text
stringlengths 1
1.21M
| meta
dict |
|---|---|
NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 16a0582n.06
Case Nos. 15-3909/15-4090
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
Oct 25, 2016
UNITED STATES OF AMERICA, ) DEBORAH S. HUNT, Clerk
)
Plaintiff-Appellee, )
) ON APPEAL FROM THE UNITED
v. ) STATES DISTRICT COURT FOR
) THE NORTHERN DISTRICT OF
$506,069.09 SEIZED FROM FIRST MERIT ) OHIO
BANK, et al., )
)
Defendants, )
)
SYED JAWED AKHTAR-ZAIDI; ERUM )
ZAIDI; PAIN MANAGEMENT OF )
NORTHERN OHIO, INC., )
)
Claimants-Appellants. )
BEFORE: SILER, GIBBONS, and COOK, Circuit Judges.
SILER, Circuit Judge. Claimants Dr. Syed J. Ahktar-Zaidi (“Dr. Zaidi”), his wife, Erum
Zaidi (“Erum”), and Pain Management of Northern Ohio, Inc. (“PMNO”) (together,
“Claimants”) appeal the district court’s order of forfeiture in rem of thirteen financial accounts
and 139 pieces of jewelry. For the reasons set forth below, we AFFIRM the district court’s
judgment.
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
FACTUAL AND PROCEDURAL BACKGROUND
Dr. Zaidi owned and operated PMNO, a pain management clinic in Solon, Ohio. In 2012
and 2013, undercover law enforcement officers presented as patients to Dr. Zaidi, who
“performed at best a cursory examination” before prescribing to them Schedule II and III pain
medication. As a result, the government alleged that Dr. Zaidi prescribed controlled substances
outside the scope of his professional practice and without a legitimate purpose, in violation of
21 U.S.C. § 841. The Drug Enforcement Administration (the “DEA”) eventually suspended his
certificate of registration to distribute controlled substances.
The government further alleged that Dr. Zaidi laundered the tainted proceeds of his drug-
trafficking activities by comingling them in various accounts in his own name and those of Erum
and PMNO and that he then funneled the funds into investment portfolios and financial
retirement accounts. This activity, the government says, enabled Dr. Zaidi to “successfully
‘launder[]’ the criminal proceeds and allowed for clean integration back into the financial
system,” in violation of 18 U.S.C. §§ 1956 and 1957.
In January 2014, the government filed an in rem forfeiture complaint against a number of
bank and investment accounts in the names of Dr. Zaidi, Erum, PMNO, and various
combinations thereof. The accounts’ aggregate value totals approximately $4.8 million. The
government also sought forfeiture of 139 pieces of jewelry allegedly purchased with the
proceeds of Dr. Zaidi’s trafficking and valued at over $90,000.
In February 2014, Claimants asserted their interests in the defendant assets. The court
scheduled a case management conference (“CMC”) for March 12, 2014, and required the parties
to personally attend. On March 5, 2014, the Zaidis petitioned to be excused from appearing in
person at the CMC due to “undue hardship,” claiming that because their assets were frozen, they
-2-
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
had been forced to move to Pakistan to live with family. The court granted the motion. The
government immediately petitioned the court to reconsider its ruling, arguing that the Zaidis had
left the United States upon learning of the criminal investigation. Given the pending
investigation, counsel agreed to stay the case until July 2014. The stay was later extended to
October 2014.
In August 2014, the grand jury indicted Dr. Zaidi for one count of conspiring to distribute
controlled substances, thirty-six counts of distributing controlled substances, one count of health
care fraud, eight counts of money laundering, and a forfeiture specification naming the fourteen
defendant properties discussed above. After Dr. Zaidi failed to appear at his arraignment, the
district court issued an arrest warrant and deemed him “a fugitive from justice.”
After Dr. Zaidi’s indictment, the government moved to convert the upcoming telephonic
conference to a CMC at which the Zaidis’ personal appearance would be required. Opposing the
motion, Dr. Zaidi submitted medical records and a letter from a Pakistani doctor suggesting that
his heart condition precluded international air travel “for [the] foreseeable future.”
In October 2014, Erum moved to dismiss the forfeiture complaint as it related to her
personal jewelry and the seized accounts listed in her name. The court denied the motion,
concluding that the complaint’s factual allegations supported a reasonable belief that the
government would be able to satisfy its burden of proof at trial. The court also denied Erum’s
motion to transfer a portion of the seized assets to pay the Zaidis’ taxes and accountants, finding
that she had not met the hardship requirements of 18 U.S.C. § 983(f)(1).
The court scheduled a CMC for January 2015, and again required the parties’ attendance.
The government noticed Erum’s deposition for the same date as the CMC. But the day before
the scheduled CMC and deposition, the Zaidis again moved to excuse their personal appearance.
-3-
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
They claimed that Dr. Zaidi’s coronary-artery disease barred him from traveling, that Erum was
the “sole caregiver and provider” for her young daughters, and that traveling to Cleveland
“would place a tremendous hardship on her and her children.” The Zaidis further noted that the
United States State Department had warned American citizens against traveling to and from
Pakistan.
During the next teleconference, the court directed Erum “to decide whether to litigate her
forfeiture claim or abandon it.” The court advised that because Erum was not a target of the
criminal investigation, any attempt to “exercise[] her Fifth Amendment right not to incriminate
herself at her deposition” would result in her being “deemed to have given up her claim on the
seized assets.” The court rescheduled the CMC for February 2015, and warned that if Erum
failed to attend the proceeding, her claim would be dismissed for want of prosecution.
Four days before the scheduled CMC and deposition, Claimants moved for partial
summary judgment as to the jewelry and all but one of the seized accounts. The same day, Erum
renewed her motion to be excused from her personal appearance at the CMC given the pending
summary judgment motion and her decision to “exercise her Fifth Amendment right and decline
to testify under oath at a deposition.” The district court denied the motion and deemed
Claimants’ motion for partial summary judgment prematurely filed.
The following day, Erum asked the court to reconsider its order. Denying the motion, the
court issued the following directive:
Mrs. Zaidi has not been named in the indictment issued against her
husband. . . . And the Government represents that she is not a
target of a criminal investigation. The fact that Mrs. Zaidi may be
called as a witness in her husband’s criminal prosecution, should
he ever return to this country, is an insufficient basis upon which to
make a blanket assertion of that privilege preceding her deposition
in this civil forfeiture case. And it is altogether unacceptable for
-4-
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
Mrs. Zaidi to determine whether her personal appearance at the
CMC is necessary despite a federal court order requiring her to be
here.
Mrs. Zaidi has been stringing the Court along for months, allowing
her time to make preparations to fly to the United States for two
days to attend her deposition and the CMC. For these reasons,
along with all the reasons previously addressed, Claimants’ Motion
for Reconsideration of the Court’s Order of February 24, 2015 . . .
is DENIED.
If Mrs. Zaidi fails to appear tomorrow as ordered, the Court will
dismiss her claim against the assets that are the subject of this civil
case for want of prosecution.
Erum did not appear at the February 27, 2015, CMC. Consequently, the court dismissed her
claim for want of prosecution.
Turning next to the “premature” motion for summary judgment, the court directed the
government to provide “a general outline of additional evidence of criminal conduct beyond that
set forth in the complaint along with evidence tying the money seized to that conduct.” Finally,
the court advised that it “did not intend to keep this case on its docket indefinitely, and that Dr.
Zaidi must return to this country if he wishes to challenge the forfeiture.”
Though the court acknowledged Dr. Zaidi’s claimed heart condition, it noted that his
medications consisted of “a beta blocker, nitroglycerin, and an aspirin” and that “millions of
people . . . travel all the time with those same medications.” During the teleconference, Dr. Zaidi
explained that the seizure of his assets left him unable to afford an angiogram to determine
whether he required bypass surgery. The court advised that Dr. Zaidi’s counsel should file a
motion to this effect and that the court would “free up some of the seized money” to pay for the
procedures. The court stayed the case until June 8, 2015.
-5-
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
In May 2015, the court denied Claimants’ motion for partial summary judgment. The
court cautioned that “unless Dr. Zaidi returns to the United States by June 8, 2015, or makes
some substantial showing that he will return after a further short delay, the Court will dismiss his
claim to the seized assets and that of PMNO for want of prosecution.”
On June 4, 2015, the court ordered Claimants to “show cause (including a date certain of
his return) why Dr. Zaidi’s and the corporation’s claim should not be dismissed for want of
prosecution.” Claimants responded with a document entitled “This Record Presents the
Antithesis of a Want of Prosecution.”
In June 2015, the court dismissed Dr. Zaidi’s and PMNO’s remaining claims for want of
prosecution. It concluded:
The bottom line is that the Court will not permit these Claimants to
litigate their claims to the seized assets in abstentia and without
discovery. . . . By failing to return to the United States within the
reasonable time period set by the Court, or otherwise advising the
Court of when he will return, Dr. Zaidi simply thwarts the judicial
proceedings.
The court granted the government’s motion for forfeiture of all of the seized properties.
DISCUSSION
I. The court did not abuse its discretion in dismissing the claims for want of
prosecution.
The court dismissed the Zaidis’ claims under the broad authority vested by Federal Rule
of Civil Procedure 41(b), which empowers district courts to dismiss an action for failure “to
prosecute or to comply with these rules or a court order.” Fed. R. Civ. P. 41(b). We review a
district court’s dismissal for failure to prosecute for abuse of discretion. Schafer v. City of
Defiance Police Dep’t, 529 F.3d 731, 736 (6th Cir. 2008).
-6-
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
Four factors generally guide the panel’s determination of whether a district court’s
dismissal for failure to prosecute was an abuse of discretion:
(1) whether the party’s failure is due to willfulness, bad faith, or
fault; (2) whether the adversary was prejudiced by the dismissed
party’s conduct; (3) whether the dismissed party was warned that
failure to cooperate could lead to dismissal; and (4) whether less
drastic sanctions were imposed or considered before dismissal of
the action.
Carpenter v. City of Flint, 723 F.3d 700, 70304 (6th Cir. 2013) (quoting Mulbah v. Detroit Bd. of
Educ., 261 F.3d 586, 589 (6th Cir. 2001)). These factors suggest that the district court did not
abuse its discretion in dismissing Claimants’ actions.
1. Claimants’ failure to prosecute is attributable to willfulness, bad faith, or
fault.
“Although typically none of the factors is outcome dispositive,” a party’s bad faith may
be the most compelling factor. Knoll, 176 F.3d at 363 (citing Carter v. City of Memphis, 636
F.2d 159, 161 (6th Cir. 1980)). “While ‘willfulness, bad faith, or fault’ have often been
described in these terms of ‘a clear record of delay or contumacious conduct,’ that construction
has more recently been supplemented by a requirement of ‘either an intent to thwart judicial
proceedings or a reckless disregard for the effect of [the plaintiff’s] conduct on those
proceedings.’” Prime Finish, LLC v. ITW Deltar IPAC, 608 F. App’x 310, 314 (6th Cir. 2015)
(quoting Schafer, 529 F.3d at 737).
From the litigation’s commencement, the court warned that it would not allow the Zaidis
to litigate their case without returning to the United States. Dr. Zaidi, who suffered a heart attack
and had a stent implanted in 2007, repeatedly argues that his heart condition rendered him unable
to travel. But the court noted that many people take the same medications as Dr. Zaidi and
-7-
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
remain able to travel. Moreover, Dr. Zaidi failed to heed the court’s suggestion that he should
file a motion to release some of the seized money to pay for necessary treatments. The court
noted that in his response brief, Dr. Zaidi “[did] not mention, let alone address, any of this.”
Given these facts, it is clear that their pretrial filings were dilatory tactics.
Dr. Zaidi relies upon United States v. Salti, 579 F.3d 656 (6th Cir. 2009), in support of
his argument that the government must show, as matter of law, that his failure to return is solely
an attempt to evade prosecution. He contends that because the government did not dispute his
medical evidence, the court improperly disentitled him for “as long as he remains a fugitive from
justice.”
Had the court dismissed Dr. Zaidi’s action based on the fugitive disentitlement statute,
28 U.S.C. § 2466, Dr. Zaidi might be correct. Applying that statute, Salti noted the
government’s failure to satisfy its burden and reversed the district court’s dismissal of the third-
party claim at issue: “If [the claimant] is indeed too sick to travel, such that his illness is what
prevents him from returning to the United States, the Government has not shown as a matter of
law that [the claimant’s] being in [a foreign country], and not the United States, is ‘in order to
avoid criminal prosecution.’” 579 F.3d at 66566 (quoting 28 U.S.C. § 2466(a)(1)). But though
various filings refer to Dr. Zaidi as a fugitive, he admits that the government “never formally
moved for disentitlement.” To the contrary, the court stated that “[t]he fugitive disentitlement
doctrine . . . is irrelevant to this civil case.” Dr. Zaidi’s claims were not dismissed under a
fugitive-disentitlement theory, but for want of prosecution. Accordingly, Salti does not render
the court’s determination an abuse of discretion.
Erum’s conduct suggests an even more “reckless disregard for the effect of [her] conduct
on [the court’s] proceedings.” Prime Finish, 608 F. App’x at 314 (quoting Schafer, 529 F.3d at
-8-
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
737). She repeatedly ignored the court’s dictate to attend the scheduled deposition. Instead, she
filed numerous motions restating the same Fifth Amendment argument that the court had
previously rejected. As the court explained:
Erum Zaidi cannot unilaterally decide that her presence is not
needed at the CMC by her counsel’s declaration. She is not a
criminal defendant, and she is not entitled to assert a blanket
exercise of her Fifth Amendment privilege. In re Morganroth,
718 F.2d 161, 167 (6th Cir. 1983). . . . There are areas of inquiry
that would not subject Mrs. Zaidi to criminal exposure – the
primary one being the question of whether she has standing to
assert her claim against the seized assets in this civil forfeiture
action. However, by announcing her intention not to testify at all
at her deposition, she is foreclosing all areas of inquiry. The Court
will not allow Mrs. Zaidi to unilaterally foreclose particular areas
of inquiry regarding the facts underlying her claim to the seized
assets while simultaneously reserving to herself the ability to
selectively make declarations supporting her claim to those assets .
...
The court correctly applied Morganroth, wherein the petitioner was subpoenaed for a
deposition as a non-party witness in a civil action. Petitioner Morganroth argued that truthfully
answering the same questions that he had been asked in a previous proceeding might subject him
to a perjury charge. See 718 F.2d at 165. The Sixth Circuit determined that Morganroth’s
blanket assertion of privilege was “not enough.” Id. at 167. Rather, Morganroth was required to
“supply such additional statements under oath and other evidence to the District Court in
response to each question propounded so as to enable the District Court to reasonably identify
the nature of the criminal charge for which Morganroth fears prosecution . . . and to discern a
sound basis for the witness’ reasonable fear of prosecution.” Id. Simply asserting the privilege
is insufficient. Rather,
[A] witness must supply personal statements under oath or provide
evidence with respect to each question propounded to him to
-9-
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
indicate the nature of the criminal charge which provides the basis
for his fear of prosecution and, if necessary to complement non-
testimonial evidence, personal statements under oath to meet the
standard for establishing reasonable cause to fear prosecution
under this charge.
Id. at 16970. Moreover, “[w]hile the privilege is to be accorded liberal application, the court
may order a witness to answer if it clearly appears that he is mistaken as to the justification for
the privilege in advancing his claim as a subterfuge.” Id. at 167 (citations omitted).
Erum’s blanket assertion of the privilege appears to be the sort of “subterfuge”
contemplated by Morganroth. As the government notes, Erum’s interpretation of the Fifth
Amendment, like Morganroth’s, would disallow any civil deposition “for fear that some
unintentional exposure to potential criminal liability would occur if any question were
answered.” Her refusal to comply with the court’s orders constituted defiance of its orders and
authority.
2. The government was prejudiced by Claimants’ conduct.
Applying the second factor, we have explained that prejudice results where “the
[government] ‘wastes time, money and effort in pursuit of cooperation which [the claimant] was
legally obligated to provide.’” Kovacic v. Tyco Valves & Controls, LP, 433 F. App’x 376, 381
(6th Cir. 2011) (quoting Harmon v. CSX Transp., Inc., 110 F.3d 364, 368 (6th Cir. 1997)).
From the case’s beginning, the government voiced its concern that it could be obligated
to perform “complex and time-consuming discovery, litigation[,] and trial preparation without
any assurances that the claimants would ever return to the United States to pursue their claim.”
The government expended time, effort, and resources responding to numerous pleadings that
Claimants filed in a clear effort to delay the proceedings. This factor weighs in favor of
affirming the district court’s dismissal of the Zaidis’ claims.
- 10 -
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
3. The court warned Claimants that failure to cooperate could lead to
dismissal.
“As to the third factor, ‘[p]rior notice, or the lack thereof, is . . . a key consideration when
determining whether a district court abuses its discretion in dismissing a case pursuant to Rule
41(b).” Prime Finish, 608 F. App’x at 315 (quoting Stough v. Mayville Comm. Schs., 138 F.3d
612, 615 (6th Cir. 1998)). As stated above, the court repeatedly cautioned that it would not
allow Claimants to litigate their claims from abroad. Though Claimants were on notice that the
court was contemplating dismissal of their actions, they repeatedly flouted its orders. This
factor, too, weighs in favor of affirming the district court’s dismissal.
4. The court considered less drastic sanctions before dismissing Claimants’
actions.
We have stated that “the sanction of dismissal is appropriate only if . . . no alternative
sanction would protect the integrity of the pretrial process.” Prime Finish, 608 F. App’x at 315
(quoting Wu v. T.W. Wang, Inc., 420 F.3d 641, 644 (6th Cir. 2005)). “Such caution is necessary
because where the district court has not manifested consideration of less drastic sanctions, it is
more difficult . . . to conclude that the district court exercised its discretion with appropriate
forethought.” Id. (quoting Schafer, 529 F.3d at 738 (internal quotation marks omitted)).
Here, the court attempted to accommodate the Zaidis’ concerns regarding their ability to
travel and Dr. Zaidi’s purported medical condition. It rescheduled hearings and Erum’s
deposition at their request. Moreover, as noted above, the court offered to allow Dr. Zaidi to
access the seized funds to pay for medical treatment allegedly required to allow him to travel.
But given the Zaidis’ recalcitrance, the court found that “dismissal is the only sanction the Court
can exercise other than staying the case forever – something the Court will not do
- 11 -
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
For the foregoing reasons, the court’s Rule 41(b) dismissal was prompted by the Zaidis’
“intent to thwart judicial proceedings or . . . reckless disregard for the effect of [their] conduct on
those proceedings.’” Prime Finish, 608 F. App’x at 314 (quoting Schafer, 529 F.3d at 737).
Accordingly, the court did not abuse its discretion in dismissing Claimants’ action for lack of
prosecution.
II. The court did not err in denying Claimants’ motion for partial summary
judgment.
Prior to discovery, Claimants moved for partial summary judgment as to all but one of
the seized financial accounts, as well as the jewelry. They argued that the civil forfeiture
complaint was insufficient; that the government was bound by the evidence presented at the
administrative hearing that resulted in the suspension of Dr. Zaidi’s registration to prescribe
controlled substances; and that the government lacked authority to seize Erum’s personal
jewelry. The court denied the motion.
We review the district court’s denial of summary judgment de novo, applying the same
Rule 56(c) standard as the district court and taking the facts in the light most favorable to the
nonmovant. Moldowan v. City of Warren, 578 F.3d 351, 373 (6th Cir. 2009) (citations omitted).
We also review de novo the district court’s interpretation of federal forfeiture laws. United
States v. Coffman, 612 F. App’x 278, 284 (6th Cir. 2015) (citing United States v. O’Dell,
247 F.3d 655, 679 (6th Cir. 2001)).
According to Claimants, the government’s evidence was limited to the factual record
developed at Dr. Zaidi’s hearing before a DEA administrative law judge. But Claimants are
incorrect. The administrative hearing concerned Dr. Zaidi’s appeal of the DEA’s suspension of
his registration to prescribe controlled substances; it did not address the forfeitability of the
properties at issue here. Claimants provide no authority suggesting that the government is
- 12 -
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
limited to evidence presented at an administrative hearing to prove a forfeiture complaint’s
allegations. To the contrary, the government may pursue evidence beyond that contained in the
complaint: 18 U.S.C. § 983(c)(2) permits the government to “use evidence gathered after the
filing of a complaint for forfeiture to establish, by a preponderance of the evidence, that property
is subject to forfeiture.” Id. (emphasis added).
Claimants next assert that the government lacked evidence to prove forfeitability beyond
the allegations in its complaint. However, the government identified ample additional evidence
of Dr. Zaidi’s alleged conduct. In its memorandum, the government pointed to an expert’s
review of patient files, data analysis of Dr. Zaidi’s prescribing history, Dr. Zaidi’s own
statements, and PMNO staff’s observations that the majority of patients were “drug seekers.”
Moreover, the forfeiture statute permits the government to acquire additional evidence until the
date of trial to prove the forfeitability of assets. See 18 U.S.C. § 983(c)(2). The government’s
evidence was sufficient to support the seizure of Claimants’ assets.
Claimants next contend that because the government submitted no evidence in opposition
to their motion for partial summary judgment, the court improperly denied the motion. They
suggest that because the government did not rebut the representations in their motion and its 700
pages of attached exhibits, the court should have accepted their evidence as undisputed and
thereby proven. But though claimants assert that “the government elected to stand on the mere
allegations of its complaint” in response to their motion, they are again misguided. The
government objected to being required to respond to Claimants’ summary judgment motion
because “such a response would require the [government] to unilaterally provide extensive
discovery” to Claimants, despite their lack of intent to return to the United States. As such, the
court did not require the government to respond to the motion with disclosure of its evidence.
- 13 -
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
Characterizing the motion as “premature” and based on an invalid theory of law, the court
excused the government from filing a formal response supported by affidavits and evidentiary
exhibits.
The court’s reasoning was sound. Federal Rule of Civil Procedure 56(d) authorizes a
court to “(1) defer considering [a summary judgment] motion or deny it; (2) allow time to obtain
affidavits or declarations or to take discovery; or (3) issue any other appropriate order” upon a
nonmovant’s showing that “it cannot present facts essential to justify its opposition.” Fed. R.
Civ. P. 56(d). To be sure, the government lacked an adequate opportunity to engage in discovery
when Claimants filed their motion: by repeatedly disobeying the court’s orders, Claimants
effectively foreclosed discovery.
Claimants also note that the government did not avail itself of the procedure
contemplated by Federal Rule of Civil Procedure 56(d)—that is, to “show[] by affidavit or
declaration that . . . it cannot present facts essential to justify its opposition [to summary
judgment].” This technicality is not determinative here. Before the deadline for filing a
response to Claimants’ motion, the court ruled sua sponte that the motion had been filed
prematurely. Moreover, the court later opined that “Claimants’ efforts to litigate this case
without allowing the Government to conduct discovery is unfairly prejudicial to the
Government.” Confronted with Claimants’ bad faith throughout this proceeding, the court’s
denial of their motion was not erroneous.
Finally, Claimants offer a substantive challenge to the forfeiture at issue. 18 U.S.C.
§ 981(a)(1)(C) subjects to forfeiture “[a]ny property . . . which constitutes or is derived from
proceeds traceable to . . . any offense constituting ‘specified unlawful activity.’” According to
Claimants, the three undercover law enforcement officers made sixteen visits to PMNO and paid
- 14 -
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
the clinic a total of $2,135 in cash. The cash was deposited into PMNO’s business account at
First Merit Bank. Claimants argue that only the business account into which the cash was
deposited was subject to seizure—not the remaining thirteen financial accounts or the jewelry.
The Civil Asset Forfeiture Reform Act of 2000 requires the government to establish by a
preponderance of the evidence that the property in question is subject to forfeiture. 18 U.S.C.
§ 983(c)(1). Moreover, “if the Government’s theory of forfeiture is that the property was used to
commit or facilitate the commission of a criminal offense, or was involved in the commission of
a criminal offense, the Government shall establish that there was a substantial connection
between the property and the offense.” 18 U.S.C. § 983(c)(3).
According to Claimants, “There is no evidence in this record of a substantial connection
between thirteen of the fourteen seized financial accounts or the jewelry, and to the alleged
specified unlawful activity related to treatment of the three undercover operatives.” They point
to United States v. Coffman, which explains:
Commingling of fraud proceeds with untainted money as part of
concealment money laundering under 18 U.S.C. § 1956(a)(1)(B)(i)
permits the forfeiting of the untainted money in certain
circumstances. . . . Forfeiture of commingled funds . . . is proper
when the government demonstrates that the defendant pooled the
funds to facilitate or disguise his illegal scheme. Commingling is
enough to expose the legitimate funds to forfeiture, if the
commingling was done for the purpose of concealing the nature or
source of the tainted funds (that is, if the commingling was done to
facilitate money laundering in violation of 18 U.S.C.
§ 1956(a)(1)(B)(i)).
574 F. App’x 541, 561 (6th Cir. 2014) (internal quotation marks and citations omitted).
Claimants observe that in Coffman, the government supplied bank records and financial analyses
to support its theory that the defendant commingled tainted and untainted funds to conceal their
- 15 -
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
source. See 574 F. App’x at 561. By contrast, they say, “the government . . . did not offer a
single piece of evidence establishing any connection between the tainted agent funds . . . to the
other thirteen seized accounts or to the jewelry.” They further argue that their alleged violations
of 18 U.S.C. §§ 1956 and 1957 cannot stand, as the government did not show that any of the
deposits were designed to conceal or disguise “the nature, the location, the source, the
ownership, or the control of the proceeds.” See United States v. Dierker, 417 F. App’x 515, 521
(6th Cir. 2011).
But the government responds convincingly:
If the claimants had returned to the United States and discovery
had commenced, they would have learned that expert analyses of
pharmacy records, Medicare records, and patient medical records,
would have supported the conclusion that a significant portion of
Syed Zaidi’s medical practice was outside of medical standards
and amounted to drug trafficking; and from a financial analysis of
his financial account records, that he laundered the proceeds of that
drug trafficking into and between the seized financial accounts.
However, claimants were not entitled to discovery of this
information through the prematurely filed motion for partial
summary judgment.
Had discovery commenced, the inadequacies that Claimants perceive in the government’s case
may have been confirmed. But Claimants’ own absence thwarted such discovery. To allow
them to benefit from that absence would defy fairness. The court’s denial of Claimants’ motion
for summary judgment was not erroneous.
III. The court did not err in denying Erum’s motion to dismiss the complaint.
Claimants next challenge the court’s denial of Erum’s motion to dismiss the forfeiture
complaint. We review de novo a district court’s dismissal of a complaint for failure to state a
claim. Havard v. Wayne Cnty., 436 F. App’x 451, 456 (6th Cir. 2011). In forfeiture cases, such
- 16 -
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
motions are governed by 18 U.S.C. § 983 and Rules G(8)(b)(ii) and G(2)(f) of the Supplemental
Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions (the “Supplemental
Rules”). Section 983, which prescribes the general rules for civil forfeiture actions, provides,
“No complaint may be dismissed on the ground that the Government did not have adequate
evidence at the time the complaint was filed to establish the forfeitability of the property.”
According to Supplemental Rule G(8)(b)(ii),
In an action governed by 18 U.S.C. § 983(a)(3)(D) the complaint
may not be dismissed on the ground that the government did not
have adequate evidence at the time the complaint was filed to
establish the forfeitability of the property. The sufficiency of the
complaint is governed by Rule G(2).
Id. Rule G(2), in turn, establishes the requirements for an adequate civil forfeiture complaint, the
last of which provides that “[t]he complaint must . . . state sufficiently detailed facts to support a
reasonable belief that the government will be able to meet its burden of proof at trial.”
Supplemental Rule G(2)(f).
Accepting the complaint’s allegations as true, the government satisfied Rule G(2)’s
requirements: the complaint supports a reasonable belief that the government would be able to
prove at trial that Dr. Zaidi used Erum’s accounts to launder the proceeds of his trafficking
activities. 18 U.S.C. § 981(a)(1)(C) authorizes the forfeiture of property “derived from proceeds
traceable to” a qualifying criminal violation, including unlawful trafficking in controlled
substances by a physician. See 21 C.F.R. § 1306.04(a) (“An order purporting to be a prescription
issued not in the usual course of professional treatment . . . is not a prescription within the
meaning and intent of . . . the [Controlled Substances] Act and the person . . . issuing it[] shall be
subject to the penalties provided for violations of the provisions of law relating to controlled
substances.”).
- 17 -
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
Though Erum was not charged with a crime, assets in her name may nonetheless be
subject to forfeiture. See 18 U.S.C. § 981(a)(1)(C) (subjecting to civil forfeiture “[a]ny
property . . . which constitutes or is derived from proceeds traceable to” a qualifying criminal
violation). The government’s financial analysis suggests that Dr. Zaidi “engaged in a complex
series of financial transactions using not only his own accounts, but those of his wife and
company, to comingle the tainted proceeds with the untainted proceeds, and successfully
laundered the tainted proceeds.” As the court noted, “[T]he Government is not required to allege
in the complaint all of the facts and evidence at its disposal. It is sufficient for the Government
to simply plead enough facts for the claimant to understand the theory of forfeiture, to file a
responsive pleading, and to undertake an adequate investigation.” See United States v.
$22,173.00 in United States Currency, 716 F. Supp. 2d 245, 248 (S.D.N.Y. 2010). Because “the
complaint . . . contain[s] either direct or inferential allegations respecting all material elements to
sustain a recovery under some viable legal theory,” Havard, 436 F. App’x at 457 (internal
quotation marks and citation omitted), the district court did not err in denying Erum’s motion to
dismiss.
IV. The court did not err in denying Claimants’ motion to release the seized funds to
pay their taxes.
Finally, Claimants challenge the district court’s denial of their motion to transfer
$144,702.00 from the seized financial accounts to be applied to their federal, state, and local
taxes. They also sought the transfer of an additional $9,150.00 to their accounting firm for their
professional services. Denying the motion, the court looked to 18 U.S.C. § 983(f), which
“outlines the circumstances under which civil forfeiture claimants are entitled to immediate
release of seized property and the procedure to be followed in obtaining such release.” United
States v. Contents of Accounts (Chavez), 629 F.3d 601, 608 (6th Cir. 2011). To demonstrate
- 18 -
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
entitlement to the release of property based on hardship, Claimants must satisfy § 983(f)(1)’s
requirements.
