; they are given "special protections" befitting the particular sovereign interest in preventing the attachment and execution of central bank property. EM I, 473 F.3d at 485. Plaintiffs cannot evade this statutory requirement by using Bancec to turn assets that would otherwise be considered property of a central bank held for its own account into property of the Republic that is not entitled to immunity.
(a) The Text and Structure of § 1611(b)(1)
"We begin, as always, with the text of the statute." Permanent Mission of India to United Nations v. City of New York, 551 U.S. 193, 197, 127 S.Ct. 2352, 168 L.Ed.2d 85 (2007) (analyzing FSIA § 1605). Section 1611(b) provides in full:
(b) Notwithstanding the provisions of section 1610 of this chapter, the property of a foreign state shall be immune from attachment and from execution, if
(1) the property is that of a foreign central bank or monetary authority held for its own account, unless such bank or authority, or its parent foreign government, has explicitly waived its immunity from attachment in aid of execution, or from execution, notwithstanding any withdrawal of the waiver which the bank, authority or government may purport to effect except in accordance with the terms of the waiver; or
(2) the property is, or is intended to be, used in connection with a military activity and
(A) is of a military character, or
(B) is under the control of a military authority or defense agency.
28 U.S.C. § 1611(b) (2006) (emphasis supplied).
First, the text of the statute provides that the only qualification for immunity under § 1611(b)(1) is whether the property of the central bank is "held for its own account." We are mindful that in interpreting the statute we must "give effect to Congress' choice of words, and understand that the text, as written," does not create an independence requirement for the immunity of central bank assets under the FSIA. United States v. Wilson, 503 U.S. 329, 342, 112 S.Ct. 1351, 117 L.Ed.2d 593 (1992); see also Utah v. Evans, 536 U.S. 452, 463, 122 S.Ct. 2191, 153 L.Ed.2d 453 (2002) ("[The Court] read[s] limitations on [its] jurisdiction to review narrowly.") (citing Webster v. Doe, 486 U.S. 592, 603, 108 S.Ct. 2047, 100 L.Ed.2d 632 (1988)).
Second, the plain language of the statute suggests that Congress recognized that the property of a central bank, immune under § 1611, might also be the property of that central bank's parent state. As the United States, appearing as amicus curiae, observes, "if Congress had intended to limit § 1611(b)(1) to independent central banks, one would have expected the introductory language of the subsection `Notwithstanding the provisions of section 1610 of this chapter' to refer only to § 1610(b), which provides for execution or attachment of the property of state agencies and instrumentalities, rather than to § 1610 as a whole." United States Amicus Br. 6-7. But § 1611(b)(1) refers to § 1610 in its entirety including those provisions of § 1610 applicable only to foreign states. Therefore, the statute seems to anticipate *189 the possibility that property held by the central bank may also be property of the sovereign state.
In response to the government, plaintiffs contend that "when Congress chose to immunize the `property of a foreign central bank' ... it had in mind the property of a government agency or instrumentality with separate legal personhood." Pls. Supp. Br. at 6 (emphasis in original). The legislative history of § 1611(b)(1), however, belies this claim. In the House Report on the FSIA, upon which we relied in EM I, Congress explained that
Section 1611(b)(1) provides for the immunity of central bank funds from attachment or execution. It applies to funds of a foreign central bank or monetary authority which are deposited in the United States and "held" for the bank's or authority's "own account" i.e., funds used or held in connection with central banking activities, as distinguished from funds used solely to finance the commercial transactions of other entities or of foreign states. If execution could be levied on such funds without an explicit waiver, deposit of foreign funds in the United States might be discouraged. Moreover, execution against the reserves of foreign states could cause significant foreign relations problems.
FSIA House Report 31, reprinted in 1976 U.S.C.C.A.N. 6604 at 6630;[18]see also EM I, 473 F.3d at 473 (referencing Paul L. Lee, Central Banks and Sovereign Immunity, 41 Colum. J. Transnat'l L. 327, 376 (2003) (noting that Section 1611(b)(1) appears to have been developed in order to avoid the "potential difficulties" that central banks would be faced with if their assets were subject to attachment under the provisions of Section 1610(b))).
The FSIA House Report reflects Congress's understanding that while the "funds of [] foreign central banks" are managed through those banks' accounts in the United States, those funds are, in fact, "the reserves of [the] foreign state[s]" themselves. FSIA House Report 31, as reprinted in 1976 U.S.C.C.A.N. 6604 at 6630. In other words, the property of central banks deserves protection notwithstanding the fact that central banks may not have separate legal personhood. "By referring to the property of a foreign state and the property of a central bank interchangeably, Congress indicated its understanding that central bank property could be viewed as the property of a foreign state, and nonetheless be immune from attachment." See United States Amicus Br. 8.
(b) Historical Context
Perhaps most convincingly, the historical backdrop against which the FSIA was passed forecloses the argument that a determination of agency liability under Bancec can render property attachable that is otherwise immune under § 1611(b)(1). As plaintiffs' expert observes, "[t]wenty years ago ... most central banks in the world functioned as departments of ministries of finance[,]" in which "the level of actual independence ... was usually lower than indicated in the law." Alex Cukierman, Central Bank Independence and Monetary Policymaking Institutions Past Present and Future, 24 Eur. J. Pol. & *190 Econ. 722, 722 (2008). That statement, written in 2008, refers to a time in the mid-late 1970s just after the FSIA had been passed by Congress. Indeed, one account of the history of central banking describes an "alternating pattern" of central bank independence in which in "the period from the First World War to the 1970s ... there was a move to greater government control, and of more dependent central banks." Forrest Capie et al., The Future of Central Banking 49 (1994); see also M.H. de Kock, Central Banking 327 (3d ed.1954) (recognizing the "pronounced trend toward State ownership and control of central banks" in the post-war era). See generally id. at 325-330.
Accordingly, when Congress passed the FSIA, it had no reason to believe that foreign central banks and monetary authorities would be independent of their parent states because, at that time, most were not. Moreover, Congress had reason to suspect that, as appears to be the case with Argentina, a central bank's actual degree of autonomy may not be entirely predictable based on its degree of juridical independence. In an environment in which Congress was worried that execution against foreign central bank deposits might "discourage[]" foreign states from depositing their reserves in the United States, see FSIA House Report 31, reprinted in 1976 U.S.C.C.A.N. 6604 at 6630; see also EM I, 473 F.3d at 473, it makes no sense to assume that Congress would enact a statute designed to prevent "significant foreign relations problems" which failed to immunize a significant portion of the central bank reserves in the United States at that time. Id.
Indeed, as BCRA and the Republic point out, by some calculations, the independence ranking that plaintiffs introduced into the record in support of their argument that BCRA is the "alter ego" of the Republic under Bancec renders BCRA more independent than the Federal Reserve System, the central bank of the United States, and more independent than the Bank of England, the central bank of the United Kingdom. See BCRA and Republic Joint Reply Br. 40 (citing Simone Polillo & Mauro Guillen, Globalization Pressures and the State: The Global Spread of Central Bank Independence, 110 Am. J. Sociology 1764, 1781 (2005) (data available at http://www.management.wharton.upenn.edu/guillen/2009_docs/CBI_index_updated.pdf)). Assuming, arguendo, that such rankings are relevant indicators of independence for the purpose of determining juridical status under Bancec, it is simply inconceivable that Congress would have designed a statute pursuant to which all of the assets of the United States Federal Reserve system could be treated as attachable interests of the United States (absent other principles of sovereign immunity). See EM I, 473 F.3d at 476 n. 12 (stating same).
* * *
We therefore conclude that § 1611(b)(1) immunizes foreign central bank property "held for its own account" without regard to the central bank's independence from its parent state; that is, we hold that the analysis of the immunity of a foreign central bank's property begins with § 1611(b)(1). There is no indication in the text, history, or structure of the FSIA that Congress intended to make the immunity of a central bank's property contingent on the independence of the central bank. The statute makes no reference to the independence or autonomy of a central bank or monetary authority. Moreover, the history of the FSIA and of the independence of central banks suggests that Congress understood the property of a foreign central bank to be deserving of immunity regardless of that bank's independence. Plaintiffs fail to convince us that an independence *191 requirement can be fairly read into the statute.
(iv)
Having concluded that the immunity of the FRBNY Funds under the FSIA turns not on whether the BCRA is entitled to a presumption of independence from the Republic under Bancec, but on whether the funds are property of the BCRA "held for its own account" under § 1611(b)(1), we must now decide whether the FRBNY Funds meet that test.
The definition of the phrase "held for its own account" in § 1611(b)(1) is a matter of first impression in this Circuit. See EM I, 473 F.3d at 485 (declining to "decide which interpretation of § 1611(b)(1)'s `held for its own account' language is correct"). The parties and amici propose three competing definitions.
First, BCRA argues that central bank property is "held for its own account" if that property is used for "traditional central banking activities." BCRA Br. 37. This appears to be the test adopted by Congress in the FSIA, see FSIA House Report 31, reprinted in 1976 U.S.C.C.A.N. at 6630 (Funds "`held' for the bank's or authority's `own account' ... [include] funds used or held in connection with central banking activities, as distinguished from funds used solely to finance the commercial transactions of other entities or of foreign states"), and apparently is the only test ever to be applied by a federal court in this country. See, e.g., Ministry of Def. & Support for Armed Forces of Islamic Repub. of Iran v. Cubic Def. Sys., 385 F.3d 1206, 1223-24 (9th Cir.2004) (discussing FSIA House Report for the proposition that "held for its own account" means "used or held in connection with central banking activities"), vacated on other grounds sub nom., Ministry of Def. & Support for Armed Forces of Islamic Repub. of Iran v. Elahi, 546 U.S. 450, 126 S.Ct. 1193, 163 L.Ed.2d 1047 (2006); Bank of Credit and Commerce Int'l (Overseas) Ltd. v. State Bank of Pak., 46 F.Supp.2d 231, 239 (S.D.N.Y.1999) ("Pursuant to 28 U.S.C. § 1611, the property of a foreign central bank held `for its own account' is immune from attachment in the United States. Funds are considered to be `held for a central bank's own account' if they are used to perform functions that are normally understood to be the functions of a nation's central bank, and are not utilized in commercial activities."), vacated on other grounds, 273 F.3d 241 (2d Cir.2001); Banco Central de Reserva del Peru v. Riggs Nat'l Bank of Washington, D.C., 919 F.Supp. 13, 17 (D.D.C.1994) (citing FSIA House Report); Banque Compafina v. Banco de Guatemala, 583 F.Supp. 320, 322 (S.D.N.Y.1984) (same).
A second proposed definition of central bank property "held for its own account" is offered by the FRBNY, appearing as amicus curiae. FRBNY suggests an alternative definition drawn from the common law of bank deposits. FRBNY Amicus Br. 14 (citing Clackamas Gastroenterology Assocs. P.C. v. Wells, 538 U.S. 440, 447, 123 S.Ct. 1673, 155 L.Ed.2d 615 (2003) ("[C]ourts will look to the common law to fill gaps in statutory text, particularly when an undefined term has a settled meaning at common law.")).[19] Under the *192 so-called "plain language test," property of a central bank is "held for its own account" if it is in an account in the central bank's name because "[u]nder fundamental banking law principles, a positive balance in a bank account reflects a debt from the bank to the depositor" and no one else. Id. (citing Citizens Bank of Md. v. Strumpf, 516 U.S. 16, 21, 116 S.Ct. 286, 133 L.Ed.2d 258 (1995) (a bank account "consists of nothing more or less than a promise to pay, from the bank to the depositor")); see also Bradford v. Chase Nat'l Bank, 24 F.Supp. 28, 38 (S.D.N.Y.1938) ("[T]he best, if not the only, way in which the possession of a chose in action such as a bank account can be shown, is by showing in whose name the account stands, for the person in whose name the account stands has absolute control of it and that is all possession of a chose in action can mean."), aff'd sub nom., Berger v. Chase Nat'l Bank, 105 F.2d 1001 (2d Cir.1939), aff'd, 309 U.S. 632, 60 S.Ct. 707, 708, 84 L.Ed. 990 (1940). Indeed, in 1993, the district court in Weston Compagnie de Finance et D'Investissement, S.A. v. La Republica del Ecuador concluded without referring to it by name that the "plain language" test is a necessary but not sufficient condition for central bank property immunity under § 1611(b)(1). 823 F.Supp. 1106, 1112 (S.D.N.Y.1993) ("Any funds in an account in the name of a foreign central bank are thus funds `of' that foreign central bank.... To say that, however, does not end the inquiry. Such funds are, under § 1611(b)(1), immune from attachment only if `held for [the foreign central bank's] own account.'" (alteration in original)).
Finally, relying on a "grammatical and syntactical construction of Section 1611(b)," plaintiffs suggest a third definition of property of a central bank "held for its account": "[p]roperty of a central bank is `held for its own account' when it is held for [the central bank's] own profit or advantage." Pl. Br. 77-78. According to plaintiffs,
in the statutory phrase "property ... of a foreign central bank held for its own account": (1) the words "its own" refer back to the term "central bank" (not "property"); and (2) the word "for" denotes that the words that follow "its own account" constitute the purpose for which the property is "held.".... Because Congress employed the word "account" to identify a particular purpose the motivation of the central bank for holding the "property," the only definition of "account" that makes sense is "profit, advantage."
Id. at 77. (quoting Webster's New Int'l Unabridged Dictionary 12 (3d ed.1976) (sixth definition of the noun "account") (emphases omitted)). Drawing on this definition, plaintiffs argue that if, pursuant to Bancec, a court were to disregard the juridical separateness of BCRA, the FRBNY Funds "cannot be held for the central bank's own profit or advantage" because the central bank "is the sovereign." Id. at 81 (emphasis in original).
Plaintiffs' definition is novel but cannot be correct. BCRA is charged by statute with power and responsibility over, among other things, issuing and monitoring the stability of the Argentine peso, establishing and implementing monetary policy, investing reserves, acting as the Republic's financial agent and as depository and agent for the Republic before "international monetary, banking and financial entities," and regulating the Argentine banking system and financial sector. See BCRA Charter Arts. 1-60; JA Vol. V at 763-75. These are all traditional activities of central banks, see Ernest T. Patrikis, Foreign Central Bank Property: Immunity from Attachment in the United States, 1982 U. Ill. L.Rev. 265, 274 n. 37 (1982) (enumerating "functions of central banks"), *193 which are performed "in the national economic interest," de Kock, Central Banking at 22. They are also, to a one, functions which defy any attempt to divide the interest of the central bank from that of the state it serves.
An example on this point may be instructive. The District Court identified "the Republic's use of resources of BCRA in 2005 to pay the debt owed to the IMF" as a "non-regular monetary operation[] which BCRA carried out at the behest of the Republic in order to serve the Republic's (not BCRA's) political and economic purposes." EM Ltd., 720 F.Supp.2d at 299. In fact, this transaction was "of great significance," id., in demonstrating "that the Republic could draw on the resources of BCRA at will," id. at 300. However, while the Republic's conduct with regard to the Kirchner Decrees demonstrates its control over the BCRA notwithstanding BCRA's statutory independence it does not follow that early repayment of the Republic's debt to the IMF did not inure to the "profit" or "advantage" of BCRA. As BCRA and the Republic observe, "[t]he debt to the IMF was carried on the books of BCRA as a liability of BCRA to the Republic.... It was surely to BCRA's `advantage' to pay off that debt." BCRA and Republic Joint Reply Br. 27.
Plaintiffs offer no standard for deciding whether a given reserve policy or central bank investment is conducted for the "advantage" of the central bank, or that of its parent state. We suspect that is so because no reasonable strategy for doing so exists. Indeed, as BCRA's charter makes explicit, at the end of each year BCRA's "profits," above and beyond fifty percent of its capital, are required by law to "be freely transferred to the National Government account." BCRA Charter, Art. 38; JA Vol. V at 772. Notwithstanding its independent legal status, asking courts to disaggregate activities that are for BCRA's advantage and not the Republic's (or vice versa) misunderstands the legal structure of BCRA and the very purpose of a central bank.
On the other hand, the "central banking activities" test is not without difficulty, either. On its face, the House Report "distinguishe[s]" between property "used or held in connection with central banking activities," which is immune from attachment under § 1611(b)(1), and that used "solely to finance the commercial transactions... of foreign states," which is not. FSIA House Report 31, reprinted in 1976 U.S.C.C.A.N. at 6630. However, the structure of the FSIA suggests that property used for commercial activity and property of a central bank held for its own account are not mutually exclusive categories, because some property of a central bank held for its own account is a category of property used for commercial activity. As the District Court in Weston observed,
28 U.S.C. § 1609 renders all property of a foreign state in the United States immune from attachment, except as provided in §§ 1610 and 1611, which except from the operation of § 1609, upon certain conditions, "property in the United States of a foreign state ... used for a commercial activity in the United States." 28 U.S.C. § 1610(a) and (d) (1988). 28 U.S.C. § 1611(b)(1) then provides that, "[n]otwithstanding the provisions of section 1610 of this chapter, the property of a foreign state shall be immune from attachment ..." if it is property "of a foreign central bank or monetary authority held for its own account," subject to waiver of postjudgment attachment. 28 U.S.C. § 1611(b)(1), in other words, is an exception to § 1610, providing for immunity from attachment that would otherwise be allowed by § 1610. Without § 1610, no property of a foreign state would be subject to attachment; § 1610, however, allows attachment *194 only of property "used for a commercial activity." The property referred to in § 1611(b)(1) therefore must be property used for a commercial activity: if it were not, it would not be attachable at all. It follows that a showing that property of a central bank is used for a commercial activity does not, of itself, exclude it from the immunity granted by § 1611(b)(1).
Weston, 823 F.Supp. at 1112.
In order to resolve this tension, one practitioner of central banking law has proposed a modified central bank functions test, pursuant to which "property of a central bank is immune from attachment if the central bank uses such property for central banking functions as such functions are normally understood, irrespective of their commercial nature." Patrikis, Foreign Central Bank Property, 1982 U. Ill. L.Rev. at 277. Conversely, "if an activity is to be regarded as commercial, as distinguished from a central bank activity, it should be an activity of the foreign central bank not generally regarded as a central banking activity." Id. at 277-78. This test was adopted by the district court in Weston, see 823 F.Supp. at 1113, and, more recently, by another district court in Olympic Chartering, S.A. v. Ministry of Indus. & Trade of Jordan, 134 F.Supp.2d 528, 534 (S.D.N.Y.2001) ("If the funds at issue are used for central bank functions as these are normally understood, then they are immune from attachment, even if used for commercial purposes.").
We think that this modified test which combines the "plain language" of the statute and "central bank activities" tests as conjunctive requirements accords with the text and purpose of § 1611(b)(1), and we therefore adopt this test for purposes of determining whether central bank property is "held for its own account." Where funds are held in an account in the name of a central bank or monetary authority, the funds are presumed to be immune from attachment under § 1611(b)(1). This presumption is consistent with the recognition that "FSIA immunity is immunity not only from liability, but also from the costs, in time and expense, and other disruptions attendant to litigation." Kelly v. Syria Shell Petroleum Dev. B.V., 213 F.3d 841, 849 (5th Cir.2000); see also EM I, 473 F.3d at 486 (district courts must calibrate the "`delicate balancing between permitting discovery to substantiate exceptions to statutory foreign sovereign immunity and protecting a sovereign's or sovereign agency's legitimate claim to immunity from discovery'") (quoting First City, Texas-Houston, N.A. v. Rafidain Bank, 150 F.3d 172, 176 (2d Cir.1998) (quotation marks omitted)). A plaintiff, however, can rebut that presumption by demonstrating with specificity that the funds are not being used for central banking functions as such functions are normally understood, irrespective of their "commercial" nature.[20]
Had the District Court applied this test, it would have concluded that the *195 FRBNY Funds were property of the BCRA held for the central bank's own account at FRBNY. We have already established that the FRBNY Funds are held in BCRA's name at FRBNY. See EM I, 473 F.3d at 473 ("[T]he FRBNY Funds that plaintiffs seek to attach are held in BCRA's name."). Pursuant to the parties' March 2009 Stipulation, the FRBNY Funds of December 30, 2005 are said to have been derived from four types of transactions conducted by BCRA: (1) $31 million was transferred into the FRBNY account in order to pay Argentine banks that sought to reduce the amount of their U.S. dollar reserves; (2) $32.2 million was transferred into the account because certain Argentine banks were increasing their U.S. dollar reserves; (3) BCRA had purchased approximately $35 million in U.S. dollars throughout the day in order to control its currency; and (4) $1.2 million was deposited pursuant to a regulatory exchange rule that BCRA imposed on Argentine exporters. See EM Ltd., 720 F.Supp.2d at 303. The record clearly establishes that the accumulation of foreign exchange reserves to facilitate the regulation of the peso and the custody of cash reserves of commercial banks pursuant to central bank regulations are paradigmatic central banking functions; see also Filler v. Hanvit Bank, 378 F.3d 213, 217 (2d Cir.2004) (recognizing that "protecting depositors and promoting financial stability" are "functions traditionally performed by the government" in the context of an instrumentality's immunity under FSIA).
(v)
Having concluded that the FRBNY Funds are property of the BCRA "held for its own account," the final question under § 1611(b)(1) is whether there has been an effective waiver of immunity with respect to that property.
Section 1611(b)(1) provides that the only exception to the immunity for property of a central bank or monetary authority held for its own account is where "such bank or authority, or its parent foreign government, has explicitly waived its immunity from attachment in aid of execution, or from execution." 28 U.S.C. § 1611(b)(1).
The District Court concluded that the Republic had explicitly waived its immunity. See EM Ltd., 720 F.Supp.2d at 301. The terms and conditions governing the bonds provide that with regard to any potential immunity from attachment and execution of the Republic's property "the Republic has irrevocably agreed not to claim and has irrevocably waived such immunity to the fullest extent permitted by the laws of such jurisdiction and consents generally for the purposes of the Foreign Sovereign Immunities Act to the giving of any relief or the issue of any process in connection with any Related Proceeding or Related Judgment."[21] Terms and Conditions Governing the 10.000% New AR$ Global Bond due September 19, 2008, ISIN #XS0130278467, at *12; JA V:346.[22]
However, the District Court also concluded that "there has been no waiver of immunity with respect to BCRA." EM Ltd., 720 F.Supp.2d at 297 (emphasis supplied). We agree. Waiver under the FSIA must be "clear and unambiguous." Carpenter v. Republic of Chile, 610 F.3d 776, 779 (2d Cir.2010). In circumstances in which we have recognized the waiver of *196 immunity with respect to an agency or instrumentality of a foreign state, that waiver has specifically embraced the foreign state and the relevant agency or instrumentality. See, e.g., LNC Invs., Inc. v. Republic of Nicaragua, 115 F.Supp.2d 358, 361 (S.D.N.Y.2000), aff'd sub nom., LNC Invs., Inc. v. Banco Central De Nicaragua, 228 F.3d 423 (2d Cir.2000) (waving immunity "[t]o the extent that the Republic or any Governmental Agency has or hereafter may acquire any immunity from jurisdiction of any court").
Here, while the Republic waived immunity under the FSIA for "the Republic or any of its revenues, assets or property," the Republic's waiver did not mention the "instrumentalities" of the Republic or BCRA in particular, much less BCRA's reserves at FRBNY. As we previously observed, "although the Republic's waiver of immunity from attachment is worded broadly, it does not appear to clearly and unambiguously waive BCRA's immunity from attachment, as it must do in order to be effective." EM I, 473 F.3d at 485 n. 22.
D.
One need not have what Argentina's great gift to literature termed a "case[] of prodigious memory" to recall the Republic's appalling record of keeping its promises to its creditors.[23]See id. at 466, n. 2. Argentina's record in global bond markets has given new meaning to the concept of caveat emptor. Even when the Argentine people offer a substantial premium to those adventurous souls who risk a loan to the country, for many investors, the experience of being a creditor to the Republic has been a profile in disappointment.
In the particular circumstances presented here, there is no doubt, as the District Court recognized, that while the Republic provided explicit assurances in its bonds that plaintiffs would have recourse to hold it to its promises, "[w]hat the bonds do not say is that the law of this jurisdiction the Foreign Sovereign Immunities Act imposes severe restrictions upon the ability of a creditor of the Republic to obtain an attachment or execution." EM Ltd., 720 F.Supp.2d at 301. We share the District Court's understandable irritation at the Republic's "willful defiance of [its] obligations to honor the judgments of a federal court." Id. at 304. Indeed, as we have had occasion to observe before, "[w]e understand the frustration of the plaintiffs who are attempting to recover on judgments they have secured. Nevertheless, we must respect the [FSIA's] strict limitations on attaching and executing upon assets of a foreign state." Aurelius Capital Partners, 584 F.3d at 132.
Because BCRA's sovereign immunity over the FRBNY Funds has not been waived and the FRBNY Funds are property of BCRA held for its own account under 28 U.S.C. § 1611(b)(1), we hold that the FRBNY Funds are immune from attachment and restraint. The District Court therefore erred in concluding that it had subject-matter jurisdiction to adjudicate a suit for attachment and restraint of the FRBNY Funds.[24] The April 7, 2010 opinion *197 and all associated orders of the District Court are vacated and the cause is remanded to the District Court for further proceedings consistent with this opinion.
CONCLUSION
To summarize:
(1) Plaintiffs' motion for certification of the appeal under 28 U.S.C. § 1292(b) is granted because the District Court's ruling involves unresolved questions of law and an appeal would advance the termination of the litigation. See EM Ltd. v. Republic of Argentina, 473 F.3d 463, 471 (2d Cir.2007).
(2) Plaintiffs' motions to attach the FRBNY Funds are not barred under the doctrine of claim preclusion because the 2005 motions vacated by this Court in EM I were not final judgments on the merits. See Dayco Corp. v. Foreign Transactions Corp., 705 F.2d 38, 39 (2d Cir.1983).
(3) Plaintiffs' motions to attach the FRBNY Funds are not barred under the doctrine of issue preclusion because the issue presented on appeal whether the FRBNY Funds are attachable because BCRA is not entitled to the presumption of juridical separateness under First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983) was not litigated and decided by a court of competent jurisdiction in a prior proceeding. See Ali v. Mukasey, 529 F.3d 478, 489 (2d Cir.2007).
(4) Section 1611(b)(1) immunizes the property of a central bank or monetary authority "held for its own account" without regard to whether the bank or authority is entitled to a presumption of independence from its parent state under First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983).
(5) Where funds are held in an account in the name of a central bank or monetary authority, the funds are presumed to be immune from attachment under § 1611(b)(1); this presumption may be rebutted by demonstrating with specificity that the funds are not being used for central banking functions as such functions are normally understood, irrespective of their "commercial" nature.
(6) The Republic's waiver of immunity is not sufficiently explicit and unambiguous so as to waive BCRA's immunity with respect to the FRBNY funds pursuant to § 1611(b)(1).
Accordingly, for the reasons stated above, we hold that the FRBNY Funds are immune from attachment and execution. The orders of the District Court related to plaintiffs' motions to attach the FRBNY Funds are vacated and the cause is remanded for further proceedings consistent with this opinion.
NOTES
[1] Although, as a general matter, only a party of record may appeal a judgment, United States ex rel. Louisiana v. Jack, 244 U.S. 397, 402, 37 S.Ct. 605, 61 L.Ed. 1222 (1917), a nonparty may appeal in certain circumstances "when the nonparty has an interest that is affected by the trial court's judgment." Hispanic Soc'y v. New York City Police Dep't, 806 F.2d 1147, 1152 (2d Cir.1986). BCRA is such a party. See, e.g., Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 313 F.3d 70, 81 (2d Cir.2002) (recognizing the standing of non-party Republic of Indonesia to appeal a judgment that allowed a party to garnish property allegedly owned by the Republic.); United States v. Int'l Bhd. of Teamsters, 931 F.2d 177, 183-84 (2d Cir. 1991) (recognizing the standing of non-party union affiliates whose practices were directly affected by an order approving a settlement between the government and the union). Indeed, plaintiffs do not contest BCRA's standing. See Palmieri v. Allstate Ins. Co., 445 F.3d 179, 188 (2d Cir.2006) (issues not raised on appeal are treated as waived).
[2] 28 U.S.C. § 1611(b)(1) provides, in relevant part:
(b) Notwithstanding the provisions of section 1610 of this chapter, the property of a foreign state shall be immune from attachment and from execution, if
(1) the property is that of a foreign central bank or monetary authority held for its own account, unless such bank or authority, or its parent foreign government, has explicitly waived its immunity from attachment in aid of execution, or from execution, notwithstanding any withdrawal of the waiver which the bank, authority or government may purport to effect except in accordance with the terms of the waiver.
See also note 14, post (providing the text of 28 U.S.C. § 1610(a) in relevant part).
[3] The Republic concedes that in the Fiscal Agency Agreement governing the debt instruments owned by plaintiffs it clearly and unambiguously waived its right to assert its sovereign immunity from suit in claims regarding those instruments. See Republic Br. 18 ("In the FAA, the Republic waived its immunity to suit and consented to the jurisdiction of New York courts in connection with claims based upon the bonds."); see also NML Capital, Ltd. v. Republic of Argentina, 05-cv-2434 (S.D.N.Y. Feb. 28, 2005), Singer Decl. Ex. A, Fiscal Agency Agreement between The Republic of Argentina and Bankers Trust Company, Fiscal Agent (Oct. 19, 1994) ("The Republic hereby irrevocably waives and agrees not to plead any immunity from the jurisdiction of any such court to which it might otherwise be entitled in any action arising out of or based on the securities or this Agreement by the holder of any Security."); Joint Appendix ("JA") Vol. I at 226. All of the instruments on which plaintiffs have sued were issued pursuant to the Republic's 1994 Global Note Program, which is governed by the October 19, 1994 Fiscal Agency Agreement. Republic Br. 18.
[4] On January 14, 2005, Argentina launched a "global exchange offer" pursuant to which foreign creditors holding debt instruments on which the Republic had defaulted in 2001 could voluntarily exchange their non-performing bonds for new securities. When the 2005 Global Exchange Offer closed on February 25, 2005, the aggregate outstanding foreign private debt that had been tendered totaled approximately 76 percent, representing a par value of $62.3 billion. On April 30, 2010, while this appeal was pending, Argentina launched a second global exchange offer, the 2010 Global Exchange Offer, aimed at replacing the outstanding non-performing debt that had not already been tendered in 2005. When that Offer closed on June 30, 2010, the aggregate amount of securities in default tendered (along with a similar offer conducted concurrently by Argentina in Japan), totaled approximately $12.2 billion, representing approximately 67 percent of the aggregate outstanding non-performing debt. As a result of the 2005 and 2010 Global Exchange Offers, Argentina has restructured over 91 percent of the foreign debt on which it defaulted in December 2001. See Republic of Argentina, Annual Report for Foreign Governments and Political Subdivisions 16-17 (Securities and Exchange Commission Form 18-K) (Oct. 1, 2010) (available at http://www.sec.gov/Archives/edgar/data/914021/XXXXXXXXXXXXXXXXXX/roa-18k_0927.htm) (last visited June 2, 2011).
[5] It is undisputed that in the terms and conditions governing each of the securities at issue in this case the Republic agreed to submit to "the jurisdiction of any New York state or federal court sitting in the Borough of Manhattan, The City of New York ... over any suit, action, or proceeding against it or its properties, assets or revenues with respect to the Securities of this Series or the Fiscal Agency Agreement ... except with respect to any actions brought under the United States federal securities laws."
[6] On October 27, 2003, a final judgment of $724,801,662.56 the par value of the principal interest owed on the 10.000% New AR$ Global Bond due September 19, 2008, ISIN #XS0130278467 was entered against the Republic in favor of EM Ltd. EM Ltd. v. Republic of Argentina, No. 03 Civ 2507, 2003 WL 22454934 (S.D.N.Y. Oct. 27, 2003), aff'd, 382 F.3d 291 (2d Cir.2004). As of January 11, 2010, that judgment had accrued post-judgment interest of almost $61 million, bringing the total value of the judgment to $785,778,299.98. Restraining Order, EM Ltd. v. Republic of Argentina, No. 03-2507 (S.D.N.Y. Jan. 13, 2010).
As of February 4, 2011, the Republic owed $1,612,960,236.98 of principal and post-judgment interest to NML Capital, Ltd. pursuant to a final judgment for the recovery of so-called "Floating Rate Accrual Notes," which became due and payable on April 10, 2005. See Order of Attachment, NML Capital, Ltd. v. Republic of Argentina, No. 06 Civ. 6466 (S.D.N.Y. Feb. 18, 2011) (aggregating a December 18, 2006 judgment in No. 03 Civ. 8845 ($62,830,391.32), two May 29, 2009 judgments in No. 05 Civ. 2434 ($2,341,379.51) and No. 06 Civ. 6466 ($4,410,819.85), and two additional actions not at issue in this appeal).
[7] FRBNY provides accounts in which approximately 250 foreign central banks and monetary authorities manage foreign exchange reserve holdings and other property. As of December 31, 2009, the balances in these accounts totaled nearly $3 trillion, representing more than half of the worldwide U.S. dollar-denominated reserves. FRBNY Amicus Br. 3. According to FRBNY, in 2009 foreign official reserves invested in U.S. Treasury securities through foreign central bank and monetary authority accounts at FRBNY represented approximately 30 percent of the marketable outstanding debt of the United States. Id.
[8] The parties' stipulation indicates that between October 1 and December 30, 2005, a time period of particular relevance as discussed below, FRBNY Funds were principally derived from four types of transactions. First, BCRA requires that Argentine banks maintain certain cash reserves, called efectivo minimo, on deposit at BCRA. Second, BCRA used its FRBNY account to provide foreign exchange transaction services to domestic Argentine banks, including currency settlement services. Third, BCRA used the FRBNY account to transfer funds on behalf of the Republic to and from certain international organizations and multilateral fora to which the Republic is a party, to and from Argentine embassies and missions abroad, and to certain foreign business service providers for expenses incurred by the Republic, including the law firm representing the Republic in this case. Fourth, and finally, BCRA used the FRBNY account to make payments of U.S. dollar-denominated operational expenses, such as the purchasing of currency paper and BCRA's subscription to Bloomberg news service. EM Ltd., 720 F.Supp.2d at 303.
[9] In addition to its account at FRBNY, BCRA maintains at least one U.S. dollar-denominated account at the BIS in Basel, Switzerland. See EM Ltd., 720 F.Supp.2d at 288.
[10] In September 2001, before Argentina's sovereign debt default, BCRA held $4.2 billion in its FRBNY account and $10.2 billion at other commercial banks in the United States. By December 2003, the FRBNY account had a cash deposit of $500 million; all of the other accounts had been emptied. While the running balance in the FRBNY account reached $1 billion at various points in 2004, by the fall of 2005 it was reduced to approximately $200 million.
[11] On December 15, 2005, President Kirchner issued two emergency Executive Decrees intended to facilitate the early repayment of the Republic's $9.8 billion in outstanding debt to the IMF. See Cohen Decl., Ex. 2, (Dec. 30, 2005); JA Vol. V at 377. Decree 1599/2005 permitted the use of BCRA reserves in excess of those needed to back the Republic's monetary base referred to as "Unrestricted Reserves," see Rivera Decl. ¶ 5 (Nov. 28, 2006); JA Vol. II at 627 to be used "to repay obligations due to international financial entities." Decree 1599/2005 Art. 1 (amending Law 23,928 Art. 4); JA Vol. III at 442. Decree 1601/2005 instructed that the Republic's debt to the IMF be repaid out of the "unrestricted reserves" created by Decree 1599/2005. JA Vol. II at 627. On December 29, 2005, the Ministry of Economy and Production ordered BCRA to repay the IMF loan ahead of schedule pursuant to the IMF Decrees. Decree 1601/2005 Art. 1; JA Vol. III at 448. On January 3, 2006, the Republic's debt to the IMF was repaid by BCRA using BCRA's assets by order of the Ministry of Economy and Production pursuant to the IMF Decrees. In exchange, BCRA received a non-transferable note from the Republic. Id.; see generally EM I, 473 F.3d at 468 (discussing Argentina's early repayment of its 2003 IMF loan).
[12] Subject to a January 9, 2006 Stipulation and Consent Order entered by the District Court, the attachment and restraining orders granted by the Part I judge were amended to require FRBNY to maintain in BCRA's account a sum not less than an amount equal to approximately $100 million that is, an amount equal to 95 percent of the amount on deposit at the close of business on January 6, 2006. See EM Ltd., 720 F.Supp.2d at 275.
[13] 28 U.S.C. § 1292(b) provides, in relevant part:
When a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order. The Court of Appeals which would have jurisdiction of an appeal of such action may thereupon, in its discretion, permit an appeal to be taken from such order, if application is made to it within ten days after the entry of the order....
[14] 28 U.S.C. § 1610(a) provides, in pertinent part, as follows:
(a) The property in the United States of a foreign state ... used for a commercial activity in the United States, shall not be immune from attachment in aid of execution, or from execution, upon a judgment entered by a court of the United States or of a State ... if
(1) the foreign state has waived its immunity from attachment in aid of execution or from execution either explicitly or by implication, notwithstanding any withdrawal of the waiver the foreign state may purport to effect except in accordance with the terms of the waiver....
[15] As the District Court recognized, by reframing the focus of its argument beyond the Kirchner Decrees, plaintiffs expanded the scope of our inquiry considerably, bringing into the record the Republic's disregard of BCRA's ostensibly independent monetary policy autonomy in order to accumulate "unsterilized" foreign exchange reserves; the Republic's abuse of its appointment power in order to replace BCRA leadership unwilling to do its bidding; and the Republic's interference with the BCRA's operational independence in order to ensure that the BCRA's reserves were beyond the reach of execution by foreign courts. See EM Ltd., 720 F.Supp.2d at 295. All these actions, plaintiffs claim, were designed to use BCRA reserves to selectively pay some of the Republic's foreign creditors while allowing the Republic to avoid paying the obligations of other, less favored creditors.
We note, however, that unpacking the forces that shape the monetary policy decisions of a sovereign state is difficult, and while the record often permits us to discern with confidence what happened, it does not always permit us to determine why a particular decision was made, much less whether it was effected by one political entity against its will and at the behest of another. Like the District Court, although we consider the entire record on appeal, we focus on those policy decisions, like the Kirchner Decrees, for which we have the highest degree of confidence that the record is sufficiently developed to permit an informed judgment. See, e.g., EM Ltd., 720 F.Supp.2d at 299 (noting that while "[t]here is evidence that, beginning in late 2004, the Republic directed BCRA to issue increased amounts of pesos to purchase U.S. dollars, thus lowering the value of the peso in a manner favoring certain portions of the electorate ... [t]he [District Court does] not rely to any great degree on this circumstance, because the details are not clear from the record.").
[16] 28 U.S.C. § 1603(a)-(b) provides that
(a) [a] "foreign state," except as used in section 1608 of this title, includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state as defined in subsection (b).
(b) An "agency or instrumentality of a foreign state" means any entity
(1) which is a separate legal person, corporate or otherwise, and
(2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and
(3) which is neither a citizen of a State of the United States as defined in section 1332(c) and (e) of this title, nor created under the laws of any third country.
We have previously determined that both Argentina and BCRA are "foreign states" within the meaning of § 1603(a). See Weltover, Inc. v. Republic of Argentina, 941 F.2d 145, 148 (2d Cir.1991), aff'd, 504 U.S. 607, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992). In addition, the definition of a foreign state under § 1608, which provides for the service of process against a foreign state under the FSIA, is not relevant here.
[17] 28 U.S.C. § 1609 provides, in full, that "[s]ubject to existing international agreements to which the United States is a party at the time of enactment of this Act[,] the property in the United States of a foreign state shall be immune from attachment[,] arrest[,] and execution except as provided in sections 1610 and 1611 of this chapter."
[18] See also Sen. Judiciary Comm., Define Jurisdiction of U.S. Courts in Suits Against Foreign States, Sen. Rep. No. 1310, 94th Cong., 2d Sess. 8-9. As we observed in Texas Trading & Mill. Corp. v. Federal Republic of Nigeria, "[t]he House and Senate Committees filed identical reports, and references [herein] to the House Report may be deemed to represent the views of the Senate Committee as well." 647 F.2d 300, 306 n. 18 (2d Cir.1981), overruled on other grounds by Frontera Res. Azer. Corp. v. State Oil Co. of Azer. Repub., 582 F.3d 393 (2d Cir.2009).
[19] In its brief, FRBNY discussed both the "plain language" test and the "central bank activities" test but did not urge this Court to adopt one or the other, under the theory that the FRBNY Funds are entitled to immunity pursuant to § 1611(b)(1) under both tests. Compare FRBNY Amicus Br. 16 ("Where, as here, a deposit is denominated in the central bank's own name, that deposit is the property of the central bank held for its own account."), with id. at 18 ("Under the `central banking functions' test, the funds in the BCRA Account are clearly property of a central bank held for its own account.").
[20] We recognize that there is no definitive list of activities "normally understood" to be central banking functions. Indeed, the definition of what constitutes a "central bank activity" is likely to change over time. However, as this case illustrates, even in unusual circumstances it is not difficult to tell whether a central bank is engaged in a function characteristic of central banks. If that were to change or if the sphere of normally understood central bank activities were to significantly exceed Congress's understanding of those activities deserving of sovereign immunity it is likely that Congress's interest in preserving the immunity of central bank property would change as well. In that instance, we have no doubt that Congress could and would "recalibrate" the FSIA's statutory scheme as necessary.
[21] The Terms and Conditions define a Related Proceeding as "any suit, action, or proceeding against it or its properties, assets or revenues with respect to the Securities of this Series or the Fiscal Agency Agreement," and a Related Judgment as a "final non-appealable judgment in any such Related Proceeding."
[22] The Terms and Conditions of all of the other instruments at issue in this litigation contain the same or similar waivers.
[23] Jorge Luis Borges used the phrase "prodigious memory" to describe Ireneo Funes, a fictional character who "remembered not only every leaf of every tree in every patch of forest, but every time he had perceived or imagined that leaf." Jorge Luis Borges, Funes, His Memory, in Collected Fictions 134, 136 (Andrew Hurley, trans., Penguin Books 1998) (1942).
[24] Because we conclude that FRBNY Funds are immune from attachment and execution pursuant to § 1611(b)(1), we need not reach the question of whether the District Court correctly determined that the Republic's control of BCRA was sufficient to disregard the presumption of juridical separateness under Bancec. We intimate no view on that question.
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Order entered April 1, 2020
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-19-01557-CV
CRAIG PATRICK POWER, Appellant
V.
BRADEN RICHARD POWER, Appellee
On Appeal from the 134th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-15-14415
ORDER
Before the Court is court reporter LaToya Young-Martinez’s March 25,
2020 request for an extension of time until March 27, 2020 to complete the
reporter’s record in this appeal. As of the date of this order, Ms. Young-Martinez’s
portion of the record has not been filed.
We GRANT the request to the extent that we ORDER the reporter’s record
be filed no later than April 6, 2020. As the reporter’s record was first due January
18, 2020 and three extensions have already been granted, we caution Ms. Young-
Martinez that failure to comply may result in the Court taking any necessary steps
to ensure the record is filed, including ordering she not sit as a reporter until the
reporter’s record is filed and the trial court holding a hearing to determine why
the record has not been filed.
We DIRECT the Clerk of the Court to send a copy of this order to the
Honorable Dale Tillery, Presiding Judge of the 134th Judicial District Court; Ms.
Young-Martinez; and, the parties.
/s/ BILL WHITEHILL
JUSTICE
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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SADAT I., et al., :
:
Plaintiffs, : Civil Action No.: 17-1976 (RC)
:
v. : Re Document Nos.: 96, 99
:
KIRSTJEN NIELSEN, United States :
Secretary of Homeland Security, et al., :
:
Defendants. :
MEMORANDUM OPINION
DENYING DEFENDANTS’ MOTION TO DISMISS WITHOUT PREJUDICE;
GRANTING IN PART PLAINTIFFS’ MOTION TO JOIN PARTIES AND AMEND COMPLAINT
I. INTRODUCTION
This action challenges the United States Immigration and Customs Enforcement’s
(“ICE’s”) treatment of certain arriving aliens, one of several challenges to ICE conduct
percolating through the federal court system. Plaintiffs traveled to the United States, sought
asylum at official ports of entry (“POEs”), and were detained by ICE. They claim that an ICE
policy directive dictates that they should be paroled pending consideration of their asylum
petitions. However, according to Plaintiffs, ICE officials are no longer following the binding
policy directive and are instead systematically denying parole to punish Plaintiffs for seeking
asylum, and to deter other potential asylum seekers. Defendants have moved to dismiss
Plaintiffs’ action, 1 and Plaintiffs have moved to amend their complaint and join as plaintiffs
three similarly-situated individuals. In the interest of judicial economy, the Court will allow
1
Defendants are government officials who implemented or enforced the alleged
immigration deterrence policy.
Plaintiffs to amend their complaint and join additional plaintiffs, and it will deny Defendants’
motion without prejudice.
II. BACKGROUND
This Court’s prior opinion contains detailed background on the relevant statutory
framework, agency guidance, and Plaintiffs’ individual circumstances and conditions of
detention. See Aracely, R. v. Nielsen, 319 F. Supp. 3d 110, 120–25 (D.D.C. 2018). 2 Briefly,
Plaintiffs are “arriving aliens” from outside of the United States who surrendered to ICE officials
at POEs, sought asylum, and were detained pursuant to 8 U.S.C. § 1225(b)(1)(B)(ii) pending
consideration of their asylum petitions.3 As § 1225(b) detainees, Plaintiffs may be paroled “into
the United States temporarily” by the Attorney General “in his discretion.” Id. § 1182(d)(5)(A).
United States Department of Homeland Security (“DHS”) regulations provide that the Secretary
of Homeland Security “may invoke” this parole authority for an individual who is “neither a
security risk nor a risk of absconding” and who meets one or more of a series of conditions, one
of which is that “continued detention is not in the public interest.” 8 C.F.R. § 212.5(a) & (b)(5).
A 2009 ICE directive sets forth certain procedures that must be utilized and factors that,
according to Plaintiffs, must be considered when evaluating parole requests under 8 C.F.R.
§ 212.5. ICE Directive No. 11002.1: Parole of Arriving Aliens Found to Have a Credible Fear of
2
As discussed in greater detail below, that opinion granted in part Plaintiffs’ motion for a
preliminary injunction and denied Defendants’ motion to transfer the action to the Southern
District of Texas. Id. at 131, 157.
3
“Arriving alien means an applicant for admission coming or attempting to come into the
United States at a port-of-entry, or an alien seeking transit through the United States at a port-of-
entry, or an alien interdicted in international or United States waters and brought into the United
States by any means, whether or not to a designated port-of-entry, and regardless of the means of
transport. An arriving alien remains an arriving alien even if paroled pursuant to section
212(d)(5) of the [Immigration and Nationality Act], and even after any such parole is terminated
or revoked.” 8 C.F.R. § 1.2.
2
Persecution or Torture (“Morton Directive” or the “Directive) (Dec. 8, 2009), ECF No. 74-16.
According to the Directive, when an arriving alien found to have a credible fear of persecution
establishes, to ICE’s satisfaction, his or her identity and that he or she presents neither a flight
risk nor a danger to the community, “[ICE] should, absent additional factors . . . parole the alien
on the basis that his or her continued detention is not in the public interest.” Id. ¶ 6.2; see also
id. ¶ 8.3. Plaintiffs claim that they have met these criteria and should be paroled under the
Directive. Third Am. Compl. (“TAC”) ¶ 41, ECF No. 73.
Plaintiffs also claim, however, that despite Plaintiffs’ apparent eligibility for parole, ICE
officials, at the direction of high-level policy makers, are no longer following the Morton
Directive. See id. ¶¶ 38–75. Instead, according to Plaintiffs, ICE is systematically denying
parole to adult POE asylum seekers who are unaccompanied by children, to punish those
individuals and deter immigration. Id. Plaintiffs claim that they were denied parole because of
this deterrence policy, and that their prolonged detention is unconstitutional, contrary to law, and
contrary to the Morton Directive. Id. ¶¶ 109–141.
Plaintiffs now seek to join three additional plaintiffs and amend their complaint for a
fourth time. 4 See generally Pls.’ Opposed Mot. Join Parties & Amend Compl. (“Amend Mot.”),
ECF No. 99. The proposed plaintiffs are POE asylum seekers who are currently detained under
8 U.S.C. § 1225(b) and have been denied parole under § 1182(d)(5)(A). Id. at 1–2; Fourth Am.
Compl. (“FAC”) ¶¶ 82, 84–85, ECF No. 99-1. The proposed complaint amendments are
relatively minor. First, Plaintiffs have added background details on the proposed plaintiffs. See
id. ¶¶ 9–11, 82, 84–85. Second, Plaintiffs have added certain details regarding Defendants’
4
Plaintiffs also request “a deadline of January 1, 2019 during which they may evaluate . .
. additional parties and their claims and seek leave to join them.” Amend Mot. at 3. That request
is discussed below.
3
alleged deterrence policy. See id. ¶¶ 54, 62–66. Third, Plaintiffs have asserted that the alleged
deterrence policy has been applied to aliens eligible for conditional release under a different
statutory provision, 8 U.S.C. § 1231, discussed in greater detail below. See id. ¶¶ 53, 86(J).
Fourth, Plaintiffs have withdrawn their claims on behalf of Plaintiffs Aracely R., Hatim B., and
Junior M.5 Fifth, and finally, Plaintiffs have withdrawn certain claims regarding their First
Amendment rights and their rights to bond hearings before immigration judges. In summary,
Plaintiffs seek to assert substantially the same claims on behalf of substantially similar plaintiffs.
Defendants oppose Plaintiffs’ motion, and they have filed a motion to dismiss this action
in full. See generally Defs.’ Opp’n Amend Mot. (“Opp’n”), ECF No. 101; Defs.’ Mot. Dismiss,
ECF No. 96. Both motions are ripe for the Court’s consideration.
III. ANALYSIS
The Court must first determine whether to grant Plaintiffs’ motion to join additional
plaintiffs and amend the complaint, because if amendment is warranted Defendants’ motion to
dismiss is moot. See Adams v. Quattlebaum, 219 F.R.D. 195, 197 (D.D.C. 2004) (“Because [the
defendant’s] motion [to dismiss] pertains to the original and now-superseded complaint, the
court denies it without prejudice.”). The Court will consider, in order of complexity, whether
Plaintiffs may join additional plaintiffs under Federal Rule of Civil Procedure 20, and then
whether Plaintiffs may amend their complaint under Federal Rule 15. In line with the Federal
Rules’ bent towards entertaining the broadest possible scope of action consistent with fairness to
the parties, the Court concludes that Plaintiffs may join additional plaintiffs and amend their
complaint in certain respects. The Court also provides, in the interest of judicial efficiency, time
5
Two Plaintiffs remain—Sadat I. and Mikailu J.—pending Plaintiffs’ motion to join
additional plaintiffs.
4
for Plaintiffs to join additional, similarly-situated plaintiffs. Accordingly, the Court grants
Plaintiffs’ motion in part and denies Defendants’ motion without prejudice.
A. Plaintiffs May Join Additional Plaintiffs
Federal Rule 20(a)(1) provides that plaintiffs may join in one action if they seek relief
“with respect to or arising out of the same transaction, occurrence, or series of transactions or
occurrences,” and if “any question of law or fact common to all plaintiffs will arise in the
action.” Fed. R. Civ. P. 20(a)(1). “The purpose of Rule 20 is to promote trial convenience and
expedite the final resolution of disputes, thereby preventing multiple lawsuits, extra expense to
the parties, and loss of time to the court as well as the litigants appearing before it.” Boomer
Dev., LLC v. Nat. Ass’n of Home Builders of U.S., 325 F.R.D. 6, 18 (D.D.C. 2018) (quoting M.K.
v. Tenet, 216 F.R.D. 133, 137 (D.D.C. 2002)). Accordingly, Rule 20(a)’s requirements “are to
be liberally construed in the interest of convenience and judicial economy . . . in a manner that
will secure the just, speedy, and inexpensive determination of th[e] action.” Spaeth v. Mich.
State Univ. Coll. of Law, 845 F. Supp. 2d 48, 53 (D.D.C. 2012) (omission and alteration in
original) (quoting Davidson v. District of Columbia, 736 F. Supp. 2d 115, 119 (D.D.C. 2010)).
Despite ample case law suggesting that joinder of plaintiffs should be liberally granted,
Defendants raise two primary arguments for why joinder is inappropriate here. Both arguments
fail.
Defendants first argue that Plaintiffs’ current claims are moot, and therefore that “there is
simply no overlap” between the current Plaintiffs and the proposed plaintiffs “that would provide
this Court the opportunity to resolve a common question.” Opp’n at 4. Defendants have the
“‘heavy’ burden” of establishing mootness. Motor & Equip. Mfrs. Ass’n v. Nichols, 142 F.3d
449, 459 (D.C. Cir. 1998) (quoting L.A. Cty. v. Davis, 440 U.S. 625, 631 (1979)). In attempting
5
to satisfy this burden, Defendants correctly note that “[n]o current [P]laintiff is detained under 8
U.S.C. § 1225(b) with a credible fear of persecution,” and they argue that Plaintiffs can thus no
longer challenge their detention in the same way that the proposed plaintiffs can. Opp’n at 2; see
also Joint Status Report, ECF No. 94. However, the mere fact that Defendants have temporarily
released Plaintiff Sadat I. from § 1225(b) detention—and that Plaintiff Mikailu J. has become
detained under a different statutory provision—does not necessarily moot Plaintiffs’ claims. A
defendant’s cessation of challenged conduct moots an action only if the defendant demonstrates
that “(1) there is no reasonable expectation that the conduct will recur and (2) ‘interim relief or
events have completely and irrevocably eradicated the effects of the alleged violation.’” Motor
& Equip. Mfrs. Ass’n, 142 F.3d at 459 (quoting Davis, 440 U.S. at 631). Otherwise, voluntary
cessation of challenged conduct would leave a defendant “free to return to [its] old ways.”
Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 189 (2000)
(quoting City of Mesquite v. Aladdin’s Castle, Inc., 455 U.S. 283, 289 n.10 (1982)).
In determining whether the voluntary cessation doctrine applies here, the Court must
precisely define Defendants’ allegedly illegal conduct and determine whether a return to that
conduct is possible. See Clarke v. United States, 915 F.2d 699, 703 (D.C. Cir. 1990) (“What is
the injury that is capable of repetition, and what are the ‘old ways’ to which the voluntarily
ceasing defendant might return?”). Again, Plaintiffs challenge the legality of their detention
under 8 U.S.C. § 1225(b)(1)(B)(ii) and the policy underlying that detention. Defendants have
submitted no evidence that they have permanently halted or altered the alleged policy, and they
have repeatedly admitted that ICE may revoke Plaintiff Sadat I.’s parole at any time and re-
detain him under § 1225(b) if ICE determines that “the purposes of such parole . . . have been
served.” 8 U.S.C. § 1182(d)(5)(A); see 8 C.F.R. § 212.5(e)(2)(i); Opp’n at 3; Defs.’ Reply Supp.
6
Mot. to Dismiss (“Defs.’ Reply”) at 5, ECF No. 100. While 8 C.F.R. § 212.5(e)(2)(i) requires
that a paroled alien be given written notice of parole revocation, “it provides no other procedural
and no meaningful substantive limit on [ICE’s] exercise of discretion” in revoking parole.
Rodriguez v. Hayes, 591 F.3d 1105, 1117 (9th Cir. 2010) (discussing an analogous parole
provision). Defendants have identified no constraints on this discretion, and nothing in the
record suggests that Sadat I.’s re-detention is subject to anything other than ICE’s whims.
Cf. Picrin–Peron v. Rison, 930 F.2d 773, 776 (9th Cir. 1991) (holding that the voluntary
cessation doctrine was inapplicable where “the government filed a declaration of the director of
the Los Angeles District Office of the INS who reiterated under oath” that the plaintiff “w[ould]
be paroled for another year” absent the occurrence of certain circumstances outside the
government’s control). And Defendants’ conclusory assertions that a parole revocation is
“hypothetical,” Defs.’ Reply at 5, or speculative, Opp’n at 3, are not sufficient to show that
“there is no reasonable expectation” that Sadat I. may be re-detained. Davis, 440 U.S. at 631
(quoting United States v. W.T. Grant Co., 345 U.S. 629, 633 (1953)).
Tracking this reasoning, other courts have held that temporary relief does not moot a
challenge to an immigration-related policy where the plaintiffs may be re-exposed to that policy.
For instance, another district court recently concluded that certain individuals’ release from
§ 1225(b) detention did not moot claims substantially similar to those raised here, because those
individuals’ “re-detention . . . f[ell] within [the government’s] broad discretionary control”
and “[a] contrary holding would permit [the government] to ‘return to [its] old ways’ by
subjecting [the plaintiffs] to a second round of prolonged detention.” Abdi v. Duke, 280 F. Supp.
3d 373, 396 (W.D.N.Y. 2017) (quoting Laidlaw, 528 U.S. at 189). Similarly, in reviewing an
alleged government policy of refusing to process asylum seekers at POEs, a different district
7
court recently held that the government’s agreement to process the plaintiffs did not moot their
complaint. Al Otro Lado, Inc. v. Nielsen, 327 F. Supp. 3d 1284, 1303 (S.D. Cal. 2018). The
court reasoned that “there is nothing in the [c]omplaint that suggests that [the plaintiffs] will not
attempt to seek asylum again and, if so, that CBP officers will not turn them away from a POE”
pursuant to the challenged policy. Id.; see also Rodriguez, 591 F.3d at 1117–18 (holding that the
plaintiff’s challenge to the conditions of his immigration-related detention was not mooted by his
discretionary parole). This Court follows these decisions in holding that Plaintiffs’ claims here
are not moot with respect to Sadat I. 6
Defendants next argue that they would be prejudiced by the proposed joinder of new
plaintiffs. Opp’n at 4–5. 7 In claiming prejudice, Defendants place significant weight on the
Court’s prior order granting in part Plaintiffs’ motion for a preliminary injunction and denying
Defendants’ motion to transfer the action. See Aracely, 319 F. Supp. 3d at 131, 157. Defendants
6
Because the Court holds that Sadat I.’s claims are not moot, for purposes of this opinion
it need not consider whether Mikailu J.’s claims are moot. Defendants may raise that argument
again when they move to dismiss Plaintiffs’ amended complaint.
7
While Defendants’ prejudice assertion does not directly address Federal Rule 20’s
joinder requirements, it raises an argument under Federal Rule 21. Rule 21 permits a court to
sever specific parties or claims from an action “upon a sufficient showing of prejudice to the
defendant, delay, or potential for jury confusion.” Martinez v. DOJ, 324 F.R.D. 33, 38 (D.D.C.
2018) (quoting Alexander v. Edgewood Mgmt. Corp., 321 F.R.D. 460, 464 (D.D.C. 2017)); see
also Fed. R. Civ. P. 21. It is well established that courts have broad discretion to refuse Rule 20
joinder when they confront circumstances supporting Rule 21 severance. See, e.g., Acevedo v.
Allsup’s Convenience Stores, Inc., 600 F.3d 516, 521 (5th Cir. 2010) (“[E]ven if [the Rule 20]
test is satisfied, district courts have the discretion to refuse joinder in the interest of avoiding
prejudice and delay.”); Aleman v. Chugach Support Servs., Inc., 485 F.3d 206, 218 n.5 (4th Cir.
2007) (“[T]he court has discretion to deny joinder if it determines that the addition of the party
under Rule 20 will not foster the objectives of the rule, but will result in prejudice, expense, or
delay.” (alteration in original) (quoting 7 Charles Alan Wright, et al., Federal Practice and
Procedure § 1652 (3d ed. 2001))); see also Council on Am.-Islamic Relations Action Network,
Inc. v. Gaubatz, 793 F. Supp. 2d 311, 323 (D.D.C. 2011) (“Attempts to join a party who satisfies
the test for permissive joinder should generally not be denied in the absence of undue prejudice,
expense, or delay.” (citing Chavez v. Ill. State Police, 251 F.3d 612, 632 (7th Cir. 2001))).
8
claim that joinder would allow the proposed plaintiffs to “implement de facto offensive non-
mutual issue preclusion” regarding the “significant issues” decided by the Court in that order.
Opp’n at 5. Defendants oversell the significance of the preliminary issues decided by the Court,
and they oversell the consequences of those decisions.
Defendants’ suggestion that the Court’s preliminary injunction order may have preclusive
effect is unsupported by precedent. See Sole v. Wyner, 551 U.S. 74, 84 (2007) (noting the
“tentative character” of a preliminary injunction, which “ha[s] no preclusive effect in the
continuing litigation”); Natural Res. Def. Council v. Pena, 147 F.3d 1012, 1023 (D.C. Cir. 1998)
(noting “the provisional nature of preliminary injunctive relief”); Mahoney v. Babbitt, 113 F.3d
219, 224 (D.C. Cir. 1997) (noting the limited preclusive value of preliminary injunction
findings). In its order, the Court merely held that Plaintiffs are likely to succeed on the merits of
some of their claims. See Aracely, 319 F. Supp. 3d at 149. Should Plaintiffs seek preliminary
injunctive relief with respect to the proposed plaintiffs, they must again meet the standard for
such relief and Defendants may again vigorously oppose Plaintiffs’ motion. And despite
Plaintiffs’ limited success at the preliminary injunction stage, they must still prove their claims
on the merits.
Moreover, Defendants fail to cite authority in support of the proposition that a court’s
earlier rulings on certain preliminary issues, such as venue, render the subsequent joinder of
plaintiffs inappropriate. The Court held that venue is properly laid in this jurisdiction. Aracely,
319 F. Supp. 3d at 131. Defendants may be unhappy with this decision, but that unhappiness is
not sufficiently prejudicial to defeat the joinder of plaintiffs raising identical factual and legal
questions.
9
Having concluded that Sadat I.’s claims are not moot and that joinder would not unfairly
prejudice Defendants, the Court must determine whether the proposed plaintiffs seek relief
“arising out of the same transaction, occurrence, or series of transactions or occurrences” as
those impacting Sadat I., and whether “any question of law or fact common to all plaintiffs will
arise in the action.” Fed. R. Civ. P. 20(a). Both requirements are met. Like Sadat I., the
proposed plaintiffs are POE asylum seekers who have been detained under 8 U.S.C. §
1225(b)(1)(B)(ii) and denied parole under 8 U.S.C. § 1182(d)(5)(A) and 8 C.F.R. § 212.5. See
FAC ¶¶ 2, 82–86. The proposed plaintiffs ask this Court to determine (1) whether Defendants
have prolonged their detention in order to punish the plaintiffs and deter other individuals from
seeking asylum in the United States; and (2) whether that justification and its consequences
violate the Constitution, certain statutes, and ICE’s own internal policies and procedures. See
generally FAC. These are the same factual and legal questions raised by Plaintiffs’ current
complaint. See generally TAC. Accordingly, “convenience and judicial economy” warrant
joinder of the proposed plaintiffs to “secure the just, speedy, and inexpensive determination of
th[e] action.” Spaeth, 845 F. Supp. 2d at 53 (alteration in original) (quoting Davidson, 736 F.
Supp. 2d at 119).
B. Plaintiffs May Amend the Complaint, Though Not to the Full Extent Requested
Because Plaintiffs have already amended their complaint three times, they may no longer
amend it as of right. Fed. R. Civ. P. 15(a)(1). Accordingly, under Federal Rule of Civil
Procedure 15(a)(2), Plaintiffs “may amend [their complaint] only with the opposing party’s
written consent,” which they have not secured, “or the [C]ourt’s leave.” Id. 15(a)(2). The “grant
or denial of an opportunity to amend is within the [Court’s] discretion,” Foman v. Davis, 371
10
U.S. 178, 182 (1962), and “[t]he [C]ourt should freely give leave [to amend the complaint] when
justice so requires,” Fed. R. Civ. P. 15(a)(2).
“When evaluating whether to grant leave to amend [under Rule 15(a)(2)], the Court must
consider (1) undue delay; (2) prejudice to the opposing party; (3) futility of the amendment; (4)
bad faith; and (5) whether the plaintiff has previously amended the complaint.” Howell v. Gray,
843 F. Supp. 2d 49, 54 (D.D.C. 2012) (citing Atchinson v. District of Columbia, 73 F.3d 418,
425–26 (D.C. Cir. 1996)). As noted, the amended complaint differs from the current complaint
in that it includes background on the proposed new plaintiffs, see FAC ¶¶ 9–11, 82, 84–85, and
additional detail on Defendants’ alleged deterrence policy, see id. ¶¶ 54, 62–66, it more
explicitly challenges Plaintiff Mikailu J.’s detention under 8 U.S.C. § 1231, see id. ¶¶ 53, 86(J),
and it drops certain claims included in the current complaint. Defendants’ only argument against
these amendments, aside from Defendants’ general opposition to the joinder of additional
plaintiffs, is that Plaintiffs’ challenge to Mikailu J.’s detention cannot survive a motion to
dismiss. Opp’n at 6–7. In other words, Defendants argue that amendment is futile with respect
to that claim. See Williams v. Lew, 819 F.3d 466, 471 (D.C. Cir. 2016) (“Courts may deny a
motion to amend a complaint as futile . . . if the proposed claim would not survive a motion to
dismiss.” (quoting James Madison Ltd. by Hecht v. Ludwig, 82 F.3d 1085, 1099 (D.C. Cir.
1996))). Defendants’ argument is well taken.
Plaintiffs’ motion to amend the complaint regarding Mikailu J.’s current detention must
be evaluated in the proper factual and statutory context. In late 2017, an immigration judge
denied Mikailu J.’s asylum petition and ordered him removed from the United States. See
Decision of the Board of Immigration Appeals at 1, ECF No. 100-1. That decision was upheld
by DHS’s Board of Immigration Appeals (“BIA”) on August 17, 2018, a final administrative
11
order of removal. See Pls.’ Opp’n Defs. Mot. Dismiss at 8, ECF No. 98; Decision of the Board
of Immigration Appeals at 2–3. As an alien subject to a final administrative order of removal,
Mikailu J.’s detention is governed by a different statutory scheme than POE asylum seekers such
as Sadat I. and the proposed plaintiffs. Under this scheme, an alien who has been ordered
removed must be removed within ninety days. 8 U.S.C. § 1231(a)(1). During this ninety-day
period, “the Attorney General shall detain the alien.” Id. § 1231(a)(2). After the ninety-day
period, the Attorney General may continue to detain the alien pending his or her removal, id. §
1231(a)(6), or may instead conditionally parole the alien, id. § 1231(a)(3); 8 C.F.R. § 241.4(a).
According to Plaintiffs, Mikailu J. is detained under this scheme while the Fifth Circuit considers
his appeal of the BIA’s decision. See Pls.’ Opp’n Defs. Mot. Dismiss at 8; Pls.’ Reply Supp.
Amend Mot. (“Reply”) at 1, ECF No. 102.
Plaintiffs’ proposed claims regarding Mikailu J.’s detention are tenuous at best.
Plaintiffs make the conclusory assertion that ICE’s alleged deterrence policy regarding POE
asylum seekers—the complaint’s focus—“has also been applied to persons in post removal
proceedings under 8 U.S.C. § 1231.” FAC ¶ 53. More specifically, Plaintiffs claim that Mikailu
J. “will suffer” from this policy during his § 1231 detention. Id. ¶ 86(J). However, Plaintiffs do
not indicate that the policy has already been applied to Mikailu J. or any other Plaintiff, or that it
will be applied imminently. Nor could they so indicate, when they filed their motion to amend
the complaint, because at that time Mikailu J.’s ninety-day removal period had not yet expired
and his detention was mandatory. 8 See 8 U.S.C. § 1231(a)(2). This is exactly the type of
8
Plaintiffs also assert that Mikailu J.’s case should “soon be remanded” for a new
consideration of his asylum petition. Reply at 1. When this hypothetical remand occurs, Mikailu
J. will no longer be detained under § 1231. Id. Thus, it seems that to the extent Mikailu J. “will
suffer” from Defendants’ alleged policy during his § 1231 detention, Plaintiffs allege that his
suffering will be short lived.
12
“‘conjectural’ or ‘hypothetical’” injury that the Supreme Court has held is insufficient to convey
standing. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992) (quoting Whitmore v. Arkansas,
495 U.S. 149, 155 (1990)); see also DEK Energy Co. v. FERC, 248 F.3d 1192, 1195 (D.C. Cir.
2001) (“There is quite a gulf between the antipodes of standing doctrine—the ‘imminent’ injury
that suffices and the merely ‘conjectural’ one that does not.”). Thus, because Plaintiffs’
allegations regarding Mikailu J.’s § 1231 detention would likely fail to survive a motion to
dismiss, the Court denies as futile Plaintiffs’ motion to add those allegations. The Court allows
Plaintiffs’ other proposed amendments.
IV. CONCLUSION
As the Supreme Court has dictated, under the Federal Rules, “the impulse is toward
entertaining the broadest possible scope of action consistent with fairness to the parties; joinder
of claims, parties and remedies is strongly encouraged.” United Mine Workers of Am. v. Gibbs,
383 U.S. 715, 724 (1966). Following that guidance, and for the foregoing reasons, the Court
grants Plaintiffs’ motion to amend their complaint in certain respects and join additional
plaintiffs. The Court also concludes that in the interest of judicial efficiency, and to avoid
duplicative, piecemeal briefing, Plaintiffs shall have until January 18, 2019 to join additional
plaintiffs and further amend the complaint. Given that Plaintiffs have now amended their
complaint four times, the Court does not expect to grant additional requests to amend the
complaint or join plaintiffs after that date.
The Court hereby ORDERS:
1. Defendants’ Motion to Dismiss (ECF No. 96) is DENIED WITHOUT
PREJUDICE.
13
2. Plaintiffs’ Motion to Join Parties and Amend Complaint (ECF No. 99) is
GRANTED IN PART as follows:
a. Plaintiffs may join the proposed plaintiffs.
b. Plaintiffs may amend the complaint as proposed, except that plaintiffs
may not add the proposed references to 8 U.S.C. § 1231 detention.
3. Plaintiffs may not amend the complaint or join additional plaintiffs after
January 18, 2019.
An order consistent with this Memorandum Opinion is separately and contemporaneously issued.
Dated: January 4, 2019 RUDOLPH CONTRERAS
United States District Judge
14
| {
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} |
Pursuant to Ind. Appellate Rule 65(D), this
Memorandum Decision shall not be
regarded as precedent or cited before any
court except for the purpose of establishing
the defense of res judicata, collateral
estoppel, or the law of the case.
ATTORNEY FOR APPELLANT: ATTORNEYS FOR APPELLEE
DEPARTMENT OF CHILD SERVICES:
DEIDRE L. MONROE
Public Defender’s Office EUGENE M. VELAZCO, JR.
Gary, Indiana DCS Lake County Office
FILED
Gary, Indiana
ROBERT J. HENKE Aug 29 2012, 9:41 am
DCS Central Administration
Indianapolis, Indiana CLERK
of the supreme court,
court of appeals and
tax court
ATTORNEY FOR APPELLEE
LAKE COUNTY COURT APPOINTED
SPECIAL ADVOCATE:
DONALD W. WRUCK
Dyer, Indiana
IN THE
COURT OF APPEALS OF INDIANA
IN THE MATTER OF THE TERMINATION )
OF THE PARENT-CHILD RELATIONSHIP OF )
J.K., M.K., and C.K. (MINOR CHILDREN) and )
)
S.P. (MOTHER), )
)
Appellant-Respondent, )
)
vs. ) No. 45A03-1201-JT-45
)
INDIANA DEPARTMENT OF CHILD )
SERVICES, )
)
Appellee-Petitioner, )
)
and )
LAKE COUNTY COURT APPOINTED )
SPECIAL ADVOCATE, )
)
Appellee. )
APPEAL FROM THE LAKE SUPERIOR COURT
The Honorable Mary Beth Bonaventura, Judge
Cause Nos. 45D06-1104-JT-118, -119, and -120
August 29, 2012
MEMORANDUM DECISION - NOT FOR PUBLICATION
CRONE, Judge
Case Summary
S.P. (“Mother”) appeals the trial court’s involuntary termination of her parental rights
to her children J.K., M.K., and C.K. Mother contends that the trial court’s decision is clearly
erroneous. Finding no error, we affirm.
Facts and Procedural History
Mother had three children with B.K. (“Father”). J.K. was born in August 2006, M.K.
in September 2007, and C.K. in November 2009. Mother tested positive for cocaine and
opiates at the time of C.K.’s premature birth, and C.K. was treated for intrauterine drug
exposure and severe withdrawal symptoms. The Department of Child Services (“DCS”)
removed the children from Mother’s care and ultimately placed them with their paternal
grandparents, with whom both Mother and Father lived at the time. The children were found
to be children in need of services (“CHINS”), and both Mother and Father were ordered to
participate in various services, including parenting classes and substance abuse evaluation
2
and treatment. Mother participated in and even completed some of the services but continued
to test positive for illegal drugs. She was arrested for shoplifting in October 2010 and
consequently violated her probation for a prior theft conviction. Father’s parents kicked
Mother out of their home, and she eventually moved into a friend’s apartment.
In April 2011, DCS filed a petition to terminate Mother’s and Father’s parental rights.
Father voluntarily relinquished his parental rights. The trial court held an evidentiary hearing
and on December 20, 2011, issued an order terminating Mother’s parental rights that reads in
pertinent part as follows:
The allegations of the petition are true:
The child(ren) ha[ve] been removed from their parent(s) for at least six (6)
months under a dispositional decree(s) of this Court dated January 20, 2010,
retroactive to November 24, 2009 ….
The child(ren) ha[ve] been removed from the parent and ha[ve] been under the
supervision of [DCS] for at least fifteen (15) of the most recent twenty-two
(22) months.
There is a reasonable probability that the conditions resulting in the removal of
the child[ren] from their parents’ home will not be remedied in that: DCS
became involved when [C.K.] was born testing positive for drugs at birth.
Mother also tested positive for drugs. The child was born premature and was
having severe drug withdrawals. Mother and Father had a history of
marijuana, ecstasy, cocaine, and heroin abuse. Mother and [F]ather were
participating in a meth[a]done treatment plan.
[DCS] set up a case plan for reunification for the parents which included a
drug and alcohol evaluation, random drug screens, individual counseling,
parenting assessment, psychological evaluation and parenting classes. Father
was to establish paternity. The parents were not consistent with the services
and continued to struggle with their substance abuse issues. The parents were
offered supervised visitations with the children and [M]other would sleep
during the visitations. Mother always appeared to be under the influence of
some drug. Mother was not consistent in attending the visitations. The
3
substance abuse evaluations recommended that the parents complete an
intensive inpatient or outpatient substance abuse program. The parents did not
have stable housing and were living with the grandparents. Initially, [M]other
was asked to remove herself from the grandparent[s’] home due to [M]other
continuing to test positive on her drug screens. After [M]other completed a
hair follicle test in Spring 2010 and the results were negative, except for the
meth[a]done, [M]other was allowed to move back into the grandparent[s’]
home. Therapy and services now became home based for the parents who
were residing with the grandparents and the children. The services became
more stable. The parents were not progressing in their services. The parents
continued to struggle with their substance abuse issues. The parents were then
ordered to participate in the intensive substance abuse program. Mother was
ordered into an inpatient program and [M]other did not want to participate.
Mother did not have employment. Mother did not have stable housing.
Mother could not live independently and relied on the grandparents for
support. Mother and Father both have a criminal record and currently [F]ather
is incarcerated. Mother has a criminal history and has been incarcerated at
various times throughout this case. [M]other eventually participated in the
services after several months and several service agencies, but was reluctant in
the participation. Mother would not consistently make herself available for the
service providers. The parents have made no progress in their case plan.
In January 2011 [M]other indicated that she would enter into an inpatient
substance abuse program in order to keep the permanency plan of
reunification. Mother was given another chance to prove that she could
properly parent these children. Mother failed to enter a program. Mother
indicated that she did not need any more treatment besides the meth[a]done.
Mother was arrested for shoplifting in January 2011. [M]other was kicked out
of the grandparent[s’] home. [M]other would not make herself available for
the drug screens. Mother only completed a handful of the attempted screens.
[M]other tested positive for marijuana in January 2011 and tested positive for
cocaine in March 2011. Mother had an active bench warrant in March 2011
and was incarcerated. [M]other was ordered into an inpatient rehabilitation
program pursuant to her probation plan. Mother indicated to the case manager
that she did complete an inpatient program, but could not provide any proof of
same. Mother completed a hair follicle test in October 2011 which was
positive for cocaine. Mother completed three hair follicle tests over the course
of this case in March 2010, June 2010, and October 2011, all of which were
positive. Mother has been unable to remain drug free. Services have been
closed out for [M]other due to her noncompliance, lack of progress and
4
continued drug use. Mother is still unstable in her housing situation and has
been living with various friends.
….
Neither parent is providing any emotional or financial support for the children.
Father has voluntarily relinquished his parental rights. The children are in
relative placement with the grandparents and are thriving. Mother is not in any
position to properly parent these children. Mother has failed to remain drug
free. Mother has failed to complete[] any case plan for reunification. Services
were offered to [M]other for over two years with multiple substance abuse
programs and [M]other could not remain drug free. The children were
removed from parental care in November 2009 and have never been returned
to parental care. The issues that were present when [DCS] became involved in
November 2009 have not been remedied. Mother is still in complete denial of
her substance abuse problem. Mother has no desire to enter into a substance
abuse program. These children are stable and happy and have bonded in the
grandparent[s’] home. These children deserve a drug free home.
There is a reasonable probability that the continuation of the parent-child
relationship poses a threat to the well-being of the child[ren] in that:
Additionally, the children deserve a loving, caring, safe, stable and drug free
home [sic].
It is in the best interest of the child[ren] and their health, welfare and future
that the parent-child relationship between the child[ren] and their parents be
forever fully and absolutely terminated.
[DCS] has a satisfactory plan for the care and treatment of the child[ren] which
is Adoption by the grandparents ….
Appellant’s App. at 5-7.1
Mother now appeals. Additional facts will be provided as necessary.
1
Mother’s counsel has included portions of the hearing transcript in the appellant’s appendix in
violation of Indiana Appellate Rule 50(F), which says, “Because the Transcript is transmitted to the Court on
Appeal pursuant to Rule 12(B), parties should not reproduce any portion of the Transcript in the Appendix.”
5
Discussion and Decision
“The involuntary termination of parental rights is an extreme measure that terminates
all rights of the parent to his or her child and is designed to be used only as a last resort when
all other reasonable efforts have failed.” M.H.C. v. Hill, 750 N.E.2d 872, 875 (Ind. Ct. App.
2001).
The Fourteenth Amendment to the United States Constitution provides parents
with the rights to establish a home and raise their children. However, the law
allows for termination of those rights when the parties are unable or unwilling
to meet their responsibility as parents. This policy balances the constitutional
rights of the parents to the care and custody of their children with the State’s
limited authority to interfere with these rights. Because the ultimate purpose
of the law is to protect the child, the parent-child relationship must give way
when it is no longer in the child’s best interest to maintain the relationship.
Id. (citations omitted).2
Indiana Code Section 31-35-2-4(b) provides that a petition to terminate parental rights
must meet the following relevant requirements:
(2) The petition must allege:
(A) that one (1) of the following is true:
(i) The child has been removed from the parent for at least six (6)
months under a dispositional decree.
(ii) A court has entered a finding under IC 31-34-21-5.6 that reasonable
efforts for family preservation or reunification are not required,
including a description of the court’s finding, the date of the finding,
and the manner in which the finding was made.
2
At the end of the argument section of Mother’s brief, counsel writes, “The Court must make a stance
[sic] in ruling that the parents have fundamental rights that are protected by the U.S. Constitution. The
continued destruction of the family structure should not be tolerated by this Court.… The Court must stop the
direct assault on the rights of parents in the State of Indiana.” Appellant’s Br. at 11. We appreciate vigorous
advocacy, but such rhetoric goes beyond the bounds of effective advocacy.
6
(iii) The child has been removed from the parent and has been under the
supervision of a county office of family and children or probation
department for at least fifteen (15) months of the most recent twenty-
two (22) months, beginning with the date the child is removed from the
home as a result of the child being alleged to be a child in need of
services or a delinquent child;
(B) that one (1) of the following is true:
(i) There is a reasonable probability that the conditions that resulted in
the child’s removal or the reasons for placement outside the home of
the parents will not be remedied.
(ii) There is a reasonable probability that the continuation of the parent-
child relationship poses a threat to the well-being of the child.
(iii) The child has, on two (2) separate occasions, been adjudicated a
child in need of services;
(C) that termination is in the best interests of the child; and
(D) that there is a satisfactory plan for the care and treatment of the child.
DCS must prove “each and every element” by clear and convincing evidence. In re G.Y., 904
N.E.2d 1257, 1261 (Ind. 2009); Ind. Code § 31-37-14-2. “Clear and convincing evidence
need not show that the continued custody of the parent is wholly inadequate for the child’s
very survival. Instead, it is sufficient to show by clear and convincing evidence that the
child's emotional and physical development is threatened by the parent's custody.” In re
G.H., 906 N.E.2d 248, 251 (Ind. Ct. App. 2009) (citation omitted). If the trial court finds that
the allegations in a petition are true, the court shall terminate the parent-child relationship.
Ind. Code § 31-35-2-8(a).
We have long had a highly deferential standard of review in cases involving the
termination of parental rights. In re D.B., 942 N.E.2d 867, 871 (Ind. Ct. App. 2011). We
7
neither reweigh evidence nor assess witness credibility, and we consider only the evidence
and reasonable inferences most favorable to the trial court’s judgment. Id. We apply a two-
tiered standard of review: we first determine whether the evidence supports the trial court’s
findings and then determine whether the findings support the judgment. Id. In deference to
the trial court’s unique position to assess the evidence, we will set aside its judgment
terminating a parent-child relationship only if it is clearly erroneous. Id. “A finding of fact is
clearly erroneous when there are no facts or inferences drawn therefrom to support it.” In re
J.H., 911 N.E.2d 69, 73 (Ind. Ct. App. 2009), trans. denied. A judgment is clearly erroneous
only if the legal conclusions drawn by the trial court are not supported by its findings of fact
or the conclusions do not support the judgment. Id. “If the evidence and inferences support
the trial court’s decision, we must affirm.” In re C.G., 954 N.E.2d 910, 923 (Ind. 2011).
Initially, Mother contends that the trial court erred in concluding that there is a
reasonable probability that the conditions that resulted in the children’s removal will not be
remedied and that continuation of the parent-child relationship poses a threat to the children’s
well-being. Because DCS is required to prove only one of the foregoing, we address only the
first. Mother does not specifically challenge the validity of any of the findings supporting the
trial court’s conclusion, but instead suggests that the court failed to give sufficient weight to
the fact that she “completed parenting classes, participated in individual and family therapy,
submitted to numerous drug screens, and completed two substance abuse programs.”
Appellant’s Br. at 9.
8
In determining whether there is a reasonable probability that the conditions that
resulted in a child’s removal will not be remedied,
the trial court must judge a parent’s fitness to care for her child at the time of
the termination hearing, taking into consideration evidence of changed
conditions. The trial court must also evaluate the parent’s habitual patterns of
conduct to determine the probability of future neglect or deprivation of the
child. Pursuant to this rule, courts have properly considered evidence of a
parent’s criminal history, drug and alcohol abuse, history of neglect, failure to
provide support, and lack of adequate housing and employment. The trial
court may also properly consider the services offered to the parent by [DCS]
and the parent’s response to those services as evidence of whether conditions
will be remedied. Finally, [DCS] is not required to provide evidence ruling out
all possibilities of change; rather, it need establish only that there is a
reasonable probability the parent’s behavior will not change.
In re I.A., 903 N.E.2d 146, 154 (Ind. Ct. App. 2009) (citations, quotation marks, and
emphases omitted).
Here, the children were removed from Mother’s care because of her illegal drug use,
which negatively affected the health of her newborn baby. Notwithstanding Mother’s
participation in (and even completion of) parenting classes and substance abuse programs,
she tested positive for illegal drugs on several occasions, including as recently as two months
before the termination hearing. The trial court was free to disregard Mother’s self-serving
claims of newfound sobriety and her explanation for the positive drug test. Mother was
arrested for shoplifting within a year of the termination hearing, violated her probation for a
prior theft conviction, and never obtained stable housing or employment. Under these
circumstances, we cannot conclude that the trial court clearly erred in determining that there
is a reasonable probability that Mother’s behavior will not change. Mother’s argument to the
9
contrary is essentially an invitation to reweigh evidence and judge witness credibility, which
we may not do.
Mother also challenges the trial court’s conclusion that termination of the parent-child
relationship is in the children’s best interests. She contends that the children’s paternal
grandfather testified that he would deny her visitation3 and claims that he is punishing her
“because she would not voluntarily relinquish her parental rights.” Appellant’s Br. at 11.
She further claims that the children “will experience severe mental anguish, if they were told
that they would not see their mother again. Certainly, mental abuse is not in the best interest
of [the children], and their interests are most definitely not served by this ruling.” Id. The
termination of Mother’s parental rights is the unfortunate result of her own wrongdoing, and
the children’s grandfather is well within his rights to deny her visitation. Mother has failed to
establish how this constitutes “mental abuse,” let alone that the trial court clearly erred in
concluding that termination is in the children’s best interests. Mother has raised no other
claims of error, and therefore we affirm.
Affirmed.
RILEY, J., and BAILEY, J., concur.
3
Mother has failed to support this contention with a citation to the transcript as required by Indiana
Appellate Rule 46(A)(8)(a).
10
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3 Cal.App.3d 536 (1970)
83 Cal. Rptr. 567
LIQUOR SELLERS, INC., Plaintiff and Appellant,
v.
DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL, Defendant and Appellant. RICHARD CORSETTI, Plaintiff and Appellant,
v.
DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL, Defendant and Appellant. (Two Cases.) MARINO DEL CARLO, Plaintiff and Respondent,
v.
DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL et al., Defendants and Appellants. (Consolidated Cases.)
Docket Nos. 25473, 25476, 25477, 26386.
Court of Appeals of California, First District, Division Two.
January 16, 1970.
*538 COUNSEL
Thomas C. Lynch, Attorney General, Wiley W. Manuel and L. Stephen Porter, Deputy Attorneys General, for Defendants and Appellants.
J. Bruce Fratis for Plaintiffs and Appellants.
Dooling, Kelly & Moiseeff and Joseph I. Kelly for Plaintiff and Respondent.
OPINION
TAYLOR, J.
In these four appeals, the Department of Alcoholic Beverage Control (hereafter Department), appeals from judgments remanding the matters for a reconsideration of the penalties imposed in the light of Business and Professions Code section 24755.1, enacted after the licensees' violations of the retail price maintenance statute (Bus. & Prof. Code, § 24755). In the Liquor Sellers and Corsetti cases, the licensees also cross-appeal from the portion of the judgments determining that Business and Professions Code section 24755 is constitutional.
Preliminarily, we turn to these cross-appeals and the contention that the minimum retail price maintenance provisions of the Alcoholic Beverage Control Act are invalid under the antitrust laws of the United States and the State of California. Recently, in Samson Market Co. v. Alcoholic Beverage Control Appeals Board, 71 Cal.2d 1215, 1218-1221 [81 Cal. Rptr. 251, 459 P.2d 667], and one of its companion cases, Big Boy Liquors, Ltd. v. Alcoholic Beverage Control Appeals Board, 71 Cal.2d 1226 [81 Cal. Rptr. 258, 459 P.2d 674], our Supreme Court rejected an identical contention and reaffirmed its prior decisions as to the validity and constitutionality of the retail price maintenance provisions.
We turn, therefore, to the question raised by the Department's appeals, namely, whether the trial court erred in concluding that Business and Professions Code section 24755.1 could be retroactively applied to violations that occurred prior to its effective date of September 17, 1965.
As there are no contentions concerning the sufficiency of the evidence, and as the trial court in each case found that the retail price statute had been violated as alleged, a brief summary of the pertinent facts will suffice. The violations of the licensees involved occurred in 1961, 1962 and 1963. By the beginning of 1965, the Appeals Board of the Department had affirmed *539 each of the decisions to suspend the licensees' off-sale licenses, and each of the licensees, pursuant to Code of Civil Procedure section 1094.5, had filed a petition for a writ of mandate in the superior court. On June 8, 1965, the superior court entered an interim order in each case indicating that Business and Professions Code section 24755 was constitutional, and that the various petitions should be denied on all grounds except those relating to the penalty. These interim orders also indicated that the final decisions would be announced on July 19, 1965.
On January 26, 1967,[1] the court entered the final judgments remanding the causes for further proceedings as to the penalty in the light of Business and Professions Code section 24755.1, which prescribes monetary fines and prohibits license revocation or suspension for violations of Business and Professions Code section 24755. The court found that the Legislature intended that the new penalty provisions of section 24755.1 apply as the proceedings instituted against the licensees were not final on September 17, 1965, the effective date of the statute. The court further found that neither the Department nor its Appeals Board had the opportunity to determine whether the penalties imposed by section 24755.1 were less severe than the penalties imposed and that, therefore, the imposition of the suspensions would constitute an abuse of discretion. Accordingly, the court vacated the interim orders and remanded the matters to the Department for a reconsideration of the penalties.
The retroactivity of Business and Professions Code section 24755.1 was extensively reviewed and discussed by our Supreme Court in Wilke & Holzheiser, Inc. v. Department of Alcoholic Beverage Control, 65 Cal.2d 349 [55 Cal. Rptr. 23, 420 P.2d 735], a case involving retail price violations that occurred prior to 1961. The court noted the general presumption that legislative changes do not apply retroactively unless the Legislature expressly so determines and it stated at pages 372 and 373, in language applicable to the instant proceedings "The Legislature's alteration of the method for enforcement of a statute, however, ordinarily reflects its decision that the revised method will work greater future deterrence and achieve greater administrative efficiency. Yet the design for efficacy of deterrence and efficiency of administration hardly affects the case which has already reached a final administrative decision based upon the old procedure. The enactment of section 24755.1 constitutes just such an attempted improvement in the machinery of enforcement. The Legislature determined that the imposition of mandatory fines, which become immediately payable despite appeal or mandate, would prove more effective in enforcing the statute than criminal prosecution, or discretionary suspension and revocation of *540 licenses, which often involve substantial procedural delays. (See, e.g., the stay provisions of Code Civ. Proc., § 1094.5, subd. (f).)
"Whatever advantages the Legislature may have contemplated by the new procedure, such benefits could not inure in the instant litigation. However cumbersome or slow the old machinery may have been, it has done its work. To undo it now and begin anew with the more streamlined mechanism would not fulfill the legislative design. Indeed, the legislative purpose would be served better by a decision which terminates this litigation than by a remand for further proceedings on charges which, in some instances, have extended over a decade.
"The incongruity of remanded proceedings in this case becomes even clearer in light of the prospective functioning of part of the amended statute. An integral segment of the new enforcement system is the provision of section 24755.1 requiring prompt payment or execution of a surety bond pending appeal. That central provision is necessarily prospective in operation. Section 24755.1 clearly does not apply to a license suspension or revocation preceding its effective date." (Italics partially added.)
The court then commented (at p. 373) that a second and alternative reason for holding that section 24755.1 operates only prospectively, exists in the federal and state constitutional prohibitions against ex post facto punishment. The court stated at page 374: "Although arguably the revised statute provides penalties in some respects more, and in others less, severe than those previously imposed, we cannot sever the less onerous provisions and give retroactive effect to them alone in order to avoid the constitutional issue; such legal surgery would clearly violate the legislative compromise reflected in the statute. Finding just such an obstacle in In re Griffin (1965) 63 Cal.2d 757 [48 Cal. Rptr. 183, 408 P.2d 959], we refused to give retroactive effect to any part of a statute which reduced the minimum sentence for selling marijuana while postponing eligibility for parole. As applied to the petitioner in Griffin, the new law, considered as a whole, operated more harshly and hence could not constitutionally be given retroactive effect. Having been relieved of the burdens imposed by the new law, petitioner could not avail himself of its benefits. (Id. at p. 761.)
"Accordingly, we hold that, in the instant case, absent a contrary expression of legislative intent, a decrease in penalties which is not readily severable from an accompanying increase will be given prospective effect only. The provision in section 24755.1 which abrogates the penalties of discretionary license suspension and revocation thus does not apply to the present case, since all of the violations in question preceded the effective date of that section." (Italics added.)
(1) Thus, the crucial date for the application of the statute for constitutional *541 reasons alone is the date of the licensees' violations, not the finality of the administrative proceedings. All of the violations here occurred long before the enactment of the statute. In each instance, when the Department adopted the hearing officers' recommendations for suspensions, these were the only penalties then authorized. Likewise, the Department's final actions, the determinations of its Appeal Board, also occurred long before the effective date of Business and Professions Code section 24755.1.
The licensees here rely on Reimel v. Alcoholic Beverage etc. Appeals Board, 256 Cal. App.2d 158 [64 Cal. Rptr. 26]. There, the appellate court indulged in dicta that appears to be the source of the trial court's action in the instant case. The very last paragraph of the opinion (p. 176) reads as follows: "The court in Wilke & Holzheiser, Inc. (p. 373) held `Section 24755.1 clearly does not apply to a license suspension or revocation preceding its effective date.' However, in view of the current legislative intent concerning license revocation and suspension demonstrated by section 24755.1 the Department may elect to review respondent licensee's penalty assessments before they are placed in effect, as permitted by section 24211, added in 1963."
Business and Professions Code section 24211 reads: "The department may on its own motion at any time before a penalty assessment is placed into effect and without any further proceedings, review the penalty, but such review shall be limited to its reduction."
In view of the language in Wilke (quoted above at p. 540) concerning the impossibility of severing the less onerous penalties of section 24755.1 from the more onerous one, hindsight compels the conclusion that the reference to section 24211 in Reimel was both superfluous and questionable. We note, however, that the reference to section 24211 in Reimel may have been occasioned by the fact that at the time (Dec. 1966), as well as at the time of the trial court's decisions herein, the constitutionality of section 24755.1 had not been determined. Our Supreme Court expressly did not reach the constitutional question in Wilke, supra, at page 371, and only recently ruled on it in Kirby v. Alcoholic Beverage Control Appeals Board, 71 Cal.2d 1200 [81 Cal. Rptr. 241, 459 P.2d 657]. In Kirby, the court held that the Department's constitutional powers over licenses (Cal. Const., art. XX, § 22), is subject to a reasonable legislative enactment, such as section 24755.1, which qualifies the Department's jurisdiction over licensing in cases involving the minimum price statute. (2) With the illumination supplied by this most recent decision, we can conclude (more easily than the court in Reimel or the trial court here) that Business and Professions Code section 24211 cannot be properly applied in the instant case, to give *542 the Department discretion to impose penalties not yet conceived (much less enacted) at the time the violations occurred or its administrative proceedings were concluded.
The judgments are reversed and the trial court directed to affirm the decisions of the Department.
Shoemaker, P.J., and Agee, J., concurred.
Plaintiffs' petitions for a hearing by the Supreme Court were denied March 11, 1970. Peters, J., and Mosk, J., were of the opinion that the petition should be granted.
NOTES
[1] The reasons for this delay are not apparent from the record.
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3 F.3d 439
Villarealv.Collins**
NO. 93-8080
United States Court of Appeals,Fifth Circuit.
Aug 19, 1993
1
Appeal From: W.D.Tex.
2
AFFIRMED.
**
Conference Calendar
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NO. 07-02-0455-CR
IN THE COURT OF APPEALS
FOR THE SEVENTH DISTRICT OF TEXAS
AT AMARILLO
PANEL A
DECEMBER 9, 2004
______________________________
DWAYNE R. MCBEAN, APPELLANT
V.
THE STATE OF TEXAS, APPELLEE
_________________________________
FROM THE 137TH DISTRICT COURT OF LUBBOCK COUNTY;
NO. 2001-438413; HONORABLE CECIL PURYEAR, JUDGE
_______________________________
Before JOHNSON, C.J., and REAVIS and CAMPBELL, JJ.
OPINION
Appellant Dwayne R. McBean appeals from his conviction for aggravated sexual
assault and sentence of 60 years confinement. Presenting two issues, he urges that the
trial court erred by overruling his challenge to a veniremember and that he received
ineffective assistance of counsel during the punishment phase of trial. We affirm.
BACKGROUND
Appellant Dwayne R. McBean and Tina Williams were involved in an extended
personal relationship during which Williams and her two children would occasionally visit
at appellant's home. During one such stay, Williams discovered appellant sexually
assaulting her 13-year old daughter. Appellant was indicted in Lubbock County for
aggravated sexual assault. The Lubbock County District Attorney's office represented the
State.
Trial was to a jury. One member of the jury venire was Kim Hayes, an assistant
district attorney in the Lubbock County DA's office. During voir dire, appellant's counsel
questioned Hayes as to whether she would be able to be an impartial juror considering that
her employer was the agency prosecuting the case. Hayes stated that she had no
knowledge of or information as to the case and she could be fair and impartial as a juror.
Appellant's counsel challenged her for cause. Appellant's counsel also advised the trial
court that there were numerous veniremembers that counsel already had decided to strike
and that if a peremptory challenge had to be used to strike Hayes, which it would be, then
appellant would have to ask the Court to grant an additional peremptory challenge. The
challenge for cause was denied. No other ruling was sought and none was made.
The docket sheet reflects that following voir dire of the jury venire the parties
exercised their peremptory challenges then the jury was empaneled and sworn. Although
the record does not clearly reflect when the State and appellant handed their peremptory
challenge lists to the clerk, see Tex. Crim. Proc. Code Ann. art 35.25, 35.26(a) (Vernon
1989), (1) the reporter's record shows that at the conclusion of voir dire a recess was taken,
after which the judge announced which veniremembers would comprise the jury. After the
court announced the members of the jury, counsel for appellant stated that one of
appellant's peremptory challenges had been exercised to strike veniremember Hayes and
the remainder of appellant's challenges had been used. Counsel then identified the
seventh juror as objectionable and requested an additional peremptory challenge to strike
her. The request was denied and the jury was sworn.
Appellant was found guilty. During the punishment phase of trial the State introduced
copies of judgments relating to appellant's prior misdemeanor offenses. Appellant called
two witnesses, Doris Leal, an investigator for the Lubbock County District Attorney's Office,
and Adam Puckett, a probation officer for Lubbock County. Through Leal appellant raised
the issue of accepting responsibility for criminal behavior. Leal confirmed that appellant
had been placed on community supervision for a misdemeanor offense, pled true to
probation violations during a revocation hearing related to that community supervision, and
had accepted responsibility for violating his community supervision. Puckett was called to
testify regarding probation conditions for sex offenders. Upon cross-examination by the
State, Puckett elaborated on sex offender counseling and the importance of offenders
accepting responsibility for the charged offense in order for the counseling to be effective.
During summation at the punishment phase, appellant's counsel reminded the jury
that appellant had accepted responsibility for each of the misdemeanor cases and his
violations of probation conditions for those cases, and asked the jury to consider probation
as an appropriate punishment. The State made no reference during summation to whether
appellant had accepted responsibility for the aggravated sexual assault pending before the
jury. The jury assessed appellant's punishment at 60 years confinement.
Appellant's first issue asserts that the trial court erred in overruling his challenge for
cause as to veniremember Hayes because she was an employee of the prosecuting
attorney's office. His second issue alleges ineffective assistance of counsel because
counsel failed to object when the prosecutor allegedly commented on appellant's failure to
testify and appellant's exercise of his right to a trial by jury.
ISSUE ONE: FAILURE TO GRANT
CHALLENGE TO A VENIREMEMBER
Appellant does not assert that Hayes was personally biased or prejudiced. Instead,
he urges that she was biased as a matter of law because of her employment.
To preserve error for appellate review the complaining party must make a timely
objection specifying the grounds for the objection if the grounds are not apparent from the
context; the objection must be made at the earliest possible opportunity; the complaining
party must obtain an adverse ruling from the trial court; and the issue on appeal must
correspond to the objection made at trial. See Tex. R. App. P. 33.1(a)(1)(A) (2); Wilson v.
State, 71 S.W.3d 346, 349 (Tex.Crim.App. 2002); Dixon v. State, 2 S.W.3d 263, 265
(Tex.Crim.App.1998).
Appellant urges that he preserved error in regard to the trial court's denial of his
challenge to Hayes because he complied with the requirements set out in Johnson v. State,
43 S.W.3d 1 (Tex. Crim. App. 2001): he used a peremptory challenge on Hayes, used all
his remaining peremptory challenges, and asked for an additional peremptory challenge
to strike an objectionable, specified veniremember who served on the jury. We disagree
that appellant's actions to preserve error conformed to those presented in Johnson.
In Johnson the trial court erroneously denied Johnson's challenges for cause of two
veniremembers. Johnson used peremptory challenges to strike the two veniremembers
and requested two additional peremptory challenges. The request was denied. Id. at 3.
During voir dire Johnson had identified two objectionable veniremembers who eventually
sat on the jury. Id. at 4. Thus, in Johnson, a non-capital case as is appellant's case, the
defendant requested additional peremptory challenges, identified specific objectionable
veniremembers before his peremptory challenges were exercised, and used peremptory
challenges to strike the disqualified veniremembers before names of the jury members
were called out. See art. 35.26.
The record before us shows that appellant did not advise the trial court that he had
used a peremptory challenge to strike Hayes, request an additional peremptory challenge
and identify a specific veniremember who would be struck with the challenge until after he
exercised his peremptory challenges, turned in his strike list, and members of the jury had
been identified. Appellant's facts differ from those in Johnson.
Peremptory challenges to prospective jurors are provided pursuant to statute and
are made without assigning any reason. Art. 34.14. In a non-capital felony case such as
the one under consideration, the State and defendant are each entitled to ten peremptory
challenges. Art. 35.15. The challenges are exercised by the parties striking names of
prospective jurors from lists provided by the clerk, then returning the lists to the clerk. In
a felony trial the first twelve names which have not been struck are called and comprise the
jury. See art. 35.26.
The trial court's refusal to excuse a disqualified veniremember pursuant to a
challenge for cause is error, see Johnson, 43 S.W.3d at 5, but does not necessarily
constitute harmful error because a peremptory challenge may be used to strike the
disqualified veniremember . See id. at 5-7. But, when a challenge for cause is erroneously
denied and the challenging party uses a peremptory challenge to strike the disqualified
veniremember, then the erroneous denial may be harmful error because the challenging
party has effectively received fewer peremptory challenges than provided by statute. See
id. at 5-6; Martinez v. State, 763 S.W.2d 413, 415 (Tex.Crim.App. 1988). In such a
circumstance the aggrieved party has suffered harmful error if the party (1) used a
peremptory challenge to strike the challenged, disqualified veniremember; (2) exhausted
all remaining peremptory challenges; (3) requested and was denied an additional
peremptory challenge, and (4) identified a specific veniremember who would have been
removed with the additional challenge, and who thereafter sat as a juror. See Johnson, 43
S.W.3d at 2, 4, 5-6; Martinez, 763 S.W.2d at 415. In instances of erroneous denial of
challenges for cause, however, the cases do not always clearly distinguish between steps
required to preserve error from harm analysis. See Johnson, 43 S.W.3d at 5 n.6.
In the matter before us, appellant's counsel advised the trial court during voir dire
that a peremptory challenge would be used on Hayes and that an additional peremptory
challenge would be asked for. As of that time, however, voir dire was continuing, appellant
had not exercised any peremptory challenges, he was not in the process of exercising his
challenges, nor did appellant specifically identify any veniremember who would be stricken
if an additional peremptory challenge were to be granted. It was only after the parties had
exercised their peremptory challenges and identities of the jurors were revealed that
appellant advised the trial court that he had actually exercised a peremptory challenge to
strike Hayes, made a request for an additional peremptory challenge, identified one of the
chosen jurors as objectionable, and obtained a ruling on the request.
Article 35.26(a) calls for the parties in non-capital felony cases and in capital felony
cases wherein the death penalty will not be sought to make or decline to make peremptory
challenges before names of those to serve as jurors are determined and the jurors are
called. Allowing either party to exercise a peremptory challenge after the jurors are
identified would not comply with the unambiguous statutory language. See art. 35.25 and
art. 35.26. (3)
Peremptory challenges in civil cases are exercised in a similar manner as that
provided for in criminal cases: following jury voir dire peremptory challenges are made by
striking or erasing names from venire lists and turning the strike lists in to the clerk. In
district court cases the first twelve names not stricken are called and "shall be the jury."
See Tex. R. Civ. P. 232, 234. In Carpenter v. Wyatt Constr. Co., 501 S.W.2d 748
(Tex.Civ.App.-Houston [14th Dist.] 1973, writ ref'd n.r.e.), a civil case, the court addressed
a fact situation similar to the one before us. In Carpenter, a challenge for cause was made
during voir dire of the jury panel. After peremptory challenges were exercised and the jury
had been selected, but before the jury was sworn or seated, the Carpenters made a bill of
exceptions. In their bill, they complained of the overruling of their challenge for cause,
complained that they were forced to use a peremptory challenge on the venireperson
challenged for cause, and identified a specific, chosen juror on whom they would have
exercised the challenge had they not been forced to use the strike on the challenged
venireperson. The court held that the bill of exceptions was not timely to preserve error.
Id. at 750.
Language in Carpenter and other civil cases indicates that in order to preserve error
in civil cases the complaining party must identify objectionable veniremembers before
exercising peremptory challenges. See Hallett v. Houston N.W. Med. Ctr., 689 S.W.2d
888, 890 (Tex. 1985) ("For these reasons the complaining party waives any error by not
timely bringing such error to the attention of the trial court prior to making his peremptory
challenges"); Beavers v. Northrop Worldwide Aircraft Servs., Inc., 821 S.W.2d 669, 673
(Tex.App.-Amarillo 1991, writ denied) (Hallett requires that the trial court be told specifically
which objectionable jurors will remain after peremptory strikes are made and requires such
notification be made prior to the actual exercise of those strikes.); Carpenter, 501 S.W.2d
at 751 ("To preserve error, such objection must be made known before the exercise of
peremptory strikes.").
In order for an objection or complaint as to an action of the trial court to be timely,
it must be made at the earliest possible opportunity. See Wilson, 71 S.W.3d at 349; Dixon,
2 S.W.3d at 265. Appellant could have advised the trial court when he actually exercised
his peremptory challenges that he was using a challenge to strike Hayes, was exhausting
the remainder of his challenges, was requesting an additional peremptory challenge and
had to accept a specifically-identified objectionable venireperson because he used a strike
on Hayes. For, it was at that time when appellant's unbridled right to exercise the full
number of statutory peremptory challenges was violated. See Johnson, 43 S.W.3d at 8
(Keller, P.J., concurring). At that point the trial court could have examined appellant's strike
list, reconsidered denial of the challenge for cause, and granted the request for another
peremptory strike. See id. at 8, 9 ("Courts should err on the side of granting for cause
challenges, not on denying them . . . if the trial court gives the defendant sufficient extra
peremptory challenges then the error is cured.") By delaying his request until after the
parties' peremptory challenges had been exercised and the jury members disclosed,
appellant not only failed to make his complaint known at the earliest time, but delayed
making it known until a time outside that provided by statute for exercising peremptory
challenges. See art. 35.25 and art. 35.26.
The conclusion follows that appellant did not timely (1) advise the trial court that he
had actually used a peremptory challenge to strike Hayes and had used all his other
peremptory challenges, (4) (2) request an additional peremptory challenge and (3) identify a
specific objectionable juror that he would strike if given an additional peremptory challenge.
Assuming, without deciding, that the trial court erred in denying appellant's challenge for
cause, error was not preserved for review. TRAP 33.1(a)(1).
Appellant's first issue is overruled. (5)
ISSUE TWO: INEFFECTIVE ASSISTANCE
OF COUNSEL
Appellant did not testify at either the guilt-innocence or punishment phases of trial.
He sought probation by offering testimony of other witnesses at the punishment phase as
to his eligibility for probation, conditions placed on sexual offender probationers, success
rates for sexual offenders placed on probation and his past probation history as shown by
prior misdemeanor judgments granting probation which had been introduced by the State.
Appellant points to three questions asked by the prosecutor on cross-examination of
appellant's witness Adam Puckett, a probation officer for Lubbock County, which appellant
urges as the basis of his ineffective assistance claim. By those three questions the State
asked about and elicited testimony to the effect that a significant relationship existed
between sexual offender probationers accepting responsibility for their crimes and
successful completion of probation, and that most probationers were in that status because
they pled guilty and took responsibility initially. Appellant contends that this line of
questioning improperly commented on his right to remain silent and his trial counsel's
failure to object denied appellant his constitutional right to remain silent. Relying on
Robertson v. State, 100 S.W.3d 36 (Tex.App.-Waco 2002, pet. ref'd), appellant contends
that (1) the prosecutor's comments on responsibility were an improper reference to
appellant's failure to testify; (2) the comments were ongoing and flagrant; (3) trial counsel's
failure to object denied the judge an opportunity to instruct the jury to disregard the
improper reference; (4) the improper remarks greatly affected the jurors during the
punishment phase of the trial; and (5) the improper comments affected the severity of the
punishment imposed by the jury. Hence, appellant contends, his trial counsel was
ineffective and the violation of his constitutional right to remain silent harmed him because
the jury assessed a more severe punishment than it would have assessed otherwise.
A claim of ineffective assistance of counsel requires the appellant to show that (1)
counsel's performance was so deficient that counsel was not functioning as the "counsel"
guaranteed under the Sixth Amendment, and (2) counsel's deficient performance
prejudiced appellant, depriving him of a fair trial. Strickland v. Washington, 466 U.S. 668,
687, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984). The defendant must prove by a
preponderance of the evidence that there is no plausible professional reason for a specific
act or omission. See Bone v. State, 77 S.W.3d 828, 836 (Tex.Crim.App. 2002). Just as
a criminal defendant is entitled to an opportunity to explain himself and present evidence
on his behalf, defense counsel should also ordinarily be accorded an opportunity to explain
his or her actions before being labeled as ineffective. Id. A record which is silent as to why
appellant's trial counsel took or failed to take certain actions is generally not adequate to
establish ineffective assistance of counsel. See Rylander v. State, 101 S.W.3d 107, 111
(Tex.Crim.App. 2003). An appellate court will not use speculation as to the reasons for
questioned actions or omissions of counsel to overcome the strong presumption that
counsel made trial decisions in the exercise of reasonable professional judgment. See
Jackson v. State, 877 S.W.2d 768, 771 (Tex.Crim.App.1994); Lopez v. State, 79 S.W.3d
108, 112 (Tex.App.-Amarillo 2002, no pet.).
Appellant references no evidence of reasons for counsel's failure to object to the
State's questions and the witness's responses. Absent such evidence, and based on the
record before us, the presumption that counsel's actions were the product of reasonable
professional judgment prevails. We will not use speculation as to counsel's mental
processes as the basis for concluding that counsel was ineffective.
Appellant has not shown that trial counsel's performance was so deficient that
appellant was not afforded the counsel guaranteed by the Sixth Amendment. His second
issue is overruled.
The judgment of the trial court is affirmed.
Phil Johnson
Chief Justice
Publish.
1.
" "
2.
""
3.
4. Of course, the record must substantiate the statement.
5. '
'
'
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NO. 07-09-00390-CR
IN THE COURT OF APPEALS
FOR THE
SEVENTH DISTRICT OF TEXAS
AT
AMARILLO
PANEL A
AUGUST
16, 2011
NATASHA MARIE HELLER, APPELLANT
v.
THE STATE OF TEXAS, APPELLEE
FROM THE COUNTY COURT AT LAW NO. 2
OF RANDALL COUNTY;
NO. 2009-5244-2; HONORABLE RONALD WALKER JR., JUDGE
Before CAMPBELL
and HANCOCK and PIRTLE, JJ.
OPINION
Appellant
Natasha Marie Heller was charged by information with misdemeanor criminal
trespass.[1] At trial, over appellants objection, the
trial court instructed the jury it could find her guilty of a lesser-included
offense of attempted criminal trespass.
The jury found her guilty of the lesser offense, and imposed a fine of
$500 as punishment. We will overrule her
appellate issue, and affirm the judgment.
Background
The
information alleged appellant entered a habitation. Evidence showed that appellant knocked on the
door of the home of the complainant, seeking to discuss child support payments
he owed her. When the door was not
answered, appellant raised a window of the home and extended her arm and head
through the window into the homes interior.
The complainants wife saw appellant and called police. The complainant and his wife denied appellant
had consent to enter their home.
After presentation of the States
case, appellant moved for an instructed verdict on the charge of criminal
trespass, arguing the State had not proved notice or a completed trespass. The
trial court denied the instructed verdict and, over appellants objection,
included in the charge an instruction on the lesser-included offense of
attempted criminal trespass. As noted,
the jury convicted appellant of the lesser offense.
Analysis
Appellants
sole issue on appeal is a contention the trial court erred by including the
lesser-included offense of attempted criminal trespass in the jury charge.
Under
the two-pronged test applied to determine whether an offense is a lesser-
included offense, the first prong examines whether the lesser offense is included within the proof necessary to establish the offense charged. Rousseau v. State, 855
S.W.2d 666, 672-73 (Tex.Crim.App. 1993); Royster v. State, 622 S.W.2d
442, 446 (Tex.Crim.App. 1981).
Application of the first prong of the test involves a question of
law. Hall
v. State, 225 S.W.3d 524, 535 (Tex.Crim.App. 2007). The second prong of the test considers
whether there is evidence to permit the jury rationally to find that the
defendant, if guilty, is guilty only of the lesser offense.
Rousseau, 855 S.W.2d at 673.
Appellants contention deals only with the first prong of the test.
By
statute, an offense is a lesser-included offense if it consists of an attempt
to commit the offense charged. Tex. Code
Crim. Proc. Ann. art. 37.09(4) (West 2010).
Penal Code Section 15.01 defines criminal attempt. It provides, in part, A person commits an
offense if, with specific intent to commit an offense, he does an act amounting
to more than mere preparation that tends but fails to effect the commission of
the offense intended. Tex. Penal Code Ann. § 15.01(a) (West 2011).
There are instances in which courts
have found the inconsistency between the specific intent to commit an offense
requirement in the criminal attempt statute and the elements of a particular
attempted offense precluded its use as a lesser-included offense under article
37.09(4). See Gonzales v. State, 532 S.W.2d 343, 345 (Tex.Crim.App. 1976)
(instruction on attempted involuntary manslaughter properly denied as
lesser-included offense of attempted murder; involuntary manslaughter negates
specific intent to kill); Yandell
v. State,
46 S.W.3d 357, 361 (Tex.App.--Austin 2001, pet. ref'd) (deadly conduct not
lesser-included offense of manslaughter under art. 37.09(4); it is impossible
to specifically intend to recklessly kill another). In its analysis in one such situation, the
court in Strong v. State, 87
S.W.3d 206 (Tex.App.--Dallas 2002, pet. refd), pointed out that because the
offense of driving while intoxicated has no culpable mental state,[2]
the attempt statute cannot apply to DWI.
Id. at 217.
Appellants argument in this appeal
is founded on the same premise. She
contends Penal Code § 30.05, defining the offense of criminal trespass,
contains no required culpable mental state, so the attempt statute can have no
application to charges of violation of § 30.05.
Accordingly, appellant argues, the court erred by instructing the jury
on attempted criminal trespass. The
basic difficulty with appellants argument is that its premise is faulty. As the State here argues, the Court of
Criminal Appeals rather clearly has held that Penal Code § 6.02 operates to
require that the conduct proscribed by § 30.05 be accompanied by an
intentional, knowing or reckless culpable mental state. Holloway v. State, 583 S.W.2d 376, 377 (Tex.Crim.App. 1979); West v. State,
567 S.W.2d 515, 516 (Tex.Crim.App. 1978); accord
De Vaughn v. State, 239 S.W.3d 351, 356 (Tex.App.--San Antonio 2007, no
pet.); see Tex. Penal Code Ann. §
6.02(b), (c) (West 2011).
In support of her contention that
criminal trespass requires no culpable mental state, appellant cites Moses v. State, 814 S.W.2d 437, 442
(Tex.App.--Austin 1991, pet. refd as untimely). For that proposition, Moses relies on Reed v. State,
762 S.W.2d 640, 646 (Tex.App.--Texarkana 1988, pet. refd). Both cases contain the statement that no
culpable mental state is required under § 30.05 other than a volitional
refusal to leave when requested. The
State notes that we also have cited Reed
for the same proposition, on two occasions.
See Dunn v. State, 979 S.W.2d
403, 408 (Tex.App.--Amarillo 1998, pet. refd); Brumley v. State, 804 S.W.2d 659 (Tex.App.--Amarillo 1991, no
pet.). The State urges that we disavow Dunn and Brumley because of their apparent conflict with the Court of
Criminal Appeals holdings regarding the operation of Penal Code § 6.02, in Holloway, 583 S.W.2d at 377, and West, 567 S.W.2d at 516.
For our purpose today, we think it
sufficient to note that the volitional refusal to leave language from Reed, 762 S.W.2d at 646, arose from a
prosecution under § 30.05(a)(2), in which it was alleged the trespasser
received notice to depart but failed to do so. Tex. Penal Code Ann. § 30.05(a)(2) (West 2011);
Reed, 762 S.W.2d at 646. The same was true of Dunn, Moses, and Brumley. See Dunn,
979 S.W.2d at 408; Moses, 814 S.W.2d
at 442; Brumley, 804 S.W.2d at
662. Our present case is one in which
appellant was prosecuted under § 30.05(a)(1), by which she had notice that
[her] entry was forbidden.[3] The volitional refusal to leave language
originating in Reed has no
application in a case under § 30.05(a)(1).
Citing Gonzales, 532 S.W.2d at 345, and other cases, the court in Strong made the further statement that
[t]he attempt statute does not apply when the culpable mental state for the
offense attempted is less than knowing.
Strong, 87 S.W.3d at 217. We need not consider the application of that
statement to the case at bar, however, because the information under which
appellant was accused of criminal trespass alleged that she entered the habitation
intentionally and knowingly. No
culpable mental state less than knowing is involved here. See
Hall, 225 S.W.3d at 535 (elements and
facts alleged in the charging instrument are used to find lesser-included
offenses).
Finally, we note that the offense of
attempted criminal trespass as a lesser-included offense has been recognized by
Texas cases. See Jones v. State, 170 S.W.3d 772, 776 (Tex.App.--Waco
2005, pet. refd) (attempted criminal trespass can be a lesser-included offense
of attempted burglary); Johnson v. State,
773 S.W.2d 721, 725 (Tex.App.--Houston [1st Dist.] 1989, pet. refd)
(indicating attempted criminal trespass may be a lesser-included offense of
burglary of a building).
For these reasons, we overrule
appellants sole issue on appeal
and affirm the judgment of the trial court.
James
T. Campbell
Justice
Publish.
[1]
See Tex. Penal Code Ann. § 30.05 (West 2011).
[2]
Tex. Penal Code
Ann. § 49.11(a) (West 2011).
[3]
See Salazar v. State, 284 S.W.3d 874, 880 (Tex.Crim.App.
2009) (habitation inherently provides notice that entry is forbidden).
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629 F.3d 264 (2011)
UNITED STATES of America, Appellant,
v.
Joseph PROCHILO, Defendant, Appellee.
United States of America, Appellant,
v.
Elvis Guerrero, Defendant, Appellee.
Nos. 09-1450, 09-1523.
United States Court of Appeals, First Circuit.
Heard March 3, 2010.
Decided January 13, 2011.
*266 Cynthia A. Young, Assistant United States Attorney, with whom Michael K. Loucks, Acting United States Attorney, was on brief, for appellant.
Bernard Grossberg for Joseph Prochilo.
George F. Gormley, with whom Stephen P. Super was on brief, for Elvis Guerrero.
Before BOUDIN, Circuit Judge, SOUTER,[*] Associate Justice, and HOWARD, Circuit Judge.
HOWARD, Circuit Judge.
In these interlocutory appeals in two unrelated criminal cases, the government challenges the district court's orders excluding cooperating witnesses from testifying at trial. In each case, the district court excluded a key prosecution witness after concluding that the government had failed to meet its disclosure obligations under Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963). Under Brady, the government has a duty to disclose evidence in its possession that is favorable to the accused and material to guilt or punishment. Id. at 87, 83 S.Ct. 1194. We address the two appeals below.
I. Joseph Prochilo
A sting operation set up by agents of the Bureau of Alcohol, Tobacco, Firearms and Explosives ("ATF") resulted in the indictment of Joseph Prochilo for being a felon in possession of a firearm in violation of 18 U.S.C. § 922(g)(1). The case against Prochilo relies almost solely on *267 the expected testimony of a government cooperator. The cooperator had played a central role in the sting, both arranging and consummating the purchase of the firearm. Prochilo seasonably sought from the government exculpatory and impeachment information and materials relating to the cooperator. The discovery request focused on evidence that Prochilo might use to impeach the witness, and cited eighteen different categories of evidence. Essentially, Prochilo requested all cooperator-related evidence in the government's possession, including: (1) all cooperation agreements between the witness and government agencies; (2) copies of reports or documents relating to the witness's "contacts" with those agencies; and (3) the complete files that any government agency had on the witness.
At a hearing on the discovery motion, the government maintained that it had reviewed the cooperator-related files and had turned over any Brady material in its possession. Among other things, the government had disclosed to Prochilo:
all payments the government [had] made to the [cooperating witness (CW)]; the CW's cooperation agreement and confidential informant authorization request with the ATF; the CW's criminal record; that the CW was in the witness protection program and had violated a rule of that program by making an unauthorized trip to a prohibited area; that the CW worked for, and was paid by, the DEA for information, services, and security; that the CW wrote a movie script that discussed his use of oxycontin and criminal activities; an account of the CW's illicit drug use and involvement in illegal drug sales; that [the] ATF had notified certain law enforcement authorities of the CW's relationship with [the] ATF, which had led to the dismissal of state criminal charges against him; and that the CW had worked as an informant for and received promises, rewards, and inducements from the United States Secret Service, the Essex County [Massachusetts] Sheriff's Department, the DEA [Drug Enforcement Agency], and the FBI [Federal Bureau of Investigation].[1]
The district court initially denied Prochilo's motion for production as moot, with the explicit provision that he could renew his motion after reviewing the materials disclosed by the government.
Not long after the hearing, Prochilo filed a renewed motion for production of exculpatory and impeachment information and materials. In this motion, Prochilo asked the district court to order the government to disclose the witness's "entire relationship with the government." Prochilo requested: (1) details regarding the witness's work with the United States Secret Service, the Essex County Sheriff's Department, the DEA, and the FBI; (2) information regarding the other ATF cases on which the cooperator worked; (3) the witness's cooperation agreements with government agencies other than the ATF; (4) a description of other firearms seized by the government as a result of the witness's cooperation; (5) information about the cooperator's contacts with other government agencies as they related to other matters or other investigations; and (6) a list of all benefits the witness received as a result of these contacts. The district court granted Prochilo's motion.
*268 The government continued to resist additional disclosure, and in response Prochilo argued that the requested materials would support his claim that the witness had set him up, and they would enable him to explore bias arising from the cooperator's relationship to the government. The district court reaffirmed its earlier ruling, ordering the government "to produce all files related to the [witness's] relationship with the Government, including the CW's relationship with the Government in all other cases."
In motions for reconsideration, the government maintained that Prochilo had failed to provide any "plausible indication" that the materials he sought contained evidence that was both favorable to him and material. The government did, however, provide additional information about the cooperator's work with various federal law enforcement agencies, noting that the witness had provided assistance in twelve cases or investigations by the ATF (two of which also involved the DEA), four cases or investigations by the DEA alone, and two investigations by the FBI. The government explained that the cooperator had assisted these agencies by either providing information or playing a direct role in arranged transactions. The government continued to maintain, however, that it had already turned over all Brady material relating to the witness. It also asked the court to exclude the witness from testifying at trial in the event that the court denied reconsideration. The district court reaffirmed its order and excluded the witness. This appeal ensued.
Discussion
"[W]e review Brady determinations for abuse of discretion." United States v. DeCologero, 530 F.3d 36, 65 (1st Cir.2008). Under Brady, the government has a duty to disclose evidence in its possession that is favorable to the accused and material to guilt or punishment. 373 U.S. at 87, 83 S.Ct. 1194; Strickler v. Greene, 527 U.S. 263, 280, 119 S.Ct. 1936, 144 L.Ed.2d 286 (1999). Evidence is "favorable to the accused" if it is either exculpatory or impeaching in nature and "material" if there is a reasonable probability that, had it been disclosed, the result of the proceeding would have been different. Strickler, 527 U.S. at 280, 119 S.Ct. 1936; Kyles v. Whitley, 514 U.S. 419, 435, 115 S.Ct. 1555, 131 L.Ed.2d 490 (1995) (evidence is material if it "could reasonably be taken to put the whole case in such a different light as to undermine confidence in the verdict").
The government is primarily responsible for deciding what evidence it must disclose to the defendant under Brady. Pennsylvania v. Ritchie, 480 U.S. 39, 59-60, 107 S.Ct. 989, 94 L.Ed.2d 40 (1987). And at least where a defendant has made only a general request for Brady material, the government's decision about disclosure is ordinarily final unless it emerges later that exculpatory evidence was not disclosed. Id. at 59, 107 S.Ct. 989.
When the defendant seeks access to specific materials that the government maintains are not discoverable under Brady, however, a trial court may in some instances conduct an in camera review of the disputed materials. See Ritchie, 480 U.S. at 58 n. 15, 107 S.Ct. 989; United States v. Caro-Muniz, 406 F.3d 22, 29-30 (1st Cir.2005); 6 Wayne R. LaFave et al., Criminal Procedure § 24.3(b) (3d ed. 2007). To justify such a review, the defendant must make some showing that the materials in question could contain favorable, material evidence. Ritchie, 480 U.S. at 58 n. 15, 107 S.Ct. 989 (explaining that the defendant must establish a "basis for his claim" that what he seeks "contains material evidence"); United States v. Brandon, 17 F.3d 409, 456 (1st Cir.1994); LaFave, supra, § 24.3(b). This showing *269 cannot consist of mere speculation. United States v. Navarro, 737 F.2d 625, 631 (7th Cir.1984); see also Brandon, 17 F.3d at 456. Rather, the defendant should be able to articulate with some specificity what evidence he hopes to find in the requested materials, why he thinks the materials contain this evidence, and finally, why this evidence would be both favorable to him and material. United States v. Rosario-Peralta, 175 F.3d 48, 55-56 (1st Cir.1999) (illustrating the kind of showing required); Caro-Muniz, 406 F.3d at 30 (similar).
The district court's order that the government disclose all cooperator-related material in its possession directly to Prochilo was not faithful to these principles. Prochilo's motions were general and speculative in nature. To be sure, many of the materials he requested could, depending on the facts of a particular case, contain material impeachment evidence. The government, however, maintained that it had already disclosed all such evidence in Prochilo's case. At this juncture, it was up to Prochilo to put that representation into question by identifying specific materials he wanted the court to inspect in camera and by showing them to be favorable and material. He failed to do so. Accordingly, there was no basis for the court to conduct an in camera inspection, much less order disclosure directly to Prochilo.
Prochilo's four primary arguments in support of the court's order are unpersuasive. First, he speculates that the undisclosed materials might reveal that the cooperating witness is "flawed" or that the government's investigative techniques were flawed. Where, as here, however, the government maintains that it has turned over all material impeachment evidence, speculation is insufficient to permit even an in camera review of the requested materials.
Second, Prochilo appears to suggest that the materials that he desires could help substantiate an entrapment defense. For starters, Prochilo has yet to assert an entrapment defense. But even if he had, Brady already requires the government to disclose all favorable and material evidence in its possession to the defendant; this includes any evidence indicating that the witness had improperly induced Prochilo or others to commit crimes. Nothing in the record of this case suggests that the government has failed to turn over such evidence.
Third, Prochilo claims that at a hearing the government stated that this is the only ATF investigation on which the witness worked that has resulted in a prosecution. This "lack of prosecution," he contends, "begs for disclosure as it is certainly relevant to the issue of [the witness's] credibility regarding the reasons that the other matters were not prosecuted." The government never made such a statement, however. At the hearing, the government stated only that none of the other cases had resulted in a trial. When questioned at oral argument in this court, the government stated that some of the investigations did in fact result in prosecutions.
Fourth, Prochilo makes the familiar argument that he is entitled to the requested materials because only his counsel, not the government or the district court, will be able to judge what evidence is both favorable to him and material. The Supreme Court has already rejected this argument. Ritchie, 480 U.S. at 59, 107 S.Ct. 989 ("Defense counsel has no constitutional right to conduct his own search of the [government's] files to argue relevance."). Brady did not create a broad rule of discovery in criminal cases. See id. at 59-60, 107 S.Ct. 989.
*270 In sum, the district court's approach shifted from the government to the defendant the primary authority to assess whether material in the government's possession must be disclosed, and in so doing endorsed a broad rule of discovery in criminal cases; Brady permits neither. See Navarro, 737 F.2d at 631.
II. Elvis Guerrero
In this case a sting operation set up by federal agents resulted in the arrests and indictments of Elvis Guerrero and two others for attempting to purchase cocaine. The government charged all three with conspiring to distribute cocaine and with attempting to possess cocaine with the intent to distribute. See 21 U.S.C. §§ 846, 841(a)(1); 18 U.S.C. § 2.
The government's case against Guerrero hinges almost exclusively on the testimony of a long-time government cooperator who had played an integral role in the sting. The government disclosed to Guerrero impeachment evidence that it considered discoverable under Brady. This evidence included information that the witness had been paid $5,000 for her work on the case, a redacted report of her criminal and probation record, and information indicating that she had worked for the government for many years.
Not satisfied with the extent of the disclosure, Guerrero filed a motion to compel further discovery, requesting that the court order the government "to produce all information in its possession, custody, or control, regarding the [witness]," and identifying several categories of information.[2] The motion also explained generally how each category of evidence could contain useful impeachment evidence.
The motion to compel was addressed at a final pretrial conference, during which the government maintained that it had reviewed the witness's voluminous file and had turned over all Brady material in its possession. Despite this representation, the district court granted the defendant's motion in its entirety, telling the government to "give him everything." The court further ruled that, to the extent that the government had doubts about particular materials, it could ask the court to review those materials in camera.
The government filed a motion for reconsideration, stating that it had supplemented its disclosure, turning over "the CW's [(cooperating witness's)] criminal history; a detailed listing of payments the CW received in this case as well as in other investigations and/or cases over the past 17 years, reflecting both the years of payment and number of cases; information about the CW's immigration status; and four cooperation agreements between the Drug Enforcement Administration ('DEA') and the CW, including the cooperation agreement in force during this case and one currently in force as the CW *271 continues to work with the DEA." The government maintained that no other material in its possession was discoverable under Brady. As in Prochilo's case, the prosecutors asked the court, if it were to deny reconsideration, to also exclude the witness from testifying so that an immediate appeal would lie. The district court denied the motion for reconsideration and excluded the witness.
Discussion
Applying the same standards as we have applied in reviewing the government's appeal in Prochilo's case, we cannot discern a basis for concluding that Guerrero met his burden of articulating with some specificity what evidence he hopes to find in the requested materials, why he thinks the materials contain this evidence, and why this evidence would be both favorable to him and also material. Rosario-Peralta, 175 F.3d 48, 55-56.
The motion to compel discovery broadly requested access to all cooperator-related materials in the government's possession and merely speculated that these materials could contain material impeachment evidence. Such a showing is insufficient to permit even an in camera review of the disputed materials. Nevertheless, the district court once again ordered the government to disclose all cooperator-related materials directly to the defendant. Consequently, the court erred both in its disclosure ruling and to the extent that it agreed to conduct an in camera review of certain cooperator-related materials.
We do not, however, completely rule out in camera review here. On remand, Guerrero should be allowed to request access to specific materials and to make a case for in camera inspection of those materials. In his appellate brief, Guerrero does endeavor to make the necessary particularized showing. In support of his request for the files of unrelated cases on which the cooperator worked, Guerrero says that he has evidence showing that she was paid widely varying amounts for her work (e.g., $18,700 in one case and $100 in another). He argues that the case files may reveal that the witness worked on a commission basis, that is, payments to her were dependent on how many defendants she implicated. Access to the case files, Guerrero claims, will allow him to determine whether or not this commission theory is accurate and, if it is, will provide him with further grounds for impeachment. Whether such a showing is sufficient to justify an in camera review of certain files is committed to the discretion of the district court in the first instance.
A couple of loose ends remain. First, Guerrero's suggestion that the Confrontation Clause of the Sixth Amendment provides an independent ground for upholding the district court's order is incorrect. The Supreme Court has thus far only evaluated disclosure claims like Guerrero's under the Due Process Clause of the Fifth and Fourteenth Amendments. United States v. Bagley, 473 U.S. 667, 674-78, 105 S.Ct. 3375, 87 L.Ed.2d 481 (1985); see also Ritchie, 480 U.S. at 51-54, 107 S.Ct. 989. Second, his argument about the government's handling of a videotape of the alleged drug transaction is not properly before us.
III. Conclusion
We reverse the exclusion order in No. 09-1450 (Prochilo), vacate the exclusion order in No. 09-1523 (Guerrero), and remand both cases for further proceedings consistent with this opinion.
NOTES
[*] The Hon. David H. Souter, Associate Justice (Ret.) of the Supreme Court of the United States, sitting by designation.
[1] Most of the evidence that the government provided to Prochilo is not part of the record on appeal because it was exchanged between the parties and not filed with the district court. Various pleadings filed by the parties, however, discuss what evidence the government gave Prochilo and there is no dispute that Prochilo received the materials mentioned here.
[2] The motion to compel encompassed the following categories: (1) information about the government's prior use of the cooperator, including the case name and number of each prosecution in which she had been used by any federal, state, or local law enforcement agency as a witness, a cooperating individual, or source of information; (2) all agreements between the witness and any federal, state, or local law enforcement entity, all documents reflecting payments made to her or on her behalf, and any information regarding promises, rewards or inducements (including preferential treatment) to the witness, her family, or her friends and associates; (3) the witness's arrest and conviction record and all information concerning any unauthorized criminal activity or misconduct by her, as well as any prison records; (4) information regarding any assets the cooperator had obtained from criminal activity over the last 15 years; and (5) information reflecting her bad character or matters relevant to her credibility, including evidence of impairments, poor memory, and bias.
| {
"pile_set_name": "FreeLaw"
} |
If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
PEOPLE OF THE STATE OF MICHIGAN, UNPUBLISHED
July 25, 2019
Plaintiff-Appellee,
v No. 344352
Shiawassee Circuit Court
JERALD DAN HARGROVE, LC No. 2017-009816-FC
Defendant-Appellant.
Before: O’BRIEN, P.J., and FORT HOOD and CAMERON, JJ.
PER CURIAM.
Defendant pleaded guilty to third-degree criminal sexual conduct (CSC III), MCL
750.520d(1)(a), and accosting a minor for immoral purposes, MCL 750.145a. He was sentenced
to serve concurrent terms of 120 to 180 months for the CSC III conviction and 23 to 48 months
for the accosting a minor conviction. He now appeals by leave granted. We affirm.
I. FACTUAL SUMMARY AND PROCEDURAL HISTORY
Defendant’s convictions arose from his sexual penetration of a child who was less than
14 years old. As was later revealed at the sentencing proceeding, defendant had sexually
penetrated the girl, his young sister-in-law, between 20 (his estimate) and 50 (the victim’s claim)
times.
At the plea-taking proceeding, the prosecutor noted that defendant would be pleading to
two charges and that five other charges would be dismissed, and that the estimated guideline
range would be 41 to 75 months, whereas as charged it would have been 81 to 135 months. The
prosecutor emphasized “that the guidelines as indicated are merely estimated by us at this time.”
Defense counsel agreed that defendant was prepared to plead to the agreement as stated and that
the terms were accurate “as far as [he] understand[s] them.” Defendant concurred. Both
defendant and his counsel denied that anything else had been promised. The trial court then
questioned defendant concerning his understanding of the plea agreement, emphasized that the
guidelines were an estimate, and stated that the court would “score the accurate guidelines as we
get close to sentencing” and “they might be higher, they might be lower, or they may be exactly
-1-
where your attorney and [the prosecutor] estimated them to be.” The court stated that the two
attorneys “had been doing this for [a] long time and they’re pretty good at it, but ultimately the
Court will decide what the accurate guidelines are.” The court noted that “if the guidelines are
higher as the Court scores them as we get close to sentencing, that would not be a basis for you
to withdraw your plea.” (Emphasis added.) Defendant affirmed that he understood, and that he
had discussed his situation with his attorney and had concluded that it was in his best interests to
plead guilty rather than go to trial. After confirming that defendant had gone over the Advice of
Rights form, signed it after reading it, and did not have any questions about his rights, the court
confirmed that defendant was willingly and knowingly waiving his rights. The court then
reiterated that “the Court doesn’t know what your sentence is going to be at this point.”
Defendant then pleaded guilty.
At sentencing, some adjustments were made to prior record variables (PRVs) and offense
variables (OVs). With respect to OV 7, which addressed aggravated physical abuse, the court
noted that 50 points had to be assessed for “similarly egregious conduct designed to heighten the
victim’s fear or anxiety during the offense.” The court stated:
Here, the victim’s mother just told us that Defendant threatened the victim
by saying that everyone would shun her if she reported this offense, and she
continued by saying that they did. And the Presentence Investigation Report
[PSIR] corroborates that by the victim herself by saying, you know, the people at
school, you know they have shunned her.
So, the conduct by the defendant, then, was designed to heighten her fear
and prevent her from reporting his conduct; so, the evidence preponderates
towards a scoring of OV 7 at fifty (50) points.
The court concluded that the overall suggested guidelines range on the accosting offense was 5
to 23 months and that the revision for the CSC III offense made the range 57 to 95 months.
However, the court found the suggested guidelines range to be inadequate considering the
severity of defendant’s conduct, specifically stating that “the guidelines in this case are not
reasonable.” Accordingly, the court exceeded the guidelines range and imposed sentences of 23
to 48 months for the accosting conviction and 120 to 180 months for the CSC III conviction.
II. DEFENDANT’S UNDERSTANDING OF THE PLEA BARGAIN
Defendant first claims that he pleaded guilty because of a promise that he would be
sentenced within the estimated guidelines range and that because the trial court did not adhere to
this promise, he is entitled to withdraw his plea or, alternatively, to specific performance of the
sentencing agreement. This argument rests upon a faulty assumption: there is no evidence that
defendant was promised that he would be sentenced within the estimated guidelines range in
effect at the plea-taking, or within the sentencing guidelines as recalculated at sentencing.
Defendant argues that because the prosecutor and the trial court both advised him of the
estimated guidelines range at the time of the plea, he had a “reasonable expectation” that he
would be sentenced within the estimated guidelines minimum sentence range. This was not a
-2-
fair assumption to draw from the statements of the prosecutor and the trial court. Defendant’s
subjective “reasonable expectation” is not the same thing as a sentence bargain.
Defendant argues that “the trial court specifically tied the bargain to the actual guidelines
at the time of sentencing by informing [defendant] that even if the guidelines were different at
sentencing he would not have grounds to withdraw his plea. There would be no reason to make
such a statement unless the plea was specifically tied to a guidelines sentence.” This argument is
incorrect. Letting a defendant know that the guidelines might be incorrectly figured and that
they could be higher, but that if they turned out to be higher, he would not have a basis to
disavow his plea, is not equivalent to informing the defendant that his plea is tied to the
estimated guidelines—it is in fact doing exactly the opposite: it is telling the defendant that his
plea is not tied to the estimated guidelines, so if the actual guidelines turned out to be higher, he
could not withdraw his plea on the basis that he pleaded to a sentence within the estimated
guidelines. Therefore, the first premise of defendant’s claim is incorrect and moreover, there is
no indication in the record that defendant’s plea was not understanding, voluntary and knowing.
MCR 6.302(A); People v Cole, 491 Mich 325, 333; 817 NW2d 497 (2012).
Defendant next claims that he is entitled to withdraw his plea or to specific performance
because his plea bargain was illusory. However, since there was no sentence agreement
defendant cannot be entitled to specific performance. Neither the prosecutor, defendant’s trial
counsel, the trial court, nor the plea agreement document state that part of the agreement was a
sentence within the estimated sentencing guidelines. Defendant was informed of the estimated
guidelines ranges that applied to the added third-degree CSC charge he was pleading guilty to
and of the guidelines range that was applicable to the first-degree CSC charges that were being
dismissed. This enabled him to judge the value of agreeing to plead guilty to a lesser charge.
Contrary to defendant’s claim, there is simply no evidence in the record that defendant was
promised a sentence within the estimated sentencing guidelines range. Nor has defendant
submitted an affidavit from either himself or his trial counsel asserting under oath that there was
such a sentence agreement. Therefore, the second premise of defendant’s underlying claim has
not been established. Defendant clearly was not deprived of a promised benefit and he is not
entitled to withdraw his guilty plea or to specific performance of a nonexistent sentence bargain.1
Defendant next claims that this Court cannot find that his counsel’s failure to object to
the trial court’s imposition of a sentence in excess of the estimated guidelines range constituted a
waiver of his right to raise this issue. Defendant again assumes that there was a sentence
1
Without citing any supporting authority, defendant also claims that he is entitled to specific
performance “because the government is now in possession of statements made by [defendant],
which would not have been available if it were not for the plea negotiations.” Presumably
defendant is referring to the statements he made at the plea-taking and at sentencing. Setting
aside the question of whether the prosecution would be entitled to use such statements at a trial,
the PSIR makes it clear that defendant had already admitted to the investigating officer that he
had sexual intercourse with the victim on at least 20 occasions. The admissions defendant made
at the plea-taking and at sentencing add little to these admissions that had already been made.
-3-
agreement. Counsel’s lack of objection to the departure sentence is not a matter of waiver; it is
evidence that there was no sentence agreement in the first place.
Finally, defendant claims that he is entitled to a sentence within the estimated or actual
guidelines range or the option to withdraw his guilty plea. But defendant has failed to establish
that there was a sentencing agreement and therefore, he has shown no plain error in failing to
honor that agreement and has likewise not established an entitlement to any relief. 2
III. IMPLIED SENTENCING AGREEMENT
Defendant next asserts that he is entitled to enforcement of a plea/sentence bargain that
he admits was, at best, only “implied.” This claim is without merit.
First, defendant claims that his counsel preserved this issue by objecting on the record at
the time of sentencing. We disagree. Defendant personally addressed the court and said nothing
at all about the sentence. Defendant’s counsel objected to the court’s scoring of OV 7, but did
not object to the court’s decision to exceed the estimated guidelines range. Therefore, this issue
is unpreserved. This Court reviews unpreserved issues for plain error. People v Shenoskey, 320
Mich App 80, 82; 903 NW2d 212 (2017). “To avoid forfeiture under the plain error rule, three
requirements must be met: 1) error must have occurred, 2) the error was plain, i.e., clear or
obvious, 3) and the plain error affected substantial rights. . . . The third requirement generally
requires a showing of prejudice, i.e., that the error affected the outcome of the lower court
proceedings. . . .” People v Carines, 460 Mich 750, 763; 597 NW2d 130 (1999) (citations and
text omitted).
Defendant admits that “[t]he assistant prosecutor in the instant case did not promise to
recommend a certain sentence, but he informed the trial court and [defendant] of the estimated
guidelines at the time of the plea and gave every indication that there would be no objection to a
guidelines sentence.” This Court rejects this characterization because the prosecutor made no
comment, one way or the other, concerning what sentence, if any, he would recommend. The
full plea bargain was that in exchange for defendant’s plea to one count of accosting and
soliciting a child and to the added count of CSC III, the prosecution would dismiss five of the
original six counts, which included three counts of first-degree CSC. The prosecutor noted the
estimated guidelines range, but made no statement at all regarding his position on the guidelines
or defendant’s sentence. We note that the record contains two documents related to the plea-
taking: an advice of rights form from the date of the plea-taking that does not indicate anything
at all about the proposed plea bargain, and a Plea Agreement with the same date that was signed
by defendant and stated that he would plead guilty to CSC III and accosting a child for immoral
purposes and that the prosecutor would dismiss five of the original six charges. A box before
“Sentence Agreement” on the form was not checked, indicating that neither party viewed the
plea agreement as encompassing a sentence agreement. Moreover, item number 5 on the form
2
We review unpreserved issues for plain error. People v Anderson, 322 Mich App 622, 634; 912
NW2d 607 (2018).
-4-
provides a space to indicate the estimated guidelines range but, again, it does not indicate that
there is any plea bargain for a sentence within the guidelines range. Absent an explicit sentence
bargain, the line appears to be informational only. It informed defendant of the estimated
guidelines minimum sentence range at the time of the plea and nothing more. It simply informed
defendant that his guilty plea to a lesser offense would result in exposure to a reduced guidelines
range—not that his sentence would necessarily be within that range. Defendant appears to
recognize this because he only claims that he had a “reasonable expectation” that the prosecutor
would not seek a sentence outside the estimated guidelines range.
After the prosecutor’s description of the plea bargain, defendant’s trial counsel stated
simply, “My client is prepared to plead as [the prosecutor] just recited.” Defendant was then
asked, under oath, if he agreed with the statements of the prosecutor and trial counsel, and he
responded affirmatively. Both the prosecutor and defendant’s counsel stated that there were no
other promises that had not been placed on the record. The court cautioned defendant that the
guidelines were only estimated and that and that “if the guidelines are higher . . . that would not
be a basis for you to withdraw your plea.” The court also stated:
And it also means that when we come back for our sentencing, . . . if you
don’t like our sentence—you think it’s too much incarceration, or you don’t like a
term of probation, or you don’t like [sex offender] registration, . . . that would not
be a basis for you to withdraw your plea. Do you understand . . . ?
Defendant acknowledged that he understood. In light of this record, defendant cannot credibly
argue that he believed the prosecutor was recommending a sentence within the estimated
guidelines range and that the court was bound to give him such a sentence.
At sentencing, the prosecutor argued that the sentencing guidelines did not adequately
account for the number of times defendant had sex with the victim and did not adequately
account for the emotional damage defendant had caused to the victim’s family. But, in the end,
the prosecutor merely concluded: “So, your Honor, please fashion a sentence that addresses all
of the goals of sentencing, and . . . that stresses to our community this is not tolerated.” Contrary
to defendant’s claim, the prosecutor did not argue that the court should exceed the sentencing
guidelines. The trial court stated that the guidelines in this case, as calculated, were not
reasonable. When the trial court decided to depart from the sentencing guidelines, neither
defendant nor his counsel interjected by claiming that there was a deal. If defendant truly
believed his plea bargain called for a sentence within the guidelines range, he presumably would
have done so.
Defendant relies on People v Nixten, 183 Mich App 95; 454 NW2d 160 (1990), where
the defendant pleaded guilty in return “for a reduction in the charged offense and a promise that
‘the People will recommend that the minimum sentence in this case not exceed eight years.’ ” Id.
at 97. At sentencing, the prosecutor recommended a minimum sentence of seven years, 11
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months, and 28 days. Id. at 97-98. This Court held that this was error requiring resentencing.3
Id. at 98-99. Importantly, the present facts are distinguishable because the prosecutor did not
make a specific recommendation of any sentence, let alone one within the estimated guidelines
range. Moreover, the trial court departed from the guidelines range, so Nixten is not applicable.
Accordingly, defendant has failed to demonstrate plain error that would justify resentencing.
IV. ASSESSMENT OF OV 7
Defendant next claims that he was deprived of due process by the trial court’s
reassessment of OV 7 at 50 points. Defendant raised this claim in a timely motion to remand,
thereby preserving it for appellate review. MCL 769.34(10). “Under the sentencing guidelines,
the circuit court’s factual determinations are reviewed for clear error and must be supported by a
preponderance of the evidence. Whether the facts, as found, are adequate to satisfy the scoring
conditions prescribed by statute, i.e., the application of the facts to the law, is a question of
statutory interpretation, which an appellate court reviews de novo.” People v Hardy, 494 Mich
430, 438; 835 NW2d 340 (2013).
MCL 777.37 provides:
(1) Offense variable 7 is aggravated physical abuse. Score offense
variable 7 by determining which of the following apply and by assigning the
number of points attributable to the 1 that has the highest number of points:
(a) A victim was treated with sadism, torture, excessive brutality, or
similarly egregious conduct designed to substantially increase the fear and anxiety
a victim suffered during the offense…………………………………50 points
(b) No victim was treated with sadism, torture, excessive brutality, or
similarly egregious conduct designed to substantially increase the fear and anxiety
a victim suffered during the offense 0 points
(2) Count each person who was placed in danger of injury or loss of life as
a victim.
3
This Court subsequently disagreed strongly with the rationale of the two-judge majority in
Nixten, see People v Swirles (After Remand), 218 Mich App 133, 139-141; 553 NW2d 357
(1996), but concluded that it was compelled to honor the holding because of a later panel’s
partial adoption of the Nixten holding in People v Shuler, 188 Mich App 548; 470 NW2d 492
(1991). Nevertheless, the Swirles Court factually distinguished Nixten and therefore declined to
follow it. Swirles, 218 Mich App at 140-141. This Court in Shuler agreed with the Nixten
holding, but also declined to impose resentencing because the trial court had chosen to exceed
the sentencing guidelines, and the defendant had reaffirmed his plea, so the prosecutor’s
recommendation had no effect. Shuler, 188 Mich App at 550-552.
-6-
(3) As used in this section, “sadism” means conduct that subjects a victim
to extreme or prolonged pain or humiliation and is inflicted to produce suffering
or for the offender’s gratification.
The trial court’s reason for assessing OV 7 at 50 points was its conclusion that
defendant’s conduct “was designed to heighten [the victim’s] fear and prevent her from reporting
his conduct” since defendant had “threatened the victim by saying that everyone would shun her
if she reported this offense.” OV 7 was interpreted by our Supreme Court in Hardy, where our
Supreme Court explained that to assess points based on the defendant’s conduct being designed
to substantially increase the fear and anxiety a victim suffered during the offense, the defendant’s
conduct must be “intended to make a victim’s fear or anxiety greater by a considerable amount.”
Hardy, 494 Mich at 441. The Court summarized: “The relevant inquiries are (1) whether the
defendant engaged in conduct beyond the minimum required to commit the offense; and, if so,
(2) whether the conduct was intended to make a victim’s fear or anxiety greater by a
considerable amount.” Id. at 443-444. See also People v Rodriguez, ___ Mich App ___, ___;
___ NW2d ___ (2019) (Docket No. 338914); slip op at 4 (under circumstances in which the
defendant “took no other action that could rise to the level of egregious conduct similar to
sadism, torture, or excessive brutality designed to substantially increase the fear and anxiety of
[the victim],” the trial court erred in assessing 50 points for OV 7). Assuming that defendant
made some form of the alleged threats to the victim, the record does not indicate that he made
the alleged threats during the commission of the offense with the intent to substantially increase
the victim’s fear and anxiety during the offense. Accordingly, the trial court did not correctly
interpret or apply MCL 777.37 in deciding to assess 50 points for OV 7. When these points are
subtracted from the total, defendant’s total OV assessment is reduced from 115 points to 65
points, changing the suggested sentencing range. Nevertheless, defendant was not sentenced
pursuant to the sentencing guidelines; instead, the trial court departed upward. In People v
Lockridge, 498 Mich 358, 395 n 31; 870 NW2d 502 (2015), the Court stated:
In cases such as this one that involve a minimum sentence that is an upward
departure, a defendant necessarily cannot show plain error because the sentencing
court has already clearly exercised its discretion to impose a harsher sentence
than allowed by the guidelines and expressed its reasons for doing so on the
record. It defies logic that the court in those circumstances would impose a lesser
sentence had it been aware that the guidelines were merely advisory. Thus, we
conclude that as a matter of law, a defendant receiving a sentence that is an
upward departure cannot show prejudice and therefore cannot establish plain
error.
Therefore, defendant is not entitled to a remand for resentencing.
V. PROPORTIONALITY OF THE DEPARTURE SENTENCE
Finally, defendant contends that the trial court’s departure sentence was not reasonable
because it violated the principle of proportionality. This claim is without merit.
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A sentence that departs from the sentencing guidelines suggested minimum sentence
range is reviewed for reasonableness pursuant to the principle of proportionality, “which requires
sentences imposed by the trial court to be proportionate to the seriousness of the circumstances
surrounding the offense and the offender.” People v Steanhouse, 500 Mich 453, 460; 902 NW2d
327 (2017), quoting People v Milbourn, 435 Mich 630, 636; 461 NW2d 1 (1990). In making this
reasonableness determination, the reviewing court looks at “the circumstances of [the] case, the
record, and the trial court’s statements during sentencing.” People v Walden, 319 Mich App
344, 351; 901 NW2d 142 (2017). A court abuses its discretion if it imposes a disproportionate
sentence. People v Rice, 235 Mich App 429, 445; 597 NW2d 843 (1999).
In relevant part, MCL 769.34(3)(b) provides:
(3) A court may depart from the appropriate sentence range established under the
sentencing guidelines set forth in [the statute] if the court has a substantial and
compelling reason for that departure and states on the record the reasons for
departure. All of the following apply to a departure:
* * *
(b) The court shall not base a departure on an offense characteristic or offender
characteristic already taken into account in determining the appropriate sentence
range unless the court finds from the facts contained in the court record, including
the presentence report, that the characteristic has been given inadequate or
disproportionate weight. [Emphasis added.]
The trial court concluded that the guidelines were assessed properly, but that it still had to
impose a sentence that was “reasonable and proportionate to the seriousness of the offense and
this offender, and the [c]ourt finds that the guidelines in this case are not reasonable.” Initially,
the court noted that because of the plea bargain, three counts of first-degree CSC, a life offense,
had been dismissed. Citing People v Armstrong, 247 Mich App 423; 636 NW2d 785 (2001), the
trial court stated that it could take into account defendant’s conduct that was dismissed as part of
a plea bargain. The Armstrong Court stated:
Defendant has an uncontrollable sexual attraction toward little boys,
apparently as a result of his history of sexual abuse. The trial court did not err in
finding that this factor was not adequately considered by the guidelines. . . . The
trial court also did not err in finding that the need to protect other children by the
sentence imposed is another factor not adequately considered by the guidelines. . .
. Further, the guidelines take into account psychological injury to the victim
requiring therapy, MCL 777.34, but do not take into account the violation of the
victim’s parents’ trust in defendant, the effect on the family occasioned by the
victim’s loss of trust in all men, including his own father, or the effect on the
victim and his sister from having to learn about sexual matters at such a young
age. We also note that the prosecutor’s decision, in exchange for defendant’s
guilty plea, to dismiss a charge of first-degree CSC, which carries a potential life
sentence, and the fact that defendant was not charged with attempted CSC for
-8-
trying to have the victim perform oral sex on him are additional factors that the
court can consider when deciding whether departure is warranted. . . . Therefore,
the trial court did not abuse its discretion in finding substantial and compelling
reasons for departing upward from the guidelines. [Id. at 425-426 (citations
omitted and emphasis added).]
In contrast to Armstrong, defendant claims that dismissed charges could not be
considered, citing an unpublished case. However, unpublished opinions are not precedential
authority, MCR 7.215(C)(1), whereas Armstrong, as a published opinion, is controlling. MCR
7.215(C)(2). The trial court properly considered the fact that defendant had been subject to three
life-offense counts of first-degree CSC that were dismissed by the plea bargain. Moreover, there
was record support for those charges, including defendant’s own admission. That defendant had
sexual intercourse with a 13 to14-year-old girl, his sister-in-law, on numerous occasions, each
time constituting a first-degree CSC offense, is clearly a substantial and compelling factor that
supports a departure from a sentencing guidelines range that was calculated for a single CSC III
offense.4
The court’s next reason for exceeding the guidelines range was the number of times
defendant had sexual intercourse with the victim. The court further noted that defendant sent
nude photographs of himself to the victim and solicited nude photographs of the victim. Citing
People v Horn, 279 Mich App 31; 755 NW2d 212 (2008), the court stated: “The [c]ourt finds
that the guidelines are inadequate in this regard as they do not account for the defendant’s actual
established pattern and practice of repeatedly victimizing the same individual.”5 This Court in
Horn found that “[a]n individual’s established pattern of predatory conduct toward a selected
victim clearly constitutes probative evidence of future behavior toward the victim.” Id. at 47.
The court next addressed the inadequacy of OV 10 [exploitation of vulnerable victim]
regarding psychological injury to the victim. MCL 777.40. The court concluded that, based on
the victim’s impact statement and the victim’s mother’s statement at sentencing, the 10 points
assessed for OV 10 were inadequate: “ten (10) points just doesn’t give us enough weight to
4
In arguing that the trial court could not consider the dismissal of the first-degree CSC charges,
or the multiplicity of first-degree CSC offenses established by defendant’s and the victim’s
statements to the investigating officer, defendant is arguing that defendant can only be compared
to a hypothetical defendant who committed one CSC III on a 13-year-old girl. Acceptance of
this argument would be inconsistent with the principle of proportional sentencing.
5
Defendant states: “The trial court did not state that these variables [OV 11, OV 12, and OV 13]
were not afforded adequate weight in determining [defendant’s] applicable range.” But that is
precisely what the court stated: “The [c]ourt finds that the guidelines are inadequate” with
respect to defendant’s repeated victimization of the victim. The trial court’s failure to
specifically use the terms “OV 11, OV 12, and OV 13” when it made its pronouncement does not
overcome the fact that its statement clearly indicated its determination that those OV assessments
were inadequate to reflect defendant’s behavior.
-9-
reflect the extensive psychological impact that these crimes have had on the victim—I mean, not
only to her own person, but she’s now estranged from her sister, her sister doesn’t talk to the rest
of the family, and those are all things that are not accounted for under this variable.” The court
then noted that because the conviction offense was not a homicide, it could not assess points
under OV 5 for psychological harm to the victim’s family. Defendant argues that the trial court
was precluded from considering this factor because the Legislature, by limiting OV 5 to
homicide cases, made a policy determination that the psychological harm to a victim’s family
could not be considered with regard to any other type of offense. Defendant cites no authority in
support of this claim, and it is clearly inconsistent with the whole sentencing system. Failure to
support a claim with caselaw or legal analysis results in abandonment of the claim. People v
Johnson, 315 Mich App 163, 199; 889 NW2d 513 (2016). Furthermore, where there is plainly
support for an aggravating factor that is not considered by the sentencing guidelines, it is
reasonable for the court to consider that factor in determining whether the guidelines should be
exceeded. “Relevant factors for determining whether an out-of-guidelines sentence is more
proportionate than a sentence within the guidelines range ‘include (1) whether the guidelines
accurately reflect the seriousness of the crime; (2) factors not considered by the guidelines; and
(3) factors considered by the guidelines but given inadequate weight.’ ” People v Odom, ___
Mich App ___; ___ NW2d ___ (Docket No. 339027; issued March 12, 2019), p 9, quoting
People v Dixon-Bey, 321 Mich App 490, 525; 909 NW2d 458 (2017) (emphasis added).6
Defendant argues that the victim’s age was accounted for in OV 10, and that a continuing
pattern of criminal behavior was considered in OV 11, OV 12, and OV 13. Defendant ignores
the trial court’s statement that these variables were inadequate to deal with the degree of criminal
conduct engaged in by defendant. Moreover, OV 10 deals with exploitation of a vulnerable
victim. MCL 777.40. Defendant was assessed 15 points for this OV, which involves predatory
conduct. MCL 777.40(1)(a). The age of the victim does not factor into the predatory conduct
factor; it instead applies to factor (b), the exploitation of the victim’s youth, which is assessed for
10 points. MCL 777.40(1)(b). Thus, the guidelines—as assessed—did not consider the victim’s
age in OV 10.
The court was precluded from assessing points for sexual penetrations outside the
sentencing offense in OV 11. MCL 777.41(2)(a) and (b). Defendant’s contention that this was
considered for OV 11 is misplaced. Likewise, OV 12 concerns contemporaneous criminal acts,
which the statute defines as those that occur within 24 hours of the sentencing offense and which
will not result in a separate conviction. MCL 777.42(2)(a)(i) and (ii). There was no evidence of
a contemporaneous criminal offense, so defendant’s contention that this was considered for OV
12 is misplaced.
OV 13 addresses continuing patterns of criminal behavior and contemplates consideration
of defendant’s other admitted criminal sexual penetrations of the victim. However, defendant
6
We acknowledge that our Supreme Court has scheduled oral argument on whether to grant the
defendant’s application for leave to appeal in Dixon-Bey. People v Dixon-Bey, 501 Mich 1066;
910 NW2d 303 (2018).
-10-
was only assessed 25 points for this variable based on “[t]he offense [being] part of a pattern of
[unspecified] felonious criminal activity involving 3 or more crimes against a person.” MCL
777.43(1)(c). The only factor that would approximate defendant’s behavior is (1)(a), which
involves “3 or more sexual penetrations against a person or persons less than 13 years of age.”
MCL 777.43(1)(a). The court could not assess this factor against defendant because it was not
established that the victim was less than 13 years of age. 7 Therefore, the trial court did not abuse
its sentencing discretion by determining that OV 13 did not adequately account for defendant’s
continuing pattern of criminal behavior; he did not simply commit at least three general felonious
crimes against a person, but between 20 and 50 sexual penetrations of a 13 to 14-year-old girl.
Defendant has failed to demonstrate that the trial court abused its sentencing discretion
by determining that the sentencing guidelines were inadequate to account for defendant’s
criminal behavior and that it was thus appropriate to depart upward from the guidelines.
However, defendant also argues that even if the trial court was justified in departing from the
guidelines, the court did not justify the degree of its departure.
We have determined that OV 7 was improperly assessed and that the total offense
variable assessment should therefore have been 65 points rather than 115 points. The suggested
minimum sentence range for defendant’s CSC III conviction would therefore be 51 to 85
months. Thus, the maximum-minimum sentence within the guidelines would be 85 months or
one month over seven years. The court instead imposed a minimum sentence of 120 months (10
years)—approximately 3 years longer than the sentencing guidelines would suggest.
At sentencing, after expressing its specific concerns (as detailed above), the court further
stated:
And the [c]ourt finds that the guidelines, you just can’t measure these
offenses in their proper context. The [c]ourt could have scored at least ninety (90)
points for Offense Variables, while the grids of these offenses, well, they don’t
allow the [c]ourt to account for anything more than seventy-five (75), and because
the guidelines do no accurately reflect the Offense Variable score, the [c]ourt
finds that the guidelines, even with the [c]ourt’s added OV 7, is [sic] inadequate.
* * *
And the [c]ourt wishes to focus this sentence on the protection of society
and the deterrence of other potential sex offenders, you know, others that are
similarly situated, that are contemplating whether they should engage in a selfish
act, maybe they’ll think twice.
7
Although the victim’s mother believed that defendant began having sexual relations with the
victim when she was 12 years old, the victim herself stated that the acts began when she was 13
years old.
-11-
So before imposing the sentence the [c]ourt wants to state that it can best
effectuate these goals by imposing the maximum sentence allowed by law under
this plea agreement, and it would depart upward to reach its chosen sentence,
even if the guidelines were scored differently, or if only one of the facts listed by
the Court were present.
Given the magnitude of defendant’s offense, the impact it had on the victim and the
victim’s family, the number of felonious criminal sexual assaults committed, and the young age
of the victim, assessing an extra three years on the minimum sentence does not strike this Court
as disproportionate. Given the nature of defendant’s criminal conduct, the trial court’s
determination that a guidelines sentence was not adequate was a reasonable determination. The
degree of departure—approximately three years beyond the maximum sentence suggested by the
guidelines—is not disproportionate.8 “[T]he key test [of proportionality] is whether the sentence
is proportionate to the seriousness of the matter, not whether it departs from or adheres to the
guidelines’ recommended range.” Milbourn, 435 Mich at 661. “Rather than impermissibly
measuring proportionality by reference to deviations from the guidelines, our principle of
proportionality requires ‘sentences imposed by the trial court to be proportionate to the
seriousness of the circumstances surrounding the offense and the offender.’ ” Steanhouse, 500
Mich at 474, quoting Milbourn, 435 Mich at 636. Contrary to these admonitions from
Steanhouse and Milbourn, defendant’s argument seeks to make departure from the sentencing
guidelines the sole determinant of whether defendant’s sentence is disproportionate. However,
the trial court’s statements make it clear that it was the seriousness of defendant’s conduct—not
the guidelines’ suggested minimum sentence range—that was the deciding factor behind its
sentencing decision. And given the seriousness of defendant’s conduct, the record amply
supports the trial court’s exercise of sentencing discretion.
8
This Court would compare its decision in People v Rosa, 322 Mich App 726, 748-749; 913
NW2d 392 (2018), where this Court concluded:
Considering the record and the trial court’s statements in support of the
sentence, the trial court did not abuse its discretion in departing from the
guidelines when sentencing defendant. Defendant’s long history of abusing KR,
the presence of a child during the assault, and the damage done to a family of four
children were not fully accounted for by the guidelines. We also conclude that
the extent of the departure was not disproportionate. The departure was 19
months from a guidelines maximum of 281 months, a proportional increase given
the nonguidelines considerations and which, in percentage terms, was an increase
of approximately 7%. As a result, the sentencing departure was “proportionate to
the seriousness of the circumstances surrounding the offense and the offender.”
Milbourn, 435 Mich at 636.
-12-
Affirmed.
/s/ Colleen A. O’Brien
/s/ Karen M. Fort Hood
/s/ Thomas C. Cameron
-13-
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264 A.2d 510 (1970)
Aubrey WILSON, Defendant Below, Appellant,
v.