A claimant . . . is entitled to immediate release of seized property
if—
(A) the claimant has a possessory interest in the property;
(B) the claimant has sufficient ties to the community to
provide assurance that the property will be available at the
time of the trial;
(C) the continued possession by the Government pending the
final disposition of forfeiture proceedings will cause
substantial hardship to the claimant, such as preventing the
functioning of a business, preventing an individual from
working, or leaving an individual homeless;
(D) the claimant’s likely hardship from the continued
possession by the Government of the seized property
outweighs the risk that the property will be destroyed,
damaged, lost, concealed, or transferred if it is returned to
the claimant during the pendency of the proceeding; and
(E) none of the conditions set forth in paragraph (8) applies.
18 U.S.C. § 983. Paragraph 8 provides, in relevant part, that the subsection “shall not apply if
the seized property. . . is contraband, currency, or other monetary instrument, or electronic funds
unless such currency or other monetary instrument or electronic funds constitutes the assets of a
legitimate business which has been seized.” 18 U.S.C. § 983(f)(8)(A).
The court determined that the Zaidis could not demonstrate the community ties required
by § 981(f)(1)(B), as they had placed their Ohio home on the market and were “actively avoiding
the practical reach of the Court’s civil and criminal jurisdiction by remaining in Pakistan.” It
also noted that because the Zaidis sought the funds to pay their taxes and accountants, they could
not demonstrate that the funds would be available at the time of trial. Finally, the court
acknowledged that § 983(f)(8)(A) excludes from release seized currency and other monetary
instruments unless they “constitute[] the assets of a legitimate business which has been seized.”
- 19 -
Case Nos. 15-3909/15-4090
United States v. $506,069.09 Seized From First Merit Bank, et al.
It determined that this provision did not apply, as “it cannot be said that PMNO was a legitimate
business.”
Claimants assert that the court errantly applied § 983(f)(1). They note that though the
statute provides for the release of seized property to the claimant, they sought instead to transfer
seized funds to the Department of Treasury. Such transfer, they say, is not contemplated by §
983(f)(1). But Claimants point to no statute that allows such transfer. As such, the court’s denial
of the motion was not erroneous.
AFFIRMED.
- 20 -
| {
"pile_set_name": "FreeLaw"
} |
UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 99-10659
GEORGE S. ROBERTSON
Plaintiff-Appellant
VERSUS
UNITED STATES OF AMERICA
Defendant-Appellee
Appeal from the United States District Court
For the Northern District of Texas
( 4:98-CV-981-BE )
July 12, 2001
Before GARWOOD, PARKER, and DENNIS, Circuit Judges.
Per Curiam:*
Plaintiff-appellant George Robertson filed an interlocuotry
appeal of the district court’s March 3, 1999, “gag order”
restraining him from communicating with the media about his case
against the United States. We construe the district court’s order
as having expired upon the final disposition of Robertson’s suit,
*
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.
1
and therefore as having no continuing effect on the parties.
Accordingly, we do not reach the merits of this issue, which is
moot.
Robertson also appealed the district court’s denial of his
motion for default judgment against the United States. However,
this court’s jurisdiction is generally limited to appeals of final
decisions of district courts. 28 U.S.C. § 1291 (2000). And, as
this claim is not “separable from, and collateral to, rights
asserted in the action, too important to be denied review and too
independent of the cause itself to require that appellate
consideration be deferred until the whole case is adjudicated,”
Adult Film Ass’n of America, Inc. v. Thetford, 776 F.2d 113, 115
(5th Cir. 1985), it is not susceptible to interlocutory review under
the collateral order doctrine. Id. We therefore lack jurisdiction
to consider Robertson’s appeal of the district court’s denial of
his motion for default judgment.
Accordingly, the “gag order” appeal is dismissed as moot, and
the motion for default judgment appeal is dismissed for lack of
appellate jurisdiction.
Appeals DISMISSED.
2
| {
"pile_set_name": "FreeLaw"
} |
In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 14-‐‑3045
GLOBAL TECHNOLOGY & TRADING, INC., and MANOJ JAIN,
Plaintiffs-‐‑Appellants,
v.
TECH MAHINDRA LIMITED, formerly known as SATYAM
COMPUTER SERVICES LIMITED,
Defendant-‐‑Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 09 C 5111 — William T. Hart, Judge.
____________________
ARGUED MAY 28, 2015 — DECIDED JUNE 15, 2015
____________________
Before BAUER, EASTERBROOK, and RIPPLE, Circuit Judges.
EASTERBROOK, Circuit Judge. The Illinois Business Brokers
Act of 1995 requires brokers for the sale of businesses in the
state to register. 815 ILCS 307/10-‐‑10. Brokerage agreements
must be in writing. 815 ILCS 307/10-‐‑35. Promises to pay un-‐‑
registered brokers for their services are unenforceable. 815
ILCS 307/10-‐‑60. Global Technology & Trading, Inc., appar-‐‑
ently was unaware of this statute when it orally agreed with
2 No. 14-‐‑3045
Satyam Computer Services to act as a broker in the purchase
of Bridge Strategy Group, LLC, a business operating in Illi-‐‑
nois. (Satyam, based in India, is now known as Tech Mahin-‐‑
dra; we use its old name for congruence with the district
court’s opinion and the parties’ submissions.)
Global brokered the acquisition, but Satyam refused to
pay for its services. Global sued in state court, seeking a 3%
commission (about $600,000). Satyam removed to federal
court under the alien diversity jurisdiction. 28 U.S.C.
§§ 1332(a)(2), 1441(b). It contended that Bridge Strategy had
compensated Global for its services as an intermediary and
that it had never promised any additional compensation.
The lack of a writing, according to Satyam, reflects the fact
that there is no agreement, period.
Pleadings were exchanged and discovery conducted.
When the litigation was four years old, Satyam filed a mo-‐‑
tion for summary judgment with a brand new argument:
that Global is not registered under the Business Brokers Act
and for this reason, as well as the oral nature of the promise
Global sought to enforce, the Act blocks any relief. Global
was taken aback; apparently its lawyers, like its principals,
had never heard of the Business Brokers Act. Global has not
denied that the Act, if applied, dooms this lawsuit. But it
maintains that the Act is an affirmative defense, which un-‐‑
der Fed. R. Civ. P. 8(c) had to appear in Satyam’s answer to
the complaint. By waiting four years to invoke the Act,
Global insists, Satyam has forfeited its benefit.
Rule 8(c) says that a defendant “must” include all affirm-‐‑
ative defenses in the answer to the complaint. The district
court analogized §307/10-‐‑35 (the written-‐‑contract require-‐‑
ment) to a Statute of Frauds and concluded that the Business
No. 14-‐‑3045 3
Brokers Act is an affirmative defense. But the court added
that Rule 8(c) does not specify a consequence for a litigant’s
failure to include an affirmative defense in an answer. Sev-‐‑
eral of our decisions hold that a district court may (though it
need not) permit an untimely affirmative defense, provided
the plaintiff does not suffer prejudice from the delay. See,
e.g., Williams v. Lampe, 399 F.3d 867, 871 (7th Cir. 2005);
Schmidt v. Eagle Waste & Recycling, Inc., 599 F.3d 626, 632 (7th
Cir. 2010). Most other circuits follow the same approach. See,
e.g., Brinkley v. Harbour Recreation Club, 180 F.3d 598, 612–13
(4th Cir. 1999); Camarillo v. McCarthy, 998 F.2d 638, 639 (9th
Cir. 1993); Moore, Owen, Thomas & Co. v. Coffey, 992 F.2d
1439, 1445 (6th Cir. 1993); Kleinknecht v. Gettysburg College,
989 F.2d 1360, 1374 (3d Cir. 1993); Ball Corp. v. Xidex Corp.,
967 F.2d 1440, 1443–44 (10th Cir. 1992).
Williams and Schmidt add that the expense of conducting
a suit does not count as prejudice; what they mean by “prej-‐‑
udice” is a reduction in the plaintiff’s ability to meet the de-‐‑
fense on the merits—if, say, a witness has died, or docu-‐‑
ments have been destroyed, during the time between when
the defense should have been raised and when it was actual-‐‑
ly raised. Finding that Global had not suffered prejudice, the
district court excused Satyam’s delay and entered judgment
in its favor.
Global contends that Williams and similar decisions are
inconsistent with the language of Rule 8(c), which says that
affirmative defenses “must” be raised no later than the an-‐‑
swer to the complaint. Yet Rule 8(c) does not provide a con-‐‑
sequence for delay. It differs in this respect from Fed. R.
Crim. P. 12(e), which until recently provided that the omis-‐‑
sion of an affirmative defense from pretrial motions practice
4 No. 14-‐‑3045
in a criminal case “waives” that defense; the civil rules say
nothing of the sort. Criminal Rule 12(e) has been replaced by
Fed. R. Crim. P. 12(c)(3), which says that failure to raise a de-‐‑
fense on time blocks its presentation unless the district judge
finds “good cause” for the delay; this language, too, is with-‐‑
out a parallel in Civil Rule 8(c)—though it does have a paral-‐‑
lel in Civil Rule 12(h)(1), which says that four specific de-‐‑
fenses are waived by their omission from the answer or a
motion governed by Rule 12(g)(2). Affirmative defenses un-‐‑
der Rule 8(c) are not on the list of those waived by omission.
Although Civil Rule 8(c) does not specify a consequence
for the omission of an affirmative defense, a different rule
authorizes district judges to excuse untimely filings. Rule
6(b)(1)(B) provides that a judge may extend the time to do
something, even after the deadline has passed, “if the party
failed to act because of excusable neglect.” See Pioneer In-‐‑
vestment Services Co. v. Brunswick Associates L.P., 507 U.S. 380
(1993) (defining “excusable neglect”). Some deadlines cannot
be extended under any circumstances, see Rule 6(b)(2), but
Rule 8(c) is not on that list. The district court did not make
an excusable-‐‑neglect finding, perhaps because none of the
litigants drew Rule 6(b)(1)(B) to its attention—even in this
court neither side mentions it—but a basis for such a finding
is easy to appreciate. Until shortly before Satyam filed its
motion, no one knew about the Business Brokers Act. Global
and its lawyers, Satyam and its lawyers, and the judge all
were in the dark about a statute that has been called a pitfall
for the unwary. The Illinois Business Brokers Act: Pitfalls for the
Unwary, 85 Ill. B.J. 542 (1997). Professional business brokers
doubtless know about the Act and follow its rules, but
someone who occasionally or rarely serves as an intermedi-‐‑
ary may not. Pioneer Investment Services holds that district
No. 14-‐‑3045 5
judges have discretion when evaluating claims of excusable
neglect; had the judge been asked to exercise that discretion,
he would not have abused it by allowing Satyam to invoke
the Act belatedly. As a practical matter, that’s what the dis-‐‑
trict judge did by relying on Williams and similar decisions.
Alternatively, the district court might have turned to
Rule 15(a)(2), which provides that judges may allow plead-‐‑
ings to be amended and “should freely give leave when jus-‐‑
tice so requires.” The only circuit that has nominally rejected
the approach of Williams and Schmidt has reached the same
functional result by using Rule 15(c)(2) to allow belated
amendments to add affirmative defenses. See Jackson v. Dis-‐‑
trict of Columbia, 254 F.3d 262, 267 (D.C. Cir. 2001); Harris v.
Secretary of Veterans Affairs, 126 F.3d 339, 345 (D.C. Cir. 1997).
Jackson says that the district judge should allow the amend-‐‑
ment when that would not prejudice the plaintiff’s oppor-‐‑
tunity to address the merits. That’s the Williams and Schmidt
approach by another name. (The Fifth Circuit’s approach
likewise differs from Williams and Schmidt in nomenclature
but not result. See Lucas v. United States, 807 F.2d 414, 417–18
(5th Cir. 1986).)
Global observes that litigation should be efficiently man-‐‑
aged, see Fed. R. Civ. P. 1, and that it is inefficient to allow
matters to last for four years longer than necessary. That’s
true enough, but it takes chutzpah for Global to blame
Satyam. Had Global’s lawyers done better legal research be-‐‑
fore suing, see Fed. R. Civ. P. 11(b)(2), they would have rec-‐‑
ognized that the Business Brokers Act makes recovery im-‐‑
possible. The bills Global has footed in this suit stem from its
own lawyers’ poor preparation. Global should count itself
lucky that the district court did not impose a sanction for fil-‐‑
6 No. 14-‐‑3045
ing what is, with knowledge of the Act, a frivolous suit. For
their part, Satyam’s lawyers failed to track down the Busi-‐‑
ness Brokers Act early in the litigation, but that delay carries
a self-‐‑inflicted penalty: under the American Rule, Satyam
must bear its own legal fees for the extra years this suit lin-‐‑
gered. It is unnecessary for the judiciary to be stingy with
extensions of the Rule 8(c) deadline, or with amendments
under Rule 15(a)(2), since both plaintiffs and defendants
want to recognize and raise affirmative defenses as soon as
possible, in order to cut their own legal bills.
We need not decide whether the Business Brokers Act is
an affirmative defense for the purpose of Rule 8(c). We de-‐‑
cline to overrule Williams and similar decisions. District
judges have authority to authorize a litigant to assert an af-‐‑
firmative defense despite its omission from the answer. That
authority was not abused in this case.
AFFIRMED
| {
"pile_set_name": "FreeLaw"
} |
United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT April 8, 2004
Charles R. Fulbruge III
Clerk
No. 03-60657
Summary Calendar
FENNY TJANDRA TJIN; IRSAN; PATRICIA ANGELIA; KYAN STEPHEN
ANGELO; IAN PATRICK ANGELO,
Petitioners,
versus
JOHN ASHCROFT, U.S. ATTORNEY GENERAL,
Respondent.
--------------------
Petition for Review of an Order of the
Board of Immigration Appeals
BIA No. A79 505 774
BIA No. A79 505 773
BIA No. A79 505 772
BIA No. A79 505 771
BIA No. A79 505 770
--------------------
Before JONES, BENAVIDES, and CLEMENT, Circuit Judges.
PER CURIAM:*
The petitioners seek review of the decision of the Board of
Immigration Appeals (“BIA”) summarily affirming the decision of
the immigration judge (“IJ”) to deny their applications for
asylum. They have not challenged the denial of withholding of
removal or the finding that they are not entitled to asylum on
the basis of a well-founded fear of future persecution. These
*
Pursuant to 5TH CIR. R. 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
No. 03-60657
-2-
claims are therefore abandoned. See Calderon-Ontiveros v.
I.N.S., 809 F.2d 1050, 1052 (5th Cir. 1986).
The petitioners argue that the BIA erred in determining that
they were not persecuted based upon their religion and ethnicity.
The petitioners argue that they established past persecution
based on Fenny Tjandra Tjin’s fear following the rape of Chinese
women during riots in Jakarta in May 1998, her feeling of
isolation during church bombings and burnings, and her loss of a
night’s sleep following a threatening phone call to her home.
After reviewing the record and the briefs, we conclude that the
decision, that the petitioners’ allegations did not rise to the
level of persecution, is supported by substantial evidence and
that the evidence in the record does not compel a conclusion
contrary to that reached by the IJ and BIA. Ontunez-Tursios v.
Ashcroft, 303 F.3d 341, 350 (5th Cir. 2002); Abdel-Masieh v.
I.N.S., 73 F.3d 579, 583-84 (5th Cir. 1996); Gomez-Mejia v.
I.N.S., 56 F.3d 700, 702 (5th Cir. 1995).
PETITION DENIED.
| {
"pile_set_name": "FreeLaw"
} |
951 F.2d 361
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.Joe Vern PIERCE, Petitioner-Appellant,v.George HERMAN, et al., Respondents-Appellees.
No. 90-16835.
United States Court of Appeals, Ninth Circuit.
Submitted Nov. 4, 1991.*Decided Dec. 20, 1991.
Before BOOCHEVER, WILLIAM A. NORRIS and KLEINFELD, Circuit Court Judges.
MEMORANDUM**
Joe Vern Pierce appeals from the district court's dismissal in part and denial in part of his petition for habeas corpus.
Pierce contends that (1) the Arizona court before which he was tried for murder in 1974 gave an unconstitutional instruction on the element of intent, (2) he was denied effective assistance of counsel, (3) his right against self-incrimination was infringed, and (4) the prosecutor and certain law enforcement officers conspired to elicit perjurious testimony against him. The first contention was rejected on the merits, and the remainder of the petition was dismissed as successive. We affirm.
I.
The judge who presided over Pierce's murder trial in Arizona state court instructed the jury that "[y]ou may determine that the defendant intended to do the act if he did it voluntarily." Five years after the trial, the United States Supreme Court held in Sandstrom v. Montana, 442 U.S. 510 (1979), that an instruction that "[t]he law presumes that a person intends the ordinary consequences of his voluntary acts" could have been interpreted by a reasonable juror as stating a mandatory presumption, thereby shifting the burden of proof on an element of the charged offense to the defendant in derogation of his rights under the Due Process Clause of the Fourteenth Amendment. The question Pierce raises is whether the trial judge's instruction in his case violated Sandstrom.
In Evans v. Lewis, 855 F.2d 631 (9th Cir.1988), we determined that the precise language employed by the trial court in Pierce's case passed constitutional muster, since it merely "allows the jury to infer intent and does not require a presumption of intent." Id., at 636. Evans controls Pierce's case, so the district court properly rejected Pierce's argument that the instruction was deficient under Sandstrom.
II.
The district court dismissed the remainder of Pierce's petition, on the ground that it merely restated allegations already adjudicated adversely to Pierce. Rule 9(b) of the Rules Governing § 2254 Cases provides that
[a] second or successive petition may be dismissed if the judge finds that it fails to allege new or different grounds for relief and the prior determination was on the merits or, if new and different grounds are alleged, the judge finds that the failure of the petitioner to assert those grounds in a prior petition constituted an abuse of the writ.
In Sanders v. United States, 373 U.S. 1 (1963), the Supreme Court stated that a federal habeas petition could be dismissed as successive if "(1) the same ground presented in the subsequent application was determined adversely to the applicant on the prior application, (2) the prior determination was on the merits, and (3) the ends of justice would not be served by reaching the merits of the subsequent application." Id., at 15.
In 1976, Pierce filed a habeas petition in federal district court in which he alleged that (1) he had been denied effective assistance of counsel in the state court proceedings, (2) statements had been elicited from him in violation of his right against self-incrimination, and (3) the prosecutor had knowingly allowed perjured testimony to be introduced at the trial. All of these allegations were ultimately rejected on the merits. In addition, the grounds underlying Pierce's petition before us are the same as those raised in his 1976 petition, despite the fact that Pierce predicates his claims now partly upon factual bases not raised in the prior proceedings. Molina v. Rison, 886 F.2d 1124 (9th Cir.1988). Thus, the remaining allegations contained in his petition failed to allege new or different grounds for relief and the prior determination was on the merits.
The "ends of justice" compel reconsideration of a petitioner's successive allegations only if he makes a showing of "manifest injustice" or "a change in the law." Molina, 886 F.2d at 1131. Neither of these conditions militates in Pierce's favor with respect to any of his claims. First, although Pierce correctly argues that Strickland v. Washington, 466 U.S. 668 (1984) substantially reformulated the standard governing allegations that a defendant had received constitutionally deficient assistance of counsel, the reformulation of the standard made it harder, not easier, to prevail on a claim of ineffective assistance. In addition, none of the alleged instances of ineffective assistance are sufficient to satisfy the Strickland standard. There is nothing in the record to indicate that Pierce is in prison because he was saddled with a poor lawyer rather than because he killed his girlfriend.
Second, Pierce correctly notes that both Rhode Island v. Innis, 446 U.S. 291 (1980) and Edwards v. Arizona, 451 U.S. 477 (1981) articulated new rules applicable to the determination of whether an interrogation is proper under Miranda and its progeny. However, the first approved the admission of statements made in a situation roughly analogous to that extant here, and the second has been determined to be inapplicable on collateral review of decisions that were final prior to May 18, 1981, approximately six years after the date the Arizona Supreme Court affirmed Pierce's conviction on direct appeal. Finally, since Pierce fails to identify any change in the law relevant to a possibility of manifest injustice resulting from a failure to reconsider his claim of prosecutorial misconduct, this allegation as well was properly dismissed.
1
Accordingly, the order of the district court denying Pierce's Sandstrom claim on the merits, and dismissing the remainder of the petition as successive, is affirmed.
*
The panel unanimously finds this case suitable for decision without oral argument, as provided in Ninth Circuit Rule 34-4(a)
**
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3
| {
"pile_set_name": "FreeLaw"
} |
631 N.W.2d 564 (2001)
2001 ND 138
Shari SELZLER, Plaintiff and Appellant,
v.
Terry SELZLER, Defendant and Appellee.
No. 20000247.
Supreme Court of North Dakota.
July 20, 2001.
*566 Lynn M. Boughey, Boughey Law Firm, Minot, for plaintiff and appellant.
Michael S. McIntee, McIntee Law Firm, Towner, for defendant and appellee.
NEUMANN, Justice.
[¶ 1] Shari Selzler appealed from an amended divorce judgment changing physical custody of the parties' ten-year-old daughter to Terry Selzler. We conclude the trial court did not err in changing custody, and we affirm.
I
[¶ 2] The Selzlers were married in 1985. When they divorced in January 1996, the decree granted Shari sole legal and physical custody of a thirteen-year-old who was Shari's natural and Terry's adoptive daughter. The parties were granted joint legal custody of their natural daughter, a six-year-old, and Shari was granted care, custody and control of that child. Terry was granted reasonable and liberal visitation rights with the younger daughter.
[¶ 3] Terry was employed as a farm laborer and Shari was employed as a social worker for Pierce County, at one time as a child abuse and neglect investigator. The *567 latter years of the marriage were marred by problems. In December 1994, a juvenile court referee found the older daughter to be a deprived child based upon the referee's finding that Terry had sexually abused her on four occasions. The referee recommended the older daughter's care, custody and control be placed with Pierce County Social Services for one year. Criminal charges based on the older daughter's allegations of sexual abuse were not pursued against Terry.
[¶ 4] After the divorce, Shari experienced disciplinary problems with the older daughter. The older daughter quit school before completing high school. She twice received treatment for chemical abuse when she was fifteen and seventeen years old, and had been arrested for driving without a license. Police were called to Shari's residence on numerous occasions on account of late night parties, dogs barking, and a registered sex offender, who was Shari's friend, being in the home with the young girls. In June 1999, an abuse and neglect report was filed against Shari and a petition for deprivation was proposed, but not filed. Instead, Shari was given an option to be supervised by a social worker from McHenry County Social Services. Shari entered into a contractual agreement requiring her to undergo therapy services, to allow no contact between the children and the registered sex offender, to allow only her children and herself to reside in the home, and to participate in future parent aid services if needed.
[¶ 5] In May 1999, Terry brought a motion to change custody of the younger daughter from Shari to himself. The trial court, after consulting counsel for the parties, appointed Sharon Hauschulz as the custody investigator. Hauschulz recommended custody of the younger daughter be changed from Shari to Terry. After three days of testimony, the trial court found a significant change of circumstances had occurred and granted the motion. Shari appealed.
II
[¶ 6] Shari argues the trial court erred in accepting the custody investigator's report because the record does not show whether the investigator met the preferred qualifications imposed by N.D.R.Ct. 8.6.
[¶ 7] When Hauschulz was proposed to serve as the custody investigator in this case, Shari's trial counsel did not object.[1] During the pretrial, trial and post-trial proceedings, Shari's counsel also raised no objection about Hauschulz's qualifications. We do not consider questions that were not presented to the trial court and are raised for the first time on appeal. Overboe v. Farm Credit Serv., 2001 ND 58, ¶ 11, 623 N.W.2d 372. Because Shari's counsel did not raise this issue before the trial court, the issue is not reviewable on appeal. Id.
III
[¶ 8] Shari argues the trial court erred in allowing the custody investigator to be excused from the court proceedings, rather than requiring her to be present throughout the three days of hearings. After the custody investigator testified during the first day of hearings, the trial court allowed her to leave the court proceedings for medical reasons. The trial court provided that the investigator could review, if requested by a party, tapes or transcripts of the hearings held outside of her presence, and further provided that she could be recalled as a witness, if requested by a party. Shari did not request the investigator to review the tapes or transcripts, or recall her as a witness.
[¶ 9] Rule 8.6(c), N.D.R.Ct., provides "[a] custody investigator shall attend all *568 court proceedings and shall testify when requested." We reject Terry's contention that, although the custody investigator must attend court proceedings, the investigator need not remain present throughout the entire court proceedings. The obvious purpose of this requirement is to have the investigator hear the testimony of other witnesses and be prepared to testify whether the investigator's opinion has been changed by any additional testimony. However, we decline to adopt Shari's view that the failure to have the custody investigator present throughout the entire proceedings always constitutes reversible error.
[¶ 10] A trial court has great latitude and discretion in conducting a trial and, absent an abuse of discretion, its decision on matters relating to the conduct of a trial will not be set aside on appeal. See Schaefer v. Souris River Telecomm. Coop., 2000 ND 187, ¶ 13, 618 N.W.2d 175; State v. Boehler, 542 N.W.2d 745, 747 (N.D. 1996); Great Plains Supply Co. v. Erickson, 398 N.W.2d 732, 734 (N.D.1986). Likewise, a trial court has broad discretion in its control of the presentation of evidence. See Mayo v. Mayo, 2000 ND 204, ¶ 39, 619 N.W.2d 631; N.D.R.Ev. 611. Although the trial court has broad discretion over the presentation of evidence and the conduct of trial, it must exercise this discretion in a manner that best comports with substantial justice. See Slaubaugh v. Slaubaugh, 466 N.W.2d 573, 580 (N.D. 1991). Moreover, we do not construe rules of court to produce absurd or ludicrous results, Disciplinary Bd. of Supreme Court v. O'Neil, 326 N.W.2d 879, 882 (N.D. 1982), but we construe them, like statutes, in a practical manner. See Huber v. Oliver County, 1999 ND 220, ¶ 16, 602 N.W.2d 710.
[¶ 11] Because unforeseen circumstances may make it impossible for a custody investigator to be present throughout the entire proceedings, we construe N.D.R.Ct. 8.6(c) to allow the court, for good cause, to excuse a custody investigator from attending the entire proceedings, but only if the court makes reasonable accommodations to preserve the parties' right to examine the investigator in light of all of the testimony given. See generally Quarne v. Quarne, 1999 ND 188, ¶ 6, 601 N.W.2d 256. Here, the custody investigator's medical problems constituted good cause to deviate from the procedural requirements. The trial court made reasonable accommodations by providing the investigator could review tapes or transcripts of the hearing, if requested by a party to do so, and by providing the investigator could be recalled as a witness, if requested by a party. The custody investigator was not requested to review tapes or transcripts of the hearing and was not recalled by the parties to testify. Consequently, Shari has shown no prejudice resulted from the accommodations made by the trial court. See Graber v. Engstrom, 384 N.W.2d 307, 311 (N.D. 1986).
[¶ 12] We conclude the trial court did not abuse its discretion in allowing the custody investigator to be excused from the proceedings after testifying.
IV
[¶ 13] Shari argues the trial court erred in relying on hearsay information relating to sexual abuse risk factors contained in the custody investigator's testimony and in rejecting contrary evidence supplied by a social worker with a master's degree in clinical social work.
[¶ 14] The custody investigator testified she was told by three unnamed professionals that, although there are no guarantees, there is less chance that the biological parent of a child will sexually *569 abuse the child than the chance that a nonbiological parent will sexually abuse the child. The social worker testified she was unaware of any research to support that opinion.
[¶ 15] Shari's trial counsel did not make a hearsay objection to the custody investigator's comments, which were given in response to a question by Shari's trial counsel during cross-examination. Moreover, the credibility of witnesses, including expert witnesses, and the weight to be given their testimony are questions of fact subject to the clearly erroneous standard of review under N.D.R.Civ.P. 52(a). Mayo, 2000 ND 204, ¶ 24, 619 N.W.2d 631. In this case, the social worker who testified was not formally qualified as an expert witness by the trial court, and was Shari's case manager from McHenry County Social Services. The trial court was not required to accept the testimony of Shari's fellow social worker who was working with and assisting Shari. Shari has failed to establish that the trial court's acceptance of the custody investigator's testimony over the social worker's testimony is clearly erroneous.
V
[¶ 16] Shari argues the trial court erred in its handling of the prior juvenile court finding that Terry had sexually abused his older, adopted daughter. In November 1994, a juvenile court referee found by clear and convincing evidence that Terry had abused the older daughter in the family home by sexually touching her on four separate occasions in 1992. Shari argues these findings of sexual abuse should create a presumption against Terry having custody of the younger daughter under N.D.C.C. § 14-09-06.2(1)(j).
[¶ 17] There is a rebuttable presumption against awarding custody to a parent who has perpetrated domestic violence. Cox v. Cox, 2000 ND 144, ¶ 17, 613 N.W.2d 516. Under N.D.C.C. § 14-09-06.2(1)(j), the presumption against awarding custody to the perpetrator arises in three circumstances: (1) "there exists one incident of domestic violence which resulted in serious bodily injury;" (2) there exists one incident of domestic violence which "involved the use of a dangerous weapon;" or (3) "there exists a pattern of domestic violence within a reasonable time proximate to the proceeding." Tulintseff v. Jacobsen, 2000 ND 147, ¶ 9, 615 N.W.2d 129. Sexual abuse can be a form of domestic violence. See N.D.C.C. § 14-07.1-01(2). However, unless serious bodily injury resulted or a dangerous weapon was used, N.D.C.C. § 14-09-06.2(1)(j) requires a pattern of abuse to occur "within a reasonable time proximate to the proceeding." Shari concedes that sexual abuse in this case did not result in serious bodily injury, involve the use of a dangerous weapon, or occur within a reasonable time proximate to the proceeding. Shari nevertheless invites this Court to create a rebuttable presumption against custody under N.D.C.C. § 14-09-06.2(1)(m) when a parent has been found to have committed sexual abuse against the child of a family or household member as defined by N.D.C.C. § 14-07.1-01(4). We decline Shari's invitation.
[¶ 18] Our primary objective in construing a statute is to ascertain the intent of the Legislature by looking at the language of the statute itself and giving it its plain, ordinary, and commonly understood meaning. Overboe, 2001 ND 58, ¶ 9, 623 N.W.2d 372. We presume the Legislature intended all that it said, and that it said all that it intended to say, and where the statutory language is plain and unambiguous, a court cannot indulge in speculation as to the probable or possible qualifications *570 which might have been in the mind of the Legislature. Little v. Tracy, 497 N.W.2d 700, 705 (N.D.1993). The factors for determining the best interest and welfare of the child are set forth in N.D.C.C. § 14-09-06.2(1), and subdivision m refers only to "[a]ny other factors considered by the court to be relevant to a particular child custody dispute." Subdivision m does not refer to a presumption against custody, as does N.D.C.C. § 14-09-06.2(1)(j). Indeed, the last sentence of N.D.C.C. § 14-09-06.2(1)(j) provides "[a] court may consider, but is not bound by, a finding of domestic violence in another proceeding under chapter 14-07.1," thereby indicating a legislative intention that previous court findings of domestic violence not be given presumptive effect. We refuse to correct what Shari terms a legislative "oversight" by rewriting the presumption statute to cover the circumstances of this case.
[¶ 19] Evidence of domestic violence which is insufficient to trigger the presumption remains a factor to be considered in determining a child's best interest under N.D.C.C. § 14-09-06.2(1). Holtz v. Holtz, 1999 ND 105, ¶ 27, 595 N.W.2d 1. The trial court in this case did not err in failing to invoke the presumption against custody based on the older daughter's allegations and the juvenile court referee's findings of sexual abuse by Terry.
VI
[¶ 20] Shari argues the trial court erred in changing custody of the younger daughter from her to Terry.
[¶ 21] Under N.D.C.C. § 14-09-06.6(6):
The court may modify a prior custody order after the two-year period following the date of entry of an order establishing custody if the court finds:
a. On the basis of facts that have arisen since the prior order or which were unknown to the court at the time of the prior order, a material change has occurred in the circumstances of the child or the parties; and
b. The modification is necessary to serve the best interest of the child.
Under this statute, the court, in deciding whether to change custody, must consider whether there has been a significant change of circumstances since the original custody decree, and, if so, whether the change requires the court to change custody to serve the best interest of the child. Anderson v. Resler, 2000 ND 183, ¶ 8, 618 N.W.2d 480. A material change in circumstances occurs when new facts are presented that were unknown to the moving party at the time the divorce decree was entered. Mayo, 2000 ND 204, ¶ 16, 619 N.W.2d 631. A material change of circumstances can occur if a child's present environment may endanger the child's physical or emotional health or impair the child's emotional development. Holtz, 1999 ND 105, ¶ 17, 595 N.W.2d 1. The party seeking modification of a custody order bears the burden of showing a change is required. N.D.C.C. § 14-09-06.6(8). The trial court's decision whether a change is required is a finding of fact subject to the clearly erroneous standard of review. Hendrickson v. Hendrickson, 2000 ND 1, ¶ 16, 603 N.W.2d 896. A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if there is no evidence to support it, or if the reviewing court is left with a definite and firm conviction a mistake has been made. Mosbrucker v. Mosbrucker, 1997 ND 72, ¶ 5, 562 N.W.2d 390.
[¶ 22] In a thorough opinion, the trial court detailed its reasons for changing custody. Since the divorce, the younger *571 daughter has developed attention deficit disorder. The court noted the younger daughter was currently having difficulty in school and had been absent 21.5 days and tardy 35 times during the 1998-1999 school term. Shari had been the subject of a Social Service investigation based on a report of neglect. Investigators found that Shari's home was unclean, the younger daughter had no bed to sleep in, and Shari had been spending time with a convicted child molester.
[¶ 23] The court analyzed the best interest factors under N.D.C.C. § 14-09-06.2(1). The court found love, affection and other emotional ties exist between the younger daughter and both of her parents, and noted the lack of the parties' ability to effectively communicate with each other had resulted in irregular contact between the younger daughter and Terry. The court found the "most relevant factor" in its decision to be the capacity and disposition of the parents to give the child love, affection and guidance, and to continue the education of the child. Because the younger daughter had lived with Shari since her birth, the court found the emotional ties and continuity favored Shari, but the court doubted whether Shari could continue to provide her necessary guidance.
[¶ 24] The court noted law enforcement officers had been summoned to Shari's home on twelve occasions in response to calls about barking dogs, loud noise from parties, and the convicted sex offender being at the home. In summer 1999, a child protection team investigated and found services were required. Shari was asked to keep the convicted sex offender out of their home, have a psychiatric evaluation, provide a bed for the younger daughter, and no longer allow the older daughter to drive without a license. Because Shari was allowing other adolescent children to reside in her home with the older daughter, Shari was also asked to discontinue this practice. The contract Shari signed to avoid a placement of her children through Social Services required her to assure the younger daughter arrived on time to school and to have no contact with the convicted sex offender.
[¶ 25] The custody investigator had reported Shari's home was "chaotic" and a "mess" when she visited. The older daughter, age 17 at the time, was living in the home along with her boyfriend, according to the younger daughter. The older daughter had earlier undergone treatment for alcohol and drug abuse. Her boyfriend was hollering and swearing at the younger daughter and two other young children she was babysitting. At the time of trial, the older daughter was pregnant and living with her boyfriend in Minot. The custody investigator described Terry's home as orderly, clean and well maintained. Terry currently lives with his financee and her two sons.
[¶ 26] In considering whether Terry could provide the guidance necessary, the court addressed the prior juvenile court referee's findings of sexual contact between Terry and the older daughter. The court noted the older daughter's allegations and the referee's findings "make this case very difficult," but found this factor nevertheless weighed in favor of Terry because "he has the more stable home where structure could be provided."
[¶ 27] The court found the length of time the child has lived in a stable and satisfactory environment and the desirability of maintaining continuity weighed against Shari. Although the younger daughter had always lived with Shari, the home was not satisfactory or stable. According to the court, Shari's allowing late night parties and a convicted child molester to be present in the home after the older daughter had alleged sexual fondling *572 by Terry showed "an inability to make responsible adult decisions as a parent and an inability to put a child's needs before her own." The court found the domestic violence presumption did not apply under the circumstances, and regarding the other statutory factors, ruled they did not favor either party or were inapplicable.
[¶ 28] The court concluded:
Due to the chaotic lifestyle and parenting choices of Shari Selzler [a] material and significant change of circumstances warrants a change of custody in the best interests of [the younger daughter] specifically based on:
1. The inability to get [the younger daughter] to school on time, her absences from school and provide structure for her. The inability to complete her homework.
2. The Plaintiff's association with a convicted sex offender allowing him to be around her two young daughters.
3. The plaintiff allowing her 17 year old daughter to have her boyfriend live at their home with her in her bedroom as well as another juvenile girl.
4. All other factors as previously noted.
This is a most difficult case because the plaintiff has had custody of [the younger daughter] since she was born. [The younger daughter] has a very strong bond with her mother. Yet her mother has been unable to provide the structure and discipline necessary for this child. Because [the younger daughter] has been diagnosed with ADD she has an even greater need for structure than a child without ADD. The defendant on the other hand has this cloud of inappropriate sexual conduct with [the older daughter]. The defendant however does appear to have a more stable home environment at this time. This child deserves an opportunity to have a stable consistent home with appropriate supervision and guidance.
[¶ 29] In this difficult case, the trial court weighed the appropriate factors in reaching its decision to change custody of the younger daughter from Shari to Terry. We conclude the trial court's modification of custody is not clearly erroneous.
VII
[¶ 30] We have considered Shari's other arguments and deem them to be without merit. The amended divorce judgment is affirmed.
[¶ 31] GERALD W. VANDE WALLE, C.J., and MARY MUEHLEN MARING, CAROL RONNING KAPSNER, and DALE V. SANDSTROM, JJ., concur.
NOTES
[1] The appellant was represented by different counsel in the trial court.
| {
"pile_set_name": "FreeLaw"
} |
399 So.2d 248 (1981)
Joseph I. HARPER, Jr., Tula Ann Harper, Raymond Youngman, Margaret J. Youngman, Elizabeth S. Staggs, Lillian L. Wilson, Linda Watts
v.
REGENCY DEVELOPMENT COMPANY, INC., Champion Construction Co., Inc., Ellard Contracting Co., Inc.
80-19.
Supreme Court of Alabama.
May 1, 1981.
Rehearing Denied June 5, 1981.
*249 Rodney A. Max of Denaburg, Schoel, Meyerson & Ogle, Birmingham, for appellants.
John F. Whitaker of Sadler, Sadler, Sullivan, Sharp & Stutts, Birmingham, for appellees.
Fournier J. Gale, III, and H. Thomas Wells, Jr., of Cabaniss, Johnston, Gardner, Dumas & O'Neal, Birmingham, for Drummond Coal Co.
JONES, Justice.
The claims upon which this appeal is based arise out of Appellees' blasting operations on Red Mountain in Birmingham, Alabama, during the months of June, July and August of 1978.[1]
Plaintiffs-Appellants are members of a residential community located on the slope of Red Mountain. Plaintiffs initiated these claims in 1979 in the district court, seeking compensation for property damage allegedly caused by Appellees' blasting operations during development of a condominium complex near the crest of the mountain.
Subsequent discovery revealed that the actual costs of repairs to Plaintiffs' residences were in excess of the jurisdictional amount of the district court ($5,000). By the time the amount of actual damages became known, however, expiration of the statute of limitations prevented dismissal and refiling of the actions in the circuit court. Consequently, Appellants amended their claims so as to remain within the district court's jurisdiction.
Upon a finding for Appellees in the district court, Appellants appealed to the circuit court and amended their complaints to claim their actual damages. Thereupon, the circuit court granted Appellees' objections to the amendments and motions to dismiss Count 1 of each of Appellants' complaints. Dismissal of Count 1 of each complaint was predicated upon grounds that it was based solely upon "strict liability" (Coalite, Inc. v. Aldridge, 285 Ala. 137, 229 So.2d *250 539 (1969)), while denial of Appellants' amendments to the ad damnum clauses was based upon ARCP 13(j). We affirm as to the order denying the amendments; we reverse and remand as to the order dismissing Count 1 of each complaint.
APPELLEES' CONTENTIONS FOR AN APPLICABLE LIABILITY STANDARD
Understandably, the position advanced by Appellees is a plea for application of the doctrine of stare decisis: To establish liability for damage allegedly caused by blasting operations, the burden is upon the Plaintiff to allege and prove that such damage was the result of Defendant's negligence and not the result of blasting conducted in accordance with usual methods and a reasonable standard of care. Mitchell v. Richardson, 277 Ala. 651, 173 So.2d 814 (1964); Vulcan Materials Co. v. Grace, 274 Ala. 653, 151 So.2d 229 (1963); Ledbetter-Johnson Co. v. Hawkins, 267 Ala. 458, 103 So.2d 748 (1958).
As a corollary, Appellees urge that strict liability is an unnecessary and unreasonable standard to impose in blasting cases in that: 1) Blasting is a reasonable and necessary activity in developing land, Cratty v. Samuel Aceto & Co., 151 Me. 126, 116 A.2d 623 (1955); 2) Liability without fault is an unreasonable and unnecessarily restrictive doctrine, Klostermann v. Houston Geophysical Co., 315 S.W.2d 664 (Ct.App.Tex.1958); 3) Rylands v. Fletcher, L.R. 3 H.L. 330 (1868), as proposed by Appellants, arguably adopts a negligence standard as opposed to one of strict liability, Toy v. Atlantic Gulf & Pacific Co., 176 Md. 197, 4 A.2d 757 (1939); 4) To apply a standard of liability without fault would amount to judicial legislation, Coalite, Inc. v. Weeks, 284 Ala. 219, 224 So.2d 251 (1969); 5) Proof of negligence is not an unreasonable burden in blasting cases, Crawford Coal Co. v. Stephens, 382 So.2d 536 (Ala.1980).
HISTORY
The history of this State's application of standards of liability in blasting cases is succinctly and aptly set forth in Appellants' brief:
"Since 1907, persons injured or damaged... by the concussion or vibration caused by blasting have been without a remedy, unless they could show that the blaster was negligent in his blasting operations. In effect, blasters in Alabama have been allowed to cause injury and damage to surrounding property so long as they do it carefully. This ... approach to liability for blasting is derived from traditional common law dichotomies of trespass/negligence (trespass on the case) and direct injury/indirect injury. These dichotomies may be explained as follows: If rocks are thrown onto plaintiff's property, there is a trespass because of the direct injury, and the defendant is liable without fault.[2] If, however, the damage was caused by concussion in the air or vibration in the ground, the injury is caused indirectly, and the remedy lies in trespass on the case for which the plaintiff must prove negligence in the blasting.[[3]]"
See, also, Rendlemen, More on Procedure Reform, 33 Ala.Law. 37, 44 (1972).
A majority of states now characterize blasting, under certain conditions, as an abnormally dangerous activity and apply a strict liability approach for injury or damage caused thereby. Restatement (Second) of Torts, §§ 519-524A (1977). This Court, in Borland v. Sanders Lead Co., 369 So.2d 523 (Ala.1979), hinted at the need to reconsider this State's application of the trespass/trespass on the case dichotomy associated *251 with damage caused by blasting operations.[4]
Under a traditional standard of negligence approach, the plaintiff must specifically show negligent conduct in the operative blasting procedures that proximately caused damage. In essence, the plaintiff's evidentiary hurdles are two-pronged: 1) proving that the defendant's conduct fell below the industry's acceptable standard of care; and 2) proving that such conduct proximately caused the damage suffered.
Both prongs of proof set the stage for a battle of the experts. The first prong, in the absence of statutory or regulatory guidelines, places the plaintiff's expert against the defendant's expert in a contest to determine the industry's empirical standard of care. Republic Steel Corp. v. Peoples, 217 F.2d 236 (5th Cir. 1954).[5] The latter prong pits the plaintiff's evidence of before and after damagein the context of circumstantial cause and effectagainst the defendant's expert, who testifies that the damage is not the result of the blasting.
In light of the subjective nature of any scientific criteria, fostered by disagreement among industry experts, creation of an acceptable standard of conduct becomes extremely difficult. At any rate, the present status of the law, when strictly applied, leaves the fact finder bound by standards established and practiced by the very industry sought to be held accountable, and not by any consideration of the abnormally and inherently dangerous character of the instrumentality or substance employed and the intrinsic risk of harm to others.
In recognition of the harshness of the traditional negligence standard of liability, this Court has relaxed the requisite standard of proof in blasting cases. In Ledbetter-Johnson Co. v. Hawkins, 267 Ala. 458, 103 So.2d 748 (1958), a plaintiff's judgment was affirmed where the expert testimony showed only that if plaintiff's "damage was done ... in the obtaining of chert from this pit by the use of dynamite ..., it would be because it was not done properly, was done in a negligent manner." Admittedly, such conclusionary evidence, even by an expert without any predicate as to the usual and customary practice in the industry or as to the manner in which defendant's conduct deviated therefromfalls far short of the requisite standard of proof in traditional negligence cases. See, also, Crawford Coal Co. v. Stephens, 382 So.2d 536 (Ala.1980), and the cases cited therein.
Additionally, this Court has consistently treated blasting claims as actions in trespass, thus applying absolute liability, where rocks or other debris were thrown upon plaintiff's property without any differentiation between the precise damage caused by the trespassing objects and any simultaneous damage caused by concussion or vibration. See Milford v. Tidwell, 276 Ala. 110, 159 So.2d 621 (1963); Ex parte Birmingham Realty Co., 183 Ala. 444, 63 So. 67 (1913); Bessemer Coal, Iron and Land Co. v. Doak, 152 Ala. 166, 44 So. 627 (1907).
While this accommodation to plaintiff's heavy burden of proof has not overtly altered the standard of liability, at the very least it has tended to treat the dangerous condition created by the ultrahazardous activity as the basis for testing the requisite proof of fault. Indeed, the Doak Court observed that where blasting takes place in the midst of "a thickly settled city," one "acts at his peril."
*252 STRICT LIABILITY IN TORT
In the now famous case of Rylands v. Fletcher, supra, the defendants were mill owners who had constructed a reservoir on their land. Water escaped therefrom into an abandoned coal mine through connecting passages and into the adjoining mine of the plaintiff. In the absence of trespass (the flooding damage being indirect) or the existence of any nuisance, the English court applied the doctrine of strict liability in tort to hold defendants liable, saying:
"We think that the true rule of law is that the person who for his own purposes brings on his land and collects and keeps there anything likely to do mischief if it escapes, must keep it at his peril, and if he does not do so is prima facie answerable for all the damage which is the natural consequence of its escape."
Fletcher v. Rylands, L.R. 1 Ex. 265, 279-80 (1866).
This holding was somewhat restricted upon review by the House of Lords, wherein the strict liability principle was made applicable only to "non-natural" uses of defendant's land, as distinguished from "any purpose for which it might in the ordinary course of the enjoyment of land be used." Rylands v. Fletcher, supra.
"After a long period during which Rylands v. Fletcher was rejected by the large majority of American courts which considered it, the pendulum has swung to acceptance of the case and its doctrine in the United States." W. Prosser, Handbook of the Law of Torts, § 78 (4th ed. 1971).
Adherence to the strict liability doctrine has been approved by the Restatement (Second) of Torts (1977), § 519 of which provides:
(1) One who carries on an abnormally dangerous activity is subject to liability for harm to the person, land or chattels of another resulting from the activity, although he has exercised the utmost care to prevent the harm.
(2) This strict liability is limited to the kind of harm, the possibility of which makes the activity abnormally dangerous.
AN ABNORMALLY DANGEROUS ACTIVITY CONSTITUTES NEGLIGENCE
We believe our adoption of the Restatement lightens the requisite burden of proof without abandoning the time-honored fault philosophy. Whether we adopt, by name, strict liability in tort for damages caused by blasting operations, or whether we perceive our holding as a mere expansion of prior cases, is relatively unimportant. What is important, in our view, is the preservation of our fault-based tort concept in the context of a modified standard of liability which no longer perpetuates what Professor Prosser terms "a marriage of legal technicalities with scientific ignorance." W. Prosser, Handbook of the Law of Torts, § 78 (4th ed. 1971).
The fault concept is preserved simply by transposing the basis for testing culpability from the degree of care exercised in the manner in which the blasting operation is conducted to the conduct of the blaster in carrying on an abnormally dangerous activity which subjects innocent parties to an unreasonable risk of harm. To treat the discharge of an abnormally dangerous substance under ultrahazardous conditions as wrongful conduct is not violative of the duty/breach of duty principle of tort law. The use of the explosives under abnormally dangerous conditions is negligence, and thus actionable if such conduct proximately causes damage to another.
Our holding today is strikingly similar, both in kind and degree, to the Alabama extended manufacturer's liability doctrine. Casrell v. Altec Industries, Inc., 335 So.2d 128 (Ala.1976); Atkins v. American Motors Corp., 335 So.2d 134 (Ala.1976). There, we lessened the consumer's burden of proof, but retained the fault concept, by transposing the basis for testing culpability from the degree of care exercised in the manufacturing process to the product's defective condition at the time of sale. Here, we simply shift the culpability test from the degree of care exercised in the discharge of *253 the explosives to the carrying on of an abnormally dangerous activity. See Henderson v. Wade Sand and Gravel Co., Inc., 388 So.2d 900 (Ala. 1980), which altered the requisite burden of proof from that of traditional negligence to that of nuisance in the context of property damage caused by a continuing activity involving use of underground water.
While our law no longer permits, as a defense, proof of the degree of care with which a defective product was made and sold to the public, neither will it permit the blaster to defend on the ground that he carefully prepared and detonated the explosive. In either case, to carefully injure another is no longer an acceptable exercise of one's legal duty of due care.
In neither case, however, is the claimant exempt from definitive standards of proof both as to culpability and as to proximate cause. Just as the plaintiff must prove the defective condition of the product and an injury or damage proximately resulting therefrom, one claiming blasting damage can establish liability of the blaster only by proving that such damage is the proximate result of an abnormally dangerous activity.
AN ABNORMALLY DANGEROUS ACTIVITY
The Restatement (Second) of Torts, § 520 (1977), sets forth the following factors to be considered in determining whether an activity is abnormally dangerous:
(a) existence of a high degree of risk of some harm to the person, land or chattels of others;
(b) likelihood that the harm that results from it will be great;
(c) inability to eliminate the risk by the exercise of reasonable care;
(d) extent to which the activity is not a matter of common usage;
(e) inappropriateness of the activity to the place where it is carried on; and
(f) extent to which its value to the community is outweighed by its dangerous attributes.
It is apparent that liability for an abnormally dangerous activity arises out of the intrinsic danger of the ultrahazardous activity itself and the risk of harm it creates to those in the vicinity. Restatement (Second) of Torts, § 519, Comment d (1977). The basis for liability is that one who for his own purposes creates an abnormal risk of harm to his neighbors must be responsible for relieving that harm when in fact it does occur. Id.
The rule of strict liability, however, only applies to that harm which is within the scope of the abnormal risk upon which liability is based. In other words, one who detonates explosives on his own property may be responsible for the risk of harm to persons or property in the vicinity. If, however, no explosion takes place, but someone trips over the dynamite and breaks a leg, strict liability will not apply. Restatement (Second) of Torts, § 519, Comment e (1977).
Our adoption of the Restatement is not a holding that the mere act of blastinganytime, anywherewill subject one to liability without fault. The Restatement (Second) of Torts, § 519 (1977), speaks of "abnormally dangerous activities." Thereafter, § 520 provides guidelines against which to test the appropriateness of the blasting operations. Each case will present its own set of facts against which the § 520 guidelines will apply.[6]
A finding, guided by a consideration of factors outlined in the Restatement, that the blaster was "one who carries on an abnormally dangerous activity" is a finding of negligencethe breach of a legal duty and, a further finding that such conduct proximately damaged another, renders the blaster liable therefor. Ordinarily, both of these determinations will be issues of fact for the jury.[7]
*254 We hold, therefore, that the trial judge's dismissal of Count 1 of each of Appellants' complaints was reversible error.
AD DAMNUM CLAUSE AMENDMENTS
The trial court's rejection of claimants' offered amendments to increase their prayer for damages above the jurisdictional level of the district court is mandated by ARCP 13(j). Plaintiffs had the right to claim only a portion of their damages in order to remain within the jurisdiction of the district court; but, by doing so, they destroyed their right, on appeal to the circuit court, to claim the excess. See Hardy v. Tabor, 369 So.2d 559 (Ala.Civ.App.1979).
The constitutional issue raised by Appellants is without merit. Therefore, that portion of the trial court's order sustaining the Appellees' objection to Appellants' amendments is affirmed.
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.
MADDOX, FAULKNER, SHORES and ADAMS, JJ., concur.
TORBERT, C. J., and ALMON, EMBRY and BEATTY, JJ., dissent.
EMBRY, Justice (dissenting):
Before addressing the substantive bases for my views contrary to those of the majority, I feel compelled to express my incredulity that these cases involving an amount in controversy of five thousand dollars each are being considered by this court rather than the Court of Civil Appeals. Affirmance by the majority of the order denying the amendments to plaintiffs' complaints seeking more than five thousand dollars as damages is positive concession that these appeals are not within the jurisdiction of this court. To rule otherwise, the majority would, perforce, repeal Rule 13(j), ARCP.
Regarding the substantive holding and content of the majority opinion, I would summarize my views by stating: If it ain't broke, don't fix it. I do not think the law in Alabama regarding liability for blasting needs changing; therefore, I would not tamper with it.
It seems to me that adopting a rule of strict liability in cases of the nature of those here before us, is not only unnecessary and undesirable but will inevitably lead to severe inhibition of needed development of natural resources vital to the survival of a viable industrialized economy and a society with adequate energy, food, shelter, and creature comforts to make life in that society more than mere organic existence.
Under our system of accountability for one's acts that damage another, we have studiously attempted to adhere to the concept of fault; even when it became necessary to balance the burden between the injured and those responsible for the injury in the case of manufactured goods. See Casrell and Atkins, cited in the majority opinion.
I see no need for a prolix convoluted discussion of the various approaches taken by the courts to determine the nature of the cause of action accruing as the result of damage in consequence of blasting depending upon whether that damage results from vibration, concussion or from casting inanimate objects upon the person or property of another. The simple fact is that the negligence standard as applied in Alabama is a reasonable one and neither places an undue burden of proof on the plaintiff nor presents him with anything approaching an impossible task. No plaintiff is bound by a standard of care of defendant that merely conforms to an acceptable standard to those industries engaged in blasting activities. Proof of proximate cause of damage from blasting is a common sense matter which can be shown by any relevant and material evidence, even if it be circumstantial. E. g., see Cratty v. Samuel Aceto & Co., 151 Me. 126, 116 A.2d 623 (1955).
*255 As aptly put by appellees: "It, therefore, becomes clear that the negligence standard as applied to blasters is not just an empirical standard, but involves matters of location, severity, necessity, propriety and techniques, among others. In other words, negligence `according to the relative circumstances' is a much sounder and more applicable standard." Illustrating the ease of carrying plaintiffs' burden and the liberality of proof required to sustain that burden are the facts of Crawford Coal Co. v. Stephens, 382 So.2d 536 (Ala.1980).
In conclusion: the decision of the majority in this case is not needed; it departs from a well settled body of law with which the bench and bar are familiar; it raises new questions to be resolved without justifiable or desirable results to be served by their resolution, and last but not least, it places an undue burden upon industry without achieving a concomitant desirable social or economic objective.
TORBERT, C. J., and ALMON and BEATTY, JJ., concur.
APPENDIX
Chapter 21
ABNORMALLY DANGEROUS ACTIVITIES
Section
519. General principle
520. Abnormally dangerous activities
520A. Ground damage from aircraft
520B. Liability to trespassers
520C. Liability to licensees and invitees
521. Abnormally dangerous activity carried on in pursuance of a public duty
522. Contributing actions of third persons, animals and forces of nature
523. Assumption of risk
524. Contributory negligence
524A. Plaintiff's abnormally sensitive activity
§ 519. General Principle
(1) One who carries on an abnormally dangerous activity is subject to liability for harm to the person, land or chattels of another resulting from the activity, although he has exercised the utmost care to prevent the harm.
(2) This strict liability is limited to the kind of harm, the possibility of which makes the activity abnormally dangerous.
Comment:
a. The general rule stated in this Section is subject to exceptions and qualifications, too numerous to be included within a single Section. It should therefore be read together with §§ 520 to 524A, by which it is limited.
b. As to the factors to be considered in determining whether an activity is abnormally dangerous, see § 520.
c. The word "care" includes care in preparation, care in operation and skill both in operation and preparation.
d. The liability stated in this Section is not based upon any intent of the defendant to do harm to the plaintiff or to affect his interests, nor is it based upon any negligence, either in attempting to carry on the activity itself in the first instance, or in the manner in which it is carried on. The defendant is held liable although he has exercised the utmost care to prevent the harm to the plaintiff that has ensued. The liability arises out of the abnormal danger of the activity itself, and the risk that it creates, of harm to those in the vicinity. It is founded upon a policy of the law that imposes upon anyone who for his own purposes creates an abnormal risk of harm to his neighbors, the responsibility of relieving against that harm when it does in fact occur. The defendant's enterprise, in other words, is required to pay its way by compensating for the harm it causes, because of its special, abnormal and dangerous character.
*256 Comment on Subsection (2):
e. Extent of protection. The rule of strict liability stated in Subsection (1) applies only to harm that is within the scope of the abnormal risk that is the basis of the liability. One who carries on an abnormally dangerous activity is not under strict liability for every possible harm that may result from carrying it on. For example, the thing that makes the storage of dynamite in a city abnormally dangerous is the risk of harm to those in the vicinity if it should explode. If an explosion occurs and does harm to persons, land or chattels in the vicinity, the rule stated in Subsection (1) applies. If, however, there is no explosion and for some unexpected reason a part of the wall of the magazine in which the dynamite is stored falls upon a pedestrian on the highway upon which the magazine abuts, the rule stated in Subsection (1) has no application. In this case the liability, if any, will be dependent upon proof of negligence in the construction or maintenance of the wall. So also, the transportation of dynamite or other high explosives by truck through the streets of a city is abnormally dangerous for the same reason as that which makes the storage of the explosives abnormally dangerous. If the dynamite explodes in the course of the transportation, a private person transporting it is subject to liability under the rule stated in Subsection (1), although he has exercised the utmost care. On the other hand, if the vehicle containing the explosives runs over a pedestrian, he cannot recover unless the vehicle was driven negligently.
Illustration:
1. A, with reasonable care, carries on blasting operations in a closely settled rural district. A has no reason to know of the presence of B's mink ranch nearby. The noise of the blasting frightens the mink and the fright causes them to kill their young. A is not subject to strict liability to B for the loss of the mink.
§ 520. Abnormally Dangerous Activities
In determining whether an activity is abnormally dangerous, the following factors are to be considered:
(a) existence of a high degree of risk of some harm to the person, land or chattels of others;
(b) likelihood that the harm that results from it will be great;
(c) inability to eliminate the risk by the exercise of reasonable care;
(d) extent to which the activity is not a matter of common usage;
(e) inappropriateness of the activity to the place where it is carried on; and
(f) extent to which its value to the community is outweighed by its dangerous attributes.