The STATE of Delaware, Plaintiff Below, Appellee.
Supreme Court of Delaware.
March 9, 1970.
*511 Sheldon N. Sandler, Wilmington, for appellant.
Francis A. Reardon, State Prosecutor, Wilmington, for appellee.
WOLCOTT, C. J., and CAREY and HERRMANN, JJ., sitting.
WOLCOTT, Chief Justice:
This case presents constitutional questions rising out of the conviction of defendant for possession of a Molotov cocktail[*]
in violation of 11 Del.C. § 360. The statute involved reads:
"§ 360. Molotov cocktails or other explosive devices prohibited
"(a) Whoever manufactures, transfers, uses, possesses or transports any Molotov Cocktail or any other device, instrument or object designed to explode or produce uncontained combustion with intent to cause bodily or physical harm shall be guilty of a felony and shall be imprisoned for not less than 3 years nor more than 10 years.
"(b) Any person over 16 years old who violates the provisions of this section shall be prosecuted as an adult.
"(c) In any prosecution under this section, it is prima facie evidence of intent to cause bodily or physical harm if the accused had possession of the device prescribed by this section in a public place."
Defendant raises three grounds for appeal:
Whether 11 Del.C. § 360, (1) is so vague and indefinite as to violate due process of law; (2) raises a presumption in subparagraph (c) which deprives defendant of due process of law and violates his privilege against self-incrimination; (3) violates Art. 2, Del.Const., § 16, Del.C.Ann. by including in the body of the statute subjects not expressed in the title.
Before considering these contentions, we must observe that defendant has stated his grounds in terms too sweepingly broad. The constitutionality of a statute is considered in the light of the standing of the party who seeks to raise the question and of its particular application. It is an established principle of law that one may not urge the unconstitutionality of a statute if he is not harmfully affected by the particular feature of the statute alleged to be in conflict with the Constitution. Barrows v. Jackson, 346 U.S. 249, 73 S.Ct. 1031, 97 L.Ed. 1586.
With this fundamental in mind, we consider defendant's claims.
Defendant asserts that the phrase "any device, instrument, or object designed to explode or produce uncontained combustion" is too vague to inform defendant what type of devices are prohibited by the statute. It is clear that this defendant lacks standing to attack this portion of the Act. He was charged with possession of a Molotov cocktail, and there is no vagueness as to that term which has dictionary meaning.
The test which must be applied to defendant's contention concerning the presumption created by subparagraph (c) of § 360 has recently been spelled out by the United States Supreme Court. In Leary v. United States, 395 U.S. 6, 89 S.Ct. 1532, 1548, 23 L.Ed.2d 57, it was held:
"* * * a criminal statutory presumption must be regarded as `irrational' or `arbitrary,' and hence unconstitutional, unless it can at least be said with substantial assurance that the presumed fact *512 is more likely than not to flow from the proved fact on which it is made to depend. And in the judicial assessment the congressional determination favoring the particular presumption must, of course, weigh heavily."
How does § 360 fare when this standard is applied to the facts of this case?
The presumption, quoted above, authorizes the jury to infer from defendant's possession of a Molotov cocktail in a public place the necessary element of "intent to cause bodily or physical harm." We think it is important that a Molotov cocktail, as was discussed previously, is defined as an "incendiary bomb". We hold that it can be said with "substantial assurance" that a person who possesses such a device in a public place, "more likely than not", has the intent to cause bodily or physical harm.
Finally, we consider defendant's claim that 11 Del.C. § 360 violates Art. 2, Del. Const., § 16 by including material in subparagraphs (b) and (c) which are not expressed in the title. The provision of Art. 2, Del.Const., § 16 here invoked is, in pertinent part:
"No bill * * * shall embrace more than one subject which shall be expressed in its title."
This court has often held that the title of an act need not be an index of the details of the bill. It is sufficient if the title is so framed as to apprise a reasonable person, interested in the subject matter of the legislation, sufficiently to lead him to an inquiry into the body of the bill. State ex rel. Craven v. Schorr, Del.Supr. 11 Terry 193, 131 A.2d 158, 162 (1957).
The presumption raised by subparagraph (c) relates to elements of the offense stated in the title of the act. Thus, it is clearly permissible under our interpretation of Art. 2, Del.Const., § 16.
The defendant here lacks standing to attack any possible title deficiency as to juveniles in subparagraph (b), because at the time of trial he was over 18 years of age and thus not affected by that provision.
We affirm the judgment of conviction.
UPON MOTION FOR REARGUMENT
Defendant, on motion for reargument, urges his standing to attack the constitutionality of 11 Del.C. § 360(b). Defendant states that while he was over 18 years of age at the time of his trial, he was only 17 at the time he was charged, and therefore, except for subparagraph (b), he would have been tried in Family Court.
Though the facts regarding his age which he now presents should have been brought forward long before this stage, nevertheless, we will assume arguendo both that these facts are true and that defendant has standing to attack the constitutionality of subparagraph (b). See State v. Fowler, 6 Storey 519, 194 A.2d 558 (Del.Super.Ct. 1963).
It is unnecessary to reiterate what we have said above regarding the scope of Art. 2, Del.Const., § 16. Suffice it to say that, in our view, the title of the bill was adequate notice to all persons interested or concerned with Molotov cocktails to make inquiry into the bill to discover if they were affected, including the identity of the court in which they could be prosecuted. State ex rel. Craven v. Schorr, Del.Supr. 11 Terry 193, 131 A.2d 158 (1957).
The motion for reargument is denied.
NOTES
[*] The American Heritage Dictionary (1969 Ed.) defines "Molotov cocktail" as: "A makeshift incendiary bomb made of a breakable container filled with flammable liquid and provided with a rag wick."
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838 F.2d 1212
Leev.Continental Casualty Ins.
NO. 87-3111
United States Court of Appeals,Fifth Circuit.
JAN 21, 1988
1
Appeal From: M.D.La.
2
REVERSED.
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316 B.R. 485 (2004)
In re THE STERLING RUBBER PRODUCTS COMPANY, Debtor.
No. 03-40549.
United States Bankruptcy Court, S.D. Ohio, Western Division.
October 25, 2004.
*486 Lawrence T. Burick, Charles D. Shook, Dayton, OH, for debtor.
Timothy R. Dodd, Evansville, IN, Robert R. Faulkner, Evansville, IN, Arthur R. Hollencamp, Dayton, OH, for creditor.
Mary Anne Wilsbacher, U.S. Trustee Office, Columbus, OH, U.S. Trustee.
LAWRENCE S. WALTER, Bankruptcy Judge.
DECISION OF THE COURT:
1) DENYING SPENCER CETRAL DEVELOPERS, LLC'S MOTION TO HAVE PROOF OF CLAIM DEEMED TO BE TIMELY FILED
-AND-
2) DENYING SPENCER CETRAL DEVELOPERS, LLC'S MOTION FOR RELIEF FROM JUDGMENT OR ORDER PUSUANT TO FEDERAL RULE OF BANKRUPTCY PROCDURE 9024
This matter is before the court on the following filings of record: Creditor Spencer Central Developers, LLC's Motion to Have Proof of Claim Deemed to be Timely Filed and Response to Debtor's and Debtor-in-Possession's Remaining Objections of Record [Doc. 128]; Spencer Central Developers, LLC's Motion for Relief from Judgment or Order Pursuant to Federal Rule of Bankruptcy Procedure 9024 [Doc. 132]; Spencer Central Developers, LLC's Response to Debtor's and Debtor-in-Possession's Objections of Record [Doc. 134]; Objection of Debtor and Debtor in Possession, the Sterling Rubber Products Company, to the Motion of Spencer Central Developers, LLC for Relief from Judgment or Order Pursuant to Federal Rule of Bankruptcy Procedure 9024 [Doc. 140]; Reply of Debtor and Debtor in Possession, the Sterling Rubber Products Company, to Response of Spencer Central Developers, LLC to Debtors' and Debtor-in-Possession's Objections of Record [Doc. 142]; and Objection of Debtor and Debtor in Possession, the Sterling *487 Rubber Products Company, to Motion Filed by Spencer Central Developers, LLC to Have Proof of Claim Deemed to be Timely Filed and Response to Debtor's and Debtor-in-Possession's Remaining Objections of Record [Doc. 144].
Creditor Spencer Central Developers, LLC ("SCD") filed its motions for relief from judgment and to have its claim deemed timely filed in response to the court's Order Sustaining Objection of Debtor and Debtor in Possession, the Sterling Rubber Products Company, to Proof of Claim of Spencer Central Developers, LLC and Disallowing Claim for All Purposes [Doc. 122]. The court order was entered after SCD failed to file a timely response to Debtor Sterling Rubber Products Company's objection to SCD's proof of claim [Doc. 105].
The court held a hearing on SCD's motions and the Debtor's responses and objections on August 5, 2004. The following constitutes the courts findings of fact and conclusions of law.
FACTUAL AND PROCEDURAL BACKGROUND
On April 15, 2004, Creditor SCD filed its proof of claim in this bankruptcy case in the amount of $256,238.33 based on a prepetition judgment and a claim for attorney fees. [Proof of Claim # 98.] The proof of claim was filed on April 15, 2004 which was one day after the April 14, 2004 bar date set by court order for the filing of proofs of claim in this Chapter 11 bankruptcy case. [Doc. 62, Order Fixing Proof of Claims Bar Date.] A Notice of Last Day to File Proofs of Claim [Doc. 64] was sent to all creditors providing the bar date of April 14, 2004 and this notice: Whether or not your claim is scheduled, you are permitted to file a Proof of Claim. If your claims [sic] is not listed at all or if your claim is listed as disputed, contingent, or unliquidated, then you must file a Proof of Claim by the deadline listed above or you may not be paid any money on your claims against the debtor in the bankruptcy case.
SCD's claim was scheduled as "disputed" and SCD acknowledges that it was required by the language of the notice to file its claim by April 14, 2004.
Because SCD filed its proof of claim one day after the deadline, the Debtor filed an objection to SCD's proof of claim with a notice of objection. [Doc. 105.] In the objection, the Debtor argued that the claim should be disallowed in full for two reasons: 1) for the untimely filing of the claim; and 2) for substantive reasons based on a Release Agreement with an entity related to the Debtor that, the Debtor argues, releases the Debtor from liability for SCD's claims against it. Furthermore, the Debtor asserted that, if the claim were to be allowed, it should be reduced by the $32,616.29 in attorney fees requested by SCD because no attorney fee award was ever granted to SCD in any court.
On the final page of the Debtor's objection, below the certificate of service, the Debtor includes what is titled as a "Notice of Objection to Claim." [Doc. 105, p. 9.] The notice is highlighted by a text box (a lined border framing the text), and certain salient language is bolded and underlined. Id. The notice includes the following language:
NOTICE OF OBJECTION TO CLAIM
Debtor and Debtor in Possession, The Sterling Rubber Products Company ("SRP"), has filed an objection to your claim in this bankruptcy case.
Your claim may be reduced, modified or eliminated. You should read these papers carefully and discuss *488 them with your attorney, if you have one.
If you do not want the court to eliminate or change your claim, then on or before June 2, 2004, you or your attorney must file with the court a written response to the objections, explaining your position, at the Clerk's Office, United State [sic] Bankruptcy Court for the Southern District of Ohio, Dayton Office, 120 W. Third Street, Dayton, Ohio 45402.
If you mail your response to the court for filing, you must mail it early enough so that the court will receive it on or before the date stated above.
You must also mail a copy to Lawrence T. Burick, Esq., Thompson Hine LLP, 2000 Courthouse Plaza, N.E., Dayton, Ohio 45402.
If you or your attorney do not take these steps, the court may decide that you do not oppose the objection to your claim.
Id. (emphasis, including bold and underlining, is part of the text of the actual notice). The Debtor's objection to SCD's proof of claim and notice were served by regular mail on SCD's attorney, and filed with the court, on May 3, 2004. Id.
SCD did not file a response to the Debtor's objection within the time period proscribed in the notice and the pertinent Local Bankruptcy Rule. Following the expiration of the deadline for SCD to file a response to the Debtor's objection, the court entered an order on June 7, 2004 noting that no response to the Debtor's objection had been filed and disallowing SCD's claim in full. [Doc. 122.]
On June 14, 2004, SCD filed its Motion to Have Proof of Claim Deemed to Be Timely Filed [Doc. 128] and, subsequently, a Motion for Relief from Judgment or Order [Doc. 132]. The court held a hearing to consider the motions and Debtor responses on August 5, 2004.
At the hearing, the Debtor did not dispute the evidence establishing that SCD timely prepared and sent its proof of claim to the bankruptcy court on April 13, 2004, one day prior to the deadline. [Doc. 128, Exs. A and B.] SCD sent the parcel using the U.S. Postal Service's guaranteed overnight delivery. Id. A tracking notice from the U.S. Postal Service confirms that while the proof of claim was accepted by the postal service for overnight delivery on April 13, 2004, the parcel did not arrive at the bankruptcy court until April 15, 2004, one day beyond the deadline and the guaranteed delivery date. Id. SCD argues that its proof of claim should be deemed timely filed because the circumstances leading to the untimely filing were outside of SCD's control.
With respect to SCD's failure to file a response to the Debtors' objection to the proof of claim, SCD's attorneys stated that they did not read the deadline in the notice attached to the Debtor's objection because it was inconspicuously placed after the certificate of service. [Doc. 105, p. 9.] Consequently, they did not realize that a response to the objection was necessary until after the deadline had passed. Furthermore, they argue that the language of the notice is vague and suggests that SCD's response to the Debtor's objection was permissive rather than mandatory. SCD's attorneys assert that they mistakenly believed the court would hold a hearing on the Debtor's objection whether or not they responded. Consequently, they were surprised by the court order granting the Debtor's objection, and disallowing the claim. They then filed a motion to have the proof of claim deemed timely filed and a motion for relief from the order granting the Debtor's objection.
*489 LEGAL ANALYSIS
Creditor SCD requests that the court reconsider the order disallowing SCD's claim and deem the proof of claim timely filed. Pursuant to 11 U.S.C. § 502(j) and Fed. R. Bankr.P. 3008, with proper notice and hearing, a court may reconsider the disallowance of a claim "for cause" and "according to the equities of the case." 11 U.S.C. § 502(j); Fed. R. Bankr.P. 3008. See also Neal Mitchell Associates v. Braunstein (In re Lambeth Corp.), 227 B.R. 1, 7 (1st Cir. BAP 1998). The court exercises broad discretion in its determination to reconsider a disallowed claim under § 502(j). Lambeth, 227 B.R. at 7, n. 10.
SCD would like the court to determine that cause exists to deem the claim timely filed because SCD filed its proof of claim only one day late and the untimeliness of the filing was caused by the postal service, a circumstance arguably outside of the creditor's control. See Pioneer Investment Services Co. v. Brunswick Associates Limited Partnership, 507 U.S. 380, 388, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993) (noting that a court may accept a late filed proof of claim under the "excusable neglect" standard of Fed. R. Bankr.P. 9006 when the late filing was caused by inadvertence or mistake as well as circumstances outside the creditor's control).
However, before the court can reach the issue of the untimely filing of SCD's proof of claim, the court must consider the exacerbating failure of SCD to respond to the Debtor's objection to the proof of claim. The Debtor filed its objection based on both SCD's untimely filing of the claim as well as for substantive reasons including that a portion of the claim was for attorney fees in the state court matter that SCD had never been awarded and that a release agreement waives the Debtor's liability. It is SCD's failure to respond to the Debtor's objection, rather than the untimeliness of the proof of claim itself, that led the court to enter an order disallowing the claim under Local Bankruptcy Rule ("LBR") 3007-l(c) and (d).
SCD requests relief from the default order disallowing its claim following its failure to respond to the objection pursuant to Fed. R. Bankr.P. 9024 making the provisions of Fed.R.Civ.P. 60(b) applicable in bankruptcy proceedings.[1] This rule allows the court to grant a party relief from a final order or judgment for, among other reasons, "mistake, inadvertence, surprise, or excusable neglect." Fed.R.Civ.P. 60(b)(1).
In Pioneer, the Supreme Court reviewed the meaning of the term "excusable neglect" in the context of Chapter 11 bankruptcies and the bankruptcy rules. 507 U.S. 380, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993). The court concluded that the term, in this context, is a "somewhat `elastic concept' and is not limited strictly to omissions caused by circumstances beyond the control of the movant." Id. at 392, 113 S.Ct. 1489 (further citations omitted). In the final analysis, the Supreme Court concluded that the process of determining what types of neglect are considered excusable, "is at bottom an equitable one, taking account of all relevant circumstances surrounding the party's omission." Id. at 395, 113 S.Ct. 1489. The Supreme Court established several nonexclusive factors to consider in this analysis: 1) the *490 danger of prejudice to the debtor; 2) the reason for the delay including whether it was within the reasonable control of the movant; 3) the length of the delay and its potential impact on the judicial proceedings; and 4) whether the movant acted in good faith. Id.
The Supreme Court further specified one factor that should not be considered by the courtthe appropriateness of penalizing a party for its attorney's omission or mistake. Id. at 396, 113 S.Ct. 1489. Instead, the Court recognized that clients must be held accountable for the acts and omissions of their attorneys. Id. (noting that "[a]ny other notion would be wholly inconsistent with our system of representative litigation, in which each party is deemed bound by the acts of his lawyeragent"). Related to that is the Supreme Court's acknowledgement that while the concept of "excusable neglect" may include mistakes and carelessness, it does not generally extend to an attorney's "inadvertence, ignorance of the rules, or mistakes construing the rules ...." Id. at 392, 113 S.Ct. 1489. Nor in assessing the culpability of the attorney in missing a bar date did the court give much weight to the fact that the attorney experienced upheaval in his law practice at the time the deadline was missed. Id. at 398,113 S.Ct. 1489.
In reviewing the factors considered determinative by the Supreme Court, this court has concluded that only one factor supports SCD's request for reconsideration. Most of the other factors, especially the reasons for SCD's delay, demonstrate that SCD's actions do not amount to excusable neglect. Consequently, SCD's request for reconsideration must be denied.
A. Danger of Prejudice
The first factor the court considers under Pioneer is the danger of prejudice to the Debtor caused by SCD's neglect. Id. at 395, 113 S.Ct. 1489. The court concludes that, beyond the expense of litigating this matter, the Debtor has not faced significant prejudice because of SCD's failure to respond to the objection. The Debtor has not filed a plan of reorganization in reliance on the disallowance of the claim nor have creditors relied on the disallowance in voting on a plan of reorganization. See In re Freightway Corp., 171 B.R. 41, 43 (Bankr.N.D.Ohio 1994); In re Waggoner, 157 B.R. 433, 436 (Bankr. E.D.Ark.1993). The lack of prejudice to the Debtor supports granting SCD reconsideration of the order disallowing its claim.
B. Reason for the Delay
Next, the court turns to the factor considered by many circuits to be preeminent in the Pioneer analysis, the reason for the delay. See In re Kmart Corp., 381 F.3d 709, 715 (7th Cir.2004); United States v. Torres, 372 F.3d 1159, 1163 (10th Cir. 2004) (noting that fault in the delay remains, "perhaps the most important single factorin determining whether neglect is excusable"); Graphic Communications International Union, Local 12-N v. Quebecor Printing Providence, Inc., 270 F.3d 1, 5 (1st Cir.2001) (stating that while Pioneer provides a more forgiving standard for excusable neglect than prior case law, "there still must be a satisfactory explanation for the late filing" and "the excuse given for the late filing must have the greatest import"); Lowry v. McDonnell Douglas Corp., 211 F.3d 457, 463 (8th Cir. 2000); Allied Domecq Retailing USA v. Schultz (In re Schultz), 254 B.R. 149, 153 (6th Cir.BAP2000) (noting that courts addressing excusable neglect in the context of filing an untimely notice of appeal have focused on the reason for the delay).
SCD acknowledges receiving the Debtor's objection in a timely fashion. SCD *491 provides only two bases for its failure to respond to the objection: 1) the notice of the deadline provided in the Debtor's objection was inconspicuously placed at the end of the objection below the certificate of service; and 2) the language of the notice was vague and, if read, would not have provided SCD with clear notice that its claim would be disallowed absent a response to the objection. The court concludes that neither of these reasons for SCD's delay constitutes excusable neglect.
SCD argues that it did not read the inconspicuously placed notice containing the thirty day response deadline. While SCD is correct that the notice was placed at the end of the Debtor's objection after the certificate of service, the notice was referred to in the caption of the Debtor's objection. [Doc. 105.] Moreover, except for its placement at the end of the objection, the notice was otherwise emphasized. The notice was highlighted by placement in a text box and was titled in bold and underlined letters, "NOTICE OF OBJETION TO CLAIM." [Id., p. 9.] Certain lines within the notice were also highlighted, including the words "Your claim may be reduced, modified or eliminated" and the date by which the response must be filed, "June 2, 2004." Id. Furthermore, the Debtor's inclusion of the notice comports with the requirements of LBR 3007-1(b). Consequently, the court rejects SCD's argument that the notice was inconspicuous.
SCD's argument suggests that it should not have to page through an entire document to determine its deadline for response. The court disagrees. In many instances, a movant is not required to provide an opponent with any notice of the deadline for a response. See PDS Engineering & Construction, Inc. v. Link Corp. (In re Lyman), 254 B.R. 517, 519-20 (Bankr.D.Conn.2000) (noting that counsel should not rely on counsel's adversary to provide information on the relevant procedural rules). Instead, the opponent is charged with knowledge of the applicable rules and statutes. Id. In this case the applicable rule is LBR 3007-l(c) and (d) which makes clear the need for the creditor to timely respond to an objection in order to preserve the creditor's claim.[2] This local rule is prominently labeled "CLAIMSOBJECTIONS" and its language states, in pertinent part:
(c) Response. The claimant whose claim is the subject of a filed objection shall file a response to the objection and serve a copy thereof as directed by the notice not later than thirty (30) days after service of the objection. Any response shall state clearly in its caption the objection to which it is responding.
(d) Failure to Respond. If a claimant fails to file a timely response to an objection, the claimant shall be deemed to have waived any objection to the relief sought and the objecting party shall submit an appropriate order.
LBR 3007-1. SCD did not provide a reason for failing to read and follow the court's local rule and, as stated previously, neither ignorance nor a misconstruction of a procedural rule constitutes excusable neglect. See Pioneer, 507 U.S. at 392, 113 S.Ct. 1489; McCurry v. Adventist Health System/Sunbelt, Inc., 298 F.3d 586, 594 (6th Cir.2002) (party was not entitled to relief from judgment under Rule 60(b) because the attorney's misinterpretation of the law or a strategic miscalculation does not constitute mistake justifying a second bite of the apple); HML II, Inc. v. Ginley (In re HML II, Inc.), 234 B.R. 67, 71-2 *492 (6th Cir. BAP 1999), affd, 215 F.3d 1326 (Table), 2000 WL 659140 (6th Cir. May 11, 2000) (holding that counsel's unfamiliarity with bankruptcy procedure does not constitute excusable neglect where counsel misread the deadline for filing an appeal under Fed. R. Bankr.P. 8002); Marks Management Corp. v. Reliant Manufacturing, Inc., 268 B.R. 505, 514-15 (E.D.Mich.2001), affd, 74 Fed.Appx. 493, 2003 WL 21995438 (6th Cir. Aug.18, 2003) (noting that a failure to respond to a motion for summary judgment by the deadline set by the local bankruptcy rules, leading the court to grant the unopposed motion, did not constitute excusable neglect); Artificial Intelligence Corp. v. Casey (In re Casey), 198 B.R. 918, 924-25 (Bankr.S.D.Cal.1996) (noting that a mistake in interpreting and applying local and federal rules is not excusable neglect).
Finally, the court turns to SCD's argument that, had the creditor read the notice, the vague language of the notice did not make clear the need for SCD to respond to the Debtor's objection to preserve its claim. Specifically, SCD argues that the inclusion of the word "may" in the Debtor's notice suggests that filing a response to the objection was optional and that a failure to respond would not lead the court to disallow the claim without further hearing. The court disagrees with this contention.
The language of the Debtor's notice comports with the language of Official Bankruptcy Form 20B promulgated by the Judicial Conference of the United States under the authority granted in Fed. R. Bankr.P. 9009. Official Form 20B, to be used by parties to provide notice to creditors of an objection to claim, includes the word "may" in only one location, where the official form notes, in bold and underlined terms, "Your claim may be reduced, modified or eliminated." Official Form 20B. However, the word "may" used in this phrase refers to the court's discretion in the actions it may take against the creditor's claim rather than the discretion of the creditor to respond to the objection. Regarding the necessity of a creditor to respond to the objection to preserve its claim, the official form states:
If you do not want the court to eliminate or change your claim, then on or before (date), you or you lawyer must:
{If required by local rule or court order.}
File with the court a written response to the objection, explaining your position at
{address of bankruptcy clerk's office}
....
If you or your attorney do not take these steps, the court may decide that you do not oppose the objection to your claim.
See Official Form 20B. The language of Official Form 20B, and the identical language of the Debtor's notice, clearly state that a creditor must respond to an objection to its claim or the court may reduce, modify or eliminate the claim. In fact, the purpose of the language of Official Form 20B, and the identical language of the Debtor's notice, is to provide creditors with:
... a uniform, plain English explanation of what they must do to respond to objections to their claims .... The form is intended to make it clear to creditors that the court may eliminate or change their claims unless they take the specified steps to oppose the objections.
See Official Form 20B Instructions.
It is apparent that SCD's only basis for reconsideration of the order disallowing its claim is the failure of its counsel to read the notice and pertinent procedural rule *493 establishing the deadline for responding to an objection to claim. The court concludes that neither of these reasons for delay constitutes excusable neglect. See Vaughan v. Mortgage Lenders Network (In re Bradbury), 310 B.R. 313, 319 (Bankr.N.D.Ohio 2003) (noting that the need for the neglect to be "excusable" under Pioneer is to deter creditors or other parties from freely ignoring court ordered deadlines in the hope of winning a permissive reprieve under the procedural rules).
Even if this court were to ignore SCD's conduct in failing to respond to the claim objection and instead analyzed only SCD's fault in filing its proof of claim one day late, SCD's actions still fall short of excusable neglect. Considering the magnitude of SCD's claim and SCD's knowledge of this bankruptcy case from its inception, it is difficult to justify SCD's waiting until the last possible moment to transmit the claim via the U.S. Mail. This bankruptcy case was filed December 4, 2003. Notice of the claims bar date was served on all creditors on January 24, 2004. SCD has supplied no reason for waiting until April 13, 2004, the day before the bar date, to mail its proof of claim.
Once the package was mailed, SCD argues that the matter was beyond its control. But, SCD could have tried to track the shipment or at least called the clerk's office to ensure that the claim had been received. If delivery on the final day was in doubt, SCD could have faxed a duplicate claim to local counsel in Dayton who could have hand-delivered the claim to the clerk's office for filing. In the alternative, SCD might have sent a duplicate claim by courier or even had one or its agents or attorneys make the trip to Dayton to ensure timely filing. The bankruptcy court was Electronic Case Filing ("ECF") compliant, so counsel for SCD could also have instantaneously filed a motion on the claims bar date requesting a one or two day extension of the bar date and explaining the situation as contemplated by Fed. R. Bankr.P. 9006(b). At a minimum, SCD might have checked with the court by telephone or on PACER[3] the day after the filing deadline to ascertain whether the claim was filed and, having discovered the late filing, could have then filed its motion to file its claim out of time. In fact, SCD did none of these things and instead waited until 60 days had passed, an objection to the claim had been filed, and the court had entered an order disallowing the claim. While the neglect is quite apparent here, the excuse for it is not.
C. Length of the Delay
Another relevant factor under the Pioneer analysis is the length of the delay and, in this case, the court considers it significant. If the court focused on the length of delay fbr SCD to respond to the Debtor's objection, the length could have been infinite. SCD erroneously believed it had no responsibility to respond during the thirty-day objection period, expecting the court to protect SCD's rights by holding a hearing on the objection regardless of whether or not SCD filed a response. SCD has provided no basis for this belief and it is contrary to the clear language of LBR 3007-1 and customary practice in bankruptcy court.[4] Without any articulated *494 basis for SCD's erroneous belief, SCD's delay beyond the thirty-day period provided for response by local rule is patently unreasonable.
SCD urges the court to focus on its short one-day delay in filing its claim on April 15, 2004. However, following the late filing, even upon receipt of an objection to its claim, SCD took no action to ensure that its untimely claim was deemed allowed. It was only after the court's order disallowing the claim that SCD finally requested judicial relief. SCD took no action until sixty (60) days following the original bar date when SCD submitted its motion to have its claim deemed timely filed on June 14, 2004. The court considers sixty (60) days a significant delay before taking action, especially under these circumstances where the claim is filed at the last minute with the attendant risk of late filing. See Kmart Corp., 381 F.3d at 714 (noting that the bankruptcy court was "well within its province" to consider the creditor's eighty-one day delay in requesting judicial relief under Fed. R. Bankr.P. 9006 rather than the fact that the proof of claim itself was only filed one day past the bar date).
D. Good Faith
Finally, the court turns to the issue of the creditor's good faith. Although not significantly questioned by the Debtor, the failure of SCD to file a proof of claim "until the proverbial `eleventh hour'" and a significant delay prior to seeking judicial relief shows a lack of diligence if not good faith. Id. at 715-16 (noting that the creditor's failure to send the proof of claim until the day prior to the bar date, failure to follow up with the claims processing agency and then, following the discovery of the untimeliness of the filing, failure to seek judicial relief for over a month shows a lack of diligence and not a strong showing of good faith). Nonetheless, as the Debtor did not question the creditor's good faith, the court finds that this factor neither supports nor undercuts the court's final determination. Id.
CONCLUSION
The court understands the significance of this matter to both the Debtor and to SCD because of the dollar amount of the judgment forming the basis of SCD's claim. The court concludes that to receive relief from the order disallowing its claim, SCD was required to demonstrate some excusable neglect for failing to respond to the Debtor's objection beyond a failure to read the attached notice or to become familiar with the applicable Local Bankruptcy Rules and bankruptcy procedure. SCD was unable to demonstrate that its error amounts to excusable neglect. After reviewing all relevant factors, the court holds that SCD is not entitled to relief from the order disallowing its claim.
WHEREFORE, the court denies Creditor Spencer Central Developers, LLC's Motion to Have Proof of Claim Deemed to be Timely Filed [Doc. 128] and denies Creditor Spencer Central Developers, LLC's Motion for Relief from Judgment or Order Pursuant to Federal Rule of Bankruptcy Procedure 9024 [Doc. 132].
SO ORDERED.
NOTES
[1] There are some limitations to the applicability of Rule 60(b) in bankruptcy proceedings including that the one year limitation on bringing the motion for reconsideration is not applicable to reconsideration of orders disallowing claims entered without a contest. Fed. R. Bankr.P. 9024. The court concludes that none of the limitations is relevant to its analysis.
[2] LBR 3007-1 derives from Fed. R. Bankr.P. 3007 and its requirement that service of a claim objection occur at least thirty (30) days prior to any hearing.
[3] PACER is an acronym that stands for Public Access to Court Electronic Records. This computerized service, provided by the U.S. Judiciary, is designed to make official case and docket information from the federal courts available to the public electronically.
[4] Bankruptcy Code Section 102 provides the rules of construction used to construe both the statutes of the Bankruptcy Code as well as bankruptcy procedural rules. 11 U.S.C. § 102; Fed. R. Bankr.P. 9001. Pursuant to § 102, the phrase "after notice and hearing" or similar phrase is construed as authorizing an act without an actual hearing if notice is proper and such hearing is not requested timely by a party in interest. 11 U.S.C. § 102(1).
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755 P.2d 139 (1988)
91 Or.App. 350
In the matter of the Compensation of the Beneficiaries of Mario SCARINO, Deceased, Claimant.
Mary Ann Scarino, Petitioner,
v.
SAIF Corporation, Respondent.
TP-87002; CA A45358.
Court of Appeals of Oregon.
Argued and Submitted April 20, 1988.
Decided June 1, 1988.
Robert K. Udziela, Portland, argued the cause for petitioner. With him on the brief was Pozzi, Wilson, Atchison, O'Leary & Conboy, Portland.
Darrell E. Bewley, Asst. Atty. Gen., Salem, argued the cause for respondent. With him on the brief were Dave Frohnmayer, Atty. Gen., and Virginia L. Linder, Sol. Gen., Salem.
Before RICHARDSON, P.J., and NEWMAN and DEITS, JJ.
RICHARDSON, Presiding Judge.
Petitioner seeks review of a third party distribution order of the Workers' Compensation Board. She is the surviving spouse of a worker who died of an occupational disease; compensation was paid by SAIF. She was also the personal representative of his estate in Washington. As such, she brought a wrongful death action in the United States District Court for the Western District of Washington against various manufacturers and suppliers of the asbestos which caused the decedent's disease. After she obtained a judgment of approximately $250,000 in that action, she filed a "ratification of covenants and disbursement of funds" in the Washington probate court, proposing to disburse approximately $97,000 of the damages to herself and approximately $16,000 to each of the decedent's adult children. Petitioner is a "beneficiary" under the Oregon Workers' Compensation Law; the parties agree that the adult children are not. ORS 656.005(2); ORS 656.005(5). However, all four are "beneficiaries" of the wrongful death action. RCW 4.20.020. The issue is whether the base amount for calculating the share of the judgment to which SAIF is entitled under ORS 656.593 should or should not include the damages allocated to the children. The Board concluded that it should. We reverse.
ORS 656.580 provides:
"(1) The worker or beneficiaries of the worker, as the case may be, shall be paid the benefits provided by ORS 656.001 to 656.794 in the same manner and to the same extent as if no right of action existed against the employer or third party, until damages are recovered from such employer or third party.
"(2) The paying agency has a lien against the cause of action as provided by ORS 656.591 or 656.593, which lien *140 shall be preferred to all claims except the cost of recovering such damages."
ORS 656.593(1) provides, as pertinent:
"If the worker or the beneficiaries of the worker elect to recover damages from the employer or third person, notice of such election shall be given the paying agency by personal service or by registered or certified mail. The paying agency likewise shall be given notice of the name of the court in which such action is brought, and a return showing service of such notice on the paying agency shall be filed with the clerk of the court but shall not be a part of the record except to give notice to the defendant of the lien of the paying agency, as provided in this section. The proceeds of any damages recovered from an employer or third person by the worker or beneficiaries shall be subject to a lien of the paying agency for its share of the proceeds as set forth in this section * * *."
Petitioner argues, inter alia:[1]
"[U]nder Washington law, while the right to bring an action for wrongful death vests in the personal representative, benefits of such an action belong to persons designated in the statute as beneficiaries, and the personal representative is merely the statutory agent or trustee acting in favor of the designated statutory beneficiaries * * *.
"[Petitioner] is the sole statutory beneficiary, under Oregon's Workers' Compensation Law, to benefits payable by SAIF. Thus, only her share of the proceeds of the third party judgment is subject to SAIF's lien. The Board erred in distributing to SAIF a portion of the third party judgment that was obtained for the benefit of [decedent's] grown children, who are beneficiaries under the probate laws of the State of Washington, but are not beneficiaries under Oregon's Workers' Compensation Law."
SAIF argues that its lien under ORS 656.580(2) is not against the proceeds received by a particular beneficiary, "but against the cause of action." That argument is premised on less than all of the relevant statutory language. ORS 656.580(2) gives SAIF a "lien against the cause of action as provided by ORS 656.591 or 656.593." (Emphasis supplied.) ORS 656.593(1) provides that the "proceeds of any damages recovered from an employer or third person by the worker or beneficiaries shall be subject to a lien of the paying agency." (Emphasis supplied.)
SAIF also makes a related contention:
"The total of the proceeds recovered from the third party is subject to the lien, and no part of that recovery can be allocated to persons outside of the workers' compensation system to defeat the lien or any part of it."
SAIF relies on SAIF v. Cowart, 65 Or. App. 733, 738, 672 P.2d 389 (1983), where we agreed with the argument that the "statutory scheme does not authorize distribution of any portion of a claimant's recovery to a party who, like claimant's wife, has a separate claim outside the workers' compensation system." (Emphasis supplied; footnote omitted.)
In Cowart, the worker and his wife brought an action against a third party tortfeasor, stating separate claims for his personal injuries and for her loss of consortium. They sought and obtained SAIF's approval of a $65,000 settlement. See ORS 656.587. When the approval was sought and given, it was understood by the parties that the entire amount of the proposed *141 settlement was for the husband's claim. 65 Or App at 736-37. However, he and his wife, together with their attorneys, later decided to "allocate" $15,000 of the settlement to the wife's claim.
There are many differences between this case and Cowart. The most salient is that, here, what petitioner did was analogous to what we said that the claimant in Cowart could have done but did not:
"[T]he parties agreed to a settlement of claimant's cause of action for $65,000; he thereafter attempted to change the agreement. Separate provision could have been made for claimant's wife's claim for loss of consortium prior to the time claimant sought SAIF's approval of the settlement, but it was not. Claimant's unilateral decision that $15,000 of the proceeds be allocated to her claim came too late." 65 Or. App. at 738, 672 P.2d 389. (Emphasis supplied.)
Under the Washington wrongful death law, RCW 4.20.010 et seq, an action may be maintained by a personal representative for the benefit of various persons, including the spouse and children of the decedent. Petitioner was the personal representative as well as a beneficiary of the action. However, it was only in the latter capacity that she could obtain any personal recovery through the action, and she did not do that until, as plaintiff and personal representative, she allocated or disbursed the proceeds of the judgment to herself and the other beneficiaries of the action.
This case is the converse of Cowart. The claimant there sought to divert part of the already ascertained and approved amount of the settlement to his wife. Here, petitioner had obtained no recovery, and her share of the tort judgment was not ascertained until the children's shares of the damages were simultaneously allotted. Those shares were never part of her recovery.[2]
We agree with petitioner's argument, and we conclude that SAIF erred by including the children's damages in the third party distribution calculation. Petitioner asks that the third party distribution order which she proposed "should be ordered by this Court." We consider the more appropriate disposition to be for the Board to make the distribution determination on remand.
Reversed and remanded.
NOTES
[1] Among her other arguments is that the "Board wrongly asserted jurisdiction over proceeds of an estate in Washington" and:
"The Board, rejecting [petitioner's] position below, wrongfully asserted that because the `Ratification' filed by [petitioner] in the Probate Court in Washington was not a `final order' of the Washington Court, but merely her `desire' to disburse the funds in a particular fashion, it was not usurping the decision of the Washington Probate Court. The Board was wrong, in that pursuant to Washington Law, absent objection within 30 days, a proposed distribution by the personal representative of an estate becomes the final order of the Probate Court, without necessity of the entry of a decree. See RCW 11.68.110."
The grounds for our disposition make it unnecessary for us to reach that argument, and we expressly do not.
[2] Whether our reasoning reaches beyond the wrongful death action context is a question that we need not now decide. We note, however, that the distinction we have made is not an invitation to gamesmanship, nor is there any basis for believing that gamesmanship occurred here. Indeed, a personal representative who brings a wrongful death action is a trustee for the beneficiaries of the action, see Gray v. Goodson, 61 Wash.2d 319, 378 P.2d 413 (1963), and has a duty to devise a proper apportionment of the damages among them.
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45 B.R. 574 (1984)
In re Byron Jon GREIMAN, Connie Sue Greiman, Debtors.
Bankruptcy No. 84-05015, Contested No. 699.
United States Bankruptcy Court, N.D. Iowa.
December 19, 1984.
Memorandum of Decision January 9, 1985.
*575 R. Fred Dumbaugh and Dan Childers, Cedar Rapids, Iowa, for debtors.
Linda Kniep, Des Moines, Iowa, for movant.
Findings of Fact, Conclusions of Law and ORDER Granting Motion for Lifting of Stay
WILLIAM W. THINNES, Bankruptcy Judge.
The matter before the Court involves a request by John Hancock Mutual Life Insurance Company for relief from the automatic stay or alternatively adequate protection of its interest in Missouri farmland owned and operated by the Debtors-in-Possession (Debtors). Evidentiary hearings on Hancock's motion were held on September 4, 1984, and October 30, 1984. The parties requested and were granted permission to brief the issues. Having reviewed their briefs and the evidence adduced at both hearings, the Court, pursuant to F.R.B.P. 7052, makes the following Findings of Fact, Conclusions of Law and Orders.
BACKGROUND FACTS
Since approximately 1975, the Debtors had been involved in two farming operations, one located in Hancock County, Iowa, and the other in Harrison and Mercer counties in Missouri. The Missouri farmland is approximately 200 miles from their Iowa operation where Debtors reside. Prior to their acquisition of this property, favorable commodities prices allowed the Debtors to make substantial profits from their Iowa grain farming operation. Nonetheless, Mr. Greiman, who has an undergraduate degree in Animal Science, a Masters in Animal Nutrition and a Doctorate in Animal Breeding, was interested in establishing a livestock operation. This interest coupled with personal health concerns prompted the Debtors to purchase the Missouri farm for use as a livestock operation. The property, consisting primarily of rolling pastureland with an abundant, accessible water supply and good physical improvements was particularly well suited for Debtors' intended purpose. Unfortunately, the cattle market turned sour as did commodities prices while interest rates skyrocketed. The resulting financial pressure caused the Greimans to seek a refinancing loan from John Hancock in September of 1980. Because Missouri *576 suffered a drought during the 1980 crop year and winter feed was in short supply, Debtors sold off much of their herd that winter and began converting their Missouri operation to a row crop farm. Since 1981, Debtor has continually brought more and more acres into production by working and planting the upland rolling pastures. By 1984, some 991 acres were being row cropped with 91 acres planted in corn and 900 acres in soybeans.
FINDINGS OF FACT
1. The Debtors, Byron and Connie Greiman, filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on February 8, 1984.
2. At the time of filing, the outstanding principal and interest on Debtors' loan from Hancock was approximately $1,000,000. Their current delinquent indebtedness stands at a little more than $125,000. No payments have been made by Debtors since sometime in 1983. Hancock's loan was secured by a deed of trust executed by Debtors in 1980 and properly recorded in the Harrison and Mercer County recorders' offices. This document covers the entire Missouri property which consists of 1734.5 acres[1] located in the two counties. When this financing transaction was consummated, Debtors valued the Missouri farm at $1,706,200 and were using the land primarily for their livestock operation.
3. The debt against the property far exceeds its value. Credible testimony elicited from Hancock's outside appraiser placed the current fair market value of the farm at $310 per acre or $537,795.00. Debtors' appraiser who did not visit the farm but merely studied Hancock's appraisal agreed this figure was within the ball park.
4. The Missouri farm like most agricultural real estate has suffered a substantial decline in value in the last two years.[2] A 1983 Iowa land survey revealed that values in Decatur County, which is only two miles north of Debtors' property, declined 17 percent in 1983.[3] While Debtors do not seriously dispute a past diminution in value, they hotly contest the future trend of the land market generally and this property in particular. Nonetheless, credible testimony by Hancock's appraiser established that if market conditions remain the same, that is, high interest rates and depressed commodities prices and livestock prices, property values will probably continue to decline. He also opined that marginal farmland like the Debtors will suffer a greater decline, a fact substantiated by the Iowa land survey which revealed that on the average low-grade Iowa farmland declined by 7 percent while high-grade land fell 6.3 percent and medium-grade land decreased 5.8 percent in value.
5. The Missouri property is subject to a further value decline from two other sources. Due to the topography of the land, the highest and best use of this property is for a livestock operation. Although the evidence established that only 400 acres should be row cropped on a rotational basis, Debtors have consistently intensified their use of the property so that by the past crop year 900 acres of land was dedicated to beans and 91 acres to corn. Much of the land Debtors have brought into production has been in the upland pasture *577 portion which contains slopes up to 20 percent. And while they have been using a no-till method to row crop the uplands, the rows are planted straight up and down the hills rather than on the contour because the slopes are too steep for machinery to move horizontally across the land.[4] As a result, the upland portion has been subject to erosion, a process that is likely to be exacerbated if the land is row cropped in the future as Debtor proposes. Essentially then, Debtors current and intended future use of the land is wasting the asset and diminishing its value. As the topsoil is depleted, the productivity of the land will continue to decline.[5]
6. Additionally, there is a potential for a decline in value due to a deterioration of the improvements. Because the highest and best use of the property is a livestock operation, the physical condition of the farm buildings is crucial to its overall value. Since Debtors have abandoned their livestock operation, they have little incentive to keep the buildings in top repair.[6] Moreover, testimony adduced at the hearing revealed that the start up costs are significantly enhanced when buildings and equipment are not being used. The house and a couple of buildings presently need substantial repairs while others are in need of some minor maintenance. In sum, the Court concludes the past and future potential for erosion as well as the likely deterioration of the physical improvements seriously jeopardizes the value of Hancock's collateral.
7. Except in 1981 when debtors sold a substantial portion of their livestock herd, the Debtors have continually lost money on their combined Missouri-Iowa farm operation. The following figures taken from Debtors' income tax statements are illustrative:
Net Farm Income (Losses)
1980 1981 1982 1983
($140,521.71) $19,717.00 ($307,772.45) ($30,158.87)
Even adding back depreciation expense which can artificially reduce farm income, Debtors' earnings still do not yield a positive income.[7]
1980 1981 1982 1983
($ 78,642.85) $49,155.44 ($280,558.45) ($ 5,579.39)
8. Debtors' income picture for 1984 does not look much better at least with regard to the Missouri property.[8] When *578 the Debtors filed their Plan of Reorganization and Disclosure Statement on September 14, 1984, they projected the Missouri operation would yield a net farm income of $54,592. At the October 30th hearing, Debtor revealed the beans were too poor to harvest and the only income from the Missouri acreage would come from his federal crop insurance. Comparing Debtors' 1984 projections with their revised estimates provides the Court with yet another poignant example of Debtors' overly optimistic outlook on the Missouri farm's productive capabilities.
1984 Projections Revised Estimates
Gross income $199,564 $115,000
Expenses 144,972 144,972
________ _________
Net Income $ 54,592 ($29,972)
Unlike the other years when Debtors were making substantial debt service payments, in 1984, they had complete protection from such interest expenses and still could not show any gain from their Missouri operation.[9]
9. The Court also concludes Debtors' Cash Flow Projections for 1985 are too unrealistic. In particular, they estimate gross income from crops sales to be $378,795. The breakdown of this income is as follows:
Acres Yield Price Total
Corn 541 115 Bu/A $3.00/Bu $186,645
Beans 915 30 Bu/A $7.00/Bu. 192,150
Since Debtors' Iowa operation consists of 440 acres they must contemplate row cropping a good deal of the Missouri acreage (1456440 = 1016). Yet substantial testimonial and documentary evidence introduced by the movant established that only a little over 400 acres of the Missouri farmland is suitable for rotational row cropping. In light of this fact, Debtors' projections of rather substantial yields from the remaining 616 acres of Missouri farmland strikes the Court as wishful thinking. Moreover, crop sales figures from previous years do not support Debtors' optimistic projections. Absent crop insurance this year, Debtors' losses from their Missouri operation would have been even more overwhelming than they have been. And while Debtors claim they have not experienced a normal year since they began row cropping, evidence indicates that the steep slopes and erosion problems will likely decrease the future productivity of this land.[10] In sum, the Court concludes the Missouri farm as it is presently being operated and as Debtors propose to operate it will undoubtedly be a drain on their farm operations as a whole, rather than an enhancement to Debtors' income.
10. Debtors conditionally offered to give Hancock a lien in their 1985 Missouri crop second only to their input suppliers if this Court found the Movant was not adequately protected.
CONCLUSIONS OF LAW
Based on the foregoing facts and the inferences therefrom, the Court concludes:
1. Hancock has sustained its burden under 11 U.S.C. § 362(g)(1) of proving Debtors have no equity in the property.
2. Conversely, Debtors have not carried their burden of proving the Missouri property is necessary for an effective reorganization. 11 U.S.C. § 362(g)(2). Therefore, the stay must be vacated pursuant to 11 U.S.C. § 362(d)(2).
3. Additionally, the Debtors have failed to offer adequate protection of Hancock's interest in the property because:
(a) more likely than not, the value of the property will continue to decline in the foreseeable future;
*579 (b) the Debtors' current farming practices are wasting the asset;
(c) nonuse of the property for a livestock operation will increase the startup costs in converting the property to its highest and best use and lacking an incentive to repair, the condition of the outbuildings will probably continue to deteriorate;
(d) given the past production of this land, a lien in the 1985 crop is an iffy proposition at best and, in any event, would not protect Hancock against the erosion of its asset.
4. In the absence of a showing of adequate protection, the Court is duty bound to lift the stay. 11 U.S.C. § 362(d)(1).
ORDER
IT IS HEREBY ORDERED that the automatic stay provided by 11 U.S.C. § 362(a) should and is lifted pursuant to 11 U.S.C. § 362(d)(1) and (2).
PURSUANT to F.R.B.P. 7052, a Memorandum of Decision will be issued at a later time.
MEMORANDUM OF DECISION
In view of the evidence adduced at the hearings, there are essentially three issues presented for decision. Specifically, the Court must decide: (1) whether the farming practices employed by Debtors are impairing the value of the Missouri property; (2) whether the value of the land has and will continue to decline by reason of the agricultural climate and market conditions; and (3) whether the farm as it is currently being utilized is sufficient to carry its own weight or make any contribution to an effective reorganization. The first two issues deal with adequate protection while the latter focuses on whether the Missouri property is necessary for an effective reorganization.
There are two statutory grounds for lifting the stay. 11 U.S.C. § 362(d)(1) and (d)(2). The test under § 362(d)(2) is conjunctive; thus the stay cannot be lifted pursuant to this section unless both conditions are satisfied, that is, unless debtor has no equity in the property and it is not necessary for an effective reorganization. Even if a debtor avoids a vacation of the stay under this section, it can nonetheless be lifted under § 362(d)(1) if a creditor's interest in the property is not adequately protected.
By statute the task of justifying a continuation of the stay is allocated principally to the Debtors. They must shoulder the burden on the question of adequate protection and all other stay issues except their equity in the property, proof of which is the bailiwick of the creditor. 11 U.S.C. § 362(g). The charge on Debtors includes not only the task of going forward but also the ultimate burden of persuasion.
A moving creditor seeking relief from the stay, in addition to carrying the ultimate burden of proof with respect to equity, must establish the validity and perfection of its security interest and the amount of its debt along with any other allowable costs secured by its claim. In re Irving A. Horns Farms Inc., 42 B.R. 832, 836 (Bkrtcy.N.D.Iowa 1984). Hancock has met its burden in this regard since its deed of trust was properly recorded and the amount of the indebtedness far exceeds the value of the property. Hence, the remaining issue relevant to a lifting of the stay pursuant to section 362(d)(2) is whether the property is necessary to effective reorganization.
I. Necessary for an Effective Reorganization
Generally, courts considering this issue have required more than a bare assertion by Debtors that the property is necessary for their survival and their hope of reorganization. In the main, the majority have required a showing by debtors that there is a reasonable possibility of a successful reorganization within a reasonable time. In re Development, Inc., 36 B.R. 998, 1005 (Bkrtcy.Hawaii 1984); La Jolla Mortgage Fund v. Rancho El Cajon Associates, 18 B.R. 283, 291 (Bkrtcy.Cal.1982); In re *580 Clark Technical Associates, Ltd., 9 B.R. 738, 740 (Bkrtcy.Conn.1981); In re Hutton-Johnson Co., Inc., 6 B.R. 855, 860, (Bkrtcy. S.D.N.Y.1980); In the Matter of Terra Mar Associates, 3 B.R. 462, 466, (Bkrtcy. Conn.1980). Armed with this standard, courts have frequently scuttled property even in single asset cases because debtor's reorganization efforts were not congruent with the hard economic realities of their current and prospective financial position. See, e.g., In re Amarex, Inc., 30 B.R. 763, 767 (Bkrtcy.Okla.1983) (words "necessary for an effective reorganization" for purposes of denial of relief from automatic means essential to an effective reorganization and not merely that it would be useful or helpful and such fact must be ascertainable at the time of consideration of a continuation of stay and a clear showing must be made); Gem Savings Association v. Oak Manor Home, Inc., 17 B.R. 84, 86 (Bkrtcy.Ohio 1981) (A vacation of the stay is appropriate where the potential for reorganization is slight other than a proverbial boot-strap operation at the expense of third party risks); In re Mikole Developers, Inc., 14 B.R. 524, 526-27 (Bkrtcy.Penn.1981) (The mere fact the property is indispensable to debtor's survival is not enough and debtor's high hopes for reorganization or need for the property is not the sine qua non under § 362(d)(2) particularly where, as here, debtor's present operations are not profitable and are unlikely to be so in the next several months); Matter of Sundale Associates, Ltd., 11 B.R. 978, 981 (Bkrtcy. Fla.1981) (Debtor's manifest failure to discharge the statutory burden of proving the property is necessary for an effective reorganization in light of the absence of testimonial or documentary evidence supporting the likelihood of the proposed sale cause this court to conclude the creditor is entitled to a vacation of the stay).
Conversely, at least one court has rejected a possibility or feasibility test as the appropriate standard under section 362(d)(2) in favor of one based on need. In re Koopmans, 22 B.R. 395 (Bkrtcy.Utah 1982). Under this narrower test, property is necessary for an effective reorganization "whenever it is necessary, either in the operation of the business or in a plan to further the interests of estate through rehabilitation or liquidation." Id., 22 B.R. at 407. See also, In re Keller, 45 B.R. 469 at 471-472 (Bkrtcy.N.D.Iowa 1984).
While the court would not foreclose the possibility that the feasibility of reorganization would never be a determining factor in stay litigation, the primary thrust should not be a global inquiry into a debtor's financial prospects but the nexus between a specific property and the part it is likely to play in a reorganization effort. Basically the focus should be on whether the property in question can make an identifiable contribution to a debtor's reorganization, be it a liquidation or a rehabilitation. In line with this more limited focus, property may be necessary if it generates income that will benefit the estate or if it enhances the sale value of the business as a going concern.
Ascertaining the appropriate legal standard does not in any meaningful way address the kind of factual showing a debtor must make to sustain his burden under section 362(d)(2)(B). If a reorganization is in its infancy, a lesser showing may be sufficient. At this stage, it would be unreasonable to expect a debtor to produce hard evidence of profitability or potential sale value when the debtor has not had an opportunity to evaluate all the options that may result in a financial turnaround. See e.g., In re W.S. Sheppley Co., 45 B.R. 473 (Bkrtcy.N.D.Iowa 1984). Even further along the road, testimony by the debtor concerning the need of the property for an effective reorganization coupled with the peculiar facts and circumstances of a case may be sufficient to hold a creditor at bay under section 362(d)(2). See e.g., Keller, at 472. On the other hand, when the available evidence casts substantial doubt on a debtor's assertions that the property is necessary to his reorganization efforts, debtor's burden becomes *581 more difficult. Such is the case at bar.
Assessing the evidence in stay litigation is an inexact science at best. So much depends on future trends, especially in the agricultural sector, where interest rates, commodity prices, the weather, government programs and a myriad of other factors have a large and sometimes crushing impact on a farmer's financial health. Nonetheless, courts frequently are called upon to practice this inexact science and to assess the meaning of past and future trends. To that end, the Court notes that Debtors' immediate past financial experience with this property belies their assertion that the Missouri farm is necessary for an effective reorganization. Indeed, the available evidence compels a conclusion that this property has and will continue to be a financial drain on their farming operations.
For the past four years, Debtors' combined Missouri-Iowa operations have resulted in substantial losses except in 1981 when Debtors sold almost $140,000 worth of livestock. This pattern continued in 1984 when their earlier projections of net income from the Missouri property were thwarted by almost a total failure of their soybean crop turning a projected profit of $54,592 into a $29,972 loss.[11] Only federal crop insurance saved Debtors from more overwhelming and devasting losses on their Missouri operation in 1984. And while Debtors point to several unfortunate circumstances to explain their recent income history, the fact remains that the current and intended use of the property has never generated positive income, not even in 1984 when they enjoyed complete protection from the huge debt service expenses they incurred in prior years. If Debtors had been required to pay interest at the 10 percent rate proposed in their plan, their losses for 1984 would jump to almost $79,000.
Debtors nevertheless contend this property, even under adverse conditions, can make a substantial contribution to their reorganization efforts. Absent considerable evidence by movant that much of the Missouri property is not suitable for row cropping, the Court might concur in Debtors' optimism that this property can generate sufficient income to service the debt on Hancock's secured claim and provide a source of revenue for other classes of their creditors. When, however, Debtors' optimistic projections for 1985 are considered in the context of the land's unsuitability for row cropping and its past performance, this Court can only conclude that the property will, more likely than not, make little or no contribution to Debtors' reorganization efforts. Indeed, since the property is located over 200 miles from Debtors' primary operation, the expenses of commuting and, or keeping two sets of equipment could entail additional costs that will involve a drain on Debtors' resources particularly if they reap little income from the property. In that regard, the Court notes Debtor Byron Greiman and his 15-year-old son intend to crop farm 1456 acres by themselves and while this is not an impossible undertaking, the 200-mile commute makes the task more expensive and arduous not only in dollars and cents but also in time and energy.
In sum, the Court concludes the Debtors have failed to sustain their burden of proof and persuasion on the reorganization issue since the available evidence rather than supporting their position tends to compel the opposite conclusion. Accordingly, Hancock is entitled to a vacation of stay under section 362(d)(2).
II. Adequate Protection
Hancock is also entitled to relief from the stay under 11 U.S.C. § 362(d)(1) because Debtors have not carried their burden of proof or persuasion on the issue of *582 adequate protection. As this Court recently observed:
"Adequate protection" as bearing upon the automatic stay contemplates protecting the secured creditor from "decreases in the value of such entity's interest" in the collateral due to the imposition of the stay; in the context of the automatic stay, Congress believed the existence vel non of such a decline to be almost decisive in determining the need for adequate protection.
In re Borchers, 45 B.R. 69 at 72 citing In re Saypol, 31 B.R. 796, 800 (Bkrtcy.N.Y.1983).
In the case at bar, Hancock presented weighty evidence that the value of its collateral was jeopardized in several respects; first, Debtors' current and intended farming practices are creating a serious erosion problem; second, land prices have and will continue to decline given the current agricultural climate and market conditions; and third, the physical improvements are likely to deteriorate in view of Debtors' nonuse and a lack of incentive for Debtors to repair them or maintain their condition.
Not surprisingly, Debtors hotly dispute the existence of an erosion problem or the likelihood of a value decline by reason of the current and future market trends. In the face of substantial evidence undermining their position, Debtors throw up several lines of defense. Although the Court does not wish to unduly prolong this opinion, a couple of their contentions deserve further comment.
In the first instance, Debtors argue that even assuming an erosion problem exists, Hancock has not established the erosion is contributing to a value decline, nor made any record regarding the amount of the decline. As to the first part of their argument, two witnesses testified the erosion would diminish the value of the property. Even Debtors' appraiser, who had not visited the property and thus could not evaluate the degree of erosion, admitted that severe erosion would affect the value of the property. The remainder of Debtors' argument concerning Hancock's failure to establish the amount of the decline overlooks the placement of the burden of proof and persuasion. Once the likelihood of a diminution in value has been credibly raised, a prima facie case for lifting the stay for lack of adequate protection has been made until and unless Debtors effectively negate this showing by competent evidence. See, In re Borchers, 45 B.R. 69, 72 (Bkrtcy. N.D.Iowa 1984).
As is apparent from the Court's findings, the better evidence established that Hancock's interest in the property was subject to a diminution in value from three separate sources. Even though the evidence did not pinpoint the percentage of the expected decline, the Court concludes that the cumulative detrimental effect on Hancock's interest cannot be characterized as de minimis.[12]
As their second line of defense, Debtors contend proof of declining value is rendered nugatory by Hancock's admission that it intends to retain the property even if it gains possession. In other words, Debtors argue that Hancock's position that it is being harmed by a value decline is disingenuous because it does not intend to protect itself against that eventuality if this Court should vacate the stay.[13] Once again *583 the Debtors are laboring under a misapprehension.
A creditor does not have any duty to explain what it intends to do with the collateral if it is successful in vacating the stay. The mere fact a secured claimant would do nothing more than Debtor with the property does not mean debtor should be allowed to keep the property. In re BBT, 11 B.R. 224, 230 (Bkrtcy.Nev.1981).
Secondly and perhaps more to the point, Debtors' argument does not speak to the value decline attributable to the erosion problems. Although credible evidence indicated that present farming practices are dissipating the topsoil, Debtors still intend to continue row cropping the farm. Consequently, were Hancock to regain possession of the property, it could take whatever steps were necessary to prevent further erosion. By virtue of obtaining control over the property, Hancock would have an opportunity to mitigate future losses from Debtors' erosive farming methods. Indeed, a Hancock employee testified that their first priority would be to reseed the hills.
Because the evidence conclusively establishes the need for adequate protection, the Court now turns to a consideration of Debtors' claims concerning adequate protection of Hancock's interest in the property.
First, Debtors claim their Plan of Reorganization which is currently on file would protect Hancock against any decline in value that conceivably would occur. Debtors' proposed plan values Hancock's secured claim at $490,000 and contemplates paying that amount over 30 years at an annual interest rate of 10 percent in equal yearly installments of $51,978.83. Additionally, they intend to pay interest on the movant's claim from the date of confirmation through December 31, 1984. Altogether then, Debtors contend these payments would exceed $60,000 and Hancock would be protected against a 10 percent value decline in the Missouri property during the first year.
The Court concludes Debtors' Proposed Plan does not constitute adequate protection of Hancock's interest in the property for two reasons. The 1984 interest payment will not materialize since it stands no chance of confirmation until early 1985. Additionally, the yearly payments are to be made on or before December 31 of each year. As a consequence, Hancock will probably not receive any payment at all until December of 1985. The prospect of a payment twelve months hence does not adequately protect Hancock against the current value decline particularly in light of Debtors' past earnings record with this property nor does it address the longterm effect on values that are likely to result from Debtors' erosive farming practices.
Debtors' income picture since they began grain farming the Missouri operation is bleak. Even in 1984 when they enjoyed complete protection from debt service expenses, Debtors lost money on their Missouri operation. In view of these historical losses, the burden was on Debtors to show that their Missouri operation could be profitable. Absent some evidence of changes in factors responsible for the losses experienced in the Missouri operation, the Court has no basis to accept Debtors' bold and unpersuasive statements that even minimal payments to Hancock can be made. Stated otherwise, Debtors cannot rely on their Plan to provide adequate protection without some competent proof their prior losses will be obviated in the future. See, e.g., In re Binning, 24 B.R. 328, 330 (Bkrtcy.Ohio 1982) (Secured creditor entitled to relief from automatic stay to proceed with foreclosure action where farmer-debtor's unconfirmed Chapter 11 plan did not provide adequate protection since no explanation was provided as to why projected future profitability was expected when actual recent history of debtors had been otherwise).
The second shortcoming in Debtors' reliance on their plan to provide adequate *584 protection is even more fundamental. Although they contend payment under the plan will protect Hancock against a 10 percent decline in the value of the property, this Court determines otherwise. Specifically, Debtors cannot rely on the interest portion of their plan payment to provide adequate protection since it does not reach or reduce the amount of Hancock's secured claim. Debtors propose making equal yearly installments to Hancock of $51,798.83 for a period of 30 years. Since $49,000 of their first annual payment constitutes interest, Debtors would be paying $2,978.83 in principal on Hancock's $490,000 secured claim. A principal payment of this amount would only protect against 0.6% decline in value in the first year. Yet the evidence clearly established the decline would be much greater. Hancock's appraiser valued the property as of February 8, 1984, and did not take into account the effects on market value of yet another disastrous crop year. Given the drought in the area, the drop in value by reasons of market conditions will far exceed 0.6% protection afforded by Debtors' plan. In short, payment under Debtors' plan does not afford adequate protection of Hancock's interest in the property.
At the end of the final hearing, Debtors offered Hancock a lien on their 1985 crop, second only to their input suppliers, to secure Hancock for any actual decline in value if the court found a lack of adequate protection. They contend this offer constitutes adequate protection because even if the crop fails next year they have established that expected earnings from the Missouri farm can be protected by crop insurance. At the risk of sounding redundant, a replacement lien in the 1985 crop, in light of the unsuitability of the property for grain farming and the land's past performance, is an iffy proposition at best. As for the crop insurance argument, the Debtors have offered no proof on the continued availability to them of this kind of insurance or its costs. Even if crop insurance is available, it is not sufficient to adequately protect movant's interest.
Accepting Debtors' figures at face value the expected return on crop insurance would be $115,000 minus cost inputs of $56,000 and a premium payment of $15,000 or $44,000 total. It is unclear from Debtors' argument whether the $44,000 protection offered by the replacement lien is in addition to the payment under the Plan. Assuming first that it is, it is clear that the federal crop insurance would not adequately protect Hancock's interest because there would be no monies from the Missouri operation to fund the 1985 payment to Hancock if the insurance proceeds are used to compensate Hancock for the decline in value. If the replacement lien is construed only as guaranteeing payment under the Plan, then the $44,000 is not adequate protection because it would not meet even Debtors' 1985 interest obligations of $49,000. As noted earlier, only payments on the principal amount of secured creditors' claim can be used in evaluating the likelihood of adequate protection.
In sum, the Court concludes that neither Debtors' proposed Plan of Reorganization nor their offer of replacement lien constitutes adequate protection of Hancock's interest in the property. In the absence of a showing of adequate protection of its interest, Hancock is entitled to a vacation of stay under section 362(d)(1).
NOTES
[1] There seems to be a conflict between the parties as to the exact acreage. Debtors maintain this farm consists of 1796 acres while Hancock believes the total acreage is 1700.5. The court has relied on Hancock's independent appraiser's report for its figure since this total was taken from the Harrison and Mercer County records.
[2] The parties own estimates of value in varying contexts are illustrative of this diminution in value. For instance, despite the high value Debtor placed on the property in 1980 and again in 1983 when he was in default, he listed the property as worth $449,000 in his bankruptcy schedules in February of 1984, and his Plan of Reorganization filed in September of 1984 contemplates paying Hancock $490,000 for the property. Conversely, re-valuation summaries prepared by a Hancock employee valued the property at $827,660 in January of 1984 and $703,000 in March of the same year.
[3] This steeper decline was apparently related to the fact that for the fourth consecutive year, this area suffered from adverse weather conditions which greatly reduced crop yields.
[4] Hancock's appraiser, an individual with extensive experience as a farm manager, opined that no-till in vertical rows is not really a conservation practice but rather approaches a straight farming method in terms of expected erosion. He further ventured that soybeans are the worst crop in terms of erosion damage since they are a legume which tends to loosen the top soil making the land more vulnerable to sheet erosion in the advent of heavy rains. Debtors response to this evidence was two witnesses who claimed Debtors' farming practices were similar to those of other farmers in the area and the erosion on Debtors' farm was about the same as neighboring farms. Debtor also claimed he undertook certain conservation measures on the property such as shoring up gullies and ditches, however, the court notes that although the income tax forms provide a line for conservation expenses, there are no such entries in Debtors' 1980, 1981, 1982 or 1983 returns.
[5] This conclusion was substantiated by the appraiser's report and his testimony which established no yields could be expected from soybeans or corn on Gara soils with 9 to 20 percent, the kind of land which comprises much of Debtors' Missouri property. The appraiser's opinion was substantiated by the Soil Interpretation Record published by the Soil Conservation Service which indicated that no expected yield from soybeans or corn on Gara soils with a slope of more than 14 percent or even on this soil with a slope of 9-14 percent if the land was severely eroded.
[6] Although Debtors list substantial repair expense for the 1980-1983 tax years, it is difficult to tell whether those expenditures were for building maintenance and repairs or merely machinery and equipment. Additionally, if the expenditures were for buildings, the Court is unable to tell whether they were for the Missouri improvements since the tax returns cover their combined operations. Whatever the case, in 1984 Debtors only expended $1,000 for building maintenance and have budgeted the same amount for building expense in 1985.
[7] Some of these figures may not be exact because the copies of income tax forms received by the Court are not of the best quality. However, the figures are a very close approximation.
[8] Debtors cash rented the Iowa farm in 1984 concentrating all their farming efforts on the Missouri operation. These income figures do not include $45,675 Debtors received in cash rent for the Iowa farm.
[9] According to their tax returns, debt servicing expenses were $181,536.34 in 1980, $167,665.10 in 1981, $224,139.83 in 1982, and $189,730.15 in 1983. The Court also notes, based on Debtors proposed Plan of Reorganization valuing the property at $490,000 at annual interest rate of 10 percent, that Debtors' debt services costs would have been $49,000 increasing their 1984 loss to almost $79,000.
[10] See footnote 5, supra.
[11] Because Debtors cash rented their Iowa farm in 1984, the Court attributed all operating expenses incurred by Debtors to their Missouri operation. This expense allocation accords with that of the Debtors in their 1984 cash flow projections which was attached to their Disclosure Statement. In order to be perfectly fair with Debtors, perhaps one-half of the living expenses should be attributed to their Iowa farm which still leaves a loss of $16,733.
[12] Thus, this case is distinguishable from In re W.S. Sheppley Co., 45 B.R. 473 (Bkrtcy.N.D.Iowa 1984) where the Court held that although the second mortgagee's security position was being eroded because of accruing interest to the prior secured creditor, the mortgagee was not entitled to relief from the stay given the infancy of debtor's reorganization efforts and the fact that the shortfall was de minimis when compared to the value of building and the amount of the debt.
[13] As a corollary to this argument, Debtors note that if Hancock regains possession and devotes it to its highest and best use, a conservative utilization of the property will only produce approximately $7,000 in yearly income whereas under Debtors' Plan Hancock would receive $51,918.83. The Court concludes Debtors erroneously relied on one of the movant's exhibits which projected Debtors income from their row cropping operation in 1984. This estimate of $7,000 income proved optimistic in light of the failure of their soybean crop. Under an income approach, Hancock's appraiser projected that an annual net income of $31,699.46 could be realized by devoting the property to its proper use.
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660 F.2d 867
BUSINESS ASSOCIATION OF UNIVERSITY CITY, University CityBusiness Association, Inc., Cheryl Bethea, andCedar Park Community Development Corporationv.LANDRIEU, Moon, Secretary of the Department of Housing andUrban Development, and City of Philadelphia, andRedevelopment Authority of the City of Philadelphia andI.B.I.D. Associates, Resident Advisory Board, and TenantAction Group.Appeal of BUSINESS ASSOCIATION OF UNIVERSITY CITY andUniversity City Business Association, Inc.
No. 80-2717.
United States Court of Appeals,Third Circuit.
Argued May 19, 1981.Decided Aug. 5, 1981.Rehearing and Rehearing In Banc Denied Sept. 29, 1981.As Amended Oct. 13, 1981.
Alice W. Ballard, Steven A. Hyman, Ralph David Samuel (argued), Samuel, Ballard & Hyman, Philadelphia, Pa., for appellants.
Henry A. Stein, Mesirov, Gelman, Jaffe, Cramer & Jamieson, Philadelphia, Pa., for I.B.I.D. Associates.
Peter F. Vaira, U. S. Atty., James G. Sheehan (argued), Walter S. Batty, Jr., Asst. U. S. Attys., Peter Campanella, John Abbott, Felice Weiner, U. S. Dept. of Housing and Urban Development, Philadelphia, Pa., for Moon Landrieu.
Joyce S. Wilkerson (argued), George D. Gould, Arthur Schmidt, Community Legal Services, Philadelphia, Pa., for Resident Advisory Board and Tenant Action Group.
Louis F. Hinman, III, Deputy City Sol., City of Philadelphia, Philadelphia, Pa., for City of Philadelphia.
Carl S. Primavera, Philadelphia, Pa., for Redevelopment Authority of the City of Philadelphia.
Before ADAMS, ROSENN and HIGGINBOTHAM, Circuit Judges.
OPINION OF THE COURT
A. LEON HIGGINBOTHAM, Jr., Circuit Judge.
1
Over the past two decades, Congress and several federal agencies have explored various policies for minimizing racial and economic segregation in American society. One such approach was recognized by this Court in Shannon v. HUD, 436 F.2d 809 (3d Cir. 1970). There, we held that the Civil Rights Act of 1968, 42 U.S.C. §§ 3601, 3608(d)(5) (1976), required the Department of Housing and Urban Development (HUD) to consider, before approving construction of proposed federally subsidized low income housing, its impact on racial concentration. The location of new housing, we observed, could lead to the "undue concentration of persons of a given race, or socio-economic group, in a given neighborhood," and thereby "have the 'effect of subjecting persons to discrimination ... (or) ... substantially impairing accomplishment of the (integrative) object of the' " 1968 Civil Rights Act. Id. at 820. When reviewing locations for proposed low income housing, therefore, HUD was obligated to weigh the need for "desegregation of housing" through some institutionalized method. Id. at 821. Accord Otero v. New York City Housing Authority, 484 F.2d 1122 (2d Cir. 1973). In light of Shannon and the subsequent passage by Congress of the Housing and Community Development Act of 1974 (the Act), HUD has since promulgated regulations requiring its officials to consider, prior to the approval of a new low income housing project, the impact of the project on the concentration of racial and low income persons.
2
In this case, we are asked to review HUD's approval of a new low income project in light of these statutory and regulatory obligations. Because we find that HUD's decision was based on a consideration of the relevant factors and does not constitute an abuse of discretion, we will affirm the decision of the district court upholding HUD's approval.
I.
3
The Section 8 New Construction Program of the Housing and Community Development Act of 1974, 42 U.S.C. § 1437f(a) (1976) seeks to aid "lower income families in obtaining a decent place to live and (to promote) economically mixed housing." In Section 5301(c), Congress provided:
4
The primary objective of this chapter is the development of viable urban communities, by providing decent housing and a suitable living environment and expanded economic opportunities, principally for persons of low and moderate income.
5
The program stimulates construction by private developers of housing for low income families through a system of rent subsidies. Federal or state agencies normally provide low interest construction mortgages, underwritten by HUD, for private developers of approved construction projects for low income families.1 After the project is built, HUD subsidizes the rental payments of the low income tenants under Section 8 up to a certain percentage of their income so they can afford housing which is at the same time economically profitable for the developer.2
6
Although the actual rental subsidies are only extended after the housing is built and rented, the Section 8 program necessarily requires review and approval by HUD of a proposal before private or local government resources can be committed for construction. Under the administrative regulations, HUD normally advertises that it has available funds for sites in a particular geographic area. See 24 C.F.R. § 880.203 (1979).3 Prospective developers submit for HUD's review their "preliminary proposals," which must detail the location, size, intended rents, along with other pertinent information concerning their proposed projects. See 24 C.F.R. § 880.205 et seq. (1979). The administrative regulations promulgated by HUD require its officials to review these proposals for compliance with technical, financial, fair-housing/equal opportunity, and environmental requirements. See §§ 880.208 et seq. (1979). Compliance with the regulations provide the basis for many of the claims by the plaintiffs in the present action, and are outlined below.
7
The developers of proposals which are found by HUD officials to be conditionally acceptable submit "final proposals," which, if accepted, provide the basis of the final agreement between HUD and the developer, called an "Agreement to Enter Into a Housing Assistance Payments Contract." See 24 C.F.R. § 880.214 (1979). The Housing Assistance Payments Contract is entered into by HUD upon the successful completion of the project by the developer.
8
The administrative regulations relevant to the present appeal direct HUD officials to review site selections for their impact on the concentration of minority and low income families. Rule 24 C.F.R. § 880.112(c)(1) (1979) requires that:
9
The site shall not be located in: (1) an area of minority concentration unless (i) sufficient, comparable opportunities exist for housing for minority families, in the income range to be served by the proposed project, outside areas of minority concentration, or (ii) the project is necessary to meet overriding housing needs which cannot otherwise feasibly be met in that housing market area.4
10
Further, Rule 24 C.F.R. § 880.112(d) (1979) mandates:
11
The site shall promote greater choice of housing opportunities and avoid undue concentration of assisted persons in areas containing a high proportion of low income persons.
12
The present case concerns HUD's approval under Section 8 of a bid to construct low income housing at a site in West Philadelphia (the development). The land is owned by the City of Philadelphia. The previous administration in Philadelphia, according to all parties, compiled a "dismal" record in the construction of low income units in non-impacted areas. In May of 1979, after several earlier threats, HUD withheld 21 million dollars in block grants until the City Administration submitted an acceptable strategy for constructing 448 subsidized units for low and moderate income family households in non-impacted areas, and construction on at least 100 of these units had begun. App. at 446-47. The land at issue in the present case, which was originally designated for commercial use under the City's comprehensive plan, was rezoned on March 15, 1979 for residential use and offered to HUD as an acceptable location for non-impacted low income housing. A private developer, I.B.I.D. Associates, supported by the Philadelphia Office of Housing and Urban Development, proposed to build 70 low-rise federally subsidized townhouses on the presently vacant block.
13
The lot is located near the Northwestern border of the campus of the University of Pennsylvania, between 39th and 40th Streets and between Market and Ludlow Streets. This places the site on the northern border of Census Tract 88, which contains the University of Pennsylvania Campus and a great deal of the University and middle class community that lives adjacent to the University in West Philadelphia. Although there is some disagreement in definition, much of what is commonly referred to as "University City" is contained within this tract. At the time of the 1970 census, which is admittedly dated, the tract only had a 8.5% black population and a total 13.9% non-white population. App. at 423. The same tract was not densely populated having only a 23.2% family population. There has been some commercial development on the northern portion of the tract in the past few years, especially along Market Street, which runs directly North of the site. Nevertheless, a significant portion of the land, razed in anticipation of future economic development, is currently vacant. The census tract immediately to the West had a 18.6% black population and a total of 23.7% non-white population when the 1970 census was taken. Id.
14
Although the proposed site is on the northern border of the University Campus and residential community, it abuts what both parties agree is a poorer and more racially impacted section of Philadelphia. Census Tract 91, whose southern border runs along Market Street across from the proposed site, encompassed a 65.3% minority population, at the time of the 1970 census. Census Tract 92, whose southern border begins along Market Street two blocks to the West of the proposed development, had a 98.4% minority population at the time of the 1970 census. Directly across Market Street from the site in Tract 91 lies a Section 8 subsidized 20-story housing project named University Square. It contains 448 rental units for the elderly and disabled with a 50% black population. App. at 184. Another subsidized low-rise rental apartment, named Center Post Village, is situated immediately to the North of University Square. Seventy-eight of the 84 families living in that housing are black. The project proposed for 39th and Market Streets is expected to house a population which is 50% black.
15
Officials at HUD reviewed the proposal for the development at 39th and Market Streets as to its impact on concentration of minority and low income residents and its environmental effects. The developer made modifications to provide parks and sound barriers so as to separate the project from some of its commercial neighbors, as the environmental review had suggested. Thereafter, HUD officials approved the proposal.
16
On September 25, 1980, however, two local business organizations the Business Association of University City and the University City Business Association (Business Associations) brought suit against HUD seeking an injunction blocking approval of the development. They claimed that HUD had failed to give adequate consideration to the increased concentration of minorities and low income individuals that would result from the construction. Alternatively, they argued that even if HUD officials had "considered these factors," as a substantive issue, placement of the project directly adjacent to other low income housing and a racially impacted census tract allegedly constituted, as a matter of law, an impermissible concentration of assisted individuals and racial minorities. They further contended that the Act required HUD to assure that the housing construction constituted a rational utilization of land and resources. The failure by HUD to undertake such a review, in the plaintiffs' view, necessitates a remand for a reanalysis by the agency on this question.
17
After holding hearings on September 30, October 2 and October 6, the district court denied plaintiffs' motion for a preliminary injunction. On October 7, 1980, defendants moved for an expedited hearing schedule on the permanent injunction. They claimed that the rise in interest rates and the continued freezing of HUD funds until commencement of construction demanded an expedited decision. Although plaintiffs opposed the motion, the court expedited discovery and scheduling. Final hearings were held on October 27 and 28. The court entered final judgment for the defendants on all claims on October 29. Plaintiffs filed a timely appeal from the district court's decision, raising the claims discussed above as well as challenging the expedited hearing schedule ordered by the district court.
II.
18
Whether HUD has fulfilled its obligation to evaluate the racial impact of proposed Section 8 housing depends on the depth of the review undertaken by its officials. Under Regulation 880.112(c)(1) (1979), the development could only have been approved if HUD officials properly investigated and determined that it was not in an "area of minority concentration." Of course, under the regulations, approval may be given to a project in an area of minority concentration where satisfactory housing alternatives exist "outside areas of minority concentration," or where there are "overriding housing needs which cannot otherwise feasibly be met in that housing market area." 880.112(c)(1) (i) and (ii) (1979). In this case, however, HUD officials clearly did not approve the project under this exception to the regulation, and the Department has not contended before this court that such an exception is appropriate in this case. Thus, the critical question we must address is whether HUD adequately considered whether the project was in an area of minority concentration.
19
The HUD official who undertook this review was Walter Valentine, a Fair Housing/Equal Opportunity Specialist for Northern Pennsylvania, Philadelphia, and parts of Delaware. Valentine had some preexisting familiarity with the project area, having served as a relocation specialist with the Redevelopment Authority for the City of Philadelphia between 1964 and 1968, and having been employed in his present position since 1973. Valentine has also been a resident of West Philadelphia since 1960.
20
Since Valentine's approval of the project by use of a HUD Section 8 checklist was not accompanied by a written explanation, the basis of his decision was developed in his testimony at trial. HUD's internal guidelines define areas with over a 40% minority population as racially impacted. App. at 172. Because HUD does not have any formal standards for determining the relevant area in which the proposed site was located, this became the critical focus of Valentine's review.5 According to his testimony, he examined the racial composition of the census tract in which the site was located, Census Tract 88, as well as that of Census Tract 87, which is immediately to the West across 40th Street. They had a non-white population of 13.9% and 23.7%, respectively. The two census tracts to the North, 91 and 92, had a 65.3 and 98.4 percent non-white population, respectively. Recognizing that the census data was dated and that the census boundaries cut through the geographical area in which the project was to be located, Valentine supplemented the raw data with analysis of other factors. He discussed with local realtors what changes in racial composition and local land values had occurred in recent years, made a physical inspection of the site, and reviewed school statistics at the neighborhood Drew Elementary School. The most important addition to the census data, according to Valentine, was his personal knowledge of housing developments in the area.
21
On the basis of this review, Valentine determined that, even if the area may have been racially concentrated as of 1970 when the census was taken, it was less so at the time of his review. He testified that "the area has undergone extensive redevelopment and change since I have been in Philadelphia," with a "significant downward change percentage-wise of the number of minorities residing in that particular area" App. at 174. This had occurred not only in Census Tract 88, which covers the area to the south of the project, but also 91, whose southern boundary was along Market Street across the street from the project. Thus, Valentine concluded that the proposed project, which was expected to have a 50% minority population, would not be constructed in a racially impacted area.
22
The general standard of judicial review of an agency's decision, as set forth in the Administrative Procedure Act, 5 U.S.C. § 706(2)(A), (B), (C), and (D), is that the agency decision must be overturned if it was "arbitrary, capricious, and abuse of discretion, or otherwise not in accordance with law," or if the decision failed to meet statutory, procedural, or constitutional requirements.6 Under this standard, a court must first "decide whether the agency has acted within the scope of its authority." Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 415, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971). In this case, the Business Associations do not allege that the agency acted outside its zone of authority. The second level of inquiry, according to the Supreme Court is to
23
consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment. Although this inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one. The Court is not empowered to substitute its judgment for that of the agency.
24
401 U.S. at 416, 91 S.Ct. at 823. Our review in the present case is even more limited because the district court has made independent findings of fact on the quality of the investigation undertaken by HUD and the demographic characteristics of the West Philadelphia community which it examined. Those factual determinations may only be overturned if they are clearly erroneous.
25
The Business Associations' primary challenge to HUD's decision appears to be that HUD, in determining that the area was not racially impacted, did not consider all of the relevant factors.7 HUD supposedly neglected to evaluate the existence of low income units across the street from the site; "pretended not to see the two minority-impacted Census Tracts"; and "ignored its own requirements for investigation of racial impacting." Appellants' Brief at 23.
26
It is absolutely clear from the findings of the district court and Valentine's testimony, however, that HUD considered the proximity of the already existing low income housing sites and minority impacted census tracts. All of the factors raised by the Business Associations were known by Valentine and specifically weighed by him. Valentine did not confine his analysis to information from dated census tracts reports, as was the case in King v. Harris, 464 F.Supp. 827 (E.D.N.Y.), aff'd mem., sub nom. King v. Faymor Development Co., 614 F.2d 1288 (2d Cir. 1979), vacated, 446 U.S. 905, 100 S.Ct. 1828, 64 L.Ed.2d 256 (1980), aff'd mem. on remand, 636 F.2d 1202 (2d Cir. 1980). In King, the district court held that reliance on census tract boundaries "in vacuo" to define "area" for impaction purposes was arbitrary and capricious. Here, Valentine supplemented the census information through informal interviews and his own personal knowledge of "gentrification" in the West Philadelphia community.8 Of course, appellants criticize Valentine's failure to undertake an extensive interview of local residents or real estate developers. We do not believe that given his experience in the area, Valentine was required to undertake any extensive formal review of housing changes in the neighborhood since the 1970 census. Such a judicial requirement could add significant costs to the already rising price of low income housing and, perhaps more importantly, substantially delay the construction of housing for the poor, a critical factor in this case in light of the withholding of federal funds. Our decision in Shannon, although not dispositive of the present appeal, only required housing officials to thoughtfully weigh the question of racial impact. It did not mandate the adoption of extensive procedures to investigate all housing possibilities which would result in undue delay to the start of construction. 436 F.2d at 822.
27
Although the appellants' claims are technically phrased as a challenge to the failure of HUD to consider certain factors, the Business Associations have also, in effect, challenged the weight given to these factors by Valentine. HUD supposedly "lost sight of the obvious relevant facts concerning the definition of the neighborhood," "neglected" to consider the nearby low income projects, "neglected" the nearby racially impacted census tracts; and "neglected" to observe the "highly commercial and institutional area" proximate to the site in Census Tract 88. Appellants brief at 23-24. In challenging HUD's decision on the grounds that it did not give proper weight to these factors, therefore, appellants are making a substantive challenge to the decision. On this question they must meet the heavy burden of demonstrating HUD has made a "clear error in judgment in defining the relevant area." Overton Park, 401 U.S. at 416, 91 S.Ct. at 823.
28
The definition of the relevant "area" is necessarily a highly subtle judgment which can be formed through an assessment of past, existing and future housing patterns, social interaction between members of the community, and economic development. Valentine concluded that the project was not in an impacted area principally on the grounds that it fell within an increasingly white middle class section of the City. The minority population of this section had been diminishing over the past decade through "gentrification," expansion of the University, and related commercial development. A Professor of Sociology, Dr. Van Til, testified that the residents of the new project would generally utilize some of the commercial, medical, and business facilities of this area. Valentine determined from his own knowledge and brief inspection of the area to the north of Census Tract 88 that there had been a reduction in the minority population there as well due to extensive clearance. App. at 179. On these grounds, he concluded that the project would not be in an impacted area.
29
The Business Associations' challenge to this judgment apparently is based on the view that locating a new development on the border of a geographical area which, if considered alone, would be impacted, is arbitrary and capricious in light of the prohibition against locating new housing in a racially impacted area. Census data would be determinative, as they see it, if the "site were physically moved 35 feet across the street" into Census Tract 91; in that event "there could be no question but that it would be part of an impacted area." Appellants brief at 23. The mere proximity to a racially impacted area is determinative, the appellants argue, because "the people who would be living at this site would much more likely relate to the neighborhood directly across the street, albeit part of the heavily minority impacted area, than to the highly institutional and commercial area to the south of the site in the non-impacted Census Tract 88." Appellants brief at 18.
30
The Business Associations would have us hold that it was a clear error of judgment for HUD not to find that mere proximity to a racially impacted area, not construction in a racially impacted area, was required. This argument contains within it an assumption that the population of the project, which will be 50% minority and situated on the border between an impacted and non-impacted area, will not interact with the predominately middle class and university populations which border its three sides. Housing decisions, as we have said, require a subtle assessment of past and future housing trends. Whether families living in the proposed development should best be characterized as part of the University community living in Census Tract 88 or a part of what Business Associations describe as the minority population in Census Tract 91, or some area in between, is clearly a judgment within the purview of informed administrative discretion. There is testimony from Valentine and Van Til which rebuts the Business Associations' assumption, and we certainly cannot say that HUD made a clear error in judgment in rejecting the Business Associations' assumption. We decline to hold as a matter of law that the population of proposed projects will necessarily become part of nearby racially concentrated communities.
31
Substantively, the Business Associations' attack on the method for identifying the relevant area is misconceived. Because the census tract which borders on the proposed project was in 1970 racially impacted does not mean that the area around the project which is only one part of the census tract is impacted today. Valentine testified that there had been some integration in the area to the north of the project. We cannot hold that the agency erred as a matter of law in failing to impute the racial characteristics of an entire census tract, as revealed in dated census information, to a particular area on its border years later.
III.
32
The Business Associations' second claim is that HUD committed a clear error in judgment when it considered the impact of the development on the concentration of low income persons. According to 24 C.F.R. § 880.112(d) (1979), in order to be approved, "the site shall promote greater choice of housing opportunities and avoid undue concentration of assisted persons in areas containing a high proportion of low income persons."9 The HUD economist who undertook this review for the Department was Gerard M. Lester. According to Lester's testimony, he first determined that the census tract in which the development was to be located was "an area of low or moderate income." App. at 261. To decide whether the proposed project would result in an undue concentration of assisted persons in the area, Lester used two techniques. First, he looked to the number of assisted persons living in Census Tract 88. Since he found that there were no other units, the proposed development would only have raised the number of assisted units to 2.8%. Second, Lester determined the number of assisted housing units within a half-mile radius of the site. Since he found that there would be 650 units if the proposed units were built, the percentage of assisted units in the area would only rise with the development to 5.8%, the city-wide average. Lester also made a site visit which confirmed that the existing units were across Market Street from the development. On these grounds he determined that the development would not cause an undue concentration of assisted persons.
33
Technically, appellants challenge Lester's decision, as they did Valentine's, on the ground that he did not give adequate consideration to a relevant factor in this circumstance, the existence of low income housing adjacent to the site. Thus, they would have us remand to HUD to "re-evaluate the site ... to tak(e) into consideration the existence of five hundred and thirty-two assisted housing units adjacent to the site...." Appellant's brief at 33. But, as in the case of Valentine, it is clear Lester was aware of and considered the factor. Therefore, we will interpret the Business Associations' claim to be that it was a clear error in judgment for Lester to base his decision on the number of assisted units in the census tract or in a one-half mile radius.
34
The construction of adjacent housing units does not necessarily constitute an undue concentration of assisted persons. If appellants' argument were accepted, the construction of 650 low income housing units in any one place would in itself constitute an undue concentration of assisted persons. Clearly, other factors, such as the surrounding neighborhood, transportation and commercial patterns, which Lester analyzed, are relevant. We cannot hold that HUD's decision was arbitrary and capricious.10
IV.
35
The Business Associations next challenge HUD's site approval on the ground that HUD did not investigate or rule on the rationality of the utilization of this land for residential development. As evidence of this obligation, they point to a list of "secondary" objectives11 of the Act summarized in its prologue. Title 42 U.S.C. § 5301(c) (1976) states in pertinent part:
36
The primary objective of this chapter is the development of viable urban communities, by providing decent housing and a suitable living environment and expanding economic opportunities, principally for persons of low and moderate income. Consistent with this primary objective, the Federal assistance provided in this chapter is for the support of community development activities which are directed toward the following specific objectives
37
(5) a more rational utilization of land and other natural resources and the better arrangement of residential, commercial, industrial, recreational, and other needed activity centers; ...
38
As the Business Associations see it, since one of the objectives of the Act is to promote "rational land use," HUD must specifically determine whether each site selection will further this goal. Because no official clearly determined that this site selection was economically rational, appellants would have us remand for a determination of economic rationality. In support of this view, the Business Associations offered the testimony of economist Richard Edelstein, who concluded that the most rational economic development for the area was commercial. App. at 337.
39
We do not read the general statement of objectives of the Act as strictly as appellants would have us. The mere fact that Congress concluded that low income housing projects would, as a secondary objective, lead to "rational land utilization" does not mean that they meant to require HUD to consider the site's most economically rational land use in each housing decision. This conclusion is reinforced by the fact that there is no substantive reference to the provision in the legislative history. If Congress had intended to mandate such a strict procedural hurdle that would, in effect, federalize zoning law, they would have done so in more precise terms than those found in § 5301 and its legislative history. It must be remembered that the agency most qualified to make coordinated decisions of future land utilization the local zoning agency must approve each project before construction begins. In this case, the Philadelphia Housing Authority has rezoned the site to permit residential development. We do not believe that Congress meant to require HUD to act as a federal housing authority after these local agencies have made their decision merely by the inclusion of a list of subsidiary objectives in the Act. The Business Associations have not referred us to a single case that has ever taken such a position, and we do not believe that Congress intended such a result.12
V.
40
The final claim of the appellants is that the expedited hearing schedule established by the district court was an abuse of discretion because it unduly restricted their ability to prepare for trial. The Business Associations filed their complaint on September 25, 1980, seeking to enjoin the project. The district court denied appellants' motion for a preliminary injunction on October 7, 1980 and scheduled trial for October 27. The appellants requested a continuance but their motion was denied. The district court entered its findings of fact and conclusions of law on the denial of a preliminary injunction on October 10.13 In that opinion, the district court indicated that whether the area was impacted depended on the definition of the relevant "area" and wrote that the issue was a "substantial question of fact." App. at 245. Further, the district court noted that the "status of housing city-wide" would have to be examined to decide whether the project could be built "in proximity to two other federally subsidized housing projects." App. at 247.
41
The gist of the appellants' argument is that in their view the "case was a relatively simple one" and the district court asked "for far more evidence" than was necessary or possible to gather in a short period of time. Appellants' Brief at 44. In support of the proposition that the court's denial of a continuance was an abuse of discretion the appellants rely on Sutherland Paper Co. v. Grant Paper Box Co., 183 F.2d 926 (3d Cir. 1950).
42
In Sutherland Paper, the court recognized "that as a general proposition, the grant or denial of continuances is a matter within the discretion of the trial court." 183 F.2d at 931. There, the defendants to a patent infringement suit claimed that the district court's denial of a continuance after the court decided certain motions two weeks prior to trial "which, had they been disposed of favorably to the defendants, would have made unnecessary certain trial preparation" was an abuse of discretion. Id. at 930. Our court remanded the case to the trial court because in a patent case, involving highly technical procedures, various tests had to be carried out on the patented articles and the validity of the plaintiff's processes had to be tested.14
43
Here, the appellants cannot argue that complicated scientific procedures had to be employed prior to trial. Nor can they contend that they were unaware of HUD's plans to allow development of the site. In fact, the Business Associations' attorneys were in contact with the Director of the Office of Housing and Community Development for the City of Philadelphia as early as June 14, 1979. In a letter of that date, counsel for the Business Associations discussed various sites in West Philadelphia to place the Section 8 housing. App. at 453. Clearly, this is not a case like Sutherland where the district court's delay in deciding critical motions and then its refusal to grant a continuance seriously prejudiced the litigant. Simply stated, Sutherland stands for the proposition that when a party is prejudiced by a justifiable reliance on the trial court, the denial of a continuance will constitute an abuse of discretion. See Fontana v. United Bonding Insurance Co., 468 F.2d 168, 169-70 (3d Cir. 1972).
44
We have concluded that in the circumstances of this case the trial court did not abuse its discretion by denying appellants' request for a continuance. The case was fully prepared and argued at the preliminary injunction hearing and the district court's opinion of October 10 set out what the judge believed to be the plaintiffs' burden at trial. In light of the fact that the City was operating under a 21 million dollar federal freeze until low income housing was built, it was not error for the district court to expedite the final hearing.
VI.
45
Often there is a tendency almost like a hydraulic pressure to expand a doctrine beyond the limits of its logic. In this case the appellants seek to push the doctrine of integrated housing or non-impacted lower income housing beyond the limit of the logic in any of our prior cases, any civil rights statutes or any existing governmental regulations. If appellants' position were adopted, the consequence might be that minorities and low income persons would not be able to have any HUD-assisted housing built in a census tract area where the black population is under 10% and where the low income population is minimal. Ironically, if appellants' position were accepted the exclusion of minorities and the poor would be accomplished because business development groups, like appellants, believe that the most rational use of the land would be for commercial purposes.15 The victims of poverty and discrimination would not be able to live in the commercial facilities which appellants prefer to have built on the site. The plaintiffs are responsible business persons who have no animosity against the poor or minorities, and probably would like for all citizens to have decent housing. But, under the guise of their concern about the poor and minorities, business interests would probably acquire this land, and the poor and minorities might be forced to live in areas far more racially concentrated and poverty-stricken than the proposed housing project at 39th and Market Streets.
46
One of appellants' complaints is the drawing of a dividing line down Market Street to define the area to ascertain racial concentration or low income impactment. They would prefer to move the line one block south and consolidate that additional block with Census Tracts 91 and 92. The drawing of the line at Market Street, appellants say, is too short-sighted. Yet, when the defendants choose a larger geographical area with a half-mile radius, then the appellants complain that the radius is too long for defining the area. But as Mr. Justice Holmes observed:
47
If in its theory the distinction is justifiable, as for all that we know it is, the fact that some cases, including the plaintiffs, are very near to the line makes it none the worse. That is the inevitable result of drawing a line where the distinctions are distinctions of degree: and the constant business of the law is to draw such lines.
48
Dominion Hotel Inc. v. State of Arizona, 249 U.S. 265, 269, 39 S.Ct. 273, 274, 63 L.Ed. 597 (1919). We find the appellees could permissibly draw the lines where they did and that there is no basis for granting the injunctive relief appellants requested. Though espousing with vigor fair housing concepts, appellants would create a condition for the poor and minorities which John O. Calmore has characterized as being "neither fair nor housing."16
49
For the foregoing reasons, we will affirm the judgment of the district court.
ADAMS, Circuit Judge, concurring:
50
Although there is serious doubt in my mind whether the decision by HUD to approve the West Philadelphia project was a wise one, the issue before us does not involve the wisdom of the agency's action, as the Court might view it. Rather, it is a much more limited question.
51
The Administrative Procedure Act, 5 U.S.C. § 706(2)(A), provides that an agency decision is to be overturned only if it is "arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law." And in Citizens to Preserve Overton Park v. Volpe, 401 U.S. 102, 415, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971), the Supreme Court declared that in a situation like this one the judiciary is to determine
52
whether there has been a clear error of judgment ... Although this inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one. The Court is not empowered to substitute its judgment for that of the agency.1
53
Since I cannot say, on the basis of the record before us, that HUD has acted arbitrarily or capriciously, has abused its discretion, or committed a clear error of judgment, I agree with the majority that the action of the agency may not be set aside.
1
Normally, the permanent mortgage commitment is provided by the Government National Mortgage Association. HUD is not a lending institution, but issues insurance to lending institutions. The mortgage to the developers in the present case was secured through tax free bonds issued by the Philadelphia Housing Finance Corporation, which was established by The Philadelphia Housing Authority. See Testimony of B. Altman, App. at 125
2
Under an agreement between HUD and the private developer, named a "Housing Assistance Payment (HAP) Contract," HUD is obligated to subsidize the difference between not less than 15% but no more than 25% of the families income and the contract rent. See 24 C.F.R. §§ 880.101; 880.118 (1979). Restrictions are placed on the owner however. His rental charge is limited to no more than 10% over the fair market rental for the unit as established by HUD. 42 U.S.C. 1437f(c)(1) (1976). Moreover, tenants may not be required to pay more than 25% of their gross income toward their rent. At least 30% of the assisted units must also be rented by families which earn no more than 50% of the local median. 42 U.S.C. § 1437f(c)(3); 1437f(c)(7); 1437f(f)(2) (1976)
3
Interested developers may obtain a packet giving further information and HUD's specific objectives for a particular area. See 24 C.F.R. § 880.204 (1979)
4
24 C.F.R. § 880.112(c)(1) (1979) has since been amended to read as follows:
The site must not be located in:
(1) An area of minority concentration unless (i) sufficient, comparable opportunities exist for housing for minority families, in the income range to be served by the proposed project, outside areas of minority concentration, or (ii) the project is necessary to meet overriding housing needs which cannot otherwise feasibly be met in that housing market area. An "overriding need" may not serve as the basis for determining that a site is acceptable if the only reason the need cannot otherwise feasibly be met is that discrimination on the basis of race, color, religion, creed, sex, or national origin renders sites outside areas of minority concentration unavailable....
24
C.F.R. § 880.206(c)(1) (1980). In HUD jargon, an area of minority concentration is called an "impacted area."
5
HUD has made an administrative decision to use census tract boundaries since economic and racial data is readily obtainable for them. Mr. Valentine revealed in his testimony that HUD also reviews data for the area surrounding the particular census tract in question. App. at 172
6
Both parties agree that this is the applicable standard. Section 706(2) (E) and (F), which mandate, respectively, review under a substantial evidence standard and a review de novo, are inapplicable. They concern, in the case of Section 706(2)(E), review of agency rulemaking, and, in the case of 706(2)(F), "action which is adjudicatory in nature and the agency factfinding procedures are inadequate" or "when issues that were not before the agency are raised in a proceeding to enforce nonadjudicatory agency action." Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 415, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971)
7
Appellants have requested a remand for reconsideration by HUD of the question of racial impact, rather than a remedy
8
Gentrification is a term used in land development to describe a trend whereby previously "underdeveloped" areas become "revitalized" as persons of relative affluence invest in homes and begin to "upgrade" the neighborhood economically. This process often causes the eviction of the less affluent residents who can no longer afford the increasingly expensive housing in their neighborhood. Gentrification is a deceptive term which masks the dire consequences that "upgrading" of neighborhoods causes when the neighborhood becomes too expensive for either rental or purchase by the less affluent residents who bear the brunt of the change
9
"Assisted persons" are defined as individuals living in federally subsidized housing units
10
The Business Associations also argue that HUD failed to consider in its decision the need to deconcentrate "low income persons," as allegedly required by one of the Act's secondary objectives:
(T)he reduction of the isolation of income groups within communities and geographical areas and the promotion of an increase in the diversity and vitality of neighborhoods through the spatial deconcentration of housing opportunities for persons of lower income and the revitalization of deteriorating or deteriorated neighborhoods to attract persons of higher income.
42 U.S.C. § 5301(c)(6) (1976). Even if we were to find that the statement of purpose necessarily obligated HUD to review concentration of assisted units for each site selection, as the Business Associations argue, we still would uphold HUD's approval because HUD's analysis under 24 C.F.R. § 880.112(d) (1979), discussed above, fulfilled this same objective.
11
See Aertsen v. Landrieu, 637 F.2d 12, 22 (1st Cir. 1980)
12
We have some difficulty in discerning how HUD could assure rational land uses in the context of low income housing. Publicly subsidized low income housing is frequently economically irrational, as economists use that word, because it is not built through the private market. Any judicially imposed review of the rationality of housing development could lead to more confusion than advancement of the objectives of the Act
13
Although the district court opinion was entered on October 10, apparently it was not received by the appellants until October 14
14
The court described the prejudice suffered by the defendants as follows:
The affidavits filed by the defendants in conjunction with their motion for new trial tend to show that defendants wished to present, but could not prepare within the time allowed, substantial proof tending both to establish affirmatively that the plaintiff's waxes carry resinous impurities and to show, negatively, the inadequacy of the tests relied on by plaintiff to prove the absence of such substances. It seems clear therefore that they were prejudiced by the action of the trial court, and that the case should be remanded to the district court for a new trial.
Furthermore, the court noted that the inventor and key technician essential to the defendants' case had experienced ill health during the expedited period. 183 F.2d at 930.
15
These businessmen are no longer supported in this litigation by any group which represents the poor, minorities, the government, the powerless, or the residents of the surrounding community
16
See Calmore, Fair Housing v. Fair Housing: The Problems With Providing Increased Housing Opportunities Through Spatial Deconcentration, 14 Clearinghouse Rev. 7, 8 (May 1980), where the author relates the following realities:
In Washington, D. C., during September 19-21, 1979, the author attended a joint meeting with members of the Legal Services Community Development Block Grant Task Force, the Working Group for Community Development Reform, and the National Citizens Monitoring Project on CDBG. The monitoring experiences of these groups confirm that in many cities, large and small, the object of expanding housing opportunities through the spatial deconcentration of the nonwhite and urban poor, accompanied by the broad prohibitions related to building and rehabilitating federally-assisted low-income housing in impacted areas, is causing severe problems in meeting the housing and community development needs of low-income residents in such areas.
One blatant local horror story involved the loss of 85 units of large family rental housing on the fringe of an urban renewal zone in Connecticut because HUD refused to approve a rehabilitation proposal on the ground that the building was too near other assisted housing. Eighty-five predominantly Spanish-speaking families lost their housing in a city with a near-zero vacancy rate, a four to eight year wait for public housing and a high condominium and commercial conversion rate. Everyone in the city, including the mayor, objected to HUD's decision. The building was demolished after the usual fires.
The Legal Services attorney who related this story states:
It is understandable, therefore, that I take particular exception to the utility of a rule which prohibits undue concentration of assisted persons in areas containing a high proportion of low-income persons. I can understand why it is not a good thing to have whole census tracts filled with wall-to-wall high rise housing projects. Density is the real issue and lack of parks, playgrounds, etc.
What is wrong, however, with a whole census tract of rehabilitated row houses? Nothing, say HUD rules, unless the area is poor. Therefore gentrification is okay.
1
As Justice Frankfurter stated in S.E.C. v. Chenery, 318 U.S. 80 at 94, 63 S.Ct. 454 at 462, 87 L.Ed. 626 (1942), a landmark administrative law case:
"If the action rests upon an administrative determination an exercise of judgment in an area which Congress had entrusted to an agency of course it must not be set aside because the reviewing court might have made a different determination were it empowered to do so."
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195 B.R. 769 (1996)
In re Terry D. LOGAN and Charlene M. Logan, husband and wife, Debtors.
Terry D. and Charlene M. LOGAN, husband and wife, Plaintiffs,
v.
Richard and Michelle AHLBRECHT, husband and wife, Defendants.
Bankruptcy No. 89-01973-K31. Adv. No. A94-0065-K31.
United States Bankruptcy Court, E.D. Washington.
February 2, 1996.
*770 Zachary Mosner, Seattle, WA, for the State of Washington.
Craig S. Sternberg, Seattle, WA, for plaintiffs/debtors.
Robert M. Boggs, Yakima, WA, for Ahlbrechts/defendants.
Thomas J. Sawyer, Washington, D.C., for Internal Revenue Service.
MEMORANDUM OPINION
JOHN M. KLOBUCHER, Bankruptcy Judge:
JURISDICTION
Jurisdiction of this court is proper pursuant to 28 U.S.C. § 1334(a), 28 U.S.C. *771 § 157(a), (b)(1) and (2), and Local Rule 29 of the United States District Court for the Eastern District of Washington.
ISSUE
This case involves a recreational summer home which is located on real property within the Snoqualmie National Forest subject to a "Term Special Use Permit". The debtors were the owners of the summer home at the time they filed their petition in bankruptcy. It was sold during the course of administration and the proceeds have been interplead into the registry of the Court.
The issue involved is one of priority among competing encumbrancers. The debtors purchased the property in 1984 and obtained title by means of a "Bill of Sale". As a part of the transaction they granted the Ahlbrechts a security interest in the property and executed a financing statement which was filed with the State of Washington Department of Licensing. That filing, however, lapsed prior to the bankruptcy petition without the filing of a continuation statement. The security interest of the Ahlbrechts was treated as personal property and no "fixture filing" was attempted. Both the federal and state governments subsequently obtained tax liens against all property of the debtors.
It is the contention of the Ahlbrechts that their security interest, being first in time, takes priority over the tax liens. It is their contention that the summer home falls within the category of "consumer goods", that it is not a "fixture" and that their security agreement was automatically perfected without the filing of a financing statement pursuant to the terms of Article 9 of the Uniform Commercial Code.
The governmental agencies, on the other hand, argue that the summer home does not fall within the category of "consumer goods" and that, even if it does, it is a "fixture" and a security interest therein must be perfected with a "fixture filing".
DISCUSSION
The security agreement obtained by the Ahlbrechts was accompanied with the filing of a financing statement with the State of Washington Department of Licensing. It was not, however, recorded as a fixture filing with the Auditor of the County wherein the real property is situate. In any event, the term of the financing statement had expired prior to the bankruptcy without the filing of a continuation statement, so if the financing statement were critical to the priority of the security interest the tax liens would have obtained priority upon its expiration. See General Electric Credit Corporation v. Isaacs, 90 Wash.2d 234, 581 P.2d 1032 (1978).
It is first necessary to determine whether the summer home falls within the category of "consumer goods". Otherwise the filing of a financing statement would be critical to perfection of the security interest.
RCW 62A.9-302(1)(d) provides as follows:
(1) A financing statement must be filed to perfect all security interests except the following: . . .
(d) a purchase money security interest in consumer goods; but filing is required for a motor vehicle required to be registered and other property subject to subsection (3) of this section; and fixture filing is required for priority over conflicting interests in fixtures to the extent provided in RCW 62A.9-313;. . . . (emphasis added).
It is conceded by the governmental agencies that the Ahlbrechts hold a purchase money security interest in the summer home. It is their contention however that the property does not fall within the definition of "consumer goods".
"Goods" are defined under RCW 62A.9-105(1)(h) as follows:
(h) "Goods" includes all things which are movable at the time the security interest attaches or which are fixtures (RCW 62A.9-313), but does not include money, documents, instruments, accounts, chattel paper, general intangibles, or minerals or the like (including oil and gas) before extraction. "Goods" also includes standing timber which is to be cut and removed under a conveyance or contract for sale, the unborn young of animals and growing crops; (emphasis added)
*772 Clearly the summer home would fall within the definition of "goods" even if it were classified as a fixture, and none of the parties have seriously contended that the summer home was not bought and used primarily for personal, family or household purposes. Commercial Credit Equipment Corporation v. Carter, 83 Wash.2d 136, 516 P.2d 767 (1973) clearly demonstrates the broad parameters of Washington's interpretation of consumer goods.
[T]he classifications of Sec. 9109 are based solely on use or function and it is almost, if not impossible, to conceive of an item of tangible personal property that cannot be a consumer goods. Even the recently retired "Queen Mary" could qualify as a consumer good if purchased by a billionaire for his own personal use and one recalls that the late Henry Ford, at one time, bought up entire factories for his personal museum. (Commercial Credit, pg. 142, 516 P.2d 767)
Thus, I have come to the conclusion that the summer home at issue falls within the definition of "consumer goods" and that it does therefore fall within the exception of subsection 302(1)(d).
The crux of this case then turns upon whether the summer home also falls within the definition of a "fixture", which would necessitate a fixture filing in order to obtain priority over some conflicting interests under Article 9 of the Uniform Commercial Code if applicable in this case.
RCW 62A.9-313(1)(a) provides as follows:
Goods are "fixtures" when they become so related to particular real estate that an interest in them arises under real estate law.
Thus, the Uniform Commercial Code, as enacted by the State of Washington, does not specifically define fixtures other than to defer that definition to real estate law which, at least in Washington, has evolved through case law.[1]
The Supreme Court of Washington as early as 1905 adopted a litmus test for the determination of fixtures.
"`The true criterion of a fixture is the united application of these requisites: (1) Actual annexation to the realty, or something appurtenant thereto; (2) application to the use or purpose to which that part of the realty with which it is connected is appropriated; and (3) the intention of the party making the annexation to make a permanent accession to the freehold.'" Filley v. Christopher, 39 Wash. 22, 80 P. 834 (1905).
That criterion is reaffirmed in subsequent case law, but was refined in Ballard v. Alaska Theater Co., 93 Wash. 655, 161 P. 478 (1916), where we find the following statement:
"In determining whether a chattel which has been annexed to the freehold is a trade fixture or a part of the realty, the cardinal inquiry is into the intent of the party making the annexation. Often there is difficulty in determining the intent, but, whatever may be the legal relation of the parties between whom the controversy is waged, *773 when the intent is discovered it is generally controlling."
In Liberty Lake Sewer District No. 1 v. Liberty Lake Utilities Company, Inc., 37 Wash.App. 809, 683 P.2d 1117 (1984), it was argued that underground water pipes had become fixtures in spite of the intent of the annexor that they would remain personal property. The court rejected that argument, pointing out that Washington case law has clearly established that the intention of the annexor is the most important factor of consideration and that such intent is determined from the circumstances surrounding the annexation, including the nature of the article affixed, the annexor's situation in relation to the freehold, the manner of annexation, and the purpose for which it was made. When a person with no interest in the land affixes an article thereto in the furtherance of his own purposes, the presumption is that he intends to reserve title to the chattel in himself.
The court pointed out that cases where innocent purchasers for value have prevailed over the intent of the annexor are based upon equitable doctrines and not upon the law of fixtures.
The District relies on Boeringa v. Perry [96 Wash. 57, 164 P. 773] [(1917)], supra, in its argument that it is not bound by the agreements. However, Boeringa states only "where a subsequent purchaser for value has no notice, either actual or constructive . . . that the property in question has been agreed and determined to be chattel property", then the annexation is treated as real estate. Boeringa, at 62 [164 P. 773]. The rule applies to purchasers of land. Here, the District is not purchasing the land. The purchasers are the abutting landowners and, as stated above, they were not misled by the appearance of the pipes. Even if the rule applied, the District cannot be considered a purchaser without notice since it is held to knowledge of the custom in the trade and, like the abutting landowners, could not reasonably have been misled by the appearance of the pipes. Liberty Lake Sewer, page 817, 683 P.2d 1117.
These cases emphasize that the intent is to be determined from the objective circumstances surrounding the annexation and not from the secret intent as espoused by the testimony of the annexor.
An examination of the objective facts in the case at bar leads me to the following observations. Considering first the nature of the article affixed, it cannot be denied that it has the appearance of a permanent structure. Although it rests upon pier blocks as opposed to a foundation, and can be removed without damage to the real property, its removal would probably cause substantial damage to the structure itself. From the photographs in evidence it appears that its removal from the site would either require the felling of some trees or a dissection of the structure. It has the appearance of a residence, but the special term use permit limits its use to summer recreational purposes and prohibits its use as a permanent residence. It must be removed within a reasonable time following termination of the permit.
Under the facts of this case I conclude that the nature of the article affixed is outweighed by the circumstances surrounding the annexation, the annexors' situation in relation to the freehold, and the purpose for which it was made. I emphasize that the property involved here is national forest property owned by the United States of America. The use of property within our national forests is rigidly restricted by federal statutes and regulations of the Department of Agriculture. Exhibit U.S.A. #1 depicts a huge sign near the highway upon entry "Wenatchee National Forest U.S. Department of Agriculture". The second page of that exhibit depicts another large sign abutting the roadway leading to the summer home which advises "NOTICE SPECIAL USE PERMIT AREA. ROADWAYS FOR INGRESS AND EGRESS "ONLY"".
16 U.S.C. § 497 authorizes the Secretary of Agriculture ". . . to permit the use and occupancy of suitable areas of land within the national forests, not exceeding five acres and for periods not exceeding thirty years, for the purpose of constructing or maintaining summer homes . . .". That statute further provides "the authority provided by this paragraph shall be exercised in such manner as not to preclude the general public from *774 full enjoyment of the natural, scenic, recreational, and other aspects of the national forests."
The law is settled that SPECIAL USE PERMITS create no vested property rights. See Paulina Lake Historic Cabin Owners Association v. U.S.D.A. Forest Service, 577 F.Supp. 1188 (D.Ore.1983).
The "term special use permit" issued to the debtors in this case was to expire December 31, 1998. By its terms it was non-transferrable and provided that the structures on the property must be removed upon termination. Failure of the permittee to remove the structures could result in their removal by the federal government at the expense of the permittee.
It is difficult to imagine a case that would more clearly demonstrate the intent of the parties to maintain the severability of a structure from the real property upon which it is situated. Not only is the structure movable, but it must be removed upon termination of the special use permit. I find these factors to far outweigh the argument that it may be difficult to transport the structure as a single unit down the narrow roadway which leads to its present location.
It is my conclusion, therefore, that the summer home in question is not "so related to particular real estate that an interest in (it) arises under real estate law". The interest created was purely that of personal property. A "fixture filing" was not required under the Uniform Commercial Code, and any priority of the tax liens over the security interest of the Ahlbrechts would have to be founded purely on equitable principles.
Neither the federal government nor the State of Washington is in a position to urge the application of estoppel or other equitable doctrines which might result in the structure being treated as real property. Neither enjoys the posture of a purchaser in good faith and for value. Both entities merely assert tax liens against property rights of the Ahlbrechts, who are not liable for the taxes. Neither entity was mislead by the Ahlbrechts' failure to give additional notice of their security interest in the property. Furthermore, the Internal Revenue Service is in an unenviable position to argue the permanent nature of the structure when it was the United States Government that ordered its severance. The parties have not addressed the issue of whether the knowledge of one governmental agency may be imputed to another agency and the court, for the reasons stated herein, finds it unnecessary to explore that issue.
The Internal Revenue Service places heavy emphasis on the fact that the attorney for the Ahlbrechts at the time of sale did file a financing statement. It is argued that this evidences an admission on the part of the Ahlbrechts that the filing of a financing statement was critical to the perfection of their security interest. That conclusion however, is unwarranted. Although the filing of a financing statement was not necessary to protect their interest against an encumbrancer of the Logans' interest, a literal interpretation of the Uniform Commercial Code leads me to the conclusion that failure to file a financing statement would leave them unprotected against a purchaser for value of the Logans' interest. RCW 62A.9-307(2) provides as follows:
In the case of consumer goods, a buyer takes free of a security interest even though perfected if he buys without knowledge of the security interest, for value and for his own personal, family or household purposes unless prior to the purchase the secured party has filed a financing statement covering such goods.
I conclude that it was at the very least appropriate for the Ahlbrechts' attorney to file a financing statement, and that his failure to do so would probably constitute negligence.
CONCLUSION
I conclude from the above that the summer home at issue does fall within the category of "consumer goods" but that it is not so related to the particular real estate that an interest in it arises under Washington Real Estate Law and therefore is not a "fixture" as defined by RCW 62A.9-313(a). The security interest of the Ahlbrechts was automatically perfected without the necessity of a filed *775 financing statement and, being first in time, takes priority over the liens of the Internal Revenue Service and the State of Washington.[2]
NOTES
[1] The American Law of fixtures has evolved along two separate paths among the several states. Some courts have adhered more closely to the early English and Roman concept of the physical nature of the article itself in reaching a determination of its identity, while other courts have drifted toward a concept which relies more upon the circumstances of the annexation and the intent of the parties who accomplish that act. Alphonse M. Squillante, 191 The Law of Fixtures: Common Law and the Uniform Commercial Code, 15 Hofstra L.Rev. 191 (1987).
Those courts which emphasize the physical attributes of the object usually rely upon the manner of annexation of the object to the real property and the injury that would likely result from its removal, including injury to the object itself. On the other hand, those cases which emphasize the intent of the parties making the annexation place less importance on the damage caused by removal barring damage to the real property itself. Those cases which emphasize the nature of the object and the method of its annexation often look to the appearance which the object conveys to a casual observer, while those cases which emphasize the intent of the annexor disregard the physical appearance in defining the object as a fixture or a chattel, leaving the protection of parties who might be deceived by such appearance up to equitable estoppel doctrines. A distinction between these two basic approaches may have taken on significantly more importance with the advent of the Uniform Commercial Code.
[2] I note in passing that even if the cabin were to be classified as a fixture, it might be entitled to priority over the governmental liens pursuant to RCW 62A.9-313(4)(d) which provides as follows:
(4) A perfected security interest in fixtures has priority over the conflicting interest of an encumbrancer or owner of the real estate where . . .
(d) the conflicting interest is a lien on the real estate obtained by legal or equitable proceedings after the security interest was perfected by any method permitted by this Article.
It might be argued that "any method permitted by this Article" as to a purchase money security interest in consumer goods means that it may be perfected without any filing at all, inasmuch as RCW 62A.9-302(1)(d) provides that such security interest is automatically perfected whereas Section 313 merely refines the issue of priorities. See Eldon H. Reiley, Guidebook to Security Interests in Personal Property, CB GSI § 12.09, n. 71, (1986-1989). That issue, however, was not addressed by the parties and, inasmuch as I have concluded that the cabin is not a fixture I find it unnecessary to further explore the same.
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532 F.2d 1373
Gatlinv.McMunn*#
No. 76-1367
United States Court of Appeals, Fifth Circuit
5/28/76
1
N.D.Ga.
AFFIRMED
*
Summary Calendar case; Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of New York et al., 5 Cir., 1970, 431 F.2d 409
# Local Rule 21 case; see NLRB v. Amalgamated Clothing Workers of America, 5 Cir., 1970, 430 F.2d 966.
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[Cite as Stark Cty. Treasurer ex rel. Ferrero v. Stark Cty. Court of Common Pleas, 2011-Ohio-433.]
COURT OF APPEALS
STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT
STARK COUNTY TREASURER EX JUDGES:
REL. JOHN D. FERRERO, STARK Hon. Julie A. Edwards, P.J.
COUNTY PROSECUTING ATTORNEY, Hon. Sheila G. Farmer, J.
ET AL. Hon. Patricia A. Delaney, J.
Relators
-vs- Case No. 2010CA00237
STARK COUNTY COURT OF
COMMON PLEAS, ET AL.
Respondents OPINION
CHARACTER OF PROCEEDING: Writ of Prohibition/Mandamus
JUDGMENT: Denied
DATE OF JUDGMENT ENTRY: January 31, 2011
APPEARANCES:
For Relators For Respondents
JOHN D. FERRERO PERICLES G. STERGIOS
Stark County Prosecutor Two James Duncan Plaza
Massillon, OH 44646
ROSS A. RHODES
AMY A. SABINO For Intervenor Gary D. Ziegler
110 Central Plaza, South
Suite 510 JOSEPH E. CIRIGLIANO
Canton, OH 44702 MATTHEW W. NAKON
AMY L. DELUCA
35765 Chester Road
Avon, OH 44011-1262
DENNIS R. THOMPSON
CHRISTY B. BISHOP
2719 Manchester Road
Akron, OH 44319
Stark County, Case No. 2010CA00237 2
Farmer, J.
{¶1} This matter comes before this court as an original action in prohibition and
mandamus, requesting an order that would preclude respondents, Stark County Court
of Common Pleas and the Honorable H. F. Inderlied, Jr., from maintaining and enforcing
a valid order to pay the attorney fees of intervenor, Gary Zeigler.
{¶2} There are two relevant actions pending in the Stark County Court of
Common Pleas involving the litigants in the case at bar. The first case filed is an action
to recoup funds from intervenor Gary Zeigler due to employee theft which occurred
while intervenor was Stark County Treasurer. The second case was filed by intervenor
as a declaratory judgment action wherein intervenor sought to have the statute
authorizing the removal of a treasurer from office declared unconstitutional. Prior to the
filing of the declaratory judgment action, intervenor moved respondent to appoint him
counsel in the recoupment case because intervenor could not be represented by the
Stark County Prosecutor’s Office due to a conflict of interest.
{¶3} The order for the appointment of counsel relates solely to the recoupment
action (Common Pleas Case No. 2010CV02773). The underlying declaratory judgment
action (Common Pleas Case No. 2010CV03025) contains no such order for appointed
counsel. The specific court order states the following:
{¶4} "The Court further finds, upon consideration, that defendant Zeigler is
entitled to appointed counsel in this case, pursuant to R.C. 305.14, 309.09, and
2744.07(A)(1). See also Whaley v. Franklin Cty. Bd. of Commrs., 92 Ohio St.3d 574,
2001-Ohio-1287. To require the procedure contemplated by R. C. 305.14 would be an
exercise in futility given the obligation under R.C. 2744.07(A)(1) and the Whaley
Stark County, Case No. 2010CA00237 3
decision and in light of plaintiff's position as expressed in the within motion and briefs in
support thereof."
{¶5} We note the declaratory judgment action was consolidated with the
recoupment action on August 20, 2010, after the appointment of counsel in Case No.
2010CV02773.
{¶6} In the agreed stipulations filed sub judice, we find the following pertinent
facts:
{¶7} "2. Gary D. Zeigler, at all times relevant to the Recoupment Action, was a
public official/county officer pursuant to Ohio Revised Code Chapter 321 and R.C.
309.09.
{¶8} "3. The claims against Gary D. Zeigler in the Recoupment Action stem
from a theft of funds from the Stark County treasury. The claims instituted by Relators
arise from R.C. 9.39, 321.02, 321.04, 321.37 and the common law of Ohio.
{¶9} "4. A prosecuting attorney cannot represent multiple adverse parties
where the representation would involve the assertion of a claim by one client against
another client represented by the prosecuting attorney in the same proceeding. R. Prof.
Conduct 1.7(c)(2).
{¶10} "5. Neither the Stark County Prosecuting Attorney, nor the Stark County
Board of County Commissioners made any application to the trial court for appointment
of counsel for Zeigler."
Stark County, Case No. 2010CA00237 4
WRIT OF PROHIBITION
{¶11} Relators claim the trial court lacked authority to order the payment of
appointed attorney fees because the statutory framework of R.C. 309.09(A) and
305.14(A) was not followed relative to the procedure for appointed counsel.
{¶12} In order for this court to issue a writ of prohibition, three conditions must
be met:
{¶13} "(1) The court or officer against whom it is sought must be about to
exercise judicial or quasi-judicial power; (2) it must appear that the refusal of the writ
would result in injury for which there is no adequate remedy; (3) the exercise of such
power must amount to an unauthorized usurpation of judicial power." State ex rel.
Northern Ohio Telephone Co. v. Winter (1970), 23 Ohio St.2d 6, 8.
{¶14} Further, in Kelley, Judge v. State ex rel. Gellner (1916), 94 Ohio St. 331,
341, the Supreme Court of Ohio stated the following:
{¶15} "In all cases where an inferior court has jurisdiction of the matter in
controversy and keeps within the limits prescribed by law for its operation, the superior
court should refuse to interfere by prohibition, for it should not consider whether the
court below erred in the exercise of its powers, since it has nothing to do with the
correctness of the rulings of the inferior court but only with its exercise of jurisdiction."
(Emphasis added.)
{¶16} In the joint stipulation of facts submitted by the parties, the parties agreed
the recoupment complaint was filed while intervenor was Stark County Treasurer, and
the recoupment action is for monies lost while intervenor was the treasurer. Relators
Stark County, Case No. 2010CA00237 5
original action at paragraph four also claimed the same. Therefore, intervenor was a
public official entitled to representation.
{¶17} Although relators now claim they had no duty to defend because
intervenor was not a defendant who was acting in a good faith, well-intended attempt to
carry out his official duties or responsibilities, this argument was not addressed to the
trial court and in fact was refuted by relators' own arguments made contra to the
appointment of counsel:
{¶18} "It cannot be said that he has acted in bad faith or was not well
intentioned; however, neither can it be said that he has 'acted' at all with respect to his
underlying liability, and so it is difficult to conclude that the liability arises from 'a good
faith, well-intended attempt to carry out official duties or responsibilities.' " Plaintiffs'
Motion for Relief from Judgment or Order and for Reconsideration of Appointment of
Counsel filed August 10, 2010 at 3. See also, Relators' Merit Brief filed October 14,
2010 at 11.
{¶19} Relators contend only the prosecuting attorney and the board of county
commissioners may make a request for appointed counsel upon their determination that
a need exists for appointed counsel. It is undisputed that an application pursuant to
R.C. 305.14(A) was not made to the trial court by the prosecuting attorney and the
board of county commissioners.
{¶20} As noted by our brethren from the Eighth District in State ex rel. Dreamer
v. Mason, Cuyahoga App. No. 93949, 2010-Ohio-4110, ¶31-32, the procedural nature
of the statute may be waived when there is a clear conflict:
Stark County, Case No. 2010CA00237 6
{¶21} "However, courts have carved out an exception to the rule mandating a
proper application under R.C. 305.14 before authorization of outside counsel. When the
prosecuting attorney has a conflict of interest and fails to apply for the appointment of
outside counsel when there is a duty to defend, 'this joint application is not a
prerequisite to a trial court's authorization of outside counsel.' State ex rel. Trumbull
Cty. Bd. of Elections v. Trumbull Cty. Bd. of Commrs., Trumbull App. No. 2009 TR 85,
2010-Ohio-2281, 2010 WL 2026075, at ¶21. In Seminatore, the Ohio Supreme Court
held that the prosecutor's or board of commissioners' failure to make this application
when a conflict of interest exists constitutes an abuse of discretion, and mandamus is
an appropriate remedy to compel action. Seminatore at 463-464, 20 O.O.3d 388, 423
N.E.2d 105. In such circumstances, the joint application may be ordered, or a court of
common pleas may directly appoint legal counsel to represent the county officer. State
ex rel. Jefferson Cty. Children Servs. Bd. v. Hallock (1986), 28 Ohio St.3d 179, 182-183,
28 OBR 269, 502 N.E.2d 1036; State ex rel. Hillyer v. Tuscarawas Cty. Bd. of Commrs.
(1994), 70 Ohio St.3d 94, 637 N.E.2d 311.
{¶22} "Our analysis of R.C. 305.14 does not end, however, with compelling or
bypassing the joint application to the trial court. A prosecutor is authorized to advise or
represent a county officer pursuant to R.C. 309.09(A) after the good-faith and well-
intended determination is reached. It follows then, that to authorize outside counsel to
advise or represent a county officer, that same good-faith and well-intended evaluation
must take place. Common sense dictates that a party other than a prosecutor with a
conflict of interest should make this determination. In interpreting R.C. 305.14(A), we
find that the General Assembly intended the court to play this role. 'The court of
Stark County, Case No. 2010CA00237 7
common pleas***may authorize the board [of commissioners] to employ legal counsel to
assist***[a] county officer in any matter of public business***and in the prosecution or
defense of any action***in which***[the] officer is a party or has an interest, in its official
capacity.' (Emphasis added.) R.C. 305.14(A). Therefore, under R.C. 305.14(A),
authorization of outside counsel when a conflict of interest exists is at the court's
discretion, insomuch as the court must make a good-faith, well-intended determination."
{¶23} Given the above analysis, we find the trial court's action was not an
unauthorized usurpation of judicial power. Therefore, we find a writ of prohibition does
not lie sub judice.
WRIT OF MANDAMUS
{¶24} Relators also claim they are entitled to a writ of mandamus.
{¶25} "In order for this court to issue a writ of mandamus, relators must establish
that they have a clear legal right to the requested relief, respondents have a clear legal
duty to perform the requested relief, and there is no adequate remedy at law. State ex
rel. Eshleman v. Fornshell, 125 Ohio St.3d 1, 2010-Ohio-1175, 925 N.E.2d 609, ¶20.
Moreover, mandamus is an extraordinary remedy that is to be exercised with caution
and only when the right is clear. State ex rel. Williams v. Brown (1977), 52 Ohio St.2d
13, 15, 6 O.O.3d 79, 368 N.E.2d 838." State ex rel. Dreamer, supra, at ¶11.
{¶26} Relators attempt to justify the mandamus action by claiming the need for
extraordinary relief:
{¶27} "Relators filed the instant action because there is a very real possibility
that fees in this case could not only negate the value of any public funds recovered in
Stark County, Case No. 2010CA00237 8
the lawsuit but will also deepen the budget crisis the county is already experiencing."
Relators' Merit Brief at 16.
{¶28} In its August 27, 2010 order, the trial court specifically addressed these
concerns:
{¶29} "Interestingly, this Court conditioned the appointment of counsel for
defendant Zeigler on the provision of 'reasonable and necessary attorney fees and
expenses' only. No fees will be approved that don't meet that criteria. Naming 5
attorneys does not mean that 5 attorneys will be allowed to charge for the same work.
In fact, doing so would be both unreasonable and unnecessary."
{¶30} It is the gist of relators' argument that once fees are awarded, it will be
impossible to maintain a meaningful appeal. We disagree with this argument and find to
assume such a position is to argue that appeals are worthless. Although relators'
argument may be politically palatable to the public, it does not give rise to a finding that
there does not exist an adequate remedy at law.
{¶31} We concede the consolidation of the complaints leads to initial confusion.
However, it will be the final and ultimate duty of the trial court to segregate the costs of
the proceedings as they pertain to judgments and findings against intervenor as the duly
elected county treasurer and/or any personal liability in intervenor's non-elected
capacity as the guarantee of a performance bond.
{¶32} Relators have never argued in their filings or in their various arguments to
the trial court or this court that intervenor personally benefited or obtained any gain.
Intervenor's role as a defendant in the recoupment action is a result of his elected
Stark County, Case No. 2010CA00237 9
position, guarantee on his own security bonds, or under his obligations pursuant to R.C.
9.39 and 117.01(E). (Fourth Claim for Relief, Complaint filed July 28, 2010).
{¶33} Because the trial court has made no specific monetary award of attorney
fees, we find relators filing is premature and a direct appeal on the issue after the award
of attorney fees is an adequate remedy at law. The requests for a Writ of
Prohibition/Mandamus are denied.
By Farmer, J.
Edwards, P.J. and
Delaney, J. concur.
_s/ Sheila G. Farmer__________________
_s/ Julie A. Edwards__________________
_s/ Patricia A. Delaney________________
JUDGES
SGF/as 1214
Stark County, Case No. 2010CA00237 10
IN THE COURT OF APPEALS FOR STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT
STARK COUNTY TREASURER :
EX REL. JOHN D. FERRERO, STARK :
COUNTY PROSECUTING ATTORNEY, :
ET AL. :
:
Relators :
:
-vs- : JUDGMENT ENTRY
:
STARK COUNTY COURT OF :
COMMON PLEAS, ET AL. :
:
Respondents : Case No. 2010CA00237
For the reasons stated in our accompanying Memorandum-Opinion, the requests
for a Writ of Prohibition/Mandamus are denied. Costs to relators.
_s/ Sheila G. Farmer__________________
_s/ Julie A. Edwards__________________
_s/ Patricia A. Delaney________________
JUDGES
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2015 IL App (3d) 120892
Opinion filed May 19, 2015
_____________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
A.D., 2015
THE PEOPLE OF THE STATE OF ) Appeal from the Circuit Court
ILLINOIS, ) of the 13th Judicial Circuit,
) Bureau County, Illinois,
Plaintiff-Appellee, )
) Appeal No. 3-12-0892
v. ) Circuit No. 12-CF-40
)
JOSUE VALDEZ, ) Honorable
) Marc P. Bernabei,
Defendant-Appellant. ) Judge, Presiding.
_____________________________________________________________________________
PRESIDING JUSTICE McDADE delivered the judgment of the court, with opinion.
Justice Carter concurred in the judgment and opinion.
Justice Holdridge specially concurred, with opinion.
_____________________________________________________________________________
OPINION
¶1 Defendant, Josue Valdez, was a noncitizen who pled guilty to burglary predicated upon
theft (720 ILCS 5/19-1(a) (West 2012)). He filed a timely motion to withdraw his guilty plea,
claiming his counsel provided him ineffective assistance of counsel by failing to advise him that
he would be deported as a result of his plea, in violation of the holding in Padilla v. Kentucky,
559 U.S. 356 (2010). The trial court denied the motion, finding that counsel's advice was
deficient but that defendant was not prejudiced because the court admonished defendant that his
plea may have adverse immigration consequences. Defendant appeals. We conclude that the
immigration consequences of defendant's plea were clear and that counsel failed to meet his duty
to advise defendant of those consequences. Counsel's deficiencies prejudiced defendant, and that
prejudice was not cured by the court's admonishments. Therefore, we vacate the judgment and
remand for further proceedings.
¶2 FACTS
¶3 Defendant—a noncitizen from the Dominican Republic married to a United States
citizen—was charged with burglary (720 ILCS 5/19-1(a) (West 2012)) for entering a building
with the intent to commit theft after he allegedly took a ring and earrings from a neighbor's
unoccupied building. The trial court appointed counsel and an interpreter. At a pretrial hearing,
counsel expressed his difficulty explaining to defendant that counsel represented him in his
criminal matter only, not in his ongoing divorce. In addition, counsel stated:
"It appears that he is also—an [Immigrations and Customs Enforcement] hold on
my client and he may have immigration issues as well, which I also do not represent
him on.
So it appears to me that [defendant] has three different and distinct legal
problems, and I'm trying to help my client to understand that I'm here on one of those
three different legal problems. I don't think it's any secret that I'm not involved in the
divorce in this matter. I don't represent him on immigration issues, other than to
advise him—
THE COURT: Of a conviction.
COUNSEL: Yes."
The court granted a recess for counsel to speak with defendant.
2
¶4 When the pretrial hearing came back on the record, the parties announced that they had
reached a plea agreement, under which defendant would plead guilty to burglary—a Class 2
felony—and receive a sentence of four months in the county jail, followed by three years'
probation. The court admonished defendant about the charge and potential penalties in
accordance with Illinois Supreme Court Rule 402(a) (eff. July 1, 2012).
¶5 The court further admonished defendant in accordance with section 113-8 of the Code of
Criminal Procedure of 1963 (Code) (725 ILCS 5/113-8 (West 2012)):
"THE COURT: If you were not a citizen of the United States, you are hereby
advised that a conviction of the offense for which you have been charged, the
burglary charge, may have the consequences of deportation, exclusion from
admission to the United States, or denial of naturalization under the laws of the
United States. Do you understand that?
THE DEFENDANT: Yes.
THE COURT: Are you completely satisfied with the way that [defense counsel]
has represented you?
THE DEFENDANT: Yes.
THE COURT: Do you have any complaints to make about his work in this case?
THE DEFENDANT: No. Everything has been fine."
¶6 The State presented a factual basis, stating that, if the cause were to proceed to trial, the
State would provide evidence that Keith Peterson discovered that his class ring and a pair of his
wife's earrings were missing from their house, which had sat uninhabited for a month. Further
evidence would show that defendant was in possession of the ring and earrings and that
defendant admitted to entering the Petersons' building and taking the property.
3
¶7 When the court asked defendant whether anyone was forcing him to plead guilty,
defendant responded:
" THE DEFENDANT: They used it against me, yes. They used it against me
because they threatened me with deportation.
THE COURT: Who did?
THE DEFENDANT: The—my wife's dad and grandpa. And he pushed my wife
so that she would do the same.
***
THE COURT: Okay. I can't accept the guilty plea if you're being forced to do it.
I can only accept a guilty plea if you want to do it.
THE DEFENDANT: I have to accept it.
THE COURT: Okay.
THE DEFENDANT: Because I don't have any possibility of winning the case
since my wife is being forced here and her father to do certain things. She is the one
who took me to that property to see some animals.
THE COURT: How are they making you plead guilty instead of pleading not
guilty and having a trial?
THE DEFENDANT: Because you're telling me I have to—they're going to
deport me to the Dominican Republic.
THE COURT: Who is telling you that? Who is telling you they're going to
deport you?
THE DEFENDANT: Because I have—well, because I won't agree to the divorce.
Two days is when I—when I got papers for a divorce.
4
THE COURT: What does that have to do with whether or not you plead guilty or
not guilty to this charge of burglary?
THE DEFENDANT: Because on the theft case, my wife knew that I never
touched anything belonging to anyone. Everything that I used, it's with the sweat of
my own body.
THE COURT: Okay. Do you want to plead guilty to this charge or do you want
to have a trial where—
THE DEFENDANT: I can't go to a trial because I don't have the money to pay an
attorney.
THE COURT: You have a free lawyer. He doesn't cost you any money. He is
free.
THE DEFENDANT: Yes, but—but the attorney is good and I feel very good and
I am very appreciative of everything he has done for me. But it's not the same to pay
an attorney that is going to look for all the information of what I need to win the case.
THE COURT: Well, if anybody is forcing you to plead guilty today against your
will, then we have to stop right now and we'll just go to trial on the scheduled date of
August 27.
THE DEFENDANT: No, I want to accept because—for myself. Because with
God, I will get through the problem and I'll leave it behind me.
THE COURT: Okay. But I have to ask you again, then: Are you pleading guilty
because that's what you decided that you want to do, or are you doing it because you
feel like you're being forced against your will to do it?
THE DEFENDANT: It's because I have decided to do it.
5
THE COURT: Okay. So let me ask you again: Is anybody forcing you to plead
guilty? Because you have a right to plead not guilty and to have a trial to decide
whether or not you're guilty. You're not required to plead guilty. You have a right to
do that and you have a right to make this deal, but you also have a right not to do it,
and I just want to know what you want to do.
THE DEFENDANT: I want to have the opportunity to get out and go back into
my career, and a month ago I can come back and fight the case and pay an attorney.
Everything will be very different because that attorney would have all the information
that they need.
THE COURT: Okay. Well, first of all, you have a very good attorney.
Secondly, these proceedings today are done. There will be no guilty plea because
he is telling me he is being forced.
THE DEFENDANT: No, no. I want—everything is fine. I don't want you to
stop.
THE COURT: Well—
THE DEFENDANT: I am guilty.
THE COURT: You just told me that you wanted to get out so you could fight the
case. You're not going to be able to do that if you plead guilty. Once you plead
guilty, the case is over.
THE DEFENDANT: Well, that's fine, then. I want the case to be over. I need to
move on.
THE COURT: So do you want to keep going today with this deal?
THE DEFENDANT: Yes.
6
THE COURT: So is anybody forcing to you [sic] do it or are you doing it
because you want to do it?
THE DEFENDANT: It's because I want to do it.
THE COURT: Are you being forced to do it?
THE DEFENDANT: I can't go back. I have to go forward. Everything has been
correct.
THE COURT: I told you that if you're found guilty—and one way that you could
be found guilty is if you plead guilty—I've told you that you could be deported from
the country. That's not up to me. It's up to the federal government. And I don't know
if they would do it or not, but only they can do it. Your wife can't do it as a result of
this conviction, but you told me you understood that, if you plead guilty, they could
deport you. Do you understand that?
THE DEFENDANT: Yes.
THE COURT: And you still want to go forward?
THE DEFENDANT: Yes, I want to go forward."
The court accepted defendant's guilty plea and the terms of the plea agreement.
¶8 Within 30 days of entering his plea, defendant filed a pro se motion to "open and vacate"
his conviction. The court treated that filing as a motion to withdraw defendant's guilty plea and
appointed new counsel for defendant. Counsel filed an amended motion to withdraw the guilty
plea, arguing that the guilty plea was involuntary due, in part, to the erroneous advice of counsel.
In addition, defendant claimed that he was innocent of the charged conduct, alleging that he
found the jewelry in a gas station parking lot and did not take it from the Petersons' building.
Defendant argued that the police investigation reports would support defendant's claim that he
7
found the jewelry rather than took it from the Petersons. In addition, defendant argued that
counsel was ineffective for advising him to stipulate to an erroneous set of facts at the guilty plea
hearing.
¶9 A hearing was held on the amended motion to withdraw defendant's guilty plea.
Defendant testified that he never admitted to taking the jewelry from the Petersons' building but
rather found the property in a gas station parking lot. The State introduced a police report of
Bureau County Deputy Sheriff Eric Barnes. The report stated that defendant's wife, Jenny
Valdez, had discovered defendant in possession of a class ring with Keith Peterson's name on it
and a pair of earrings. Jenny told police that defendant stated that he found the jewelry in a gas
station parking lot. Jenny told defendant to return the property to Peterson. Barnes investigated
the theft, and defendant told Barnes that he found the property in a parking lot. Defendant told
Barnes that he returned the ring to Peterson.
¶ 10 The court found that guilty plea counsel failed to inform defendant about the possibility
of deportation: "[i]t never came up for discussion between the two of them based on the
uncontradicted evidence here." As a result, the court concluded that counsel provided deficient
performance under the first prong of Strickland. However, the court found that its own
admonishments cured counsel's deficiency, and therefore defendant suffered no prejudice under
Strickland. The trial court explained:
"It makes little sense to suggest that he wouldn't have pled guilty had [defense
counsel] told him about it when the court clearly and more than once told him about
it, and yet he insisted, after hearing it directly from the judge himself, that he wanted
to go forward. It would make little sense to suggest that in the face of what happened
at the guilty plea proceedings, to suggest that he wouldn't have pled guilty if his
8
lawyer would have told him the same thing that the judge told him not once but
twice."
The court denied defendant's motion to withdraw his guilty plea. Defendant appeals.
¶ 11 ANALYSIS
¶ 12 Defendant appeals from the circuit court's denial of his motion to withdraw his guilty
plea. A challenge to a guilty plea alleging ineffective assistance of counsel is subject to the
standard set forth in Strickland v. Washington, 466 U.S. 668 (1984). People v. Hall, 217 Ill. 2d
324 (2005). Under that familiar standard, defendant must establish: (1) that counsel's
performance fell below an objective standard of reasonableness; and (2) a reasonable probability
that the outcome of the proceedings would have been different absent counsel's errors.
Strickland, 466 U.S. 668. Both prongs of Strickland involve mixed questions of fact and law that
we review under a dual standard of review: the court's factual findings are reviewed against the
manifest weight of the evidence, while the ultimate decision whether counsel was ineffective is
reviewed de novo. People v. Coleman, 2015 IL App (4th) 131045, ¶¶ 61-67.
¶ 13 I. Deficient Performance
¶ 14 In Padilla, 559 U.S. 356, the Supreme Court of the United States unambiguously held
that the sixth amendment right to effective assistance of counsel announced in Strickland, 466
U.S. 668, extends to advice about the potential deportation risks that may accompany a criminal
defendant's conviction. The Court held that "[i]t is quintessentially the duty of counsel to
provide her client with available advice about an issue like deportation and the failure to do so
'clearly satisfies the first prong of the Strickland analysis.' " Padilla, 559 U.S. at 371 (quoting
Hill v. Lockhart, 474 U.S. 52, 62 (1985) (White, J., concurring, joined by Stevens, J.)).
¶ 15 Padilla established a two-tiered standard for determining counsel's duty to advise about
9
immigration consequences. Where the immigration consequences of a defendant's plea are
"unclear or uncertain," counsel need do no more than advise her client that the plea "may carry a
risk of adverse immigration consequences." Padilla, 559 U.S. at 369. In contrast, where the
immigration consequences of a particular plea are "succinct, clear, and explicit," counsel must
advise the client of those specific consequences. Id. at 368.
¶ 16 A conviction for residential burglary predicated upon theft potentially exposed defendant
to deportation under two subsections of section 1227 of the Immigration and Nationality Act
(Act) (8 U.S.C. § 1227 (2012)). First, section 1227(a)(2)(A)(iii) provided that an alien convicted
of an aggravated felony at any time after admission is deportable. 8 U.S.C. § 1227(a)(2)(A)(iii)
(2012). Second, section 1227(a)(2)(A)(i) stated that an alien convicted of a "crime involving
moral turpitude" within five years of admission to the United States "is deportable." 8 U.S.C.
§ 1227(a)(2)(A)(i) (2012). We address those subsections in turn.
¶ 17 A. Aggravated Felony
¶ 18 The federal immigration statutes define an aggravated felony as, inter alia, a theft or
burglary offense "for which the term of imprisonment [sic] at least one year." 8 U.S.C.
§ 1101(a)(43)(G) (2012). The term of imprisonment referenced in that subsection is the term
actually imposed, not the statutorily available sentence. United States v. Guzman-Bera, 216 F.3d
1019, 1021 (11th Cir. 2000). Here, defendant was sentenced to less than one year of
imprisonment. Therefore, his conviction did not qualify as an aggravated felony.
¶ 19 B. Crime Involving Moral Turpitude
¶ 20 Section 1227(a)(2)(A)(i) of the Act makes an alien deportable who has been convicted of
a "crime involving moral turpitude" (CIMT) within five years of admission to the United States.
8 U.S.C. § 1227(a)(2)(A)(i) (2012). However, unlike the aggravated felony subsection, the
10
statutory language of the CIMT subsection does not define a "crime involving moral turpitude."
To determine whether defendant's conviction was a CIMT, we must consult federal case law.
¶ 21 Moral turpitude is a notoriously difficult phrase to define. See Jordan v. De George, 341
U.S. 223, 239 (1951) (Jackson, J., dissenting). However, it is generally defined as "conduct
which is inherently base, vile, or depraved, and contrary to the accepted rules of morality and the
duties owed between persons or to society in general." In re Ajami, 22 I. & N. Dec. 949, 950
(BIA) (1999) (per curiam).
¶ 22 Although determining whether a crime is a CIMT can be a difficult exercise, in the
present case it was clear that a conviction for burglary predicated upon theft was a CIMT. The
federal case law is in agreement that crimes involving theft are CIMTs. See, e.g., United States
v. Esparza-Ponce, 193 F.3d 1133, 1336 (9th Cir. 1999) (theft is a CIMT); In re Lopez-Meza, 22
I. & N. Dec. (BIA) 1188, 1193 (1999) (including theft in a list of CIMTs); In re Frentescu, 18 I.
& N. Dec. (BIA) 244, 245 (1982) (superseded by statute on other grounds) (burglary with intent
to commit theft is a CIMT); In re De La Nues, 18 I. & N. Dec. (BIA) 140, 145 (1981) (burglary
and theft are CIMTs); but see Hernandez-Cruz v. Holder, 651 F.3d 1094, 1112 (9th Cir. 2011)
(commercial burglary not necessarily a CIMT). Therefore, with minimal research beyond the
text of the immigration statute, counsel could have determined with clarity that defendant's
conviction made him deportable.
¶ 23 The State argues that the immigration consequences of a conviction are never clear when
the text of the immigration statute itself does not explicitly declare a conviction deportable. See,
e.g., State v. Ortiz-Mondragon, 2014 WI App 114, ¶¶ 12-13, 358 Wis. 2d 423, 856 N.W.2d
339); Lopez-Penaloza v. State, 804 N.W.2d 537, 544-46 (Iowa Ct. App. 2011). The State
correctly points out that in Padilla, counsel could have determined that the plea made the
11
defendant deportable "simply from reading the text of the statute." Padilla, 559 U.S. at 368.
Although the question whether residential burglary qualified as a CIMT was not apparent merely
from reading the text of the statute, we conclude that the answer was nevertheless clear from a
minimal investigation of the case law. Counsel therefore had a duty to advise defendant that, by
pleading guilty, deportation was "presumptively mandatory." See id. at 369.
¶ 24 In the present case, counsel failed to meet his duty under Padilla. After a hearing on the
motion to withdraw, the court found that counsel failed to give defendant any advice about the
deportation consequences of his plea. Counsel's performance therefore fell well below the
constitutional threshold. Counsel provided deficient performance under the first prong of
Strickland.
¶ 25 II. Prejudice Under Strickland
¶ 26 To establish a viable claim of ineffective assistance of counsel, defendant must also show
that he suffered prejudice as a result of his attorney's constitutionally deficient performance.
Prejudice is defined as a reasonable probability that, but for counsel's errors, the result of the
proceeding would have been different. Strickland, 466 U.S. at 694. In the context of a guilty
plea, defendant must show that, but for counsel's errors, the defendant would not have pleaded
guilty and would have insisted on going to trial. People v. Hughes, 2012 IL 112817, ¶ 63.
Establishing prejudice requires more than a " 'bare allegation' " that defendant would have
rejected the plea and proceeded to trial. Id. ¶ 64 (quoting Hall, 217 Ill. 2d at 335). Rather,
defendant must assert either (1) a claim of actual innocence, or (2) a plausible defense that could
have been raised at trial. Id. The question of prejudice depends in large part on predicting
whether the defendant would have been successful at trial. Hall, 217 Ill. 2d at 336.
¶ 27 In the present case, defendant argues that he was unaware that deportation was a
12
presumptively mandatory result of his guilty plea. According to defendant, had he known of
those specific immigration consequences, he would have pled not guilty and proceeded to trial,
in the hopes of avoiding deportation. Additionally, defendant argues that there was a reasonable
probability that he would have succeeded at trial because he was actually innocent of the charge.
¶ 28 We agree that defendant has established a reasonable probability that, had he been
advised that his guilty plea mandated deportation, he would have pled not guilty and proceeded
to trial. In support of that finding, we note that in his motion to withdraw his guilty plea,
defendant raised a claim of actual innocence, alleging that he found the jewelry rather than took
it from the Petersons' building. In addition, during his plea colloquy, defendant's confused
statements seemed to imply that he was pleading guilty in order to avoid deportation and that he
felt forced into pleading guilty. Under these facts, we find that defendant established a
reasonable probability that, had he known that deportation was "practically inevitable" (Padilla,
559 U.S. at 364), he would have rejected the guilty plea and proceeded to trial.
¶ 29 The State argues that any prejudice that defendant might have suffered was cured by the
court's admonishments under section 113-8 of the Code (725 ILCS 5/113-8 (West 2012)). That
statute requires the court to recite the following warning to a defendant prior to accepting a guilty
plea:
" 'If you are not a citizen of the United States, you are hereby advised that
conviction of the offense for which you have been charged may have the
consequences of deportation, exclusion from admission to the United States, or denial
of naturalization under the laws of the United States.' " 725 ILCS 5/113-8 (West
2012).
13
In the present case, the court admonished defendant under section 113-8 prior to accepting his
guilty plea.
¶ 30 The State is correct that a trial court's admonishments can serve to cure the prejudice
resulting from defense counsel's erroneous advice. See, e.g., People v. Ramirez, 162 Ill. 2d 235
(1994); People v. Jones, 144 Ill. 2d 242 (1991). In the present case, however, the section 113-8
admonishment did not cure counsel's deficiencies.
¶ 31 The section 113-8 admonishment mirrors the advice counsel is required to give under
Padilla when the immigration consequences of the conviction are not clear. Padilla, 559 U.S. at
369 (requiring counsel to advise that the conviction "may carry a risk of adverse consequences").
If the deportation consequences of defendant's conviction had been unclear in the present case,
the section 113-8 admonishment would likely have been sufficient to cure any prejudice.
¶ 32 However, where, as here, the consequences were "truly clear" (id.), counsel had a duty to
advise of those specific consequences. The section 113-8 admonishments are generic to every
guilty plea and, by definition, do not warn of the specific consequences of a particular
conviction. Nor does section 113-8 warn against the definitive nature of those consequences. In
defendant's case, deportation was presumptively mandatory; section 113-8 warns only that
nebulous immigration consequences "may" occur. 725 ILCS 5/113-8 (West 2012). As a result,
the court's section 113-8 admonishments were insufficient to cure the prejudice suffered by
defendant.
¶ 33 Although in Padilla the Court was not tasked with determining whether the defendant
suffered prejudice, the thrust of the opinion established that the failure of defense counsel to
advise about immigration consequences can be prejudicial. In so doing, the Padilla Court
declined to designate immigration consequences as either direct or collateral to a conviction:
14
"The collateral versus direct distinction is thus ill suited to evaluating a Strickland claim
concerning the specific risk of deportation." Padilla, 559 U.S. at 366. Therefore, Illinois courts'
continued reliance on the collateral versus direct distinction in other contexts does not preclude
immigration consequences from being considered in the context of prejudice as it relates to
ineffective assistance under the sixth amendment. Cf. People v. Carrera, 239 Ill. 2d 241 (2010)
(holding that deportation is not a direct consequence of a guilty plea for purposes of the Post-
Conviction Hearing Act (725 ILCS 5/122-1 et seq. (West 2012))). That is, whether Illinois
courts continue to describe deportation as a direct or a collateral consequence is irrelevant to
determining whether a defendant received effective assistance of counsel.
¶ 34 Defendant established that his plea was involuntary because he received ineffective
assistance of counsel. As a result, the court erred by denying his motion to withdraw his guilty
plea.
¶ 35 Lastly, the majority disavows the commentary contained in ¶¶ 43-44 of the special
concurrence.
¶ 36 CONCLUSION
¶ 37 The judgment of the circuit court of Bureau County is vacated, and the cause is remanded
for further proceedings.
¶ 38 Vacated and remanded.
¶ 39 JUSTICE HOLDRIDGE, specially concurring.
¶ 40 I agree with the majority's judgment and with its reasoning in almost all respects. I write
separately because I disagree with two aspects of the majority's analysis. Citing People v.
Hughes, 2012 IL 112817, ¶ 64 (which relied upon People v. Hall, 217 Ill. 2d 324, 335 (2005)),
the majority states that, in order to establish that he was prejudiced by his counsel's failure to
15
admonish him of the potential immigration consequences of his guilty plea, a defendant "must
assert" either "a claim of actual innocence" or "a plausible defense that could have been raised at
trial." Supra ¶ 26.
¶ 41 I disagree. While a claim of innocence or the apparent existence of a plausible trial
defense may make a defendant's showing of prejudice stronger, neither is required in order to
show prejudice in cases involving counsel's failure to advise a defendant as to the immigration
consequences of his guilty plea. Such a requirement makes sense in other contexts. For
example, if a defendant claims that his counsel provided ineffective assistance by failing to
discover exculpatory evidence or by failing to inform the defendant of a possible defense before
inducing him to plead guilty (as in Hall), the prejudice to the defendant, if any, will depend on
whether the presentation of the undiscovered evidence or the assertion of the affirmative defense
at issue could have resulted in an acquittal at trial. See Hall, 217 Ill. 2d at 335-36; Hill, 474 U.S.
at 59. However, that is not the case when counsel fails to advise a defendant of the risks of
deportation, because the defendant may suffer prejudice in that instance regardless of the
strength of his case at trial. As noted, to show prejudice in such cases, the defendant is only
required to show that a decision to reject the plea bargain would have been "rational under the
circumstances." Padilla, 559 U.S. at 372. A defendant facing potential deportation may show
that his decision to reject a plea offer and go to trial would have been "rational" without showing
that he would likely have succeeded at trial. See, e.g., Orocio, 645 F.3d at 643 (ruling that,
under Padilla, a "rational" decision not to plead guilty "does not focus solely on whether a
defendant would have been found guilty at trial"). As the Padilla Court recognized, preserving a
noncitizen defendant's right to stay in the United States may be more important to the defendant
than a potential sentence of imprisonment. Padilla, 559 U.S. at 368. See, e.g., Orocio, 645 F.3d
16
at 645. A defendant who fears deportation more than he does imprisonment might rationally
choose to risk a lengthier prison sentence in exchange for even a slight chance of prevailing at
trial and thereby avoiding deportation. Counsel's failure to advise his client of the risk of
deportation prejudices the defendant by depriving him of that chance. Under such
circumstances, it would be inappropriate and overly burdensome to require the defendant to
show that he would have succeeded at trial in order to establish prejudice. 1
¶ 42 In addition, the majority notes that "whether Illinois courts continue to describe
deportation as a direct or a collateral consequence is irrelevant to determining whether a
defendant received effective assistance of counsel." Supra ¶ 33. While I agree with that
statement in the abstract, it appears to be based on an erroneous assumption that Illinois courts
may continue to treat deportation as a "collateral consequence" after Padilla. As I explained in
my separate opinion in People v. Guzman, 2014 IL App (3d) 090464, ¶¶ 64-72 (Holdridge, J.,
specially concurring in part and dissenting in part), Padilla forecloses state courts from treating
deportation as a collateral consequence.
¶ 43 One final point bears mentioning. As the majority correctly notes (supra ¶ 15), under
Padilla, the scope of an attorney's obligations to warn his or her client of potential immigration
consequences depends upon whether those immigration consequences are "succinct, clear, and
explicit." Padilla, 559 U.S. at 368. If so, counsel must advise the client of those specific
consequences. Id. If not, counsel is only required to advise his or her client that the guilty plea
"may carry a risk of adverse immigration consequences." Id. at 369. I agree with the majority
1
The First District of our Appellate Court has reached the opposite conclusion. See
People v. Gutierrez, 2011 IL App (1st) 093499, ¶ 45. However, I find the Gutierrez court's
analysis of this issue contrary to Padilla and I would therefore decline to follow Gutierrez.
17
that a particular immigration consequence may be deemed "clear" and "explicit" even if it is not
expressly prescribed by an immigration statute so long as it is clearly established by case law
interpreting such a statute. However, we live in a time when the President and the Attorney
General of the United States, by their statements and actions, have asserted that the executive
branch's "enforcement discretion" includes the authority to decline to follow statutes and case
law requiring deportation for entire classes of people. If this is true, (i.e., if the President and the
Attorney General have the unbridled discretion to disregard immigration law as they see fit),
then the immigration consequences flowing from a guilty plea will never be "clear" or "explicit,"
even if they are clearly and explicitly mandated by immigration statutes or case law. Any
conclusion based upon a review of the positive law will always be tentative, provisional, and
subject to the whims of the executive branch. Thus, under Padilla, an attorney would arguably
never be required to provide more than a general warning that a guilty plea "may carry a risk of
adverse immigration consequences."
¶ 44 I raise this issue merely to note the ways in which the executive branch's recent assertions
of expansive discretionary authority over deportations might impact an attorney's obligations
under Padilla. I do not purport to resolve this issue today. However, we, as jurists, are bound to
base our decisions on the written law. Therefore, because the relevant case law clearly
establishes that the offense to which the defendant pled guilty in this case was a deportable
"crime involving moral turpitude" under 8 U.S.C. § 1227(a)(2)(A)(i) (2012), I join the majority's
conclusion that the immigration consequences at issue were clear.
18
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IN THE
TENTH COURT OF APPEALS
No. 10-13-00318-CV
IN RE JOHN C. PASCHALL
Original Proceeding
MEMORANDUM OPINION
Relator’s petition for writ of mandamus is denied.
AL SCOGGINS
Justice
Before Chief Justice Gray,
Justice Davis, and
Justice Scoggins
Petition denied
Opinion delivered and filed October 17, 2013
[OT06]
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IN THE COURT OF CRIMINAL APPEALS
OF TEXAS
NO. PD-1649-13
DONNIE LEROY KACHEL, Appellant
v.
THE STATE OF TEXAS
ON APPELLANT’S PETITION FOR DISCRETIONARY REVIEW
FROM THE TENTH COURT OF APPEALS
MCLENNAN COUNTY
K EASLER, J., delivered the opinion of the Court, in which K ELLER, P.J., and
M EYERS, H ERVEY, A LCALA, and Y EARY, JJ., joined. R ICHARDSON, J., filed a
concurring and dissenting opinion, in which J OHNSON, J., joined. N EWELL, J.,
concurred.
OPINION
The State charged Donnie Kachel with indecency with a child by exposure. After
initially denying his presence at the scene, Kachel admitted to changing clothes in the street
outside the victim’s home, but claimed that he saw only an adult woman and requested a
lesser-included instruction on indecent exposure. The judge denied the request, and the court
of appeals affirmed. Because there was some evidence that Kachel exposed himself only to
KACHEL—2
an adult, we reverse and remand the cause to the court of appeals for a harm analysis.
I. Facts and Procedural History
On the evening of October 22, 2010, Katerina Jones and her nine-year-old daughter
returned to their Waco home after a day of shopping. As the two were about to enter their
home, the daughter exclaimed: “Mom, that man has no clothes on.” Jones turned and saw
a man standing naked in the street and behaving “weird, like he was on drugs.” In a panic,
Jones unlocked the door, rushed in with her daughter, and locked the door behind her. She
then called a relative for help, before reporting the incident to 911. While they were waiting
for help, Jones feared that the man would attempt to break into her house, and her daughter
began to cry. Jones later testified that each time she peered through her blinds to see if the
man was still outside, he reacted by thrusting his pelvis forward and fondling himself. When
Jones’s relative arrived, the man got into his truck and stared with a “crazy look” before
speeding away.
Shortly thereafter, a police officer patrolling a nearby truck stop came upon Kachel,
whose truck matched the description given by Jones. As the officer approached the truck,
he saw Kachel in the driver’s seat nervously trying to clothe himself. When questioned,
Kachel told the officer that he had parked at the truck stop on his way home from work in
order to change his clothes. He also denied being near Jones’s house on Richter Avenue.
Kachel then stated that he was in fact going to a friend’s apartment located on Richter
Avenue. Then Kachel changed his story again, stating that he had changed out of his dirty
KACHEL—3
and greasy work clothes on Richter Avenue, before going to his friend’s apartment. He
explained that he was not familiar with the area and did not know at the time that there was
a truck stop nearby where he could have changed instead. Jones and her daughter identified
Kachel at the truck stop as the naked man outside their house.
After his arrest, Kachel admitted to drinking beer and smoking methamphetamine
before he left for his friend’s apartment. He also admitted to smoking methamphetamine
while on Richter Avenue before changing his clothes. Kachel claimed that, while he was
changing his clothes, he saw a woman pull into her driveway, exit her car, and look toward
him. He explained that this caused him to flee because he had been standing in the street in
his thong underwear. But he claimed to have seen no one other than the woman and denied
being naked, masturbating, or displaying his genitals. He also stated that the woman had
been two houses away from him and that he had been changing on the other side of his truck.
The State charged Kachel with indecency with a child by exposure, a third-degree
felony.1 At trial, Kachel did not present any evidence, but did request a jury instruction on
the lesser-included offense of indecent exposure, a Class B misdemeanor.2 The judge,
however, denied the request, holding that there was no evidence of the lesser-included
offense because Kachel denied any exposure at all at the scene and during his post-arrest
interview. The jury convicted Kachel of indecency with a child by exposure and assessed
1
See T EX. P EN. C ODE § 21.11(a)(2)(A).
2
Id. at § 21.08.