Comment:
a. This Section deals only with the factors which determine whether an activity is abnormally dangerous. The general principle of strict liability for abnormally dangerous activities is stated in § 519. The limitations upon strict liability for abnormally dangerous activities are stated in §§ 521-524A.
b. Distinguished from negligence. The rule stated in § 519 is applicable to an activity that is carried on with all reasonable care, and that is of such utility that the risk which is involved in it cannot be regarded as so great or so unreasonable as to make it negligence merely to carry on the activity at all. (See § 282). If the utility of the activity does not justify the risk it creates, it may be negligence merely to carry it on, and the rule stated in this Section is not then necessary to subject the defendant to liability for harm resulting from it.
c. Relation to nuisance. If the abnormally dangerous activity involves a risk of harm to others that substantially impairs the use and enjoyment of neighboring lands or interferes with rights common to all members of the public the impairment or interference may be actionable on the basis of a public or a private nuisance. (See § 822, and Comment a under that Section). The rule of strict liability stated in § 519 frequently is applied by many courts in these cases under the name of "absolute *257 nuisance," even when the harm that results is physical harm to person, land or chattels.
d. Purpose of activity. In the great majority of the cases that involve abnormally dangerous activities the activity is carried on by the actor for purposes in which he has a financial interest, such as a business conducted for profit. This, however, is not necessary for the existence of such an activity. The rule here stated is equally applicable when there is no pecuniary benefit to the actor. Thus a private owner of an abnormally dangerous body of water who keeps it only for his own use and pleasure as a swimming pool is subject to the same liability as one who operates a reservoir of water for profit.
e. Not limited to the defendant's land. In most of the cases to which the rule of strict liability is applicable the abnormally dangerous activity is conducted on land in the possession of the defendant. This, again, is not necessary to the existence of such an activity. It may be carried on in a public highway or other public place or upon the land of another.
f. "Abnormally dangerous." For an activity to be abnormally dangerous, not only must it create a danger of physical harm to others but the danger must be an abnormal one. In general, abnormal dangers arise from activities that are in themselves unusual, or from unusual risks created by more usual activities under particular circumstances. In determining whether the danger is abnormal, the factors listed in Clauses (a) to (f) of this Section are all to be considered, and are all of importance. Any one of them is not necessarily sufficient of itself in a particular case, and ordinarily several of them will be required for strict liability. On the other hand, it is not necessary that each of them be present, especially if others weigh heavily. Because of the interplay of these various factors, it is not possible to reduce abnormally dangerous activities to any definition. The essential question is whether the risk created is so unusual, either because of its magnitude or because of the circumstances surrounding it, as to justify the imposition of strict liability for the harm that results from it, even though it is carried on with all reasonable care. In other words, are its dangers and inappropriateness for the locality so great that, despite any usefulness it may have for the community, it should be required as a matter of law to pay for any harm it causes, without the need of a finding of negligence.
Comment on Clauses (a) and (b):
g. Risk of harm. An activity that is abnormally dangerous ordinarily involves a high degree of risk of serious harm to the person, land or chattels of others. The harm threatened must be major in degree, and sufficiently serious in its possible consequences to justify holding the defendant strictly responsible for subjecting others to an unusual risk. It is not enough that there is a recognizable risk of some relatively slight harm, even though that risk might be sufficient to make the actor's conduct negligent if the utility of his conduct did not outweigh it, or if he did not exercise reasonable care in conducting it. If the potential harm is sufficiently great, however, as in the case of a nuclear explosion, the likelihood that it will take place may be comparatively slight and yet the activity be regarded as abnormally dangerous.
Some activities, such as the use of atomic energy, necessarily and inevitably involve major risks of harm to others, no matter how or where they are carried on. Others, such as the storage of explosives, necessarily involve major risks unless they are conducted in a remote place or to a very limited extent. Still others, such as the operation of a ten-ton traction engine on the public highway, which crushes conduits beneath it, involve such a risk only because of the place where they are carried on. In determining whether there is such a major risk, it may therefore be necessary to take into account the place where the activity is conducted, as to which see Comment j.
Comment on Clause (c):
h. Risk not eliminated by reasonable care. Another important factor to be taken into account in determining whether the activity is abnormally dangerous is the impossibility *258 of eliminating the risk by the exercise of reasonable care. Most ordinary activities can be made entirely safe by the taking of all reasonable precautions; and when safety cannot be attained by the exercise of due care there is reason to regard the danger as an abnormal one.
There is probably no activity, unless it is perhaps the use of atomic energy, from which all risks of harm could not be eliminated by the taking of all conceivable precautions, and the exercise of the utmost care, particularly as to the place where it is carried on. Thus almost any other activity, no matter how dangerous, in the center of the Antarctic continent, might be expected to involve no possible risk to any one except those who engage in it. It is not necessary, for the factor stated in Clause (c) to apply, that the risk be one that no conceivable precautions or care could eliminate. What is referred to here is the unavoidable risk remaining in the activity, even though the actor has taken all reasonable precautions in advance and has exercised all reasonable care in his operation, so that he is not negligent. The utility of his conduct may be such that he is socially justified in proceeding with his activity, but the unavoidable risk of harm that is inherent in it requires that it be carried on at his peril, rather than at the expense of the innocent person who suffers harm as a result of it. Thus the manufacture in a city of certain explosives may involve a risk of detonation in spite of everything that the manufacturer may reasonably be expected to do; and although he may not be negligent in manufacturing them at all, he is subject to strict liability for an abnormally dangerous activity.
A combination of the factors stated in Clauses (a), (b) and (c), or sometimes any one of them alone, is commonly expressed by saying that the activity is "ultrahazardous," or "extra-hazardous." Liability for abnormally dangerous activities is not, however, a matter of these three factors alone, and those stated in Clauses (d), (e), and (f) must still be taken into account.
As to strict liability for ground damage resulting from aviation, see § 520A.
Comment on Clause (d):
I. Common usage. An activity is a matter of common usage if it is customarily carried on by the great mass of mankind or by many people in the community. It does not cease to be so because it is carried on for a purpose peculiar to the individual who engages in it. Certain activities, notwithstanding their recognizable danger, are so generally carried on as to be regarded as customary. Thus automobiles have come into such general use that their operation is a matter of common usage. This, notwithstanding the residue of unavoidable risk of serious harm that may result even from their careful operation, is sufficient to prevent their use from being regarded as an abnormally dangerous activity. On the other hand, the operation of a tank or any other motor vehicle of such size and weight as to be unusually difficult to control safely, or to be likely to damage the ground over which it is driven, is not yet a usual activity for many people, and therefore the operation of such a vehicle may be abnormally dangerous.
Although blasting is recognized as a proper means of excavation for building purposes or of clearing woodland for cultivation, it is not carried on by any large percentage of the population, and therefore it is not a matter of common usage. Likewise the manufacture, storage, transportation and use of high explosives, although necessary to the construction of many public and private works, are carried on by only a comparatively small number of persons and therefore are not matters of common usage. So likewise, the very nature of oil lands and the essential interest of the public in the production of oil require that oil wells be drilled, but the dangers incident to the operation are characteristic of oil lands and not of lands in general, and relatively few persons are engaged in the activity.
The usual dangers resulting from an activity that is one of common usage are not regarded as abnormal, even though a serious risk of harm cannot be eliminated by all reasonable care. The difference is sometimes *259 not so much one of the activity itself as of the manner in which it is carried on. Water collected in large quantity in a hillside reservoir in the midst of a city or in coal mining country is not the activity of any considerable portion of the population, and may therefore be regarded as abnormally dangerous; while water in a cistern or in household pipes or in a barnyard tank supplying cattle, although it may involve much the same danger of escape, differing only in degree if at all, still is a matter of common usage and therefore not abnormal. The same is true of gas and electricity in household pipes and wires, as contrasted with large gas storage tanks or high tension power lines. Fire in a fireplace or in an ordinary railway engine is a matter of common usage, while a traction engine shooting out sparks in its passage along the public highway is an abnormal danger.
Comment on Clause (e):
j. Locality. Another factor to be taken into account in determining whether an activity is abnormally dangerous is the place where it is carried on. If the place is one inappropriate to the particular activity, and other factors are present, the danger created may be regarded as an abnormal one.
Even a magazine of high explosives, capable of destroying everything within a distance of half a mile, does not necessarily create an abnormal danger if it is located in the midst of a desert area, far from human habitation and all property of any considerable value. The same is true of a large storage tank filled with some highly inflammable liquid such as gasoline. Blasting, even with powerful high explosives, is not abnormally dangerous if it is done on an uninhabited mountainside, so far from anything of considerable value likely to be harmed that the risk if it does exist is not a serious one. On the other hand, the same magazine of explosives, the hugh storage tank full of gasoline or the blasting operations all become abnormally dangerous if they are carried on in the midst of a city.
So likewise, the collection of large quantities of water in irrigation ditches or in a reservoir in open country usually is not a matter of any abnormal danger. On the other hand, if the reservoir is constructed in a coal mining area that is honeycombed with mine passages, or on a bluff overhanging a large city or if water is collected in an enormous standing tank above the same city, there is abnormal danger and strict liability when, without any negligence, the water escapes and does harm.
In other words, the fact that the activity is inappropriate to the place where it is carried on is a factor of importance in determining whether the danger is an abnormal one. This is sometimes expressed, particularly in the English cases, by saying there is strict liability for a "non-natural" use of the defendant's land.
There are some highly dangerous activities, that necessarily involve a risk of serious harm in spite of all possible care, that can be carried on only in a particular place. Coal mining must be done where there is coal; oil wells can be located only where there is oil; and a dam impounding water in a stream can be situated only in the bed of the stream. If these activities are of sufficient value to the community (see Comment k), they may not be regarded as abnormally dangerous when they are so located, since the only place where the activity can be carried on must necessarily be regarded as an appropriate one.
Comment on Clause (f):
k. Value to the community. Even though the activity involves a serious risk of harm that cannot be eliminated with reasonable care and it is not a matter of common usage, its value to the community may be such that the danger will not be regarded as an abnormal one. This is true particularly when the community is largely devoted to the dangerous enterprise and its prosperity largely depends upon it. Thus the interests of a particular town whose livelihood depends upon such an activity as manufacturing cement may be such that cement plants will be regarded as a normal activity for that community notwithstanding the risk of serious harm from the emission of cement dust. There is an analogy here to the consideration of the same elements *260 in determining the existence of a nuisance, under the rule stated in § 831; and the Comments under that Section are applicable here, so far as they are pertinent.
Thus in Texas and Oklahoma, a properly conducted oil or gas well, at least in a rural area, is not regarded as abnormally dangerous, while a different conclusion has been reached in Kansas and Indiana. California, whose oil industry is far from insignificant, has concluded that an oil well drilled in a thickly settled residential area in the city of Los Angeles is a matter of strict liability.
In England, "a pluvial country, where constant streams and abundant rains make the storage of water unnecessary for ordinary or general purposes," a large reservoir in an inappropriate place has been found to be abnormally dangerous. In west Texas, a dry land whose livestock must have water, such a reservoir is regarded as "a natural and common use of the land." The same conclusion has been reached by many of the western states as to irrigation ditches.
Comment:
1. Function of court. Whether the activity is an abnormally dangerous one is to be determined by the court, upon consideration of all the factors listed in this Section, and the weight given to each that it merits upon the facts in evidence. In this it differs from questions of negligence. Whether the conduct of the defendant has been that of a reasonable man of ordinary prudence or in the alternative has been negligent is ordinarily an issue to be left to the jury. The standard of the hypothetical reasonable man is essentially a jury standard, in which the court interferes only in the clearest cases. A jury is fully competent to decide whether the defendant has properly driven his horse or operated his train or guarded his machinery or repaired his premises, or dug a hole. The imposition of strict liability, on the other hand, involves a characterization of the defendant's activity or enterprise itself, and a decision as to whether he is free to conduct it at all without becoming subject to liability for the harm that ensues even though he has used all reasonable care. This calls for a decision of the court; and it is no part of the province of the jury to decide whether an industrial enterprise upon which the community's prosperity might depend is located in the wrong place or whether such an activity as blasting is to be permitted without liability in the center of a large city.
On Rehearing
JONES, Justice.
On application for rehearing, Appellees (supported by amicus curiae brief) contend, inter alia, that the Court of Civil Appeals and not this Court has exclusive jurisdiction of this appeal. Because the dissent and not the majority opinion addressed this jurisdictional issue, we accede to Appellees' insistence that we do so.
The Court of Civil Appeals jurisdiction is fixed by Code 1975, § 12-3-10:
"The court of civil appeals shall have exclusive appellate jurisdiction of all civil cases where the amount involved, exclusive of interest and costs, does not exceed $10,000.00 ..."
In the context of the instant case, the key phrase is "where the amount involved ... does not exceed $10,000.00." One of the substantive issues presented by this appeal was the propriety of the trial court's order disallowing Plaintiffs' amendments in circuit court. If allowed, each of the Plaintiff's claims would exceed $10,000. Not until this Court entertained the appeal and ruled adversely to Plaintiffs on this issue could it be said that each of the consolidated claims did not exceed $10,000 in amount. Either this Court had jurisdiction in the first instance (and, if so, retained jurisdiction for the purpose of full disposition of the appeal) or it did not have the power to decide any issue presented.
We are aware that Appellees' position is supported by the following sentence from the dissenting opinion: "Affirmance by the majority of the order denying the amendments to plaintiffs' complaints seeking more than five thousand dollars as damages is positive concession that these appeals are not within the jurisdiction of this court." *261 By way of authority the dissent concludes: "To rule otherwise, the majority would, perforce, repeal Rule 13(j), ARCP."
The minority's proposition is self answering. "Affirmance by the majority" of the issue relating to the amendments necessarily (and "perforce," if you please) means that this Court assumed jurisdiction of an appeal where the amount involved exceeded $10,000. Such "affirmance" constitutes an enforceable order only if this Court acted with jurisdiction. To be sure, once the appeal was entertained and the trial court's order disallowing the amendments was affirmed, each of the claims involved an amount less than $10,000. But we know of no authority (nor have we been aided by Appellees, amicus curiae, or the dissenters in this regard) for the splitting of appellate jurisdiction under these circumstances. This Court cannot take jurisdiction for the disposition of one issue, and then, in light of its holding, dismiss (or transfer) the appeal for lack of jurisdiction.
Suppose, for example, that a jury verdict were rendered, and judgment entered thereon, for $15,000. On motion for J.N.O.V., defendant's only ground insists that $9,000 is the highest award supported by the evidence. On appeal, the only issue presented is the propriety of the trial court's order overruling defendant's motion. Under the rationale urged by appellees, this Court's reversal (thus fixing the plaintiff's judgment at $9,000) would strip it of jurisdiction and mandate dismissal of the appeal, thus leaving the $15,000 judgment undisturbed; and this for the reason that, if this Court has no jurisdiction, it had no power to reverse on the damage issue.
Likewise, here, if we have no jurisdiction, we have no power to affirm on the amendment issue. And we have been careful to note that Appellees' lack of jurisdiction argument is premised on the validity of our order affirming the trial court's denial of the amendments to the ad damnum clause of each of Plaintiff's claims. In the absence of a judgment fixing the amount of recovery, the amount claimed in the pleadings is the only guide by which jurisdiction as between this Court and the Court of Civil Appeals may be determined. Although unsuccessful in their efforts to assert a higher claim on their appeal to circuit court, Plaintiffs' proffered amendments put in controversy amounts in excess of $10,000 for each claim. Jurisdiction of this consolidated appeal is with this Court.
OPINION EXTENDED AND APPLICATION FOR REHEARING OVERRULED.
FAULKNER, SHORES and ADAMS, JJ., concur.
TORBERT, C. J., concurs to deny application for rehearing on the jurisdictional issue; but he would grant rehearing on the substantive issue.
MADDOX, J., concurs specially.
ALMON, EMBRY and BEATTY, JJ., dissent.
MADDOX, Justice (concurring specially).
The applicants for rehearing ask:
"What pressing reasons clamor for adopting of the rule of liability without fault, and the abandonment of the rule of negligence?"
The appellees also state that given this state's scintilla rule, there is no need for changing the standard of negligence as applied to blasting. They say: "It is axiomatic that in light of this state's scintilla rule, a properly prepared case demonstrating even the slightest gleam or glimmer of negligence is a case to be submitted for jury determination. There are many blasting cases that have come before this Court that demonstrate the ease with which this can be done." They then cite Crawford Coal Company v. Stephens, 382 So.2d 536 (Ala. 1980). The applicants for rehearing also state that the decision of the majority was made without the necessary scientific and empirical data required for a comprehensive decision and without the input necessary to determine what effect the decision would have on the development of Alabama and the growth of its industry.
The applicants for rehearing, of course, raise some interesting questions, questions *262 which I wrestled with conscientiously before concurring in the original opinion. Let me now state the reasons why the present state of the law compelled me to take the position I took.
As the applicants correctly point out, Crawford Coal is an example of the ease with which negligence can be proved. If the majority opinion totally abolished the fault concept in blasting cases, as applicants for rehearing fear it does, and as some of the dissenters contend it does, then the majority opinion would be bad law, but the majority opinion clearly retains the fault concept by requiring proof of proximate causation. A close reading of Crawford Coal against the backdrop of Coalite's Inc. v. Weeks, 284 Ala. 219, 224 So.2d 251 (Ala. 1969), shows that the step taken by this decision is indeed only a short one. It certainly is not a giant leap.
I share some of the same concerns the applicants have about the role of this Court when faced with a rule which no longer serves the public good. In Henderson v. Wade Sand and Gravel Corp., 388 So.2d 900 (Ala.1980), I dissented on the ground that if the rule of law stated in prior decisions of this Court no longer served the public good and did not strike a balance between the competing interests, the remedy should come from the Legislature which was best suited to consider and evaluate the competing rights, duties and societal interests. The question may be asked, and appropriately so, why this case is different.
I think this case is different, because in Crawford Coal, supra, this Court affirmed a judgment based upon proof which essentially only connected the blasting as the proximate cause of the injury.
The majority decision still requires a plaintiff to show that blasting was the proximate cause of the plaintiff's injury and damage. While the decision does lighten plaintiff's burden of proof quantitatively, it does not necessarily do so qualitatively.
EMBRY, Justice (dissenting):
The reasoning of the majority opinion on rehearing regarding the jurisdictional question turning on "the amount involved" is even more incredible than that employed upon original deliverance! By a convoluted and contorted illogic, the amount involved suddenly becomes not what was actually claimed in the ad damnum clause of the dismissed Count One of each of the complaints but rather what was claimed in the impermissible and disallowed amendments to those counts. This being the case, this court had no jurisdiction. This fact should have been noted at the time the record reached this court and the cases should have thereupon been transferred to the Court of Civil Appeals. See Williamson v. Birmingham Transit Corp., 344 So.2d 489 (Ala.1977); cf. Great Central Insurance Company v. Edge, 292 Ala. 613, 298 So.2d 607 (1974). Under this state of the law, anytime a litigant wishes to bypass the Court of Civil Appeals, all that need be done is to proffer some known illegal or impermissible claim or amendment that recites a sum in excess of ten thousand dollars and in spite of it being properly stricken or disallowed, behold, you now have direct access to this court. What more specious reasoning can there be?
I reiterate my views concerning the merits, previously expressed in the original dissent.
ALMON and BEATTY, JJ., concur.
NOTES
[1] Five separate claims were consolidated in the trial court and on appeal.
[2] See, e. g., Coalite Inc. v. Weeks, 284 Ala. 219, 224 So.2d 251 (1969); Milford v. Tidwell, 276 Ala. 110, 159 So.2d 621 (1963); Vulcan Materials Co. v. Grace, 274 Ala. 653, 151 So.2d 229 (1963); Central Iron & Coal Co. v. Vandenheuk, 147 Ala. 546, 41 So. 145 (1906).
[3] See, e. g., Lehigh Portland Cement Co. v. Dobbins, 282 Ala. 513, 213 So.2d 246 (1968); Vulcan Materials Co. v. Grace, 274 Ala. 653, 151 So.2d 229 (1963); Bessemer Coal, Iron & Land Co. v. Doak, 152 Ala. 166, 44 So. 627 (1907).
[4] We note with interest that the legal scholars' debate in this field centers not on the trespass/trespass on the case dichotomy; rather, as J. Fleming, The Law of Torts 40 (4th ed. 1971), states:
"In many American blasting cases, it has been held that damage from flying rocks is trespass, but from vibration or concussion at most nuisance. This proposition, which has been castigated as a marriage of legal technicality with scientific ignorance, is nonetheless commendable because any encroachment of trespass on the field traditionally occupied by nuisance would lead to undesirable restrictions on users of land." (Emphasis added.)
[5] Blasting regulations are specifically promulgated under the Coal Surface Mining Reclamation Act in § 9-16-41, Code 1975. Of course, those in the blasting industry argue that these regulations are far too restrictive to apply in any context other than mining.
[6] Because of its utility in the management of a blasting case in the trial court, we append hereto a copy of the Restatement (Second) of Torts, §§ 519 and 520, with Comments.
[7] We note that this aspect of our holding, particularly the determination of the issue of "abnormally dangerous activity," is at odds with Comment (1) of the Restatement. Consistent with our holdings in Casrell and Atkins, we adhere to the traditional rule of submitting both the issue of culpability and proximate cause to the jury except where no dispute of fact is presented on the issue by the evidence.
| {
"pile_set_name": "FreeLaw"
} |
118 So.2d 688 (1960)
Al HEWITT et al., Plaintiffs-Appellants,
v.
Dozier B. WEBSTER, Clerk of Court, et al., Defendants-Appellees.
No. 9186.
Court of Appeal of Louisiana, Second Circuit.
March 10, 1960.
*689 Tucker, Bronson & Martin, Shreveport, for plaintiff-appellant.
Cook, Clark, Egan, Yancey & King, Shreveport, for defendants-appellees.
Edwin L. Blewer, Dist. Atty. and John A. Richardson, Asst. Dist. Atty., Shreveport, for intervenor-appellee.
AYRES, Judge.
Plaintiffs, by this action, seek to have declared public records subpoena returns for witnesses to appear before a grand jury and, as such, subject to their inspection under the provisions of LSA-R.S. 44:1 et seq., commonly known and referred to as the Public Records Act. Made defendants were the Clerk of Court and Sheriff of Caddo Parish, Louisiana, in and for which parish the grand jury was impaneled and in which plaintiffs reside and of which they are citizens and electors.
The State of Louisiana, through the district attorney for the First Judicial District in and for Caddo Parish, Louisiana, intervened and opposed plaintiffs' demands, to which the defendants had interposed exceptions of no cause and of no right of action. From a judgment sustaining the exceptions and dismissing plaintiffs' suit, they have appealed.
The primary and decisive issue is whether the returns on the subpoenas issued for the appearance of witnesses before the grand jury are public records, or such public records, as are within the contemplation of the Public Records Act and, therefore, subject to inspection. All other issues presented, such as the interest or lack of interest of plaintiffs to institute and maintain this action or of the State to intervene, or as to the capacity or propriety of the clerk and sheriff to stand in judgment, or as to whether the issue is moot are indecisive and their consideration may be entirely pretermitted and the principal issue resolved.
The definition of public records, as contained in the statute, is very broad and apparently all-inclusive, as is readily ascertainable by a mere reading of § 1 thereof, which we quote:
"All records, writings, accounts, letters, and letter books, maps, drawings, memoranda and papers, and all copies or duplicates thereof and all photographs or other similar reproductions of the same, having been used, being in use, or prepared for use in the conduct, transaction or performance of any business, transaction, work, duty or function which was conducted, transacted or performed by or under the authority of the Constitution or the laws of this state, or the ordinances or mandates or orders of any municipal or parish government or officer, or any board or commission or office established or set up by the Constitution or the laws of this *690 state, or concerning or relating to the receipt or payment of any money received or paid by or under the authority of the Constitution or the laws of this state are public records, subject to the provisions of this Chapter except as hereinafter provided."
That the coverage of the statute is extensive is further emphasized in § 3 which makes the statute apparently applicable to all public records concerning the administration, management, conduct, direction and business of the office or department or force of any sheriff, district attorney, police officer or investigating agency, except when such records are held as evidence in an investigation or for the prosecution of a criminal charge prior to their use in open court or to the final disposition of the charge.
One of the positions taken by the State and defendants is that the Public Records Act is a general statute and is without application and is not controlling in the presence of special laws and the expressed public policy as regards the sanctity, security, and secrecy of the proceedings of grand juries. That the Public Records Act is a general statute having application generally to and covering the whole subject matter of public records must be conceded. Equally obvious is that special and particular statutes or sections of the Code of Criminal Procedure, pertaining to grand juries, are special laws as contradistinguished from general laws in that they pertain to and encompass a special and particular subject, namely, grand juries.
The general rule is that where there is apparent conflict between a general law and a special law on the same subject, the latter must prevail in the particular matter to which it applies. Even though the general law may have been passed subsequent to the passage of the special law, the special law is not thereby repealed by implication and it is only affected if reference is made to it expressly. State ex rel. Texada v. Capdevielle, 140 La. 229, 72 So. 946; Kearns v. City of New Orleans, La. App., 160 So. 470. Indeed, it is well settled that a general statute does not have the effect of repealing a special law upon the same subject matter unless the intent to repeal is so plain and evident that it cannot be doubted. State of Louisiana ex rel. Warren Realty Company, Inc., v. City of New Orleans, 226 La. 297, 76 So.2d 308; Wenk v. Anisman, 211 La. 641, 30 So.2d 567; Town of Abbeville v. Police Jury of Vermilion Parish, 207 La. 779, 22 So.2d 62; Third Dist. Land Co., Limited, v. Geary, 185 La. 508, 169 So. 528; State ex rel. City of New Orleans v. Louisiana Tax Commission, 171 La. 211, 130 So. 46. It will not be presumed, where the legislature enacted a special statute for a particular case, that it intended its repeal or amendment by the subsequent enactment of a general statute on the same subject matter. City of Bogalusa v. Gullotta, 181 La. 159, 159 So. 309; State ex rel. Day v. Rapides Parish School Board, 158 La. 251, 103 So. 757; Cumberland Telephone & Telegraph Co. v. Morgan's Louisiana & T. R. & S. S. Co., 112 La. 287, 36 So. 352; Welch v. Gossens, 51 La. Ann. 852, 25 So. 472. The jurisprudence of this State is in accord with the rule generally prevailing. This rule is stated in 50 Am. Jur., pp. 562-563, "Statutes," § 561, as follows:
"It has been broadly stated that the rule as to repeals implied from repugnancy of provisions applies as well between a general and a special or local act as between two general ones. As a general rule, however, general or broad statutory provisions do not control, modify, limit, affect, or interfere with special or specific provisions. To the contrary, to the extent of any irreconcilable conflict, the special or specific provision modifies, qualifies, limits, restricts, excludes, supersedes, controls, and prevails over the general or broad provision, which accordingly must yield to the special or specific provision, and operate only upon such cases as are not included therein. The special or specific act and the general or *691 broad law stand together, the one as the law of a particular case, and the other as the general rule. Hence, the special or specific provision is often referred to as an exception to the general or broad provision. These rules prevail where there is a repugnancy between the two acts, and no manifestation of a different intent to be found in the statute."
and in 82 C.J.S. Statutes § 298c, p. 515,
"A subsequent statute which is general does not repeal or abrogate a former statute which is special and intended to operate on a particular subject, or a particular phase of a single subject, * * *."
In this regard, it may be appropriate to observe that the Code of Criminal Procedure provides that the sessions of grand juries shall be secret (LSA-R.S. 15:215), and that, by his oath, a grand juror is bound to "keep secret his own counsel, that of his fellows and that of the state; * *" (LSA-R.S. 15:204).
The historical origin and development of the grand jury system was extensively discussed by Chief Justice Fournet of the Louisiana Supreme Court, in State v. Revere, 232 La. 184, 94 So.2d 25, 29, in the course of which it was stated:
"Not only has the grand jury been, traditionally, an inquisitorial body charged with determining whether probable grounds for suspicion of a crime exists, but, from its very beginning, its sessions have been surrounded by a cloak of seclusion and secrecy that has been jealously guarded and preserved during the intervening centuries as the only means of insuring that it be permitted the freedom of action necessary for a vigorous and effective discharge of its duties. The reasons underlying this necessity for secrecy are manyfold. Among them are: (1) It promotes freedom in the disclosure of crime; (2) prevents coercion of grand jurors through outside influence and intimidation and thus permits a freedom of deliberation and opinion otherwise impossible; (3) protects the safety and freedom of witnesses and permits the greatest possible latitude in their voluntary testimony; (4) prevents perjury by all persons appearing before the grand jury; (5) prevents the subornation of perjury by withholding facts that, if known, the accused or his confederates might attempt to disprove by false evidence and testimony; (6) avoids the danger of the accused escaping and eluding arrest before the indictment can be returned; and (7) keeps the good names of the persons considered, but not indicted, from being besmirched. Thus it may be seen that the secrecy that has from time immemorial surrounded the grand jury sessions is not only for the protection of the jurors and the witnesses, but for the state, the accused, and, as has been said, for society as a whole. * * *
* * * * * *
"* * * Our statutes demand that grand jurors, witnesses, and all authorized persons be administered the oath by which they swear to keep secret the proceedings of the grand jury and that secrecy cannot, thereafter, be invaded. RS 15:204, 212, 213, 215, 470, 471; State v. Jones, 8 Rob. 616; State v. Watson, 34 La.Ann. 669; State v. Lewis, 38 La.Ann. 680; State v. Britton, 131 La. 877, 60 So. 379, and State v. Taylor, 173 La. 1010, 139 So. 463."
Germane to the subject and appropriate to the matter under discussion is a statement contained in "State Grand Jury Handbook," prepared under the auspices of the Section of Judicial Administration of the American Bar Association, which we quote:
"Secrecy as to all Grand Jury proceedings, including not only action upon an Indictment or Presentment, but the fact that any such matter was considered or any witnesses called, is of *692 the utmost importance. Thus only can the Grand Jurors themselves be protected from being subjected to pressure by persons who may be involved in the action of the Grand Jury. Thus only can persons be prevented from escaping while an Indictment against them is under consideration. Thus only can witnesses before the Grand Jury be prevented from being tampered with, or intimidated, before they testify at the trial. Thus only can such witnesses be encouraged to give the Grand Jury information as to the commission of crime. Thus only can an innocent person who has been improperly subjected to a charge, but where the Indictment has been dismissed, be saved the disgrace attendant upon the making of such a charge. Note that to achieve the above protection for the Grand Jury, for the individuals involved, including the witnesses, and for the citizens at large, this pledge of secrecy is paramount and permanent." (Emphasis supplied.)