KACHEL—4
punishment at sixty years in prison due to his two prior felony convictions. The Tenth Court
of Appeals affirmed, holding that, because Kachel presented no evidence that he was
unaware that a child was present other than his statement that he only saw a woman, he had
not provided some evidence of the lesser-included offense.3
II. Analysis
Whether a defendant is entitled to a lesser-included instruction is governed by a two-
step test. First, we determine “whether the offense contained in the requested instruction is
a lesser-included offense of the charged offense.”4 If it is, then we decide “whether the
admitted evidence supports the instruction.”5 The purpose of a lesser-included instruction
is to avoid leaving the jurors with two “equally distasteful” options: (1) to acquit the
defendant when they believed him or her guilty of the lesser-included offense, or (2) to
convict the defendant of an offense that they did not believe he or she committed.6 To avoid
that predicament, we liberally permit a lesser-included instruction.7
3
Kachel v. State, No. 10-11-00337-CR, 2013 Tex. App. LEXIS 13257, at *5–6
(Tex. App.—Waco Oct. 24, 2013, pet. granted) (mem. op., not designated for
publication).
4
Goad v. State, 354 S.W.3d 443, 446 (Tex. Crim. App. 2011). See also Rousseau
v. State, 855 S.W.2d 666, 673 (Tex. Crim. App. 1993) (“[F]irst, the lesser included
offense must be included within the proof necessary to establish the offense charged.”).
5
Goad, 354 S.W.3d at 446. See also Rousseau, 855 S.W.2d at 673 (“[S]econd, some
evidence must exist in the record that would permit a jury rationally to find that if the defendant
is guilty, he is guilty only of the lesser offense.”).
6
Eldred v. State, 578 S.W.2d 721, 723 (Tex. Crim. App. 1979).
7
Bignall v. State, 887 S.W.2d 21, 24 (Tex. Crim. App. 1994).
KACHEL—5
In order to satisfy the first step, the offense generally must fall within one of the four
statutory definitions of a lesser-included offense.8 The second step requires that an appellate
court examine the entire record, and a “statement made by a defendant cannot be plucked out
of the record and examined in a vacuum in a lesser included offense analysis.” 9 To satisfy
this requirement—generally considered a low threshold—a defendant need only show
“[a]nything more than a scintilla of evidence” to support the lesser-included offense.10 But
merely undermining the charged offense is not enough; the defendant must substantiate the
requested lesser-included offense with at least some evidentiary support.11 Therefore, our
analysis turns not on an alleged lack of evidentiary support for the charged offense, but on
whether any evidence of the lesser-included offense exists that would require instruction on
it despite the charged offense. Simply put, we look to whether the lesser-included offense
constitutes a “valid, rational alternative to the charged offense.”12 And in doing so, we
consider neither the credibility of the evidence pertaining to the lesser-included offense, nor
whether it conflicts with other evidence.13 Therefore, we must determine what a jury could
rationally conclude given the evidence, without encroaching upon its role as the sole
8
See T EX. C ODE C RIM. P ROC. art. 37.09(1)–(4).
9
Ramos v. State, 865 S.W.2d 463, 465 (Tex. Crim. App. 1993) (citations omitted).
10
Bignall, 887 S.W.2d at 23.
11
Schweinle v. State, 915 S.W.2d 17, 19 (Tex. Crim. App. 1996).
12
Goad, 354 S.W.3d at 446.
13
Id. at 446–47.
KACHEL—6
factfinder.
A. Indecent exposure is a lesser-included offense of indecency with a child by
exposure.
A person commits indecency with a child by exposure if, “with a child younger than
17 years of age, whether the child is of the same or opposite sex, the person, with intent to
arouse or gratify the sexual desire of any person, exposes the person’s anus or any part of the
person’s genitals, knowing the child is present.”14 But a person commits only indecent
exposure if “he exposes his anus or any part of his genitals with intent to arouse or gratify
the sexual desire of any person, and he is reckless about whether another is present who will
be offended or alarmed by his act.”15 Thus, indecent exposure is a lesser-included offense
of indecency with a child by exposure because “[t]he elements of these two offenses are
identical except that indecency with a child requires the defendant to know that a child is
present, where indecent exposure requires that the defendant is reckless as to the presence
of another person.”16 Therefore, the court of appeals correctly held the first step satisfied.
B. Some admitted evidence purports to show that Kachel was guilty of only
indecent exposure.
In Jones v. State, we affirmed the court of appeals’ decision to require lesser-included
14
T EX. P EN. C ODE § 21.11(a)(2)(A).
15
Id. at § 21.08(a).
16
Briceno v. State, 580 S.W.2d 842, 844 (Tex. Crim. App. 1979). See also T EX.
C ODE C RIM. P ROC. ART. 37.09(1) (“An offense is a lesser included offense if it is
established by proof of the same or less than all the facts required to establish the
commission of the offense charged.”).
KACHEL—7
instructions on misdemeanor theft and assault for a defendant charged with robbery.17
Because Jones had made both a “blanket” denial of all criminal liability and a self-defense
argument, the State argued that he could not satisfy the second step of the lesser-included
analysis for either theft or assault.18 It cited our earlier admonition against “plucking” a
defendant’s statement out of the record and examining it in a vacuum to argue that the court
of appeals misrepresented Jones’s defense “by taking parts of it out of context.” 19 But we
held that the State misconstrued case law and neglected “the fact that a jury is permitted to
believe or disbelieve any part of a witness’[s] testimony, including a defendant.” 20
Therefore, a defendant can point to his or her own statements as evidence that he or she is
guilty of only the lesser-included offense, even if that defendant also denied committing any
offense.21 And for a lesser-included instruction to serve its purpose, this must be the law.
Otherwise, in order to obtain a lesser-included instruction, a defendant would have no right
to first put the State to its burden to prove the lesser-included offense beyond a reasonable
17
984 S.W.2d 254, 258 (Tex. Crim. App. 1998).
18
Id. at 257–58.
19
Id. at 257.
20
Id. at 258.
21
Id. at 257 (“If there is evidence within a defendant’s testimony which raises the
lesser included offense, it is not dispositive that this evidence does not fit in with the
larger theme of that defendant’s testimony.”).
KACHEL—8
doubt.22 It is, after all, an instruction—not a plea agreement.
Therefore, our analysis must turn, not on plucking Kachel’s initial general denials of
culpability out of the record and examining them in a vacuum, but on whether these
denials—in light of all the other evidence in the record—also foreclosed all culpability as to
the requested lesser-included offense. And although Kachel’s statements are inconsistent and
contradictory, he did make several general denials of any culpability. He initially denied
being on Richter Avenue. Then he admitted to being on Richter Avenue, but that he was
only changing his clothes. Then he also admitted to seeing an adult woman as he was
changing, but that his genitals were covered by his thong underwear and blocked from view
by his truck. But Kachel has consistently denied that he ever saw a child. And because the
jury is “permitted to believe or disbelieve any part” of Kachel’s statements,23 a reasonable
jury—in light of all the evidence in the record—could have:
(1) disbelieved Kachel’s initial general denials of being on Richter Avenue;
(2) believed his admission to changing his clothes in the street on Richter Avenue;
(3) believed his admission to seeing an adult woman while he was changing;
(4) believed his denial of seeing any child while he was changing;
(5) disbelieved his denial that his genitals were covered by his thong underwear and
blocked from the woman’s view by his truck; and
22
See Bignall, 887 S.W.2d at 24 (rejecting a rule that “anytime a defendant denies
the commission of an offense, a charge on a lesser included offense will not be
warranted” as “clearly not the law of this state”).
23
See Jones, 984 S.W.2d at 258.
KACHEL—9
(6) disbelieved his denial that he made any sexual gestures.
And regardless of the likelihood that the jury would have actually made these
conclusions—which it is not our role to determine24 —they nevertheless establish indecent
exposure as a “valid, rational alternative” to indecency with a child by exposure.25 Therefore,
because the only difference between indecency with a child by exposure and indecent
exposure is the culpable mental state relating to the presence of a child, a reasonable juror
could have found Kachel guilty of only indecent exposure, and the trial court therefore erred
in denying his request.26 And given the low threshold of the second step—requiring only
“[a]nything more than a scintilla of evidence”—coupled with our policy of liberally
permitting lesser-included instructions, this is true regardless of whether we ourselves would
have made the same conclusions listed above.27
The court of appeals, however, cited Lofton v. State28 for the proposition that a
“defendant’s own testimony that he committed no offense, or testimony which otherwise
shows that no offense occurred at all, is not adequate to raise the issue of a lesser-included
24
See Sweed v. State, 351 S.W.3d 63, 69 (Tex. Crim. App. 2011) (“It is the jury’s role,
not the court’s, to determine whether there is sufficient evidence to support a lesser-included
offense.”).
25
See Goad, 354 S.W.3d at 446.
26
See Briceno, 580 S.W.2d at 844.
27
See Bignall, 887 S.W.2d at 23–24.
28
45 S.W.3d 649 (Tex. Crim. App. 2001).
KACHEL—10
offense.”29 In Lofton, a defendant—charged with assault on a public servant for striking an
arresting officer—requested a lesser-included instruction on resisting arrest. When he
testified, Lofton “flatly denied” even touching the officer, stating: “I didn’t want to because
I know that would not be right. I was just merely stating that I hadn’t done anything
wrong.”30 Because of that denial, we held that Lofton could not support his request for the
lesser-included instruction on resisting arrest.31 But although Kachel did initially, like
Lofton, flatly deny all criminal culpability by telling officers that he had not been on Richter
Avenue at the time in question, he soon abandoned that position and admitted to seeing a
woman while changing his clothes there in the street. And although Kachel continued to
claim that his genitals were covered by his thong underwear and blocked from view by his
truck, those claims—in light of all the evidence presented to the jury—did not rise to the
level of Lofton’s flat denial of any culpability that would prevent the requested lesser-
included offense from serving as a “valid, rational alternative to the charged offense.” 32
Similarly, the State cites Godsey v. State33 and argues that, because Kachel never
testified and in fact rested without presenting any evidence, his statements to the police are
29
Kachel, 2013 Tex. App. LEXIS 13257, at *5 (citing Lofton, 45 S.W.3d at 652).
30
Lofton, 45 S.W.3d at 651.
31
Id. at 652.
32
See Goad, 354 S.W.3d at 446. See also Bignall, 887 S.W.2d at 24.
33
719 S.W.2d 578 (Tex. Crim. App. 1986).
KACHEL—11
hearsay and therefore cannot constitute “evidence.”34 But in Godsey we did not address, or
even mention the word “hearsay.” And, unlike Godsey, it was the State—not the defendant
himself35 —that elicited these statements during its direct examination of Officers Kent and
Adams and its admission of Kachel’s tape-recorded interview into evidence. The State
cannot claim that the evidence it entered into the record is now somehow not evidence.
Furthermore, the content of Kachel’s statements, taken together, differed from those
in Godsey. Convicted of attempted capital murder for pointing a gun at police officers
outside his apartment, Godsey claimed at trial that “he never went outside of the apartment,
never pointed his gun at the police, never saw any police officers the day of the offense, and
did not intend to murder anyone.” 36 Instead, he testified that he had been shot in the
apartment hallway when “he left the gun in the bedroom and walked into the hallway,
intending to go into the kitchen to get another beer.”37 We rejected Godsey’s argument that
he was improperly denied his requested lesser-included instruction on aggravated assault
because we held that the “evidence” raised as support in effect argued: “I was not there so
I could not intend to kill anyone.”38 And we clarified that Godsey’s claims did not present
34
State’s Brief, at 9–11.
35
See Godsey, 719 S.W.2d at 580.
36
Id. at 584.
37
Id. at 580.
38
Id. at 584.
KACHEL—12
us with an instance “in which part of a defendant’s testimony could be reasonably believed
by a jury in the context of the facts, so as to support a charge on the lesser included
offense.”39 But again, although Kachel did initially claim that he was not on Richter Avenue,
he soon abandoned that defense and admitted that he had been changing his clothes there, but
that he only saw an adult woman—not a child. Therefore, unlike Godsey, Kachel could point
to some admitted evidence of indecent exposure.
III. Conclusion
Because Kachel requested an instruction on an offense that was included within the
one charged and could support his request with some evidence in the record, the judge erred
in refusing the instruction. Therefore, we reverse the judgment of the court of appeals and
remand the cause to the court of appeals to conduct a harm analysis under Almanza v. State.40
DELIVERED: March 18, 2015
DO NOT PUBLISH
39
Id.
40
686 S.W.2d 157 (Tex. Crim. App. 1984).
| {
"pile_set_name": "FreeLaw"
} |
758 F.Supp. 729 (1991)
NORCAL/CROSETTI FOODS, INC., Paterson Frozen Foods, Inc. and Richard A. Shaw, Inc., each California corporations, Plaintiffs,
v.
UNITED STATES CUSTOMS SERVICE, United States Department of the Treasury, Honorable Nicholas Brady, Secretary of the Treasury, John Durant, Director of the Commercial Rulings Division, United States Customs Service, and Harvey B. Fox, Director of the Office of Regulations and Rulings of the United States Customs Service, Defendants,
Covemex, S.A. de C.V., Mar Bran, S. de R.L., Expohort, S.A. de C.V., Vegetales Congelados, S. de P.R., and Congelados Don Jose, S.A. de C.V., Amici Curiae.
Court No. 89-09-00495.
United States Court of International Trade.
February 27, 1991.
*730 Titchell, Maltzman, Mark, Bass, Ohleyer & Mishel, Richard D. Maltzman, Robert Ted Parker, San Francisco, Cal., for plaintiffs.
Stuart M. Gerson, Asst. Atty. Gen., Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office, Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice, Susan Burnett Mansfield, U.S. Customs Service, (Ruth Hansell, of counsel), for defendants.
Brownstein, Zeidman, and Schomer, Irwin Altschuler, Donald S. Stein, Washington, D.C., for amici curiae.
OPINION
MUSGRAVE, Judge.
Plaintiffs move for summary judgment to compel defendant United States Customs Service to withdraw a Ruling Letter endorsing the present practice of marking imported frozen produce with country of origin on the rear panel of packages, and to require that such marking be placed on the front panel of packages in type size comparable to the product description and/or in a contrasting color. Plaintiffs also request that Customs be ordered to enact new regulations "to amend 19 C.F.R. § 134.41(b) to enforce the plain Congressional intent of 19 U.S.C. § 1304." Defendant United States Customs Service moves for summary judgment on the ground that the agency action at issue should be set aside only if the Court finds that Customs action was arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law.
Held: Customs Ruling Letter No. HQ 731830 does not comply with the clear language of 19 U.S.C. § 1304, and does not reflect the Congressional intent in enacting the statute. Frozen vegetables must be marked clearly and conspicuously with their country of origin as required by statute and as defined below.
I. INTRODUCTION
This case presents questions concerning the interpretation of the country of origin marking requirement of 19 U.S.C. § 1304 (1990) ("§ 1304"), the jurisdiction of this Court under 28 U.S.C. § 1581(i)(4) (1990), the standard of review of administrative rulings, the discretion of the United States Customs Service ("Customs") to interpret its own regulations and the extent to which an administrative determination made by Customs may be overruled when that determination does not comply with law. The Court finds that the present practice of marking country of origin on frozen vegetable packages on the rear panel is not conspicuous, and that the Customs Ruling Letter No. HQ 731830 deviates from the clear language of, and does not follow the Congressional purpose behind, § 1304. Further, the markings are neither conspicuous *731 nor "as legibl[e] as ... as the nature of the [packages] ... will permit."[1] The markings are neither easily found nor read without strain, as required by Customs Regulation 19 C.F.R. § 134.41(b) (1990).
Norcal/Crosetti Foods, Inc., Patterson Foods, Inc., and Richard A. Shaw, Inc. ("Norcal") are California-based packagers of frozen produce, and are supported in this action by local food packaging worker's unions. Based on their perception that imports of foreign frozen produce were seriously eroding their market, Norcal requested a ruling that imported frozen vegetables were not marked in accordance with § 1304 and Customs regulations and that they should be marked in a contrasting color on the front panel of the packages ("Ruling Request"). Norcal submitted photocopies of frozen vegetable packaging and several scientific reports on the levels of pesticides in imported produce. On November 21, 1988, John Durant, Director of the Commercial Rulings Division, denied Norcal's request in Ruling Letter No. HQ 731830 ("Ruling Letter"). The Ruling Letter interpreted the country of origin marking requirement contained in § 1304 and Customs Regulation 19 C.F.R. § 134.41(b).[2] Director Durant stated that the markings were legible and that
[c]onsumers are familiar with the industry practice of displaying nutritional information and an expiration date on food products such as packages of frozen produce. As these dates and nutritional information are conspicuous on packages, country of origin marking displayed in close proximity to such dates or data is conspicuous as well, i.e., it is easily found and read without strain, and satisfies marking requirements.[3]
Following the denial of the Ruling Request, Norcal brought this action in the U.S. District Court for the Northern District of California, from which the case was transferred by stipulation to this Court on August 30, 1989.[4] Following the Court's decision on jurisdiction[5] both parties moved for summary judgment and the issues were argued before the Court on December 5, 1990.
II. FACTS
Imported frozen vegetables have been sold in this country for some time, but their market share has increased exponentially in the past few years. The foreign produce appears to have blended seamlessly into the stream of commerce and is sold under well-known U.S. labels such as Green Giant and Bird's Eye. Norcal made the Ruling Request after its share of the frozen vegetable packaging market declined significantly due to increased imports of foreign produce. The Ruling Letter impacts the domestic industry at a particularly sensitive time; over 300 frozen food packaging jobs have been lost recently in plaintiffs' production area. See Exported Jobs Drive Home Grim Lesson in Economics, Los Angeles Times, January 13, 1991, at 1, col. 1; Green Giant Layoffs Sock Watsonville, *732 San Francisco Examiner, January 20, 1991, at B-1, col. 5.
Norcal alleges that because of the lower labor costs and comparatively lax regulatory requirements, Mexican producers in particular are able to export frozen vegetables into the United States at a fraction of the domestic production cost.[6] Norcal's unrebutted evidence shows that the final cost to the consumer of domestic frozen vegetables is comparable to that of imported frozen vegetables. However, the consumer may facebut may not perceivean increased health risk in choosing frozen vegetables from other countries.[7] Food and Drug Administration ("F.D.A.") inspectors at various border crossings have found levels of pesticides in imported vegetables that would be unacceptable in domestic produce. Consumers might or might not choose to eat domestically-produced frozen vegetables if informed of the country of origin by conspicuous marking. Section 1304 mandates that they should be given a realistic choice.
The government did not support its argument that the packages submitted were not representative of packages from the entire country. The Court's own research in eight states[8] revealed that they were in fact representative of frozen food packaging from across the country. However, certain packages submitted to the Court were not part of the administrative record and should properly be disregarded. P.P.G. Indus., Inc. v. United States, 13 CIT ___, ___, 708 F.Supp. 1327, 1329 (1989). The Court's decision is based solely on those packages submitted to Customs with the Ruling Request.
On the sample packages supplied to Customs, the country of origin marking appeared almost exclusively on the rear panel. Manufacturers place the country of origin marking where it is not easily found by the consumer. Most often, it is lost among the various small typeface information contained on the back or side panel of the package. The producers are reluctant to display conspicuously the source of the food, suggesting that there must be a valid reason for requiring stricter compliance than required in the Ruling Letter.[9]
The product type, brand name and weight, and occasionally other descriptive data[10] are all conspicuously displayed on the front panel. The packaging typically uses contrasting colors for the product type and brand name; the weight of the package is often simply in black-on-white lettering. This is the data the manufacturer apparently wants the customer to see except for the weight, which is required to be displayed according to 15 U.S.C. § 1453 (1988). Other less important data is in fine print on the rear of the package. Nutritional information is uniformly displayed on the rear or side panel under F.D.A. regulation 21 C.F.R. § 101.9 (1990). The only consistency in the country of origin marking was the inconsistency of where the manufacturer chooses to place the mark. Therefore, the customer cannot be assured of easily finding the mark, even if he or she gives the package a reasonable inspection. The manufacturers do not place the country of origin mark conspicuously, perhaps for fear of losing sales. This is at cross-purposes with Congress' attempt to ensure that consumers have the country of origin of foreign goods in mind when selecting products, i.e. before purchase.
*733 The Court takes judicial notice of the common method of displaying the merchandise in shelved freezers or frozen food bins with the front panel in view and the rear panel obscured. Frozen vegetables are commonly marketed in long, low freezers with open tops, or wall-mounted freezers with glass doors. Access is limited and sometimes awkward, given that the produce must not defrost. The packages are usually placed so that only the front panel is clearly visible. Customers are unable to scan the labels as easily as they can those on dry goods or other produce that is not frozen, because the package is frozen and cold to the touch and because, at least in upright freezers, to do so the freezer door must be held open. All these factors prevent the consumer from having the opportunity to see the country of origin marking that is secluded among the small print on the back of the package.[11]
III. DISCUSSION
A. Jurisdiction
The government moved on November 8, 1989 to dismiss the case for lack of jurisdiction. Norcal invoked jurisdiction in this Court under 28 U.S.C. § 1581(h) (1990), or in the alternative under § 1581(i)(4). After briefing and oral argument, the Court decided in Slip Op. 90-13, 14 CIT ___, 731 F.Supp. 510 (1990), that jurisdiction was proper under 28 U.S.C. § 1581(i)(4) (1990).
Jurisdiction cannot be based on 28 U.S.C. § 1581(h), because standing under that section is, in effect, restricted to importers. Standing thereunder is restricted by 28 U.S.C. § 2631(h), to persons who would have standing to bring a case under 28 U.S.C. § 1581(a) to contest a denial of a protest under 19 U.S.C. § 1515.[12] Section 1515 cases arise exclusively from protests filed under 19 U.S.C. § 1514.[13] Section 1514, however, does not apply to domestic interested parties defined in 19 U.S.C. § 1516 (1990).[14] It explicitly states that "[e]xcept as provided in ... [19 U.S.C. § 1516] ..., decisions of the appropriate customs officer ... shall be final and conclusive ... unless a protest is filed in accordance with this section...."[15] Therefore, for parties who can file actions under section 1516, § 1514 does not apply. The statute cannot be read otherwise. Section 1516 is specifically restricted to petitions by interested parties to challenge "the appraised value, the classification, or rate of duty [of imported goods]." 19 U.S.C. § 1516. If Norcal had come to this Court alleging that jurisdiction was available under § 1516, the government would surely (and more convincingly) have challenged the appropriateness of shoe-horning an action concerning the proper marking of merchandise into a jurisdictional statute concerned with appraised value, classification or rate of duty. This is an exceptional case involving a party who would have standing to file an action under § 1516, but does not have a cause of action which fits within its boundaries. It is in this type of special circumstance that this Court's jurisdiction was expanded by Congress in 28 U.S.C. § 1581(i)(4) so that plaintiffs like Norcal would not be frustrated by an overly technical reading of this Court's jurisdictional statute. Norcal can proceed under 28 U.S.C. § 1581(i)(4) because its claim would be barred under any other portion of § 1581. Miller & Co. v. United States, 824 *734 F.2d 961, 963 (Fed.Cir.1987), cert. denied, 484 U.S. 1041, 108 S.Ct. 773, 98 L.Ed.2d 859 (1988) ("Section 1581(i) jurisdiction may not be invoked when jurisdiction under another subsection of § 1581 is or could have been available").
Congress set up the jurisdictional checklist described above primarily to provide importers with an efficient way to administratively challenge Customs determinations in the seven areas listed in 19 U.S.C. § 1514(a) and later in this Court only if their protest was denied. Importers are the most common and necessary parties to protests of Customs determinations. Yet Congress also intended for domestic, non-importer interested parties to have redress before this Court. Most such cases will fall within 19 U.S.C. § 1516. This case is one of the special instances where a party without the normal "importer" standing necessary for a direct challenge under § 1581(h) suffers from Customs' administration and enforcement of the marking statute. Norcal does not protest the importation of the vegetables, merely Customs' interpretation of § 1304. Therefore, Norcal is exactly the type of party Congress intended to cover in the residual jurisdiction clause of 28 U.S.C. § 1581(i)(4). Although Norcal lacks standing under 28 U.S.C. § 1581(h), this Court may take jurisdiction pursuant to the residual jurisdiction of 28 U.S.C. § 1581(i)(4),[16] since the case directly relates to the proper administration and enforcement of an international trade law (marking) referred to in 28 U.S.C. § 1581(a)-(h). To put § 1581(i)(4) in the context of this case, the Court holds that it has exclusive jurisdiction of any civil action commenced against the United States, the Customs Service, and the officers of the Customs Service, that arises out of any law of the United States providing for administration and enforcement with respect to country of origin marking. This jurisdiction is in addition to the Court's direct jurisdiction over § 1581(h) cases brought by importers. Because Norcal seeks enforcement of the marking statute, § 1304, and marking is a matter specifically referred to in § 1581(h), this Court has jurisdiction under § 1581(i)(4). In light of the remand of this matter to Customs, this Court believes that it would not be appropriate to require exhaustion of administrative remedies under 28 U.S.C. § 2637(d) (1990).
B. Standard of Review
In this case the Court is asked to review an administrative determination construing both a statute and an administrative regulation. The construction of a statute by the agency charged with administering it is entitled to deference by the courts, and ordinarily that construction will be affirmed if it has a reasonable basis in law. But this Court is not obliged "to stand aside and rubber-stamp [its] affirmance of administrative decisions [deemed] inconsistent with the statutory mandate or that frustrate the Congressional policy underlying a statute." N.L.R.B. v. Brown, 380 U.S. 278, 291, 85 S.Ct. 980, 988, 13 L.Ed.2d 839 (1965). As shown below, the congressional intent behind § 1304 is clear and not contradictory. This Court cannot shirk its responsibility to see that intent fulfilled.
Chevron U.S.A., Inc. v. Natural Resources Defense Council teaches that
[t]he judiciary is the final authority on issues of statutory construction and must reject administrative constructions which are contrary to the clear congressional intent. If a court, employing traditional tools of statutory construction, ascertains that Congress had an intention on the precise question at issue, that *735 intention is the law and must be given effect.[17]
This Court must determine whether Customs has construed § 1304 in a manner clearly contrary to the congressional intent. Where Congress in plain language has expressed its intention and the legislative history does not demonstrate a contrary purpose, this Court is bound to follow the statutory provision as written. Schramm v. Department of Health & Human Services., 682 F.2d 85, 91 (3d Cir.1982) (criticized on other grounds by Romane v. Defense Contract Audit Agency, 760 F.2d 1286 (C.A.F.C.1985)). Section 1304 uses simple language requiring conspicuous marking. The legislative history described infra compels the Court to the conclusion that Customs has not followed the statutory provision as written.
The government argues that the Ruling Letter is entitled to considerable deference and is not arbitrary, capricious, or otherwise contrary to law. The agency's interpretation is "permissible" and 19 C.F.R. § 134.41(b) is entitled to considerable deference because it is a "longstanding and consistent administrative regulation." The government confuses the standard of review of regulations with that of Ruling Letters. Customs regulations are usually entitled to deference. See, e.g., Chevron v. N.R.D.C., supra. But Customs ruling letters which bind only the party to which they are issued are not entitled to the same deference. However, in this case Customs' action exceeds even the abuse of discretion standard described in Chevron.
The Treasury Department ("Treasury") has the duty to implement rules and regulations according to 19 U.S.C. § 1304(b) but must comply with the plain words of the statute, or the regulations they issue are a nullity. The Supreme Court has put it succinctly:
`The power of an administrative officer or board to administer a federal statute and to prescribe rules and regulations to that end is ... [only] the power to adopt regulations to carry into effect the will of the Congress as expressed by the statute. A regulation which does not do this, but operates to create a rule out of harmony with the statute, is a mere nullity.'[18]
The Ruling Letter in this case is such a nullity. It creates a rule out of harmony with the "conspicuous" requirement of § 1304. The government claims that it is within Customs' power to make rules and regulations to administer the marking statute. That is undoubted. What is unacceptable is the specific interpretation given in this case. Although plaintiff also objects to 19 C.F.R. § 134.41(b) and suggests redrafting it for Customs, the Court does not now need to overturn that regulation to right the manifest wrong. The Ruling Letter must be overturned because the ultimate criterion in a case involving the interpretation of administrative regulations is "the administrative interpretation, which becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulation." Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 413-14, 65 S.Ct. 1215, 1217, 89 L.Ed. 1700 (1945) (emphasis added). The Ruling Letter is plainly erroneous in light of 19 C.F.R. § 134.41(b) and is incompatible with the clear language used consistently by Congress since 1897.
C. Legislative History of 19 U.S.C. § 1304
The government claims that the Customs Service interpretation of the statute is consistent with the legislative history. To the extent that the legislative history of the marking requirement can be found, that statement is in error as to the Ruling Letter. Although the government admits Congress intended to provide consumers with a choice, they err by ignoring *736 the principal intent behind the marking requirement: that goods be marked conspicuously so that consumers can easily find the marks. Ignoring that obvious intent defeats the entire purpose of the marking requirement.
The legislative history of the country of origin marking requirement demonstrates that Congress intended goods be marked clearly and conspicuously. Congress first required country of origin markings in 1890.[19] The requirement that goods be marked "in a conspicuous place" was added by the Tariff of 1897, but there is apparently no legislative history as to the addition of that requirement.[20] Presumably, Congress did not believe that markings that were "plainly marked" in "legible English words" were adequate and wanted to ensure that products were marked manifestly and visibly. The Tariff Act of 1909 required that "all articles of foreign manufacture ... shall be marked, ... in legible English words, in a conspicuous place that shall not be covered or obscured by any such attachments or arrangements, so as to indicate the country of origin ...," and that all packages containing imported articles "shall be marked ... so as to indicate legibly and plainly, in English words, the country of origin and the quantity of their contents ..."[21]
The marking requirement was rewritten in the Trade and Tariff Act of 1930, and again in 1938, but contained the same requirements as before.[22] In 1953 Congress exempted goods which could not be economically marked[23] and no further amendments were made until 1984, when Congress exempted certain steel pipe and fittings and allowed alternate methods of marking for certain items.[24] In 1988 Congress increased penalties for concealing markings.[25]
Congress acted in 1890 to implement what is now § 1304 primarily so that imported goods would be marked with their country of origin or refused entry. Congress also intended to protect customers from shoddy foreign-produced goods sold under American labels.[26] Congress' intent in passing at least one revision of the marking requirement might be found in the headnote to the Tariff Act of 1930, which states that its purpose is "to provide revenue, *737 to regulate commerce with foreign countries, to encourage the industries of the United States, to protect American labor, and for other purposes."[27] Whether the marking requirement was originally for the purpose of protecting domestic manufacturers or consumers does not determine this Court's decision. What is at issue is whether Customs' interpretation of § 1304 and its own regulations correctly implement the Congressional intent that goods be marked conspicuously. Director Durant failed to discuss the readily apparent congressional intent and the judicial gloss on the intent behind the marking requirement. This failure substantially reduces the persuasiveness of the Ruling Letter.[28] Although the government strenuously opposes the notion that a purpose of the marking requirement is the protection of U.S. industry, cases construing the marking requirement have found that Congress did intend, at least in part, to benefit domestic labor and industry. See, e.g., United States v. American Sponge & Chamois, 16 Ct.Cust.App. 61, 66, T.D. 42,731 (1928) ("The [marking] law was not intended so much to derive revenue as it was to protect the American manufacturer and purchaser of the merchandise"). In Globemaster, Inc. v. United States, 68 Cust.Ct. 77, 340 F.Supp. 974 (1972), the Customs Court discussed whether an importer may be relieved of the country of origin marking requirement by payment of the 10% additional duty provided for in § 1304. Although the Court did not address the issue of whether the markings involved were conspicuous, it stated that
[section 1304] reflects the Congressional intent that the public be apprised of the country of origin of merchandise.... Congress was also aware of the fact that many consumers prefer merchandise produced in this country, and sought `... to confer an advantage on domestic producers of competing goods.'[29]
Given the judicial interpretation that Congress did intend to protect domestic producers, the Customs Service should have addressed that apparent intent before summarily dismissing the Ruling Request. Customs has found a congressional intent behind § 1304 in other cases, but failed to do so here. In Treasury Decision 91-7, Tariff Treatment and Country of Origin Marking of Sets, Mixtures, and Composite Goods, codefendant Harvey Fox, Director of the Office of Regulations and Rulings, recognized that
[t]he primary purpose of the country of origin marking statute is to `mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.'[30]
The government argues that since Congress has repeatedly reenacted the provisions of § 1304 and added certain provisions but never changed Customs' construction of "conspicuous," then Customs' interpretation of its regulation "must be deemed to have received Congressional approval."[31] The government is mixing apples with frozen broccoli. Congress may or may not have acquiesced in 19 C.F.R. *738 § 134.41(b), but Congress has clearly not acquiesced in the Ruling Letter as the specific issue has not arisen before Norcal's Ruling Request, and Congress has not amended § 1304 since the Ruling Letter was issued. The clarity of the marking requirement and the legislative history and judicial interpretations of 19 U.S.C. § 1304 compel this Court to fulfil its obligation to enforce the clear language of the statute by finding that the Ruling Letter clearly contravenes the requirement that imported goods be conspicuously marked.
D. Customs Has Ruled Inconsistently
This Court has an obligation "to assure uniformity in the application of the Customs laws throughout the United States where, as recognized, the administrative determinations in the respective Customs districts and regions may conflict due to error construction [sic] or lack of individual knowledge of the facts." P.P.G. Indus., Inc. v. United States, 4 CIT 143, 148, 1982 WL 2262 (1982); see also National Corn Growers Assoc. v. Baker, 10 CIT 517, 521, 643 F.Supp. 626 (1986) ("An important objective of ... the Customs Courts Act of 1980 was to provide greater uniformity and consistency in the interpretation and application of the international trade laws.") The Court therefore must carefully observe the Customs Service decisions in this area to ensure uniform application of the statute. The Customs Service has ruled inconsistently on country of origin marking of frozen produce. Although Customs can change its policy in implementing the marking requirement, the Court's research has revealed a lack of thoughtful analysis of the issues involved in those rulings pertaining to marking of frozen produce. Prior rulings are not acknowledged in the Ruling Letter. Other rulings do not refer to each other, even when changing Customs policy. The Court therefore deems it necessary to examine the Customs rulings in this area.
The District Director of Customs from Laredo, Texas held in 1986 that packages of broccoli imported in bulk must be marked with the country of origin because the broccoli was not substantially transformed after entry.[32] That ruling conflicts with Customs Service Decision No. 79-404, which exempted frozen vegetables imported in bulk from the marking requirement even after repackaging because they were (incorrectly) held to be incapable of being marked. 13 Cust.Bull. 1606 (1979). But the 1986 ruling makes no reference to the prior decision. Customs Regulation 19 C.F.R. § 134.25 (1984) does attempt to establish some uniformity by requiring importers to certify that the goods they import will be properly marked after repackaging. Imported frozen vegetables must be marked with their country of origin so that the ultimate consumer will know where the vegetables came from, as mandated by statute.
E. The Ruling Letter Lacks Reasoned Analysis
One factor to be considered in giving weight to an administrative ruling is "the `thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.'" Adamo Wrecking Co. v. United States, 434 U.S. 275, 287 n. 5, 98 S.Ct. 566, 574 n. 5, 54 L.Ed.2d 538 (1978) (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 164, 89 L.Ed. 124 (1944)). Customs reasoned that the country of origin marking was placed close to the expiration date or nutritional information panel on some of the packages and was therefore conspicuous because consumers often look at the expiration date on produce.[33] The government claims that it does not understand plaintiff's argument that Customs bootstrapped conspicuousness by claiming that nutritional information was conspicuous *739 and that because the country of origin marking was close to or among the nutritional information, it was therefore conspicuous as well. This deduction seems transparent to the Court; indeed the flaw in Customs' reasoning is conspicuous. The analogy made in the Ruling Letter to the placement of nutritional information on packages is unconvincing because that information is not presently required to be placed on packages at all.[34] Logically, therefore, there is less interest in having it clearly before the customer when he or she picks up the package. A more persuasive analogy is to the requirement that packages disclose the weight of their contents on the principal display panel. 15 U.S.C. § 1453(a)(2)-(3) (1988). The weight marking must be a certain size, located on the front, or most prominent panel, of the package.
Customs' conclusory rationale that the marking is conspicuous by virtue of its proximity to nutritional information is not persuasive. It is a simple but flawed syllogism. The main premise that nutritional information and expiration dates are marked conspicuously is unsupported conjecture. Also, pointing to one requirement as evidence of the conspicuousness of the other is logically flawed. The two are not born of the same concerns, or the same level of congressional involvement. Nutritional information may be conspicuous for purposes of F.D.A. regulations which require it on the rear or side panel of packages. But Customs cannot interpret the marking statute according to requirements set forth in F.D.A. regulations, and should analogize hesitantly and perspicaciously to those regulations, if it must analogize at all. There is no evidence that Congress intended to allow or require marking on the rear or side panels of packages. Congress did intend that packages be marked conspicuously, and "as legibly" as possible.
Director Durant refused to address the common meaning of the terms used in the statute. But where a ruling depends on the construction of a single non-technical word, looking at the common usage is especially appropriate.[35] "Conspicuous" is not subject to a great variety of definitions. Webster's New Universal Unabridged Dictionary defines conspicuous as: "1. easy to see or perceive; obvious; manifest; as, to stand in a conspicuous place.... 2. attracting attention by being unexpected, unusual, or outstanding; remarkable; striking...." Webster's New Universal Unabridged Dictionary 390 (2nd Ed., 1983). Webster's New International Dictionary Unabridged defines conspicuous: "1. Obvious to the eye or mind; plainly visible; manifest. 2. Attracting or tending to attract attention, as by reason of size, brilliance, contrast, or station; striking; eminent; as, a conspicuous tower; conspicuous statement. 3. Undesirably noticeable, esp. by reason of accident or violation of good taste; as, a conspicuous necktie; ... See PROMINENT ..." Webster's New International Dictionary Unabridged 570 (2nd Ed.1956). The present method of marking frozen vegetable packaging is clearly not conspicuous within the above definitions, nor within the use of the word conspicuous in the clear language of the statute.
Customs failed to discuss factors it considered in similar cases. For instance, Customs Service Decision 90-41 held that grand pianos made in Korea but designed in West Germany must be marked where the consumer expects to see the country of origin.
*740 We require only that the location of the country of origin marking be conspicuous, and not that it be in the most conspicuous location. We take into account where the ultimate purchaser of a grand piano expects to find country of origin marking.... [W]e are also guided by the requirement that the marking be easily found and read without strain; that the method of marking is appropriate to the nature of the article; and that the marking will be sufficiently permanent to ensure that the marking will remain on the article until it reaches the ultimate consumer unless deliberately removed.
C.S.D. 90-41, 24 Cust.B. & Dec. 32, 35 (April 4, 1990) (emphasis added). The Ruling Letter lacks any similarly convincing rationale, or even a cogent explanation of country of origin marking requirements. Well-known requirements were not analyzed or explained. Customs failed to consider in any manner the marketing and display of frozen vegetables. Certain packages listed the name and U.S. address of the manufacturer, but without nearby notations of country of origin. In that case, the packages must more clearly denote country of origin than must packages without a U.S. address because a package bearing an American address has the capability of actively misleading consumers into believing that a product is produced by an American manufacturer. If the words "U.S.," or "America," or a United States address appear on the label, then the article must be marked with the country of origin in at least a comparable size. 19 U.S.C. § 1304; 19 C.F.R. § 134.46 (1990); National Juice Products Assoc. v. United States, 10 CIT 48, 628 F.Supp. 978 (1986). Although Director Durant mentioned this requirement in the Ruling Letter, he did not mention that several of the packages did not comply. For instance, packages stamped with the country of origin and the expiration date all failed to place that information on the same panel as the address of the U.S. distributor. Still, Director Durant acquiesced in this violation with a wink toward the regulations: "Customs believes that allowing country of origin marking to be stamped on with an expiration date facilitates compliance with the marking laws since it allows packers to have a small number of standard packages with space left available for imprinting information unique to the package." Ruling Letter, at 4-5. Customs should not place the convenience of packagers above the law.
Defendants state that the markings are often small and lost in the nutritional information, and that
the marking on a particular label might not be obscured, but might nonetheless not comply with country of origin marking requirements because, for example, the lettering is so small as to not be legible, the marking might be lost in the nutritional information, or the marking might be smeared. Nothing in the regulation at issue, the ruling at issue, our moving brief, or this brief is to the contrary.[36]
The Court agrees entirely. However, the Ruling Letter failed to address these points. Some of the packages submitted to Customs did have a country of origin marking lost in the nutritional information, yet Customs did not invalidate them. Others had smudged markings, which in connection with the small typeface involved and the location of the marks on the side panel of the package, combine to prevent consumers from finding them. The Ruling Letter allows food producers to bury the country of origin marking among other small typeface information on the rear panel of the package, where it is unseen and ignored.
In addition, certain packages submitted to the Court (but not to Customs) marked "May Contain Product of United States, U.K., Poland, Spain, Mexico, Belgium and Guatemala" are insufficiently marked. See C.S.D. 89-111, 23 Cust.B. & Dec. No. 44 (April, 1989). Although these packages are not officially before the Court, they violate Customs regulations and § 1304 and cannot be ignored. The Court holds that packages of frozen produce bearing similar markings must be refused entry until *741 marked with the actual country of origin of produce. See, e.g., C.S.D. 86-27, 20 Cust.B. 654, 655-56 (1986) (imported orange juice concentrate could not be marked "may contain concentrate from Florida and/or Brazil" because such language was "too far a deviation from the statutory requirement of section 1304 ... to inform the ultimate purchaser of the country of origin").
Nowhere do defendants and their allied amici curiae contend that any harm would befall Customs or amici's clients if the intent of Congress were implemented and the packages were marked in accordance with law and the consumer actually visually informed of the source country of the produce. A search for any concern by the defendants for the actual or potential deception practiced upon consumers is fruitless. Defendants' thrust appears to be the preservation of prerogatives, not the pursuit of justice under the law.
The government's argument equating Customs' admittedly longstanding administrative regulation interpreting "conspicuous" to mean easily found and read without strain, with the Ruling Letter in this case that frozen vegetable markings comply with those requirements is disingenuous. Although plaintiffs object to the regulation, their main complaint is that the Ruling Letter does not follow the Congressional intent behind the "conspicuous" requirement. The issue is not whether easily found and read without strain sufficiently substitute for "conspicuous," but whether both requirements would allow the present method of marking frozen vegetables to continue. The Court finds that those requirements are not met by the present practice of marking on the rear or side panel. Although Customs has routinely interpreted "conspicuous" through 19 C.F.R. § 134.41(b), it failed in the Ruling Letter to follow the clear meaning of the statute or the regulation.
IV. CONCLUSION
The primary question is whether the requirement that goods be marked in a conspicuous place as legibly, indelibly and as permanently as the package will permit is met by placing such a marking in relatively fine print on a panel of the package that invariably is not presented to the consumer's scrutiny. Anyone with a common understanding of the term "conspicuous" must answer that question in the negative. "Conspicuous" marking does not necessarily mean "in type size comparable to the product description and/or in a contrasting color," but does mean clear to the naked eye. The markings are not as conspicuous or as legible as the packages will permit: a glance at the front panel reveals an abundance of space which would accommodate the mandated disclosure more legibly than at present. In light of the special factors involved in the marketing of frozen food products, the marking must be on the front of the package. Foreign-origin produce may or may not have gained U.S. market share because U.S. consumers are essentially unaware of its origin. What is clear, however, is that the Congressional mandate that imported produce be conspicuously marked is not being carried out, and therefore the consumer does not have the choice mandated by statute.
The clear language of § 1304 requires conspicuous marking. The legislative history and judicial interpretation indicate that the purpose is to give the consumer an easily discernible choice and to aid U.S. business and labor, insofar as domestic consumers may favor domestic products. The present placement of marking does not carry out the statutory mandate because it is not conspicuous. Defendants and amici offer no substantive reasons why the mandate is pernicious or harmful, or any other reason why the statutory mandate should not be carried out. The Court holds that it must be carried out. This can be done by complying with the statute, which at a minimum means that the country of origin must be displayed on the front or most prominent panel of the package, that is, the panel most often presented to the consumer. The mark must be placed on that panel in a conspicuous manner, keeping in mind the common meaning of that term.
Accordingly, this matter is remanded to the Commissioner of Customs for action *742 consistent with the forgoing decision. It is so ordered.
AMENDED JUDGMENT
Upon consideration of the briefs filed and the arguments presented in this case, the Court finds that country of origin markings on frozen produce as submitted to the U.S. Customs Service are neither located "in a conspicuous place" nor set forth "as legibly as the nature of the ... containers ... will permit" as required by statute. Based upon that finding, and the Court's further finding that there is no genuine issue of material fact, the Court finds that plaintiffs are entitled to judgement as a matter of law. Good cause appearing, it is hereby
ORDERED that defendants shall withdraw the Ruling Letter dated November 21, 1988 attached as Exhibit B to plaintiffs' complaint, and shall issue a new ruling letter finding that:
1. The samples of frozen produce packaging submitted to Customs with plaintiffs' ruling request do not comply with 19 U.S.C. § 1304 nor 19 C.F.R. § 134;
2. In order to be conspicuous, in light of the method by which frozen produce is merchandised and in light of the other requirements of 19 U.S.C. § 1304, country of origin marking of frozen produce must be located on the front panel of the package and must be marked in a type size and style so as to be conspicuous;
3. Any prior Customs Decisions or rulings not in accordance with this decision shall be revoked by the new ruling letter to be issued by Customs.
Accordingly, this matter is remanded to the United States Customs Service and the other named defendants for action in compliance with this decision. Defendant Customs Service shall submit the new ruling letter to the Court as soon as practicable but in any event no later than 90 days from the date of this order.
NOTES
[1] 19 U.S.C. § 1304 (1990). 19 U.S.C. § 1304(a) reads in pertinent part:
(a) Marking of articles
Except as hereinafter provided, every article of foreign origin (or its container ...) imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit in such manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article....
19 U.S.C. § 1304(a) (1990) (emphasis added).
[2] 19 C.F.R. § 134.41(b) reads as follows:
Degree of permanence and visibility. The degree of permanence should be at least sufficient to ensure that in any reasonably foreseeable circumstance, the marking shall remain on the article (or its container) until it reaches the ultimate purchaser unless it is deliberately removed. The marking must survive normal distribution and store handling. The ultimate purchaser in the United States must be able to find the marking easily and read it without strain.
19 C.F.R. § 134.41(b) (1990) (emphasis added).
[3] Ruling Letter, at 4.
[4] That stipulation was entered into "without waiver of any objection defendants may have to service, jurisdiction, or otherwise." Defendant's Reply at 7.
[5] Norcal/Crosetti Foods, Inc. v. United States Customs Serv., 14 CIT ___, 731 F.Supp. 510 (1990). See also discussion of jurisdictional issues, infra, at section III.A.
[6] This allegation was not rebutted. Ruling Request at 17-18.
[7] This is vehemently denied by defendants, and especially by amici, but there is enough evidence to buttress the proposition that the consumer should be given the easy choice mandated by 19 U.S.C. § 1304.
[8] California, Connecticut, Florida, Georgia, New Jersey, New Mexico, New York and South Carolina.
[9] See National Juice Products Assoc. v. United States, 10 C.I.T. 48, 54 n. 8, 628 F.Supp. 978 (1986), where plaintiffs attempted to show that marking packages with the country of origin would work irreparable harm upon them by causing a "loss of consumer acceptance."
[10] Such as "Grade A Fancy," "No Salt Added," etc.
[11] Cf. 21 C.F.R. § 101.15(a)(1) (1990) (defines the prominence of the required weight statements on packages they must "appear on the part or panel of the label which is presented or displayed under customary conditions of purchase....").
[12] 28 U.S.C. § 2631(h) (1990).
[13] 19 U.S.C. § 1515 provides in part that "the appropriate customs officer, within two years from the date a protest was filed in accordance with [19 U.S.C. § 1514], shall review the protest and shall allow or deny such protest in whole or in part...." 19 U.S.C. § 1515(a) (1990) (emphasis added).
[14] It is clear that Norcal would be a "domestic interested party" under several provisions of 19 U.S.C. § 1516. The government is correct to point out that 19 U.S.C. § 1516 does not grant Norcal a jurisdictional foothold in this Court. However, it shows that Congress intended such domestic parties to have redress in this Court, at least for the cases therein described.
[15] 19 U.S.C. § 1514(a) (1990) (emphasis added).
[16] 28 U.S.C. § 1581(i) reads in pertinent part:
(i) In addition to the jurisdiction conferred upon the Court of International Trade by subsections (a)-(h) of this section and subject to the exception set forth in subsection (j) of this section, the Court of International Trade shall have exclusive jurisdiction of any civil action commenced against the United States, its agencies, or its officers, that arises out of any law of the United States providing for ...
(4) administration and enforcement with respect to the matters referred to in ... subsections (a)-(h) of this section.
28 U.S.C. § 1581(i) (1990).
[17] Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843 n. 9, 104 S.Ct. 2778, 2781 n. 9, 81 L.Ed.2d 694 (1984), reh'g denied, 468 U.S. 1227, 105 S.Ct. 28, 82 L.Ed.2d 921 (1984) (citations omitted).
[18] United States v. Larionoff, 431 U.S. 864, 873 n. 12, 97 S.Ct. 2150, 2156 n. 12, 53 L.Ed.2d 48 (1977) (quoting Manhattan Gen. Equip. Co. v. Commissioner, 297 U.S. 129, 134, 56 S.Ct. 397, 400, 80 L.Ed. 528 (1936)).
[19] The Tariff Act of 1890 required that
[A]ll articles of foreign manufacture, such as are usually or ordinarily marked, stamped, branded or labeled, and all packages containing such or other imported articles, shall be plainly marked, stamped, branded, or labeled in legible English words, so as to indicate the country of their origin; and unless so marked, stamped, branded or labeled they shall not be admitted to entry.
Tariff of 1890, § 6, 26 Stat. 613 (1890).
[20] Tariff Act of 1897, c. 11, § 8, 30 Stat. 206 (1897).
[21] Tariff of 1909, c. 6, § 7, 36 Stat. 85 (1909) (emphasis added). Note that both the quantity of the contents and the country of origin were required to be marked legibly and plainly.
[22] Tariff Act of 1930, Pub.L. No. 71-361, c. 497, § 304, 46 Stat. 590, 687 (1930); Customs Administrative Act, Pub.L. No. 75-721, c. 679, § 3, 52 Stat. 1077 (1938).
[23] Customs Simplification Act, Pub.L. No. 83-243, c. 397, § 4(c), 67 Stat. 507, 509 (1953).
[24] Trade and Tariff Act of 1984, Pub.L. No. 98-573, tit. II, § 207, 98 Stat. 2976 (1984).
[25] Omnibus Trade and Competitiveness Act of 1988, Pub.L. No. 100-418, tit. I, § 1907(a)(1), 102 Stat. 1314 (1988). By thus amending the statute, Congress arguably intended to revitalize the country of origin marking requirement, and to redouble efforts to have goods marked conspicuously.
[26] House Report No. 1466 states that
[t]he admitted superiority of certain lines of American goods has induced the importation of foreign imitations of inferior quality, with American brands, to be put on our market as the superior goods of American manufacture. Inferior goods, the manufacture of one country, have also been imported and sold bearing the marks of the superior manufactures of established reputation of another country. A practice has also grown up of importing goods under invoices authenticated in a country other, and in a currency of less value, than of the country of manufacture.
Section 23 forbids entry to merchandise not plainly marked, stamped, branded, or labelled with the name of the country in which it is manufactured, with the purpose of protecting both our own people from the imposition of inferior goods and the revenue from possible loss through undervaluation.
H.R.Rep. No. 1466, 51st Cong., 1st Sess. at 6-7 (1890) (emphasis added).
[27] Headnote to Tariff Act of 1930, 46 Stat. at 590 (1930) (emphasis added).
[28] The only mention in the Ruling Letter of congressional intent is as follows:
We believe the proper sources for defining the word "conspicuous" are the statute itself, the regulations issued thereunder and court decisions made in light of both of these. The use of dictionary definitions would be necessary and proper only in the absence of these other sources. In addition, we note the lack of any Congressional action to modify the statute in any way that would result in your interpretation of `conspicuous'. Our interpretation and application of 19 U.S.C. § 1304 has been well known for many years.
Ruling Letter, at 2.
[29] Globemaster v. United States, 340 F.Supp. at 976 (citing United States v. Ury, 106 F.2d 28, 29 (2d Cir.1939)).
[30] T.D. 91-7, 25 Cust.Bull. & Dec. No. 2/3, 6, 14-15 (Jan. 8, 1991) (citing United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 (1940)).
[31] Defendant's Reply Brief to Plaintiff's Response to Defendant's Cross-Motion for Summary Judgment, at 5 (citing Fribourg Navigation Co. v. Commissioner, 383 U.S. 272, 283, 86 S.Ct. 862, 868-69, 15 L.Ed.2d 751 (1966)).
[32] C.S.D. 86-28, 20 Cust.Bull. 656, 660-61 (1986).
[33] "As [expiration] dates and nutritional information are conspicuous on packages, country of origin marking displayed in close proximity to such dates or data is conspicuous as well...." Ruling Letter, at 4.
[34] Food and Drug Administration regulations require nutritional information only on a few food types, while generally, "[n]utrition information relating to food may be included on the label and in the labeling of the product: Provided, That it conforms to the requirements of this section." 21 C.F.R. § 109(a) (1990) (emphasis added). Although the F.D.A. is contemplating new regulations which would require the nutritional information on food labels, those regulations have not been promulgated.
[35] See Addison v. Holly Hill Fruit Products, Inc., 322 U.S. 607, 618, 64 S.Ct. 1215, 88 L.Ed. 1488 (1944), reh'g denied, 323 U.S. 809, 65 S.Ct. 27, 89 L.Ed. 645 (1944) ("Legislation when not expressed in technical terms is addressed to the common run of men and is therefore to be understood according to the ordinary sense of the thing.")
[36] Defendant's Reply Brief, at 13.
| {
"pile_set_name": "FreeLaw"
} |
TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-04-00749-CV
Tina Marie Fox, Appellant
v.
Troy Ben Fox, Appellee
FROM THE DISTRICT COURT OF BURNET COUNTY, 33RD JUDICIAL DISTRICT
NO. 21,584, HONORABLE V. MURRAY JORDAN, JUDGE PRESIDING
M E M O R A N D U M O P I N I O N
Appellant Tina Marie Fox appeals two issues pertaining to the final decree of divorce
from her marriage to appellee Troy Fox. (1) After issuing the divorce decree, (2) the district court ordered
that Tina and Troy's daughter M.F. attend St. Peter's Lutheran School in Marble Falls for the 2004-05 school year, and that her primary residence be restricted to Burnet County. The district court also
ordered that the portions of the initial decree addressing the couple's tax liabilities for prior years
and child support obligations be corrected and modified. After the district court issued these orders,
Tina requested findings of fact and conclusions of law. The district court denied her request, finding
that it was not timely filed.
In her first and second issues on appeal, Tina contends that the district court erred by
(1) failing to issue findings of fact and conclusions of law and (2) finding her request for findings
of fact and conclusions of law untimely. In her third, fourth, and fifth issues, Tina insists that the
district court abused its discretion by ordering that: (3) M.F.'s residence be restricted to Burnet
County; (4) M.F. attend St. Peter's Lutheran School for the 2004-05 school year; and (5) certain
portions of the initial decree be corrected and modified. Because we hold that Tina was not harmed
by the district court's failure to issue findings of fact and conclusions of law and that the district
court did not abuse its discretion by issuing the post-initial decree orders, we affirm in part.
However, we also reverse and remand in part because we hold that no substantive or probative
evidence exists that would support the court's restriction of the child's residence to Burnet County
beyond the school year 2004-05.
BACKGROUND
Tina and Troy were married in August 1995. Tina worked in automotive sales and
also ran a nail salon. Troy owned and operated pawn shops in Marble Falls, Taylor, and Belton.
Tina had a ten-year-old son, Anthony, from a prior relationship; Troy had no children. Tina, Troy
and Anthony lived together in Burnet County throughout the marriage. Tina has no family in Burnet
County. Her two sisters live in Belton and Killeen; her mother lives in West Virginia. Troy grew
up in Burnet County; his parents, two siblings, and several nieces and nephews, still reside there.
After M.F. was born in 1998, the couple agreed that Tina would stop working to stay home with the
children.
Troy filed for divorce in April 2002. In June 2004, the district court issued its "final
order" concerning conservatorship of M.F. Tina and Troy were appointed joint managing
conservators, with Tina having the exclusive right to establish M.F.'s primary residence. The court
stated that a possible geographic restriction would be addressed at a later date. Trial on all
unresolved issues was set for July. On the day before trial, Tina and Troy entered into a Rule 11
agreement that addressed community property issues, as well as child support. The agreement
specifically stated that any issues pertaining to a geographical restriction or choice of schools for
M.F. in 2004-05 would either be addressed in a separate agreement or be decided by the court. At
the hearing, Tina insisted that it would be in M.F.'s best interest to allow her to move to nearby
Lakeway (3) and attend public school there. Troy wanted to restrict her residence to Burnet County.
When the couple could not agree, a hearing was held on July 22, 2004. At the close of the hearing
the district judge announced that it was in M.F.'s best interest to remain in Burnet County and return
to her same school for the first grade in Fall 2004. A written order imposing this geographic
restriction was filed on August 28.
The district court signed the initial decree of divorce on July 26, 2004. It addressed
the couple's federal income tax liability for prior years and the year of divorce. The initial decree
stated, "In the event that there is a refund for prior years, the parties shall split the refund." This
decree also included this statement addressing income tax liability in the year of divorce: "Troy Fox
shall be entitled to any taxes prepaid on behalf of Troy Fox individually or on behalf of the Pawn
Shops, Tina Fox is ordered to sign any documents necessary to implement this agreement."
Although the Rule 11 agreement indicated that Troy would pay $1,200 a month in child support, the
initial decree failed to impose this child support obligation.
On August 17, Troy filed a motion seeking to reform, clarify, and correct certain
property issues in the initial decree. In the alternative, Troy requested a new trial. Troy insisted that
the provision entitling him to any prepaid income taxes in excess of the parties' tax liability was
incorrectly placed in the section addressing taxes for the year of divorce, rather than taxes for prior
years, as the parties had agreed. Likewise, he argued that the clause purporting to divide any tax
refund from prior years was contrary to their agreement and was erroneously inserted in the decree
by Tina's attorney. Troy argued that these mistakes rendered the decree in conflict with the parties'
Rule 11 agreement, which was incorporated into the initial decree.
After a hearing on October 7, the district court modified the income tax provisions
as Troy requested and added the child support obligations that had inadvertently been omitted from
the initial decree. On October 13, Tina filed a request for findings of fact and conclusions of law
concerning the geographic restriction and the correction and modification of the income tax
provisions. On October 29, the district court denied Tina's request, finding it untimely. This appeal
followed.
DISCUSSION
Findings of fact and conclusions of law
In her first two issues, Tina suggests that the district court erred by finding untimely
her request for findings of fact and conclusions of law. Rule 296 provides a party with the
procedural right to request from the trial court written findings of fact and conclusions of law. See
Tex. R. Civ. P. 296. The trial court's duty to make such findings and conclusions is mandatory when
the request is timely. See Tex. R. Civ. P. 297; see also Cherne Indus., Inc. v. Magallanes, 763
S.W.2d 768, 772 (Tex. 1989); Glass v. Williamson, 137 S.W.3d 114, 117-18 (Tex. App.--Houston
[1st Dist.] 2004, no pet.). If a trial court does not file findings, it is presumed harmful unless the
record affirmatively shows that the appellant suffered no harm. See, e.g., Tenery v. Tenery, 932
S.W.2d 29, 30 (Tex. 1996); Cherne Indus., Inc., 763 S.W.2d at 772; Glass, 137 S.W.3d at 118.
Generally, in complicated cases with disputed facts, or with two or more grounds for
recovery or defense, the inference of harm cannot be defeated. Elliott v. Kraft Foods N. Am., Inc.,
118 S.W.3d 50, 54 (Tex. App.--Houston [14th Dist.] 2003, no pet.). If, however, the lack of
findings is harmless, we can affirm. See Tex. R. App. P. 44.1(a). Error is harmful if it prevents a
party from properly presenting a case to the appellate court. See Tex. R. App. P. 44.1(a)(2); Tenery,
932 S.W.2d at 30; Brazoria County v. Texas Comm'n on Envtl. Quality, 128 S.W.3d 728, 744 n.10
(Tex. App.--Austin 2004, no pet.). A trial court's failure to issue findings of fact and conclusions
of law will be considered harmful if, under the circumstances of the particular case, an appellant
would be required to guess the reason or reasons for the trial court's decision. Brazoria County, 128
S.W.3d at 744 n.10; Elliott, 118 S.W.3d at 54.
A judgment that actually disposes of all parties and all claims is final. In re
Burlington Coat Factory Warehouse, 167 S.W.3d 827, 830 (Tex. 2005). In this case, the district
court retained plenary jurisdiction to modify its initial decree, and there was not a final judgment
until the district court issued its October 7, 2004 order modifying the initial decree. At that time, the
district court resolved the parties' dispute regarding the income tax provisions and imposed the
previously agreed upon child support obligation that had not been included in the initial decree.
Therefore, the district court erred by finding Tina's October 13 request for findings of fact and
conclusions of law untimely. See Tex. R. Civ. P. 296 (providing that requests for findings of fact
and conclusions of law be filed within twenty days after judgment is signed).
Because Tina's request was timely, we must determine whether she was harmed by
the lack of findings and conclusions. Troy argues that Tina does not have to guess the reasons
behind the district court's orders pertaining to either its imposition of the geographic limitation or
its decision to correct and modify the initial decree because the district judge, Murray Jordan,
announced his rulings and stated his reasons at the hearings. We agree.
At the hearing on the residency restriction, Judge Jordan clearly stated that his main
concern was to secure a stable environment for M.F. He acknowledged that for two years the
divorce proceedings had been extremely stressful for a child her age. He explained that M.F. had
attended St. Peter's Lutheran School in Burnet County for the prior two school years and had made
friends there. He insisted that, if M.F. were older and better equipped to deal with the stress of a
move and a new school, his decision might have been different. He then stated that restricting her
residence to Burnet County would make it easier for M.F. to continue in this same school.
Therefore, he ordered M.F. to attend St. Peter's for the first grade (2004-05) and reside in Burnet
County. He added, "It may be that a move to outside this area after a year would be appropriate."
At the hearing on Troy's motion to reform, clarify, and correct the judgment, Judge
Jordan stated that there clearly were two mistakes made in drafting the decree, the income tax
provisions and the omission of any child support obligation, both at odds with the parties' agreement.
He suggested the mistakes were probably due to the fact that there was a hurried push to enter the
initial decree the day after the Rule 11 agreement was signed. Because he found the provisions of
the initial decree and the incorporated Rule 11 agreement ambiguous, he heard evidence pertaining
to the parties' intentions. Subsequently, he asserted that the decree entered on July 26 did not
accurately represent the parties' intentions.
The record clearly establishes the reasons underlying Judge Jordan's decisions in this
case. Therefore, Tina was not harmed by the lack of written findings and conclusions of law. (4)
Consequently, we overrule Tina's first two issues regarding the district court's failure to file written
findings of fact and conclusions of law.
Residence restriction
In her third and fourth issues, Tina suggests that the district court abused its discretion
when it ordered that M.F.'s primary residence be established solely within Burnet County and that
M.F. attend St. Peter's Lutheran School for the 2004-05 school year. Tina maintains that the orders
are not in the best interest of M.F., who should be allowed to move to Lakeway and enroll in its
exemplary public schools. Tina claims that the move would improve both her and M.F.'s quality
of life without diminishing Troy's relationship with M.F. In addition, Tina asserts that nearby
Lakeway is closer to Troy and his family than other cities actually located within Burnet County.
The legislature has explicitly stated, "The best interest of the child shall always be
the primary consideration of the court in determining the issues of conservatorship and possession
of and access to the child." Tex. Fam. Code Ann. § 153.002 (West 2002); Lenz v. Lenz, 79 S.W.3d
10, 14 (Tex. 2002). The trial court is given wide latitude in determining the best interests of the
child and will be reversed only for an abuse of discretion. Gillespie v. Gillespie, 644 S.W.2d 449,
451 (Tex. 1982); Coleman v. Coleman, 109 S.W.3d 108, 110 (Tex. App.--Austin 2003, no pet.).
A trial court abuses its discretion if it reaches a decision so arbitrary and unreasonable as to amount
to a clear and prejudicial error of law or if it clearly fails to correctly analyze or apply the law. In
re Ford Motor Co., 165 S.W.3d 315, 317 (Tex. 2005). As long as some evidence of a substantive
and probative character exists to support the order, we will not substitute our judgment for that of
the trial court. Echols v. Olivarez, 85 S.W.3d 475, 477 (Tex. App.--Austin 2002, no pet.).
Family code section 153.001 states that the public policy of this state is to provide
a safe, stable, and nonviolent environment for the child. Tex. Fam. Code Ann. § 153.001(a)(2)
(West 2002). The code is silent as to the specific factors that the trial court should consider when
determining whether a residency restriction is in the best interest of the child. In Lenz, the supreme
court provided some guidance in applying our state's best-interest standard when divorced parents
seek to relocate. See 79 S.W.3d at 13-16. The court highlighted various relevant factors to be
considered: the reasons for and against the move; the effect on extended family relationships; the
effect on visitation and communication with the non-custodial parent to maintain a full and
continuous relationship with the child; the possibility of a visitation schedule allowing the
continuation of a meaningful relationship between the non-custodial parent and child; the nature of
the child's existing contact with both parents, and the child's age, community ties, and health and
educational needs. See id. at 15-17. However, the supreme court clearly stated that suits affecting
the parent-child relationship are intensely fact-driven and consequently involve careful balancing of
these numerous factors. Id. at 18-19.
As we have noted, the district court's primary concern was to provide a secure and
stable environment for M.F. The court heard testimony that M.F. had attended St. Peter's Lutheran
School for two years and was excited about returning for the first grade. The record also indicates
that many of M.F.'s extracurricular activities take place in Burnet County. In addition, there is
evidence establishing that most of M.F.'s paternal extended family lives in Burnet County. Judge
Jordan recognized that it was difficult for Tina to get along with Troy and his family and that it may
not be in her best interest to remain in Burnet County. However, the record indicated that M.F. had
been insulated from much of the familial acrimony.
Judge Jordan concluded that it would promote stability for M.F. to attend the first
grade at St. Peter's:
The child has attended St. Peter's Lutheran School for two years and made friends,
and that the stability for the child will be for her to stay in St. Peter's Lutheran School
at least for another year.
The problem with establishing a home for the child in Lakeway would be if the child
continues in St. Peter's School, she would have to be transported 35 miles to school
each day. If she is closer to St. Peter's School, then it would be better for the child
to be able to go to school in St. Peter's Lutheran School.
So the Court feels that the best interest of the child is that she attend St. Peter's
Lutheran School one more year, but that the home of the child be established in
Burnet County. . . . And certainly as the circumstances change, the-we can change
the order. But at this time, I'll rule that the residence of the child be established in
Burnet County, and that she be placed in St. Peter's Lutheran School for the first
grade.
The record before us includes evidence supporting Judge Jordan's conclusion that the stability of the
child would be served by continuing to attend St. Peter's Lutheran School for the school year 2004-05, that changing the child's residence to Lakeway would impede school attendance at St. Peter's
by adding 35 miles of transportation twice a day, and that restricting the child's residence to Burnet
County would facilitate the goal of keeping her in the same school for another year. Therefore, we
hold that the district court did not abuse its discretion by restricting M.F.'s primary residence to
Burnet County to enable her to attend the first grade at St. Peter's. However, we find no substantive
or probative evidence that would support the court's restriction of the child's residence to Burnet
County and its denial of the mother's request to move to Lakeway after that school year ended. (5) We
hold that the court abused its discretion in continuing the restriction and denying the mother's
request to allow the child to reside in the Lakeway community after the end of the 2004-05 school
year. We sustain in part Tina's third and fourth issues.
Modification and correction of the initial decree
In her final issue, Tina argues that the district court abused its discretion by ordering
that the initial decree be modified and corrected. Tina claims that the district court (1) erroneously
admitted evidence of the couple's settlement negotiations; (2) improperly allowed Troy to
renegotiate the corrected and modified initial decree; and (3) failed to divide income tax refunds
from prior years in a just and right manner.
The district court signed and filed the initial decree on July 26, 2004. On August 17,
Troy filed a motion seeking to reform, clarify, and correct certain portions of the initial decree. He
argued that the portions of the initial decree pertaining to the couple's income tax liabilities were
ambiguous because the Rule 11 agreement was not properly incorporated into the initial decree. On
September 24, the district court held a hearing on Troy's motion. At the hearing, the district court
heard testimony from Troy's attorney, Robert Gradel, and Gradel's secretary, Jennifer Bunting, that
during the settlement negotiations Troy agreed to pay a portion of Tina's credit card debt in exchange
for receiving any tax prepayments or overpayments. Gradel also offered into evidence copies of
faxes that he sent to Tina's attorney, Glynn Turquand, pointing out this drafting error in the initial
decree. In one fax, Gradel made three suggestions for language that he felt should be included in the
decree. Gradel stated that two of the suggestions were adopted, but his request that the decree
section entitled "Liability for Federal Income Taxes for Prior Year" include a sentence awarding
Troy any refunds was not incorporated as requested. (6) Instead, substantially similar language was
placed in the section entitled Treatment/Allocation of Community Income for Year of Divorce.
Finally, Gradel testified that the sentence, "In the event that there is a refund for prior years, the
parties shall split the refund," was contrary to the parties' agreement as reflected in the Rule 11
agreement. Turquand objected to the admission of Gradel's and Bunting's testimony, as well as the
faxes. He claimed Texas Rule of Evidence 408 barred the admission of evidence of conduct or
statements made during settlement negotiations. See Tex. R. Evid. 408. Turquand also argued that
both the Rule 11 agreement and the initial decree were clear and unambiguous.
The district court found the initial decree and the Rule 11 agreement ambiguous and
on October 7 it ordered that three sections of the initial decree be corrected or modified. First, the
district court deleted the sentence splitting tax refunds for prior years between the parties. Second,
it transferred the sentence granting Troy all prepayments of tax to the section concerning tax liability
for prior years. Finally, the district court ordered that the initial decree be modified to include the
previously agreed upon child support provision. (7)
Ambiguity
Whether a divorce decree or an agreement is ambiguous is a question of law subject
to de novo review. See Shanks v. Treadway, 110 S.W.3d 444, 447 (Tex. 2003); Guerrero v. Guerra,
165 S.W.3d 778, 782 (Tex. App.--San Antonio 2004, no pet.). We interpret a divorce decree like
any other judgment, reading the decree as a whole and "effectuating the order in light of the literal
language used" if that language is unambiguous. Reiss v. Reiss, 118 S.W.3d 439, 441 (Tex. 2003)
(quoting Wilde v. Murchie, 949 S.W.2d 331, 332 (Tex. 1997)). A judgment is ambiguous if it is
susceptible to more than one reasonable interpretation. Shanks, 110 S.W.3d at 447. If the decree
is ambiguous, a court should review the record along with the decree to aid in interpreting the
judgment. Id.
After extensive negotiation, Tina and Troy entered into a Rule 11 agreement outlining
how the marital property would be divided. The substance of the agreement was to be included in
the initial decree. Specifically, the initial decree states, "The Court finds that the parties have entered
into an Agreement Incident to Divorce, in a document separate from this Final Decree of Divorce.
The Court approves the agreement and incorporates it by reference as part of this decree as if it were
recited herein verbatim and orders the parties to do all things necessary to effectuate the agreement."
The only reference to the couple's income tax liabilities in the Rule 11 agreement is found in
paragraph 8 which states, "For 2004, parties [Tina and Troy] will partition income, taxes will be as
if divorced on January 1, 2004. Any tax prepayment or deficit will belong to Troy for pawn shops,
his income."
In her response to Troy's motion, Tina contends that paragraph 8 addresses only the
couple's tax liability for 2004. However, it is unclear whether the reference to 2004 in the first
sentence also modifies the second sentence governing the treatment of tax prepayments and deficits.
The second sentence could be read to mean any tax prepayment or deficit in 2004, or it could be read
to mean any tax prepayment or deficit from any year. This distinction is critical because Troy insists
that the word "prepayment" includes overpayments from prior years. Troy maintains that he should
be allowed to apply all overpaid income taxes in 2003 to offset his 2004 tax liability. Tina would
confine the second sentence in paragraph 8 to the year 2004 and rely on the unexplained insertion
dividing tax refunds between the parties to claim one-half of the tax refund from 2003.
We conclude that the second sentence of paragraph 8 is ambiguous because it is
susceptible to more than one reasonable interpretation. Therefore, if the parties intended to award
any income tax prepayments or deficits to Troy, this is in direct conflict with the provision in the
initial decree that any tax refund from a prior year be divided between the parties. Because the
decree specifically incorporated the Rule 11 agreement, we conclude that the provisions of the decree
that address federal income tax liabilities and refunds are ambiguous. See Shanks, 110 S.W.3d at
447. Therefore, the district court did not abuse its discretion by admitting evidence for the purpose
of ascertaining the parties' intentions. See National Union Fire Ins. Co. v. CBI Indus., Inc., 907
S.W.2d 517, 520 (Tex. 1995); EMC Mortgage Corp. v. Davis, 167 S.W.3d 406, 413 (Tex.
App.--Austin 2005, pet. filed).
Modification
A trial court retains plenary power to vacate, modify, correct, or reform its judgment
at any time until the judgment becomes final thirty days after it is signed. See Tex. R. Civ. P. 306a
(time periods run from date judgment is signed), 329b (motions for new trial and motions to modify,
correct, or reform judgment extend duration of trial court's plenary power); Fruehauf Corp. v.
Carrillo, 848 S.W.2d 83, 84 (Tex. 1993); In re Garza, 153 S.W.3d 97, 102 (Tex. App.--San
Antonio 2004, no pet.). Within this time period, the trial court's power to modify its judgment has
been described as "practically unlimited" or "virtually absolute." Rogers v. Clinton, 794 S.W.2d 9,
12 (Tex. 1990) (Cook, J., dissenting); Cook v. Cook, 888 S.W.2d 130, 131 (Tex. App.--Corpus
Christi 1994, no writ).
However, once a divorce decree becomes final it is beyond the power of the trial court
to issue an order that modifies the division of property. Tex. Fam. Code Ann. § 9.007(b) (West
1998). Property adjudications in a divorce decree become final the same as other judgments relating
to title and possession of property. Harleaux v. Harleaux, 154 S.W.3d 925, 928 (Tex. App.--Dallas
2005, no pet.). Here, the district court's plenary power had not expired at the time it signed the
October 7 order modifying the initial decree. See Tex. R. Civ. P. 329b(a) (motion to modify shall
be filed within thirty days after judgment is signed), 329b(c) (if motion to modify is not determined
within seventy-five days after judgment was signed, it shall be considered overruled). Therefore,
the district court was authorized to modify the initial decree in accordance with the evidence of the
parties' agreement. See Cook, 888 S.W.2d at 131.
The record includes testimony and evidence supporting the district court's
modification of the initial decree. The modification is also supported by other non-disputed
provisions of the initial decree. First, the parties agree that Troy is liable for any income tax deficit
in all prior years. If Troy is liable for any prior income tax liability, it follows that he also be entitled
to any tax refund or overpayment. Second, both the initial decree and the Rule 11 agreement
explicitly state that community income generated in 2004, the year of divorce, shall be partitioned
as if the couple were divorced on January 1, 2004. Under the partition agreement, Tina and Troy
would file separate income tax returns for 2004 reflecting "all income earned by gains and losses
generated by, and deductible expenses referable to assets awarded" to either Tina or Troy under the
initial decree. Thus, the provision in paragraph 8 of the Rule 11 agreement that, "Any tax
prepayment or deficit will belong to Troy for pawn shops, his income," would be redundant if it only
applied to the year 2004.
Accordingly, we hold that the district court's modification of the income tax
provisions in the decree of divorce did not constitute an abuse of discretion.
CONCLUSION
We hold that (1) Tina was not harmed by the district court's failure to issue findings
of fact and conclusions of law; (2) the district court did not abuse its discretion by ordering that M.F.
attend St. Peter's Lutheran School in Marble Falls for the 2004-05 school year and that she reside
in Burnet County in order to facilitate her attendance at St. Peter's; and (3) the district court did not
abuse its discretion by modifying and correcting the income tax provisions of the initial decree.
However, we hold that the district court abused its discretion in extending the geographic restriction
on the child's residence beyond the 2004-05 school year. We reverse and remand that portion of the
divorce decree for further proceedings consistent with this opinion.
__________________________________________
Bea Ann Smith, Justice
Before Justices B. A. Smith, Patterson and Pemberton
Affirmed in Part; Reversed and Remanded in Part
Filed: January 13, 2006
1. For ease of reference, we will refer to the parties by their first names.
2. The divorce decree was issued in July 2004 and was entitled "Final Decree of Divorce on
Property Issues." We will refer to the decree as the "initial decree." Earlier the district court had
issued an order concerning conservatorship and support of the child. In that order, the district court
specifically stated that any geographic restriction on the residence of the child would be addressed
at a later time. The initial decree explicitly incorporated the order concerning conservatorship of the
child.
3. Lakeway, Texas, is a small community approximately thirty-five miles from the Marble
Falls area, which is where Tina and M.F. lived at the time of the divorce.
4. We emphasize that oral comments from the bench are not substitutes for written findings
of fact and conclusions of law. See In re Jane Doe 10, 78 S.W.3d 338, 340 n.2 (Tex. 2002); Narvaez
v. Maldonado, 127 S.W.3d 313, 316 n.1 (Tex. App.--Austin 2004, no pet.). We rely on Judge
Jordan's oral pronouncements solely for the purpose of conducting our harm analysis.
5. The record reflects that St. Peter's Lutheran School enrolls students from pre-kindergarten
through second grade. M.F. would not be able to attend St. Peter's beyond the end of the school year
2005-06. The record does not reflect if M.F. is presently enrolled in the second grade at St. Peter's.
6. The requested insertion read: "Troy Fox shall be entitled to any taxes prepaid on behalf of
Troy Fox individually or on behalf of the Pawn Shops, and Tina Fox is ordered to sign any
documents necessary to implement this agreement."
7. Neither party raises a complaint about the modification adding the child support obligation
to the decree of divorce.
| {
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890 S.W.2d 584 (1994)
319 Ark. 132
Orville LINDSEY, Appellant,
v.
STATE of Arkansas, Appellee.
No. CR 94-638.
Supreme Court of Arkansas.
December 19, 1994.
*585 Robert E. Irwin, Russellville, for appellant.
Sandy Moll, Asst. Atty. Gen., Little Rock, for appellee.
BROWN, Justice.
This appeal is brought from a judgment of conviction for two counts of rape involving a child younger than age 14 for which the appellant, Orville Lindsey, received two life sentences. The victim was Lindsey's daughter, B.L., who was age eight at the time of the offenses. Lindsey raises two points on appeal: (1) the trial court erred in permitting testimony of his daughter's trench foot condition; and (2) the trial court erred in excluding evidence that the victim, B.L., had accused others of raping and sexually molesting her. Neither point warrants a reversal of the judgment, and we, therefore, affirm.
On May 19, 1993, Corporal John Serrette of the Russellville Police Department was dispatched to the home of Roger Dale Mason after being notified of a disturbance there. When he arrived, he found B.L., and after talking to her, it became apparent to him that she was a victim of sexual abuse. B.L. told the police officer that Lindsey had sexually abused her. She was taken to the Russellville Police Department for questioning and then to St. Mary's Hospital in Russellville where she was examined by a pediatrician, Dr. Robin Goodman. B.L.'s hymenal opening was found to be significantly enlarged and in an irregular shape, suggesting repeated penetration. Dr. Goodman also found that she had gonorrhea bacteria in her throat and a severe case of trench foot which results from feet being kept warm, moist, and unclean for a prolonged period of time. Both of B.L.'s feet were afflicted with the *586 condition and were puffy and swollen with peeling skin and inflammation.
Lindsey was arrested on May 21, 1993, and charged with raping B.L. by sexual intercourse and oral sex and with endangering her welfare and the welfare of her six-year-old sister by allowing each to develop the trench foot condition. On the day of the trial, defense counsel for Lindsey orally moved the trial court to allow the testimony of three proposed witnesses who would testify that B.L. had accused other persons of sexual conduct. Lindsey also sought severance of the endangerment charge for purposes of trial. The trial court severed the endangerment charge but initially reserved judgment on whether evidence of B.L.'s trench foot ailment could come in at the trial of the rape charges. The court made the following ruling:
I'll grant your motion with respect to a severance of the endangering the welfare of a minor in the second degree. That's on the Amended Information as Count III. So, that charge will not be considered by this Jury in terms of the factual basis for that charge. It may have some relevance under 404(b). What I'd rather do at this time is to deny your request for motion in limine on that aspect.... I can envision a situation where it might be relevant. You know, if it is an examinationone or more girls taken to the hospital for examination of the basis of what brings us here today and then that condition in Count III was seen and observed by the treating physicians, that could have a basis of some relevance under 404(b); but I'd rather hear how that comes out. I'm not sure how it would come out; but the actual charge itself, I will sever.
After the trial court made this ruling, defense counsel continued to argue that any proof of trench foot would be highly prejudicial and inflammatory and of no probative value. The trial court reiterated that it might have some relevance on the issue of Lindsey's intent. The prosecutor added that the State intended to introduce proof of B.L.'s trench foot as part of her total condition at the time of the doctor's examination and, hence, it was relevant under Ark. R.Evid. 404(b). Defense counsel countered that this was an effort by the State to prove one crime by proof of another crime. The trial court concluded the discussion by denying Lindsey's motion to exclude testimony of B.L.'s trench foot condition.
On the issue of Lindsey's three proposed witnesses who would testify about B.L.'s prior allegations of sexual conduct, the trial court ruled that this testimony was prohibited by the Rape Shield Act and that Lindsey's request for an exception to the Act, orally made on the day of the trial, did not comply with the Act's stated procedures.
Trial commenced and, during the State's direct examination of Dr. Robin Goodman, a question was asked about whether the doctor immediately noticed something about B.L. and her younger sister when they were at the hospital.[1] Defense counsel objected, and this exchange ensued at the bench:
Defense Counsel: Your Honor, at this point, I wish to object to this question. He's going to ask about the feet; and I don't think it is relevant at this point.
Prosecutor: Your Honor, it's been testified about seeing it that night. It's the same examination and it will all go into the mix; and I think the Jury is entitled to hear about that.
Defense Counsel: I don't think it has any probative value on the rape at all.
Prosecutor: It's the physical condition of the child and it goes to this man, absence of mistake, and the manner in which this man treated his children.
The Court: I think I've ruled on that on your motion in limine earlier. I'll stand by that ruling. I'll overrule your objection.
Dr. Goodman was then questioned about B.L.'s trench foot malady which the doctor described:
Basically in [B.L.'s] case both of her feet were very swollen. The skin, especially the skin under her toes and up near the balls of her feet were almost white because *587 they were so puffy and swollen. The skin was starting to peel off from around the toes and on the balls of the feet. The surrounding skin was very red which would mean it was very inflamed; and it was very tender when you touched the skin around these areas.
Prior to Dr. Goodman's testimony, Kent Tallent, a Pope-Yell County SCAN employee, was called by the State as a witness and testified. Defense counsel explored on cross-examination whether the State Department of Human Services had placed custody of B.L. with Lindsey because he was a fit parent. On redirect examination, the State continued to explore Lindsey's fitness as a parent as did defense counsel on recross-examination.
Lindsey was found guilty by the jury and sentenced to two life terms in prison, to be served concurrently.
I. RULE 404(b)
Lindsey first contends that the trial court erred in allowing Dr. Goodman to testify about B.L.'s trench foot illness because it was irrelevant to the trial on the rape charges and prejudiced his case. Lindsey further urges that the error was particularly egregious because the trial court had severed the endangerment charge involving B.L.'s case of trench foot for trial. The State counters with several theories: (1) B.L.'s trench foot was part of the res gestae of the case; (2) under Ark.R.Evid. 404(b) proof of trench foot was relevant to the issue of Lindsey's intent or tendency to abuse B.L.; and (3) defense counsel opened the door on the issue of whether Lindsey was a fit parent, thereby allowing testimony of B.L.'s trench foot.
We begin with the observation that trial courts have broad discretion in deciding evidentiary issues, and their decisions are not reversed absent an abuse of discretion. Larimore v. State, 317 Ark. 111, 877 S.W.2d 570 (1994); Terry v. State, 309 Ark. 64, 826 S.W.2d 817 (1992); State v. Massery, 302 Ark. 447, 790 S.W.2d 175 (1990).
In the instant case, we are dealing with the admissibility of a wrong or act, apart from the specific rape offenses, which involved the neglect of B.L. to such an extent that she developed a severe case of trench foot. As a general proposition, proof of other crimes, wrongs, or acts is not admissible under our Rules of Evidence merely to prove the bad character of the defendant and to show that his actions conformed to that character. Ark.R.Evid. 404(b). Rule 404(b), however, does recognize exceptions to the general rule:
(b) Other Crimes, Wrongs, or Acts. Evidence of other crimes, wrongs, or acts is not admissible to prove the character of a person in order to show that he acted in conformity therewith. It may, however, be admissible for other purposes, such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident.
This court has recognized that the list of exceptions to inadmissibility under Rule 404(b) is not an exclusive list but rather represents examples of the types of circumstances where evidence of other crimes or wrongs or acts would be relevant and admissible. Thrash v. State, 291 Ark. 575, 726 S.W.2d 283 (1987); White v. State, 290 Ark. 130, 717 S.W.2d 784 (1986); see also Strong, McCormick on Evidence, § 190, p. 345 (4th Ed.1992).
We have further made it clear that if the introduction of testimony of other crimes, wrongs, or acts is "independently relevant to the main issuerelevant in the sense of tending to prove some material point rather than merely to prove that the defendant is a criminalthen evidence of that conduct may be admissible with a proper cautionary instruction by the court." White v. State, 290 Ark. 130, 140, 717 S.W.2d 784, 789 (1986), quoting Alford v. State, 223 Ark. 330, 334, 266 S.W.2d 804, 806 (1954); see also Price v. State, 268 Ark. 535, 597 S.W.2d 598 (1980). Thus, if the evidence of another crime, wrong, or act is relevant to show that the offense of which the appellant is accused actually occurred and is not introduced merely to prove bad character, it will not be excluded. Sullivan v. State, 289 Ark. 323, 711 S.W.2d 469 (1986). In White v. State, supra, we concluded that the trial court correctly ruled that the testimony regarding a prior beating of the victim, his wife, was *588 admissible to show a specific propensity to beat that person. It was, therefore, probative of the defendant's participation in his wife's murder. We further observed that the appellant had been entitled to a cautionary instruction limiting the use of this evidence, yet failed to ask for one. Because the appellant in White failed to ask for a cautionary instruction, we held that he could not claim error on appeal.
Lindsey also failed to ask for a limiting instruction in the instant case that the proof of trench foot could only be considered as relevant behavior in connection with the rape offenses and not merely as proof of his general bad character. Under our decision in White v. State, supra, this failure forecloses a claim of error on appeal. See also Ark.R.Evid. 105. No doubt, Lindsey did not ask for this limiting instruction because he did not believe the trench foot evidence to be relevant for any purpose. We disagree, however, and choose to address the Rule 404(b) issue. We have no hesitancy in concluding that permitting an eight-year-old child to develop a severe case of trench foot is a form of neglect by the parent and that the neglect of a child's physical needs is necessarily a form of abuse. Hence, we believe that a father's perpetration of child abuse by neglect is relevant to a case of sexual abuse against that same child, when both forms of abuse are occurring at the same time. Such evidence is pertinent in that it establishes an intentional pattern of abusive behavior on the part of the parent toward the childthe first by neglecting her basic hygienic needs and the second by soliciting her to engage in sexual activity. A contemptible lack of caring for a child's essential healthcare needs easily intertwines with sexual abuse of the child. Both forms of abuse are intentional and evidence lack of care, concern, and respect for the child's well-being.
In considering crimes, wrongs, and acts in a Rule 404(b) analysis in 1991, this court has further stated:
We have long held that all of the circumstances connected with a particular crime may be shown, even if those circumstances would constitute a separate crime.
Collins v. State, 304 Ark. 587, 591, 804 S.W.2d 680, 682 (1991); see also Wilson v. State, 298 Ark. 608, 770 S.W.2d 123 (1989); Thomas v. State, 273 Ark. 50, 615 S.W.2d 361 (1981). To have withheld from the jury the child's obvious and total physical condition at the time of Lindsey's arrest would have deprived them of the full circumstances surrounding the crime and the abuse perpetrated. Thus, we hold that proof of the trench foot condition as evidence of Lindsey's abuse by neglect was relevant to the charge of rape of the child under Rule 404(b).
The next question is whether, though relevant under Rule 404(b), the probative value of the trench foot condition was substantially outweighed by the danger of unfair prejudice and, thus, inadmissible under Ark. R.Evid. 403. There is no doubt that such proof of abuse by neglect would have an adverse impact on Lindsey at trial, but we do not believe that unfair prejudice occurred. This is not a case where Lindsey was on trial for rape, and evidence of an unrelated murder occurring a year earlier and involving a different victim was offered. Here, the victim was the same personhis daughter, B.L. Both the trench foot condition and the rapes occurred in the same time period. Furthermore, a parent/child relationship existed between the malefactor and the victim. We cannot say that Lindsey was unfairly prejudiced by this testimony.
In addition, we do not view the fact that the trial court severed the endangerment charge for trial to be conclusive of whether Dr. Goodman could describe the girl's physical condition at the time of his examination under Rule 404(b). To be sure, severance may be granted where two offenses are not part of a single scheme or plan. See Ark.R.Crim.P. 22.2(a). Recently, we reversed a judgment of conviction of rape where severance of five rape counts was appropriate and had not been granted by the trial court. See Clay v. State, 318 Ark. 550, 886 S.W.2d 608 (1994). We did so because the five rape counts involved alleged rapes of five separate victims at different locations outside of the defendant's home over a twelve-month period. The analysis under *589 Rule 404(b), however, is different because the options for determining relevance are much broader. As already stated, the Rule 404(b) exceptions go beyond a plan or scheme and include any independently relevant proof such as motive, opportunity, intent, absence of mistake, and other categories. Moreover, this list of exceptions is not all-inclusive. There may be other examples where the proof offered is independently probative. The focal point of a Rule 404(b) analysis is whether the proof of the other crime, wrong, or act is relevant, not whether it was part of a single plan or scheme. In this instance, the trial court correctly concluded that B.L.'s trench foot condition was relevant proof of the crimes charged.
Though we decide this point as a Rule 404(b) exception, defense counsel also opened the door to testimony of Lindsey's fitness as a parent by his cross-examination of Kent Tallent, the Pope-Yell County SCAN employee. We agree with the State that defense counsel's suggestion that Lindsey was a fit parent afforded the State the opportunity to rebut this with proof of the child's actual physical condition while living with her father. See, e.g., McFadden v. State, 290 Ark. 177, 717 S.W.2d 812 (1986); Pursley v. Price, 283 Ark. 33, 670 S.W.2d 448 (1984). In McFadden, we held that proof of bad character, even when inadmissible under Rule 404(b), becomes admissible when a party opens the door by eliciting evidence of good character.
II. RAPE SHIELD ACT
Lindsey next maintains that the trial court erred in disallowing evidence of B.L.'s prior allegations of sexual abuse. The trial court ruled that the Rape Shield Act, codified at Ark.Code Ann. § 16-42-101 (Repl.1994), applied to these allegations. We decline to reach this issue for the simple reason that no written motion was filed by Lindsey on this point as required by § 16-42-101(c)(1). See Laughlin v. State, 316 Ark. 489, 872 S.W.2d 848 (1994). Moreover, there was no proffer of testimony made by Lindsey, and it is, therefore, impossible for this court to know the nature of the accusations made, against whom they were made, and under what circumstances they were made. See Byrum v. State, 318 Ark. 87, 884 S.W.2d 248 (1994); Gaines v. State, 313 Ark. 561, 855 S.W.2d 956 (1993). It is the duty of the appellant to present a record of the case sufficient for our review of the point raised. See Stewart v. State, 316 Ark. 153, 870 S.W.2d 752 (1994). This Lindsey failed to do.[2]
We have reviewed the record in this case for other reversible error in accordance with Ark.Sup.Ct.R. 4-3(h) and have found none.
Affirmed.
HAYS, J., concurs.
HOLT, C.J., and DUDLEY and NEWBERN, JJ., dissent.
HAYS, Justice, concurring.
I have some difficulty connecting the evidence of trench foot to whether the appellant was guilty of raping his nine-year-old daughter. However, for a number of reasons, I concur in the majority opinion. For one thing, the evidence strongly preponderates on the side of guilt. The enlarged and misshapen vagina of the victim showed telling signs of frequent penetration. The presence of gonorrhea bacteria in her throat reenforces that conclusion. The child herself made a credible witness and the examining physician testified repeatedly that there was no doubt that she had been sexually abused. In short, I am not persuaded there is any likelihood that the jury convicted the appellant based on evidence of trench foot rather than on the evidence of sexual abuse.
NEWBERN, Justice, dissenting.
The thesis of the plurality opinion is that: (1) the evidence that Mr. Lindsey allowed his daughter to develop trenchfoot is evidence of abuse; (2) evidence that Mr. Lindsey raped his daughter is evidence of abuse; (3) evidence with respect to the trenchfoot charge is relevant to the rape charge because it shows a propensity on the part of Mr. Lindsey *590 to abuse his child. That is precisely what is prohibited by Ark.R.Evid. 404(b). It is the result sought to be prevented by Ark. R.Crim.P. 22.2(a) which gives a defendant the right to a severance when two offenses are joined for trial solely on the ground that they are of the same or similar character.
Prior to the advent of modern joinder and severance rules, based on the ABA Standard cited below, the courts struggled with the issue of prejudice in a single prosecution of multiple offenses. The long since discredited "simple and distinct" rule attributed to Judge Learned Hand dealt only with the question whether jurors would be confused by evidence of more than one offense being presented. We have come a long way. M. Berger, Other Crimes Evidence: A Unified Approach to Severance and Admissibility, 45 Brooklyn L.Rev. 1117 (1979). The problem is solved by the two rules cited above.
Rule 404(b) provides:
Evidence of other crimes, wrongs, or acts is not admissible to prove the character of a person in order to show that he acted in conformity therewith. It may, however, be admissible for other purposes, such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident.
The plurality opinion mercifully does not attempt to show that one of the examples used in the rule was present in this case. It depends on the general "other purposes" language of the rule. The instances in which we have gone beyond the examples stated in the rule are those in which there is evidence of multiple sex offenses.
In Clay v. State, 318 Ark. 550, 886 S.W.2d 608 (1994), we held that five alleged sex offenses, charged against Mr. Clay, each involving a separate, unrelated young woman, were improperly joined. We recognized that we have been liberal in permitting the joinder of sex offenses when they involved repeated offenses against the same child or occurred in one household. See Free v. State, 293 Ark. 65, 732 S.W.2d 452 (1987) (showing a proclivity toward a specific act with a person or class of persons with whom the accused has an intimate relationship).
The questionably liberal approach with respect to joinder of sex offenses is nothing new. It was discussed thoroughly in Slough & Knightly, "Other Vices, Other Crimes," 41 Iowa L.Rev. 325, 333-334 (1956), quoted in 2 Weinstein's Evidence, p. 404-80 (1988). It has, however, to do only with joinder of sex offenses, based upon a supposed irresistible and warped biological instinct, and not joinder of sex offenses and other offenses.
In Clay v. State, supra, we cemented the relationship in this jurisdiction between Rule 404(b) and Ark.R.Crim.P. 22.2(a). We cited the Commentary to § 2.2(a) of the ABA Standards Relating to Joinder and Severance, Approved Draft and pointed out that if an accused were prosecuted separately on each charge as to which he had the right of severance, the evidence of the other crime(s) would not be admissible under Rule 404(b).
To say evidence that Mr. Lindsey was guilty of endangering the health of his child by allowing her to contract trenchfoot is relevant to the charge that he raped her can only be based upon the contention that it demonstrates he is a bad man, a person of bad character, or a person with a propensity to commit one crime because he has committed another. The dissenting opinion in Clay v. State, supra, argued that joinder should have been allowed because under Rule 404(b) the evidence of each of the separate sex offenses would have been admissible in each of the other cases because it showed the "propensity" to commit the crime. Again, that is what the rule disallows.
It makes no sense to give a criminal defendant the absolute right to sever offenses in order to prevent jurors from being unduly influenced by evidence of the commission of crime "A" in the consideration whether the defendant was guilty of crime "B" and then to allow evidence, in the prosecution of crime "B," that the defendant committed crime "A."
Mr. Lindsey did not open the door to character evidence. Here is how the testimony in question appears in the record:
BY MR. IRWIN [Defense Counsel]:
Q. Mr. Tallent [County SCAN Director], did you discover that a court in this state *591 had placed these children with Mr. Orville Lindsey?
A. Excuse me?
Q. Did you discover that a court in the State of Arkansas had placed these children in the custody of Mr. Lindsey?
A. I had been told by Mr. Lindsey and Mrs. Lindsey in an interview that they had custody of the children.
Q. So, that's how you know it?
A. Yes, sir.
Q. What about the mother of these children? Did she tell you they were taken from her by a court and put with Mr. Lindsey?
A. I believe that's what she said that he had custody of her or of the children.
Q. Butand put in there by a court?
A. Yes, sir.
Q. And, when that happens does the court determine whether or not a person is a fit parent?
A. I don't really know the proceedings of the Chancery Court. I assume that that is one of their concerns.
Q. All right.
BY MR. IRWIN: That's all.
RE-DIRECT EXAMINATION
BY MR. KENNEDY [Prosecutor]:
Q. When custody is removed through the process you've just described is that by court order?
A. Yes, sir, that's the only way it can be.
Q. Before custody is taken from a natural parent and placed with the Department of Human Services is there an adjudication that the natural parent is not a fit parent?
BY MR. IRWIN: I object, Your Honor. That's not the only reason. In this particular case the father was in jail.
BY MR. KENNEDY: Your Honor, he opened the door.
BY THE COURT: That'sthat doesn't state an objection.
BY MR. IRWIN: I objected.
BY THE COURT: That's something you can bring out by argument or examination of the witness.
BY MR. IRWIN: All right. I'll just ask him.
BY THE COURT: Go ahead.
A. Would you repeat your question, please sir?
Q. Before custody is placed in the Department of Human Services is there a necessity of an adjudication that the natural parent or custodial parent is not a fit parent?
A. Yes, sir.
BY MR. KENNEDY: Nothing further.
RECROSS EXAMINATION
BY MR. IRWIN:
Q. Now, are you telling the Court that in this case there was an adjudication in this case that this man was not a fit parent or simply that he was in jail and couldn't take care of the child? You hadyou had a you had a child service case protective order for the children, did you not?
A. We also have an adjudication order date June 29th of 1993, that specifically states that the Courtnumber four, the Court finds that [the children] are dependent-neglected as defined in the Arkansas Juvenile Code and that the allegations in the petition are true and correct.
Q. Yes, sir; and the definition of dependent-neglected in this particular situation was that their mother didn't have them and the father was in jail and there wasn't anybody to take care of them, was there?
A. No, sir. The reason that the children were found dependent-neglected was because of the sexual abuse allegations.
Q. Oh, that's what that
A. Yes, sir.
Q. was, the allegations?
A. Yes, sir.
Q. That's what we are trying today to see whether it's true or not?
A. I assume so.
Q. Okay.
The initial questions asked by Mr. Lindsey's counsel went to the placement of custody of the child with Mr. Lindsey rather than *592 his wife. The first reference to fitness as a parent came with the question, "And, when that happens does the court determine whether or not a person is a fit parent?" The term "a person" in the context of the question could have referred to either parent; more particularly it could have referred to a determination that the child's mother was unfit. The remainder of the questions by both parties had to do with removal of the child from Mr. Lindsey. In that series he was clearly on the defensive, attempting to show that the court had not determined him to be an "unfit parent" which is a far cry from presenting evidence of his good character. No door was opened.
Under our rules, Mr. Lindsey is entitled to be tried for one crime at a time.
I respectfully dissent.
HOLT, C.J., and DUDLEY, J., join in this dissent.
NOTES
[1] One reference was made by Dr. Goodman to the trench foot condition of B.L.'s sister, but no objection was made by Lindsey, and that issue is not raised on appeal.
[2] Act 934 of 1993 amended the Rape Shield Statute to include allegations of sexual conduct by the victim, but Act 934 became effective after the dates of the rape offenses.
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[Cite as Grose v. Cleveland, 2014-Ohio-4819.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 101003
MATTHEW GROSE
PLAINTIFF-APPELLEE
vs.
CITY OF CLEVELAND
DEFENDANT-APPELLANT
JUDGMENT:
AFFIRMED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-12-785118
BEFORE: Rocco, P.J., E.A. Gallagher, J., and Stewart, J.
RELEASED AND JOURNALIZED: October 30, 2014
-i-
ATTORNEYS FOR APPELLANT
Barbara A. Langhenry
Director of Law
L. Stewart Hastings
Joseph F. Scott
Assistant Directors of Law
City of Cleveland
601 Lakeside Avenue
Room 106
Cleveland, Ohio 44114
ATTORNEY FOR APPELLEE
Jonathan S. Tsilimos
Lawrence Landskroner & Associates, L.L.C.
55 Public Square
Suite 1040
Cleveland, Ohio 44113
KENNETH A. ROCCO, P.J.:
{¶1} Defendant-appellant the city of Cleveland (“the City”) appeals from the trial
court’s order denying the City’s motion for summary judgment on the basis of statutory
immunity. Because plaintiff-appellee Matthew Grose has established that an exception to
statutory immunity applies in this case, we affirm the trial court’s final judgment.
{¶2} Because this case involves an appeal from a grant of summary judgment, we recite
the relevant facts in the light most favorable to the nonmoving party, Grose. See Gilbert v.
Summit Cty., 104 Ohio St.3d 660, 2004-Ohio-7108, 821 N.E.2d 564, ¶ 6.
{¶3} Plaintiff-appellee Grose has lived at his residence on Holmden Avenue since 2003.
Holmden Avenue is a one-way street that slopes steeply downward from west to east. Grose’s
home does not have a driveway, so he regularly parked his car along the south side of Holmden
Avenue near his home.
{¶4} Grose began to notice surface water on Holmden Avenue and, on November 4,
2009, he sent an email to his city councilman about the water problem. In the email, Grose
noted that the road was sinking in, and that there was always a steady stream of water running
down the street. Grose also sent the email to the Mayor’s Action Center and to Robert Mavec, a
city employee in the Streets Department.
{¶5} According to Grose, the problem continued throughout the winter of 2009-2010.
On December 2, 2010, Grose sent another email to his city councilman regarding the problem of
surfacing water on Holmden Avenue, stating that a new water leak had sprung up on the road.
Grose’s concerns were forwarded to the Director of Public Utilities for the City. Grose asserts
that by February 2011, the problem was still not remedied.
{¶6} On the night between February 1 and 2, 2011, a short but significant rise in the
temperature washed away the snow and ice that had accumulated on the roadway in front of
Grose’s home. On February 3, 2011, Grose drove from his home to go to work. After work,
he picked up his roommate, and they headed home. Neither Grose nor his roommate observed
any snowy or icy condition as they approached their home on Holmden Avenue. Grose parked
his vehicle on the street. After exiting his vehicle, he slipped on a patch of black ice on the
street, landing on his back, and sustaining injury. Both Grose and his roommate averred that
there was no ice anywhere else on the roadway except in the area of roadway where Grose had
slipped on the ice. This was the same area of the roadway that Grose had complained about to
the City in the past.
{¶7} Grose filed a complaint against the City on June 15, 2012, alleging that the City was
negligent in failing to satisfy its duty under R.C. 2744.02(B)(3) to keep the public roadway on
Holmden Avenue in good repair.1 Grose obtained an expert report from civil engineer, Victor
Dozzi (“the Dozzi Report”). Dozzi determined that on the date of the incident, the pavement
was broken in the area where Grose fell. As a result, groundwater was able to seep up through
the cracks and onto the surface of the street. The Dozzi Report explained that the water that
seeped through the cracks froze on the street’s surface as it was exposed to the cold. The ice on
the street was limited to the area where water had seeped up through the pavement. The Dozzi
Report concluded that the failure of the City to intercept the groundwater flow under the
pavement allowed water to seep up onto the road’s surface. The Dozzi Report further
concluded that if the pavement at the site of the fall had been maintained so that it was sound and
1
Grose also maintained an alternative theory of negligence in his complaint that is not relevant
this appeal.
unbroken, there would have been no upward seepage of groundwater through the pavement and
ice would not have formed on the surface.
{¶8} Pierre Haddad is the City’s expert in this case and, at the time of the incident, he was
working for the City as the Group Manager of the Advanced Planning and Hydraulics Unit.
Haddad testified on behalf of the City and also prepared an expert report (“the Haddad Report”).
Like the Dozzi Report, the Haddad Report opined that Holmden Avenue was experiencing
surfacing water from underground, and that this water was finding its way out along the curb,
under the pavement, and through the pavement cracks. The Haddad Report recommended that
300 feet of underdrain be installed along the north curb of Holmden Avenue to intercept the
groundwater flow and conduct it away from the street. The underdrain was constructed after
Grose’s fall. To date, Grose avers that the water problem remains on Holmden Avenue
notwithstanding the construction of the underdrain.
{¶9} Grose also deposed Robert Mavec, the City’s Commissioner of Traffic Engineering
and Commissioner of Streets. Mavec is the head of the Division of Streets, which is
responsible for repairing potholes and sinking roadways within the City. Mavec was one of the
recipients of the email from Grose that was sent in November 2009 regarding the deteriorating
condition of Holmden Avenue and the presence of water on the road. At his deposition, Mavec
reviewed a photograph depicting the area of Holmden Road where Grose fell and admitted that
the photo depicted pavement that needed to be repaired.
{¶10} Following discovery, the City moved for summary judgment, asserting sovereign
immunity. The trial court denied the City’s motion. The City now appeals, setting forth a
single assignment of error for our review:
The trial court erred as a matter of law when it failed to grant summary judgment
in favor of the City for an alleged failure to prevent naturally occurring
groundwater from freezing on a public road.
{¶11} Because this case involves an order granting summary judgment, we review the
trial court’s order de novo. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 671 N.E.2d
241 (1996). Under Civ.R. 56(C), summary judgment should be granted if (1) there is no
genuine issue as to any material fact; (2) the moving party is entitled to judgment as a matter of
law; and (3) reasonable minds can come to but one conclusion, and that conclusion is adverse to
the party against whom the motion for summary judgment is made, who is entitled to have the
evidence construed most strongly in his favor. Gilbert v. Summit Cty., 104 Ohio St.3d 660,
2004-Ohio-7108, 821 N.E.2d 564, at ¶ 6.
{¶12} The moving party carries the initial burden of setting forth specific facts that
demonstrate his or her entitlement to summary judgment. Dresher v. Burt, 75 Ohio St.3d 280,
292-293, 662 N.E.2d 264 (1996). If the movant fails to meet this burden, the court should not
grant summary judgment. If the movant does meet its burden, summary judgment is warranted
only if the nonmovant fails to establish the existence of a genuine issue of material fact. Id. at
293.
{¶13} R.C. Chapter 2744 grants governmental immunity to political subdivisions subject
to certain exceptions, and we apply a three-tiered analysis to determine whether immunity
applies. Fedarko v. Cleveland, 8th Dist. Cuyahoga No. 100223, 2014-Ohio-2531, ¶ 10. The
first tier of the analysis applies the “general rule that a political subdivision is immune from
liability incurred in performing either a governmental function or proprietary function.”
Caraballo v. Cleveland Metro. School Dist., 8th Dist. Cuyahoga No. 99616, 2013-Ohio-4919, ¶
10. The second tier looks to whether an exception to immunity exists under R.C. 2744.02(B).
Fedarko at ¶ 10. Under the third tier, if an exception does exist, the political subdivision has
the burden of demonstrating that one of the defenses under R.C. 2744.03 applies. Id.
{¶14} In the instant case, the parties agree that the City is a political subdivision under
tier one. The issue here is whether an exception to immunity exists under R.C. 2744.02(B).
Specifically, the parties dispute whether the following exception applies:
Except as otherwise provided in section 3746.24 of the Revised Code, political
subdivisions are liable for injury, death, or loss to person or property caused by
their negligent failure to keep public roads in repair and other negligent failure to
remove obstructions from public roads * * *.
R.C. 2744.02(B)(3). (Emphasis added.)
{¶15} The parties agree that groundwater is flowing downhill under Holmden Avenue.
The parties also agree that the ice formed as a result of that water seeping up through the cracks
in the roadway. But the City argues that Grose’s case is actually about water drainage as
opposed to the condition of the road’s surface. In support of its argument, the City contends
that it was able to remedy the problem on Holmden Avenue by installing a new drain system to
reroute the groundwater away from the surface of Holmden Avenue. Grose has presented
evidence that contradicts the City’s assertion that the drain system has remedied the problem of
water seeping up through the road’s cracks onto Holmden Avenue. But regardless, the City’s
argument misses the mark; because Grose’s complaint asserts that he was injured as a result of
the City’s negligent failure to keep the public road in repair, we must determine whether the
record could support such a claim. See Fink v. Twentieth Century Homes, Inc., 8th Dist.
Cuyahoga No. 99550, 2013-Ohio-4916, ¶ 23 (analyzing whether the record supported plaintiff’s
claim categorization in a statutory immunity case).
{¶16} The proper inquiry is whether reasonable minds could conclude that the icy
condition on Holmden Avenue would not have existed had the City repaired the cracks on the
road. 2 See Todd v. Cleveland, 8th Dist. Cuyahoga No. 98333, 2013-Ohio-101, ¶15
(explaining that keeping public roadways “in repair” under R.C. 2744.02(B)(3) includes repairing
holes and crumbling pavement when a road is deteriorating). We answer that question in the
affirmative.
{¶17} Grose points to evidence from both civil engineering experts to support his
contention that the failure to repair the cracks in the road caused the icy condition. Both experts
agreed that the ice that Grose fell on was caused by surfacing water seeping up through the
cracks in the street. In his deposition, Haddad stated that the source of the water had to be from
water surfacing through cracks and holes in the roadway. The Dozzi Report included
photographs of the area of the road where Grose fell. These photographs show that this area of
the road contained visible cracks and holes. The Dozzi Report concluded that if the pavement
at the site of the fall had been maintained so that it was sound and unbroken, there would have
been no upward seepage of groundwater through the pavement and ice would not have formed on
the surface.
Grose argues that we should analyze this case under the standard set forth in Grimmer v.
2
Rocky River, 8th Dist. Cuyahoga No. 94271, 2010-Ohio-4683. Although that case involved ice on a
roadway, the standard we articulated in that case was used to determine whether the ice constituted a
nuisance under the old version of R.C. 2744.02(B)(3). Unlike the instant case, in Grimmer the
plaintiff did not contend that the road itself was in disrepair. Rather, the ice on the road was caused
by water flowing from a leaky fire hydrant. We decline to apply the test articulated in Grimmer,
because it is ill-suited for analyzing whether statutory immunity applies when it is alleged that an icy
condition is caused by the condition of the road itself. We similarly decline to apply a case that the
City asks us to rely on, Howard v. Miami Twp. Fire Div., 119 Ohio St.3d 1, 2008-Ohio-2792, 891
N.E.2d 311, because that case also deals with an “obstruction” on the road as opposed to an alleged
failure to maintain the public roadway. See Todd v. Cleveland, 8th Dist. Cuyahoga No. 98333,
2013-Ohio-101, ¶ 14 (“The terms ‘in repair’ and ‘obstructions’ exist separately under R.C.
2744.02(B)(3) and provide two separate, independent bases for precluding statutory immunity with
respect to public roads.”).
{¶18} The City argues that Grose cannot prevail because roadways are not impervious
to water, nor designed to never crack. The City also asserts that resurfacing Holmden Avenue
would not solve the ongoing problem of the groundwater seeping up onto the road. But in the
instant case, Grose has presented evidence that the cracks in the road where he fell constituted a
road in “disrepair.” Mavec conceded as much in his deposition. Both experts agreed that the
water seeped through those cracks in the road. A reasonable factfinder could certainly conclude
that the icy condition would not have existed if the City had repaired the cracks. And while the
City asserts that a lasting solution to the problem would require a redesign of the road or a
redesign of the road’s drainage system, the City’s brief does not support this contention with any
citation to the record. Our review of the record leads us to conclude that there is a genuine issue
of material fact on whether the icy condition would have existed had the City fixed the cracks in
the road.
{¶19} But that is not the end of the analysis because, under the plain language of R.C.
2744.02(B)(3), the exception applies only if the City was negligent in failing to repair the cracks
on Holmden Avenue. See R.C. 2744.02(B)(3) (exception to immunity exists for “negligent
failure to keep public roads in repair”); Todd v. Cleveland, 8th Dist. Cuyahoga No. 98333,
2013-Ohio-101, ¶ 19. In a claim for negligence, a claimant is required to produce evidence
demonstrating the existence of a duty, a breach of that duty, and that the breach was the
proximate cause of the claimant’s injury. See Feldman v. Howard, 10 Ohio St.2d 189, 196, 226
N.E.2d 564 (1967). And a “‘municipal corporation is liable only for negligence in creating a
faulty condition or in failing to repair, remove or guard against defects after receiving actual or
constructive notice of their existence.’”3 Wilson v. Cleveland, 8th Dist. Cuyahoga No. 98035,
3
However, we question whether notice should continue to be required.
2012-Ohio-4289, 979 N.E.2d 356, ¶ 23, quoting Graves v. E. Cleveland, 8th Dist. Cuyahoga No.
70675, 1997 Ohio App. LEXIS 326 (Jan. 30, 1997).
{¶20} The City’s argument in support of summary judgment focused solely on whether
the icy condition was caused by a failure to repair the road, and at no point has the City made any
argument on the issue of negligence. The City has, therefore, waived the issue of negligence for
purposes of summary judgment. For the aforementioned reasons, we conclude that this case
falls within the R.C. 2744.02(B)(3) exception to immunity. Under tier three, the City has not
argued that any of the defenses under R.C. 2744.03 apply in this case. We, therefore, conclude
that the trial court correctly granted summary judgment in this case and so we overrule the sole
assignment of error.
{¶21} Judgment affirmed.
It is ordered that appellee recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment into
execution.
A certified copy of this entry shall constitute the mandate pursuant to
Because the City has an affirmative duty to keep its roads in repair, the City should
take affirmative steps to discover defects.
Rule 27 of the Rules of Appellate Procedure.
__________________________________________
KENNETH A. ROCCO, PRESIDING JUDGE
EILEEN A. GALLAGHER, J., CONCURS;
MELODY J. STEWART, J.,
CONCURS IN JUDGMENT ONLY
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Fourth Court of Appeals
San Antonio, Texas
OPINION
No. 04-13-00316-CV
BEXAR COUNTY TEXAS,
Appellant
v.
Deputy Sheriff's Association of Bexar
DEPUTY SHERIFF’S ASSOCIATION OF BEXAR COUNTY,
Appellee
From the 166th Judicial District Court, Bexar County, Texas
Trial Court No. 2011-CI-14030
Honorable Martha B. Tanner, Judge Presiding
Opinion by: Catherine Stone, Chief Justice
Sitting: Catherine Stone, Chief Justice
Marialyn Barnard, Justice
Patricia O. Alvarez, Justice
Delivered and Filed: January 22, 2014
AFFIRMED
This appeal arises from Bexar County’s refusal to permit payroll deductions which it
contends are not authorized by law. The deductions in controversy are from the paychecks of
deputy sheriffs that are transmitted to the Deputy Sheriff’s Association of Bexar County. The
County claims the requested deductions are impermissible political action committee
contributions, while the Association claims the requested deductions are permissible union
membership dues. After a bench trial, the trial court granted a declaratory judgment in favor of
the Association. On appeal, the County contends: (1) it is not statutorily authorized to deduct
04-13-00316-CV
payments which have been designated as political action committee contributions; and (2) the trial
court’s award of attorney’s fees was not just and equitable. We disagree with the County’s
contentions and affirm the trial court’s judgment.
BACKGROUND
In 2006, the Association became the exclusive bargaining agent for the Bexar County
deputy sheriffs. In the collective bargaining agreement, the County agreed to deduct the
Association’s membership dues from the payroll of deputies who so authorized the deduction. The
minimum amount of monthly dues necessary to maintain membership in the Association is forty
dollars. The Association has also established a general purpose political action committee (PAC).
If an Association member wishes to contribute an additional ten dollars of dues towards the PAC,
they are instructed to authorize a payroll deduction of fifty dollars per month. After each payroll
period, the County initiates a wire transfer all of the funds collected from the payroll deductions
to the Association’s bank account. For each forty dollar deduction, the Association treasurer then
transfers thirty dollars to its parent labor organization, Combined Law Enforcement Associations
of Texas (CLEAT), and ten dollars to the Association’s general fund. For each fifty dollar
deduction, the treasurer does the same, but transfers an additional ten dollars to the PAC account.
The PAC reports the contribution in the individual name of the member to the Texas Ethics
Commission.
When the Bexar County Auditor became aware that a portion of the fifty dollar deduction
was ultimately transferred to the PAC, the Auditor refused to process deductions in excess of forty
dollars. The Association sought a declaratory judgment declaring that its dues could be deducted
in this manner. The trial court declared “that the [PAC] contributions procedure utilized by [the
Association] and its members as described in [the Association’s] Original Petition is not unlawful.”
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04-13-00316-CV
PAYROLL DEDUCTIONS
A. Standard of Review
A trial court’s declaratory judgment involving the interpretation of a statute is a legal
question subject to a de novo review. City of Houston v. Bates, 406 S.W.3d 539, 543 (Tex. 2013);
City of Houston v. Hildebrandt, 265 S.W.3d 22, 25 (Tex. App.—Houston [1st Dist.] 2008, pet.
denied). An appellate court’s “ultimate purpose when construing a statute is to discover the
Legislature’s intent.” City of Round Rock v. Rodriguez, 399 S.W.3d 130, 133 (Tex. 2013). The
best indication of that intent is found in a statute’s words, which are construed “according to their
plain and common meaning.” Id.; City of Rockwall v. Hughes, 246 S.W.3d 621, 625 (Tex. 2008);
TEX. GOV’T CODE ANN. § 311.011(a) (West 2013).
B. Discussion
The issue in this case involves the interpretation of Section 155.001(a)(2) of the Texas
Local Government Code. The statute provides, in relevant part:
(a) The commissioners court, on the request of a county employee, may authorize a payroll
deduction to be made from the employee’s wages or salary for:
(1) payment to a credit union;
(2) payment of membership dues in a labor union or a bona fide employees
association;
(3) payment of fees for parking in a county-owned facility;
(4) payment to a charitable organization; or
(5) payment relating to an item not listed in this subsection if the commissioners
court determines that the payment serves a public purpose.
TEX. LOCAL GOVT. CODE § 155.001 (West 2008).
1. Arguments of the Parties
There is no dispute that the Association is a labor union. The County’s principal argument
is that Section 155.001(a)(2) exclusively authorizes a deduction of “membership dues” and that a
PAC contribution is not a “membership due.” The County concedes that the Association may
collect membership dues by payroll deduction and then use those general funds to make PAC
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04-13-00316-CV
contributions on behalf of the Association. However, it argues that when the PAC contributions
are reported in the names of the individual members, the County exceeds statutory authority
because it is deducting something other than “membership dues.” The County argues that the
common meaning of a “membership due” is the minimum amount the Association requires to
maintain membership in good standing, which is forty dollars. The County further argues that the
payroll deduction is unlawful because a county only has those powers expressly conferred or
necessarily implied from other grants of power.
The Association’s position is that the ten dollars that is ultimately transferred to the PAC
is a voluntary portion of its membership dues. Thus, the Association argues that it maintains two
tiers of membership dues—one tier for basic membership and another tier for members who wish
to support the union’s political activity. The Association contends that the County is not exceeding
its statutory authority when it processes the fifty dollar dues deduction because the County
transfers those funds directly to the Association, not to the PAC. The Association further argues
that the County’s position would require a county to monitor and investigate whether union
membership dues ultimately are used for political purposes, which would unnecessarily entangle
it in a union’s political affairs and prevent a union from determining its own dues structure. To
illustrate this point, the Association contends that a county would be required to inquire as to
whether any portion of the CLEAT dues are ultimately used for political purposes.
2. Legislative Intent
We must construe the meaning of “membership dues in a labor union or bona fide
employees association” as provided in Section 155.001(a)(2) to determine whether the Legislature
intended that term to encompass funds that a union regularly collects from its members and
subsequently transfers to a union PAC, which then reports the contribution in the individual
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04-13-00316-CV
member’s name. The Legislature has not defined “membership dues” and no Texas court has
interpreted it in any context.
When determining the plain and common meaning of words in a statute, the court may rely
on “definitions listed in commonly used dictionaries.” CenterPoint Energy Entex v. Railroad
Comm’n of Texas, 208 S.W.3d 608, 619 (Tex. App.—Austin 2006, pet dism’d); see Traxler v.
Entergy Gulf States, Inc., 376 S.W.3d 742, 747 (Tex. 2012). “Membership” is defined as “[t]he
state or status of being a member.” WEBSTER’S THIRD NEW INT’L DICTIONARY 1408 (2002).
“Dues” is defined as “the fee or charge required for membership, affiliation, initiation, use,
subscription.” Id. at 699. Additionally, the Texas Attorney General construed a similar statute
under the Texas Education Code 1 and defined “membership fees or dues” as “the fixed amount of
money due or owed in exchange for membership.” Tex. Att’y. Gen. Op. No. GA-0774 (2010).
Applying these definitions, it is clear that a “membership due” is not, as the County
contends, strictly the minimum amount required to maintain membership in an organization.
Rather, “membership” is the “status” of being a member and a due is the “fee . . . required” for
that status. See WEBSTER’S THIRD NEW INT’L DICTIONARY 699, 1408 (2002). Nothing in the
definition of “membership dues” forecloses the possibility that an organization can maintain
multiple tiers of required and optional membership statuses, with varying levels of associated dues.
Although an organization may require a minimum due to maintain membership in good standing,
it may also require additional dues that entitle a member to additional membership status or
benefits. See Harden v. Colonial Country Club, 634 S.W.2d 56, 57 (Tex. App.—Fort Worth 1982,
writ ref’d n.r.e.). Therefore, a “membership due” is any amount that is paid in exchange for the
status or benefits of membership. In the union context, one of these benefits may include an
1
“A school district employee is entitled to have an amount deducted from the employee’s salary for membership fees
or dues to a professional organization.” TEX. EDUC. CODE. ANN. § 22.001(a) (West 2012).
-5-
04-13-00316-CV
opportunity for greater participation in the union’s political activity. Accordingly, the Association
has defined its membership dues structure as including the following two levels: (1) forty dollars
for basic membership; or (2) fifty dollars for basic membership with the additional benefit of PAC
participation.
The County argues that the fifty dollar due at issue cannot be a membership due because a
ten dollar portion is subsequently reported by the PAC in the individual member’s name and
therefore possesses the character of a PAC contribution, not a membership due. We disagree. The
statute concerns only the character of a payment at the time of the payroll deduction, not at the
time of some subsequent disposition. Here, the funds are membership dues at the time of the
payroll deduction. The Association then makes a PAC contribution from its account after
membership dues are deposited there by the County. It is undisputed that a union has a right to
make PAC contributions from funds derived from its membership dues. Whether or not state law
also imposes a particular reporting requirement for that transaction is not determinative of the
character of a deduction for purposes of Section 155.001(a)(2). 2 Moreover, no County resources
are used to facilitate the Association’s PAC contribution. The transaction is an internal matter
handled by the Association’s treasurer wherein membership dues are transferred from one union
account to another.
C. Conclusion
We hold that in enacting Section 155.001(a)(2), the Legislature did not intend
“membership dues in a labor union or bona fide employees association” to include only the
minimum amount required to maintain membership in the union or association. Rather, that term
may include any amount paid in exchange for the status or benefits of membership, including
2
No issue is raised on appeal regarding the propriety of a union contributing a portion of a member’s membership
dues to a PAC in the name of the individual member, as opposed to making the contribution in the union’s name.
-6-
04-13-00316-CV
different amounts associated with different tiers of membership. Accordingly, the trial court did
not err when it granted the declaratory judgment in favor of the Association.
ATTORNEY’S FEES
A. Standard of Review
A trial court may award costs and attorney’s fees that are both “reasonable and necessary”
and “equitable and just.” TEX. CIV. PRAC. & REM. CODE ANN. § 37.009 (West 2008). Whether
the awarded fees are “reasonable and necessary” is a question of fact and whether they are
“equitable and just” is a question of law. Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998). In
a declaratory judgment case, we review a trial court’s award of attorney’s fees for an abuse of
discretion. Id. “It is an abuse of discretion for a trial court to rule arbitrarily, unreasonably, or
without regard to guiding legal principles.” Id. We must view the evidence in the light most
favorable to the trial court’s ruling, indulging every presumption in its favor. Approach Resources
I, L.P. v. Clayton, 360 S.W.3d 632, 639 (Tex. App.—El Paso 2012, no pet.).
B. Discussion
The parties stipulated the amount of attorney’s fees that were “reasonable and necessary.”
The only issue on appeal is whether the trial court abused its discretion in awarding attorney’s fees
that were not “equitable and just.” After considering the written arguments of counsel and the
record as a whole, the trial court awarded the Association reasonable and necessary attorney’s fees
as stipulated. The amount of fees stipulated for the trial court proceedings totaled $20,706.52 and
$10,000 for defending an appeal to an intermediate court of appeals.
The County argues that it is “equitable and just” for both sides to bear their own costs. It
contends that it was not “equitable and just” to award fees to the Association because the County
acted in good faith reliance on its interpretation of the law and a prior attorney general opinion
interpreting a similar statute. Further, the County cites cases where it was not an abuse of
-7-
04-13-00316-CV
discretion to deny attorney’s fees when both parties had legitimate rights to pursue. The
Association responds that the County cannot insulate itself from an award of attorney’s fees by
relying in good faith on the law, citing cases where governmental entities were ordered to pay
attorney’s fees even where the entities relied in good faith on erroneous interpretations of the law.
The Association contends that it was forced to vindicate the legal rights of its members through
litigation after the County refused to negotiate over the payroll deduction issue until the
Association’s procedure was deemed legal by a court.
Whether awarded fees are “equitable and just” is “a matter of fairness in light of all the
circumstances.” Ridge Oil Co., Inc. v. Guinn Investments, Inc., 148 S.W.3d 143, 162 (Tex. 2004).
It is within the trial court’s discretion to reduce the amount of reasonable and necessary fees or to
award no fees at all. Id. Although the good faith conduct of the parties may factor into the trial
court’s decision regarding award of fees, it is not determinative. Cap Rock Elec. Co-op., Inc. v.
Texas Utilities Elec. Co., 874 S.W.2d 92, 102 (Tex. App.—El Paso 1994, no writ) (one party’s
good faith did not preclude award of fees to opposing party); cf. Texas Health Care Ass’n v. Health
& Human Services Comm’n, 949 S.W.2d 544, 548 (Tex. App.—Austin 1997, no pet.) (court did
not abuse discretion by not awarding fees to either party where good faith dispute existed on issues
of law).
It is conceded that both parties acted in good faith reliance on their own interpretations of
the statute. While it likely would not have been an abuse of discretion to deny fees to both parties,
the trial court’s decision to award fees to only one party is not an abuse of discretion unless it is
established that the trial court ruled “arbitrarily, unreasonably, or without regard to guiding legal
principles.” Bocquet, 972 S.W.2d at 21. Here, both parties make compelling arguments regarding
the fairness of awarding fees only to the Association. However, the County has not established
that the trial court’s decision was arbitrary, unreasonable, or without regard to guiding legal
-8-
04-13-00316-CV
principles. Accordingly, the trial court did not abuse its discretion in awarding attorney’s fees to
the Association.
CONCLUSION
The County has failed to establish that the trial court erred when it granted the
Association’s requested declaratory relief. The County has also failed to establish that the trial
court abused its discretion when it awarded attorney’s fees to the Association. Accordingly, the
judgment of the trial court is affirmed.
Catherine Stone, Chief Justice
-9-
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276 P.3d 1126 (2012)
249 Or. App. 179
STATE
v.
CLARK.
A145049
Court of Appeals of Oregon.
March 21, 2012.
affirmed without opinion.
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127 F.3d 1107
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.UNITED STATES of America, Plaintiff-Appellee,v.Donald DARRAH, Defendant-Appellant.
No. 96-16818.
United States Court of Appeals, Ninth Circuit.
Submitted Oct. 20, 1997**Decided Oct. 27, 1997.
Appeal from the United States District Court for the Northern District of California Charles A. Legge, District Judge, Presiding
Before THOMPSON, T.G. NELSON, and KLEINFELD, Circuit Judges.
1
MEMORANDUM*
2
Donald Darrah appeals the district court's denial of his 28 U.S.C. § 2255 motion to vacate his sentence imposed after he pleaded guilty to possessing methamphetamine with intent to distribute. We review de novo the district court's denial of Darrah's motion. See United States v. McMullen, 98 F.3d 1155, 1156-57 (9th Cir.1996), cert. denied, 117 S.Ct. 2444 (1997). We have jurisdiction pursuant to 28 U.S.C. § 2255, and we affirm.
3
Darrah contends that his attorney provided ineffective assistance by failing to challenge his sentence for possesion of methamphetamine, because Darrah possessed D,L-methamphetamine rather than D-methamphetamine. This contention lacks merit.
4
A successful ineffective assistance of counsel claim requires a defendant to show deficient performance by his attorney and prejudice from that deficiency. See Strickland v. Washington, 466 U.S. 668, 687 (1984). The reviewing court should avoid "the distorting effects of hindsight" and "evaluate the conduct from counsel's perspective at the time." Id. at 689.
5
Here, the performance of Dairah's counsel was not deficient because the Sentencing Guidelines then distinguished only between "Methamphetamine" and "L-Methamphetamine." See U.S.S.G. § 2D1.1(a)(3), (c)(7) & comment. (n.10) (1991). The guidelines did not refer to D, L-methamphetamine, nor was there other authority available to Darrah's attorney suggesting that D, L-methamphetamine might not be considered "Methamphetamine" under U.S.S.G. § 2D1.1(c)(7). Accordingly, viewing the conduct of Darrah'E counsel from his perspective at the time, Darrah has not demonstrated that his attorney's performance fell below "the wide range of reasonable professional assistance." See Strickland, 466 U.S. at 689.
6
AFFIRMED.
**
The panel unanimously finds this case suitable for decision without oral argument. See 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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106 F.3d 423
NOTICE: Federal Circuit Local Rule 47.6(b) states that opinions and orders which are designated as not citable as precedent shall not be employed or cited as precedent. This does not preclude assertion of issues of claim preclusion, issue preclusion, judicial estoppel, law of the case or the like based on a decision of the Court rendered in a nonprecedential opinion or order.DAWN EQUIPMENT COMPANY, Plaintiff-Appellee,v.KENTUCKY FARMS INCORPORATED, Defendant-Appellant.
No. 97-1052.
United States Court of Appeals, Federal Circuit.
Nov. 14, 1996.
1
APPEAL DISMISSED.
ORDER
2
The appeal having been docketed in error,
IT IS ORDERED:
3
That the appeal is DISMISSED.
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129 F.2d 655 (1942)
MID-CONTINENT PIPE LINE CO. et al.
v.
HARGRAVE.
No. 2415.
Circuit Court of Appeals, Tenth Circuit.
March 24, 1942.
Rehearing Denied July 14, 1942.
*656 I. L. Lockewitz and C. A. Kothe, both of Tulsa, Okl. (J. C. Denton, R. H. Wills, *657 J. H. Crocker, and J. P. Greve, all of Tulsa, Okl., on the brief), for appellants.
H. W. Carver, of Wewoka, Okl. (Geo. C. Crump, of Wewoka, Okl., on the brief), for appellee.
Before BRATTON, HUXMAN, and MURRAH, Circuit Judges.
BRATTON, Circuit Judge.
Hubert Hargrave, as agent for fifty-six named persons, instituted this action in the district court of Seminole County, Oklahoma, against Mid-Continent Petroleum Corporation, herein called the petroleum company, and Cosden Pipe Line Company, now Mid-Continent Pipe Line Company, herein called the pipe line company, to recover overtime compensation, liquidated damages, and attorneys' fees, under the provisions of the Fair Labor Standards Act of 1938, 52 Stat. 1060, 29 U.S.C.A. §§ 201-219. The cause was removed to the United States Court for Eastern Oklahoma and there tried without a jury; three of the persons disclaimed during the trial; findings of fact and conclusions of law were made in which it was found and concluded that forty-four of the claimants were entitled to overtime compensation and liquidated damages in respective specified sums, and that attorneys' fees in the lump sum of $750 should be allowed. Judgment was rendered in favor of plaintiff for $1,295.92, the aggregate amount of the overtime compensation and liquidated damages, and for the attorneys' fees. Both companies appealed.
It is contended that the services rendered were of such nature that the claimants are not entitled to any of the benefits of the Fair Labor Standards Act. The petroleum company was engaged in the business of producing, refining and marketing oil and gas products. It owned oil wells in Seminole County, and it owned and operated a refinery at Tulsa. Its refined products consisted of gasoline, lubricating oil, naphtha, kerosene, distillate, road oil, asphalt, wax and grease. These products were sold to jobbers, dealers and consumers; and a large part of them were shipped into twelve or fourteen other states. The pipe line company was a common carrier of crude oil by pipe line, it transported oil for the petroleum company from Seminole County to the refinery, and it transported oil for others, all in Oklahoma. A strike was in progress and violence to the properties of both companies was being committed or threatened. About four hundred persons including the claimants were employed as watchmen to guard the wells, pipe lines, and other property and equipment against depredation, injury or destruction. Section 3(b) of the act defines "commerce" to mean trade, commerce, transportation, transmission, or communication among the several states or from any state to any place outside thereof; and section 3(j) defines "produced" to mean produced, manufactured, mined, handled, or in any other manner worked on in any state, and provides that for the purposes of the act an employee shall be deemed to have engaged in the production of goods if he was employed in producing manufacturing, mining, handling, transporting, or in any other manner working on such goods, or in any process or occupation necessary to the production thereof, in any state. It is manifest that the act specifically requires that in order for an employee to come within its provisions, the nature of his services must be such that he is engaged in commerce or in the production of goods for commerce. Fleming v. A. B. Kirschbaum Co., 3 Cir., 124 F.2d 567. But in order to be engaged in the production of goods for commerce, it is not requisite that he come in actual, physical contact with the goods produced. It suffices if his services are useful and essential in a process or occupation necessary to the production of goods for commerce. Fleming v. A. B. Kirschbaum Co., supra; Fleming v. Arsenal Building Corporation, 2 Cir., 125 F.2d 278, certiorari granted 62 S.Ct. 801, 86 L.Ed. ___.
Here the petroleum company was clearly engaged in interstate commerce, and injury or destruction of the wells, pipe lines, and other property and equipment would have impeded, hindered and perhaps destroyed that commerce. The services of the watchmen to protect the property were deemed to be and were essential to the production of the goods for commerce along with the services of the employee who operated the pump, the employee who operated the booster station, the employee who repaired the machinery, and the employee who operated the gadgets which refined the crude oil into gasoline, lubricating oil, or kerosene. The claimants were engaged in the production of goods for commerce within the meaning of the act. Fleming v. A. B. Kirschbaum Co., supra; Cf. Fleming v. Arsenal Building Corporation, supra.
*658 Next it is urged with emphasis that under no theory are the watchmen employed by the pipe line company entitled to claim benefits under the act for the reason that the business of that company was solely and exclusively the transportation of crude oil in intrastate commerce. Manifestly it was contemplated from the outset that the crude oil produced from the wells of the petroleum company in Seminole County would be transported by the pipe line company from the wells to the refinery, that it would be there processed, and that much of the refined products would then be shipped in interstate commerce to jobbers, dealers, and consumers. The stop at the refinery was not intended as the end of the journey, but merely as an interruption for the purpose of being processed into the refined products. And the transportation of the crude oil in the pipe lines was an essential incident or part in the preparation of the goods for commerce. It seems clear that the watchmen who guarded the pipe lines and other property of the pipe line company used in connection with the transportation of such crude oil for that purpose were engaged in the preparation of goods for commerce, as defined in the act.
It is further contended that since the contracts pursuant to which the several watchmen were employed specified a wage in excess of the minimum provided by the act, and since such wage was established prior to the employment of the watchmen and was accepted by them, the claimants are not entitled to further compensation. The basis of the employment at the start was $5 per day of twelve hours, and seven days per week. The hours were later reduced to eight but the compensation per day and the days per week continued without change. Section 6 of the act provides that every employer shall pay to each of his employees engaged in commerce or in the production of goods for commerce not less than 25 cents per hour during the first year from the effective date of the section, not less than 30 cents per hour during the next six years, and not less than 40 cents per hour after the expiration of seven years from such date; and section 7 provides that a workweek shall not exceed forty-four hours during the first year after the effective date of the act, shall not exceed forty-two hours during the next year, and shall not exceed forty hours after the expiration of the second year, and that compensation for overtime shall be not less than one and one-half times the regular rate. The act applies and exacts in mandatory terms the payment of minimum wages and overtime compensation computed on the basis of sections 6 and 7, even where the contract of employment calls for compensation in excess of the minimum wages prescribed in the act. Bumpus v. Continental Baking Co., 6 Cir., 124 F.2d 549; William H. Missel v. Overnight Motor Transportation Company, Inc., 4 Cir., 126 F.2d 98.
The judgment is attacked on the additional ground that there was no evidence which showed that during the period of the employment of these watchmen any of the oil produced and refined by the petroleum company moved or was intended to be moved in interstate commerce. No evidence was submitted affirmatively showing that on the very days these employees worked as watchmen any of the oil produced and refined by the petroleum company actually moved in interstate commerce. But there was evidence showing generally that the petroleum company was engaged in the business of producing crude petroleum, refining it, and selling and shipping a large part of the refined products in interstate commerce. And there was no suggestion in the course of cross-examination or otherwise that any cessation or change occurred during the period in question. The evidence was abundantly sufficient to establish a prima facie showing that the oil produced and refined during such period moved or was intended to be moved in interstate commerce.
Next comes the contention that since it was established by the evidence that the two companies were separate and distinct corporate entities and that each acted separately from the other in respect to the employment of the watchmen, the joint judgment resulted in an unwarranted increase in the amount of the recovery. The court found in substance that the two companies were acting jointly when any of the claimants were said to have been employed for a time by one of the companies during the period in question and for a time by the other. The companies acted separately in issuing checks in payment of the wages of the claimants. But there was testimony that both companies employed a single person to hire the watchmen, that he worked for both in employing them, that they were employed to guard the properties of both, that they *659 worked part of the time under the employ of one and part under the employ of the other, and that sometimes they worked for both at the same time. The evidence and the fair inferences to be drawn from it support the finding. It therefore must stand on appeal. Rule of Civil Procedure 52(a), 28 U.S.C.A. following section 723c. And certainly if the two companies acted jointly in the premises a joint judgment against them was warranted.
The award of attorneys' fees is challenged on the ground of being excessive. While the aggregate sum sought for overtime compensation and liquidated damages was not large, there were more than fifty separate claimants and most of them recovered. Plaintiff moved to remand the action, and the companies moved to dismiss it on jurisdictional grounds. In addition to the time consumed in the trial, the attorneys for the claimants prepared and presented to the trial court two written briefs, one in opposition to the motion to dismiss and the other on the merits; and at the time of fixing the amount of the fees it seemed fairly apparent to the court that an appeal would be taken which would require the attorneys to brief and argue the case in this court, and they have done so. In view of all the facts and circumstances, the amount awarded cannot be regarded as objectionably excessive.
The final contention is that plaintiff was not the real party in interest, that the action was not maintainable in his name in the state court, and that on removal to the United States Court it could not be maintained in that manner. The several claimants signed a written instrument in which it was recited that they employed plaintiff to represent them in the collection of the overtime from the two companies, gave him authority to represent them in or out of court, and appointed him as their agent. Section 16(b) of the act, supra, provides inter alia that an action for the recovery of overtime compensation and liquidated damages may be maintained in any court of competent jurisdiction in the name of the employee or employees in interest or in the name of a designated agent; and Title 12, section 223, Oklahoma Statutes 1941, provides inter alia that a person expressly authorized by statute may bring an action without joining with him the person for which benefit it is prosecuted. State and federal courts are vested with concurrent jurisdiction of suits of a civil nature arising under the laws of the United States, except where Congress has expressly limited jurisdiction to the federal courts. In the absence of such an express limitation, a state court of general jurisdiction will enforce a right of civil recovery arising under an act of Congress and susceptible of adjudication conformably to the prevailing rules of procedure. Grubb v. Public Utilities Commisssion of Ohio, 281 U.S. 470, 50 S.Ct. 374, 74 L.Ed. 972. Instead of Congress limiting to the federal courts jurisdiction of an action for the recovery of overtime compensation and liquidated damages under the act, it expressly provided that such an action may be maintained in any court of competent jurisdiction. And the district courts in Oklahoma are courts of general jurisdiction. Section 16(b), supra, and Title 12, section 223, supra, construed together, clearly authorized the maintenance of the action in the state court in the name of the agent, and it was likewise maintainable in that manner after removal.
The judgment is affirmed.
HUXMAN, Circuit Judge (dissenting).
Congress, in the exercise of its sound discretion, imposed stringent penalties for the violation of the Fair Labor Standards Act, 29 U.S.C.A. §§ 201-219. The penalties provided in the Act are severe so severe that in many instances employers hesitate to assert rights in court which they honestly feel they have, because of the penalties they suffer if they are mistaken and the judgment goes against them. This should be kept in mind in the administration of the Act. Excessive and burdensome attorneys' fees should not be added to the mandatory penalties of the Act where a claim is resisted honestly and in good faith by an employer.
This case does not present a flagrant or intentional violation of the Act. It had just been passed. It was questionable whether watchmen fell within its provisions. There were no decisions by courts for the guidance of the employers. Since then the courts have not been able to agree themselves whether the Act applies to watchmen. Appellants paid more than the minimum wage provided in the Act for the total number of hours worked. It cannot be said that appellants acted in bad faith.
*660 All the appellants owed was $660.25. For services rendered in collecting this amount, the attorneys were allowed a fee of $750. They got more than the clients did. To me it appears conclusively that such an allowance is excessive.
Neither am I impressed with the showing as to the enormous amount of work that was done in the case. True, there were more than fifty claimants, but the amount due them was not in dispute. The books of appellants accurately reflected the time they had worked and the amount paid them. There is no evidence that appellants concealed these facts or refused to make them available to plaintiffs. A complete summary could have been prepared by appellants' bookkeeping department within a few hours. There is no evidence that this was not done.
Neither was the case particularly complicated. In fixing the fee, the court took into consideration the fact that an appeal might be taken. This, in my opinion, it had no right to do. If it could consider that, why not take into account the possibility of an application for certiorari and the further possibility that it might be granted?
When all is said, the case presented the one question, whether the Act applied to these watchmen. If it did, there was admittedly due them the sum of $660.25. The question was a close one. Appellants, acting in good faith, asked the court to determine the question. Because, in good faith, they guessed wrong, they are compelled to pay the $660.25 due, a like amount as a penalty, and, on top of all, $750 attorneys' fees, and also the costs of the action. In short, they are compelled to pay $2,075.50 and the court costs in settlement of a claim of $660.25, because they honestly thought the Act did not apply. If such penalties are to be inflicted, employers may well hesitate before they challenge any demands made upon them, no matter how ill founded. The payment of this judgment will not be a burden on these appellants, but that is beside the point. In my view, $350 would have been adequate compensation for the legal services rendered.
For these reasons I am compelled respectfully to dissent from that part of the judgment of the court approving the allowance of attorneys' fees.
On Petition for Rehearing.
BRATTON, Circuit Judge.
The companies now contend that under Walling v. A. H. Belo Corporation, 62 S. Ct. 1223, 86 L.Ed. ___, the contracts of employment involved in this case fulfilled all of the requirements of the Fair Labor Standards Act, and that the employees are not entitled to recover for overtime compensation. In the Belo case the amounts paid the employees exceeded the minimum provided in the act, and it was expressly agreed by the employer and the employees that such sums should constitute both basic pay and overtime compensation. In other words, it was mutually agreed in effect that the amounts paid should be divided into two parts basic pay and overtime pay. And the court held that the agreement cut off the right to recover any additional sum under the act.
Here certain representatives and employees of the companies agreed among themselves prior to the employment of any watchmen that the $5 per day should cover both straight time and overtime; that part of it should be allocated to straight time and part to overtime. But the companies and the watchmen did not enter into any such agreement. The matter was never mentioned between them, directly or indirectly. There was no mutual understanding that any part of the amount paid should be allocated to or treated as overtime compensation.
The petition for rehearing is denied.
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386 F.2d 192
NATIONAL LABOR RELATIONS BOARD, Petitioner,v.AGAWAM FOOD MART, INC., d/b/a the Food Mart, Respondent.
No. 6931.
United States Court of Appeals First Circuit.
December 1, 1967.
Warren M. Davison, Atty., with whom Arnold Ordman, Gen. Counsel, Dominick L. Manoli, Associate Gen. Counsel, Marcel Mallet-Prevost, Asst. Gen. Counsel, and Robert M. Lieber, Atty., N. L. R. B., Washington, D. C., were on brief, for petitioner.
David I. Shactman, Springfield, Mass., with whom Arthur M. Marshall, Springfield, Mass., was on brief, for respondent.
Before ALDRICH, Chief Judge, McENTEE and COFFIN, Circuit Judges.
PER CURIAM.
1
This case reaches what appears at first blush to be an unusual and unfair result. Scrutiny of the record, however, indicates to us that the findings and opinion of the trial examiner, adopted by the Board, to the effect that the respondent was not really endeavoring to obtain the union's assent to a wage increase, but was seeking to place the union in an unfavorable light and capitalize on the situation, were not plainly wrong. Indeed, we think the Board was plainly right. If respondent's purpose was the simple and single one which it contends it was, namely, a bona fide attempt to obtain the union's waiver of objection to an increase in benefits, it would have asked the union first, and privately, rather than commence with a public announcement clearly indicating that those employees who were represented, or sought to be represented, by the union were disadvantaged thereby. That this was not mere thoughtlessness on respondent's part is evidenced by its subsequent conduct.
2
Respondent does not criticize the form of the order as such, but had it we would think a broad order, even extending as it did to section 8(a) (3), was justified in this case.
3
The order will be enforced.
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10/04/2017
IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
June 21, 2017 Session
IN RE LIAM S., ET AL.1
Appeal from the Juvenile Court for Jefferson County
No. 16-00423 Dennis Roach, II, Judge
No. E2016-02461-COA-R3-PT
This appeal involves the termination of a mother and father’s parental rights to their two
minor children. Following a bench trial, the trial court found that clear and convincing
evidence existed to support the termination of each parent’s parental rights on the
statutory grounds of abandonment for failure to provide a suitable home, substantial
noncompliance with the requirements of the permanency plan, and the persistence of
conditions which led to removal. Relative to Mother, the court found clear and
convincing evidence existed to support the additional grounds of abandonment for failure
to visit and to pay child support. The court further found that termination of each
parent’s rights was in the best interest of the children. The parents appeal. We affirm the
trial court’s judgment as to grounds for termination but vacate the trial court’s judgment
as to the best interest of the children and the trial court’s judgment terminating the mother
and the father’s parental rights.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Juvenile Court
Affirmed in Part and Vacated in Part; Case Remanded
JOHN W. MCCLARTY, J., delivered the opinion of the Court, in which CHARLES D.
SUSANO, JR., J. and D. MICHAEL SWINEY, C.J., joined.
Gregory E. Bennett, Seymour, Tennessee, for the appellant, Katie L.
Daniel Hellman, Knoxville, Tennessee, for the appellant, Erin S.
1
This court has a policy of protecting the identity of children in parental rights termination cases
by initializing the last name of the parties.
Herbert H. Slatery, III, Attorney General and Reporter, and Jordan K. Crews, Assistant
Attorney General, Nashville, Tennessee, for the appellee, State of Tennessee, Department
of Children’s Services.
OPINION
I. BACKGROUND
Liam S. was born to Katie L. (“Mother”) and Erin S. (“Father”) (collectively “the
Parents”) in 2009. Mother and Father never married. Jonah L. was born in 2012. Father
was not listed on Jonah’s birth certificate; however, Mother identified him as the father,
and he also held himself out as the father.
The Parents first became involved with the Tennessee Department of Children’s
Services (“DCS”) in January 2014, at which time the Parents entered into a non-custodial
permanency plan to address issues of drug abuse, mental health, domestic violence,
inadequate parenting skills, and unstable housing. The following month, on February 20,
2014, DCS received another referral based upon the same allegations. On that day, the
Parents were also arrested for traffic offenses and possession of drug paraphernalia.
Mother tested positive for oxycodone, opiates, marijuana, and suboxone, while Father
tested positive for oxycodone, opiates, and marijuana. Liam and Jonah (“the Children”)
were later adjudicated as dependent and neglected. Mother was sentenced in October
2014 to 6 years for aggravated burglary, 2 years each for 2 counts of theft, and 11 months
and 29 days for possession of drug paraphernalia. Her concurrent sentences were
suspended to supervised probation following the service of 120 days in jail. She was also
required to complete a drug and alcohol assessment and comply with recommendations
and to submit to random drug screens.
Several permanency plans were entered, each of which contained the following
requirements for each parent: (1) submit to drug screens and pill counts; (2) complete
mental health and alcohol and drug assessments and follow recommendations; (3)
complete parenting, anger-management, and domestic violence classes and follow
recommendations; (4) maintain safe and stable housing; (5) obtain a legal source of
income and transportation; and (6) pay child support. The Parents participated in the
development of the initial plan that remained unchanged with the exception of the added
goal of adoption in August 2015.2 DCS later withdrew the requirements that Mother
participate in anger-management and domestic violence classes.
2
The Parents argue on appeal that they were not informed or invited to participate in the development of
two plans, dated August 14, 2015, and February 22, 2016, that added the goal of adoption; however, the
record also reflects that the Parents participated in the ratification hearing for the said plans and indicated
assent to the goals and terms contained therein.
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DCS paid for services from June 2014 through July 2015. While the Parents
completed some requirements, DCS could no longer provide funding because the Parents
failed to follow recommendations from their assessments and to demonstrate a lasting
change. Specifically, Mother completed her alcohol and drug assessment in June 2014
but failed to follow the recommendations by attending intensive education. She later
relapsed and resumed illegal drug use. She also refused drug screens in Spring 2015 and
failed to submit to hair follicle testing as requested until June 2016. Relative to Father,
he tested positive for marijuana in July 2015 and failed to submit to a hair follicle test as
requested until July 2016. He also failed to complete the parenting component of his
alcohol and drug assessment and to attend an education program.
Mother attended multiple drug treatment programs but failed to successfully
combat her addiction until she enrolled in Life Changers, a 12-month faith-based
discipleship program, in September 2015. It is not a licensed drug treatment facility.
However, Mother lived on campus and was required to submit to random drug screens.
DCS transported the Children to the Life Changer’s facility for visitation. Mother was
unable to attend two of the scheduled four visitations during the time period due to her
placement on disciplinary probation. Mother also only made one child support payment
of $62.82 on June 11, 2015. She was not permitted to work outside the facility while
enrolled in the program.
DCS filed a petition to terminate each parent’s parental rights on May 20, 2016,
based upon the statutory grounds of abandonment for failure to provide a suitable home,
substantial noncompliance with the permanency plan, and the persistence of conditions
which led to removal. Relative to Mother, DCS alleged the additional grounds of
abandonment for failure to visit and to pay child support.
The case proceeded to a hearing in October 2016. Much of the testimony
presented related to Mother’s repeated attempts to overcome her addiction. Mother
conceded that DCS had provided her with a list of housing resources in the four months
following the removal of the Children. She explained that she did not pursue suitable
housing because of her ongoing addiction at the time. She provided that during the
relevant time period, she lived with different people who also abused drugs.
Mother testified that she attended multiple drug treatment programs and relapsed
following completion of those programs. However, Mother testified that her
participation in the Life Changer’s program helped her to finally defeat her “active
addiction.” She noted that she had not failed a drug screen while attending the program.
She conceded that she would be unable to care for the Children until she graduated and
then completed an additional 90-day aftercare program. She further conceded that she
-3-
had been demoted as a result of the stress of these proceedings, thereby delaying her
graduation. She claimed that despite the delay, she was set to graduate in a few weeks
following the hearing. She agreed that she had not remitted payment for child support
during the relevant time period even though she was capable of obtaining employment.
She noted that she was not permitted to obtain employment outside of the program.
Jessica Deskins, a director of Life Changers, and Ken Gilliam, pastor and attorney
for Life Changers, spoke highly of Mother and attested to her progress since her entry
into the program. They conceded that she had received “disciplinary write-ups” but
explained that she had improved and shown significant progress. Ms. Deskins further
provided that Mother would be eligible for transitional housing upon completion of the
after-care program. Mr. Gilliam provided that Mother currently worked in a Life
Changer’s retail store he managed. He claimed that she was an exemplary employee.
Relative to the Children, the record established that they responded well to their
current foster home, which provided a calm, structured, and supportive environment.
Foster Mother testified that the Children have resided with her and her husband since
March 2015. She expressed love for the Children and indicated a desire to adopt them.
She provided that they called her and her husband mom and dad but also admitted that
they referred to the Parents as mom and dad. She stated that the Children never asked for
the Parents but acknowledged that they talked about their activities upon returning from
visitation and appeared as if they enjoyed the visitation. She provided that they were
sometimes “hard to calm down” and “get to sleep” on visitation days. She claimed that
Liam also had nightmares on a few occasions following visitation.
Father admitted his drug abuse and his inability to provide suitable housing for the
Children at the time of removal. He agreed that DCS may have provided him with a list
of resources to assist him in obtaining suitable housing but asserted that he found housing
without help from DCS. He provided that he had appropriate housing and that he lived
with a roommate. He asserted that the roommate was leaving his residence at the time of
the hearing and further claimed that he never planned to house the roommate with the
Children upon their return. He stated that he maintained stable employment with an
income of $1,200 per month and that he was planning to fix his vehicle but had access to
other transportation when necessary.
Father claimed that he completed a number of the permanency plan requirements.
He alleged that DCS failed to assist him in his completion of the remainder of the
permanency plan requirements and that services were later abruptly stopped. He agreed
that he had not completed an alcohol and drug education program as a required
recommendation from his assessment and that he failed to complete additional parenting
education. He claimed that he was unable to afford the classes and education required
-4-
and that DCS refused his request for financial assistance. He conceded that at one time,
he advised DCS that he would pay for services himself.
Donna Mitchell, who was employed by Covenant Counseling, testified that she
provided counseling services for Father in his home in June and July 2015. She recalled
reviewing his mental health and alcohol and drug assessments with him. She provided
that she recommended intensive outpatient treatment following a failed drug screen in
July 2015. She asserted that he minimized his drug abuse and did not indicate intent to
remain clean and sober once the Children were returned. She stated that services were
discontinued after he failed the drug screen.
Glenda Walthers, a DCS employee assigned to the case, testified that DCS only
approved services for those actively completing the requirements of his or her
permanency plans. She stated,
There is a whole chain of persons that have to approve the spending of that
money. I have to take it to the team leader. I have to take it to the team
coordinator. And then after a certain amount of time when services have
been lingering and no completion has been done by the parents, no
demonstration that we’re close to getting – you know, all of that has to be
justified; all of that has to be looked at.
Ms. Walthers admitted that Mother completed her assessments and provided
certificates of completion for anger management and domestic violence classes but that
Mother never showed a “significant demonstration of a change that was brought on by
completion” of her classes. She explained that the Parents remained involved, despite the
volatile nature of their relationship while Mother completed the anger management and
domestic violence components of the permanency plan. She agreed that Mother
completed an alcohol and drug assessment and attended a co-occurring psycho-
educational program with Helen Ross-McNabb but provided that Mother later relapsed,
necessitating a new assessment and completion of an alcohol and drug treatment
program. She stated that Mother never completed a new assessment or attended a
licensed drug treatment program. She further claimed that Mother did not have reliable
transportation or housing at the time of the hearing.
Ms. Walthers acknowledged that Mother’s failure to complete a new assessment
and to obtain transportation or housing was likely a result of her enrollment in the Life
Changer’s program. She agreed that Mother found success in the program and had
remained drug free for approximately one year. She further acknowledged that she no
longer had reason to believe that the Parents maintained an unhealthy relationship.
However, she expressed concern about Mother’s ability to remain stable outside of the
-5-
structured environment provided by Life Changers. She explained that an actual alcohol
and drug treatment program would provide her with the skills necessary to excel outside
of a structured environment. She acknowledged that Mother made plans to remain
involved with Life Changers for ongoing support and that Mother even expected an offer
of employment at the time of her completion of the program.
Relative to each parent’s failure to provide a suitable home, Ms. Walthers testified
that Father had a roommate who had not passed a background check at the time of the
hearing. Additionally, Father could not provide the roommate’s last name. She noted
that the Children were removed, in part, because the Parents exposed them to
inappropriate people and even lived with roommates that also used drugs. She provided
that Mother would be unable to provide a suitable home for at least another 90 days
following her completion of the program.
Relative to visitation, Ms. Walthers provided that Mother was afforded one four-
hour visit per month and that DCS transported the Children to Life Changers for
visitation once Mother enrolled in the program. She asserted that Mother only visited
twice during the relevant time period, once in February and again in April 2016. She
explained that Life Changers denied visitation on two occasions because Mother had
been placed on probationary status at Life Changers. She agreed that Mother faithfully
attended visitation when not on probationary status even before her entry into the Life
Changer’s program. She further agreed that Mother’s visits with the Children were
appropriate with only a few minor issues since the time of removal.
Relative to child support, Ms. Walthers provided that Mother did not remit
payment during the relevant time period. She conceded that Mother was not permitted to
work while enrolled in the Life Changer’s program but asserted that Mother chose to
enroll in the program and remain there, despite the fact that her visitation and ability to
remit child support were affected by her enrollment.
Relative to the Children, Ms. Walthers claimed that the Children had significant
behavioral issues at the time of removal. She asserted that the Children required structure
and routine, especially Liam who had been diagnosed with attention deficit hyperactivity
disorder. She expressed concern about Mother’s ability to raise them and provide the
structure and consistency necessary for them to thrive. She claimed that a disruption in
their current environment could negatively affect their progress.
Following the hearing, the trial court found clear and convincing evidence to
support termination of Mother’s parental rights based upon abandonment for failure to
remit child support, to visit, and to provide a suitable home; substantial noncompliance
with the permanency plan; and the persistence of conditions which led to removal. The
-6-
court also found clear and convincing evidence to support termination of Father’s
parental rights based upon abandonment for failure to provide a suitable home;
substantial noncompliance with the permanency plan; and the persistence of conditions
which led to removal. The court further found that termination of each parent’s parental
rights was in the best interest of the Children. This appeal followed.
II. ISSUES
We consolidate and restate the issues on appeal as follows:
A. Whether clear and convincing evidence supports the court’s
termination of Mother’s parental rights based upon a finding of
abandonment for failure to remit child support pursuant to Tennessee Code
Annotated section 36-1-102(1)(A)(i).
B. Whether clear and convincing evidence supports the court’s
termination of Mother’s parental rights based upon a finding of
abandonment for failure to visit pursuant to Tennessee Code Annotated
section 36-1-102(1)(A)(i).
C. Whether clear and convincing evidence supports the court’s
termination of each parent’s parental rights based upon a finding of
abandonment for failure to provide a suitable home pursuant to Tennessee
Code Annotated section 36-6-102(1)(A)(ii).
D. Whether clear and convincing evidence supports the court’s
termination of each parent’s parental rights based upon a finding of
substantial noncompliance with the permanency plan pursuant to Tennessee
Code Annotated section 36-1-113(g)(2).
E. Whether clear and convincing evidence supports the court’s
termination of each parent’s parental rights based upon the persistence of
conditions which led to removal pursuant to Tennessee Code Annotated
section 36-1-113(g)(3).
F. Whether clear and convincing evidence supports the court’s finding
that termination of each parent’s parental rights was in the best interest of
the Children pursuant to Tennessee Code Annotated section 36-1-113(i).
-7-
III. STANDARD OF REVIEW
Parents have a fundamental right to the care, custody, and control of their children.
Stanley v. Illinois, 405 U.S. 645 (1972); In re Drinnon, 776 S.W.2d 96, 97 (Tenn. Ct.
App. 1988). This right “is among the oldest of the judicially recognized liberty interests
protected by the Due Process Clauses of the federal and state constitutions.” In re M.J.B.,
140 S.W.3d 643, 652-53 (Tenn. Ct. App. 2004). “Termination of a person’s rights as a
parent is a grave and final decision, irrevocably altering the lives of the parent and child
involved and ‘severing forever all legal rights and obligations’ of the parent.” Means v.
Ashby, 130 S.W.3d 48, 54 (Tenn. Ct. App. 2003) (quoting Tenn. Code Ann. § 36-1-
113(I)(1)). “‘[F]ew consequences of judicial action are so grave as the severance of
natural family ties.’” M.L.B. v. S.L.J., 519 U.S. 102, 119 (1996) (quoting Santosky v.
Kramer, 455 U.S. 745, 787 (1982)).
While parental rights are superior to the claims of other persons and the
government, they are not absolute and may be terminated upon appropriate statutory
grounds. See Blair v. Badenhope, 77 S.W.3d 137, 141 (Tenn. 2002). Due process
requires clear and convincing evidence of the existence of the grounds for termination of
the parent-child relationship. In re Drinnon, 776 S.W.2d at 97. A parent’s rights may be
terminated only upon
(1) [a] finding by the court by clear and convincing evidence that the
grounds for termination of parental or guardianship rights have been
established; and
(2) [t]hat termination of the parent’s or guardian’s rights is in the best
interest[] of the child.
Tenn. Code Ann. § 36-1-113(c). “[A] court must determine that clear and convincing
evidence proves not only that statutory grounds exist [for the termination] but also that
termination is in the child’s best interest.” In re Valentine, 79 S.W.3d 539, 546 (Tenn.
2002). The existence of at least one statutory basis for termination of parental rights will
support the trial court’s decision to terminate those rights. In re C.W.W., 37 S.W.3d 467,
473 (Tenn. Ct. App. 2000), abrogated on other grounds by In re Audrey S., 182 S.W.3d
838 (Tenn. Ct. App. 2005).
The heightened burden of proof in parental termination cases minimizes the risk of
erroneous decisions. In re C.W.W., 37 S.W.3d at 474; In re M.W.A., Jr., 980 S.W.2d 620,
622 (Tenn. Ct. App. 1998). Evidence satisfying the clear and convincing evidence
standard establishes that the truth of the facts asserted is highly probable. State v.
Demarr, No. M2002-02603-COA-R3-JV, 2003 WL 21946726, at *9 (Tenn. Ct. App.
-8-
Aug. 13, 2003). This evidence also eliminates any serious or substantial doubt about the
correctness of the conclusions drawn from the evidence. In re Valentine, 79 S.W.3d at
546; In re S.M., 149 S.W.3d 632, 639 (Tenn. Ct. App. 2004); In re J.J.C., 148 S.W.3d
919, 925 (Tenn. Ct. App. 2004). It produces in a fact-finder’s mind a firm belief or
conviction regarding the truth of the facts sought to be established. In re A.D.A., 84
S.W.3d 592, 596 (Tenn. Ct. App. 2002); Ray v. Ray, 83 S.W.3d 726, 733 (Tenn. Ct. App.
2001); In re C.W.W., 37 S.W.3d at 474.
In 2016, the Tennessee Supreme Court provided guidance to this court in
reviewing cases involving the termination of parental rights:
An appellate court reviews a trial court’s findings of fact in termination
proceedings using the standard of review in Tenn. R. App. P. 13(d). Under
Rule 13(d), appellate courts review factual findings de novo on the record
and accord these findings a presumption of correctness unless the evidence
preponderates otherwise. In light of the heightened burden of proof in
termination proceedings, however, the reviewing court must make its own
determination as to whether the facts, either as found by the trial court or as
supported by a preponderance of the evidence, amount to clear and
convincing evidence of the elements necessary to terminate parental rights.
The trial court’s ruling that the evidence sufficiently supports termination
of parental rights is a conclusion of law, which appellate courts review de
novo with no presumption of correctness. Additionally, all other questions
of law in parental termination appeals, as in other appeals, are reviewed de
novo with no presumption of correctness.
In re Carrington H., 483 S.W.3d 507, 523-24 (Tenn. 2016) (internal citations omitted).
IV. DISCUSSION
A. & B.
In terminating Mother’s parental rights based upon the statutory ground of
abandonment for failure to visit and remit support, the court considered the four months
preceding May 20, 2016, the filing date of the termination petition. The relevant time
period was January 20, 2016, through May 19, 2016.3 A parent’s willful failure to
support “means the willful failure, for a period of four (4) consecutive months, to provide
3
“The applicable four month window . . . includes the four months preceding the day the petition
to terminate parental rights is filed but excludes the day the petition is filed.” In re Jacob C.H.,
No. E2013-00587-COA-R3-PT, 2014 WL 689085, at *6 (Tenn. Ct. App. Feb. 20, 2014).
-9-
monetary support or the willful failure to provide more than token payments toward the
support of the child.” Tenn. Code Ann. § 36-1-102(1)(D). Token support is “support,
under the circumstances of the individual case, [that] is insignificant given the parent’s
means.” Tenn. Code Ann. § 36-1-102(1)(B). A parent’s willful failure to visit “means
the willful failure, for a period of four (4) consecutive months, to visit or engage in more
than token visitation.” Tenn. Code Ann. § 36-1-102(1)(E). Token visitation is
“visitation, under the circumstances of the individual case, [that] constitutes nothing more
than perfunctory visitation or visitation of such an infrequent nature or of such short
duration as to merely establish minimal or insubstantial contact with the child.” Tenn.
Code Ann. § 36-1-102(1)(C).
This court has consistently held that the term willfulness as it applies to a party’s
failure to visit or remit support must contain the element of intent. In re Swanson, 2
S.W.3d 180, 188-89 (Tenn. 1999). The element of intent utilized in termination
proceedings “does not require the same standard of culpability as is required by the penal
code.” In re Audrey S., 182 S.W.3d at 863. “Willful conduct consists of acts or failures
to act that are intentional or voluntary rather than accidental or inadvertent.” Id. “[A]
person acts ‘willfully’ if he or she is a free agent, knows what he or she is doing, and
intends to do what he or she is doing.” Id. at 863-64.
1.
Mother argues that her failure to remit child support was not willful. She further
claims that DCS failed to present sufficient evidence to establish her capacity to remit
support during the relevant time period.
We acknowledge Mother’s enrollment in the Life Changer’s program affected her
ability to remit support. We also commend Mother in her effort to achieve rehabilitation;
however, Mother chose to enroll in the program, knowing that her ability to remit support
would be affected. Additionally, this was not a case where a parent had extenuating
circumstances but faithfully provided support when he or she was able. See In re Dylan
H., No. E2010-01953-COA-R3-PT, 2011 WL 6310465, at *7 (Tenn. Ct. App. Dec. 16,
2011) (reversing the termination decision because mother was simply unable to fulfill her
child support obligation during the relevant time period). In this case, Mother remitted
one payment of child support throughout the entirety of the Children’s placement even
when she was actually employed at various times. With these considerations in mind, we
conclude that there was clear and convincing evidence to establish that Mother
abandoned the Children by willfully failing to remit child during the relevant time period.
- 10 -
2.
Only one statutory ground must be established by clear and convincing evidence
to justify termination. Tenn. Code Ann. § 36-1-113(c). In the event of further appellate
review, we will address the remaining grounds. Mother claims that her failure to visit
was not willful as evidenced by her placement on probationary status, which affected her
ability to attend visitation. Further, she notes that she attended two of the four visits
during the relevant time period. The Supreme Court has held that “a parent who
attempted to visit and maintain relations with his child, but was thwarted by the acts of
others and circumstances beyond his control, did not willfully abandon his child.” In re
A.M.H., 215 S.W.3d 793, 810 (Tenn. 2006) (citing Swanson, 2 S.W.3d at 189).
However, “[a] parent’s failure to visit may be excused by the acts of another only if those
acts actually prevent the parent from visiting the child or constitute a significant restraint
or interference with the parent’s attempts to visit the child.” In re M.L.P., 281 S.W.3d
387, 393 (Tenn. 2009) (citation omitted). Again, Mother chose to enroll in Life
Changers, knowing that her ability to visit with the Children could be affected. We
acknowledge that Mother faithfully attended visitation when able; however, two, four-
hour visits in the relevant time period cannot be characterized as more than token
visitation. With these considerations in mind, we conclude that there was clear and
convincing evidence to establish that Mother abandoned the Children by willfully failing
to visit during the relevant time period.
C.
A parent may be found to have abandoned his or her child by failing to establish a
suitable home. The relevant statutory provision provides, in pertinent part, as follows:
The child has been removed from the home of the [parent] as the result of a
petition filed in the juvenile court in which the child was found to be a
dependent and neglected child [ ], and the child was placed in the custody
of the department or a licensed child-placing agency, that the juvenile court
found, or the court where the termination of parental rights petition is filed
finds, that the department or licensed child-placing agency made reasonable
efforts to prevent removal of the child or that the circumstances of the
child’s situation prevented reasonable efforts from being made prior to the
child’s removal; and for a period of four (4) months following the removal,
the department or agency has made reasonable efforts to assist the [parent]
to establish a suitable home for the child, but that the [parent] have made no
reasonable efforts to provide a suitable home and have demonstrated a lack
of concern for the child to such a degree that it appears unlikely that they
will be able to provide a suitable home for the child at an early date. The
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efforts of the department or agency to assist a [parent] in establishing a
suitable home for the child may be found to be reasonable if such efforts
exceed the efforts of the [parent] toward the same goal, when the [parent] is
aware that the child is in the custody of the department[.]
Tenn. Code Ann. § 36-1-102(1)(A)(ii). Termination for failure to provide a suitable
home requires a finding, supported by clear and convincing evidence that a parent failed
to provide a suitable home for his or her child even after DCS assisted that parent in his
or her attempt to establish a suitable home.4 Tenn. Code Ann. § 36-1-102(1)(A)(ii). DCS
is required to use its “superior insight and training to assist parents . . . whether the
parents ask for assistance or not.” State, Dep’t of Childrens Servs. v. Estes, 284 S.W.3d
790, 801 (Tenn. Ct. App. 2008).
Mother
Mother claims that the record is silent as to DCS’s reasonable efforts. We
disagree. Mother admitted that DCS provided her with a list of housing resources but
that she was unwilling to accept assistance at that time due to her addiction.
Accordingly, we conclude that DCS’s efforts were reasonable in light of Mother’s failure
to accept assistance and that Mother abandoned the Children by failing to establish a
suitable home at the time of the hearing.
Father
Father claims that he established suitable housing and that his roommate was
willing to leave the residence once Liam returned home. We disagree. The Children
were removed, in part, due to the Parents’ inability to provide a suitable home without the
assistance of questionable roommates. Father was less than forthcoming with details
concerning his roommate and failed to present a suitable home for inspection prior to the
hearing. Accordingly, we conclude that Father abandoned the Children by failing to
provide a suitable home.
D.
Tennessee law requires the development of a plan of care for each foster child and
further requires that the plan include parental responsibilities that are reasonably related
4
Our Supreme Court specifically overruled the progeny of cases requiring “DCS to prove by clear and
convincing evidence that it made reasonable efforts to reunify as a precondition to termination of parental
rights.” In re Kaliyah S., 455 S.W.3d 533, 555, n. 34 (Tenn. 2015). However, that holding does not
abrogate DCS’s responsibility to make reasonable efforts to assist parents in establishing a suitable home
pursuant to Tennessee Code Annotated section 36-1-102(1)(A)(ii).
- 12 -
to the plan’s goal. Tenn. Code Ann. § 37-2-403(a)(2)(A). A ground for termination of
parental rights exists when a petitioner proves by clear and convincing evidence that
“[t]here has been substantial noncompliance by the parent or guardian with the statement
of responsibilities in a permanency plan.” Tenn. Code Ann. § 36-1-113(g)(2). To
establish noncompliance, the trial court must initially find “that the requirements of the
permanency plans are reasonable and related to remedying the conditions that caused the
child to be removed from the parent’s custody in the first place.” In re M.J.B., 140
S.W.3d at 656; see In re Valentine, 79 S.W.3d at 547. When the trial court does not
make such findings, the appellate court should review the issue de novo. In re Valentine,
79 S.W.3d at 547. Second, the court must find that the parent’s noncompliance is
substantial, In re M.J.B., 140 S.W.3d at 656, meaning that the parent must be in
“noncompliance with requirements in a permanency plan that are reasonable and related
to remedying the conditions that warranted removing the child from the parent’s
custody.” In re Z.J.S., No. M2002-02235-COA-R3-JV, 2003 WL 21266854, at *12
(Tenn. Ct. App. June 3, 2003). To assess a parent’s substantial noncompliance with a
permanency plan, the court must weigh “both the degree of noncompliance and the
weight assigned to that particular requirement.” Id. at *12. Conversely, “[t]erms which
are not reasonable and related are irrelevant, and substantial noncompliance with such
terms is irrelevant.” In re Valentine, 79 S.W.3d at 548-49.
Here, the permanency plans required each parent to (1) submit to drug screens and
pill counts; (2) complete mental health and alcohol and drug assessments and follow
recommendations; (3) complete parenting, anger-management, and domestic violence
classes and follow recommendations; (4) maintain safe and stable housing; (5) obtain a
legal source of income and transportation; and (6) pay child support.
Mother
Mother claims that she evidenced substantial compliance by her completion of the
assessments and classes, attendance at Life Changers, and recent negative drug screens.
While we acknowledge that Mother found success at Life Changers, the record reflects
that the permanency plan required completion of an additional alcohol and drug
assessment and attendance at an alcohol and drug treatment program for good reason,
namely to ensure that Mother was able to combat her addiction outside of the confines of
an extremely structured housing facility. Additionally, Mother had not maintained safe
and stable housing or paid support at the time of the hearing. These requirements were
not only reasonable and related to remedying the conditions that warranted removal,
namely drug abuse, an inability to parent, and unsuitable housing, but completion of these
requirements were essential for establishing that Mother could care for the Children
without assistance. With these considerations in mind, we conclude that there was clear
- 13 -
and convincing evidence to establish that Mother failed to substantially comply with the
requirements of the permanency plan.
Father
Father claims that he completed the majority of the permanency plan
requirements. The record reflects that Father had not completed an alcohol and drug
education program as a required recommendation from his assessment and that he failed
to complete additional parenting education. Additionally, he had not yet maintained safe
and stable housing without the assistance of a questionable roommate at the time of the
hearing. These requirements were not only reasonable and related to remedying the
conditions that warranted removal, namely drug abuse, an inability to parent, and
unsuitable housing, but completion of these requirements were essential for establishing
that Father could care for the Children without assistance. Accordingly, we conclude that
there was clear and convincing evidence to establish that Father failed to substantially
comply with the requirements of the permanency plan.
E.
Under Tennessee law, a court may terminate parental rights when:
(3) The child has been removed from the home of the parent or guardian
by order of a court for a period of six (6) months and:
(A) The conditions that led to the child’s removal or other conditions
that in all reasonable probability would cause the child to be subjected to
further abuse or neglect and that, therefore, prevent the child’s safe return
to the care of the parent(s) or guardian(s), still persist;
(B) There is little likelihood that these conditions will be remedied at an
early date so that the child can be safely returned to the parent(s) or
guardian(s) in the near future; and
(C) The continuation of the parent or guardian and child relationship
greatly diminishes the child’s chances of early integration into a safe, stable
and permanent home.
Tenn. Code Ann. § 36-1-113(g)(3) (emphasis added). Termination of parental rights
requires clear and convincing evidence of all three factors. In re Valentine, 79 S.W.3d at
550. Additionally, the persistence of conditions ground may only be applied “where the
- 14 -
prior court order removing the child from the parent’s home was based on a judicial
finding of dependency, neglect, or abuse.” In re Audrey S., 182 S.W.3d at 874.
Mother
Mother claims that the conditions which led to removal have since been remedied
as evidenced by her substantial progress. We disagree. Mother had not maintained safe
and stable housing or established her ability to combat her addiction outside of the
confines of an extremely structured housing facility. The record reflects that Mother still
had to complete an additional 90-day aftercare program upon graduation before she could
arrange for housing with the Children. Given Mother’s tendency to relapse, we conclude
that that there is little likelihood that the conditions which led to removal will be
remedied at an early date so that the Children can be safely returned in the near future
and that the continuation of the relationship greatly diminishes the children’s chances of
early integration into a safe, stable and permanent home. Accordingly, we conclude that
the conditions which led to removal still persist.
Father
Father claims that he remedied the conditions which led to the Children’s removal
as evidenced by his establishment of suitable housing, completion of various assessments
and programs, and his last negative drug screen in July 2016. Again, we note that Father
had not completed an alcohol and drug education program, completed additional
parenting education, or maintained safe and stable housing without the assistance of a
questionable roommate at the time of the hearing. Given Father’s inability to accept
responsibility for these failures or to give an indication that these issues would be
addressed in the near future, we conclude that there is little likelihood that the conditions
which led to removal will be remedied at an early date so that the Children can be safely
returned in the near future and that the continuation of the relationship greatly diminishes
the Children’s chances of early integration into a safe, stable and permanent home.
Accordingly, we conclude that the conditions which led to removal still persist.
F.
Having concluded that there was clear and convincing evidence supporting at least
one statutory ground to terminate each parent’s parental rights, we must consider whether
termination was in the best interest of the Children. In making this determination, we are
guided by the following non-exhaustive list of factors:
- 15 -
(i) In determining whether termination of parental or guardianship
rights is in the best interest of the child . . . the court shall consider, but is
not limited to, the following:
(1) Whether the parent or guardian has made such an adjustment of
circumstance, conduct, or conditions as to make it safe and in the child’s
best interest to be in the home of the parent or guardian;
(2) Whether the parent or guardian has failed to effect a lasting
adjustment after reasonable efforts by available social services agencies
for such duration of time that lasting adjustment does not reasonably
appear possible;5
(3) Whether the parent or guardian has maintained regular visitation or
other contact with the child;
(4) Whether a meaningful relationship has otherwise been established
between the parent or guardian and the child;
(5) The effect a change of caretakers and physical environment is likely
to have on the child’s emotional, psychological and medical condition;
(6) Whether the parent or guardian, or other person residing with the
parent or guardian, has shown brutality, physical, sexual, emotional or
psychological abuse, or neglect toward the child, or another child or
adult in the family or household;
(7) Whether the physical environment of the parent’s or guardian’s
home is healthy and safe, whether there is criminal activity in the home,
or whether there is such use of alcohol or controlled substances as may
render the parent or guardian consistently unable to care for the child in
a safe and stable manner;
(8) Whether the parent’s or guardian’s mental and/or emotional status
would be detrimental to the child or prevent the parent or guardian from
effectively providing safe and stable care and supervision for the child;
or
5
In re Kaliyah S., 455 S.W.3d at 555 (“[I]n a termination proceeding, the extent of DCS’s efforts to
reunify the family is weighed in the court’s best-interest analysis, but proof of reasonable efforts is not a
precondition to termination of the parental rights of the respondent parent.”).
- 16 -
(9) Whether the parent or guardian has paid child support consistent
with the child support guidelines promulgated by the department
pursuant to [section] 36-5-101.
Tenn. Code Ann. § 36-1-113(i). “This list is not exhaustive, and the statute does not
require a trial court to find the existence of each enumerated factor before it may
conclude that terminating a parent’s parental rights is in the best interest of a child.” In re
M.A.R., 183 S.W.3d 652, 667 (Tenn. Ct. App. 2005). The General Assembly has also
stated that “when the best interest[] of the child and those of the adults are in conflict,
such conflict shall always be resolved to favor the rights and the best interest[] of the
child, which interests are hereby recognized as constitutionally protected.” Tenn. Code
Ann. § 36-1-101(d); see also White v. Moody, 171 S.W.3d 187, 194 (Tenn. Ct. App.
2004) (holding that when considering a child’s best interest, the court must take the
child’s perspective, rather than the parent’s).
Mother
We, like the trial court, believe that is was an extremely close case. Questions
remain as to whether Mother may effectively parent the Children in a safe and stable
home following her completion of the Life Changer’s program. The Children currently
reside in a safe and stable foster home with parents who love them and indicated a desire
to adopt them. However, we cannot discount the fact that Mother has made tremendous
progress through her year-long attendance at Life Changers. We believe that this is
simply one of the rare cases where the parent has made a lasting adjustment, while
managing to maintain a relationship with her children. We note that Mother faithfully
attended visitation before and after the relevant time period and that the Children still
referred to her as “mom” at the time of the hearing.
Father
While the record reflects that Father’s progress was less significant than Mother’s,
he has maintained a relationship with the Children since removal and has faithfully
attended visitation. He has also consistently paid child support and successfully passed
recent drug screens. We also do not wish to leave the Children without a father if the
proceedings following remand establish that termination of Mother’s parental rights is
not in the best interest of the Children.
Accordingly, we reverse the trial court’s best interest finding relative to Mother
and Father and the termination of each parent’s parental rights.
- 17 -
V. CONCLUSION
We hold that the evidence does not preponderate against the trial court’s judgment
finding multiple grounds for the termination of the parental rights of both Mother and
Father. As a matter of law, we hold that the evidence in the record clearly and
convincingly supports the trial court’s findings with respect to grounds for termination.
Accordingly, this part of the trial court’s judgment is affirmed. We further hold,
however, that the evidence preponderates against the trial court’s best interest of the
Children determinations as to both Mother and Father. Accordingly, we vacate (1) the
trial court’s judgment as to the best interest of the Children and (2) so much of the trial
court’s judgment as terminates the parental rights of both Mother and Father. This case is
remanded to the trial court for further proceedings on the sole issue of the best interest of
the Children. Costs on appeal are taxed to the Tennessee Department of Children’s
Services.
_________________________________
JOHN W. McCLARTY, JUDGE
- 18 -
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806 P.2d 685 (1991)
311 Or. 159
In the Matter of the Application of Kenneth Miles JAFFEE, Petitioner,
For Admission to the Oregon State Bar.
SC S35948.
Supreme Court of Oregon, In Banc.
Argued and Submitted December 5, 1990.
Decided February 26, 1991.
*686 Arno H. Denecke, Salem, argued the cause for petitioner. Thad M. Guyer, Medford, filed the petition for reconsideration.
Jeffery D. Sapiro, Oregon State Bar, Lake Oswego, argued the cause for the Oregon State Bar.
PER CURIAM.
The issue in this case is whether to admit Kenneth Miles Jaffee (applicant) to the Oregon State Bar. Applicant is a graduate of the McGeorge School of Law and an attorney admitted to practice in California since 1975. We do not admit applicant.
PROCEDURAL HISTORY
Applicant passed the Oregon State Bar examination in July 1988 and had earlier passed the Multistate Professional Responsibility Examination. After a hearing in November 1988, the Oregon Board of Bar Examiners, by a split vote, did not recommend his admission. Applicant did not seek review of that decision in this court.
He reapplied in 1990. On August 28, 1990, after another hearing, the Board recommended his admission by a vote of ten to two.[1] We initially denied his admission by an order dated September 18, 1990, without receiving written or oral arguments. Thereafter, applicant petitioned for reconsideration before this court. Although neither the Rules for Admission of Attorneys in Oregon (Rules for Admission) nor the Oregon State Bar Rules of Procedure (BRs) contemplate an applicant's appeal from a positive recommendation by the Board, applicant argued that fundamental fairness requires such a procedure in the event that this court is considering denying admission despite the recommendation. He pointed out that, unless such an appeal were allowed, a person receiving the Board's favorable recommendation would be in a less protected position than one who receives an adverse recommendation, which permits an appeal. BR 1.1(i); Rules for Admission 5.05 to 5.15. We agree with those arguments and have provided the same review as we would have if applicant had appealed an adverse recommendation by the Board. We have considered both written and oral arguments and have reviewed the record de novo. BR 10.6.
FACTS
From 1975 to late 1982, applicant practiced law in Sacramento, California, in the field of criminal defense. In July 1986, he was suspended from practice for one year and placed on probation for one year, for neglect of client matters and unprofessional conduct, which had occurred in 1981 and 1982. Also while practicing in California, applicant served two days in jail for contempt, relating to his presentation of the defense in a criminal jury trial, and was, on another occasion, fined $50.
Applicant's wife, who also was his sole employee, was murdered in September 1982. The crime has not been solved, but applicant believes that a former client was responsible. Following his wife's death, applicant moved to a rural area in southern Oregon. From late 1982 to late 1985, he was not employed; he used marijuana almost daily.
In August 1985, law enforcement officers raided applicant's property pursuant to a search warrant. They found 143 marijuana plants, ranging in size from tiny seedlings to tall plants, in a garden plot and window box. Also found were scales, a needle kit, books concerning drugs, a few small plastic bags of dried marijuana, and numerous firearms. In December 1985, applicant was convicted of manufacture of a controlled substance, ORS 475.992(1)(a), a Class A felony. He had no prior criminal record, and no additional charges were brought as a result of the 1985 incident.
*687 Applicant was sentenced to community service and probation. He performed the community service at the Center for Non-Profit Legal Services, Inc., as a legal assistant. In July 1986, his probation was revoked for a threat of violence and for possession of firearms. He was sentenced to six months in jail and further probation. Applicant served the six months in jail. In March 1988, the circuit court granted an early termination of the extended probation.
After applicant disclosed the conviction to the California State Bar, it instituted a disciplinary proceeding. Applicant agreed to all pertinent facts and cooperated in the disciplinary process. He stipulated to a six-month suspension from practice followed by two and one-half years of monitored probation. The California Supreme Court accepted the stipulation by order dated April 29, 1989. Applicant served the six-month suspension without incident and has complied with all aspects of the monitored probation, including quarterly reporting. If the probation is not violated, it will end on April 30, 1992.
Applicant testified that he has not used drugs since the revocation of his probation in 1986. He described his incarceration as a turning point. After serving the jail sentence, in early 1987 he again became employed at the same legal services office as a legal assistant. At the time of the hearing, applicant remained in that position. His supervisor testified that applicant was committed to the legal services program and that he would be hired as a staff attorney there, if admitted. That also was applicant's desire. His supervisor and coworkers praised applicant's legal skills and rehabilitation and gave their unqualified recommendation for his admission.
In addition, applicant became active in a nonprofit drug and alcohol rehabilitation and counseling program that serves the Jackson County area, and became president of the organization's board of directors. The executive director of the program, a clinical psychologist, recommended applicant's admission without qualification. She praised his work with clients and his leadership on the program's board. In her professional opinion, applicant's antisocial behavior after his wife's death, from 1982 to the incarceration in 1986, was an aberration that he would not repeat in the future.
At the time of argument, applicant was 46 years old, had two adult daughters, and was remarried.
ANALYSIS
Applicant has the burden to establish by clear and convincing evidence that he is of good moral character. ORS 9.220(2); BR 7.5; Rule for Admission 1.55. As was the case in In re Rowell, 305 Or. 584, 754 P.2d 905 (1988), applicant concedes that his past conduct shows that he did not previously have the good moral character necessary to his admission as an attorney. "The question is therefore whether applicant's moral character has changed sufficiently that he should be admitted to the practice of law." 305 Or. at 588, 754 P.2d 905.
Had we disbarred an attorney in applicant's position, the disbarred attorney would not be permitted to apply for reinstatement until five years after the effective date of the disbarment. BR 6.1(d). We do not believe that an applicant for admission should be in a more favorable position than a similarly situated attorney applying for reinstatement.
Applicant committed criminal acts that reflected adversely on his honesty, trustworthiness, and fitness to practice law and engaged in conduct prejudicial to the administration of justice, in violation of DR 1-102(A)(2) and (4). ORS 9.527(4); see generally ABA Standards for Imposing Lawyer Sanctions § 5.1 (failure to maintain personal integrity). Four factors lead us to conclude that we likely would have disbarred him for those violations: (1) the seriousness of the crime of which applicant was convicted; (2) the length of time during which criminal conduct occurred; (3) the commission of more than one offense; and (4) the presence of aggravating factors. First, the acts were serious; they included a Class A felony and a threat of *688 violence. See ORS 9.527(2) (Supreme Court may disbar attorney for conviction of a felony). Second, applicant's criminal behavior extended over a substantial period over three years by his own admission. Third, applicant committed two distinct kinds of acts, manufacture of a controlled substance by cultivating marijuana and violation of probation for a threat of violence and for possession of firearms, which he knew was illegal. Fourth, aggravating factors were present: prior discipline (albeit for a different kind of conduct in a different state) and selfish motives, particularly in the circumstances of the threat that precipitated the revocation of probation, in addition to a pattern of criminal conduct over time and multiple offenses. See ABA Standards for Imposing Lawyer Sanctions § 9.22 (listing aggravating factors). Mitigating factorspersonal or emotional problems, cooperation in the disciplinary proceedings, and subsequent remorsewere not sufficient to offset the aggravating factors. See ABA Standards for Imposing Lawyer Sanctions § 9.32 (listing mitigating factors).
We utilize the five-year reinstatement, not to add complication to the admissions process, but to bring a certain amount of consistency and symmetry to the overall issue of who is (and who is not) entitled to practice law in this state. The Board of Bar Examiners (Board) is charged with determining, in the first instance, whether an applicant has the requisite good moral character for admission. Commission of prior felonies, or misdemeanors involving moral turpitude, is relevant to that determination. Until now, however, the Board has not received guidance from this court as to how to weigh such a criminal history in making its assessment of present moral character. The answer to that question should now be clear: If this court would have disbarred a lawyer for engaging in a course of criminal conduct, resulting in ineligibility for a five-year period, an applicant is ineligible for the same period.[2]
Of course, because applicant was not in fact disbarred, we cannot measure five years from the effective date of disbarment. The most closely analogous date in this instance is the date on which applicant's probation was revoked; that is the date on which the most recent misconduct was adjudicated. Accordingly, applicant may reapply for admission after July 23, 1991. Applicant thereafter must (as an applicant for reinstatement would have to do) establish by clear and convincing evidence that he is rehabilitated and presently possesses the necessary good moral character for admission (or readmission).[3]
One more point must be made regarding the application of the five-year reinstatement period to applicants for first-time admission to the Oregon State Bar. Obviously, before membership in the bar, an applicant's conduct is not regulated by the high standards governing attorney behavior. The question therefore arises whether prior acts by an applicant that would not necessarily lead to criminal charges, but would result in an attorney's disbarment, should prevent admission of the applicant for the full five-year period. There is no fixed answer to that question. Some acts, although not criminal, may be of such a nature as to demonstrate outright inconsistency with the practice of law. The Board should use our prior disciplinary cases resulting in disbarment as a guide in performing its function in eligibility cases. Those precedents discuss eligibility for readmission and may serve as analogies for cases of first-time admission.
CONCLUSION
Applicant's reapplication for admission to the Oregon State Bar is denied with leave to reapply after July 23, 1991.
NOTES
[1] Two of the ten favorable votes were to admit applicant conditionally during the completion of the California State Bar probation, which will be described in the text below.
[2] We recognize that we did not apply this analysis in In re Rowell, 305 Or. 584, 754 P.2d 905 (1988); the analysis was not considered there.
[3] Nothing in this opinion should be construed to comment on the merits of a future application, if one is made.
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484 F.Supp. 598 (1980)
David M. WOLLMAN, Plaintiff,
v.
Jake GROSS, Jr., Defendant.
Civ. 79-4031.
United States District Court, D. South Dakota, S. D.
February 20, 1980.
*599 *600 N. Dean Nasser, Jr., Sioux Falls, S. D., for plaintiff.
Robert D. Hiaring, U. S. Atty., Sioux Falls, S. D., and Pamela L. Wood, Trial Attorney Torts Branch, Dept. of Justice, Washington, D. C., for defendant.
Timothy Nimick, of Woods, Fuller, Shultz & Smith, Sioux Falls, S. D., for insuror.
MEMORANDUM DECISION
NICHOL, Chief Judge.
The case arises out of an automobile accident on June 11, 1976, between the plaintiff, David Wollman, and the named defendant, Jake Gross, Jr. The plaintiff and the defendant are lifelong neighbors who live about one and one-half miles apart near Freeman, South Dakota. On the date of the accident the defendant Gross was employed by the Agriculture Stabilization and Conservation Service (ASCS). He was the District Director for the ASCS State Office in charge of the supervision and review of programs for ten county offices within the state of South Dakota. It was for the purpose of checking the Davison County ASCS office in Mitchell, South Dakota, that the defendant left his home in his personal car on June 11, 1976. Mr. Gross' home was his assigned duty station and he received mileage reimbursement from the government for such trips. After finishing his work at the ASCS office in Mitchell he drove toward his home duty station by the most direct route without deviating for any personal business. The accident occurred around 4:00 p. m. on County Road 13 between the farmsteads of the plaintiff and the defendant.
Neither the plaintiff nor the defendant realized that defendant Gross was driving as a federal employee within the scope of his employment. Defendant Gross did not report the accident to his administrative office and his personal insurance company began dealing with the plaintiff. On January 25, 1979, more than two years after the accident, the plaintiff filed a complaint in state court naming Jake Gross, Jr., individually, as defendant. The involvement of the United States Government was first recognized by the counsel of the defendant's personal insuror somewhere in mid-February, 1979. The case was removed to federal court by the United States Attorney on March 23, 1979. On March 29, 1979, the United States filed a motion to dismiss for lack of jurisdiction due to the untimeliness of any administrative claim. The plaintiff then sent an administrative claim to the *601 United States Department of Agriculture dated July 16, 1979, and on July 18, 1979, filed with this court a motion to remand to state court. A hearing on the two pending motions was heard by this court on August 29, 1979.
There are two questions to be resolved to determine the outcome of the United States Government's motion to dismiss and the plaintiff's motion for remand:
(1) Whether Jake Gross, Jr., was a federal employee acting within the scope of his employment at the time of the accident, and
(2) Whether the Federal Tort Claim was presented within two years of the date of the claims accrual?
I. MR. GROSS WAS A FEDERAL EMPLOYEE ACTING WITHIN THE SCOPE OF HIS EMPLOYMENT AT THE TIME OF THE ACCIDENT.
Under the Federal Tort Claims Act, the United States District Courts have exclusive jurisdiction of tort actions where a federal employee involved in an accident is acting within the scope of his employment at the time of the collision. 28 U.S.C. section 2679(b). Determining who is an employee of the government for Federal Tort Claim purposes is a matter of federal law. Pattno v. United States, 311 F.2d 604 (10th Cir. 1962), cert. den. 373 U.S. 911, 83 S.Ct. 1300, 10 L.Ed.2d 412 (1963). The term "employee of the government" is defined to include "officers or employees of any federal agency" and "persons acting on behalf of a federal agency in an official capacity . . ." 28 U.S.C. section 2671. The critical element in determining when someone is a federal employee is the power of the federal government to control the detailed physical performance of his duties. United States v. Orleans, 425 U.S. 807, 814, 96 S.Ct. 1971, 1975, 48 L.Ed.2d 390 (1976); Logue v. United States, 412 U.S. 521, 528, 93 S.Ct. 2215, 2219, 37 L.Ed.2d 121 (1973); Gere v. United States, 425 F.Supp. 847, 850 (D.S.D. 1977).
The Agricultural Stabilization and Conservation Service is an agency of the United States established by the Secretary of Agriculture. The ASCS structure has been recognized as a "hierarchy of command" functioning as a government agency under the overriding authority and control of the Secretary of Agriculture and his appointees. Duba v. Schuetzle, 303 F.2d 570, 571 (8th Cir. 1962). Employees of the ASCS have consistently been recognized as federal employees under the Federal Tort Claims Act. Duba v. Schuetzle, 303 F.2d 570 (8th Cir. 1962); Gross v. Sederstrom, 429 F.2d 96, 98 (8th Cir. 1970); Delgado v. Akins, 236 F.Supp. 202 (D.Ariz.1964); Myers v. Cromwell, 267 F.Supp. 12 (D.Kan.1967). Contra, Lavitt v. United States, 177 F.2d 627 (2d Cir. 1949).
Jake Gross, Jr., was at the time of the accident and is now the District Director for the ASCS State Office. He is a full-time civil service employee who is paid by the federal government. He is an Agricultural Program Specialist in charge of the execution of agricultural programs and the supervision of county ASCS offices. He is under the supervision of the State Executive Director of the ASCS. This court finds that Jake Gross is controlled under the Secretary of Agriculture's hierarchy of command within the ASCS structure and is accordingly a government employee.
Unlike the determination of who is a federal employee according to federal law, this court is bound to apply state law in determining whether or not a federal employee's acts are within the scope of employment. Williams v. United States, 350 U.S. 857, 76 S.Ct. 100, 100 L.Ed. 761 (1955); Davies v. U. S., 542 F.2d 1361, 1362 (9th Cir. 1976). Although no case decided under South Dakota law is analogous to the facts of the present case, a number of general tenets have been either adopted or noted previously by the South Dakota courts.
In Morman v. Wagner, 63 S.D. 547, 262 N.W. 78, 79-80 (1935), it was determined that an act of an employee done for the benefit of the employer either directly or indirectly is within the general scope of a servant's employment, but an act done to *602 effect some independent purpose of the employee's is not within that scope. Several general principles were also noted in Alberts v. Mutual Service Casualty Insurance Co., 80 S.D. 303, 123 N.W.2d 96, 98 (1963). The court first noted the general rule as set out in 57 C.J.S. Master and Servant § 570d(2):
(C)onduct which the master has specifically directed is within the scope of the servant's employment, but it is not essential that the conduct be specially authorized by the master . . . (A)n act is within the scope of a servant's employment where it is reasonably necessary or appropriate to accomplish the purpose of his employment, and intended for that purpose although in excess of the powers actually conferred on the servant by the master.
Alberts v. Mutual Service Casualty Insurance Co., 123 N.W.2d at 98. The court then pointed out section 228(1) of the American Law Institute Restatement, Agency 2d:
Conduct of a servant is within the scope of employment if (a) it is of the kind he is employed to perform, (b) it occurs substantially within the authorized time and space limits; (c) it is actuated at least in part, by a purpose to serve the master.
Alberts, 123 N.W.2d at 98, and concluded from American Law Institute, Restatement, Agency 2d section 239 and other case authority that:
The servant may also be within the scope of his employment in using an instrumentality not expressly authorized to effect a result which he has been ordered by the master to accomplish where the means are not specified . . . and no other means are available, . . . or if the means available are not in operating condition. . . . For, `if the master directs a servant to accomplish a result and does not specify the means to be used, the servant is authorized to employ any usual or suitable means'.
Alberts, 123 N.W.2d at 99.
The plaintiff argues that Mr. Gross was an independent contractor in the use of his automobile even though he is normally an employee in other respects because the government did not have the right as a master to control the use of Mr. Gross' personal car at the time of the accident. The plaintiff relies on a line of cases where because the use of a personal car was permitted by the employer but not required or reasonably necessary to the performance of any business duties, the employee was found not to be within the scope of employment at the time of the automobile accident. Daugherty v. United States, 427 F.Supp. 222 (W.D.Pa.1977); Tavolieri v. Allain, 222 F.Supp. 756, 758-759 (D.Mass. 1963); Murphy v. United States, 113 F.Supp. 345, 346 (W.D.N.Y.1953); Bissell v. McElligott, 369 F.2d 115 (8th Cir. 1966), aff'g 248 F.Supp. 219 (W.D.Mo.1965), cert. den. 387 U.S. 917, 87 S.Ct. 2029, 18 L.Ed.2d 969 (1967); Manderacchi v. United States, 264 F.Supp. 380 (D.Md.1967). But see, Levin v. Taylor, 150 U.S.App.D.C. 261, 464 F.2d 770 (D.C.Cir. 1972); United States v. Farmer, 400 F.2d 107 (8th Cir. 1968), aff'g 261 F.Supp. 750 (S.D.Iowa 1966). These cases find the use of a personal car to be merely permitted for the employee's convenience where such options as a bus, taxicab, trolley, passenger train, government vehicle, or walking were equally suitable alternatives.
Even assuming such a premise is the applicable law in South Dakota, these cases are not applicable to the facts of the present case. Mr. Gross' job required him to do a great deal of field travel between various county offices and his official duty station at his farmstead near Freeman, South Dakota. The use of his personal car can be considered reasonably necessary for such a business which required "that a majority of time" be directed to field travel in rural South Dakota where there are few available methods of public transportation. Furthermore, Mr. Gross' use of his personal car was not merely a matter of his personal convenience. The government reimbursed Mr. Gross for his mileage on such trips. An affidavit from Mr. Gross' supervisor finding the use of his vehicle in the scope of employment stated that "Mr. Gross was authorized *603 to use his private vehicle for transportation since no General Service Authority vehicles were available for him to use and any other suitable transportation would have resulted in a greater expense to the government." Mr. Gross' use of his personal car was not merely a personal decision of his own but an authorized government use for the convenience and benefit of the employer as well as a mode of transportation reasonably necessary to the employee's business duties.
The mere fact that Mr. Gross was allowed to select the precise time and routes he would travel does not make the employee an independent contractor in the use of his car where the act of driving his car is an act within the ordinary scope and course of employment. Standard Oil Co. v. Parkinson, 152 F. 681, 683-4 (8th Cir. 1907). The authority to select when and what routes to travel can be implied as "usual, customary, and necessary to fulfill the duty intrusted to him by the master." Alberts, 123 N.W.2d at 98.
This court concludes that Mr. Gross' accident occurred in the transaction of business for the ASCS. He was traveling for the sole purpose of serving government business; he was traveling on the most direct route between the county ASCS office in Mitchell, South Dakota, and his assigned duty station in Freeman; he was using an expressly authorized means of transportation; he was driving during regular working hours, and he was being paid his regular salary plus mileage at the time of the accident. Mr. Gross was acting within the scope of his employment for the ASCS at the time of the accident. This result is consistent with South Dakota law on scope of employment previously noted.
II. THE PLAINTIFF'S CLAIM IS UNTIMELY.
As the defendant named was a federal employee acting within the scope of his employment at the time of the automobile accident, the plaintiff's exclusive remedy is against the United States under the Federal Tort Claims Act. 28 U.S.C. section 2679(b). Section 2675(a) of the Federal Tort Claims Act requires as a jurisdictional prerequisite that any claim must first be presented to the appropriate administrative agency and denied. This administrative claim must be presented "to the appropriate federal agency within two years after such claim accrues". 28 U.S.C. section 2401(b); Meeker v. United States, 435 F.2d 1219 (8th Cir. 1970); West v. United States, 592 F.2d 487, 492 (8th Cir. 1979).
The plaintiff's administrative claim was filed with the Department of Agriculture more than two years after the accident occurred. The plaintiff argues, however, in this action that the time of accrual should not be the date of the accident and injury but the date he first discovered that the defendant was acting as a federal employee on federal business at the time of the accident. Determining when a particular federal tort claim accrues is a matter of federal law which must be determined by the court in light of the surrounding circumstances. United States v. LePatourel, 593 F.2d 827, 830 (8th Cir. 1979); Steele v. United States, 599 F.2d 823, 826 (7th Cir. 1979).
The general rule under the Act has been that a tort claim for personal injury or property damage resulting from the negligent operation of a motor vehicle by a government employee accrues at the time of the injury "when the injury coincides with the negligent act and some damage is discernible at that time." Steele v. United States, 599 F.2d 823, 828 (7th Cir. 1979); Mendiola v. United States, 401 F.2d 695, 697 (5th Cir. 1968). However, the courts have recognized that there are circumstances when a claim accrues at a later time. For example, in medical malpractice actions where the injury and the cause are not immediately known and actions where new law applied retroactively has created a new basis for a claim, the time of accrual has been postponed. Neely v. United States, 546 F.2d 1059, 1069 (3rd Cir. 1976); United States v. LePatourel, 593 F.2d 827, 830 (8th Cir. 1979); United States v. Kubrick, ___ *604 U.S. ___, ___, 100 S.Ct. 352, 359, 62 L.Ed.2d 259 (1979). In these types of cases it is stated that a claim accrues against the government under the Act when the plaintiff discovers or in the exercise of reasonable diligence should have discovered the essential elements of his possible cause of action. Bridgford v. United States, 550 F.2d 978, 981-82 (4th Cir. 1977); Quinton v. United States, 304 F.2d 234, 240 (5th Cir. 1962).
There is no basis, however, for a categorical exception to rule 2401(b) where the plaintiff is not at the outset aware of the defendant's employment status. And under the circumstances of this case, this court does not find it justified to extend the accrual date when the plaintiff knew all the essential facts of the case except the fact that the government was vicariously liable under the Federal Tort Claims Act for Mr. Gross' allegedly negligent actions.
Similar results have been reached in other cases. In West v. United States, 592 F.2d 487, 492 (8th Cir. 1979), the accrual date of a medical malpractice claim was determined to be the date upon which the plaintiffs learned of the injury and its cause and not the date when the status of the doctor as a federal employee acting within the scope of employment was discovered. As any administrative claim would be untimely, the case was totally barred. In Baker v. United States, 341 F.Supp. 494 (D.Md.1972), neither the plaintiff nor anyone else connected with the matter including the employee and representatives of his insurance company realized that at the time of the accident the employee was acting within the scope of federal employment. Upon discovery of such information more than two years after the accident, the case was removed to federal court and dismissed. In Steele v. United States, 599 F.2d 823 (7th Cir. 1979), the tort claim against the Federal Aviation Administration was found to accrue at the time of the injury even though the plaintiff was unaware at that time that an agency of the United States was the party allegedly negligent in failing to warn of the remote power switch which caused the electrical shock to the plaintiff. This case was also dismissed for failure to file a timely administrative claim. In Lien v. Beehner, 453 F.Supp. 604 (N.D.N.Y.1978), the court refused to toll the two year limitation period running from the time of the injury and damage solely because the government employment of the defendants was shielded from both the plaintiff and the public. The court in Driggers v. United States, 309 F.Supp. 1377, 1379 (D.S.C.1970), also rejected the contention that an administrative claim is not required to be filed within two years from the date of the accident because the status of the defendant as a government employee acting in the course of his employment was not clearly known to the plaintiff.
This is not a case where the government is found to have "lull(ed) plaintiffs into a false sense of security" by deliberately waiting until two years after an accident before substituting the United States as a party for the individual employee and then removing the state case to federal court and seeking dismissal. E. g., Kelley v. United States, 568 F.2d 259 (2d Cir. 1978), cert. den. 439 U.S. 830, 99 S.Ct. 106, 58 L.Ed.2d 124; West v. United States, 592 F.2d 487, 493 (8th Cir. 1979). In the present case no action was commenced by the plaintiff until after two years from the time of the accident. Nor can the government's or its employee's silence before the commencement of suit or the filing of an administrative claim be seen to estop the two year limitation period or affect the accrual date. There is no assertion of any active or deliberate concealment and the plaintiff has acknowledged that he knew Mr. Gross was employed by the ASCS. In 1974 Mr. Gross had aided his neighbor, Mr. Wollman, in obtaining a job as a part-time crop appraiser with the State ASCS. Furthermore, the limitation period of section 2401(b) is jurisdictional and not subject to estoppel. Best Bearings Co. v. United States, 463 F.2d 1177 (7th Cir. 1972); Lien v. Beehner, 453 F.Supp. 604, 606 (N.D.N.Y. 1978).
*605 The application of the two year statute of limitations under the Federal Tort Claims Act may result in hardship to plaintiffs in those cases where meritorious claims are barred. Nevertheless, it must also be remembered that the statutes are designed to protect defendants from bearing the burden of defending against stale claims. As recently stated by the United States Supreme Court, "Section 2401(b), the limitations provision involved here, is the balance struck by Congress in the context of tort claims against the Government; and we are not free to construe it so as to defeat its obvious purpose, which is to encourage the prompt presentation of claims. We should regard the plea of limitations as a `meritorious defense', in itself serving a public interest." United States v. Kubrick, ___ U.S. ___, ___, 100 S.Ct. 352, 357, 62 L.Ed.2d 259 (1979).
Accordingly, the plaintiff's motion to remand this case to state court is denied and the motion of the United States for dismissal is granted. Counsel for the United States is directed to prepare an order in accordance with this opinion.
| {
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In the
United States Court of Appeals
For the Seventh Circuit
No. 99-3657
ALAN L. MATHENEY,
Petitioner,
v.
RONDLE ANDERSON,
Respondent.
Appeal from the United States District Court
for the Northern District of Indiana, South Bend Division.
No. 98 C 183--Allen Sharp, Judge.
ARGUED JUNE 29, 2000--DECIDED June 18, 2001
Before COFFEY, KANNE and ROVNER, Circuit
Judges.
COFFEY, Circuit Judge. On March 7, 1989,
the State of Indiana charged Alan
Matheney in a two-count indictment with
murder and burglary. Matheney entered a
plea of not guilty as to both counts. In
April 1990, an Indiana jury found
Matheney guilty on both counts and
recommended the death penalty. The trial
judge agreed, and on May 11, 1990,
Matheney was sentenced to death.
After exhausting his state remedies,
Matheney filed a petition on July 10,
1998, in federal court pursuant to 28
U.S.C. sec. 2254 for a writ of habeas
corpus challenging his convictions and
death sentence. On July 30, 1999, the
district court, without holding an
evidentiary hearing, denied Matheney’s
habeas petition. See Matheney v.
Anderson, 60 F. Supp. 2d 846 (N.D. Ind.
1999). The court proceeded to grant a
certificate of appealability on two
issues: (1) whether the state trial court
"should have found the petitioner
incompetent to stand trial or, in the
alternative, should have granted an
evidentiary hearing on the petitioner’s
competency to stand trial"; and (2)
"whether the petitioner was denied
effective assistance of counsel at the
penalty and the sentencing phases of his
trial . . . ."
With respect to the second issue,
Matheney claims that his trial attorney’s
performance fell below an objective
standard of reasonableness when the
attorney did not call the defense
psychiatrist, Dr. Helen Morrison, to the
stand during the penalty phase of the
trial. Dr. Morrison had previously
testified during the guilt phase of the
trial, in support of Matheney’s defense
of insanity, that she believed Matheney
suffered from a mental disease or defect
at the time of the murder. Matheney
claims that if Dr. Morrison had been
called to the stand during the penalty
phase, she could have offered testimony
to establish the existence of a factor
mitigating against imposition of the
death penalty--that a mental disease or
defect rendered Matheney incapable of
conforming his conduct to the
requirements of the law. We reject
Matheney’s claim because the trial judge,
who is the ultimate decision-maker in
matters of capital sentencing under
Indiana law, stated on the record that he
gave no weight to this mitigating factor
because, after hearing the testimony
during the guilt phase of the trial, he
agreed with the two court-appointed
psychiatrists that Matheney suffered from
no mental disease or defect at the time
of the murder. Thus, we are convinced
that Matheney has failed to demonstrate a
reasonable probability that additional
testimony from Dr. Morrison during the
sentencing phase of the trial would have
resulted in imposition of a sentence
other than death.
However, we remand this case for an
evidentiary hearing on issues related to
Matheney’s alleged incompetency to stand
trial and his lawyer’s performance on
issues related thereto. Matheney’s trial
attorneys filed a petition requesting the
trial court to order independent
psychiatrists to perform both a
competency evaluation and a sanity evalu
ation. They then failed to follow through
with the request for a competency
evaluation after the trial court failed
to include it in its order for a sanity
evaluation. Given that a legitimate
question has been raised as to Matheney’s
competency to stand trial and his
lawyer’s performance on this issue, we
remand the case for an evidentiary
hearing.
I. BACKGROUND
On March 4, 1989, the defendant, while
on an eight-hour pass from prison,
brutally murdered Lisa Bianco (his ex-
wife and the mother of his two daughters,
Amber and Brooke). The core facts of this
case were succinctly set forth in the
Indiana Supreme Court’s opinion denying
Matheney’s direct appeal of his
conviction:
On March 4, 1989, appellant was given an
eight-hour pass from the Correctional
Industrial Complex in Pendleton, Indiana
where he was an inmate. Appellant was
serving a sentence for Battery and
Confinement in connection with a previous
assault on his ex-wife, Lisa Bianco, who
was the victim in this case. The
passauthorized a trip to Indianapolis;
however, appellant drove to St. Joseph
County. Appellant went to the house of a
friend, Rob Snider, where he changed
clothes and removed an unloaded shotgun
from the house without the knowledge of
those present.
Appellant then drove to Mishawaka. He
parked his car not far from Bianco’s
house and broke in through the back door.
Bianco ran from her home, pursued by
appellant. Neighbors witnessed the chase
that ensued.
When appellant caught Bianco, he beat her
with the shotgun which broke into pieces.
One neighbor confronted appellant and saw
him get into a car and drive away.
Appellant surrendered to a policeman
later that afternoon. The autopsy showed
that Bianco died as a result of trauma to
the head from a blunt instrument.
Matheney v. State, 583 N.E.2d 1202, 1204-
05 (Ind. 1992), cert. denied, 504 U.S.
962 (1992).
It is worth noting that at trial the
prosecution introduced overwhelming
evidence of Matheney’s murder of Bianco.
Ray Matheney, appellant’s brother, and
Rob Snider, a friend of appellant,
testified at trial that Alan Matheney
arrived at Snider’s home at about 1:00
p.m. on March 4, 1989. Snider further
testified that when Petitioner left
Snider’s home approximately one hour
later, a gun belonging to Snider’s step-
son was missing. Matheney’s daughter,
Brooke, testified that she was at home
with her mother in St. Joseph County on
the afternoon of the Fourth when she saw
her father enter the house and confront
her mother. At her mother’s request,
Brooke ran next door to the home of
Denise Sloan and asked Sloan to call the
police. Sloan and several other neighbors
testified that they watched Matheney
violently assault and murder Bianco in
the middle of the street by repeatedly
striking her with a rifle./2 The
evidence was so powerful that when
defense counsel began his opening
statement, he admitted: "On March 4,
1989, in the early afternoon, Alan
Matheney beat his ex-wife to death in
broad daylight, on a public streetcorner,
in Mishawaka, Indiana." Defense counsel
went on to argue that Matheney was insane
at the time of the killing, his legal
defense. Thus, Matheney’s petition for
habeas corpus relief centers not on a
claim of innocence, but rather that the
legal system failed to properly insure
that he was mentally competent to stand
trial for his crimes and subsequently to
be sentenced to death.
A. Pre-Trial Proceedings
Subsequent to charges being filed
against Matheney in the St. Joseph County
Indiana Superior Court, the court
appointed the Public Defender’s Office to
represent him. Public Defenders Philip
Skodinski and Charles Lahey were jointly
appointed and entered an appearance on
Matheney’s behalf. After defense
counsels’ initial consultation with their
client, they learned that Matheney was of
the belief that his ex-wife had been
having an affair with a local county
prosecutor, Mike Barnes, and further,
that Matheney allegedly believed the two
had schemed to falsely imprison Matheney
on trumped-up battery and confinement
charges to "keep him out of the way."
On March 14, 1989, after learning of his
client’s belief in this conspiracy
against him, Skodinski filed a "Notice of
Insanity Defense and Request for
Examination by Out-of-Area Psychiatrists
for Purpose of Determining Competency to
Stand Trial and Sanity at the Time of the
Alleged Offense." The motion requested
"the appointment of two court-appointed
psychiatrists, from outside St. Joseph
County for the purpose of determining [1]
the Defendant’s competency to stand trial
and [2] mental state at the time of the
alleged offense." (emphasis added).
On March 27, 1989, the court held a
hearing on defense counsel’s motion and
issued an order appointing two
independent psychiatrists, Drs. Myron
Berkson and George Batacan, to evaluate
Matheney. The court’s minutes state that
the court ordered the doctors to evaluate
Matheney as to (1) his sanity at the time
of the offense, as well as (2) his
competency to stand trial:
The Court further indicates that on March
27th this Court appointed Drs. Berkson
and Balacan [sic], both of Michigan City,
Indiana, for the purpose of determining
competency to stand trial and sanity.
But on the same day as the hearing, the
trial judge also signed a mimeographed
order entitled "Order for Examination
Concerning Sanity." This order made no
mention of an investigation to determine
the defendant’s present competency to
stand trial, but rather directed Drs.
Berkson and Batacan to evaluate Matheney
only with regard to his sanity at the
time of the murder:
The Defendant, by his attorney of record,
Phillip Skodinski, having filed notice of
defense of insanity, the court now
appoints Dr. Myron Berksen [sic], M.D.
and Dr. George A. Balacan [sic], M.D. to
examine the defendant, to file a written
report with the court, and to testify at
hearing concerning the sanity or insanity
of the defendant at the time of the
alleged offense.
****
Evidentiary hearing on defendant’s sanity
or insanity to be set upon receipt of the
doctor’s reports by the court. (emphasis
added)./3
Furthermore, when the court implemented
its order and issued written instructions
to the court-appointed doctors dealing
with the scope of the psychiatric reports
to be submitted , the court failed to
direct the doctors to conduct and make
findings regarding Matheney’s competency
to stand trial, as originally requested
by defense counsel. Instead, the court’s
order limited the doctors’ attention to
the question of Matheney’s sanity at the
time of the commission of the crimes
charged. The court’s instructions to the
independent psychiatrists read in
pertinent part as follows:
IN YOUR OPINION, IS IT POSSIBLE THE
DEFENDANT MAY HAVE BEEN INSANE AT THE
TIME OF THE CRIME? DATE OF CRIME:
FROM YOUR EXAMINATION OF THE DEFENDANT,
DO YOU HAVE AN OPINION AS TO WHETHER THE
DEFENDANT, AS A RESULT OF MENTAL DISEASE
OR DEFECT, WAS UNABLE TO APPRECIATE THE
WRONGFULNESS OF HIS CONDUCT AT THE TIME
OF THE OFFENSE?
"MENTAL DISEASE OR DEFECT" MEANS A
SEVERELY ABNORMAL MENTAL CONDITION THAT
GROSSLY AND DEMONSTRABLY IMPAIRS A
PERSON’S PERCEPTION, BUT THE TERM DOES
NOT INCLUDE AN ABNORMALITY MANIFESTED
ONLY BY REPEATED UNLAWFUL OR ANTISOCIAL
BEHAVIOR/4
B. The Doctors’ Reports
1. Drs. Batacan and Berkson individually
reported to the court that Matheney was
sane at the time he committed the crimes
a. Dr. Batacan
Dr. Batacan filed a five page
undated/5 report with the court
indicating that he interviewed Matheney
on two separate occasions, April 12,
1989, and June 21, 1989, "to determine
the question of [Matheney’s sanity] at
the time of the commission of crime."
Batacan’s comprehensive report details,
in narrative fashion, statements Matheney
made during these interviews which
explain how his anger lead to the murder
of Bianco:
When he left [the prison, Matheney] drove
to Granger to his family’s home from
where he called his wife [Bianco]. . . .
She told him that they [Bianco and the
prosecutor] would file more charges
against him [and] that he’ll never get
out of prison. He grabbed an unloaded gun
from a friend’s house where he left some
of his personal belongings. He was very
upset at the time. Several things were
going through his mind like "She killed
her brother by giving him drugs, he was a
good friend of mine. . . . I have two
beautiful children and she left them and
they were playing with drugs. She abused
those children. She was a hateful person
. . . . I have no remorse for what
happened, it was bound to happen because
they put me in a position that I’ll never
get out of prison."
After Dr. Batacan completed two
psychiatric interviews of Matheney which
lasted a total of five hours, he made the
following findings:
The defendant maintained a level of
mental alertness throughout the
examination and [was] able to engage in
a[n] interview with spontaneity and
cooperativeness. He is responsive,
attentive and rather vigilant. His
alertness refers to his ability to give
an orienting response to the questions
about any emotionally meaningful stimuli.
He is coherent [in both] speech and
thought. He sustains an ongoing ability
of concentration without disruption. He
is soft spoken and articulate.
He has an intact memory for both remote
and recent events. He is fully oriented
to time, place, person and specific
situations. He denies experiencing
unrealistic ideas and feelings. He has
not experienced any distorted
interpretation and perception of reality,
such as hallucinations and delusions. His
feelings of being aggrieved and beliefs
of being unjustly [treated] are very real
to him. His affect is appropriate. He
does not show any signs and symptoms of
mental disease or mental defect now nor
during the event in question.
After relating his observations and
findings, Dr. Batacan concluded that,
despite Matheney’s continuing belief that
his imprisonment was the product of a
conspiracy directed by a county
prosecutor, Matheney "was legally sane at
the time of the commission of the crime."
Dr. Batacan concluded that (1) Matheney
was not suffering from any form of
"mental disease or defect" either at the
time of the interviews or at the time of
the murder of his ex-wife, and (2)
Matheney was capable of recognizing the
wrongfulness of his actions at the time
the crime was committed.
b. Dr. Berkson
After interviewing Matheney twice,/6
Dr. Berkson filed a report dated April
19, 1989, opining "that Alan Matheney did
not suffer from a mental disease or
defect such [that] he was unable to
appreciate the wrongfulness of his
conduct at the time of the offense." Like
Dr. Batacan, Dr. Berkson supported his
opinion that Matheney was legally sane
during the commission of his crimes by
noting the observations he made while
interviewing Matheney:
He stated he was in good health, he was
aware of the nature of the charges
against him, he was aware of the
functions of the various individuals
involved in courtroom proceedings, he was
aware of the difference between a lie and
a mistake . . . . His verbalizations were
generally logical, sequential, goal
directed, and usually self serving. He
talked of his relationship with his ex-
wife who he felt had a personal
relationship with the prosecutor ****
[Matheney] reports he was told [that he
could not serve time in an out-of-state
jail], then he proceeded to give a rather
detailed account of his activities on the
day of the alleged offense.
He talked of increasing anger at his ex-
wife because he felt she was keeping him
incarcerated, that he had gone to her
home to get tapes that would have shown
he had done nothing wrong, that she and
Michael Barnes had no intention "of
letting me out of jail and would file
other charges against me." He then
detailed the rest of the events.
2. Neither Dr. Berkson nor Dr. Batacan
rendered an opinion concerning Matheney’s
competency to stand trial.
As discussed previously, there is
nothing in the record demonstrating that
Drs. Batacan and Berkson were ever
informed that competency to stand trial
was an issue to be evaluated or by what
standard competency was to be measured
under Indiana law. As a result of this
breakdown in communication, it is not
surprising that neither Dr. Batacan nor
Dr. Berkson filed reports relating a
conclusion as to Matheney’s competency to
stand trial.
Conversely, it is startling that neither
Matheney’s counsel (who had properly seen
fit to file a motion requesting an
examination of Matheney’s competency to
stand trial) nor the trial judge (who,
according to the court’s minutes,
purportedly ordered Drs. Batacan and
Berkson to evaluate Matheney’s competency
to stand trial at the March 27, 1989
hearing on defense counsel’s motion) ever
raised a question regarding the reports’
omission or inquired of the doctors as to
whether they believed Matheney was
competent to stand trial. The joint
failure of defense counsel, the
prosecution, and the court itself to (1)
obtain qualified psychiatric evaluations
from mental health professionals and (2)
hold the hearing on defendant’s
competency to stand trial that defense
counsel had requested is particularly
perplexing in light of the fact that this
is a capital offense case.
C. The Change of Venue
On March 20, 1989, the prosecution
initially filed a motion for a change of
venue to move the trial from St. Joseph
County, Indiana, which Matheney’s public
defenders successfully opposed. Later
that year, Matheney personally concluded
that a trial outside of St. Joseph County
would shield him from the influence
supposedly wielded by prosecutor Michael
Barnes, whom he believed to be the
ringleader of the conspiracy./7 Matheney
consequently filed a pro se motion
requesting a change of venue, and at the
December 21, 1989, hearing on the motion
Matheney argued (over the strenuous
objections of his attorneys) for a change
of venue based on his belief that the
alleged relationship between his deceased
ex-wife and Barnes would taint his
ability to get a fair trial in St. Joseph
County, where Barnes served as a county
prosecutor. At the hearing on his motion,
Matheney stated:
I feel that there is to [sic] many major
issues being overlooked in this case and
I feel the reasons for that is because of
the victim’s relationship with a certain
prosecutor. I also have copies of
statements from other witnesses of a
trial back in ’87 where witnesses were
told certain things and the same thing is
being repeated with the same witnesses.
They are being told to say certain things
by the prosecution . . . .
****
These attorneys here [his defense
counsel], they’re friends with Prosecutor
Barnes in this case and they are not
going to go in front of the courtroom and
give a --, produce evidence to show that
this guy was criminally involved in this
case. They got to work with this man
every day. To many issues of this --,
Frankenstein is being overlooked, so I
feel that by taking this out of the
County, then I can get a hold of a Judge,
whoever is going to sit on it, and try to
convince him . . .
The trial judge granted Matheney’s pro
se motion for a change of venue, and the
case was transferred to Lake County and
assigned to Judge James Letsinger. As a
result of the transfer of the case to
Lake County, the court-appointed public
defenders (Skodinski and Lahey) requested
that they be permitted to withdraw from
representing Matheney./8 Judge Letsinger
denied defense counsels’ request to
withdraw, but did appoint Scott King, a
Lake County defense lawyer well-versed in
the defense of death penalty cases, to
act as lead defense counsel. Skodinski
and Lahey were instructed to remain as
co-counsel and assist when necessary.
D. Trial
As noted previously, Matheney’s trial
strategy admitted the murder of Bianco,
but asserted that he was unable to
appreciate the wrongfulness of his
conduct at the time of his offense as the
result of a mental disease or defect, and
therefore legally insane. See Ind. Code
sec. 35-41-3-6(a). To this end, defense
counsel called Matheney’s sisters who
testified that he exhibited delusional
behavior in jail when he requested copies
of nonexistent documents that supposedly
revealed the existence of Bianco’s affair
with prosecutor Barnes and its relation
to his continued imprisonment. Defense
counsel also called as witnesses
attorneys who had previously represented
Matheney in civil actions and thus were
aware of his allegedly delusional
behavior. Matheney’s lawyers also called
Dr. Helen Morrison, his defense
psychiatrist, as their final witness./9
She testified that she had: 1)
interviewed Matheney; 2) reviewed his
previous mental history and reports,
including the court-ordered reports of
Drs. Batacan and Berkson; and 3) reviewed
tapes of recorded phone conversations
between Matheney and Bianco. According to
Dr. Morrison, Matheney suffered from a
"severe paranoid personality disorder
that impairs his perceptions of reality
and his perception of what is going on."
Furthermore, Dr. Morrison opined that
Matheney’s paranoid personality disorder
was "consistent" with the definition of a
"mental disease or defect" used in
Indiana’s insanity defense.
Interestingly, Dr. Morrison did not
offer any opinion (nor was she asked by
any party or the court) whether Matheney
could distinguish right from wrong at the
time of the commission of the crime, as
required by Indiana’s insanity defense
statute. Ind. Code sec.35-41-3-
6(a)./10 In fact, at post-trial
deposition on October 7, 1994, Dr.
Morrison testified that Matheney could
appreciate the wrongfulness of his
conduct at the time of the crime, and
thus was sane:
Q: [I]n your opinion did Mr. Matheney
understand the difference between right
and wrong?
A: Yes, he did.
****
Q: Did you and Mr. King [defense counsel]
ever discuss your inability to opine that
as to the second prong or the volitional
prong of the insanity defense in Indiana?
A: I am not certain what you mean.
Q: In your opinion Mr. Matheney could
distinguish between right and wrong?
A: Yes.
Q: Did you and Mr. King ever discuss the
fact that in your testimony you cannot
satisfy the cognitive portion of the
insanity defense?
A: No.
After the defense rested, the trial
court called and questioned both the
court-appointed psychiatric experts, Dr.
Batacan and Dr. Berkson, each of whom
testified that Matheney was sane at the
time he murdered his ex-wife because he
was not suffering from "a mental disease
or defect." On April 11, 1990, after one
day of deliberation, the jury returned a
verdict of guilty on both counts.
E. Sentencing
On April 12, 1990, a sentencing hearing
was conducted before the same jury that
had determined Matheney’s guilt. At
sentencing, neither the defense, the
prosecution, nor the court chose to
recall Dr. Morrison, Dr. Batacan, or Dr.
Berkson. Defense counsel pursued a
primary strategy of calling character
witnesses, who testified that Matheney
was a good father to his children, in an
effort to stave off the death penalty. In
his closing statement during sentencing,
defense counsel relied primarily on the
testimony of these character witnesses in
asking the court to spare Matheney’s
life:
[We heard] testimony from the two friends
of his, about Alan, and his brother was
one of them, about Alan with the
children. . . . He has produced and
contributed to society, and has produced
children. He has endeavored to maintain
contact with his children, his daughters.
There are positive aspects of this man.
There is a humanity in this man.
Although relying primarily on character
witnesses, defense counsel also argued
that at the time of the murder, Matheney
was unable to conform his conduct to the
requirements of the law due to a mental
disease or defect. Ind. Code sec. 35-50-
2-9(c) lists the mitigating circumstances
that a jury may consider when deciding
whether to recommend the imposition of
the death penalty. One qualifying circum
stance, known as the "inability to
conform" mitigator, states that capital
punishment may not be appropriate if:
[t]he defendant’s capacity to appreciate
the criminality of the defendant’s
conduct or to conform that conduct to the
requirements of law was substantially
impaired as a result of mental disease or
defect . . . .
Ind. Code sec. 35-50-2-9(c)(6). At the
sentencing hearing, defense counsel
asserted that the testimony elicited at
trial established that Matheney suffered
from a mental disease or defect that
substantially impaired his ability to act
lawfully:
Third, is subsection 6 under the
mitigating circumstances, the ability to
conform to the requirements of the law,
appreciate wrongfulness of conduct, due
to the existence of mental illness,
mental disease. It’s a cousin, sort of,
of the insanity defense.
We have presented evidence, I believe,
simply not medical evidence, but other
evidence: something was wrong. And
something was wrong with Mr. Matheney.
Did he know right from wrong? There’s
arguments that are advanced and were
advanced both ways. But here, we have the
additional clause of the ability to
conform one’s conduct to the requirements
of the law even if one is able to
appreciate the wrongfulness of that
conduct.
The jury rejected the defense’s
arguments and returned a unanimous
recommendation that the death penalty be
imposed. The trial judge agreed with the
jury’s recommendation, and on May 11,
1990, Matheney was sentenced to
death./11
F. State Court Post-Conviction
Proceedings
In November 1992, Indiana Public
Defender Jeff Merryman was substituted by
the Public Defender’s Office to represent
Matheney. On November 25, 1992, Merryman
filed a petition in Indiana state court
requesting post-conviction relief on
Matheney’s behalf. At a September 9,
1994, hearing on the petition held before
a state court magistrate, Merryman filed
an amended petition for post-conviction
relief raising the question of Matheney’s
competency to stand trial./12 The
amended petition for post-conviction
relief specifically asserted the
following errors relating to Matheney’s
alleged lack of competency to stand
trial:
8(G) Matheney was denied his right to a
fair trial, to due course and due process
of law, and to be free from cruel and
unusual punishment when he was subjected
to a criminal trial despite being
incompetent to understand the nature of
the proceedings or to assist in defending
the charges against him.
****
9(c)(6) Trial and appellate counsel were
ineffective in their failure to notify
the court that Matheney was incompetent
at all stages of this litigation.
Matheney was incompetent to stand trial,
and was incompetent to proceed on direct
appeal.
****
9(G) Matheney was not competent to stand
trial. His inability to trust trial
counsel rendered him unable to provide
them with any meaningful assistance in
devising a defense to the charges against
him. Nor was Matheney able to form a
rational understanding of the proceedings
against him. Had Matheney’s competence
been pursued and properly litigated,
Matheney would have been found not
competent to defend the charges.
Under Indiana law, a defendant is
competent to stand trial if "the court
finds that the defendant has the ability
to understand the proceedings and assist
in the preparation of the defendant’s
defense." Ind. Code sec. 35-36-3-1(b). In
support of the post-conviction argument
that Matheney was incompetent to stand
trial, defense counsel presented the
state magistrate judge with a combination
of depositions and affidavits, drawn
primarily from family members, former
defense attorneys, Dr. Morrison, and Dr.
Berkson, in an attempt to illustrate that
Matheney could not assist in preparing
his defense. Dr. Morrison’s deposition
testimony pointed out that she felt
Matheney was not competent to be tried:
He [Matheney] was not rational. He
continued through the time that I had
seen him to believe that this was a
conspiracy on the part of Michael Barnes
and Lisa Bianco, that he would not be in
the position if it had not been for them,
that those tapes were the only thing that
would exonerate him. I think I was asked
a question about a session where those
were the primary thoughts that continued
with him. He had no concept in my opinion
of what was going on as far as his role
in the trial was concerned. To him the
only thing that was important and the
only thing that this trial was going to
do was to prove that he had not
threatened Lisa Bianco because those
tapes could be available.
****
He was not capable of [rationally
consulting with trial counsel] because
the delusion that he maintained
interfered with any ability to look at
the reality of what he needed to go
through as far as the trial was
concerned, what the charges were.
Everything to him remained and remains a
conspiracy. (emphasis added).
Contradicting Dr. Morrison’s opinion
were Matheney’s three trial attorneys,
who testified that Matheney did
understand the proceedings and was able
to assist in his own defense. When asked
if he felt that Matheney was competent to
stand trial, Philip Skodinski stated:
I think he was [competent]. I mean, some
of his ideas were [not] good ideas, but
that doesn’t necessarily mean he wasn’t
competent to use his own defense. He
wanted to interview people and use them
as witnesses which some weren’t very good
people to use as witnesses. But I am not
sure that’s the criteria to provide you
are not competent to assist in your own
defense. It depends on what you feel is
competent.
Public Defender Charles Lahey concurred
with Skodinski, stating his belief that
Matheney was competent to be tried:
"Despite his obsessive conduct, I didn’t
find Alan that incapable of planning his
own defense. In fact, he was actively
planning it although it wasn’t right in
all regards." Lead defense counsel Scott
King similarly testified that Matheney
did not cooperate with counsel to the
full extent of his ability "partially
because he didn’t want to."/13
After considering the relevant evidence
presented and the arguments of counsel,
the state court magistrate judge ruled
that Matheney was competent to proceed
with the post-conviction proceedings and
then denied his petition for post-
conviction relief, stating:
The repeated pro se criticisms of the
attorneys, the courts, and the rulings on
the admissibility of evidence, all are in
themselves sufficient to support the
conclusion that the petitioner had always
had a very clear understanding of the
nature of the proceedings even if he did
not agree with others’ opinions of what
should be presented in those proceedings.
(Emphasis added).
G. State Court Post-Conviction Appeal
On April 1, 1996, Public Defender
Merryman appealed the state trial court’s
denial of Matheney’s petition for post-
conviction relief. His 125-page appellate
brief cited approximately 185 legal
authorities in support of the following
challenges to Matheney’s conviction and
sentence of death: (1) that the post-
conviction state court erred in failing
to reach the merits of his ineffective
assistance of counsel claim after
deciding that the pleadings were
insufficient; (2) that Matheney was
denied a full and fair hearing because
the state court magistrate judge was
biased and forced him to proceed in a
post-conviction hearing when he could not
rationally consult with counsel; (3) that
trial counsel provided Matheney
ineffective assistance in failing to
request a hearing on his competency to
stand trial; (4) that the prosecutor
committed misconduct in cross-examining a
witness at trial with inadmissible
statements made by Matheney;/14 (5)
that the jury instructions given at trial
were fundamentally erroneous because they
should have instructed the jury that
Matheney was presumed to be insane under
Indiana law; and (6) that the Indiana
death penalty statute is
unconstitutional.
The Indiana Supreme Court denied
Matheney any relief on appeal./15 See
Matheney v. State, 688 N.E.2d 883 (Ind.
1997), cert. denied, 525 U.S. 1148
(1999). As the third argument contained
in Matheney’s Indiana state post-
conviction brief (that Skodinski, Lahey,
and King were ineffective in failing to
request a hearing on his competency to
stand trial) is now before this court, we
recount the Indiana Supreme Court’s
judgment. The Indiana Supreme Court held
that defense counsel were not
ineffective:
Given the psychiatrists’ determinations
before trial, trial counsels’ own
opinions of Matheney’s competency, and
Dr. Berkson’s earlier determination of
Matheney’s competency, trial counsel were
not ineffective for failing to follow up
their request for a determination of
competency with a formal motion for a
hearing on Matheney’s competency.
Id. at 899.
II. ISSUES
As stated previously, the federal
district court denied Matheney’s petition
for a writ of habeas corpus, but granted
him a certificate of appealability on two
issues: (1) whether the state trial court
should have found Matheney incompetent to
stand trial or, in the alternative,
should have granted an evidentiary
hearing on the petitioner’s competency to
stand trial due to the problem
surrounding Matheney’s initial request
for such a hearing; and (2) whether
Matheney was denied effective assistance
of counsel at the penalty and the
sentencing phases of his trial. We also
consider Matheney’s related argument that
(3) he was denied effective assistance of
counsel because his trial counsel failed
to pursue his potential incompetency to
stand trial, thereby granting, in part,
his motion to expand the certificate of
appealability. See Porter v. Gramley, 112
F.3d 1308, 1312 (7th Cir. 1997).
III. DISCUSSION
A. Standard for Determining Entitlement to
Evidentiary Hearing
Matheney argues that the federal
district court should not have denied him
a writ of habeas corpus without at least
holding an evidentiary hearing on his
competency claims. Under 28 U.S.C. sec.
2254(e)(2), added by the Antiterrorism
and Effective Death Penalty Act (AEDPA),
the failure to develop a factual record
in the Indiana courts adequate to
adjudicate his competency claims
potentially bars Matheney from having
such a hearing:
If the applicant has failed to develop
the factual basis of a claim in State
court proceedings, the court shall not
hold an evidentiary hearing on the claim
unless the applicant shows that--
(A) the claim relies on--
(i) a new rule of constitutional law,
made retroactive to cases on collateral
review by the Supreme Court, that was
previously unavailable; or
(ii) a factual predicate that could not
have been previously discovered through
the exercise of due diligence; and
(B) the facts underlying the claim would
be sufficient to establish by clear and
convincing evidence that but for
constitutional error, no reasonable
factfinder would have found the applicant
guilty of the underlying offense.
However, we have previously held that if
the "fail[ure] to develop the factual
basis of a claim in State court
proceedings" can not be attributed to
something the petitioner "did or
omitted," Section 2254(e)(2) does not
apply and it is then necessary to
evaluate the request for an evidentiary
hearing under pre-AEDPA standards. Burris
v. Parke, 116 F.3d 256, 258-59 (7th Cir.
1997). We cannot say that Matheney,
(rather than his counsel) "failed" to
establish a record sufficient to analyze
his claims on appeal as the record
clearly establishes that the majority of
Matheney’s attempts to file pleadings
with the state courts were refused and
not considered. More importantly, justice
dictates that a hearing on whether
counsel was constitutionally deficient in
failing to establish Petitioner’s
competency to stand trial cannot be
barred by counsel’s failure to secure a
hearing and develop a record--the very
product of the alleged ineffectiveness.
See also Jones v. United States, 167 F.3d
1142, 1145 (7th Cir. 1999). We thus
consider whether Matheney was entitled to
receive an evidentiary hearing from the
federal district court.
Under pre-AEDPA standards, a federal
evidentiary hearing is required if (1) a
habeas petitioner alleges facts which, if
proved, would entitle him to relief and
(2) the state courts--for reasons beyond
the control of the petitioner--never
considered the claim in a full and fair
hearing. Porter, 112 F.3d at 1317. The
federal district court concluded that
Matheney had not received a full and fair
evidentiary hearing on his competency to
stand trial from the Indiana state
courts, Matheney v. Anderson, 60
F.Supp.2d 846, 860 (N.D. Ind. 1999), and
we agree. In this respect we note that
the Indiana Supreme Court did not discuss
Matheney’s due process and sua sponte
competency to stand trial claims when it
denied his petition for post-conviction
relief. Matheney v. State, 688 N.E.2d 883
(Ind. 1997). Therefore, if Matheney has
alleged facts in his petition that, if
proved, entitle him to relief, he is
entitled to an evidentiary hearing.
Townsend v. Sain, 372 U.S. 293, 312-13
(1963) overruled on other grounds, Keeney
v. Tamayo-Reyes, 504 U.S. 1 (1992).
B. Matheney Claims Trial Counsel Provided
Ineffective Assistance By Failing To
Pursue The Initial Request For A
Competency Hearing
Under the section of the Indiana
Criminal Code at issue, an Indiana trial
court is required to hold a competency
hearing before submitting the case to the
jury if, at any time, it has "reasonable
grounds for believing that the defendant
lacks the ability to understand the
proceedings and assist in the preparation
of his defense." Ind. Code sec. 35-36-3-
1(a). Matheney argues that he received
ineffective assistance of counsel because
his defense team did not pursue his
request for a hearing on his competency
to stand trial prior to the commencement
of trial. To establish a claim for
ineffective assistance of counsel, a
petitioner must establish that: (1) his
attorney’s performance fell below an
objective standard of reasonableness; and
(2) the attorney’s deficient performance
actually prejudiced the petitioner.
Strickland v. Washington, 466 U.S. 668,
687 (1984). Courts deferentially review
defense counsel’s performance under the
first prong, presuming reasonable
judgment unless the factual record rebuts
such a presumption. Strickland, 466 U.S.
at 689. With regard to the second prong,
the prejudice element, "[t]he defendant
must show that there is a reasonable
probability that, but for counsel’s
unprofessional errors, the result of the
proceeding would have been different."
Id.
From the record before us, we cannot
authoritatively state that defense
counsel performed reasonably under
Strickland’s first prong when, for
reasons unexplained, they allowed
Matheney to proceed to trial without
first obtaining the hearing on his
competency to stand trial that they had
previously filed with the court. The
record is unclear, at best, as to why
defense counsel, after filing a petition
requesting that the trial court order
independent psychiatrists to perform both
a competency evaluation and a sanity
examination, failed to follow through
with the competency request when it
became apparent that the trial court’s
order asked Drs. Batacan and Berkson for
opinions solely related to the question
of Matheney’s sanity at the time of his
offense. An adequate record is imperative
to properly evaluate ineffective
assistance claims. United States v.
Draves, 103 F.3d 1328, 1335 (7th Cir.
1997). An evidentiary hearing must
therefore be held to determine whether
trial counsel performed reasonably with
respect to the issue of Matheney’s
competency to stand trial.
As to the second prong of Strickland,
Matheney argues that there is a
reasonable probability he would have been
found incompetent to stand trial and
would not have been convicted if he had
been allowed to proceed with a hearing on
his competency to stand trial. A
defendant who is tried and convicted of a
crime while legally incompetent has been
denied his due process right to a fair
trial. Drope v. Missouri, 420 U.S. 162,
172 (1975); Pate v. Robinson, 383 U.S.
375, 378 (1966). The Supreme Court has
held that if a state fails to observe its
statutorily prescribed procedures aimed
at testing whether a defendant is
competent to stand trial, then that
defendant’s right to procedural due
process has been violated. Drope, 420
U.S. at 172. Certainly, a question has
been raised as to Matheney’s mental
capacity to stand trial by Dr. Morrison’s
deposition testimony, which reads in
pertinent part:
He [Matheney] was not rational. He
continued through the time that I had
seen him to believe that this was a
conspiracy on the part of Michael Barnes
and Lisa Bianco, that he would not be in
the position if it had not been for them,
that those tapes were the only thing that
would exonerate him. I think I was asked
a question about a session where those
were the primary thoughts that continued
with him. He had no concept in my opinion
of what was going on as far as his role
in the trial was concerned. To him the
only thing that was important and the
only thing that this trial was going to
do was to prove that he had not
threatened Lisa Bianco because those
tapes could be available.
****
He was not capable of [rationally
consulting with trial counsel] because
the delusion that he maintained
interfered with any ability to look at
the reality of what he needed to go
through as far as the trial was
concerned, what the charges were.
Everything to him remained and remains a
conspiracy. (emphasis added).
Based upon the legitimate questions
raised in the record relating to
Matheney’s competency to stand trial, we
are of the opinion that Matheney was
entitled to and should have received an
evidentiary hearing on his petition. We
thus remand Alan Matheney’s case to the
district court to hold an evidentiary
hearing on three issues raised in his
appellate brief surrounding his
competency to stand trial: (1) whether
Matheney was competent to stand trial in
1990; (2) whether Matheney’s counsel were
ineffective when they failed to pursue
the initial request for a
competencyhearing; and (3) whether the
state trial court was obligated to hold a
competency hearing sua sponte. See Lewis
v. Lane, 822 F.2d 703 (7th Cir. 1987).
The district court will have access to
the medical records from three doctors
(Berkson, Batacan, and Morrison) who
examined Matheney in 1989, including, but
not limited to, psychiatric evaluations
both before and after the commission of
his crimes. In addition, the district
court has the testimony from Matheney’s
criminal defense counsel and civil
counsel that is already in the record.
Finally, as the district court enjoys
broad discretion in fashioning the scope
of the hearing, Wright v. Gramley, 125
F.3d 1038, 1044 (7th Cir. 1997), it may
well desire to consider any additional
information that would assist the
court./16
C. Petitioner Claims Trial Counsel
Provided Ineffective Assistance At The
Sentencing Phase Of His Trial By Failing
to Present Additional Evidence That
Petitioner’s Alleged Mental Illness Was A
Mitigating Factor.
Matheney also claims that during the
sentencing phase of his trial, his
attorneys failed to present evidence that
he suffered from a "mental disease or
defect" that prevented him from
controlling his conduct at the time of
the murder, and that this failure denied
Matheney effective assistance of counsel.
As with any allegation of ineffective
assistance of counsel, we review
Matheney’s claim under the two-prong test
of Strickland. As recently determined by
the United States Supreme Court, we can
only grant Matheney a writ of habeas
corpus on this issue if we find that the
Indiana Supreme Court’s rejection of his
claim was either "contrary to . . . or
involved an unreasonable application of"
the performance and prejudice rules set
out in Strickland. Williams v. Taylor,
120 S.Ct. 1495, 1523 (2000). In other
words, "we must determine that the state-
court decision was both incorrect and
unreasonable before we can issue a writ
of habeas corpus." Washington v. Smith,
219 F.3d 620, 628 (7th Cir. 2000). Under
Strickland, a petitioner must establish
that his counsel’s performance was
deficient and that the petitioner was
prejudiced by counsel’s substandard
performance. The petitioner "bears a
heavy burden when seeking to establish an
ineffective assistance of counsel claim."
Drake v. Clark, 14 F.3d 351, 355 (7th
Cir. 1994).
Matheney concedes that during the
sentencing phase of the trial, his
attorneys argued to the jury that he was
suffering from a mental disease or defect
that rendered him unable to conform his
conduct to the requirements of the law.
His attorneys also urged the jury to
consider this to be a factor weighing
against recommending imposition of the
death penalty. However, Matheney argues
that he was prejudiced when his counsel
failed to present "readily available
evidence that, at the time of the crime,
[Matheney] was ’grossly psychotic’" and
unable to conform his conduct to the
requirements of the law. The "readily
available evidence" Matheney points to is
testimony from Dr. Helen Morrison
regarding the specific elements of the
"inability to conform" death penalty
mitigator. Matheney’s ineffective
assistance of counsel at sentencing claim
argues that if such testimony from Dr.
Morrison had been presented, there is a
reasonable probability that the jury and
judge would have reached a different
conclusion as to whether imposition of
the death penalty was appropriate. We
disagree, and hold that the trial judge’s
stated rationale for choosing to give
little or no weight to the "inability to
conform" death penalty mitigator
precludes a reasonable probability that
additional testimony from Dr. Morrison
could have had an effect on the judge’s
decision to impose the death penalty.
Matheney was therefore not prejudiced by
any arguable deficiency by counsel in
this regard, and we affirm the district
court’s decision on this issue.
As discussed previously, to establish a
claim for ineffective assistance of
counsel, Matheney must demonstrate that:
(1) his attorneys’ performance at
sentencing fell below an objective
standard of reasonableness; and (2) his
attorneys’ deficient performance actually
prejudiced him. Strickland, 466 U.S. at
687. With respect to the second, or
"prejudice" prong of the Strickland test,
the defendant must demonstrate that there
is a reasonable probability that, but for
counsel’s error, the result of the
proceeding would have been different.
Strickland, 466 U.S. at 694. A reasonable
probability is "a probability sufficient
to undermine confidence in the outcome."
Id.
The second prong of the Strickland test
has been applied to alleged errors of
counsel committed during the sentencing
phase of a capital case. As this court
has previously held:
In the penalty phase of a capital case,
to show prejudice the movant must
demonstrate that "a reasonable
probability exists that, but for
counsel’s substandard performance, the
sentencer ’would have concluded that the
balance of aggravating and mitigating
factors did not warrant death.’"
Foster v. Schomig, 223 F.3d 626, 636-37
(7th Cir. 2000) (emphasis added); see
also Hall v. Washington, 106 F.3d 742,
751-52 (7th Cir. 1997); Strickland, 466
U.S. at 695.
We need not determine the first, or
"performance," prong of the Strickland
test, if we find that counsel’s alleged
deficiency did not prejudice the
defendant. Strickland, 466 U.S. at 697;
Milone v. Camp, 22 F.3d 693, 701 (7th
Cir. 1994). We hold that Matheney cannot
meet his burden of establishing prejudice
because the trial judge’s stated
rationale for imposing the death sentence
precludes a reasonable probability that
additional testimony from Dr. Morrison
would have affected the court’s
sentencing decision. Thus it is not
necessary for us to decide the
"performance" prong of the Strickland
test and render an opinion on the
objective reasonableness of counsel’s
decision not to call Dr. Morrison at the
sentencing phase of the trial.
It is important to understand that under
Indiana law, "the sentencer," as that
phrase was used in Strickland and Hall,
refers exclusively to the trial judge,
and not the jury. While Indiana law
provides for a jury recommendation on the
appropriateness of the death penalty, the
trial judge has the exclusive power to
impose sentence, and is under no
obligation to heed, or give substantial
weight to, the jury’s recommendation.
Ind. Code sec. 35-50-2-9(e).
Indiana law is clear on this point. Even
if a jury has recommended imposition of
the death penalty, the trial judge is
still required to independently weigh the
evidence and reach a "separate
conclusion":
[A]fter any jury recommendation pursuant
to the death penalty statute, the trial
court as trier of fact must independently
determine the existence of aggravators
and mitigators, weigh them, consider the
recommendation of the jury, and come to a
separate conclusion as to whether or not
to impose the death penalty.
Kennedy v. State, 578 N.E.2d 633, 637
(Ind. 1991), cert. denied, 503 U.S. 921
(emphasis added).
In Indiana, however, unlike Mississippi,
the jury does not have the ultimate power
of decision. The jury makes a
recommendation to the judge about whether
or not to impose the death penalty, but
the judge is not required to follow the
recommendation--it is his decision to
make, not the jury’s. . . . In Indiana,
the sentencing judge must give due
consideration to the jury’s
recommendation, but he need not give it
any particular weight.
Fleenor v. Anderson, 171 F.3d 1096, 1098
(7th Cir. 1999) (emphasis added).
Thus, to prevail on his ineffective
assistance at sentencing claim, Matheney
is required to demonstrate that but for
counsel’s decision not to call Dr.
Morrison to the stand, there is a
reasonable probability that the trial
judge (not the jury) would have found
that the balance of aggravating and
mitigating factors did not warrant
imposition of the death penalty. As we
shall discuss below, the trial judge’s
articulated reasons for imposing the
death penalty lead us to the conclusion
that there is no reasonable probability
that any additional testimony from Dr.
Morrison could have affected Matheney’s
ultimate sentence.
1. The Legal Standards
The elements of the Indiana insanity
defense are slightly different than those
of the "inability to conform" sentencing
mitigator. However, for purposes of this
case it is important to focus on the
similarities between the two standards:
Both require proof that the defendant
suffered from a "mental disease or
defect." Indiana’s insanity defense
statute provides as follows:
A person is not responsible for having
engaged in prohibited conduct if, as a
result of mental disease or defect, he
was unable to appreciate the wrongfulness
of the conduct at the time of the
offense.
Ind. Code sec. 35-41-3-6(a).
As noted previously, Indiana’s
"inability to conform" death penalty
mitigator states that the court may
consider the following as mitigation
against imposition of the death penalty:
The defendant’s capacity to appreciate
the criminality of the defendant’s
conduct or to conform that conduct to the
requirements of the law was substantially
impaired as a result of mental disease or
defect or of intoxication.
Ind. Code sec. 35-50-2-9(c)(6).
Both statutes require a defendant to
make the threshold showing of the
existence of a mental disease or defect,
although the required degree of
volitional impairment resulting from the
disease or defect differs under the two
standards. Obviously, if a defendant is
unable to establish that he suffered from
a mental disease or defect at the time of
the crime, he cannot establish either an
insanity defense or the death penalty
mitigator. A finding that a defendant did
not suffer from a mental disease or
defect precludes the application of both,
or either, of these statutes.
2. The Opinions of the Doctors
During the guilt phase of the trial, the
two independent expert witnesses
disagreed with Dr. Morrison on the issue
of whether Matheney suffered from a
"mental disease or defect" at the time of
the murder. Dr. Morrison opined that at
the time Matheney murdered his ex-wife,
he was suffering from a personality
disorder that was consistent with the
existence of a "mental disease."/17
Dr. Morrison’s opinion was diametrically
opposed to that of the two independent
court-appointed psychiatrists who also
testified during the guilt phase of the
trial. Both Drs. Batacan and Berkson--
appointed to serve as neutral experts for
the court--opined that Matheney was not
suffering from a mental disease or defect
at the time of the murder. Both doctors
gave unequivocal testimony on this issue.
Dr. Batacan testified as follows:
Q: Okay, let me ask you the next question
in sequence, then. Did you, as a result
of questioning the defendant, Alan L.
Matheney, observe any symptoms of mental
disease or defect?
A: No, your Honor, I did not.
Q: Are you able to, as a normal course,
when a person does have symptoms of
mental disease or defect, are you able to
detect that by the method which you’ve
outlined to us today?
A: Yes, your honor.
This opinion was reiterated in Dr.
Batacan’s written report, which stated
that Matheney was not suffering from any
"mental disease or defect, either at the
time of the interviews or during the
murder of his ex-wife." (emphasis added).
As stated in his report, Dr. Batacan’s
opinion stems from his interviews with
Matheney:
He has an intact memory for both remote
and recent events. He is fully oriented
to time, place, person and specific
situations. He denies experiencing
unrealistic ideas and feelings. He has
not experienced any distorted
interpretation and perception of reality,
such as hallucinations and delusions. His
feelings of being aggrieved and beliefs
of being unjustly [treated] are very real
to him. His affect is appropriate. He
does not show any signs and symptoms of
mental disease or mental defect now nor
during the event in question. (emphasis
added).
Dr. Batacan’s conclusion that Matheney
never suffered from a mental disease or
defect was shared by Dr. Berkson. The
second independent expert testified as
follows:
Q: Are you able to discern symptoms of
mental disease or defect by questioning a
subject like that?
A: Yes, sir.
Q: Did you, as a result of your
examination, discover any symptoms of
mental disease or defect in Mr. Matheney?
A: No, sir, I did not.
In his written report to the court, Dr.
Berkson confirmed his conclusion that
"Alan Matheney did not suffer from a
mental disease or defect . . . at the
time of the offense."/18
3. The Trial Judge’s Sentencing Decision
Bearing in mind the applicable legal
standards and the content of the three
psychiatrists’ trial testimony regarding
the existence of a mental disease or
defect, we turn now to the trial judge’s
sentencing decision. For purposes of
Matheney’s ineffective assistance at
sentencing claim, a crucial consideration
is the rationale given by the judge for
not giving weight to the "failure to
conform" mitigator. Significantly, the
record does not reflect a finding by the
judge that Matheney had failed to submit
convincing evidence that he was unable to
conform his conduct to the requirements
of the law (the omitted sentencing
testimony on which the dissent relies).
Indeed, it was not necessary for the
judge to reach that issue once he chose
to give no credence to Dr. Morrison’s
threshold premise that Matheney suffered
from a mental disease. The judge’s
sentencing decision correctly makes no
distinction between a diagnosis of
"mental disease or defect" offered in
support of the insanity defense and one
offered in support of the death penalty
mitigator, as the element is a
prerequisite to the application of both
statutes. The judge’s sentencing decision
implicitly recognizes that it makes no
difference when Dr. Morrison’s opinion on
the existence of a mental disease was
offered--during the guilt phase of the
trial, the sentencing phase, or both. The
rejection of this opinion for one purpose
is a rejection of the opinion for both
purposes.
At sentencing, the court identified and
discussed each of the mitigating factors
it considered. With respect to the
"failure to conform" mitigator, the court
stated the following on the record:
6. Standard: The defendant’s capacity to
appreciate the criminality of the
defendant’s conduct or to conform the
conduct to the requirements of the law
was substantially impaired as a result of
mental disease or did he [sic] defect or
of intoxication. Facts: This mitigating
factor is the old insanity defense since
repealed. It’s definition contains the
cognitional function as well as the
volitional function of the mind. Since it
has not been repealed, it will be
considered as it presently exists. The
defense expert, Dr. Morrison, offered a
diseased mind diagnosis rejected by the
jury. Mr. Matheney has proven to be aware
of the criminal justice system including
methods to manipulate it. The Court
concurs with Dr. Batacan and Dr. Berkson
that the defendant has been feigning
symptoms of mental illness. This defense
was rejected by the jury. However, that
does not dispose of the issue. It may be
considered a mitigating factor though not
rising to the level of a defense. It
should also be noted here that the
verdict form in Phase I of guilty but
mentally ill was not selected by the
jury. The jury, as well as the Court, has
concluded that mental disease or defect
was nonexistent in this case. Neither was
the defendant acting under an
irresistible impulse. He had been
planning this murder for some time. He
had solicited others in prison to kill
Mrs. Bianco. These plans, of course,
proved unsuccessful. There was no
evidence that he had been drinking or on
drugs.
(emphasis added).
As the preceding quote from the
transcript makes clear, the trial judge
thoroughly considered all the evidence
and the opinions offered by the medical
experts and chose to believe, or give
greater weight to, the opinions of Drs.
Batacan and Berkson that Matheney was not
suffering from any mental disease or
defect at the time of his fatal assault
on his ex-wife. It is not our role to
second-guess a credibility determination
made by an experienced trial judge for
purposes of sentencing. United States v.
Tolson, 988 F.2d 1494, 1497 (7th Cir.
1993). The judge’s decision to reject Dr.
Morrison’s diagnosis is critically
important because the existence of a
mental disease or defect is the element
common to both the insanity defense and
the "inability to conform" death penalty
mitigator. A failure to convince the jury
or judge that a defendant is suffering
from a mental disease or defect precludes
application of both the insanity defense
and the death penalty mitigator, and this
is what happened in Matheney’s case. Had
Dr. Morrison been recalled to the stand
during the penalty phase of the trial,
her opinion as to the existence of a
mental disease or defect would obviously
have been the same opinion she gave
during the guilt phase of the trial. In
light of this fact, and the judge’s
clearly enunciated reasoning for
rejecting the mitigating factor, we are
convinced that Matheney has failed to
demonstrate a reasonable probability that
additional testimony from Dr. Morrison
would have led the trial judge to impose
a sentence other than death.
This would be quite a different case had
the trial judge based his sentencing
decision on a conclusion that Matheney
was suffering from a mental disease, but
that Matheney had failed to produce
evidence that the disease rendered him
incapable of conforming his conduct to
the requirements of the law. If that were
the case, a credible argument could be
advanced that additional testimony from
Dr. Morrison might have affected the
court’s sentencing decision. As the
record stands, the judge’s rejection of
the existence of a mental disease or
defect is determinative of this issue on
appeal. The district court’s decision
must therefore be affirmed in this
respect.
4. Aggravating Sentencing Factors
Alternatively, even if Dr. Morrison’s
testimony had been presented at
sentencing, and even if the sentencing
judge had for some reason given credence
to her opinions on the second go-around,
this alone does not establish a
reasonable probability that Matheney
would not have received the death
penalty. Under Indiana law, the presence
of one (or more than one) mitigating
factor does not preclude imposition of
the death penalty. Rather, the statutory
aggravating factors are weighed against
the mitigating factors, and the resulting
balance determines the appropriateness of
the death penalty. Kennedy, 578 N.E.2d at
637; see also Foster, 223 F.3d at 637.
The majority disagrees with the dissent’s
conclusion that evidence of the
aggravating factors was "not strong." We
are convinced that the existence of
aggravating factors was more than
sufficient to uphold imposition of the
death penalty even in the face of
testimony that Dr. Morrison might have
presented in the sentencing phase of the
trial.
a. Lying-in-Wait Aggravator
The dissent characterizes the evidence
supporting the "lying-in-wait" aggravator
as "weak at best," but this view is not
supported by the record. Indeed, the
dissent offers no explanation for its
position that the evidence was "weak,"
other than to cite a dissenting opinion
from one justice on the Indiana Supreme
Court out of the five who heard the case.
The majority interprets the fact that a
majority of the Indiana Supreme Court
found the evidence of aggravating factors
to be sufficient to uphold the sentence
to be testament to the strength of that
evidence rather than its "weakness," and
we are at a loss to understand how the
dissent can view it in any other fashion.
The totality of the evidence paints
Matheney as a cold, calculating killer--
one clear-headed enough to scheme and
plan the fatal act. The record
demonstrates that: (1) Matheney parked
his vehicle in a parking lot near an
alley behind Bianco’s house, a full city
block away, despite the fact that there
was available parking in close proximity
to the home; and (2) Matheney approached
the home not via the front door or the
city street, but rather by approaching
from the rear, walking down an alley and
through a backyard secluded by a dense
growth of bushes and trees, a large
wooden gate, and a garage. These facts
were not contested by Matheney at trial,
and they obviously lend much credence to
the prosecution’s theory that Matheney’s
objective was to surprise Bianco and
violently assault her while she remained
in an off-guard and vulnerable position.
The Indiana Supreme Court summarized its
opinion on this issue as follows:
It would be reasonable for the trier of
fact to conclude that appellant had used
a circuitous approach toward Bianco’s
house in order to conceal himself from
her and that testimony regarding the
amount of time involved tended to prove
that appellant waited and watched until
he could take Bianco by surprise. The
evidence regarding his use of a deadly
weapon was indicative of his intent to
kill. The evidence was sufficient to
support the finding that this aggravating
factor was proven beyond a reasonable
doubt.
Matheney, 583 N.E.2d at 1208-09.
The prosecution convincingly established
a time-line showing that: (1) Matheney
went to Snider’s home to obtain a weapon
and left Snider’s home with the shotgun
at approximately 2 p.m.; and, (2) he did
not break into Bianco’s home until at
least an hour later, despite the relative
proximity of the two residences. From
this time-line, and the evidence of
Matheney’s roundabout approach and entry
into Bianco’s home, it is reasonable to
conclude (as the trial court did) that
Matheney was "lying in wait" in Bianco’s
backyard in an effort to take her by
surprise. See Matheney, 583 N.E.2d at
1204-05.
In fact, as recognized in the dissent,
throughout the long appellate history of
this case, only Justice DeBruler alone of
the five member Indiana Supreme Court was
of the opinion that the evidence and
time-line did not adequately support a
finding that the "lying-in-wait"
aggravator was proven beyond a reasonable
doubt. Once again, the majority
interprets the fact that only a single
justice questioned the trial judge’s
decision on the lying-in-wait aggravator
as a testament to the strength of that
evidence.
b. Felony Murder Aggravator
The dissent takes the position that the
intentional killing while committing a
burglary aggravator should not have been
be given much weight in the trial court’s
sentencing decision. In effect, the
dissent is re-weighing the evidence and
goes on to characterize the evidence
supporting this aggravator as being "not
as compelling in this case as in others."
Once again, the dissent relies
exclusively on the dissenting opinion of
a single Justice of the five-member
Indiana Supreme Court as support for the
position that the felony murder
aggravator is not "compelling" when the
burglary is accomplished for purposes of
committing the murder, as opposed to a
separate felony. Obviously, the majority
of the Indiana Supreme Court did not
agree with this position, nor do we. We
agree with the Indiana Supreme Court that
the felony murder aggravator applies to
the very situation present in this case--
forcible entry of a residence with the
intent to commit murder. Matheney, 583
N.E.2d at 1207.
The testimony from witnesses, including
Matheney’s own young daughter,
demonstrated that Matheney burst through
the back door of Bianco’s home and
confronted his ex-wife in the presence of
their daughter, while armed with the
shotgun that he later used to bludgeon
Bianco to death with such force that the
weapon was literally smashed to pieces.
See Matheney, 583 N.E.2d at 1204-05.
Matheney’s violent assault and ultimate
murder of Lisa Bianco was horrific in and
of itself; the fact that it was
accomplished by a forcible surprise
attack in the home makes it all the more
reprehensible, given the recognized
importance of the "home as a sanctuary."
See Moore v. Marketplace Restaurant,
Inc., 754 F.2d 1336, 1343 (7th Cir.
1985); Welsh v. Wisconsin, 466 U.S. 740
(1984).
c. Balancing the Sentencing Factors
Under Indiana law, a sentencing judge is
not permitted to consider evidence
supporting a mitigating factor in
isolation. Rather, the judge is obligated
to balance the strength of such evidence
against the facts supporting the
aggravating factors. In light of the
facts underscoring the brutal nature of
this crime and its occurrence inside the
supposed sanctuary of Bianco’s home, we
are not convinced that additional
testimony from Dr. Morrison at
sentencing, if it had been presented and
believed, would have necessarily tipped
the balance against imposition of the
death penalty. As we noted in Foster:
Sentencing judges may not be impressed
with the idea that to know the cause of
viciousness is to excuse it; they may
conclude instead that when violent
behavior appears to be outside the
defendant’s power of control, capital
punishment is appropriate to
incapacitate.
Foster, 223 F.3d at 637.
We must remember that the judge heard
substantial evidence demonstrating
Matheney’s extensive planning and
deliberate execution of the fatal
assault. The judge also heard testimony
from the arresting officer that Matheney
was calm, relaxed, and displayed no
nervousness or distress when he turned
himself in approximately two hours after
committing the murder. Rather, Matheney
calmly informed the officer that he
assumed his ex-wife had died as a result
of his assault. The officer testified
that between the time of the murder and
the time he turned himself in, Matheney’s
primary concern was with purchasing
cigarettes to take with him to jail.
These facts, demonstrating the
deliberate, well-planned and fully pre-
meditated nature of the murder, were
uncontested by Matheney at trial. The
judge also heard evidence concerning the
extreme violence of the murder; how the
shotgun was smashed into pieces by the
force of Matheney’s blows to Bianco’s
body. In light of the aggravating
circumstances set forth in this record,
we certainly cannot agree that there is a
reasonable probability that the presence
of a single mitigating factor would
necessarily have staved off imposition of
the death penalty. For this additional
reason, we are convinced that Matheney
was not prejudiced, even if one accepts
the premise that his counsel did not
perform reasonably at sentencing.
IV. CONCLUSION
We affirm the district court’s decision
that the petitioner’s ineffective
assistance of counsel claim with respect
to the sentencing phase of his trial is
without merit. We also hold that the
petitioner is entitled to an evidentiary
hearing in the district court in order
that he might be given the opportunity to
offer evidence to develop the factual
basis of his claim surrounding his
competency to stand trial. This case is
REMANDED to the district court with
INSTRUCTIONS to proceed with an evidentiary
hearing consistent with this opinion.
FOOTNOTES
/1 Matheney and Bianco were divorced on June 19,
1985, and Bianco was awarded custody of the
couple’s two daughters. Matheney initially was
granted supervised visitation. On the day of his
first unsupervised visitation, July 3, 1985,
Matheney seized his children and left Indiana for
other parts of the United States. He was
apprehended on August 23, 1985, in North Carolina
and charged with confinement. He was convicted
and sentenced on the confinement charge and of a
battery charge stemming from an earlier physical
attack on his ex-wife.
/2 Bianco’s neighbor Wilbur Stockdale testified that
he opened the front door of his home, yelled at
Matheney, and then chased him until Matheney
reached his car and drove away.
/3 The "Order for Examination Concerning Sanity"
issued by the court was a "form" order containing
boilerplate language regarding the appointment of
doctors for an investigation into the sanity of
a criminal defendant at the time of the commis-
sion of the offense.
/4 Judge Swartz instructed the doctors in conformity
with Indiana’s legal test for insanity, codified
at Ind. Code sec. 35-41-3-6(a), which states:
A person is not responsible for having engaged in
prohibited conduct if, as a result of mental
disease or defect, he was unable to appreciate
the wrongfulness of the conduct at the time of
the offense.
The definition of "mental disease or defect"
contained in her instructions quotes the defini-
tion adopted by the legislature. See Ind. Code
sec. 35-41-3-6(b).
/5 In addition to being undated, the report is
devoid of any file-stamp date as to when the
report was filed with the court. Therefore, it is
impossible to specifically determine when the
report was prepared, other than to note it was
after June 21, 1989 (the date of Dr. Batacan’s
second interview with Matheney) and prior to May
1990 (when Dr. Batacan testified at Matheney’s
trial).
/6 Dr. Berkson’s report states that he interviewed
Matheney on two different occasions, once on
April 14, 1989, and on a previous date, but the
report fails to disclose the date of the first
interview.
/7 Not surprisingly, there is nothing in the record
that supports Matheney’s claim that Barnes’
prosecution of him was prompted by any improper
motive.
/8 Skodinski and Lahey argued that, as public de-
fenders for St. Joseph County, the change of
venue outside St. Joseph County imposed severe
transportation and caseload difficulties upon
them.
/9 Dr. Morrison testified that she maintained a
practice in both Hammond, Indiana, and Chicago,
Illinois. She further testified that she had been
certified as an expert in more than 100 previous
trials and had testified for both the prosecution
and defense. Prior to testifying for Matheney,
she had testified "three or four times" in Indi-
ana, always for the prosecution.
/10 As noted, Indiana law requires that a defendant
asserting the insanity defense prove both: (1)
the existence of a mental disease or defect, and
(2) that as a result of the mental disease or
defect, he could not appreciate the wrongfulness
of his conduct at the time of the crime. See Ward
v. State, 438 N.E.2d 750, 753 (Ind. 1982).
/11 In 1992, Matheney was denied relief by the Indi-
ana Supreme Court on direct appeal. The court
held that: (1) Matheney was not entitled to have
the jury instructed on manslaughter grounds
because there was no evidence that Bianco had
"provoked" him into acting with the "sudden heat
of passion"; and (2) sufficient evidence support-
ed the trial court’s decision that the prosecu-
tion proved aggravating circumstances warranting
imposition of the death penalty. See Matheney v.
State, 583 N.E.2d 1202 (Ind. 1992), cert. denied,
504 U.S. 962 (1992).
/12 On the same day as the hearing on Matheney’s
petition for post-conviction relief, defense
counsel sought a stay of the post-conviction
proceedings on the ground that Matheney was
incompetent to proceed with the hearing. Inter-
estingly, Matheney resisted his attorneys’ tac-
tics by filing pro se motions offering to prove
his own competence to proceed with the post-
sentencing hearing.
/13 Further, on direct questioning from the state
magistrate judge at Matheney’s state post-convic-
tion proceedings, Matheney exhibited a level of
knowledge that led the state magistrate judge to
determine that Matheney was competent to proceed
with the post-conviction hearing:
Q. Mr. Matheney, do you know who I am?
****
A. Magistrate Page.
Q. And do you know what my function is here?
A. Today you are presiding over this post convic-
tion hearing. . . .
Q. What is a post conviction hearing?
A. The attack of the legalities of your convic-
tion, whether it was legal or illegal, to bring
up issues that you feel that a defendant has a
right to a new trial or sentence relief or
whatever.
****
Q. Your attorneys have filed a Petition for Post
Conviction Relief, in which numerous grounds are
alleged. Have you had an occasion to read this
petition?
A. I read it a couple of times, and I just paid
attention to the grounds that pertained to me.
There’s a lot of stuff in there, statutorily,
that they put in everybody’s death penalty; and
I didn’t pay too much attention to, because
they’ve already been ruled on over and over
again.
Q. And the doctor said that you felt or seemed to
indicate or give the impression that you felt
that these issues were frivolous, because the
only issue you feel is relevant is the one about
[the alleged conspiracy between your wife and the
prosecuting attorney at your trial] or this--
A. No. There’s a lot of issues in there that I
agree with. The only ones that I didn’t agree
with were the ones that they keep putting in
everybody’s issue, that the Supreme Court keeps
turning down.
****
Q. Well, the general challenges to the death
penalty itself?
A. Right, yes.
Q. You feel that those are a waste of time
because of the previous rulings of the Supreme
Court?
A. Yeah. When I discussed them, they said, well,
you never know when you’re going to get a new
Supreme Court; but a new Supreme Court don’t come
along often enough in this decade.
Q. Does that seem unreasonable for them to take
that position? Have you not seen cases where a
court will rule the same way over and over again;
and then all of a sudden, along comes the same
question and they say, well, now that we think
about it, we’ve changed our mind?
A. Yeah, I’ve seen cases like that. I just felt
that there could have been more issues investi-
gated and put in this than what was . . . . I
believe during this whole thing that they want to
investigate my childhood. Well, that has abso-
lutely nothing--what I repeatedly told them, over
and over again, is that what you should concen-
trate on is what had taken place, you know, the
death of Lisa Bianco, and what caused it; and we
should concentrate on investigating this particu-
lar, you know, period of time. Going back to my
childhood 30 or 40 years ago, to me, doesn’t seem
like it’s--you know, it’s a waste of time, a
waste of valuable time. I think time could be
better spent on investigating things about the
incident itself.
/14 At trial, prosecutors had cross-examined Mike
Scopelitis, an attorney who had represented
Matheney in his divorce from Bianco, with a
series of questions focusing on whether Matheney
had ever admitted to Scopelitis that he had
threatened Bianco. The prosecution based its
questions to Scopelitis on the content of tape-
recorded phone calls that had been excluded by
the trial judge as inflammatory.
/15 The Indiana Supreme Court held: (1) Matheney was
competent to stand trial; (2) he was not denied
a fair trial as a result of the trial court’s
refusal to allow defense counsel to call a prose-
cutor as a defense witness on the issue of
insanity; (3) that viewing the totality of the
circumstances, no constitutional error was com-
mitted in the sentencing procedures. Matheney v.
State, 688 N.E.2d 883 (Ind. 1997), cert. denied,
525 U.S. 1148 (1999).
/16 For example, the district court may decide that
additional psychiatric analysis will be helpful
to its decision. United States v. Franzen, 686
F.2d 1238, 1247 (7th Cir. 1982) (noting that
habeas petitioner’s "possible lack of fitness
appears to be of a permanent rather than transi-
tory nature; therefore further medical or psychi-
atric testing may be relevant.").
/17 The majority is perplexed by the dissent’s insis-
tence that Dr. Morrison was not properly prepared
by defense counsel to testify at trial. If, in
fact, Dr. Morrison’s potential testimony at
sentencing regarding Matheney’s mental condition
would have had the substantial impact that the
dissent attempts to ascribe to it, we fail to
understand how she could have been unprepared to
testify. Moreover, simply asserting that defense
counsel did not spend sufficient time with a
witness prior to trial is insufficient to main-
tain a claim for ineffective assistance of coun-
sel. United States v. Olson, 846 F.2d 1103, 1108
(7th Cir. 1988). As we noted in Olson, an experi-
enced attorney can accomplish far more in a
single conference with a witness than a neophyte
lawyer can get out of several. Id.
In any event, whether or not defense counsel
properly prepared Dr. Morrison to testify at
sentencing is not relevant to our analysis be-
cause we find that her opinion, even if it had
been presented as the dissent characterizes it,
would not have altered the trial judge’s decision
to impose the death penalty. After Dr. Morrison
testified during the guilt phase of the trial,
the trial judge was fully aware of her opinion
that Matheney was suffering from a mental disease
or defect at the time of the murder. The judge
weighed that opinion against the contrary opin-
ions of Drs. Batacan and Berkson and chose to
give greater credence to the opinion of the
court-appointed psychiatrists. The judge’s sen-
tencing decision also carefully weighed and
considered all the testimony presented by law
enforcement personnel regarding the nature of the
crime and the entire criminal investigation.
/18 The dissent’s quotation from Dr. Berkson’s trial
testimony is taken out of context. Dr. Berkson
did not merely testify that Matheney did not
suffer from a mental disease that rendered him
incapable of distinguishing right from wrong. Dr.
Berkson testified that at the time the murder was
committed, Matheney did not suffer from any
mental disease or defect at all.
ROVNER, Circuit Judge, concurring in part, dis-
senting in part. I join in the majority’s
thorough opinion regarding the issue of Mathe-
ney’s competence to stand trial. I write sepa-
rately only because I would reverse the district
court on the sentencing issue as well because
Matheney’s trial attorney failed to present
critical mitigating evidence at the sentencing
hearing.
A defendant’s mental disease or defect is
relevant both to an insanity defense and to the
death penalty determination, but the standards
are different in those two contexts. The insanity
defense does not apply if a defendant is able to
appreciate the wrongfulness of his conduct, even
if the defendant is unable to conform his conduct
to the requirements of the law. Matheney v.
State, 688 N.E.2d 883, 898 (Ind. 1997), citing
Ind. Code sec. 35-41-3-6 (West 1986). In con-
trast, it is a mitigating factor at sentencing
that a defendant was unable to conform his con-
duct to the requirements of the law. Id., citing
Ind. Code sec. 35-50-2-9(c)(6) (West Supp. 1996).
Therefore, a jury’s rejection of the insanity
defense at trial does not preclude the applica-
tion of that mitigating factor at sentencing.
Matheney’s counsel chose to argue that mitigat-
ing factor at the sentencing hearing, but failed
to produce the critical evidence supporting it.
Matheney’s counsel argued that, even if Matheney
was not able to prove insanity because he could
distinguish right from wrong, he nevertheless
could establish the presence of the mitigating
factor because he was unable to conform his
conduct to the requirements of the law. As the
majority recognizes, Matheney’s counsel did not
make a tactical decision to forego that mitigat-
ing factor in favor of others, but affirmatively
argued that factor. His counsel failed, however,
to introduce any psychiatric testimony establish-
ing that Matheney was unable to conform his
conduct to the requirements of the law. At a
hearing on Matheney’s petition for post-convic-
tion relief, Dr. Morrison testified that Matheney
understood that his conduct was wrongful, but
that his actions at the time of the murder were
defined by the delusions he experienced, render-
ing him incapable of conforming his behavior to
the requirements of the law. In other words, her
testimony would have been consistent with the
jury verdict rejecting the insanity defense, but
would have established the mitigating factor
based on his mental illness. Matheney’s counsel
failed to present that testimony--or any testimo-
ny--to support the argument that the mitigating
factor was met. That failure may be explained by
Dr. Morrison’s testimony that defense counsel
spent only one hour with her preparing her for
the deposition, and no time subsequent to that
preparing her to testify at trial. Defense coun-
sel never even described the standards for insan-
ity or the mitigating factors under Indiana law,
and never asked her at trial or sentencing the
critical questions of whether Matheney could
appreciate the wrongfulness of his conduct and
conform his conduct to the requirements of the
law. That lack of preparation by trial counsel is
telling given that Matheney’s defense was insani-
ty, Dr. Morrison was the key psychiatric witness,
and the strongest factor mitigating against the
death penalty was his mental illness.
Because Matheney’s counsel failed to present Dr.
Morrison’s testimony at sentencing, and failed to
elicit that critical testimony at trial which
then could have been considered by the jury at
sentencing, the jury had no basis upon which to
accept the defense argument in mitigation. Where
the defense counsel argues a mitigating factor
but fails to present any evidence whatsoever to
establish that factor even though such evidence
is readily available, we cannot excuse that
conduct as a tactical decision. We cannot assume
that the jury’s rejection of the insanity defense
would have doomed a defense argument at sentenc-
ing based on mental illness, given that the
standards were different and Dr. Morrison’s
testimony would have been consistent with the
jury’s verdict. See, e.g., Eddmonds v. Peters, 93
F.3d 1307, 1325 (7th Cir. 1996) (Flaum, J., and
Rovner, J., concurring) ("A determination of
sanity [ ] cannot be a sufficient reason to
forego inquiry into psychological problems for
mitigation purposes.") citing Stephens v. Kemp,
846 F.2d 642, 653 (11th Cir. 1988), and Loyd v.
Whitley, 977 F.2d 149, 156-57 (5th Cir. 1992).
The failure to present Dr. Morrison’s testimony
was prejudicial because it was by far the stron-
gest mitigation evidence Matheney possessed. Dr.
Morrison’s testimony would have provided a per-
spective on Matheney that integrated the evidence
of mental disease and defect provided at trial
but harmonized with the jury’s rejection of the
insanity defense. Absent that testimony, the jury
had no reason to distinguish the insanity defense
from the mitigating factor. Therefore, the testi-
mony by Dr. Morrison was pivotal to the strongest
mitigating factor available to Matheney. His
defense counsel chose to argue for that mitigat-
ing factor, but never presented the psychiatric
testimony that would provide the necessary foun-
dation for it.
Moreover, although Drs. Batacan and Berkson did
not appear to agree with Dr. Morrison’s analysis,
defense counsel had many avenues available to
either discredit or reconcile their opinions. For
instance, Dr. Batacan testified that in order for
a condition to constitute a "mental disease or
defect" by the legal definition, it must include
hallucinations. In fact, he stated that even if
a person experienced delusions, depression, or
other symptoms, "in the absence of hallucination,
there is no mental disease." Tr. at 1539-40.
Because there was no evidence that Matheney
experienced hallucinations, Dr. Batacan concluded
that he did not possess a mental disease or
defect. Even Dr. Berkson agreed that Dr. Bata-
can’s interpretation of mental disease or defect
was wrong. Given Dr. Batacan’s fundamental, and
rather stunning, misunderstanding of the term
"mental disease or defect," his opinion was
incorrect as a matter of law, and thus entitled
to no consideration.
Dr. Berkson’s testimony did not suffer from a
similar fundamental error, but it was not without
its limits. In both his written report and his
trial testimony, Dr. Berkson concluded that
Matheney "did not suffer from a mental disease or
defect that would render him incapable of distin-
guishing right from wrong." That precluded the
insanity defense, but was perfectly consistent
with Dr. Morrison’s opinion. In fact, at the
post-conviction deposition, Dr. Berkson stated
that his opinion was not inconsistent with Dr.
Morrison’s. Dr. Berkson further attested at that
deposition that Matheney suffered from a mental
disease--paranoid personality--which affected
Matheney’s behavior but not his ability to appre-
ciate the wrongfulness of the offense, and thus
did not rise to the level of legal insanity. Dr.
Berkson’s statements at the post-conviction
deposition make clear that if defense counsel had
more thoroughly explored his opinion, they could
have elicited testimony that would have been
helpful at sentencing and that would have been
consistent with Dr. Morrison’s opinion. In fact,
Dr. Berkson in his written report prior to trial
left open the possibility of altering his opinion
if provided additional evidence by defense coun-
sel. In that report and at the post-conviction
deposition, Dr. Berkson stated that he had called
Matheney’s attorneys seeking further information,
but had no contact with those attorneys after
that time and never received further information
from them. Therefore, Dr. Berkson’s opinion,
properly developed by defense counsel, would have
been consistent with Dr. Morrison’s opinion, and
would have significantly impacted the determina-
tion by the judge and the jury of whether
Matheney suffered from a mental disease or de-
fect. Accordingly, even in light of the opinions
of Drs. Batacan and Berkson, Dr. Morrison’s
opinion could have been strong evidence of the
mitigating factor.
The existence of a mental disease or defect
that rendered him incapable of conforming his
conduct to the law would have been a significant
mitigating factor, and there is a reasonable
probability that it would have altered the jury’s
recommendation--particularly because the aggra-
vating factors were not strong here. The two
aggravating factors were that the offense was
committed (1) by lying in wait and (2) during the
course of a burglary. Although the majority
devotes much time to discussing the brutality of
the crime, a point I do not question and with
which I am in agreement, it is not one of the
aggravating factors that are available to the
jury, and therefore cannot be a part of this
analysis. We are limited to considering the two
identified aggravating factors.
The lying-in-wait factor was based upon evidence
that he approached the home from the rear, and
that the timeline established by the prosecution
allowed for a conclusion that he waited behind
the house before entering. That evidence was weak
at best, and a dissenting justice of the Indiana
Supreme Court declared that there was no basis to
find that factor. Matheney v. State, 583 N.E.2d
1202, 1210 (Ind. 1992) (DeBruler, J. dissenting).
The burglary factor was premised on Matheney’s
actions in breaking through the door and entering
the home in search of his wife. Burglary requires
a forcible entry with the intent to commit a
felony, but there was no intent to commit a
separate felony here such as robbery or rape,
which would elevate the murder to another level
by adding an additional intended felony. Instead,
the intent for the burglary was the intent to
commit the murder, the same intent necessarily
found for the murder charge itself. Therefore,
the aggravating factor of the burglary is present
here, but is not as compelling in this case as in
others, because it did not encompass an intent to
commit a separate felony. See id. at 1210 (DeBru-
ler, J. dissenting) ("where the intent of the
burglary is the intent to kill, the weight of the
aggravator is greatly diminished, for the mind
has formed but a single felonious intent.") Thus,
the jury would have been required to balance the
evidence that in committing the murder he may
have waited in the yard for a short time and then
forcibly entered the home, against evidence that
his mental illness rendered him incapable of
conforming his conduct to the requirements of the
law. On those facts, I believe that there is a
reasonable probability--that is, one sufficient
to undermine confidence in the outcome--that but
for the failure to present that mitigating evi-
dence, the result would have been different. See
Williams v. Taylor, 529 U.S. 362, 120 S. Ct.
1495, 1513-14 (2000). I would therefore conclude
that Matheney received ineffective assistance of
counsel at sentencing, and would reverse and
remand on that issue as well.
| {
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789 F.2d 917
U.S.v.Berik
85-5200
United States Court of Appeals,Fourth Circuit.
4/29/86
1
D.Md.
AFFIRMED
| {
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} |
635 N.E.2d 1144 (1994)
Ronnell SMITH, Appellant-Respondent,
v.
MARION COUNTY DEPARTMENT OF PUBLIC WELFARE, Appellee-Petitioner.
No. 49A02-9305-JV-222.
Court of Appeals of Indiana, Second District.
June 23, 1994.
Transfer Denied November 3, 1994.
*1145 Mark E. Bell, Bell & Bell, Indianapolis, for appellant.
Mary Jane Norman, Atty. for Marion County, Office of Family and Children, Indianapolis, appellee.
FRIEDLANDER, Judge.
Appellant-respondent Ronnell Smith (Smith) appeals the trial court's termination of her parental rights as to her minor son, Joseph, claiming that the trial court erred in denying Smith a right to court-appointed counsel during a Child In Need Of Services (CHINS) proceeding.[1]
We affirm.
The facts most favorable to the judgment are that on February 22, 1991, The Department of Public Welfare (DPW) filed a CHINS petition alleging that Smith was homeless and attempting to sell Joseph (born on August 28, 1989), that Smith was never available to care for Joseph, was an alcoholic, a "heavy" drug user, and that she served as a "lookout" in nearly fifty robberies.
At the initial hearing, the trial court advised Smith of her rights, and she requested and received a continuance for the purpose of obtaining counsel. The continued initial hearing was held on March 5, and Smith advised the court that she was not able to *1146 retain counsel until March 8. Another continuance was requested and granted. On June 4, 1991, Smith admitted, without representation of counsel, that Joseph was a CHINS.
Smith signed an agreed entry in lieu of a fact-finding hearing. While admitting that Joseph was a CHINS, Smith did not admit or deny the specific allegations contained in the petition. The agreed entry provided that Joseph would remain in his aunt's home while Smith would submit to an assessment at Midtown Mental Health Facility. Smith also agreed to participate in parenting classes, maintain a proper home, visit Joseph regularly, and keep the DPW apprised of any changes concerning her employment and residence.
At a hearing conducted on December 3, 1991, the DPW reported that Smith was not making progress. Smith failed to appear at a subsequent hearing, and the trial court was advised that Smith was not attending parenting classes. On May 12, 1992, the DPW filed a petition to terminate Smith's parental rights as to Joseph. Counsel was appointed for Smith, and a final hearing on the petition was concluded on December 29, 1992.
The trial court entered the following findings of fact and conclusions of law:
"FINDINGS OF FACT
1. Joseph Smith, date of birth August 28, 1989, is the child of Ronnel [sic] Smith and his alleged father is Joe Blaylock.
2. Joseph Smith was found to be a Child in Need of Services by this Court's order of April 30, 1991.
3. Joseph Smith was removed from the care and custody of his parents in February, 1991 due to their inability, refusal or neglect to supply him with necessary food, clothing, shelter, medical care or supervision. (Stipulation of the parties [sic] filed October 23, 1992). He was then placed in relative care with his maternal aunt, Michelle Smith.
4. Joseph Smith was placed into foster care with the current foster parents on November 19, 1991 because Michelle Smith had asked to have him removed from her care and he has resided continuously with the current foster parents since November 19, 1991.
5. The following services have been offered and available to Ronnell Smith: parenting assessment, parenting classes through the Marion County Department of Public Welfare ("Department"), Family Service Association, and the Family Support Center, bus tickets, drug and alcohol assessment, individual low or no-cost counseling through the community mental health center, foster and relative care for Joseph, visitation with Joseph, and caseworker services.
6. The Department has offered the parents reasonable services in light of all the circumstances, including the parents' failure to follow through with necessary services, and Joseph's needs for permanency.
7. Ronnell Smith was aware of the services available to her and necessary to alleviate the reasons for the removal of Joseph from her care and custody, through caseworker communications, both written and oral, and through Court hearings and orders.
8. Despite opportunity to do so, Ronnell Smith failed to visit Joseph on a regular basis throughout the entire time he was a Child in Need of Services.
9. Toni Mattioda, a counselor for children and families, and an expert in the field of parenting assessments, performed a parenting assessment on Ronnell Smith on January 14, 1992.
10. Toni Mattioda testified that Ronnell did not demonstrate any serious psychopathy or thought disorder and was not in need of psychiatric treatment.
11. As a result of the parenting assessment, Mattioda recommended that in order to ensure the emotional health and safety of Joseph, that Ronnell Smith 1) become involved in counseling to resolve personal issues prior to addressing parenting issues; 2) participate in a drug and alcohol assessment; 3) demonstrate a period of stability in relationships, employment, and residence; 4) complete parenting classes; and 5) participate in supervised visitation with *1147 Joseph pending cooperation with the other four recommendations.
12. Mattioda referred Ronnell Smith to Midtown Community Mental Health Center, Fountain Square Clinic, for individual counseling.
13. Ronnell Smith has not participated consistently in individual counseling since the date of the parenting assessment and has not received a positive recommendation from a therapist stating that she has adequately addressed the personal issues identified in the parenting assessment.
14. Ronnell Smith has not demonstrated adequate stability in employment, relationships, or residence while Joseph has been a Child in Need of Services. Since February 7, 1991 Ronnell Smith has had nine different addresses and ten different places of employment.
15. Despite numerous opportunities to do so, Ronnell Smith did not complete a drug and alcohol assessment until October 23, 1992, during the pendency of the termination of parental rights proceedings.
16. Despite numerous opportunities to do so, Ronnell Smith has never completed parenting classes.
17. Ronnell Smith has not completed any educational or vocational classes or training since February 7, 1991.
18. Randall Krupsaw, a clinical psychologist, and expert in the field of assessment of child-caregiver relationships, performed an assessment of the relationship and emotional bonding between Joseph and his current foster parents. The assessment took place on October 6, 1992.
19. Based upon his assessment of Joseph and his current foster parents, it was Dr. Krupsaw's opinion that Joseph had a strong emotional bond to his current foster parents.
20. It was Dr. Krupsaw's opinion, that if the parents' rights were terminated, it was in Joseph's best interest to be adopted by the current foster parents and the current foster parents desire and intend to adopt Joseph if parental rights are terminated.
21. The current whereabouts of Joe Blaylock, the alleged father, are unknown. Joe Blaylock was served with notice of this termination of parental rights proceeding by publication notice, which expired on October 23, 1992. Joe Blaylock has not appeared in this proceeding.
22. Joe Blaylock has not demonstrated any ability to adequately care for Joseph or to alleviate the reasons for the removal of Joseph.
23. There is a reasonable probability that the reasons for the removal of Joseph from the care and custody of his mother, Ronnell Smith, and his alleged father, Joe Blaylock, will not be remedied.
24. There is a reasonable probability that continuation of the parent-child relationship between Joseph and his mother, Ronnell Smith, and his alleged father, Joe Blaylock, poses a threat to the well-being of the child.
25. It is in Joseph's best interest to be adopted by the current foster parents.
26. The plan of the Department for Joseph if parental rights are terminated, adoption by the current foster parents, is satisfactory.
27. Termination of the parental rights of Ronnell Smith and Joe Blaylock is in the best interest of Joseph Smith.
CONCLUSIONS OF LAW
1. Joseph Smith was found to be a Child in Need of Services by this Court's order of April 30, 1991.
2. Joseph Smith has been removed from his parents under the terms of a dispositional decree for more than six months.
3. There is a reasonable probability that the reasons for the removal of Joseph from the care and custody of his mother, Ronnell Smith, and his alleged father, Joe Blaylock, will not be remedied.
4. There is a reasonable probability that continuation of the parent-child relationship between Joseph and his mother, Ronnell Smith, and his alleged father, Joe Blaylock, poses a threat to the well-being of the child.
5. Termination of the parental rights of Ronnell Smith and Joe Blaylock is in the best interest of Joseph Smith.
*1148 6. The plan of the Department for Joseph Smith if parental rights are terminated, adoption by the current foster parents, is satisfactory."
Record at 32-36.
Smith appeals, and we restate the issues she presents for review as follows:
I. Was Smith denied a right to court-appointed counsel during the CHINS proceeding?
II. Did the trial court abuse its discretion in not appointing counsel for Smith during the CHINS proceeding?
III. Were Smith's due process rights violated when she signed the agreed entry in the CHINS proceeding without the benefit of counsel?
Smith was not entitled to court-appointed counsel as a matter of right during the CHINS proceeding.
While there are no relevant Indiana cases directly on point deciding whether an indigent parent has a right to be represented by court-appointed counsel in a CHINS proceeding, we initially observe that Smith has waived the issue. Smith is presenting this issue for the first time on appeal following the termination proceedings, and this court has determined that the time for appealing an issue in a CHINS proceeding commences when the dispositional decree is entered. See Matter of M.R. (1983), Ind. App., 452 N.E.2d 1085. Even after the time had expired permitting Smith to appeal, she did not move to set aside the judgment; nor did she raise the issue at the trial stage of the termination proceedings. This court has determined that a party may not raise an issue for the first time on appeal. Rodgers v. Rodgers (1987), Ind. App., 503 N.E.2d 1255, trans. denied.
The record before us demonstrates that Smith knew she had the right to obtain an attorney of her own choosing, and the trial court granted her the opportunity to do so. See appellees' appendix at 7-10. Smith never requested that an attorney be appointed, and there is no evidence suggesting that Smith was coerced, induced, or defrauded when she signed the agreed entry. Because Smith failed to raise the issue in a timely fashion, she has waived the issue.
Even if the issue had not been waived, Ind. Code 31-6-7-2(b) [hereinafter referred to as the right to counsel statute] provides in relevant part that:
"If a parent in proceedings to terminate the parent-child relationship does not have an attorney who may represent him without a conflict of interest, and if he has not lawfully waived his right to counsel ... the juvenile court shall appoint counsel for him... . The court may appoint counsel to represent any parent in any other proceeding."
(Emphasis supplied).
This court had the opportunity to construe the termination statute as it applied to adoption proceedings in Petition of McClure (1990), Ind. App., 549 N.E.2d 392. In McClure, we determined that because adoption results in the termination of a parent's rights, an indigent non-consenting parent to an adoption proceeding is entitled to court-appointed counsel. A parent's interest in the liberty of his child is a fundamental one, and permanently removing a child from an indigent parent without affording the parent the right to assistance of court-appointed counsel may be a denial of due process. McClure, supra.
Unlike adoption proceedings, the entry of a CHINS decree does not necessarily pave the path to a termination of the parent-child relationship. See IC 31-6-4-3 et seq. Before the parent-child relationship will terminate, the child must have been removed from the parent under a dispositional decree for at least six months, and the DPW must prove the allegations that are required to be presented in the petition pursuant to IC 31-6-5-4.[2] As provided by the right to counsel *1149 statute, an indigent parent acquires the unfettered right to court-appointed counsel at that time. See IC 31-6-7-2(b). A CHINS decree simply does not automatically contemplate a termination of parental rights, and we cannot say that the legislature impliedly intended that the right of court-appointed counsel attaches during that proceeding. Smith's argument that court-appointed counsel is a fundamental right during proceedings which do not necessarily result in the termination of a parent's right should be addressed to the legislature.
II.
The trial court properly exercised its discretion when it did not appoint counsel for Smith during the CHINS proceeding. As discussed in issue I, supra, Smith has not preserved this issue, inasmuch as she failed to raise it in a timely fashion.
Even if the issue had not been waived, the right to counsel statute provides that the court may appoint counsel to an indigent parent in proceedings other than termination cases. See IC 31-6-7-2(c). The record before us shows that Smith never requested appointed counsel during the CHINS proceeding, and there is no implication that she ever desired one. Smith did not present any evidence demonstrating that she was indigent, which may have entitled her to court-appointed counsel.[3] Failure to develop and provide cogent argument as to this issue preserves nothing for review. Keller v. State (1990), Ind., 549 N.E.2d 372.
Smith has also failed to show how she was prejudiced by the failure to have counsel present at the CHINS proceeding, inasmuch as she has not demonstrated that the termination hearing would have produced a different result, had she been represented by counsel at the CHINS hearing. One who seeks to disturb a trial court's judgment must affirmatively show an erroneous ruling and prejudice resulting therefrom. See Northern Indiana Pub. Serv. Co. v. East Chicago Sanitary Dist. (1992), Ind. App., 590 N.E.2d 1067; Atwood v. Prairie Village, Inc. (1980), Ind. App., 401 N.E.2d 97. This court does not presume prejudice, and absent such a showing, we will not disturb the trial court's ruling. Homehealth, Inc. v. Northern Indiana Pub. Serv. Co. (1992), Ind. App., 600 N.E.2d 970; Beta Alpha Shelter of Delta Tau Delta v. Strain (1983), Ind. App., 446 N.E.2d 626.
The DPW was required to prove each and every element contained in the termination statute by clear and convincing evidence. Shaw v. Shelby County Dep't of Pub. Welfare (1992), Ind. App., 584 N.E.2d 595; IC 31-6-5-4. The absence of counsel at the CHINS proceeding had no bearing on the evidence that was presented at the termination hearing. The DPW established that Smith did not visit Joseph on a regular basis. She also failed to participate in required individual counseling. Smith did not demonstrate employment or residential stability, and failed to complete parenting classes. Record at 33-35. Based on the evidence presented, the trial court found there was a reasonable probability that the continuation of the parent-child relationship posed a threat to Joseph's well-being. Record at 35. Smith has failed to show how having counsel at the CHINS proceeding would have enabled her to show a reasonable probability that she would have made "the necessary improvements that would result in permanent unification ..." with Joseph. Matter of D.T. (1989), Ind. App., 547 N.E.2d 278, 282.
The trial court did not abuse its discretion in failing to appoint counsel for Smith at the CHINS proceeding.
III.
Smith was not denied her due process rights by signing the agreed entry. Once again, Smith has waived the issue because she did not raise it in a timely fashion. See Rodgers, supra.
The CHINS petition contained a very detailed statement of facts upon which the neglect *1150 allegations were made. Record at 205-06. The February 21, 1991 order states that Smith was advised of the allegations in the petition along with her rights and various dispositional alternatives. See appellee's appendix at 7-10. Smith understood she had a right to obtain counsel because she requested a continuance to retain an attorney. Appellee's appendix at 8. When Smith signed the agreed entry, the trial court verified that she understood she was agreeing that Joseph was a CHINS, agreeing to placement of Joseph with his aunt, and agreeing that she would participate in various services offered by the DPW. Appellant's appendix at 5-6.
At the subsequent termination hearing, Smith stipulated that Joseph was a CHINS. Smith also knew that this admission, through the agreed entry, could lead to a termination of her parental rights inasmuch as she signed an advisement form which so provided. Appellee's appendix at 10.
A party's stipulation conceding the truthfulness of some alleged fact is an admission in which the other party need not offer any evidence to prove that fact. The party who stipulates to such a fact is also not permitted to disprove that fact. Schreiber v. Rickert (1943), 114 Ind. App. 55, 50 N.E.2d 879. At the outset of the termination proceeding, Smith's court-appointed counsel stipulated that Smith was admitting to the CHINS petition. Record at 58. Smith was made aware of her rights and the consequences of an adjudication by the rights form that she signed.
The record demonstrates that Smith received all the rights afforded her by federal and state law in both the CHINS and termination proceedings. Smith has waived any error regarding a right to counsel at the CHINS proceeding, and she has failed to show how she has been harmed by not having counsel present during the CHINS hearing.
Judgment affirmed.
KIRSCH, J., concurs.
SULLIVAN, J., concurs with separate opinion.
SULLIVAN, Justice, concurring.
I agree that termination of Smith's parental rights was not erroneous. I write separately, however, in order to state that under some circumstances it might constitute an abuse of discretion for a CHINS court to fail to appoint counsel for an indigent parent.
The majority here holds: "The absence of counsel at the CHINS proceeding had no bearing on the evidence that was presented at the termination hearing." Op. at 1144. This conclusion is somewhat misleading. It focuses upon failure of visitation, non-participation in counseling and parenting sessions, and instability of residence and employment. These factors then prompt the court to validate the trial court's determination that continuation of the parent-child relationship posed a threat to the child's well being. While these determinations are factually supported, they do not necessarily support the conclusion that Smith was not adversely affected by the absence of counsel at the CHINS stage.
It must be kept in mind that several of the allegations which led to the CHINS determination were extremely damaging to Smith's parental relationship, i.e., that Smith participated in a child selling scheme, that she was an alcoholic, a heavy drug user and was a participant in nearly fifty robberies. The fact that Smith's agreed entry specifically admitted only that the child was in need of services and did not specifically admit or deny the damaging accusations does not dispel the strong probability that the allegations may have had some bearing upon the ultimate termination judgment. Had counsel been present at the CHINS stage those allegations or some of them might have been contested.
The termination stage in large measure depends upon preceding events. Most importantly, for cases of this nature, is the requirement that the court must conclude that the "reasons for the [CHINS] removal... . will not be remedied." Op. at 1147. Thus, we cannot say with any degree of assurance that the trial court in making its decision focused only upon the relatively innocuous factors emphasized by the majority opinion.
*1151 This case could well have provided the basis for enunciation of a prospective rule establishing that in some circumstances a parent might have a right to appointed counsel. If lack of counsel is likely to lead to particularly damaging uncontested allegations and if such allegations be deemed established and not subject to subsequent challenge, those allegations might virtually assure a subsequent termination decision. In such situations the trial court might well abuse its discretion by failing to appoint counsel for an indigent parent.[1]
Be that as it may, in the present case, affirmance is appropriate. Even though Smith may have been qualifiedly entitled to counsel had she so requested, her attorney at termination did not attack the agreed CHINS entry or request that the allegations of the CHINS petition be reestablished by evidence. Neither does Smith, on appeal, challenge the validity of those assertions.
Subject to these observations, I concur.
NOTES
[1] Oral argument was held in Indianapolis on May 17, 1994.
[2] The petition for the termination of parental rights must allege that there is a reasonable probability that "the conditions that resulted in the child's removal or the reasons for placement outside the parent's home will not be remedied; or the continuation of the parent-child relationship poses a threat to the well-being of the child; termination is in the best interests of the child; and there is a satisfactory plan for the care and treatment of the child." IC 31-6-5-4. (Emphasis supplied).
[3] To the contrary, Smith testified at the October 19, 1992 termination hearing that she had been employed at several restaurants, grocery stores, and other businesses since February 7, 1991.
[1] In this context, I find fault with that portion of the written advisement form which instructs parents of alleged CHINS children that: "You may obtain legal counsel for all proceedings although there is no right to a free court appointed attorney." Appellee's Appendix at 10. This advisement is misleadingly inflexible and permits of no exception notwithstanding the clear proviso of I.C. 31-6-7-2 which contemplates discretionary appointment of counsel. This advisement should be deleted from the written form and replaced by a more accurate statement of the rights of parents.
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Order Michigan Supreme Court
Lansing, Michigan
June 24, 2014 Robert P. Young, Jr.,
Chief Justice
148774 Michael F. Cavanagh
Stephen J. Markman
Mary Beth Kelly
Brian K. Zahra
Bridget M. McCormack
PEOPLE OF THE STATE OF MICHIGAN, David F. Viviano,
Plaintiff-Appellee, Justices
v SC: 148774
COA: 319525
Wayne CC: 12-006937-FC
WALTER DEWAYNE FOLDS,
Defendant-Appellant.
____________________________________/
On order of the Court, the application for leave to appeal the January 3, 2014 order
of the Court of Appeals is considered, and it is DENIED, because we are not persuaded
that the question presented should be reviewed by this Court.
I, Larry S. Royster, Clerk of the Michigan Supreme Court, certify that the
foregoing is a true and complete copy of the order entered at the direction of the Court.
June 24, 2014
h0616
Clerk
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Pursuant to Ind.Appellate Rule 65(D),
this Memorandum Decision shall not be Apr 30 2014, 7:59 am
regarded as precedent or cited before any
court except for the purpose of
establishing the defense of res judicata,
collateral estoppel, or the law of the case.
ATTORNEY FOR APPELLANT: ATTORNEYS FOR APPELLEE:
BARBARA J. SIMMONS GREGORY F. ZOELLER
Oldenburg, Indiana Attorney General of Indiana
RICHARD C. WEBSTER
Deputy Attorney General
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
HOWARD WILSON, )
)
Appellant-Defendant, )
)
vs. ) No. 49A05-1308-CR-384
)
STATE OF INDIANA, )
)
Appellee-Plaintiff. )
APPEAL FROM THE MARION SUPERIOR COURT
The Honorable Shatrese Flowers, Commissioner
Cause No. 49F19-1205-CM-31790
April 30, 2014
MEMORANDUM DECISION - NOT FOR PUBLICATION
FRIEDLANDER, Judge
Howard Wilson appeals his conviction of class A misdemeanor Battery,1 arguing that
the State presented insufficient evidence to rebut his claim of self-defense.
We affirm.
On May 12, 2012, Raelyna Harden went to visit her mother at her Indianapolis
apartment. As she pulled into the parking lot, her car stopped running. Harden left the car in
the parking lot and went inside to visit with her mother for several hours. When Harden’s
sister, Theresa, who lived in the same apartment complex, came home, Harden’s mother went
to her apartment to ask if Theresa’s boyfriend, Wilson, would come charge the battery in
Harden’s car. Wilson refused at first, but finally agreed to help.
Wilson drove Theresa’s car to where Harden’s car was parked and hooked up jumper
cables to charge the battery. While the battery was charging, Harden and Wilson argued
about family matters. The argument escalated, and at one point Harden walked away and
went up to her sister’s apartment to ask her a question. Wilson and Harden’s mother
followed her. Harden knocked on the door, but Theresa did not answer. Harden then walked
away toward her mother’s apartment, and Wilson told her he would kill her if she ever
knocked on Theresa’s door again. Harden and her mother began walking toward the parking
lot, and Wilson followed them and continued to argue with Harden. Wilson had started to
walk away when Harden called him a “drunk effing bum.” Transcript at 38. Wilson then
turned around, and Harden immediately turned her back and began to walk away. Wilson
1
Ind. Code Ann. § 35-42-2-1 (West, Westlaw current with all legislation of the 2nd Reg. Sess. of the 118th
General Assembly (2014) with effective dates through May 1, 2014).
2
came up behind Harden and struck her on the side of her face and mouth, knocking her to the
ground and causing her severe pain. The blow caused Harden’s gums to split open and bleed
profusely and her lips to swell and bruise. Wilson then ran to the parking lot, removed the
jumper cables from the vehicles, and fled in Theresa’s car. After her mother helped her to
her feet, Harden called 911.
As a result of these events, Wilson was charged with class A misdemeanor battery. A
jury trial was held on June 20, 2013, and Wilson was found guilty as charged. Wilson now
appeals.
On appeal, Wilson argues that the State presented insufficient evidence to rebut his
self-defense claim. The standard for reviewing a challenge to the sufficiency of evidence to
rebut a claim of self-defense is the same standard used for any claim of insufficient evidence.
Wallace v. State, 725 N.E.2d 837 (Ind. 2000). We neither reweigh the evidence nor judge
the credibility of witnesses. Id. If there is sufficient evidence of probative value to support
the conclusion of the trier of fact, the judgment will not be disturbed. Id. “A valid claim of
self-defense is legal justification for an otherwise criminal act.” Id. at 840.
To prevail on a self-defense claim, Wilson must show that he: (1) was in a place
where he had a right to be; (2) did not provoke, instigate, or participate willingly in the
violence; and (3) had a reasonable fear of death or great bodily harm. Wilson v. State, 770
N.E.2d 799 (Ind. 2002); see also I.C. § 35-41-3-2 (West, Westlaw current with all legislation
of the 2nd Reg. Sess. of the 118th General Assembly (2014) with effective dates through May
1, 2014). When a self-defense claim is raised and finds support in the evidence, the State
3
bears the burden of negating at least one of the necessary elements. Wilson v. State, 770
N.E.2d 799. The State may meet its burden by offering evidence directly rebutting the
defense, by affirmatively showing that the defendant did not act in self-defense, or by relying
upon the sufficiency of the evidence from its case-in-chief. Miller v. State, 720 N.E.2d 696
(Ind. 1999). If a defendant is convicted despite his claim of self-defense, we will reverse
only if no reasonable person could say that self-defense was negated beyond a reasonable
doubt. Wilson v. State, 770 N.E.2d 799.
Wilson’s argument on appeal is nothing more than a request to reweigh the evidence
and credit his testimony over that of Harden and her mother. Harden testified that Wilson
struck her in the face as she was walking away from him, causing severe pain and bleeding.
Harden’s mother also testified that Wilson struck Harden and that “it just came out of
nowhere.” Trancript at 80. This evidence was sufficient to support a conclusion that Wilson
was the sole aggressor and had no fear of death or bodily harm. The State presented
sufficient evidence to rebut Wilson’s claim of self-defense.
Judgment affirmed.
MATHIAS, J., and PYLE, J., concur.
4
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[Cite as State v. Keiter, 2013-Ohio-120.]
IN THE COURT OF APPEALS OF OHIO
SECOND APPELLATE DISTRICT
MONTGOMERY COUNTY
STATE OF OHIO :
: Appellate Case No. 25235
Plaintiff-Appellee :
: Trial Court Case No. 09-CR-2960
v. :
:
EDGAR S. KEITER, SR. : (Criminal Appeal from
: (Common Pleas Court)
Defendant-Appellant :
:
...........
OPINION
Rendered on the 18th day of January, 2013.
...........
MATHIAS H. HECK, JR., by CARLEY J. INGRAM, Atty. Reg. #0020884, Montgomery
County Prosecutor’s Office, Appellate Division, Montgomery County Courts Building, P.O.
Box 972, 301 West Third Street, Dayton, Ohio 45422
Attorney for Plaintiff-Appellee
BYRON K. SHAW, Atty. Reg. #0073124, 4800 Belmont Place, Huber Heights, Ohio 45424
Attorney for Defendant-Appellant
.............
HALL, J.
{¶ 1} Edgar S. Keiter appeals from the trial court’s denial of a post-sentence motion
to withdraw his no-contest plea to one count of rape and his guilty plea to three counts of
gross sexual imposition.
{¶ 2} Keiter’s appointed appellate counsel has filed a brief pursuant to Anders v.
California, 386 U.S. 738, 87 S.Ct. 1396, 18 L.Ed.2d 493 (1967), asserting the absence of any
non-frivolous issues for our review. The Anders brief raises potential issues, which counsel
has concluded are frivolous. Keiter also has filed a pro se brief, advancing four assignments of
error.
{¶ 3} The record reflects that Keiter entered his pleas as part of a negotiated
agreement. The trial court accepted the pleas and made a finding of guilt. The matter then
proceeded to a sentencing hearing. At the outset of the hearing, the trial court discussed a
letter that it had received from Keiter. The trial court noted that the letter was ambiguous but
could be interpreted as a request to withdraw his pleas. Defense counsel responded that he had
discussed the letter with Keiter, who wished to proceed with sentencing. In open court, Keiter
agreed that he wanted to be sentenced that day. Consistent with the plea agreement, the trial
court proceeded to impose an aggregate ten-year prison sentence and five years of post-release
control. The trial court journalized its sentence in a February 22, 2010 judgement entry.
{¶ 4} Over a year later, on March 24, 2011, Keiter filed a pro se motion to withdraw
his pleas. In support, he asserted that his guilty plea to the gross sexual imposition charges was
not entered knowingly, intelligently, or voluntarily. He further argued that the rape charge was
unsupported by the evidence and that his no-contest plea resulted from ineffective assistance
of counsel. On July 1, 2011, the trial court overruled the motion without a hearing. After
quoting extensively from the plea and sentencing transcripts, the trial court concluded:
This court finds that the record, including the Crim.R. 11 dialogue,
demonstrates that Keiter is not entitled to relief under Crim.R. 31.2 [sic]. He
3
has failed to submit evidentiary documents containing sufficient operative facts
to demonstrate that his no contest and guilty pleas were coerced, the result of
intimidation and ineffective assistance of counsel, or otherwise rendered
involuntary and/or that the withdrawal of his pleas is necessary to correct a
manifest injustice.
(July 1, 2011 Decision and Entry).
{¶ 5} On June 6, 2012, Keiter filed a pro se notice of appeal from the trial court’s
July 1, 2011 denial of his motion to withdraw his pleas.1 His appointed appellate counsel
raises two issues for our review. The first issue concerns the trial court’s decision to proceed
with sentencing after receiving the letter from Keiter mentioned above. We agree with counsel
that any potential argument about the letter is wholly frivolous. As noted above, the trial court
discussed the letter before sentencing Keiter. In response to questioning, Keiter assured the
trial court he wanted to be sentenced. Moreover, any argument about the pre-sentence letter
could have been raised on direct appeal. The pre-sentence letter was not mentioned in the
defendant’s motion to withdraw his plea, and was not raised as a basis to support withdrawal
of the plea in the trial court.
{¶ 6} Appointed appellate counsel also notes that the trial court incorrectly advised
Keiter at the plea hearing that he would be a Tier I sex offender. The record reflects, however,
that the trial court immediately corrected itself and explained that Keiter would be a Tier III
1
Although Keiter’s appeal from the trial court’s denial of his motion to withdraw his pleas was untimely, this court granted him
leave to proceed with a delayed appeal. Parenthetically, we note that on April 16, 2012, Keiter previously had filed an untimely direct appeal
from the February 22, 2010 termination entry and had sought leave to proceed with a delayed appeal. This court denied that request and
dismissed the direct appeal on May 10, 2012.
4
sex offender. We see no non-frivolous issue for appeal.
{¶ 7} In Keiter’s pro se brief, his first assignment of error refers to the pre-sentence
letter he wrote to the trial court. He argues that he did not understand the meaning of a
no-contest plea and that he clearly wanted to withdraw his pleas before sentencing. The record
does not support this argument. The record reflects a proper Crim.R. 11 plea colloquy. The
record further reflects that the trial court explained the nature and consequences of both a
guilty plea (for the GSI counts) and a no-contest plea (for the rape count). The court
explained that a no contest plea was not an admission of guilt, but rather an admission of the
facts contained in the indictment, and that the court would find him guilty. After the court
explained the no contest plea, the court asked Keiter: “So do you understand that will be the
result of your pleading no contest?” The defendant answered: “Yes, sir, I do.” Then, at
sentencing, the record reflects that Keiter expressly stated he was prepared to proceed after the
court made specific reference to the letter. Again, we see no non-frivolous issue for appeal.
{¶ 8} In his second assignment of error, Keiter argues that the trial court erred at
sentencing when it failed to inform him of his appellate rights. This argument fails to
demonstrate a non-frivolous issue for at least three reasons. First, Keiter did not raise the
argument in support of his post-sentence motion to withdraw his pleas. Second, in a “serious
offense” (felonies or misdemeanors with potential of more than six months confinement,
Crim. R. 2) when a plea is involved, the trial court “shall advise the defendant of the
defendant’s right, where applicable, to appeal or to seek leave to appeal the sentence imposed”
Crim. R. 32(B)(2). Here the defendant’s asserted and potential issues all concern the
defendant’s plea, not his sentence. Moreover, his appeal is about the denial of his motion to
5
withdraw his pleas which was not filed until a year later. Thus, if the trial court’s failure to
provide appellate advice amounted to error, we see no prejudice. Third, the trial court’s failure
to advise Keiter of his appellate rights at his sentencing is not related to whether the pleas that
were completed a couple weeks earlier were knowingly and intelligently made. The second
assignment is without arguable merit.
{¶ 9} In his third assignment of error, Keiter contends his trial counsel provided
ineffective assistance by not informing him of his appellate rights and by incorrectly advising
him about the nature of a no-contest plea. Again, we see no non-frivolous issue for appeal.
Keiter did not mention his attorney’s alleged failure to advise him of his appellate rights in his
post-sentence motion to withdraw his pleas. He argued instead that the pleas were the result of
ineffective assistance of counsel because his attorney had failed to explain the nature of a
no-contest plea. Counsel’s alleged failure to inform Keiter of his appellate rights had nothing
to do with his pleas or the denial of his post-sentence motion to withdraw them. As for
counsel’s allegedly deficient explanation of a no-contest plea, the record contains no
evidentiary support for the claim. We note too that the trial court itself adequately explained
the effect of a plea of guilty and of a no-contest plea to Keiter before accepting his pleas.
{¶ 10} Finally, Keiter contends the trial court erred at his sentencing hearing by
notifying him of post-release control after imposing his sentence. This argument fails to raise a
non-frivolous issue for appeal. The trial court advised Keiter of his post-release control
obligations during the plea hearing. It repeated that explanation during the sentencing hearing.
Immediately after imposing Keiter’s prison term, the trial court proceeded to place him on five
years of post-release control. Contrary to Keiter’s argument, the trial court did not impose
6
post-release control after sentencing him. Post-release control was part of the sentence.
Moreover, the trial court’s imposition of post-release control at sentencing had nothing to do
with Keiter’s pleas or the denial of his post-sentence motion to withdraw them.
{¶ 11} Pursuant to our responsibilities under Anders, we have conducted an
independent review of the record. Based on that review, we agree with appointed appellate
counsel’s assessment that there are no non-frivolous issues for appeal related to the trial
court’s denial of Keiter’s post-sentence motion to withdraw his pleas.
{¶ 12} The judgment of the Montgomery County Common Pleas Court is affirmed.
.............
DONOVAN and FROELICH, JJ., concur.
Copies mailed to:
Mathias H. Heck, Jr.
Carley J. Ingram
Byron K. Shaw
Edgar Keiter
Hon. Dennis J. Langer
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NUMBER 13-04-244-CR
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
FABIO SANTIAGO CRUZ, Appellant,
v.
THE STATE OF TEXAS, Appellee.
On appeal from the 105th District Court
of Nueces County, Texas.
MEMORANDUM OPINION
Before Justices Rodriguez, Castillo, and Garza
Memorandum Opinion by Justice Castillo
By one issue, appellant Fabio Santiago Cruz asserts that the trial court abused
its discretion in denying his motion to suppress illegally seized evidence.
The State
counters that the seizure of the cocaine was justified under the plain view doctrine.
We affirm.
I. Background
The indictment charged Cruz with possession of cocaine. Cruz filed a motion
to suppress, asserting the cocaine was seized without a warrant or probable cause.
The trial court convened a hearing on Cruz's motion to suppress. The arresting officer,
Bryan Hager, testified that he had six years' law enforcement experience, including
drug enforcement and "anything that goes on in the street." Officer Hager testified
that, on or about December 12, 2003, he responded to a dispatch regarding an assault
on a child. Reportedly, while at a friend's residence, Cruz gave a dollar bill to a minor
child sitting on his lap, hugged her, and kissed her inappropriately. Witnessing the
incident, the friend yelled at Cruz who immediately fled.
The child’s mother directed Hager to Cruz's residence. Hager testified that his
intent to contact Cruz was to investigate the assault on a child report. Through the
screen door of Cruz's apartment, Hager saw a man who identified himself as Cruz.
Hager asked Cruz if he could enter because he had to talk to him. Cruz agreed. Cruz
stood beside a table. In plain view on top of the table, Hager saw a pink baggie which
appeared to contain a substance he believed to be cocaine. The baggie was about the
size of a stamp. Hager testified that the packaging was common for illegal drugs.
Hager handcuffed Cruz. On cross-examination, Hager testified that, because other
officers were present, he could have secured the scene and obtained a search warrant.
He testified that Cruz did not consent to the search of the apartment. Hager did not
confirm the substance in the baggie was an illegal drug. Although Cruz was
intoxicated, Cruz understood Hager's questions and communicated in English.
Cruz testified that, while at his residence, he responded to a knock at the door.
Believing a friend was there, he opened the door. The officer at the door told Cruz he
was under arrest but did not provide a reason. Cruz testified that the officer did not
ask permission to enter and "they just came in." Cruz denied giving permission to the
officer to enter his residence. Once inside, the officer proceeded to the dining room
table, situated approximately ten feet away, and collected the baggie. Cruz admitted
that the officer found the baggie and then told him he was under arrest. Cruz
conceded that the baggie was on the table and not hidden.
The trial court found the officer’s testimony to be credible and denied the
motion to suppress.
II. Standard of Review
At a suppression hearing, the trial court is the sole finder of fact. Arnold v.
State, 873 S.W.2d 27, 34 (Tex. Crim. App. 1993). The trial court is free to believe
or disbelieve any or all of the evidence presented. Romero v. State, 800 S.W.2d 539,
543 (Tex. Crim. App. 1990) (en banc); see Johnson v. State, 803 S.W.2d 272, 287
(Tex. Crim. App. 1990) (en banc). Thus, in reviewing a trial court's ruling on a motion
to suppress, we give almost total deference to the trial court's determination of
historical facts and application-of-law-to-fact questions that turn on credibility and
demeanor. Perales v. State, 117 S.W.3d 434, 437 (Tex. App.–Corpus Christi 2003,
pet. ref'd); Morrison v. State, 71 S.W.3d 821, 827 (Tex. App.–Corpus Christi 2002,
no pet.) (citing Guzman v. State, 955 S.W.2d 85, 89 (Tex. Crim. App. 1997) (en
banc)). We review de novo application-of-law-to-fact questions that do not turn on
credibility and demeanor. Morrison, 71 S.W.3d at 827 (citing Guzman, 955 S.W.2d
at 89). In the absence of explicit fact findings, we assume that the trial court's ruling
is based on implicit fact findings supported in the record. Perales, 117 S.W.3d at 437;
see Carmouche v. State, 10 S.W.3d 323, 328 (Tex. Crim. App. 2000) (recognizing
implicit fact findings). We then review de novo whether the facts, express or implied,
are sufficient to provide legal justification for admitting the complained-of evidence.
See Morrison, 71 S.W.3d at 827 (citing Garcia v. State, 43 S.W.3d 527, 530 (Tex.
Crim. App. 2001)).
We uphold a trial court's ruling on a suppression motion if it is reasonably
supported by the record and is correct on any theory of law applicable to the case.
Villarreal v. State, 935 S.W.2d 134, 138 (Tex. Crim. App. 1996) (en banc); Perales,
117 S.W.3d at 438. This is true even if the decision is correct for reasons different
from those espoused by the trial court. Romero, 800 S.W.2d at 543.
III. Plain View Seizure
The Fourth Amendment of the United States Constitution and article I, section
9 of the Texas Constitution guarantee the right to be secure from unreasonable
searches and seizures made without probable cause. U.S. Const. amend. IV; Tex.
Const. art. I, § 9; see Walter v. State, 28 S.W.3d 538, 540-41 (Tex. Crim. App.
2000). Police entry into a home without consent is a search and subject to the
protections of the Fourth Amendment. McNairy v. State, 835 S.W.2d 101, 106 (Tex.
Crim. App. 1991) (en banc). Warrantless intrusions and searches are presumptively
unreasonable. United States v. Karo, 468 U.S. 705, 717 (1984). A warrantless
search is permissible only in rare circumstances. Katz v. United States, 389 U.S. 347,
357 (1967). The burden of proving any exception to the warrant requirement falls on
the prosecution. McDonald v. United States, 335 U.S. 451, 455-56 (1948).
"No evidence obtained by an officer or other person in violation of any
provisions of the Constitution or laws of the State of Texas, or of the Constitution or
laws of the United States of America, shall be admitted in evidence against the
accused on the trial of any criminal case." Tex. Code Crim. Proc. Ann. art. 38.23(a)
(Vernon 2005). An exception is the plain view doctrine. The plain view doctrine
provides that, if an officer perceives a suspicious object while lawfully engaged in an
activity in a particular place, that officer may immediately seize the object. Zayas v.
State, 972 S.W.2d 779, 785 (Tex. App.–Corpus Christi 1998, pet. ref'd.) (citing
Texas v. Brown, 460 U.S. 730, 739 (1983); Harris v. United States, 390 U.S. 234,
236 (1968) (per curiam); Clark v. State, 548 S.W.2d 888, 889 (Tex. Crim. App.
1977)). Such seizure is presumptively reasonable, assuming that there is probable
cause to associate the property with criminal activity. Id. (citing Arizona v. Hicks, 480
U.S. 321, 326-37 (1987)).
Items in "plain view" may be seized by law enforcement personnel if (1) the
initial intrusion was proper, that is, the police have a right to be where they are when
the discovery is made; and (2) it is "immediately apparent" to the police that they have
evidence before them (probable cause to associate the property with criminal activity).
Walter, 28 S.W.3d at 541 (citing Horton v. California, 496 U.S. 128, 134-36 (1990));
Haley v. State, 811 S.W.2d 600, 603 (Tex. Crim. App. 1992) (en banc). The
incriminating nature of an item is "immediately apparent" if the officer has probable
cause to believe that the item is either evidence of a crime or contraband. See Brown,
460 U.S. at 742. Probable cause does not demand any showing that such a belief be
correct or more likely true than false.
Id.
IV. Discussion
In his sole issue, Cruz argues that the evidence was illegally seized because
officer Hager did not have a warrant or reasonable or probable cause to seize the
evidence. See Walter, 28 S.W.3d at 541. Cruz does not dispute that the evidence
was in plain view;
rather, he asserts that the issue is whether the incriminating nature
of the seized item was "immediately apparent." The State counters that seizure of the
baggie was justified under the plain view doctrine. The State asserts that the
"immediately apparent" requirement of the plain view doctrine was met because (1)
Cruz consented to the officer’s entry; and (2) the officer, an experienced police officer,
recognized the small baggie as a common way to package illegal drugs.
Viewed in the light most favorable to the trial court's ruling with proper
deference to the trial court's credibility determination, the evidence shows that, at the
time Hagar saw the property, he was lawfully engaged in an investigation of an assault
on a child report.
According to officer Hager, and based on his experience in drug
enforcement, the property he saw in plain view during his investigation appeared to
be packaged in the same manner that illegal drugs are commonly packaged. Hager
believed the baggie contained cocaine.
While this belief was not required to be
correct or more likely true than false in order to support probable cause, see Brown,
460 U.S. at 742, for purposes of the motion to suppress hearing, the trial court could
have taken judicial notice that the property seized was cocaine based on the
indictment before it. See Tex. R. Evid. 201.
We conclude that sufficient articulable facts exist in this case to demonstrate
Hager's reasonable suspicion that the baggie he saw in plain view contained cocaine.
Thus, we conclude that the State's proof met the "immediately apparent" requirement
of the plain view doctrine requiring probable cause to connect the seized item to
criminal activity. See Walter, 28 S.W.3d at 541. We conclude the cocaine,
discovered in plain view, was legally seized and, thus, admissible under the plain view
doctrine. Accordingly, the trial court did not abuse its discretion in denying the motion
to suppress.
V. Conclusion
We overrule Cruz's sole issue. We affirm the trial court's ruling.
ERRLINDA CASTILLO
Justice
Do not publish.
Tex. R. App. P. 47.2(b).
Memorandum Opinion delivered and filed
this 2nd day of June, 2005.
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812 S.W.2d 154 (1991)
Phyllis RANIER, Movant,
v.
MOUNT STERLING NATIONAL BANK, Respondent.
No. 90-SC-196-DG.
Supreme Court of Kentucky.
June 6, 1991.
Rehearing Denied August 29, 1991.
*155 Tom H. Pierce, Versailles, for movant.
John C. Fogle, Mount Sterling, for respondent.
SPAIN, Justice.
This action arises out of the interpretation of a subordination agreement. In 1977, Phyllis Ranier loaned $200,000 to Algin and Doris Nolan and secured the promissory note with a first mortgage lien on their house and lot located in Montgomery County, Kentucky. In 1983, the Nolans applied for a home improvement loan with the Mount Sterling National Bank (Bank) to repair their home which was damaged by fire. Before approving the loan, the Bank required Mrs. Ranier to subordinate her lien on the Nolan property to the Bank's mortgage lien.
On February 28, 1983, Mrs. Ranier and the Bank executed a subordination agreement. The agreement, drafted by the Nolans' attorney, stated in pertinent part as follows:
WHEREAS, Doris C. Nolan and Algin H. Nolan have entered into a loan agreement with the Mt. Sterling National Bank, Mr. Sterling, Kentucky, whereby they will borrow the total sum of $125,000.00 from the Mt. Sterling National Bank, to be secured by a first real estate mortgage on the above described property in favor of the Mt. Sterling National Bank, and it is intended by the parties hereto that the above referenced real estate mortgage lien in favor of Thelma Phyllis Ranier ... shall become a second and junior mortgage lien to the new first real estate mortgage lien in favor of Mt. Sterling National Bank. (Emphasis added.)