In State v. Britton, 131 La. 877, 60 So. 379, 380, the defendant sought to elicit from the district attorney, the clerk of court and the sheriff and their deputies, information as to whether subpoenas had been issued and served for the appearance of witnesses before a grand jury, and whether any witnesses had appeared before the grand jury. In upholding a ruling of the lower court in sustaining an objection to the request made, the Supreme Court stated:
"The rulings of the court were correct. It is a general rule, and one well settled, that testimony concerning the grand jury must come from others than the members of said jury. 1 Wharton, Criminal Law, §§ 509, 512; 1 Bishop's Crim.Pro. § 874; State v. Lewis, 38 La.Ann. 680; State v. Comeau, 48 La. Ann. [249,] 250, 19 So. 130; State v. Richard, 50 La.Ann. 210, 23 So. 331; State v. Perioux, 107 La. 601, 31 So. 1016. We refer to Greenleaf, vol. 1, par. 252, in support of the ruling of the trial judge that the rule is equally applicable to the prosecuting officers of the state. The rule, for the same reason, is applicable to other attaches of the court, with reference to the evidence sought, to the effect that the clerk had not issued, and the sheriff had not served, subpoenas upon witnesses to appear before the grand jury."
Thus, in the Britton case, it was held that neither the clerk and his deputies nor the sheriff and his deputies, nor the district attorney could testify as to whether grand jury subpoenas had been issued or served. The production of the subpoenas and the returns thereon would have been equally objectionable and amenable to the same ruling. It would appear that an accused affected directly by the actions of the grand jury would have a better right to, and a greater interest in, the information sought than third persons having only a general interest.
The law of secrecy as regards the proceedings of the grand jury includes, as a matter of public policy, the names of the witnesses who appear before the jury. To those who may be affected by their testimony, publication of the names of the witnesses without further information would, no doubt, in many instances, be sufficient to apprise those intended to be investigated of their forthcoming investigation by the grand jury. Thus, it is evident by the mere revelation of the names of the witnesses the law of secrecy as regards the proceedings would be thwarted and the purposes intended to be attained defeated.
From neither the facts nor the law could the documents in question be characterized as permanent public records. We have been referred to no authority, and our search reveals no authority, whereby the clerk of court is directed or authorized to issue grand jury summonses, or that either the sheriff or the clerk is *693 designated custodian for such subpoenas or returns, or that, in fact, a custodian has even been designated for those documents. Too, it may be pointed out that neither the witnesses appearing before a grand jury are paid for their appearance, nor the sheriff remunerated for serving the subpoenas. Hence, no record for public inspection or auditing is permitted or authorized. The keeping or preservation of these or similar records would contravene both the statutory provisions and public policy as to secrecy of grand jury proceedings. A grand jury may, on its own initiative, investigate any matter coming to its attention, from whatever source, and, for that purpose, may receive testimony of witnesses voluntarily appearing, or it may issue its own summonses and subpoenas without the enlistment, or intervention, of the services of any public official or office.
The grand jury has the power to act in only one of the following ways: (1) by returning a true bill; (2) by returning a "no bill," or not a true bill; and (3) by pretermitting entirely the matter investigated. It is prohibited from otherwise making any report on any matter submitted to it for investigation, except as the law may expressly so provide. LSA-R.S. 15:210. Included in the exception is the inspection and report to be made of the prisons, hospitals, and public institutions maintained within the parish in which the grand jury is impaneled. LSA-R.S. 15:211.
We know of no statutory provision for the keeping or preservation, by the grand jury, of the subpoenas and returns for the witnesses to appear before it. Their use is only temporary and no purpose could be served by their preservation as permanent records.
Moreover, it was held, in State v. Bankston, 165 La. 1082, 116 So. 565, that an ex parte affidavit of the accused's codefendant, procured by the State and in possession of the district attorney, was not a public document nor a matter of public record, but was the private property of the district attorney, who could not be compelled to turn it over to counsel for the accused for inspection. The court likewise, in State v. Mattio, 212 La. 284, 31 So.2d 801, expressed considerable doubt that a police report was a public record within the contemplation of the public Records Act. Such reports were held, in State v. Lee, 173 La. 966, 139 So. 302, not to be public documents but private property of the State.
See, also, State v. Dallao, 187 La. 392, 175 So. 4, 20. There, it was stated:
"The defendant Cauche complains of the ruling of the trial judge refusing him oyer and inspection of statements, reports, confessions, and documents alleged to be in the possession of the police department. We find no error in the ruling. So far as the documents called for were public in character, defendant was not entitled to their inspection until they had been used in open court. Section 5 of Act No. 242 of 1912, as amended by Act No. 255 of 1920, § 3. And so far as they were of a private nature, defendant was not entitled to their inspection until they were offered in evidence. State v. Lee, 173 La. 966, 139 So. 302."
While it is true that the authorities herein cited were criminal prosecutions and involve the statutory rights of the parties therein accused, the logic applied is probably more, but at least equally, applicable to this action wherein plaintiffs have no particular or special interest or rights to inspect and peruse generally the public records other than as specifically recognized and conferred upon them as members of society in general.
We conclude, therefore, that the subpoenas for the appearance of witnesses before the grand jury and the returns of service thereon are not such public records, as contemplated by the Public Records Act, and are, therefore, not subject to public *694 inspection. To otherwise hold, we would necessarily be compelled to give precedence and priority to a general law over statutes having application to a particular subject matter. Too, such ruling would be in disregard of the firmlyand well-established jurisprudence as regards the secrecy of grand jury proceedings, as heretofore pointed out. We, therefore, are of the opinion that the judgment sustaining the exception of no cause and of no right of action is correct and must be affirmed.
However, it may be appropriate to further point out that should it be held that the subpoenas and returns constitute public documents within the purview of the Public Records Act, they will clearly come within the exemptions provided in § 3 of the statute, which provides that the statute does not apply to records held by the prosecuting or enforcement officers "* * * until after the public records have been used in open court or the criminal charge has been finally disposed of." Where the district court makes a determination that the records for which oyer is sought are public records but exempt from the operation of the statute, no appeal lies from its decision, and we would therefore be without jurisdiction or authority to entertain the appeal. We would, in that event, have no alternative other than to dismiss the appeal. The portion of the section referred to, LSA-R.S. 44:3, subd. B, reads as follows:
"In all cases set forth in this Section and in R.S. 44:2, upon petition filed against the custodian of the records by one or more citizens in the district court of the parish where the record is so held, the district judge shall determine summarily in open court or in chambers whether the record is bona fide held for investigation of any violation of the laws of this state or as evidence in the prosecution of a criminal charge. No appeal shall lie from the decision of the judge." (Emphasis supplied.)
However, as heretofore stated, our affirmance of the judgment is based upon the conclusion that subpoenas for the appearance of witnesses before grand juries and the returns thereon are not subject to inspection under the authority of the Public Records Act.
For the reasons assigned, the judgment appealed is affirmed at appellants' cost.
Affirmed.
| {
"pile_set_name": "FreeLaw"
} |
797 S.W.2d 532 (1990)
STATE of Missouri, Respondent,
v.
Norman E. DOUGLAS, Appellant.
Norman E. DOUGLAS, Appellant,
v.
STATE of Missouri, Respondent.
Nos. WD 41558, WD 42522.
Missouri Court of Appeals, Western District.
August 14, 1990.
Motion for Rehearing and/or Transfer Denied October 2, 1990.
Application to Transfer Denied November 20, 1990.
Elizabeth Clarke, Carmel, Ind., for appellant.
William L. Webster, Atty. Gen., Breck K. Burgess, Asst. Atty. Gen., Jefferson City, for respondent.
*533 Before KENNEDY, P.J., and SHANGLER and GAITAN, JJ.
Motion for Rehearing and/or Transfer to Supreme Court Denied October 2, 1990.
KENNEDY, Judge.
Defendant Norman Douglas appeals from convictions upon jury trial of one count of first degree sexual assault, § 566.040, RSMo 1986; two counts of rape, § 566.030, RSMo 1986; one count of sodomy, § 566.060, RSMo 1986; and two counts of child abuse, § 568.060, RSMo 1986. The sexual offenses were committed against his stepdaughter and daughter and the instances of child abuse were against his stepdaughter, his daughter and his son. He was sentenced as a persistent offender to consecutive prison terms of 25 years on each of three counts and 10 years on each of the other three counts.
One of the 10-year sentences was for first degree sexual assault in having sexual intercourse with 15-year-old stepdaughter Tracy. For error in the disallowance of cross-examination of Tracy with respect to her sexual activity after the alleged incident for which defendant was convicted, we reverse the conviction on Count 5 and remand for a new trial on that count.
On the other counts the convictions are affirmed.
Defendant also appeals from the trial court's denial of his Rule 29.15 motion for post-conviction relief. No brief has been filed specifying any error. Thus, the appeal is deemed abandoned and the denial of his Rule 29.15 motion is affirmed. SAB Harmon Industries, Inc. v. All State Building Systems, Inc., 733 S.W.2d 476, 479 n. 1 (Mo.App.1987); Wisdom v. Wisdom, 689 S.W.2d 82, 85 (Mo.App.1985); see Thummel v. King, 570 S.W.2d 679, 684-88 (Mo. banc 1978).
The sufficiency of the evidence to support the convictions is not challenged, and we need state the evidence only briefly.
Defendant and his wife lived at Hallsville, Missouri, with eight children. Tracy was the child of the wife and stepchild of the defendant while Velveeta and Raymond were the children of the wife and the defendant. Tracy was the oldest of the children. She was 15 years old in July or August 1987, the time of the first degree sexual assault with which defendant was charged and convicted. She testified to repeated earlier uncharged acts of intercourse, beginning when she was 8 years old.
Velveeta was 12 in April 1988, the time of the sodomy of which defendant was convicted. Defendant on that occasion put his finger into her vagina. Velveeta testified he had done this often before. She testified also that he had sexual intercourse with her when she was 12 years old in the summer of 1987 and again in March or April 1988, the two rapes with which defendant was charged and convicted. She testified also to repeated earlier uncharged acts of intercourse beginning when she was 11 years old, following cunnilingus performed upon her by defendant.
The child abuse convictions were based upon testimony of defendant's excessive, injury-inflicting punishments administered to Tracy and Velveeta, and to a younger son, Raymond.
Defendant advances two claims of error. One such claim is that the court erred in allowing evidence of defendant's uncharged sexual crimes against Tracy and Velveeta. The allowance of the complained-of evidence to show defendant's motive was within the trial court's discretion. "Prior sexual intercourse or intimacy between defendant and victim indicates a sexual desire for the victim by the defendant and tends to establish a motive for statutory rape, i.e. satisfaction of defendant's sexual desire for the victim." State v. Graham, 641 S.W.2d 102, 105 (Mo. banc 1982). Graham involved the statutory rape by the defendant of his 11-year-old stepdaughter. Numerous cases have considered and have rejected defendant's argument. See State v. Taylor, 735 S.W.2d 412, 415-18 (Mo.App.1987); State v. V_____ C_____, 734 S.W.2d 837, 842-45 (Mo.App.1987); State v. Sandlin, 703 S.W.2d 48, 49 (Mo.App.1985); State v. Smith, 694 S.W.2d 901, 902 (Mo.App.1985); State v. Koster, 684 S.W.2d 488, 490 (Mo. App.1984).
*534 Defendant's second claim of error is that the court erred in refusing on the basis of the rape shield statute, § 491.015, RSMo 1986,[1] to allow him to cross-examine Tracy with respect to her other sexual activity than the alleged intercourse of which defendant was charged. This allegation of error must be sustained.
Defendant was convicted of first degree sexual assault upon Tracy. Tracy testified defendant had sexual intercourse with her in the summer of 1987, when she was 15 years old.
The state presented the testimony of Dr. Maria Teresa Esquivel, a pediatrician, who had examined Tracy on May 9, 1988, upon reference by the Division of Family Services. Dr. Esquivel's examination of Tracy's genitalia disclosed the absence of hymenal tissue. This, according to Dr. Esquivel, "would [not] be a usual finding on an individual who had not engaged in sexual intercourse." She was then asked if her observations of Tracy were "consistent with penile penetration of the vagina." Dr. Esquivel answered in the affirmative.
Defendant's counsel then, after Tracy's direct examination was completed, asked the court's permission to cross-examine her with respect to other sexual activity during the time intervening between defendant's alleged intercourse with herin the summer of 1987and Dr. Esquivel's examination on May 9, 1988, when the absence of the hymen was noted. Defendant's counsel quoted from Dr. Esquivel's report, which stated: "Tracy says in the last few months she was sexually active with her boyfriend." The State objected to the proposed cross-examination on the basis of the rape shield statute, and the court sustained the objection.
In the absence of the rape shield statute, it is scarcely debatable that the proposed cross-examination of Tracy about her sexual activity with her boyfriend after the time of the sexual assault with which defendant was charged and before Dr. Esquivel's examination would have been admissible and its exclusion error. Dr. Esquivel's testimony of the absence of Tracy's hymen when she examined her in May 1988 was offered by the State for no other purpose than to support Tracy's testimony that the defendant had had intercourse with her in July or August 1987. The intended inference was that the absence of the hymen was attributable to defendant's alleged intercourse with her. The defendant was put to an unfair disadvantage when he was not allowed to counter the inference by showing that other sexual activity could have accounted for the absence of the hymen. Biener v. St. Louis Public Service Co., 160 S.W.2d 780, 785 (Mo.App.1942); Mo. Evidence Restated, sec. 103(e) (Mo.Bar 1984); 1A Wigmore, Evidence § 133 (Tillers rev. 1983); see also Hollocher v. Taylor, 506 S.W.2d 105, 106 (Mo.App.1974).
If the State had not put on the testimony of Dr. Esquivelwhich, as we have noted above, was presented for no other purpose than to support Tracy's accusation of inter-course *535 then undoubtedly the statute would have required the exclusion of the proposed cross-examination. The cross-examination would for that matter have been excludable by common law principles as being irrelevant to any issue in the case and having no tendency to impeach Tracy. State v. Lee, 404 S.W.2d 740, 749 (Mo. 1966); State v. Kain, 330 S.W.2d 842, 845-46 (Mo.1960); State v. Taylor, 320 Mo. 417, 8 S.W.2d 29, 34 (1928).
Does § 491.015, RSMo 1986, require the exclusion of this evidence? The State, citing State v. Jones, 716 S.W.2d 799, 800 (Mo. banc 1986), says it does, that Jones makes the statute's prohibition absolute, with the exceptions expressly delineated in subsections (1), (2), (3) and (4) of paragraph 1 thereof. We do not think Jones is to be read so narrowly. The holding of that case was that the trial court's exclusion of evidence of a rape victim's consensual sex with defendant three and one-half to four and one-half months before the date of the alleged forcible rape of the victim was not error, as against defendant's claim that the evidence was relevant to his defense of consent. The court concluded that defendant was not deprived of a fair trial by the exclusion of the evidence, and that the trial court in the circumstances had not abused its discretion in excluding the same. The clear implication is that if the exclusion of the evidence had been deemed to have deprived defendant of a fair trial the conviction would have been reversed and the case remanded for a new trial.
To give paragraph 1 of the rape shield statute the absolute effect argued for by the State would be to make an unconstitutional application thereof, an eventuality mentioned in State v. Ray, 637 S.W.2d 708, 709 n. 1 (Mo. banc 1982).[2] The statute may not be applied to deny defendant his constitutional rights. In Davis v. Alaska, 415 U.S. 308, 94 S.Ct. 1105, 39 L.Ed.2d 347 (1974), the Supreme Court held that an Alaska statute making juvenile court records confidential could not be applied to prevent cross-examination of a crucial prosecution witness about his juvenile court record to show the witness's bias and his possible reasons for testifying untruthfully. To allow the confidentiality statute to put off limits a salient inquiry of the witness, the Supreme Court held, would violate the Confrontation Clause of the Sixth Amendment and the Fourteenth Amendment.
In Chambers v. Mississippi, 410 U.S. 284, 93 S.Ct. 1038, 35 L.Ed.2d 297 (1973), a homicide defendant had been prevented by the application of the hearsay rule and the rule that a party vouches for the truthfulness of the testimony of his own witness, from showing that another had repeatedly confessed to the crime with which the defendant was charged. The Supreme Court held that the Mississippi trial court's narrow and mechanistic application of the voucher and hearsay rules had deprived defendant of the fair trial contemplated by due process.
The teaching of Davis and Chambers is that a rule of evidence, whether it has its origin in statute, as in Davis and in the present case, or in common law, as in Chambers, may not be narrowly or mechanistically applied to deprive a defendant of rights to confront and cross-examine witnesses and to call witnesses in his own defense, both rights essential to due process and guaranteed by the Fourteenth Amendment.
To make particular application of the Davis and Chambers teaching to the present case, the rape shield statute may not be applied so strictly as to deprive the defendant of the fair trial comprehended by the concept of due process. To allow the State to show that Tracy's hymen was absent, with the clear and calculated implication *536 that its absence was caused by intercourse with the defendant, then to forbid defendant to show that Tracy had had intercourse with another, was violative of defendant's right to a fair trial.[3]
Defendant's conviction of first degree sexual assault on Count 5 is reversed and that count is remanded for a new trial. The convictions on all other counts are affirmed. The court's denial of defendant's Rule 29.15 motion is affirmed.
All concur.
NOTES
[1] Sec. 491.015, RSMo 1986, reads as follows:
1. In prosecutions under chapter 566, RSMo, or prosecutions related to sexual conduct under chapter 568, RSMo, opinion and reputation evidence of the complaining witness' prior sexual conduct is inadmissible; evidence of specific instances of the complaining witness' prior sexual conduct or the absence of such instances or conduct is inadmissible, except where such specific instances are:
(1) Evidence of the sexual conduct of the complaining witness with the defendant to prove consent where consent is a defense to the alleged crime and the evidence is reasonably contemporaneous with the date of the alleged crime; or
(2) Evidence of specific instances of sexual activity showing alternative source or origin of semen, pregnancy or disease;
(3) Evidence of immediate surrounding circumstances of the alleged crime; or
(4) Evidence relating to the previous chastity of the complaining witness in cases, where, by statute, previously chaste character is required to be proved by the prosecution.
2. Evidence of the sexual conduct of the complaining witness offered under this section is admissible to the extent that the court finds the evidence relevant to a material fact or issue.
3. [Omitted].
The "prior sexual conduct" referred to in § 491.015, RSMo 1986, we assume to mean sexual conduct prior to trial, rather than prior to the alleged crime.
[2] Sec. 491.015 has been held facially constitutional. State v. Ray, 637 S.W.2d at 709 n. 1; State v. Brown, 636 S.W.2d 929, 934-35 (Mo. banc 1982). For a discussion of unconstitutional application of a facially constitutional statute, see In re Marriage of Siller, 187 Cal.App.3d 36, 231 Cal.Rptr. 757, 764-65 (1986). See also, Foundation for the Handicapped v. Department of Social and Health Services of Washington State, 97 Wash.2d 691, 648 P.2d 884, 887 (1982); Felder v. Harnett County Bd. of Educ, 349 F.2d 366, 367-68 (4th Cir.1965); 1 J. Sutherland, Statutory Construction § 2.06 (4th ed. 1985 rev.).
[3] The following language from the Supreme Court's opinion in Davis v. Alaska, 415 U.S. at 320, 94 S.Ct. at 1112, is apt:
The State's policy interest in protecting the confidentiality of a juvenile offender's record cannot require yielding of so vital a constitutional right as the effective cross-examination for bias of an adverse witness. The State could have protected Green from exposure of his juvenile adjudication in these circumstances by refraining from using him to make out its case; the State cannot, consistent with the right of confrontation, require the petitioner to bear the full burden of vindicating the State's interest in the secrecy of juvenile criminal records.
| {
"pile_set_name": "FreeLaw"
} |
574 F.2d 1339
Roosevelt Lonzo KNOXSON, Petitioner-Appellant,v.W. J. ESTELLE, Jr., Director, Texas Department ofCorrections, Respondent- Appellee.
No. 77-2411.
United States Court of Appeals,Fifth Circuit.
June 15, 1978.
Roosevelt Lonzo Knoxson, pro se.
Carolyn Truesdell, Houston, Tex. (Court-appointed), for petitioner-appellant.
John L. Hill, Atty. Gen., Austin, Tex., Douglas M. Becker, David M. Kendall, Joe B. Dibrell, Jr., Asst. Attys. Gen., Austin, Tex., for respondent-appellee.
Appeal from the United States District Court for the Southern District of Texas.
Before BROWN, Chief Judge, AINSWORTH and VANCE, Circuit Judges.
ORDER:
1
We have before us the appellee's motion to revoke appellant Knoxson's leave to file his post-submission brief, to strike the brief, and to rebrief and reargue the question whether Knoxson has exhausted his state remedies. Knoxson filed a post-submission brief after oral argument was held in the case. During the arguments, the Court raised several questions critical to understanding and disposing of the habeas petition. The brief addresses the history of Knoxson's attempts to obtain access to a copy of his trial transcript, and includes copies of letters to and from Knoxson, the trial judge, and his attorney. None of the correspondence is part of the record of the case. The State registers violent objections to our consideration of these letters, which have emerged for the first time on this appeal, and urges that if the documents can be authenticated and the facts they reveal legally established, the Texas Court must be given the first opportunity to determine their impact on the case.
2
The post-submission brief does contain new factual allegations in support of Knoxson's legal plea. With regard to these new facts, we believe that the petitioner has failed to exhaust his state remedies. His petition must be dismissed from the federal court without prejudice to give the state court an opportunity to review these newly surfaced facts in the further proceedings that we expect Knoxson to pursue. See Picard v. Connor, 1971, 404 U.S. 270, 276, 92 S.Ct. 509, 30 L.Ed.2d 438; United States ex rel. Boodie v. Herold, 2 Cir., 1965, 349 F.2d 372; Gurule v. Turner, 10 Cir., 1972, 461 F.2d 1083; Developments in the Law Habeas Corpus, 83 Harv.L.Rev. 1038, 1069 (1970) (". . . evidence . . . clearly crucial to the claim . . . should first be presented to the state if the exhaustion rule is to be an effective one").
3
This Court believes that the interests of the state of Texas, the federal courts, and the petitioner are best balanced by allowing the state courts to consider this evidence. We therefore vacate the District Court's denial of habeas relief and remand to the District Court with directions to dismiss the suit without prejudice to Knoxson's right to refile the petition if he is dissatisfied with the outcome of any proceedings he brings in the state court.
4
The state's motions to revoke appellant's leave to file a post-submission brief, to strike said brief, and to rebrief and reargue the question of exhaustion, are DENIED.
| {
"pile_set_name": "FreeLaw"
} |
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 01-21103
Conference Calendar
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
DEMETRIO HERNANDEZ-FLORES,
Defendant-Appellant.
--------------------
Appeal from the United States District Court
for the Southern District of Texas
USDC No. H-01-CR-470-1
--------------------
June 18, 2002
Before HIGGINBOTHAM, DAVIS, and EMILIO M. GARZA, Circuit Judges.
PER CURIAM:*
The Federal Public Defender for Demetrio Hernandez-Flores
has moved for leave to withdraw and has filed a brief pursuant
to Anders v. California, 386 U.S. 738 (1967). Hernandez has
received a copy of counsel’s motion and brief, but he has not
filed a response. Our review of the brief filed by counsel and
the record discloses no nonfrivolous issue for appeal.
Accordingly, the motion for leave to withdraw is GRANTED, counsel
is excused from further responsibilities, and the APPEAL IS
DISMISSED. See 5TH CIR. R. 42.2.
*
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.
| {
"pile_set_name": "FreeLaw"
} |
382 B.R. 610 (2008)
In re WORLDCOM, INC., et al., Reorganized Debtors.
No: 02-13533 (AJG).
United States Bankruptcy Court, S.D. New York.
February 21, 2008.
*611 *612 *613 Mark. S. Carder, Esq., Mark A. Shaiken, Esq. of Counsel, Kansas. City, MO, Stinson Morrison Hecker LLP, Special Counsel to the Reorganized Debtors.
James B. Cavanagh, Esq. of Counsel, Lieben, Whitted, Houghton, Slowiaczek & Cavanagh, PC, .LLO, Omaha, NE, Attorneys for the Waldinger Corporation.
OPINION REGARDING CLAIM NUBER 3059 INCLUDING WALDINER CORP.'S MOTION FOR RECONSIDERATION
ARTHUR J. GONZALEZ, Bankruptcy Judge.
I. INTRODUCTION
Waldinger Corporation ("Waldinger") asserts a secured claim against WorldCom, *614 Inc. (the "Debtors" or "WorldCom") for $371,362 plus interest and attorneys' fees, secured by a construction lien under Nebraska law. The Debtors dispute that the claim is secured and additionally dispute the basis of the claim.
After considering multiple hearings and pleadings, the Court issued an opinion on February 23, 2007 (the "February Opinion") granting the Debtors' motion for partial summary judgment to classify Waldinger's claim as unsecured because of the finding that the. Lien lapsed as matter of law on May 20, 2004. Waldinger requests the Court to reconsider that partial summary judgment and to allow its claim as secured.
Waldinger asserts it is further entitled to the Nebraska statutory interest rate for a mechanic's lien of 12% per annum pursuant to Nebraska statutes §§ 45-103.02(2) and 45-104, and the recovery of all fees and expenses, including attorney's fees (collectively, "Attorney's Fees") pursuant to section 506 of chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"). The Debtors argue that Waldinger is not entitled to interest or Attorney's Fees for various reasons.
The Court held a trial on this matter on December 13, 2007. For the reasons that follow, the Court has reconsidered its earlier judgment in the February Opinion that Waldinger's lien lapsed as matter of law but concludes that Waldinger is not entitled to a secured claim for other reasons. The Court finds that Waldinger is entitled to recovery under quantum meruit, but the Court must hold a further hearing to determine the reasonable value of the services Waldinger provided to the Debtors.
II. JURISDICTION
The Court has subject matter jurisdiction over this proceeding pursuant to sections 1334 and 157(b) of title 28 of the United States Code, the July 10, 1984 "Standing Order of Referral of Cases to Bankruptcy Judges" of the United States District Court for the Southern District of New York (Ward, Acting C.J.), and paragraph 32 of the Court's Order Confirming Debtors' Modified Second Amended Joint Plan of Reorganization under chapter 11 of title 11 of the United States Code. This matter is a core proceeding pursuant to section 157(b)(2)(B) of title 28 of the United States Code. Venue is proper before the Court pursuant to sections 1408 and 1409 of title 28 of the United States Code.
III. BACKGROUND
A. Factual and Procedural Background[1]
Waldinger is engaged in the construction business in Omaha, Nebraska and the surrounding region. WorldCom owns a building in Omaha named the Mid-Continent Data Center at 7400 World Communications Drive, Omaha, Nebraska (the "Data Center"). Sometime in 2000, WorldCom executives informed the Data Center's building manager, Raymond Brock ("Brock"), that they wanted to have additional air handling units installed to meet their forecasted additional need. (Trial Ex. 37, Brock Depo. 21:11-21:20.) Air handing units are large machines essential to cool and ventilate the rooms in which multiple computer systems and data storage hardware are located. Brock stated that a colleague at WorldCom told him that Waldinger had done "some" to "all" of the mechanical work at the Data Center and thus should be contacted to install the air handing units. (Id. at 21:21-22:22.) Brock testified that he subsequently had *615 contact with Michael Smearman ("Smearman"), a manager for Waldinger, regarding the Debtors' need for additional air handling units. (Id. at 23:3-23:6.) In mid to late-2000, WorldCom requested a proposal and quote from Waldinger regarding air handling units for the. Data Center. On September 15, 2000, Waldinger submitted a proposal to the Data Center (Trial Ex. 1.) The proposal provided a quote of $1,098,000 in labor and materials for the purchase and installation of three new air handling units numbers 6, 7, and 43 (the "AHU's"), at the Data Center, and contained proposed work for existing air handling unit number 5. The proposal by Waldinger included $576,332 for the cost of the three AHU's. (Trial Ex. 4.) On November 14, 2000, WorldCom Purchasing, LLC issued a written purchase order to Waldinger for the purchase of the three AHU's referenced in the proposal at the price of $576,000. (Trial Ex. 2.) Installation was not referenced in that purchase order.
Waldinger's employees were at the Data Center performing work on other air handing units, numbers 5 and 24, in the fall and winter of 2000. The Data Center is a secure facility and Waldinger's employees needed authorization to access the facility. Waldinger testified that from March through July 2001, Waldinger's employees performed work to prepare the Data Center for the delivery and installation of the AHU's, for example, building raised concrete "housekeeping pads" where the AHU's were to be placed, and installing ductwork, piping, and sheet metal. WorldCom's building manager at the Data Center, Brock, stated in a deposition that there was some "prep work" that needed to be done for the three AHU's to be put in place, including putting up some ductwork and installing the housekeeping pads. (Trial Ex 37, 47:19-47:48.) A Waldinger job foreman, George Russell ("Russell"), testified that he observed Waldinger employees working to prepare the sheet metal ducts at the Data Center prior to the installation and delivery of the three AHU's. (Russell Depo., Trial Ex. 34, 43:8-44:7, 49:6-49:11). Brock affirmed that Waldinger moved lights to make ductwork fit. (Trial Ex. 37, 52:21-52:23.) Brock acknowledges that Waldinger did some sheet metal work, but disputes whether they were directed to do so. (Trial Ex. 37, 49:9-4918.) Brock stated that he did not tell any employee of Waldinger that they were authorized to install the AHU's. (Trial Ex. 37, 49:9-49:18; 64:5-64:9.)
Russell testified that Brock authorized work on another air handling unit, number 5 (Trial Ex. 34, 8:14-8:23, 10:12-10:20.) Brock admits that he instructed Russell or Smearman to get the work done on number five, as instructed by the Debtors' governance people. (Trial Ex. 37, 47:19-48:4.)
The three AHU's were delivered to the Data Center in July 2001. Waldinger contends that it rented a crane and forklifts to offload and move the AHU's to the concrete pads and that its employees performed that work. At trial, Waldinger showed that it paid a sub-contractor in full for cost of the AHU's. (Trial Ex. 21.) Some time after the AHU's were in place on the concrete pads, Brock instructed Waldinger to stop all further work. Brock testified that it was after the AHU's had been delivered and placed on the concrete pads, that a more senior WorldCom employee, Arnold Espinosa ("Espinosa"),[2]*616 told him to instruct Waldinger to stop work. (Trial Ex. 37, 58:2-58:10.) Brock testified that Espinosa told him that Waldinger only had purchase orders to purchase the AHU's, and not to install them. (Trial Ex. 37, 58:6-58:11). The date of the instructions to Waldinger has not been precisely pinned down. John Wilhelmi ("Wilhelmi"), Waldinger's Division President, testified that Smearman told him to stop work in July 2001 via WorldCom's instruction. (Trial Tr. 78:11-78:20.) At his deposition, Wilhelmi stated that Waldinger was told to stop work in approximately September 2001. (Trial Ex. 36, Wilhelmi Dep., 65:9-65:11.)
Waldinger submitted three Applications for Payment to WorldCom, addressed to the "Mid Continent Data Center, 7400 World Communications Drive, Omaha, NE 68122" to the attention of Ray Brock. Application No. 1 was issued on June 5, 2001, requesting payment in the total amount of $483,500, and included a line item for the $223,053 related to the purchase of the three AHU's. (Trial Ex. 7.) WorldCom paid application No. 1 in full on or about July 27, 2001. (Trial Ex. 8.) Waldinger issued Application No. 2 on July 6, 2001, requesting payment in the amount of $51,879. The majority of that application, $31,693, was requested for sheet metal work, and $12,450 was requested for concrete work. (Trial Ex. 9.) WorldCom paid the full amount of $51,879 on or about October 30, 2001. Waldinger issued Application No. 3 on August 2, 2001, requesting payment in the total amount of $411,983. That application included a line item for $353,279 related to the purchase of the three AHU's. The balance of Application No. 3 related to other work and materials Waldinger claims to have performed at the Data Center. WorldCom paid only $40,621 of the balance due Application No. 3 on October 15, 2001. Thus, the total paid by WorldCom equaled $576,000a sum that matches the November 14, 2000 purchase order issued by WorldCom to Waldinger for the purchase of the three AHU's.
Thereafter, Waldinger requested payment from WorldCom, which it did not receive. Paul Morrison, a controller for Waldinger in late 2001 to early 2002, testified that he spoke to Espinosa on September 24, 2001, about getting paid for the installation, Morrison does not recall whether he came to a resolution with Espinosa and stated that Espinosa neither confirmed nor denied that WorldCom owed Waldinger money. (Trial Ex. 35, 24:8-24-13.) On October 25, 2001, Morrison and Smearman held a conference call with three managers from WorldCom to ask about payment. No resolution occurred. (Trial Ex. 16, October 25, 2001 e-mail from Morrison to Wilhelmi.)
Waldinger filed a lien (the "Lien") on the Omaha property with the Register of Deeds in Nebraska on or about October 29, 2001 pursuant to the Nebraska Construction Lien Act, Neb. Rev. Stat, § 52-125, et seq. The Lien was in the amount of $463,862 for the cost of the installation, which included $371,362 for the Construction Services already performed. On or about January 29, 2002, Waldinger filed a petition against WorldCom in a Nebraska state court, alleging claims of breach of contract and quantum meruit. After WorldCom successfully moved that action to federal court, Waldinger withdrew that action and the parties reached a settlement agreement (the "Settlement Agreement"). The Settlement Agreement was executed between Waldinger and World-Com Purchasing, LLC between June 26, 2002 and July 1, 2002. Along with the *617 Settlement Agreement, Waldinger, and WorldCom Purchasing, LLC, also executed an Installation Services Agreement, attached to the Settlement Agreement as Exhibit A. Although relevant portions of the Settlement Agreement are discussed more fully below, some provisions will be noted here. In the Settlement Agreement, WorldCom Purchasing agreed to issue a purchase order to Waldinger to, authorize the installation of the AHU's, and to `pay Waldinger a total of $499,718 for the completion of installation of the AHU's. The Settlement Agreement referred to the payment, in two installations, as the "Settlement Funds."
Approximately three weeks after the Settlement Agreement was reached, the Debtors filed for bankruptcy protection. On July 21, 2002, and thereafter on November 9, 2004, the Debtors filed petitions under chapter 11 of the Bankruptcy Code.
Waldinger filed proof of claim 3059 (the "Claim") as a secured creditor in the amount of $371,362 "plus additional charges per attached" on or about December 3, 2002. The Claim listed MCI World-Com Network Services, Inc. as Debtor. Attached to the Claim were copies of the Lien and the Settlement Agreement.
On May 17, 2003, MCI sent a letter to Waldinger formally terminating the Installation Services Agreement. (Trial Ex. 30.)
On October 31, 2003, the Court confirmed the Debtors' Plan of Reorganization (the "Plan"). The Plan became effective on April 20, 2004 (the "Effective Date"). May 20, 2004 was thirty days after the Effective Date. The Plan, in Article 7.01, entitled the Debtors to object to claims until 180 days after the Effective Date. On October 15, 2004; the Debtors timely filed an objection to the Claim as part of its SeventySecond Omnibus Objection (the "Objection"), seeking to expunge and disallow the Claim, asserting that the Claim is disputed and unsecured. On November 16, 2004, Waldinger filed its response to the Debtors' Seventy-Second Omnibus Objection to Proofs of Claim. In that objection, Waldinger did not complain that it was not paid for the work it had done to finish air handling unit number five. Instead, Waldinger's grievance for lack of payment concerned just the three AHU's. (Response of the Waldinger Corporation to the Debtors' SeventySecond Omnibus Objection to Proofs of Claim, ¶ 3.)
The Debtors subsequently filed for partial summary judgment in July 2005. Waldinger filed an opposition to that motion and a cross-motion for partial summary judgment. The Court held a hearing on January 31, 2006. After that hearing, the Debtors and Waldinger submitted supplemental memoranda of law addressing certain issues that were raised at the hearing. The Court then directed the Debtors and Waldinger to more fully address certain issues which were implicated by Waldinger's and the Debtors' arguments (the "Second Supplemental Briefing"). In response, the Debtors and Waldinger submitted briefs primarily focusing on whether sections 362(b)(3) and 546(b)(2) or section 108(c) of the Bankruptcy Code were applicable to the Claim throughout the duration of the automatic stay of section 362.
As of December 2007, Brock stated that air handling unit number 5 was never completed to operational status and that various construction firms, including Waldinger, were in the process of completing work on the three AHU's to get them into service. (Trial Ex. 37, 41:9-42:9.)
B. The February 23, 2007 Opinion
After considering multiple hearings and pleadings, the Court issued the February Opinion. The February Opinion made *618 several findings. Among them, that (i) section 108 delayed the need for Waldinger to take action to foreclose on the Lien until May 20, 2004, thirty days after expiration of the section 362 automatic stay, (ii) on May 20, 2004, the Lien lapsed and the Omaha property no longer secured the Claim, and (iii) the Claim is unsecured because the Lien lapsed as matter of law on May 20, 2004.
The Court also considered the effect of the Plan's injunction, Article 10.04, in describing a course of action Waldinger could have taken
On the Effective Date, the automatic stay of section 362 was lifted and, as such, section 108(c) tolled the need to commence a Foreclosure Action for 30 days after the Effective Date. Waldinger was required to institute the Foreclosure Action within 30 days. However, Waldinger was restricted by the Plan's injunction from commencing the Foreclosure Action. Waldinger was required to seek the Court's permission to institute the Foreclosure Action or for the Court to provide other relief. However, Waldinger failed to request any relief.
February Opinion, 21.
Waldinger moved the Court to reconsider, alter, and amend the February Opinion, and the order signed on May 10, 2007 granting the motion of the Debtors for partial summary judgment to reclassify proof of claim number 3059 of Waldinger (the "Motion to Reconsider").
In the Motion to Reconsider, Waldinger argued that the February Opinion includes an implied assumption that the Lien was in place on May 20, 2004, such that Waldinger could have requested the Court to either lift the automatic stay or grant Waldinger relief from the Plan's injunction to allow it to pursue action to foreclose on the Lien. However, Waldinger pointed out that the Lien, as well as all other liens, lapsed on the Effective Date according to express provisions in the Plan and the Debtors' Disclosure Statement. Waldinger, in effect, argued that the proposed course of action the Court described above would be an impossibility due to the Lien's termination under the Plan on the Effective Date. Waldinger further argued that it was an error for the Court to determine the secured status of the Claim at a date past the Effective Date.
In its Motion to Reconsider, Waldinger requested that the hearing of the motion be deferred and considered at the trial as to validity and amount of the Claim.
C. The Parties' Main Contentions at Trial
The thrust of Waldinger's argument is that the Court's prior finding in the February Opinion is wrong. Waldinger then seeks to establish that prior to the extinguishments of liens under the Plan, it held a valid lien. Waldinger contends that the Claim is secured as an involuntary statutory mechanics' lien claim pursuant to the Nebraska Construction Lien Act ("the Lien Act"), Neb.Rev.Stat. §§ 59-126, et seq. The Lien Act requires the existences of a "real estate improvement contract" to qualify for a construction lien. The parties agree that a written contract was not made but dispute whether the parties entered into an oral contract.
The Debtors argue that the Claim is unsecured because there was no contract for the installation of the AHU's. They further contend that Waldinger is not entitled to allowance of the unsecured claim in the amount unilaterally billed but, rather, the Claim should be allowed if at all in quantum meruit in the amount of the reasonable value conferred by the installation. The Debtors, citing Federal Rule of Evidence 702, argue that expert testimony *619 is required to prove the reasonable value of the installation and point out that Waldinger proffered no expert, testimony. Thus, the Debtors state that although quantum meruit recovery is hypothetically possible if established, it should not be allowed on evidentiary grounds.
The Debtors argue that under Nebraska law pre-judgment interest is not recoverable and that attorney's fees are not recoverable under 11 U.S.C. § 506(b), because the Claim is not fully secured. The Debtors argue that even the Claim were secured, interest and fees are not recoverable because section 506(b) requires that the provision for attorney's fees has to be provided for "under the agreement under which the claim arose." The Debtors argue that no agreement provided for such fees.
D. The Motion to Modify the Pre-Trial Order
The Debtors, after agreeing to a Joint Pre-Trial Order that contained a list of undisputed facts, filed a motion on December 11, 2007 to modify that pre-trial order (the "Motion to Modify the Pre-Trial Order"). The Debtors contend that one of the facts agreed to as undisputed in the pre-trial order was erroneously included. Part of Item N under Undisputed Facts stated that "[a]ny construction lien held by Waldinger was not released prior to the filing of the bankruptcy." In the Motion to Modify the Pre-Trial Order, the Debtors contend that statement is erroneous because the Settlement Agreement released the Debtor from any lien or claim relating to the dispute over the installation of the AHU's. The Debtors point to Paragraph 3.1 of the Settlement Agreement which states in part
Waldinger and its related persons . . . hereby release and forever discharge WorldCom and all other related persons, affiliates . . ., from and against all actions, causes of action, claims, suits, debts, liens, . . . that they now have or may have had, or hereafter claim to have . . . arising out of or relating to this Dispute.
The Debtors contend that the Settlement Agreement indicates that Waldinger released the Debtors, including their affiliates, from liability for the claim and any lien prior to the Debtors' bankruptcy filing. Likely because of the late nature of the Motion to Modify the Pre-Trial Order, filed just two days before trial, Waldinger did not file a written response or respond in depth at trial.[3] The Debtors' development of their arguments was also lagging. The Debtors stated at trial that the Settlement Agreement represented something akin to a novation, as found in the Court's decision in Beepwear Paging Products, LLC v. SkyTel Corp. (In re WorldCom, Inc.), No. 02-13533, 2006 WL 2400326 (Bankr.S.D.N.Y. May 30, 2006), affd, No. 06 Civ. 5245(KMW), 2007 WL 2049723 (S.D.N.Y. July 13, 2007) (finding that novation occurred, extinguishing liability for original agreement).
Section 1.9 of the Settlement Agreement states that "[p]ayment of the Settlement Funds by WorldCom shall finally settle and resolve all claims asserted or which could have been asserted against World-Com, or any of its parents, subsidiaries, affiliates or predecessors, arising out of, or in any relating to, the Dispute, the State Court Action or the Federal Court Action. *620 Fulfillment of the obligations under this Agreement and the Contract shall finally settle and resolve all claims asserted or which could have been asserted against Waldinger, or any of its subsidiaries, affiliates or predecessors. . . ."
Section 5.2 states that the "Agreement is binding on the Parties, their heirs, predecessors, successors, parents, subsidiaries, affiliates. . . ."
IV. DISCUSSION
A. Allowance of Claims
The allowance of claims is governed by Bankruptcy Code section 502. See, e.g., In re Asia Global Crossing, Ltd., 344 B.R. 247, 250 (Bankr.S.D.N.Y.2006). Section 502(a) and Bankruptcy Rule 3001(f) state that a claim which is filed is deemed allowed unless a party in interest objects. Once an objection to a claim is made, the court is to determine the amount of the claim after notice and a hearing. See, e.g., In re Adelphia Commc'ns Corp., No. 02-41729(REG), 2007 WL 601452, at *4 (Bankr.S.D.N.Y. Feb.20, 2007) (citing § 502(b)). Once an objectant offers sufficient evidence to overcome the prima facie validity of the claim, the claimant must meet the usual burden of proof to establish the claim's validity. See id. at *5 (citing In re Rockefeller Ctr. Props., 272 B.R. 524, 539 (Bankr.S.D.N.Y. 2000)). The validity and legality of claims generally is determined by applicable nonbankruptcy law. See Travelers Cas. & Sur. Co. of America v. Pacific Gas & Elec. Co., ___ U.S. ___, ___ _ ___, 127 S.Ct. 1199, 1204-05, 167 L.Ed.2d 178 (2007); see also 4 Collier on Bankruptcy, ¶ 502.03(1)(a) (15th Ed.2007) ("In determining the amount, the court is guided by otherwise applicable state or federal law, whether the claim is liquidated or contingent or if any other issues exist which bear upon the amount of the claim.").
B. Waldinger's Motion to Reconsider, Alter, and Amend the February Opinion
The granting of a motion to alter or amend an order under Bankruptcy Rule 9023, which incorporates Rule 59(e) of the Federal Rules of Civil Procedure, "is merited when there has been a clear error or manifest injustice in an order of the court or if newly discovered evidence is unearthed." In re Enron Corp. v. J.P. Morgan Sec. Inc., et al. (In re Enron Corp.), 356 B.R. 343, 350 (Bankr.S.D.N.Y.2006) (quoting In re Bird, 222 B.R. 229, 235 (Bankr.S.D.N.Y.1998)); see also In re Interbank Funding Corp., No. 02-41590(BRL), 2007 WL 2080512, at *2 (Bankr.S.D.N.Y. July 19, 2007) (To obtain relief under Bankruptcy Rule 9023, a party must present "manifest errors of law or fact" or "newly-discovered evidence.") (citing Rule 59(e)'s standards from Griffin Indus., Inc. v. Petrojam, Ltd., 72 F.Supp.2d 365, 368 (S.D.N.Y.1999)); In re Best Payphones, Inc., No. 01-15472(SMB), 2007 WL 203980, at *5 (Bankr.S.D.N.Y. Jan.24, 2007) (stating that an amended judgment is also allowed when it is necessary to prevent manifest injustice.). The burden is on the movant to show that factual matters were overlooked that could have materially influenced the prior decision. See In re Enron Corp., 356 B.R. at 350-51.
In the Motion to Reconsider and at trial, Waldinger argued that the February Opinion includes an implied assumption that the Lien was in place on May 20, 2004, such that Waldinger could have requested the Court to either lift the automatic stay or grant Waldinger relief from the Plan's injunction to allow it to pursue action to foreclose on the Lien. However, Waldinger pointed out, the Lien, as well as all other liens, lapsed on the Effective Date according to express provisions in the Plan and *621 the Debtors' Disclosure Statement. Waldinger, in effect, argued that the course of action the Court described above on page nine would be an impossibility due to the Lien's termination under the Plan on the Effective Date. Waldinger further argued that it was an error for the Court to determine the secured status of the Claim as of a date past the petition date.
The Debtors countered that the Plan did not render enforcement of the Claim an impossibility. Regarding the Lien, the Debtors argued that the Lien remained in effect after the Plan's Effective Date. According to the Debtors, the Plan did not block Waldinger's route to obtain allowance of the Claim, and thus the foreclosure of the Lien was still possible. The Debtors explained that article 403(b) of the Plan determines what would happen to the Claim if "allowed" under article 1.10 of the Plan, such as by the allowance of a disputed claim after the Court's final order.[4] Further, the Debtors repeated their arguments from the briefings leading to the February Opinion that Waldinger could have moved for relief from the automatic stay prior to the Effective Date for the purpose of filing, an action to foreclose on the Lien. The Debtors also asserted that after the Effective Date, Waldinger could have sought relief from the Plan's injunction to achieve the same purpose.
Section 1141(c) of the Bankruptcy Code provides, with exceptions that are not relevant, that "except as otherwise provided in the plan or in the order confirming the plan, after confirmation of a plan, the property dealt with by the plan is free and clear of all claims and interests of creditors, equity security holders, and of general partners in the debtor." The "default rule" is that section 1141(c) extinguishes liens, since they are "interests," unless the bankruptcy plan otherwise preserves them. See Elixir Indus. v. City Bank & Trust Co. (In re Ahern Enter.), 507 F.3d 817, 820-21 (5th Cir.2007). The Plan invokes section 1141(c).
Article 10.03 of the Plan states
Discharge of Debtors. Upon the Effective Date and in consideration of the distributions to be made hereunder, except as otherwise expressly provided herein, each holder (as well as any trustees and agents on behalf of each holder) of a Claim or Equity Interest and any affiliate of such holder shall be deemed to have forever waived, released, and discharged the Debtors, to the fullest extent permitted by section 1141 of the Bankruptcy Code, of and from any and all Claims, Equity Interests, rights, and liabilities that arose prior to the Effective Date.
Article 10.01 of the Plan states in part
Vesting of Assets. Upon the Effective Date, pursuant to sections 1141(b) and (c) of the Bankruptcy Code, all property of the estates of the Debtors shall vest in the Reorganized Debtors free and clear of all Claims, Liens, encumbrances, charges, and other interests, except as provided herein.
The Court finds that Waldinger's premise is correctthe February Opinion incorrectly assumed that the Lien was still in effect on the Plan's Effective Date and *622 during the subsequent thirty-day period.[5] The Court does not accept the Debtors' argument that the Plan did not extinguish the Lien upon the Effective Date. As a general matter, a reorganization plan's provision that vests the property of the estates in the debtors "free and clear" of all liens will void all liens unless the lien was expressly preserved in the plan. See, e.g., In re Ahern Enter., 507 F.3d at 820-21; FDIC v. Union Entities (In re BeMac Transport Co., Inc.), 83 F.3d 1020, 1025 (8th Cir.1996) (noting the rule that "a secured creditor who participates in the reorganization may also lose its lien by confirmation of a reorganization plan which does not expressly preserve the lien."); In re Penrod, 50 F.3d 459, 463 (7th Cir.1995) (holding that section 1141(c) covers liens and "that unless the plan of reorganization, or the order confirming the plan, says that a lien is preserved, it is extinguished by the confirmation").
The recent Fifth Circuit decision of in In re Ahern Enterprises comprehensively discussed how, pursuant to section 1141(c), the confirmation of a Chapter 11 plan voids liens on property dealt with by the plan unless the liens are specifically preserved, provided that the lien holder participated in the reorganization. That court, after discussing the reasoning and results of the leading cases, stated that four conditions must be met for a lien to be avoided under section 1141(c). 507 F.3d at 822. First, "the plan must be confirmed; (2) the property that is subject to the lien must be dealt with by the plan; (3). the lien holder must participate in the reorganization; and (4) the plan must not preserve the lien." Id.
Applying those criteria to Waldinger's Lien shows that the Plan voided the Lien.
First, it is undisputed that the Debtors' Plan has been confirmed. As stated above in the "Background" section, the Court confirmed the Debtor's Plan on October 31, 2003 and it became effective on April 20, 2004.
Second, the property subject to the Lien was dealt with by the Plan. Article 10.01 of the Plan stated that "all property of the estates of the Debtors shall vest in the Reorganized Debtors free and clear of all Claims, Liens. . . ." That section encompasses the Data Center, the property subject to the Lien. The Court notes that the second criterion of "the property that is subject to the lien must be dealt with by the plan" does not require the lien itself to be dealt with by the Plan. See In re Ahern Enter., 507 F.3d at 823.
Third, Waldinger participated in the reorganization proceeding by filing a proof of claim. See id. ("it is a sufficient level of participated that Elixir filed a proof of claim as an unsecured priority creditor").
Considering the last criterion for the Plan to void the Lien, that "the plan must not preserve the lien," the Court finds that the Plan did not preserve the Lien. Article 10.01 of the Plan stated that "all property of the estates of the Debtors shall vest in the Reorganized Debtors free and clear of all Claims, Liens, encumbrances, charges, and other interests, except as provided herein." (Emphasis added.) Courts have generally held that a phrase such as "except as provided herein" means that for a lien to survive it must be expressly preserved. In In re Ahern Enterprises, the court stated that whether a plan of reorganization *623 "provides otherwise" that property dealt with by the plan reverted to the debtors free and clear of liens means that the plan must expressly state that the lien remains on the property to which it is attached. Id. at 824; see also In re BeMac Transport, 83 F.3d at 1027 ("Where a plan does not expressly preserve a lien, a lienholder may lose it after confirmation of the plan, provided that the lienholder participated in the reorganization and its property was dealt with by the plan.") (italics in original); In re Regional. Building Sys., Inc., 251 B.R. 274, 279 (Bankr. D.Md.2000) ("when a property is dealt with by a plan, the effect of § 1141(c) is plain: after confirmation of the plan, the creditor's liens on that property are extinguished if not expressly preserved"). The Debtors argument is that the Plan implicitly, not expressly, preserved the Lien because the parties still had to reach finality on the Debtors' objection to the Claim before the Claim reached article 403(b) of the Plan, which would determine the status of an "Allowed" Claim. At trial, the Debtors counsel stated "the critical part is they [Waldinger] never got to Allowed Secured Claims, so . . . the lien remains in effect" and that "nothing happened on the filing of the Plan, or the confirmation of the Plan or the Effective Date of the. Plan that terminated their Lien." (Trial Tr., 174.) Given the weight of the authority discussed above, the Plan voided the. Lien because it did not expressly preserve it.
The Court thus has reconsidered the February Opinion, that Claim filed by Waldinger's Claim is unsecured because as a matter of law the Lien lapsed on May 20, 2004. That finding will be disregarded by the Court in its consideration of the secured status of the Claim. As a result, Waldinger's failure to take action to foreclose upon the Lien after the expiration of the section 108 period is not a basis for the Debtors to object to the secured status of Waldinger's claim. Since the Plan extinguished the Lien, Waldinger could not take steps to foreclose upon the Lien. The Debtors' objections to the allowability of the claim or the status of the Lien will be limited to what objections could be raised on the Effective Date.
C. Discussion of Dispositive Effect of the Settlement Agreement
If the Debtors are correct that Waldinger released its Lien in the Settlement Agreement, Waldinger's Claim would seem limited to unsecured status, with the possible question remaining of whom it would be a claim againstthe Settlement Agreement was with WorldCom Purchasing, LLC while the Claim listed MCI World-Corn Network Services, Inc.
For multiple reasons, the Court finds that the Settlement Agreement did not operate as an accord or satisfaction, novation, or substitute agreement to extinguish Waldinger's ability to pursue liability under any original agreement. Although the Settlement Agreement states that it "supersedes any and all prior agreements" (¶ 5.1), the Settlement Agreement contemplated stipulated performance by both WorldCom and Waldinger to satisfy or discharge the then-current claim of Waldinger. For example, paragraph 1.9 states that "[p]ayment of the Settlement Funds by WorldCom shall finally settle and resolve all claims asserted or which could have been asserted against WorldCom, or any of its parents, subsidiaries, affiliates or predecessors, arising out of, or in any relating to, the Dispute . . ." and that "[f]ulfillment of the obligations under this Agreement and the Contract shall finally settle and resolve all claims. . . ." (Settlement Agreement, ¶ 1.9) (emphasis added). It is not disputed that Waldinger submitted an invoice to the Debtors pursuant to *624 paragraph 1.3 of the Settlement Agreement. Further, it is not disputed that the Debtors failed to pay Waldinger after receiving that invoice, as they were obligated under paragraph 1.4 of that same agreement.
An accord and satisfaction has been defined under Nebraska law as "a discharge of an existing indebtedness by the rendering of some performance different from that which was claimed as due and the acceptance of such substituted performance by the claimant in full satisfaction of the claim." See Lone Cedar Ranches, Inc. v. Jandebeur, 246 Neb. 769, 523 N.W.2d 364, 369 (1994). To constitute an accord and satisfaction under Nebraska law, there must be (1) a bona fide dispute between the parties, (2) substitute performance tendered in full satisfaction of the claim, and (3) acceptance of the tendered performance. See Mischke v. Mischke, 253 Neb. 439, 571 N.W.2d 248, 256 (1997). "The burden of proof to maintain an alleged accord and satisfaction is on the party seeking to enforce it." Lone Cedar Ranches, 523 N.W.2d at 369. The Debtors have not established the latter two requisite elements. The Debtors did not undertake the stipulated performance pursuant to the Settlement Agreement.
For similar reasons, that the Settlement Agreement contemplates future performance and thus did not completely extinguish the Debtors' existing liability, the Settlement Agreement did not constitute a novation. See Chadron Energy Corp. v. First Nat'l Bank of Omaha, 221 Neb. 590, 379 N.W.2d 742, 749 (1986) ("In order for a novation to occur, the existing liability must be completely extinguished and a new one substituted in its place.")
Along the same lines, the Settlement Agreement did not operate as a substituted agreement that would have immediately discharged. Waldinger's prior claims. See the discussion in Joseph M. Perillo, Calamari & Perillo on Contracts, §§ 21.4-21.5. (5th Ed.2003). An example of a bilateral executory accord is given that "C (creditor) writes D (debtor), `I promise to discharge the debt you owe me upon delivery of your black Mercedes if you promise to deliver the Mercedes within a reasonable time.'" Id. at § 21.4. If D delivers the car and C accepts it, there is an accord and satisfaction. Id. In the event the debtor materially breaches the executory accord, the creditor has the option of enforcing the original claim or the executory accord. Id. at § 21.5. The bilateral executory accord is distinguished from a substituted agreement. As an example of the latter, C says to D, "`If you will promise to deliver your black Mercedes within 30 days I will immediately treat the debt you owe me as satisfied and discharged.' Id. That is a substituted agreement and operates immediately to discharge C's claim. Id. In the event of a breach of a substituted agreement, any action would have to be brought on the substituted agreement. Id. The Settlement Agreement, in contemplating future performance to resolve the claims, does not resemble the example of the substituted agreement. Rather, it is closer to the example of the bilateral executory accord, the failure of which entails the creditor to sue under the original claim or the executory accord.
The case the Debtors cited at trial, Beepwear Paging Products, LLC v. SkyTel Corp. (In re WorldCom Inc.), No. 02-13533, 2006 WL 2400326 (Bankr.S.D.N.Y. May 30, 2006), aff'd, No. 06 Civ. 5245(KMW), 2007 WL 2049723 (S.D.N.Y. July 13, 2007), where the Court and the affirming district court found that a substitute agreement or novation occurred which extinguished liability for the original agreement, is distinguishable. In that *625 case, decided under Delaware law, the district court found that a settlement agreement was a novation, and not an accord and satisfaction, because the parties in their settlement agreement intended to completely extinguish the original agreement. 2007 WL 2049723, at *2. That court also stated that an accord under Delaware law occurs when a party to an existing contract "may agree with the other party to accept from him in the future a stated performance in satisfaction of the subsisting contractual duty." Id. (citation omitted). As stated above, the Settlement Agreement, in contemplating that Waldinger would accept future performance in satisfaction of the subsisting duty, shows that the agreement did not operate as a novation.
Even had the Debtors established that the Settlement Agreement operated as an accord and satisfaction, novation, or substituted agreement, the Court would have found the Settlement Agreement subject to rescission from the total and complete failure of the Debtors' performance. See Gallner v. Sweep Left, Inc., 203 Neb. 169, 277 N.W.2d 689, 690 (1979) ("The failure to perform a promise, the performance of which is a condition, entitles the other party to the contract to a rescission thereof."); see also Eliker v. Chief Indus., Inc., 243 Neb. 275, 498 N.W.2d 564, 566-67 (1993) (a ground for equitable cancellation may arise from a breach of contract which is so substantial and fundamental as to defeat the object of the parties in entering into the contract). The Debtors failure to pay Waldinger pursuant to the Settlement Agreement was a breach of a mutual promise and a failure of a condition precedent to Waldinger's performance of completing the installation work. See Gallner, 277 N.W.2d at 690 ("Where contractual promises are mutual and dependent, the failure of one party to perform authorizes the tither to rescind the contract. The failure to perform a promise, the performance of which is a condition, entitles the other party to the contract to a rescission thereof.") Such a rescission would render the Settlement Agreement of no consequence. The purpose of rescission is to place the parties in a status quo, that is, return the parties to their position that existed before the rescinded contract. See Johnson Lakes Dev., Inc. v. Central Nebraska Public Power & Irrigation Dist., 5 Neb.App. 957, 568 N.W.2d 573, 582 (1997) (the "remedy of rescission involves more than cancellation of a contract and includes judicial effort to place contractual parties in, as nearly as possible, substantially the same condition which existed when the contract was entered into").
D. The Existence of a Contract
In order to a establish that it holds a valid lien under the Lien Act, Waldinger must show that the parties entered into a "real estate improvement contract" See Tilt-Up Concrete, Inc. v. Star City/Federal, Inc., 255 Neb. 138, 582 N.W.2d 604, 610 (1998) ("Tilt-Up I"); see also Mid-America Maintenance, Inc. v. Bill Morris Ford, Inc., 232 Neb. 920, 442 N.W.2d 869, 871 (1989) ("a construction lien is not valid absent a contract between the parties"). The Nebraska legislature has defined a "real estate improvement contract" as "`an agreement to perform services, including labor, or to furnish materials for the purpose of producing a change in the physical condition of land or in a structure. . . .'" Tilt-Up I, 582 N.W.2d at 610 (citing Neb.Rev.Stat. §52-130). Since a mechanic's lien serves to secure the claims of those who have contributed to the construction of a building, "it should receive the most liberal construction to give full effect to its provisions." Vince Kess, Inc. v. Krueger *626 Constr. Co., 202 Neb. 673, 276 N.W.2d 669, 670 (1979).