The Nolans then executed a six-month promissory note on March 8, 1983, in favor of the Bank in the amount of $125,000 and secured the note with a first mortgage lien on the Nolan property. The future advance clause of the mortgage stated that "... the total indebtedness at any one time outstanding shall not exceed the sum of. . . $125,000 . . ."
Without notice to Mrs. Ranier, the Bank, in July 1985, approved an additional loan to the Nolans in the amount of $75,000 to complete the repairs on their property. The Nolans signed a new promissory note in favor of the Bank in the amount of $200,000. The Nolans' original note in the amount of $125,000 was marked "renewed" by the Bank and returned to the Nolans. The note remained secured only to the extent of the Bank's first mortgage on the Nolan property. The record indicates that the note was renewed several times and a total sum of $95,269.04, including $17,182.82 in principal and $78,269.32 in interest, had been paid to the Bank. The Bank applied the principal and interest to the unsecured portion of the note.
The Nolans defaulted on their notes. A foreclosure action was instituted by the Bank and the Nolan property was sold by the Master Commissioner for $181,000. Both the Bank and Ranier moved for summary judgment on the issue of their respective priorities in the proceeds of the foreclosure sale. The trial court granted summary judgment in favor of the Bank on the issue of priority and awarded it the sum of $140,216.48, which included the original promissory note principal amount of $125,000, plus interest, court costs, and attorney's fees. Mrs. Ranier received the balance of $35,892.09.
Ranier appealed to the Court of Appeals which affirmed the decision of the trial court. We granted discretionary review. Movant Ranier argues that the Bank breached the terms of the subordination agreement when it loaned the additional sum of $75,000. She also argues that Louisville Joint Stock Land Bank v. McNeely, 267 Ky. 425, 102 S.W.2d 389 (1937) requires the Bank to apply the mortgage payments it received from the Nolans first to the original indebtedness or secured portion of its renewed promissory note.
The Court of Appeals held that the equitable principles in McNeely were inapplicable and that the terms of the subordination agreement governed the Bank's priority. *156 The Court of Appeals and the trial court stated that the agreement did not contain any provision which prohibited the Bank from making additional loans to the Nolans nor any requirement that the payments made by the Nolans be applied to the original secured portion of the note.
We agree with the lower courts that the subordination agreement does not contain any provision which prohibited additional loans from the Bank to the Nolans, nor does it provide specifically that any payments received from the Nolans would be used first to the reduce the original secured portion of the renewed promissory note. The Bank did not breach the subordination agreement when it renewed the note and approved an additional unsecured loan in the amount of $75,000 to complete the repairs on the Nolan residence. But we do believe that the Bank has breached its implied covenant of good faith and fair dealing when it failed to give notice to Mrs. Ranier of its subsequent loan to the Nolans and when it unilaterally applied the mortgage payments it received from the Nolans first to the unsecured portion of the new promissory note.
KRS 355.9-316 provides that subordination agreements may be entered into "by any person entitled to priority." In construing contracts, including subordination agreements, we are required to look to the intention of the parties and to ascertain how they meant the agreement to operate when they entered into it. Wilcox v. Wilcox, Ky., 406 S.W.2d 152, 153 (1966); Parrish v. Newbury, Ky., 279 S.W.2d 229 (1955); Jones v. Linkes, Ky., 267 S.W.2d 936 (1954). But "[w]hen a contract is silent with respect to a matter vital to the rights of the parties, a court, in construing it, is necessarily compelled to resort to a consideration of the surrounding circumstances and the conduct of the participants indicating their interpretations." Caudill v. City of Maysville, 297 Ky. 78, 178 S.W.2d 945, 946 (1944).
Prior to the parties entering into the subordination agreement, Mrs. Ranier held a first mortgage position on the Nolan property. She was asked by the Bank and the Nolans to subordinate her advantageous security position in favor of the Bank so that the Bank would approve a $125,000 home improvement loan to the Nolans. Mrs. Ranier then acquiesced and entered into the subordination agreement in the good faith belief that her mortgage would be subordinated only to the extent of $125,000, on which the Nolans were making regular payments. The Bank then loaned the Nolans an additional $75,000. No notice was given to Mrs. Ranier, nor did she agree to further subordinate her mortgage to an additional $75,000. The renewed note in the amount of $200,000 was, in fact, two notes containing a $125,000 secured note and a $75,000 unsecured note. The Bank clearly benefited from the subordination agreement because it was able to obtain a first lien on the property and then it subverted the agreement by applying the payments it received from the Nolans, not to the $125,000 debt, but to the unsecured portion of the note. Mrs. Ranier has been relegated, to her detriment, to an inferior position in the proceeds of the foreclosure sale while the Bank has been allowed to collect on both its unsecured and secured notes, including interest, court costs, and attorney fees. We do not believe that the intent of Ranier when she entered into the agreement was to place her pre-existing first mortgage in the status of a second mortgage in perpetuity. Her intent clearly was that her mortgage be temporarily subordinated to the Bank's mortgage to the extent of $125,000. We believe that the Bank had an implied duty to Mrs. Ranier under the subordination agreement to apply the payments it received from the Nolans in a manner which did not prejudice the priority of her mortgage.
In every contract, there is an implied covenant of good faith and fair dealing. 17A Am Jur2d Contracts section 380; KRS 355.1-203. Indeed, it may be said that contracts impose on the parties thereto a duty to do everything necessary to carry them out. Beech Creek Coal Co. v. Jones, Ky., 262 S.W.2d 174 (1953). The Bank, in this case, has breached its implied duty of good faith and fair dealing when it applied the $95,269.04 which it received from the Nolans in payment first to the unsecured note. Basic fundamental fairness and equity *157 both require the Bank to apply the $95,269.04 to the principal and interest on the original $125,000 secured note.
We recognize the rule that, as between the two of them, a creditor receiving payments from his debtor, without any direction as to their application, may apply them to any legal debt, secured or unsecured, which he holds against his debtor. Straub v. Chemical Bank, Ky.App., 608 S.W.2d 71 (1980). But where a third-party creditor executes a subordination agreement in favor of said creditor, the latter has an implied duty under equitable principles to apply the payment it receives from the debtor in a manner which does not prejudice the third-party creditor's subordinated security interest.
In McNeely, supra, 102 S.W.2d at 392, we stated that
... where neither debtor nor creditor has applied the payment made, the court, in making the application, should exercise a sound discretion according to equitable principles so as to effectuate justice according to the equities of the case. (Citation omitted.) This rule is particularly applicable where the equities of a third person are involved. In such cases the court will apply the payments as may seem reasonable and just according to the rights of all parties involved. (Citations omitted.)
Equity requires the Bank to effectuate justice according to the understanding of the parties as represented by the subordination agreement. That being so, equity recognizes as done that which ought to be done, and the judgment has the practical effect of conforming it. Bowen v. Frazier, Ky., 444 S.W.2d 728 (1969).
The decisions of the Court of Appeals and Montgomery Circuit Court are reversed and the matter is remanded to the trial court. The proceeds of the foreclosure sale shall be distributed in accordance with this decision.
STEPHENS, C.J., and COMBS, LAMBERT, LEIBSON and REYNOLDS, JJ., concur.
WINTERSHEIMER, J., dissents by separate opinion.
WINTERSHEIMER, Justice, dissenting.
I respectfully dissent from the majority opinion because I do not believe the subordination agreement requires the interpretation placed on it by the majority and the doctrine of equitable subrogation is not applicable. If this case is to be reversed and remanded, I believe that the most that should be required is a vacation of the summary judgment and a remand for a determination of the allegedly ambiguous phrase.
The subordination agreement does not make any provision about the application of payments. There is no reference to any preexisting indebtedness, nor a limitation on the total indebtedness. The existing law expressed in Martuscelli v. Planters Bank & Trust Co., Ky.App., 705 S.W.2d 938 (1986) is at variance with the conclusion reached by the majority opinion. There is no clear evidence of fraud or overreaching, and there is no basis to insert into the agreement conditions which could have been stated in the original agreement.
Equitable subrogation has been limited to situations where it is necessary to avoid unjust enrichment. See United Pacific Ins. Co. v. First National Bank, Ky., 457 S.W.2d 833 (1970). Reliance on McNeely, supra, is inappropriate because there was no assignment of the first mortgage, nor any agreement by the second mortgagee to subordinate his security. It is not the function of this Court to change obligations of contract which the parties have made, nor to add a condition which was not written into the original contract. White v. Winchester Land Development Corp., Ky. App., 584 S.W.2d 56 (1979).
I believe the circuit judge and the Court of Appeals have correctly analyzed the language of the subordination agreement, and I would not disturb their decision.
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56 Wis.2d 286 (1972)
201 N.W.2d 778
STATE EX REL. PEDERSEN, Appellant,
v.
BLESSINGER, Sheriff of Racine County, Respondent.
No. State 97.
Supreme Court of Wisconsin.
Argued October 5, 1972.
Decided November 9, 1972.
*287 For the appellant there was a brief and oral argument by Arthur B. Nathan of Racine.
For the respondent the cause was argued by Robert D. Martinson, assistant attorney general, with whom on the brief was Robert W. Warren, attorney general.
HALLOWS, C. J.
On July 20, 1971, Michael Pedersen pleaded no contest to a state charge of disorderly conduct (sec. 947.01 (1), Stats.) and was fined $50 and costs. He also pleaded no contest to a state charge *288 of operating a vehicle without a license (sec. 343.05) and was fined $35 and costs and was given sixty days in which to pay the fines and costs. When he failed to do so a commitment was issued in which he was ordered to serve not more than twenty and fifteen days in the county jail or until he paid the fines and costs. The record is not clear whether these time limits were originally set at the time of conviction or at the time the commitment was issued.[1] The original sentence is not in the record. Pedersen was arrested and jailed and at a hearing for a writ of habeas corpus Pedersen claimed he was indigent and that the imprisonment for his inability to pay was unconstitutional as a denial of the equal protection of the laws. The trial court found the statutes constitutional and from the order quashing the writ, Pedersen appealed, and he was granted a stay during his appeal.
Pedersen claims it is unconstitutional to imprison him because of his inability to pay the fines and rests his argument upon Tate v. Short (1971), 401 U. S. 395, 91 Sup. Ct. 668, 28 L. Ed. 2d 130, Morris v. Schoonfield (1970), 399 U. S. 508, 90 Sup. Ct. 2232, 26 L. Ed. 2d 773; and Williams v. Illinois (1970), 399 U. S. 235, 90 Sup. Ct. 2018, 26 L. Ed 2d 586. The holding of these cases as distinguished from their language does not control this case, as the question here involved was expressly not decided in Pedersen's favor when in the Tate Case the court said, pages 400, 401:
"Nor is our decision to be understood as precluding imprisonment as an enforcement method when alternative means are unsuccessful despite the defendant's reasonable efforts to satisfy the fines by those means; the determination of the constitutionality of imprisonment in that circumstance must await the presentation of a concrete case."
*289 What these cases teach is that one who has been convicted of a crime and fined is not to be imprisoned in satisfaction of the fine or in lieu thereof if he is unable to pay the fine. The holdings go no farther. In Williams, the Illinois statute authorized both a fine and an imprisonment. Williams was sentenced to the maximum of one year for petty theft and fined $500 plus costs. The judgment provided that if Williams did not pay the fine and costs by the expiration of the imprisonment he was to remain in jail until the amount was satisfied at the rate of $5 per day. The supreme court held the statute as applied to Williams, an indigent, worked an invidious discrimination solely because he was too poor to pay the fine and therefore violated the equal protection clause. Actually, the holding was much narrower because Williams had served the maximum term and the court said imprisonment for failure to pay the fine could not exceed the maximum imprisonment term. And, it is to be noted that the imprisonment was in satisfaction of the fine and the maximum term had already been served. In the instant case, imprisonment is not in lieu of the fines but is a means to enforce their collection and is in no sense a punishment for the crime or in payment of the fines.
Although sec. 947.01, Stats., provides for a fine of not more than $200 or imprisonment for not more than ninety days or both and also sec. 343.05 (3), Stats., provides for a fine of not more than $100 or imprisonment of not more than six months, or both, for the first offense, Pedersen's sentence was a fine only.
In Morris v. Schoonfield, remanded in light of Williams, Mr. Justice WHITE wrote a concurring opinion in which he stated the principle of Williams applied to jailing of an indigent for failure to pay a fine although no accompanying prison sentence was involved. In Tate v. Short, supra, the Texas statute provided for a fine only for traffic offenses and also for imprisonment for *290 the nonpayment of the fine at the rate of $5 per day. Thus imprisonment on a predetermined formula was in satisfaction and in payment of the fine. The court in Tate adopted Justice WHITE'S view and stated as follows, page 398:
"`the same constitutional defect condemned in Williams also inheres in jailing an indigent for failing to make immediate payment of any fine, whether or not the fine is accompanied by a jail term and whether or not the jail term of the indigent extends beyond the maximum term that may be imposed on a person willing and able to pay a fine. In each case, the Constitution prohibits the State from imposing a fine as a sentence and then automatically converting it into a jail term solely because the defendant is indigent and cannot forthwith pay the fine in full.'"
Thus a jail sentence cannot be automatically substituted for a fine in the event the defendant is unable to immediately pay the fine. This is the typical $30 or thirty days sentence. We do not have this alternative; nor a predetermined equivalency formula; nor do we have imprisonment in terms of payment of a fine, much less at a certain dollar rate per day. We do have in sec. 973.07, Stats., a six months' limitation on the enforcement method of collection of a fine by imprisonment, supposedly on the ground of public policy that if six months' incarceration will not induce payment, a longer period will be fruitless. In village, city and county ordinance violations, the sanction can be only a fine or a forfeiture as those units of government lack sovereignty which is necessary to make such violation a crime involving the punishment of imprisonment. State ex rel. Keefe v. Schmiege (1947), 251 Wis. 79, 28 N. W. 2d 345.
The problem of imposing fines and their collection from indigents has been the subject of much consideration by scholars. The Standards on Sentencing Alternatives *291 and Procedures of the American Bar Association[2] reflects the philosophy of rethinking the function of the *292 fine as a criminal sanction and when a fine is conceived as an alternative to a jail sentence, imprisonment following default in the payment of the fine is illogical and results in unfairness to those unable to pay because of their poverty. Two approaches have been suggested to alleviate imprisonment for nonpayment. This is in keeping with the credit way of doing businesseven before the advent of our credit-card society. The Model Penal Code in sec. 302.1 (1)[3] provides for instalment payments or the payment within a specified period of time. See also: Note, Fines and FiningAn Evaluation, 101 U. of Pa. L. Rev. (1953), 1013, 1022-1024; Note, Imprisonment of Indigents for Non-Payment of Fines or Court Costs: The Need for Legislation That Will Provide Protection for the Poor, 48 N. Dak. L. Rev. (1971), 109; Discriminations Against the Poor, 81 Harv. L. Rev. (1967), 435, 448; California Penal Code 1205, 1966 supplement; New York Criminal Procedure, sec. 470-d 1 (b); as amended, 1967 Session Laws, ch. 681, sec. 61. Another approach is that fines be imposed only on those who are likely to be able to pay them and this determination should be made at the time of sentencing. See Model Penal Code, sec. 7.02 (3) (a). However, a variation *293 exists to cover cases where the defendant is unable to pay a fine imposed when his ability to pay has not been predetermined. In such a case he may at any time apply to the court for a resentence. See New York Code, Criminal Procedure, sec. 470-d 1 (b), as amended, 1967, Session Laws, ch. 681, sec. 61. This alternative we have in Wisconsin under the doctrine of Hayes v. State (1970), 46 Wis. 2d 93, 175 N. W. 2d 625, if the application is made or the court moves sua sponte within ninety days of the sentencing.
Of course, if a court is to determine at the time of sentencing whether a defendant is able to pay a fine, the result may be, at least in state cases, although it would be impossible in ordinance cases, that all defendants would spend a short term confinement in jail as a punishment in order to avoid an inverse discrimination. In fact, Mr. Justice BLACKMUN in his concurring opinion in Tate has well put it in these words, page 401:
"Eliminating the fine whenever it is prescribed as alternative punishment avoids the equal protection issue that indigency occasions and leaves only possible Eighth Amendment considerations. If, as a nation, we ever reach that happy point where we are willing to set our personal convenience to one side and we are really serious about resolving the problems of traffic irresponsibility and the frightful carnage it spews upon our highways, a development of that kind may not be at all undesirable."
We consider sec. 973.05 (1), Stats.,[4] to be constitutional. There may be isolated cases where the application of the section might work a discrimination but such an application is not required by the force of commands of these statutes. A period of sixty days is set in sec. *294 973.05 (1). This is the equivalent timewise in most cases of instalment payment. We do not read Tate as requiring instalment payment, although courts seemed to be divided on this point. In State v. De Bonis (1971), 58 N. J. 182, 276 Atl. 2d 137, the court took the view that a provision for instalment payment was required; but the court in Rutledge v. Turner (1972 Okla. Crim. App.), 495 Pac. 2d 119, held that a future date for total payment in lieu of payment in instalments was acceptable. Certainly, under our statute a trial judge can order instalment payments within the sixty-day period. The question then remains whether sixty days is a reasonable time for the payment of fines in all cases. We think that in most cases, especially those involving traffic offenses the time is reasonable and we hold this section to be constitutional on its face. This section does not provide for any automatic conversion to imprisonment; nor does it forthwith require the payment of a fine. Besides, this section does not prevent a trial court from exercising its inherent power to stay the sentence providing for payment within sixty days upon such terms as the court may then find to be just. This inherent power to stay a sentence to meet the needs of an individual case must be construed as part and parcel of the statute.
We hold also that sec. 973.07, Stats.,[5] is constitutional, as the trial court found. This section, likewise, does not automatically require imprisonment for the failure to pay a fine. It is not directory on the trial courts but permissive. The language is "may be committed." In what cases a defendant should be committed depends upon the facts to be determined by the trial court. If the defendant has ability to pay the fine and will not, then imprisonment is a proper means of enforcement. *295 In such case, the defendant has a key to his imprisonment and it is only his contumacy which keeps him from enjoying his liberty.
But what about the person unable in fact and in truth to pay a fine? In such a case, we hold it would be discriminatory to imprison him to coerce a performance he is unable to give. Under such conditions he is imprisoned because of his poverty. The inability to pay a fine is not different than the inability to pay alimony and support in civil cases. The failure must be contumacious. O'Connor v. O'Connor (1970), 48 Wis. 2d 535, 542, 180 N. W. 2d 735, 739. But the inability to pay and the question of indigency are relative terms and in the case of a fine, the trial courts should take a long and hard look upon the argument of inability to pay in our affluent society.
Too many people claim indigency when there is no indigency in fact. Too many claim an inability to pay when they consider the payment of a fine to be in the lowest order of priority. In traffic cases it is difficult to find inability to pay when a defendant owns an automobile and seemingly has money to buy gasoline or has the ability to borrow. Nevertheless, the constitution we believe forbids the imprisonment as a fine-collection method when the court knows it cannot work. Since Wisconsin does not have a sentencing alternative of imprisonment as the equivalent or in payment of a fine,[6] other methods, perhaps civil, must be used to collect the fines as a last resort.
Since we hold that sec. 973.05, Stats., is prima facie constitutional, we think the defendant when given a period of time in which to pay a fine has the burden *296 to apply to the court for relief, if he is unable to pay within the given time. Lacking such an application by the defendant, the court may under sec. 973.07, commit the defendant to imprisonment as a collection method. The defendant, if he has failed to apply to the court prior to commitment, may seek a hearing and a determination of his ability to pay the fine. But the burden is on the defendant to prove his inability and that the application of this section would be unconstitutional as applied to him. It must be remembered that courts generally, and traffic courts in particular, are not collection agencies and should not be made such. Our courts are overcrowded with cases and only the most streamlined procedure, consistent with constitutional demands, should be mandated. We repeat the defendant has the burden to raise and prove his inability to pay the fine where a commitment is ordered for his failure to do so. Inconvenience, luxury commitments and nonessential priorities do not constitute inability. The payment of a fine is to be given a high priority.
Much time could be saved if trial courts would follow the practice of ascertaining the defendant's ability to pay a fine at the time of sentencing. In cases of crime, probation might be considered as an alternative (sec. 973.09, Stats.). We also point out that under Hayes v. State, supra, the trial court could within ninety days of sentencing if the facts warrant, change or modify the sentence. The courts' power under Hayes gives some flexibility to avoid unconstitutionally imprisoning a person because he is unable to pay a fine. The ABA Standards on Sentencing Alternatives and Procedures recommend trial courts be given the power to modify their sentences;[7] so does the Model Penal Code, sec. *297 302.3.[8] However, contrary to Wisconsin's theory that imprisonment is a collection device and somewhat illogically, the American Bar Association's Standards consider imprisonment for nonpayment of a fine to be a discharge of the obligation to pay the fine. See sec. 6.5 (b) and Commentary, p. 289. We still think imprisonment should be a sanction for the inexcusable failure to pay a finein ordinance traffic cases it can have no other function in this state.
*298 We do not in this opinion pass upon the constitutionality of sec. 54.15 (1) of the Youth Service Act.[9] We see no problem with sec. 973.05 (2), Stats.,[10] relating to probation. Instalment payment or payment of the whole fine beyond the sixty-day limitation may be made a condition of probation. Sec. 973.09 (1) permits the court to "impose any conditions which appear to be reasonable and appropriate." The sixty-day limitation for those not on probation should not be carried over to those on probation. This construction gives both sections full operation for their intent and purposes without doing violence to either and such a construction strongly follows since both sections are a part of the criminal code and were passed at the same time. Brunette v. Bierke (1955), 271 Wis. 190, 72 N. W. 2d 702. See also Harte v. Eagle River (1970), 45 Wis. 2d 513, 173 N. W. 2d 683; State ex rel. Thompson v. Gibson (1964), 22 Wis. 2d 275, 125 N. W. 2d 636.
The evidence of inability to pay on the part of Pedersen in the court below is unsatisfactory. It does not appear in the record that at the time of sentencing or at the time the commitment was issued there was a hearing at which the defendant's ability to pay the fine was determined. Such a hearing is necessary to avoid an unconstitutional application of the statutes. We think *299 the case should be returned to determine whether Pedersen is now able to pay the fines. We say "now" because Pedersen has had about one year and four months' time to save or raise funds for the payment of this comparatively small fine.
By the Court.The order dismissing the writ of habeas corpus is set aside, and the court ordered to hold a hearing to determine Pedersen's ability now to pay the fines and costs, and for such further action as is not inconsistent with this opinion.
NOTES
[1] No question of counsel representation is raised on this appeal under the rule of Argersinger v. Hamlin (1972), 407 U. S. 25, 92 Sup. Ct. 2006, 32 L. Ed. 2d 530.
[2] "2.7 Fines.
"(a) The legislature should determine the offenses or categories of offenses for which a fine would be an appropriate sentence, and should state the maximum fine which can be imposed. Except in the case of offenses committed by a corporation, the legislature should not authorize the imposition of a fine for a felony unless the defendant has gained money or property through the commission of the offense.
"(b) Whether to impose a fine in a particular case, its amount up to the authorized maximum, and the method of payment should remain within the discretion of the sentencing court. The court should be explicitly authorized to permit installment payments of any imposed fine, on conditions tailored to the means of the particular offender.
"(c) In determining whether to impose a fine and its amount, the court should consider:
"(i) the financial resources of the defendant and the burden that payment of a fine will impose, with due regard to his other obligations;
"(ii) the ability of the defendant to pay a fine on an installment basis or on other conditions to be fixed by the court;
"(iii) the extent to which payment of a fine will interfere with the ability of the defendant to make any ordered restitution or reparation to the victim of the crime; and
"(iv) whether there are particular reasons which make a fine appropriate as a deterrent to the offense involved or appropriate as a corrective measure for the defendant.
Revenue production is not a legitimate basis for imposing a fine.
"(d) It would be appropriate for the legislature to endorse in the penal code standards such as those specified in subsection
(c). They are in any event commended to sentencing courts as guides to the exercise of discretion.
"(e) The court should not be authorized to impose alternative sentences, e.g., `thirty dollars or thirty days.' The effect of nonpayment of a fine should be determined after the fine has not been paid and after examination of the reasons for nonpayment. The court's response to nonpayment should be governed by the standards set forth in section 6.5.
"(f) In fixing the maximum fine for some offenses, the legislature should consider the feasibility of employing an index other than a dollar amount in cases where it might be appropriate.
For example, a fine relative to the amount of the gain might be appropriate in cases where the defendant has profited by his crime, or a fine relative to sales, profits, or net annual income might be appropriate in some cases, such as business or antitrust offenses, in order to assure a reasonably even impact of the fine on defendants of variant means.
"(g) Legislative attention should also be devoted to the desirability of a special schedule of fines for offenses committed by corporations."
[3] "Section 302.1. Time and Method of Payment; Disposition of Funds.
"(1) When a defendant is sentenced to pay a fine, the Court may grant permission for the payment to be made within a specified period of time or in specified installments. If no such permission is embodied in the sentence, the fine shall be payable forthwith."
[4] "973.05 Fines. (1) When a defendant is sentenced to pay a fine, the court may grant permission for the payment to be made within a period not to exceed 60 days. If no such permission is embodied in the sentence, the fine shall be payable forthwith."
[5] "973.07 Failure to pay fine or costs. When a fine or the costs are not paid as required by the sentence, the defendant may be committed to the county jail until the fine and costs are paid or discharged for a period fixed by the court not to exceed 6 months."
[6] Certainly, sec. 973.07, Stats., which contemplates imprisonment until the fine and costs are paid, does not provide even by implication that such imprisonment is in satisfaction of the debt, and any argument of double punishment is not meritorious. See Milwaukee v. Horvath (1966), 31 Wis. 2d 490, 143 N. W. 2d 446, and State ex rel. Keefe v. Schmiege, supra.
[7] "6.5 Modification of sentence: fines; nonpayment.
"(a) The sentencing court should have the power at any time to revoke or remit a fine or any unpaid portion, or to modify the terms and conditions of payment. When failure to pay a fine is excusable, such authority should be exercised.
"(b) Incarceration should not automatically follow the nonpayment of a fine. Incarceration should be employed only after the court has examined the reasons for nonpayment. It is unsound for the length of a jail sentence imposed for nonpayment to be inflexibly tied, by practice or by statutory formula, to a specified dollar equation. The court should be authorized to impose a jail term or a sentence to partial confinement (section 2.3) for nonpayment, however, within a range fixed by the legislature for the amount involved, but in no event to exceed one year. Service of such a term should discharge the obligation to pay the fine, and payment at any time during its service should result in the release of the offender.
"(c) The methods available for collection of a civil judgment for money should also be available for the collection of a fine, and should be employed in cases where the court so specifies.
"(d) In the event of nonpayment of a fine by a corporation, the court should be authorized to proceed against specified corporate officers under subsection (b) or against the assets of the corporation under subsection (c)."
[8] "Section 302.3. Revocation of Fine.
"A defendant who has been sentenced to pay a fine and who is not in contumacious default in the payment thereof may at any time petition the Court which sentenced him for a revocation of the fine or of any unpaid portion thereof. If it appears to the satisfaction of the Court that the circumstances which warranted the imposition of the fine have changed, or that it would otherwise be unjust to require payment, the Court may revoke the fine or the unpaid portion thereof in whole or in part."
[9] "54.15 Duty of court when person fails to pay fine; violation of probation. (1) If the court sentences a person who is less than 21 years of age at the time of his apprehension to the payment of a fine and the fine is not paid, the court may either remit the fine in whole or in part, or commit him to confinement for a length of time permitted by statutes relating to imprisonment for failure to pay fines. However, such confinement may be only in a place approved by the department for confinement of such persons as come within the purview of sections 54.08 to 54.38."
[10] "973.05 Fines...
"(2) When a defendant is sentenced to pay a fine and is also placed on probation, the court may make the payment of the fine a condition of probation...."
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633 F.2d 214
Dollar Rent A Car Systems, Inc.v.Louisville and Jefferson County Air Board
79-3034
UNITED STATES COURT OF APPEALS Sixth Circuit
9/17/80
1
W.D.Ky.
AFFIRMED
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Dismissed and Memorandum Opinion filed June 23, 2005
Dismissed and Memorandum Opinion filed June 23, 2005.
In The
Fourteenth Court of Appeals
____________
NO. 14-05-00365-CV
____________
CENTER FOR MEDICAL GENETICS, P.A., Appellant
V.
DR. EDUARDO S. CANTU,
Appellee
On Appeal from the 165th District
Court
Harris County, Texas
Trial Court Cause No.
03-43343
M E M O R A N D U M O
P I N I O N
This is an appeal from a judgment signed November 8,
2004. No clerk=s record has been filed. The clerk responsible for preparing the
record in this appeal informed the court appellant did not make arrangements to
pay for the record.
On May 19, 2005, notification was transmitted to all parties
of the Court's intent to dismiss the appeal for want of prosecution unless,
within fifteen days, appellant paid or made arrangements to pay for the record
and provided this court with proof of payment.
See Tex. R. App. P.
37.3(b).
Appellant filed no response.
Accordingly, the appeal is ordered dismissed.
PER CURIAM
Judgment rendered and Memorandum
Opinion filed June 23, 2005.
Panel consists of Justices Yates,
Anderson, and Hudson.
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Opinion issued September 28, 2006
In The
Court of Appeals
For The
First District of Texas
____________
NO. 01-05-00925-CR
____________
ERIC LOERA, Appellant
V.
THE STATE OF TEXAS, Appellee
On Appeal from the 208th District Court
Harris County, Texas
Trial Court Cause No. 1005427
MEMORANDUM OPINION
A jury convicted appellant, Eric Loera, of aggravated robbery and assessed
punishment at 15 years in prison. See Tex. Pen. Code Ann. § 29.03(a)(2) (Vernon
2003). We determine whether the evidence was legally sufficient to show that
appellant was a party to the crime of aggravated robbery. We affirm.
Facts
On October 28, 2004, Raphael Marenco left his job at the Taco Cabana at about
11:00 p.m. and headed home. He was unfamiliar with the area because it was his first
day working there, and he quickly became lost. He pulled into a gas station and asked
a young man for directions. That man, appellant, told Marenco that he knew the area
where Marenco lived and would help him get home if Marenco would give him a ride.
As soon as Marenco agreed, appellant told his friend, Carlos Roman, to get into the
truck. The two men directed Marenco to a poorly lit, uninhabited area. Realizing that
this was not the right way, Marenco turned around and went back to the gas station.
Roman put five dollars’ worth of gas into Marenco’s truck, and the three continued on
their way. This time, Roman and appellant told Marenco to drive into an apartment
complex parking lot. After Marenco parked the truck, Roman exited the vehicle, came
around to the driver’s side, and pulled out a gun. He then demanded that Marenco get
out of the truck and give him his money, wallet, and watch. During this time,
appellant remained inside the truck and rummaged through Marenco’s things. When
Roman was satisfied that he had gotten everything from Marenco, he told Marenco to
start walking; he and appellant then drove away in the truck.
Marenco walked to an apartment complex, found an off-duty police officer, Pam
Slater, and relayed what had just happened. Officer Slater notified the dispatcher of
the incident and requested an officer to come to the scene. Officers Belonoski and
Holloway, from the Houston Police Department, responded. Officer Belonoski
remained at the apartment complex to talk to Marenco, while Officer Holloway went
to look for the stolen truck in the area. After just a few minutes, Officer Holloway
notified Officer Belonoski that he had possibly found the vehicle, and Officer
Belonoski went to the site. When Officer Belonoski got there, the truck sped away,
and a high-speed chase ensued. The chase ended when Roman, the driver of the stolen
truck, made a sharp turn and lost control of the vehicle. The truck landed in a ditch,
and the officers were then able to take Roman into custody. Appellant, however,
jumped out of the vehicle and began running from the police officers. Officer
Holloway chased him on foot and finally caught him about 40 feet away. Appellant
was wearing Marenco’s watch when he was captured.
Shortly after the police had apprehended the suspects, a police unit picked up
Marenco from the apartment complex and brought him to the scene. Marenco was
asked if any of the men in custody had been involved in the robbery earlier that night.
A flashlight was shone on the faces of the men, and Marenco positively identified
Roman and appellant as those who had robbed him. Marenco stated that a third man
in the truck, who evidently had been picked up after Marenco had been forced from
the vehicle, had not been present during the robbery.
Sufficiency of the Evidence
In his sole point of error, appellant contends that the evidence was legally
insufficient to prove that he committed aggravated robbery because the evidence
showed “mere presence” and did not establish that he was a party to the crime.
A. The Standard of Review
In reviewing a legal-sufficiency challenge, we view the evidence in the light
most favorable to the verdict to determine whether any rational trier of fact could have
found the essential elements of the offense beyond a reasonable doubt. King v. State,
29 S.W.3d 556, 562 (Tex. Crim. App. 2000); Johnson v. State, 23 S.W.3d 1, 7 (Tex.
Crim. App. 2000). Although a legal-sufficiency analysis entails a consideration of all
evidence presented at trial, an appellate court may neither re-weigh the evidence nor
substitute its judgment for the jury’s. King, 29 S.W.3d at 562. The fact finder is
entitled to believe all, some, or none of any witness’s testimony. Sharp v. State, 707
S.W.2d 611, 614 (Tex. Crim. App. 1986).
B. The Law
The indictment alleged that appellant had committed the offense of aggravated
robbery. A person commits aggravated robbery, as the jury was charged here, if he
commits robbery and uses or exhibits a deadly weapon. See Tex. Pen. Code Ann.
§ 29.03(a)(2) (Vernon 2003). Under the charge given here, a person is guilty of
robbery if, while in the course of committing theft, and with intent to obtain or to
maintain control of the property, he intentionally or knowingly threatens or places
another in fear of imminent bodily injury or death. Id. § 29.02(a)(2). A person
commits theft if he unlawfully appropriates property with intent to deprive the owner
of property. Id. § 31.03(a) (Vernon Supp. 2005).
Under the law of parties upon which the jury was instructed, a person is
criminally responsible for the conduct of another if, “acting with intent to promote or
assist the commission of the offense, he solicits, encourages, directs, aids, or attempts
to aid the other person to commit the offense.” Id. § 7.02(a)(2) (Vernon 2003). The
evidence must show that, at the time of the offense, the parties were acting together,
each contributing some part toward the execution of their common purpose. See
Ransom v. State, 920 S.W.2d 288, 302 (Tex. Crim. App. 1994). In determining
whether a defendant participated in an offense as a party, the fact finder may examine
the events occurring before, during, and after the commission of the offense and may
rely on actions of the defendant that show an understanding and common design to
commit the offense. Id. An accused’s mental state may be inferred and proven
circumstantially from acts or surrounding circumstances. See Ledesma v. State, 677
S.W.2d 529, 531 (Tex. Crim. App. 1984).
C. Analysis
Appellant was convicted of aggravated robbery under the law of parties. For
this conviction to be upheld, the evidence below must have shown that appellant
“acting with intent to promote or assist the commission of the offense,”
“encourage[d], . . . aid[ed], or attempt[ed] to aid” Roman in robbing Marenco. See
Tex. Pen. Code Ann. § 7.02 (a)(2). Appellant’s mere presence at the scene of the
offense would not alone have sufficed to support his conviction. However, his
presence is a circumstance tending to prove guilt, which, combined with other facts,
may suffice to show that appellant was a participant. See Valdez v. State, 623 S.W.2d
317, 321 (Tex. Crim. App. 1979). The State presented evidence of such additional
facts. Marenco testified that appellant asked him for a ride and then invited Roman
to join. Thus, appellant provided Roman the opportunity to rob Marenco. Further,
when Roman exited the vehicle and began threatening Marenco with the gun and
robbing him, appellant remained in the truck searching through Marenco’s property.
Appellant’s flight on foot after the truck went into the ditch is also a circumstance
showing appellant’s guilt. See Ysasaga v. State, 444 S.W. 2d 305, 308 (Tex. Crim.
App. 1969), overruled on other grounds, 711 S.W.2d 240 (Tex. Crim. App. 1986),
From the time that the two men climbed into Marenco’s truck until the robbery
was over, appellant did not say a single word to Marenco or to Roman. Appellant
contends that this is proof that he was not acting with Roman because he never
threatened Marenco or asked him for any of his possessions. However, a rational jury
could have inferred that appellant’s silence was a sign of his guilt in that he never
helped Marenco, either. Additionally, appellant could have told Roman to stop what
he was doing, but he did not. And when Roman began robbing Marenco, appellant
began searching Marenco’s vehicle for more things that he could take. When
appellant was caught, Marenco’s watch was recovered from his person. Finally,
appellant fled the scene when the stolen truck crashed into the ditch. Although flight
alone will not support a guilty verdict, evidence of flight from a crime scene is a
circumstance from which an inference of guilt may be drawn. See Valdez, 623 S.W.2d
at 321; Ysasaga, 444 S.W.2d at 308. A rational juror could have found all of this
testimony sufficient to establish that appellant’s intent was to aid Roman and, as such,
he was a party to the offense. See Valdez, 623 S.W.2d at 321.
Viewing the evidence in the light most favorable to the verdict, a rational jury
could have inferred from this evidence that appellant, “acting with intent to promote
or assist the commission of” the aggravated robbery, “encourage[d], . . . aid[ed], or
attempt[ed] to aid” Roman in carrying out the crime. See Tex. Pen. Code Ann.
§ 7.02(a)(2). Therefore, we overrule appellant’s sole point of error.
Conclusion
We affirm the judgment of the trial court.
Tim Taft
Justice
Panel consists of Justices Taft, Keyes, and Hanks.
Do not publish. See tex. R. App. P. 47.2 (b).
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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
OCT 23, 2007
No. 06-16268 THOMAS K. KAHN
Non-Argument Calendar CLERK
________________________
D. C. Docket No. 02-02683-CV-TWT-1
MICHAEL ALAN TURNER,
Petitioner-Appellant,
versus
TONY HOWERTON,
Respondent-Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
_________________________
(October 23, 2007)
Before BIRCH, WILSON and PRYOR, Circuit Judges.
PER CURIAM:
Michael Alan Turner, a Georgia state prisoner proceeding pro se, appeals the
district court’s denial of his motion under Federal Rule of Civil Procedure 60(b)
for relief from the district court’s final order denying Turner’s petition for a writ of
habeas corpus under 28 U.S.C. § 2254. We AFFIRM.
I. BACKGROUND
In September 2002, Turner filed a pro se petition for a writ of habeas corpus
pursuant to 28 U.S.C § 2254. He claimed numerous grounds for relief, namely:
(1) ineffective assistance of counsel, including a claim that his counsel failed to file
a motion to suppress (ground one); (2) he was unaware of the nature and
consequences of his guilty plea (ground two); (3) prosecutorial misconduct
(ground three); (4) the state preliminary court and trial court violated his Fifth and
Sixth Amendment rights by not providing him with counsel during his plea
proceedings and making various other errors prior to the entry of his guilty plea
(ground four); (5) the state trial judge improperly allowed Turner to enter a guilty
plea to a “silent record,” when the record would have established that Turner’s
waiver of constitutional rights was invalid; (6) the county magistrate judge violated
the United States and Georgia constitutions by allowing him to plead guilty
without counsel and failing to inform him of his right to appeal (ground six); (7)
2
the Public Defender’s Office obstructed justice by destroying his case file (ground
seven); and (8) that, under the “new rule of law” stated in Apprendi v. New Jersey,
530 U.S. 466, 120 S.Ct. 2348 (2000), the sentencing court improperly enhanced his
sentence (ground eight). R1-1, Supplemental Pages at 1-9.
The government moved to dismiss the petition for lack of exhaustion,
arguing that Turner had not exhausted ground eight. In response to the
government’s motion, the district court offered Turner three choices: (1) proceed
on the mixed petition and face potential dismissal pursuant to Rose v. Lundy, 455
U.S. 509, 519-20, 102 S.Ct. 1198, 1204 (1982); (2) withdraw ground eight, his
unexhausted Apprendi claim, and proceed on the remaining grounds; or (3)
voluntarily dismiss the entire petition and file a state habeas action, so that Turner
could fully and fairly litigate all of his claims, including ground eight, and exhaust
his state court remedies. Turner elected to dismiss ground eight and proceed on the
remaining grounds.
On 28 July 2004, a magistrate judge issued a report and recommendation,
recommending that Turner’s petition be denied. First, the magistrate judge found
that subpart (d) of Turner’s ineffective assistance of counsel claims under ground
one of his petition (that Turner’s counsel was ineffective for failing to file a motion
to suppress), and grounds five, six, and seven were unexhausted but procedurally
3
defaulted because Turner failed to raise them properly and timely in the state
courts and did not show cause and prejudice to excuse his failure to do so. The
magistrate judge then addressed the merits of Turner’s remaining claims under
grounds one, two, three, and four.
The magistrate judge found that the state habeas court reasonably applied the
correct rule of law in ruling on Turner’s claims of ineffective assistance of counsel.
He also found that Turner received effective assistance of counsel. Therefore, the
magistrate judge found that Turner was not entitled to federal habeas relief under
ground one. With respect to ground two, the magistrate judge found that Turner
voluntarily and intelligently entered his guilty plea, based upon the reconstructed
transcript of Turner’s plea hearing.1 The reconstructed transcript indicated that
Turner understood the rights he was waiving through his guilty plea, that the state
recommended a life sentence, that he had not been threatened into entering his
plea, and that there would be no trial as a result of his plea. As to ground three, the
magistrate judge found that the state habeas court correctly held that, through
Turner’s knowing and voluntary guilty plea, Turner waived his right to bring
claims of prosecutorial misconduct. Finally, the magistrate judge found that all of
1
The transcript of Turner’s guilty plea hearing was lost. The state trial judge
subsequently created a reconstructed transcript pursuant to O.C.G.A. § 5-6-41(g), and ruled that
the reconstructed transcript has the same binding effect as a transcript filed by the court reporter
pursuant to O.C.G.A § 5-6-41(e).
4
Turner’s claims in ground four, in which he alleged various errors in the state
preliminary proceedings and trial court prior to entry of his guilty plea, were either
waived through Turner’s guilty plea or resolved in the state habeas court’s
discussion of the voluntary nature of his plea.
After de novo review, the district court approved and adopted the magistrate
judge’s report and recommendation, and dismissed Turner’s petition on 18 October
2004. On 19 October 2005, Turner filed a motion for relief from judgment,
pursuant to Rule 60(b)(1),(3),(4), and (6). Turner argued that the district court
erred by determining that he had presented a mixed petition and by allowing him to
proceed through one of only three options. In addition to the three options he was
given, Turner asserted that the district court should have allowed him to hold the
federal habeas proceedings in abeyance pending exhaustion of his state claims.
Further, Turner argued that the state habeas court never made a plain statement that
it was relying upon a procedural bar to dismiss his claims during the state habeas
proceedings. Therefore, according to Turner, the district court mistakenly found
that the allegedly unexhausted grounds were procedurally barred, and further erred
in finding that Turner had not raised these claims in state court. Turner also
maintained that the district court judgment was void because it “relied on state law
to determine a federal question of whether … O.C.G.A. § 17-10-1(a) created a
5
liberty interest … in a determinate sentence” for a specific amount of time. R4-59
at 10-11. Finally, Turner argued that the district court mistakenly found no error in
his trial counsel’s failure to advise him of his right to an appeal.
The district court denied Turner’s Rule 60(b) motion as untimely. We
granted Turner’s subsequent motion for a certificate of appealability (COA) on the
question of whether the district court erred by dismissing that motion as untimely.
We found that the district court abused its discretion in finding that Turner’s Rule
60(b) motion was untimely, and we remanded for a review on the merits.
However, we found that Turner abandoned his claims pursuant to Rule 60(b)(3)
and (6) by failing to address them in his motion.2 We also determined that, to the
extent that his motion challenged the district court’s resolution of the merits of his
petition, specifically, the claims that he was not advised of his right to a direct
appeal and that he was denied effective assistance of counsel, the motion
constituted a second or successive habeas petition over which the district court
lacked jurisdiction
On remand, the district court denied Turner’s Rule 60(b) motion. Turner
applied for a certificate of appealability (“COA”), and the district court granted his
motion on the issue of “whether an alleged legal error constitutes a ‘mistake’ under
2
Issues not raised in an initial brief are deemed abandoned. Isaacs v. Head, 300 F.3d
1232, 1253 n.6 (11th Cir. 2002) (citations omitted).
6
Rule 60(b).” R5-96. We expanded the COA to include the question, “[i]f so,
whether the district court erred in denying [Turner’s] Rule 60(b) motion.” Turner
v. Howerton, No. 06-16268 (11th Cir. Sept. 23, 2007).
II. DISCUSSION
Pro se pleadings are held to a less stringent standard than pleadings drafted
by attorneys and are liberally construed. Tannenbaum v. United States, 148 F.3d
1262, 1263 (11th Cir. 1998) (per curiam). “[A] district court's order under Rule
60(b) is reviewable only for abuse of discretion.” American Bankers Ins. Co. of
Fla. v. Northwestern Nat'l Ins. Co., 198 F.3d 1332, 1338 (11th Cir. 1999). Rule
60(b) provides that “the [district] court may relieve a party or a party’s legal
representative from a final judgment, order, or proceeding for the following
reasons: (1) mistake, inadvertence, surprise, or excusable neglect ... [or] (4) the
judgment is void.” Fed. R. Civ. P. 60(b). A Rule 60(b) motion seeking relief on
grounds of mistake or inadvertence must be filed within one year after entry of the
judgment or order that the movant seeks to challenge. Id. An appeal from a ruling
on a Rule 60(b) motion is limited to the grant or denial of that motion and does not
subject the underlying judgment to review. Bankers Ins. Co., 198 F.3d at 1338.
Our review of subject matter jurisdiction de novo. See Milan Express, Inc. v.
Averitt Express, Inc., 208 F.3d 975, 978 (11th Cir. 2000).
7
A. A Legal Error Can Be a “Mistake” Within the Scope of Rule 60(b)
A legal error in a judicial ruling can constitute a “mistake” as that term is
used in Rule 60(b). However, we must distinguish between motions alleging
“mistakes” cognizable under Rule 60(b) and motions that seek review of a court’s
prior resolution of the merits of a habeas petition. The Supreme Court has
determined that “when a Rule 60(b) motion attacks, not the substance of the federal
court’s resolution of a claim on the merits, but some defect in the integrity of the
federal habeas proceedings,” the motion should not be considered a second or
successive habeas petition. Gonzalez v. Crosby, 545 U.S. 524, 532, 125 S.Ct.
2641, 2648 (2005). By contrast, the Court stated that a Rule 60(b) motion that
“seeks to add a new ground for relief,” or “attacks the federal court’s previous
resolution of a claim on the merits,” constitutes a second or successive habeas
petition, which requires pre-certification by a court of appeals. Id. The Court
explained:
The term “on the merits” has multiple usages. We refer here to
a determination that there exist or do not exist grounds
entitling a petitioner to habeas corpus relief under 28 U.S.C.
§§ 2254(a) and (d). When a movant asserts one of those
grounds (or asserts that a previous ruling regarding one of
those grounds was in error) he is making a habeas corpus
claim. He is not doing so when he merely asserts that a
previous ruling which precluded a merits determination was in
error-for example, a denial for such reasons as failure to
exhaust, procedural default, or statute-of-limitations bar.
8
Id. at 532 n.4, 125 S.Ct. at 2648 n.4 (citations omitted).
Under Gonzalez, a legal error may be a “mistake” within Rule 60(b) when
the purported error occurred in a “previous ruling which precluded a merits
determination,” such as a denial based on procedurally barred or unexhausted
claims. Id. In this case, Turner’s Rule 60(b) motion challenged, among other
things, the district court’s determination that several grounds in Turner’s petition
were procedurally barred, and we have jurisdiction to review that claim as a
potential mistake under Rule 60(b).
B. The District Court Did Not Err in Denying Turner’s Rule 60(b) Motion
The district court correctly denied Turner’s Rule 60(b) motion. First, the
district court properly denied Turner’s ineffective-assistance-of-counsel claims.
Since we had already determined that Turner’s ineffective assistance of counsel
claim was successive, the district court did not have jurisdiction to hear the claim
under the “law of the case” doctrine. See Turner v. Howerton, 196 F. App’x 848,
851 (11th Cir. 2006) (per curiam). “[T]he ‘law of the case’ doctrine ‘invokes the
rule that findings of fact and conclusions of law by an appellate court are generally
binding in all subsequent proceedings in the same case in the trial court or on a
later appeal.’” Westbrook v. Zant, 743 F.2d 764, 768 (11th Cir. 1984) (citation
omitted). “The doctrine ‘generally operates to preclude a reexamination of issues
decided upon appeal, either by the district court on remand or by the appellate
9
court itself upon a subsequent appeal.’” Id. (citation omitted). Under this doctrine
and our prior opinion in this case, the district court was bound to deny Turner’s
ineffective assistance claims because we previously had determined that these
claims were an attack on the district court’s resolution of the merits of his § 2254
petition, and were not properly raised in a Rule 60(b) motion.
Second, Turner argued that the magistrate judge erred by finding that his §
2254 petition was mixed and by giving him only three options for how to proceed
on the petition, which were: (1) to proceed on his mixed petition and face possible
dismissal pursuant to Rose v. Lundy, 455 U.S. at 519-520, 102 S.Ct. at1204; (2) to
withdraw his unexhausted Apprendi claim 3 and proceed only upon the remaining
grounds; or (3) to voluntarily dismiss the entire petition and file a state habeas
action to exhaust all state court remedies.4 Turner also argues that he should have
been given the option to stay the proceedings on his petition and hold several of his
grounds in abeyance pending his attempts to exhaust those grounds in state court.
To exhaust state remedies, a petitioner must fairly present every issue raised
3
The district court correctly held that Turner’s Apprendi claim was unexhausted.
Further, Turner was not entitled to relief under Apprendi. We have held that Apprendi
announced a new rule of constitutional law and may not be applied retroactively to cases already
final on direct review, such as this case. In re Anderson, 396 F.3d 1336, 1339-40 (11th Cir.
2005).
4
Turner also argued that his petition was not mixed because the state had an opportunity
to litigate these issues in Turner’s state habeas petition. As we have explained, Turner could not
amend his state habeas petition to include these grounds after the final evidentiary hearing in the
state habeas proceedings. This argument lacks merit.
10
in his federal petition to the state’s highest court. Castille v. Peoples, 489 U.S.
346, 351, 109 S.Ct. 1056, 1060 (1989). Procedural default occurs when the
petitioner never raised the claim in state court and it is obvious that the
unexhausted claim would now be procedurally barred in state court. Bailey v.
Nagle, 172 F.3d 1299, 1303 (11th Cir. 1999) (per curiam). Georgia law establishes
that, under most circumstances, any claims not raised in a petitioner’s initial state
habeas petition may not be raised in a successive petition. O.C.G.A. § 9-14-51.
The Supreme Court held that a procedural default does not bar consideration of a
federal claim unless the last state court rendering a judgment in the case “clearly
and expressly” stated that its judgment rested on a state procedural bar. Harris v.
Reed, 489 U.S. 255, 263, 109 S.Ct. 1038, 1043 (1989). This rule is inapplicable,
however, in cases such as this where the claim has never been presented to the state
courts. Chambers v. Thompson, 150 F.3d 1324, 1326-1327 (11th Cir. 1998).
Turner’s petition contains several unexhausted but procedurally defaulted
claims. In subpart (d) of ground one, Turner presented a claim that his trial
counsel was ineffective for failing to file a motion to suppress, which he
voluntarily dismissed from his original state habeas petition and raised again in his
federal petition. Turner presented grounds five, six, and seven to the state habeas
court only after the final evidentiary hearing in his state habeas case. Since
Georgia law does not permit amendments to a state habeas petition after the final
11
evidentiary hearing, these claims were not timely presented to the state habeas
court. When ruling on Turner’s petition, the district court correctly held that
subpart (d) of ground one, and grounds five, six, and seven of Turner’s petition
were unexhausted but procedurally defaulted. On remand, when considering
Turner’s Rule 60(b) motion, the district court did not abuse its discretion in
determining that it had correctly ruled that several of Turner’s claims were
procedurally barred.
Relatedly, Turner argues that the district court should have allowed him to
stay the proceedings on his federal petition and hold grounds one, subpart (d), five,
six, and seven in abeyance pending his attempts to exhaust those grounds in state
court. Initially, we note that the magistrate judge entered the order offering Turner
his three alternatives on 13 August 2003, and Turner’s Rule 60(b) motion was filed
in October 2005. Thus, we lack jurisdiction over this issue since Turner’s motion
was filed well over one year since the entry of the magistrate judge’s order. See
F.R.C.P. Rule 60(b).5
5
Even if we did have such jurisdiction, this argument lacks merit. The stay and abeyance
option was not clearly established when the district court denied Turner’s petition in October
2004. In 2005, the Supreme Court decided that this option “should be available only in limited
circumstances,” and is appropriate only where “the district court determines there was good
cause for the petitioner’s failure to exhaust his claims first in state court.” Rhines v. Weber, 544
U.S. 269, 277, 125 S.Ct. 1528, 1535 (2005). In this case, the district court did not find good
cause for Turner’s failure to exhaust ground one, subpart (d), five, six, and seven in state court.
Moreover, while the district court had the ability to grant Turner a continuation or abeyance
while he exhausted his state remedies, it was not obligated to do so. Therefore, the district court
did not err by not offering him the stay and abeyance option. In conclusion, the district court
committed no error redressable under Rule 60(b) relating to its disposition of the unexhausted
12
Finally, Turner argues that the district court made a mistake under Rule
60(b) when it allegedly erred by using state law to determine that he had no liberty
interest in a sentence for a determinate number of years. We do not have
jurisdiction over this claim. Turner did not present this argument in his § 2254
petition or his subsequent amendments of it. Further, Turner may not use a Rule
60(b) motion to raise a new claim attacking the merits of the district court’s
decision that the state did not violate his constitutional rights by recommending a
life sentence, and he may not raise this new claim on appeal. Gonzales v. Crosby,
545 U.S. at 532, 125 S.Ct. at 2648.
III. CONCLUSION
Turner has appealed the denial of his Rule 60(b) motion for relief from the
district court’s final order denying his § 2254 petition. As we have explained, the
district court’s denial of Turner’s § 2254 petition is AFFIRMED.
but procedurally defaulted claims contained in Turner’s mixed § 2254 petition.
13
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842 F.2d 1074
56 USLW 2561, 10 Fed.R.Serv.3d 441,10 Fed.R.Serv.3d 921
Don KIRSHNER, Plaintiff-Appellee,andSchumaier, Roberts & McKinsey, Appellant,v.UNIDEN CORPORATION OF AMERICA, Defendant-Appellee.
No. 87-5838.
United States Court of Appeals,Ninth Circuit.
Argued and Submitted Feb. 5, 1988.Decided March 18, 1988.
Gregory A. Long, Sheppard, Mullin, Richter & Hampton, Los Angeles, Cal., for appellant.
Frederick L. McKnight, Jones, Day, Reavis & Pogue, Los Angeles, Cal., for defendant-appellee.
Appeal from the United States District Court for the Central District of California.
Before ALARCON, FERGUSON and BEEZER, Circuit Judges.
ALARCON, Circuit Judge:
1
The law firm of Schumaier, Roberts & McKinsey (Schumaier) is counsel for Don Kirshner (Kirshner), the plaintiff in the underlying action for personal injuries. Schumaier challenges the district court's authority to enter a protective order requiring Schumaier to return to defendant Uniden Corporation of America (Uniden) certain documents, protected by the attorney-client privilege, that Schumaier obtained through discovery in a separate action filed by another of Schumaier's clients against Uniden. Schumaier also contends that the district court's imposition of sanctions denied Schumaier due process.
2
We begin with a recitation of the pertinent facts. We then address two preliminary matters raised by Uniden: We grant Uniden's motion to strike portions of Schumaier's Excerpts of Record; and we reject Uniden's argument that our previous denial of Schumaier's Petition for Writ of Mandamus bars Schumaier from challenging the protective order on this appeal.
3
On the merits of Schumaier's appeal, we hold that the district court abused its discretion in issuing a protective order purporting to restrict the use of documents obtained in a separate action. Accordingly, we vacate the protective order. We further find that the district court erred in imposing sanctions against Schumaier. We also deny Uniden's request for sanctions on appeal.
I. PERTINENT FACTS
4
Schumaier, appearing pro hac vice, and Michael W. Weinstock (Weinstock), a sole practitioner in Los Angeles, filed this products liability action on Kirshner's behalf against Uniden on September 10, 1985. On May 27, 1986, Uniden filed a motion for a protective order requiring Schumaier to return to Uniden certain documents in Schumaier's possession, which documents were allegedly protected by Uniden's attorney-client privilege. Uniden's motion also sought to prevent Schumaier from using the contested documents for any purpose.
5
Schumaier had not obtained the contested documents through discovery in the Kirshner action but apparently through discovery in Gearhart v. Uniden Corp., an action filed in the United States District Court for the Eastern District of Missouri. Schumaier represented Gearhart in that action. Schumaier asserts, and Uniden does not dispute, that at the time Uniden moved for the protective order in this action, Kirshner was not seeking discovery from Uniden.
6
Uniden based its motion for the protective order in this matter on a discovery ruling by Chief Judge Manuel L. Real of the Central District of California in a separate action entitled Michaels v. Uniden Corp. In support of its motion for a protective order in this action, Uniden asserted that in Michaels, Judge Real had ruled that the same contested documents were protected by Uniden's attorney-client privilege.
7
Prior to moving for a protective order, Uniden's counsel requested that Schumaier return the contested documents based on Judge Real's order in Michaels. Schumaier refused to return the documents, contending that the court in Michaels had merely denied plaintiff's motion to compel further answers to questions propounded during the deposition of Harold A. Ducote, Jr., Uniden's former general counsel. Schumaier insisted that the court in Michaels had neither examined the contested documents nor declared them to be privileged.
8
The Proof of Service attached to Uniden's motion for a protective order indicates that both Weinstock and Schumaier were served by mail on May 23, 1986. Weinstock admitted that he received a copy of the notice and motion. Schumaier alleges that it did not receive a copy of the notice and motion. Neither Weinstock nor Schumaier filed written opposition to the motion for a protective order in the Kirshner action.
9
On June 13, 1986, realizing that no opposition had been filed, Uniden filed and served a supplemental memorandum requesting sanctions against Weinstock and Schumaier "under Central District Rules 7.6 and 27.1, 28 U.S.C. Sec. 1927, and the inherent powers of the Court." Schumaier received notice of the request for sanctions at its Missouri offices on Saturday, June 14, 1986, two days before the scheduled date for the hearing on Uniden's motion.
10
On Monday, June 16, 1986, the district court held a hearing on Uniden's motion for a protective order. Weinstock and counsel for Uniden attended the hearing; Schumaier did not. At the close of the hearing, the district judge granted Uniden's motion for a protective order. The court further imposed sanctions jointly and severally on Weinstock and Schumaier in the amount of $5,946.25 "as costs for the seeking of the order."
II. PRELIMINARY MATTERS
A. Uniden's Motion to Strike
11
Uniden has moved to strike Schumaier's Opening Brief, portions of its Excerpts of Record, and its Designation of Record on Appeal on the ground that Schumaier has included within the excerpts certain materials not properly part of the record on appeal.
12
Fed.R.App.P. 10(a) provides as follows: "Composition of the Record on Appeal. The original papers and exhibits filed in the district court, the transcript of proceedings, if any, and a certified copy of the docket entries prepared by the clerk of the district court shall constitute the record on appeal in all cases." This court's Rule 10-2 provides, in pertinent part: "Pursuant to FRAP 10(a), the complete record on appeal consists of: ... (b) the district court clerk's record of original pleadings, exhibits and other papers filed with the district court ('clerk's record')." Ninth Cir.R. 10-2.
13
Papers not filed with the district court or admitted into evidence by that court are not part of the clerk's record and cannot be part of the record on appeal. See United States v. Walker, 601 F.2d 1051, 1054-55 (9th Cir.1979) (affidavits that "were not part of the evidence presented to the district court" would not be considered on appeal); Panaview Door & Window Co. v. Reynolds Metals Co., 255 F.2d 920, 922 (9th Cir.1958) (striking from record an exhibit that had been attached to appellant's trial court memorandum of points and authorities and a document that had been marked for identification, neither of which had been received in evidence); Watson v. Rhode Island Ins. Co., 196 F.2d 254, 255-56 (5th Cir.1952) (granting motion to strike documents that were tendered as exhibits to brief on appeal but that had not been offered in evidence below).
14
Schumaier does not dispute that it never filed or submitted to the court below the Declaration of David R. Buchanan, Excerpts of Record (ER) 236-39. The Declaration, therefore, is not part of the record on appeal and must be stricken.
15
Schumaier did not file the documents that appear at ER 263-88 and 293-341. None of these documents are listed on the district court's docket sheet. Schumaier notes, however, that each of these documents was an exhibit to Schumaier's Petition for Writ of Mandamus previously filed in this court, which Petition and exhibits were served on the district court judge. Accordingly, Schumaier argues, these documents "were before the United States District Court before it entered the final judgment from which this appeal is taken" and were properly included in the Excerpts of Record.
16
Papers submitted to the district court after the ruling that is challenged on appeal should be stricken from the record on appeal. See Walker, 601 F.2d at 1055 ("We are here concerned only with the record before the trial judge when his decision was made.") (emphasis added); Heath v. Helmick, 173 F.2d 156, 156-57 (9th Cir.1949) (striking from record on appeal papers that were filed in district court after judgment from which appeal was taken) ("The cause must be tried here upon the record made at the original trial.").
17
Schumaier's written objections to the proposed order were submitted to the district court prior to the entry of the protective order. The contested portions of the Excerpts of Record, however, were not served on the court until July 15, 1986, one month after the hearing on the motion and one week after entry of the protective order.
18
The only case cited by Schumaier to support its position, Love v. Royall, 179 F.2d 5 (8th Cir.1950), is distinguishable. In that case, the Eighth Circuit denied plaintiff's motion to strike defendant's supplemental record on appeal, which contained papers from a separate court proceeding instituted by plaintiff. Id. at 7. In Love, however, unlike in the present case, the contested papers had been "before the District Court on the argument of the motion to dismiss the complaint...." Id.
19
In short, the contested portions of Schumaier's Excerpts of Record were neither filed with the district court, considered by the court, nor even before the court when it entered the order that Schumaier now challenges on appeal. We, therefore, strike the papers (ER 236-39, 263-88 and 293-341) from the record and give them no consideration in adjudicating this appeal. See Watson, 196 F.2d at 256 (court refuses to consider grounds for reversal evidenced in documents that have been stricken from record on appeal); Heath, 173 F.2d at 157 (court gives no consideration to stricken materials in disposing of appeal). Uniden's motion to strike is denied in all other respects.
20
B. Schumaier's Petition for Writ of Mandamus
21
On August 19, 1986, Schumaier petitioned this court for a writ of mandamus to relieve it from the effect of the protective order now at issue in this appeal. The arguments Schumaier presented in the petition are virtually identical to the arguments Schumaier now presents in its brief. On October 24, 1986, a motions panel of this court denied the petition. Uniden contends that such denial operates to bar Schumaier from relitigating the propriety of the protective order on this appeal.
22
"[U]nder the 'law of the case' doctrine one panel of an appellate court will not as a general rule reconsider questions which another panel has decided on a prior appeal in the same case." Kimball v. Callahan, 590 F.2d 768, 771 (9th Cir.), cert. denied, 444 U.S. 826, 100 S.Ct. 49, 62 L.Ed.2d 33 (1979). The doctrine applies, however, only when the first panel ruled on the merits. See United States v. Dean, 752 F.2d 535, 541 (11th Cir.1985) ("[A] prior denial of a petition for a writ of mandamus will have res judicata effect only if the denial was 'on the merits,'...."), cert. denied, --- U.S. ----, 107 S.Ct. 97, 93 L.Ed.2d 48 (1986); Connolly v. Pension Benefit Guaranty Corp., 673 F.2d 1110, 1112-13 (9th Cir.1982) (first panel's summary denial of petition for writ of mandamus did not constitute law of the case because it did not reach the merits); 18 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure Sec. 4478 at 798-99 n. 31 (1981) [hereinafter Wright ] ("Denial of mandamus by an appellate court ordinarily does not rest on a determination of the merits that should become binding as the law of the case.").
23
"[W]hen the denial of a petition for a writ of mandamus is, or may be, the result of the special limitations inherent in the writ, such a denial does not establish the law of the case." Dean, 752 F.2d at 542; accord Connolly, 673 F.2d at 1113 (where first panel's denial of petition may have been motivated by any of several guidelines governing issuance of writ, second panel would not speculate as to motivation for denial, and denial did not constitute law of the case); Key v. Wise, 629 F.2d 1049, 1054-55 (5th Cir.1980) (second panel not bound by first panel's denial of petition for writ of mandamus raising same issue, where first panel provided no explanation for its ruling), cert. denied, 454 U.S. 1103, 102 S.Ct. 682, 70 L.Ed.2d 647 (1981); 18 Wright Sec. 4478 at 798 ("Rulings that simply deny extraordinary relief for want of a clear and strong showing on the merits, ... do not trigger law of the case consequences.") (footnote omitted).
24
Denial of Schumaier's petition for a writ of mandate was based on the following grounds: "Petitioner has not demonstrated that the district court clearly erred in directing the return of documents it found to be privileged or that it is faced with harm incapable of correction on a subsequent appeal, if necessary." The court's statement reveals that its denial was based not on the merits of Schumaier's petition but on the presence of two factors that counsel withholding of any extraordinary writ--petitioner's failure to demonstrate clear error by the district court and the availability of relief by means of direct appeal. See Bauman v. United States District Court, 557 F.2d 650, 654-55 (9th Cir.1977) (identifying five guidelines to be considered in determining whether to issue writ of mandamus).
25
Because the denial of Schumaier's petition was "the result of the special limitations inherent in the writ, such a denial does not establish the law of the case." Dean, 752 F.2d at 542. Accordingly, the denial does not operate to bar Schumaier from challenging the propriety of the protective order on this appeal.
III. THE PROTECTIVE ORDER
26
We turn now to the merits of the appeal. Schumaier challenges the protective order at issue on the following grounds: (1) Federal Rule of Civil Procedure 26(c), which governs the issuance of protective orders in connection with pretrial discovery, does not authorize issuance of an order purporting to control the use of documents obtained other than through discovery in the pending proceeding; (2) The order entered in this matter violates Schumaier's first amendment rights; and (3) The order is void for vagueness. Because we agree that the order was unauthorized by Rule 26(c), we do not reach Schumaier's second and third contentions.
27
Uniden argues that we should decline to hear Schumaier's challenge because it was not presented to the court below. See United States v. Oregon, 769 F.2d 1410, 1414 (9th Cir.1985) ("[A]bsent exceptional circumstances, an issue not raised below will not be considered on appeal."). Schumaier admittedly filed no opposition to Uniden's motion for a protective order. However, Schumaier filed objections in response to the proposed order prepared by Uniden's counsel. In its objections, Schumaier raised the arguments it now advances on appeal. Although Schumaier's arguments were cursory in form, they were nevertheless sufficient to apprise the district court of Schumaier's position prior to the court's entry of the written order. Schumaier, therefore, is not precluded from raising the arguments on this appeal.
28
"We review the district court's grant of a protective order relating to discovery for abuse of discretion." KL Group v. Case, Kay & Lynch, 829 F.2d 909, 915 (9th Cir.1987).
29
In making its motion for a protective order, Uniden relied on Fed.R.Civ.P. 26(c). The district court's order is silent concerning the authority for its issuance. Both Schumaier and Uniden assume that the district court acted under Rule 26(c). Rule 26 is entitled "General Provisions Governing Discovery." Rule 26(c) is subtitled "Protective Orders" and provides, in pertinent part, as follows:
30
Upon motion by a party or by the person from whom discovery is sought, and for good cause shown, the court in which the action is pending ... may make any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including one or more of the following: (1) that the discovery not be had....
31
Fed.R.Civ.P. 26(c).
32
We have not previously been called upon to decide whether Rule 26(c) empowers a district court to order a party to return privileged documents obtained by his attorney through discovery in a separate action brought by another person against the same defendant. We have held that a district court may order a party to return privileged documents inadvertently produced during discovery in the same proceeding pending before the court. See, e.g., KL Group, 829 F.2d at 919 (district court did not abuse discretion in ordering return of privileged document inadvertently produced in action pending before the court). Such authority, however, is inapposite to the problem presented in the instant matter, where the documents were obtained in a separate action.1
33
The most helpful Ninth Circuit authority is Whittaker Corp. v. Execuair Corp., 736 F.2d 1341 (9th Cir.1984). There, the district court refused to permit plaintiff to introduce evidence of documents that plaintiff had discovered "in a separate antitrust action between the parties, after the discovery cutoff date in the case at bar." Id. at 1347. On plaintiff's appeal, we reversed, ruling that the district court's power to control discovery in the case before it did not extend to documents obtained in a separate action between the parties:
34
"A discovery cutoff date does not ... affect admissibility of evidence obtained outside of the discovery process of the case in which the cutoff date is ordered." Id. We noted that if defendant believed that plaintiff's pursuit of discovery in the separate antitrust action was improper, defendant "should have sought a protective order in the antitrust case." Id.
35
The Second Circuit has considered an issue similar to that raised in the present appeal and has concluded that Rule 26(c) provides no authority for the issuance of protective orders purporting to regulate the use of information or documents obtained through means other than discovery in the pending proceeding. Bridge C.A.T. Scan Assocs. v. Technicare Corp., 710 F.2d 940 (2d Cir.1983). In Bridge, Exhibit A to plaintiff's complaint listed information concerning defendant's products and customers collected by plaintiff's counsel prior to the commencement of the action. Id. at 942. Defendant contended that the data contained in Exhibit A were trade secrets and moved for a protective order to prevent plaintiff from improperly using or disclosing the data. Id. Although it recognized that the data had not been obtained through pretrial discovery, the district court nevertheless issued the requested protective order, relying on Rule 26(c). Id. at 943.
36
The Second Circuit reversed, holding that Rule 26(c) does not authorize the district court to issue protective orders with respect to data obtained through means other than the court's discovery processes:
37
The district court believed that it was empowered to enter its April 11 Order prohibiting plaintiff from disclosing the Exhibit A trade data by the authority granted under Fed.R.Civ.P. 26(c)(7).... Rule 26, however, which is entitled "General Provisions Governing Discovery," is not a blanket authorization for the court to prohibit disclosure of information whenever it deems it advisable to do so, but is rather a grant of power to impose conditions on discovery in order to prevent injury, harassment, or abuse of the court's processes....
38
* * *
39
[S]ince Exhibit A and the data it contained were not information obtained by means of discovery but had been compiled by Bridge's counsel prior to commencing the lawsuit, Rule 26(c) did not give the court authority to prohibit disclosure of the trade data.
40
Id. at 944-45; see also Ferguson v. Ford Motor Co., 8 F.R.D. 414 (S.D.N.Y.1948) (refusing to issue order under predecessor to Rule 26(c) requiring defendant to file under seal allegedly confidential documents obtained from plaintiff's employee outside discovery process); 4 Moore's Federal Practice p 26.78 at 26-503 to 26-504 (1987) ("The provision for protective orders in Rule 26(c) is plainly limited in its application to protection from abuses flowing from the employment of the discovery rules. Similarly, it has been held that the court may not issue an order limiting a party in the use it may make of information not acquired under the discovery rules, even though had the same information been sought through discovery the opposing party would have been entitled to a protective order.") (footnotes omitted).
41
As we held in Whittaker Corp., a district court's power to control discovery does not extend to material discovered in a separate action, notwithstanding the fact that the parties were identical. 736 F.2d at 1347. The remedy for a party seeking the return of material improperly discovered in a separate action is to seek a protective order from the court that presided over the discovery process in that discrete proceeding. In the matter before us, the district court lacked the power to issue a valid protective order to compel the return of documents obtained through discovery in a separate action.
IV. SANCTIONS IMPOSED BY THE DISTRICT COURT
42
Uniden's request for sanctions was served on Schumaier by mail on Friday, June 13, 1986. Schumaier received the request the following day. Two days later, on Monday, June 16, 1986, the district court awarded sanctions against Weinstock and Schumaier.
43
Schumaier argues that the court's award of sanctions violated due process because counsel did not receive adequate notice or opportunity to respond to Uniden's request for sanctions. Schumaier also argues that Uniden would have filed its motion for a protective order "regardless of any action on the part of Schumaier." Accordingly, Schumaier contends that the failure to oppose the motion for a protective order "had nothing to do with the expenditure of time in writing it."
44
Uniden requests that we sustain the imposition of sanctions on the following grounds:
45
One. Written notice of the motion for a protective order was mailed to Schumaier three weeks before the hearing date.
46
Two. Schumaier had two days' actual notice of the request for sanctions.
47
Three. The local rules require that a party oppose or acquiesce in a motion.
48
Four. The district court may impose sanctions for a violation of the local rules.
49
"A district court's award of sanctions is reviewable for abuse of discretion." FTC v. Alaska Land Leasing, Inc., 799 F.2d 507, 510 (9th Cir.1986).
50
Under 28 U.S.C. Sec. 1927, "[a]ny attorney ... who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." 28 U.S.C. Sec. 1927 (1982). Section 1927 authorizes a taxing of only those excess costs incurred by reason of "an attorney's unreasonable and vexatious conduct." United States v. Blodgett, 709 F.2d 608, 610 (9th Cir.1983). Moreover, section 1927 "does not authorize imposition of sanctions in excess of costs reasonably incurred because of such conduct." Id. at 610-11.
51
Uniden incurred the cost of making its motion for a protective order because Schumaier refused to comply with Uniden's demand that the documents be returned. Schumaier's refusal, however, was not unreasonable. The transcript of the discovery hearing in Michaels confirms Schumaier's contention that when the district court denied plaintiff's motion to compel Mr. Ducote to answer deposition questions, the court did not adjudicate the privileged character of the documents now at issue and did not impose any obligation on Schumaier to return the documents to Uniden. Schumaier acted reasonably, therefore, in not acceding to Uniden's later demand that Schumaier return the documents. Uniden's demand was premised solely on its disputed understanding of the Michaels ruling.
52
Once Schumaier refused to return the documents, Uniden had no recourse but to seek an order from an appropriate court that would adjudicate the privileged nature of the documents and order their return. Absent such a motion, Uniden had no means of recovering the documents. Uniden incurred the cost of making its motion because of Schumaier's reasonable refusal to return the documents, not because of Schumaier's failure to oppose the motion. Uniden incurred no excess costs because of Schumaier's failure. Since section 1927 permits an award of excess costs only, Blodgett, 709 F.2d at 610-11, the district court abused its discretion in imposing sanctions under section 1927.
53
In addition to relying on section 1927, Uniden premised its request for sanctions on the local court rules and on the inherent powers of the court. Central District Local Rule 7.6 requires the nonmoving party to file either a memorandum in opposition or a written statement that he or she will not oppose the motion. Local Rule 27.1 provides: "The violation of or failure to conform to any of these Local Rules ... shall subject the offending party or counsel to such penalties, including monetary sanctions and/or the imposition of costs and attorney's fees to opposing counsel, as the Court may deem appropriate under the circumstances."
54
Schumaier does not argue that the district court's award was unauthorized by the local rules. Instead, Schumaier contends that it had inadequate notice and opportunity to be heard before the sanctions were imposed.
55
Sanctions under local court rules should not be imposed absent notice, an opportunity to respond, and a hearing. Miranda v. Southern Pacific Transp. Co., 710 F.2d 516, 522 (9th Cir.1983); see Roadway Express, Inc. v. Piper, 447 U.S. 752, 767, 100 S.Ct. 2455, 2464, 65 L.Ed.2d 488 (1980) ("[S]anctions ... should not be assessed lightly or without fair notice and an opportunity for a hearing on the record.") (footnote omitted); Alaska Land Leasing, Inc., 799 F.2d at 510 (quoting Toombs v. Leone, 777 F.2d 465, 472 (9th Cir.1985)) ("Due process ... requires that parties subject to sanctions have 'sufficient opportunity to demonstrate that their conduct was not undertaken recklessly or willfully.' " ).
56
We have held that a district court has no power "to impose monetary sanctions against attorneys without affording them procedural due process as protective as that afforded by Fed.R.App.P. 46(c)," which guarantees the attorney a "hearing, if requested," before sanctions may be imposed. Miranda, 710 F.2d at 523 & n. 13.
57
In Miranda, we identified "compelling reasons why notice, an opportunity to prepare a defense, and a hearing are required before sanctioning counsel":
58
These procedural requirements will ensure that: (1) the attorneys will have an opportunity to prepare a defense and to explain their questionable conduct at a hearing; (2) the judge will have time to consider the severity and propriety of the proposed sanction in light of the attorneys' explanation for their conduct; and (3) the facts supporting the sanction will appear in the record, facilitating appellate review.
59
Id. at 522-23.
60
In the present case, Schumaier first received notice of Uniden's intent to seek sanctions on Saturday, June 14, 1986, just two days before the hearing at which sanctions were imposed. This short notice, arriving during the weekend before the Monday hearing, undoubtedly left Schumaier inadequate time to prepare a defense and to travel from its offices in Missouri to Los Angeles to attend the hearing.
61
At the hearing on Uniden's motion and request for sanctions, Schumaier's local co-counsel, Weinstock, represented to the court that Schumaier had informed him that Schumaier had not received notice of Uniden's motion. Weinstock further stated: "I would request that the court ... defer any sanctions until it has an opportunity to hear what law offices of Schumaier, Roberts and McKinsey have to say. I understand they have been trying to call the court as well as Mr. McKnight [Uniden's counsel] and as Mr. McKnight indicated he did get in touch with Mr. McKnight but I am not aware whether he--they were able to contact the court."Schumaier was entitled to be present at a hearing at which it could present its defense to Uniden's request for sanctions. Weinstock's presence at the June 16 hearing was insufficient to protect Schumaier's interest. Indeed, Weinstock resisted Uniden's request for sanctions by arguing that Schumaier, not he, bore responsibility for the violation of the local court rules.
62
Under Miranda, the district court had no power to impose sanctions without granting at least a short continuance of the hearing to enable Schumaier to attend. The award of sanctions, therefore, whether under the authority of the local rules or under the court's inherent authority to control its own processes, constituted an abuse of discretion.
V. SANCTIONS ON APPEAL
63
Uniden requests an award of sanctions on appeal "for opposing counsel's burdensome inclusion of ... improper, unnecessary and irrelevant material in Schumaier's excerpts of record." Uniden makes its request under this court's Rule 30-2, which provides:
64
The court in appropriate cases will impose sanctions against any attorney who vexatiously and unreasonably increases the cost of litigation by inclusion of unnecessary material in the excerpts of record. Counsel will be provided notice and have an opportunity to respond before sanctions are imposed.
65
Ninth Cir.R. 30-2. Uniden cites no case construing or applying Rule 30-2, and our research has disclosed none.
66
Uniden moved to strike "literally hundreds of pages of improper and irrelevant materials in Schumaier's excerpts of record." We have granted the motion in part, striking 79 pages of materials. See Part II(A) supra. We are not persuaded, however, that Schumaier's inclusion of these 79 pages "vexatiously and unreasonably increase[d] the cost of litigation," the prerequisite to an award of sanctions under our Rule 30-2. Accordingly, we deny Uniden's request for sanctions on appeal.
VI. CONCLUSION
67
Uniden's motion to strike is GRANTED as to pages 236-39, 263-88 and 293-341, inclusive, of the Excerpts of Record and is DENIED in all other respects. The protective order entered by the district court in this matter on July 7, 1986 is VACATED. The court's imposition of sanctions against Schumaier, as reflected in the same order, is REVERSED. Uniden's request for sanctions on this appeal is DENIED. Each party shall bear its own costs.
1
Schumaier does not argue that the documents previously produced by Uniden are not privileged, or that Uniden's earlier production of the documents operated as a waiver of the privilege. Schumaier limits its arguments to the propriety of the issuance of a protective order in the present case. Thus, we need not address the question of inadvertent waiver of the attorney-client privilege
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Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
6-11-2003
Trustees Natl v. Lutyk
Precedential or Non-Precedential: Precedential
Docket No. 01-2394
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PRECEDENTIAL
Filed June 11, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-2394
TRUSTEES OF THE NATIONAL ELEVATOR INDUSTRY
PENSION, HEALTH BENEFIT AND EDUCATIONAL FUNDS
v.
ANDREW LUTYK,
Appellant
Appeal from the United States District Court
for the Eastern District of Pennsylvania
Civil Action No. 00-2301
District Judge: Honorable Marvin Katz
Argued: December 2, 2002
Before: ROTH, SMITH, and CUDAHY,* Circuit Judges
(Filed: June 11, 2003)
Frank Breitman, Esq.
Andre C. Dasent, Esq. (argued)
785 Bourse Building, 21 S. 5th St.
Philadelphia, PA 16106
Attorneys for Appellant
* Honorable Richard D. Cudahy, United States Court of Appeals for the
Seventh Circuit, sitting by designation.
2
Robert P. Curley, Esq.
Sally M. Tedrow, Esq. (argued)
David D. Capuano, Esq.
O’Donoghue & O’Donoghue
325 Chestnut St., Suite 515
Philadelphia, PA 19106
Attorneys for Appellee
OPINION OF THE COURT
SMITH, Circuit Judge:
On this appeal, the sole issue raised by defendant
Andrew Lutyk is whether the record of a non-jury trial
justified piercing the corporate veil of the American Elevator
Company to impose personal liability on him as its sole
shareholder for unpaid contributions the corporation owed
to health, benefit, and pension funds established by a
collective bargaining agreement. Because we believe that
the District Court did not base its decision on clearly
erroneous factual findings, we will affirm.
I.
Defendant Andrew Lutyk was the president, sole director,
and sole shareholder of the American Elevator Company
(“American”), a small, closely-held corporation which
performed elevator service and repair. Lutyk incorporated
American in late 1992. Pursuant to various agreements
between American and the International Union of Elevator
Constructors, AFL-CIO, in addition to the regular wages
paid to its employees, American was obligated to make
monthly contributions to various benefit and pension
funds. American was also required to make certain wage
deductions from the employees’ salaries, then remit those
deductions to the pension fund.
The benefit and pension funds — the National Elevator
Industry Pension Fund, the National Elevator Industry
Health Benefit Fund, and the National Elevator Industry
Educational Fund (collectively, the “NEI Funds”) — were
3
created and maintained pursuant to § 302(c)(5) of the Labor
Management Relations Act, 29 U.S.C. § 186(c)(5), and
administered by a Board of Trustees, the plaintiff in this
action. The Pension Fund is an employee pension benefit
plan as defined by § 3(2) of the Employee Retirement
Income Security Act (“ERISA”), 29 U.S.C. § 1002(2). The
Health Fund and Educational Fund are employee welfare
benefit plans as defined in § 3(1) of ERISA, 29 U.S.C.
§ 1002(1). All the NEI Funds are also multiemployer plans
as defined in § 3(37)(A) of ERISA, 29 U.S.C. § 1002(37)(A).
In 1996, American began to experience financial
difficulties due to an unrelated lawsuit and misconduct by
the company’s former controller. While corporate equity
nominally included $25,000 in “Common Stock” and
$141,000 in “Additional Paid In Capital” at the end of 1995,
American’s 1996 tax return listed negative retained
earnings of $373,420, which rose to negative $433,051 by
the end of 1996. In short, by at least December 31, 1995,
no equity remained in the company. Nonetheless, American
was carrying $133,268 in supposed “Loans from
shareholders” in 1995. The available corporate records
showed that these loans rose to at least $174,881.00 at the
end of 1996 and remained there at least until December 31,
1997, but dropped to a mere $24,356.00 by the end of
1998. The District Court found that, beginning at least in
1996 and continuing until American ceased operations in
late 1999, the corporation was insolvent.
At this time, American fell behind in meeting its
contractual obligations to contribute to the NEI Funds. In
1998, the Board of Trustees sued American to recover these
unpaid benefit contributions. That civil action culminated
in a consent judgment whereby American agreed to pay the
NEI Funds a total of $280,284.60. However, in 1999,
American ceased business operations. Although subsequent
payments were made to the NEI Funds, American paid only
$40,000 pursuant to the consent judgment, along with
$2,524.74 that had been deducted from the employees’
paychecks after the consent judgment, but not immediately
paid to the NEI Funds.
On May 4, 2000, the Board of Trustees initiated the
present lawsuit against defendant Lutyk personally,
4
alleging that he was also liable to the NEI Funds as a
fiduciary under § 409 of ERISA, § 29 U.S.C. § 1109(a).
Plaintiff sought to recover from Lutyk the full amount of
what it had been unable to collect from American, as well
as additional contributions accrued but never paid by
American after the consent judgment. The District Court
denied plaintiff ’s motion for summary judgment on the
ERISA claims, concluding that there were material issues of
fact in dispute concerning whether the unpaid
contributions to the benefit funds were plan “assets.” Tr. of
the Nat’l Elevator Indus. Pension v. Lutyk, 140 F. Supp. 2d
407, 412 (E.D. Pa. 2001) (“Lutyk I”). While reasoning that
this potentially prohibited Lutyk from having any direct
liability under ERISA, the District Court sua sponte read
our opinion in Solomon v. Klein, 770 F.2d 352 (3d Cir.
1985), to provide that by “piercing the corporate veil,” the
claims against Lutyk might be sustained. Lutyk I, 140 F.
Supp. 2d at 412-13. Although also declining to grant
summary judgment on that ground, the District Court
established piercing the corporate veil as an issue for trial.
Id. at 413-14.1
After a non-jury trial, the District Court concluded that,
under the terms of the parties’ agreements, the unpaid
contributions in this case were not plan “assets” within the
meaning of 29 U.S.C. § 1002(21)(A)(i). Tr. of the Nat’l
Elevator Indus. Pension v. Lutyk, 140 F. Supp. 2d 447, 456
(E.D. Pa. 2001) (“Lutyk II”). Therefore, Lutyk was not a
“fiduciary” of those funds under § 409 of ERISA, 29 U.S.C.
§ 1109(a), and was not directly liable for all but $332.54 of
the debt that American owed to the NEI Funds.2
Nonetheless, because the District Court concluded that the
circumstances of the case justified piercing the corporate
veil of American, the District Court found Lutyk personally
1. Though not material to this decision, the District Court also concluded
that a three-year statute of limitations barred recovery of some of the
debts of American. See 140 F. Supp. 2d at 414.
2. The $332.54 stemmed from the liquidated damages and interest
associated with the $2,524.74 in previously unremitted employee wage
deductions, which the District Court reasoned were plan assets. Lutyk II,
140 F. Supp. 2d at 456.
5
liable for the remainder of the $287,627.43 that American
then owed the NEI Funds. Id. at 460.
The District Court asserted jurisdiction over this case
pursuant to 28 U.S.C. § 1331. We have jurisdiction over the
appeal pursuant to 28 U.S.C. § 1291.3 When a district court
conducts a non-jury trial, we “review the District Court’s
findings of facts for clear error. Application of legal precepts
to historical facts receives plenary review.” In re Unisys Sav.
Plan Litig., 173 F.3d 145, 149 (3d Cir. 1999). “It is not for
us to pass upon the numerous factual and legal issues as
though we were trying the cases [d]e novo. ‘It is not enough
to reverse the District Court that we might have appraised
the facts somewhat differently. If there is warrant for the
action of the District Court, our task on review is at an
end.’ ” Matter of Penn Cent. Transp. Co., 596 F.2d 1127,
1140 (3d Cir. 1979) (quoting Group of Inst’l Inv. v. Chicago,
M., St. P. & P. R. Co., 318 U.S. 523, 564 (1943)).
3. We asked the parties to provide us with supplemental briefing on
whether the Supreme Court’s decision in Peacock v. Thomas, 516 U.S.
349 (1996), impacts on the jurisdiction of the federal courts to
adjudicate these claims. We believe that Peacock is distinguishable
because the “complaint in [that] lawsuit alleged no violation of ERISA or
of the plan. The wrongdoing [which justified piercing the corporate veil]
alleged in the complaint occurred . . . some four to five years after [the
corporation’s] ERISA plan was terminated, and [plaintiff] did not —
indeed, could not — allege that [defendant] was a fiduciary to the
terminated plan.” Id. at 353. By contrast, the “well-pleaded complaint” in
this action asserted claims based on ERISA for both the unremitted
employee wage deductions and the unpaid employer contributions. See
Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987) (discussing
the “well-pleaded” complaint rule). The District Court below concluded
that the unpaid wage deductions were plan “assets.” Lutyk II, 140 F.
Supp. 2d at 456. Thus, Lutyk was a fiduciary derivatively liable under
federal ERISA law for $332.54. Unlike Peacock, where the plaintiff
asserted no direct violation of federal law by the defendant, it was based
on established ERISA liability in this suit that the District Court was able
to invoke the further “equitable remedy” of piercing the corporate veil to
hold Lutyk liable for the balance of the funds American owed the
Trustees. See In re Blatstein, 192 F.3d 88, 100 (3d Cir. 1999). Whatever
implications Peacock has on the statutory authority of district courts to
“pierce the corporate veil” in ERISA cases, we are satisfied that the
District Court properly invoked federal subject-matter jurisdiction over
this dispute.
6
II.
At summary judgment, the District Court sua sponte
invoked the “alter ego doctrine” and questioned whether,
pursuant to Solomon, 770 F.2d at 353, it might be
appropriate for the plaintiff to fix liability upon Lutyk by
piercing the corporate veil. “Piercing the corporate veil is
not itself an independent ERISA cause of action, but rather
is a means of imposing liability on an underlying cause of
action.” Peacock v. Thomas, 516 U.S. 349, 354 (1996)
(quotation omitted); see also 1 William Meade Fletcher,
Fletcher Cyclopedia of the Law of Private Corporations
§ 41.10 (2002). “The ‘classical’ piercing of the corporate veil
is an equitable remedy whereby a court disregards the
existence of the corporation to make the corporation’s
individual principals and their personal assets liable for the
debts of the corporation.” In re Blatstein, 192 F.3d 88, 100
(3d Cir. 1999) (citation omitted); see also Bd. of Tr. of
Teamsters Local 863 Pension Fund v. Foodtown, Inc., 296
F.3d 164, 171 (3d Cir. 2002); Publicker Indus., Inc. v.
Roman Ceramics Corp., 603 F.2d 1065, 1069 (3d Cir. 1979).
If applicable, the doctrine permits a “charge[ ] [of] derivative
. . . liability” against the person or entity controlling the
corporation. United States v. Bestfoods, 524 U.S. 51, 64
(1998) (noting that piercing the corporate veil gives rise to
derivative liability, though direct liability was appropriate
on those facts because of the peculiar nature of CERCLA
“operator” liability). “Because alter ego is akin to and has
elements of fraud theory, we think it too must be shown by
clear and convincing evidence.” Kaplan v. First Options of
Chicago, Inc., 19 F.3d 1503, 1522 (3d Cir. 1994).
In his brief to this Court on appeal, Lutyk’s entire
summary of argument is as follows:
The district court erred and abused its discretion in the
determination to pierce the corporate veil and impose
personal liability under ERISA without sufficient record
support.
We read Lutyk to be challenging only the District Court’s
application of the legal test for piercing the corporate veil
set forth in United States v. Pisani, 646 F.2d 83, 87-88 (3d
Cir. 1981) and the related factual findings. Our review of
7
the proceedings below indicates that Lutyk made no
objection, as he did not raise the issue to us in his briefs,
with respect to the District Court’s authority to pierce the
corporate veil and impose liability on a third-party not
directly liable under ERISA.4 While our reading of the
District Court’s order indicates that the District Court
purported to pierce the corporate veil pursuant to ERISA
§ 502(a)(2), 29 U.S.C. § 1132(a)(2), and we have some
doubts regarding the District Court’s authority to do so,5
“[i]t is well established that failure to raise an issue in the
district court constitutes a waiver of the argument” in the
Court of Appeals. Brenner v. Local 514, United Bhd. of
Carpenters & Joiners of Am., 927 F.2d 1283, 1298 (3d Cir.
1991); see also Medical Protective Co. v. Watkins, 198 F.3d
100, 105 n.3 (3d Cir. 1999). Likewise, although the District
Court did not make a specific finding concerning the
amount of funds siphoned from American, Lutyk has
similarly conceded that the imposition on him of the full
judgment that remained against American of $287,627.43
was appropriate. See Peacock, 516 U.S. at 352 (declining to
4. In Solomon, we held that a corporate shareholder or officer is not an
“employer,” as that term is defined for purposes of ERISA, Solomon, 770
F.2d at 353-54, an interpretation that has achieved nearly universal
acceptance in the other federal circuits. See Antol v. Esposto, 100 F.3d
1111, 1118 n.2 (3d Cir. 1996) (string-citing cases). While we stated in
dictum that “[h]ad [those plaintiffs] proceeded on an alter ego basis our
inquiry would be different,” we did not state that such a course would
have been a means of imposing direct federal liability under ERISA.
Solomon, 770 F.2d at 353. Because “[w]e did not intend that sentence to
dispose of an important issue which we had yet to face head-on,” see,
e.g., In re FMC Corp. Packaging Sys. Div., 208 F.3d 445, 450-51 (3d Cir.
2000), it cannot be said that the dictum of Solomon and Cent. Pa.
Teamsters Pension Fund v. McCormick Dray Line, Inc., 85 F.3d 1098,
1109 (3d Cir. 1996) settles the question of direct ERISA liability against
a corporate officer or shareholder through the “alter ego” doctrine.
5. See Peacock, 516 U.S. at 354 (noting it is unresolved “if ERISA permits
a plaintiff to pierce the corporate veil to reach a defendant not otherwise
subject to suit under ERISA”); see also Mertens v. Hewitt Assoc., 508
U.S. 248, 251 (1993) (rejecting that “ERISA authorizes suits for money
damages against nonfiduciaries who knowingly participate in a
fiduciary’s breach of fiduciary duty”). But see Bd. of Tr., Sheet Metal
Workers’ Nat’l Pension Fund v. Elite Erectors, Inc., 212 F.3d 1031, 1038
(7th Cir. 2000).
8
address a similar issue).6 Because the parties did not raise
these issues below and Lutyk did not invoke them on
appeal, we will assume, without deciding, that these
actions of the District Court were proper. We consider here
only the specific issue raised in this Court by Lutyk.
III.
In analyzing the conduct of Lutyk and applying the alter
ego doctrine to determine whether it was appropriate to
invoke its remedy to pierce the corporate veil, the District
Court below reasoned that “[f]ederal law governs liability for
a breach of a labor contract between union and employer,
including liability based on a theory of corporate veil
piercing.” Lutyk II, 140 F. Supp. 2d at 457 (citing Am. Bell
Inc. v. Fed’n of Tel. Workers of Pa., 736 F.2d 879, 886 (3d
Cir. 1984)). Therefore, the District Court applied our Pisani
decision and the factors outlined therein as a matter of
federal common law, 646 F.2d at 88, to determine whether
it was appropriate to pierce American’s corporate veil.
Lutyk does not appeal the application of Pisani’s factors
or of federal “common law,” per se. However, he does
dispute the District Court’s failure to require, as an element
for establishing that the “alter ego doctrine” is applicable,
that the plaintiff prove that the corporation was intended as
a sham or facade to defraud the corporate creditors.
6. The alter ego doctrine is a “tool of equity.” Pearson v. Component Tech.
Corp., 247 F.3d 471, 484 (3d Cir. 2001); Kaplan, 19 F.3d at 1521. As “an
equitable remedy,” In re Blatstein, 192 F.3d at 100, piercing the
corporate veil is not technically a mechanism for imposing “legal”
liability, but for remedying the “fundamental unfairness [that] will result
from a failure to disregard the corporate form.” See, generally, Fletcher,
supra, § 41.25. “[A]lter ego status is determined by conduct of the parties
that is material to the dispute at hand,” Kaplan, 19 F.3d at 1522; thus,
the theory of harm alleged may affect the scope of the remedy that equity
demands. The Trustees did not assert that American was, in its entirety,
a “sham” or “facade”; nonetheless, full liability for American’s debts is
appropriate as Lutyk implicitly conceded to siphoning at least
$287,627.43 from American. The District Court noted “[t]here [was] no
dispute among the parties that if Lutyk were to be found liable . . . , he
would be liable for the full amount of the unpaid employer payments.”
Lutyk II, 140 F. Supp. 2d at 452.
9
Because neither party challenges the application of our
alter ego doctrine to this case, we will also assume without
deciding that those factors apply, and consider whether
“fraudulent intent” is indeed a required element of the
analysis. Cf. United States v. Bestfoods, 524 U.S. 51, 63 n.9
(1998) (declining to discuss whether the state or federal
alter ego doctrine applied to determine derivative liability
under CERCLA). In Pearson v. Component Tech. Corp., 247
F.3d 471 (3d Cir. 2001), this Court discussed the factors of
the “Third Circuit alter ego test,” id. at 484, and noted
some of the differences between our test, and others. One
of the “most important differences across jurisdictions
seem[s] to reside largely in . . . whether an element of
‘fraudulent intent,’ inequitable conduct, or injustice is
explicitly required. . .” Id. at 484 n.2. Nonetheless, in
determining whether to “pierce the corporate veil,” we
considered
the following factors: gross undercapitalization, failure
to observe corporate formalities, nonpayment of
dividends, insolvency of debtor corporation, siphoning
of funds from the debtor corporation by the dominant
stockholder, nonfunctioning of officers and directors,
absence of corporate records, and whether the
corporation is merely a facade for the operations of the
dominant stockholder. See American Bell, 736 F.2d at
886.
Id. at 484-85 (emphasis added). We have never
characterized these “factors” as elements of a rigid test.
See, e.g., American Bell, 736 F.2d at 886 (these factors are
“not the exclusive approach”); Pisani, 646 F.2d at 88. What
we have done is to essentially inquire “into whether the
debtor corporation is little more than a legal fiction.”
Pearson, 247 F.3d at 485. While “piercing of the corporate
veil is an equitable remedy,” In re Blatstein, 192 F.3d at
100, and therefore “the situation must present an element
of injustice or fundamental unfairness, . . . a number of
these factors can be sufficient to show such unfairness.”
Pisani, 646 F.2d at 88 (quotation omitted); see also
Fletcher, supra, §§ 41.25, 41.32 (“constructive fraud and
avoiding an inequitable result is often enough”). Because
our test does not require proof of actual fraud as a
10
prerequisite for piercing the corporate veil, the District
Court’s failure here to require that the plaintiff prove that
American was established as a “facade” was not an error of
law.7
IV.
“[A]lter ego . . . must be shown by clear and convincing
evidence.” Kaplan, 19 F.3d at 1522. Nonetheless, “[w]hen
findings [of a district court] are based on determinations
regarding the credibility of witnesses, Rule 52(a) demands
even greater deference to the trial court’s findings” by the
court of appeals. Ragan v. Tri-County Excavating, Inc., 62
F.3d 501, 507 (3d Cir. 1995). Furthermore, where, as here,
the appellant fails to point to specific evidence either in the
record or not in the record before the District Court which
shows that the Court’s findings were made in “clear error,”
id. at 506, we are inclined to affirm the District Court.
The District Court reasoned that factual findings with
respect to the following “factors” weighed in favor of
piercing the corporate veil: the insolvency of the debtor
corporation, American’s undercapitalization, the siphoning
of American’s funds by Lutyk, and the dearth of corporate
formalities and corporate records, as well as the element
that injustice would occur if Lutyk was not made
responsible. See Pisani, 646 F.2d at 88 (listing factors). We
conclude that, with the exception of the District Court’s
conclusion regarding American’s undercapitalization, the
District Court’s findings are adequately supported by the
record and not clearly erroneous.
The District Court’s finding with respect to American’s
insolvency is well supported by the record. The scant
corporate records before the Court demonstrated that
corporate equity was negative and that liabilities exceeded
corporate assets. Nonetheless, the very purpose of the
corporate form is to limit the liability of investors to the
7. We note, however, that where the conduct alleged to justify piercing
the corporate veil is that the corporation as a whole is a “sham” or
“facade,” a finding “akin to . . . fraud” is necessary. See Kaplan, 19 F.3d
at 1521-23.
11
capital they pay in, see Zubik v. Zubik, 384 F.2d 267, 273
(3d Cir. 1967); insolvency, without more, is not a factor
which can justify piercing a corporate veil. See American
Bell, 736 F.2d at 886 (requiring “specific, unusual
circumstances”). However, insolvency may raise questions
concerning the conduct of corporate officers and
shareholders which otherwise would be presumed
appropriate, see Fletcher, supra, § 41.40; here, it causes us
to closely scrutinize the actions of Lutyk.
In particular, the District Court’s findings with respect to
American’s insolvency are strong evidence to support the
Court’s conclusion that Lutyk was siphoning funds. See
Pisani, 646 F.2d at 88 (affirming piercing of the corporate
veil when the shareholder “repaid the [shareholder] loans to
himself with corporate funds while the corporation was
failing”). The corporate records before the District Court
indicated that American owed Lutyk on “loans” of
$174,881.00 at the end of 1996 and 1997. Over the next
year, as American plunged deeper into insolvency and the
corporation failed to pay the contributions it owed the NEI
Funds under the collective bargaining agreements, the
amount of those “shareholder loans” dropped precipitously
to $24,356.00. While Lutyk disputes the fact that those
loans were repaid, he points to no evidence in the record
indicating that the District Court’s finding was clear error.
Beyond the “loans” that Lutyk caused American to repay
him, American’s ledgers also show that Lutyk directly
withdrew increasing amounts of cash from the corporation
as it declined. The District Court noted that in 1997, Lutyk
apparently took from the corporation $28,100 through so-
called “partner’s drawings.” Those drawings increased to
$35,913 in 1998. Then, in the first three months of 1999
alone, Lutyk took from the company a further $38,688 in
that manner.
Of course, not “every payment to a stockholder during
insolvency would justify piercing the corporate veil,”
Kaplan, 19 F.3d at 1522, and some portion of those
payments may have been legitimate given the finding that
American paid its President no salary. However, these
irregularly scheduled, erratic, but not insignificant
“drawings” underscore the District Court’s findings and
12
conclusions on two other factors relevant to piercing the
corporate veil: Lutyk’s substantial disregard of corporate
formalities in his management and ownership of American
and a significant commingling by Lutyk of American’s
assets with his own. The District Court noted that it
received from Lutyk few of American’s tax returns,
accounting ledgers, receipts, or other documents which are
commonly maintained by an ordinary corporation in its
operations. While Lutyk asserts that the lack of formal
documentation was due to a storage facility being flooded,
the District Judge who heard the witnesses testify did not
credit this assertion, and nothing was provided by Lutyk to
corroborate his testimony on this alleged flood.
Beyond the “partner’s drawings,” Lutyk seemed to freely
take funds from the company accounts as he saw fit and
when he saw fit. That American paid its “President” no
salary, while cutting against siphoning, indicates a lack of
respect for the corporate form and of American as a
separate entity. Evidence before the District Court also
indicated that American employed members of Lutyk’s
family for substantially inflated compensation. His
daughter, originally hired by American as an office manager
for five dollars an hour during the first five to six years of
American’s existence, saw her compensation grow to fifteen,
then twenty, dollars an hour by the end of American’s
operations. At the same time, his wife was suddenly added
to American’s payroll in 1998 at fifteen dollars an hour,
though she had no prior work experience. Other evidence
demonstrated that corporate funds were used to pay
entertainment expenses for Lutyk and his daughter, though
the vast majority of these expenses were without a
description or identifiable business purpose. The few travel
and entertainment expenses that were documented
included yacht and golf club fees, though Lutyk admitted
he scarcely brought corporate clients to these clubs and
paid these fees personally for many years prior to the
incorporation of American.
Perhaps as important as what the District Court did
consider was what it properly did not consider. See
Pearson, 247 F.3d at 495 (factors need be “relevant”); In re
Blatstein, 192 F.3d at 100 (same); Pisani, 646 F.2d at 88
13
(same); see also Kaplan, 19 F.3d at 1522 (“alter ego status
is determined by conduct of the parties that is material to
the dispute at hand”). In piercing the corporate veil, the
District Court did not afford any weight to either
American’s failure to pay dividends or the non-functionality
of the corporation’s officers, other directors, and
shareholders. Ordinarily, findings on those two factors
would weigh in favor of applying the alter ego doctrine. See,
e.g., Pisani, 646 F.2d at 88 (listing factors). Nonetheless,
such failures by a closely-held corporation such as
American are not unusual, and not a strong factor in favor
of piercing the corporate veil of such a company. See 18
Am. Jur. 2d Corporations § 48 (2002) (“lack of formalities in
a closely-held or family corporation does not often have as
much consequence as where other kinds of corporations
are involved”). Furthermore, many jurisdictions actually
hold that the payment of dividends at a time when a
corporation is insolvent favors piercing the corporate veil.
See, e.g., Bd. of Tr. of Teamsters Local 863 Pension Fund v.
Foodtown, Inc., 296 F.3d 164, 173 (3d Cir. 2002)
(discussing New Jersey law).
Nonetheless, we believe that the District Court erred in
concluding that American was “grossly undercapitalized for
purposes of its corporate undertaking,” Lutyk II, 140 F.
Supp. 2d at 458, and, on these facts, inappropriately gave
that finding significant weight. It appears that the District
Court conflated an inquiry into American’s supposed
“undercapitalization” with its earlier inquiry into American’s
insolvency. Though there is substantial overlap between
these concepts, and they are often confused, as a matter of
corporate law, mere insolvency is distinct from
undercapitalization. See, generally, Fletcher, supra, § 41.33
(a “corporation that was adequately capitalized when
formed, but which subsequently suffers financial reverses is
not undercapitalized”).
Preliminarily, we view this inquiry as having little
relevancy to determining whether piercing the corporate veil
was justified here. The alter ego doctrine is not applied by
a test, but by consideration of relevant “factors . . . [to
determine] whether the debtor corporation is little more
than a legal fiction.” See Pearson, 247 F.3d at 484-85. A
14
shortage of capital, as with all the factors of the alter ego
doctrine, is not per se a reason to pierce the corporate veil.
See 18 Am. Jur. 2d, supra, § 49. Companies commonly
become insolvent, then bankrupt; piercing the corporate
veil is an exception reserved for extreme situations, rather
than the rule. See American Bell, 736 F.2d at 886 (piercing
the corporate veil has “demanding” requirements to be
applied only in “specific, unusual circumstances”). Rather,
the inquiry into corporate capitalization is most relevant for
the inference it provides into whether the corporation was
established to defraud its creditors or other improper
purpose such as avoiding the risks known to be attendant
to a type of business. See Fletcher, supra, § 41.33; 18 Am.
Jur. 2d, supra, § 49. No such accusations appear in this
record.
Assuming that American’s capitalization “for the
purposes of the corporate undertaking” was relevant, Lutyk
II, 140 F. Supp. 2d at 458, in conducting such an inquiry
courts generally “look to initial capitalization, asking
whether a company was adequately capitalized at the time
of its organization.” Matter of Multiponics, Inc., 622 F.2d
709, 717 (5th Cir. 1980); see also Fletcher, supra, § 41.33.
“Necessarily, this inquiry is highly factual and may vary
substantially with the industry, company, size of the debt,
account methods employed, and like factors. The primary
inquiry of this Court is to ask whether, under the
circumstances, reasonably prudent [individuals] with
general business background would deem the company
undercapitalized.” Multiponics, 622 F.2d at 717.
In “the application of the alter ego theory to pierce the
corporate veil . . . [t]he burden of proof on this issue rests
with the party attempting to negate the existence of a
separate entity.” See Publicker Indus., Inc. v. Roman
Ceramics Corp., 603 F.2d 1065, 1069 (3d Cir. 1979).
Nonetheless, the record below is devoid of any evidence or
finding as to the level of capital required for a corporation
of American’s size to conduct elevator service, maintenance,
and repair. For a small, closely-held corporation such as
American, the $166,000 in initial capitalization may well
have been sufficient for that corporate undertaking under
normal operating conditions.
15
The District Court found that capitalization in American
was limited to the $25,000 paid in for the common stock,
stating that “no evidence was presented to support or
explain the significance of the[ ] line items” listing $141,000
in “additional paid-in capital.” We are unclear as to why
any explanation was required, considering that term’s
conventional use in the accounting profession. There is no
evidence in the record contradicting the company balance
sheets and tax returns, which show an additional $141,000
in capital was paid in. Supp. App. 85. Lutyk also testified
that his capital contribution to American was greater than
the $25,000 for the common stock, an assertion that was
not contradicted by any other witness. In concluding that
American was undercapitalized for its corporate purpose,
the District Court relied solely on its insolvency and the
ratio of American’s capital stock to its shareholder loans as
of December 31, 1995 and thereafter.
Further complicating the inquiry into capitalization is the
District Court’s finding that American’s “financial woes
were due to the costs of an unrelated lawsuit and
misconduct by a prior controller,” not underinvestment,
mismanagement, or other negligence by Lutyk. Lutyk II,
140 F. Supp. 2d at 453. Over that period of financial
difficulty, Lutyk’s shareholder loans of $95,768.00 nearly
doubled to $174,881.00 to keep American from failing. We
believe that
[u]nder such circumstances, loans . . . cannot be
sufficient to satisfy this prong, particularly in this
context where . . . [Lutyk] was instead by this point
conducting a “rescue” operation in an attempt to
“return the Company to profitability[.]” We surely do
not want to discourage [shareholders of closely held
corporations] from attempting to keep their . . .
operations afloat with temporary loans by holding that
the mere fact that loans were even necessary
establishes . . . liability.
Pearson, 247 F.3d at 503; see also Carpenters Health and
Welfare Fund of Philadelphia and Vicinity by Gray v.
Kenneth R. Ambrose, Inc., 727 F.2d 279, 284 (3d Cir. 1983),
abrogation on other grounds recognized by Antol v. Esposto,
100 F.3d 1111, 1119 (3d Cir. 1996). While American’s
16
December 31, 1995 ratio of loans to equity was not
irrelevant for proving American was undercapitalized for its
“purposes” in 1992, Multiponics, 622 F.2d at 717 (“evidence
of inadequate subsequent capitalization [insolvency] may be
indicative of initial undercapitalization”), its usefulness was
severely limited by the finding that American’s financial
trouble stemmed from exceptional events that occurred
after incorporation. Because evidence justifying piercing the
corporate veil must be “clear and convincing,” Kaplan, 19
F.3d at 1522, that, without more, was insufficient.
Although we reject the District Court’s conclusion that
American was “undercapitalized,” as that term is relevant to
the alter ego doctrine, we emphasize that the finding
regarding American’s substantial insolvency during the final
years of its operations adds great support to the Court’s
conclusion regarding the siphoning of funds. Cf. Crane v.
Green & Freedman Baking Co., 134 F.3d 17, 23 (1st Cir.
1998) (“wrongful diversion of corporate assets to or for
controlling individuals at a time when the corporation is in
financial distress . . . can justify piercing the corporate
veil”). Although “ ‘rescue’ operation[s]” by the shareholders
of a closely held corporation do not ordinarily justify
piercing the corporate veil, see Pearson, 247 F.3d at 503,
once Lutyk apparently became convinced that the “ship”
was indeed lost in December 1998, that insolvency makes
American’s paying off of the “shareholder loans” to Lutyk,
to the detriment of other creditors, highly suspect. See
Pisani, 646 F.2d at 88; Multiponics, 622 F.2d at 718 (“proof
of subsequent undercapitalization [insolvency] may be
further proof of inequitable conduct, such as actions of
gross mismanagement, self interest, and the like”).
Thus, we believe that the evidence in the record supports
both the District Court’s conclusion that “the situation . . .
present[s] an element of injustice or fundamental
unfairness” and its decision to pierce the corporate veil.
Pisani, 646 F.2d at 88. While American spiraled deeper into
debt and failed to make its employee benefit payments to
the NEI funds, Lutyk was able to withdraw a significant
portion of the money he had “loaned” to the endeavor.
Simultaneously, Lutyk increased the level of funds he
personally withdrew from the corporation and that
17
American paid to his immediate family. Yet American’s
obligations to its creditors grew; and those employees of
American who were not members of the controlling
shareholder’s family saw a significant portion of their
compensation go unpaid. The “fundamental unfairness” of
this situation is patent. Id.
V.
In sum, we are not persuaded that the District Court was
“without sufficient record support” to pierce the corporate
veil. With the exception of the District Court’s conclusion
regarding undercapitalization, the evidence from the trial
adequately supports the District Court’s findings, and it
properly applied those findings in determining that piercing
the corporate veil was appropriate. Of those findings, most
egregious was Lutyk’s siphoning of funds over the final
months of American’s operations while the company was
known to be deeply insolvent, though the record is replete
with other evidence of abuse of the corporate form.
Although Lutyk may have initially founded American as a
bona fide corporation for conducting elevator work, his
conduct in the management of that company, particularly
over the final years of the company’s operations, is clear
and convincing evidence of sufficient abuse of the corporate
form for his personal benefit so as to justify the equitable
remedy of piercing the corporate veil. The judgment of the
District Court will be affirmed.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
| {
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Filed 3/9/16 P. v. Rivera CA2/5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
THE PEOPLE, B263809
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. VA119142)
v.
VIRGINIA DEL CARMEN RIVERA,
Defendant and Appellant.
APPEAL from an order of the Superior Court of the County of Los Angeles,
Michael A. Cowell, Judge. Affirmed.
Law Office of Zulu Ali, Zulu Ali for Defendant and Appellant.
Kamala D. Harris, Attorney General, Gerald A. Engler, Chief Assistant Attorney
General, Lance E. Winters, Senior Assistant Attorney General, Paul M. Roadarmel, Jr.
and Steven D. Matthews, Supervising Deputy Attorneys General, for Plaintiff and
Respondent.
INTRODUCTION
On June 14, 2011, defendant and appellant Virginia Del Carmen Rivera pled no
contest to perjury and was granted three years of probation. On January 27, 2015,
defendant filed a motion to withdraw her plea arguing she was not, prior to her plea,
properly advised of the immigration consequences it carried. The trial court denied the
motion and defendant appeals that order. Because the record demonstrates the
advisements given to defendant prior to the entry of her plea were in compliance with
Penal Code section 1016.5, subdivision (a),1 we affirm the trial court’s order.
BACKGROUND
At the time defendant entered her plea she signed a waiver of rights form, and
specifically initialed a paragraph contained therein, which read as follows: “I understand
that if I am not a citizen of the United States, I must expect my plea of guilty or no
contest will result in my deportation, exclusion from admission or reentry to the United
States, and denial of naturalization and amnesty.” Defendant also acknowledged in the
form that she discussed the paragraphs initialed with her attorney and, by initialing those
paragraphs, she represented she understood and agreed with the contents contained
therein.
After defendant submitted the waiver of rights form to the court, the prosecutor
orally advised her of certain consequences of her plea. In pertinent part, the prosecutor
stated, “If you are not a citizen of the United States, a plea to this charge will result in
your deportation, denial of naturalization and denial of re-entry into the country.”
Despite these consequences defendant indicated she still wished to enter her plea.
In her motion to withdraw the plea, defendant pointed out she was taken into
federal custody by Immigration and Customs Enforcement in 2011 and her application
1
All further statutory references are to the Penal Code.
2
for asylum was denied due to her plea. She argued she was entitled have her plea vacated
because she was not advised the plea would preclude her from obtaining relief from
“removal” in the form of “Cancellation of Removal and Asylum.” In the memorandum
of points and authorities supporting the motion, defendant maintained she would have not
pled no contest if these “special consequences” of the plea were explained to her.
DISCUSSION
Defendant contends the law required her to be advised her plea would result in
“mandatory deportation” and “the unavailability of certain relief like cancellation of
removal or asylum.” 2 Simply put, reversal is not required because the nature of the
required immigration advisements are well-settled and, in this case, they were clearly
iterated to defendant.
“Section 1016.5[, subdivision] (a) requires a trial court, before accepting a plea of
guilty or no contest, to explain to a defendant that if the defendant is not a citizen of this
country, conviction of the charged offense ‘may have the consequences of deportation,
exclusion from admission to the United States, or denial of naturalization . . . .’ Section
1016.5[, subdivision] (b) provides a remedy for a noncitizen defendant who is not
2
Although this is the essence of defendant’s claim, she also asserts the trial court
should have considered both the legislative intent in enacting section 1016.5 and the fact
that, as of the passage of congressional legislation in 1990, a federal judge may not issue
a determination that a criminal conviction must be excluded from forming the basis for
deportation under what was known as a “judicial recommendation against deportation.”
But, defendant asked the trial court to vacate her plea based on section 1016.5. She did
not argue the advisements she proposed were required by either the Federal Constitution
(see, e.g., Padilla v. Kentucky (2010) 559 U.S. 356, 360, 364 [Sixth Amendment requires
defense counsel to advise his client the offense to which he is pleading would result in the
removal from the country] or the absence of any previously existing federal law. As
such, those issues, to the extent they are presented, are forfeited. (See People v. Chism
(2014) 58 Cal.4th 1266, 1300.) Moreover, the requirements of section 1016.5 are clear
and it is therefore unnecessary to resort to external sources such as legislative intent and
pre-existing federal doctrines to determine whether the trial court complied with it. (Hess
v. Ford Motor Co. (2002) 27 Cal.4th 516, 531; Quarterman v. Kefauver (1997) 55
Cal.App.4th 1366, 1371.)
3
advised of these consequences: ‘If . . . the court fails to advise the defendant as required
by this section and the defendant shows that conviction of the offense to which [the]
defendant pleaded guilty or nolo contendere may have the consequences for the
defendant of deportation, exclusion from admission to the United States, or denial of
naturalization . . . the court, on [the] defendant’s motion, shall vacate the judgment and
permit the defendant to withdraw the plea of guilty or nolo contendere, and enter a plea
of not guilty.’ To prevail on a section 1016.5 motion, a defendant must establish (1) that
the advisements were not given; (2) that the conviction may result in adverse immigration
consequences; and (3) that the defendant would not have pled guilty or no contest had
proper advisements been given. [Citation.]” (People v. Arriaga (2014) 58 Cal.4th 950,
957-958.) We review the denial of a motion to withdraw a plea under an abuse of
discretion standard and, in that respect, will only reverse the order if it was the result of
arbitrary or capricious decision-making by the trial court. (People v. Limon (2009) 179
Cal.App.4th 1514, 1517-1518.)
The immigration consequences paragraph defendant initialed in the waiver of
rights form complied with the dictates of section 1016.5, subdivision (a) by advising
defendant she “must expect” her plea “will result” in her “deportation, exclusion from
admission or reentry to the United States, and denial of naturalization or amnesty . . . .”3
These consequences were paraphrased and reiterated to her orally when, prior to entering
her plea, she was advised by the prosecutor that her plea “will result in [her] deportation,
denial of naturalization and denial of re-entry into the country.” Taken as a whole, the
advisements went beyond the requirement that defendant be told she “may” suffer certain
immigration consequences by expressing, in certain terms, that not only should she
expect to suffer these consequences, but that she would in fact suffer the stated
consequences. Indeed, while not necessary, the advisements for all intents and purposes
3
The advisements need not be oral—a validly executed plea agreement containing
the immigration advisement satisfies the requirements of section 1016.5, subdivision (a).
(People v. Ramirez (1999) 71 Cal.App.4th 519, 521; People v. Gutierrez (2003) 106
Cal.App.4th 169, 175.)
4
contained a certainty of adverse immigration consequences that was on par with those
proposed by defendant.
We turn briefly to the two remaining factors relevant to the merits of the motion.
There is no discussion in the appellate briefs regarding the second factor, i.e., whether the
conviction may result in adverse immigration consequences. However, defendant’s
declaration at trial indicated she was the subject of a removal matter initiated by
Immigration and Customs Enforcement. It appears the existence of this factor was never
disputed by the People.
The third factor is more problematic for defendant. The declaration filed in
support of the motion indicated defendant “would not have pled guilty” if she had been
advised of “the immigration consequences” of the plea. But, it is undisputed that
defendant was advised of immigration consequences; what is disputed was whether she
was required to specifically be told that (a) she was subject to “mandatory deportation,”
and (b) “certain relief” such as “cancellation of removal or asylum” would be unavailable
to her. Defendant did not provide any evidence that she would have elected not to enter
the plea if these specific words were uttered to her.
5
DISPOSITION
The order denying defendant’s motion to withdraw her plea is affirmed.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
KUMAR, J.
We concur:
TURNER, P. J.
KRIEGLER, J.
Judge of the Superior Court of the County of Los Angeles, assigned by the Chief
Justice pursuant to article VI, section 6 of the California Constitution.
6
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582 F.2d 224
47 A.L.R.Fed. 621, 78-2 USTC P 9633,3 Fed. R. Evid. Serv. 1097
UNITED STATES of America, Plaintiff-Appellee,v.Michael E. QUINTO, Defendant-Appellant.
No. 914, Docket 78-1027.
United States Court of Appeals,Second Circuit.
Argued May 9, 1978.Decided Aug. 7, 1978.
Frederic Block, Smithtown, N. Y., Hull, Block & Grundfast, Smithtown, N. Y., for defendant-appellant.
Mary McGowan Davis, Asst. U. S. Atty., Brooklyn, N. Y. (David G. Trager, U. S. Atty., Eastern District of New York, Brooklyn, N. Y., of counsel), for plaintiff-appellee.
Before WATERMAN, INGRAHAM* and MANSFIELD, Circuit Judges.
WATERMAN, Circuit Judge:
1
While it is superfluous to say that the intent of a tax evader is to try "to screw the government out of some cash if (he can)," what makes this contested tax evasion case remarkable is that, according to the government, Quinto, the alleged tax evader here, was gracious enough to acknowledge to two Internal Revenue Service agents when interviewed by them that that is precisely what he was hoping to accomplish by failing to report approximately $15,000 of income over a two-year period. Not surprisingly, though, Quinto's recollection of his interview with the IRS agents, as developed during his testimony in his own defense at his trial before Judge Pratt and a jury in the United States District Court for the Eastern District of New York on two charges of tax evasion (26 U.S.C. § 7201) and two charges of willfully subscribing false income tax returns (26 U.S.C. § 7206(1)), is somewhat different.
2
The legal issue which we are required to resolve on this appeal from Quinto's conviction on all counts of the four-count indictment brought against him was precipitated by the government's unwillingness to rely solely upon the revenue agents' in-court testimony regarding their interview. More particularly, to rehabilitate one agent's damaged credibility and further to prove that Quinto had indeed made certain extremely incriminatory remarks to his inquisitors, the government sought to introduce, and, after initial refusals by the judge, was permitted to introduce an elaborate IRS memorandum recounting in extraordinary detail what had purportedly transpired during Quinto's interrogation by the IRS agents and two federal prosecutors. Inasmuch as we agree with Quinto that the district court erred by admitting the memorandum as a prior consistent statement under Fed.R.Evid. 801(d)(1)(B) and that the court's erroneous admission of the document severely prejudiced Quinto's right to a fair trial, we reverse the judgment order of conviction and remand for a new trial on all counts of the indictment.
3
The four-count indictment upon which Quinto was prosecuted charged him with two counts of income tax evasion, in violation of 26 U.S.C. § 7201, for the calendar years 1974 and 1975, and with two counts of willfully subscribing false income tax returns, in violation of 26 U.S.C. § 7206(1), for those same two years. Following a six-day jury trial in the United States District Court for the Eastern District of New York, Quinto was convicted on all four counts. Upon his four convictions, Quinto was sentenced to a two-year term of imprisonment on each count, the sentences to be served concurrently with two months of each two-year term to be served in a "jail-type" institution. Quinto was also fined $2,500 on each of the four convictions, the total of the fines so imposed being $10,000. Execution of sentence was stayed and Quinto has been free on bail pending disposition of this appeal.
4
Michael Quinto is a full-time employee of the Suffolk County (New York) Land Management Bureau, serving in the capacity of Senior Right of Way Agent. Since 1965, however, Quinto had also performed services on a part-time basis for the architectural and engineering firm of Wiedersum Associates. Because of Quinto's numerous business and personal contacts with school board members throughout Suffolk County, Wiedersum had retained him as a "public relations man or sales representative" who might be able to arrange interviews for the firm with Suffolk County school boards interested in obtaining architectural or engineering services of the type provided by Wiedersum. Quinto's arrangement with Wiedersum provided that if, as a result of the interviews Quinto arranged, the firm were selected to perform professional services for a school district, Quinto's compensation would amount to 41/2-5% Of Wiedersum's gross architectural fee. It was understood, however, that, as a general matter, Quinto would not be reimbursed by Wiedersum for any of the business expenses he might incur while performing services for Wiedersum. Beginning in 1965 Quinto received $50 per week from Wiedersum as an advance against the commissions it was expected he would earn and in 1966 the size of the weekly advance was increased to $100 per week. Quinto continued to receive these weekly payments until 1975. Moreover, the firm would also occasionally make lump-sum payments to Quinto to cover commissions he had earned.
5
As a result of Quinto's successful public relations efforts, Wiedersum paid Quinto over $75,000 and on his federal income tax returns for the years 1965-1973 Quinto carefully reported as gross income all these amounts so received from Wiedersum. Quinto's troubles with the Internal Revenue Service, however, developed out of his failure to report on his 1974 and 1975 federal income tax returns any income he received from Wiedersum during those years. It is conceded that Wiedersum paid Quinto $10,400 (composed of $5,400 in weekly checks and a $5,000 lump-sum payment) in 1974 and $5,300 (all in weekly payments) in 1975. Quinto did not report any of this income, and he did not claim any business expenses which he might have incurred through his employment by Wiedersum. According to the testimony of an IRS official, as a result of Quinto's failure to report the payments received from Wiedersum in 1974 and 1975 Quinto underpaid his federal income tax by approximately $3,300 in 1974 and by $1,950 in 1975.
6
Inasmuch as the defense acknowledged that Quinto had failed to report the aggregate $15,700 received from Wiedersum during 1974 and 1975, the government's proof at trial was directed at establishing that at the time he had failed to report the income Quinto had had the willful intent that must exist for a defendant to be convicted of tax evasion (§ 7201) and of willfully subscribing false income tax returns (§ 7206(1)). To establish the willfulness of Quinto's failure to report income, the government relied upon the testimony of James Wallwork, a Special Agent in the Intelligence Division of the Internal Revenue Service. The crucial portion of the agent's testimony concerned an interview with Quinto conducted by Wallwork, Peter Fuhrman, another IRS Special Agent, and two Assistant United States Attorneys. Several days prior to August 20, 1976, the date on which the interview was conducted, a federal prosecutor had called Quinto and asked him to appear for the interview at the prosecutor's office in the United States Courthouse in Brooklyn. At the time the invitation was extended, the agents and the prosecutor were fully aware that Quinto had not reported the $15,700 he had received from Wiedersum during 1974 and 1975. Unaccompanied by counsel, Quinto appeared at the scheduled time and was ushered into the prosecutor's office. Wallwork testified at trial that, prior to the start of the interrogation, one of the two prosecutors who was present advised Quinto that he was a target of a grand jury investigation and that he was also a subject of a criminal investigation by the Internal Revenue Service. Miranda warnings were also given, and these were repeated several times during the course of the interview. After the initial warnings had been given, Quinto claimed to understand his rights and expressed his desire to proceed with the discussion. Quinto was eventually asked why he had not reported the money he had received from Wiedersum during 1974 and 1975, and according to Wallwork, Quinto, after some abortive attempts to extricate himself from his obvious predicament, blurted out: "Okay, I was trying to screw the government out of some cash if I could."
7
Defense counsel conducted a vigorous cross-examination of Wallwork which was designed to show that the meeting of August 20 had been more of an inquisition than an interview and that subsequent to that interview the IRS had failed to conduct an adequate enough investigation for the purpose of corroborating Quinto's story that he had had various unreported business expenses, attributable primarily to Quinto's entertainment of members of local school boards, which would counterbalance any unreported income.1 On Agent Wallwork's redirect examination, the government attempted to prove that the IRS had carefully investigated all business expenses which Quinto claimed he had not reported and had found that these claimed expenses simply did not exist. In particular, Wallwork testified that he personally had interviewed seven local school board members whom Quinto claimed he had entertained during 1974 and 1975 and that all seven individuals, including a Mr. O'Connell and a Mr. Fingar, denied having been entertained by Quinto.
8
More importantly, though, the prosecution on redirect examination elicited from Wallwork that the agents had prepared a memorandum following the August 20 "interview" with Quinto. The document, consisting of eight single-spaced, typed pages, purported to describe exactly what had happened at Quinto's session with the agents. It disclosed, among other things, that Quinto had been read the rights to which Wallwork had previously referred in his direct testimony and, in what was portrayed as a verbatim quotation of Quinto's remarks, that Quinto had confessed that his purpose in failing to report the income was "to screw the government out of some cash if (he) could." Arguing that there had been "a general attack on the agent's credibility," the government attempted to introduce the memorandum as a prior consistent statement usable not only to corroborate Wallwork's in-court direct testimony but also usable under Fed.R.Evid. 801(d)(1)(B) as "substantive evidence" to prove that Quinto had made the fatal admission the IRS agents claim he made. The defense objected to the admission of the document, and, although the judge sustained the objection, he expressly left open the possibility that he might permit the document to be admitted later in the trial "if there (were) a challenge to its credibility, even the form of a contradiction."2
9
Quinto testified in his own defense and his testimony covered two distinct areas. First of all, his recollection of what had transpired at his interview conducted by the IRS agents and the federal prosecutors differed materially from the version of that incident conveyed to the jury through Agent Wallwork's testimony and, importantly, the version which would eventually be conveyed to the jury through the later-admitted IRS memorandum of that interview as well. Quinto, claiming that he had been lured to the interview on the pretext that the discussions there would involve certain land condemnation procedures, stated that the interview had been conducted in inquisitorial fashion, his inquisitors "badgering" and "goading" him and calling him a "liar" at several points during the interview. Quinto stated that he had not been informed at the start of the interview that he was a target, and that he had no recollection of having been informed that he had the right to leave the room at any time, or that he could refuse to answer questions. As to the supposed admission that he was trying "to screw the government out of some cash," Quinto testified that Agent Wallwork had distorted what Quinto had actually said:
10
When they were goading me and goading me, I just said, "Do you think for one moment I would try to screw the Government out of a few dollars?" That's what I said, in just that tone, with a question mark on the end of it. (Tr. at 693.)
11
During Quinto's direct examination, defense counsel also attempted to establish that Quinto's failure to report income and to pay the taxes due on that income was attributable to his good faith belief that his undeclared business expenses for 1974 and 1975 exceeded his unreported income for those two years.3 During his cross-examination, Quinto denied that he had admitted at the interview that his purpose in not reporting the income had been to "screw the government out of some cash." Undaunted by this categorical denial, the prosecutor kept pressing the witness to concede that he had made the damaging statement and, to get Quinto to retract his denial, the prosecutor attempted to "refresh the witness's recollection" by showing him the IRS memorandum and directing his attention to the point in the memorandum where it was stated that Quinto had made the admission of guilt. At this point the prosecutor again offered the IRS memorandum into evidence, and again Judge Pratt refused to admit the document.
12
The remainder of the defense case was presented through character witnesses and witnesses who testified in support of Quinto's story that certain business expenses he supposedly incurred during 1974 and 1975 were incurred in connection with his promotional efforts on behalf of Wiedersum. Moreover, two of the witnesses, O'Connell and Fingar, who were members of local school boards, directly contradicted portions of Wallwork's prior testimony. As already mentioned, Wallwork had testified that, during his investigation to determine whether Quinto had incurred the business expenses Quinto said he had incurred, Wallwork had visited with these particular school board members. According to Wallwork's direct testimony during the government's case-in-chief, these individuals had responded that they had not been entertained by Quinto during 1974 or 1975. During their direct testimony on Quinto's behalf at trial, however, these two school board members denied having told the IRS agents that Quinto had not entertained them during 1974 and 1975. In addition, another witness contradicted Wallwork's testimony. Wallwork had previously testified that the IRS agents had learned, contrary to what they had been told by Quinto, that Quinto's wife had purchased certain gifts from a local pharmacy at the request of her employer rather than on behalf of her husband. Testifying for the defense, however, the pharmacist from whose store Mrs. Quinto had purchased these gifts disputed Wallwork's testimony that Mrs. Quinto had purchased them at the request of her employer rather than on behalf of her husband.
13
After the defense had rested, the judge, of his own accord, reopened the question of the admissibility of the IRS memorandum:
14
The Court: A little earlier this morning, Mr. Marcus, you offered in evidence the statement of the revenue agent.
15
Mr. Gillen: I think that was yesterday.
16
The Court: It had been previously offered and I ruled upon it at that time. I believe again this morning you offered it, almost in passing, without any particular discussion of the point.
17
Mr. Marcus: Yes, your Honor.
18
The Court: I sustained the objection at the time and I have been thinking about it further, and have wondered whether you were now taking the position that the implied attack upon Mr. Wallwork's credibility as to recent fabrication or improper motive or influence or something, had been sufficiently established to warrant its admission.
19
Mr. Marcus: That in fact, is the basis for the offer at that time. It would seem to me that at this point, we have had almost a day of Mr. Quinto, in essence, saying that Special Agent Wallwork lied in connection with saying "He was not given his rights," saying he was or was not told he was a target, etc.
20
The Court: I know what he said. Just when you made the offer, you didn't say anything that rang the bell that you were reasserting the argument, which you had previously made, and Which I expressly left open in the event the contradictions should occur.
You did intend to reassert that
21
Mr. Marcus: That is correct, your Honor.
22
The Court: I will reflect on the matter over lunch. I will give you my ruling after lunch.
23
Tr. at 852-53 (emphasis supplied).
24
After lunch, the judge did exactly that, ruling that "I have decided that I will admit (the memorandum) into evidence under 801(d)(1)(2) (Sic ), I believe it is." Id. at 870. Thereafter, the prosecutor distributed the memorandum, now an exhibit in the case, to the jurors and it was taken by them into the jury room when they retired to deliberate Quinto's fate.
25
Quinto's principal argument on appeal is that the district court committed reversible error by admitting the IRS memorandum into evidence as a prior consistent statement under Fed.R.Evid. 801(d)(1)(B). We agree, and we hold that the memorandum should have been excluded regardless of whether it was offered for the truth of the matters asserted therein or merely for the more limited purpose of rehabilitating the in-court testimony of Agent Wallwork of the Internal Revenue Service.
26
For nearly 200 years last past, the courts have enforced, except in certain very limited circumstances, a general prohibition against the use of prior consistent statements. While it is true that the use of such statements to prove the truth of the matters asserted has always been clearly barred by the hearsay rule, See, e. g., 4 Wigmore, Evidence § 1132, at 294 (Chadbourn rev. 1972); 6 Wigmore, Evidence § 1792, at 327 (Chadbourn rev. 1976),4 the courts have also generally prohibited the use of such evidence even when the proponent of the prior consistent statement was simply offering it for the more limited purpose of bolstering the witness's damaged credibility. United States v. Check, --- F.2d ----, ---- n. 27 (2d Cir. 1978); Mitchell v. American Export Isbrandtsen Lines, Inc., 430 F.2d 1023, 1029 (2d Cir. 1970); United States v. Lev, 276 F.2d 605, 608 (2d Cir.), Cert. denied, 363 U.S. 812, 80 S.Ct. 1248, 4 L.Ed.2d 1153 (1960); 6 Wigmore, Evidence § 1792, at 327 (Chadbourn rev. 1976) ("Consistent statements to Corroborate a witness are admitted in certain cases only.") (emphasis in original). The rationale for excluding most, but not all, prior consistent statements being offered to establish the witness's credibility is one of relevancy. "The witness is not helped by (the prior consistent statement;) even if it is an improbable or untrustworthy story, it is not made more probable or more trustworthy by any number of repetitions of it." 4 Wigmore, Evidence § 1124, at 255 (Chadbourn rev. 1972); See 4 Wigmore, Evidence § 1122, at 254 (Chadbourn rev. 1972). There have been situations, however, in which courts traditionally have felt that it is indeed relevant to the issue of whether the witness's in-court testimony should be believed that on prior occasions the witness has uttered statements which are consistent with his in-court testimony. "Prior consistent statements traditionally have been admissible to rebut charges of recent fabrication or improper influence or motive." Note to Rule 801, Notes of the Advisory Committee on the Proposed Rules of Evidence (hereinafter "Advisory Committee Notes"), 56 F.R.D. 183, 296 (1972); Accord, United States v. Check, supra, --- F.2d at ---- - ----; See, e. g., 4 Wigmore, Evidence § 1128, at 268 (Chadbourn rev. 1972); 4 Weinstein's Evidence P 801(d)(1)(B)(01). But the prior consistent statements have been so admissible only when the statements were made prior to the time the supposed motive to falsify arose. United States v. Check, supra, at ----; United States v. Fayette, 388 F.2d 728, 733 (2d Cir. 1968); United States v. Grunewald, 233 F.2d 556, 566 (2d Cir. 1956), Rev'd on other grounds, 353 U.S. 391, 77 S.Ct. 963, 1 L.Ed.2d 931 (1957); People v. Davis, 44 N.Y.2d 269, 405 N.Y.S.2d 428, 376 N.E.2d 901 (1978); 4 Weinstein's Evidence P 801(d) (1)(B)(01); J. McLaughlin, "New York Trial Practice," 179 N.Y.L.J. No. 111, June 9, 1978, at pg. 1, col. 1, pg. 2, col. 4-5. Only then was the prior consistent statement "relevant" on the issue of credibility; that is, it tended to make the trustworthiness of the witness's in-court testimony more probable, after that testimony had been assailed, inasmuch as the consistency of the prior statement with the witness's testimony at trial made it "appear that the statement in the form now uttered was independent of the (alleged) discrediting influence." 4 Wigmore, Evidence § 1128, at 268 (Chadbourn rev. 1972).
27
To the extent that a prior consistent statement is used for rehabilitative purposes, the Federal Rules of Evidence have apparently not altered prior law. Fed.R.Evid. 402 laconically states that "(e)vidence which is not relevant is not admissible," and "relevant" evidence is defined in Fed.R.Evid. 401 as being "evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence." Needless to say, irrelevant evidence is evidence which does not possess such a tendency. While credibility is always an issue of consequence and while "testimony which aids in the jury's determination of a (witness's) credibility and veracity (is always relevant)," Lewis v. Baker, 526 F.2d 470, 475 (2d Cir. 1975), it is well-recognized, as we have already explained, that only some well-defined classes of prior consistent statements can really so assist the jury. Therefore, it has been only those particular categories of prior consistent statements which have been able to withstand the objection that the prior consistent statement is irrelevant to the issue of the witness's credibility.
28
In one very significant respect, though, the Federal Rules of Evidence, through the adoption of Fed.R.Evid. 801(d)(1)(B), have altered the preexisting evidentiary law on the use of prior consistent statements. Fed.R.Evid. 801(d) (1)(B) provides, in pertinent part:
29
(d) Statements which are not hearsay. A statement is not hearsay if
30
(1) Prior statement by witness. The declarant testifies at the trial or hearing and is subject to cross-examination concerning the statement, and the statement is . . . (B) consistent with his testimony and is offered to rebut an express or implied charge against him of recent fabrication or improper influence or motive . . ..
31
As can be seen, Fed.R.Evid. 801(d)(1)(B) does not, in and of itself, purport to allow the introduction of any prior consistent statements, but it does insure that any prior consistent statement which satisfies its requirements will not be regarded as "hearsay" and thus inadmissible under Fed.R.Evid. 802. In other words, prior consistent statements which satisfy the conditions set forth in Fed.R.Evid. 801(d)(1)(B) can now be used, in contrast to the restricted permissible uses under preexisting law, as "substantive evidence," Note to Rule 801, Advisory Committee Notes, Supra, 56 F.R.D. at 296, to prove the truth of the matters asserted therein. E. g., United States v. Check, --- F.2d at ---- - ----. It is of greatest importance, however, that, inasmuch as the drafters of the proposed Federal Rules of Evidence intended that prior consistent statements could be used as substantive evidence only in those "situations in which rehabilitation through consistency would formerly have been allowed," 4 Weinstein's Evidence P 801(d)(1)(B)(01), at 801-100; Accord, United States v. Check, supra, at ---- - ----. Note to Rule 801, Advisory Committee Notes, Supra, 56 F.R.D. at 296, the standards for determining whether prior consistent statements can now be admitted as substantive evidence are precisely the same as the traditional standards and, as explained above, continue to be the standards used under the new rules of evidence for determining which varieties of prior consistent statements can be admitted for the more limited purpose of rehabilitation.
32
It is clear, therefore, that to avoid having the prior consistent statement found irrelevant under Fed.R.Evid. 402 or incapable of satisfying the requirements of Fed.R.Evid. 801(d)(1)(B), the proponent must demonstrate three things. First, he must show that the prior consistent statement is "consistent with (the witness's in-court) testimony." Fed.R.Evid. 801(d)(1) (B). Second, the party offering the prior consistent statement must establish that the statement is being "offered to rebut an express or implied charge against (the witness) of recent fabrication or improper influence or motive." Id. Finally, it is necessary that, as was the situation under the law of evidence prior to the adoption of the Federal Rules of Evidence, See, e. g., United States v. Check, supra, at ---- - ----; United States v. Fayette,supra, 388 F.2d at 733; United States v. Grunewald, supra, 233 F.2d at 566, the proponent must demonstrate that the prior consistent statement was made prior to the time that the supposed motive to falsify arose, E. g., United States v. Check, supra, --- F.2d at ----; United States v. McGrath, 558 F.2d 1102, 1107 (2d Cir. 1977), Cert. denied, 434 U.S. 1064, 98 S.Ct. 1239, 55 L.Ed.2d 765 (1978); United States v. Lombardi, 550 F.2d 827, 828-29 (2d Cir. 1977) (per curiam); 4 Weinstein's Evidence P 801(d)(1)(B)(01).
33
Here, during oral argument before us, in response to pointed questioning from the bench the government has failed to satisfy this third requirement. The various improper motives5 the defense vigorously asserted the IRS agent might have had for lying on the witness stand motives reducible essentially to a claim that, regardless of Quinto's actual guilt or innocence, throughout the entire investigation the government agents were ruthlessly seeking a conviction, presumably to enhance their own professional advancement and aggrandizement would have been as operative at the time the IRS agents compiled the memorandum summarizing their interview with Quinto as those motives were at the time the IRS agents testified at trial. Indeed, Quinto's testimony attempted to show that the "interview" had been more in the nature of a trap and an inquisition and that, even at the time of the interview, the IRS agents and the prosecutors were, in common parlance, out "to get" him. Thus, the deeply rooted prejudice which Quinto claims was motivating the agents' actions existed both at the time the memorandum was compiled and at the time of Quinto's trial.
34
Moreover, while the admissibility of the memorandum was being debated at trial, at no time during his extended remarks on the subject did the prosecutor apparently point out to Judge Pratt exactly what improper motives might have existed at trial that did not also exist at the time of the compilation of the memorandum. Indeed, restricting his argument advocating the document's admission to the ground that there had been "a general attack on the agent's credibility," indeed, a "broad based attack on motive, intent, integrity of not only this agent, but the Internal Revenue Service in the preparation and prosecution of this case," the prosecutor seemingly thought the memorandum admissible regardless of the time when the alleged motive to falsify might have arisen. Judge Pratt also mistakenly assumed that, regardless of the time when any motive to falsify might have arisen, the memorandum was admissible as soon as there had been a clear "challenge to (the agent's) credibility, even (in) the form of a contradiction," Tr. at 347, or "contradictory testimony by someone else," Id. Although the district judge refused to admit the document during the redirect examination of Agent Wallwork, he did permit it to be introduced after Wallwork's testimony had been "contradicted" by Quinto and several other witnesses. The judge's apparent reasons for allowing the document to be admitted are not, and historically have not been, a sufficient basis for admitting prior consistent statements for rehabilitative purposes.
35
A former consistent statement helps in no respect to remove such discredit as may arise from a contradiction by other witnesses. When B is produced to swear to the contrary of what A has asserted on the stand, it cannot help us, in deciding between them, to know that A has asserted the same thing many times previously. If that were an argument, then the witness who had repeated his story to the greatest number of people would be the most credible.
36
4 Wigmore, Evidence § 1127, at 267 (Chadbourn rev. 1972); Accord, e. g., United States v. Adams, 385 F.2d 548, 550 n. 3 (2d Cir. 1967) (Friendly, J.) ("prior consistent statements . . . would have been equally incompetent after impeachment which here was solely by contradiction"); Mitchell v. American Export Isbrandtsen Lines, Inc., supra, 430 F.2d at 1029 (prior consistent statement to bolster witness's testimony inadmissible "even after the witness whose testimony is sought to be bolstered has been contradicted"); United States v. Leggett, 312 F.2d 566, 572-73 (4th Cir. 1962), Cert. denied, 377 U.S. 955, 84 S.Ct. 1633, 12 L.Ed.2d 499 (1964); See People v. Williams, 403 N.Y.S.2d 548 (2d Dep't 1978).
37
We therefore conclude that the memorandum was irrelevant for the rehabilitative purpose of bolstering Agent Wallwork's challenged credibility and, to the extent that it was used or could be used as substantive evidence to prove the truth of the matters asserted in the memorandum, it did not satisfy the requirements of Fed.R.Evid. 801(d)(1)(B) and it therefore was not excluded from the definition of hearsay contained in Fed.R.Evid. 801(c). As a consequence, it was inadmissible under Fed.R.Evid. 802 unless it could satisfy the standards of one of the hearsay exceptions delineated in Rules 803 and 804 of the Federal Rules of Evidence. This it could not do, for "in criminal cases reports of public agencies setting forth matters observed by police officers and other law enforcement personnel . . . cannot satisfy the standards of any hearsay exception if those reports are sought to be introduced against the accused." United States v. Oates, 560 F.2d 45, 84 (2d Cir. 1977); United States v. Ruffin, 575 F.2d 346, 356 (2d Cir. 1978). We therefore hold that the district court erred in admitting the IRS memorandum against Quinto.
38
Having concluded that the memorandum was improperly admitted into evidence, we must now determine whether the error necessitates reversal of the convictions. We do not hesitate to decide that it does. The test for determining whether error not of constitutional dimension is prejudicial error, is, of course, a familiar one. Regardless of whether there were other independently sufficient evidence to convict the defendant, we can find the error harmless only if "our conviction is sure that the error did not influence the jury or had but very slight effect," United States v. Ruffin, supra, 575 F.2d at 359, quoting Kotteakos v. United States, 328 U.S. 750, 764, 66 S.Ct. 1239, 90 L.Ed. 1557 (1946); Accord, United States v. Check, supra, --- F.2d at ---- - ----; United States v. Frank, 494 F.2d 145, 161 n. 19 (2d Cir.), Cert. denied, 419 U.S. 828, 95 S.Ct. 48, 42 L.Ed.2d 52 (1974). Here it is a virtual certainty that the eight-page single-spaced IRS report substantially influenced the jury to convict Quinto. The more official and authoritative a writing appears to be, the less likely it is that even cautious or cynical individuals will be able to resist the temptation to regard the accuracy of the contents of the document as being beyond reproach. The memorandum which the IRS agents prepared following their interview with Quinto is, to say the least, impressive in appearance. Indeed, the specificity with which the document relates the entire course of the interview, the questions propounded by the interrogators and Quinto's responses to those inquiries, leads us to believe that it would indeed be the unusual juror who would be unimpressed and uninfluenced by the memorandum or who would be at all dubious that Quinto had been treated solicitously or that he actually had confessed that he was "trying to screw the government out of some cash if (he) could." In fact, we have little doubt that once the jury had retired to the privacy of their deliberations, the document which we have held to have been improperly admitted probably became the single most important piece of evidence, testimonial or documentary, against Quinto, for "(t)he jury thus had before it a neat condensation of the government's whole case against the defendant. The government's witnesses in effect accompanied the jury into the jury room. In these circumstances we cannot say that the error did not influence the jury, to the defendant's detriment, or had but very slight effect." United States v. Ware, 247 F.2d 698, 700-01 (7th Cir. 1957); Accord, United States v. Brown, 451 F.2d 1231, 1233-34 (5th Cir. 1971); Sanchez v. United States, 293 F.2d 260, 267-70 (8th Cir. 1961); See United States v. Frattini, 501 F.2d 1234, 1235-36 (2d Cir. 1974); See also United States v. Adams, supra, 385 F.2d at 550-51 (Friendly, J.). Moreover, the error is not rendered harmless by the fact that IRS "agents had testified and were cross-examined on the same subjects." United States v. Adams, supra, 385 F.2d at 551 (interpreting Ware and Sanchez ); Accord, United States v. Ware, supra, 247 F.2d at 700-01; United States v. Brown, supra, 451 F.2d at 1234. Finally, this was a case in which, on both the tax evasion and false swearing charges, the issue of paramount importance was whether the defendant had acted with willful intent. Of course, if the jury believed that Quinto had really stated that his purpose in not reporting income had been "to screw the government out of some cash," Quinto, for all practical purposes, could not possibly have hoped for acquittals on any of the charges. Although Wallwork testified that Quinto had made such a crucial admission, the jury might not have credited the agent's in-court testimony. It is difficult for us to believe, however, that the jury could have ignored the elaborate IRS memorandum which was improperly introduced into evidence and, unfortunately for Quinto, this document was all the jury really needed to see to conclude that Quinto had indeed acted willfully in violating the Internal Revenue laws.
39
Judgment order reversed and case remanded for a new trial on all counts of the indictment.6
*
Of the United States Court of Appeals for the Fifth Circuit, sitting by designation
1
As Judge Pratt correctly explained to the jury, the existence of these unreported business expenses, if they were of sufficient magnitude, might have been a complete defense to the tax evasion (§ 7201) charges
Now, let us discuss each of the three elements of the tax evasion charges. With respect to the first element, that there be a substantial tax due and owing, the Government must prove that the Defendant had taxable income which he failed to report on his tax return, and that had he reported such income, there would have been a substantial additional tax due and owing to the United States.
Taxable income is what remains after all lawful exemptions and deductions are subtracted from gross income. Here, there is no dispute that the monies received from Wiedersum Associates in 1974 and 1975 were part of his gross income. The issue for you to determine, therefore, in deciding whether there was in fact a taxable income which Defendant failed to report, is whether there were, as Defendant claims, unreported business expense deductions equal to or in excess of the gross income from Wiedersum in that year. If you find that there was a taxable income which was not reported, then you must also determine whether the amount of the additional tax due on that additional taxable income was substantial.
Much of the testimony you have heard has been directed to the question of alleged business expense deductions. How should you go about evaluating that evidence? To begin with, keep in mind that it is the Government's burden to prove beyond a reasonable doubt the basic element, that there was a substantial additional tax due and owing. To prove this, the Government presented evidence and the Defendant admitted that he had received some $10,000 of unreported income in 1974, and some $5,000 in 1975. At that point the law requires the Defendant, if he claims offsetting business expense deductions to come forward with evidence establishing his entitlement to those deductions. The Defendant here has attempted to present such evidence which the Government challenges both as to whether legitimate business expenses were actually incurred, and if so, as to the amount of those expenses.
You have heard the evidence and the arguments of Counsel with respect to these claimed business expense deductions. You should weigh all of that evidence and determine on the entire case whether the Government has established beyond a reasonable doubt that a substantial additional tax was in fact due.
Tr. at 1164-1166.
In contrast, as Judge Pratt carefully instructed the jury, a defense to the willful subscribing counts could not be predicated Solely on the basis of the existence of unreported expenses, but the existence of such expenses could well serve as an important element of a defense, based upon a good faith mistake of law, aimed at establishing that the defendant had not acted willfully.
The fourth element of the crime is willfulness. Used in this connection, willfulness means a voluntary, and intentional violation of a known legal duty. It is to be distinguished from accident, inadvertence, or negligence. Mere negligence, even gross negligence, is not sufficient to constitute willfulness under the criminal law.
The making of a false return is willful if the Defendant's act was voluntary and purposeful and done with the specific intent to fail to do what he knew the law requires to be done; that is to say, with a purpose to disobey or disregard the law which requires him to file a true return disclosing to the Government facts, material to the determination of his tax liability. On the other hand, the Defendant's conduct is not willful if you find that he filed a false return because of negligence, inadvertence, accident or reckless disregard for the requirements of the law or due to his good faith misunderstanding of the requirements of the law.
As we have already discussed, you have heard considerable evidence concerning certain business expense deductions. Defendant claims he did not report those deductions in the belief that when his business expenses offset his related business income he was not obligated to report either one. Of course, we discussed before the first two counts of the indictment, those charging tax evasion. The Government must prove a substantial tax due and owing thereon and the presence or absence of the claimed business expense deduction is not only relevant in this case, but it may be critical and decisive.
In the context of Counts Three and Four, however, the evidence as to the business expense deductions is to be considered by you only in a very limited sense. First of all, it's not a defense to a charge of false reporting in violation of 7206 to show that the taxpayer had permissible business expense deductions which he also neglected to report on his tax returns. In other words, the existence of such expense deductions in amounts approximating the income that was not reported, would not eliminate the Defendant's obligation of reporting the income in question.
The extent to which you may consider the evidence of such business expense deductions, however, is on the issue of whether the Defendant in good faith believed that he had such deductions in the amounts which would approximate the income he had received, and that he also believed that if the deductions approximated the income he had no obligation to report either one. Only on this issue of the Defendant's state of mind may you consider the claimed business expense deductions in connection with the third and fourth counts of the indictment.
Tr. at 1176-78.
2
Mr. Gillen: The other objection, I think, it is put in to bolster the agent's testimony
The Court: That is why she is offering it.
Mr. Gillen: I know that. I think it is redundant. I do not know if your Honor has noticed, I have not complained up until this point, but Mr. Marcus likes to get his point across two or three times as to every item. I like to get my point across once in a while two or three times, but not as to every single item.
The Court: I think the question before me is whether this is admissible under 801(d)(1)(b). It is offered as a statement which is consistent with the witness' testimony and is offered to rebut an expressed or implied charge against the witness of recent fabrication or improper influence or motive.
Do you think there is a claim here of recent fabrication?
Mr. Marcus: No, I think the claim is improper motive, bias.
The Court: How does this statement rebut the implied improper motive?
Mr. Marcus: He suggested that this witness should not be believed.
For example, on page 6, Quinto was then asked, "how it was possible that he had forgotten to include $10,000 on his return when in addition to the $5,000 check there were weekly payments of $100." At this point Quinto said, "okay, I was trying to screw the Government out of some cash if I could."
The witness made the statement as to what he had heard during the course of the meeting. Mr. Gillen attempted to attack that statement and others that suggests that the Government had been holding back expenses, that they didn't give him credit for expenses that he had during the course of this interview, and to the extent that he said he lied, this agent shouldn't be believed. There is a general attack on the agent's credibility. There is a prior consistent statement that does rebut that. I think it properly comes in under 801(d)(1)(b).
It is consistent with his testimony.
The Court: I do not recall anything that I interrupted as an attack on this witness' credibility interpretation of events perhaps.
Mr. Gillen: That is correct.
The Court: But, the basic elements of what transpired, particularly as a meeting, I thus far haven't seen it. It may become relevant later on if there is contradictory testimony by someone else. At this point, I think it is nothing more than adding the majesty of the written word to what we have explored in some detail. I would sustain the objection, that is not to say that I wouldn't accept it later on, if there is a challenge to its credibility, even the form of a contradiction.
Mr. Marcus: Your Honor, during the opening, Mr. Gillen suggested that, in words or substance, that the Government hadn't given the guy a fair shake, in that they didn't give him credit for expenses which they should have. I am suggesting to the Court that there has been a broad based attack on motive, intent, integrity of not only this agent, but the Internal Revenue Service in the preparation and prosecution of this case. I am suggesting to the extent that there has been this attack, this statement certainly does rebut any motive of improper conduct on the part of the Internal Revenue Service.
The Court: It does not rebut that particular charge, assuming that the charge has any place in the case.
Mr. Marcus: I certainly concede it goes to the more generally based allegation that Mr. Gillen made at the start and has made from time to time in connection with the cross-examination of this witness. I am simply suggesting to the extent that he has put into issue here, in his opening and in connection with the examination of this witness, the motive or intent of the United States Attorney and the Internal Revenue Service, this statement does rebut an improper motive or improper intent, and for that reason, I'd offer it.
The Court: I will sustain the objection at this point. Clearly what credibility, if any, the defendant is entitled for expenses is a question that the jury has to resolve on the first two counts of the indictment I am not sure that the Government is required to give him credit in any sense. I am not even sure in any sense that the Government is even entitled to give credit in "deductions" which haven't been claimed. I do not really see how it comes into the case. I can see it as a point of argument by Mr. Gillen. I am not sure of its relevancy. It hasn't been objected to thus far. It is too late to take it out of the case entirely. Even assuming the relevancy of the argument, I do not see that the particular exhibit tends to rebut the general claim that Quinto hasn't been given a fair shake, in terms of the investigatory aspect of the case.
Tr. at 345-49.
3
See note 1 Supra
4
§ 1792. Witness' statements used in impeachment. The utterances of a witness indicating Bias are receivable to impeach him (§ 950 Supra ) on the principles noted in the preceding section. Statements offered as Self-contradictions are admitted not as assertions to be credited, but merely as constituting an inconsistency which indicates the witness to be in error in one or the other statement; their use as hearsay assertions is uniformly prohibited by the courts (§ 1018 Supra ). Such an apparently inconsistent statement may be explained away by other utterances (§ 1044 Supra ). Consistent statements to Corroborate a witness are admitted in certain cases only, but are never conceded to have any testimonial force (§ 1132 Supra ). In all of the foregoing instances the utterance is used otherwise than as an assertion to be credited, and therefore the hearsay rule is not applicable
6
Wigmore, Evidence § 1792, at 326-27 (Chadbourn rev. 1976)
5
The prosecutor did not claim that Agent Wallwork's testimony was being attacked as a "recent fabrication," See Tr. at 346, but instead claimed that the testimony was being assailed on the ground that it was based on "improper motive, bias," Id
6
Having concluded as we do that Quinto's convictions must be reversed, we have no occasion to consider either the claim that the prosecutor made improper and prejudicial remarks during his summation or the contention that Judge Pratt's method of designating alternate jurors was improper. Moreover, inasmuch as we are reversing all convictions we need not here resolve a Quinto contention that the two convictions on the false subscribing counts should have been struck off and the sentences thereon vacated on the ground that these two crimes are lesser-included offenses within the greater offenses of tax evasion
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Opinions of the United
2007 Decisions States Court of Appeals
for the Third Circuit
8-14-2007
Subramanian v. Frost
Precedential or Non-Precedential: Non-Precedential
Docket No. 06-3294
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Recommended Citation
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 06-3294
IN RE: RAVI SUBRAMANIAN;
RAJALAKSHMI SUBRAMANIAN,
Appellants
BARRY W. FROST; CHAPTER 7 TRUSTEE,
and HSBC BANK, NA, as successor by
merger to HSBC BANK USA, for itself
and as collateral agent for BANK
OF BARODA
v.
RAVI SUBRAMANIAN;
RAJALAKSHMI SUBRAMANIAN
Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil No. 05-cv-05098)
District Judge: Honorable Mary Little Cooper
Argued July 10, 2007
Before: RENDELL and AMBRO, Circuit Judges,
and SHAPIRO, * District Judge.
(Filed: August 14, 2007 )
__________________
*Honorable Norma L. Shapiro, Senior Judge of the United States District Court for
the Eastern District of Pennsylvania, sitting by designation.
John F. Bracaglia, Jr. [ARGUED]
Cohn, Bracaglia & Gropper
275 East Main Street
P.O. Box 1094
Somerville, NJ 08876
Counsel for Appellants
Barry W. Frost
Teich, Groh, Frost & Zindler
691 State Highway 33
Trenton, NJ 08619
John R. Altieri [ARGUED]
25 Salem Street
P.O. Box 279
Hackensack, NJ 07601
Counsel for Appellees
OPINION OF THE COURT
RENDELL, Circuit Judge.
Debtors Ravi and Rajalakshmi Subramanian appeal the District Court’s order
affirming the Bankruptcy Court’s order denying debtors’ motion to vacate the default
judgment entered against them in the bankruptcy adversary proceeding initiated by the
Chapter 7 Bankruptcy Trustee and creditor HSBC. For the reasons set forth below, we
will affirm.
I.
In November 2002, judgment was entered in the United States District Court for
the Southern District of New York in favor of creditor HSBC against debtor Ravi
Subramanian, and several of the companies of which Subramanian was a principal and an
2
insider: Silverline Technologies, Inc. (STI), Silverline Technologies Limited (STL), and
Seranova, Inc. (“Seranova”). Judgment was entered against Subramanian pursuant to his
guaranty of STI’s obligations to HSBC. STL is the India-based parent company of STI
and is purportedly insolvent. Both STI and Seranova filed for bankruptcy in 2003.
Debtors filed a Chapter 7 bankruptcy petition in the United States Bankruptcy
Court for the District of New Jersey on January 6, 2004. Thereafter, Barry W. Frost was
appointed Chapter 7 Trustee of the Estate. In September 2004, Frost and HSBC filed a
complaint seeking denial of debtors’ bankruptcy discharge pursuant to 11 U.S.C. §
727(a)(2)(A)-(B), (3), (4)(a), (5), (6) and (7), and § 523(a)(2)(B) and (a)(6). The
complaint sets forth, in 199 paragraphs, the facts supporting plaintiffs’ claims that debtors
should be denied a discharge. On October 1, 2004, the complaint was served on debtors
by U.S. mail to their counsel pursuant to Fed. R. Bankr. P. 7004(b)(9).
Debtors failed to file a timely answer to the complaint. The answer was hand
delivered to the courthouse by debtors’ counsel on November 3, three days after the
answer deadline and, according to the time stamps from the Clerk’s Office, 40 minutes
after plaintiffs filed a request for entry of a default. The answer asserted a general denial
as to every allegation in the complaint. The Clerk’s Office granted the request for a
default on November 4 and debtors did not thereafter move to vacate the default. On
December 6, 2004, plaintiffs moved for entry of judgment by default. Debtors did not
respond to this motion. The Bankruptcy Court granted the motion for judgment by
default on January 11, 2005, and ordered that the debtors were barred from receiving a
3
discharge pursuant to 11 U.S.C. § 727(a)(6)(A) and (a)(3).
Debtors then moved on January 27, 2005 to vacate the default judgment. The
motion was not accompanied by a memorandum of law. Debtors’ counsel attested that he
did not receive a mailed copy of the motion for default judgment. He did not, however,
dispute that he was aware that a default had been entered by the Clerk’s Office. After a
hearing on March 7, 2005, the Bankruptcy Court entered an order on April 13, 2005
denying the motion to vacate the default judgment without prejudice and sua sponte
relieving debtors’ counsel. Debtors retained new counsel and again moved on May 25,
2005 pursuant to Rule 60(b) to vacate the default judgment. The motion was
accompanied by a memorandum of law and a certification from Mr. Subramanian that
addressed some of the allegations in the complaint. Debtors also sought leave to file an
amended answer and informed the Court that they would file an amended petition to
address any unresolved discrepancies in their initial filing.
On September 13, 2005, the Bankruptcy Court denied debtors’ second motion to
vacate the default judgment. In re Subramanian, No. 04-2685, slip op. at 2 (D.N.J.
Bankr. Sept. 13, 2005). The Court concluded that debtors could seek relief from the
default judgment under Rule 60(b)(1) based on the “excusable neglect” of their counsel,
but could not seek relief under Rule 60(b)(6) based on “exceptional circumstances”
because they were not without blame for the entry of the default. Id. at 6-7. The Court
set forth the three factors that must be considered when determining whether to vacate a
default judgment pursuant to Rule 60(b)(1): (1) whether the plaintiff will be prejudiced;
4
(2) whether the defendants have a meritorious defense; and (3) whether the default was
the result of the defendants’ culpable conduct. Id. at 7 (citing Gold Kist, Inc. v.
Laurinburg Oil Co., 756 F.2d 14, 19 (3d Cir. 1985)). As to the second factor, whether the
defendants have a meritorious defense, the Bankruptcy Court concluded that debtors
failed to answer, in whole or in part, Counts 5, 7, 12, 13, 16, 22, 23, 23[a],1 and 26 of the
Complaint, and the unanswered allegations in those counts were therefore treated as
having been confessed against debtors. Id. at 9. The Court did not address the other two
Gold Kist factors because debtors did not satisfy the threshold requirement of setting forth
a meritorious defense, and thus could not prevail on their motion to vacate the default
judgment. Id. at 11.
Debtors appealed. The District Court affirmed the order of the Bankruptcy Court,
and noted that debtors failed to respond at all to the allegations in Counts 5, 12, 13, and
16 of the Complaint and only responded in part to several of the allegations in the other
counts in the Complaint, including those in Counts 7, 22, 23[a], and 26. In re
Subramanian, No. 05-5098, slip op. at 2 (D.N.J. June 14, 2006).
Debtors then appealed the order of the District Court, and filed a motion for a stay
in that Court. As part of their motion for a stay, debtors submitted a supplemental
certification, which provided more detailed responses to particular allegations in the
complaint. Since this certification was not before either the Bankruptcy Court or the
1
The Complaint is misnumbered so that there are two separate claims labeled
“Twenty-Third Claim for Relief.”
5
District Court, we will not consider it on appeal.2 See In re Application of Adan, 437 F.3d
381, 388 n.3 (3d Cir. 2006) (“[W]e will not consider new evidence on appeal absent
extraordinary circumstances, such as those that render the case moot or alter the
appropriateness of injunctive relief, a change in pertinent law, or facts of which a court
may take judicial notice.”).
II.
The District Court had jurisdiction over this appeal pursuant to 28 U.S.C. §
158(a)(1). We have jurisdiction pursuant to 28 U.S.C. § 158(d). Our review of the
District Court’s decision effectively amounts to review of the Bankruptcy Court’s opinion
in the first instance, In re Hechinger Inv. Co. of Delaware, 298 F.3d 219, 224 (3d Cir.
2002), because our standard of review is “the same as that exercised by the District Court
over the decision of the Bankruptcy Court,” In re Schick, 418 F.3d 321, 323 (3d Cir.
2005).
We review the Bankruptcy Court’s findings of fact for clear error and exercise
plenary review over questions of law. In re Fruehauf Trailer Corp., 444 F.3d 203, 209-
10 (3d Cir. 2006). “Absent legal error, we review the court’s refusal to set aside a default
judgment under Rule 60(b) only for abuse of discretion.” See In re The Home
Restaurants, Inc., 285 F.3d 111, 113 (1st Cir. 2002). “A bankruptcy court abuses its
2
The supplemental certification in support of debtors’ motion for a stay was
submitted to the District Court in September 2006, after the District Court had already
entered an order on June 14, 2006 affirming the judgment of the Bankruptcy Court.
6
discretion when its ruling is founded on an error of law or a misapplication of law to the
facts.” In re O'Brien Environmental Energy, Inc., 188 F.3d 116, 122 (3d Cir. 1999).
Bankruptcy Rule 9024, concerning “relief from judgment or order,” incorporates
Federal Rule of Civil Procedure 60.3 Rule 60(b) provides, in relevant part:
On motion and upon such terms as are just, the court may relieve a party or
a party's legal representative from a final judgment, order, or proceeding for
the following reasons: (1) mistake, inadvertence, surprise, or excusable
neglect; ... or (6) any other reason justifying relief from the operation of the
judgment. The motion shall be made within a reasonable time, and for
reasons (1), (2), and (3) not more than one year after the judgment, order, or
proceeding was entered or taken. A motion under this subdivision (b) does
not affect the finality of a judgment or suspend its operation.
Debtors sought to vacate the default judgment pursuant to Rule 60(b)(1) or, in the
alternative, pursuant to Rule 60(b)(6).
A. Rule 60(b)(1): Excusable Neglect
Debtors argued that the default judgment should be vacated under Rule 60(b)(1)
based on the “excusable neglect” of their counsel. A court ruling on a motion to set aside
a default judgment under Rule 60(b)(1), “must consider the following three factors: (1)
whether the plaintiff will be prejudiced; (2) whether the defendant has a meritorious
3
Rule 9024 provides: “Rule 60 F.R.Civ.P. applies in cases under the Code except
that (1) a motion to reopen a case under the Code or for the reconsideration of an order
allowing or disallowing a claim against the estate entered without a contest is not subject
to the one year limitation prescribed in Rule 60(b), (2) a complaint to revoke a discharge
in a chapter 7 liquidation case may be filed only within the time allowed by § 727(e) of
the Code, and (3) a complaint to revoke an order confirming a plan may be filed only
within the time allowed by § 1144, § 1230, or § 1330.”
7
defense; and (3) whether the default was the result of the defendant's culpable conduct.”
Gold Kist, 756 F.2d at 19.
The threshold question is whether the defendant has a meritorious defense.
Resolution Trust Corp. v. Forest Grove, 33 F.3d 284, 288 (3d Cir. 1994). “[A] defendant
does not have the right to have a default judgment set aside automatically upon alleging a
defense. Rather, we imposed a more stringent standard which requires that a defendant
seeking to set aside a default judgment set forth with some specificity the grounds for his
defense. The court must then evaluate that defense to determine whether it is
meritorious.” Harad v. Aetna Cas. & Sur. Co., 839 F.2d 979, 982 (3d Cir. 1988). As we
noted in United States v. $55,518.05 in U.S. Currency, 728 F.2d 192 (3d Cir. 1984), “[i]f
we allow the setting aside of a default judgment on the mere recitation of the relevant
statutory language or a phrase in the Federal Rules of Civil Procedure, then we will be
establishing a new right to automatically set aside any default judgment if counsel is
diligent enough to quote the applicable statute or rule of civil procedure.” Id. at 196. It is
sufficient that the proffered defense is not “facially unmeritorious.” Emcasco Ins. Co. v.
Sambrick, 834 F.2d 71, 74 (3d Cir. 1987).
Debtors argue that the Bankruptcy Court erred in concluding that they failed to
assert a meritorious defense to the allegations in the complaint. Debtors contend that they
responded to every “category of allegation” with four defenses. First, they asserted that
the alleged apparent inconsistencies in their deposition testimony could be explained by
the fact that “a deponent responding to questions involving $70,285,406.00 of debt,
8
numerous companies, countries, and individuals, cannot reasonably be expected to not
only remember every detail of every transaction, but more importantly, to give the answer
in precisely the same fashion at each and every deposition.” Appellants’ Br. 16. Second,
the alleged inconsistencies between their petition and their testimony could be explained
by the fact that their prior counsel spent only about one hour with debtors preparing the
bankruptcy petition. Third, debtors sought leave to file an amended answer to properly
respond to each of the allegations in the complaint. Fourth, debtors intended to file an
amended bankruptcy petition to address the discrepancies raised by plaintiffs.
We agree with the District Court that the Bankruptcy Court did not abuse its
discretion in denying debtors’ motion to vacate the default judgment pursuant to Rule
60(b)(1) because debtors failed to assert a meritorious defense as to all of the allegations
in the complaint.
Debtors failed to assert any defense to the claim in Count 7 of the Complaint that
they should be denied a discharge pursuant to § 727(a)(4)(A) of the Bankruptcy Code
because they knowingly and fraudulently made false statements concerning Mrs.
Subramanian’s employment at Ecomserver, as evidenced by the fact that several checks
were written to Mrs. Subramanian for amounts greater than her salary and one check for
“House Rent - Feb.” App. 526. When asked at his deposition why a check from
Ecomserver to Mrs. Subramanian would say that it was for “house rent” in the memo line,
Mr. Subramanian replied “I don’t know.” App. 465.
Debtors also failed to assert a defense to the claim in Count 22 of the Complaint
9
that they should be denied a discharge pursuant to § 727(a)(7) of the Bankruptcy Code
because they, during the bankruptcy case or within one year before the date of the filing
of the petition, transferred the property of an insider, Silverline Holding Corp., with the
intent to hinder, delay, or defraud the Silverline Holding creditors. Specifically, plaintiffs
allege that debtors transferred a BMW owned by Silverline Holding Corp. to Mrs.
Subramanian in exchange for very little money, even though the car was valued at
$15,000 by debtors.
In addition, debtors failed to assert a defense to the claim in Count 23 of the
Complaint that they should be denied a discharge pursuant to § 727(a)(4)(A), (a)(5), and
(a)(7) of the Bankruptcy Code because they knowingly made false statements, concealed
property of an insider and failed to adequately explain an insider’s loss of assets.
Specifically, the complaint alleges that Mr. Subramanian lied on STI’s bankruptcy
schedules by failing to include the interests of a subsidiary of STI, a company called Expo
24-7. Debtors also failed to assert a defense to the claim in Count 23[a] of the Complaint
that debtors should be denied a discharge because they knowingly made false statements
concerning Unified Herbal, and willfully and maliciously injured creditor HSBC by
making false statements concerning Unified Herbal. Specifically, the complaint alleges
that Mr. Subramanian made false statements to HSBC with regard to STI’s rights to
collect the Unified Herbal receivables.
Finally, debtors failed to assert a defense to the claim in Count 26 of the Complaint
that they should be denied a discharge because Mr. Subramanian knowingly made a false
10
statement in writing concerning the financial condition of an insider, upon which HSBC
relied, that Mr. Subramanian failed to adequately explain the loss of an insider’s assets,
and that Mr. Subramanian willfully and maliciously injured creditor HSBC. Specifically,
the complaint alleges that Mr. Subramanian signed borrowing base certifications for STI
in March and April 2002 showing gross receivables for STI of $70-71 million. Then, in a
June 12, 2002 affidavit, Mr. Subramanian stated that STI had gross receivables of $36
million as of March 31, 2002. He stated in a June 26, 2002 affidavit that STI had gross
receivables of $25 million as of June 26, 2002. Mr. Subramanian failed to explain the
discrepancies in the amounts he provided as compared to the actual amounts, or, if these
were true representations, failed to explain the drastic loss in value of the STI receivables.
We find no error in the Bankruptcy Court’s finding that debtors failed to assert a
meritorious defense to these allegations in Counts 7, 22, 23, 23[a], and 26 of the
Complaint, and therefore conclude that the Court did not abuse its discretion in denying
debtors’ motion to vacate the default judgment.
B. Rule 60(b)(6): Exceptional Circumstances
Debtors argue in the alternative that, even if they are not entitled to relief under
Rule 60(b)(1), they are entitled to relief from the judgment pursuant to Rule 60(b)(6) due
to “exceptional circumstances,” namely, the gross negligence of their counsel. Relief
under 60(b)(6) is only available where the other subsections of Rule 60(b) do not apply.
Medunic v. Lederer, 533 F.2d 891, 893 (3d Cir. 1976). Actions of counsel that constitute
“excusable neglect” are properly considered as a basis to set aside a judgment under Rule
11
60(b)(1), while actions by counsel that constitute inexcusable “gross negligence” can be
“exceptional circumstances” justifying relief under Rule 60(b)(6). See Boughner v. Sec’y
of Health, Ed. & Welfare, 572 F.2d 976, 978-79 (3d Cir. 1978) (finding inexcusable gross
negligence of attorney in failing to respond to summary judgment motion was, in light of
“the absence of neglect by the parties,” an “exceptional circumstance” justifying relief
from judgment under Rule 60(b)(6)).
Debtors argue that their attorney was grossly negligent in failing to file a timely
answer, that they were not to blame for their attorney’s gross negligence, and that they are
therefore entitled to relief from judgment. Since the record before us does not show that
the conduct of debtors’ counsel “indicates neglect so gross that it is inexcusable,” we find
no error in the conclusion that debtors failed to show “extraordinary circumstances” that
would entitle them to relief from judgment under Rule 60(b)(6). See Boughner, 572 F.2d
at 978 (finding “gross negligence” where counsel’s “egregious conduct amounted to
nothing short of leaving his clients unrepresented”). Here, debtors were well aware of the
progress of the proceedings in the District Court and of their counsel’s actions. Debtors
were sent a copy of the motion for entry of default and the motion for default judgment,
which were mailed to their residences in India and New Jersey. There is no evidence that
debtors made any inquiries to their counsel or the court following receipt of these
motions, nor have debtors argued that their counsel made any misrepresentations to them
concerning the status of their case. Accordingly, we find no error in the Bankruptcy
Court’s ruling that debtors failed to show their entitlement to relief from judgment under
12
Rule 60(b)(6).
III.
Accordingly, for the reasons set forth, we will affirm the District Court’s order
affirming the Bankruptcy Court’s order denying debtors’ motion to vacate the default
judgment entered against them.
SHAPIRO, District Judge, Concurring.
I agree with Judge Rendell’s well-reasoned opinion that appellants’ second motion
to vacate the default judgment failed to assert a meritorious defense to a number of
allegations of the adversary complaint and therefore the denial of the motion should be
affirmed.
However, I write separately to note disapproval of the prolix adversary complaint,
consisting of 199 allegations in 52 pages and numerous pages of 32 evidentiary exhibits
(A-FF) in support of the allegations.
Bankruptcy Rule 7008 provides that Fed. R. Civ. P. 8 applies in adversary
proceedings. Fed. R. Civ. P. 8(a)(2) requires, in pertinent part, that a pleading shall
contain:
“A short and plain statement of the claim showing that
the pleader is entitled to relief . . .” .
Bankruptcy Rule 7009 provides that Fed. R. Civ. P. 9 applies in adversary
proceedings. Fed. R. Civ. P. 9(b) provides that:
13
“In all averments of fraud or mistake, the circumstances
constituting fraud or mistake shall be stated with particularity.
Malice, intent, knowledge, and other condition of mind of a
person may be averred generally.”
This complaint by the Chapter 7 Trustee and a creditor bank objects to discharge
of debtors and dischargeability to the bank on account of “an ongoing pattern of evasion
and deceit.” (Compl. ¶ 6). It states not only the requisite allegations as to the parties,
jurisdiction, and venue, but also 80 paragraphs of introduction, before alleging 26 claims
for relief in 113 additional paragraphs, each of which refers to some or all of the prior
“introductory” allegations.
Stating with particularity circumstances constituting fraud does not require
unnecessarily repetitive statements. “Fact” pleading is discouraged by the Federal Rules
of Civil Procedure and a complaint, protracted by the inclusion of evidence, is an
imposition on the adverse party and the court.
If the motion to vacate the default judgment were denied solely for failure to
answer the complaint timely, affirming might be a problem because of the nature and
structure of this complaint; but the Bankruptcy Judge allowed appellants to file a renewed
motion to vacate more than four months after the default judgment was entered.
As the opinion states, that motion failed to offer meritorious defenses to a number of the
claims for relief although there was adequate time to do so. The Bankruptcy Judge (A81)
and the District Judge (AA118) both found that proof of any one of those claims would
warrant denial of discharge. Therefore, I concur in the opinion and judgment to affirm.
14
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424 N.W.2d 85 (1988)
In re the Marriage of Steven A. JOHNSON, Petitioner, Respondent,
v.
Meridee A. JOHNSON, Appellant.
No. CX-87-2247.
Court of Appeals of Minnesota.
May 31, 1988.
*86 Kent D. Laugen, Patrick J. Costello, Ltd., Red Wing, for petitioner, respondent.
Joanne Thatcher Swanson, Swanson Law Office, St. Paul, Charles J. Lee, Bentley, Christianson & Lee, Red Wing, for appellant.
Considered and decided by FORSBERG, P.J., and FOLEY and NORTON, JJ., without oral argument.
OPINION
FORSBERG, Judge.
This appeal is from a judgment dissolving the 13-year marriage of appellant Meridee A. Johnson and respondent Steven A. Johnson, and from an order denying Meridee's motion for amended findings or for a new trial. Because the trial court's findings fail to support an award of sole physical custody to Steven and because the only evidence presented favors custody being awarded to Meridee, we reverse and award custody to Meridee and remand on the issue of child support.
FACTS
The sole issue at trial was the custody of the parties' three sons, ages 13, 10, and 8. During the marriage, Meridee was a homemaker and employed occasionally by the school district as a swimming instructor and aerobics teacher. Steven is a mortician and operates a funeral home. The parties both grew up in Red Wing, Minnesota, where they lived for the last 10 years of their marriage. Many relatives also lived in Red Wing, and the children had much contact with both parties' extended families.
After the parties separated permanently in September 1985, the children lived with Meridee in the marital homestead. In May 1986, Meridee announced that she was planning to move to Arizona with the children. Her plans were postponed when Steven objected and obtained a temporary injunction against the move. Meridee then enrolled in a secretarial course at the vocational institute in Red Wing, which she completed in March 1987. By that time, she decided not to move to Arizona because it would be too difficult on the children.
Meridee eventually secured a job in West Bloomington, Minnesota and rented a three-bedroom town house in Apple Valley, which is a 45-minute drive from Red Wing. She testified that she chose to live in Apple Valley
because of the school system. I was close enough to work, but I thought Apple Valley offered a lot of the same things I had in Red Wing. It's a small community, they could walk to church, there's a playground, there's a dirt bike path, there's a pond for the dog to swim. It offers a lot of value.
At the time of trial, Meridee had already enrolled the children in school, and had arranged day care with a neighbor.
Because the marital homestead had been sold, the children moved in with Steven *87 while Meridee relocated in Apple Valley. Steven was then living with his parents. He planned to remarry in November 1987 and purchase a home in Red Wing. Although he had signed a purchase agreement by the time of trial, he had not yet obtained financing.
The trial court had ordered a custody investigation to be conducted by social worker David Olson. Olson prepared his report at a time when Meridee was still planning to move to Arizona. In a videotaped deposition which was shown at trial, Olson was informed that Meridee's plans had changed and that she now was residing in Apple Valley. Olson testified that the children did not specifically express a custodial preference, but that they perceived themselves to be living with Meridee. He further indicated that both parents were involved with the children, but that Meridee was the primary caretaker both before and after the parties' separation. Olson finally testified that it would be in the children's best interests to move to Apple Valley and stay with Meridee. He stated that this would be the least disruptive alternative because although the children would lose daily contact with their father, continuity of care would be preserved by remaining with their primary parent.
Testimony was taken from both parties, Steven's fiance, a former neighbor, and Meridee's mother. This testimony confirmed Olson's evaluation that although Steven was an involved father, Meridee had performed most of the nurturing and caretaking duties. Steven further testified that although the children had been raised as Catholics, if granted custody he would raise them in his Lutheran faith.
Following presentation of the evidence, the court interviewed the children in chambers. During the course of the interview, the eldest child stated that "if my mom decides to move to Apple Valley I think it might be better for me to live here, because of my dad." The younger two made no statements of preference.
The trial court found that each child was capable of expressing a custodial preference, but that only the eldest had stated a definite preference to live with Steven. It then found that the children were comfortable living in Red Wing and had a support group of relatives in town. The court also found that "when the children were younger, [Meridee] attended to the majority of the personal needs of the children, but, in the projected family living and working arrangements [Steven] will be more of a primary caretaker than will be [Meridee]."
The court awarded the parties joint legal custody of the children, but granted sole physical custody to Steven subject to reasonable visitation by Meridee. Steven was ordered to continue the children's upbringing in the Catholic faith. Meridee was ordered to pay $200 per month in child support.
ISSUE
Do the trial court's findings and the evidence presented support an award of custody to respondent?
ANALYSIS
Minn.Stat. § 518.17, subd. 3 (1986) provides that "[i]n determining custody, the court shall consider the best interests of the child * * *." Minn.Stat. § 518.17, subd. 1 (Supp.1988), lists the factors which a court should use in determining the best interests of a child. These criteria mandate that custody be given to the primary caretaker when both parents are suitable custodians and the child is too young to express a preference. Pikula v. Pikula, 374 N.W.2d 705, 711-12 (Minn.1985).
"Under the statutory scheme and Pikula, the trial court is required to make particularized findings of fact regarding the best interests of the child and the primary parent." Ohm v. Ohm, 393 N.W.2d 411, 413 (Minn.Ct.App.1986). A trial court is not required to address every statutory factor. Rosenfeld v. Rosenfeld, 311 Minn. 76, 83, 249 N.W.2d 168, 171-172 (1976). Rather, "[i]t is sufficient if the findings as a whole reflect that the trial court has taken the statutory factors into consideration, in so far as they are relevant, in *88 reaching its decision." Id. at 83, 249 N.W. 2d at 172.
In this case, the trial court found that the children are old enough to express a preference. While Meridee challenges this finding, we cannot conclude that it is clearly erroneous given the children's ages and the trial court's interview of the children. See Petersen v. Petersen, 394 N.W. 2d 586, 588 (Minn.Ct.App.1986), pet. for rev. denied (Minn. Dec. 17, 1986) (seven-year-old child capable of expressing custodial preference). We do conclude, however, that the trial court's remaining findings fail to support an award of custody to Steven and ignore undisputed evidence supporting an award to Meridee.
Those findings are clearly erroneous because the trial court improperly accorded too much weight to Steven's intention to stay in Red Wing. Such a consideration, while proper when central to the concepts of continuity and stability in children's lives, is inappropriate in this case where Meridee has moved only 45 minutes away in order to obtain employment and the children will be moving to a different neighborhood regardless of which parent is granted custody. Indeed, Meridee testified that she chose Apple Valley as her new home partly because of its proximity and similarities to Red Wing. We believe it was error to give custody to Steven merely because he is able to continue working and residing in Red Wing. See Kennedy v. Kennedy, 376 N.W.2d 702, 706-07 (Minn. Ct.App.1985).
The findings which are affected by this incorrect assumption include that the children had lived in Red Wing all of their lives and were comfortable living in Red Wing and attending Red Wing schools, that each of the children interacted well with both parents and siblings, and that the extended families residing in Red Wing formed a support network. See Minn.Stat. § 518.17, subd. 1(c) and (d).
Similarly affected is the trial court's finding that the eldest child expressed a definite preference to remain with his father but that the younger two expressed no preference. See Minn.Stat. § 518.17, subd. 1(b). While the oldest child stated that he might like to live with his father if his mother moved away from Red Wing, at no time did he make a statement which can be characterized as a definite preference. What he did express to the trial judge was a definite preference to remain in Red Wing, which is substantially different than indicating that he clearly and unequivocally wished to remain with his father. Even assuming that the oldest child did express a preference to live with his father, that preference is not determinative of final placement and is only one of the factors to be considered in ascertaining a child's best interests.
Most important is the trial court's failure to consider the role of Meridee as the primary parent. Although the Pikula doctrine is not controlling in this case because of the children's ages, the importance of this concept to the best interests standard cannot be ignored. See Pikula, 374 N.W. 2d at 712 ("Continuity of care with the primary caretaker is not only central and crucial to the best interest of the child, but is perhaps the single predicator of a child's well-being"). Particularly, the trial court failed to mention Olson's recommendation that the children live with Meridee in Apple Valley because of the desirability of maintaining continuity. See Minn.Stat. § 518.17, subd. 1(e). The court also failed to acknowledge in Meridee's favor that she had already established a proposed custodial home while Steven's future residential plans were relatively uncertain as of the time of trial. See Minn.Stat. § 518.17, subd. 1(f). Thus, if the court had considered Meridee's role as the primary parent, it would have had to make a number of findings favoring her as the custodial parent.
Finally, although the court found that the parties had equal capacity to give the children love, affection and guidance, it failed to realistically consider the parties' ability to continue raising the children as Catholics. See Minn.Stat. § 518.17, subd. 1(h). The court did order Steven to raise the children in the Catholic faith, even after *89 he insisted at trial that if granted custody he would raise the children in his own Lutheran faith. The court again ignores Meridee's central role in the children's upbringing. Had this factor been properly considered, it too would have favored an award of custody to Meridee.
In conclusion, the trial court's findings not only fail to favor an award of custody to Steven, but the only evidence presented compels that physical custody of the children be awarded to Meridee. We accordingly reverse the decision of the trial court and remand on the issue of child support.
DECISION
Reversed and remanded.
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779 N.W.2d 254 (2010)
PEOPLE of the State of Michigan, Plaintiff-Appellee,
v.
Clifford GOODMAN, Defendant-Appellant.
Docket Nos. 139076. COA No. 290120.
Supreme Court of Michigan.
March 24, 2010.
Order
By order of December 21, 2009, the defendant's former appellate counsel was directed to file a supplemental brief. On order of the Court, the brief having been received, the application for leave to appeal the May 12, 2009 order of the Court *255 of Appeals is again considered, and it is DENIED. The defendant's attorney acknowledges that the delay in filing the defendant's May 23, 2005 application for leave to appeal in COA No. 262929 was due to the attorney's erroneous calculation of the appellate filing deadline, and he admits his sole responsibility for the error. Accordingly, the defendant had been deprived of his direct appeal as a result of constitutionally ineffective assistance of counsel. See Roe v. Flores-Ortega, 528 U.S. 470, 477, 120 S.Ct. 1029, 145 L.Ed.2d 985 (2000); Peguero v. United States, 526 U.S. 23, 28, 119 S.Ct. 961, 143 L.Ed.2d 18 (1999). For purposes of MCR 6.502(G)(1), the Court notes that the defendant's January 30, 2009 application for leave to appeal was properly denied under the standard applicable to direct appeals.
Costs are imposed against attorney Joseph L. Stewart, only, in the amount of $250, to be paid to the Clerk of this Court.
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FILED
United States Court of Appeals
Tenth Circuit
October 28, 2009
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
FOR THE TENTH CIRCUIT
R. WAYNE JOHNSON,
Plaintiff-Appellant,
v. No. 09-7054
(D.C. No. 6:08-CV-00430-RAW)
DEPARTMENT OF VETERANS (E.D. Okla.)
AFFAIRS,
Defendant-Appellee.
ORDER AND JUDGMENT *
Before TACHA, ANDERSON, and EBEL, Circuit Judges.
Plaintiff R. Wayne Johnson appeals the district court’s dismissal of his
action based on lack of subject matter jurisdiction and res judicata. Exercising
jurisdiction under 28 U.S.C. § 1291, we affirm.
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value
consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Background
Mr. Johnson, a Marine veteran, filed a pro se complaint alleging that
Congress violated separation-of-powers principles when it enacted legislation that
vests exclusive jurisdiction over veterans benefits decisions in two
executive-branch bodies—the regional offices of the Department of Veterans
Affairs (VA) and the Board of Veterans’ Appeals (BVA). 1 He also argued that
38 C.F.R. § 3.665, which limits benefits for certain convicted felons, cannot be
applied to him constitutionally because it was promulgated after his felony
offense, which occurred in 1977. For relief, he asked the district court to rule that
an adverse benefits decision based on the regulation violated not only
separation-of-powers principles but the takings and due-process clauses of the
Fifth Amendment. And he requested the district court to order defendant to “pay
him his 30% illegally taken in 1983- to date- via VOID statutes—and issue him
3[0]% checks monthly, with interest thereon.” R. at 11.
Noting that Mr. Johnson could have raised his constitutional challenges in
an appeal from the jurisdictional dismissal of a previous action challenging the
1
We note that two of the statutes Mr. Johnson identified as the object of his
challenge, 38 U.S.C. §§ 5109A and 7111, concern the standard of review for
decisions rendered by the Secretary of Veterans Benefits and the BVA, not the
authority of the regional VA offices or the BVA over benefits decisions. The
relevant jurisdictional statutes are discussed below. Further, the third statute he
named, 38 U.S.C. § 5331, is nonexistent; it appears that, as in a prior action, he
may have been challenging 38 U.S.C. § 5313, “Limitation on payment of
compensation and dependency and indemnity compensation to persons
incarcerated for conviction of a felony.”
-2-
adverse benefits decision, the district court issued a show-cause order regarding
res judicata. The court also instructed Mr. Johnson to address the court’s lack of
subject matter jurisdiction under 38 U.S.C. § 7252(a), which provides that “[t]he
Court of Appeals for Veterans Claims shall have exclusive jurisdiction to review
decisions of the [BVA].”
Mr. Johnson and defendant Department of Veterans Affairs (VA) filed
responses to the show-cause order. After considering the responses, the district
court concluded that it lacked subject matter jurisdiction and that the claims were
barred on res judicata grounds. Specifically, the court looked to the substance of
the claims, particularly the requested relief, and found that the claims were not a
facial constitutional challenge to the statutes and regulation but an attack on a
benefits decision cloaked in constitutional terms. The district court explained that
under 38 U.S.C. § 7104, Mr. Johnson’s only option was to appeal the initial
benefits decision of the regional VA office to the BVA, and that under 38 U.S.C.
§§ 511 and 7252(a), BVA decisions are not subject to review in the district courts
but only in the United States Court of Appeals for Veterans Claims (CAVC), an
Article I court, whose decision is only appealable to the United States Court of
Appeals for the Federal Circuit under 38 U.S.C. § 7292(c). 2 This exclusive
2
Section 511 vests authority over benefits decisions in the Secretary of
Veterans Benefits and provides for limited review under, inter alia, chapter 72 of
Title 38, which includes §§ 7252 and 7292. Further review in the United States
Supreme Court upon certiorari is available under § 7292(c).
-3-
jurisdictional pathway was created by Congress in the Veterans’ Judicial Review
Act, Pub. L. No. 100-687, 102 Stat. 4105 (1988) (VJRA). The district court also
concluded that Mr. Johnson’s constitutional claims were barred by res judicata
because they could have been raised in his prior suit concerning the adverse
benefits decision. This pro se appeal followed. Our review is de novo. See
Youren v. Tintic Sch. Dist., 343 F.3d 1296, 1305 (10th Cir. 2003) (subject matter
jurisdiction); MACTEC, Inc. v. Gorelick, 427 F.3d 821, 831 (10th Cir. 2005) (res
judicata).
Discussion
On appeal, Mr. Johnson first takes issue with the district court’s
characterization of his claims as challenges to the adverse benefits decision. He
contends that instead, he challenges the authority of Congress to pass the
jurisdictional statutes confining review to the regional VA offices and the BVA as
a violation of the separation of powers. Even giving Mr. Johnson’s pro se filings
a liberal reading, see Trackwell v. U.S. Gov’t, 472 F.3d 1242, 1243 (10th Cir.
2007), we agree with the district court’s characterization of his claims.
To determine the nature of a claim, courts examine the substance of a
plaintiff’s allegations, not merely the labels applied to them. Weaver v. United
States, 98 F.3d 518, 520 (10th Cir. 1996). As noted above, Mr. Johnson asked the
district court to order defendants to reinstate the full amount of his benefits
without reduction under 38 C.F.R. § 3.665. And in his appellate brief, framed as
-4-
a “threshold issue,” he argues that the year of his felony offense, 1977, is a “key”
fact because, he claims, crimes committed before 1980 do not fall within the
benefits-limiting provisions of 38 C.F.R. § 3.665. 3 Aplt. Br. at 4. Mr. Johnson’s
emphasis on this “threshold issue” reinforces the fact that his claims stem from
the VA’s alleged error in reducing his benefits under the regulation. Thus,
despite being couched as constitutional challenges to statutes and a regulation, the
claims function only as a means to contest the adverse benefits decision. As the
district court properly explained, constitutional challenges to a benefits decision
are subject to review only through the jurisdictional scheme established in the
VJRA described above. See Beamon v. Brown, 125 F.3d 965, 970-72 (6th Cir.
1997); see also Hall v. U.S. Dep’t of Veterans’ [sic] Affairs, 85 F.3d 532, 534-35
(11th Cir. 1996) (constitutional challenge to benefit reduction under 38 C.F.R.
§ 3.665); cf. Burkins v. United States, 112 F.3d 444, 447 (10th Cir. 1997)
(explaining statutory sequence of appellate review in BVA, CAVC, and Federal
Circuit). While the BVA lacks power to determine constitutional questions
3
Mr. Johnson apparently bases his argument on § 3.665(c)(1), which
mandates a reduction in benefits for “person[s] serving a period of incarceration
for a conviction of a felony committed after October 7, 1980.” We note, without
expressing an opinion on its applicability here, that the regulation also applies to
“a veteran who, on October 7, 1980, was incarcerated . . . for a felony committed
before that date, and who remains so incarcerated for a conviction of a felony as
of December 27, 2001.” Id. § 3.665(c)(3). Mr. Johnson’s filings suggest he
committed a felony before October 7, 1980, and that he was incarcerated for it,
but provide no indication that he did not remain incarcerated for that felony on
the operative dates in § 3.665(c)(3).
-5-
regarding veterans benefits, Johnson v. Robison, 415 U.S. 361, 368 (1974),
Congress has granted such power to the CAVC and the Federal Circuit, see
38 U.S.C. § 7261(a)(1) (authorizing CAVC to “decide all relevant questions of
law [and] interpret constitutional, statutory, and regulatory provisions”); id.
§ 7292(c)-(d) (vesting exclusive jurisdiction in Federal Circuit to review
challenges to validity and constitutionality of statutes and regulations brought in
appeal from CAVC decision).
Mr. Johnson appears to be laboring under a misconception that federal
district courts have unlimited jurisdiction and that Congress may not erode it by
legislation. The law is to the contrary: “Federal courts are courts of limited
jurisdiction; they are empowered to hear only those cases authorized and defined
in the Constitution which have been entrusted to them under a jurisdictional grant
by Congress.” Henry v. Office of Thrift Supervision, 43 F.3d 507, 511 (10th Cir.
1994). In the case of veterans benefits decisions, Congress has established the
exclusive jurisdictional scheme described above, which authorizes review only in
the BVA, the CAVC, the Federal Circuit, and the United States Supreme Court. 4
Furthermore, Mr. Johnson mistakenly places heavy reliance on the following
4
In Hall, the Eleventh Circuit expressed concern whether district courts, in
light of the passage of the VJRA in 1988, continue to have jurisdiction over facial
challenges to the constitutionality of statutes affecting veterans benefits under
Johnson v. Robison, 415 U.S. 361 (1974). See Hall, 85 F.3d at 534-35. Because
we conclude that Mr. Johnson’s claims do not present facial challenges to any
statutes governing veterans benefits, we need not resolve whether Johnson v.
Robison remains good law.
-6-
principle: “Congress cannot vest review of the decisions of Article III courts in
officials of the Executive Branch.” Miller v. French, 530 U.S. 327, 343 (2000)
(discussing Hayburn’s Case, 2 U.S. (2 Dall) 408 (1792)). This principle has no
application here because the VJRA does not place the judgment of any Article III
court under executive-branch review.
Having concluded that the district court lacked jurisdiction under the
VJRA, we need not address the other basis of the court’s disposition, res judicata.
Conclusion
The judgment of the district court is AFFIRMED.
Entered for the Court
David M. Ebel
Circuit Judge
-7-
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FILED
NOT FOR PUBLICATION NOV 16 2012
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
TOMAS PELICO-HERNANDEZ, No. 10-71080
Petitioner, Agency No. A088-915-388
v.
MEMORANDUM *
ERIC H. HOLDER, Jr., Attorney General,
Respondent.
On Petition for Review of an Order of the
Board of Immigration Appeals
Submitted November 13, 2012 **
Before: CANBY, TROTT, and W. FLETCHER, Circuit Judges.
Tomas Pelico-Hernandez, a native and citizen of Guatemala, petitions for
review of a Board of Immigration Appeals’ (“BIA”) order dismissing his appeal
from an immigration judge’s decision denying his application for asylum,
withholding of removal, and protection under the Convention Against Torture
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
(“CAT”). We have jurisdiction under 8 U.S.C. § 1252. We review for substantial
evidence the agency’s factual findings and we review de novo the agency’s legal
determinations. Wakkary v. Holder, 558 F.3d 1049, 1056 (9th Cir. 2009). We
deny the petition for review.
The record does not compel the conclusion that Pelico-Hernandez
established extraordinary circumstances to excuse his untimely application for
asylum. See 8 C.F.R. § 1208.4(a)(5). Accordingly, we deny the petition as to
Pelico-Hernandez’s asylum claim.
Substantial evidence supports the BIA’s finding that Pelico-Hernandez
failed to establish the guerillas’ actions in Guatemala were motivated by either his
actual or imputed political opinion, or by his indigenous ethnicity. See INS v.
Elias-Zacarias, 502 U.S. 478, 482-84 (1992); Parussimova v. Mukasey, 555 F.3d
734, 740 (9th Cir. 2009) (“[t]he Real ID Act requires that a protected ground
represent ‘one central reason’ for an asylum applicant’s persecution”). With
respect to his fear of future harm, the BIA found that Pelico-Hernandez failed to
establish criminal gangs would persecute him on account of a protected ground.
Pelico-Hernandez does not challenge this finding. See Martinez-Serrano v. INS, 94
F.3d 1256, 1259-60 (9th Cir. 1996) (issues not supported by argument are deemed
waived). Accordingly, Pelico-Hernandez’s withholding claim fails.
2 10-71080
Finally, substantial evidence supports the BIA’s denial of CAT protection
because Pelico-Hernandez failed to demonstrate it is more likely than not he would
be tortured by or with the consent or acquiesce of a public official in Guatemala.
See Soriano v. Holder, 569 F.3d 1162, 1167 (9th Cir. 2009).
PETITION FOR REVIEW DENIED.
3 10-71080
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534 F.2d 331
Armstrongv.Trans World Airlines, Inc.
No. 75-2139
United States Court of Appeals, Seventh Circuit
4/26/76
1
N.D.Ind.
AFFIRMED
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226 S.C. 108 (1954)
83 S.E.2d 713
THE SOUTH CAROLINA MENTAL HEALTH COMMISSION
v.
RUFUS A. MAY.
16915
Supreme Court of South Carolina.
September 30, 1954.
*109 Messrs. T.C. Callison, Attorney General, and James S. Verner, Assistant Attorney General, of Columbia, for Appellant.
Messrs. Mays, Featherstone & Bradford, of Greenwood, for Respondent.
*110 Messrs. T.C. Callison, Attorney General, and James S. Verner, Assistant Attorney General, of Columbia, for Appellant, in reply.
September 30, 1954.
TAYLOR, Justice.
J. Hiram May being mentally ill was admitted to the South Carolina State Hospital on November 14, 1911, and remained there as a patient until his death on July 15, 1952. Rufus A. May was appointed administrator of his estate and the South Carolina Mental Health Commission duly filed a claim amounting to $13,279.58 against such estate for the care and treatment furnished the deceased while a patient in the State Hospital, said claim being for treatment and care from May 2, 1915, he having been a patient continuously during this time. A verified claim for this amount was filed with the administrator and rejected. Defendant in his answer denied liability for any charges except those accruing after the approval of the Mental Health Act on March 7, 1952, 48 St. at Large, p. 2042, and interposed the defenses of waiver and the Statute of Limitations. Thereafter motion was made by Defendant for judgment on the pleadings. Judge Bellinger, then presiding, overruled the defense of waiver and the contention that the new Mental Health Act repealed all prior acts, upholding however, the plea of limitations and both parties now appeal, Plaintiff contending that there was error in upholding the Statute of Limitations and Defendant contending, first, that it was *111 error to hold that the Mental Health Act of 1952 did not have the effect of rendering invalid all claims or charges which accrued prior to the date of the approval of the Act, March 7, 1952; second, that it was error not to hold that the Board of Regents of the Hospital had waived their rights to assess charges against the Defendant's estate.
The 1915 Act cut off all charges and claims prior to the date of that Act. It clearly sets forth the duties of executors or administrators as to ascertaining from the State Board of Charities whether or not the deceased person was supported while an inmate and if not it provided for the filing of a claim for such amount as might be due. Section 23, Act 100 of 1915, 29 St. at Large, pp. 132, 138, reads as follows:
"Upon the death of a person who is an inmate, or has been an inmate since the passage of this Act, of said institution, and who is possessed of property, it shall be the duty of the executor or administrator to ascertain from the State Board of Charities whether the deceased person was supported while an inmate, and if not, the Board may present a claim for support, or for the balance due in case less than the minimum rate had been paid. Such claim shall be allowed and paid as other lawful claims against the estate: Provided, That the Board may waive the presentation of any claim when, in their judgment, an otherwise dependent person would be directly benefited by the estate. It shall be lawful for the Board to accept from a guardian, committee or trustee of an inmate a contract agreeing to pay to the State from the property of his ward before or after death of his ward a fixed annual amount for the support of such ward while an inmate, and with interest at four per cent. per annum. A copy of such contract shall be filed in the Probate Court of the proper county, and duly entered as a part of the records concerning such ward."
Subsequent acts relating to this subject, however, reveal there is a continuity of provisions that such claims should be kept alive and not cut off as provided in the 1915 Act. *112 The foregoing as carried in the 1952 Code appears as Section 975, Title 32 and reads as follows:
"Upon the death of a person who is an inmate, or has since February 20, 1915 been an inmate, of the State Hospital and who is possessed of property, the executor or administrator shall ascertain from the Board of Regents of the Hospital whether the deceased person was supported while an inmate and, if not, the Board may present a claim for support or for the balance due in case less the minimum rate had been paid. Such claim shall be allowed and paid as other lawful claims against the estate. But the Board may waive the presentation of any claim when, in its judgment, an otherwise dependent person would be directly benefited by the estate."
Act No. 836 of the 1952 Acts provides in Section 16, Article 4, the following:
"Upon the death of a person who is or has been a patient or trainee of a state mental health facility the executor or administrator and the judge of probate shall notify the commission in writing. If the decedent was cared for at the expense of the state during his confinement, the commission shall present a claim for the amount due and this claim shall be allowed and paid as other lawful claims against the estate. The commission may waive the presentation of any claim where, in its opinion, an otherwise dependent person would be directly benefited by waiver."
In an Act approved by the Governor, March 23, 1954, 48 St. at Large, pp. 1732, 1741. Section 20, we find the following:
"There is hereby created a general lien upon the real and personal property of any person who is receiving or who has received care or treatment in a state mental health facility, to the extent of the total expense to the State in providing the care, training or treatment. The commission shall send to the clerk of court and to the judge of probate of the county of the patient's or trainee's known or last known residence a statement showing the name of the patient or *113 trainee and the date upon which the lien attaches, which shall be filed in the offices of the clerk of court and the judge of probate in each county in which the patient or trainee then owns or thereafter acquires property, real or personal, and no charge shall be made for this filing. From the time of filing in either office, the statement shall constitute due notice of the lien against all property then owned or thereafter acquired by the patient or trainee. No action to enforce the lien may be brought more than one year after the patient's or trainee's death. This lien shall in no way affect the right of homestead."
Section 24, of the same Act, reads:
"Provided, however, that limitations against claims for charges for care, training, maintenance or treatment heretofore or hereafter received by any patient or trainee from the South Carolina State Hospital, any State Training School, or any State Mental Health Facility, shall commence to run against the State, its boards, commissions or agencies charged with the operation of the above institutions only from the last date upon which care, training, maintenance or treatment was furnished to any such patient or trainee."
The foregoing Acts by using such expressions as "Upon the death of a person who is an inmate, or has since February 20, 1915 been an inmate" and "Upon the death of a person who is or has been a patient or trainee of a state mental health facility" together with an expressed provision that limitations against such claims or charges shall commence to run against the State, its Boards or Commissions or agencies charged with the operation of such institutions only from the last date of such care, training, maintenance or treatment denotes a continuity of thought running throughout such legislation to the idea that such indigent mentally ill are to receive such care upon the condition that they pay for it when and if able. The Act approved by the Governor March 23, 1954, heretofore referred to, came after the entering of judgment in this case *114 on January 16, 1954, and is referred to only for the purpose of showing the intent of the Legislature running throughout its acts on this subject. Such legislation carries with it the thought of the responsibility of the State to care for its indigent insane with a view to improvement or cure, if possible, and that such treatment be paid for in whole or in part, if possible, by the patient or his or her estate. Conditions of life subject to change as they are, it is hardly reasonable to say that because one is admitted to such institutions as an indigent patient and later becomes one of substance by inheritance or otherwise he or she or the estate, as in this instance, should not be required to compensate the State for the costs of his or her care and treatment. The maintenance and care of one mentally ill is not an unconditional charity but rather based upon the expectation of future reimbursement if the circumstances should thereafter permit.
Prior to the passage of Act 836 of the 1952 Acts, the control of the Hospital was vested in the Board of Regents. Section 2, Article 1, of the 1952 Act, provides for the appointment of the Board of Regents to be known as the South Carolina Mental Health Commission. Section 3 of Article 1 vests this new Commission with all title to the property, real and personal, which theretofore was vested in the old Board of Regents; all contractual rights and duties of the Board of Regents were devolved upon the Commission. Section 9 of that Article continued in existence the South Carolina State Hospital. Section 16, Article 4, provides that upon the death of one who is or has been a patient in a mental health facility, the Commission shall present a claim against the estate. All of which lends strength to the position that it was the intent of the General Assembly that the liability of patients and their estates should continue without interruption, that the 1952 Act did not wipe out all prior claims but that the new Regents or Commissioners absorbed the powers and duties of the old Board of Regents.
*115 The Indiana Supreme Court in a situation analogous to the one at bar stated in State ex rel. Milligan v. Ritter's Estate, 221 Ind. 456, 48 N.E. (2d) 993, 998:
"It is true that there is an express repeal of the Act of 1917, but it is equally true that there is no departure from the policy of reimbursement for the care of patients, and no indication of an intention to abolish the state's right of reimbursement. The former statute is substantially reenacted. * * * `It does not require an express saving clause to prevent the destruction of rights existing under former statutes. If the intention to preserve and continue such right is clearly apparent, it will be carried into effect.' * * * "`When the Legislature reenacted the same provision, and provided for its taking effect at the same time as the repeal of the old statute, it is clear that they intended to continue such provision in force without interruption."'"
See also Duke Power Co. v. South Carolina Tax Commission, 4 Cir., 81 F. (2d) 513, 516, certiorari denied 298 U.S. 669, 56 S.Ct. 834, 80 L.Ed. 1392, where it stated:
"The general rule, of course, is that the repeal of a statute has the effect of blotting it out as completely as if it had never existed and of putting an end to all proceedings under it. 59 C.J. 1189, 1190, and cases there cited. But it is equally well settled that a repealing act ought not be construed, if any other construction is possible, as intended to affect rights which have vested under the act repealed or as requiring the abatement of actions instituted for the enforcement of such rights."
Also, see State Hospital at Raleigh v. Security Nat. Bank, 207 N.C. 697, 178 S.E. 487.
Defendant-Respondent relies strongly upon Columbia Ry. Gas. & Electric Co. v. Carter, 127 S.C. 473, 121 S.E. 377, and other cases construing tax statutes: but these cases (a) did not involve repeal and simultaneous reenactment of another statute on the same subject; (b) cases construing tax statutes, in case of doubt, must resolve *116 the doubt in favor of the taxpayer. In the instant case there was a simultaneous repeal and reenactment and the rule of construction in tax cases is not applicable but the rule that a repealing act should not be considered as putting an end to all proceedings under the prior act if any other construction is possible as to such rights as have vested under the act repealed should be applied. See Duke Power Co. v. S.C. Tax Commission, 4 Cir., 81 F. (2d) 513; State v. Patterson, 220 S.C. 269, 66 S.E. (2d) 875; 50 Am. Jur., "Statutes," Sec. 533; State v. Williams, 117 N.C. 753, 23 S.E. 250; State v. Ritter's Estate, supra; also, 82 C.J.S., Statutes, § 295, to the effect that: "The repeal and simultaneous reenactment of substantially the same statutory provision are to be construed, not as an implied repeal of the original statute, but as an affirmance and continuation thereof." And 82 C.J.S., Statutes, § 288, wherein it is stated: "The courts will not adjudge a statute to have been repealed by implication unless a legislative intent to repeal or supersede the statute plainly and clearly appears. The implication must be clear, necessary, irresistible, and free from reasonable doubt." Such test was not met in the instant case and we are of the opinion that the 1952 Act did not have the effect of rendering invalid all claims or charges which accrued prior to the approval of the Act, March 7, 1952.
Since the intent of the Legislature governs in construction of statutes, much of what has been heretofore said is also apropos to the question of whether or not the six year Statute of Limitations as set forth in Title 10, Section 143, Code of Laws for South Carolina for 1952, is applicable in the instant case so as to bar the State from recovering such amounts as were due beyond the six year period. Section 16, Art. 4, of the Act of March 7, 1952, under which this action was brought states: "The commission shall present a claim for the amount due and this claim shall be allowed and paid as other lawful claims against the estate." The Order appealed from held, in effect, that the words "this claim shall be allowed and paid as other lawful *117 claims against the estate" were to be construed literally and controlled since other lawful claims against the estate were barred beyond the six year period. We are of the opinion, however, that such directive related to procedural matters such as the distribution of assets, etc., and was not intended to make the Statute of Limitations applicable to the facts of the case at bar. The first rule of construction in the interpretation of statutes is that of intention on the part of the Legislature, State v. Patterson, supra. The Legislature has repeatedly dealt with problems of this nature and it is explicit that it was their intention that the patient when able should reimburse the State for such care and maintenance. Executors or administrators of the estates of such patients were required to ascertain from the proper authorities whether or not the deceased was supported while an inmate and the claim for such support or the balance due in case less than the minimum rate had been paid was required to be paid and allowed as other claims against the estate.
Limitations statutes are statutes of grace permitting the avoidance and evasion of a liability when pleaded and such a plea becomes an affirmative defense; see Scovill v. Johnson, 190 S.C. 475, 3 S.E. (2d) 543. Generally the limitations laws do not apply unless made expressly applicable. See Limitations of Actions, 34 Am. Jur., Section 48. It is, of course, true that limitations in proper cases will run against the State but such provisions must be strictly construed in favor of the State, 53 C.J.S., Limitations of Actions, § 15, p. 943. Keeping in mind that the Legislature did not choose to make the six year statute expressly applicable and the construction of such statutes must be construed strictly in favor of the State, we are of the opinion that it was the intention of the Legislature that such limitations should not apply. It would be a strained construction to say that the Legislature intended to require the executor or administrator of the estate of a former inmate and the Probate Judge to notify the Commission and the Commission to then file a claim for the amount due upon *118 the death of one who is or has been a patient and then limit such liability to the six years as provided in what is known as our Statute of Limitations, Sec. 10-143, Art. 3 of the 1952 Code of Laws for South Carolina.
The very nature of the subject presents unusual problems for the consideration of both the Legislature and the Courts as well as those who are the beneficiaries of the State's facilities in such matters. This Court has not heretofore been called upon to pass upon a question of this precise nature but the case of Aiken v. Welch, 204 S.C. 180, 28 S.E. (2d) 806, holds that the Statute of Limitations commenced to run from the date of death of one who promised to pay another a sum of money when he was able to do so (when he sold his house) or in case of death his estate would pay it. The Opinion of this Court in State ex rel. State Highway Department v. Piedmont & Northern Railway Co., 186 S.C. 49, 194 S.E. 631, relied on so strongly by Respondent in our opinion is not controlling in matters of this nature but the language of the statute requiring a claim be filed upon the death of a person who is or has been a patient for the amount due was intended by the Legislature to cover the period during which such care and treatment was received.
It is contended that the Board of Regents of the South Carolina State Hospital acting within their discretion waived the collection of charges against the Defendant's intestate for his care and treatment. The Order appealed from held that no facts were alleged tending to show any acts on the part of the Plaintiff, its officers or agents from which waiver might reasonably be inferred and we find no error therein.
For the foregoing reasons, we are of the opinion that the Order appealed from should be affirmed in so far as it holds that the 1952 Mental Health Act does not have the effect of rendering invalid all claims or charges which accrued prior to the date of its approval, March 7, 1952, and that there was no waiver on the part of the Board of Regents *119 of the Hospital; but reversed in so far as it holds that the Statute of Limitations is applicable to the claim for care and services rendered the decedent.
Affirmed in part; reversed in part.
STUKES, OXNER and LEGGE, JJ., and J. FRANK EATMON, Acting Associate Justice, concur.
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799 F.Supp. 120 (1992)
ST. PAUL FIRE & MARINE INSURANCE COMPANY (SURETY FOR CARREON, INC.), Plaintiff,
v.
The UNITED STATES, Defendant.
Court No. 88-02-00094.
United States Court of International Trade.
August 3, 1992.
*121 Glad & Ferguson, T. Randolph Ferguson and John M. Daley, San Francisco, Cal., for plaintiff.
Stuart M. Gerson, Asst. Atty. Gen., Joseph I. Liebman, Attorney in Charge, Intern. Trade Field Office, Commercial Litigation Branch, Washington, D.C., Pamela G. Larrabee, Governors Island, N.Y., for defendant.
MEMORANDUM OPINION AND ORDER
GOLDBERG, Judge:
Plaintiff St. Paul Fire & Marine Insurance Company ("St. Paul") brought this *122 action pursuant to 28 U.S.C. § 1581(a) (1988) challenging the denial by the United States Customs Service ("Customs") of its protest regarding the liquidation of forty-one entries of merchandise. St. Paul contends that the merchandise was liquidated by operation of law at the rate of duty claimed by the importer at the time of entry because Customs improperly extended the time for liquidation of the entries. Defendant asserts that it properly extended the time for liquidation of the forty-one entries, and that duties were appropriately assessed. The case is before the court on cross motions for summary judgment.
Background
Plaintiff is the surety for Carreon Management Services, Inc. ("Carreon"), which made forty-one entries of merchandise at El Paso, Texas between July 14, 1981 and August 24, 1982. Carreon claimed duty-free treatment for the merchandise under Item 807.00, of the Tariff Schedules of the United States ("TSUS").
Item 807.00 provides duty-free treatment for imports of articles assembled abroad with components produced in the United States. Classification of merchandise under Item 807.00 is conditioned upon the importer's submission to Customs of detailed documentation including invoices, certificates of origin, foreign assemblers' declarations, and actual cost data.
Carreon failed to file, at the time of entry, or at any time thereafter, actual cost data and certificates of origin required by Customs to support its claim for duty-free treatment under Item 807.00, TSUS.
Customs extended the time for liquidation under 19 U.S.C. § 1504(b)(1) (1988) for the forty-one entries[1] because it was awaiting receipt of the required information from Carreon. Customs issued three one-year extensions for merchandise entered before February 1983, and two one-year extensions for merchandise entered thereafter.[2]
On April 5, 1984, and again on October 10, 1984, Customs issued a Request for Information (Form CF 28) to Carreon seeking the required missing data. Carreon failed to respond to both requests.
On January 4, 1985, Customs liquidated the forty-one entries. Customs denied Carreon's claim for duty-free treatment under Item 807.00, TSUS, and assessed duties. On March 3, 1985, Customs issued a demand for payment to St. Paul for the duties. At that time, St. Paul discovered that Carreon had discontinued business and would not pay the duties due Customs. St. Paul filed a protest on May 8, 1985 contesting the validity of the liquidations and the extensions for the time to liquidate. On August 20, 1987, Customs denied the protest, and St. Paul paid Customs $273,994.44, the duties due on Carreon's entries. St. Paul filed a summons with the court on February 10, 1988, and a complaint on March 28, 1988. Both St. Paul and the government move for summary judgment.
Discussion
1. Standard of Review
Decisions by Customs to extend the period in which to liquidate entries are subject to judicial review. International Cargo & Surety Ins. Co. v. United States, 15 CIT ___, 779 F.Supp. 174, 176 (1991); Detroit Zoological Soc'y v. United States, 10 CIT 133, 137-138, 630 F.Supp. 1350, 1356 (1986); Pagoda Trading Co. v. United States, 9 CIT 407, 411, 617 F.Supp. 96, 99-100 (1985), aff'd, 5 Fed.Cir. (T) 10, 804 F.2d 665 (1986); and Bar Bea Truck Leasing Co. v. United States, 4 CIT 138, 140 (1982) (quoting People v. United States Dep't of Agric., 427 F.2d 561, 567 (D.C.Cir. 1970)). These decisions will be upheld if they are proper under the statute, and are not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. International Cargo, 15 CIT at ___, 779 F.Supp. at 176; Detroit Zoological, 10 CIT at 137-138, 630 F.Supp. at 1356.
*123 Summary judgment is appropriate only where the pleadings and other documents on file demonstrate that there is "no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." USCIT R. 56(d). The party opposing summary judgment may not rest on its pleadings, but must respond with specific facts showing the existence of a genuine issue for trial. See International Cargo, 15 CIT at ___, 779 F.Supp. at 176; Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986) (citing Fed.R.Civ.P. 56(e)); United States v. Pent-R-Books, Inc., 538 F.2d 519 (2nd Cir.1976), cert. den., 430 U.S. 906, 97 S.Ct. 1175, 51 L.Ed.2d 582 (1977); and Stevens v. Barnard, 512 F.2d 876 (10th Cir.1975). In ruling on cross-motions for summary judgment, if the court determines that no genuine issues of material fact exist, the court may properly grant summary judgment in favor of the movant who is "entitled to judgment as a matter of law." Texas Apparel Co. v. United States, 12 CIT 1002, 1004, 698 F.Supp. 932, 934 (1988), aff'd per curium, ___ Fed.Cir. (T) ___, 883 F.2d 66 (1989), cert. den., 493 U.S. 1024, 110 S.Ct. 728, 107 L.Ed.2d 747 (1990) (quoting USCIT R. 56(d)).
2. Statutory Limitations on Liquidation
Subsection (a) of 19 U.S.C. § 1504 provides that:
Except as provided in subsection (b) of this section, an entry of merchandise not liquidated within one year from:
(1) the date of entry of such merchandise;
. . . . .
shall be deemed liquidated at the rate of duty, value, quantity, and amount of duties asserted at the time of entry by the importer of record.
19 U.S.C. § 1504(a) (1988).
Subsection (b) of § 1504 permits Customs to extend the period in which to liquidate an entry if:
(1) information needed for the proper appraisement or classification of the merchandise is not available to the appropriate customs officer;
(2) liquidation is suspended as required by statute or court order; or
(3) the importer of record requests such extension and shows good cause therefor.
19 U.S.C. § 1504(b)(1) (1988).
Customs may only grant three extensions and no extension may exceed one year. 19 C.F.R. § 159.12(a) & (e) (1991).[3] Therefore, the period for liquidation of merchandise cannot exceed four years from the date of entry.
Prior to 1978, "Customs could delay liquidation as long as it pleased, with or without giving notice." International Cargo, 15 CIT at ___, 779 F.Supp. at 177; see also S.Rep. No. 95-778, 95th Cong., 2d Sess. 32 (1978), reprinted in, 1978 U.S.C.C.A.N. 2211, 2242. Congress enacted Section 1504 in 1978 to "increase certainty in the customs process for importers, surety companies, and other third parties with a potential liability relating to a customs transaction." S.Rep. No. 95-778, 95th Cong., 2d Sess. 32 (1978), reprinted in, 1978 U.S.C.C.A.N. at 2243. Congress specifically noted that by the passage of Section 1504, "[s]ureties would ... be better protected against losses resulting from the dissolution of their principals in instances where there has been undue delay in liquidating *124 entries." S.Rep. No. 95-778, 95th Cong., 2d Sess. 32 (1978), reprinted in, 1978 U.S.C.C.A.N. at 2243.
3. Extension of Liquidation
Plaintiff claims that Customs' extensions of the time for liquidation were unjustified on two grounds. First, St. Paul argues that Customs had no valid basis to extend liquidation for insufficient information under § 1504(b)(1) beyond the second anniversary date of each entry. Specifically, plaintiff maintains that Customs had all the information it needed to properly classify the merchandise, i.e., to deny the claimed Item 807.00 classification, by the second anniversary date of each entry. Second, St. Paul contends that the total length of time of the extensions for each entry, which ranged from thirteen to twenty-nine months, was unreasonable under the circumstances.[4] Memorandum of Points and Authorities in Support of Plaintiff's Motion for Summary Judgment on the Complaint or, in the Alternative, for Summary Adjudication as to Ten Entries at 1-2.
Defendant responds that Customs made a determination that Item 807.00, TSUS, was the proper classification for the merchandise, that it extended liquidation to obtain information needed to liquidate the entry according to its correct classification, and that the court should defer to Customs' determination. Additionally, defendant contends that the second and third extensions of liquidation were proper because Customs found it more efficient to give the importer "the benefit of the doubt" until it had cause to determine that the required information would not be forthcoming. Defendant's Memorandum in Support of its Motion for Summary Judgment and in Opposition to Plaintiff's Motion for Summary Judgment at 17.
The court addressed the issue of whether an extension for insufficient information under Section 1504(b)(1) was justified in Detroit Zoological, 10 CIT 133, 630 F.Supp. 1350. There, the court held that the term "information," as used in § 1504(b)(1), "should be construed to include whatever is reasonably necessary for proper appraisement or classification of the merchandise involved." 10 CIT at 138, 630 F.Supp. at 1356. Specifically, the court held "information" to include internal Customs advice requested by the importer.
Subsequently, in International Cargo, the court interpreted the term "information" to include internal information sought by Customs. 15 CIT at ___, 779 F.Supp. at 178. These interpretations of the term "information" in Detroit Zoological and International Cargo are sufficiently broad to cover the information Customs requested in the case at bar, namely cost data and country of origin information to support Carreon's claim under Item 807.00.
In Detroit Zoological, the court also addressed the issue of whether the length of an extension by Customs was reasonable. It held that the court should ordinarily "defer to Customs' determination that it needs additional information to liquidate an entry and therefore requires an extension of the statutory period." 10 CIT at 138, 630 F.Supp. at 1357. However, the extension period granted must be "for a reasonable period of time relative to the situation," and it cannot be "so great as to constitute an abuse of discretion." Id., 10 CIT at 138-139, 630 F.Supp at 1357 (emphasis added). Based upon that reasoning, this court concludes that the number of one-year extensions granted by Customs, i.e., the total extension period, also must be reasonable in light of the circumstances.
In this case, Carreon's entry papers indicated that the merchandise would qualify for duty-free treatment under Item 807.00, TSUS. Customs had cause to expect Carreon to file the required supporting documentation *125 for classification under Item 807.00, TSUS. Customs acted reasonably in preliminarily finding that the proper classification of the merchandise was under Item 807.00, TSUS. Yet, Customs could not liquidate the entries because it lacked "information" reasonably necessary to liquidate those entries under the proper classification. Therefore, the court finds that Customs was justified in granting the first one-year extensions of time to liquidate the merchandise to provide Carreon an opportunity to submit the supporting documentation.
Determining whether the total length of the extensions was proper requires an inquiry into its reasonableness in light of the circumstances. In this case, the importer made entries from July 1981 until August 1982, claiming classification of the merchandise under Item 807.00, TSUS. This classification is dependent upon the importer's submission to Customs of supporting documentation including certificates of origin and actual cost data. Carreon did not file actual cost data or certificates of origin at the time of entry.
Customs' regulation regarding the time period within which the importer must file actual cost data states:
Actual cost data must be submitted as soon as accounting procedures permit. To insure that information used for Customs purposes is reasonably current, the importer shall ordinarily be required to furnish updated cost and assembly data at least every six months, regardless of whether he considers that significant changes have occurred. The 6-month period for the submission of updated cost or other data may be extended by the district director if such extension is appropriate for the type of merchandise involved, or because of the accounting period normally used in the trade, or because of other relevant circumstances.
19 C.F.R. § 10.21 (1991) (emphasis added).
Under the circumstances presented, Customs and Carreon agreed that Carreon "was required to submit cost submissions to the district director at the relevant port at six month intervals, and actual cost data was required to be submitted on a Customs Form 247 no later than 60 days after the close of the importer's fiscal year." Defendant's Response to Plaintiff's First Interrogatories, Response to Interrogatory No. 1.A.; see also Reply Brief in Response to Plaintiff's Opposition to Defendant's Cross Motion for Summary Judgment at 4; Plaintiff's Reply to Defendants' Opposition to Motion for Summary Judgment and Response to Cross-Motion for Summary Judgment at 6; and Customs' Deposition, Exhibit 6, Section 13(h).
Applying the facts in a light most favorable to defendant by assuming that Carreon's fiscal year began on the date of its first entry, July 14, 1981, Customs expected Carreon to submit the actual cost data by no later than mid-September 1982. Based on the agreement between Carreon and Customs, it was reasonable for Customs to expect Carreon to furnish updated cost data at least every six months. Despite the guidelines set forth in Customs' regulation and the terms of Carreon's agreement with Customs, Carreon failed to submit the actual cost data or any updated data in 1982.
The court has held that Customs reasonably granted first extensions of the liquidation period in 1982 for the 1981 entries,[5] and in 1983 for the 1982 entries. The issue therefore, is whether, in light of the circumstances, Customs reasonably granted second extensions of the liquidation period in 1983 for the 1981 entries[6] and a similar extension in 1984 for the 1982 entries. And finally, whether Customs reasonably granted third extensions for the 1981 entries and some of the 1982 entries in 1984.
Customs granted these second and third extensions even though Carreon neither sent the required information nor made any effort to contact Customs regarding these entries and the missing documentation. Customs itself made no attempt to contact Carreon for the outstanding documentation *126 until April 5, 1984, when it finally sent Carreon a Request for Information. After receiving no response, Customs sent another Request for Information on October 10, 1984. Again, Carreon failed to respond.
Given Carreon's failure to submit documentation within two years from the date it entered the merchandise, or to even contact Customs and affirm that it would submit the data, however late, the proper classification of the merchandise no longer resided under Item 807.00, TSUS. After the first one-year extension, which expired in mid-1983 for most entries, Customs had no cause to believe that Carreon would submit the required cost data. Accordingly, the second and third extensions, issued on the statutory basis that Customs had insufficient information to properly classify the merchandise, were unreasonable and constituted an abuse of discretion.
In Pagoda Trading, 9 CIT at 411, 617 F.Supp. at 100, the court held that where Customs' delay of liquidation is improper, plaintiff is prejudiced as a matter of law. The court finds that the lengthy delay of liquidation in this case was improper, and that St. Paul was prejudiced as a matter of law. Thus, all forty one entries are deemed to have been liquidated by operation of law at the rate of duty claimed by Carreon at the time of entry.
Conclusion
For the foregoing reasons, plaintiff's motion for summary judgment is granted, and defendant's cross-motion for summary judgment is denied. Customs is directed to reliquidate the subject entries as duty-free under Item 807.00, TSUS, as proposed by Carreon upon entry, and to refund to plaintiff the excess duties collected with interest as provided in 19 U.S.C. § 1520.
APPENDIX
Entry No. Entry Date First Extn. Second Extn. Third Extn. Liquidation Date
XX-XXXXXX-X 07-14-81 June 1982 June 1983 July 1984 01/04/85
XX-XXXXXX-X 07-17-81 June 1982 June 1983 July 1984 01/04/85
XX-XXXXXX-X 07-23-81 June 1982 June 1983 July 1984 01/04/85
XX-XXXXXX-X 07-24-81 June 1982 June 1983 July 1984 01/04/85
XX-XXXXXX-X 07-30-81 June 1982 July 1983 July 1984 01/04/85
XX-XXXXXX-X 08-06-81 No record July 1983 July 1984 01/04/85
XX-XXXXXX-X 08-13-81 No record July 1983 July 1984 01/04/85
XX-XXXXXX-X 08-20-81 No record July 1983 July 1984 01/04/85
XX-XXXXXX-X 08-26-81 No record July 1983 July 1984 01/04/85
XX-XXXXXX-X 09-02-81 No record July 1983 July 1984 01/04/85
XX-XXXXXX-X 09-02-81 No record July 1983 July 1984 01/04/85
XX-XXXXXX-X 09-03-81 No record Aug. 1983 July 1984 01/04/85
XX-XXXXXX-X 09-11-81 Aug. 1982 Aug. 1983 July 1984 01/04/85
XX-XXXXXX-X 09-18-81 Aug. 1982 Aug. 1983 July 1984 01/04/85
XX-XXXXXX-X 09-24-81 Aug. 1982 Aug. 1983 July 1984 01/04/85
XX-XXXXXX-X 10-09-81 Sept. 1982 Sept. 1984 July 1984 01/04/85
XX-XXXXXX-X 10-22-81 Sept. 1982 Sept. 1983 July 1984 01/04/85
XX-XXXXXX-X 11-05-81 Sept. 1982 Oct. 1983 Sep. 1984 01/04/85
XX-XXXXXX-X 11-16-81 Oct. 1982 Oct. 1983 Sep. 1984 01/04/85
XX-XXXXXX-X 11-30-81 Oct. 1982 Oct. 1983 Sep. 1984 01/04/85
XX-XXXXXX-X 02-03-82 Dec. 1982 Dec. 1983 Feb. 1984 01/04/85
XX-XXXXXX-X 02-08-82 Jan. 1983 Jan. 1984 Nov. 1984 01/04/85
XX-XXXXXX-X 02-12-82 Jan. 1983 Jan. 1984 Nov. 1984 01/04/85
XX-XXXXXX-X 02-16-82 Jan. 1983 Jan. 1984 Nov. 1984 01/04/85
XX-XXXXXX-X 02-19-82 Jan. 1983 No record Nov. 1984 01/04/85
XX-XXXXXX-X 03-24-82 Feb. 1983 No record Not applicable 01/04/85
XX-XXXXXX-X 04-07-82 March 1983 No record Not applicable 01/04/85
XX-XXXXXX-X 07-14-82 June 1983 July 1984 Not applicable 01/04/85
XX-XXXXXX-X 07-21-82 June 1983 July 1984 Not applicable 01/04/85
XX-XXXXXX-X 07-23-82 June 1983 July 1984 Not applicable 01/04/85
XX-XXXXXX-X 07-28-82 June 1983 July 1984 Not applicable 01/04/85
XX-XXXXXX-X 08-05-82 July 1983 July 1984 Not applicable 01/04/85
XX-XXXXXX-X 08-06-82 July 1983 July 1984 Not applicable 01/04/85
XX-XXXXXX-X 08-10-82 July 1983 July 1984 Not applicable 01/04/85
XX-XXXXXX-X 08-13-82 July 1983 July 1984 Not applicable 01/04/85
XX-XXXXXX-X 08-17-82 July 1983 July 1984 Not applicable 01/04/85
*127
XX-XXXXXX-X 08-19-82 July 1983 July 1984 Not applicable 01/04/85
XX-XXXXXX-X 08-24-82 July 1983 July 1984 Not applicable 01/04/85
XX-XXXXXX-X 11-09-82 Oct. 1983 Sept. 1984 Not applicable 01/04/85
XX-XXXXXX-X 11-12-82 Oct. 1983 Sept. 1984 Not applicable 01/04/85
XX-XXXXXX-X 11-24-82 Oct. 1983 Sept. 1984 Not applicable 01/04/85
NOTES
[1] St. Paul contends that Customs extended the time for liquidation for only thirty-one of the forty-one entries.
[2] See Appendix for schedule of dates of entry, extensions, and liquidation.
[3] 19 C.F.R. § 159.12(a) & (e) provide in pertinent part:
(a) Reasons(1) Extension. The district director may extend the 1-year statutory period for liquidation for an additional period not to exceed 1 year ...
. . . . .
(e) Limitation on extensions. The total time for which extensions may be granted by the district director may not exceed 3 years.
[4] St. Paul has also argued, in the alternative, that Customs failed to issue first extensions for seven entries and second extensions for three entries, and that these entries were therefore deemed liquidated at the rate of duty assessed at the time of entry. Customs claims that extensions were issued on these entries, but that the computer records reflecting the issuance of the extensions were lost. The court need not determine here whether the extensions were actually issued since it grants St. Paul's requested relief on other grounds.
[5] Customs also properly granted a first extension in December 1982 for one 1982 entry.
[6] Customs also granted a second extension in December 1983 for one 1982 entry.
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COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
§
ROBERT D. MAXWELL, No. 08-14-00027-CR
§
Appellant, Appeal from the
§
v. 199th Judicial District Court
§
THE STATE OF TEXAS, of Collin County, Texas
§
Appellee. (TC# 199-80460-2013)
§
OPINION
Appellant Robert D. Maxwell appeals his convictions for indecency with a child. In three
issues, Appellant challenges the trial court’s evidentiary rulings, raises a claim of ineffective
assistance of counsel, and complains about the trial court’s failure to give a unanimity instruction
in the jury-charge. We affirm the convictions.1
BACKGROUND
In cause number 199-80460-2013, Appellant was indicted on four counts of indecency
with a child, M.E.2 Appellant pleaded “not guilty” to the charged offenses. A jury returned a
1
As this case was transferred from our sister court in Dallas, Texas, we decide it in accordance with the precedent
of that court. TEX. R. APP. P. 41.3; see also, TEX.GOV’T CODE ANN. § 73.001 (West 2013).
2
To protect the complainants’ anonymity, we will refer to them by the initials of their full names. TEX.R.APP.P.
9.10(a)(3).
“guilty” verdict for two of the four counts. The judgment of the court assessed punishment at ten
years’ confinement to run consecutively with trial cause no. 199-80491-2012 on one count and
the other, ten years confinement suspended, with ten years community supervision. Appellant
now appeals his convictions on several grounds.
The complainants in these companion cases are M.E. and H.S.3 Appellant is M.E.’s
stepfather. At trial, M.E. testified that Appellant first began by taking M.E. to various stores
when M.E. was in the seventh and eighth grade. During these outings, M.E. explained,
Appellant would drive to dark and remote areas within store parking lots. M.E. further explained
that the trips first consisted of Appellant exposing himself and asking M.E. to watch, which M.E.
refused. M.E. described how, over time, Appellant ridiculed M.E. into watching Appellant
masturbate and later, “talked [M.E.] into touching [Appellant]” While M.E. was unable to
remember the specifics of all the incidents, M.E. testified that these “parking lot” incidents
occurred more than once and gradually progressed to Appellant forcing M.E. to masturbate
Appellant.
M.E. also testified to certain “swimming” incidents. M.E. described how, on more than
one occasion at the pool, Appellant began by tickling M.E. and M.E.’s friend, H.S. M.E. further
testified that Appellant would then follow M.E. and H.S. around in the pool and grab both M.E.
and H.S.’s breasts over their bathing suits—what M.E. referred to as scooping. Lastly, M.E.
testified to certain “mudding” incidents. During these outings, M.E. explained that Appellant
would drive recklessly in order to startle both M.E. and H.S. M.E. explained that to make
Appellant stop the reckless driving, M.E. had to kiss H.S. Once stopped, M.E. explained,
Appellant would get out of the vehicle and masturbate. In addition, M.E. testified to a mudding
3
This appeal, 08-14-00027-CR (cause no. 199-80460-2013) is a companion case to 08-14-00028-CR (cause no.
199-80491-2012). These cases were tried jointly. M.E. is the complainant in 199-80460-2013, the case at hand, and
H.S. is the complainant in the companion case 199-80491-2012 (08-14-00028-CR).
2
incident where Appellant grabbed H.S.’s breast.
M.E.’s first forensic interview was with Lydia Conner. During this interview, M.E. made
certain allegations that Sergeant Jim Blackburn (“Sgt. Blackburn”) with the Collin County
Sheriff’s Office reviewed. Sgt. Blackburn testified that while he did not think there was enough
to charge a crime, “it seemed that there was enough happened [sic] that it disturbed [M.E.]
enough to make the allegation.” At trial, M.E. testified that she previously told a friend that
Appellant raped M.E., which had given rise to this first interview. While Sgt. Blackburn
declined to further investigate, he did refer the interview to Child Protective Services.
M.E. admitted during trial that she previously lied when she told a friend at school that
Appellant raped M.E. Nevertheless, M.E. testified that while she initially lied to investigators
and denied that anything occurred, moving to Nebraska and away from Appellant made it easier
to talk about the incidents.
Sandra Maddox (“Ms. Maddox”) also testified at trial. Ms. Maddox lived in Appellant’s
neighborhood. Ms. Maddox testified that after uncomfortably observing M.E. and H.S. interact
with Appellant, she invited M.E. to her barn where M.E. confessed that on one occasion on their
way to the store, Appellant stopped his vehicle, masturbated, and made M.E. touch Appellant’s
penis. Sometime after M.E.’s conversation with Ms. Maddox, Ms. Maddox called H.S.’s older
brother and informed him of her concerns. H.S.’s bother informed his parents about the contents
of the call, and H.S.’s parents ultimately notified the police.
M.E.’s father also testified at trial. Appellant attempted to question M.E.’s father about
an allegation that M.E. made involving M.E.’s father’s father-in-law. Outside the presence of
the jury, Appellant explained that this testimony would establish that when M.E.’s mother was
displeased, M.E. would fabricate allegations of abuse so that M.E.’s mother could get her way.
3
Specifically, and still outside the presence of the jury, M.E.’s father explained that once after
leaving Nebraska, M.E. told M.E.’s mother that M.E.’s father’s father-in-law had a sexual
conversation—what M.E.’s father referred to as a “sex talk”—with M.E. M.E.’s father stated
that M.E.’s mother did not want M.E. to return to Nebraska with M.E.’s father because of this
conversation. M.E.’s father further explained that this allegation was never investigated or
confirmed. M.E. never returned to Nebraska. After listening to arguments on the issue and the
M.E.’s father’s testimony, the trial court ruled that M.E.’s father’s testimony was inadmissible
and was therefore not presented to the jury. Appellant’s first issue is regarding the trial court’s
ruling on the Nebraska allegation testimony.
Andrea Kemp (“Ms. Kemp”), a forensic interviewer with the Family Advocacy Network
in Kearney, Nebraska, testified on the State’s behalf as an expert witness. 4 Ms. Kemp conducted
M.E.’s second forensic interview in Nebraska. During cross-examination, Appellant’s trial
counsel asked Ms. Kemp how many forensic interviews Ms. Kemp had conducted and, in a
follow-up question, also asked how many of these interviews were ultimately determined false
outcries. Ms. Kemp responded to Appellant’s trial counsel’s follow-up question, without any
objection, that “maybe two or three percent” were false outcries. In a second issue, Appellant
argues that the Appellant’s trial counsel was ineffective by eliciting this inadmissible testimony.
The State charged Appellant with four counts of indecency with a child by: (1) touching
M.E.’s genital’s with Appellant’s hand; (2) causing the hand of M.E. to touch Appellant’s
genitals; (3) touching the breasts of M.E.; and (4) exposing part of Appellant’s genitals. The jury
acquitted Appellant on Counts (1) and (3) and convicted Appellant on Counts (2) and (4).
In the companion case, trial cause no. 199-80491-2012, Appellant was indicted on seven
4
The record does not contain a witness list nor was Ms. Kemp designated as an expert at trial, however, both the
Appellant and the State referred to Ms. Kemp as an expert.
4
counts of indecency with a child by touching the breasts of a child, H.S. After the close of
evidence, however, the State proceeded with only two of the seven counts. The jury returned a
“guilty” verdict for both counts.
The jury-charge stated the unanimity requirement in the “Presiding Juror” section. The
jury-charge in this case contained a general unanimity instruction informing the jury that, “[y]our
verdict must be unanimous and signed by the presiding juror.” In a third issue, Appellant asserts
that the trial court erred when it did not give the jury a more explicit unanimity instruction
concerning which incident of exposure constituted the indecency by exposure count.
DISCUSSION
In three issues, Appellant asserts that: (1) the trial court erred by excluding impeachment
evidence (the Nebraska allegation) that the complainant, M.E., previously accused a relative of
having an “inappropriate” sexual conversation with M.E.; (2) trial counsel rendered ineffective
assistance by eliciting inadmissible testimony regarding the truthfulness of the class of persons to
whom the complainants belong; and (3) the trial court erred by failing to give a unanimity
instruction requiring the jurors to unanimously agree which of the alleged incidents at trial
constituted each of the charged offenses.
1. Exclusion of Impeachment Evidence
Appellant first argues the trial court should have admitted testimonial evidence of the
Nebraska allegation since it showed M.E.’s motive to lie and facilitate M.E.’s mother’s desires to
keep M.E. with her, which, in turn, would undermine M.E.’s credibility.
A. Standard of Review
We review the trial court’s decision to admit or exclude evidence under an abuse of
discretion standard. Jackson v. State, Nos. 05-13-00579-CR, 05-13-00580-CR, 2014 WL
5
3955171, at *1 (Tex.App--Dallas Aug. 14, 2014, no pet.)(mem. op., not designated for
publication), citing Page v. State, 213 S.W.3d 332, 337 (Tex.Crim.App. 2006). A trial court’s
determination that is within the zone of reasonable disagreement will not be disturbed on appeal.
Jackson, 2014 WL 3955171 at *1, citing Burden v. State, 55 S.W.3d 608, 615 (Tex.Crim.App.
2001).
B. Analysis
It is well established that a witness’s credibility may not be impeached with specific
instances of the witness’s conduct other than specific criminal convictions. TEX.R.EVID. 608(b).
Nevertheless, the Texas Court of Criminal Appeals has acknowledged that the Confrontation
Clause of the Sixth Amendment may require admission of evidence that Rule 608(b) would
otherwise bar. Lopez v. State, 18 S.W.3d 220, 225 (Tex. Crim. App. 2000). In Lopez, appellant
Lopez was charged and convicted of aggravated sexual assault of a child and indecency with a
child. Id. at 222. Lopez purportedly compelled a twelve-year-old to perform oral sex on Lopez
over the course of several months. Id. at 221. Lopez unsuccessfully attempted to impeach the
twelve-year-old’s credibility with testimonial evidence about a complaint the twelve-year-old
previously made: that his mother had thrown him against a washing machine. Id. The Court in
Lopez held that sex abuse cases create no per se exception to Rule 608(b) and, in balancing the
probative value of the testimonial evidence against the risk of admission, determined this
testimonial evidence would unduly prejudice the jury. Id. at 225–26. In conducting its analysis,
the Court found that while the twelve-year-old’s credibility was a crucial issue a trial, the fact
that the washing machine incident was never proven false, in addition to its dissimilarity to oral
sex, meant it would very likely confuse the jury. Id. at 226 (“Its probative value was extremely
low, and the risk that its admission would confuse the jury was high.”).
6
The Court, however, has found that a defendant is entitled to show any relevant fact that
might tend to establish ill feeling, bias, motive, interest, or animus on the part of any witness
testifying against him, subject to reasonable restrictions. Billodeau v. State, 277 S.W.3d 34, 43
(Tex.Crim.App. 2009), citing TEX.R.EVID. 613(b). Finding that the trial court abused its
discretion, the Court in Billodeau determined the defendant was entitled to present evidence that
the child-complainant in an aggravated sexual assault prosecution made false threats accusing
two neighbors of sexual molestation. Id. at 43. There, child-complainant alleged the defendant
had kissed the child-complainant, put his penis in the child-complainant’s anus, and then threated
to kill the child-complainant if the child-complainant told anyone about the incident. Id. at 37.
The child-complainant in Billodeau suffered from a mental illness since the age of four up until
the date of the alleged incident, when the child-complainant was eight years of age. Id. at 37-38.
The Court noted that this mental illness contributed to the child-complainant’s acts of rage and
anger and that the child-complainant understood the definition molestation. Id. at 38, 42. The
Court determined that the child-complainant’s previous false threats accusing neighbors of
molestation when angry about perceived injustices were similar to the issue on appeal there: the
accusation that the defendant in Billodeau had molested the child-complainant. Id. at 43. In
conducting a non-constitutional, Rule of Appellate Procedure 44.2(b)5 analysis, the Court
determined that the defendant in Billodeau was entitled to present evidence of the false threats
after the child-complainant denied making the false threats. Id. at 43.
We find that the present case falls in line with Lopez. Like Lopez, the Nebraska
allegation was never developed nor shown to be false. See Lopez, 18 S.W.3d at 225-26. In
addition, the Nebraska allegation was dissimilar to the parking lot, swimming, and mudding
5
The rule provides: “Any other error, defect, irregularity, or variance that does not affect substantial rights must be
disregarded.” See, TEX.R.APP.P. 44.2(b).
7
incidents, namely: the Nebraska allegation involved a “sex talk” while the others involved more
than a conversation. See id. Moreover, this case involved multiple incidents (the parking lot,
swimming, and mudding incidents) and two victims with similar allegations, unlike Billodeau,
which involved one allegation of molestation against the defendant and one victim, who suffered
from a mental illness. Billodeau, 277 S.W.3d at 38-42. Lastly, the Appellant cross-examined
M.E. but failed to mention the Nebraska allegation; as such, M.E. never denied the allegation at
trial, which would have then given rise to a 613(b)(3)6 examination.7 As such, we find the trial
court did not abuse its discretion and that the risk of confusion was high, outweighing the
testimony’s probative value. Because we find the present case in line with Lopez and unlike
Billodeau, Appellant’s first issue is overruled.
2. Ineffective Assistance of Counsel
In a second issue, Appellant contends that his trial counsel’s representation was
ineffective when counsel elicited inadmissible testimony: namely, expert testimony regarding the
truthfulness of the class of persons to which the complainants belong.
A. Standard of Review
To prevail on a claim of ineffective assistance of counsel, an appellant must establish by
a preponderance of the evidence that: (1) trial counsel’s performance was deficient; and (2) that
this deficient performance deprived appellant of a fair trial. Strickland v. Washington, 466 U.S.
668, 687, 104 S.Ct. 2052, 2064, 80 L.Ed.2d 674 (1984); Ex parte Chandler, 182 S.W.3d 350,
353 (Tex.Crim.App. 2005). Appellant must satisfy both Strickland components; the failure to
6
Texas Rules of Evidence 613(b)(3) provides, in relevant part, that when examining a witness about a bias or
interest, a party must first inform the witness of the circumstances surrounding the bias or interest and the witness
“must be given the opportunity to explain or deny” the circumstances, and only if the witness denies can extrinsic
evidence be admitted. [Emphasis added].
7
The Appellant and the State failed to discuss this rule on appeal.
8
satisfy either will defeat his ineffectiveness claim. Perez v. State, 310 S.W.3d 890, 893
(Tex.Crim.App. 2010).
Under the first prong of Strickland, the appellant must show that trial counsel’s
performance fell below an objective standard of reasonableness. Strickland, 466 U.S. at 698,
104 S.Ct. at 2064. Stated differently, the appellant must show by a preponderance of the
evidence that trial counsel’s actions did not meet the objective norms for professional conduct.
Mitchell v. State, 68 S.W.3d 640, 642 (Tex.Crim.App. 2002). Under the second prong of
Strickland, the appellant must establish that there is a reasonable probability that but for trial
counsel’s deficient performance, the outcome of the case would have been different. Mitchell,
68 S.W.3d at 642. Reasonable probability is that which is sufficient to undermine the confidence
in the outcome. Id.
We presume that the representation fell within the wide range of reasonable and
professional assistance. Mallett v. State, 65 S.W.3d 59, 63 (Tex.Crim.App. 2001). Ineffective
assistance claims must be firmly founded in the record to overcome this presumption. Thompson
v. State, 9 S.W.3d 808, 813 (Tex.Crim.App. 1999). In most direct appeals, this task is very
difficult because the record is undeveloped and, as such, cannot reflect the potential failings of
trial counsel. Id. at 813-14. Claims of ineffective assistance of counsel are generally not
successful on direct appeal because of the undeveloped record and are thus more appropriately
developed an application for writ of habeas corpus. Lopez v. State, 343 S.W.3d 137, 143
(Tex.Crim.App. 2011). “[W]hen no reasonable trial strategy could justify the trial counsel’s
conduct, counsel’s performance falls below an objective standard of reasonableness as a matter
of law, regardless of whether the record adequately reflects the trial counsel’s subjective reasons
for acting as [trial counsel] did.” Andrews v. State, 159 S.W.3d 98, 102 (Tex.Crim.App. 2005).
9
B. Analysis
Expert testimony that a particular witness is truthful is inadmissible under Rule 702.8
Yount v. State, 872 S.W.2d 706, 711 (Tex.Crim.App. 1993). Moreover, an expert may not give
an opinion that a complainant, such as a sexual assault victim, or the complainant’s class is
truthful. Yount, 872 S.W.2d at 712; cf. Schutz v. State, 957 S.W.2d 52, 71 (Tex.Crim.App. 1997)
(testimony regarding the ability to perceive is allowed whereas a tendency testimony is not
allowed). Appellant points to several cases where our sister courts found a defendant’s trial
counsel to be ineffective based on the admission of inadmissible expert testimony regarding a
witness’s testimony. In each of the cases, however, the ineffective assistance stemmed from the
trial counsel’s failure to object to inadmissible expert opinion testimony regarding each of the
child-complainant’s truthfulness.
In Fuller v. State, the State elicited the expert’s opinion testimony regarding “[the
expert’s] particular determination of [the child-complainant’s] truthfulness.” 224 S.W.3d 823,
835 (Tex.App--Texarkana 2007, no pet.). On appeal, “[appellant] complain[ed] his counsel was
ineffective in not objecting[.]” Id. at 829. In Sessums v. State, four expert witnesses were asked
“to explain and then comment directly on the factors they used in determining if this [child-
complainant] was telling the truth.” 129 S.W.3d 242, 248 (Tex.App.--Texarkana 2004, pet.
ref’d). On appeal, “[appellant] argue[d] counsel was ineffective because he did not object[.]” Id.
at 246. In Miller v. State, two experts and the child-complainant’s mother testified “that each
believed [child-]complainant was telling the truth[.]” 757 S.W.2d 880, 883 (Tex.App.--Dallas
1988, pet. ref’d). In resolving the appeal, the court determined that the testimony “was
inadmissible and should have been objected to by defense counsel.” Id. at 883. Lastly, in
8
Texas Rule of Evidence 702 provides, in relevant part: “A witness who is qualified as an expert . . . will help the
trier of fact to understand the evidence or to determine a fact in issue.”
10
Garcia v. State, a detective and an expert testified over “the truthfulness of the testimony of the
complaining witnesses.” 712 S.W.2d 249, 253 (Tex.App.--El Paso 1986, pet. ref’d). On appeal,
the complaint was “the failure to make proper objections to exclude the inadmissible and
prejudicial testimony . . . .” Id.
The present case is different: Appellant’s trial counsel elicited the complained-of
testimony regarding M.E. truthfulness. Appellant’s trial counsel began by inquiring into Ms.
Kemp’s interview process. After asking how many forensic interviews Ms. Kemp had
conducted, Appellant’s trial counsel asked how many were ultimately determined to be false
outcries, which Ms. Kemp responded, “maybe two to three percent.” Appellant’s trial counsel
followed up by inquiring into the cause of the false outcries, and Ms. Kemp explained that most
of these false outcries involved custody battles. Appellant’s trial counsel never inquired into Ms.
Kemp’s specific opinion of M.E.’s truthfulness.
Although the reasons for trial counsel’s conduct may not readily appear in the record, if
there is at least a possibility the conduct could have been a part of a legitimate trial strategy, we
will generally defer to trial counsel’s decisions. Ortiz v. State, 93 S.W.3d 79, 88-89
(Tex.Crim.App. 2002). The record is entirely void of any explanation for trial counsel’s
conduct. In reviewing the entire dialogue surrounding the complained-of testimony, we find that
a possible motive was to suggest that allegations of abuse may arise in custody battles—as in
M.E.’s case. Applying the presumption of reasonable professional assistance, and in finding a
possible trial strategy, we conclude that Appellant has failed to satisfy the first prong of
Strickland. See King v. State, 91 S.W.3d 375, 383 (Tex.App.--Texarkana 2002, pet. ref’d)
(holding that where trial counsel acted affirmatively and the record was undeveloped, the
appellant failed the first prong of Strickland); see also Sorrells v. State, No. 03-08-00072-CR,
11
2010 WL 1404625, at *10 (Tex.App.--Austin Apr. 9, 2010, pet. ref’d)(mem. op., not designated
for publication)(holding that where “the record is undeveloped with regard to defense counsel’s
reasoning for his actions, and because his actions could reasonably have been part of a sound
trial strategy, we conclude [the appellant] has not proven by a preponderance of the evidence that
defense counsel provided deficient performance . . . .”)[Emphasis added].9 Because Appellant
must satisfy both prongs of Strickland and he failed this first prong, we decline to address the
second prong. For the above reasons, we overrule Appellant’s second issue.
3. Unanimity Instruction
In a third issue, Appellant argues the trial court erred by failing to give a unanimity
instruction requiring the jurors to unanimously agree which alleged incident discussed at trial
constituted each of the charged offenses.
A. Standard of Review
Appellate courts review claims regarding jury-charge errors under a two-pronged test.
Almanza v. State, 686 S.W.2d 157, 171 (Tex.Crim.App. 1984). First, we must determine
whether error exists; second, if error exists, we then evaluate the harm caused by the error. Ngo
v. State, 175 S.W.3d 738, 743 (Tex.Crim.App. 2005). Next, if there is a charge error, the degree
of harm required for reversal depends on whether the error was preserved at trial. Almanza, 686
S.W.2d at 171; Neal v. State, 256 S.W.3d 264, 278 (Tex.Crim.App. 2008). If the error was
preserved, we review for “some harm” whereas unpreserved errors are reversible only for
egregious harm. Almanza, 686 S.W.2d at 171.
B. Analysis
The governing law in Texas requires that a jury verdict be unanimous in all criminal
9
We also note that Appellant’s trial counsel referred to “our trial strategy” during the trial and was attentive enough
to object to a possible hearsay statement before it was made.
12
cases. TEX.CODE CRIM.PROC.ANN. art. 36.29(a)(West Supp. 2016); Cosio v. State, 353 S.W.3d
766, 771 (Tex.Crim.App. 2011). Stated differently, “the jury must be unanimous in finding
every constituent element of the charged offense in all criminal cases.” Jourdan v. State, 428
S.W.3d 86, 94 (Tex.Crim.App. 2014). Unanimity “means that the jury must ‘agree upon a single
and discrete incident that would constitute the commission of the offense alleged.’” Cosio, 353
S.W.3d at 771, (quoting Stuhler v. State, 218 S.W.3d 706, 717 (Tex.Crim.App. 2007)).
“[T]hree variations may result in non-unanimous verdicts as to a particular incident of
criminal conduct[.]” [Internal citations and footnotes omitted]. Cosio, 353 S.W.3d at 771. Of
the three variations, Appellant basis his non-unanimity appeal on the fact that the State charged a
particular offense and presented evidence that the defendant committed that offense on multiple,
separate occasions. See Cosio, 353 S.W.3d at 772. If the State presents evidence that the
defendant committed the charged offense on multiple occasions, the trial court can ensure
unanimity by instructing the jury that its verdict must be unanimous as to a single offense among
those presented. Id. at 772. The instruction, however, should not refer to any specific evidence
and should permit the jury to return a general verdict. Id. at 776. A constitutional unanimity
violation is subject to the constitutional harm standard when properly preserved by a timely and
specific objection at trial. Id. at 776; see TEX.R.APP.P. 33.1(a). A jury-charge error, however,
will never be waived by a defendant’s failure to object at trial. Almanza, 686 S.W.2d at 171. In
the present case, the issue has not been properly preserved therefore we analyze a charge error, if
there is one, under the egregious harm standard. See Cosio, 353 S.W.3d at 776.
i. Jury-Charge Error
When analyzing a potential jury-charge error, we must first determine if error exists.
Ngo, 175 S.W.3d at 743. Appellant claims that the State charged one offense (indecency with a
13
child by exposure) and presented evidence that the defendant committed the offense on multiple
occasions. Appellant’s trial counsel did not raise a jury-charge issue at trial. As an initial matter,
we note that the jury-charge in this case contained the general unanimity instruction informing
the jury that, “[y]our verdict must be unanimous and signed by the presiding juror.” Appellant
argues that this instruction was insufficient because the State presented evidence of more than
one incident to prove the offense of indecency with a child by exposure.10 See Cosio, 353
S.W.3d at 772 (“non-unanimity may occur when the State charges one offense and presents
evidence that the defendant committed the charged offense on multiple but separate occasions.”).
Appellant insists that the trial court should have submitted a unanimity instruction for
each count. At trial, Appellant did not produce an alternate jury-charge. While a more explicit
unanimity jury-charge could help reduce the likelihood of the error Appellant raises in this issue,
we cannot conclusively say, without a posited alternative jury-charge, that the failure to provide
a hypothetical instruction with a more explicit unanimity requirement would result in a jury-
charge error. See Curry v. State, 222 S.W.3d 745, 753 (Tex.App.--Waco 2007, pet. ref’d)(noting
that courts presume that juries follow the general unanimity instruction).
The jury-charge contained one count of indecency with a child by exposure. As such, the
jury could have based their conviction of evidence of anyone of the repeated parking lot
incidents, up until they progressed to actual contact, in order to unanimously find that the
Appellant exposed himself to M.E.
10
Appellant incorrectly claimed in his original appeal brief that the jury-charge contained two counts of indecency
by exposure out of the four total counts. The indictment and the jury charge show one charge of indecency by
exposure; the remaining three were charges of indecency by touching. Appellant only challenged the exposure
count in the original brief, the State acknowledged the possibility of error regarding the touching counts in its
response, which prompted appellant to raise both exposure and touching errors in the reply brief. For the purposes
of this opinion, we will consider only those arguments raised in the original brief. See U.S. Lawns, Inc. v. Castillo,
347 S.W.3d 844, 849 (Tex.App.--Corpus Christi 2011, pet. denied)(It is well settled that Rule 38.3 “does not allow
an appellant to include in a reply brief a new issue in response to a matter pointed out in [the] appellee’s brief but
not raised by the appellant’s original brief.”); see also TEX.R.APP.P. 38.3.
14
ii. Harm Analysis
Assuming, for the sake of argument, the charge was erroneous, because Appellant failed
to preserve the jury-charge error at trial, reversal is warranted only if the error resulted in
egregious harm. See Neal, 256 S.W.3d at 278. Appellant relies on the San Antonio Court of
Appeal’s decision in Arrington, another child sex abuse case in which the court overturned a
conviction for jury-charge error, but that decision was reversed. Arrington v. State, 413 S.W.3d
106 (Tex.App.--San Antonio 2013), rev’d, 451 S.W.3d 834 (Tex.Crim.App. 2015).
“An egregious harm determination must be based on a finding of actual father than
theoretical harm.” Cosio, 353 S.W.3d at 777. Actual harm is established when the erroneous
jury instruction affected “the very basis of the case,” “deprive[d] the defendant of a valuable
right,” or “vitally affect[ed] a defensive theory.” Id. In assessing harm, we consider: (1) the
entire jury charge; (2) the state of the evidence, including contested issues and the weight of the
probative evidence; (3) the parties’ arguments; and (4) all other relevant information in the
record. Id. This analysis is done on a case-by-case basis. Gelinas v. State, 398 S.W.3d 703, 710
(Tex.Crim.App. 2013).
(1) The Entire Jury Charge
In Cosio, a jury convicted the defendant of two counts of aggravated sexual assault of a
child and two counts of indecency with a child by contact, each supported by evidence of
multiple incidents of criminal conduct. Cosio, 353 S.W.3d at 769-70. The trial court there gave
the jury multiple instructions on unanimity, but none was adequate to appropriately inform the
jurors that they had to be unanimous as to which incident of criminal conduct they believed
constituted each count in the indictment. Id. at 774. As in Cosio, the defendant in Arrington was
charged with several different sexual offenses. Arrington, 451 S.W.3d at 837-38. The charge
15
did not require the jurors to be unanimous as to which separate criminal act constituted each
count, but instead, included only a generic unanimity instruction. Id. at 838.
In light of our analysis above (Section 3.B.i.), we find that the jury instructions here were
unlikely erroneous since any one of the repeated parking lot incidents, up until the actual contact
between the Appellant and M.E., could have been the basis for the one exposure conviction. We
conclude that this factor weighs against finding egregious harm.
(2) The State of the Evidence
Under this element, we consider the entire record in determining whether the evidence
made it more or less likely that the jury-charge caused Appellant actual harm. Casio, 353
S.W.3d at 841. At trial, Appellant’s defense against the allegations was that M.E. fabricated the
allegations against him.11 Before the allegations were fully developed, M.E.’s mother intended
to move to Nebraska along with M.E. and the Appellant’s son. At trial, M.E.’s mother testified
regarding a court order prohibiting her from changing her domicile in Collin County, Texas.
Since M.E.’s mother shared a biological son with Appellant, Appellant was able to obtain a court
order preventing their son’s relocation and therefore preventing M.E.’s mother from leaving
Collin County. The State objected to the introduction of the court order. Appellant responded to
the objection by stating that the order would “show a bias of [M.E.’s mother].” M.E.’s mother
had not paid the next month’s rent in Collin County, anticipating their move to Nebraska and
was thereafter forcibly evicted. According to M.E.’s mother, when M.E. became aware of what
was happening to her mother and brother as a result of the non-relocation order, M.E. disclosed
more details regarding the misconduct of the Appellant.
If the jury had believed Appellant’s theory, it would have found him not guilty of all of
11
In his first issue on appeal, Appellant asserted that the trial committed an error in excluding testimony that would
undermine the credibility of M.E. in order to show that she had fabricated the allegations against Appellant.
16
the counts of indecency. Instead, in finding Appellant guilty of two of the four counts of
indecency towards M.E., the jury necessarily disbelieved Appellant’s defensive evidence. This
first sub-factor goes against finding that the state of the evidence should be weighed in favor of
finding egregious harm.
Second, in light of our finding in Appellant’s second issue on appeal (Section 2), the
inadmissible testimony regarding the truthfulness of the class of persons to which M.E. belongs
does not implicate that the state of the evidence should be weigh in finding egregious harm.
Arrington, 451 S.W.3d at 842 (Where the Court found that inadmissible testimony regarding the
child-complainant’s testimony that was admitted at trial was “before the jury to consider in
finding appellant guilty . . . .”). Where trial counsel fails to object, or, as in the present case,
offers, inadmissible testimony, the jury could properly consider it as evidence of appellant’s
guilt. Id. at 843 (“An appellate court should not disregard evidence that was admitted for all
purposes at a trial merely because it believes that a trial court could have excluded the evidence
had a proper objection been presented.”). Disregarding inadmissible but admitted evidence at
trial would be an improper focus on theoretical harm. Id. This second sub-factor goes against
finding that the state of the evidence should be weighed in favor of finding egregious harm.
Lastly, inconsistencies in a child-complainant’s testimony alone do not warrant finding
that the state of the evidence should be weighed in favor of finding egregious harm. Arrington,
451 S.W.3d at 843. In the present case, there were inconsistences regarding M.E.’s first forensic
interview, what she told Ms. Maddox, what she told a friend, and what she later said at trial.
Nevertheless, we cannot conclude that any slight inconsistencies in M.E.’s testimony had any
actual effect on the unanimity of the jury’s verdict; in finding Appellant guilty of two counts, the
jury necessarily found M.E. credible. See Arrington, 451 S.W.3d at 843 (“[I]n deciding to
17
convict appellant of six counts, the jury necessarily found the complainant credible. Although
[the complainant] may have been inconsistent in attempting to explain the reason for the
existence of the rumors, and was somewhat inconsistent as to the types of abuse that appellant
inflicted upon her during each of the four incidents, the jury clearly resolved any inconsistences
in favor of [the complainant], and not appellant.”).
In considering the entire record, the jury clearly credited M.E.’s story and not Appellant’s
defense. Had the jury believed Appellant’s defense, they would have acquitted Appellant on all
charges. Because the entire record fails to show actual harm to Appellant, this factor weighs
strongly against a finding of egregious harm.
(3) The Parties’ Arguments
Under this factor, we look to whether any statements made by the State, Appellant, or the
trial judge exacerbated or ameliorated error in the charge. Arrington, 451 S.W.3d at 844. In
Ngo, the Court found egregious harm where the jury charge did not contain a unanimity
instruction and the jury was explicitly and repeatedly told by the prosecution and the trial judge
that it need not return a unanimous verdict. 175 S.W.3d 751 (“This is not an instance of a jury
charge which is simply missing an important word—‘unanimously’—which reasonable jurors
might infer from the context of the entire charge or from the comments of the advocates
emphasizing the correct legal principles.”).
In the present case, only Appellant’s trial counsel mentioned the unanimity requirement
in his closing argument: “If [Appellant] is found guilty of any of the charges in this case I
suggest it will be a difficult thing for you to reach unanimously or quickly.” [Emphasis added].
This factor, therefore, we believe weighs slightly against a finding of egregious harm. Cf.
Arrington, 451 S.W.3d at 844 (where the Court found that the factor weighed neither for nor
18
against finding egregious harm where neither party mentioned the unanimity requirement).
(4) Other Relevant Information in the Record
M.E. testified to several occasions when she felt uncomfortable: the parking lot
incidents, the swimming incidents, and the mudding incidents. M.E. testified as to how the
parking lot incidents began by exposure and progresses to actual contact. Ms. Maddox reiterated
these progressive parking lot incidents. We find that the other relevant information factor here
weighs against finding egregious harm.
(5) Conclusion of Jury-Charge Harm Analysis
Concluding that none of the factors weigh in favor of finding egregious harm, we find
that if there was a jury-charge error, it would not have caused Appellant egregious harm. See
Arrington, 451 S.W.3d at 845 (Where the Court concluded that although “the only factor that
weighs in favor of finding egregious harm is the jury instructions[,] . . . the evidence in the entire
record and the analytical meaning of the jury’s verdicts in the aggregate show that the erroneous
instructions did not cause actual harm.).
C. Conclusion of Appellant’s Third Issue
The potentially “erroneous jury instructions did not cause” Appellant “egregious harm”
even if they failed to instruct the jury to be unanimous regarding what particular act or acts
“support each count” because “the evidence in the entire record and the analytical meaning of the
jury’s verdicts in the aggregate show that the erroneous instructions did not cause actual harm to
appellant.” See Arrington, 451 S.W.3d at 845; see also Cosio, 353 S.W.3d at 777-78 (finding no
egregious harm even though the jury-charge allowed for non-unanimous verdicts when two other
factors did not weigh in favor of egregious harm). Issue Three is overruled.
CONCLUSION
19
Having overruled Appellant’s three issues on appeal, we affirm the convictions.
October 31, 2016
YVONNE T. RODRIGUEZ, Justice
Before McClure, C.J., Rodriguez, and Hughes, JJ.
(Do Not Publish)
20
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178 F.3d 1378
SCALTECH INC., Plaintiff-Appellant,v.RETEC/TETRA, L.L.C., Defendant-Appellee.
Nos. 97-1365, 97-1480.
United States Court of Appeals,Federal Circuit.
June 4, 1999.Rehearing Denied; Suggestion for RehearingEn Banc Declined June 16, 1999.
Robert M. Hardy, Jr., of Seabrook, Texas, for plaintiff-appellant. With him on the brief were Jeffrey W. Tayon and Robert M. Gray, Conley, Rose & Tayon, of Houston, Texas.
David J. Brody, Hamilton, Brook, Smith & Reynolds, P.C., of Lexington, MA, argued for defendant-appellee. With him on the brief was Deirdre E. Sanders.
Before RICH, PLAGER and GAJARSA, Circuit Judges.
ORDER
RICH, Circuit Judge.
1
Retrec/Tetra, L.L.C. petitions for rehearing of our decision of September 10, 1998 vacating the district court's summary judgment ruling that U.S. Patent No. 5,433,717 is invalid under 35 U.S.C. § 102(b) (1994) and remanding for further proceedings.
2
To clarify certain issues, and to take account of the intervening Supreme Court decision in Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 119 S.Ct. 304, 142 L.Ed.2d 261 (1998),
IT IS ORDERED THAT:
3
The petition for rehearing is granted to the extent that we amend our opinion of September 10, 1998. The amendments are incorporated into new Part III of the opinion and the opinion is reissued as of this date.
4
Scaltech, Inc. (Scaltech) appeals from the judgment of the United States District Court for the Southern District of Texas, H-95-4190, granting a motion for summary judgment in favor of Retec/Tetra, L.L.C. (Retec), holding U.S. Patent No. 5,433,717 invalid because an embodiment of the claimed invention was "on sale" within the meaning of 35 U.S.C. § 102(b) (1994). We vacate and remand.
BACKGROUND
5
Scaltech is in the business of recycling industrial waste produced during the refining of petroleum products. Retec is in the business of producing delayed coker quench streams for use in producing delayed petroleum coke. Their paths crossed when they both used waste products from the petroleum refinery process to produce coke, albeit apparently for different purposes--Retec for producing coke and Scaltech for disposing of waste.
6
Scaltech is the assignee of record of U.S. Patent No. 5,433,717 (the '717 patent) issued 22 August 1995 on the application of Robert M. Scalliet, filed on 19 January 1993 and entitled "Recycle of Waste Streams." The '717 patent is generally directed to a process for the disposal of oil refinery waste in conjunction with a "delayed coking" process by which oil refiners produce coke. Coke is a porous solid that is produced as a by-product in the oil refining process. It is frequently burned as a fuel.
7
Production of coke by the "delayed coking" method involves heating the crude oil residue and introducing it into a vessel called a coker drum under specified conditions that result in transformation of the crude oil residue into coke. The coke is then cooled, or "quenched," by the controlled introduction of an aqueous slurry of solids, or "quench stream," into the coker drum. According to the '717 patent, quantities of refinery waste may be successfully disposed of in the quench stream of the delayed coker unit if the waste introduced to the quench stream is comprised of greater than seventy percent of the solids having a particle size less than 15 microns. The '717 patent teaches that this may be accomplished by the treatment of the waste before it is introduced into the quench stream to remove most of the free oil or mobile organic material and reduce the solid particle size. This leaves the de-oiled waste solids suspended in water, or an aqueous slurry of the waste solids, which is then introduced into the delayed coker quench stream.
8
Claims 1 and 6 are the only independent claims in the '717 patent. Claim 1 reads:
9
In a process for producing delayed petroleum coke, wherein a liquid hydrocarbon feed stream is introduced into a delayed coking vessel under delayed coking conditions and the coke produced is quenched, the improvement comprising:
10
treating a waste stream containing water, organic compounds and solids so as to cause attrition of said solids to produce a delayed coker quench stream containing from about 5 to about 35% by weight solids, water and less than about 6% by weight mobile organics, said solids in said coker quench stream having a particle size distribution such that greater than about 70% of the total solids volume comprises solids having a particle size of less than about 15 microns; and
11
introducing said coker quench stream into said coking vessel during quenching.
Claim 6, the broadest claim, reads:
12
A process for producing delayed coker quench stream for use in producing delayed petroleum coke wherein a liquid hydrocarbon feed stream is introduced into a delayed coking vessel under delayed coking conditions and the coke produced is quenched, comprising:
13
treating a waste stream containing water, organic compounds and solids so as to cause attrition of said solids to produce a delayed coker quench stream containing from about 5 to about 35% by weight solids, water and less than about 6% by weight mobile organics, said solids in said coker quench stream having a particle size distribution such that greater than about 70% of the total solids volume comprises solids having a particle size of less than about 15 microns.
14
Scaltech brought suit against Retec for infringement of the '717 patent. After completing a modicum of discovery, Retec raised the affirmative defense of patent invalidity under 35 U.S.C. § 102(b), alleging that Scaltech sold or offered for sale a process embodying the claimed invention of the '717 patent more than one year before its filing date. On 24 February 1997, Retec filed a motion for summary judgment seeking a holding of patent invalidity.
15
The district court granted summary judgment in favor of Retec, holding the patent invalid under 35 U.S.C. § 102(b) as a result of an "on sale" bar. This appeal followed.
DISCUSSION
16
* On summary judgment, the district court found the invention claimed in the '717 patent was "on sale" within the meaning of 35 U.S.C. § 102(b). Summary judgment is appropriate when 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). We undertake plenary review of a grant of summary judgment. See KeyStone Retaining Wall Systems, Inc. v. Westrock, Inc., 997 F.2d 1444, 1449, 27 USPQ2d 1297, 1301 (Fed.Cir.1993).
II
17
The following facts pertinent to the alleged offer for sale are either undisputed or represent non-movant Scaltech's version. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In 1987 Scaltech was treating refinery waste at Chevron's refinery in Port Arthur, Texas. Scaltech was using a Guinnard DC-6 vertical disk centrifuge (the DC-6 centrifuge) to remove the oil from the raw waste, return the oil to the refinery, and press the wet solids into cakes for shipment to hazardous land fill locations.
18
While Scaltech was performing this contract, Chevron began testing an alternative solution for disposing of its refinery wastes involving injecting the waste into the coking process. Coke is made at the end of the refining process by injecting the unrefined hydrocarbons into large drums, called coker units. In the coker unit it is heated to a very high temperature in the "coking cycle." During the coking cycle the hydrocarbon materials are converted to solid coke fuel. Prior to removal from the coker unit, water is introduced to cool the coke bed. The cooling process is called the "quench cycle."
19
Injection of refinery waste into the coke bed during the quench cycle was initially suggested by Mobil Oil Company in 1975 and is described in detail in United States Patent No. 3,917,564 (the Meyers Patent). When waste injection rates began to exceed one to two pounds of solids per ton of coke, however, refineries frequently encountered unacceptable problems with the process. Chevron was no exception. It struggled with uneven solid formation in the coke, noxious odors, and soft spots in the coke bed. Thus, this method did not appear to be a viable method for the disposal of all its waste products.
20
When Chevron asked its waste disposal contractor, Scaltech, for suggestions to improve the process, the named inventor of the '717 patent, Robert Scalliet, suggested that the above-outlined problems might be caused by excessive oil in the waste feed. He theorized that oil might be plugging the coke pores in the coker unit. Scalliet offered to provide a few loads of the de-oiled waste sediments, produced by processing the waste through a centrifuge, so that Chevron could test Scalliet's theory. It was using the de-oiling method to prepare the hazardous waste cakes which were tucked into landfill. Chevron picked up one or two truck loads of the waste matter and apparently injected it into its coker unit. Scaltech did not actually participate in the injection. It only provided the de-oiled waste sediment that was part of its hazardous waste disposal process.
21
Scaltech's contract to make hazardous waste cakes for Chevron was not renewed. In 1988, Scaltech heard third hand that Chevron was pleased with the results of the injection of de-oiled waste into its coke. Based on these promising comments, Scaltech thought that it might have a method to overcome the one to two pound waste per ton of coke limitation posed by the Meyers patented process. It sought access to a coker unit such that it could test its theories. Between 1988 and 1991, Scaltech contacted six different refineries and proposed to use the DC-6 centrifuge to process refinery waste. In four of the proposals, it described the process as a test or a trial. In two, a 30 March 1988 proposal to Chevron and a 15 November 1988 proposal to Champlin, it did not expressly identify the procedure as experimental. The court relied on these final two proposals to invalidate the '717 patent. In none of the proposals did Scaltech indicate that it would control either (1) the particle size to be injected in the coker unit or (2) the specific solids concentration in the material to be delivered to the coker unit. The only equipment described was the DC-6 centrifuge which it had been using to de-oil the solids at Chevron.
22
In December 1991 Scaltech entered into a contract with CITGO to separate the oil from its refinery waste and process the hazardous waste sediment. At that time CITGO opted to dispose of hazardous waste sediment in a cement kiln rather than in the hazardous waste cakes Chevron was producing. While performing this contract, Scaltech received permission, in early 1992, to test the process of disposing of the de-oiled waste by injection into the coker quench cycle.
23
It carefully monitored the oil content of the waste feed run into the DC-6 centrifuge and the waste solids slurry run into the coker unit. It determined that the waste solids slurry was virtually free of oil and, to their surprise, it discovered that the particles were also of very small size. The particle size was not being reduced by the DC-6 centrifuge itself, but rather by the ejection of the solid slurry onto a cast iron plate as it exited the centrifuge at high velocity. It concluded that the problems of the Meyer patent process were that the oil and the large particles were blocking the pores and preventing high absorption rates throughout the coke bed. By carefully monitoring the solid injection rates and gradually increasing the solid concentrations it was able to inject 18 pounds of solids per ton of coke. Having discovered the necessary conditions of small particle size and high solids concentration, it then filed a patent application.
III
24
The question on appeal is whether the claimed invention was offered for sale within the meaning of § 102(b). We conclude that, on the record before us, the district court erred by failing to address whether an embodiment of the claimed invention was offered for sale.
25
Section 102(b) reads in relevant part: "[a] person shall be entitled to a patent unless ... the invention was ... in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States." 35 U.S.C. § 102(b). A claimed invention is considered to be on sale within the meaning of § 102(b) if, more than one year before the filing date to which the claim is entitled (the critical date), two conditions are satisfied. First, the product must be the subject of a commercial offer for sale. See Pfaff v. Wells Electronics, Inc., 525 U.S. 55, ----, 119 S.Ct. 304, 311, 142 L.Ed.2d 261 (1998). Second, the invention must be ready for patenting. See id. at ----, 119 S.Ct. at 312. One way to satisfy the second condition is by proof of reduction to practice before the critical date. See id.
26
The "invention" which has been offered for sale must, of course, be something within the scope of the claim. See Graver Tank & Mfg. Co. v. Linde Air Products Co., 339 U.S. 605, 607, 70 S.Ct. 854, 94 L.Ed. 1097 (1950) (a claim in a patent provides the metes and bounds of the right which the patent confers on the patentee to exclude others from making, using, or selling the protected invention). Hence, the first determination in the § 102(b) analysis must be whether the subject of the barring activity met each of the limitations of the claim, and thus was an embodiment of the claimed invention. In this case, claim 6, set forth above, is the broadest claim. It specifically requires that the "delayed coker quench stream [contain] ... about 5 to about 35% by weight solids ... less than about 6% by weight mobile organics [and the solids] ... having a particle size distribution such that greater than about 70% of the total solids volume comprises solids having a particle size of less than about 15 microns." The record does not indicate whether an embodiment of the claimed invention was offered for sale. The district court did not address whether the process that was offered in the 30 March 1988 proposal to Chevron or the 15 November 1988 proposal to Champlin would necessarily have satisfied the claim limitations relating to small particle size and high solids concentration.
27
We note that there is no requirement that the offer specifically identify these limitations. See, e.g., RCA Corp. v. Data General Corp., 887 F.2d 1056, 1060, 12 USPQ2d 1449 (Fed.Cir.1989); Sonoscan, Inc. v. Sonotek, Inc., 936 F.2d 1261, 1263, 19 USPQ2d 1156, 1158 (Fed.Cir.1991). Nor is there a requirement that Scaltech must have recognized the significance of these limitations at the time of offer. See Titanium Metals Corp. v. Banner, 778 F.2d 775, 780, 227 USPQ 773, 777-78 (Fed.Cir.1985); Verdegaal Bros., Inc. v. Union Oil Co., 814 F.2d 628, 633, 2 USPQ2d 1051, 1054 (Fed.Cir.1987). If the process that was offered for sale inherently possessed each of the claim limitations, then the process was on sale, whether or not the seller recognized that his process possessed the claimed characteristics. See In re King, 801 F.2d 1324, 1326, 231 USPQ 136, 138 (Fed.Cir.1986).
28
Inherency may not be established by probabilities or possibilities. The mere fact that a certain thing may result from a given set of circumstances is not sufficient to establish inherency. See Continental Can Co. v. Monsanto Co., 948 F.2d 1264, 1269, 20 USPQ2d 1746, 1749 (Fed.Cir.1991). However, if the natural result flowing from the operation of the process offered for sale would necessarily result in achievement of each of the claim limitations, then claimed invention was offered for sale. See id.
29
The district court must determine if the process offered for sale, in its normal use, inherently satisfies each claim limitation. If so, then the offer creates a § 102(b) bar. The district court did not perform this analysis. Therefore, we vacate the district court's holding and remand for a determination as to whether the process on sale inherently satisfies each claim limitation.
30
We have considered the parties' other arguments and conclude that they are either unpersuasive or unnecessary for resolution of this appeal.1 Accordingly, we vacate the court's ruling on summary judgment that the '717 patent is invalid by reason of an on sale bar and remand for further proceedings consistent with this opinion.
31
VACATE AND REMAND.
1
Scaltech argues that its invention was still experimental at the time Scaltech was soliciting an opportunity to practice the invention. This argument fails because it is premised on the "experimental stage" doctrine which has been rejected by both this court and the Supreme Court. See Lough v. Brunswick Corp., 86 F.3d 1113, 39 USPQ2d 1100 (Fed.Cir.1996); City of Elizabeth v. American Nicholson Pavement Co., 97 U.S. (7 Otto) 126, 24 L.Ed. 1000 (1877). Commercial exploitation, if not incidental to the primary purpose of experimentation, will result in an on sale bar, even if the invention was still in its experimental stage. See Paragon Podiatry Laboratory, Inc. v. KLM Laboratories, Inc., 984 F.2d 1182, 1185, 25 USPQ2d 1561, 1563 (Fed.Cir.1993)
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34 Cal.App.3d 717 (1973)
110 Cal. Rptr. 307
ALICE C. TYLER, as Executrix, etc., Plaintiff and Respondent,
v.
CRAIG R. NORTON et al., Defendants and Appellants.
Docket No. 41380.
Court of Appeals of California, Second District, Division Four.
October 19, 1973.
*720 COUNSEL
Fidler & Bell, Early, Maslach, Foran & Williams, Thomas C. Underwood and Ronald W. Fidler for Plaintiff and Respondent.
W. Dickerson Milliken, Richard L. Franck and Parker, Milliken, Kohlmeier, Clark & O'Hara for Defendants and Appellants.
OPINION
KINGSLEY, J.
Plaintiff[1] sued for breach of a written contract for the purchases of corporate stock. After a nonjury trial, he recovered judgment. Defendants have appealed; we affirm.
I
We first consider a procedural matter which lies at the heart of the trial court's jurisdiction.
The action is a simple[2] action for breach of a written contract. It was filed on July 12, 1971. On August 10, 1971, defendants filed their answer. *721 On October 8, 1971, defendants filed a demand for jury trial. That filing was reflected on the register of actions, but, for reasons unexplained and apparently unknown, the original document was lost and has never appeared in the superior court file. On October 20, 1971, plaintiffs filed an "At Issue" memorandum, indicating a one-day trial. On November 11, 1971, the clerk issued his notice of assignment as a nonjury trial on December 30, 1971. On November 12, 1971, pursuant to stipulation, plaintiff filed an amended complaint, to which defendants filed an answer on November 18, 1971. On December 6, 1971, defendants filed a motion to vacate the trial setting and to set the case for trial as a jury trial. That motion was heard on December 14, 1971, in department 1 of the superior court. The minutes of that hearing show (by a rubber stamp) "Motion Granted." Those minutes also recite the vacation of the December 30th trial date and that "On the Court's Own Motion" the cause was to trail on January 5, 1972.[3] A declaration (not contradicted on the record before us) by the attorney[4] who appeared for defendants at the December 14, 1971, hearing in department 1, recites the following occurrences with reference to the motion to set the case for jury trial:
"c. Mr. Fidler responded that defendants did not ask for a jury soon enough and were not entitled to it since it was a matter in equity in which there was no right to trial by jury. He then argued to the court, among other matters, his theory of the nature of the case and generally outlined his version of the facts and the issues before the court on the motion.
"d. The court responded to Mr. Fidler by indicating that plaintiffs should be willing to let defendants have a jury trial inasmuch as they would have a far less chance of prevailing with a jury. He then stated that he would continue the case until Mr. Franck's return from the out of State trip set forth in his Declaration, but that he was not presently going to rule on the jury trial request. He did not state that the motion was either granted or denied regarding the jury trial request and finally concluded the hearing by indicating that if defendants want to make a motion at trial for a jury, that plaintiff should agree."[5]
*722 (1) Trial counsel for defendants alleges, in declarations filed by him, that he relied on those statements by the judge, as reported to him by his associate, and prepared for jury trial on January 5, 1972. When he arrived in department 1, on that day, he discovered that the daily calendar listed the case as "non-Jury."[6] He avers that he concluded that, in the meantime, the court had decided to rule on the motion and had denied it. (He asserts he was unaware of the minute order until much later.) Assuming that his attempt to secure a jury had been futile, he went to the assigned trial department (department 54) and proceeded to a nonjury trial without objection. He did not raise the jury trial issue in the trial department until he made it a ground for a new trial motion, which was denied.
While defendants had not "waived" jury trial by any of the methods set forth in section 631 of the Code of Civil Procedure, it nevertheless follows that defendants cannot, on this appeal rely on any error in the assignment of the case. We agree that the information available to counsel on January 5, 1972, was confusing. He nevertheless was advised that the judge in department 1 had indicated an opinion that the motion could properly be made in a trial department. Nothing prevented him from renewing his motion at that time and place.[7] Defendants cannot play "Heads I win, Tails you lose" with the trial court. After proceeding, without objection, to try their case for two days before a judge, they may not, after losing, raise the procedural issue. (Glogau v. Hagan (1951) 107 Cal. App.2d 313 [237 P.2d 329].)
II
The parties to this action, together with two other men, owned all of the stock of Nordril, Inc., a Liberian corporation, plaintiff owning 121/2 percent of the issued stock. The corporation had been engaged in oil drilling operations in Argentina but, as the result of expropriation of its Argentine assets by that government, it held notes (pagares), the value of which was, at the time of the contract herein involved, uncertain. Tyler desired to get out of the Nordril company and offered to sell his stock in exchange for a 121/2 percent share of the proceeds of the pagares, when, as and if *723 received by Nordril. With the approval of the other stockholders, defendants, on July 15, 1965, executed a written agreement with plaintiff, reading as follows:
WITNESSETH:
It is agreed between the parties as set forth hereinafter:
"1. Seller agrees to deliver a properly endorsed stock certificate for seventy-five (75) shares of Nordril, Inc., a Liberian Corporation, to Buyers.
"2. Buyers agree jointly and severally to indemnify Seller against any loss, including interest paid, Seller may suffer as the result of that certain guarantee executed by Seller in favor of Bankers Trust Company of New York guaranteeing the payment of Eighteen Thousand Seven Hundred Fifty Dollars ($18,750.00) borrowed from Bankers Trust Company by Nordril, Inc., said guarantee being dated January 1 1965. Buyers agree to reimburse Seller for any such loss within ten (10) days of the date of payment by the Seller and, if such reimbursement is not promptly made, further agree to pay Seller interest at the rate of 6% per year, beginning ten (10) days after notification to Buyers that Seller has been required to advance funds because of the obligation incurred by Seller as the result of said guarantee, and continuing until Seller has been fully reimbursed for all funds paid out under terms of said guarantee.
"Buyers agree that all net proceeds deriving from any sale of equipment of Nordril, Inc., which is now located in the Republic of Argentina, or any net proceeds received by Buyers as the result of any settlement with the Argentine government, with respect to said equipment in the Republic of Argentina, will be transferred to Seller promptly upon receipt of same, whether such proceeds be in the form of installment or lump sum payments. The net proceeds shall be computed on the basis of seventy-five (75) shares of Nordril, Inc., stock being 12 1/2% of the total outstanding stock of said Nordril, Inc.
"IN WITNESS WHEREOF, Seller and Buyers have executed this agreement for sale and purchase of seventy-five (75) shares of the common stock of Nordril, Inc. on the 15th day of July, 1965.
/s/ "JOHN C. TYLER
JOHN C. TYLER
/s/ "CRAIG R. NORTON
CRAIG R. NORTON
/s/ "HAL J. WEBB
HAL J. WEBB"
*724 Ultimately, payments on the pagares in the total amount of $258,749.13 were received by Nordril; plaintiff received, by checks drawn on Nordril accounts, six payments, totaling $24,033.94. The present action is for the balance of $12,281.26, plus interest.
(2) Plaintiff contended in the trial court, and contends here, that the agreement created a personal obligation on the part of defendants, measured by the proceeds to Nordril from the pagares. Defendants admit that the first paragraph of paragraph 2 of the agreement (indemnifying plaintiff against loss on his guarantee of Nordril obligations) was a personal obligation assumed by them as individuals, but they contend that the remainder of that paragraph (providing for the purchase price of the Nordril shares) was a corporate obligation and not one assumed by them as individuals.
After a two-day trial, at which there was substantial evidence from the three parties concerned, together with documentary evidence, interrogatories and answers to them, the trial court found for plaintiff and awarded to him the sums prayed for.
We conclude that the trial court correctly interpreted the agreement. The first draft of the agreement was prepared by Webb; Tyler's nephew, an attorney, made some minor modifications in the portion dealing with the indemnity paragraph, but left unchanged the paragraph herein pertinent. In form it is a contract by defendants as individuals. It admittedly is obligatory in part on them as individuals. A rational reading is that both parts of paragraph 2 were by the same obligors.
Defendants urge, as we understand them, three contentions in favor of their position:
(a) (3) Such payments as were made were in the form of checks drawn by Nordril on its corporate account; plaintiff made no objection to payment in that form. The argument is non-persuasive. The use of corporate funds to meet the personal obligations of the controlling stockholders of a closely held corporation is not unusual. Recipients are, unless otherwise warned, entitled to assume that their debtor has made proper arrangements with the corporation for payments by it on his account.
(b) (4) The corporate minutes of Nordril, entered two years later, purported to treat the Tyler shares as belonging to the corporation, ratifying the payments made by Nordril to plaintiff, and distributing the Tyler shares (together with shares of another minority stockholder acquired after the Tyler transaction) among the remaining stockholders "in amounts such *725 that their relative percentage ownership of the stock of Nordril, Inc., does not change." We agree with the trial court that this unilateral action, two years later, unknown to plaintiff, sheds no light on the intent of the parties to the agreement of July 1965.
(c) (5) Defendants argue that, if construed as plaintiff contends and the trial court found, the agreement would be illegal, as constituting an attempt by them to dispose of corporate assets. Clearly, if the agreement is construed to make the receipt by Nordril of payment of the pagares merely the measure of the amount and the fixing of the time for defendants to meet their conditional obligation to plaintiff, there is no possible illegality. The value of defendants' interest in the assets of Nordril would be increased by Nordril's receipt of the pagares payments; defendants then would be better able to transfer to plaintiff the equivalent of that increase in the value of their stockholdings.
An agreement is to be construed as valid if reasonably possible. (1 Witkin, Summary of Cal. Law (7th ed. 1960) § 222, pp. 250-251.) We apply that canon here.
III
(6) Defendants complain that the trial court did not make more detailed findings of fact. The controlling finding, as made by the trial court, was as follows: "1. On July 15, 1965 at Los Angeles, California, plaintiff and Defendants entered into a valid contract admitted into evidence as Plaintiff's Exhibit 1." But, for a party to complain on appeal of the insufficiency of findings, the alleged deficiency must be "brought to the attention of the trial court either prior to entry of judgment or in conjunction with a motion under Section 657 or 663." (Code Civ. Proc., § 634.) Defendants state in their brief that: "On motion for a new trial filed pursuant to Section 657, defendants brought to the attention of the trial court that the findings prepared by plaintiff were devoid of any mention of the following: (1) The defense that defendants executed the contract as officers and agents of the corporation and not as individuals and that this lends legality to the contract, and (2) that the evidence that plaintiff Tyler expected the pagare payments to be the source of his consideration was substantially uncontradicted." We have read from the clerk's transcript the papers filed in connection with the new trial motion and the reporter's transcript of the argument on that motion. Nowhere can we find any suggestion that *726 defendants desired any additional findings; their effort was to convince the trial court that the finding above quoted was in error. This is not a compliance with section 634.
The judgment is affirmed.
Files, P.J., and Dunn, J., concurred.
A petition for a rehearing was denied November 14, 1973, and the opinion was modified to read as printed above. Appellants' petition for a hearing by the Supreme Court was denied December 14, 1973.
NOTES
[1] The original plaintiff was John C. Tyler; after judgment, and during the progress of this appeal, Mr. Tyler died. Alice C. Tyler, the executrix of his estate, has been substituted as party appellant. For convenience we use the term "plaintiff" to refer to John Tyler.
[2] In saying that the case was a "simple" breach of contract suit we mean only that only monetary damages for the breach were sought. We do not deprecate the complexity of the factual and legal issues that developed at the trial on the merits.
[3] The register of actions shows, on the entry for the December 14, 1971, hearing, "Cause trailed to 1-5-72"; there is no reference to the other part of defendants' motion.
[4] Because of illness, the principal counsel for defendants could not appear at the December 14, 1971, hearing; defendants were represented by counsel's office associate.
[5] We have been furnished with a transcript of the December 14th hearing, certified by the official court reporter then assigned to department 1. That transcript supports the paraphrase given in counsel's declaration.
[6] A photostatic copy of the printed calendar of department 1 for December 14, 1971, is incorporated in counsel's declaration; it supports his allegation of that fact.
[7] In addition to the fact that the judge in department 1 had suggested that he apply to the judge in the trial department, counsel must have been aware that section 631 of the Code of Civil Procedure expressly allows a court to grant a jury trial although one has theretofore been "waived" by a statutory method. Defendants offer no excuse for not seeking to invoke the trial judge's discretionary power.
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Opinions of the United
2001 Decisions States Court of Appeals
for the Third Circuit
11-20-2001
In Re: Gi Nam v.
Precedential or Non-Precedential:
Docket 00-4141
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2001
Recommended Citation
"In Re: Gi Nam v." (2001). 2001 Decisions. Paper 270.
http://digitalcommons.law.villanova.edu/thirdcircuit_2001/270
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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Filed November 20, 2001
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 00-4141
IN RE: GI NAM
CITY OF PHILADELPHIA
v.
GI NAM
MARVIN KRASNY, CHAPTER 7 TRUSTEE; FREDERIC
BAKER, ASSISTANT U. S. TRUSTEE,
Trustees
CITY OF PHILADELPHIA,
Appellant
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil Action No. 00-cv-00347)
District Judge: Honorable Stewart Dalzell
Argued: July 27, 2001
Before: ROTH, BARRY and FUENTES,
Circuit Judges
(Filed: November 20, 2001)
Steven M. Schain, Esquire
2401 Pennsylvania Avenue
Philadelphia, PA 19130
Kenneth I. Trujillo, Esquire
City Solicitor
Marcia Berman, Esquire (Argued)
Deputy City Solicitor, Appeals Unit
City of Philadelphia
Law Department
One Parkway Building
1515 Arch Street, 17th Floor
Philadelphia, PA 19102-1595
Attorneys for Appellant-City of
Philadelphia
Eric L. Frank, Esquire (Argued)
Miller, Frank & Miller
21 South 12th Street
640 PSFS Building
Philadelphia, PA 19103
Attorney for Appellee-Gi Nam
Marvin Krasny, Esquire
Wolf, Block, Schorr & Solis-Cohen
1650 Arch Street, 22nd Floor
Philadelphia, PA 19103
Attorney/Chapter 7 Trustee
Frederic J. Baker, Esquire
U.S. Department of Justice
Office of the Trustee
601 Walnut Street
The Curtis Center,
Suite 950 West
Philadelphia, PA 19106
Attorney/Assistant U.S. Trustee
2
Karen A. Brancheau, Esquire
1421 Arch Street
Philadelphia, PA 19102
Attorney for Amicus-Appellant
PA District Attorneys Association
OPINION OF THE COURT
ROTH, Circuit Judge:
This bankruptcy appeal presents a question with
potentially far-reaching implications for the States'
administration of their criminal justice systems. It is also
one of first impression in this Circuit. The issue is whether
the debt to a State of a bond surety for a defendant who
fails to appear is dischargeable in the surety's Chapter 7
bankruptcy. We decide the question here only in the
context of the case before us: The bond surety is a relative
of the non-appearing defendant.
We conclude that the decision of the District Court,
holding such a debt dischargeable, contradicts the plain
meaning of the applicable statute. In light of the problems
that such a holding might inflict upon the functioning of
the bail release system, we will reverse the District Court's
decision.
I. FACTS
David Nam (David), the son of the debtor, Gi Nam (Nam),
was charged in Philadelphia, Pennsylvania, on September
22, 1997, with a number of offenses, including murder,
robbery and burglary in connection with the shooting death
of Anthony Schroeder during a March 1997 robbery. Bail
was set at $1 million, conditioned on a 10% cash payment
by the surety and an agreement by the defendant and the
surety to assume legal responsibility for paying the full
amount of the bail to the Commonwealth of Pennsylvania.
By a Certification of Bail and Discharge, dated January 12,
1998, executed by both Nam and David, Nam agreed to
serve as surety for the bail. The operative portion of the
Certification reads as follows:
3
WE THE UNDERSIGNED, defendant and surety, our
successors, heirs and assigns, are jointly and severally
bound to pay the Commonwealth of Pennsylvania in
the sum of ONE MILLION dollars ($1,000,000). WE are
bound by the CONDITIONS of this bond as shown on
both sides of this form.
Pursuant to the terms of the bond, both Nam and David
agreed that the latter would appear in court at all required
times and that Nam, as surety, would notify the court in
writing of any change in David's address. The Certification
also states, "If defendant performs the conditions as set
forth herein, then this bond is to be void, otherwise the
same shall remain in full force and this bond in the full
sum thereof shall be forfeited." Additionally, both Nam and
David authorized the entry of a judgment by confession
against them in the amount of the bond, regardless of
whether a default of the bond conditions occurred.
On March 12, 1998, David Nam failed to appear in court
for a pre-trial status listing in his criminal case.
Consequently, on April 6, 1998, the Court of Common Pleas
of Philadelphia, Criminal Section, ordered the bail bond
forfeited pursuant to the terms of the bond agreement, the
Pennsylvania Rules of Criminal Procedure, and local court
rules.1 The criminal court entered a judgment against Nam
as surety on the forfeited bond in the amount of the bail,
plus court costs: $1,000,018.50.2 The notice of entry of
judgment against Nam, which bears the caption of David's
criminal case, reads in pertinent part:
Bail in the amount of $1000000.00 has been sued out
and judgment entered in the amount of $1000018.50
including cost of $18.50 due to failure of the above
named defendant to appear for trial on 3/12/98 in
Room 604 CJC 1301 Filbert St.
_________________________________________________________________
1. See Pa.R.Crim.P. 4016(A)(2)(a); Rule 510A of the Philadelphia Court
Rules for the Criminal Division of the Court of Common Pleas.
2. Given that Nam had initially posted $100,000, or 10% of the total bail,
in cash, it is not clear why the court did not enter a judgment in the
amount of $900,018.50. That question, however, is not before this Court
and we do not address it.
4
You may reduce your financial responsibility by
producing the defendant forthwith and filing a petition
with the Clerk of Quarter Sessions to vacate, in total or
in part, the judgment against you.
When David was released on bond, Nam provided him
with living quarters and the necessities of life. Some time
before his pre-trial status hearing, David fled to South
Korea where his paternal grandmother resides. It appears
that, once David had fled to Korea, Nam followed him there
and paid a lawyer $10,000 to represent David. See Krasny
v. Gi and Yeoung Nam, 245 B.R. 216, 220, 225-26 (Bankr.
E.D. Pa. 2000). Indeed, Nam testified at a S 341 creditors
hearing before the trustee on August 9, 1999, that he had
provided David with such assistance. See id. at 220.3 David
remains a fugitive.
On May 19, 1999, Nam petitioned for bankruptcy under
Chapter 7 of the Bankruptcy Code. Nam listed the City of
Philadelphia as the creditor on a claim in the amount of
$1,045,000, arising from the bail bond security. On August
27, 1999, the City of Philadelphia filed a Complaint in
Adversary, alleging that, although Nam had listed the bail
bond judgment as an "unsecured non-priority claim" in the
schedule he had filed in the bankruptcy case, such debt
was not in fact dischargeable pursuant to 11 U.S.C.
S 523(a)(7). On September 2, 1999, Nam filed a motion to
dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6),
arguing that the bail bond debt was dischargeable.
_________________________________________________________________
3. Because these facts concerning Nam's possible collusion with his son
are not part of the record in the instant case, we do not rely upon them
in deciding this appeal. Indeed, it follows as a matter of law from our
holding here that we need not reach the question whether Nam has
aided his son and thereby engaged in `wrongdoing' sufficient to forfeit
his
right to seek dischargeability under the District Court's rule.
Nevertheless, we include this information here to illustrate the
difficulty
of administering a rule such as the one formulated by the District Court
that would make the wrongdoing of the debtor dispositive of the question
of dischargeability. See Sections II and IV.A, infra. Indeed, given Nam's
colorable misconduct, it would seem that the District Court misapplied
the rule in the very case in which it announced it.
5
II. PROCEDURAL HISTORY
The Bankruptcy Judge granted Nam's motion to dismiss
on December 8, 1999. The Bankruptcy Court rejected the
City's arguments that the judgment against Nam satisfied
the elements of S 523(a)(7) and that forfeited bail bonds
must be exempted from discharge in order to safeguard the
integrity of the bail and criminal justice systems. The court
construed S 523(a)(7) narrowly, holding that it only exempts
from discharge "obligations imposed upon the debtor as
punishment for his wrongdoing" and that the judgment
against Nam arose "because a condition of the bond was
breached and not because the surety is being punished."
The District Court affirmed the Bankruptcy Court's
judgment, holding that S 523(a)(7) excepts from discharge
only sanctions that are penal, as opposed to civil, in nature
and that result from the debtor's own wrongdoing. The
District Court further found that Nam never assumed any
independent obligation to produce David in court and,
thus, that Nam committed no wrongdoing. Consequently,
the court held the debt dischargeable. Moreover, the
District Court enunciated a more general proposition
concerning the application of S 523(a)(7): A judgment
against a surety, arising from a forfeited bail bond, will be
exempted from discharge under S 523(a)(7) only if the
surety played some affirmative role in the defendant's
failure to appear. This appeal followed.
III. JURISDICTION
The Bankruptcy Court had jurisdiction under Title 11 of
the United States Code, 28 U.S.C. S 1334(b), as a complaint
to determine the dischargeability of a debt. The District
Court had jurisdiction pursuant to 28 U.S.C. S 158(a) and
we have jurisdiction of this appeal pursuant to 28 U.S.C.
S 158(c) and 28 U.S.C. S 1291. We exercise plenary review
over a district court's bankruptcy decision. Commonwealth
of Pa. Dept. of Environmental Resources v. Tri-State Clinical
Laboratories, Inc., 187 F.3d 685, 687 n.2 (3d Cir. 1999).
6
IV. DISCUSSION
A. SECTION 523(a)(7)
The sole statutory provision at issue in this appeal is the
exception to discharge provided by 11 U.S.C. S 523(a)(7),
which states in pertinent part:
(a) A discharge under section 727 . . . of this title does
not discharge an individual debtor from any debt--
. . . .
(7) to the extent such debt is for a [1] fine, penalty, or
forfeiture [2] payable to and for the benefit of a
governmental unit, and [3] is not compensation for
actual pecuniary loss, other than a tax penalty. . ..
11 U.S.C. S 523(a)(7) (emendations added). In order to
"determine whether [a debt] is dischargeable under
S 523(a)(7), we must determine whether [such] debt meets
the three requirements of the section." In re Rashid, 210
F.3d 201, 206 (3d Cir. 2000). Here, the parties do not
dispute that Nam's debt is payable to and for the benefit of
a governmental unit (either or both the Commonwealth of
Pennsylvania and the City of Philadelphia) or that the $1
million bail bond debt is not compensation for any
pecuniary loss by such governmental entities or any other
party.4 Consequently, we need only concern ourselves with
the construction of the first prong of S 523(a)(7): the "fine,
penalty or forfeiture" provision. The City argues that Nam's
debt is a "forfeiture" of the bond amount arising from
David's failure to appear and, therefore, falls within the
plain language of the statute. Nam on the other hand
contends that the statute only creates an exception for
"penal" debts, a category into which Nam's debt assertedly
does not fall.
_________________________________________________________________
4. As the District Court correctly noted, the $18.50 in costs might be
regarded as compensation for a pecuniary loss on the part of the court
system. In what follows, we assume that is so, and confine our
discussion to the remaining $1 million (arguably as reduced by the
$100,000 that Nam has already paid). See District Court opinion at note
10; note 2, supra.
7
Following the teaching of the Supreme Court, we have
held that the "starting point of any statutory analysis is the
language of the statute itself." Commonwealth of Pa. Dept.
of Environmental Resources v. Tri-State Clinical Laboratories,
Inc., 178 F.3d 685, 688 (3d Cir. 1999), citing Pa. Dept. of
Pub. Welfare v. Davenport, 495 U.S. 552, 557-58 (1990);
Kelly v. Robinson, 479 U.S. 36, 43 (1986). Consequently,
our analysis of the "fine, penalty or forfeiture" prong of
S 523(a)(7) must begin with the plain language of the
statute.
On its face, the judgment against Nam seems to come
within the plain meaning of the term "forfeiture." For
example, "forfeiture" is defined in Black's Law Dictionary as
"a divestiture of specific property without compensation;
. . . [a] deprivation or destruction of a right in consequence
of the nonperformance of some obligation or condition."
BLACK'S LAW DICTIONARY 650 (6th Ed. 1990). "Forfeiture" is
defined by Webster's Dictionary as "the divesting of the
ownership of particular property of a person on account of
the breach of a legal duty and without any compensation to
him: the loss of property or money on account of one's
breach of the terms of an agreement, bond, or other legal
obligation." WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY
(1971). Clearly, the judgment against Nam arose from
David's nonperformance of his obligation to appear in court
and Nam's breach of his duty to produce David for trial.
Moreover, the judgment5 does not compensate the City for
any pecuniary loss suffered but instead serves as an
incentive to the surety to prevent the defendant's flight and
to produce him insofar as the surety is capable.
The District Court, however, attempted to construe
S 523(a)(7) using traditional canons of construction. We find
that this attempt at construction results in fact in writing
the term "forfeiture" out of the statute.
As a preliminary matter, we note that the District Court's
conclusion that a forfeiture must be "penal" in order to
come within the exception conflicts with the plain language
of the statute. Nothing in that language equates a forfeiture
with a penalty. Quite the contrary, "penalty" and
_________________________________________________________________
5. Excluding the $18.50 in court fees. See notes 2 and 4, supra.
8
"forfeiture" are two distinct terms within the phrase "fine,
penalty, or forfeiture." Citing Kelly v. Robinson, 479 U.S. 36
(1986) and In re Collins, 173 F.3d 924 (4th Cir. 1999), the
District Court reasoned that S 523(a)(7) excepts from
dischargeability only those forfeitures which are"penal
sanctions that result from the debtor's wrongdoing."
Finding no such qualification in S 523(a)(7), we disagree
with the District Court's reasoning. We do not interpret
Kelly to imply that the "fine, penalty or forfeiture" prong of
S 523(a)(7) is restricted in scope to except from
dischargeability only obligations of a penal nature.
Furthermore, to the extent the Fourth Circuit so interpreted
Kelly in In re Collins, we decline to adopt a similar rule
here.
The Kelly court addressed the question whether
"restitution obligations, imposed as conditions of probation
in state criminal proceedings, are dischargeable in
proceedings under Chapter 7 of the Bankruptcy Code."
Kelly, 479 U.S. at 38. The Supreme Court held that such
restitution obligations, although not excepted expressly by
S 523(a)(7), fall within the S 523(a)(7) exception and,
therefore, are not dischargable. See id. at 53. The Supreme
Court based this holding on findings that (1) S 523(a)(7)
"creates a broad exception for all penal sanctions" and (2)
restitution obligations such as the one at issue in Kelly
constitute "penal sanctions." Id. at 51-53. Kelly, therefore,
stands for the proposition that S 523(a)(7) excepts from
dischargeability some penal sanctions that technically are
neither fines nor penalties nor forfeitures. However, it does
not follow logically from this proposition thatS 523(a)(7)
excepts only sanctions of a penal nature.
The Kelly court addressed the penal nature of restitution
obligations and the history, object and policy ofS 523(a)(7)
because the plain language of that statute fails to address
"restitution obligations" expressly. The instant appeal is
distinguishable from Kelly insofar as "forfeitures" -- the
type of obligation alleged to be at issue -- are excepted
expressly from discharge by S 523(a)(7). Because S 523(a)(7)
expressly excepts forfeitures without regard to penal
nature, we need not address this characteristic in assessing
the applicability of S 523(a)(7) to Nam's alleged forfeiture.
9
Returning to the District Court's use of the canons of
statutory construction, we find its reliance on the canon
ejusdem generis to lead to an erroneous interpretation of
the statute. According to that canon, "where general words
follow specific words in a statutory enumeration, the
general words are construed to embrace only objects
similar in nature to those objects enumerated by the
preceding specific words." United States v. Weadon, 145
F.3d 158, 160 (3d Cir. 1998). Nevertheless, the District
Court's attempt to render "forfeiture" a more general term
than "penalty" is strained and unconvincing. The
alternative dictionary definitions of "forfeiture" which the
District Court cites span varying degrees of generality.
Although Black's Dictionary characterizes"forfeiture" as a
"comprehensive term," it also defines it as a"divestiture of
specific property" -- language which resembles that
dictionary's alternative definitions of "penalty" in both its
broadness and its specificity; "penalty" is an"elastic term
with many different shades of meaning" but is nevertheless
"generally confined to pecuniary punishment." BLACK'S LAW
DICTIONARY 650, 1133 (6th ed. 1990).
It is not necessary to make here the numerous similar
observations possible with respect to the dictionary
definition of "fine"; it suffices merely to note that the
generality of the terms in question cannot be ascertained
with any reliability on the basis of their dictionary
definitions and that it is difficult to discern any lexical
justification for the assertion that "forfeiture" is a more
general term than "penalty." It follows that the canon
ejusdem generis is inapplicable to this case. Moreover, even
were it applicable, it could not be used to reach the result
of the District Court -- the transformation of the term
"forfeiture" into surplusage -- because ejusdem generis
"cannot be employed to render general words meaningless."
Ferrara & DeMercurio, Inc. v. St. Paul Mercury Ins. Co., 169
F.3d 43, 52 (1st Cir. 1999), quoting United States v. Alpers,
338 U.S. 680, 682 (1950).
Similarly flawed is the District Court's application of the
maxim noscitur a sociis to subsume the term"forfeiture"
within the earlier term "penalty." The Supreme Court has
stated that "[t]he maxim noscitur a sociis, that a word is
10
known by the company it keeps, while not an inescapable
rule, is often wisely applied where a word is capable of
many meanings in order to avoid the giving of unintended
breadth to Acts of Congress." Folger Adam Sec., Inc. v.
DeMatteis/MacGregor JV, 209 F.3d 252, 258 (3d Cir. 2000),
quoting Jarecki v. G.D. Searle & Co., 367 U.S. 303, 307
(1961). Put differently, the maxim provides that the
meaning of an ambiguous statutory term may be derived
from the meaning of the accompanying terms. In re
Continental Airlines, Inc., 932 F.2d 282, 288 (3d Cir. 1991).
Were the maxim applicable here, it would indeed be
possible to hold that the term "forfeiture" should be read as
"penal forfeiture" in light of the term's proximity to the word
"penalty." S 523(a)(7). However, noscitur a sociis can have
no application in this context because "[w]hen Congress
has separated terms with the conjunction `or,' it is
presumed that Congress intended to give the terms`their
separate, normal meanings.' " In re Continental Airlines, 932
F.2d at 288, quoting Garcia v. United States, 469 U.S. 70,
72 (1984). Consequently, we are again referred to the plain
meaning of the term "forfeiture" which, as we have
indicated supra, encompasses debts such as Nam's.
B. STATE LAW CONTEXT AND HISTORY
As is often the case, such an analysis of the "plain
meaning" of the statutory language in a vacuum, while
helpful, cannot of itself provide an adequate guide to the
proper construction of the statute. To buttress the
preceding discussion, we now turn to the state-law context
of S 523(a)(7) and its history. As Nam points out in his
appellate brief, absent explicit Congressional intent to
incorporate state law, the meaning of a term in a federal
statute is a question of federal law. See In re Wilson, 252
B.R. 739, 742-43 (B.A.P. 8th Cir. 2000); accord In re
Gianakas, 917 F.2d 759 (3d Cir. 1900) (federal law
determines dischargeability under 11 U.S.C. S 523(a)(5)).
Nevertheless, this fact does not render the characterization
of debts such as Nam's under applicable state law wholly
without meaning. Although the label that state law affixes
to a certain type of debt cannot of itself be determinative of
the debt's character for purposes of the federal
11
dischargeability provisions, such state-law designations are
at least helpful to courts in determining the generic nature
of such debts under the law that most directly governs their
creation, e.g., whether they are penal or civil, fines or
forfeitures.
In the case of Nam's debt, Pennsylvania law defines a
judgment entered against a surety as a result of his failure
to produce the defendant in court as a "forfeiture." Rule
4016 (A)(2)(a) of the Pennsylvania Rules of Criminal
Procedure, entitled "forfeiture," authorizes the bail authority
to "order the case or other security forfeited" as a sanction
for the defendant's violation of a condition of the bail bond.
Local court rules also use the term "forfeiture"; Rule 510A
of the Philadelphia Court Rules for the Criminal Division of
the Court of Common Pleas authorizes the court to order
bail to be "forfeited" when the defendant fails to appear for
court and states that the surety is obligated to produce the
defendant at all required court appearances "under penalty
of forfeiture of his bail bond." Consequently, the District
Court correctly conceded that the $1 million judgment
against Nam is characterized as a forfeiture under state
law.
The history of S 523(a)(7) strongly suggests that Congress
intended the sort of forfeiture entered against Nam to come
within the exemption from dischargeability set forth in that
section. Section 523(a)(7) came into being in 1978, when
Congress enacted the present Bankruptcy Code. The
parties to this litigation do not dispute that, in enacting the
Code, Congress codified case law exempting certain
penalties and forfeitures from discharge under the former
Bankruptcy Act of 1898. Moreover, such codified case law
included a line of authority holding that obligations against
sureties arising from forfeited bail bonds were
nondischargeable. In what follows, we will review the
fundamental historical rationale for and the development of
S 523(a)(7) against the background of the prior 1898 Act
case law from which that statute emerged.
In general, a discharge granted to a debtor in a Chapter
7 bankruptcy proceeding voids all judgments previously
applicable to the debtor, except for debts that are exempt
from discharge under 11 U.S.C. S 523, which"expresses
12
Congressional policy that certain debts should be excluded
from discharge because of overriding public policy relating
to the type of the debt, the manner in which liability for it
was incurred, or the underlying social responsibility that
it represents." Bankruptcy Service, Lawyers Edition,
Ch. 27: Code 523, S 27:4 at 27-90 (West 1999). Such
"[d]ischargeability exceptions reflect a decision by Congress
to allow certain competing public interests to override the
`fresh start' purpose of bankruptcy." Id . As the Supreme
Court has stated, "Congress evidently concluded that the
creditors' interest in recovering full payment of debts in
[the] categories [encompassed by S 523(a)] outweighed the
debtors' interest in a complete fresh start." Grogan v.
Garner, 498 U.S. 279, 287 (1991).
Although the 1898 Act contained no provision specifically
forbidding the discharge of fines, penalties, or forfeitures
due the government, it did provide that certain types of
debts were nondischargeable. See Bankruptcy Act of 1898,
SS 17, 63 (repealed 1978). Pursuant to S 57j of the 1898
Act, penalties or forfeitures owed to the government were
only allowed as a claim in bankruptcy to the limited extent
that such penalties or forfeitures compensated the
government for a pecuniary loss. Section 57j provided:
Debts owing to the United States, a State, a county, a
district, or a municipality as a penalty or forfeiture
shall not be allowed, except for the amount of the
pecuniary loss sustained by the act, transaction, or
proceeding out of which the penalty or forfeiture arose.
30 Stat. 561, 11 U.S.C. S 93 (repealed 1978).
It is evident then that in enacting this provision,
Congress intended to protect general creditors against the
reduction of debts owed them by limiting the debts
allowable to the government to its actual pecuniary losses.
A leading treatise on bankruptcy explained the policy
considerations underlying S 57j in the following terms:
It is perfectly conceivable that a bankruptcy law is
anxious not to curtail this sovereign power to mete out
punishment and therefore treats claims for penalties
on a footing of equality with, if not of precedence over,
other claims. Yet there is on the other hand the natural
13
tendency and task of the bankruptcy law to mitigate as
far as possible the losses to be sustained by creditors,
and under this aspect there is an undeniable equity in
the postulate that participation in the estate should be
denied to a creditor who has neither in some degree
contributed to the distributable funds (e.g., by the
governmental protection on which taxation is supposed
to be based), nor has suffered a pecuniary loss by
parting with something in money's worth. It is this
consideration for the bankrupt's creditors that
pervades S 57j.
3 Collier on Bankruptcy, P 57.22[1], at p. 382 (14th ed.
1977).
The notion that the conflicting interests of protecting the
government's power to punish and defending the rights of
general creditors should be thus balanced is a recurring
theme of the case law under the 1898 Act. See, e.g.,
Simonson v. Granquist, 369 U.S. 38, 40 (1962) (stating that
S 57j "plainly manifests a congressional purpose to bar all
claims of any kind against a bankrupt except those based
on a `pecuniary' loss. So understood, this section, which
has been a part of the Bankruptcy Act since its enactment
in 1898, is in keeping with the broad aim of the Act to
provide for the conservation of the estates of insolvents
. . . ."); Goggin v. United States, 140 F.Supp. 557, 560 (Ct.
of Claims 1956) ("[w]hen Congress, in [S57j], drew a
distinction between a penalty of forfeiture, on the one hand,
and the pecuniary loss sustained, on the other, we think it
meant that an arbitrarily set amount . . . should not be put
in competition with the claims of the ordinary creditors of
the bankrupt."), vacated on other grounds, 152 F.Supp. 78
(Ct. of Claims 1957).
Thus, under pre-1978 bankruptcy statutes and judicial
decisions, penalties and forfeitures owed to the government
were, for the most part, not allowed as claims. The
correlative question whether such debts should be
dischargeable was firmly settled by the judiciary long before
the enactment of the Code in 1978. Because penalties and
forfeitures owed to the government were essentially not
allowable, courts generally exempted them from discharge
as a way of holding debtors responsible for such penalties
14
and forfeitures while avoiding interference with the results
of state criminal proceedings. See United States v. Ron Pair
Enters., Inc., 489 U.S. 235, 245 (1989); Kelly, 479 U.S. at
44-47; Tri-State Clinical Laboratories, 178 F.3d at 695. As
the Kelly Court stated, "[d]espite the clear statutory
language, most courts refused to allow a discharge in
bankruptcy to affect the judgment of a state criminal
court." Kelly, 479 U.S. at 45. This principle of
nondischargeability of penalties and forfeitures payable to
the government and not in remuneration of a pecuniary
loss was so "uniformly accepted" by 1978 that Congress
incorporated it into the Code as an explicit statutory
exception to dischargeability in S 523(a)(7). Ron Pair, 489
U.S. at 245 n.8; Kelly, 479 U.S. at 44-46, quoting 1A Collier
on Bankruptcy P 17.13, at 1609-10 & n.10 (14th ed. 1978);
id. at 51 (recognizing that S 523(a)(7)"codified the judicially
created exception to discharge for fines [, penalties and
forfeitures]").
C. CASE LAW
The line of authority underlying this judicially-created
exception is an old and venerable one, stretching back to
the turn of the twentieth century. In In re Caponigri, 193 F.
291, 292 (S.D.N.Y. 1912), Judge Learned Hand addressed
the issue whether a claim of the United States on a forfeited
recognizance for bail in a criminal case, asserted against a
debtor who had acted as surety for a defendant who fled,
was allowable, given that it constituted a penalty or
forfeiture under former S 57j. Significantly, in Caponigri, as
in the instant case, the debtor was a surety for the criminal
defendant and not the defendant himself. Judge Hand held
that "the recovery on a recognizance for bail is essentially
the recovery of a penalty, and is a forfeiture." 193 F. at 292.
Judge Hand adhered to the concept of a penalty being by
definition unrelated to any pecuniary loss; the amount of a
penal obligation, he wrote, "is measured neither by the
obligee's loss nor by the valuation placed by him upon what
he has given in exchange." Id.
In the years that followed, Caponigri came to be viewed as
controlling authority on the question of the allowability of
forfeited bail bonds. See, e.g., In re Lake, 22 Am. Bankr.
15
N.S. 168 (F. Ref. Minn. 1932). More significantly, however,
the Caponigri decision provided an analytical framework for
defining debts. This framework was applied to determine
the allowability of types of penalties and forfeitures other
than bail bonds. Many cases applied Judge Hand's penalty
test to find obligations to be disallowed where the
obligations were imposed for coercive or regulatory
purposes and were not proportionate to any actual
pecuniary loss. See, e.g., In re James Butler Grocery Co., 22
F.Supp. 993, 994-95 (E.D.N.Y. 1938); In re Erlin Manor
Nursing Home, Inc., 36 B.R. 672, 678-79 (Bankr. D. Mass.
1984); In re Idak Corp., 19 B.R. 765, 772-75 (Bankr. D.
Mass. 1982).
Moreover, the reasoning of Caponigri was applied to
dischargeability as well as to allowability. As early as 1914,
a court in New York held that claims by governments
against sureties for judgments on forfeited bail bonds were
nondischargeable under the 1898 Act. See In re Weber, 212
N.Y. 290, 106 N.E. 58 (1914). See also Commonwealth v.
McMillen, 1 Ky. Rptr. 270 (Ct. of Appeals of Ky. 1880)
(accord). In Weber, the debtor sought the discharge of a
judgment entered against him on a forfeited bail bond.
Following Judge Hand's decision in Caponigri, the court
found the obligation not to be allowable. See Weber, 212
N.Y. at 291-92, 106 N.E. at 59. The court went further,
however, ruling that because the obligation was not
allowable, it was also not dischargeable: "It could not have
been intended by the Bankruptcy Act that a bankrupt
should be discharged of the payment of a debt which was
not allowable." Id.
Both factually6 and legally, Weber is on all fours with the
_________________________________________________________________
6. The opinion does not make clear whether the debtor was the criminal
defendant or a surety for another. Nevertheless, the Weber Court's
wholesale adoption of Judge Hand's analysis in Caponigri suggests that
the cases were factually identical. Additionally, at least one bankruptcy
treatise suggests that the debtor in Weber was in fact a surety. See
Harold Remington, A Treatise on the Bankruptcy Law of the United
States, vol. 8, S 3304 at 156 (6th ed. 1956) (citing Weber as authority
for
the proposition that "[j]udgment against the bondsman on an appearance
bond in a criminal case, forfeiting the bond, is . .. not dischargeable")
16
instant case. Moreover, the parties to this appeal agree, and
the Supreme Court instructed in Kelly, that cases under
the 1898 Act, relating to the dischargeability of certain
fines, forfeitures and penalties, comprise part of the
judicially-created body of exceptions that Congress codified
in S 523(a)(7), and therefore guide courts' dispositions of
such cases. As the District Court stated, "courts
interpreting the present Bankruptcy Code have referred to
the practices under the Act of 1898 that preceded it, and in
construing provisions of the Code that were codifications of
earlier judge-made law, as S 523(a)(7) evidently was, courts
interpret the codification to match the prior judge-made law
absent evidence of specific intent that it be interpreted
otherwise, see Kelly, 479 U.S. at 44, 47." District Court
Opinion at 18 n.19. Nevertheless, the District Court failed
to follow this teaching insofar as it entirely ignored Weber,
notwithstanding the City's heavy reliance on that case in its
reply brief.
The District Court sought to explain its refusal to rely
upon pre-Code jurisprudence with the assertion that
practice relating to the dischargeability question at issue
was "mixed" during that period.This view is b ased upon a
single case, United States v. Hawkins, 20 F.2d 539 (S.D.
Cal. 1927). Hawkins, however, conflicts with all other
judicial and scholarly authority which recognizes the
exception to dischargeability for penalties and forfeitures --
an exception which the District Court itself acknowledged
as axiomatic in its opinion.7 Given that Hawkins is a
summary opinion of only two paragraphs, bereft of analysis
_________________________________________________________________
(emphasis added). Regardless of identity of the debtor in Weber, however,
that decision still governs the instant case because of the broad scope of
its underlying rationale: "It could not have been intended by the
Bankruptcy Act that a bankrupt should be discharged of the payment of
a debt which was not allowable." Weber, 212 N.Y. at 291-92, 106 N.E.
at 59.
7. See In Re: Gi Nam, 254 B.R. 834, 846 n.25 (E.D. Pa 2000) (noting
"pre-Code judicial practices by which courts found that judgments of
state criminal courts were not discharged in bankruptcy despite that the
strict application of the letter of the Act of 1898 would have discharged
them" (citing Kelly, 479 U.S. at 44-48)).
17
and lacking any references to Caponigri, Weber, McMillen,
or the judicially-created exception to dischargeability for
penalties and forfeitures, it is virtually worthless as a
precedent.8 Even if we could properly rely on Hawkins, the
decision by its terms stands only for a very narrow
proposition not directly applicable here: S 17 of the 1898
Act provides no exception whatever to dischargeability for
penalties and forfeitures. We conclude that the District
Court erred in relying on Hawkins for the proposition that
pre Code practice concerning the dischargeability of
penalties and forfeitures was "mixed."
D. PUBLIC POLICY CONSIDERATIONS
The clarity and weight of the judicial authority discussed
supra are great enough that such authority provides a
sufficient basis for deciding this appeal. Nevertheless, the
implications of this case for the administration of justice
are potentially of such a magnitude that it is necessary to
devote more than passing attention to the public policy
considerations underlying the dischargeability question.
These issues range from socioeconomic equity to the ability
of the several States to administer their justice systems.
First and foremost among these policy concerns is the
issue of socioeconomic fairness. Let us return to some
critical facts presented by this case -- facts emphasized by
neither party to this litigation. Here, Nam, the father of the
fugitive defendant, had sufficient means to pay $100,000 in
cash and to assure payment of the remaining $900,000 in
the event of forfeiture. As the Pennsylvania District
Attorneys Association points out in its amicus brief, the
parents and relatives of the typical accused felon in
Philadelphia, who is more likely than not economically
disadvantaged, do not have such resources at their
_________________________________________________________________
8. The Bankruptcy Court here recognized the limited usefulness of
Hawkins, noting that the "court's decision in United States v. Hawkins
. . . consists of only two paragraphs. The court simply held that none of
the four exceptions to discharge listed in S 17 of the Act covered the
debt
of a surety on a bail bond. It did not analyze whether the words `fine,
penalty or forfeiture' cover a surety's obligation on a bail bond." In Re:
Gi
Nam, 255 B.R. at 155 n.7.
18
command. The average defendant is forced to remain in jail
while awaiting trial, all but certainly experiencing far poorer
living conditions than the defendant free on bail. At least
one bankruptcy court has discussed this danger:
Eventually, freedom on bail would be restricted to
those defendants who could pay cash up front, i.e.,
wealthy defendants only. Poor and middle class
defendants would be forced to languish in overcrowded
jails. [Among t]he end results would be . . . inequitable
discrimination against those defendants not fortunate
enough to possess thousands of dollars in ready cash.
In re: Bean, 66 B.R. 454, 457 (Bankr. D.Colo. 1986). The
District Court's decision, therefore, opens the door to
accusations that the Philadelphia justice system treats the
wealthy and the poor differently.