Under Nebraska law, a "contract may be written or oral and can be shown by circumstantial evidence." Tilt-Up I, 582 N.W.2d at 610. "There must be both an offer and acceptance." Id. "Mutual assent to a contract is determined by the objective manifestations of intent by the parties, not by their subjective statements of intent." Id. "Acceptance of an offer may be illustrated by words, conduct, acquiescence indicating agreement and may be indicated by the silence and inaction of an offeree." Id.
At trial, Waldinger presented its evidence as to the existence of an agreement between Waldinger and the Debtors to install the three AHU's.
Waldinger did not present evidence of oral statements by any representative of the Debtors that shows their assent to paying more than $500,000 for the installation of the three AHU's. Waldinger's main contention is that the "silence and acquiescence of WorldCom as to the work performed by Waldinger after submission of the requested proposal is a clear manifestation of the existence of a real estate improvement contract." (Waldinger's Trial Brief, 20). Waldinger argues that Debtors' governance people in Colorado "obviously approved" of Waldinger's proposal to install three AHU's. (Trial Tr., 166.)
Russell, job foreman at the time for Waldinger, testified that Waldinger did work preparing for the installation of the three AHU's in the spring of 2001. (Trial Ex. 34, Russell Dep., 5:8). Russell testified that Brock authorized him to move and reconnect a waterline and to move a "control airline" to allow a hole to be opened in a concrete block wall so that sheet metal ductwork could be installed. Id.
Waldinger argues that trial exhibit thirty-nine shows that "there were five or six guys that are working there on a weekly basis for three or four months." (Trial Tr., 170). Exhibit thirty-nine is a spreadsheet prepared by Wilhelmi, Waldinger's Division President, from Waldinger's accounting records that shows the hours worked by Waldinger employees for sheet metal shop, sheet metal field, and steamfitter. It is not clear whether the work referenced in the spreadsheet pertains to work for existing unit number five or the three AHU's.
The Debtors argue that there never was any agreement for Waldinger to install the three AHU's. The Debtors dispute that any WorldCom employee told Waldinger that they should or were authorized to install the AHU's. The Debtors also argue that no Waldinger representative testified that he believed that Brock, the manager of the Data Center, had the authority to bind WorldCom to a contract, or even had a conversation with Brock about entering into an installation contract. (See Trial Ex. 38, Morrison Depo., 34:8-34:11; Trial Ex. 34, Russell Depo. 18:19-18:22; Trial Ex. 36, Wilhelmi Depo., 22:12-22:17, 23:15-23:18.)
At trial, Debtor pointed out that nothing in the purchase order issued from World-Corn to Waldinger on November 14, 2000 (Trial Ex. 2), for the three AHU's concerned installation. (Trial Tr., 29). Brock also testified that after he submitted the September 15, 2000 proposal from Waldinger to the Governance People, they did not authorize him to undertake any action with respect to the proposal. (Trial Ex. 37, 30:10.)
Besides disputing that Brock gave Waldinger authority to install the AHU's, the Debtors pointed out that the one written agreementthe November 14, 2000 purchase orderfor $576,000 for the purchase *627 of the three AHU's is not from Brock; it is from individual named Jason Stablier. Brock testified that he had no involvement with the issuance of purchase orders.
The Debtors argue that Waldinger, in sum, relies on air and water line movement that Russell did on Brock's instruction months before the three AHU's arrived for the inference that Waldinger was authorized and there was a contract to install the AHU's.,
For legal support, Waldinger relies on two Nebraska cases involving oral construction contracts and liens, Tilt-Up I and Sorenson v. Dager, 8 Neb.App. 729, 601 N.W.2d 564 (1999).
In both cases, a Nebraska court found that the circumstantial evidence showed that the parties had entered into an oral real estate improvement contract. In Sorenson, the owner of real property, who was building a house, asked his general contractor, Michael Niemeyer ("Niemeyer"), to solicit bids for the construction. Id. at 567. Niemeyer contacted the plaintiff, Lon Sorenson, to do the framing work. Sorenson orally provided a figure of $72,840 to Niemeyer, a figure which Niemeyer used in his contract with the property owner. The case is of little application to the present matter because the issue of whether there was a contract between Niemeyer and Sorenson did not appear to be critical or even disputed. The appellate court noted that the trial court found that both Niemeyer and Sorenson agreed that they had a contract for Sorenson to do the house's framing. Id. at 570. The pressing issues on appeal were whether Sorenson had substantially performed under that agreement before walking off the job and whether Sorenson was entitled to a lien for the reasonable value of his servicesunder the theory of quantum meruitin the absence of substantial performance.
Tilt-Up I contains more relevant facts. There, Tilt-Up Concrete, Inc. ("Tilt-Up") was a contractor specializing in the construction of buildings using concrete walls and had previously done numerous projects for the defendant Star City/Federal, Inc. ("Star City"). The defendant asked Tilt-Up to provide numerous bids for the construction of a building to be leased to the Lincoln, Nebraska office of Immigration and Naturalization Services ("INS"). Within days of being formally awarded the INS project, the defendant advised Tilt-Up that it should plan on working on the project through the winter. A representative of the defendant and of Tilt-Up also discussed more changes and agreed to the scope of extra work. Tilt-Up then sent a letter to the defendant delineating the scope of the extra work and the proposed costs (the "December Letter").
In responding to the December Letter, the defendant did not inform Tilt-Up that there was no agreement or ask Tilt-Up to stop working. Rather, the defendant's response outlined the defendant's understanding of the scope of the work, its agreement with the pricing of certain work, and its disagreement with some of the pricing. Id. at 608. After further disputes over payment and the scope of their agreements, Tilt-Up filed a construction lien and sought to foreclose on it. After the district court found that Tilt-Up had a valid construction lien, the defendant appealed the finding that the parties had entered into a lump-sum contract. Id. at 610. The state Supreme Court found that the evidence showed both an offer by Tilt-Up to perform work and that the defendant "by virtue of its words and actions or inactions did manifest assent to Tilt-Up's bid price and the extra and changed work." Id. at 611. Specifically the court found that after receiving the December Letter, the defendant's president, H. Lee Gendler, did not tell Tilt-Up they had no *628 deal but, rather, authorized and directed Tilt-Up to perform concrete footing work. Furthermore, the evidence showed that Gendler "was on site and personally observed the progress being made without voicing any objections and that Gendler subsequently made . . . partial payment to Tilt-Up." Id. at 611. What is more, Gendler made a public statement at the building's groundbreaking ceremony that "Tilt-Up was the building-shell contractor for the INS project." Id. The court summarized that "[dearly, Gendler's and Hyman's directions to Tilt-Up after receipt of Tilt-Up's December 15 letter, as well as Gendler's acceptance of Tilt-Up's performance and Gendler's partial payment to Tilt-Up, evidences that Star City did accept Tilt-Up's June 29 lump-sum bid price for its normal scope of work and the extra or changed work, all as set forth in Tilt-Up's December 15 letter." Id.
In contrast to that case, the evidence presented by Waldinger does not show the Debtor and Waldinger reached an agreement for Waldinger to install the AHU's. There is no evidence that Brock or anyone from the Debtors gave anyone from Waldinger the Debtors' assent to install the AHU's. Brock stated that after he sent Waldinger's Full Proposal to the Debtors' governance people that they did not authorize him to take any action with respect to the proposal. (Trial Ex. 37, 30:6-30:13.) Brock's testimony does not indicate that the governance people acquiesced to an agreement for installation. For example, Brock stated that he talked to them "on occasion" (Id. at 61:10-61:14) and that when he told Espinosa that Waldinger was going finish the installation of the air handling units, Espinosa asked what Brock meant. (Id. at 58:23-59:7.) Unlike in Tilt-Up I, there is no evidence that a party who could bind the Debtors to a contract "observed progress being made without voicing objections." The "evidence shows that Waldinger employees were at the Data Center but they were there on other projects beyond the three AHU's, such as working on air handling unit number five. Wilhelmi himself could not even be sure if Waldinger's employees were working at the Data Center when Waldinger submitted the proposal to World-Corn because "we did work almost continuously for them." (Trial Tr., 60:7-60:10).
The best Waldinger can show is that Brock did ask about moving a water line well in advance of the arrival of the three AHU's and that Brock did ask Waldinger to do work on existing air handling unit number five. That is not enough to show assent to an installation agreement for the AHU's.
Critically, there was no, assent, implicit or express, to Waldinger's proposed price or scope of the work. This marks a crucial distinction from Tilt-Up I, where Tilt-Up sent a letter to the defendant that outlined the scope and cost of the proposed work and the defendant did not express disagreement with the contents of that letter. In the present matter, the November 14, 2000 purchase order sent by the Debtors indicated it was only for the purchase of the three AHU's and was only in the amount of $576,000. (Trial Ex. 2.) That purchase order, coming two months after Waldinger's proposal in the amount of more than a million dollars for purchase and installation does not equate to silence or acquiescence indicating the Debtors' acceptance of the offer. On the contrary, the purchase order indicates an incongruous response to the offer.
The Applications for Payment are inconclusive. Although the Applications for Payment that Waldinger sent to Brock beginning in June 2001 state the "Original Contract Sum" was $1,098,000, that application states that the contract date was *629 November 14, 2000. (Trial Ex. 7.) November 14, 2000 was when the Debtors, sent the purchase order for $576,000 for the purchase of the three AHU's to Waldinger, (Trial Ex. 2.) Further, the payments made by the Debtors precisely match the amount they agreed to pay for just the purchase of the AHU's in, their purchase order of November 2000. (Trial Ex. 2.) That further undermines the existence of an agreement to the original September 2000 proposal.
Based on the foregoing, the Court concludes that no real estate improvement contract was entered into between Waldinger and WorldCom. As a result of that conclusion, the Lien was not valid, and cannot support the allowance of a Secured
E. Attorney's Fees & Prejudgment Interest
Because the Court finds that Waldinger is not entitled, to a secured claim, it denies Waldinger's request for attorney's fees under section 506 of the Bankruptcy Code. See Enterprise Products Operating, L.P. v. Enron Gas Liquids Inc. (In re Enron), 306 B.R. 33, 43 (S.D.N.Y.2004) aff'd, 119 Fed.Appx. 344 (2d Cir.2005) ("To recover attorneys' fees under section 506(b), a creditor must establish: (1) that its claim is over-secured in excess of the fees requested; (2) that the fees are reasonable; and (3) that the agreement giving rise to the claim provides for attorneys' fees. A party failing to meet any of these requirements is not entitled to recovery."). Even if the Court determined the Claim to be secured, the Court would have denied attorney's fees because section 506 of the Bankruptcy Code requires that the attorney's fees claim arise from a provision under which the claim arises. Even assuming there was a verbal agreement for Waldinger to perform the installation of the AHD's, there is no evidence of a provision in such a verbal agreement regarding attorney's fees.
Waldinger is also not entitled to prejudgment interest. Because a reasonable controversy existed as to Waldinger's right to recover and as to the amount of the recovery, "the claim is generally considered to be unliquidated and prejudgment interest is not allowed" under Nebraska statute section 45-104. Graff v. Burnett, 226 Neb. 710, 414 N.W.2d 271 (1987); see also Daubman v. CBS Real Estate Co., 254 Neb. 904, 580 N.W.2d 552 (1998) ("prejudgment interest is available only when the claim is liquidated, that is, when there is no reasonable controversy either as to the plaintiffs right to recover or as to the amount of such recovery").
F. Recovery under Quantum Meruit
As stated above, Waldinger filed suit in January 2002 against WorldCom in a Nebraska state court, alleging claims of breach of contract and quantum meruit, claims that were withdrawn when the parties entered into the Settlement Agreement. The Debtors concede that Waldinger's Claim should be allowed at all in quantum meruit in the amount of the reasonable value conferred by the installation.
Quantum meruit is a theory of recovery "based on the equitable doctrine that one will not be allowed to profit or enrich oneself unjustly" at another's expense. Sorenson v. Dager, 8 Neb.App. 729, 601 N.W.2d 564, 572 (1999); see also Tracy v. Tracy, 7 Neb.App. 143, 581 N.W.2d 96, 101 (1998) ("the principle of quantum meruit is a contract implied in law theory of recovery based on the equitable doctrine that one will not be allowed to profit or enrich oneself unjustly at the expense of another"). Under the theory, *630 "[w]here benefits have been received and retained under circumstances that it would be inequitable and unconscionable to permit the party receiving them to avoid payment therefor, the law requires the recipient to pay the reasonable value of the services." Sorenson, 601 N.W.2d at 572. To give rise to an implied contract to pay, the party providing services must have done so expecting the other to pay, and the party receiving the services must have accepted them with the knowledge of that expectation of payment. Tracy, 581 N.W.2d at 101 (citing 66 Am.Jur.2d Restitution and Implied Contracts § 20 (1973)).
The evidence supports recovery for Waldinger under quantum meruit, however, a further hearing is required to determine the reasonable value of the services Waldinger provided to the Debtors.
The evidence shows that Waldinger provided certain installation services for the three AHU's, including building the concrete pads for the AHU's, performing certain sheet metal and conduit work, as well as performing installation work on existing AHU number five. The Debtors, even' if they did not agree to a contract with Waldinger for it to perform installation work on the three AHU's, acknowledge accepting and retaining these services. As shown by Morrison's testimony, the Debtors, at some point, became aware that Waldinger expected to be paid for these services. Brock agreed that he told the Debtor's governance people in Colorado that "a considerable amount of installation had been performed" by Waldinger when Espinoza instructed Brock to tell Waldinger to stop work on the AHU's. (Tr. Ex. 37, 58:11-58:19.) The Debtors would be unjustly enriched if they were allowed to retain the provided benefits at Waldinger's expense.
Regarding the reasonable value of the services provided by Waldinger, the Court rejects the Debtors' argument that expert testimony is required by Federal Rule of Evidence 702 to determine that value. Rule 702 states that "if scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert . . . may testify thereto . . ." Expert testimony is not "admissible when it addresses `lay matters which a jury is capable of understanding and deciding without the expert's help.'" Grdinich v. Bradlees, 187 F.R.D. 77, 82 (S.D.N.Y.1999) (quoting Andrews v. Metro North Commuter R. Co., 882 F.2d 705, 708 (2d Cir.1989)). The Debtors did not provide, and the Court did not locate, any case supporting the proposition that expert testimony is required to support a quantum meruit claim. On the contrary, the Court's own research indicates such testimony is not required. The Nebraska Supreme Court in A. Sorensen Const. Co. v. Broyhill, 165 Neb. 397, 85 N.W.2d 898 (1957), stated that there is "no specific standard" by which a court should measure the reasonable value of goods and services provided regarding a quantum meruit claim. Other cases confirm that the fact finder can competently consider evidence like business records, without the assistance of expert testimony. See Umberger v. Sankey, 154 Neb. 881, 50 N.W.2d 346, 349 (1951) ("There is no specific standard by which such reasonable value is to be determined (in quantum meruit claim).").
In Sorenson v. Pager, 8 Neb.App. 729, 601 N.W.2d 564 (Neb.App.1999), the appellate court found that the plaintiff has proven the "reasonable value of the services Sorenson performed and materials he furnished on the Dagers' house for which Sorenson was not paid," id. at 572, through evidence presented to the district court consisting of the parties' testimony and *631 their payment records. In other words, no expert testimony was needed.
Waldinger, however, has only set forth a few pieces of evidence, from which the Court could determine, the amount of the reasonable value of services provided. Wilhelmi testified that Waldinger spent from $10,000 to $15,500 to rent a crane and forklifts to unload the three AHU's after they had been shipped to the Data Center. (Tr. Trans. 72:22-73:2.) That testimony was not challenged. Further, Waldinger sent Brock a breakdown for the AHU project on September 25, 2000 that listed the expense of the crane as $13,322. (Tr. Ex. 4.) The evidence also shows that Waldinger paid subcontractor D.R. Anderson $14,900 to build concrete pads for the three AHD's. (Tr. Ex. 24.) There was testimony given that from March through July 2001, Waldinger employees worked hundreds of hours to prepare sheet metal for the ductwork that would be needed for the three AHU's, and air handler unit number 5. (Tr. Ex. 39.) That evidence of hours worked, perhaps introduced to support the existence of an agreement, does not offer much guidance for the determination of the value of the services because no testimony was given as to the hourly rate of the workers. Also, as stated above, it is not clear whether the work referenced in the spreadsheet pertains to work for existing unit number five or the three AHU's.
Brock testified that Waldinger did not do all sheet metal duct work for the AHU's but that "some" duct work was done. (Id. at 42:16-42:21, 47:23.) Brock admits that "there was some preparation work done" for the three AHU's. (Id. at 47.) But without evidence to quantify how the sheet metal work provided a reasonable value to the Debtors, the Court cannot guess and should not attempt to determine it without additional evidence being submitted.
The Settlement Agreement does not provide the basis for recovery under quantum meruit. Although Waldinger contends that the Settlement Agreement is conclusive as to the amount of the Claim, Waldinger does not contend that the Settlement Agreement provides a measure of the "reasonable value of the services" provided under quantum meruit. Furthermore, the Settlement Agreement could not provide a basis for the reasonable value of services provided. That agreement contemplated that Waldinger would provide further installation services but such services were ultimately not provided. Under the Settlement Agreement's paragraph 1.5, Waldinger was to "begin completion of the installation of the AHU's. . . .", however, the Debtors' bankruptcy intervened and it is undisputed that Waldinger did no further work at the Data Center under the Settlement Agreement.
For the reasons stated above, Waldinger will be entitled to recover $14,900 for the concrete pad installation) $15,500 for the cost of the crane rental, and an additional amount to' be determined after a further hearing for the reasonable value of the installation services under the theory of quantum meruit.
V. CONCLUSION
For the reasons stated above,
1. Waldinger's motion for reconsideration is granted.
2. Waldinger is not entitled to a secured claim.
3. Waldinger is entitled to an unsecured claim under quantum meruit in an amount to be determined after a further hearing.
The Debtors shall submit an order consistent with this opinion.
NOTES
[1] Unless noted otherwise, the facts in Section If I are undisputed.
[2] Brock's testimony leads to the conclusion that Espinosa is one of the Debtors'"Governance People" located in Colorado. Explaining the role of the Debtors' governance people in Colorado, Brock testified that they monitored the cooling and power usage of the Data Center, through monthly reports they received, and also took on a planning role for the Data Center. (Trial Ex. 37, 27:1-27:9.)
[3] At trial, Waldinger raised an allegation that the Debtors procured the Settlement Agreement through fraud, knowing that they would soon file for bankruptcy protection, and that the Court should thereby find that Waldinger was not bound the agreement. The Court disregards that entirely conclusory allegation of fraud.
[4] As stated in the February Opinion at 24 Under the Plan [¶ 1.10] there are five situations in which a claim is "Allowed"(i) any Claim that has been listed by the Debtors in their Schedules, [. . .] as liquidated in amount and not disputed or contingent and for which no contrary proof of claim has been filed, (ii) any Claim allowed hereunder, (iii) any Claim that is not Disputed, (iv) any Claim that is compromised, settled, or otherwise resolved [. . .], or (v) any Claim that, if Disputed, has been Allowed by Final Order.
[5] The application of the Plan to the Lien and all liens vis a vis section 1141(c) of the Bankruptcy Code was overlooked by the Court and was not discussed by the parties prior to the February Opinion.
| {
"pile_set_name": "FreeLaw"
} |
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________ FILED
U.S. COURT OF APPEALS
No. 11-11753 ELEVENTH CIRCUIT
FEB 8, 2012
Non-Argument Calendar
JOHN LEY
________________________
CLERK
D.C. Docket No. 5:10-cr-00012-WTM-JEG-4
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
JOSE IGNACIO BUSTOS-NUNEZ,
Defendant-Appellant.
__________________________
Appeal from the United States District Court for the
Southern District of Georgia
_________________________
(February 8, 2012)
Before CARNES, HULL and WILSON, Circuit Judges.
PER CURIAM:
After pleading guilty, Defendant Jose Ignacio Bustos-Nunez appeals his 51-
month sentence for conspiracy to possess with intent to distribute approximately
186 pounds of marijuana, in violation of 21 U.S.C. §§ 841(a)(1) and 846. After
review, we affirm.
I. BACKGROUND
On appeal, Bustos-Nunez argues that the district court erroneously applied a
three-level managerial-role enhancement, pursuant to U.S.S.G. § 3B1.1(b),
without first resolving disputed factual portions of the Presentence Investigation
Report (“PSI”).1 See Federal Rule of Criminal Procedure 32(i)(3)(B). The fatal
problem for Bustos-Nunez is that he admitted certain facts in his plea hearing and
did not challenge other recounted facts in the PSI. Those undisputed facts, taken
together, are sufficient to support the role enhancement. We explain why.
A. Role Enhancement
The issue involves a managerial-role enhancement under U.S.S.G.
1
Rule 32(i)(3)(B) provides:
At sentencing, the court:
...
(B) must—for any disputed portion of the presentence report or other controverted
matter—rule on the dispute or determine that a ruling is unnecessary either because
the matter will not affect sentencing, or because the court will not consider the matter
in sentencing; . . . .
Fed. R. Crim. P. 32(i)(3)(B).
2
§ 3B1.1(b), which provides the defendant’s offense level is increased by three
levels if he “was a manager or supervisor (but not an organizer or leader) and the
criminal activity involved five or more participants or was otherwise extensive.”
U.S.S.G. § 3B1.1(b). To qualify for the enhancement, the defendant need only
manage or supervise one other participant. Id. § 3B1.1, cmt. n.2. Defendant
Bustos-Nunez has never disputed that the marijuana conspiracy had at least five
participants. We thus turn to the other undisputed facts in the plea hearing.
B. Plea Hearing
Defendant Bustos-Nunez and five codefendants—Juan Cano, Marco Rivera,
German Ortega-Flores, Gabriel Sanchez-Cervantes and Gabriel Sanchez-Gomez—
were charged with conspiring to possess 186 pounds of marijuana with the intent
to distribute. Defendant Bustos-Nunez pled guilty pursuant to a plea agreement.
At the plea hearing, the government called Agent Stephen B. Tinsley of the
Drug Enforcement Agency (“DEA”) to testify as to the factual basis for Bustos-
Nunez’s plea. Agent Tinsley testified that the DEA investigated a marijuana
distribution scheme led by Pedro Bustos, Defendant Bustos-Nunez’s brother.
While conducting surveillance of a residence in Nicholls, Georgia, agents
observed Defendant Bustos-Nunez walking around a 53-foot trailer. The next day,
“occupants and other codefendants” unloaded at least 186 pounds of marijuana,
3
which was subsequently broken down and repackaged for delivery. After the
surveillance, agents conducted a traffic stop and seized 176 pounds of marijuana
in a vehicle driven by Defendant Bustos-Nunez.
According to Agent Tinsley, the DEA’s investigation showed that
Defendant Bustos-Nunez “was the person who was in charge of the distribution of
this particular load of marijuana as far as related to his other codefendants.”
Agent Tinsley explained that Defendant Bustos-Nunez “was sent here by his
brother’s organization to oversee the unloading and the repackaging, and making
sure that it got distributed through other codefendants to the right people, and then
Mr. Nunez was supposed to be in charge of collecting the drug proceeds to be sent
back to Mexico.”
When the district court asked Defendant Bustos-Nunez whether he agreed
with Agent Tinsley’s testimony, Bustos-Nunez replied, “Yes, Your Honor.” Thus,
Bustos-Nunez’s admitted facts in the plea hearing are sufficient to support the role
enhancement, but there is more.
C. PSI’s Factual Summary
The PSI contained this factual summary about Defendant Bustos-Nunez’s
offense conduct. While he objected to certain statements, he did not object to the
following facts.
4
First, DEA agents placed the residence in Nicholls, Georgia under
surveillance after receiving information that it was being used to store drugs.
Then, on April 7, 2010, agents noticed a 53-foot car-hauler parked near the rear
door of the residence. Throughout the night, agents saw several people look at
and touch the front of the car hauler.
The next day, agents watched a Jeep Cherokee leave the residence after a
bag was loaded into it. Later, the Jeep Cherokee returned to the residence, another
bag was loaded into the vehicle, and it departed again. Codefendant Rivera drove
the Jeep Cherokee, and codefendant Ortega-Flores was a passenger. As agents
initiated a traffic stop, Rivera used his cell phone. Once the Jeep Cherokee was
stopped, agents searched the vehicle and found ten pounds of marijuana.
Approximately one hour later, agents watched as Defendant Bustos-Nunez
exited the Nicholls residence, loaded a suitcase and four garbage bags into the
trunk of a Nissan Altima, and departed. Agents performed a traffic stop on the
Defendant Bustos-Nunez’s Nissan Altima, searched the vehicle and found 176
pounds of marijuana.
Back at the residence, agents saw codefendants Sanchez-Cervantes and
Sanchez-Gomez working on the car-hauler and putting a compartment back
together. A subsequent inspection of the car-hauler revealed it was constructed
5
with hollow tubing that had been used to store the marijuana. Inside the residence,
agents found packing materials, such as plastic wrap, tape, bags and scales.
Later, codefendant Cano admitted that codefendant Sanchez-Gomez
recruited him to transport the marijuana between Georgia and Texas using a
Dodge truck and the car-hauler. Sanchez-Gomez admitted that he was acting at
the direction of Defendant Bustos-Nunez’s brother in Mexico. Sanchez-Gomez
also admitted helping Defendant Bustos-Nunez and Ortega-Flores unload the
marijuana from the car-hauler.
Once the marijuana was inside the residence, Defendant Bustos-Nunez and
Ortega-Flores transferred the marijuana into separate bags. While Sanchez-Gomez
and his son, Sanchez-Cervantez, were outside fixing the car-hauler, Defendant
Bustos-Nunez left the residence, put a bag containing money in a Nissan truck and
drove away. Sanchez-Gomez later learned that Defendant Bustos-Nunez had
received a call advising him to leave the residence because codefendants Rivera
and Ortega-Flores had been stopped by law enforcement.
In a subsequent interview, Ortega-Flores stated that Defendant Bustos-
Nunez asked him to pick up a Jeep Cherokee in Atlanta and transport it to
“someone to take somewhere,” then later instructed Ortega-Flores to drive the
Jeep Cherokee to the Nicholls, Georgia residence where Rivera placed a bag in the
6
car. Bustos-Nunez then told Ortega-Flores to await further instructions from him
(Bustos-Nunez).
D. Disputed Factual Portions of the PSI
The PSI did recount statements of codefendants Rivera and Sanchez-Gomez
to which Defendant Bustos-Nunez objected. Specifically, the PSI alleged that: (1)
Sanchez-Gomez stated he learned Defendant Bustos-Nunez was locally in charge
of overseeing the unloading and safekeeping of the marijuana as well as collecting
the money; and (2) Rivera stated that Defendant Bustos-Nunez instructed Rivera
to travel to the Jacksonville, Florida airport to pick up Sanchez-Cervantes and
Sanchez-Gomez and that Rivera believed codefendant Ortega-Flores was working
under Defendant Bustos-Nunez’s direction.
E. Section 3B1.1(b) Role Enhancement
The PSI recommended that Defendant Bustos-Nunez receive a three-level
enhancement pursuant to U.S.S.G. § 3B1.1(b) for his role as a manager or
supervisor of the marijuana conspiracy. Defendant Bustos-Nunez filed a written
objection challenging the § 3B1.1(b) role enhancement. The written objection did
not dispute most of the PSI’s offense conduct, but did dispute the above-recounted
statements of Sanchez-Gomez and Rivera. However, the written objection did not
dispute Ortega-Flores’s statement that he was following Defendant Bustos-
7
Nunez’s instructions to drive a Jeep Cherokee to pick up Rivera, who loaded a bag
into the vehicle.
F. Sentencing Hearing
At sentencing, the district court overruled Bustos-Nunez’s objection to the
role enhancement, stating that it agreed with the PSI. The district court calculated
the advisory guidelines range of 51 to 63 months and allowed Bustos-Nunez to
allocute. Defense counsel made arguments in mitigation and asked for a sentence
at the low end of the guidelines range. The district court then asked defense
counsel whether there was “anything else.” Defense counsel said no.
After imposing a 51-month sentence, the district court asked defense
counsel whether there was any other objection to the court’s “findings of fact,
conclusions of law, or manner in which the sentence was pronounced,” and
defense counsel again said no. Bustos-Nunez filed this appeal.
II. DISCUSSION
At sentencing, the government must prove by a preponderance of the
evidence the facts supporting any guidelines enhancements. United States v.
Ndiaye, 434 F.3d 1270, 1300 (11th Cir. 2006). The defendant’s failure to object
to a factual allegation in the PSI constitutes an admission for sentencing purposes.
United States v. Wade, 458 F.3d 1273, 1277 (11th Cir. 2006). Thus, the
8
sentencing court may rely on undisputed statements in the PSI “despite the
absence of supporting evidence.” United States v. Lopez-Garcia, 565 F.3d 1306,
1323 (11th Cir. 2009).
If, on the other hand, the defendant objects to factual statements in the PSI,
the government’s burden to prove those disputed facts is triggered. United States
v. Lawrence, 47 F.3d 1559, 1566 (11th Cir. 1995). Under Rule 32(i)(3)(B), the
district court must then “rule on the dispute or determine that a ruling is
unnecessary either because the matter will not affect sentencing, or because the
court will not consider the matter in sentencing.” Fed. R. Crim. P. 32(i)(3)(B). In
resolving the factual dispute, the district court may consider the defendant’s
admissions at the plea hearing. See United States v. Martinez, 584 F.3d 1022,
1027 (11th Cir. 2009); Lawrence, 47 F.3d at 1568; United States v. Wilson, 884
F.2d 1355, 1356 (11th Cir. 1989).