Also of concern are the implications of the District
Court's decision for principles of federalism and comity that
must be respected in order to insure the proper functioning
of the several States' justice systems. In Kelly , the Supreme
Court stated that "we must consider the language of S 523
in light of the history of bankruptcy court deference to
criminal judgments and in light of the interests of the
States in unfettered administration of their criminal justice
systems." Kelly, 479 U.S. at 43-44. Throughout its opinion,
the Supreme Court repeatedly emphasized the significant
deference due to state criminal proceedings in the context
of federal bankruptcy law. Discussing S 523, the Court
wrote, "[o]ur interpretation of the [Bankruptcy] code also
must reflect the basis for this judicial exception, a deep
conviction that federal bankruptcy courts should not
invalidate the results of state criminal proceedings." Id. at
49 (citation omitted). The District Court's opinion fails to
take account of these important considerations, and,
insofar as its decision in favor of Nam sanctions the use of
federal bankruptcy laws to evade the financial
consequences of noncompliance with Pennsylvania's bail
system, it constitutes the very sort of federal interference
with a State's administration of justice which the Supreme
Court condemned in Kelly.
The course that the District Court urges entails not only
19
relatively abstract problems such as these, but also
potentially grave concrete consequences for the States'
administration of their respective criminal justice systems
and the proper functioning of the bail system. In terms of
a basic behavioral incentive analysis, the rule that the
District Court proposes would throw into doubt the viability
of the current bail system by creating perverse incentives
for sureties who are also relatives of the defendant, as well
as for such defendants themselves. Once a criminal
defendant becomes convinced that his relative will be able
to escape financial responsibility (other than the negative,
albeit temporary and comparatively lesser, consequences of
the bankruptcy filing itself) for the bail amount if the
defendant flees, the incentive to appear for trial diminishes
sharply. Similarly, given that the surety would no longer
face a sizable debt should the defendant flee (again, leaving
aside the consequences of a bankruptcy), the surety would
no longer be deterred from assisting the defendant in his
flight. This is a particularly serious risk in cases, such as
the Nams', in which the criminal defendant faces execution.
Many a father might consider the opportunity to purchase
his son's life at the cost of enduring a bankruptcy
proceeding to be an attractive bargain.9
The States' bail systems are "central to our modern
criminal procedure"; any threat to their efficacy and
integrity damages the States' criminal justice systems. In
_________________________________________________________________
9. Of course, these concerns do not come into play when a professional
bail bondsman acts as surety for a criminal defendant. In such cases,
the professional bondsman is not inherently interested in helping the
defendant avoid punishment; nor is the defendant likely troubled by the
impact of his actions on the bondsman's finances. Professional
bondsmen are compensated in advance through fees for the risk that the
defendant will flee; consequently, the forfeiture of a bail bond is, from
the perspective of the bondsman, merely an anticipated cost of doing
business. See In re Collins, 173 F.3d 924, 932 (4th Cir. 1999).
Nevertheless, the instant case does not present, and we therefore do not
address ourselves to, the question of professional sureties. For that
reason, we find both Collins and the recent Fifth Circuit decision in In
re
Hickman, 260 F.3d 400 (5th Cir. 2001) inapplicable to the case at bar in
part because those cases involved commercial bail bondsmen. It should
be noted that many jurisdictions, including Philadelphia, do not provide
for professional bondsmen.
20
re: Bean, 66 B.R. at 456-57; see Commonwealth v.
Truesdale, 449 Pa. 325, 335-36, 296 A.2d 829, 834 35
(1972) (discussing purpose and importance of bail system);
Ruckinger v. Weicht, 356 Pa. Super. 455, 457, 514 A.2d
948, 949 (1986) (same). Were we to permit the rule that the
District Court proposes, the effectiveness of the bail system
would be reduced because the risk of flight by criminal
defendants released on bail under bonds executed by
nonprofessional sureties would increase. The adverse
consequences of the proposed rule are obvious. They
include hampering the States' ability to prosecute criminal
defendants, thereby increasing the danger such persons
pose to the public; imposing increased costs on the States
for locating and capturing fugitives; increasing the costs of
pre-trial detention for defendants who otherwise would be
released on bail; and exacerbating the already serious
problem of overcrowding in detention facilities. Such costs,
however "difficult to quantify," are, contrary to the District
Court's view, hardly "marginal" considerations.
V. CONCLUSION
For the foregoing reasons, we will reverse the decision of
the District Court and remand this case for further
proceedings consistent with this opinion. We hold that, in
light of the statute's plain language, its history, and
applicable case law, 11 U.S.C. S 523(a)(7) does not except
from discharge in a Chapter 7 bankruptcy a bail bond
forfeiture judgment entered against a family surety for
failure to produce the defendant for trial.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
21
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184 F.2d 971
PRUYN'S ESTATEv.COMMISSIONER OF INTERNAL REVENUE.
No. 7.
Docket 21453.
United States Court of Appeals Second Circuit.
Argued October 10, 1950.
Decided November 3, 1950.
Haggerty, Myles & Wormser and Silverson & Allison, all of New York City, Harry Silverson, New York City, of counsel, for petitioner, Mona Shelley, executrix of estate of Mary L. Pruyn, deceased.
Theron Lamar Caudle, Asst. Atty. Gen., Ellis N. Slack and L. W. Post, Sp. Assts. to Atty. Gen., for respondent, Commissioner of Internal Revenue.
Before AUGUSTUS N. HAND, CHASE and FRANK, Circuit Judges.
PER CURIAM.
1
Prior to 1931, the decedent and her younger sister, Nelly K. Pruyn, purchased survivor annuity contracts from commercial insurance companies, each paying one-half of the consideration. The decedent died in 1943, leaving her sister surviving. The question presented on this appeal is whether the interest that passed to the surviving sister upon the death of Mary L. Pruyn was includible in the decedent's gross estate for the purposes of the Federal Estate Tax under Section 811(c) or Section 811(e) of the Internal Revenue Code 26 U.S.C.A. The Tax Court, in a decision rendered prior to the passage of the Technical Changes Act, held that the interest that passed to the surviving sister was includible in the decedent's gross estate under Section 811 (c).
2
In Commissioner v. Estate of Church, 335 U.S. 632, 69 S.Ct. 322, 93 L.Ed. 288, the Supreme Court overruled the decision in May v. Heiner, 281 U.S. 238, 50 S.Ct. 286, 74 L.Ed. 826 and held that retention by the grantor of a trust of the income for life was alone sufficient to render the transfer taxable under Section 811(c) as one intended to take effect in possession or enjoyment at or after death. Because of this decision, the Tax Court included in the Estate of Mary L. Pruyn the interest acquired by Nelly on decedent's death. But the impact of the decision of the Supreme Court in Commissioner v. Estate of Church, supra, with respect to persons dying after February 10, 1939, was changed through the subsequent amendment of Section 811(c) by Section 7 of the Technical Changes Act of 1949, c. 720, 63 Stat. 891. The pertinent provisions of the Technical Changes Act, Section 811(c) (2), are set forth in the margin.1 We see no basis for the contention that the decedent retained such a reversionary interest as the Technical Changes Act requires in order to render the transfer taxable.
3
The decedent contracted for a life estate on her own behalf and for a remainder interest on her death for the benefit of her sister, if the latter should survive her. The Tax Court found that the annuity contracts provided that there should be no participation in any distribution of surplus, and contained no requirement for payment to any person of the unrecouped purchase price of the contracts. The sole obligation of the issuing companies was to pay the annuities created by the contracts until the death of the last survivor of the two named annuitants, who in the present case was Nelly K. Pruyn.
4
The Commissioner argued that the contracts resembled trusts under which capital might be invaded for the benefit of the grantor. We can discover no such analogy. Nothing the decedent did or could do under the contracts affected the interest of her surviving sister or could increase her own. Her interest was wholly measured by contract and depended merely on the length of her own life.
5
The Commissioner further relies on Section 811 (e) of the Internal Revenue Code, which provides for inclusion of property held by a decedent as joint tenant with another. In the case at bar there was no such joint tenancy. There certainly was no right of either sister to cause a partition of her interest in the contracts and no ownership by either sister of the contracts as a whole subject to the rights of the other.
6
Because of the provisions of Section 7 of the Technical Changes Act the decision of the Tax Court adjudging the deficiency in the estate tax of Mary L. Pruyn is reversed and the proceeding is remanded with directions to expunge the deficiency, and for such further proceedings not inconsistent with this opinion as may be necessary.
Notes:
1
"Transfers Taking Effect at Death — Transfers Prior to October 8, 1949. An interest in property of which the decedent made a transfer, on or before October 7, 1949, intended to take effect in possession or enjoyment at or after his death shall not be included in his gross estate under paragraph (1) (C) of this subsection unless the decedent has retained a reversionary interest in the property, arising by the express terms of the instrument of transfer and not by operation of law, and the value of such reversionary interest immediately before the death of the decedent exceeds 5 per centum of the value of such property. For the purposes of this paragraph, the term `reversionary interest' includes a possibility that property transferred by the decedent (A) may return to him or his estate, or (B) may be subject to a power of disposition by him, but such term does not include a possibility that the income alone from such property may return to him or become subject to a power of disposition by him."
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Case: 14-41350 Document: 00513080072 Page: 1 Date Filed: 06/16/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 14-41350
Conference Calendar
United States Court of Appeals
Fifth Circuit
FILED
June 16, 2015
UNITED STATES OF AMERICA,
Lyle W. Cayce
Clerk
Plaintiff-Appellee
v.
ROSLYN KAY COLLINS,
Defendant-Appellant
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 2:14-CR-368-1
Before DAVIS, JONES, and HIGGINSON, Circuit Judges.
PER CURIAM: *
Appealing the judgment in a criminal case, Roslyn Kay Collins raises an
argument that she concedes is foreclosed by United States v. Betancourt, 586
F.3d 303, 308-09 (5th Cir. 2009), which held that knowledge of drug type and
quantity is not an element of a 21 U.S.C. § 841 offense. The unopposed motion
for summary disposition is GRANTED, and the judgment of the district court
is AFFIRMED.
* 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.
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349 Ill. App. 63 (1952)
109 N.E.2d 921
Emily Riccitelli, Appellee,
v.
Rose Sternfeld, Nathan Sternfeld, Harry Sternfeld, and Sidney Resnick, Trading as Sacramento Greasing Palace, Defendants. On Appeal of Sidney Resnick, Appellant.
Gen. No. 45,804.
Illinois Appellate Court.
Opinion filed December 30, 1952.
Released for publication January 28, 1953.
*64 CROWE & ABRAHAMSON, of Chicago, for appellant; BURT A. CROWE, of Chicago, of counsel.
LOUIS G. DAVIDSON, BENJAMIN BASS, and LOUIS P. MILLER, all of Chicago, for appellee.
MR. JUSTICE SCHWARTZ delivered the opinion of the court.
This is a personal injury suit in which plaintiff obtained a verdict and judgment for $7,500 against defendant Sidney Resnick, who was lessee of an oil and gas filling station at the southeast corner of Sacramento and Harrison Streets, Chicago. On the morning of January 9, 1948, plaintiff slipped on a piece of ice on the sidewalk adjoining defendant's premises and sustained injuries, the nature and extent of which are not in dispute. There had been a heavy snowfall on January 1st, and snow fell again on the 4th. The period between January 1st and January 9th appears from the evidence to have been one of freeze and thaw. The snow melted during the day, water trickled onto the sidewalk, and as it grew colder at night, the water froze. After the heavy snowfall, defendant's employees cleaned off a portion of the driveway leading to its gas pumps on its own private property and also dug a narrow path through the snow on the sidewalk. The snow from the sidewalk was banked on either side of the walk, and some snow shoveled from the driveway was also placed upon the piles so banked. It is plaintiff's position that this created an extra hazard; that as the thaws came, lumps of snow rolled down from the snow mounds onto the narrow pathway and froze. There is, of course, no direct testimony that the lump of ice upon which plaintiff fell came from mounds *65 of snow piled by defendant, but that was an inference drawn from the circumstances.
[1, 2] The law of the case is not in substantial dispute. It is conceded by both sides that a property owner is under no obligation to clear the sidewalks adjoining his premises. It is also conceded that where accumulations of snow and ice result from natural causes, there is no liability for injuries sustained by pedestrians. The only basis upon which defendant can be held liable in such a situation is in the commission of a positive negligent act which enhances the danger existing from natural causes. This is best illustrated by the case of King v. Swanson, 216 Ill. App. 294. There, plaintiff slipped on ice on a sidewalk adjoining defendant's premises. Defendant had dragged laundry baskets across a stretch of the sidewalk, packing the snow at that spot, causing ice to form, and making that portion of the sidewalk where plaintiff fell, especially slippery and dangerous. The court held that the slippery condition had not resulted from natural causes, but was artificially created by the practice of the defendant. On the other side, a case illustrative of exemption from liability is Miklaszewski v. City of Chicago, 194 Ill. App. 614. There, after a snowstorm the city piled snow on a vacant lot. The snow melted and ran over onto the sidewalk and froze. It was held that there was no liability. In Graham v. City of Chicago, 346 Ill. 638 (aff'g 260 Ill. App. 590) the city flooded a playground for skating. Some of the water overflowed onto the sidewalk and froze. Plaintiff slipped and was injured. The city was held liable. The court reviewed the various cases with respect to liability of the city, saying (p. 643):
"... the reason which underlies the rule exempting cities from liability because of damages from slippery ice is that of necessity. It is grounded on the fact *66 that it is unreasonable to compel a city to expend the money and perform the labor necessary to keep its walks reasonably free from ice and snow during the winter months. Especially is it true in this latitude. But the rule must be predicated on the formation of ice from natural causes, for it would be neither unreasonable ... to compel the removal of ice from sidewalks which was produced by artificial causes."
In Calhoun v. Corning, 328 Ill. App. 493, plaintiff sued the adjacent property owner for personal injuries sustained from a fall on an icy sidewalk. It was claimed that the injuries resulted from the faulty construction of the walk which had enhanced the danger of the icy condition. The court held defendant was not liable, saying (p. 496):
"It is plain that plaintiff seeks to avoid the rule which would exempt the City as well as defendant here from responsibility for accidents resulting from a general, natural condition of ice and snow. He contends the construction and maintenance of a dangerous driveway and the snow and ice conjoin to remove this case from the rule. The general condition of ice and snow covered perfect and faulty construction alike. If the driveway was faultily constructed or maintained so as to create a dangerous condition, it is for that reason that defendant would be liable, not because of the snowy and icy condition."
Heavy snowfalls create emergency conditions and a generally hazardous situation throughout this city. There have been occasions in which the entire citizenry has been mobilized to make paths along sidewalks and to clear streets for traffic. In the urgency of clearing a path and of making way for the renewal of normal traffic, both property owners and the city do their best to find a place for snow. No one can live through winters *67 in this latitude without recalling the piles of snow banked on either side of the walks even in the busiest portions of the city, sometimes staying through the spring months, with lumps of ice often falling onto the cleared portion of the sidewalks. In one sense, a dangerous situation is created, but much less dangerous than would be created if no one undertook to do anything. Plaintiff argues that if defendant had not undertaken to clear a path and if his employees had not piled up the snow, conditions would have been better than they were at the time of the accident. This is conjectural. The general assumption is that the industry displayed by citizens removing snow after a snowfall is desirable, if not necessary. The water which froze and produced the lump of ice on which plaintiff fell, came from natural causes. It cannot be said to have arisen from anything defendant did, other than removing the snow obstructing his driveway and making a path on the sidewalk for pedestrians. That in so doing he may have piled some snow from the driveway onto the piles banked along the walk is not the type of act upon which liability in a case of this character may be predicated.
Judgment reversed.
Reversed.
ROBSON, P.J. and TUOHY, J., concur.
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74 Ill.2d 435 (1978)
386 N.E.2d 39
THE PEOPLE OF THE STATE OF ILLINOIS, Appellee,
v.
GEORGE REHBEIN, Appellant.
No. 50216.
Supreme Court of Illinois.
Opinion filed December 4, 1978.
*436 Ralph Ruebner and James Geis, Deputy Defenders, and Kathy M. Morris, Assistant Appellate Defender, of the Office of the State Appellate Defender, of Chicago, for appellant.
William J. Scott, Attorney General, of Springfield, and Bernard Carey, State's Attorney, of Chicago (Donald B. Mackay, Assistant Attorney General, of Chicago, and Lee Hettinger, Iris E. Sholder, and Mary C. Shropshire, *437 Assistant State's Attorneys, of counsel), for the People.
Judgment affirmed.
MR. JUSTICE RYAN delivered the opinion of the court:
George Rehbein was convicted of the offenses of deviate sexual assault and unlawful restraint (Ill. Rev. Stat. 1977, ch. 38, pars. 11-3, 10-3) by a jury in Cook County in February 1976. The appellate court affirmed the conviction. (54 Ill. App.3d 93.) That court held that the prosecution had erred in its cross-examination by commenting on the accused's silence when he had been interrogated by the police but held that the error was harmless beyond a reasonable doubt. We do not reach the issue of harmless error. The issue we decide is whether a prosecutor's alleged reference to pretrial silence during cross-examination, in the context of clearly proper impeachment by contradictory statements, was an impermissible comment on constitutionally protected silence. We hold that the cross-examination in this case was not a comment on constitutionally protected silence and affirm the appellate court.
At trial, the complainant testified she was sexually assaulted and kidnapped on a rainy morning in August of 1975. As she waited for a bus, a copper-colored car drove up and the driver, identified as the defendant, waved to her. Thinking the driver was her neighbor, the complainant entered the car; immediately realizing she was mistaken, she told the driver she did not need a ride. The driver disregarded this statement and drove to a secluded area under a viaduct. The complainant attempted escape but failed. She was then threatened, disrobed, and sexually assaulted. The driver had no weapon. After further threats, complainant told the driver that she lived alone and that he could do anything he wanted to her at her house if he did not hurt her; the driver accepted this offer and drove toward the woman's house. At a red light she jumped from *438 the car and screamed; the driver held her arm, hit her, and then threw her purse out of the car. She noted the car's license plate.
A police officer testified regarding two conversations he had with the defendant on the morning of the assault. One conversation was by phone; the other, face to face. The officer phoned the defendant, identified himself, and explained that the license plate registered to defendant's car had become the subject of an investigation. The officer asked the defendant about the license plates and the defendant said the plates were on a blue Buick that was in his garage, inoperable and undriven for some time. In response to another question the defendant said he had been home all night. The officer subsequently went to defendant's house, explained his purpose again, and asked to see the car, since the defendant's description of the car did not fit the complainant's. The officer went to the garage with defendant's wife, found that the car was not blue but copper-colored, that it was covered with rain-drops, indicating that it was not inoperable but that it had been recently driven. He returned immediately to the house, told the defendant of the discrepancy, and informed him of his constitutional rights. At this point the defendant "denied any knowledge of being involved in any type of situation" and asked to call an attorney. Nothing further was said.
At the trial, the defendant's testimony directly contradicted that of the complainant and the police officer. Defendant acknowledged that he had in fact picked up the complainant but only after she waved at him. After riding in the car for a few moments she initiated the sexual contact and then asked for money in exchange. Defendant proceeded to the complainant's apartment at her suggestion. However, when he said that he was out of work and had no money she exclaimed that he would be sorry and left the car.
*439 This appeal focuses on the cross-examination of the defendant. He flatly denied making the phone statements to the officer about his car, and his being home all night. In the midst of admittedly proper impeachment questions, and a lengthy cross-examination as to whether the defendant went out to the police car to talk to the complainant, the prosecutor explicitly asked the defendant several times whether the defendant had earlier told the police officer the story he was now telling at trial, namely, that the girl waved to him first and that she had solicited him. A major portion of this particular colloquy is quoted in the appellate opinion below. There was no objection by defense counsel at trial to any of these questions. Defendant does not contend on appeal that the prosecution erred in asking him about his allegedly contradictory statements; the issue is the references to what defendant did not say. The parties in this court have referred to the prosecutor's conduct as a comment on silence. In the sense that reference was made to the fact that the defendant had not previously told the officers the story he told on the witness stand, it is a comment on silence, but to the extent his testimony conflicts with what he told the officer, the cross-examination did not amount to a comment on silence.
We note that the defendant's failure to object at trial to the prosecutor's remarks in this case might well have waived the issue for purposes of appeal. However, because of the importance of the substantive issue of law involved here and the great number of cases reaching the appellate courts on this issue we have elected to decide the question of the prosecutor's remarks.
A brief historical background illustrates the development of the issue on appeal comments on silence. In Miranda v. Arizona (1966), 384 U.S. 436, 16 L.Ed.2d 694, 86 S.Ct. 1602, the Supreme Court decided that certain warnings must be given to a person at the time of *440 his arrest. One of those warnings, of course, was the right to remain silent. Footnote 37 of that opinion expressly said that the prosecution may not use at trial the fact that the defendant stood mute and claimed his privilege in the face of accusation. (384 U.S. 436, 468 n. 37, 16 L.Ed.2d 694, 720 n. 37, 86 S.Ct. 1602, 1624-25 n. 37.) Harris v. New York (1971), 401 U.S. 222, 28 L.Ed.2d 1, 91 S.Ct. 643, followed Miranda but allowed use of inadmissible evidence for impeachment purposes. According to Harris the defendant's protected statements, inadmissible on direct, may be used for impeachment if they are directly contradictory to trial testimony and if they indicate that the defendant is perjuring himself. Use of post-arrest silence for impeachment was not discussed in Harris. Four years after Harris the court ruled in United States v. Hale (1975), 422 U.S. 71, 45 L.Ed.2d 99, 95 S.Ct. 2133, that a defendant's silence could not be used in the Federal courts even as impeachment. Hale invoked the court's supervisory power, and did not rule on a matter of constitutional rights. The Hale court stated that an evidentiary balancing test was to be used; if there were alternative explanations for the defendant's silence, that silence was not sufficiently probative to justify reference to it. One year later, Doyle v. Ohio (1976), 426 U.S. 610, 49 L.Ed.2d 91, 96 S.Ct. 2240, barred a State prosecutor's reference to a defendant's silence even for impeachment. Basing its reasoning on the fourteenth amendment's due process guidelines, rather than merely on the fifth amendment's privilege against self-incrimination, the court said that Miranda gives implicit assurance that silence will not be used against the defendant. Post-arrest silence is insolubly ambiguous. Doyle thus goes beyond the evidentiary test of Hale and establishes a per se constitutional bar to the use of silence. See generally Note, Impeaching a Defendant's Testimony by Proof of Post-Arrest Silence: Doyle v. Ohio, 25 Clev. St. L. Rev. 261 *441 (1976); Comment, Evidence-Doyle v. Ohio: Use of Defendant's Silence for Impeachment at Trial, 8 Loy. Chi. L.J. 438 (1977).
In Illinois, two somewhat contradictory lines of cases emerged from the pre-Miranda Illinois case of People v. Pfanschmidt (1914), 262 Ill. 411. One line allowed use of silence in the face of accusations as an "adoptive admission" (People v. Jones (1970), 47 Ill.2d 135); the other severely restricted the use of silence (People v. Lewerenz (1962), 24 Ill.2d 295). The adoptive admission cases have now been discredited by Miranda. 3 J. Wigmore, Evidence sec. 821, at 309 n. 3 (Chadbourn rev. ed. 1970).
People v. Queen (1974), 56 Ill.2d 560, is a post-Miranda case with facts somewhat similar to ours. Queen testified at his trial that his intention had been to interrupt a robbery in which he was participating by calling the police when he could momentarily escape detection by his fellow robber. No opportunity for this call presented itself. During cross-examination, and again briefly in closing arguments, the prosecutor referred to the defendant's failure to actually call the police. This court held that reference to the defendant's failure to call the police was not a comment on silence, but an impeachment of credibility by contradiction, since he had not remained silent after his arrest but had talked to the police officers.
In Doyle v. Ohio the Supreme Court, in a footnote, stated an exception to the strict ban on reference to silence, an exception which seems to be in accord with the holding in Queen and applicable to the case before us:
"It goes almost without saying that the fact of post-arrest silence could be used by the prosecution to contradict a defendant who testifies to an exculpatory version of events and claims to have told the police the same version upon arrest. In that situation the fact of earlier silence would not be used to impeach the *442 exculpatory story, but rather to challenge the defendant's testimony as to his behavior following arrest." 426 U.S. 610, 619 n. 11, 49 L.Ed.2d 91, 98 n. 11, 96 S.Ct. 2240, 2245 n. 11.
In the case before us we have a prosecutor's reference on cross-examination to the defendant's pretrial silence in direct connection with that prosecutor's admittedly proper impeachment of defendant's trial testimony with inconsistent pretrial statements. We made no distinction between the defendant's silence before or after Miranda warnings were given. In the context of the defendant's silence, the entire conversation between the defendant and the police officer must be viewed as a whole. In the instant case the prosecutor laid a foundation for the impeachment by eliciting from the police officer the defendant's pretrial statements. The prosecutor then asked the defendant if he had not, in fact, said to the police officer that the car was blue and inoperable, and that he had not been out all night. It was in the context of these questions that the prosecutor referred to the defendant's failure to tell the police his now totally contradictory exculpatory story the girl was a prostitute and waved to him first and solicited him.
In United States v. Mireles (5th Cir.1978), 570 F.2d 1287, the defendant was convicted of possession of marijuana with intent to distribute. This case is factually similar to ours. At trial, the defendant said he did not know of the marijuana concealed behind the paneling in a van he was driving and that he was merely moving furniture for another. A border agent testified that before arrest the defendant said the furniture was his own and after arrest said that he had borrowed the truck from his uncle. The defendant apparently said nothing about moving furniture for another until the trial. The Mireles court reasoned that the defendant's silence was not at issue when the prosecutor asked the defendant if he had told his *443 exculpatory story to the agents. The prosecutor was concerned as to inconsistencies; failure to mention the other person, either before or after arrest, as against defendant's trial testimony. The prosecutor's questions and argument, according to the court, "were not an impeachment by silence, as in Doyle, but merely an effort to impeach by prior statements that were inconsistent with defendant's testimony at trial." (570 F.2d 1287, 1293.) We find the reasoning of Mireles helpful. Accord, Twyman v. Oklahoma (10th Cir.1977), 560 F.2d 422 (comment on omission in purportedly complete statement made to police); United States v. Mitchell (8th Cir.1977), 558 F.2d 1332 (when confronted with fact of false statement given to officers, defendant remained silent); United States v. Conlin (2d Cir.1977), 551 F.2d 534 (evidence allowed to dispute defendant's statement that he had told exculpatory story to officers); United States v. Davis (5th Cir.1977), 546 F.2d 617, 622 n. 4 (before arrest and Miranda warnings defendant ran and shouted to officers that they might as well shoot but made no exculpatory statement); United States v. Riggs (4th Cir.1976), 537 F.2d 1219 (repeated comments about stolen money supported reference to accompanying silence).
Viewing the prosecutor's comments here in light of Queen and the Doyle footnote, and supported by the authority and reasoning of several Federal cases, we conclude that the prosecutor's references to George Rehbein's pretrial silence in this case were not impermissible comments on silence. The prosecutor's reference to silence in the context of proper impeachment by inconsistent statements was not a Doyle violation. We therefore affirm the appellate court.
Judgment affirmed.
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In the United States Court of Federal Claims
OFFICE OF SPECIAL MASTERS
No. 19-35V
UNPUBLISHED
LINDA WILSON, Chief Special Master Corcoran
Petitioner, Filed: April 17, 2020
v.
Special Processing Unit (SPU);
SECRETARY OF HEALTH AND Ruling on Entitlement; Concession;
HUMAN SERVICES, Table Injury; Influenza (Flu) Vaccine;
Shoulder Injury Related to Vaccine
Respondent. Administration (SIRVA)
Leah VaSahnja Durant, Law Offices of Leah V. Durant, PLLC, Washington, DC, for
petitioner.
Ryan Daniel Pyles, U.S. Department of Justice, Washington, DC, for respondent.
RULING ON ENTITLEMENT 1
On January 4, 2019, Linda Wilson 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 alleges that her October 26, 2017 influneza (“flu”) vaccination
caused her to suffer a Shoulder Injury Related to Vaccine Administration (“SIRVA”).
Petition at 1. The case was assigned to the Special Processing Unit of the Office of
Special Masters.
1
Because this unpublished ruling contains a reasoned explanation for the action in this case, I am
required 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). This means the ruling will be available to anyone with access to
the internet. 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, I agree that the identified material fits within this definition, I 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).
On April 15, 2020, Respondent filed his Rule 4(c) report in which he concedes
that Petitioner is entitled to compensation in this case. Respondent’s Rule 4(c) Report
at 1. Specifically, Respondent indicates that
[m]edical personnel at the Division of Injury Compensation Programs,
Department of Health and Human Services (DICP), have reviewed the
facts of this case and concluded that petitioner’s claim meets the Table
criteria for SIRVA. Specifically, petitioner more likely than not had no
history of pain, inflammation or dysfunction of the affected shoulder prior
to intramuscular vaccine administration that would explain the alleged
signs, symptoms, examination findings, and/or diagnostic studies
occurring after vaccine injection; she more likely than not suffered the
onset of pain within forty-eight hours of vaccine administration; her pain
and reduced range of motion were limited to the shoulder in which the
intramuscular vaccine was administered; and there is no other condition or
abnormality present that would explain petitioner’s symptoms. 42 C.F.R. §
100.3(a), (c)(10). Therefore, petitioner is entitled to a presumption of
vaccine causation.
Id. at 4-5. Respondent further agrees that
[w]ith respect to other statutory and jurisdictional issues, the records show
that the case was timely filed, that the vaccine was received in the United
States, and that petitioner satisfies the statutory severity requirement by
suffering the residual effects or complications of her injury for more than
six months after vaccine administration. See 42 U.S.C. §§ 300aa-
11(c)(1)(D)(i). Petitioner moreover avers that she has neither “filed [a] civil
action for [her] vaccine-related injury” nor “received compensation in the
form of an award or settlement” for the same. Ex. 7 at 2. Thus, respondent
concedes that entitlement to compensation is appropriate under the terms
of the Vaccine Act.
Id. at 5.
In view of Respondent’s position and the evidence of record, I find that
Petitioner is entitled to compensation.
IT IS SO ORDERED.
s/Brian H. Corcoran
Brian H. Corcoran
Chief Special Master
2
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727 P.2d 383 (1986)
The PEOPLE of the State of Colorado, Plaintiff-Appellee,
v.
Robert A. WIEGHARD, Defendant-Appellant.
No. 83CA0945.
Colorado Court of Appeals, Div. III.
April 24, 1986.
Rehearing Denied May 22, 1986.
Certiorari Denied October 14, 1986.
*384 Duane Woodard, Atty. Gen., Charles B. Howe, Chief Deputy Atty. Gen., Richard H. Forman, Sol. Gen., Maureen Phelan, Asst. Atty. Gen., Denver, for plaintiff-appellee.
David F. Vela, Public Defender, Claire Levy, Deputy Public Defender, Jane S. Hazen, Sp. Deputy Public Defender, Denver, for defendant-appellant.
Certiorari Denied (Wieghard) October 14, 1986.
VAN CISE, Judge.
Defendant, Robert Wieghard, appeals the judgment of conviction based on a jury verdict of guilty of first degree murder and aggravated robbery. We affirm.
Shortly after midnight on June 23, 1982, Christine Sagolla, a waitress at Bennigan's *385 restaurant in Boulder, was preparing to check out her receipts for the evening prior to finishing her shift. She entered the ladies' restroom and was followed there by a man who attempted to take her money and receipts. A struggle ensued, and the man pulled a handgun, rifled her purse, and forced her cooperation in revealing that more money was kept in the restaurant office and in gaining entry thereto.
In the office, headwaiter Henry Callahan and waitress Kathy Kiedinger were counting Kiedinger's receipts for the night. At the gunman's order, Sagolla appeared at the office window and knocked, whereupon Callahan opened the door, and the gunman pushed Sagolla in. The gunman demanded money, and Callahan gave him the money in the cash register. The gunman demanded more, and, when Callahan replied there was no more, the gunman shot him in the head at close range and left. Callahan died a short time later from the bullet wound.
On July 26 an anonymous caller informed the Boulder police department that Wieghard was responsible for the robbery and homicide at Bennigan's. On August 3, a line-up was conducted and Sagolla identified Wieghard as the gunman. The jury convicted Wieghard of first degree murder and aggravated robbery.
I.
On appeal, Wieghard first contends the trial court erred in admitting the testimony of Ron White, an inmate at the Boulder County jail. White testified at trial that, during the fall of 1982, he gained Wieghard's confidence while they were both housed at the Boulder County jail, and that Wieghard had described the crime to White, discussed the line-up procedure where Wieghard realized Sagolla had identified him, and asked White to kill Sagolla for him for $3,500 plus expenses in order to destroy the prosecution's case against him. Wieghard claims White's status was equivalent to that of a police informant and argues that, therefore, his Sixth Amendment guarantee of effective assistance of counsel during critical stages of the criminal proceedings was violated. We disagree.
Wieghard bases his argument on the rulings in Massiah v. United States, 377 U.S. 201, 84 S.Ct. 1199, 12 L.Ed.2d 246 (1964), and United States v. Henry, 447 U.S. 264, 100 S.Ct. 2183, 65 L.Ed.2d 115 (1980), which further refined the Massiah holding that, under certain circumstances, a defendant's own incriminating statements obtained by a secret government agent may not be used against him at trial. The Supreme Court in Henry noted three factors as important in determining whether the government deliberately elicited incriminating statements within the meaning of Massiah: 1) that the informant was acting as a paid informant for the government; 2) that the informant was ostensibly no more than a fellow inmate of the defendant; and 3) that the defendant was in custody and under indictment. The second and third factors were met in the present case. The only question that remains is whether White was acting under instructions as a paid informant. We conclude he was not.
It was undisputed that, during an earlier period, White had been a paid informant for the Denver police, but that relationship ended in May 1982. Also, he had given information to Boulder County jail officials, but that pertained to another case. White had no relationship with the Boulder police department or with the Boulder district attorney's office until he met with a police detective on November 1, 1982. Based on that showing, the trial court barred any information obtained by White after that meeting but allowed him to testify as to statements made by defendant to White prior thereto.
White testified he decided on his own to try to gather information from Wieghard. Under these circumstances, no evidence was presented that police "deliberately elicited" information from defendant prior to November 1. Therefore, Wieghard's Sixth Amendment guarantee was not violated, and the trial court did not err in admitting the testimony of White.
*386 II.
Wieghard next contends the trial court abused its discretion in allowing expanded media coverage of the trial. We do not agree.
In 1983, our supreme court enacted Colorado Code of Judicial Conduct Temporary Canon 3(A)(8), which outlined guidelines for expanded media coverage of court proceedings. Prior to trial, the local newspaper and television station requested expanded media coverage under this rule. At a pretrial hearing, the trial court held that the presumption was in favor of open coverage and that a party opposing such coverage would have the burden of proving adverse effects therefrom. Defense counsel stated he could not spend his time developing an evidentiary record on the matter. The court then granted the request and outlined the parameters within which it expected the media to operate.
We find no abuse of discretion by the trial court here. A hearing was conducted. Counsel were given an opportunity to present evidence. The mere presence of a camera in the courtroom does not in itself deny a defendant due process. Chandler v. Florida, 449 U.S. 560, 101 S.Ct. 802, 66 L.Ed.2d 740 (1981).
III.
Wieghard also contends the trial court abused its discretion when it allowed two prosecution witnesses to testify despite the fact that, before they testified, they had viewed news coverage of the trial in violation of the court's sequestration order. We disagree.
Matters relating to violations of sequestration orders are handled in the trial court's discretion. Absent an abuse of that discretion, the decision not to impose sanctions will be upheld. People v. Gomez, 632 P.2d 586 (Colo.1981). Here, the trial court found there was no bad faith shown as the district attorney's office had attempted to carry out the court's order. It also found that Wieghard suffered no prejudice because of what the witnesses had viewed. There was no abuse of discretion here.
IV.
Weighard further contends the trial court erred in admitting a job application that he had submitted to Bennigan's because the prosecution failed to provide discovery of the document. Again, we disagree.
At a hearing on the admission of the job application, the parties disagreed over whether a copy of Wieghard's job application had been delivered to the defense attorneys. The trial court held that the People had complied with its discovery orders, that Wieghard's lack of access to the document prior to trial was not prejudicial, and that the defense had been put on notice by other exhibits that Wieghard had done something at Bennigan's on May 16 which they should have looked into. Wieghard did not ask for a continuance, and made no showing of prejudice. Indeed, the failure to move for a continuance discredits any claim of prejudice. See People v. Graham, 678 P.2d 1043 (Colo.App.1983).
V.
Wieghard lastly contends the trial court erred in denying his motion for a mistrial based on the prosecution's comments during closing argument. He argues the prosecution unconstitutionally referred to his failure to testify. We disagree.
On appeal, Wieghard objects to the prosecutor's statement on rebuttal in closing argument: "[T]he gunman recognized Henry Callahan, the one identification we haven't heard about throughout the whole trial." Wieghard's counsel did not make a contemporaneous objection, so we must evaluate this allegation of error under the plain error standard. See People v. Constant, 645 P.2d 843 (Colo.1982). The test is whether the comment in context was calculated or intended to direct the attention of the jury to defendant's neglect or failure to testify in his own behalf. People v. Todd, 189 Colo. 117, 538 P.2d 433 (1975).
*387 We agree with the trial court that this was not a reference to Wieghard's failure to take the stand.
Judgment affirmed.
KELLY and METZGER, JJ., concur.
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484 F.3d 476
UNITED STATES of America, Plaintiff-Appellee,v.Anthony H. ANDREWS, Defendant-Appellant.
No. 06-3343.
United States Court of Appeals, Seventh Circuit.
Argued February 15, 2007.
Decided April 30, 2007.
Grant C. Johnson (argued), Office of the United States Attorney, Madison, WI, for Plaintiff-Appellee.
Dennis M. Sullivan (argued), Jay E. Heit, Herrick & Hart, Eau Claire, WI, for Defendant-Appellant.
Before EASTERBROOK, Chief Judge, and POSNER and KANNE, Circuit Judges.
KANNE, Circuit Judge.
1
Anthony Andrews pled guilty to one count of mail fraud in violation of 18 U.S.C. § 1341 pursuant to a written plea agreement. In calculating his advisory Sentencing Guidelines range, the district court imposed a two-point increase in offense level for abuse of a position of trust pursuant to U.S.S.G. § 3B1.3. The district court sentenced Andrews to sixty months' imprisonment as well as restitution in the amount of $110,045.25. Andrews appeals the district court's two-point adjustment for abuse of a position of trust. We affirm.
I. BACKGROUND
2
Anthony H. Andrews owned and operated Siren Auto Sales, a used car dealership located in Siren, Wisconsin. Andrews was licensed by the State of Wisconsin Department of Transportation as a retail vehicle dealer. As a licensed dealer, Andrews was required to follow Wisconsin Department of Transportation regulations governing the purchase and sale of vehicles.
3
Wisconsin regulations require a licensed dealer to complete a Used Motor Vehicle Purchase Contract for each used vehicle he sells. If a trade-in vehicle is part of the transaction, the licensed dealer enters the details of any outstanding loan on the vehicle on a standard form, including the relevant financial institution and the amount due at the time of the transaction. From this information, the dealer determines how much he is owed upon completion of the transaction. The dealer receives his payment for the purchased vehicle either from the purchaser or from an institution financing the transaction. The dealer, rather than the purchaser, is then responsible for making sure that any lien appearing on the trade-in's certificate of title is paid off and for certifying such payment to the Wisconsin Department of Transportation.
4
When purchasers traded in vehicles, Andrews filled out all of the required paperwork and certified to the Wisconsin Department of Transportation that any liens had been paid off in full. But, rather than actually paying off the liens, Andrews made payments to the lien holders — usually a bank. Through this scheme, Andrews could continue using the lien holders' funds without the lien holder knowing that the security for the loan (the vehicle) had actually been sold and that the lien had been fraudulently removed from the title. Andrews engaged in this conduct from January 2000 through January 2006, stealing in the vicinity of one million dollars.
5
The presentence investigation report recommended a two-point adjustment for Andrews's role in the offense pursuant to U.S.S.G. § 3B1.3 due to his abuse of a position of trust. Andrews's counsel objected to the adjustment and argued that Andrews's position as a car dealer does not qualify as a position of trust, public or private. At the sentencing hearing, the district court found that Andrews had held a position of trust, and that he abused it in a way that significantly facilitated his commission or concealment of his crime. The court stated: "You were licensed as an automobile dealer. Your customers trusted you to pay off the liens on their trade-in vehicles as promised, and in accordance with state regulations, and the purchasers of those vehicles relied on your certifications that the vehicles were not encumbered." R. 18, p. 12.
6
The two-point adjustment resulted in a total offense level of twenty-three. Paired with a criminal history category of II, this resulted in an advisory guideline range of fifty-one to sixty-three months' imprisonment.1 The district court sentenced Andrews to sixty months' imprisonment as well as $110,045.25 in restitution.
II. ANALYSIS
7
Andrews raises only one issue on appeal: whether the district court properly applied the two-point role in the offense adjustment for his abuse of a position of trust. We review the district court's interpretation and application of the Guidelines de novo, and its findings of fact for clear error. United States v. Bothun, 424 F.3d 582, 586 (7th Cir.2005); United States v. Frykholm, 267 F.3d 604, 612 (7th Cir.2001) ("We review de novo the district court's interpretation of what constitutes a `position of trust.'").
8
The § 3B1.3 adjustment applies when "the defendant abused a position of public or private trust . . . in a manner that significantly facilitated the commission or concealment of the offense . . . ." U.S.S.G. § 3B1.3. In order to determine whether the adjustment is appropriate for a particular defendant, we ask: "1) whether the defendant occupied a position of trust; and 2) whether his abuse of the position of trust significantly facilitated the crime." United States v. Stewart, 33 F.3d 764, 768 (7th Cir.1994) (citing United States v. Boyle, 10 F.3d 485, 488 (7th Cir.1993)); see also United States v. Fife, 471 F.3d 750, 753 (7th Cir.2006). "District courts need not be overly formal when determining whether a given position is one of trust; rather, they should look beyond labels, to the nature of the position the defendant is in and the responsibilities entrusted to him." Fife, 471 F.3d at 753 (citing United States v. Snook, 366 F.3d 439, 445 (7th Cir.2004); United States v. Mabrook, 301 F.3d 503, 510 (7th Cir.2002)); see also United States v. Davuluri, 239 F.3d 902, 908 (7th Cir.2001).
9
A defendant may occupy a position of trust if he has been given "access or authority over valuable things." United States v. Lamb, 6 F.3d 415, 421 (7th Cir. 1993). Positions of trust are often characterized by great discretion to act on another's behalf. United States v. Baldwin, 414 F.3d 791, 799 (7th Cir.2005); Davuluri, 239 F.3d at 909 (citing United States v. Hernandez, 231 F.3d 1087, 1091 (7th Cir. 2000); United States v. Hoogenboom, 209 F.3d 665, 671 (7th Cir.2000); United States v. Gellene, 182 F.3d 578, 596 (7th Cir. 1999)). Additionally, a position of trust significantly facilitates a crime when it makes the crime either easier to commit or more difficult for others to detect. Stewart, 33 F.3d at 768 (citing United States v. Gould, 983 F.2d 92, 94 (7th Cir.1993)).
10
The § 3B1.3 adjustment applies not only to public positions of trust, but also to private positions of trust. Baldwin, 414 F.3d at 797-99 (affirming application of abuse of trust adjustment where defendant used years-long friendship to convince victim to invest millions of dollars); United States v. Strang, 80 F.3d 1214, 1220 (7th Cir.1996) (affirming application of abuse of trust adjustment where defendant, although not a licensed investment broker, befriended victims and convinced them to invest in fraudulent scheme). While we draw no bright line where the abuse of a position of trust begins or ends, more than a mere contractual or arm's length commercial relationship is required. United States v. Dorsey, 27 F.3d 285, 289 (7th Cir.1994) (citing United States v. Parker, 25 F.3d 442 (7th Cir.1994)).
11
Andrews relies heavily on United States v. Dorsey where we reversed the imposition of an abuse of trust adjustment to the sentence of a car dealer who defrauded a bank. 27 F.3d 285. Dorsey obtained a "floor-plan" loan from his bank for the purchase of cars directly from the manufacturer. Id. at 287. Dorsey then sold those cars, while representing to his bank that the cars remained unsold at his dealership. Id. This allowed Dorsey to use both the loan money and the proceeds from the sales for his personal use. Id. We reversed the district court's application of the position of trust adjustment in Dorsey, holding that he was merely engaged in a standard commercial relationship with the bank. Id. at 289.
12
The circumstances in Dorsey stand in contrast with those of United States v. Stewart. 33 F.3d at 764. Stewart, a licensed insurance broker, solicited elderly customers to purchase annuities to fund their own funerals on a pre-need basis as a legal way of reducing their financial estates in order to qualify for Medicaid funds for nursing home expenses. 33 F.3d at 766. Rather than actually securing payment of their funeral expenses, Stewart converted his customers' investments for his own use while representing to the designated funeral directors that the annuities had been purchased. Id. We held that the district court clearly erred in not applying the § 3B1.3 adjustment. Id. at 770. Stewart could not have purchased the annuities if he was not a licensed insurance broker, and his licensed status also enabled him to convince the funeral directors that their services would be funded. Id. at 768-69. While licensed status does not per se place an individual in a position of trust, it is one factor among many to be considered in the factual context of the case. See id. at 766-70.
13
The facts of this case are more akin to Stewart than to Dorsey. Andrews was licensed by the state of Wisconsin as a retail vehicle dealer. His licensed status subjected him to Wisconsin Department of Transportation regulations requiring him to pay off his customers' prior loan obligations and to certify such payment to the Department of Transportation. His responsibility to remove the liens took the situation out of the purchasers' hands, and his certification to the Department of Transportation allowed him to conceal his crime.
14
Andrews argues that the mandatory nature of his responsibilities as a licensed dealer is precisely why he did not hold a position of trust. Because positions of trust are often characterized by broad discretion, Andrews argues that his obligation to pay off his customers' liens cannot place him in a position of trust. But Andrews was entrusted with his customers' money to act on their behalf. His customers need not have given him assets and told him to do what he pleased with them. They trusted him to act in their interests and in accordance with law, and his licensed status fostered that trust and his concealment of his actions.
15
Andrews's licensed status and responsibility to act on behalf of his customers placed him in a position of trust. His abuse of that position gave him control of the assets and allowed him to conceal his actions by certifying payment to the Wisconsin Department of Transportation. The district court's application of the two-point adjustment for an abuse of a position of trust pursuant to § 3B1.3 was not clearly erroneous.
III. CONCLUSION
16
For the foregoing reasons, the judgment of the district court is AFFIRMED.
Notes:
1
The question of whether Andrews's sentence would still have fallen within the guidelines range without the two-point adjustment was raised at oral argument and Andrews's counsel submitted a supplemental filing on the issue thereafter. Without the adjustment, Andrews's offense level is twenty-one, leading to a guidelines range of forty-one to fifty-one months. As Andrews was sentenced to sixty months' imprisonment, we need not consider the effect that overlapping ranges might have had on our decision
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 11-1832
_____________
HISTORIC BOARDWALK HALL, LLC,
NEW JERSEY SPORTS AND EXPOSITION AUTHORITY,
TAX MATTERS PARTNER
v.
COMMISSIONER OF INTERNAL REVENUE,
Appellant
_______________
On Appeal from the United States Tax Court
(No. 11273-07)
Judge: Hon. Joseph Robert Goeke
_______________
Argued
June 25, 2012
Before: SLOVITER, CHAGARES, and JORDAN, Circuit
Judges.
(Filed: August 27, 2012)
_______________
Tamara W. Ashford
Arthur T. Catterall [ARGUED]
Richard Farber
Gilbert S. Rothenberg
William J. Wilkins
United States Department of Justice
Tax Division
950 Pennsylvania Avenue, N.W.
P. O. Box 502
Washington, D.C. 20044
Counsel for Appellant
Robert S. Fink
Kevin M. Flynn [ARGUED]
Kostelanetz & Fink, LLP
7 World Trade Center, 34th Floor
New York, NY 10007
Counsel for Appellees
Paul W. Edmondson
Elizabeth S. Merritt
William J. Cook
National Trust for Historic Preservation
1785 Massachusetts Ave., N.W.
Washington, D.C. 20036
2
David B. Blair
Alan I. Horowitz
John C. Eustice
Miller & Chevalier, Chartered
655 Fifteenth Street, N.W., Suite 900
Washington, D.C. 20005
Counsel for Amicus National Trust for Historic
Preservation
A. Duane Webber
Richard M. Lipton
Robert S. Walton
Derek M. Love
Samuel Grilli
Baker & McKenzie LLP
300 East Randolph Drive, Suite 5000
Chicago, IL 60601
Counsel for Amicus Real Estate Roundtable
_______________
OPINION OF THE COURT
_______________
3
TABLE OF CONTENTS
Page
I. Background .................................................................. 9
A. Background of the HRTC Statute ...................... 9
B. Factual Background of the East Hall
Renovation....................................................... 15
1. NJSEA Background .................................. 15
2. Commencement of the East Hall
Renovation ................................................ 16
3. Finding a Partner ..................................... 18
a) The Proposal from Sovereign
Capital Resources .......................... 18
b) The Initial and Revised Five-Year
Projections ..................................... 20
c) Confidential Offering
Memorandum ................................. 22
d) Selection of Pitney Bowes .............. 23
e) Additional Revisions to Financial
Projections ..................................... 25
4. Closing ...................................................... 26
a) The HBH Operating Agreement .... 27
4
b) Lease Amendment and Sublease .... 32
c) Acquisition Loan and Construction
Loan ............................................... 33
d) Development Agreement ................ 34
e) Purchase Option and Option to
Compel ........................................... 35
f) Tax Benefits Guaranty ................... 36
5. HBH in Operation..................................... 37
a) Construction in Progress ............... 37
b) Post-Construction Phase ............... 41
6. The Tax Returns and IRS Audit ................ 44
C. The Tax Court Decision .................................. 46
II. Discussion .................................................................. 51
A. The Test ........................................................... 54
B. The Commissioner’s Guideposts ..................... 56
C. Application of the Guideposts to HBH ............ 64
1. Lack of Meaningful Downside Risk .......... 69
2. Lack of Meaningful Upside Potential ....... 77
3. HBH’s Reliance on Form over
Substance .................................................. 80
5
III. Conclusion .................................................................. 85
6
JORDAN, Circuit Judge.
This case involves the availability of federal historic
rehabilitation tax credits (“HRTCs”) in connection with the
restoration of an iconic venue known as the “East Hall” (also
known as “Historic Boardwalk Hall”), located on the
boardwalk in Atlantic City, New Jersey. The New Jersey
Sports and Exposition Authority (“NJSEA”), a state agency
which owned a leasehold interest in the East Hall, was tasked
with restoring it. After learning of the market for HRTCs
among corporate investors, and of the additional revenue
which that market could bring to the state through a
syndicated partnership with one or more investors, NJSEA
created a New Jersey limited liability company, Historic
Boardwalk Hall, LLC (“HBH”), and subsequently sold a
membership interest in HBH1 to a wholly-owned subsidiary
1
An LLC “offers the best of both worlds – the limited
liability of a corporation and the favorable tax treatment of a
partnership.” Canterbury Holdings, LLC v. Comm’r, 98
T.C.M. (CCH) 60, 61 n.1 (2009). Generally, an LLC is a
pass-through entity that does not pay federal income tax. See
I.R.C. § 701; Treas. Reg. § 301.7701-3(a). Rather, profits
and losses “pass through” the LLC to its owners, called
members, who pay individual income tax on their allocable
shares of the tax items. See I.R.C. §§ 701-04, 6031.
Although an LLC with just one owner is, for tax purposes,
disregarded as an entity separate from its owner for tax
purposes, an LLC with two or more members is classified as
a partnership for tax purposes unless it elects to be treated as
a corporation. Treas. Reg. § 301.7701-3(b)(1). Once HBH,
as a duly formed New Jersey limited liability company, had
7
of Pitney Bowes, Inc. (“PB”).2 Through a series of
agreements, the transactions that were executed to admit PB
as a member of HBH and to transfer ownership of NJSEA‟s
property interest in the East Hall to HBH were designed so
that PB could earn the HRTCs generated from the East Hall
rehabilitation. The Internal Revenue Service (“IRS”)
determined that HBH was simply a vehicle to impermissibly
transfer HRTCs from NJSEA to PB and that all HRTCs taken
by PB should be reallocated to NJSEA.3 The Tax Court
disagreed, and sustained the allocation of the HRTCs to PB
through its membership interest in HBH. Because we agree
with the IRS‟s contention that PB, in substance, was not a
bona fide partner in HBH, we will reverse the decision of the
Tax Court.
two members, it did not elect to be treated as a corporation
and thus was classified as a partnership for tax purposes for
the tax years in which it had more than one member. Thus, as
the parties do, we refer to HBH as a partnership when
analyzing whether one of its stated members was a bona fide
partner.
2
PB‟s membership interest in HBH was through PB
Historic Renovations, LLC, whose sole member was Pitney
Bowes Credit Corp. At all relevant times, Pitney Bowes
Credit Corp. was a wholly-owned subsidiary of PB. For ease
of reference, we will refer to PB Historic Renovations, LLC,
Pitney Bowes Credit Corp., and PB as “PB.”
3
The alphabet-soup of acronyms in this case is
perhaps beyond parody, but the acronyms are a more efficient
means of referring to various corporate and state entities, as
well as the tax credits and other concepts, so we reluctantly
fall into the soup.
8
I. Background
A. Background of the HRTC Statute
We begin by describing the history of the HRTC
statute. Under Section 47 of the Internal Revenue Code of
1986, as amended (the “Code” or the “I.R.C.”), a taxpayer is
eligible for a tax credit equal to “20 percent of the qualified
rehabilitation expenditures [“QREs”4] with respect to any
certified historic structure.[5]” I.R.C. § 47(a)(2). HRTCs are
only available to the owner of the property interest. See
generally I.R.C. § 47; see also I.R.S. Publication, Tax Aspects
of Historic Preservation, at 1 (Oct. 2000), available at
http://www.irs.gov/pub/irs-utl/faqrehab.pdf. In other words,
the Code does not permit HRTCs to be sold.
4
The Code defines a QRE as:
[A]ny amount properly chargeable to [a] capital
account – (i) for property for which
depreciation is allowable under [I.R.C. §] 168
and which is – (I) nonresidential real property,
(II) residential real property, (III) real property
which has a class life of more than 12.5 years,
or (IV) an addition or improvement to property
described in subclause (I), (II), or (III), and (ii)
in connection with the rehabilitation of a
qualified rehabilitated building.
I.R.C. § 47(c)(2)(A).
5
The Code defines a “certified historic structure” as
“any building (and its structural components) which – (i) is
listed in the National Register, or (ii) is located in a registered
historic district and is certified by the Secretary of the Interior
9
The idea of promoting historic rehabilitation projects
can be traced back to the enactment of the National Historic
Preservation Act of 1966, Pub. L. No. 89-665, 80 Stat. 9156
(1966), wherein Congress emphasized the importance of
preserving “historic properties significant to the Nation‟s
heritage,” 16 U.S.C. § 470(b)(3). Its purpose was to “remedy
the dilemma that „historic properties significant to the
Nation‟s heritage are being lost or substantially altered, often
inadvertently, with increasing frequency.‟” Pye v. United
States, 269 F.3d 459, 470 (4th Cir. 2001) (quoting 16 U.S.C.
§ 470(b)(3)). Among other things, the National Historic
Preservation Act set out a process “which require[d] federal
agencies with the authority to license an undertaking „to take
into account the effect of the undertaking on any … site …
that is … eligible for inclusion in the National Register‟ prior
to issuing the license.” Id. (quoting 16 U.S.C. § 470f). It also
authorized the Secretary of the Interior to “expand and
maintain a National Register of Historic Places.” 16 U.S.C.
§ 470a(a)(1)(A).
The Tax Reform Act of 1976 furthered the goals of the
1966 legislation by creating new tax incentives for private
sector investment in certified historic buildings. See Tax
Reform Act of 1976, Pub. L. No. 94-455, 90 Stat. 1520
(1976). The pertinent provisions of the 1976 Act indicate that
Congress wanted to encourage the private sector to restore
historic buildings, and, to provide that encouragement, it
established incentives that were similar to the tax incentives
for building new structures. See, e.g., 122 Cong. Rec. 34320
to the Secretary as being of historic significance to the
district.” I.R.C. § 47(c)(3).
10
(1976). Specifically, to equalize incentives affecting the
restoration of historic structures and the construction of new
buildings, it included a provision allowing for the
amortization of rehabilitation expenditures over five years, or,
alternatively, an accelerated method of depreciation with
respect to the entire depreciable basis of the rehabilitated
property. See I.R.S. Publication, Rehabilitation Tax Credit, at
1-2 (Feb. 2002), available at http://www.irs.gov/pub/irs-
mssp/rehab.pdf (hereinafter referred to as “IRS- Rehab”).
The Revenue Act of 1978 went further to incent the
restoration of historic buildings. It made a 10% rehabilitation
credit available in lieu of the five-year amortization period
provided by the 1976 Act. See Revenue Act of 1978, Pub. L.
No. 95-600, 92 Stat. 2763 (1978); see also IRS-Rehab, at 1-2.
In 1981, Congress expanded the rehabilitation credit to three
tiers, so that a taxpayer could qualify for up to a 25% credit
for certain historic rehabilitations. See Economic Recovery
Tax Act of 1981, Pub. L. No. 97-34, 95 Stat. 172 (1981); see
also IRS-Rehab, at 1-2.
The Tax Reform Act of 1986 made extensive changes
to the tax law, including the removal of many tax benefits that
had been available to real estate investors. See Tax Reform
Act of 1986, Pub. L. No. 99-514, 100 Stat. 2085 (1986); see
also Staff of J. Comm. on Tax‟n, 99th Cong., General
Explanation of the Tax Reform Act of 1986 (Comm. Print.
1987) (hereinafter referred to as “General Explanation of
TRA 86”). The HRTC survived, although it was reduced to
its modern form of a two-tier system with a 20% credit for
QREs incurred in renovating a certified historic structure, and
a 10% credit for QREs incurred in renovating a qualified
11
rehabilitated building6 other than a certified historic structure.
See Tax Reform Act of 1986 § 251, 100 Stat. at 2183; see
also I.R.C. § 47. A Congressional report for the 1986 Act
discussed the rationale for keeping the HRTC:
6
The Code defines a “qualified rehabilitated building”
as:
[A]ny building (and its structural components)
if – (i) such building has been substantially
rehabilitated, (ii) such building was placed in
service before the beginning of the
rehabilitation, (iii) in the case of any building
other than a certified historic structure, in the
rehabilitation process – (I) 50 percent or more
of the existing external walls of such building
are retained in place as external walls, (II) 75
percent or more of the existing external walls of
such building are retained in place as internal or
external walls, and (III) 75 percent or more of
the existing internal structural framework of
such building is retained in place, and (iv)
depreciation (or amortization in lieu of
depreciation) is allowable with respect to such
building.
I.R.C. § 47(c)(1)(A). Additionally, “[i]n the case of a
building other than a certified historic structure, a
building shall not be a qualified rehabilitated building
unless the building was first placed in service before
1936.” Id. § 47(c)(1)(B).
12
In 1981, the Congress restructured and
increased the tax credit for rehabilitation
expenditures [because it] was concerned that the
tax incentives provided to investments in new
structures (e.g., accelerated cost recovery)
would have the undesirable effect of reducing
the relative attractiveness of the prior-law
incentives to rehabilitate and modernize older
structures, and might lead investors to neglect
older structures and relocate their businesses.
The Congress concluded that the
incentives granted to rehabilitations in 1981
remain justified. Such incentives are needed
because the social and aesthetic values of
rehabilitating and preserving older structures
are not necessarily taken into account in
investors‟ profit projections. A tax incentive is
needed because market forces might otherwise
channel investments away from such projects
because of the extra costs of undertaking
rehabilitations of older or historic buildings.
General Explanation of TRA 86, at 149.
Evidently mindful of how the tax incentives it had
offered might be abused, Congress in 2010 codified the
“economic substance doctrine,” which it defined as “the
common law doctrine under which tax benefits … with
respect to a transaction are not allowable if the transaction
does not have economic substance or lacks a business
13
purpose.”7 I.R.C. § 7701(o)(5)(A). At the same time,
however, Congress was at pains to emphasize that the HRTC
was preserved. A Congressional report noted:
If the realization of the tax benefits of a
transaction is consistent with the Congressional
purpose or plan that the tax benefits were
designed by Congress to effectuate, it is not
intended that such tax benefits be disallowed.
… Thus, for example, it is not intended that a
tax credit (e.g., … section 47[, which provides
for HRTCs,] …) be disallowed in a transaction
pursuant to which, in form and substance, a
7
Specifically, the codification of the economic
substance doctrine provides:
In the case of any transaction to which the
economic substance doctrine is relevant, such
transaction shall be treated as having economic
substance only if … (A) the transaction changes
in a meaningful way (apart from Federal
income tax effects) the taxpayer‟s economic
position, and (B) the taxpayer has a substantial
purpose (apart from Federal income tax effects)
for entering into such transaction.
I.R.C. § 7701(o)(1). Section 7701(o) applies to all
transactions entered into after March 30, 2010. Thus, the
common-law version of the economic substance doctrine, and
not § 7701(o), applies to the transaction at issue here.
14
taxpayer makes the type of investment or
undertakes the type of activity that the credit
was intended to encourage.
Staff of J. Comm. on Tax‟n, Technical Explanation of the
Revenue Provisions of the “Reconciliation Act of 2010,” as
amended, In Combination with the “Patient Protection and
Affordable Care Act,” at 152 n.344 (Comm. Print 2010)
(emphasis added). In sum, the HRTC statute is a deliberate
decision to skew the neutrality of the tax system to encourage
taxable entities to invest, both in form and substance, in
historic rehabilitation projects.
B. Factual Background of the East Hall
Renovation
1. NJSEA Background
In 1971, the State of New Jersey formed NJSEA to
build, own, and operate the Meadowlands Sports Complex in
East Rutherford, New Jersey. The State legislature expanded
NJSEA‟s jurisdiction in 1992 to build, own, and operate a
new convention center in Atlantic City and to acquire,
renovate, and operate the East Hall. Completed in 1929, the
East Hall was famous for hosting the annual Miss America
Pageant, and, in 1987, it was added to the National Register
of Historic Places as a National Historic Landmark.
In October 1992, before renovations on the East Hall
began, NJSEA obtained a 35-year leasehold interest in the
property for $1 per year from the owner, the Atlantic County
Improvement Authority. About a month later, NJSEA
entered into an agreement with the Atlantic City Convention
15
Center Authority, the then-operator of the East Hall, to
operate both the East Hall and the new convention center. In
July 1995, NJSEA and the Atlantic City Convention Center
Authority handed over management responsibility for both
the East Hall and the yet-to-be-completed convention center
to a private entity, Spectacor Management Group
(“Spectacor”).
2. Commencement of the East Hall
Renovation
Once construction started on the new convention
center in the early 1990s, NJSEA began planning for the
future of the East Hall and decided to convert it into a special
events facility. That conversion was initially anticipated to
cost $78,522,000. Renovations were to be performed in four
phases, with the entire project expected to be completed in
late 2001.
The renovation project began in December of 1998.
By that time, NJSEA had entered into agreements with the
New Jersey Casino Reinvestment Development Authority8
pursuant to which the Casino Reinvestment Development
Authority agreed to reimburse NJSEA up to $4,146,745 for
certain pre-design expenses and up to $32,574,000 for costs
incurred in the East Hall renovation. In a March 1999
8
The Casino Reinvestment Development Authority, as
described by the Tax Court, “is a State agency created by the
New Jersey State Legislature that uses funds generated from
governmental charges imposed on the casino industry for
economic development and community projects throughout
the State.” (Joint Appendix (“J.A.”) at 11 n.4.)
16
document prepared in connection with a separate bond
issuance,9 NJSEA noted that it had received grants from the
Casino Reinvestment Development Authority to pay for the
first phase of the East Hall renovation and that “[f]unding for
the remaining cost of the project … is expected to be obtained
through the issuance by [NJSEA] of Federally Taxable State
Contract Bonds.” (J.A. at 708.) In June 1999, NJSEA issued
$49,915,000 in State Contract Bonds to fund the East Hall
renovation.
The first two phases of the renovation were completed
prior to the Miss America Pageant held in September 1999,
and Phase 3 began the following month. Through 1999,
NJSEA had entered into rehabilitation contracts for
approximately $38,700,000, and had expended $28,000,000
of that amount. Also at about that time, the estimate of the
total cost of the project increased to $90,600,000. NJSEA‟s
1999 annual report stated that the Casino Reinvestment
Development Authority had agreed to reimburse NJSEA for
“all costs in excess of bond proceeds for the project.” (Id. at
1714.) Thus, by the end of 1999, between the proceeds it had
received from the bond issuance and funds provided – or to
be provided – by the Casino Reinvestment Development
Authority, NJSEA had assurances that the East Hall
rehabilitation project was fully funded.
9
The proceeds from that bond issuance by NJSEA,
described as the 1999 Luxury Tax Bonds, were not directly
applied to the East Hall renovation. Rather, the 1999 Luxury
Tax Bonds were issued to effect the refunding of certain
amounts from an earlier bond issuance.
17
3. Finding a Partner
a) The Proposal from Sovereign
Capital Resources
In August 1998, a few months prior to the beginning of
renovations on the East Hall, Paul Hoffman from Sovereign
Capital Resources (“Sovereign”)10 wrote to NJSEA regarding
a “consulting proposal … for the sale of the historic
rehabilitation tax credits expected to be generated” by the
East Hall rehabilitation. (Id. at 691.) That proposal was
“designed to give [NJSEA representatives] a better
perspective on the structure of the historic tax credit sale, as
well as the [potential] financial benefits (estimated in excess
of $11 million) to the project.” (Id.) As an initial summary,
Hoffman stated that “the best way to view the equity
generated by a sale of the historic tax credits is to think of it
as an $11 million interest only loan that has no term and may
not require any principal repayment.” (Id.) Hoffman noted
that although NJSEA, as a tax-exempt entity, would have no
use for the 20% federal tax credit generated by QREs
incurred in renovating historic structures, there were “entities
that actively invest in [HRTC] properties … and are generally
Fortune 500 corporations with substantial federal income tax
liabilities.” (Id. at 692.) Hoffman explained that because
“[t]he [HRTC] is earned when the building is placed into
service” and “cannot be transferred after the fact,” “the
10
Sovereign describes itself as “a boutique consulting
firm that facilitates equity financing and offers financial
advisory services for historic rehabilitation … tax credit
transactions.” (J.A. at 696.)
18
corporate investor should be admitted into the partnership that
owns the project as soon as possible.” (Id.)
Hoffman next sketched out the proposed transactions
that would allow NJSEA to bring an investor interested in
HRTCs into co-ownership of the East Hall and yet provide
for NJSEA to “retain its long-term interests in the [East
Hall].” (Id. at 693.) First, NJSEA would sublease its interest
in the East Hall to a newly created partnership in which
NJSEA would be the general partner and a corporate investor
would be the limited partner. The sublease agreement would
be treated as a sale for tax purposes since the sublease would
extend longer than the useful life of the property under tax
rules. Next, that partnership would allocate 99% of its profit
and loss to the limited partner corporate investor so that such
investor could claim substantially all of the tax credits, but
only be allocated a “small portion” of the cash flow. (Id. at
694.) Finally, after a sufficient waiting period, NJSEA would
be given a purchase option to buy-out the corporate investor‟s
interest. With all that said, however, Hoffman warned that
“[c]orporate purchasers of [HRTCs] rarely accept
construction risk,” and “[t]ypically … provide no more than
10% of their equity to the partnership during the construction
period.” (Id. at 695.) Thus, Hoffman “recommend[ed] that
NJSEA plan to issue enough bonds to meet the construction
financing requirements of the project.” (Id.)
Hoffman then provided a valuation of the HRTCs. He
estimated that NJSEA could expect an investor to contribute
approximately $0.80 to $0.90 per each dollar of HRTC
allocated to the investor. In valuing the HRTCs, Hoffman
“assume[d] that NJSEA would like to minimize the cash
distribution to the investor and retain long-term ownership of
19
[the East Hall].” (Id.) He also listed four “standard
guarantees” that “[i]nvestors in the tax credit industry” would
“require” as part of the transaction: (1) a construction
completion guaranty; (2) an operating deficit guaranty; (3) a
tax indemnity; and (4) an environmental indemnity. (Id. at
696.) Additionally, Hoffman noted that “the investor will
expect that either NJSEA or the State of New Jersey be
obligated to make debt service on the bond issuance if
operating revenue is insufficient to support the debt
payments.” (Id.)
NJSEA decided to further explore the benefits
described by Sovereign. In March 1999, NJSEA issued a
request for proposal (as supplemented by an addendum on
April 30, 1999, the “RFP”) from “qualified financial advisors
… in connection with a proposed historic rehabilitation tax
credit transaction … relating to the rehabilitation of the East
Hall.” (Id. at 710.) The RFP provided that the selected
candidate would “be required to prepare a Tax Credit offering
Memorandum, market the tax credits to potential investors
and successfully close a partnership agreement with the
proposed tax credit investor.” (Id. at 721.) In June 1999,
after receiving four responses, NJSEA selected Sovereign as
its “[f]inancial [a]rranger” for the “Historic Tax Credit
transaction.” (Id. at 750.)
b) The Initial and Revised Five-Year
Projections
In September 1999, as the second phase of the East
Hall renovation had just been completed, Spectacor, as the
East Hall‟s operator, produced draft five-year financial
projections for the East Hall beginning for the 2002 fiscal
20
year.11 Those projections estimated that the East Hall would
incur a net operating loss of approximately $1.7 million for
each of those five years. Sovereign received a copy of the
projections, and, in a memo dated October 1, 1999, responded
that it was “cautious about [Spectacor‟s] figures as they might
prove excessively conservative.” (Id. at 793.) In a
December 10, 1999 memo to NJSEA representatives,
Sovereign said that, for the yet-to-be-created partnership
between NJSEA and an HRTC investor to earn the desired
tax credits, the partnership “should be able to reasonably
show that it is a going concern.”12 (Id. at 804.) To that end,
Sovereign suggested that “[t]o improve the operating results,
NJSEA could explore shifting the burden of some of the
operating expenses from the [partnership] to the Land Lessor
(either [the Atlantic County Improvement Authority] or
NJSEA depending upon [how the partnership was
structured]).” (Id.)
Approximately two months later, Sovereign received
revised estimates prepared by Spectacor. Those pro forma
11
Because it was projected that the East Hall
renovation would be completed in late 2001, fiscal year 2002
was anticipated to be the East Hall‟s first full year of
operations.
12
A “going concern” is “[a] commercial enterprise
actively engag[ed] in business with the expectation of
indefinite continuance.” Black‟s Law Dictionary 712 (8th ed.
2004). Evidently and understandably, Sovereign viewed year
after year of large losses from the operations of the East Hall
as inconsistent with an ordinary expectation of indefinite
continuance.
21
statements projected much smaller net operating losses,
ranging from approximately $396,000 in 2002 to $16,000 in
2006. Within two weeks, Spectacor made additional
revisions to those projections which resulted in estimated net
operating income for those five years, ranging from
approximately $716,000 in 2002 to $1.24 million in 2006.
About 90% of the remarkable financial turnaround the East
Hall thus was projected to enjoy on paper was due to the
removal of all projected utilities expenses for each of the five
years ($1 million in 2002, indexed for 3% inflation each year
thereafter). When the accountants for the project, Reznick,
Fedder & Silverman (“Reznick”), included those utilities
expenses in their compiled projections one week later,
Sovereign instructed them to “[t]ake [the] $1MM Utility Cost
completely out of Expenses, [because] NJSEA [would] pay at
[the] upper tier and [then] we should have a working
operating model.” (Id. at 954.)
c) Confidential Offering
Memorandum
On March 16, 2000, Sovereign prepared a 174-page
confidential information memorandum (the “Confidential
Memorandum” or the “Memo”) which it sent to 19 potential
investors and which was titled “The Sale of Historic Tax
Credits Generated by the Renovation of the Historic Atlantic
City Boardwalk Convention Hall.” (Id. at 955.) Although the
executive summary in the Confidential Memorandum stated
that the East Hall renovation would cost approximately $107
million, the budget attached to the Memo indicated that the
“total construction costs” of the project were $90,596,088.
(Id. at 1035). Moreover, the Memo stated that “[t]he
rehabilitation [was] being funded entirely by [NJSEA].” (Id.
22
at 962). The difference between the $107 million “estimated
… renovation” (id. at 961), and the “total construction costs”
of $90,596,088 was, as the Memo candidly put it, the
“[p]roceeds from the sale of the historic tax credits” (id. at
963). The Memo did not contemplate that those proceeds,
estimated to be approximately $16,354,000, would be applied
to “total construction costs” but rather indicated that the funds
would be used for three things: (1) payment of a $14,000,000
“development fee” to NJSEA; (2) payment of $527,080 in
legal, accounting, and syndication fees related to the tax-
credit transaction; and (3) the establishment of a $1,826,920
working capital reserve.
The Memo also provided financial projections through
2009. Those projections assumed that the investor would
receive a 3% priority distribution (the “Preferred Return”)
from available cash flow on its $16,354,000 contribution,
which contemporaneous NJSEA executive committee notes
described as “required by tax rules.” (Id. at 1135.) The
financial projections provided for sufficient net operating
income – ranging from $715,867 in 2002 to $880,426 in 2009
– to pay a portion of the Preferred Return on an annual basis
(varying from $465,867 in 2002 to $490,620 in 2009), but
also showed substantial tax losses through 2009 that were
mainly attributable to depreciation deductions.
d) Selection of Pitney Bowes
Four entities, including PB, responded to the
Confidential Memorandum and submitted offers “regarding
the purchase of the historic tax credits anticipated to be
generated by the renovation” of the East Hall. (Id. at 1143.)
In a May 2000 letter supplementing its offer, PB
23
recommended that NJSEA fund the construction costs
through a loan to the partnership, rather than in the form of
capital contributions, so that “the managing member could
obtain a pre-tax profit and therefore the partnership would be
respected as such for US tax purposes.” (Id. at 1145.)
On July 13, 2000, PB and NJSEA executed a letter of
intent (“LOI”) reflecting their agreement that PB would make
“capital contributions”13 totaling $16.4 million over four
installments in exchange for a 99.9% membership interest in
HBH, which NJSEA had recently formed. The LOI further
indicated that PB would also make an “Investor Loan” of $1.1
million. Consistent with PB‟s earlier recommendation, the
LOI said that NJSEA, as the managing member retaining a
0.1% interest in HBH, would provide approximately $90
million in the form of two loans: (1) a purchase money
obligation that represented the amount of QREs incurred by
NJSEA in the East Hall renovation prior to PB‟s investment
(the “Acquisition Loan”); and (2) a loan to finance the
remainder of the projected QREs (the “Construction Loan”).
According to the LOI, it was anticipated that the project
would qualify for a minimum of $17,602,667 in HRTCs:
$9,379,981 in 2000 and $8,222,686 in 2001. The LOI also
noted that a 3% Preferred Return would be paid to PB.
Although the LOI contemplated that PB would receive 99.9%
of any available cash flow, HBH‟s financial projections from
2000 to 2042 forecasted no cash flow available for
distribution during that time frame. Similarly, while the LOI
13
Although we use the term “capital contributions”
because that was the term used by the parties in this context,
we do not attribute any dispositive legal significance to it as
used herein.
24
mentioned that PB would receive 99.9% of the net proceeds
from a sale of HBH, a pre-closing memo from NJSEA‟s
outside counsel to NJSEA suggested that, “[d]ue to the
structure of the transaction,” the fair market value of PB‟s
interest in HBH would be insignificant. (J.A. at 1162.) Thus,
for its investment of $17.5 million ($16.4 million in capital
contributions and the $1.1 million Investor Loan), PB would
receive, in addition to the 3% Preferred Return, 99.9% of the
approximately $17.6 million worth of HRTCs that would be
generated from the QREs.
e) Additional Revisions to Financial
Projections
Prior to the closing on PB‟s commitment to purchase a
membership interest in HBH, an accountant from Reznick
who was preparing HBH‟s financial projections, sent a memo
to Hoffman indicating that the two proposed loans from
NJSEA to HBH “ha[d] been set up to be paid from available
cash flow” but that “[t]here was not sufficient cash to
amortize this debt.” (Id. at 1160.) To remedy the problem,
Hoffman instructed the accountant to increase the projection
of baseline revenues in 2002 by $1 million by adding a new
revenue source of $750,000 titled “naming rights,” and by
increasing both “parking revenue” and “net concession
revenue” by $125,000 each. Additionally, whereas the initial
projections assumed that baseline revenues and expenses
would both increase by 3% on an annual basis, the revised
projections used at closing assumed that baseline revenues
would increase by 3.5% annually, while maintaining the 3%
estimate for the annual increases in baseline expenses. With
those modifications, Reznick was able to project that, even
after paying PB its 3% Preferred Return, HBH could fully pay
25
off the Acquisition Loan by 2040, at which point HBH would
then be able to make principal payments on the Construction
Loan.
Also prior to closing, by moving certain expenditures
from the “non-eligible” category to the “eligible” category,14
Reznick increased by about $9 million the amount of
projected QREs that the East Hall renovation would generate.
That increase in QREs resulted in an approximately $1.8
million increase in projected HRTCs from $17,602,667 to
$19,412,173. That uptick in HRTCs, in turn, resulted in an
increase in PB‟s anticipated capital contribution from
$16,400,000 to $18,195,797.15
4. Closing
On September 14, 2000,16 NJSEA and PB executed
various documents to implement the negotiated transaction,
and PB made an initial contribution of $650,000 to HBH.
14
Reznick apparently used the terms “eligible” and
“non-eligible” construction expenditures to differentiate
between costs that were QREs and those that were not.
15
The LOI provided that PB‟s contribution would be
“adjusted … upward by $0.995 per additional $1.00 of
Historic Tax Credit in the event that … the QREs for the
Project after 1999 support[ed] Historic Tax Credits in excess
of the projected Historic Tax Credits.” (J.A. at 1148.)
16
Although it is unclear from the record exactly when
Phase 3 of the four-phase rehabilitation project was
completed, the March 2000 Confidential Memorandum
estimated that Phase 3, which began in October 1999, would
26
a) The HBH Operating Agreement
The primary agreement used to admit PB as a member
of HBH and to restate HBH‟s governing provisions was the
amended and restated operating agreement (the “AREA”).
The AREA stated that the purpose of HBH was “to acquire,
develop, finance, rehabilitate, own, maintain, operate, license,
lease, and sell or otherwise dispose of a[n] 87-year
subleasehold interest in the Historic East Hall … for use as a
special events facility.” (Id. at 157.) The AREA provided
that PB would hold a 99.9% ownership interest as the
“Investor Member,” and NJSEA would hold a 0.1%
ownership interest as the “Managing Member.” The AREA
also provided that PB, in addition to its $650,000 initial
contribution, would make three additional capital
contributions totaling $17,545,797 (collectively, with the
initial capital contribution, $18,195,797). Those additional
contributions were contingent upon the completion of certain
project-related events, including verification of the amount of
rehabilitation costs that had been incurred to date that would
be classified as QREs to generate HRTCs. According to
Section 5.01(c)(v) of the AREA, each of the four
contributions were to be used by HBH to pay down the
principal of the Acquisition Loan contemplated by the LOI.
Pursuant to the AREA, NJSEA, in addition to providing HBH
be completed by August 2000. That same memo stated that
NJSEA anticipated that the entire renovation would be
completed by December 2001, and, in fact, the East Hall
reopened in October 2001. Thus, it is likely that Phase 3 of
the renovation was entirely completed by the time NJSEA
and PB executed the various documents effecting PB‟s
investment in HBH.
27
with the Acquisition Loan and the Construction Loan, agreed
to pay all “Excess Development Costs” (the “Completion
Guaranty”),17 fund all operating deficits through interest-free
loans to HBH (the “Operating Deficit Guaranty”), and
indemnify PB against any loss incurred by PB as a result of
any liability arising from “Hazardous Materials” relating to
the East Hall,18 including remediation costs (the
“Environmental Guaranty”).
17
The AREA defined the term “Excess Development
Costs” as “all expenditures in excess of the proceeds of the
[Acquisition and Construction] Loans and the Capital
Contributions of the Members which are required to complete
rehabilitation of the [East] Hall,” including, but not limited to,
“(1) any interest, taxes, and property insurance premiums not
payable from proceeds of the Loans or Capital Contributions,
and (2) any construction cost overruns and the cost of any
change orders which are not funded from proceeds of the
Loans or Capital Contributions of the Members.” (J.A. at
161.)
18
The term “Hazardous Materials” under the AREA
included, among other things, “any „hazardous substance‟,
„pollutant‟ or „contaminant‟ as defined in any applicable
federal statute, law, rule or regulation now or hereafter in
effect … or any amendment thereto or any replacement
thereof or in any statute or regulation relating to the
environment now or hereafter in effect,” and “any hazardous
substance, hazardous waste, residual waste or solid waste, as
those terms are now or hereafter defined in any applicable
state or local law, rule or regulation or in any statute or
regulation relating to the environment now or hereafter in
effect.” (J.A. at 162.)
28
The AREA also set forth a detailed order of priority of
distributions from HBH‟s cash flow. After distributing any
title insurance proceeds or any environmental insurance
proceeds to PB, cash flow was to be distributed as follows:
(1) to PB for certain repayments on its $1.1 million “Investor
Loan” contemplated by the LOI; (2) to PB and NJSEA, in
accordance with their respective membership interests, until
PB received an amount equal to the current and any accrued
and unpaid 3% Preferred Return as mentioned in the LOI; (3)
to PB for an amount equal to the income tax liability
generated by income earned by HBH that was allocated to
PB, if any; (4) to NJSEA for an amount equal to the current
and any accrued and unpaid payments of interest and
principal owed on the Acquisition Loan and the Construction
Loan; (5) to NJSEA in an amount equal to any loans it made
to HBH pursuant to the Operating Deficit Guaranty; and (6)
the balance, if any, to PB and NJSEA, in accordance with
their respective membership interests.
Additionally, the AREA provided the parties with
certain repurchase rights and obligations.19 In the event that
NJSEA desired to take certain actions that were prohibited
under the AREA or otherwise required it to obtain PB‟s
consent to take such actions, NJSEA could instead – without
the consent of PB – purchase PB‟s interest in HBH. In the
papers submitted to us, the ill-fitting name the parties gave to
this ability of NJSEA to buy out PB without PB‟s consent is
19
Those rights and obligations are distinct from the put
and call options set forth in separate agreements which were
executed the same day and which are discussed infra in
Section 1.B.4.e.
29
the “Consent Option.” The purchase price under the Consent
Option is not measured by any fair market value of PB‟s
interest, if any such value were even to exist, but rather is
equal to the then-present value of any yet-to-be realized
projected tax benefits and cash distributions due to PB
through the end of the five-year tax credit recapture period.20
In the event that NJSEA committed a material default as
defined by the AREA, PB had the right to compel NJSEA to
purchase its interest (the “Material Default Option”) for that
same price.21
20
In this context, the term “tax credit recapture” is
apparently used to convey the concept that a taxpayer is
required to repay to the IRS a portion of a tax credit it had
previously claimed with respect to a property interest because
that property interest did not continue to qualify for the tax
credit for the requisite period of time. Specifically, if the East
Hall were disposed of or “otherwise cease[d] to be [an
HRTC] property with respect to” HBH within five years after
the East Hall was placed into service, any HRTCs allocated to
PB through its membership interest in HBH would be
recaptured by, in effect, increasing PB‟s tax (through its
membership interest in HBH) by the amount of the total
HRTCs taken multiplied by a “recapture percentage,” which
varies based on the holding period of the property. See I.R.C.
§ 50(a). The amount of HRTCs subject to recapture would
decrease by 20% for each of the first five years after the East
Hall was placed in service. See id. § 50(a)(1)(B).
21
At the time that the IRS challenged this series of
transactions, neither the Consent Option nor the Material
Default Option had been exercised.
30
To protect PB‟s interest, Section 8.08 of the AREA
mandated that NJSEA obtain a guaranteed investment
contract (the “Guaranteed Investment Contract”).22 The
Guaranteed Investment Contract had to be “reasonably
satisfactory to [PB], in the amount required to secure the
payment of the purchase price” to be paid by NJSEA in the
event that NJSEA exercised the option to purchase PB‟s
interest under another purchase option agreement that NJSEA
had.23 (Id. at 187-88; see supra note 19.) The AREA also
provided that the Guaranteed Investment Contract had to be
obtained on or before the payment of PB‟s second capital
contribution. In a memo dated two days prior to closing,
Sovereign explained to NJSEA that “[t]he [Guaranteed
Investment Contract] should be sized to pay off the Investor
Loan of $1.1 million, accrued but unpaid interest on the
[Investor Loan], and [PB‟s] annual priority distributions.”
(Id. at 1211.)
22
A “guaranteed investment contract” is “[a]n
investment contract under which an institutional investor
[here, NJSEA] invests a lump sum … with an insurer that
promises to return the principal (the lump sum) and a certain
amount of interest at the contract‟s end.” Black‟s Law
Dictionary 845 (8th ed. 2004).
23
That option, known as the call option, was one of
two vehicles (the other being the Consent Option) that was
available to NJSEA if it wanted to buy out PB‟s interest in
HBH. PB had a corresponding put option which gave it the
right to compel NJSEA to buy out PB‟s interest. As noted
earlier, supra note 19, the put and call options are discussed
infra in Section 1.B.4.e.
31
b) Lease Amendment and Sublease
NJSEA also executed several documents that
purported to transfer ownership of its interest in the East Hall
to HBH. First, NJSEA entered into an amended and restated
agreement with its lessor, Atlantic County Improvement
Authority, to extend the term of NJSEA‟s leasehold interest
in the East Hall from 2027 to 2087.24 After that agreement,
24
It appears that the leasehold interest was extended so
that its term was longer than the depreciable basis of the
improvements to be made on the East Hall for tax purposes.
That extension was in accord with Hoffman‟s ultimate plan
for NJSEA to transfer ownership of the East Hall (for tax
purposes) to the newly created partnership, a plan he laid out
in Sovereign‟s consulting proposal to NJSEA (albeit the
actual lease extension was longer than that suggested in that
proposal). (See J.A. at 693 (“Since the useful life of
commercial improvements is 39.5 years, the tax industry
consensus is that the sub-lease should be for a period of 50
years.”). Extending the lease term beyond the useful life of
the improvements was necessary so that when NJSEA entered
into a sublease with HBH in connection with the East Hall,
HBH, as Hoffman put it, could “be recognized as the „owner‟
for tax purposes” (id.), and thus would be eligible to incur
QREs that, in turn, would generate HRTCs. See I.R.C.
§ 47(c)(2)(B)(vi) (“The term „[QRE]‟ does not include …any
expenditure of a lessee of a building if, on the date the
rehabilitation is completed, the remaining term of the lease
(determined without regard to any renewal periods) is less
than the recovery period determined under [I.R.C.
§ 168(c)].”).
32
NJSEA and HBH entered into a “Sublease” with NJSEA, as
landlord, and HBH, as tenant. (Id. at 413.)
c) Acquisition Loan and
Construction Loan
As contemplated in the LOI, NJSEA provided
financing to HBH in the form of two loans. First, NJSEA and
HBH executed a document setting forth the terms of the
Acquisition Loan, reflecting NJSEA‟s agreement to finance
the entire purchase price that HBH paid to NJSEA for the
subleasehold interest in the East Hall, which amounted to
$53,621,405. That amount was intended to represent the
construction costs that NJSEA had incurred with respect to
the East Hall renovation prior to PB making its investment in
HBH. The Acquisition Loan provided for HBH to repay the
loan in equal annual installments for 39 years, beginning on
April 30, 2002, with an interest rate of 6.09% per year;
however, if HBH did not have sufficient cash available to pay
the annual installments when due, the shortfall would accrue
without interest and be added to the next annual installment.
HBH pledged its subleasehold interest in the East Hall as
security for the Acquisition Loan.
Second, NJSEA and HBH executed a document setting
forth the terms of the Construction Loan, reflecting NJSEA‟s
agreement to finance the projected remaining construction
costs for renovating the East Hall, to be repaid by HBH in
annual installments for 39 years, beginning on April 30, 2002,
at an annual interest rate of 0.1%. Although the parties only
33
anticipated $37,921,036 of additional construction costs,25 the
maximum amount that HBH could withdraw from the
Construction Loan provided by NJSEA was $57,215,733.
That difference, $19,294,697, was nearly identical to the total
investment that PB was to make in HBH ($18,195,797 in
capital contributions and $1,100,000 for the Investor Loan).
See infra Section I.B.5.a. Similar to the Acquisition Loan, the
Construction Loan provided for equal annual installments out
of available cash flow, but, if sufficient cash was not
available, any shortfall would accrue without interest and be
added to the next annual installment. HBH gave NJSEA a
second mortgage on its subleasehold interest in the East Hall
as security for the Construction Loan.
d) Development Agreement
HBH and NJSEA also entered into a development
agreement in connection with the ongoing rehabilitation of
the East Hall. The agreement stated that HBH had “retained
[NJSEA as the developer] to use its best efforts to perform
certain services with respect to the rehabilitation … of the
[East] Hall … including renovation of the [East] Hall,
25
The final projections prepared during the week prior
to closing contemplated $27,421,036 of remaining
construction costs. During that week, Sovereign sent a memo
to PB identifying an additional $10.5 million of “[p]otential
additional expenditure[s]” that included environmental
remediation costs ($3.0 million), tenant improvements ($2.5
million), and an additional rehabilitation contingency ($5.0
million). (J.A. at 1209.) If those expenditures were treated as
QREs, the memo indicated that the transaction would
generate an additional $2.1 million in HRTCs.
34
acquisition of necessary building permits and other approvals,
acquisition of financing for the renovations, and acquisition
of historic housing credits for the renovations.” (Id. at 267.)
The agreement noted that “since December 1998, [NJSEA]
ha[d] been performing certain of [those] services … in
anticipation of the formation of [HBH].” (Id.) The
agreement provided that HBH would pay a $14,000,000
development fee to NJSEA, but that fee was not to be earned
until the rehabilitation was completed. Prior to the execution
of the development agreement, as NJSEA was spending over
$53 million towards the renovation of the East Hall, it did not
pay itself any development fee or otherwise account for such
a fee.
e) Purchase Option and Option to
Compel
Concurrent with the AREA and the sublease
agreement, PB and NJSEA entered into a purchase option
agreement (the “Call Option”) and an agreement to compel
purchase (the “Put Option”). The Call Option provides
NJSEA the right to acquire PB‟s membership interest in
HBH, and the Put Option provides PB the right to require
NJSEA to purchase PB‟s membership interest in HBH.
Under the Call Option, NJSEA had the right to purchase PB‟s
interest in HBH at any time during the 12-month period
beginning 60 months after the East Hall was placed in
service.26 If NJSEA did not exercise the Call Option, then PB
26
The 60-month period was likely imposed so that, if
NJSEA did exercise the Call Option, any of the HRTCs that
PB had previously been allocated through its membership
35
had the right to exercise the Put Option at any time during the
12-month period beginning 84 months after the East Hall was
placed in service. For both the Put Option and the Call
Option, the purchase price was set at an amount equal to the
greater of (1) 99.9% of the fair market value of 100% of the
membership interests in HBH; or (2) any accrued and unpaid
Preferred Return due to PB. As already noted, supra Section
I.B.4.a, the AREA mandated that NJSEA purchase the
Guaranteed Investment Contract to secure funding of the
purchase price of PB‟s membership interest, should either of
the options be exercised.27
f) Tax Benefits Guaranty
As contemplated by the Confidential Memorandum,
HBH and PB entered into a tax benefits guaranty agreement
(the “Tax Benefits Guaranty”). Pursuant to that guaranty,
upon a “Final Determination of a Tax Benefits Reduction
Event,”28 HBH agreed to pay to PB an amount equal to the
interest in HBH would not be subject to recapture. See supra
note 20.
27
Neither of those options were exercised prior to the
IRS‟s challenge.
28
Pursuant to the Tax Benefits Guaranty, a “Tax
Benefits Reduction Event means as of any Final
Determination for any taxable year the amount by which the
Actual Tax Benefits for such year are less than the Projected
Tax Benefits.” (J.A. at 300.) A “Final Determination” was
defined as the earliest to occur of certain non-construction
related events which, “with respect to either [HBH] or [PB],
… result[] in loss of Projected Tax Benefits.” (Id. at 299.)
36
sum of (1) any reduction in projected tax benefits, “as revised
by the then applicable Revised Economic Projections,”29 as a
result of an IRS challenge; (2) any additional tax liability
incurred by PB from partnership items allocated to it by HBH
as a result of an IRS challenge; (3) interest and penalties
imposed by the IRS on PB in connection with any IRS
challenge; (4) an amount sufficient to compensate PB for
reasonable third-party legal and administrative expenses
related to such a challenge, up to $75,000; and (5) an amount
sufficient to pay any federal income tax liability owed by PB
on receiving any of the payments listed in (1) through (4).
(Id. at 300.) Although HBH was the named obligor of the
Tax Benefits Guaranty, the agreement provided that “NJSEA
… shall fund any obligations of [HBH] to [PB]” under the
Tax Benefits Guaranty. (Id. at 303.)
5. HBH in Operation
a) Construction in Progress
Pursuant to an Assignment and Assumption
Agreement executed on the day of closing between NJSEA,
as assignor, and HBH, as assignee, various agreements and
contracts – including occupancy agreements, construction
contracts, architectural drawings, permits, and management
and service agreements – were assigned to HBH. HBH
29
The “Revised Economic Projections” refer to the
revised projections made by Reznick that “reflect the actual
Tax Credits and federal income tax losses … at the time of
payment of the Second, Third and Fourth Installments.” (Id.
at 300.)
37
opened bank accounts in its name, and it deposited revenues
and paid expenses through those accounts.
As previously indicated, supra Section I.B.4.a, PB‟s
capital contributions were, pursuant to the AREA, supposed
to be used to pay down the Acquisition Loan. Although that
did occur, any decrease in the balance of the Acquisition
Loan was then offset by a corresponding increase in the
amount of the Construction Loan. As the Tax Court
explained:
Shortly [after PB‟s capital contributions were
used to pay down the principal on the
Acquisition Loan], a corresponding draw would
be made on the [C]onstruction [Loan], and
NJSEA would advance those funds to [HBH].
Ultimately, these offsetting draws left [HBH]
with cash in the amount of [PB‟s] capital
contributions, a decreased balance on the
[A]cquisition [L]oan, and an increased balance
on the [C]onstruction [L]oan. These funds were
then used by [HBH] to pay assorted fees related
to the transaction and to pay NJSEA a
developer‟s fee for its work managing and
overseeing the East Hall‟s rehabilitation.
(Id. at 17-18.) Also as discussed above, supra Section
I.B.4.c, the parties set the upper limit of the Construction
Loan approximately $19.3 million higher than the anticipated
amount of the total remaining construction costs as of the
closing date, which would allow HBH to use PB‟s
approximately $19.3 million in contributions to pay NJSEA a
development fee and expenses related to the transaction
38
without being concerned that it would exceed the maximum
limit on the Construction Loan provided by NJSEA.
PB made its second capital contribution in two
installments, a $3,660,765 payment in December 2000, and a
$3,400,000 payment the following month. Once those
contributions were received by NJSEA and used to pay down
the principal on the Acquisition Loan, NJSEA, instead of
using the entire capital contribution to fund a corresponding
draw by HBH on the Construction Loan, used $3,332,500 of
that amount to purchase the required Guaranteed Investment
Contract as security for its potential obligation or opportunity
to purchase PB‟s interest in HBH.30
HBH experienced a net operating loss31 for both
200032 ($990,013) and 2001 ($3,766,639), even though
30
As noted, supra Section 1.B.4.a, the AREA required
that NJSEA purchase the Guaranteed Investment Contract in
the amount required to secure the purchase price to be paid by
NJSEA if it exercised its Call Option. However, pursuant to a
pledge and escrow agreement entered into by NJSEA, PB,
and an escrow agent in January 2001, NJSEA also pledged its
interest in the Guaranteed Investment Contract as security for
its potential purchase obligation in the event that PB
exercised its Put Option, subject to NJSEA‟s right to apply
the proceeds of that contract toward payment of the purchase
price if it exercised its Call Option or Consent Option, or if
PB exercised its Material Default Option.
31
We use the terms “net operating income” or “net
operating loss” to mean the net income or loss before interest
and depreciation expenses.
39
projections had indicated that HBH would generate net
operating income of $500,000 in 2001.33 For the tax years
ending in 2000 and 2001, HBH reported approximately
$107.7 million in QREs, about $10.75 million more QREs
than contemplated in the financial projections attached to the
AREA.34 See supra note 25. As a result, PB‟s required
32
HBH‟s statement of operations for 2000 covered the
period June 26, 2000 (date of inception) through December
31, 2000.
33
HBH‟s accountants did not make financial
projections for operating revenues and expenses prior to
2001.
34
It was possible for HBH to claim QREs that were
incurred prior to its purported acquisition of the East Hall.
See Treas. Reg. § 1.48-12(c)(3)(ii) (“Where [QREs] are
incurred with respect to a building by a persons (or persons)
other than the taxpayer [i.e. NJSEA] and the taxpayer [i.e.
HBH] subsequently acquires the building, … the taxpayer
acquiring the property shall be treated as having incurred the
[QREs] actually incurred by the transferor …, provided that
… [t]he building … acquired by the taxpayer was … not
placed in service … after the [QREs] were incurred and prior
to the date of acquisition, and … [n]o credit with respect to
such [QREs] is claimed by anyone other than the taxpayer
acquiring the property.” ). Additionally, even if “total
construction costs” were only approximately $90.6 million as
projected, it would also have been possible to generate over
$107 million in QREs. See id. § 1.48-12(c)(2) (noting that
QREs could include, among other things, “development
fees,” “legal expenses,” and certain “[c]onstruction period
interest” expenses). In any event, as discussed infra, the IRS
40
aggregate capital contribution was increased by
approximately $2 million to $20,198,460 and the Investor
Loan was increased by $118,000 to $1,218,000.35
b) Post-Construction Phase
According to NJSEA‟s 2001 annual report, the “$90 million
renovation”36 of East Hall “was completed on time and on
budget” and reopened “in October 2001.” (Id. at 1757, 1758.)
Approximately a year later, PB made its third – and largest –
capital contribution of $10,467,849. Around the time that
contribution was made, Reznick prepared revised financial
projections. Whereas, at closing, Reznick had forecasted
$1,715,867 of net operating income for 2002, the accountants
has not challenged the amount of the QREs reported by HBH,
but rather the allocation of any HBH partnership items to PB.
35
As contemplated by the LOI, see supra note 15, the
AREA provided that “if the 2000 or 2001 Tax Credits which
[HBH] will be entitled to claim with respect to such
rehabilitation are greater than the Projected Tax Credits …
the aggregate amount of [PB‟s] Capital Contribution shall be
increased by $.995 for each $.999 by which the Tax Credits
exceed the Projected Tax Credits.” (J.A. at 178.) It is unclear
from the record why a portion of the required increase in
capital contributions was instead applied to increase the
Investor Loan.
36
The “$90 million” figure is at odds with the
statement in the Confidential Memorandum that the
renovation project would cost $107 million. The difference
approximates the sum eventually invested by PB. See supra
Section I.B.3.c.
41
now projected a net operating loss of $3,976,023. Ultimately,
after reality finished with the pretense of profitability, HBH‟s
net operating loss for 2002 was $4,280,527. Notwithstanding
the discrepancy between the initial and actual budgets for
2002, Reznick did not alter projections for 2003 and future
years. For years 2003 through 2007,37 Reznick projected an
aggregate net operating income of approximately $9.9
million. HBH actually experienced an aggregate net
operating loss of over $10.5 million for those five years. In
early 2004, PB made a portion of its fourth and final capital
contribution, paying $1,173,182 of its commitment of
$2,019,846.38
When Reznick was preparing HBH‟s 2003 audited
financial statements, it “addressed a possible impairment
issue under FASB 144.”39 (Id. at 1638.) FASB 144 requires
37
The record does not contain audited financial
statements for HBH beyond 2007.
38
After paying that portion of the fourth installment,
PB had made $19,351,796 of its $20,198,460 required capital
contribution. The notes to HBH‟s 2007 audited financial
statements indicate that the $846,664 balance, plus interest,
was still due, and was being reserved pending the outcome of
litigation with the IRS. The Tax Court also said that a
“portion of [PB‟s] fourth capital contribution … is currently
being held in escrow.” (J.A. at 17.)
39
FASB is an acronym for the Financial Accounting
Standards Board, an organization that establishes standards
which are officially recognized as authoritative by the SEC
for financial accounting and which govern the preparation of
financial reports by nongovernmental entities. The number
42
a write down of an impaired asset to its actual value
“whenever events or changes in circumstances indicate that
its carrying amount may not be recoverable,” such as when
there is “[a] current-period operating or cash flow loss
combined with a history of operating or cash flow losses or a
projection or forecast that demonstrates continuing losses
associated with the use of a long-lived asset.” Statement of
Financial Accounting Standards No. 144, Financial
Accounting Standards Board, 9 (Aug. 2001),
http://www.fasb.org/pdf/fas144.pdf) (hereinafter referred to
as “FASB 144”). In a memo to HBH‟s audit file, Reznick
considered a write down of HBH‟s interest in the East Hall
pursuant to FASB 144, “[d]ue to the fact that [HBH] has
experienced substantial operating losses and has not
generated any operating cash flow since its inception.” (J.A.
at 1638.) In the end, however, Reznick was persuaded by the
powers at HBH that HBH was never meant to function as a
self-sustaining venture and that the State of New Jersey was
going to make good on HBH‟s losses. In deciding against a
write down, Reznick explained:
Per discussions with the client, it was
determined that [HBH] was not structured to
provide operating cash flow. Instead, the
managing member, [NJSEA], agreed to fund all
operating deficits of [HBH] in order to preserve
the [East Hall] as a facility to be used by the
residents of the State of New Jersey. [NJSEA]
has the ability to fund the deficits as a result of
“144” refers to the number assigned to the particular standard
at issue here.
43
the luxury and other taxes provided by the
hospitality and entertainment industry in the
state.
(Id.) “Since there is no ceiling on the amount of funds to be
provided [by NJSEA to HBH] under the [AREA],” Reznick
concluded “there [was] no triggering event which require[d]
[a write down] under FASB 144.” (Id.) That same discussion
and conclusion were included in separate memos to HBH‟s
audit files for 2004 and 2005.40 By the end of 2007, the
operating deficit loan payable to NJSEA was in excess of $28
million.
6. The Tax Returns and IRS Audit
On its 2000 Form 1065,41 HBH reported an ordinary
taxable loss of $1,712,893, and $38,862,877 in QREs.42 On
40
The record does not contain Reznick‟s audit files for
HBH beyond 2005.
41
As detailed earlier, supra note 1, since HBH was a
duly formed New Jersey limited liability company, had two
members by the end of its 2000 tax year, and did not elect to
be treated as a corporation, it was classified as a partnership
for tax purposes for the tax years at issue here. See Treas.
Reg. § 301.7701-3(b)(1). Partnerships do not pay federal
income taxes, but rather are required to file a Form 1065,
which is an annual information return of the partnership. A
Form 1065 also generates a Schedule K-1 for each partner,
which reports a partner‟s distributive share of tax items. The
individual partners then report their allocable shares of the tax
items on their own federal income tax returns. See I.R.C.
§§ 701-04, 6031.
44
its 2001 Form 1065, HBH reported an ordinary taxable loss of
$6,605,142 and $68,865,639 in QREs. On its 2002 Form
1065, HBH reported an ordinary taxable loss of $9,135,373
and $1,271,482 of QREs. In accordance with its membership
interest in HBH, PB was issued a Schedule K-1 allocating
99.9% of the QREs for each of those tax years (collectively
referred to herein as the “Subject Years”).43
Following an audit of the returns of the Subject Years,
the IRS issued to HBH a notice of final partnership
administrative adjustment (“FPAA”). That FPAA determined
that all separately stated partnership items reported by HBH
on its returns for the Subject Years should be reallocated from
PB to NJSEA. The IRS made that adjustment on various
alternative, but related, grounds, two of which are of
particular importance on appeal: first, the IRS said that HBH
should not be recognized as a partnership for federal income
tax purposes because it was created for the express purpose of
improperly passing along tax benefits to PB and should be
treated as a sham transaction; and, second, it said that PB‟s
claimed partnership interest in HBH was not, based on the
42
HBH‟s 2000 Form 1065 stated that it began business
on June 26, 2000.
43
While PB was also allocated 99.9% of the ordinary
taxable loss for both 2001 and 2002, it appears it was only
allocated approximately 69% of the ordinary taxable loss for
2000. Although it is unclear from the record, PB could have
only been allocated 99.9% of the loss from the time it joined
as a member in HBH in September 2000, although, as noted
above, it was allocated 99.9% of the QREs for HBH‟s entire
taxable year in 2000.
45
totality of the circumstances, a bona fide partnership
participation because PB had no meaningful stake in the
success or failure of HBH.44 The IRS also determined that
accuracy-related penalties applied.
C. The Tax Court Decision
NJSEA, in its capacity as the tax matters partner of
HBH,45 filed a timely petition to the United States Tax Court
44
The FPAA provided two additional grounds for
reallocating partnership items from PB to NJSEA. It
determined that no sale of the East Hall occurred between
NJSEA and HBH for federal income tax purposes because the
burdens and benefits of ownership of the East Hall interest
did not pass from NJSEA, as the seller, to HBH, as the
purchaser. Although the IRS has appealed the Tax Court‟s
rejection of that argument, see infra note 47, we will not
address that contention in view of our ultimate disposition.
The FPAA also determined that HBH should be disregarded
for federal income tax purposes under the anti-abuse
provisions of Treas. Reg. § 1.701-2(b). The Tax Court also
rejected that determination, and the IRS has not appealed that
aspect of the decision.
45
A partnership such as HBH “designates a tax matters
partner to handle tax questions on behalf of the partnership,”
and that “partner is empowered to settle tax disputes on
behalf of the partnership.” Mathia v. Comm’r, 669 F.3d
1080, 1082 n.2 (10th Cir. 2012).
46
in response to the FPAA.46 Following a four-day trial in April
2009, the Tax Court issued an opinion in favor of HBH.
The Tax Court first rejected the Commissioner‟s
argument that HBH is a sham under the economic substance
doctrine. See supra note 7 and accompanying text. As the
Court saw it, “all of [the IRS‟s] arguments concerning the
economic substance of [HBH] [were] made without taking
into account the 3-percent return and the [HRTCs].” (Id. at
37.) The Court disagreed with the IRS‟s assertion that “[PB]
invested in the [HBH] transaction solely to earn [HRTCs].”
(Id. at 41.) Instead, the Court “believe[d] that the 3-percent
return and the expected tax credits should be viewed
together,” and “[v]iewed as a whole, the [HBH] and the East
Hall transactions did have economic substance” because the
parties “had a legitimate business purpose – to allow [PB] to
46
“Upon receiving an FPAA, a partnership, via its tax
matters partner, may file a petition in the Tax Court … .
Once an FPAA is sent, the IRS cannot make any assessments
attributable to relevant partnership items during the time the
partnership seeks review … .” Mathia, 669 F.3d at 1082.
Once that petition is filed, a partnership-level administrative
proceeding is commenced, governed by the Tax Equity and
Fiscal Responsibility Act of 1982. Under that Act, all
partnership items are determined in a single-level proceeding
at the partnership level, which is binding on the partners and
may not be challenged in a subsequent partner-level
proceeding. See I.R.C. §§ 6230(c)(4), 7422(h). This
streamlined process “remove[s] the substantial administrative
burden occasioned by duplicative audits and litigation and …
provide[s] consistent treatment of partnership tax items
among partners in the same partnership.” (J.A. at 31-32.)
47
invest in the East Hall‟s rehabilitation.” (Id.) In support of
that determination, the Tax Court explained:
Most of [PB‟s] capital contributions were used
to pay a development fee to NJSEA for its role
in managing the rehabilitation of the East Hall
according to the development agreement
between [HBH] and NJSEA. [The
Commissioner‟s] contention that [PB] was
unnecessary to the transaction because NJSEA
was going to rehabilitate the East Hall without a
corporate investor overlooks the impact that
[PB] had on the rehabilitation: no matter
NJSEA‟s intentions at the time it decided to
rehabilitate the East Hall, [PB‟s] investment
provided NJSEA with more money than it
otherwise would have had; as a result, the
rehabilitation ultimately cost the State of New
Jersey less. [The Commissioner] does not
allege that a circular flow of funds resulted in
[PB] receiving its 3–percent preferred return on
its capital contributions. In addition, [PB]
received the rehabilitation tax credits.
(Id. at 41-42.)
The Tax Court further explained that “[PB] faced risks
as a result of joining [HBH]. First … it faced the risk that the
rehabilitation would not be completed,” and additionally,
“both NJSEA and [PB] faced potential liability for
environmental hazards from the rehabilitation.” (Id. at 43.)
While recognizing that HBH and PB were insured parties
under NJSEA‟s existing environmental insurance policy, the
48
Tax Court noted that “there was no guaranty that: (1) The
insurance payout would cover any potential liability; and (2)
if NJSEA was required to make up any difference, it would
be financially able to do so.” (Id. at 43-44.) In sum, because
“NJSEA had more money for the rehabilitation than it would
have had if [PB] had not invested in [HBH],” and “[b]oth
parties would receive a net economic benefit from the
transaction if the rehabilitation was successful,” the Tax
Court concluded that HBH had “objective economic
substance.” (Id. at 46-47.)
The Tax Court used similar reasoning to reject the
Commissioner‟s assertion that PB was not a bona fide partner
in HBH. Specifically, the Court rejected the Commissioner‟s
contentions that “(1) [PB] had no meaningful stake in
[HBH‟s] success or failure; and (2) [PB‟s] interest in [HBH]
is more like debt than equity.” (Id. at 47.) After citing to the
totality-of-the-circumstances partnership test laid out in
Commissioner v. Culbertson, 337 U.S. 733 (1949), the Court
determined that “[PB] and NJSEA, in good faith and acting
with a business purpose, intended to join together in the
present conduct of a business enterprise” (J.A. at 49). After
“[t]aking into account the stated purpose behind [HBH‟s]
formation, the parties‟ investigation of the transaction, the
transaction documents, and the parties‟ respective roles,” the
Tax Court held “that [HBH] was a valid partnership.” (Id. at
52.)
Regarding the formation of a partnership, the Court
said that, because “[PB] and NJSEA joined together in a
transaction with economic substance to allow [PB] to invest
in the East Hall rehabilitation,” and “the decision to invest
provided a net economic benefit to [PB] through its 3-percent
49
preferred return and rehabilitation tax credits,” it was “clear
that [PB] was a partner in [HBH].” (Id. at 49-50.) The Court
opined that, since the East Hall operated at a loss, even if one
were to “ignore the [HRTCs], [PB‟s] interest is not more like
debt than equity because [PB] [was] not guaranteed to receive
a 3-percent return every year … [as] there might not be
sufficient cashflow to pay it.” (Id. at 51.)
The Tax Court also placed significant emphasis on
“the parties‟ investigation and documentation” to “support
[its] finding that the parties intended to join together in a
rehabilitation of the East Hall.” (Id. at 50.) According to the
Court, the Confidential Memorandum “accurately described
the substance of the transaction: an investment in the East
Hall‟s rehabilitation.” (Id.) The Court then cited to the
parties‟ investigation into mitigating potential environmental
hazards, as well as the parties‟ receipt of “a number of
opinion letters evaluating various aspects of the transaction,
to “support[] [its] finding of an effort to join together in the
rehabilitation of the East Hall.” (Id.) The Court decided that
“[t]he executed transaction documents accurately
represent[ed] the substance of the transaction … to
rehabilitate and manage the East Hall.” (Id.) Also, the Court
found it noteworthy that “the parties … carried out their
responsibilities under the AREA[:] NJSEA oversaw the East
Hall‟s rehabilitation, and [PB] made its required capital
contributions.”47 (Id. at 51.)
47
Rejecting a third alternative ground brought by the
IRS, see supra note 44, the Tax Court determined that NJSEA
had transferred the benefits and burdens of its interest in the
East Hall to render HBH the owner of the East Hall for tax
purposes, see supra note 24. To support that conclusion, the
50
Hence, the Tax Court entered a decision in favor of
HBH. This timely appeal by the Commissioner followed.
II. Discussion48
The Commissioner49 alleges that the Tax Court erred
by allowing PB, through its membership interest in HBH, to
receive the HRTCs generated by the East Hall renovation. He
characterizes the transaction as an impermissible “indirect
sale of the [HRTCs] to a taxable entity. … by means of a
purported partnership between the seller of the credits,
[NJSEA], and the purchaser, [PB].” (Appellant‟s Opening
Br. at 30.) While the Commissioner raises several arguments
Court observed that (1) “[t]he parties treated the transaction
as a sale”; (2) “possession of the East Hall vested in [HBH]”;
(3) “[HBH] reported the East Hall‟s profits and stood to lose
its income if the East Hall stopped operating as an event
space”; and (4) “[b]ank accounts were opened in [HBH‟s]
name by [Spectacor] as operator of the East Hall.” (J.A. at 54-
55.) Because of our ultimate resolution, we will not
specifically address the Tax Court‟s analysis of that
contention.
48
The Tax Court had jurisdiction pursuant to I.R.C.
§§ 6226(f) and 7442, and we have jurisdiction pursuant to
I.R.C. § 7482(a)(1). We exercise de novo review over the
Tax Court‟s ultimate characterization of a transaction, and
review its findings of fact for clear error. Merck & Co., Inc.
v. United States, 652 F.3d 475, 480-81 (3d Cir. 2011).
49
The current Commissioner of Internal Revenue is
Douglas Shulman.
51
in his effort to reallocate the HRTCs from NJSEA to PB, we
focus primarily on his contention that PB should not be
treated as a bona fide partner in HBH because PB did not
have a meaningful stake in the success or failure of the
partnership.50 We agree that PB was not a bona fide partner
in HBH.
50
The Commissioner also contends that HBH was a
sham. Specifically, the Commissioner invokes a “sham-
partnership theory,” which he says is “a variant of the
economic-substance (sham-transaction) doctrine.”
(Appellant‟s Opening Br. at 50.) That theory, according to
the Commissioner “focus[es] on (1) whether the formation of
the partnership made sense from an economic standpoint, as
would be the case [under the Culbertson inquiry], and (2)
whether there was otherwise a legitimate business purpose for
the use of the partnership form.” (Id.)
HBH contends that the IRS‟s sham-partnership theory,
which HBH asserts is “merely a rehash of the factual claims
that [the IRS] made in challenging [PB‟s] status as a partner
in HBH,” is distinct from the sham-transaction doctrine (also
known as the economic substance doctrine) that was litigated
before the Tax Court. Amicus Real Estate Roundtable (the
“Roundtable”) agrees, submitting that the Commissioner‟s
sham-partnership argument “inappropriately blur[s] the line
between the [economic substance doctrine] and the
[substance-over-form doctrine],” the latter of which applies
when the form of a transaction is not the same as its economic
reality. (Roundtable Br. at 7.) The point is well-taken, as the
economic substance doctrine and the substance-over-form
doctrine certainly “are distinct.” Neonatology Assocs., P.A. v.
Comm’r, 299 F.3d 221, 230 n.12 (3d Cir. 2002); see generally
Rogers v. United States, 281 F.3d 1108, 1115-17 (10th Cir.
52
2002) (noting differences between the substance-over-form
doctrine and the economic substance doctrine). The
substance-over-form doctrine “is applicable to instances
where the „substance‟ of a particular transaction produces tax
results inconsistent with the „form‟ embodied in the
underlying documentation, permitting a court to
recharacterize the transaction in accordance with its
substance.” Neonatology Assocs., 299 F.3d at 230 n.12. On
the other hand, the economic substance doctrine “applies
where the economic or business purpose of a transaction is
relatively insignificant in relation to the comparatively large
tax benefits that accrue.” Id.
As the Roundtable correctly explains, “[t]he fact that
[a] taxpayer might not be viewed as a partner (under the
[substance-over-form doctrine]) or that the transaction should
be characterized as a sale (again, under the [substance-over-
form doctrine]) [does] not mean that the underlying
transaction violated the [economic substance doctrine].”
(Roundtable Br. at 7.) Put another way, even if a transaction
has economic substance, the tax treatment of those engaged in
the transaction is still subject to a substance-over-form
inquiry to determine whether a party was a bona fide partner
in the business engaged in the transaction. See Southgate
Master Fund, L.L.C. ex rel. Montgomery Capital Advisors,
LLC v. United States, 659 F.3d 466, 484 (5th Cir. 2011)
(“The fact that a partnership‟s underlying business activities
had economic substance does not, standing alone, immunize
the partnership from judicial scrutiny [under Culbertson].”);
id. (“If there was not a legitimate, profit-motivated reason to
operate as a partnership, then the partnership will be
disregarded for tax purposes even if it engaged in transactions
that had economic substance.”).
53
A. The Test
A partnership exists when, as the Supreme Court said
in Commissioner v. Culbertson, two or more “parties in good
faith and acting with a business purpose intend[] to join
together in the present conduct of the enterprise.” 337 U.S. at
742; see also Comm’r v. Tower, 327 U.S. 280, 286-87 (1946)
(“When the existence of an alleged partnership arrangement
is challenged by outsiders, the question arises whether the
partners really and truly intended to join together for the
purpose of carrying on business and sharing in the profits or
losses or both.”); Southgate Master Fund, L.L.C. ex rel.
Montgomery Capital Advisors v. United States, 659 F.3d 466,
488 (5th Cir. 2011) (“The sine qua non of a partnership is an
intent to join together for the purpose of sharing in the profits
and losses of a genuine business.”).
At oral argument, the IRS conceded that this case
“lends itself more cleanly to the bona fide partner theory,”
under which we look to the substance of the putative partner‟s
interest over its form. Oral Argument at 11:00, Historic
Boardwalk Hall, LLC v. Comm’r (No. 11-1832), available at
http://www.ca3.uscourts.gov/oralargument/audio/11-
1832Historic%20Boardwalk%20LLC%20v%20Commissione
r%20IRS.wma. Accordingly, we focus our analysis on
whether PB is as a bona fide partner in HBH, and in doing so,
we assume, without deciding, that this transaction had
economic substance. Specifically, we do not opine on the
parties‟ dispute as to whether, under Sacks v. Commissioner,
69 F.3d 982 (9th Cir. 1995), we can consider the HRTCs in
evaluating whether a transaction has economic substance.
54
The Culbertson test is used to analyze the bona fides
of a partnership and to decide whether a party‟s “interest was
a bona fide equity partnership participation.” TIFD III-E, Inc.
v. United States, 459 F.3d 220, 232 (2d Cir. 2006)
(hereinafter “Castle Harbour ”). To determine, under
Culbertson, whether PB was a bona fide partner in HBH, we
must consider the totality of the circumstances,
considering all the facts – the agreement, the
conduct of the parties in execution of its
provisions, their statements, the testimony of
disinterested persons, the relationship of the
parties, their respective abilities and capital
contributions, the actual control of income and
the purposes for which it is used, and any other
facts throwing light on their true intent.
337 U.S. at 742. That “test turns on the fair, objective
characterization of the interest in question upon consideration
of all the circumstances.” Castle Harbour, 459 F.2d at 232.
The Culbertson test “illustrat[es] … the principle that a
transaction must be judged by its substance, rather than its
form, for income tax purposes.” Trousdale v. Comm’r, 219
F.2d 563, 568 (9th Cir. 1955). Even if there are “indicia of an
equity participation in a partnership,” Castle Harbour, 459
F.3d at 231, we should not “accept[] at face value artificial
constructs of the partnership agreement,” id. at 232. Rather,
we must examine those indicia to determine whether they
truly reflect an intent to share in the profits or losses of an
enterprise or, instead, are “either illusory of insignificant.”
Id. at 231. In essence, to be a bona fide partner for tax
55
purposes, a party must have a “meaningful stake in the
success or failure” of the enterprise. Id.
B. The Commissioner’s Guideposts
The Commissioner points us to two cases he calls
“recent guideposts” bearing on the bona fide equity partner
inquiry. (Appellant‟s Opening Br. at 34.) First, he cites to
the decision of the United States Court of Appeals for the
Second Circuit in Castle Harbour, 459 F.3d 220. The Castle
Harbour court relied on Culbertson in disregarding the
claimed partnership status of two foreign banks. Those banks
had allegedly formed a partnership, known as Castle Harbour,
LLC, with TIFD III-E, Inc. (“TIFD”), a subsidiary of General
Electric Capital Corporation, with an intent to allocate certain
income away from TIFD, an entity subject to United States
income taxes, to the two foreign banks, which were not
subject to such taxes. Id. at 223. Relying on the sham-
transaction doctrine, the district court had rejected the IRS‟s
contention that the foreign banks‟ interest was not a bona fide
equity partnership participation “because, in addition to the
strong and obvious tax motivations, the [partnership] had
some additional non-tax motivation to raise equity capital.”
Id. at 231. In reversing the district court, the Second Circuit
stated that it “[did] not mean to imply that it was error to
consider the sham test, as the IRS purported to rely in part on
that test. The error was in failing to test the banks‟ interest
also under Culbertson after finding that the [partnership‟s]
characterization survived the sham test.” Id. The Second
Circuit focused primarily on the Culbertson inquiry, and
specifically on the IRS‟s contention that the foreign banks
“should not be treated as equity partners in the Castle
56
Harbour partnership because they had no meaningful stake in
the success or failure of the partnership.” Id. at 224.
Applying the bona fide partner theory as embodied in
Culbertson‟s totality-of-the-circumstances test, the Castle
Harbour court held that the banks‟ purported partnership
interest was, in substance, “overwhelmingly in the nature of a
secured lender‟s interest, which would neither be harmed by
poor performance of the partnership nor significantly
enhanced by extraordinary profits.” Id. at 231. Although it
acknowledged that the banks‟ interest “was not totally devoid
of indicia of an equity participation in a partnership,” the
Court said that those indicia “were either illusory or
insignificant in the overall context of the banks‟ investment,”
and, thus, “[t]he IRS appropriately rejected the equity
characterization.” Id.
The Castle Harbour court observed that “consider[ing]
whether an interest has the prevailing character of debt or
equity can be helpful in analyzing whether, for tax purposes,
the interest should be deemed a bona fide equity
participation.” Id. at 232. In differentiating between debt and
equity, it counseled that “the significant factor … [is] whether
the funds were advanced with reasonable expectation of
repayment regardless of the success of the venture or were
placed at the risk of the business.” Id. (citation and internal
quotation marks omitted). Thus, in determining whether the
banks‟ interest was a bona fide equity participation, the
Second Circuit focused both on the banks‟ lack of downside
risk and lack of upside potential in the partnership. It agreed
with the “district court[‟s] recogni[tion] that the banks ran no
meaningful risk of being paid anything less than the
reimbursement of their investment at the [agreed-upon rate]
57
of return.” Id. at 233. In support of that finding, the Court
noted that:
[TIFD] was required … to keep … high-grade
commercial paper or cash, in an amount equal
to 110% of the current value of the [amount that
the banks would receive upon dissolution of the
partnership.] The partnership, in addition, was
obliged for the banks‟ protection to maintain
$300 million worth of casualty-loss insurance.
Finally, and most importantly, [General Electric
Capital Corporation] – a large and very stable
corporation – gave the banks its personal
guaranty, which effectively secured the
partnership‟s obligations to the banks.
Id. at 228.
Regarding upside potential, however, the Second
Circuit disagreed with the district court‟s conclusion that the
banks had a “meaningful and unlimited share of the upside
potential.” Id. at 233. That conclusion could not be credited
because it “depended on the fictions projected by the
partnership agreement, rather than on assessment of the
practical realities.” Id. at 234. Indeed, the Second Circuit
stated that “[t]he realistic possibility of upside potential – not
the absence of formal caps – is what governs this analysis.”
Id. In reality, “the banks enjoyed only a narrowly
circumscribed ability to participate in profits in excess of” the
repayment of its investment, id., because TIFD had the power
to either effectively restrict the banks‟ share of profits at 1%
above an agreed-upon return of $2.85 million, or to buy out
their interest at any time at a “negligible cost” of
58
approximately $150,000, id. at 226, 235. The return on the
banks‟ initial investment of $117.5 million was thus limited
to $2.85 million plus 1% – “a relatively insignificant
incremental return over the projected eight-year life of the
partnership,” id. at 235. In sum, “look[ing] not so much at
the labels used by the partnership but at true facts and
circumstances,” as Culbertson directs, the Castle Harbour
court was “compel[led] [to] conclu[de] that the … banks‟
interest was, for tax purposes, not a bona fide equity
participation.” Id. at 241.
The second, more recent, precedent that the
Commissioner directs us to as a “guidepost” is Virginia
Historic Tax Credit Fund 2001 LP v. Commissioner, 639 F.3d
129 (4th Cir. 2011) (hereinafter “Virginia Historic”). There,
the United States Court of Appeals for the Fourth Circuit held
that certain transactions between a partnership and its partners
which sought to qualify for tax credits under the
Commonwealth of Virginia‟s Historic Rehabilitation Credit
Program (the “Virginia Program”)51 were, in substance, sales
of those credits which resulted in taxable income to the
partnership. Id. at 132. In Virginia Historic, certain
investment funds (the “Funds”) were structured “as
51
The Virginia Program, much like the federal HRTC
statute, was enacted to encourage investment in renovating
historic properties. Virginia Historic, 639 F.3d at 132.
Similar to federal HRTCs, the credits under the Virginia
Program could be applied to reduce a taxpayer‟s Virginia
income tax liability, dollar-for-dollar, up to 25% of eligible
expenses incurred in rehabilitating the property. Id. Also like
federal HRTCs, credits under the Virginia program could not
be sold or transferred to another party. Id. at 132-33.
59
partnerships that investors could join by contributing capital.”
Id. at 133. Through four linked partnership entities with one
“source partnership” entity (the “Source Partnership”), “[t]he
Funds would use [the] capital [provided by investors] to
partner with historic property developers [“Operating
Partnerships”] renovating smaller projects, in exchange for
state tax credits.” Id. The confidential offering memorandum
given to potential investors provided that, “[f]or every $.74-
$.80 contributed by an investor, [one of the] Fund[s] would
provide the investor with $1 in tax credits. If such credits
could not be obtained, the partnership agreement promised a
refund of capital to the investor, net of expenses.” Id. at 134
(citation and internal quotation marks omitted). Additionally,
“the partnership agreement stated that the Funds would invest
only in completed projects, thereby eliminating a significant
area of risk” to the investors. Id. “[T]he Funds reported the
money paid to Operating Partnerships in exchange for tax
credits as partnership expenses and reported the investors‟
contributions to the Funds as nontaxable contributions to
capital.” Id. at 135.
The IRS “challenged [the Funds‟] characterization of
investors‟ funding as „contributions to capital‟” because the
IRS believed that the investors were, in substance, purchasers
of state income tax credits, and thus the money that the Funds
received from the investors should have been reported as
taxable income. Id. At trial, the Commissioner supported his
position with two theories. First, he relied on the substance-
over-form doctrine, saying that the investors were not bona
fide partners in the Funds but were instead purchasers; and,
second, he said that the transactions between the investors
and the partnerships were “disguised sales” under I.R.C.
60
§ 707.52 Id. at 136. The Tax Court rejected both of those
assertions, and found that the investors were partners in the
Funds for federal tax purposes. Id. at 136-37.
The Fourth Circuit reversed the Tax Court.
“Assuming, without deciding, that a „bona fide‟ partnership
existed,” the Virginia Historic court found that “the
Commissioner properly characterized the transactions at issue
as „sales‟” under the disguised-sale rules. Id. at 137. The
Fourth Circuit first turned to the regulations that provide
guidance in determining whether a disguised sale has
occurred. See id. at 137-39 (citing to, inter alia, Treas. Reg.
§§ 1.707-3, 1.707-6(a)). Specifically, it explained that a
transaction should be reclassified as a sale if, based on all the
facts and circumstances, (1) a partner would not have
transferred money to the partnership but for the transfer of
property – the receipt of tax credits – to the partner; and (2)
52
Under I.R.C. § 707(a)(2)(A),
[i]f (i) a partner performs services for a
partnership or transfers property to a
partnership, (ii) there is a related direct or
indirect allocation and distribution to such
partner, and (iii) the performance of such
services (or such transfer) and the allocation
and distribution, when viewed together, are
properly characterized as a transaction
occurring between the partnership and a partner
acting other than in his capacity as a member of
the partnership, such allocation and distribution
shall be treated as a transaction [between the
partnership and one who is not a partner].
61
the latter transfer – the receipt of tax credits – “is not
dependent on the entrepreneurial risks of partnership
operations.” Id. at 145 (quoting Treas. Reg. § 1.707-3(b)(1)).
The Fourth Circuit concluded that the risks cited by the Tax
Court – such as the “risk that developers would not complete
their projects on time because of construction, zoning, or
management issues,” “risk … [of] liability for improper
construction,” and “risk of mismanagement or fraud at the
developer partnership level” – “appear[ed] both speculative
and circumscribed.” Id. While the Fourth Circuit
acknowledged that “there was … no guarantee that resources
would remain available in the source partnership to make the
promised refunds,” it determined “that the Funds were
structured in such a way as to render the possibility of
insolvency remote.” Id.
In holding “that there was no true entrepreneurial risk
faced by investors” in the transactions at issue, the Virginia
Historic court pointed to several different factors:
First, investors were promised what was, in
essence, a fixed rate of return on investment
rather than any share in partnership profits tied
to their partnership interests. … Second, the
Funds assigned each investor an approximate
.01% partnership interest and explicitly told
investors to expect no allocations of material
amounts of … partnership items of income,
gain, loss or deduction. Third, investors were
secured against losing their contributions by the
promise of a refund from the Funds if tax
credits could not be delivered or were revoked.
62
And fourth, the Funds hedged against the
possibility of insolvency by promising investors
that contributions would be made only to
completed projects and by requiring the
Operating Partnerships to promise refunds, in
some cases backed by guarantors, if promised
credits could not be delivered.
Id. (internal citations and quotation marks omitted). In sum,
the Fourth Circuit deemed “persuasive the Commissioner‟s
contention that the only risk … was that faced by any advance
purchaser who pays for an item with a promise of later
delivery. It [was] not the risk of the entrepreneur who puts
money into a venture with the hope that it might grow in
amount but with the knowledge that it may well shrink.” Id. at
145-46 (citing Tower, 327 U.S. at 287; Staff of J. Comm. on
Tax‟n, 98th Cong., 2d Sess., General Explanation of the
Revenue Provisions of the Deficit Reduction Act of 1984, at
226 (“To the extent that a partner‟s profit from a transaction
is assured without regard to the success or failure of the joint
undertaking, there is not the requisite joint profit motive.”
(alteration in original))). Accordingly, it agreed with the
Commissioner that the Funds should have reported the money
received from the investors as taxable income. Id. at 146.
The Fourth Circuit concluded its opinion with an
important note regarding its awareness of the legislative
policy of providing tax credits to spur private investment in
historic rehabilitation projects:
We reach this conclusion mindful of the
fact that it is “the policy of the Federal
Government” to “assist State and local
63
governments … to expand and accelerate their
historic preservation programs and activities.”
16 U.S.C. § 470-1(6). And we find no fault in
the Tax Court‟s conclusion that both the Funds
and the Funds‟ investors engaged in the
challenged transactions with the partial goal of
aiding Virginia‟s historic rehabilitation efforts.
But Virginia‟s Historic Rehabilitation Program
is not under attack here.
Id. at 146 n.20.
C. Application of the Guideposts to HBH
The Commissioner asserts that Castle Harbour and
Virginia Historic “provide a highly pertinent frame of
reference for analyzing the instant case.” (Appellant‟s
Opening Br. at 40.) According to the Commissioner, “[m]any
of the same factors upon which the [Castle Harbour court]
relied in finding that the purported bank partners … were, in
substance, lenders to the GE entity also support the
conclusion that [PB] was, in substance, not a partner in HBH
but, instead, was a purchaser of tax credits from HBH.”53
(Id.) That is so, says the Commissioner, because, as
confirmed by the Virginia Historic court‟s reliance on the
53
The Commissioner acknowledges that “[a]lthough
certain aspects of [PB‟s] cash investment in HBH were debt-
like (e.g., its 3-percent preferred return), this case does not fit
neatly within the debt-equity dichotomy, since [PB]
recovered its „principal,‟ i.e. its purported capital
contributions to HBH, in the form of tax credits rather than
cash.” (Appellant‟s Opening Br. at 40 n.14.)
64
“entrepreneurial risks of partnership operations,” Treas. Reg.
§ 1.707-3(b)(1), “the distinction between an equity
contribution to a partnership … and a transfer of funds to a
partnership as payment of the sales price of partnership
property [, i.e., tax credits,]… is the same as the principal
distinction between equity and debt” (Appellant‟s Opening
Br. at 40-41). The key point is that the “recovery of an equity
investment in a partnership is dependent on the
entrepreneurial risks of partnership operations, whereas
recovery of a loan to a partnership – or receipt of an asset
purchased from a partnership – is not.” (Id. at 41.) In other
words, “an equity investor in a partnership (i.e., a bona fide
partner) has a meaningful stake in the success or failure of the
enterprise, whereas a lender to, or purchaser from, the
partnership does not.” (Id.) In sum, the Commissioner
argues that, just as the banks in Castle Harbour had no
meaningful stake in their respective partnerships, and the
“investors” in Virginia Historic were more like purchasers
than participants in a business venture, “it is clear from the
record in this case that [PB] had no meaningful stake in the
success or failure of HBH.” (Id.)
In response, HBH asserts that “[t]here are a plethora of
errors in the IRS‟s tortured effort … to apply Castle Harbour
and Virginia Historic … to the facts of the present case.”
(Appellee‟s Br. at 38.) First, HBH argues that it is
“abundantly apparent” that Castle Harbour “is completely
inapposite” to it because the actual provisions in Castle
Harbour‟s partnership agreement that minimized the banks‟
downside risk and upside potential were more limiting than
the provisions in the AREA. (Appellee‟s Br. at 35.) HBH
contends that, unlike the partnership agreement in Castle
Harbour, “[PB] has no rights under the AREA to compel
65
HBH to repay all or any part of its capital contribution,” PB‟s
3% Preferred Return was “not guaranteed,” and “NJSEA has
no … right to divest [PB] of its interest in any income or
gains from the East Hall.” (Id.)
As to Virginia Historic, HBH argues that it “has no
application whatsoever” here. (Id. at 38.) It reasons that the
decision in that case “assumed that valid partnerships existed
as a necessary condition to applying I.R.C. § 707(b)‟s
disguised sale rules” (id. at 36), and that the case was
“analyzed … solely under the disguised sale regime” – which
is not at issue in the FPAA sent to HBH (id. at 38).
Overall, HBH characterizes Castle Harbour and
Virginia Historic as “pure misdirections which lead to an
analytical dead end” (id. at 32), and emphasizes that “[t]he
question … Culbertson asks is simply whether the parties
intended to conduct a business together and share in the
profits and losses therefrom” (id. at 39). We have no quarrel
with how HBH frames the Culbertson inquiry. But what
HBH fails to recognize is that resolving whether a purported
partner had a “meaningful stake in the success or failure of
the partnership,” Castle Harbour, 459 F.3d at 224, goes to the
core of the ultimate determination of whether the parties
“„intended to join together in the present conduct of the
enterprise,‟” id. at 232 (quoting Culbertson, 337 U.S. at 742).
Castle Harbour‟s analysis that concluded that the banks‟
“indicia of an equity participation in a partnership” was only
“illusory or insignificant,” id. at 231, and Virginia Historic‟s
determination that the limited partner investors did not face
the “entrepreneurial risks of partnership operations,” 639 F.3d
at 145 (citation and internal quotation marks omitted), are
both highly relevant to the question of whether HBH was a
66
partnership in which PB had a true interest in profit and
loss,54 and the answer to that question turns on an assessment
54
We reject, moreover, any suggestion that the
disguised-sale rules and the bona fide-partner theory apply in
mutually exclusive contexts. Virginia Historic did not
“assume[] that valid partnerships existed as a necessary
condition” prior to applying the disguised-sale rules.
(Appellee‟s Br. at 36.) Rather, as the Virginia Historic court
observed, “[t]he Department of the Treasury specifically
contemplates that its regulations regarding disguised sales can
be applied before it is determined whether a valid partnership
exists.” 639 F.3d at 137 n.9 (citing Treas. Reg. § 1.707-3).
More importantly, HBH simply ignores why many of
the principles espoused in Virginia Historic are applicable
here. It is true that the challenged transaction here does not
involve state tax credits and that the IRS has not invoked the
disguised-sale rules, but distinguishing the case on those
grounds fails to address the real issue. Virginia Historic is
telling because the disguised-sale analysis in that case
“touches on the same risk-reward analysis that lies at the
heart of the bona fide-partner determination.” (Appellant‟s
Reply Br. at 9.) Under the disguised-sale regulations, a
transfer of “property … by a partner to a partnership” and a
“transfer of money or other consideration … by the
partnership to the partner” will be classified as a disguised
sale if, based on the facts and circumstances, “(i) [t]he
transfer of money or other consideration would not have been
made but for the transfer of property; and (ii) [i]n cases in
which the transfers are not made simultaneously, the
subsequent transfer is not dependent on the entrepreneurial
risks of partnership operations.” Treas. Reg. § 1.707-3(b)(1).
67
Thus, the disguised-sale analysis includes an
examination of “whether the benefit running from the
partnership to the person allegedly acting in the capacity of a
partner is „dependent upon the entrepreneurial risks of
partnership operations.‟” (Appellant‟s Reply Br. at 9
(quoting Treas. Reg. § 1.707-3(b)(1)(ii)).) That
entrepreneurial risk issue also arises in the bona fide-partner
analysis, which focuses on whether the partner has a
meaningful stake in the profits and losses of the enterprise.
Moreover, many of the facts and circumstances laid out in the
pertinent treasury regulations that “tend to prove the existence
of a [disguised] sale,” Treas. Reg. § 1.707-3(b)(2), are also
relevant to the bona fide-partner analysis here. See, e.g., id.
§ 1.707-3(b)(2)(i) (“That the timing and amount of a
subsequent transfer [i.e., the HRTCs] are determinable with
reasonable certainty at the time of an earlier transfer [i.e.,
PB‟s capital contributions];”); id. § 1.707-3(b)(2)(iii) (“That
the partner‟s [i.e., PB‟s] right to receive the transfer of money
or other consideration [i.e., the HRTCs] is secured in any
manner, taking into account the period during which it is
secured;”); id. § 1.707-3(b)(2)(iv) (“That any person [i.e.,
NJSEA] has made or is legally obligated to make
contributions [e.g., the Tax Benefits Guaranty] to the
partnership in order to permit the partnership to make the
transfer of money or other consideration [i.e., the HRTCs];”);
id. § 1.707-3(b)(2)(v) (“That any person [i.e., NJSEA] has
loaned or has agreed to loan the partnership the money or
other consideration [e.g., Completion Guaranty, Operating
Deficit Guaranty] required to enable the partnership to make
the transfer, taking into account whether any such lending
obligation is subject to contingencies related to the results of
partnership operations;”). Although we are not suggesting
68
of risk participation. We are persuaded by the
Commissioner‟s argument that PB, like the purported bank
partners in Castle Harbour, did not have any meaningful
downside risk or any meaningful upside potential in HBH.
1. Lack of Meaningful Downside Risk
PB had no meaningful downside risk because it was, for all
intents and purposes, certain to recoup the contributions it had
made to HBH and to receive the primary benefit it sought–
the HRTCs or their cash equivalent. First, any risk that PB
would not receive HRTCs in an amount that was at least
equivalent to installments it had made to-date (i.e., the
“Investment Risk”) was non-existent. That is so because,
under the AREA, PB was not required to make an installment
contribution to HBH until NJSEA had verified that it had
achieved a certain level of progress with the East Hall
renovation that would generate enough cumulative HRTCs to
at least equal the sum of the installment which was then to be
contributed and all prior capital contributions that had been
made by PB. (See J.A. at 176, 242 (first installment of
$650,000 due at closing was paid when NJSEA had already
incurred over $53 million of QREs which would generate
over $10 million in HRTCs); id. at 176-77 (second
installment, projected to be $7,092,588, was not due until,
among other events, a projection of the HRTCs for 2000
(which were estimated at closing to be $7,789,284) based on
that a disguised-sale determination and a bona fide-partner
inquiry are interchangeable, the analysis pertinent to each
look to whether the putative partner is subject to meaningful
risks of partnership operations before that partner receives the
benefits which may flow from that enterprise.
69
a “determination of the actual rehabilitation costs of [HBH]
that qualify for Tax Credits in 2000”); id. at 177 (third
installment, projected to be $8,523,630, was not due until the
later of, among other events, (1) “evidence of Substantial
Completion of Phase 4 … .”; and (2) a projection of the
HRTCs for 2001 (which were estimated at closing to be
$11,622,889) based on a “determination of the actual
rehabilitation costs of [HBH] that qualify for Tax Credits in
2001”); id. (fourth installment, projected to be $1,929,580,
was not due until, among other events, PB received a “K-1 for
2001 evidencing the actual Tax Credits for 2001,” a tax
document that would not have been available until after the
estimated completion date of the entire project).) While PB
did not have the contractual right to “compel HBH to repay
all or any part of its capital contribution” (Appellee‟s Br. at
35), PB had an even more secure deal. Even before PB made
an installment contribution, it knew it would receive at least
that amount in return.
Second, once an installment contribution had been
made, the Tax Benefits Guaranty eliminated any risk that, due
to a successful IRS challenge in disallowing any HRTCs, PB
would not receive at least the cash equivalent of the
bargained-for tax credits (i.e., the “Audit Risk”). The Tax
Benefits Guaranty obligated NJSEA55 to pay PB not only the
amount of tax credit disallowed, but also any penalties and
interest, as well as up to $75,000 in legal and administrative
expenses incurred in connection with such a challenge, and
55
Although HBH was the named obligor under the
Tax Benefits Guaranty, the agreement provided that “NJSEA
… shall fund any obligations of [HBH] to [PB]” under the
Tax Benefits Guaranty. (J.A. at 303.)
70
the amount necessary to pay any tax due on those
reimbursements. Cf. Virginia Historic, 639 F.3d at 145
(noting the fact that “investors were secured against losing
their contributions by the promise of a refund from the Funds
if tax credits could not be delivered or were revoked”
“point[ed] to the conclusion that there was no true
entrepreneurial risk faced by investors”).
Third, any risk that PB would not receive all of its
bargained-for tax credits (or cash equivalent through the Tax
Benefits Guaranty) due to a failure of any part of the
rehabilitation to be successfully completed (i.e., the “Project
Risk”) was also effectively eliminated because the project
was already fully funded before PB entered into any
agreement to provide contributions to HBH. (See J.A. at 962
(statement in the Confidential Memorandum that “[t]he
rehabilitation is being funded entirely by [NJSEA]”); id. at
1134 (notes from a NJSEA executive committee meeting in
March 2000 indicating that “[t]he bulk of the Investor‟s
equity is generally contributed to the company after the
project is placed into service and the tax credit is earned, the
balance when stabilization is achieved”); id. at 1714 (notes to
NJSEA‟s 1999 annual report stating that the Casino
Reinvestment Development Authority had “agreed to
reimburse [NJSEA] [for] … all costs in excess of bond
proceeds for the project”).) That funding, moreover, included
coverage for any excess development costs.56 In other words,
56
PB had no exposure to the risk of excess
construction costs, as the Completion Guaranty in the AREA
provided that NJSEA was obligated to pay all such costs.
Additionally, even after the renovation was completed, PB
need not worry about any operating deficits that HBH would
71
PB‟s contributions were not at all necessary for the East Hall
project to be completed. Cf. Virginia Historic, 639 F.3d at
145 (noting that the fact that “the Funds hedged against the
possibility of insolvency by promising investors that
contributions would be made only to completed projects”
“point[ed] to the conclusion that there was not true
entrepreneurial risk faced by investors”). Furthermore,
HBH‟s own accountants came to the conclusion that the
source of the project‟s funds – NJSEA (backed by the Casino
Reinvestment Development Authority) – was more than
capable of covering any excess development costs incurred
by the project, as well as any operating deficits of HBH, and
NJSEA had promised that coverage through the Completion
Guaranty and the Operating Deficit Guaranty, respectively, in
the AREA. (See J.A. at 1638 (memo to audit file noting that,
because “[NJSEA] has the ability to fund the [operating]
deficits as a result of the luxury and other taxes provided by
the hospitality and entertainment industry in the state,” and
“there is no ceiling on the amount of funds to be provided [by
NJSEA to HBH],” “no triggering event [had occurred] which
require[d] [a write down] under FASB 144”).) Cf. Virginia
Historic, 639 F.3d at 145 (noting that although “[i]t [was] true
… there was … no guarantee that resources would remain
available in the source partnership to make the promised
refunds … it [was] also true that the Funds were structured in
such a way as to render the possibility of insolvency
remote”).) Thus, although the Tax Court determined that PB
incur, as NJSEA promised to cover any such deficits through
the Operating Deficit Guaranty. Furthermore, as detailed
infra note 58, PB ran no real risk of incurring any
environmental liability in connection with the East Hall
renovation.
72
“faced the risk that the rehabilitation would not be
completed” (J.A. at 43), the record belies that conclusion.
Because NJSEA had deep pockets, and, as succinctly stated
by Reznick, “there [was] no ceiling on the amount of funds to
be provided [by NJSEA to HBH]” (id. at 1638), PB was not
subject to any legally significant risk that the renovations
would falter.57
In short, PB bore no meaningful risk in joining HBH,
as it would have had it acquired a bona-fide partnership
interest. See ASA Investerings P’ship v. Comm’r, 201 F.3d
505, 514 (D.C. Cir. 2000) (noting that the Tax Court did not
err “by carving out an exception for de minimis risks” when
assessing whether the parties assumed risk for the purpose of
determining whether a partnership was valid for tax purposes,
and determining that the decision not to consider de minimis
risk was “consistent with the Supreme Court‟s view … that a
transaction will be disregarded if it did „not appreciably affect
[taxpayer‟s] beneficial interest except to reduce his tax‟”
57
Although the question of the existence of a risk is a
factual issue we would review for clear error, there was
certainly no error in acknowledging that there were risks
associated with the rehabilitation. The relevant question,
here, however, is not the factual one of whether there was
risk; it is the purely the legal question of how the parties
agreed to divide that risk, or, in other words, whether a party
to the transactions bore any legally significant risk under the
governing documents. That question – whether PB was
subject to any legally meaningful risk in connection with the
East Hall rehabilitation – depends on the AREA and related
documents and hence is a question of law that we review de
novo.
73
(alteration in original) (quoting Knetsch v. United States, 364
U.S. 361, 366 (1960))).58
PB‟s effective elimination of Investment Risk, Audit
Risk, and Project Risk is evidenced by the “agreement … of
the parties.” Culbertson, 337 U.S. at 742. PB and NJSEA, in
substance, did not join together in HBH‟s stated business
purpose – to rehabilitate and operate the East Hall. Rather,
the parties‟ focus from the very beginning was to effect a sale
and purchase of HRTCs. (See J.A. at 691 (Sovereign‟s
“consulting proposal … for the sale of historic rehabilitation
tax credits expected to be generated” by the East Hall
renovation); id. at 955 (Confidential Memorandum entitled
“The Sale of Historic Tax Credits Generated by the
Renovation of the Historic Atlantic City Boardwalk
Convention Hall”); id. at 1143 (cover letter from Sovereign to
NJSEA providing NJSEA “with four original investment
offers from institutions that have responded to the
58
The Tax Court thought that “[PB] faced potential
liability for environmental hazards from the rehabilitation.”
(J.A. at 43.) Specifically, it theorized that PB could be on the
hook for environmental liability (1) if environmental
insurance proceeds did not cover any such potential liability,
and (2) NJSEA was unable to cover that difference. In
reality, however, PB was not subject to any real risk of
environmental liability because of the Environmental
Guaranty and the fact that PB had a priority distribution right
to any environmental insurance proceeds that HBH received
(HBH‟s counsel at oral argument indicated that HBH carried
a $25 million policy). Moreover, PB received a legal opinion
that it would not be subject to any environmental liability
associated with the East Hall renovation.
74
[Confidential] Memorandum regarding the purchase of the
historic tax credits expected to be generated by” the East Hall
renovation).)59
That conclusion is not undermined by PB‟s receipt of a
secondary benefit – the 3% Preferred Return on its
contributions to HBH. Although, in form, PB was “not
guaranteed” that return on an annual basis if HBH did not
generate sufficient cash flow (Appellee‟s Br. at 35), in
substance, PB had the ability to ensure that it would
eventually receive it. If PB exercised its Put Option (or
NJSEA exercised its Call Option), the purchase price to be
paid by NJSEA was effectively measured by PB‟s accrued
and unpaid Preferred Return. See infra note 63 and
accompanying text. And to guarantee that there would be
sufficient cash to cover that purchase price, NJSEA was
required to purchase the Guaranteed Investment Contract in
the event that NJSEA exercised its Call Option.60 Cf.
Virginia Historic, 639 F.3d at 145 (noting the fact that
“investors were promised what was, in essence, a fixed rate of
59
Although we do not “[p]ermit[] a taxpayer to control
the economic destiny of a transaction with labels” when
conducting a substance-over-form inquiry, Schering-Plough,
Corp. v. United States, 651 F. Supp. 2d 219, 242 (D.N.J.
2009), the labels chosen are indicative of what the parties
were trying to accomplish and thus those labels “throw[] light
on [the parties‟] true intent,” Culbertson, 337 U.S. at 742.
60
As noted supra in Section I.B.4.a, the Guaranteed
Investment Contract was “sized to pay off” the accrued but
unpaid Preferred Return, as well as the outstanding balance
on the Investor Loan with accrued interest. (J.A. at 1211.)
75
return on investment rather than any share in partnership
profits tied to their partnership interests” “point[ed] to the
conclusion that there was not true entrepreneurial risk faced
by investors”). Thus, the Tax Court‟s finding that PB “might
not receive its preferred return … at all” unless NJSEA
exercised its Call Option (J.A. at 51-52), was clearly
erroneous because it ignored the reality that PB could assure
its return by unilaterally exercising its Put Option.61
HBH, of course, attacks the Commissioner‟s assertion
that PB lacked downside risk, claiming that “the IRS‟s theory
that a valid partnership cannot exist unless an investor-partner
shares in all of the risks and costs of the partnership has no
basis in partnership or tax law,” and “is contrary to the
standard economic terms of innumerable real estate
investment partnerships in the United States for every type of
real estate project.” (Appellee‟s Br. at 44.) HBH also asserts
that many of the negotiated provisions – such as the
Completion Guaranty, Operating Deficit Guaranty, and the
Preferred Return – are “typical in a real estate investment
partnership.” (Id. at 45.) The Commissioner has not claimed,
however, and we do not suggest, that a limited partner is
prohibited from capping its risk at the amount it invests in a
partnership. Such a cap, in and of itself, would not jeopardize
its partner status for tax purposes. We also recognize that a
limited partner‟s status as a bona fide equity participant will
61
It is true, of course, that PB could not exercise its
Put Option until seven years from the date that the East Hall
was placed in service. However, PB would have no interest
in exercising that option within the first five years anyway
because the HRTCs that PB received would be subject to
recapture during that period. See supra note 20.
76
not be stripped away merely because it has successfully
negotiated measures that minimize its risk of losing a portion
of its investment in an enterprise. Here, however, the parties
agreed to shield PB‟s “investment” from any meaningful risk.
PB was assured of receiving the value of the HRTCs and its
Preferred Return regardless of the success or failure of the
rehabilitation of the East Hall and HBH‟s subsequent
operations. And that lack of meaningful risk weighs heavily
in determining whether PB is a bona fide partner in HBH. Cf.
Virginia Historic, 639 F.3d at 145-46 (explaining that
“entrepreneurial risks of partnership operations” involves
placing “money into a venture with the hope that it might
grow in amount but with the knowledge that it may well
shrink”); Castle Harbour, 459 F.3d at 232 (noting that
“Congress appears to have intended that „the significant
factor‟ in differentiating between [debt and equity] be
whether „the funds were advanced with reasonable
expectations of repayment regardless of the success of the
venture or were placed at the risk of the business‟” (quoting
Gilbert v. Comm’r, 248 F.2d 399, 406 (2d Cir. 1957))).
2. Lack of Meaningful Upside Potential
PB‟s avoidance of all meaningful downside risk in
HBH was accompanied by a dearth of any meaningful upside
potential. “Whether [a putative partner] is free to, and does,
enjoy the fruits of the partnership is strongly indicative of the
reality of his participation in the enterprise.” Culbertson, 337
U.S. at 747. PB, in substance, was not free to enjoy the fruits
of HBH. Like the foreign banks‟ illusory 98% interest in
Castle Harbour, PB‟s 99.9% interest in HBH‟s residual cash
flow gave a false impression that it had a chance to share in
potential profits of HBH. In reality, PB would only benefit
77
from its 99.9% interest in residual cash flow after payments to
it on its Investor Loan and Preferred Return and the following
payments to NJSEA: (1) annual installment payment on the
Acquisition Loan ($3,580,840 annual payment for 39 years
plus arrears); (2) annual installment payment on the
Construction Loan;62 and (3) payment in full of the operating
deficit loan (in excess of $28 million as of 2007). Even
HBH‟s own rosy financial projections from 2000 to 2042,
which (at least through 2007) had proven fantastically
inaccurate, forecasted no residual cash flow available for
distribution. Thus, although in form PB had the potential to
receive the fair market value of its interest (assuming such
value was greater than its accrued but unpaid Preferred
Return) if either NJSEA exercised its Call Option or PB
exercised its Put Option, in reality, PB could never expect to
share in any upside.63 Cf. Castle Harbour, 459 F.3d at 234
62
The Construction Loan called for annual interest-
only payments until April 30, 2002, and thereafter, called for
annual installments of principal and interest that would fully
pay off the amount of the principal as then had been advanced
by April 30, 2040. Under the original principal amount of
$57,215,733 with an interest rate of 0.1% over a 39-year
period, and assuming no arrearage in the payment of principal
and interest, the annual installment of principal and interest
would be approximately $1.5 million.
63
To put it mildly, the parties and their advisors were
imaginative in creating financial projections to make it appear
that HBH would be a profit-making enterprise. For example,
after Sovereign said that it was “cautious about [Spectacor‟s
projections of net losses for HBH since] they might prove
excessively conservative” (J.A. at 793), and suggested that
NJSEA “could explore shifting the burden of some of
78
[HBH‟s] operating expenses … to improve results” (id. at
804), Spectacor made two sets of revisions to HBH‟s five-
year draft projections that turned an annual average $1.7
million net operating loss to annual net operating gains
ranging from $716,000 to $1.24 million by removing HBH‟s
projected utilities expenses for each of the five years.
Similarly, when an accountant from Reznick informed
Hoffman that the two proposed loans from NJSEA to HBH
“ha[d] been set up to be paid from available cash flow” but
that “[t]here was not sufficient cash to amortize this debt” (id.
at 1160), Hoffman instructed that accountant to remedy that
issue by increasing the projection of baseline revenues in
2002 by $1 million by adding a new revenue source of
$750,000 titled “naming rights,” and by increasing both
“parking revenue” and “net concession revenue” by $125,000
each (id. at 1196). Overall, although Reznick projected near
closing that HBH would generate an aggregate net operating
income of approximately $9.9 million for 2003 through 2007,
HBH actually experienced an aggregate net operating loss of
over $10.5 million for those five years.
Despite the smoke and mirrors of the financial
projections, the parties‟ behind-the-scenes statements reveal
that they never anticipated that the fair market value of PB‟s
interest would exceed PB‟s accrued but unpaid Preferred
Return. (See id. at 1162 (pre-closing memo from NJSEA‟s
outside counsel to NJSEA that “[d]ue to the structure of the
transaction,” the fair market value would not come into play
in determining the amount that PB would be owed if NJSEA
exercised its Call Option).) That admission is hardly
surprising because the substance of the transaction indicated
that this was not a profit-generating enterprise. Cf. Virginia
Historic, 639 F.3d at 145 (noting that the fact that “the Funds
79
(“The realistic possibility of upside potential – not the
absence of formal caps – is what governs [the bona fide
equity participation] analysis.”). Even if there were an
upside, however, NJSEA could exercise its Consent Option,
and cut PB out by paying a purchase price unrelated to any
fair market value.64 See supra Section I.B.4.a. In sum, “the
structure of the … transaction ensured that [PB] would never
receive any [economic benefits from HBH].” Southgate
Master Fund, 659 F.3d at 486-87. And “[i]n light of
Culbertson‟s identification of „the actual control of income
and the purposes for which it [was] used‟ as a metric of a
partnership‟s legitimacy, the terms of the [AREA and the
structure of the various options] constitute compelling
evidence” that PB was not a bona fide partner in HBH. Id. at
486 (quoting Culbertson, 337 U.S. at 742).
3. HBH’s Reliance on Form over Substance
After attempting to downplay PB‟s lack of any
meaningful stake in the success or failure of the enterprise,
HBH presses us to consider certain evidence that it believes
“overwhelmingly proves that [PB] is a partner in HBH” under
… explicitly told investors to expect no allocation of material
amounts of … partnership items of income, gain, loss, or
deduction” “point[ed] to the conclusion that there was no true
entrepreneurial risk faced by investors” (citation and internal
quotation marks omitted)).
64
Thus, contrary to HBH‟s assertion, NJSEA
effectively did have the “right to divest [PB] of its interest in
any income or gains from the East Hall.” (Appellee‟s Br. at
35.)
80
the Culbertson totality-of-the-circumstances test. (Appellee‟s
Br. at 38.) That “overwhelming” evidence includes: (1) that
HBH was duly organized as an LLC under New Jersey law
and, as the AREA provides, “was formed to acquire, develop,
finance, rehabilitate, maintain, operate, license, and sell or
otherwise to dispose of the East Hall” (id. at 40; see J.A. at
157); (2) PB‟s “net economic benefit” from the HRTCs and
the 3% Preferred Return (Appellee‟s Br. at 41); (3) PB‟s
representatives‟ “vigorous[] negotiat[ion] [of] the terms of the
AREA” (id. at 41); (4) “the nature and thoroughness” of PB‟s
“comprehensive due diligence investigation in connection
with its investment in HBH” (id. at 42); (5) PB‟s “substantial
financial investment in HBH” (id.); (6) various business
agreements that had been entered into between NJSEA and
certain third parties that were all assigned to, and assumed by,
HBH (id. at 43); (7) bank and payroll accounts that were
opened in HBH‟s name and insurance agreements that were
amended to identify HBH as an owner and include PB as an
additional insured; and (8) the fact that, following closing,
“NJSEA kept in constant communication with [PB] regarding
the renovations to the East Hall, and the business operations
of the Hall” (id.).
Much of that evidence may give an “outward
appearance of an arrangement to engage in a common
enterprise.” Culbertson, 337 U.S. at 752 (Frankfurter, J.,
concurring). But “the sharp eyes of the law” require more
from parties than just putting on the “habiliments of a
partnership whenever it advantages them to be treated as
partners underneath.” Id. Indeed, Culbertson requires that a
partner “really and truly intend[] to … shar[e] in the profits
and losses” of the enterprise, id. at 741 (majority opinion)
(emphasis added) (citation and internal quotation marks
81
omitted), or, in other words, have a “meaningful stake in the
success or failure” of the enterprise, Castle Harbour, 459
F.3d at 231. Looking past the outward appearance, HBH‟s
cited evidence does not demonstrate such a meaningful stake.
First, the recitation of partnership formalities – that
HBH was duly organized, that it had a stated purpose under
the AREA, that it opened bank and payroll accounts, and that
it assumed various obligation – misses the point. We are
prepared to accept for purposes of argument that there was
economic substance to HBH. The question is whether PB had
a meaningful stake in that enterprise. See Castle Harbour,
459 F.3d at 232 (“The IRS‟s challenge to the taxpayer‟s
characterization is not foreclosed merely because the taxpayer
can point to the existence of some business purpose or
objective reality in addition to its tax-avoidance objective.”);
Southgate Master Fund, 659 F.3d at 484 (“The fact that a
partnership‟s underlying business activities had economic
substance does not, standing alone, immunize the partnership
from judicial scrutiny [under Culbertson]. The parties‟
selection of the partnership form must have been driven by a
genuine business purpose.” (internal footnote omitted)). To
answer that, we must “look beyond the superficial formalities
of a transaction to determine the proper tax treatment.”
Edwards v. Your Credit, Inc., 148 F.3d 427, 436 (5th Cir.
1998) (citation and internal quotation marks omitted).
Second, evidence that PB received a “net economic
benefit” from HBH and made a “substantial financial
investment in HBH” can only support a finding that PB is a
bona fide partner if there was a meaningful intent to share in
the profits and the losses of that investment. The structure of
PB‟s “investment,” however, shows clearly that there was no
82
such intent. Recovery of each of the contributions that made
up the “substantial financial investment” was assured by the
provisions of the AREA and the Tax Benefits Guaranty.
And, as the Commissioner rightly notes, PB‟s net after-tax
economic benefit from the transaction – in the form of the
HRTCs (or the cash equivalent via the Tax Benefits
Guaranty) and the effectively guaranteed Preferred Return –
“merely demonstrates [PB‟s] intent to make an economically
rational use of its money on an after-tax basis.” (Appellant‟s
Reply Br. at 13.) Indeed, both parties in a transaction such as
this one will always think they are going to receive a net
economic benefit; otherwise, the transaction would never
occur. If in fact that was the test, there would be a green-light
for every tax-structured transaction that calls itself a
“partnership.”
Third, the fact that NJSEA “kept in constant
communication” regarding the East Hall is hardly surprising.
As discussed earlier, supra Section II.C.1, each installment
contribution from PB was contingent upon NJSEA verifying
that a certain amount of work had been completed on the East
Hall so that PB was assured it would not be contributing more
money than it would be guaranteed to receive in HRTCs or
their cash equivalent. The mere fact that a party receives
regular updates on a project does not transform it into a bona
fide partner for tax purposes.
Fourth, looking past the form of the transaction to its
substance, neither PB‟s “vigorous[] negotiat[ion]” nor its
“comprehensive due diligence investigation” is, in this
context, indicative of an intent to be a bona fide partner in
HBH. We do not doubt that PB spent a significant amount of
time conducting a thorough investigation and negotiating
83
favorable terms. And we acknowledge that one of the factors
cited by Culbertson is “the conduct of the parties in execution
of its provisions.” 337 U.S. at 742. But the record reflects
that those efforts were made so that PB would not be subject
to any real risks that would stand in the way of its receiving
the value of the HRTCs; not, as HBH asserts, “to form a true
business relationship.” (Appellee‟s Br. at 41.) We do not
believe that courts are compelled to respect a taxpayer‟s
characterization of a transaction for tax purposes based on
how document-intensive the transaction becomes. Recruiting
teams of lawyers, accountants, and tax consultants does not
mean that a partnership, with all its tax credit gold, can be
conjured from a zero-risk investment of the sort PB made
here.
In the end, the evidence HBH cites focuses only on
form, not substance. From the moment Sovereign
approached NJSEA, the substance of any transaction with a
corporate investor was calculated to be a “sale of … historic
rehabilitation tax credits.” (J.A. at 691.) Cf. Castle Harbour,
459 F.3d at 236 (finding that the banks‟ interest “was more in
the nature of window dressing designed to give ostensible
support to the characterization of equity participation … than
a meaningful stake in the profits of the venture”). And in the
end, that is what the substance turned out to be.
Like the Virginia Historic court, we reach our
conclusion mindful of Congress‟s goal of encouraging
rehabilitation of historic buildings. See 639 F.3d at 146 n.20.
We have not ignored the predictions of HBH and amici that,
if we reallocate the HRTCs away from PB, we may
jeopardize the viability of future historic rehabilitation
projects. Those forecasts, however, distort the real dispute.
84
The HRTC statute “is not under attack here.” Id. It is the
prohibited sale of tax credits, not the tax credit provision
itself, that the IRS has challenged. Where the line lies
between a defensible distribution of risk and reward in a
partnership on the one hand and a form-over-substance
violation of the tax laws on the other is not for us to say in the
abstract. But, “[w]here, as here, we confront taxpayers who
have taken a circuitous route to reach an end more easily
accessible by a straightforward path, we look to the substance
over form.” Southgate Master Fund, 659 F.3d at 491
(citation and internal quotation marks omitted). And, after
looking to the substance of the interests at play in this case,
we conclude that, because PB lacked a meaningful stake in
either the success or failure of HBH, it was not a bona fide
partner
.
III. Conclusion
For the foregoing reasons, we will reverse the Tax
Court‟s January 3, 2011 decision, and remand the case for
further proceedings consistent with this opinion.
85
| {
"pile_set_name": "FreeLaw"
} |
Volume 1 of 2
FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SCOTT LYNN PINHOLSTER,
Petitioner-Appellee,
v. No. 03-99003
ROBERT L. AYERS,* Warden, of the D.C. No.
California State Prison at San CV-95-06240-GLT
Quentin,
Respondent-Appellant.
SCOTT LYNN PINHOLSTER,
Petitioner-Appellant,
No. 03-99008
v.
ROBERT L. AYERS, Warden, of the D.C. No.
CV-95-06240-GLT
California State Prison at San
OPINION
Quentin,
Respondent-Appellee.
Appeal from the United States District Court
for the Central District of California
Gary L. Taylor, District Judge, Presiding
Argued and Submitted
April 11, 2007—Seattle, Washington
Filed May 2, 2008
*Pursuant to Fed. R. App. P. 43(c)(2), Robert L. Ayers, the current cus-
todian, is substituted for Jeanne S. Woodford as Warden of the California
State Prison at San Quentin.
4729
4730 PINHOLSTER v. AYERS
Before: Alex Kozinski, Chief Judge, Raymond C. Fisher and
Richard C. Tallman, Circuit Judges.
Opinion by Judge Tallman;
Concurrence by Chief Judge Kozinski;
Dissent by Judge Fisher
PINHOLSTER v. AYERS 4733
COUNSEL
Kristofer Jorstad, Deputy Attorney General, Los Angeles,
California, for the respondent-appellant, cross-appellee.
Sean K. Kennedy, Federal Public Defender, Los Angeles,
California, for the petitioner-cross appellant/appellee.
4734 PINHOLSTER v. AYERS
OPINION
TALLMAN, Circuit Judge:
Scott Lynn Pinholster faces a death sentence in California
for murdering Thomas Johnson and Robert Beckett on Janu-
ary 9, 1982, robbing Johnson and Beckett with intentional
infliction of great bodily injury and with personal use of a
knife, robbing Todd Croutch with a firearm, and burglarizing
Michael Kumar’s residence. The jury found two special cir-
cumstances: Pinholster, in the same proceeding, was con-
victed of more than one murder, Cal. Penal Code
§ 190.2(a)(3) (1984), and he committed the murders during a
robbery and a burglary, id. § 190.2(a)(17)(i), (vii). The jury
fixed Pinholster’s penalty at death, and on June 4, 1984, the
Los Angeles County Superior Court so sentenced him.
On automatic appeal, the California Supreme Court, in an
opinion written by Justice Stanley Mosk, set aside one
multiple-murder special-circumstance finding but otherwise
affirmed the judgment. See People v. Pinholster, 824 P.2d
571 (Cal. 1992). Pinholster sought a writ of habeas corpus. He
challenged his convictions and death sentence. The California
Supreme Court summarily denied Pinholster’s state petition
for habeas corpus. Pinholster filed a federal habeas corpus
petition but the district court dismissed it when the parties
stipulated that the petition contained unexhausted claims. Pin-
holster returned to state court to exhaust those claims. On
October 1, 1997, the California Supreme Court denied Pinhol-
ster’s second habeas petition.
Pinholster then filed an amended federal habeas petition
and requested an evidentiary hearing on several claims. The
district court granted the State’s motion for summary judg-
ment on Pinholster’s claims challenging the constitutionality
of his convictions. Pinholster appeals the district court’s
denial of his request for an evidentiary hearing on his guilt
phase ineffective assistance of counsel claims. However, the
PINHOLSTER v. AYERS 4735
district court concluded that his counsel inadequately investi-
gated and deficiently presented mitigating evidence at the
penalty phase and granted Pinholster’s habeas petition with
respect to the death penalty. The State cross-appeals the dis-
trict court’s judgment setting aside Pinholster’s death sen-
tence.
We affirm the district court’s denial of an evidentiary hear-
ing on Pinholster’s claims of ineffective assistance during the
guilt phase. We reverse the district court’s grant of habeas
relief on Pinholster’s death sentence.
I
A
On January 9, 1982, Pinholster fatally stabbed the victims,
Johnson and Beckett, during Pinholster’s burglary of Kumar’s
residence.1 Pinholster, 824 P.2d at 582. Kumar was a known
drug dealer and acquaintance of Pinholster. Charles Kempf,
another acquaintance of Pinholster, testified that in mid-
December 1981, Pinholster suggested to Kempf and three oth-
ers that they rob Kumar of his drug stash.2 Id. According to
Kempf, Pinholster considered Kumar “an easy mark.” Id. The
five went to Kumar’s home, but soon aborted the plan. Kumar
was not home during the December visit, and they preferred
to gain access through Kumar rather than break in. Id. Kempf
testified that Pinholster carried a buck knife, and Pinholster
claimed he would get Kumar’s drugs “one way or the other.”
In addition, Kempf testified that Pinholster bragged about
1
We extract many of the facts and procedural history from the Califor-
nia Supreme Court opinion affirming Pinholster’s convictions and death
sentence on direct appeal, Pinholster, 824 P.2d 571, which are confirmed
by our own independent review of the record.
2
Kempf had a previous conviction for receiving stolen property and was
under arrest when he first talked with the police. He told the jury that the
authorities did not promise leniency or other benefits in return for his testi-
mony. Pinholster, 824 P.2d at 582.
4736 PINHOLSTER v. AYERS
having stabbed someone in the rectum during a previous rob-
bery. Id.
Art Corona—an accomplice in the crimes—served as the
State’s primary witness. He testified that on January 8, 1982,
he attended a social gathering at Pinholster’s apartment com-
plex. Id. Corona agreed to help Pinholster and co-defendant
Brown rob Kumar. Id. En route, Corona drove the two in his
car and stopped at Lisa Tapar’s residence. Id. Pinholster
wanted Tapar to help them gain access to Kumar’s residence.
Id. After Tapar refused to allow Pinholster into her apartment,
he used his buck knife to vandalize the door of her apartment
and the hood of her car. Id. Tapar, her father, and another wit-
ness corroborated Corona’s version of this incident. The
group then left Tapar’s apartment to burglarize Kumar’s resi-
dence.
Corona testified about the events that took place during the
burglary. Pinholster gained entry by breaking a window in the
rear of the home and Brown entered through an open sliding-
glass door. Id. at 582-83. The three ransacked the house. Id.
at 583. Pinholster found marijuana in a bedroom and spilled
a green substance in the kitchen. Id. At this time, victims
Johnson and Beckett (Kumar’s housesitters) arrived, opened
the front door, discovered the crime, and shouted they would
call the police. The three burglars attempted to leave through
the rear sliding-glass door, but Johnson and Beckett came
around to the back. As Johnson tried to enter, Pinholster
stabbed Johnson in the chest three to four times with the
knife. The California Supreme Court summarized Corona’s
description of the robbery, stabbing, and murders as follows:
[Pinholster] backed [Johnson] out of the house and
onto the patio, demanding drugs and money and
repeatedly striking him. Johnson dropped his wallet
on the ground and obeyed [Pinholster’s] order to sit.
Then Beckett approached, and [Pinholster] attacked
him. Corona saw that [Pinholster] was stabbing
PINHOLSTER v. AYERS 4737
Beckett, striking him in the chest as Corona had seen
[Pinholster] strike Johnson. [Pinholster] repeatedly
stabbed Beckett, again demanding money and drugs.
[Pinholster] picked up Johnson’s wallet and took a
wallet from Beckett’s pocket. [Pinholster] repeatedly
kicked Beckett in the head. Corona then saw code-
fendant Brown stabbing Johnson in the chest. The
three men withdrew, and Corona drove them back to
[Pinholster’s] apartment. Brown and [Pinholster]
commented that they had “gotten them good,” and
Brown said he had “buried his knife to the hilt” in
Johnson.
Id.
After the murders, the three returned to Pinholster’s apart-
ment and split the proceeds. Pinholster washed his knife and
a woman named Debbie washed Brown’s knife. Id. The next
day, Pinholster telephoned Corona and told him to “lie low.”
Two weeks later, Corona turned himself in and gave a state-
ment to the police. Corona testified at trial consistent with his
earlier statement except that at trial he also mentioned seeing
Brown stab Johnson and that he, Brown, and Pinholster
divided the proceeds. Id.
Casey Corona, Art Corona’s wife, was at Pinholster’s
apartment when Pinholster, Brown, and Art Corona returned
from Kumar’s house. At trial, Casey corroborated Corona’s
testimony about the planning, execution, and cover up of the
robbery/murders. She testified that she saw Pinholster wash
blood off his knife and she heard him say: “It had to be done
the way it was done. We had to do what we had to do.” Id.
Police had recently arrested Casey on a drug charge, and she
testified that the prosecution assisted her entry into a diver-
sion program.
Art Corona also testified that Pinholster had threatened him
on numerous occasions. Specifically, prior to the preliminary
4738 PINHOLSTER v. AYERS
hearing, Pinholster threatened to “blow up” Corona on his
way to court if Corona testified against him. Pinholster
impeached Corona with Corona’s prior burglary conviction
and Corona’s admission that he was a professional burglar. Id.
The State introduced physical evidence to corroborate Pin-
holster’s presence in Kumar’s residence after it had been ran-
sacked. Corona testified that Pinholster wore jeans and boots
on the night of the murders. Police found boots with micro-
scopic blood stains and a towel with a blood stain in Pinhol-
ster’s apartment. Police also found a pair of jeans with a blood
stain; however, investigators could not confirm whether the
blood was human. In addition, when police arrested Brown,
he had a buck knife with dimensions that corresponded to one
of Johnson’s stab wounds. Id. at 583-84. Investigators also
discovered traces of human blood near the hilt of Brown’s
knife. The police found human blood on the inside forearm of
the sleeve of Corona’s shirt, but they found no blood on his
knife. Id. at 584.
Pinholster presented an alibi when he testified in his own
defense at trial. He characterized himself as a “professional
robber” who used guns while preying on drug dealers, not a
murderer who used knives. He boasted of being a “very good
robber,” claiming that he had committed “hundreds” of rob-
beries and that he had only been caught by the authorities one
time. To support his defense, Pinholster admitted to robbing
Thomas Croutch at gunpoint on another occasion, and having
planned to rob Kumar, but denied having recruited Kempf and
the three other individuals to do so. Pinholster also admitted
to breaking into Kumar’s house on the night of the murders.
By way of his alibi, Pinholster claimed he had thrown a
party in memory of his best friend, “Shotgun,” on the night
of the murders. Id. He testified that around 8 p.m. he left the
party and went to Kumar’s house, broke a window, and
gained access through the kitchen. He took a bag of mari-
juana, touched a bluish substance in a bedroom, and spilled a
PINHOLSTER v. AYERS 4739
bag with green material in the kitchen. He denied ransacking
the house or killing anyone.3 Id. Pinholster said he had
returned to his house around 9 p.m., and smoked a consider-
able amount of marijuana and consumed a lot of alcohol.
Around 11:30 p.m., Corona asked Pinholster for an ounce of
marijuana to sell. Pinholster said he gave Kumar’s address to
Corona in exchange for a third of whatever drugs Corona took
from Kumar’s house. Corona could not find Kumar’s resi-
dence and returned around 1 a.m. Pinholster gave him the
directions again, and around 1:30 a.m. Pinholster went to
Tapar’s house to tell her that “Shotgun” had died.4 Id. at 585.
He admitted to stabbing her door and carving a swastika and
lightning bolt on her car after she refused to admit him. Pin-
holster claimed that he returned to his apartment around 2
a.m., and Corona returned around 4 a.m. Pinholster’s brother
and several friends corroborated his version of the events. The
superior court jury by its verdict obviously rejected Pinhol-
ster’s alibi defense.
B
The State sought the death penalty. On March 22, 1983, the
prosecution mailed a California Penal Code section 190.3 let-
ter to Pinholster at the Los Angeles County Jail, notifying him
that the State intended to offer aggravating evidence at the
penalty proceedings. Pinholster and his counsel5 contended
3
During rebuttal, the state called Eric Klemetti who testified that he had
purchased marijuana from Johnson at the Kumar residence at 9 p.m. He
claimed that the house was not ransacked and everything was in order.
Pinholster, 824 P.2d at 585.
4
On rebuttal, Tapar contradicted Pinholster when she testified that Pin-
holster arrived at her house in Corona’s car, not his own as he had said.
She also claimed not to have known “Shotgun,” giving Pinholster no rea-
son to discuss his death with her.
5
Between April 20, 1982, and January 19, 1983, court-appointed coun-
sel Marvin Part represented Pinholster. Attorney James Armstrong was
appointed in his place in January 1983. Pinholster requested to proceed
4740 PINHOLSTER v. AYERS
they were not informed of the letter until the guilt phase con-
cluded on April 24, 1984. Pinholster moved to exclude aggra-
vating evidence based on the prosecution’s failure to comply
with California Penal Code section 190.3. The court denied
the motion.6 Rather than move to continue the penalty phase
—a request the state trial court indicated it would grant—
Pinholster’s counsel (Brainard and Dettmar) elected to pro-
ceed. The penalty phase began on May 1, 1984. The court
instructed the jury on May 2, 1984, and the jury returned a
verdict of death on each of the two murder counts on May 7,
1984.
The prosecution called eight penalty phase witnesses. First,
Jack Taube, Pinholster’s juvenile probation officer, testified
that Pinholster had previously struck a bailiff without cause
after a court proceeding. Several bailiffs had to physically
restrain Pinholster, and, as Pinholster left the proceeding, he
continued to orally threaten the wounded bailiff. Taube also
testified about Pinholster’s involvement in juvenile gangs.
Second, Los Angeles Police Department (“LAPD”) patrol
officer David Kaufman testified that shortly after he and his
partner responded to a fight involving Pinholster, Pinholster
appeared to fake an epileptic seizure. Officer Kaufman also
testified that once handcuffed, Pinholster became belligerent
and threatened to kick the officers. After the officers trans-
ferred Pinholster to a facility for possible medical treatment,
without counsel, and from March 17, 1983, to July 13, 1983, Pinholster
represented himself. On July 12, 1983, the Los Angeles County Superior
Court appointed Harry W. Brainard after Pinholster changed his mind. On
December 20, 1983, the superior court also appointed Wilbur G. Dettmar
as second counsel under California Penal Code section 1095. Brainard and
Dettmar represented Pinholster during the guilt and penalty phases of his
trial.
6
On state habeas review, the Los Angeles County Superior Court held
an evidentiary hearing and determined that Pinholster, while representing
himself pre-trial, received actual notice of the State’s intent to seek the
death penalty. Pinholster does not challenge that finding here.
PINHOLSTER v. AYERS 4741
and upon removing Pinholster’s leg restraints, Pinholster
kicked Officer Kaufman in the head.
Third, Ernest Guzman, another LAPD officer, testified that
after refusing to enter his police vehicle on a different occa-
sion, Pinholster seemingly faked an epileptic seizure. After
the officers placed Pinholster in the police car he became vio-
lent, kicking at Officer Guzman’s head. After Pinholster told
the officers that he had a knee injury, they transported him to
Valley Receiving Hospital for an evaluation. During that time,
Pinholster spat in Guzman’s partner’s face, and refused to
allow doctors to examine his knee. Pinholster kicked and
broke one of the glass panes in the x-ray machine. Fourth,
Deputy Sheriff Michael Loper testified to having “numerous
run-ins” with Pinholster in a Los Angeles County Jail. Pinhol-
ster struck Loper as he assisted another deputy in gaining con-
trol over Pinholster, who had refused to comply with jail
rules.
Fifth, Operations Sergeant Thomas Piggott testified about
Pinholster’s violent reputation and disciplinary record at the
Los Angeles County Central Jail. He described eleven docu-
mented incidents of Pinholster’s violence or recalcitrance and
stated that Pinholster had a reputation of throwing cups of
urine at the deputies as they walked by his cell. Piggott also
testified that he tried to counsel Pinholster, but Pinholster
insisted that he wanted to go to prison. Piggott recalled Pin-
holster saying, “They better send me now, because if they
don’t I’ll just go out on the streets and do something to get
back in, go to prison.”
Sixth, Theodore Mesquita testified about fighting with Pin-
holster over a woman Mesquita dated, which resulted in Pin-
holster cutting Mesquita’s arm with a straight razor, requiring
approximately fifty stitches. Pinholster’s wife, Cathy Ann
Smith, testified that Pinholster once broke her jaw while
seeming to have an epileptic seizure. Finally, Sheriff’s Ser-
4742 PINHOLSTER v. AYERS
geant Joseph Barrett testified that Pinholster told Barrett he
would kill Art Corona when released from prison.
In addition, to minimize the inconvenience of gathering
witnesses from San Luis Obispo, Pinholster’s counsel stipu-
lated that (1) Pinholster’s prior kidnaping conviction involved
a knife, but that no plea bargain governed the knife use allega-
tion (Pinholster admitted to carrying the knife and placing it
at the victim’s throat), and (2) Pinholster committed numer-
ous prison disciplinary infractions, including throwing urine
at and threatening various corrections officers. Counsel stipu-
lated that Pinholster threatened to stab a corrections officer
and to throw another corrections officer off of the prison tier.
Pinholster’s disciplinary infractions resulted in the Director of
Corrections ordering Pinholster to be placed on a special
disciplinary diet for a nine-day period in 1979, a procedure
reserved for only the most disruptive inmates.
Pinholster’s counsel, Dettmar, waived making an opening
statement in the penalty phase of his trial and immediately
called Pinholster’s mother, Burnice Brashear. She testified
about Pinholster’s strained relationship with his step-father,
Bud Brashear; Pinholster’s head injury at age two and one-
half years when she ran over him with her car; his head injury
shortly thereafter when his head cracked the windshield dur-
ing a car accident; his disruptive behavior at school; a psy-
chologist’s recommendation that Pinholster be committed to
a mental hospital when he was ten; his time in a class for the
emotionally handicapped; his view of himself as a neighbor-
hood Robin Hood because he stole things to distribute to the
neighborhood children; his frequent stays at boys’ homes,
juvenile halls, and juvenile camps; and his epilepsy, which
she believed resulted from a severe beating at age eighteen in
county jail.
C
Following Pinholster’s unsuccessful direct appeal, he initi-
ated habeas proceedings in state and federal court. We detail
PINHOLSTER v. AYERS 4743
his submissions with regard to his penalty phase ineffective
assistance of counsel claim because the State contends that,
by the time of the federal evidentiary hearing, this claim had
transmogrified into a completely new theory for which Pin-
holster now relies on yet a third set of mental health experts.
1
Pinholster raised fifty claims for relief in his state habeas
petition. Relevant to this appeal, Pinholster claims his counsel
provided ineffective assistance at the guilt and penalty phases
of his trial. Regarding his death sentence, he argues that his
trial counsel unreasonably failed to investigate, prepare, and
present mitigating evidence, and unreasonably presented evi-
dence that hurt his mitigation case. Had his counsel investi-
gated mitigating evidence, he contends, his lawyers would
have uncovered a wealth of mitigating evidence—a turbulent,
dysfunctional, violent and abusive home life; serious, well-
documented educational disabilities; and profound mental dis-
orders. To support this claim, Pinholster submitted declara-
tions from family members and from his trial attorney,
Brainard; various medical, legal, and school records of Pin-
holster and his relatives; and a declaration obtained during
habeas proceedings from psychiatrist Dr. George Woods.
Dr. Woods diagnosed Pinholster with a long standing bipo-
lar mood disorder with psychotic features. Dr. Woods opined
that, during the murders, Pinholster was substantially
impaired by a bipolar mood disorder operating synergistically
with a seizure disorder.7 Dr. Woods also criticized Dr. John
Stalberg’s psychiatric evaluation. Dr. Stalberg had previously
examined Pinholster at defense counsel’s request on March
11, 1984, after trial began. He reviewed case materials sup-
plied by counsel, including police reports and a probation
report. Dr. Stalberg concluded that Pinholster did not manifest
7
“Seizure disorder” is the medically preferred term for what is com-
monly known as epilepsy.
4744 PINHOLSTER v. AYERS
by history any significant signs of mental disorder or defect
other than Antisocial Personality Disorder.8 Dr. Stalberg
stated he saw no mitigating evidence, and defense counsel
decided not to pursue this issue at the time. Habeas counsel
disavowed Dr. Stalberg as a credible expert after retaining Dr.
Woods to criticize Dr. Stalberg’s mid-trial evaluation of Pin-
holster.
After the parties filed briefing in the state habeas case, the
California Supreme Court issued an order to show cause, but
subsequently vacated it as “improvidently granted.” The court
then denied the writ “on the substantive ground that it is with-
out merit.” The California Supreme Court also denied several
other claims on procedural grounds.
2
In Pinholster’s first federal habeas petition, he continued to
maintain that his trial counsel unreasonably failed to investi-
gate, prepare, and present mitigating evidence during the pen-
alty phase. This time, however, Pinholster switched tactics
and renamed Dr. Stalberg as his psychiatric expert. In April
1997, Pinholster’s habeas counsel asked Dr. Stalberg to
review additional materials pertaining to Pinholster and his
family. Dr. Stalberg reviewed the materials and spoke with
several of Pinholster’s family members. Dr. Stalberg then
concluded that knowledge of Pinholster’s family history of
8
The Diagnostic and Statistical Manual of Mental Disorders (DSM),
DSM-III, the American Psychiatric Association’s handbook in effect in
1984 for diagnosing mental disorders, describes Antisocial Personality
Disorder as a personality disorder with a history of continuous and chronic
antisocial behavior in which the rights of others are violated, persistence
into adult life of a pattern of antisocial behavior that began before the age
of 15, and failure to sustain good job performance over a period of several
years. Lying, stealing, fighting, truancy, and resisting authority are typi-
cally prevalent in early childhood, and in adulthood these kinds of behav-
ior continue and include the failure to accept social norms with respect to
lawful behavior.
PINHOLSTER v. AYERS 4745
severe psychiatric disorders, Pinholster’s disturbed behavior
during childhood, and his irrational and highly aggressive
actions immediately before the homicides would have caused
him to inquire further before concluding that Pinholster
merely had a personality disorder. Dr. Stalberg also would
have inquired further to determine if the homicides related to
a mental impairment caused by organic/neurological dysfunc-
tion. Dr. Stalberg now declared that the new information he
reviewed would have materially modified his previous opin-
ion regarding mitigating circumstances, and that his review
now demonstrated the existence of voluminous mitigating
evidence.
Because the declaration contained new material facts, the
parties stipulated that certain claims, including the penalty
phase ineffective assistance of counsel claim, were unex-
hausted. The district court allowed Pinholster to exhaust the
claims in state court.
3
Pinholster filed a copy of his federal petition and Dr. Stal-
berg’s new declaration in the California Supreme Court. The
court denied Pinholster’s petition “on the substantive ground
that it was without merit” and denied other claims on proce-
dural grounds.
4
Pinholster filed a “First Amended Petition for Writ of
Habeas Corpus” in federal court on November 14, 1997. On
April 13, 1999, Pinholster filed a request for a federal eviden-
tiary hearing. Applying pre-Antiterrorism and Effective Death
Penalty Act (“AEDPA”) standards, the district court granted
an evidentiary hearing on Pinholster’s penalty phase ineffec-
4746 PINHOLSTER v. AYERS
tive assistance of counsel claim, and two other claims not rel-
evant to this appeal.9
Dr. Stalberg anticipated testifying as a witness at the fed-
eral evidentiary hearing. Pinholster submitted two new decla-
rations from Dr. Stalberg to support his amended federal
habeas petition. The first, dated January 24, 2000, explained
that it was Dr. Stalberg’s custom and practice in 1984 when
retained by defense counsel in a capital case to form an opin-
ion about a defendant’s mental state during the offense and to
identify mitigating circumstances. The second, dated June 5,
2001, expanded upon and specified the factual bases for the
opinions Dr. Stalberg previously presented to the district
court. In July 2001, the State Attorney General’s Office
deposed Dr. Stalberg. The Deputy Attorney General ques-
tioned Dr. Stalberg about his earlier declarations, and Pinhol-
ster’s counsel asked Dr. Stalberg to elaborate on various
aspects of his opinions, and to express his opinions about Pin-
holster’s mental health.
Dr. Stalberg testified that the additional materials he
reviewed did not alter his conclusion that Pinholster suffers
from Antisocial Personality Disorder. As a result of this dam-
aging testimony, on May 9, 2002, Pinholster’s current coun-
sel, the Federal Public Defender, advised Dr. Stalberg that he
would no longer call him as a witness during the evidentiary
hearing, and he no longer considered Dr. Stalberg to be Pin-
holster’s expert.
The district court nonetheless proceeded with an evidenti-
ary hearing in September 2002. The Federal Public Defend-
er’s Office now utilized two new experts—Dr. Sophia
Vinogradov and Dr. Donald Olson—to bolster Pinholster’s
9
At this time, the district court also granted the State’s motion for sum-
mary judgment on select claims, including Pinholster’s claims of ineffec-
tive assistance of counsel at the guilt phase discussed in section III of this
opinion.
PINHOLSTER v. AYERS 4747
penalty phase ineffective assistance of counsel claim. Dr.
Vinogradov and Dr. Olson both submitted declarations as
direct testimony at the evidentiary hearing. Dr. Vinogradov
concluded that Pinholster suffered “personality change,
aggressive type, due to serious childhood head trauma.” Dr.
Olson, a pediatric neurologist, testified that Pinholster likely
suffered brain damage from two head injuries in his early
childhood, which created a risk of epilepsy.
On March 25, 2003, the district court granted Pinholster’s
habeas petition and vacated his death sentence. The district
court noted that Pinholster’s attorneys admitted they had not
“prepared any evidence by way of mitigation,” yet trial coun-
sel declined an offer for a penalty phase continuance to pre-
pare extenuating evidence. The district court further reasoned
that trial counsel called one witness—Pinholster’s mother—
and her testimony was damaging, incomplete, and inaccurate.
The district court found Pinholster’s attorneys’ performance
deficient because they failed to adequately investigate miti-
gating evidence and lacked a reasonable strategic decision for
their failure. The district court ultimately found prejudice
based on the significant evidence of Pinholster’s childhood
abuse and mental impairments, combined with the prosecu-
tor’s emphasis during summation on the lack of mitigating
evidence and the length of the jury’s deliberations.
The district court revisited its March 25, 2003, Order
Granting Writ of Habeas Corpus, after determining that
AEDPA applied under Woodford v. Garceau, 538 U.S. 202
(2003). The Supreme Court filed Woodford on the same day
the district court had filed its Order. The district court none-
theless concluded that: (1) Pinholster timely filed his federal
habeas petition; (2) Pinholster was entitled to an evidentiary
hearing under AEDPA; and (3) AEDPA did not affect its
Order granting Pinholster habeas relief because the California
Supreme Court “did not adjudicate Pinholster’s claim that
counsel was ineffective for failing to investigate and present
mitigating evidence at the penalty phase.”
4748 PINHOLSTER v. AYERS
II
We review de novo the district court’s decision to grant or
deny a petition for writ of habeas corpus. Lambert v. Blodgett,
393 F.3d 943, 964 (9th Cir. 2004). We review factual findings
and credibility findings made in the context of granting or
denying the petition for clear error. Id.
Neither party disputes that AEDPA now governs Pinhol-
ster’s petition. AEDPA requires us to defer to the state court’s
determination of federal issues, unless that determination
resulted in a decision that was contrary to, or involved an
unreasonable application of, clearly established federal law,
as determined by the Supreme Court. 28 U.S.C. § 2254(d)(1).10
Deference to state court decisions applies only to claims the
state court adjudicated on the merits.11 Lambert, 393 F.3d at
965. De novo review applies if the state court did not reach
10
The court may also grant a petition where the state court adjudication
of a claim is based on an unreasonable determination of the facts in light
of the evidence presented in the state court proceeding. 28 U.S.C.
§ 2254(d)(2). We will address § 2254(d)(2) only when applicable to Pin-
holster’s appeal.
11
The district court incorrectly concluded that the California Supreme
Court’s decision disposing of Pinholster’s penalty phase ineffective assis-
tance of counsel claim was not an adjudication on the merits entitled to
deference. The California Supreme Court’s denial of a habeas petition
without comment or citation constitutes a decision on the merits of the
federal claims. See Hunter v. Aispuro, 982 F.2d 344, 347-48 (9th Cir.
1992); see also Gaston v. Palmer, 417 F.3d 1030, 1038 (9th Cir. 2005).
Though we would ordinarily look through the California Supreme Court’s
summary denial to the “last reasoned decision [in the state court system],”
Shackleford v. Hubbard, 234 F.3d 1072, 1079 n.2 (9th Cir. 2000), no other
state court determination addresses ineffective assistance of counsel at the
penalty phase. Absent a last-reasoned state court decision on this claim,
we must “perform an ‘independent review of the record’ to ascertain
whether the state court decision was objectively unreasonable.” Himes v.
Thompson, 336 F.3d 848, 853 (9th Cir. 2003) (quoting Delgado v. Lewis,
223 F.3d 976, 982 (9th Cir. 2000)); see also Greene v. Lambert, 288 F.3d
1081, 1089 (9th Cir. 2002).
PINHOLSTER v. AYERS 4749
the merits of a particular issue. Lewis v. Mayle, 391 F.3d 989,
996 (9th Cir. 2004).
A decision is “contrary to” federal law when the state court
applies a rule of law that contradicts the governing law set
forth in Supreme Court precedent or when the state court
makes a determination contrary to a Supreme Court decision
on materially indistinguishable facts. Williams v. Taylor, 529
U.S. 362, 405-06 (2000). A state court unreasonably applies
federal law when its application of Supreme Court precedent
to the facts of petitioner’s case is objectively unreasonable. Id.
at 409.
III
We first address Pinholster’s appeal of the district court’s
grant of summary judgment in favor of the State on his claims
of ineffective assistance of counsel during the guilt phase of
his trial. Pinholster seeks an evidentiary hearing, arguing that
he has provided a colorable claim that his counsel performed
deficiently. His primary contention is that his counsel failed
to adequately investigate the State’s physical evidence placing
him at the scene during the murders and this resulted in an
uninformed decision to have Pinholster testify in his own
defense. See United States v. Curtis, 742 F.2d 1070, 1076 (7th
Cir. 1984) (per curiam) (“When a defendant asserts that he
desires to exercise his constitutional right to testify truthfully,
counsel’s duty is to inform the defendant why he believes this
course will be unwise or dangerous.”).
At the time the California Supreme Court rendered its last
decision—October 1, 1997—the Supreme Court’s two-part
standard for analyzing ineffective assistance of counsel was
clearly established law. See Strickland v. Washington, 466
U.S. 668, 687 (1984). To establish a Sixth Amendment viola-
tion, Pinholster had to show that: (1) his counsel’s perfor-
mance was deficient, i.e., it fell below an objective standard
of reasonableness, and (2) the deficient performance preju-
4750 PINHOLSTER v. AYERS
diced him. Id. In reviewing counsel’s performance, we “must
be highly deferential” and should make every effort “to elimi-
nate the distorting effects of hindsight.” Id. at 689. Even if we
conclude that counsel performed deficiently, to obtain relief
the “defendant must show that there is a reasonable probabil-
ity that, but for counsel’s unprofessional errors, the result of
the proceeding would have been different. A reasonable prob-
ability is a probability sufficient to undermine confidence in
the outcome.” Id. at 694.
A
[1] To satisfy the first prong of Strickland, Pinholster must
“identify[ ] the acts or omissions ‘that are alleged not to have
been the result of reasonable professional judgment.’ ” Earp
v. Ornoski, 431 F.3d 1158, 1173-74 (9th Cir. 2005) (quoting
Strickland, 466 U.S. at 690). The State offered during its case-
in-chief the following pieces of physical evidence to corrobo-
rate Corona’s testimony and place Pinholster at the scene of
the crime at the time of the murders: (1) investigators found
dried blood on the bottom of the boots taken from Pinholster’s
closet and the sole print matched a bloody boot print near the
victims’ bodies; and (2) investigators found a palm print
matching Pinholster’s print located within the Kumar resi-
dence.12 Pinholster contends that trial counsel’s failure to
investigate this evidence constituted deficient performance,
leading to an ill-advised decision to have Pinholster testify in
his own defense, during which he admitted to several incrimi-
nating facts.
12
Pinholster requests that we take judicial notice of the following docu-
ments to support his assertion that the State unlawfully destroyed all of the
physical evidence after trial: (1) an excerpt of the Master Index with a list
of the State’s physical evidence; (2) a certificate from the Los Angeles
County Superior Court ordering the exhibits listed on the “non-valuable
exhibit” list destroyed; and (3) the “non-valuable exhibit” list. We deny
his request as these documents are not relevant to the resolution of this
appeal. See Santa Monica Food Not Bombs v. City of Santa Monica, 450
F.3d 1022, 1025 n.2 (9th Cir. 2006).
PINHOLSTER v. AYERS 4751
1
Assuming trial counsel’s failure to investigate the physical
evidence fell below the objective standard of reasonableness,
we nevertheless conclude that the district court properly
granted the State’s motion for summary judgment because
Pinholster failed to raise a colorable claim that the deficient
performance prejudiced him. See Strickland, 466 U.S. at 697
(stating that a court may presume ineffective assistance to dis-
pose of a claim on prejudice grounds).
At the homicide scene, the police detectives discovered
boot prints left in blood near the victims’ bodies. When exe-
cuting the search warrant for Pinholster’s apartment, homicide
detectives found a pair of black boots that appeared to have
tread marks that were similar to the prints left at the scene.
Testing revealed microscopic stains on the boots that gave
positive reactions for blood. Specifically, investigators
detected blood in all of the crevices of the right boot. Crimi-
nalist Steven Schliebe also testified that the treads on the
boots taken from Pinholster’s apartment were consistent with
the treads that left the boot prints at the crime scene.
During cross-examination of Detective Coffey—the detec-
tive who discovered the boots in Pinholster’s apartment—
Pinholster’s counsel asked whether the boots had a common
tread. The detective responded, “I’m not a boot expert, but I
had not seen this type of tread on boots. I have seen other
types of tread. Not to say it’s not common or uncommon. To
me, I have not seen that type of tread before.” In his habeas
petition, however, Pinholster offered a declaration from
Criminalist Schliebe that stated otherwise: Schliebe declared
that, “had he been asked if the sole pattern [of Pinholster’s
boots and the boot prints found at the crime scene were] com-
mon in the Southern California area,” he would have
answered, “the shoe sole pattern is fairly common and is fre-
quently found on work and sport boots.”
4752 PINHOLSTER v. AYERS
The district court denied Pinholster’s claim of ineffective
assistance of counsel for lack of prejudice. It reasoned that
“the boot that was found in [Pinholster’s] home had a trace of
blood on it[,] which distinguishes it from other boots with the
same tread.” The district court also denied Pinholster’s claim
that trial counsel were ineffective for eliciting Detective Cof-
fey’s opinion that the boot print was uncommon. It reasoned
that Detective Coffey “never testified that the boot print was
uncommon”; rather, he “stated that he had not seen the sole
pattern before” and “clarified that he was not a boot print
expert.”
The second piece of physical evidence was a palm print
lifted from a closet door frame in the Kumar residence that
matched a palm print later taken from Pinholster. During
direct examination, the fingerprint expert testified that he con-
ducted two prior identification attempts before he was able to
conclusively determine that the print lifted from the door
matched Pinholster’s. The expert explained that the palm print
lifted from the closet door came from the far outside portion
of the left palm. In the two prior attempts, the lab used exem-
plar cards that excluded the outside portion of the palm. Nor-
mally, when a person is palm printed, the palm is laid flat on
the exemplar card. Therefore, as the expert testified, “it was
not until [Detective] Coffey provided [his] office with this
exemplar card with the palm prints, and also a roll of the far
left-hand side, that [he was] able to find the area that matched
up with the print that [he] lifted from the door frame.”
Pinholster argues that his trial counsel were ineffective for
failing to independently test the palm print. In support of his
argument, Pinholster offered a declaration of an independent
fingerprint expert, Clarence Collins. After examining both the
lifted print and the rolled palm print taken from Pinholster,
Collins concluded that the prints “were not made by the same
person.” In addition, Pinholster offers a declaration taken
from Brainard stating that, “[h]ad I known Scott Pinholster
did not deposit the latent print found at the Kumar residence,
PINHOLSTER v. AYERS 4753
I would have conducted the defense differently, and would
have appropriately changed my advice to my client. I proba-
bly would have advised Scott Pinholster not to testify during
[the] guilt phase.”
The district court denied Pinholster’s request for an eviden-
tiary hearing on the basis that he again failed to show preju-
dice. First, Pinholster admitted that he was inside Kumar’s
residence on the night of the murders. Second, Pinholster’s
trial counsel merely stated that he probably would have
advised Pinholster not to testify.13 This does not necessarily
show that Pinholster’s admission would not otherwise have
been made. The record is quite clear that Pinholster was eager
to take the stand so he could convince the jury that, although
he saw himself as a professional thief who preyed on drug
dealers, his modus operandi was to carry a gun, not to stab his
victims with knives.
[2] We agree with the district court and hold that Pinholster
failed to show a colorable claim that he was prejudiced by
trial counsel’s alleged failure to independently investigate the
State’s physical evidence. Despite Pinholster’s contention,
Collins’s declaration does not prove that the State’s finger-
print expert was lying or misinformed. At most, it creates a
battle of the experts.14 Moreover, the jury heard the State’s
13
We are not holding, nor do we think the district court found, that Pin-
holster’s counsel’s statement that he “probably” would not have advised
Pinholster to testify is sufficient to establish that counsel’s failure to inves-
tigate was non-prejudicial. See Dissent Op. at 4785 n.2. Indeed, Pinholster
uses counsel’s declaration to argue that he was prejudiced. Pinholster
argues that had his trial counsel investigated the palm print he would have
known there was a discrepancy and therefore never would have advised
Pinholster to testify. Pinholster argues that without his testimony there was
no evidence that he was in Kumar’s residence at the time of the murders
and therefore counsel’s failure to investigate was prejudicial. As we dis-
cuss infra these arguments are simply unpersuasive as there was a wealth
of other evidence proving Pinholster’s presence in the Kumar residence.
14
Contrary to the dissent’s assertion, we are not saying that the existence
of a “battle of the experts” reduces any prejudice resulting from counsel’s
4754 PINHOLSTER v. AYERS
fingerprint expert testify that he could not match Pinholster’s
print until the third attempt. Although Pinholster argues that
the “State’s expert was pressured to find a match,” no evi-
dence supports such a contention. In addition, the State pre-
sented the palm print evidence to place Pinholster in the
Kumar residence at the time of the murders. This evidence
was cumulative as Corona testified that Pinholster was in the
Kumar residence at the time of the murders, and substantial
portions of Corona’s testimony were corroborated by Lisa
Tapar, her father, and Casey Corona. Pinholster’s admission
to the jury that he was inside Kumar’s house at some point
that night further convinces us that the alleged ineffectiveness
did not prejudice him. Therefore, we hold that the jury’s ver-
dict would not have been affected even if Pinholster’s trial
counsel had conducted an independent investigation and
introduced evidence that the palm print was not Pinholster’s.
[3] Pinholster also failed to show a colorable claim that he
was prejudiced by trial counsel’s failure to investigate the
boot prints. The State did not argue that this evidence con-
nected Pinholster to the crime because the sole prints were
unique; rather, the state argued that this evidence connected
Pinholster to the crime scene because (1) the sole prints were
consistent, and (2) Pinholster’s boots were found to have
traces of human blood on the bottom. Therefore, even if the
jury heard evidence that the sole prints were common in
Southern California, this would not have changed the verdict.
Pinholster offers no other evidence to suggest that the boot
print evidence was faulty.
2
Because we conclude that Pinholster failed to raise a color-
able claim that he was prejudiced by trial counsel’s failure to
failure to investigate the palm print. See Dissent at 4785 n.2. We are sim-
ply saying that Collins’s declaration creates only a battle of the experts;
it does not prove Pinholster’s contention that the State’s expert was misin-
formed, improperly influenced, or lying.
PINHOLSTER v. AYERS 4755
investigate the State’s physical evidence, we cannot conclude
that trial counsel’s decision to advise Pinholster to testify in
his own defense amounted to ineffective assistance. The dis-
sent is ensnared in the trap of 20/20 hindsight. It fails to give
a sufficient level of deference to counsel’s judgments given
the evidence and the type of defense Pinholster wanted to pur-
sue. See Rompilla v. Beard, 545 U.S. 374, 381 (2005) (“In
judging the defense’s investigation, as in applying Strickland
generally, hindsight is discounted by pegging adequacy to
counsel’s perspective at the time investigative decisions are
made and by giving a heavy measure of deference to coun-
sel’s judgments.” (internal quotation marks and citation omit-
ted)).
“An accused’s right to testify is a constitutional right of
fundamental dimension.” United States v. Joelson, 7 F.3d
174, 177 (9th Cir. 1993). When reviewing ineffective assis-
tance of counsel claims that question the attorney’s trial strat-
egy, it is important to “note that a defendant’s Sixth
Amendment rights are his alone, and that trial counsel, while
held to a standard of ‘reasonable effectiveness,’ is still only
an assistant to the defendant and not the master of the
defense.” Mulligan v. Kemp, 771 F.2d 1436, 1441 (11th Cir.
1985). The reasonableness of counsel’s chosen trial strategy
depends critically “on informed strategic choices made by the
defendant and on information supplied by the defendant.”
Strickland, 466 U.S. at 691. The record amply demonstrates
that this strategic tactical decision was deliberate and consid-
ered. Pinholster actively participated in all key decisions, as
he represented himself pro se at one point before the trial, and
strongly directed the strategy he wished counsel to pursue.
The record shows that Pinholster directed his trial counsel
to pursue an alibi defense on his behalf. On June 24, 1983, the
trial court held a hearing on a motion to dismiss filed by Pin-
holster while representing himself. Pinholster argued that his
first appointed trial counsel, Marvin Part, coerced him into
waiving his right to a speedy trial. During the hearing, Pinhol-
4756 PINHOLSTER v. AYERS
ster called Part to testify, waiving his attorney-client privilege.
Pinholster questioned why Part refused to interview possible
alibi witnesses in the face of physical evidence linking Pin-
holster to the crime scene. Pinholster’s insistent decision to
pursue an alibi defense necessarily impacted his counsel’s
trial strategy.15
Even without the physical evidence, the State presented
overwhelming evidence that Pinholster was at the Kumar resi-
dence on the day of the murders. Corona’s testimony not only
placed Pinholster at the scene during the murders, but it also
detailed Pinholster’s participation in the murders. Several
other witnesses corroborated Corona’s testimony.
[4] In light of the evidence placing Pinholster at the scene,
Pinholster’s failure to show prejudice from his trial counsel’s
failure to investigate the physical evidence, and Pinholster’s
strong desire to pursue an alibi defense, we cannot second
guess trial counsel’s decision to advise Pinholster to testify.16
In Strickland, the Court recognized that “[c]ounsel’s actions
are usually based . . . on informed strategic choices made by
the defendant and on information supplied by the defendant.”
466 U.S. at 691. To support Pinholster’s alibi defense, trial
counsel needed to explain the overwhelming evidence prov-
15
Brainard declared:
The strategy decided upon prior to trial was to demonstrate Scott
committed robberies and not burglaries, and that Scott used guns,
not knives, as weapons. I assumed Scott would admit to having
committed a few robberies, not hundreds, although we never
explicitly discussed the number. Part of [the] strategy decided
upon prior to trial was to admit the Croutch robbery during trial.
16
The dissent assumes that trial counsel never advised “Pinholster
against testifying, because the jury would likely conclude he was lying.”
See Dissent at 4786. There is a dearth of evidence in the record detailing
any discussion between trial counsel and Pinholster about his decision to
testify during the guilt phase. Pinholster does not allege, and there is no
evidence to support, the dissent’s assumption that trial counsel neglected
to discuss the risks of testifying with their client.
PINHOLSTER v. AYERS 4757
ing that Pinholster intended to rob the Kumar residence on the
night of the murders. In other words, counsel needed Pinhol-
ster to tell his version of the events—that he was a robber, not
a burglar, and that he used guns, not knives. Given the evi-
dence presented by the State, trial counsel’s tactical decision
to advise Pinholster to testify was reasonable. See id. Such a
decision does not amount to constitutionally deficient perfor-
mance. To declare that it was wrong because in hindsight it
proved unsuccessful and must have been uninformed is not
what the Supreme Court intended when we analyze a Strick-
land claim after the fact.
B
We also conclude that Pinholster has failed to present a col-
orable claim that he was prejudiced by the other alleged
instances of ineffective assistance of counsel during the guilt
phase of his trial.
1
One alleged instance concerned Art Corona’s police inter-
view. Through stipulation of counsel, the State introduced the
unredacted tape recording and transcription of Corona’s
police interview. During the interview, Corona claimed that
Pinholster admitted involvement in the shooting of two “wet-
backs,” that he had beaten an elderly woman, was involved in
a cocaine “rip-off,” sold drugs, committed robberies, and had
affiliated with white supremacist prison gangs.17
The California Supreme Court rejected Pinholster’s ineffec-
tive assistance of counsel claim, concluding that trial counsel
had a “rational tactical reason” for deciding not to object to
admission of the entire interview. Pinholster, 824 P.2d at 604.18
17
Trial counsel did not object to replaying the tape during deliberations,
or allowing the jury to keep the transcript while deliberating.
18
Unlike Pinholster’s other ineffective assistance of counsel claims, the
California Supreme Court reached the merits of this claim in the direct
appeal. It therefore constitutes the “last reasoned decision” of the state
court. See Shackleford, 234 F.3d at 1079 n.2.
4758 PINHOLSTER v. AYERS
The court reasoned that “[Pinholster] needed to create an
impression of candor to carry his testimony that he had bro-
ken into the Kumar house on the night of the murder[s], but
had stolen the drugs and left before Corona arrived and
stabbed the murder victims.” Id. Pinholster himself testified
about his violent criminal past and the references that Corona
made to specific instances “simply confirmed what [Pinhol-
ster] was willing to say about himself.” Id.
The California Supreme Court called Corona’s reference to
the Aryan Brotherhood “clearly innocuous,” as Corona testi-
fied that it was Brown who was affiliated with the group, not
Pinholster. Id. Moreover, the interview could reasonably be
seen as favorable to Pinholster’s defense. “[T]he tape con-
tained statements inconsistent with Corona’s trial testimony,
showed Corona’s eagerness to cooperate with the police, and
contained some reference to Corona’s contact with one
‘Butch,’ who [Pinholster] claimed was Corona’s actual
accomplice.” Id. The district court denied Pinholster’s motion
for an evidentiary hearing because certain aspects of the tape
were “beneficial to Pinholster’s case” and therefore trial coun-
sel “arguably were not deficient for failing to object to it.”
The district court concluded that admitting the tape was not
prejudicial because the case against Pinholster was strong and
the prosecution successfully discredited his defense.
[5] Whether counsel’s actions constituted a “tactical” deci-
sion is a question of fact, and we must decide whether the
state court made an unreasonable determination of the facts in
light of the evidence before it. See Edwards v. Lamarque, 475
F.3d 1121, 1126 (9th Cir. 2007) (en banc) (citing Taylor v.
Maddox, 366 F.3d 992, 999-1000 (9th Cir. 2004)). For the
reasons expressed by the district court, we hold that the Cali-
fornia Supreme Court’s conclusion that counsel made a tacti-
cal decision to admit the entire tape was not an unreasonable
determination of fact. Accordingly, the court’s conclusion that
counsel made a reasonable decision was not objectively
PINHOLSTER v. AYERS 4759
unreasonable. See id. (stating that the “reasonableness of
counsel’s decision is best described as a question of law”).
2
Pinholster also claims his counsel were ineffective in fail-
ing to object to Detective Coffey’s testimony. Detective Cof-
fey testified that Terry Pinholster, Pinholster’s brother, said
Scott Pinholster’s arrest was “no big deal” because his brother
had been arrested for murder before. Pinholster argues that
because he had never before been arrested or charged with
murder, his trial counsel had no tactical basis for failing to
object to this statement. The district court granted summary
judgment to the State on this issue, concluding that Pinholster
had failed to show prejudice as the jury had “already heard
that [Pinholster] was involved in a shoot-out in which two
‘wetbacks’ had been killed. The jury could easily have sur-
mised that [Pinholster] was arrested for murder as a result of
that incident.”
[6] Trial counsel’s failure to object to this evidence raises
concerns: The portion of the Corona tape discussing the “wet-
back” murders and the hearsay statement of Pinholster’s
brother undermine the heart of Pinholster’s defense—that he
is a robber not a murderer. Nevertheless, because the Califor-
nia Supreme Court’s decision regarding the Corona tape was
objectively reasonable, it cannot be said that Pinholster suf-
fered prejudice from admission of his brother’s statement. As
the district court reasoned, it is likely the jury put the two
together, making his brother’s statement no more prejudicial
than admission of the “wetback” statement.
3
Pinholster contends that his trial counsel were ineffective
by admitting into evidence a prior felony conviction for kid-
naping after the trial court granted a motion in limine to pro-
hibit the State from using the evidence on cross-examination.
4760 PINHOLSTER v. AYERS
In a declaration filed with Pinholster’s state and federal
habeas petitions, Brainard admitted that he “d[id] not recall
why [he] elicited Scott Pinholster’s kidnapping conviction
after the court ruled that this conviction was inadmissible for
impeachment purposes.”
Brainard’s question opened the door for the prosecution to
question Pinholster about prior offenses in which he used a
knife rather than a gun. The trial court—without objection
from Pinholster’s attorneys—allowed the State to recall Pin-
holster to the stand and question him as to whether he used
a knife during the course of the kidnaping. Pinholster testified
that he pled guilty to using a knife but denied actually having
used the knife during the commission of the offense.
Although use of a knife is alleged in the criminal information,
it was not a term of the plea agreement.19 Brainard filed a dec-
laration stating that he could “not recall whether [he] knew
the knife enhancement allegation was not found true.”
[7] We hold that Pinholster has failed to show a colorable
claim that he was prejudiced by his trial counsel’s allegedly
deficient performance. The jury heard other evidence that Pin-
holster possessed knives, including his own admission that he
used a buck knife to vandalize Lisa Tapar’s car on the night
of the murders. The district court properly denied Pinholster
an evidentiary hearing on this ineffective assistance of coun-
sel claim.
19
The colloquy during the change of plea hearing went as follows:
The court: Mr. Pinholster, Count I of the information charges
that on August 21st of last year you kidnapped a
person named Jena, J-e-n-a, Rae, R-a-e, Burdett, B-
u-r-d-e-t-t; that is, that you forcefully took her from
one place to another. Do you understand that
charge?
Pinholster: Yes, sir.
The court: Is that what you did?
Pinholster: Yes, sir.
PINHOLSTER v. AYERS 4761
4
Charles Kempf testified that during an aborted robbery
attempt at Kumar’s residence Pinholster bragged about stab-
bing an unidentified individual in the rectum. Pinholster con-
tends that his trial counsel were ineffective for failing to
object to Kempf’s statement and failing to impeach Kempf
with a prior statement in which he claims that Pinholster’s
friend did the stabbing.
[8] Pinholster cannot make out a colorable claim that he
was prejudiced by the admission of this evidence. During his
own testimony, which was dramatic and unusual in the candor
Pinholster displayed in bragging about his life of crime, Pin-
holster admitted to several violent acts and the evidence pres-
ented against him was overwhelming. The California
Supreme Court so found, see Pinholster, 824 P.2d at 601,
604, and we cannot say that the district court erred by failing
to grant an evidentiary hearing.
5
During rebuttal, Eric Klemetti testified that he purchased
marijuana from Johnson at the Kumar residence around 9
p.m. on the night of the murders. To impeach his credibility,
Pinholster’s trial counsel asked Klemetti whether he had ever
committed a burglary with Pinholster, and whether he had
acted as an informant during that case. Pinholster argues that
this amounted to ineffective assistance because the conviction
undercut his testimony that he committed robberies rather
than burglaries and was otherwise inadmissible.
[9] We agree with the district court. Trial counsel made a
rational tactical decision to impeach Klemetti’s testimony
with this evidence as the witness would have otherwise gone
unchallenged. Moreover, Pinholster failed to show prejudice
because he had already admitted that he burglarized Kumar’s
residence on the night of the murders.
4762 PINHOLSTER v. AYERS
6
Pinholster challenges his trial counsel’s decision to admit
evidence that the police had recovered narcotics during the
search of his apartment. He also claims ineffective assistance
due to his trial counsel’s failure to exclude evidence that he
had thrown a gun from the window of a different apartment
while the police executed a search warrant on his apartment.
Although his trial counsel challenged the officers’ identifica-
tion of Pinholster, Pinholster admitted during cross-
examination that he threw the gun.
[10] The district court concluded that (1) Pinholster failed
to show prejudice, as he admitted to using drugs and possess-
ing guns in his testimony; (2) that even without Pinholster’s
testimony, the narcotics evidence was not prejudicial, as the
jury heard from other sources, including Corona, that Pinhol-
ster used drugs; and (3) that though trial counsel attempted to
challenge the officers’ identification of Pinholster as the man
who threw the gun, it is reasonable to believe that the jury
found the officers’ testimony credible. We agree and hold that
the district court properly denied Pinholster’s request for an
evidentiary hearing.
7
Pinholster argues that trial counsel were ineffective for ask-
ing prospective jurors questions about white supremacist
gangs such as the Aryan Brotherhood. The district court con-
cluded that trial counsel were not deficient because they knew
the Corona tape contained references to the Aryan Brother-
hood, and they made a tactical decision to forewarn the jurors
that the subject might arise. On appeal, Pinholster argues that
trial counsel were ineffective for failing to object when the
prosecution returned to this theme throughout the guilt phase
of the trial.
[11] Pinholster has again failed to make a colorable claim
that he was prejudiced by the alleged deficient performance.
PINHOLSTER v. AYERS 4763
Given the strong evidence against Pinholster, it is not reason-
ably probable that trial counsel’s failure to exclude all refer-
ences to Pinholster’s connection to white supremacists
affected the verdict.
IV
We now turn to the State’s appeal. The State contends that
the district court improperly found, based on evidence not
before the state court, that Pinholster’s trial counsel inade-
quately investigated and deficiently presented mitigating evi-
dence at the penalty phase. We hold that Pinholster properly
exhausted his ineffective assistance of counsel claim, and that
any error the district court may have committed in holding an
evidentiary hearing is harmless because, even with the evi-
dence presented at the hearing, Pinholster has not shown that
he was prejudiced by counsel’s failure to offer additional mit-
igating evidence.20
A
A state prisoner must exhaust all available remedies in state
court before a federal court may grant him habeas relief. 28
U.S.C. § 2254(b)(1)(A); O’Sullivan v. Boerckel, 526 U.S.
838, 842 (1999). A state prisoner must describe the operative
facts and federal legal theory on which he grounds his claim
so the state court has a “ ‘fair opportunity’ to apply control-
ling legal principles to the facts bearing upon his constitu-
tional claim.” Anderson v. Harless, 459 U.S. 4, 6 (1982) (per
20
The State contends the district court abused its discretion by granting
Pinholster a federal evidentiary hearing. The State argues that the district
court failed to consider whether Pinholster—given his shifting medical
impairment theories and new lay witness declarations—properly devel-
oped a factual basis for his claim in state court. See Baja v. Ducharme,
187 F.3d 1075, 1078 (9th Cir. 1999). The State waived this issue by fail-
ing to raise it in its opening brief. See United States v. Kama, 394 F.3d
1236, 1238 (9th Cir. 2005). Moreover, as we discuss infra, any error was
harmless.
4764 PINHOLSTER v. AYERS
curiam) (quoting Picard v. Connor, 404 U.S. 270, 276
(1971)). Presenting additional facts to the district court does
not evade the exhaustion requirement when the prisoner pres-
ents the substance of his claim to the state courts. See Vasquez
v. Hillery, 474 U.S. 254, 257-58, 260 (1986) (rejecting chal-
lenge to new evidence because it did not fundamentally alter
the legal claim the state courts previously considered).
[12] We review de novo whether Pinholster failed to
exhaust California remedies. See Castillo v. McFadden, 399
F.3d 993, 998 (9th Cir. 2005). The California Supreme Court
had a sufficient opportunity to hear Pinholster’s claim of inef-
fective assistance of counsel at the penalty phase. Throughout
the habeas proceedings, Pinholster has continued to press the
same legal claim (ineffective assistance at the penalty phase)
and the same factual basis (e.g., counsel failed to present sig-
nificant mitigating evidence and, instead, presented harmful,
false evidence at the penalty phase). The federal and state
petitions detail many identical facts. Both describe trial coun-
sel’s failure to seek a continuance to prepare for the penalty
phase; counsel’s introduction of Mrs. Brashear’s testimony;
Pinholster’s childhood home life; and Pinholster’s back-
ground, including his educational, medical, psychological,
social, and family history. Pinholster did not, as the State con-
tends, “present vague and conclusory constitutional claims in
the state court, phrased with sweeping generality and sup-
ported by skimpy factual allegations.”
[13] Though during the proceedings Pinholster relied on
different experts with differing mental impairment theories,
the evolving theories have not significantly changed the evi-
dentiary basis for his arguments. These experts relied on the
same background information Pinholster presented to the state
court, and their testimonies represent only a fragment of the
mitigating evidence submitted in the state habeas proceedings.
Accordingly, the facts adduced at the evidentiary hearing
have not fundamentally altered the legal claim the California
Supreme Court already considered and rejected, and we con-
PINHOLSTER v. AYERS 4765
clude that Pinholster has exhausted this claim. See Weaver v.
Thompson, 197 F.3d 359, 364 (9th Cir. 1999) (rejecting
exhaustion argument as “unwarranted hairsplitting” where at
each step the legal claim remained the same, but the precise
factual predicate for the claim changed after the evidentiary
hearing).
B
Habeas relief is proper if the California Supreme Court’s
decision was either “contrary to, or involved an unreasonable
application of” Strickland.21 Williams, 529 U.S. at 391 (inter-
nal quotation marks omitted). We need not determine whether
Pinholster’s trial counsel performed deficiently because we
find the prejudice inquiry dispositive. See Strickland, 466
U.S. at 697 (“[T]here is no reason . . . to address both compo-
nents of the inquiry if the defendant makes an insufficient
showing of one. In particular, a court need not determine
whether counsel’s performance was deficient before examin-
ing the prejudice suffered by the defendant as a result of the
alleged deficiencies.”).
Pinholster bears the “heavy burden” of establishing actual
prejudice. See Williams, 529 U.S. at 394 (internal quotation
marks omitted). He must demonstrate that there is a reason-
able probability the sentencer would have found death unwar-
ranted absent his counsel’s errors. Strickland, 466 U.S. at 695.
“A reasonable probability is a probability sufficient to under-
mine confidence in the outcome. [I]t is insufficient to show
only that the errors had some conceivable effect on the out-
come of the proceeding, because virtually every act or omis-
21
Because the California Supreme Court summarily denied Pinholster’s
penalty phase ineffective assistance of counsel claim, we have indepen-
dently reviewed the record to ascertain whether the state court decision
was objectively unreasonable. See Himes, 336 F.3d at 853; Pirtle v. Mor-
gan, 313 F.3d 1160, 1167 (9th Cir. 2002). Though unable to analyze the
basis for the state court’s decision, we still view the decision through the
“objectively unreasonable” lens. See Delgado, 223 F.3d at 982.
4766 PINHOLSTER v. AYERS
sion of counsel would meet that test.” Williams, 529 U.S. at
394 (quoting Strickland, 466 U.S. at 693-94 (citation omit-
ted)). In Wiggins v. Smith, 539 U.S. 510 (2003), the Supreme
Court explained that we must reweigh the evidence in aggra-
vation against the totality of available mitigating evidence to
assess prejudice. Id. at 534. In so doing, “we evaluate the
totality of the evidence—‘both that adduced at trial, and the
evidence adduced in the habeas proceeding[s].’ ” Id. at 536
(emphasis omitted) (quoting Williams, 529 U.S. 397-98).22
The dissent relies heavily on the Supreme Court’s decisions
in Williams, Wiggins,23 and Rompilla. However, as Justice
O’Connor stated in her concurrence in Rompilla, we must
apply a “case-by-case approach to determining whether an
attorney’s performance was unconstitutionally deficient under
Strickland.” Rompilla, 545 U.S. at 393-94 (O’Connor, J., con-
curring). The Supreme Court has not gone so far as to say that
an attorney’s failure to uncover a certain class of mitigating
evidence automatically results in a showing of prejudice. See
id. Therefore, we must conduct an independent review of the
evidence presented, reweighing what the State produced in
the form of aggravating evidence against that which Pinhol-
ster produces in mitigation. Like the California Supreme
Court, we conclude that the potential mitigating evidence is
insufficient to outweigh the overwhelming aggravating evi-
22
Despite Chief Judge Kozinski’s misgivings, Rompilla v. Beard, 545
U.S. 374 (2005), does not signal a change in the Supreme Court’s
approach to analyzing the prejudice prong under Strickland. See Kozinski
Concurrence at 4780. The Court’s decision not to address the aggravating
evidence in Rompilla more likely resulted from its conclusion that peti-
tioner was clearly prejudiced from his counsel’s ineffective assistance, see
545 U.S. at 390 (“We think Rompilla has shown beyond any doubt that
counsel’s lapse was prejudicial; Pennsylvania, indeed, does not even con-
test the claim of prejudice”), rather than from an express desire to overrule
prior precedent.
23
But even the dissent concedes that the aggravating evidence here is
stronger than that in Wiggins because Wiggins, unlike Pinholster, did not
have a record of violent conduct. See Dissent at 4802.
PINHOLSTER v. AYERS 4767
dence. We are heavily influenced by the damage Pinholster
did to himself when he took the stand in the guilt phase and
testified to an unrepentant life of violent crime.
[14] During the state and federal habeas proceedings, Pin-
holster submitted evidence to the state court showing that he
suffered years of significant neglect and physical and emo-
tional abuse as a child. Pinholster’s step-father, Bud Brashear,
frequently beat Pinholster with his fists, a belt, or anything
else available, including a two-by-four board. Moreover, Pin-
holster presented evidence during the habeas proceedings that,
because he resembled his biological father, he was severely
beaten by his grandparents.
Pinholster painted somewhat of a different picture during a
July 16, 1991, interview with a defense investigator Sheryl
Duvall, who at the time worked as an independent Criminal
Justice Consultant. She was hired by an attorney named Leon-
ard Tauman to prepare a social history on Pinholster. As
reflected in her interview notes, Pinholster discussed his
social history, including his relationship with various family
members.24 Pinholster rejected his mother’s claim that his
step-father “abused” him growing up. Although he admitted
that his step-father used a homemade paddle freely on him
and his brothers, Pinholster claimed that they “benefitted”
from the “discipline.” Pinholster’s primary complaint about
24
The district court refused to consider statements made in Duvall’s
interview notes on the basis that the notes constituted inadmissible hear-
say. However, the parties stipulated to the admission of these interview
notes during the evidentiary hearing; Pinholster’s habeas counsel made no
objection based on hearsay. See United States v. Foster, 711 F.2d 871, 877
(9th Cir. 1983) (stating that, where there is no objection to hearsay evi-
dence, “such evidence is to be given its natural probative effect as if it
were in law admissible” (internal quotation marks omitted)). Furthermore,
the Supreme Court has instructed us to “ ‘evaluate the totality of the
evidence—both that adduced at trial, and the evidence adduced in the
habeas proceeding[s].’ ” Wiggins, 539 U.S. at 536 (quoting Williams, 529
U.S. at 397-98)).
4768 PINHOLSTER v. AYERS
his step-father was that “he didn’t seem to want the kids
around.”
Although Pinholster presented evidence of physical abuse
from his maternal grandmother, Pinholster claimed that he
and his maternal grandfather were very close. He spent sum-
mers with his grandparents, working on their chicken farm.
He claimed that his “[grandfather] was affectionate with the
boys. He made them work hard on the farm but he was quick
to praise their efforts.” Pinholster’s grandfather made him feel
good about himself. When Duvall asked Pinholster whether
he believed his life would have been different had his grand-
father lived, Pinholster responded “definitely.” He claimed
that, after his first arrest, he would have been sent to live with
his grandparents. These sentiments were supported in a medi-
cal report developed upon Pinholster’s release from the Cam-
arillo State Hospital in 1971 when Pinholster was eleven-
years-old. Pinholster was reported as being “very close” to his
maternal grandfather, with his grandfather’s death being an
“emotional shock.”
During the interview with Duvall in 1991, Pinholster also
described his relationship with his mother, Mrs. Brashear. He
claimed that he always “felt very close to his mother,” and he
had nothing but praise for her. He stated that “[s]he’s always
been supportive of all the kids. She’s always the first there
and last to leave. She always had a hot dinner on the table.”
At the time of the interview, Pinholster remained in close con-
tact with his mother.25
25
The dissent questions our consideration of Pinholster’s description of
his social history. See Dissent at 4794. We are not crediting Pinholster’s
description of the events over that of other family members. We recognize
that Pinholster was likely beaten and abused by both his step-father and
maternal grandmother. While we in no way condone such treatment of any
child, our role in these inquiries is to try and assess the extent of the miti-
gating evidence as it relates to the potential prejudice to Pinholster. In
doing so, Pinholster’s own perception of his childhood and its affect on
him is certainly relevant. We also find relevant the fact that Pinholster’s
paternal grandfather provided some stability during Pinholster’s early
childhood.
PINHOLSTER v. AYERS 4769
[15] In addition, the jury did hear some mitigating evidence
from Pinholster’s mother during her penalty phase testimony.
We recognize that Mrs. Brashear inaccurately portrayed her-
self as a dedicated, caring mother, and, indeed, she failed to
present Pinholster’s troubled childhood and mental and emo-
tional problems in the most compelling manner. Nonetheless,
the jury heard mitigating facts from her testimony. Mrs.
Brashear described Pinholster’s strained relationship with his
step-father, conceding that Bud Brashear’s attempts to disci-
pline Pinholster sometimes rose to the level of abuse.
On cross-examination, she admitted that her daughter,
Tammy Brashear, was currently on probation, and that her
other son, Alvin Pinholster, died after attempting to evade the
authorities. Mrs. Brashaer recounted an accident when she ran
over Pinholster (who was a toddler) with her car, nearly tear-
ing off one of Pinholster’s ears and causing a shoulder injury
that required just over a week in the hospital. She also dis-
cussed Pinholster’s second head injury resulting from another
car accident; a psychologist’s recommendation to commit
Pinholster to a mental hospital at age ten; his time in a class
for emotionally handicapped children; and his epilepsy, which
she believed resulted from a severe beating at age eighteen in
county jail. The penalty phase verdict reflects the jury’s obvi-
ous rejection of such mitigating circumstances in light of all
that Pinholster had said and done as a recidivist and the bru-
tality of these robbery/murders.
[16] It is unlikely Pinholster’s evidence of mental impair-
ment would have had a significant impact on the jury. As a
toddler, Pinholster was in two separate car accidents that
allegedly resulted in head injuries, and throughout his child-
hood and early adolescence, Pinholster displayed symptoms
of and received treatment for epilepsy. Nevertheless, the
experts’ opinions about Pinholster’s psychological impair-
ments and whether these impairments resulted from a head
injury have varied considerably, becoming somewhat of a
4770 PINHOLSTER v. AYERS
moving target for the California Supreme Court and federal
courts on habeas review.
The California Supreme Court has denied two habeas peti-
tions, one in which Pinholster relied on Dr. Woods as his
expert, and another in which he relied on Dr. Stalberg as his
expert. Dr. Woods opined that, during the murders, Pinholster
was substantially impaired by a bipolar mood disorder operat-
ing synergistically with a seizure disorder. Declining to pre-
sent Dr. Woods’s diagnosis,26 Pinholster rehired Dr. Stalberg
as his expert for the second state habeas petition. Dr. Stalberg
stated that he had reviewed the materials presented by Pinhol-
ster’s habeas counsel and that, had he known of “Pinholster’s
family history of severe psychiatric disorders, his disturbed
behavior during childhood, and his irrational and highly
aggressive actions immediately before the homicides,” he
would have “ma[de] further inquiry before concluding that
[Pinholster] had merely a personality disorder.” He further
stated that “[t]he new material” would have “materially modi-
fied [his] opinion regarding mitigating circumstances.” After
the California Supreme Court again denied Pinholster’s
habeas petition, he appeared ready to proceed to federal court
with Dr. Stalberg as his expert.
26
None of the other experts agreed with Dr. Woods’s diagnosis of bipo-
lar mood disorder. In his June 2001 declaration, Dr. Stalberg stated that
Pinholster “was substantially impaired by a bipolar mood disorder operat-
ing synergistically with intoxication and a seizure disorder at the time the
crime was committed.” However, during the evidentiary hearing, Dr. Stal-
berg rejected that statement as his own testimony. He stated, “I never said
that and never testified to [Pinholster having bipolar mood disorder].”
Subsequently, in August 2002, Dr. Stalberg filed another declaration in
which he stated simply that Dr. Woods’s diagnosis of bipolar mood disor-
der was “incorrect.” Dr. David Rudnick, a neuropsychiatrist who served
as an expert for the State during the federal evidentiary hearing, stated in
his declaration of July 11, 2001, that “[t]here is no evidence for the diag-
nosis of bipolar disorder at any time in Mr. Pinholster’s life.” Similarly,
Dr. Vinogradov stated that she found “no clear information supporting
true full-blown hypomanic or depressive episodes.”
PINHOLSTER v. AYERS 4771
On June 5, 2001, Dr. Stalberg executed a more detailed
declaration in which he stated that the penalty phase testi-
mony of Mrs. Brashear was “profoundly misleading” as she
failed to truthfully describe Pinholster’s early childhood,
which “was marked by significant deprivation, physical
abuse, and extreme neglect.” Dr. Stalberg again acknowl-
edged that Pinholster likely suffers from a seizure disorder,
and went on to opine that some of the violent incidents in Pin-
holster’s past—the breaking of his wife’s jaw and his assault
on Officer Kaufman—could have been attributed to his sei-
zure disorder.
After Dr. Stalberg refused, despite all of the new mitigating
evidence, to alter his diagnosis of Antisocial Personality Dis-
order, Pinholster’s habeas counsel informed him that he
would no longer be serving as their expert. Instead, in support
of his amended federal habeas petition, Pinholster choose to
rely on the new expert testimony of Dr. Vinogradov and Dr.
Olson. Dr. Olson concluded that “it is reasonably probable
that Mr. Pinholster has suffered from partial epilepsy since at
least 1968.” In support of his conclusion, Dr. Olson relied on
the two head injuries Pinholster suffered as a child, Pinhol-
ster’s abnormal EEG at age nine,27 the descriptions of Pinhol-
ster’s seizures provided by other witnesses, and Pinholster’s
treatment for seizures with standard anti-seizure medication.
Dr. Vinogradov relied on the same evidence as the other
experts and conducted two face-to-face interviews with Pin-
holster. She implicitly rejected Dr. Woods’s diagnosis, stating
there was “no clear information supporting true full-blown
hypomanic or depressive episodes.” However, she diagnosed
Pinholster with “personality change, aggressive type, due to
27
Dr. Rudnick testified that Pinholster’s abnormal EEG in 1968 could
have been caused by his Attention Deficient Hyperactivity Disorder, or by
the fact that he was only nine-years-old at the time. As Dr. Rudnick
described, maturation of the brain is “characterized by a reduction in slow
wave activity of the same frequencies observed” in Pinholster.
4772 PINHOLSTER v. AYERS
serious childhood head trauma.” She opined that, “[o]n the
night of the crimes, while intoxicated on multiple substances,
Mr. Pinholster experienced perceptual aberrations and possi-
ble psychotic symptoms.”
[17] The dissent believes that Pinholster has presented evi-
dence of “substantial neurological and emotional disorders.”
Dissent at 4794. However, the only constant with regard to
the evolving defense expert testimony has been Dr. Stalberg’s
diagnosis of Antisocial Personality Disorder and the experts’
agreement that it is reasonably probable that Pinholster suf-
fered from epilepsy.28 The California Supreme Court has
faced a revolving door of experts, each presenting his or her
own theory on Pinholster’s mental health. Although we have
no pronounced reason to question the credibility of Pinhol-
ster’s new experts, we conclude that no newly-minted expert
theory to explain his behavior would have made a difference
in the face of what Pinholster said and did.
Though the Supreme Court has recently highlighted
defense counsel’s constitutional duty to adequately investigate
mitigating evidence, we cannot say from the record either
before the state or federal district court that it was objectively
28
Dr. Rudnick agreed with Dr. Stalberg’s diagnosis and also noted in his
declaration that John Geiger, M.D., a staff psychiatrist at San Quentin
State Prison, diagnosed Pinholster with Antisocial Personality Disorder
and concluded that his violent behavior was “approximately that of the
average condemned area inmate.” Charles E. Steinke, Ph.D., a staff psy-
chologist at San Quentin, also agreed with Dr. Geiger’s diagnosis of Anti-
social Personality Disorder. We have previously noted that a diagnosis of
Antisocial Personality Disorder is “potentially more harmful to [a] peti-
tioner than [helpful].” Gerlaugh v. Stewart, 129 F.3d 1027, 1035 (9th Cir.
1997); see also Daniels v. Woodford, 428 F.3d 1181, 1204-05 (9th Cir.
2005) (concluding that the jury “never heard any mitigating psychological
explanation for Daniels’s behavior” because trial counsel relied solely on
testimony suggesting that Daniel was a “sociopath”); Clabourne v. Lewis,
64 F.3d 1373, 1384 (9th Cir. 1995) (stating that omitted mental health
records were “hardly . . . helpful” as they indicated that the defendant had
“an antisocial personality”).
PINHOLSTER v. AYERS 4773
unreasonable for the California Supreme Court to deny relief.
While trial counsel could have presented more detailed miti-
gating evidence—in the form of Pinholster’s social history
and mental health history—that evidence falls short when
compared to the mitigating evidence available in Williams,
Wiggins, and Rompilla, and the overwhelming evidence in
aggravation which Pinholster faced.
In Williams, had counsel performed effectively the jury
would have learned that Williams’s parents were imprisoned
for criminal neglect; Williams’s father repeatedly beat him;
Williams was borderline mentally retarded and had not
advanced beyond sixth grade; and, while in prison, Williams
helped crack a prison drug ring, he returned a prison guard’s
missing wallet, and prison officials testified that he was the
least likely to act violently out of all the inmates. 529 U.S. at
395-96. As the Supreme Court emphasized, this mitigating
evidence coupled with the evidence the jury did hear—that
“Williams turned himself in, alerting police to a crime they
otherwise would never have discovered, express[ed] remorse
for his actions, and cooperat[ed] with the police after that”—
could have influenced the jury’s view of Williams’s moral
culpability. Id. at 398. In Williams, the additional mitigating
evidence tended to show that Williams’s “violent behavior
was a compulsive reaction rather than a product of cold-
blooded premeditation.” Id. Pinholster, on the other hand,
presented himself to the jury as a classic antisocial personality
who revels in his disobedience to the law and social mores.
In Wiggins, defense counsel failed to present evidence that
Wiggins’s mother was an alcoholic and abusive to Wiggins
and his siblings, Wiggins entered foster care at age six, two
foster mothers physically abused him, his second foster father
repeatedly raped and molested him, he spent time homeless,
and he was mentally retarded. 539 U.S. at 525, 535, 545. In
finding that Wiggins was prejudiced by his counsel’s ineffec-
tive assistance at the penalty phase, the Supreme Court com-
pared Wiggins to Williams, noting that “Wiggins does not
4774 PINHOLSTER v. AYERS
have a record of violent conduct that could have been intro-
duced by the State to offset this powerful mitigating narra-
tive.” Id. at 537. Pinholster, in contrast, is the epitome of a
repeat offender who specializes in violent crimes.
In Rompilla, had defense counsel conducted a sufficient
investigation into mitigating evidence, the jury would have
learned that Rompilla’s parents suffered from severe alcohol-
ism; Rompilla’s mother drank during her pregnancy, causing
Rompilla to develop fetal alcohol syndrom; Rompilla and his
brothers also developed serious drinking problems; Rompil-
la’s father severely beat both Rompilla and his mother; Rom-
pilla’s mother and father fought violently, with one incident
resulting in his mother stabbing his father; and that Rompilla
suffered a depraved childhood, during which he was locked
in a mesh dog pen, isolated from other children, and slept in
an attic with no heat. 545 U.S. at 391-92. In addition, counsel
would have found evidence suggesting that Rompilla suffered
from schizophrenia and other mental disorders.
[18] In contrast to the petitioner in Wiggins, who had no
prior convictions nor a record of violent conduct, cf. Wiggins,
539 U.S. at 537, Pinholster’s violent past—a past Pinholster
proudly boasted about to the jury—offsets the mitigating evi-
dence. Pinholster bragged that he had committed hundreds of
armed robberies within a three-year time period. In addition,
he admitted to a prior kidnaping, during which he held a knife
to the victim’s throat. And, unlike the petitioner in Williams,
Pinholster neither expressed remorse over the murders of
Thomas Johnson and Robert Beckett, nor attempted to aid the
police in their investigation. Rather, Pinholster threatened to
kill the State’s lead witness, Art Corona, and proudly
recounted his recusant behavior in front of the jury.29
29
During the penalty phase, the jury also heard evidence regarding the
numerous threats and assaults Pinholster inflicted on law enforcement, as
well as several disciplinary infractions while he was arrested and incarcer-
ated. For example, LAPD officers Kaufman and Guzman testified that
PINHOLSTER v. AYERS 4775
We recognize that, at first glance, Pinholster’s habeas peti-
tion more closely resembles that of the petitioner in Rompilla.
Nevertheless, there are significant differences, and we must
analyze an attorney’s alleged ineffective assistance of counsel
on a case-by-case approach. See Rompilla, 545 U.S. at 393-
94, 396 (O’Connor, J., concurring). California law provides
that, in determining the penalty, the jury shall consider, if rel-
evant, “[t]he circumstances of the crime of which the defen-
dant was convicted in the present proceeding and the
existence of any special circumstances.” Cal. Penal Code
§ 190.3(a). Indeed, the trial court instructed the jury that “[i]n
determining which penalty is to be imposed on the Defendant,
you shall consider all of the evidence which has been received
during any part of the trial of this case.” Here, the jury wit-
Pinholster kicked or attempted to kick them in the head while they tried
to restrain him on different occasions. Los Angeles County Central Jail
Operations Sergeant Thomas Piggott testified to some of the eleven disci-
plinary incidents with Pinholster involving “overt violence or some chal-
lenge to future recalcitrant type behavior.” Finally, the State presented the
testimony of Cathy Ann Smith. She testified that Pinholster broke her jaw
while seemingly having an epileptic seizure. However, because trial coun-
sel could have rebutted some of this aggravating evidence, we do not give
it substantial weight in the reweighing of the aggravating and mitigating
factors. For example, former Los Angeles County Deputy Sheriff Dale
Peroutka would have testified that Pinholster “eventually [ ] turned him-
self around” such that Peroutka and other deputies recommended to reclas-
sify Pinholster from administrative segregation to the general population.
Peroutka no longer saw Pinholster as a danger to other deputies or
inmates; he reached an agreement with Pinholster that he could join the
general population if he behaved and complied with the rules. Likewise,
trial counsel could have diminished the impact of a serious disciplinary
infraction admitted by stipulation. Allan Page Crowder, the corrections
officer Pinholster allegedly threatened to throw off a tier in state prison,
would have testified that had he been a more seasoned officer, he would
not have considered the 1978 verbal altercation worthy of a CDC 115
disciplinary report. Nevertheless, because we find other more substantial
aggravating evidence in the record, this newfound mitigating evidence
does not change our ultimate conclusion that no reasonable juror would
have been persuaded to change his vote.
4776 PINHOLSTER v. AYERS
nessed first-hand Pinholster’s lack of remorse. Cf. Schriro v.
Landrigan, 127 S. Ct. 1933, 1944 (2007) (noting that the
“postconviction court was well acquainted with Landrigan’s
exceedingly violent past and had seen first hand his belliger-
ent behavior”); see also id. (“In his comments [to the sentenc-
ing judge], defendant not only failed to show remorse or offer
mitigating evidence, but he flaunted his menancing behavior.”
(internal quotation marks and first alteration omitted)). Justice
Mosk specifically emphasized that point in authoring the deci-
sion for the California Supreme Court: “[Pinholster] himself
made his criminal disposition clear [to the jury.] In fact, he
gloried in it.” Pinholster, 824 P.2d at 611.
[19] Pinholster viciously beat the two murder victims,
repeatedly stabbed them with a knife, and took their wallets
for a gain of $23 and a quarter-ounce of marijuana.30 Yet,
under oath, Pinholster denied murdering the victims and
bragged about the successful hundred-plus robberies he had
previously committed. Pinholster called himself a “profes-
30
The dissent questions the heinousness of these murders, comparing
this factual scenario with those found in Belmontes v. Brown, 414 F.3d
1094 (9th Cir. 2005), rev’d on other grounds, Ayers v. Belmontes, 127
S. Ct. 469 (2006); Hovey v. Ayers, 458 F.3d 892 (9th Cir. 2006); and
Fields v. Brown, 431 F.3d 1186 (9th Cir. 2005). Dissent at 4797-99. How-
ever, for the jury charged with the duty of weighing the mitigating and
aggravating factors in determining whether this defendant should receive
a life sentence or suffer death, these separate, unconnected murders are
irrelevant. Unlike a trial judge who may try several murder cases, or an
appellate court that may review several different murder convictions in
those states imposing a proportionality review on appeal in capital cases,
this is likely the first and only time these jury members will become so
intimate with facts involving the taking of human lives. The jury does not
compare one murder to another, ranking the heinousness of the individual
crimes on some imaginary scale. California does not require a proportion-
ality review as do some other states in death penalty cases. Rather, as the
Supreme Court has directed appellate courts to do, juries also consider the
underlying facts of a death penalty case on an individualized case-by-case
basis in weighing the aggravating and mitigating facts. Cal. Penal Code
§ 190.3. We do not share our colleague’s view that this was not a particu-
larly heinous double homicide.
PINHOLSTER v. AYERS 4777
sional robber,” and testified that he often wrote his name and
scratched swastikas on other people’s property as a “sideline
to robbery.”31 Moreover, the jury heard evidence that Pinhol-
ster was previously convicted for kidnaping, that he threat-
ened to kill the State’s lead witness, and that, in a jealous
rage, Pinholster slashed the arm of Thomas Mesquita with a
straight razor.
Pinholster’s detailed account of his version of the events on
the night of the murders would obviously affect the jury’s
view of Pinholster’s mental impairment evidence. And, the
jury also observed firsthand on the witness stand an individual
who failed to respect the gravitas of the multiple murder trial
through his unrepentant attitude. In addition to taking pride in
his criminal background, Pinholster was openly disrespectful
of the deputy prosecutor and ignored the seriousness of his
underlying murders. The record reflects that Pinholster was
either laughing or smirking during numerous stages of the
deputy prosecutor’s cross-examination.
[20] We cannot ignore the fact that, even while hearing
Pinholster’s defense in the guilt phase of the trial, the jury was
considering facts that were also relevant to appropriate pun-
ishment. See Cal. Penal Code § 190.3(a). In his testimony,
Pinholster portrayed himself as a career criminal who reveled
in his antisocial persona. As Dr. Rudnick explained in his dec-
laration, “individuals with Antisocial Personality Disorder
may have an inflated and arrogant self-appraisal, behave in a
cocky or self-assured manner, lack realistic concern about
their problems and display a glib, superficial charm.”32 The
31
Dr. Rudnick stated that “[Pinholster’s] behavior at Lisa Tapar’s house
was a clear, angry reaction to having the door closed on him. After stab-
bing the door, he performed the very deliberate, aggressive act of carving
various Nazi symbols on Lisa’s car.” This analysis, along with Pinhol-
ster’s ability to give a detailed description of his actions during this event,
would not have been forgotten by the jury considering any of the newly
proffered mitigating evidence.
32
As detailed above, Dr. Woods used Pinholster’s behavior at trial to
support his diagnosis of bipolar mood disorder. Given that Pinholster
4778 PINHOLSTER v. AYERS
California Supreme Court, which acknowledged the fact that
Pinholster “gloried” in his criminal history, could reasonably
have concluded that no amount of clever “after-the-fact”
assessment by habeas defense psychiatrists would have con-
vinced even a single juror to change his vote.
V
We affirm the district court’s denial of Pinholster’s request
for an evidentiary hearing on ineffective assistance of counsel
at the guilt phase and remand for dismissal of the petition. We
reverse the district court’s grant of habeas relief on his inef-
fective assistance of counsel claim at the penalty phase.
AFFIRMED in part, REVERSED in part, VACATED, and
REMANDED.
chose not to rely on Dr. Woods’s diagnosis in his federal habeas petition,
and that both Dr. Stalberg and Dr. Rudnick discredit this diagnosis, we
cannot believe the jury would have given it much weight.
PINHOLSTER v. AYERS 4779
Volume 2 of 2
4780 PINHOLSTER v. AYERS
KOZINSKI, Chief Judge, concurring:
I join Judge Tallman’s opinion in full, but I do have one
misgiving: I’m not sure whether Rompilla v. Beard, 545 U.S.
374, 393 (2005), still allows us to “reweigh the evidence in
aggravation against the totality of available mitigating evi-
dence,” Wiggins v. Smith, 539 U.S. 510, 534 (2003), when
counsel fails to uncover mitigating evidence. After all, coun-
sel failed to uncover mitigating evidence in Rompilla, and the
Supreme Court didn’t seem to address the aggravating evi-
dence in assessing prejudice. See Rompilla, 545 U.S. at 393.
Still, I have a hard time believing that Rompilla overruled a
recent case like Wiggins without bothering to say so. See id.
(quoting Wiggins, 539 U.S. at 538).
Rompilla devotes most of its analysis to describing coun-
sel’s deficiencies, not to assessing the prejudice to petitioner.
The Court found that counsel were ineffective in Rompilla
because they failed to adequately prepare for a penalty phase
hearing where the prosecution focused on petitioner’s prior
conviction, not because they failed to look for evidence of
childhood abuse. See Rompilla, 545 U.S. at 394-96
(O’Connor, J., concurring). As Justice O’Connor’s linchpin
concurrence made clear, counsel’s “trial-preparation” there
was deficient because they failed to obtain petitioner’s prior
conviction file in anticipation of a hearing where the prosecu-
tion would focus on that conviction. Id. at 395. Had defense
counsel properly prepared for the hearing by obtaining that
file, they would have stumbled across a cache of valuable evi-
PINHOLSTER v. AYERS 4781
dence of childhood abuse and mental defect. Id. at 390-91
(majority opinion). I read Rompilla for the unremarkable
proposition that counsel must take the steps a reasonable law-
yer would take in preparing for a hearing, not that counsel are
always ineffective for failing to uncover childhood mitigating
evidence.
I would therefore find (as an alternative ground for rever-
sal) that petitioner’s counsel weren’t deficient, because they
made a rational decision to pursue what was essentially a
“pity” mitigation case, rather than try to make out a case of
mental defect. Counsel faced a difficult situation: During the
guilt phase, petitioner portrayed himself as a career criminal
and boasted that he had committed hundreds of robberies
using a gun. And petitioner admitted to breaking into Kumar’s
house on the night of the murders. The jury had ample oppor-
tunity to evaluate petitioner’s demeanor. Counsel may well
have felt that petitioner’s articulate and coherent testimony
portrayed him as a clever liar, not as someone who is mentally
deficient. This conclusion would have been bolstered by Dr.
Stalberg, who evaluated petitioner’s mental state and found
him essentially normal. While Dr. Stalberg has since flipped
a couple of times in his conclusions, petitioner doesn’t rely on
him now, so we can’t say that Dr. Stalberg would ultimately
have come up with a helpful diagnosis, had petitioner’s law-
yers only given him more facts. Petitioner’s new lawyers did
eventually manage to find psychiatrists willing to say he is
mentally impaired, but trial counsel had no reason to believe
that they could swiftly find another doctor who would dis-
agree with their own expert’s diagnosis.
Under these circumstances, it was reasonable for them to
eschew a mental defect defense and pursue another mitigation
strategy. Ultimately, they focused on petitioner’s mother, who
testified about his head injuries, his disruptive behavior in
school, a psychologist’s recommendation that she commit him
to a mental hospital, his frequent stays at juvenile hall and his
epilepsy. The dissent chastises trial counsel for making “no
4782 PINHOLSTER v. AYERS
investigation into Pinholster’s background at all,” dissent at
4790, but I don’t see why talking to a defendant’s mother
doesn’t count as an investigation into his background. The
investigation may not have been as thorough as our dissenting
colleague would have preferred, but surely it’s wrong to say
that defense counsel conducted no investigation at all.
Petitioner’s mother was not the perfect mitigation witness,
but it’s not clear that petitioner had a perfect mitigation wit-
ness. Nor is perfection the standard; the question is whether,
applying the broad deference due to counsel under Strickland
v. Washington, 466 U.S. 668, 690-91 (1984), and the even
broader deference due to the California Supreme Court under
AEDPA, 28 U.S.C. § 2254(d), we can say that counsel’s deci-
sion is wholly unreasonable. This was not a case like Rom-
pilla or Williams v. Taylor, 529 U.S. 362, 395 (2000), where
review of a single file would have yielded a treasure trove of
mitigating evidence; finding all the evidence that petitioner’s
current lawyers have amassed after years of effort and expert-
shopping was simply beyond the time and resources available
to counsel at the time of trial.
Justice O’Connor’s concurrence in Rompilla reaffirmed the
“longstanding case-by-case approach to determining whether
an attorney’s performance was unconstitutionally deficient.”
Rompilla, 545 U.S. at 394 (O’Connor, J., concurring). Rom-
pilla involved a particular hearing regarding petitioner’s prior
conviction, and because counsel failed to adequately prepare
for that hearing by obtaining petitioner’s prior conviction file,
counsel were unable to adequately rebut the prior conviction
evidence. See id. at 394-96. This was a discrete, precisely
identifiable strategy—“a sure bet,” id. at 389 (majority
opinion)—that no competent counsel could overlook or
bypass. It is quite different from counsel’s debatable judg-
ment call here as to how best to present their mitigation case
—after petitioner portrayed himself as a career criminal at the
guilt phase and their mental expert found no basis for mitiga-
tion. Under a “case-by-case approach,” id. at 394 (O’Connor,
PINHOLSTER v. AYERS 4783
J., concurring), I can’t say that counsel’s decision to focus
solely on petitioner’s mother was unreasonable in these diffi-
cult circumstances. Nor was the state court unreasonable in
finding that petitioner’s constitutional rights were not vio-
lated.
FISHER, Circuit Judge, dissenting:
I respectfully dissent. This case is controlled by a trio of
recent Supreme Court decisions holding that petitioners’ Sixth
Amendment rights were violated when their lawyers failed to
present available mitigating evidence during the penalty
phases of their capital trials. See Rompilla v. Beard, 545 U.S.
374 (2005); Wiggins v. Smith, 539 U.S. 510 (2003); Williams
v. Taylor, 529 U.S. 362 (2000). The majority’s attempts to
distinguish these cases are not persuasive. Pinholster’s coun-
sel performed at least as deficiently as the lawyers in the
Court’s recent decisions; and Pinholster was prejudiced as a
result since the mitigating evidence that could have been
introduced on his behalf was at least as strong as that in Wil-
liams, Wiggins and Rompilla, and the aggravating evidence
against him was if anything weaker than that in Williams and
Rompilla. Binding Supreme Court precedent therefore com-
pels the conclusion that the state court’s summary denial of
Pinholster’s penalty phase ineffective assistance of counsel
(IAC) claim was objectively unreasonable. I would therefore
remand for the district court to issue a writ vacating Pinhol-
ster’s sentence, unless within a reasonable time set by the
court the State conducts a new penalty phase trial or imposes
a lesser sentence consistent with law.
I.
Before addressing the majority’s penalty phase analysis, I
pause to note my partial disagreement with its resolution of
Pinholster’s guilt phase IAC claim. I agree that the district
4784 PINHOLSTER v. AYERS
court did not err in denying Pinholster’s request for an eviden-
tiary hearing on that claim, but I would base that conclusion
solely on Pinholster’s failure to present a colorable claim of
prejudice. I cannot agree with the majority’s conclusion that
counsel’s decision to advise Pinholster to testify was a reason-
able tactical choice rather than deficient performance.1
Pinholster’s counsel advised him to testify to a defense that
was not only implausible and nonsensical, but also demon-
strably false. There was compelling evidence disproving
almost every facet of the defense’s case. First, contrary to Pin-
holster’s claim that he was a gun-toting robber and not a
knife-wielding burglar, several witnesses testified at trial that
they saw Pinholster carrying a large buck knife immediately
before and after the murders. Pinholster himself admitted to
carrying a knife on the night of the murders, and a knife
sheath was found in his pocket when he was arrested. Pinhol-
ster also testified, contrary to his claim that he was not a bur-
glar, that he had burglarized Kumar’s home just hours before
the murders took place. In contrast, Corona testified that he
and Pinholster went to Kumar’s house on the night of the
murders intending to rob Kumar, and that the intended rob-
bery turned into a burglary only when they found Kumar’s
home unoccupied. Corona — the State’s lead witness — thus
gave testimony that was more consistent with Pinholster’s
1
I also disagree with the majority’s conclusion that the California
Supreme Court reasonably concluded that Pinholster’s counsel was effec-
tive in failing to object to highly prejudicial evidence suggesting that Pin-
holster murdered two other individuals in Sun Valley. That court’s
conclusion was based entirely on the assumption that the evidence would
assist Pinholster’s defense. However, Pinholster’s defense was irrational
and should have never been put forth. The California Supreme Court also
failed to consider whether Pinholster could have received the same benefit
in terms of “candor,” People v. Pinholster, 824 P.2d 571, 604 (Cal. 1992),
by requesting redaction of the prior murder evidence from the Corona tape
and allowing the remainder to be played. Finally, as the prosecution never
produced evidence that two Latino men were killed in a shootout in Sun
Valley, it appears that Corona’s prior murder comments were simply
untrue.
PINHOLSTER v. AYERS 4785
defense than even Pinholster’s own testimony. The second
part of Pinholster’s alibi — that he was at Kumar’s residence
before and not after his visit to Tapar’s house — was also dis-
proved at trial. Contrary to Pinholster’s statement that he went
to Tapar’s residence by himself in order to tell her about Shot-
gun’s death, Tapar testified that she did not know Shotgun
and that Pinholster arrived in Corona’s car and appeared
intent on robbing Kumar. Even more damaging was Klemet-
ti’s testimony that he was at Kumar’s house at 9 p.m. and
found no signs of the burglary that Pinholster claimed to have
committed at 8 p.m.
On its own, counsel’s chosen defense was misguided. But
in light of counsel’s additional failure to investigate important
physical evidence, including the palm print and the boot print,
it amounted to deficient performance.2 Although a defendant’s
right to testify is his own and may not be overridden by coun-
sel, counsel nonetheless has the responsibility to indepen-
dently investigate and challenge a defendant’s implausible
story. See Phillips v. Woodford, 267 F.3d 966, 978-79 (9th
Cir. 2001) (stating that an attorney has an obligation to inves-
tigate defendant’s “ ‘incredibly lame’ ” alibi and “ ‘confront
the petitioner with the difficulties of his story’ ” (quoting
Johnson v. Baldwin, 114 F.3d 835, 838, 840 (9th Cir. 1997)).
2
The majority suggests that Pinholster suffered less prejudice from his
counsels’ failure to investigate the palm print, because counsel “merely
stated that he probably” would have advised Pinholster not to testify had
he known of evidence that the palm print found at the crime scene did not
match Pinholster’s palm. See Maj. Op. at 4753 & n.13. The question is not
what Pinholster’s ineffective counsel would have done but rather what
effective counsel would have done. Competent counsel would have cer-
tainly advised Pinholster not to testify. Nor do I agree that the existence
of only a “battle of the experts” with regard to the palm print evidence
somehow reduces the prejudice from counsel’s failure to investigate. See
id. at 4754-55. Evidence that creates a “battle of the experts” is precisely
the type of evidence that gives rise to reasonable doubt, and thus will typi-
cally support a finding of prejudice. In this case it is only because other
evidence overwhelmingly shows Pinholster’s guilt that the new palm print
evidence does not amount to prejudice.
4786 PINHOLSTER v. AYERS
Here, an investigation would have revealed that Pinholster’s
alibi was highly suspect, giving rise to counsel’s obligation to
advise Pinholster against testifying, because the jury would
likely conclude he was lying.3 See also id. at 979 (“ ‘The prej-
udice from failing to investigate the alibi and confer more
fully with petitioner is not avoided by the fact the petitioner
misinformed his attorney.’ ”) (quoting Johnson, 114 F.3d at
840). At the very least, counsel’s shortcoming in this regard
makes out a colorable claim of deficient performance for pur-
poses of obtaining an evidentiary hearing. See id. (noting that
the “colorable claim” standard is “far less onerous” than the
standard for granting the writ); see also Earp v. Ornoski, 431
F.3d 1158, 1170 (9th Cir. 2005) (describing the “colorable
claim” standard as “a low bar”).
Nonetheless, I agree that Pinholster has failed to present a
colorable claim of prejudice. There was overwhelming evi-
dence of Pinholster’s guilt, including: Art Corona’s eyewit-
ness testimony of the murders; Casey Corona’s testimony that
she saw Pinholster washing blood off his knife soon after the
murders while stating “[i]t had to be done the way it was
done”; Kempf’s testimony that Pinholster stated — while
clutching his buck knife — that he wanted to rob Kumar “one
way or the other”; Tapar’s testimony that Pinholster appeared
at her door with a knife just before the murders and that she
had the impression that Pinholster intended to steal from
Kumar; and evidence that one Gian Norelli had heard Pinhol-
ster brag about stabbing two people in Tarzana, where Kumar
lived. In light of this evidence, it is difficult to conceive of
any reasonable juror not voting to convict absent a convincing
defense theory. Pinholster has failed to articulate such a
3
The majority’s insistence that Pinholster’s counsel were not ineffective
because Pinholster was “eager to take the stand” is not illuminating. Maj.
Op. at 4753. Counsels’ deficient failure to investigate Pinholster’s alibi
defense, which in turn rendered them unable to provide competent advice
about whether he should testify, made it impossible for Pinholster to make
an informed decision as to whether he should exercise his constitutional
right to do so.
PINHOLSTER v. AYERS 4787
defense theory. Cf. Phillips, 267 F.3d at 980-81 (gauging
whether there was a colorable claim of prejudice by compar-
ing the deficient defense presented at trial to a proposed alter-
native defense). For this reason alone, I would hold that the
district court appropriately denied Pinholster an evidentiary
hearing on guilt phase ineffective assistance and, necessarily,
that the district court properly denied habeas relief with
regard to guilt.
Notwithstanding that counsel’s deficiencies were not preju-
dicial at the guilt phase, I would hold that they added consid-
erably to the prejudice Pinholster suffered at the penalty
phase. Counsel’s deficient performance at the guilt phase
resulted in the jury hearing Pinholster boast about committing
hundreds of robberies as well as other damaging evidence
suggesting that Pinholster murdered two men. The majority
itself makes evident that counsel’s failure to advise Pinholster
against taking the stand during the guilt phase was prejudicial
at the penalty phase, because it repeatedly invokes the “dam-
age Pinholster did to himself when he took the stand in the
guilt phase and testified to an unrepentant life of violent
crime.” See Maj. Op. at 4767; see also id. at 4772 (“[N]o
newly-minted expert theory to explain his behavior would
have made a difference in the face of what Pinholster said and
did.”); id. at 4774 (noting that any mitigating evidence would
have been offset when Pinholster “proudly boasted to the
jury” about his life of crime). The same jury that decided Pin-
holster’s guilt went on to decide his penalty, so the harmful
guilt phase evidence undoubtedly added to the other prejudi-
cial errors Pinholster’s counsel committed at the penalty
phase, to which I now turn.
II.
The majority holds that the California Supreme Court’s
summary denial of Pinholster’s penalty phase IAC claim was
not objectively unreasonable. I disagree. In my view, the
Supreme Court’s recent decisions in Williams, Wiggins and
4788 PINHOLSTER v. AYERS
Rompilla compel the conclusion that Pinholster’s counsel per-
formed deficiently and that Pinholster was prejudiced as a
result. The state court’s ruling to the contrary was indeed an
“unreasonable application of[ ] clearly established Federal
law, as determined by the Supreme Court of the United
States.” 28 U.S.C. § 2254(d)(1).
A.
The majority proceeds straight to the prejudice prong of the
IAC inquiry and does not contend that Pinholster’s trial coun-
sel performed competently. See Maj. Op. at 4765. This is a
wise decision, because counsel manifestly failed to satisfy the
professional standards for penalty phase representation. The
Supreme Court has held that “trial counsel [must] conduct a
thorough investigation of the defendant’s background.” Wil-
liams, 529 U.S. at 396 (citing the applicable American Bar
Association standards); see also Rompilla, 545 U.S. at 387 &
n.7; Wiggins, 539 U.S. at 524 (“[I]nvestigations into mitigat-
ing evidence should comprise efforts to discover all reason-
ably available mitigating evidence . . . .”) (internal quotation
marks omitted). Employing this approach, the Court found
deficient performance — despite AEDPA’s deferential stan-
dard of review — in Williams, Wiggins, and Rompilla. In Wil-
liams, counsel began to prepare for the penalty phase less than
a week before trial, presented only four witnesses and “failed
to conduct an investigation that would have uncovered exten-
sive records graphically describing Williams’ nightmarish
childhood.” 529 U.S. at 369, 395. In Wiggins, counsel pre-
sented no evidence of the petitioner’s life history or family
background, and failed to consult documentary evidence
beyond the petitioner’s presentence investigation (PSI) report
and Department of Social Services (DSS) records. See 539
U.S. at 516, 524-29. And in Rompilla, counsel presented five
witnesses during the penalty phase and reviewed the reports
of three mental health experts, but failed to examine the peti-
tioner’s prior conviction file even though the prosecution had
PINHOLSTER v. AYERS 4789
declared its intention to introduce that file’s contents at trial.
See 545 U.S. at 381-86.
Pinholster’s attorneys plainly performed even more defi-
ciently than the lawyers in Williams, Wiggins and Rompilla.
According to billing records, they spent only 6.5 hours pre-
paring for the penalty phase of Pinholster’s trial. One week
before the penalty phase began, counsel admitted that they
“had not prepared any evidence by way of mitigation,” and
then declined to request a continuance so that they could con-
duct a proper investigation, telling the court that they did not
think more time “would make a great deal of difference.”
They obtained no medical or psychological records, law
enforcement records or school reports for Pinholster or his
siblings, even though all of this documentary evidence was
readily available. They failed to provide the psychiatrist they
retained, Dr. Stalberg, with any of the materials he needed to
evaluate Pinholster properly. They interviewed and presented
just one witness, Pinholster’s mother, whose testimony at trial
was highly misleading and self-serving. They waived their
opening statement in the penalty phase. If the lawyers in Wil-
liams and Rompilla performed deficiently even though they
interviewed and presented multiple witnesses, and if counsel’s
performance in Wiggins was deficient despite the examination
of the petitioner’s PSI report and DSS records, then Pinhol-
ster’s attorneys cannot have satisfied the professional stan-
dards for penalty phase representation. It is not reasonable for
a lawyer to interview and present just one witness, to fail to
uncover abundant readily available mitigating evidence and to
spend less than a day preparing for a proceeding at which the
jury will decide whether the lawyer’s client should live or die.
Chief Judge Kozinski, concurring, suggests that this perfor-
mance was not deficient because counsel “made a rational
decision to pursue what was essentially a ‘pity’ mitigation
case, rather than trying to make out a case of mental defect.”
Concurring Op. at 4781. Relying almost exclusively on Jus-
tice O’Connor’s nonbinding concurrence in Rompilla, he
4790 PINHOLSTER v. AYERS
argues that Rompilla stands only for the “unremarkable prop-
osition” that counsel must take reasonable steps to prepare for
a hearing, not “that counsel are always ineffective for failing
to uncover childhood mitigating evidence.” Id. Even if he
were correct that Rompilla’s holding is so limited, however,
the same cannot be said for Williams, where the Court noted
that it was “barely disputed” that counsel were ineffective
where, as here, they “did not begin to prepare for [the penalty]
phase of the proceeding until a week before the trial” and
“failed to conduct an investigation that would have uncovered
extensive records graphically describing Williams’ nightmar-
ish childhood, not because of any strategic calculation but
because they incorrectly thought that state law barred access
to such records.” 529 U.S. at 395 (emphasis added).
In this case, counsel failed to conduct an investigation into
Pinholster’s background — not through any mistake of law,
but through apathy or negligence. This hardly seems to be a
more defensible strategic choice. Although in certain cases
counsel may have “sound reason to think it would have been
pointless to spend time and money on . . . additional investi-
gation,” and hence counsel’s failure to uncover additional
mitigating evidence would not be unreasonable, here there
was no investigation into Pinholster’s background at all,
beyond interviewing his mother. Rompilla, 545 U.S. at 383.
Where no meaningful investigation is even attempted, counsel
could hardly have developed any “sound reason” to think that
“additional investigation” would be fruitless. Id. (emphasis
added); see also id. at 389 (explaining that conducting further
investigation may not be necessary “when a lawyer truly has
reason to doubt” that further useful mitigating information
will be found) (emphasis added). Here counsel not only con-
ducted the very barest kind of investigation, they failed to
conduct any follow-up investigation into the limited mitigat-
ing evidence that they did learn from Pinholster’s mother,
such as evidence that Pinholster suffered from epilepsy. Thus
even where counsel developed “sound reason” to believe that
PINHOLSTER v. AYERS 4791
further investigation would yield fruitful evidence, counsel
utterly neglected that duty. Id.
Lastly, contrary to Chief Judge Kozinski’s suggestion,
counsel could not have made a “rational decision” to pursue
a mitigation strategy that relied solely on Pinholster’s moth-
er’s inaccurate testimony, when counsel failed to explore
meaningfully any other options. See Concurring Op. at 4781.
As the Court has explained, the question is “not whether
counsel should have presented a mitigation case,” but
“whether the investigation supporting counsel’s decision not
to introduce mitigating evidence of [the defendant’s] back-
ground was itself reasonable.” See Wiggins, 539 U.S. at 523.
Even if one could hypothesize a world in which relying on
Pinholster’s mother’s testimony and eschewing a mental
defect defense was a reasonable defense strategy, Pinholster’s
counsel could not have made such a strategic decision where
they “abandoned their investigation of petitioner’s back-
ground after having acquired only rudimentary knowledge of
his history from a narrow set of sources.” Id. at 524. Coun-
sel’s failure to investigate here was even more flagrant than
in Williams, Wiggins or Rompilla, and so was manifestly
unreasonable under clearly established Supreme Court law.
B.
1.
The majority holds that even if the performance of Pinhol-
ster’s counsel was deficient, it was not objectively unreason-
able for the state court to rule that Pinholster was not thereby
prejudiced. In reaching this conclusion, the majority mini-
mizes or ignores much of the mitigating evidence that Pinhol-
ster could have presented, overstates the value of what little
mitigating evidence was actually put before the jury, and
exaggerates the aggravating evidence that was introduced
against him. The majority thus imposes a much more stringent
test for prejudice than is required by Strickland v. Washing-
4792 PINHOLSTER v. AYERS
ton, 466 U.S. 668 (1984), and its progeny. While it is true that
Pinholster must demonstrate that there is a “reasonable proba-
bility that, but for counsel’s unprofessional errors, the result
of the proceeding would have been different,” the Court has
emphasized that a reasonable probability is less than the pre-
ponderance more-likely-than-not standard. See Strickland,
466 U.S. at 693-94; see also Rompilla, 545 U.S. at 393
(“[A]lthough we suppose it is possible that [the sentencer]
could have heard it all and still decided on the death penalty,
that is not the test.”). The gap between the evidence that was
presented and what could have been presented is more than
sufficient to “undermine confidence in the outcome” of the
proceeding. See Strickland, 466 U.S. at 694.
Beginning with the available mitigating evidence, the
majority ignores or downplays much of the probative infor-
mation that Pinholster could have presented at trial. First, the
“years of significant neglect and physical and emotional
abuse” that Pinholster experienced as a child were not, as the
majority implies, limited to the beatings by his stepfather and
grandmother. Maj. Op. at 4767-68. His birth father, Garland
Pinholster, abandoned the family when Pinholster was an
infant. Pinholster’s family was extremely poor, to the point
that the children would sometimes mix flour and water when
they were hungry. Neither Pinholster’s stepfather nor his
mother evinced any concern for Pinholster and his siblings.
Indeed, Pinholster’s mother often laughed when her children
behaved inappropriately, encouraged them to steal from
nearby rail cars and dressed the children in rags while buying
mink coats for herself.
Second, the lives of Pinholster’s siblings were worse than
the majority indicates. Pinholster’s half-sister, Tammy Brash-
ear, was convicted of prostitution and forcible sexual battery,
and became a ward of the juvenile court when she was 16.
Pinholster’s brother, Alvin Pinholster, was arrested for rob-
bery, rape, sodomy and other offenses, suffered from severe
depression and schizophrenia and eventually committed sui-
PINHOLSTER v. AYERS 4793
cide. Pinholster’s other brother, Terry Pinholster, suffered
from depression and became a user of PCP. And Pinholster’s
half-brother, Guy Pinholster, suffered from depression as well
as bipolar mood disorder, and was frequently beaten by his
father.
Third, Pinholster’s own medical history is more problem-
atic than the majority acknowledges. He suffered his first
head injury at age two when he was run over by his mother’s
car, resulting in a two-week hospital stay. He suffered a sec-
ond severe head injury a year later, during a car accident in
which Pinholster’s head hit the front windshield hard enough
to shatter the glass. According to Dr. Woods, these injuries at
the very least supported a post-traumatic diagnosis, and may
have accounted for the abnormal EEG that Pinholster
recorded as a child. Similarly, Dr. Olson and Dr. Vinogradov
stated that the injuries damaged Pinholster’s brain and caused
him to become more aggressive, while Dr. Stalberg described
the injuries as potentially “devastating” and linked them to
Pinholster’s epilepsy. That epilepsy was severe enough that
Pinholster was prescribed medication from age nine onward
and repeatedly suffered complex partial and grand mal sei-
zures. Different doctors also diagnosed Pinholster with bipo-
lar mood disorder (Dr. Woods) and personality change due to
childhood head trauma (Dr. Olson and Dr. Vinogradov),
while agreeing that he was epileptic. At age 11, Pinholster
spent more than four months in a mental institution.
Fourth, the majority does not even acknowledge that Pin-
holster had severe learning disabilities in school and was
socially isolated and maladjusted as a child. According to his
elementary school teacher, Lois Rainwater, Pinholster “had
no friends at all,” “seemed incapable of relating either to his
peers or to adults,” “seemed like a child who got no attention
or structure at home” and “fell through the cracks emotionally
and every other way.” Lastly, Pinholster had a history of
abusing alcohol, nicotine, marijuana, and heroin. He started
drinking alcohol, smoking, sniffing glue and paint and using
4794 PINHOLSTER v. AYERS
marijuana between the ages of 10 and 12; using Seconal and
downers between the ages of 13 and 14; and using heroin and
cocaine between the ages of 14 and 16. On the night of the
events in question, Pinholster was heavily intoxicated with
both alcohol and drugs.
Instead of discussing this substantial available mitigating
evidence that was not put before the jury, the majority instead
dwells on an interview Pinholster gave to a social worker in
1991, where he downplayed the extent of the abuse he suf-
fered as a child. See Maj. Op. at 4767-69. Although the
majority acknowledges that Pinholster’s stepfather “fre-
quently beat Pinholster with his fists, a belt, or anything else
available, including a two-by-four board,” the majority none-
theless focuses on Pinholster’s — the abused child’s — inter-
pretation of these events as nothing but “discipline” that
“benefitted” him and his brothers. Id. at 4767-68. Further,
while the majority goes on at length about the positive rela-
tionship Pinholster may have with his maternal grandfather,
Pinholster’s uncle and aunt testified that it was Pinholster’s
grandmother who would frequently “beat the hell out of” Pin-
holster from the time when he was a toddler. Every medical
professional who evaluated Pinholster concluded that he suf-
fered severe abuse and neglect in his childhood. Further, mul-
tiple doctors who evaluated Pinholster noted his tendency to
portray his own history inaccurately or minimize the serious-
ness of his childhood trauma so as to maintain a facade of per-
sonal control. The majority’s emphasis on Pinholster’s
rationalization of his mother’s neglect therefore seems rather
myopic if not disingenuous.
The majority also attempts to minimize the evidence of
Pinholster’s substantial neurological and emotional disorders
by emphasizing disagreements among the experts as to some
diagnoses, and stating that “the only constant with regards to
the evolving defense expert testimony has been Dr. Stalberg’s
diagnosis of Antisocial Personality Disorder and the experts’
agreement that it is reasonably probable that Pinholster suf-
PINHOLSTER v. AYERS 4795
fered from epilepsy.” Maj. Op. at 4772. It is unclear why the
majority dismisses the importance of these diagnoses, which
are clearly sufficient of themselves to indicate an organic
basis for some of Pinholster’s behavior. Further, Dr. Woods
concluded that Pinholster suffered from bipolar mood disor-
der and Dr. Olson and Dr. Vinogradov concluded that Pinhol-
ster suffered from brain damage attributable to childhood
trauma, which may have explained in part his aggressive
behavior. Even if not all experts concurred on the exact set of
diagnoses, numerous doctors agreed that Pinholster suffered
from psychological disorders that may have influenced his
criminal acts. Further, this medical testimony might have also
affected the jury’s interpretation of Pinholster’s guilt phase
testimony, again by suggesting an organic basis for his ten-
dency to exaggerate his past. Yet none of this medical evi-
dence or testimony was put before the jury to evaluate, and
the majority acknowledges that it has no reason to doubt the
credibility of these medical professionals.
The majority also gives too much credit to the penalty
phase testimony of Pinholster’s mother, Burnice Brashear.
While Brashear’s testimony did include some “mitigating evi-
dence,” see id. at 4769 — as was inevitable given Pinholster’s
horrific childhood — the overall impression she conveyed of
Pinholster’s upbringing was not just incomplete but actually
untrue. Contrary to her statements in court, Pinholster’s sib-
lings were not “[b]asically very good children,” and they got
into much more than “small trouble” with drugs, alcohol and
the law. The beatings that Pinholster endured at the hands of
his stepfather were quite certainly child abuse, not mere “dis-
cipline” or “arguments and hassles,” as Brashear also charac-
terized them. Pinholster and his siblings did not have
“everything normally materialwise that most people have,”
“decent clothes” and “a nice house,” but instead suffered from
malnutrition, lack of clothing and neglect. Pinholster’s epi-
lepsy was first diagnosed at age nine, not after he was beaten
at age 18. And Pinholster did not do “much better” at school
after being diagnosed with “perceptive vision” and moved to
4796 PINHOLSTER v. AYERS
a different classroom; rather, his academic performance con-
tinued to decline, and by his teenage years he was being shuf-
fled from one institutional setting to another. Instead of
minimizing the damage done by Brashear’s testimony, I
would simply adhere to the conclusions of Dr. Stalberg and
the district court. Dr. Stalberg described Brashear’s state-
ments as “profoundly misleading,” while the district court
opined that “[t]he available evidence ‘was far different from
the unfocused snapshot’ presented by Pinholster’s attorneys at
trial.” Hence the majority attributes false weight to the jury’s
supposedly “obvious rejection of such mitigating circum-
stances.” Id. at 4769. The jury was not presented with an
accurate picture of the mitigating circumstances, so it hardly
could have rejected them.
Finally, the majority not only overvalues Brashear’s testi-
mony, but also ignores the way in which its deficiencies were
turned against Pinholster by the prosecution. During the pen-
alty phase closing arguments, the State was able to claim, on
the basis of Brashear’s inaccurate statements, that Pinholster
had resorted to crime and violence even though he “came
from a good home,” “was not a deprived child” and “had
many things going for him, probably more than many chil-
dren.” The State also was able to discount Brashear’s testi-
mony about Pinholster’s epilepsy — and indeed to accuse her
of lying about it — by pointing to the complete lack of cor-
roborating evidence as well as her own ignorance about the
condition. On cross-examination, Brashear stated that she did
not know what type of epilepsy Pinholster had, that she was
unsure when she found out about the condition and that on
one occasion she had taken Pinholster to a doctor and, as the
prosecutor put it, “lo and behold, just like that the doctor told
them he had epilepsy.” Brashear’s flawed testimony, in com-
bination with Pinholster’s counsel’s failure to present any
other evidence in mitigation, thus made possible the State’s
devastating conclusion: “What did the defendant proffer in
this particular case as to ask you to come back with anything
less than death? . . . Not one person except his mother.” Cf.
PINHOLSTER v. AYERS 4797
Karis v. Calderon, 283 F.3d 1117, 1139 (9th Cir. 2002) (find-
ing prejudice in part because “[t]he defense counsel’s por-
trayal of [petitioner] as intelligent without any indication of
his violent and abusive childhood afforded the prosecution a
very effective argument,” and enabled “[t]he prosecutor [to]
emphasize[ ] the fact that [petitioner] was ‘bright’ and ‘cun-
ning’ and that he ‘well knew exactly what he was doing’ ”).
2.
On the other side of the ledger, the majority describes the
aggravating evidence that was introduced against Pinholster
as “overwhelming.” Maj. Op. at 4766, 4773. This evidence
must not be understated, and Pinholster is obviously not a
sympathetic person, but deeming the aggravating evidence
“overwhelming” does not make it so. First, the murders them-
selves were not as heinous as many of the other terrible
crimes that we have considered in capital cases. Pinholster did
not intend to kill anyone when he went to Kumar’s house, and
indeed was surprised when the housesitters, Johnson and
Beckett, arrived at the scene. Thus to the extent there was any
premeditation, it formed immediately before the instant
offenses took place, when a drunk, high and emotionally dis-
traught Pinholster and his two codefendants, Corona and
Brown, suddenly discovered that they were not alone in
Kumar’s house. Moreover, Brown stabbed Johnson as well
and said that he had “ ‘buried his knife to the hilt’ ” in him,
meaning that it is uncertain whether Pinholster was responsi-
ble for Johnson’s fatal wounds. See Pinholster, 824 P.2d at
582-84.
We have previously described a very similar crime as “in
essence a robbery gone wrong.” Belmontes v. Brown, 414
F.3d 1094, 1139 (9th Cir. 2005), rev’d on other grounds,
Ayers v. Belmontes, 127 S. Ct. 469 (2006). We commented in
Belmontes that the murder, which involved the bludgeoning
of a single victim with an iron bar during a robbery, “was not
pre-planned, nor did it involve kidnapping, rape, torture . . .
4798 PINHOLSTER v. AYERS
or any of the other especially heinous elements that usually
are present when a jury votes for the ultimate penalty.” Id.;
see also Summerlin v. Schriro, 427 F.3d 623, 641 (9th Cir.
2005) (en banc) (noting that “instantaneous premeditation” is
“not definitive for the purpose of establishing the especially
heinous, cruel, or depraved aggravator”). Although Pinhol-
ster’s crime was surely vicious, the facts of the crime were
unfortunately far from extreme in either their depravity or
cruelty. See, e.g., Hovey v. Ayers, 458 F.3d 892, 898 (9th Cir.
2006) (defendant abducted a young girl as she was walking
home from school, sexually molested her and abandoned her
on the side of the road with six skull fractures and 14 lacera-
tion wounds); Fields v. Brown, 431 F.3d 1186, 1202 (9th Cir.
2005) (defendant was responsible for a “ ‘one-man crime
wave’ ” during which he committed “a murder and at least
three kidnapings, rapes, and robberies within a three-week
period of time”).
Second, the aggravating evidence introduced against Pin-
holster that pertained to incidents other than the murders
themselves was also less severe than that in many of our pre-
vious cases. As the majority notes, Pinholster denied murder-
ing Johnson and Beckett, referred to himself as a
“professional robber,” testified that he often scratched peo-
ple’s property, was convicted of kidnaping and received sev-
eral disciplinary infractions while arrested and incarcerated.
See Maj. Op. at 4774-77 & n.29. As presented to the jury,
however, Pinholster’s criminal record was not very extensive,
as it did not include any convictions other than the kidnaping
count. Moreover, although the majority believes this aggra-
vating evidence was of overwhelming importance, the prose-
cutor did not actually refer to Pinholster’s denial of his
involvement in the murders, his prior robberies or his pen-
chant for scratching property at any point during the penalty
phase. Considering analogous aggravating evidence in Bel-
montes, we concluded that it was “not strong,” but was “mini-
mal” and “weak[ ].” 414 F.3d at 1106, 1139-40. The relevant
facts in that case consisted of Belmontes’ “previous[ ] incarc-
PINHOLSTER v. AYERS 4799
erat[ation] in the youth facility for being an accessory after
the fact to voluntary manslaughter, one domestic violence
incident, and two occurrences relating to possession, or possi-
ble possession, of a gun.” Id. at 1139. Similarly, we noted that
the prosecution presented “considerable” aggravating evi-
dence in Boyde v. Brown, 404 F.3d 1159, 1179 (9th Cir.
2005). The incidents introduced in that case included the peti-
tioner’s assaults on former classmates, his throwing bricks at
a van, his theft of his stepfather’s gun, his prior robberies, his
drug use while incarcerated and his plot to escape from
prison. See id.
The majority dismisses the relevance of any comparisons
between Pinholster’s murders and other crimes, noting that
under California law, the jury reviews only the facts in front
of it and does not conduct a proportionality review by com-
paring the crime to others. See Maj. Op. at 4775-76 n.30. All
jurors, however, consider a case against a background of
social understandings and shared experiences about crime and
criminals, which in turn influences their decision as to
whether someone has committed an offense so heinous as to
warrant the ultimate penalty. Indeed, the majority’s emphasis
on the lack of proportionality analysis in California law
underscores the prejudice that resulted from counsels’ failure
to put forth the reams of the readily available mitigating evi-
dence in Pinholster’s case. Because the jurors could weigh
only the aggravating and mitigating evidence presented to
them, the omissions of and outright misrepresentations about
mitigating evidence on Pinholster’s side of the scale plainly
left the jury with little to tip the balance toward life imprison-
ment over execution.
Finally, as discussed above, some of the aggravating evi-
dence that the majority cites would never have been intro-
duced had Pinholster’s counsel not performed deficiently
during the guilt phase of the trial. In particular, Pinholster’s
references to his own past robberies — probably the most
damning testimony the jury heard, next to the details of the
4800 PINHOLSTER v. AYERS
actual murders — and his statements about the swastikas and
signatures he frequently scratched into other people’s prop-
erty would never have been admitted. See Maj. Op. at 4776-
77. Competent representation during the trial’s first stage
would thus have further weakened the prosecution’s argument
during the penalty phase that Pinholster deserved the ultimate
penalty.
3.
The mitigating evidence that Pinholster could have intro-
duced was therefore substantially more compelling than the
majority acknowledges, whereas the aggravating evidence
was somewhat weaker. If the evidence on both sides of the
ledger is fairly characterized, and evaluated in light of the
Supreme Court’s recent decisions in Williams, Wiggins and
Rompilla, it is clear that the California Supreme Court’s
denial of Pinholster’s penalty phase IAC claim was objec-
tively unreasonable.
The available mitigating evidence in Williams was that the
petitioner had been beaten by his father, that his parents had
been imprisoned for criminal neglect, that he had been placed
under the custody of the social services bureau for two years,
that he was borderline mentally retarded, that he had helped
crack a prison drug ring and that he had been a peaceful pris-
oner. See 529 U.S. at 395-96. The aggravating evidence, on
the other hand, was that the petitioner had been convicted of
armed robbery, burglary and grand larceny prior to the murder
for which he was sentenced to death, and that after the murder
he perpetrated two auto thefts and two separate assaults on
elderly victims. The jury also learned that he was convicted
for setting a fire while in jail. See id. at 368-69. In Wiggins,
the available mitigating evidence was that the petitioner expe-
rienced severe privation and abuse while in his mother’s cus-
tody, that he was abused, sexually molested and raped while
in foster care, that he was homeless for a period and that his
mental capacity was diminished. See 539 U.S. at 535. The
PINHOLSTER v. AYERS 4801
only aggravating evidence was that the petitioner had
drowned his elderly victim and ransacked her apartment; he
had no record of violent conduct before or after the murder.
See id. at 514, 537. Finally, the available mitigating evidence
in Rompilla was that the petitioner grew up in a slum, that he
was abused by his father, that his parents were alcoholics, that
he consumed too much alcohol, that he was mentally retarded
and that he suffered from organic brain damage. See 545 U.S.
at 390-93. The aggravating evidence consisted of the petition-
er’s prior convictions for rape, burglary and theft, as well as
his use of torture in committing the murder for which he was
sentenced to death. See id. at 378; Rompilla v. Horn, 355 F.3d
233, 237 (3d Cir. 2004), overruled by 545 U.S. 374 (2005).
Although the majority asserts that Pinholster’s available
mitigating evidence “falls short when compared to the miti-
gating evidence available in Williams, Wiggins, and Rompil-
la,” that evidence cannot be meaningfully distinguished from
these cases. Maj. Op. at 4773. Pinholster, Williams, Wiggins
and Rompilla were all badly beaten by their parents. All four
men grew up in extreme poverty with little to no parental
attention. All four spent time in foster homes and other insti-
tutional settings as children. Pinholster and Rompilla suffered
from organic brain damage, while Williams and Wiggins
were mentally retarded or close to it. And both Pinholster and
Rompilla were addicted to alcohol.
Rather than heed these obvious similarities, the majority
emphasizes the differences that inevitably exist between one
person’s life and another’s. For instance, Williams, unlike
Pinholster, behaved well while in prison and Wiggins, also
unlike Pinholster, was sexually molested and spent time
homeless. Maj. Op. at 4773. These minor factual contrasts
cannot be legally dispositive, particularly given that several
aspects of Pinholster’s available mitigating evidence have no
parallel in Williams, Wiggins and Rompilla. Pinholster’s
mother, for example, did not just neglect him but rather
actively encouraged his illegal activities. His siblings had
4802 PINHOLSTER v. AYERS
serious problems with alcohol, drugs, mental health and the
law. Pinholster himself is a lifelong epileptic prone to severe
seizures. He was socially isolated and maladjusted as a child.
His substance abuse issues began at an early age and involved
an array of illegal drugs. And Pinholster’s counsel did not just
present incomplete information about him in mitigation, but
rather allowed his mother to give inaccurate testimony that
was then used against him by the prosecution. I do not neces-
sarily contend that these differences make Pinholster’s avail-
able mitigating evidence more powerful than that in Williams,
Wiggins and Rompilla. They do, however, more than offset
the supposedly meaningful contrasts that the majority identi-
fies.
On the aggravating evidence side, I agree with the majority
that Wiggins can be distinguished because the petitioner in
that case, unlike Pinholster, “[did] not have a record of violent
conduct that could have been introduced by the State to offset
th[e] powerful mitigating narrative.” 539 U.S. at 537; see
Maj. Op. at 4773-74. However, the aggravating evidence
against Pinholster was not dispositively stronger than that in
Williams and Rompilla. It is true, as the majority asserts, that
Pinholster admitted to committing many past robberies — in
guilt phase testimony that would never have taken place had
he been competently represented, and that the prosecutor
never mentioned during the penalty phase — and that he was
an unusually problematic inmate. See Maj. Op. at 4774-76 &
n.29. But Williams also committed theft-related offenses both
before and after his homicide, and, unlike Pinholster, he was
actually convicted of some of those crimes (namely his 1976
armed robbery and his 1982 burglary and grand larceny).
There is also no analogue in Pinholster’s criminal history to
Williams’ “two separate violent assaults on elderly victims
perpetrated after the [relevant] murder,” his proclivity for
starting fires or the testimony by two expert witnesses that he
would “pose a serious continuing threat to society.” 529 U.S.
at 368-69. Rompilla, similarly, was actually convicted of bur-
glary and theft. He was also convicted of rape — a more seri-
PINHOLSTER v. AYERS 4803
ous crime than any Pinholster committed before the instant
murders — and tortured his homicide victim before finally
putting him out of his misery. See 545 U.S. at 378; 355 F.3d
at 237. Again, I do not necessarily argue that these differences
make the aggravating evidence against Pinholster weaker than
that in Williams and Rompilla. But I cannot accept the majori-
ty’s conclusion that the aggravating evidence against Pinhol-
ster was dispositively worse.
Though the majority does not address them, it is also clear
that none of the Supreme Court decisions that have upheld
state court denials of petitioners’ penalty phase IAC claims
are as relevant here as Williams, Wiggins and Rompilla. In
Strickland, “[t]he evidence that respondent says his trial coun-
sel should have offered at the sentencing hearing would
barely have altered the sentencing profile presented to the
sentencing judge,” and the aggravating factors were “over-
whelming.” 466 U.S. at 699-700. The balance between avail-
able mitigating evidence and aggravating evidence was thus
starkly different from Williams, Wiggins, Rompilla and the
case before us. In Burger v. Kemp, 483 U.S. 776 (1987), and
Bell v. Cone, 535 U.S. 685 (2002), the Court never reached
the prejudice prong of the IAC inquiry because it concluded
that the petitioners’ lawyers had not performed deficiently.
The aggravating evidence in Burger and Bell was also more
severe than in this case, while the available mitigating evi-
dence was less powerful. See Bell, 535 U.S. at 699; Burger,
483 U.S. at 789-94. Woodford v. Visciotti, 537 U.S. 19
(2002), is inapposite for the same reason: The aggravating
evidence, which included the knifing of one man and the stab-
bing of a pregnant woman, was “devastating” while the avail-
able mitigating evidence was not particularly potent. Id. at 26.
Schriro v. Landrigan, 127 S. Ct. 1933 (2007), finally, dealt
primarily with the extraneous issue of a petitioner instructing
his lawyer not to mount a case in mitigation. The Court also
explicitly labeled the available mitigating evidence in that
case as “weak,” and noted the petitioner’s “exceedingly vio-
lent past” of murders, kidnapings and prison escapes. Id. at
4804 PINHOLSTER v. AYERS
1944. Accordingly, nothing in the Supreme Court’s other pen-
alty phase IAC decisions undermines my conclusion that we
are bound here by Williams, Wiggins and Rompilla — and
that those cases require us to hold that the California Supreme
Court’s denial of Pinholster’s penalty phase IAC claim was
objectively unreasonable.
III.
The California Supreme Court’s summary denial of Pinhol-
ster’s penalty phase IAC claim was an objectively unreason-
able application of Strickland. The performance of
Pinholster’s counsel at the penalty phase was plainly defi-
cient; and the available mitigating evidence in his favor and
the aggravating evidence against him — when they are fairly
characterized — render this case materially indistinguishable
for purposes of prejudice from Williams and Rompilla. I
therefore dissent. I would remand for the district court to issue
a writ vacating Pinholster’s sentence, unless within a reason-
able time set by the court the State conducts a new penalty
phase trial or imposes a lesser sentence consistent with law.
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35 N.Y.2d 746 (1974)
Leroy Anderson, Respondent,
v.
New York Telephone Company, Appellant.
Court of Appeals of the State of New York.
Argued September 11, 1974.
Decided October 23, 1974.
George E. Ashley, Charles Ryan Desmond, Martin F. Idzik and John C. Spitzmiller for appellant.
A. E. Schulgasser for respondent.
Concur: Chief Judge BREITEL and Judges GABRIELLI, JONES, WACHTLER, RABIN and STEVENS. Judge GABRIELLI concurs in the following opinion in which Judge WACHTLER concurs. Taking no part: Judge JASEN.
*748Order reversed, without costs, on the dissenting opinion by Mr. Justice G. ROBERT WITMER at the Appellate Division and the judgment of Supreme Court, Erie County, reinstated.
GABRIELLI, J. (concurring).
We concur in the result reinstating the judgment dismissing the complaints; but since it is abundantly clear that defendant did not "publish" the defamatory material complained of, we do not deem it necessary or prudent to rest our decision on grounds broader than that. In other words, if as we believe, there was no publication by defendant, then there is no need even to consider the further privilege and constitutional points also relied upon by the dissent below.
The facts may be quickly summarized. Plaintiff had been appointed Presiding Bishop of the Church of God in Christ in Western New York with 65 churches in his jurisdiction. In 1969 Donald L. Jackson, president of the Donald L. Jackson Foundation and sponsor of the organization "Let Freedom Ring", broadcast every week over station WWOL in Buffalo. During the course of these programs Jackson urged his listeners to call two telephone numbers. A person calling these numbers would hear accusations against plaintiff involving him in all sorts of scurrilous activities not the least of which was illegitimately fathering children by women and girls in the church.
Jackson's telephones were attached to equipment leased to Jackson by defendant. This equipment contained the recorded messages which would automatically play upon activation of the telephone by a caller.
When plaintiff heard the recording he went to the Department of Social Services in Erie County and received from authorities a letter stating that there was no record there of plaintiff as a putative father. Plaintiff thereupon went to defendant's local office in Buffalo and conferred with the person *749 in charge who, after dialing Jackson's number and listening to the message, referred plaintiff to the area manager. Upon hearing the recorded message and reading the letter from the Department of Social Services, the area manager indicated he would attempt to get Jackson to terminate the recordings. The messages continued, however, and Jackson added further allegations against plaintiff in subsequent messages.
Plaintiff, unable to secure an injunction and unsuccessful after conferences with defendant's attorneys, commenced this action in defamation. Defendant moved pursuant to CPLR 3211 (subd. [a], par. 7) for dismissal of the complaint on the ground the pleading failed to state a cause of action. Special Term, dealing only with the question of qualified privilege, ruled that a fact question existed. The case then went to trial at the conclusion of which the court granted judgment for defendant specifically on the ground "[t]hat I find that the New York Telephone Company did not publish this scandalous material."
The majority at the Appellate Division, in reversing and ordering a new trial, discussed the point involving whether defendant had a qualified privilege to allow the messages to continue after notice of their content and concluded that defendant's nonaction amounted to reckless disregard of whether the messages were false or not so as to overcome any privilege that might otherwise be enjoyed. The dissenters could not locate the duty thus imposed by the majority and further found that any action taken by defendant summarily to stop the messages would violate the subscriber's First and Fourteenth Amendment protections in that service would be curtailed in violation of the subscriber's right to a hearing and review. Initially, the dissent takes up the point concerning publication and states that, unlike the telegraph company, the employees of which actively aid in the transmission of messages (Klein v. Western Union Tel. Co., 257 App. Div. 336, 339-340, appeal withdrawn 281 N.Y. 831; Smith, Liability of a Telegraph Company for Transmitting a Defamatory Message, 20 Col. L. Rev. 30, 33-50), the telephone company's role is merely passive and no different from any company which leases equipment to another for the latter's use (42 A D 2d 151, 162-163).[1]
*750We agree with this point and because we do, we find it unnecessary to deal with the other points taken up in the dissent. In order to be deemed to have published a libel a defendant must have had a direct hand in disseminating the material whether authored by another, or not. We would limit to media of communications involving the editorial or at least participatory function (newspapers, magazines, radio, television and telegraph) the dictum, "He who furnishes the means of convenient circulation, knowing, or having reasonable cause to believe, that it is to be used for that purpose, if it is in fact so used, is guilty of aiding in the publication and becomes the instrument of the libeler" (34 N. Y. Jur. Libel and Slander, § 61; Youmans v. Smith, 153 N.Y. 214). The telephone company is not part of the "media" which puts forth information after processing it in one way or another.[2] The telephone company is a public utility which is bound to make its equipment available to the public for any legal use to which it can be put (see Matter of Shillitani v. Valentine, 296 N.Y. 161; Ann., Right Or Duty To Refuse Telephone, Telegraph, Or Other Wire Service In Aid of Illegal Gambling Operations, 30 ALR 3d 1143) and is privileged under its tariff restrictions to terminate service for cause only in certain prescribed circumstances none of which encompass the subscriber's dissemination of defamatory messages.[3]
*751It could not be said, for example, that International Business Machines, Inc., even if it had notice, would be liable were one of its leased typewriters used to publish a libel. Neither would it be said that the Xerox Corporation, even if it had notice, could be held responsible were one of its leased photocopy machines used to multiply a libel many times. Yet plaintiff argues that here the telephone company should be liable because equipment leased from it by the author of the libel was used to spread the libel. The telephone company, if anything, would have even less control over the use of its leased equipment than would those companies in the hypotheses just above noted. The latter are not public utilities and are ungoverned by the restrictions which devolve upon defendant; yet, as we have noted, it would not be seriously argued that they would be responsible for publication of a libel simply because their machines were used.
In sum, Jackson published the libel. That he used equipment leased from defendant does not render defendant a copublisher whether it had notice of the use to which the equipment was being put or not.
Order reversed, etc.
NOTES
[1] As of this writing only one law review article discussing the decision below has come to our attention. (Note, Must the Telephone Company Censor to Avoid Liability For Libel: Anderson v. New York Telephone Company, 38 Albany L. Rev. 317.) The author renders the opinion that there was here no publication and compares the telephone company to the United States Postal Service which would not be held liable as a publisher of the letters it delivers (pp. 322-323). This comparison suffers because it is unlikely the Postal Service would have notice of the contents of such letters. The two message transmission systems are alike, however, in that both are in no way involved in preparing or processing the message itself.
[2] See the discussion in Harper and James (The Law of Torts, vol. 1, § 5.18, pp. 404-406) concerning the predicates for liability of the telegraph company, none of which apply with respect to the telephone company the employees of which perform no active or affirmative function in the preparation or transfer of the message.
[3] In Matter of Figari v. New York Tel. Co. (32 A D 2d 434) it was even held that the telephone company could not require a lessee of its recording equipment to state his name and address on the recording. Such a restriction on the free use of the equipment violates free speech protections said the court and that the Public Service Commission should not have approved such a restriction since the State has no interest in uncovering authors of defamatory matter so as to aid potential plaintiffs.
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9 Kan. App. 2d 305 (1984)
677 P.2d 573
RURAL WATER DISTRICT No. 6 BUTLER COUNTY, KANSAS, Appellee,
v.
ZIEGLER CORPORATION, Appellant.
No. 55,055
Court of Appeals of Kansas.
Opinion filed February 9, 1984.
R.W. Miller and Kevin E. Glynn, of Miller and Glynn, P.C., of Kansas City, Missouri, and Michael G. Coash, of Bond, Bond & Coash, of El Dorado, for appellant.
Ray L. Connell, of Connell & Connell, of El Dorado, for appellee.
Before REES, P.J., MEYER, J., and RICHARD W. WAHL, District Judge assigned.
Petition for review denied 235 Kan. 1042.
WAHL, J.:
This is an appeal by the defendant, Ziegler Corporation, from the district court's confirmation of an arbitration award in favor of the plaintiff, Rural Water District No. 6, of Butler County, Kansas.
The record on appeal in this case is inadequate for a proper statement of facts. It does not contain, among other things, pertinent provisions of the contract between the parties, the rules governing the arbitrators or the documentation of issues presented to the arbitrators. A copy of the contract and many of the facts set forth below have been taken from the parties' briefs on appeal.
On or about April 24, 1980, Ziegler Corporation (Ziegler) entered into a contract with Rural Water District No. 6, Butler County, Kansas (District), under which Ziegler agreed to construct a water supply system for the District. The contract contained a liquidated damage clause which provided that if the project was not completed by a specified date, the District would be entitled to liquidated damages in the amount of $250 for each calendar day past the agreed completion date. The contract also provided that the District could terminate Ziegler's services if *307 Ziegler "should be intolerably negligent and slow in [its] prosecution of the work, or if [it] repeatedly fails to supply sufficient skilled workmen."
On March 15, 1982, the District served a written demand upon Ziegler to terminate its work on the project. On April 2, 1982, the District filed a petition in the district court seeking a restraining order removing Ziegler from the project. Ziegler responded by filing motions to stay the proceedings and to compel arbitration. The motion to compel arbitration was based upon a provision in the contract which provided that the parties would submit all disputes to arbitration. The trial court sustained Ziegler's motions and the case proceeded to arbitration.
In its demand for arbitration, Ziegler sought additional costs for work performed on the project. The District sought the liquidated damages provided for in the contract in addition to other expenses. The District's demand to terminate Ziegler was also presented.
The arbitration proceedings occurred on June 17, 18, and July 8, 1982. The arbitrators' award denied Ziegler's claims on all counts and terminated Ziegler's services on the project effective July 17, 1982. It also awarded the District liquidated damages, and it is primarily that portion of the award which is in dispute in this appeal. The arbitrators found the $250 per day damage figure to be reasonable and commensurate with the actual damages sustained by the District. They also found that due to "drought conditions beyond Ziegler's control," water was unavailable to Ziegler for 274 days, and, consequently, the completion date for determining liquidated damages was extended to March 21, 1982. The District was then awarded liquidated damages for the period between March 21, 1982, and July 17, 1982, in the amount of $29,250. The award also provided that "[t]his Award does not contain liquidated damages which may be assessable against Ziegler for the period from July 17, 1982, until completion of the contract work, since the amount thereof would only be ascertainable when the work is completed."
The District filed a motion to confirm the arbitration award and Ziegler moved to vacate the award. The district court denied the motion to vacate and sustained the motion to confirm the award. The court confirmed the $29,250 liquidated damage award and, with reference to the liquidated damages to be *308 awarded after July 17, 1982, provided that "this Court shall retain jurisdiction concerning the amount of liquidated damages to be assessed." Ziegler timely perfected an appeal from the order of the district court confirming the arbitration award. We affirm.
In determining the questions raised in the present case, it is helpful to review some general comments made by Justice, now Chief Justice, Schroeder in Coleman v. Local No. 570, 181 Kan. 969, 975-976, 317 P.2d 831 (1957):
"Arbitration awards, which courts regard as valid and suitable for judicial enforcement, are neither contract nor judgment but partake of the nature of both. The award partakes of the nature of a contract because it is the result of a contract, the submission agreement, whereby the parties agree to comply with the award. It differs from a contract in that it is the act of the arbitrators, not of the parties themselves. It partakes of the nature of a judgment in that, if it is valid, it is binding upon them though imposed by an outside source.
"The dual nature of the award serves to explain the limited grounds on which it may be successfully impeached. In general it may be said that the ground urged must be good, both for attack upon a judgment and for relief against the terms of a contract. But, certain grounds that would be sufficient in an appeal from a judgment would not be grounds for impeaching an award, for the reason that the contractual element is present in the award. Thus, the fact that the arbitrator made erroneous rulings during the hearing, or reached erroneous findings of fact from the evidence, is no ground for setting aside the award, because the parties have agreed that he should be the judge of the facts. Even his erroneous view of the law would be binding, for the parties have agreed to accept his view of the law. Were it otherwise in either of these cases, arbitration would fail of its chief purpose; instead of being a substitute for litigation, it would merely be the beginning of litigation. Error of law renders the award void only when it would require the parties to commit a crime or otherwise to violate a positive mandate of the law....
"Judicial intervention is ill-suited to the special characteristics of the arbitration process in labor disputes."
On pages 980-81, the court said:
"The parties having agreed to be bound by a submission to arbitration under the terms of the Agreement are in no position to complain of the award. The general rule is that errors of law and fact, or an erroneous decision of matters submitted to the judgment of the arbitrators, are insufficient to invalidate an award fairly and honestly made. Nothing in the award relative to the merits of the controversy as submitted, even though incorrectly decided, is ground for setting aside an award in the absence of fraud, misconduct or other valid objections. [Citations omitted.]"
The court continued on pages 981-982:
"But an award governing future conduct of parties to an arbitration cannot be set *309 forth as specifically as an award for money due on an open account. If an award is so written that by giving the words used their ordinary meaning, including that which may be fairly inferred from language used, there is a reasonable certainty of a common intent. Awards are not required to be written with such critical nicety that a forced construction cannot discover a doubt. Every presumption is in favor of the validity of an award, and it will be construed so as to put one consistent sense on all its terms. [Citations omitted.]"
The Kansas Uniform Arbitration Act is found at K.S.A. 5-401 et seq. An appeal from an order confirming an arbitration award is permitted by K.S.A. 5-418(a)(3), and K.S.A. 5-418(b) provides that "[t]he appeal shall be taken in the manner and to the same extent as from orders or judgments in a civil action." Thus, the Act does not impose restrictions on this court's power to review the district court's decision, but it does restrict the district court's review of the arbitrator's decision. K.S.A. 5-412(a) sets forth the limited circumstances under which an arbitration award shall be vacated:
"(a) Upon application of a party, the court shall vacate an award where:
"(1) The award was procured by corruption, fraud or other undue means;
"(2) There was evident partiality by an arbitrator appointed as a neutral or corruption in any of the arbitrators or misconduct prejudicing the rights of any party;
"(3) The arbitrators exceeded their powers;
"(4) The arbitrators refused to postpone the hearing upon sufficient cause being shown therefor or refused to hear evidence material to the controversy or otherwise so conducted the hearing, contrary to the provisions of K.S.A. 5-405, as to prejudice substantially the rights of a party; or
"(5) There was no arbitration agreement and the issue was not adversely determined in proceedings under K.S.A. 5-402 and the party did not participate in the arbitration hearing without raising the objection."
K.S.A. 5-412(a) further provides:
"But the fact that the relief was such that it could not or would not be granted by a court of law or equity is not ground for vacating or refusing to confirm the award."
Ziegler cites cases from Michigan and Illinois in which the arbitrators' awards were set aside due to errors of law. DAIIE v. Spafford, 76 Mich. App. 85, 255 N.W.2d 780 (1977); Country Mut. Ins. Co. v. Nat. Bank of Decatur, 109 Ill. App.2d 133, 248 N.E.2d 299 (1969). The cases are distinguishable from the instant case. In neither case did the court refer to and attempt to distinguish a statutory provision which provided that errors of law are not a basis for setting aside an award of the arbitrators. In *310 Evans Electrical Const. Co. v. University of Kansas Med. Center, 230 Kan. 298, 307, 634 P.2d 1079 (1981), the Kansas Supreme Court, in taking cognizance of K.S.A. 5-412 ruled:
"`Where parties have agreed to be bound by a submission to arbitration, errors of law and fact, or an erroneous decision of matters submitted to the judgment of the arbitrators, are insufficient to invalidate an award fairly and honestly made. Nothing in the award relative to the merits of the controversy as submitted, even though incorrectly decided, is ground for setting aside an award in the absence of fraud, misconduct or other valid objections.' [Coleman v. Local No. 570, 181 Kan. 969,] Syl. ¶ 4."
Hence, the legal and factual propriety, or correctness, of the arbitrators' decision in the present case is not before this Court.
Ziegler correctly notes that, since the evidence before the trial court was documentary in nature, this Court can interpret the documents as well as could the trial court. Bradley v. Estate of Jackson, 1 Kan. App.2d 695, 696, 573 P.2d 628 (1977). It does not appear, however, that all of the documents presented to the trial court are available for this Court to review. While the record is not so inadequate as to preclude all review in this case, there are significant gaps in the record which will preclude a review of certain of Ziegler's claims of error.
Ziegler contends that the arbitrators exceeded their authority in refusing to continue the arbitration proceedings until all claims were mature for a final determination. K.S.A. 5-412(a)(4) provides that an award shall be vacated when the arbitrators refuse to postpone the hearing when sufficient cause to do so has been shown. Ziegler alleges that it requested a continuance of the arbitration proceedings until the liquidated damage claims could mature. The problem is that the record on appeal fails to demonstrate that such a request was made. There are no documents reflecting such a request, and, since Ziegler has insisted that it need not provide this Court with the transcript of the arbitration proceedings, it is not possible to determine if such a request was orally made. True, Ziegler did argue before the trial court that the arbitrators erred in denying a continuance, and such allegations are contained in appellant's briefs. Neither counsel's argument before the trial court nor the assertions in the appellate briefs constitute evidence or satisfy the inadequacy of the record on appeal. Timmermeyer v. Brack, 196 Kan. 481, 483-84, 412 P.2d 984 (1966). Since Ziegler has failed to provide an adequate record to substantiate its claim of error, the claim *311 must fail. First Nat'l Bank & Trust Co. v. Lygrisse, 231 Kan. 595, 602, 647 P.2d 1268 (1982).
Ziegler argues that the arbitrators exceeded their powers by failing to render a final award on the District's claim for liquidated damages. The arbitrators awarded the District $29,250 as liquidated damages for the period between March 21, 1982, and July 17, 1982, but did not award the damages "which may be assessable" after July 17, 1982.
It is the general rule that, to be valid, an arbitration award must be a full and final disposition on all points submitted. Clark v. Goit, 1 Kan. App. 345, 41 Pac. 214 (1895); 5 Am.Jur.2d, Arbitration and Award §§ 141-142; 6 C.J.S., Arbitration § 111. An arbitration award is final when it conclusively determines the matter submitted, leaving nothing to be done but to execute and carry out the terms of the award.
The Court notes that the cases upon which Ziegler relies in its position are factually distinguishable. In Stix and Co., Inc. v. Schoor, 579 S.W.2d 160 (Mo. App. 1979), the award expressly stated that the arbitrators were ruling on but one of three issues submitted and were directing the parties to pursue other remedies on the unresolved issues. Derrick v. Compton, 249 S.C. 402, 154 S.E.2d 573 (1967), involved the arbitrators' failure to rule on an issue. These cases have no application to the issue of the assessment of future damages.
It is obvious that, at the time of the arbitration proceedings, the number of days for which liquidated damages would be assessed against Ziegler could not be determined. A similar issue was presented in Coleman v. Local No. 570, 181 Kan. at 981-82. Coleman contended that the arbitration award was defective because it did not designate the period of time over which the employees' average bonus earnings which had been awarded were to be computed. This claim was rejected by our Supreme Court.
Other jurisdictions have recognized that an award is sufficiently final if the arbitrators have ruled upon all issues which are in a condition to be considered at the time of the submission. Leavenworth & Son, Inc. v. Kimble, 157 Miss. 462, 128 So. 354 (1930); Martin v. Winston, 181 Va. 94, 23 S.E.2d 873, cert. denied 319 U.S. 766 (1943); 6 C.J.S., Arbitration § 111. It has also been held that an award is sufficiently final when only a mathematical *312 calculation is required for its implementation. Matter of Hunter v. Proser, 298 N.Y. 828, 84 N.E.2d 143 (1949). In 5 Am.Jur.2d, Arbitration and Award § 141, the matter is stated as follows:
"An award should be certain and must leave open no loophole for future disputes and litigation; when it is incomplete, uncertain, and indefinite it cannot be sustained. Technical and critical nicety is not required, however; reasonable certainty is sufficient.
"In determining the certainty of an award the same rules apply as in determining the meaning of a court order, and the entire record, including the submission and court records, in case the arbitration results from reference, may be examined. The award will be construed as a whole, and if in this light it is definite and certain, it will be valid in spite of vagueness and uncertainty in different parts when read by themselves.... The requirement of certainty also extends to the subject matter of the award. Thus ... if payment of money is directed, the amount must be ascertainable."
In the instant case, the arbitrators found that the liquidated damages were reasonable and commensurate with the actual damages sustained by the District due to Ziegler's unreasonable delay. An award is to be construed "so as to put one consistent sense on all terms." Applying that rule of construction to the award before the Court, we hold that the award for future liquidated damages, being ascertainable by a simple mathematical computation, is a final award, and the District is entitled to liquidated damages in an amount to be determined by multiplying $250 by the number of days it took to complete the construction.
Ziegler argues that the arbitrators exceeded their authority in apportioning the liquidated damage award. It is a general rule that liquidated damages cannot be apportioned when both parties are mutually responsible for a delay in completing a contract. 22 Am.Jur.2d, Damages § 233. Again, there is no evidence to support Ziegler's claim that the District was responsible for the delay in furnishing water, or that the District was even responsible for furnishing water. Ziegler's failure to provide an adequate record precludes a review of this factual question. The arbitrators found that it was drought, not the conduct of the District, which made water unavailable to Ziegler, thus justifying the postponement of the completion date for the purpose of assessing liquidated damages. Since there is no basis for holding the District was in any way responsible for the delay, the rule Ziegler seeks to invoke is inapplicable.
*313 Were the award improperly apportioned as to liquidated damages as Ziegler contends, it would nevertheless be valid and could not be vacated. This Court must remember that "the fact that the relief was such that it could not or would not be granted by a court of law or equity is not ground for vacating or refusing to confirm the award." K.S.A. 5-412(a).
Ziegler further argues that the arbitrators exceeded their authority by usurping a judicial function because only courts are empowered to interpret liquidated damage clauses. This claim correctly asserts that there are significant public policy considerations involved in determining whether a purported liquidated damage clause is valid or is an unenforceable penalty. U.S.D. No. 315 v. DeWerff, 6 Kan. App.2d 77, 626 P.2d 1206 (1981).
The parties are in dispute as to whether Ziegler's participation in the arbitration of the liquidated damage claim precludes it now from asserting that that issue was not arbitrable. The general rule is that, in the absence of an objection, a party who participates in an arbitration hearing on the merits of an issue waives his right to subsequently challenge the arbitrability of the issue. Annot., Waiver of Arbitrability, 33 A.L.R.3d 1242, § 2(a); 6 C.J.S., Arbitration § 92. There is no evidence that Ziegler objected to the arbitrability of this issue at the arbitration hearing.
This Court need not, however, decide whether Ziegler waived its claim of nonarbitrability. The record here presents no indication that the claim was presented to the district court. Ziegler cites a New York case, Niagara Wheatfield Assn., 44 N.Y.2d 68, 375 N.E.2d 37 (1978), for the proposition that public policy questions can be raised for the first time before an appellate court. While the citation appears to be a tacit admission that the issue was not presented to the district court, it serves no purpose to Ziegler. New York may allow public policy considerations to be raised for the first time on appeal. Kansas does not. In re Estate of Brown, 189 Kan. 193, 199, 368 P.2d 27 (1962). Ziegler's public policy arguments are lost to the rule that a point not raised before the trial court may not be raised for the first time on appeal. Lantz v. City of Lawrence, 232 Kan. 492, 500, 657 P.2d 539 (1983).
Finally, Ziegler contends that the district court erred in retaining jurisdiction over future liquidated damages, alleging that the ruling deprived it of its right to submit questions concerning *314 such damages to arbitration. This Court has concluded that the arbitrators' award is a final order, requiring only a finding of the number of days for which liquidated damages at a rate of $250 per day are assessable against Ziegler. Ziegler's contention is without merit since there is nothing left to arbitrate and Ziegler's right to enforce the arbitration clause has not been prejudiced.
The judgment of the district court is affirmed.
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cc: Hon. Michael Villani, District Judge
Joseph Lee Webster
Attorney General/Carson City
Clark County District Attorney
Eighth District Court Clerk
SUPREME COURT
OF
NEVADA
2
(0) 1947A
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48 Ill. App.3d 925 (1977)
363 N.E.2d 643
THE PEOPLE OF THE STATE OF ILLINOIS, Plaintiff-Appellee,
v.
CHARLES TAYLOR, Defendant-Appellant.
No. 76-255.
Illinois Appellate Court Third District.
Opinion filed May 31, 1977.
*926 Robert Agostinelli and Michael J. Pelletier, both of State Appellate Defender's Office, of Ottawa, for appellant.
Carl E. Hawkinson, State's Attorney, of Galesburg (Robert M. Hansen and James E. Hinterlong, both of Illinois State's Attorneys Association, of counsel), for the People.
Judgment affirmed.
Mr. JUSTICE BARRY delivered the opinion of the court:
The defendant in this case, Charles Taylor, was charged by indictment with the offenses of unlawful possession of a controlled substance and of unlawful delivery of a controlled substance, in violation of sections 402(b) and 401(b) of the Controlled Substances Act (Ill. Rev. Stat. 1975, ch. 56 1/2, pars. 1402(b) and 1401(b)), respectively. A member of the Galesburg Public Defender's Office was appointed to represent the defendant.
At the arraignment, the defendant pleaded not guilty to both counts, but subsequently, he withdrew his not guilty plea to the possession count and tendered a blind plea of guilty. After the trial court advised the defendant of his rights and the consequences of his guilty plea, the defendant assured the trial court that no one had made any promises, offers or threats to him to induce the guilty plea and informed the court that he was satisfied with the representation by his appointed counsel.
In explaining the factual basis for the indictment to the trial court, the prosecutor stated that, following a lawful arrest, a search of the defendant revealed that the defendant was in possession of less than 30 grams of a substance which the crime lab later determined to be heroin. The trial court accepted the guilty plea, concluding that it was understandingly and voluntarily tendered, and on the State's motion, dismissed the second count of the indictment.
The defendant moved for the granting of probation and requested a presentence investigation report. This report, which recommended probation, was admitted in evidence at the hearing on the defendant's *927 motion and in aggravation and mitigation. After evidence was presented and arguments were heard the defendant's motion for probation was denied and the trial court, agreeing with the State's recommendation, sentenced the defendant to a term of imprisonment of not less than 1 nor more than 3 years. In addition, the trial court informed the defendant of his right to appeal and that, if there were any errors to which he objected, the defendant would be required to file a motion to withdraw the guilty plea and vacate the judgment.
Immediately after being so admonished, the defendant filed such a motion. That motion alleged, in part, that the defendant had steadfastly maintained his innocence to his appointed counsel, that the defendant pled guilty "due to circumstances surrounding said charge and against his better judgment and the dictates of his conscience," and that in pleading guilty, the defendant relied on the advice of counsel that he "felt" the defendant "stood an excellent chance of receiving probation * * *."
On June 2, 1976, a hearing was held on the defendant's motion, and the same attorney who had represented the defendant at the guilty plea proceedings again appeared on behalf of the defendant. Neither side presented witnesses. And in his argument before the trial court, the defense counsel contended only that the trial court abused its discretion in denying the defendant probation. The trial court concluded, however, that it had not abused its discretion and denied the defendant's motion. From this denial of his motion to withdraw the guilty plea and vacate the judgment, the defendant appeals.
1 The only issue raised in this appeal is whether the defendant was denied the effective assistance of counsel where the defendant was represented by the same appointed counsel during the guilty plea proceedings and the proceedings held pursuant to the motion to vacate and where one of the grounds for the motion to vacate was that the defendant had entered the guilty plea in reliance on his counsel's advice. Although it is true that, if the public defender's office represents the defendant at trial and for a post-conviction motion based on the incompetence of counsel, there is a conflict of interest (People v. Terry (1970), 46 Ill.2d 75, 262 N.E.2d 923; People v. Smith (1967), 37 Ill.2d 622, 230 N.E.2d 169), we need not decide this issue because the fact that the defendant was represented by the same counsel during both guilty plea and withdrawal of guilty plea proceedings was harmless error.
If a guilty plea is induced by an unfulfilled promise of leniency, that guilty plea will be rendered void. (People v. Carmichael (1st Dist. 1974), 17 Ill. App.3d 249, 307 N.E.2d 770.) However, a defendant who merely hopes for or believes he will get a shorter sentence by pleading guilty is not entitled to a withdrawal of a guilty plea. People v. Marshall (3d Dist. 1975), 30 Ill. App.3d 17, 331 N.E.2d 566.
*928 2, 3 The facts in this case indicate that there was no promise to the defendant that he would receive probation. The defense counsel merely stated that he "felt" the defendant "stood an excellent chance of receiving probation * * *." Since the defendant merely believed or hoped for a probationary sentence, he is not entitled to a withdrawal of his guilty plea. For this reason, the fact that the defendant was represented by the same counsel during both guilty plea and withdrawal of guilty plea proceedings could not have influenced the result and, therefore, was harmless error. Chapman v. California (1967), 386 U.S. 18, 17 L.Ed.2d 705, 87 S.Ct. 824; Fahy v. Connecticut (1963), 375 U.S. 85, 11 L.Ed.2d 171, 84 S.Ct. 229.
Accordingly, the action of the Circuit Court of Knox County denying the defendant's motion to withdraw the guilty plea and vacate the judgment is affirmed.
Affirmed.
STENGEL, P.J., and ALLOY, J., concur.
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15 F.3d 1082
73 A.F.T.R.2d 94-661
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.
ATLANTIC BELGRAVE FILM ASSOCIATES; Belgrave EntertainmentAssociates, L.P., 1986 Series A, Petitioners-Appellants,v.COMMISSIONER INTERNAL REVENUE SERVICE, Respondent-Appellee.
No. 92-70460.
United States Court of Appeals, Ninth Circuit.
Submitted Dec. 15, 1993.*Decided Dec. 28, 1993.
Before: POOLE, BEEZER AND KLEINFELD, Circuit Judges.
1
MEMORANDUM**
2
The tax court granted respondent's motion to dismiss for lack of jurisdiction due to petitioner's failure to file its petition within the time prescribed by 26 U.S.C. Sec. 6226(b)(1). Petitioner appeals. The tax court had jurisdiction pursuant to 26 U.S.C. Secs. 6226 and 7442. We have jurisdiction pursuant to 26 U.S.C. Sec. 7482. We affirm.
3
We review de novo the decision of the tax court. See, Estate of Schnack v. C.I.R., 848 F.2d 933, 935 (9th Cir.1988).
4
Petitioner Belgrave Entertainment Associates ("BEA") challenges the decision of the tax court on two grounds. First, BEA argues that the notice it received was ambiguous and that, therefore, its late filing was caused by the IRS. Second, BEA argues that the notice it received was a duplicate of that sent to the tax matters partner, so that BEA was entitled to rely on the date of its notice for purposes of determining the filing deadline. We reject both these arguments.
5
* Under 26 U.S.C. Sec. 6223(a), the IRS is required to send notice of a final partnership administrative adjustment ("FPAA") first to the tax matters partner. This notice was mailed on December 21, 1990. Section 6223(d)(2) requires that notice of the FPAA be sent to notice partners within 60 days after the date the FPAA is mailed to the tax matters partner. This notice was mailed to BEA on February 5, 1991. The IRS complied fully with the statutory requirements in sending notice of the FPAA to BEA on a different date from that on which the FPAA was mailed to the tax matters partner.
6
BEA argues that the notice it received was fatally ambiguous because it reflected both the date the notice was mailed to BEA and the date the FPAA was mailed to the tax matters partner. Petitioner asserts that a notice partner could reasonably conclude from the presence of both dates on the form that the recipient was entitled to file a petition within 150 days from the date the FPAA was sent to the notice partner. We disagree.
7
The fourth paragraph of the notice provides:
8
If the tax matters partner has not filed a petition by the 90th day from the date the FPAA was mailed, any other partner entitled to receive this notice under section 6223 of the Internal Revenue Code ... may petition one of these courts after the 90th day but on or before the 150th day, from the date the FPAA was mailed to the tax matters partner.
9
We fail to see how this paragraph, taken in context of the statement near the top of the notice, "date FPAA mailed to tax matters person: 12-21-90," could be read in any way other than that intended. BEA argues that the first clause of this sentence creates ambiguity by referring to "the date the FPAA was mailed." Even if this first clause were unclear, the second clause is absolutely clear as to petitioner's duty to file within 150 days of the date the FPAA was mailed to the tax matters partner. This date, as noted above, is clearly indicated on the form. The first clause in no way confuses the message of the second. Taken together, there is but one reasonable interpretation of these two clauses.
10
Nor can we dismiss petitioner's admission that its accountant "skipped right down to the text itself," rather than reading the entire notice. In light of the failure of BEA's accountant to read that portion of the form specifying the date the FPAA was mailed to the tax matters partner, we cannot hold the IRS responsible for BEA's failure to file a timely petition.
11
We hold that BEA received unambiguous notice of the time in which to file a petition and has been afforded due process. Petitioner further cannot demonstrate, on these facts; that its failure arose out of excusable neglect.
II
12
BEA also argues that it was entitled to rely on the date the FPAA was mailed to it because the taxpayer is always entitled to rely on the latest-mailed notice for purposes of calculating the time to file. BEA relies on Tenzer v. Commissioner, 285 F.2d 956, 958 (9th Cir.1960), and Eppler v. Commissioner, 188 F.2d 95, 98 (7th Cir.1951). These cases are inapposite, as they involve second notices sent after first notices were not delivered to the taxpayers. As noted above, Sec. 6223 specifically provides that the FPAA shall be sent first to the tax matters partner, and then to other notice partners. The notice BEA received clearly indicated the date on which notice was provided to the tax matters partner. The notices are not "duplicates," within the meaning of Tenzer and Eppler.
III
13
The decision of the tax court is affirmed.
*
The panel unanimously finds this case suitable for decision without oral argument. Fed.R.App.P. 34(a); Ninth Circuit Rule 34-4
**
This disposition is not appropriate for publication and may not be cited to or used by the courts of this circuit except as provided by Ninth Circuit Rule 36-3
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NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING
MOTION AND, IF FILED, DETERMINED
IN THE DISTRICT COURT OF APPEAL
OF FLORIDA
SECOND DISTRICT
ANGLES R. OWENS, )
)
Appellant, )
)
v. ) Case No. 2D18-1721
)
STATE OF FLORIDA, )
)
Appellee. )
___________________________________)
Opinion filed November 30, 2018.
Appeal pursuant to Fla. R. App. P.
9.141(b)(2) from the Circuit Court
for Hillsborough County; Michelle Sisco,
Judge.
PER CURIAM.
Affirmed. See Carbajal v. State, 75 So. 3d 258 (Fla. 2011); State v. King,
426 So. 2d 12 (Fla. 1982); State v. Roby, 246 So. 2d 566 (Fla. 1971); Shortridge v.
State, 884 So. 2d 321 (Fla. 2d DCA 2004); Desmond v. State, 576 So. 2d 743 (Fla. 2d
DCA 1991); Budd v. State, 477 So. 2d 52 (Fla. 2d DCA 1985); Hillman v. State, 410 So.
2d 180 (Fla. 2d DCA 1982); McMillan v. State, 832 So. 2d 946 (Fla. 5th DCA 2002);
Harris v. State, 789 So. 2d 1114 (Fla. 1st DCA 2001); Hart v. State, 761 So. 2d 334
(Fla. 4th DCA 1998); Freeny v. State, 621 So. 2d 505 (Fla. 5th DCA 1993).
KHOUZAM, MORRIS, and LUCAS, JJ., Concur.
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