Here, Bustos-Nunez’s written objection did dispute some of the PSI factual
allegations relating to Bustos-Nunez’s role in the offense, specifically the
statements of codefendants Rivera and Sanchez-Gomez. At sentencing, the
district court did not resolve the factual dispute. However, any alleged error in
that regard was harmless because undisputed facts amply supported the district
court’s finding that Bustos-Nunez managed or supervised at least one participant
9
in the marijuana conspiracy.2
First, at his plea hearing, Bustos-Nunez admitted that: (1) he was sent to
Nicholls, Georgia “by his brother’s organization to oversee the unloading and the
repackaging, and making sure that it got distributed through other codefendants to
the right people,” and (2) he “was the person who was in charge of the distribution
of this particular load of marijuana as far as related to his codefendants.”
Second, Bustos-Nunez did not object to the statements of Ortega-Flores in
the PSI, which showed: (1) Bustos-Nunez directed him to drive a vehicle to
Nicholls, Georgia, where codefendant Rivera placed a bag inside, and (2) then
Bustos-Nunez told Ortega-Flores to await further directions. According to other
undisputed facts in the PSI, Rivera and Ortega-Flores were under surveillance at
the time. When agents initiated a traffic stop, they discovered that the bag
contained ten pounds of marijuana. These undisputed facts show that, at a
minimum, Bustos-Nunez supervised Ortega-Flores, one of the conspiracy’s
participants.
2
We note that at the sentencing hearing the district court indicated that Bustos-Nunez’s
objection to the § 3B1.1(b) role enhancement was a legal objection, not a factual one. Bustos-
Nunez had at least two opportunities to correct the district court or raise a Rule 32(i)(3)(B)
objection, but did not do so. Thus, there is a question as to whether Bustos-Nunez properly
preserved this issue. In any event, we need not reach this issue because the failure to resolve
these disputes is harmless given other facts, which Bustos-Nunez did not dispute, support the
role enhancement.
10
For these reasons, we find no reversible error in the district court’s
imposition of the three-level managerial-role enhancement pursuant to U.S.S.G.
§ 3B1.1(b). We affirm Bustos-Nunez’s 51-month sentence.
AFFIRMED.
11
| {
"pile_set_name": "FreeLaw"
} |
778 N.W.2d 572 (2010)
2010 ND 24
Melissa FLECK, n/k/a Melissa Regan, Plaintiff and Appellant
v.
Troy A. FLECK, Defendant and Appellee.
No. 20090075.
Supreme Court of North Dakota.
February 17, 2010.
*573 Theresa Luan Cole, Bismarck, N.D., for plaintiff and appellant.
Daniel Harry Oster, Bismarck, N.D., for defendant and appellee.
VANDE WALLE, Chief Justice.
[¶ 1] Melissa Fleck, now known as Melissa Regan, appeals from an order denying her motion to amend a divorce judgment to grant her primary residential responsibility[1] for her two children and permission to move with the children to Arizona, and granting Troy A. Fleck's motion for primary residential responsibility for the children and ordering Regan to pay child support. We conclude the district court's decision to grant Fleck primary residential responsibility for the children is not clearly erroneous, but its calculation of Regan's child support obligation is erroneous as a matter of law. We affirm in part, reverse in part, and remand for recalculation of Regan's child support obligation.
I
[¶ 2] Fleck and Regan were divorced in August 2006 and their stipulated settlement agreement was incorporated into the divorce judgment. Fleck and Regan had two children during the marriage, born in 1999 and 2000, and they agreed to share *574 "equal physical custody" and "joint legal custody" of the children. One year before the parties were divorced, Regan moved to Sioux Falls, South Dakota, to take classes for 11 months in the Mount Marty College nurse anesthesia program. While attending college in Sioux Falls, Regan returned to Bismarck almost every other weekend to see the children. After completion of the 11-month program, Regan began doing her clinicals in Bismarck and attempted to spend as much time as possible with the children. Regan graduated in February 2008. During the time Regan was pursuing her studies, Fleck, a college graduate who is employed as a Burleigh County Deputy Sheriff, had the responsibility for taking care of the children and the family home.
[¶ 3] In March 2008, Regan married Shawn Regan, who she had met while attending college in Sioux Falls. In April 2008, the couple moved to Arizona where they had both been offered employment. Both work as nurse anesthetists at the same hospital near Phoenix, Arizona. Regan has a part-time "1099 position," in which she is "paid hourly straight" and pays her own taxes, while Shawn Regan has a full-time "W-2 position," in which he receives benefits. Regan is paid $86 per hour and her husband is paid $68 per hour plus benefits. The couple purchased a home in a gated community in the area. Since moving to Arizona, Regan has traveled to Bismarck every other two weeks to live with the children in a rented apartment and the children have traveled to Arizona periodically to spend time with Regan.
[¶ 4] In August 2008, Regan filed a motion to change primary residential responsibility for the children from "shared physical custody" with Fleck to "sole physical custody" with Regan. She also sought to establish a parenting time schedule and child support obligation for Fleck, and to receive permission to relocate the children to Arizona. Fleck responded with a counter-motion to amend the divorce judgment to grant him "primary physical custody" of the children and to establish a parenting time schedule and child support obligation for Regan. Following an evidentiary hearing, the district court denied Regan's motion and granted Fleck's counter-motion awarding him primary residential responsibility for the children, awarding Regan "ample" parenting time, and ordering that Regan pay $2,246 per month for child support.
II
[¶ 5] Regan argues the district court's decision denying her request for primary residential responsibility and for permission to relocate the children to Arizona is clearly erroneous.
[¶ 6] In Maynard v. McNett, 2006 ND 36, ¶ 21, 710 N.W.2d 369, a majority of this Court explained:
We hold that a parent with joint legal and physical custody may not be granted permission to move with the parties' child, unless the district court first determines the best interests of the child require a change in primary custody to that parent. A parent with joint custody who wishes to relocate with the child must make two motions: one for a change of custody, governed by N.D.C.C. § 14-09-06.2, and one to relocate with the child, governed by N.D.C.C. § 14-09-07. The change-of-custody motion requires the party wishing to relocate to show there has been a significant change in circumstances and the best interests of the child would be served by the child's moving with the relocating parent.
The district court found that "[c]learly with [Regan's] move to Arizona and her *575 new part-time job at the same hospital at which her husband works full time, there has been a significant change in circumstances," and the parties do not challenge this finding. See, e.g., Dietz v. Dietz, 2007 ND 84, ¶ 13, 733 N.W.2d 225 (in-state move with children may be material change of circumstances); Gietzen v. Gietzen, 1998 ND 70, ¶ 10, 575 N.W.2d 924 (in-state move with child may be viewed as significant change of circumstances); Hanson v. Hanson, 1997 ND 151, ¶ 5, 567 N.W.2d 216 (out-of-state move could be substantial change of circumstances); Van Dyke v. Van Dyke, 538 N.W.2d 197, 201 (N.D.1995) (out-of-state move alone might support finding of significant change in circumstances); Gould v. Miller, 488 N.W.2d 42, 44 (N.D.1992) (move to another state is made significant by N.D.C.C. § 14-09-07). Consequently, the district court properly analyzed this case under the best interests factors contained in N.D.C.C. § 14-09-06.2(1). See Jelsing v. Peterson, 2007 ND 41, ¶ 10, 729 N.W.2d 157.
[¶ 7] In Jelsing, 2007 ND 41, ¶ 11, 729 N.W.2d 157, we said:
We exercise a limited review of child custody awards. Eifert v. Eifert, 2006 ND 240, ¶ 5, 724 N.W.2d 109. A district court's decisions on child custody, including an initial award of custody, are treated as findings of fact and will not be set aside on appeal unless clearly erroneous. Klein v. Larson, 2006 ND 236, ¶ 6, 724 N.W.2d 565. A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if no evidence exists to support it, or if the reviewing court, on the entire evidence, is left with a definite and firm conviction a mistake has been made. Gietzen v. Gabel, 2006 ND 153, ¶ 6, 718 N.W.2d 552. Under the clearly erroneous standard of review, we do not reweigh the evidence or reassess the credibility of witnesses, and we will not retry a custody case or substitute our judgment for a district court's initial custody decision merely because we might have reached a different result. Dvorak v. Dvorak, 2006 ND 171, ¶ 11, 719 N.W.2d 362. A choice between two permissible views of the weight of the evidence is not clearly erroneous, Dvorak, at ¶ 11, and our deferential review is especially applicable for a difficult child custody decision involving two fit parents. Gonzalez v. Gonzalez, 2005 ND 131, ¶ 12, 700 N.W.2d 711.
[¶ 8] In awarding primary residential responsibility for the children to Fleck, the district court found the following best interests factors in N.D.C.C. § 14-09-06.2(1)[2] favored Fleck: (d) the length of time the child has lived in a stable satisfactory environment and the desirability of maintaining continuity; (e) the permanence, as a family unit, of the existing or proposed custodial home; (h) the home, school, and community records of the child; and (m) any other relevant factors. The court found the remaining factors were either inapplicable or favored neither party. Regan does not challenge the court's findings that factor (g), the mental and physical health of the parents, favored neither party and that factors (i), the reasonable preference of the child, (j) evidence of domestic violence, and (l), the making of false allegations, are inapplicable under the circumstances. Regan challenges the court's findings on the remaining nine best interests factors.
[¶ 9] The district court found factor (a) in N.D.C.C. § 14-09-06.2(1), the love, affection, *576 and other emotional ties existing between the parents and child, favored neither party because "[b]oth parties love their children and have strong emotional ties to them." The court found factor (b), the capacity and disposition of the parents to give the child love, affection, and guidance and to continue the education of the child, favored neither party because "[b]oth parties have the capacity and are disposed to provide love, affection, guidance and education to their children." The court found factor (c), the disposition of the parents to provide the child with food, clothing, medical care, or other remedial care, favored neither party because "[b]oth parties are disposed to provide their children with food, clothing and medical care." The court found factor (f), the moral fitness of the parents, favored neither party because both Regan and Fleck are "morally fit as in regard to the custody of their children." The court found factor (k), the interaction and interrelationship of the child with any person who resides in or frequents the household of a parent, favored neither party because "[t]here is no evidence that if the children were in the custody of either parent that they would have any contact with any person who might adversely [a]ffect the children's best interests." Regan's challenge to these findings consists of emphasizing the evidence she presented to the court in support of her motion and ignoring the evidence Fleck presented in support of his motion. There is abundant evidence to support these findings, and we conclude the court's findings that these best interests factors favored neither party are not clearly erroneous.
[¶ 10] The district court found factors (d), (e), (h), and (m) in N.D.C.C. § 14-09-06.2(1) favored Fleck. Regan's challenge to these findings again focuses on the evidence she presented to the court while disregarding the evidence Fleck presented to the court. The court found:
d. The length of time the child has lived in a stable satisfactory environment and the desirability of maintaining continuity. Bismarck has always been the home city of the children. They attend school in Bismarck and they are involved in sports and other activities in Bismarck. While [Regan] provided that stable environment for the children while [Fleck] was deployed to Iraq, [Fleck] has provided that stable environment for the children since [Regan] went to Sioux Falls to further her education and achieve a goal of becoming a Nurse Anesthetist. The Court finds the children are in a stable and satisfactory environment living with [Fleck] in Bismarck. This factor favors [Fleck].
e. The permanence, as a family unit, of the existing or proposed custodial home. The evidence is that the children have lots of relatives and extended family on both sides living in Bismarck. [Regan's] mother and sister live in San Diego, while [Shawn Regan's] parents are considering a move to Arizona. The Court finds [Fleck's] home will provide the children with more of a permanent family unit in the larger sense of their extended family in Bismarck and the Bismarck area. This factor favors [Fleck].
. . . .
h. The home, school, and community record of the child. [J] is in the 3rd grade and [D] is in the 2nd grade. [J] is receiving extra help with reading and she is being helped under an IEP (Individual Education Plan) developed by her school. [Fleck] deals with this as he is dealing with a recent reading problem for [D]. [Regan] does not fully accept that [J] has need of help. Both children *577 are doing reasonably well in school with the help they are receiving. Even though [Fleck] moved to a home in the north part of Bismarck, he still takes the children to Solheim school on the south side of Bismarck so as to maintain the continuity of the education. This factor favors [Fleck].
. . . .
m. Any other factors considered by the court to be relevant to a particular child custody dispute. The Court finds that in terms of extended family, continuity, and stability the children are doing very well in [Fleck's] home in Bismarck. This factor favors [Fleck].
[¶ 11] We are especially deferential in reviewing a district court's difficult decision on primary residential responsibility when it involves two fit parents. See, e.g., Jelsing, 2007 ND 41, ¶ 11, 729 N.W.2d 157. We conclude the district court's findings on the best interests factors and its ultimate finding that the best interests of the children would be served by awarding primary residential responsibility to Fleck are not clearly erroneous.
III
[¶ 12] Regan argues the district court erred in establishing her child support obligation.
[¶ 13] "`Child support determinations involve questions of law which are subject to the de novo standard of review, findings of fact which are subject to the clearly erroneous standard of review, and may, in some limited areas, be matters of discretion subject to the abuse of discretion standard of review.'" Verhey v. McKenzie, 2009 ND 35, ¶ 5, 763 N.W.2d 113 (quoting Buchholz v. Buchholz, 1999 ND 36, ¶ 11, 590 N.W.2d 215). "A court errs as a matter of law if it does not comply with the requirements of the child support guidelines." Doepke v. Doepke, 2009 ND 10, ¶ 6, 760 N.W.2d 131. The child support guidelines, found in N.D. Admin. Code ch. 75-02-04.1, were recently described in Heinle v. Heinle, 2010 ND 5, ¶¶ 37-38:
The child support guidelines provide scheduled amounts of support based upon an obligor's net income. See N.D. Admin. Code § 75-02-04.1-10. The scheduled amounts are presumptively correct, and a district court may only deviate from this amount if a preponderance of the evidence establishes that a deviation from the guidelines is in the best interests of the supported child. State of Michigan, ex rel. Schneider v. Schneider, 2008 ND 35, ¶ 4, 745 N.W.2d 368 (citing N.D. Admin. Code § 75-02-04.1-09(2)). "This Court has emphasized any deviation from the guidelines requires the court to make a written finding or a specific finding on the record." Schneider, at ¶ 4 (citing Schumacher v. Schumacher, 1999 ND 10, ¶ 10, 589 N.W.2d 185).
The child support guidelines define "net income" as an obligor's gross annual income less federal and state tax obligations and other expenses. N.D. Admin. Code § 75-02-04.1-01(7). In calculating child support, a district court must consider "[n]et income received by an obligor from all sources. ..." N.D. Admin. Code § 75-02-04.1-02(3). Where an obligor's income is subject to fluctuation, "information reflecting and covering a period of time sufficient to reveal the likely extent of fluctuations must be provided." N.D. Admin. Code § 75-02-04.1-02(7). If an obligor's income has changed in the recent past, or is likely to change in the near future, "consideration may be given to the new or likely future circumstances." N.D. Admin. Code § 75-02-04.1-02(8). However, "unless the *578 trial court makes a determination that evidence of an obligor's recent past circumstances is not a reliable indicator of his future circumstances, the trial court must not extrapolate an obligor's income under N.D. Admin. Code § 75-02-04.1-02(8)." Korynta [v. Korynta], 2006 ND 17, ¶ 17, 708 N.W.2d 895. Therefore, unless the district court makes a specific finding that the income reflected on the prior year's tax return is not a reliable indicator of future income, "[i]t is improper to calculate an obligor's annual employment income based on a mid-year pay stub. ..." Berge v. Berge, 2006 ND 46, ¶ 19, 710 N.W.2d 417.
[¶ 14] Fleck proposed that Regan pay $2,159 per month in child support based on Shawn Regan's full-time hourly pay rate of $68 times 40 hours per week for 52 weeks per year, with a $2,400 yearly adjustment for the children's parenting time travel expenses under N.D. Admin. Code § 75-02-04.1-09(2)(i). Regan proposed a child support obligation of $1,343 per month based on her self-employment income as a "1099 independent contractor" of $86 per hour for 24 hours per week, with deductions for continuing education requirements and parenting time travel expenses. In arriving at a child support obligation of $2,246 per month, the district court reasoned "[n]ow that custody has been resolved, [Regan] should be able to work more hours," and found that "[w]ith two 12 hour shifts per week she is under-employed." The court explained: "If she worked full time at $68 per hour, like her husband, for a 40 hour week she would earn a weekly gross income of $2,720. Since she is underemployed, the Court finds [Regan] can earn a gross income at $68 per hour full time and 40 hours per week, 52 weeks per year of $141,440." The court then subtracted allowable deductions and permitted an adjustment under N.D. Admin. Code § 75-02-04.1-09(2)(i) for parenting time travel expenses in arriving at Regan's child support obligation.
[¶ 15] The district court's child support calculation does not comport with the child support guidelines and is erroneous as a matter of law. There was no evidence presented by the parties to support the court's finding that Regan was underemployed as that term is defined in N.D. Admin. Code § 75-02-04.1-07(1)(b) (significantly less than statewide average for occupation) and (2) (calculations for presumption of underemployment). See also Halberg v. Halberg, 2010 ND 20, ¶ 16. Even if there was evidence that Regan was underemployed, N.D. Admin. Code § 75-02-04.1-07(3) provides the method for imputing income to an underemployed obligor:
[G]ross income based on earning capacity equal to the greatest of subdivisions a through c, less actual gross earnings, must be imputed to an obligor who is unemployed or underemployed.
a. A monthly amount equal to one hundred sixty-seven times the hourly federal minimum wage.
b. An amount equal to six-tenths of the statewide average earnings for persons with similar work history and occupational qualifications.
c. An amount equal to ninety percent of the obligor's greatest average gross monthly earnings, in any twelve consecutive months beginning on or after twenty-four months before commencement of the proceeding before the court, for which reliable evidence is provided.
In determining imputed income here, the district court extrapolated Regan's husband's hourly income from an employment position that differed from her employment *579 position. Not only is it error when a district court "extrapolates from less than a twelve-month period" of an obligor's employment to determine the obligor's imputed income, "unless the [district] court makes a determination that evidence of an obligor's recent past circumstances is not a reliable indicator of [the obligor's] future circumstances, the [district] court must not extrapolate an obligor's income under N.D. Admin. Code § 75-02-04.1-02(8)." Korynta, 2006 ND 17, ¶ 17, 708 N.W.2d 895. Moreover, there is no support in the guidelines for the court to extrapolate an obligor's income based on the obligor's spouse's hourly income on the unsupported assumption that the obligor could find employment in a position identical to the spouse's position.
[¶ 16] We recognize a determination of Regan's income from self-employment under N.D. Admin. Code § 75-02-04.1-05 was difficult because of Regan's short history of employment as a nurse anesthetist and her lack of any employment history while she pursued her college degree. See Doepke, 2009 ND 10, ¶ 7, 760 N.W.2d 131 ("Under the child support guidelines, a self-employed individual's child support obligation is generally calculated using an average of the individual's self-employment income from the most recent five years.") We also acknowledge the scant evidence in the record presented by the parties to assist the court in correctly determining Regan's child support obligation. "Nevertheless, a court errs as a matter of law if it fails to comply with the child support guidelines in determining an obligor's child support obligation." Brandner v. Brandner, 2005 ND 111, ¶ 18, 698 N.W.2d 259. We reverse the court's child support award and remand for recalculation of Regan's child support obligation in accordance with the child support guidelines.
IV
[¶ 17] We affirm the district court's award of primary residential responsibility to Fleck, reverse the court's child support award, and remand for recalculation of Regan's child support obligation.
[¶ 18] CAROL RONNING KAPSNER, MARY MUEHLEN MARING, DANIEL J. CROTHERS, and DALE V. SANDSTROM, JJ., concur.
NOTES
[1] The terms "custody" and "visitation" are now referred to as "primary residential responsibility" and "parenting time," respectively. See N.D.C.C. § 14-09-00.1(5) and (6); Machart v. Machart, 2009 ND 208, ¶ 1 n. 1, 776 N.W.2d 795. Although the district court decided this case under the prior law, we use the current terminology in this opinion except when quoting precedent and documents in the record.
[2] The district court's decision was issued before the effective date of the 2009 amendments to N.D.C.C. § 14-09-06.2(1). See 2009 N.D. Sess. Laws ch. 149, § 5.
| {
"pile_set_name": "FreeLaw"
} |
843 S.W.2d 236 (1992)
Sean Lamount HUGHES, Appellant,
v.
The STATE of Texas, Appellee.
No. A14-92-00751-CR.
Court of Appeals of Texas, Houston (14th Dist.).
December 3, 1992.
*237 Edward Chernoff, Houston, for appellant.
Carol M. Cameron, Houston, for appellee.
Before J. CURTISS BROWN, C.J., and SEARS and ELLIS, JJ.
OPINION
SEARS, Justice.
Appellant was convicted by a jury of first degree murder and sentenced to fifteen years confinement in the Texas Department of Criminal Justice, Institutional Division. He gave notice of appeal, and the trial court set bond at one-hundred thousand ($100,000.00) dollars.
Appellant then filed an application for writ of habeas corpus in the trial court requesting that the bail be reduced. The Court denied the writ. In his sole point of error, appellant contends that the trial court abused its discretion in denying his writ for reduction of bail. We affirm.
No precise standard of review exists for reviewing the setting of bail pending appeal. Ex parte Penagos, 810 S.W.2d 796, 798 (Tex.App.Houston [1st Dist.] 1991, no pet.), citing Ex parte Pemberton, 577 S.W.2d 266, 267 (Tex.Crim.App.1979). However, Tex.Code Crim.Proc.Ann. art. 17.15 (Vernon Supp.1992) serves as a guide.
Article 17.15 provides that bail shall be set, in the exercise of discretion, and according to the following rules:
1. The bail shall be sufficiently high to give reasonable assurance that the undertaking will be complied with.
2. The power to require bail is not to be so used as to make it an instrument of oppression.
3. The nature of the offense and the circumstances under which it was committed are to be considered.
4. The ability to make bail is to be regarded, and proof may be taken upon this point.
5. The future safety of a victim of the alleged offense may be considered.
Appellant claims that the Court abused its discretion because it relied too heavily on the violent nature of the offense and discounted all other factors in setting the bail.
The two primary factors considered by trial courts in setting bail are: (1) the length of the sentence; and (2) the nature of the offense. Ex parte Rubac, 611 S.W.2d 848, 849 (Tex.Crim.App.1981). A petitioner's work record, family ties, length of residency, ability to make bond, prior criminal record, and conformity with previous bond conditions are all only supportive data relevant to bond settings. Id.
The evidence at trial showed that appellant put the gun against his girlfriend's face and shot her between the eyes. The appellant carried the gun to school on a school bus. He intimidated witnesses and endangered the lives of his schoolmates. He disposed of the gun after the offense and created a false impression that a third person committed the offense.
The facts show that appellant exhibited a callous disregard for the rules of society and for the safety of those students who were trying to better their lives through education. He committed a violent crime, in an extremely cruel manner. A bond lower than that set by the court would not be in the best interest of justice.
We find that the Court did not abuse its discretion by denying appellant's writ. The judgment is affirmed.
| {
"pile_set_name": "FreeLaw"
} |
337 Mass. 522 (1958)
150 N.E.2d 558
LOUIS W. POIRIER & others
vs.
SUPERIOR COURT & another.
Supreme Judicial Court of Massachusetts, Suffolk.
March 4, 5, April 14, 1958.
May 8, 1958.
Present: WILKINS, C.J., SPALDING, WILLIAMS, COUNIHAN, & WHITTEMORE, JJ.
Robert M. Segal, (Arthur J. Flamm with him,) for the petitioners.
George Michaels, Assistant Attorney General, for the Superior Court.
Harry J. O'Sullivan, for Kelleher.
WILKINS, C.J.
This petition for a writ of mandamus is reported by a single justice upon the question whether a case numbered 39,789 Equity in the Superior Court for Plymouth County involves or grows out of a labor dispute within G.L.c. 214, § 9A (as amended through St. 1950, c. 452, § 3), or c. 149, § 20C (as amended through St. 1950, c. 452, §§ 1, 2). The reference is to a bill in equity in which Gerald J. Kelleher (the intervening respondent here) is the plaintiff and Louis W. Poirier and others (three of whom are petitioners here) are the defendants.[1] Kelleher is a general contractor and builder in Brockton employing from twelve to seventeen workmen. The defendants are members of various labor unions or of the Brockton Building Trades Council, voluntary unincorporated associations, whose members are too numerous to be joined as parties. From July 30 until September 14, 1957, the defendants Hopkins and Larson, who were sent by the trades council, picketed on the sidewalk in front of a garage then in course of construction by Kelleher at 140 Court Street, Brockton. They carried signs reading, "Gerald J. Kelleher is Non Union. Brockton Building Trades Council, A.F. of L. C.I.O." Poirier is president of the trades council, and Hopkins, Larson, and he are members of Laborers Union Local No. 721. The pickets were never in the employ of Kelleher. None of his employees on the garage job was a member of any union. He had no contract with any union as to that job. The *524 picketing was peaceful. The foregoing facts have been agreed.
In the Superior Court the case was heard solely on the plaintiff's application for a preliminary injunction. The judge found that "there is no labor dispute and no dispute of any kind" between the plaintiff and any of the defendants; and that the picketing "has interfered with the plaintiff's carrying on of business." He ruled that G.L.c. 149, § 20C, and G.L.c. 214, § 9A, "are not applicable"; and that "the picketing is illegal." He ordered a preliminary injunction to issue against the defendants and the individual members of the building trades council and of Local No. 721 restraining picketing in front of 140 Court Street, Brockton, or in front of any other place in Brockton where Kelleher is carrying on business. The plaintiff did not file "an undertaking with adequate security," and the judge refused to make findings on the report which would be required by G.L.c. 214, § 9A, if applicable.
Before the single justice the parties agreed that the allegations of fact in the bill of complaint in the Superior Court case are true, thereby raising questions as to what are allegations of fact. See Union Old Lowell National Bank v. Paine, 318 Mass. 313, 316. The parties in their arguments were not in accord as to the effect of this agreement upon the allegations in two paragraphs of the bill: "19. That there is in fact no labor dispute existing between the plaintiff and the Truck Drivers Union nor the plaintiff and the Laborers Union, nor the plaintiff and the Plumbers Union, nor the plaintiff and the Brockton Building Trades Council. 20. That the individual defendants, the unions, the Brockton Building Trades Council, and the pickets are all unlawfully combining, conspiring, and acting solely for the purpose of compelling Kelleher to sign union agreements with the several unions involved when there is no labor dispute with any and all of them, and when Kelleher has no business relations with any of the named defendants."
General Laws c. 214, § 9A, created a new procedure, peculiar to labor cases, and provides for a summary review *525 by a single justice of questions of law arising out of the granting or denial of an injunction.[1a]Mengel v. Justices of the Superior Court, 313 Mass. 238, 244-245. Thayer Co. v. Binnall, 326 Mass. 467, 474-475. The term "labor dispute" is defined in G.L.c. 149, § 20C (as amended through St. 1950, c. 452, § 2): "(a) A case shall be held to involve or to grow out of a labor dispute when the case involves persons who are engaged in the same industry, trade, craft or occupation; ... whether such dispute is (1) between one or more employers ... and one or more employees or associations of employees; ... or (3) ... when the case involves any conflicting or competing interests in a `labor dispute' (as hereinafter defined) of `persons participating or interested' therein (as hereinafter defined). (b) A person or association shall be held to be a person participating or interested in a labor dispute if relief is sought against him or it, and if he or it is engaged in the same industry, trade, craft or occupation in which such dispute occurs, or has a direct or indirect interest therein, or is a member, officer or agent of any association composed in whole or in part of employers or employees engaged in such industry, trade, craft or occupation. (c) The term `labor dispute' ... includes any controversy arising out of any demand of any character whatsoever concerning terms or conditions of employment, or concerning the association or representation of persons in negotiating, fixing, maintaining, changing, or seeking to arrange, terms or conditions of employment, regardless of whether the disputants stand in proximate relation of employer and employee."[2]
*526 Paragraphs 19 and 20 of the bill of complaint are obviously inconsistent. The judge found in accordance with the general allegation in paragraph 19 that there is no labor dispute. But if that portion of paragraph 20 specifically alleging that the purpose of the defendants is to compel Kelleher to sign union agreements is to be taken as correct, there is a labor dispute between the parties to the bill in equity. We are of opinion that what constitutes a labor dispute under § 20C is a question of law. Consequently, there is no allegation of fact in paragraph 19 of the bill. Similarly, the words "when there is no labor dispute with any and all of them" and "unlawfully" in paragraph 20 are not allegations of fact. But the statements in the latter paragraph that the defendants were "acting solely for the purpose of compelling Kelleher to sign union agreements with the several unions involved ... when Kelleher has no business relations with any of the named defendants" are allegations of fact, which are admitted. Whitcomb v. Vigeant, 240 Mass. 359, 362. Laughlin Filter Corp. v. Bird Machine Co. 319 Mass. 287, 290. Hayeck v. Metropolitan District Commission, 335 Mass. 372, 374. That there are no business relations between the defendants in the Superior Court and Kelleher is no longer important after the addition of the words, "regardless of whether the disputants stand in proximate relation of employer and employee," in the amendment of § 20C (c) by St. 1950, c. 452, § 2. The introduction of this new phrase would be a sufficient reason why the respondents here have not cited Simon v. Schwachman, 301 Mass. 573, and Quinton's Market, Inc. v. Patterson, 303 Mass. 315.
The added words were taken from the Norris-LaGuardia act.[1b] U.S.C. (1952) Title 29, § 113 (c). That act had already been interpreted to include within the definition of a labor dispute controversies indistinguishable from that here disclosed. Lauf v. E.G. Shinner & Co. 303 U.S. 323, 329-330. New Negro Alliance v. Sanitary Grocery Co. 303 *527 U.S. 552, 560. Fur Workers Union, Local No. 72 v. Fur Workers Union, No. 21238, 105 F.2d 1, 6-8 (Ct. App. D.C.); affirmed sub nom. Fur Workers Union No. 21238 v. Fur Workers Union, Local No. 72, 308 U.S. 522. The adjudged construction by the Federal courts is to be given to the subsequent enactment by the Legislature. Thibault v. Lalumiere, 318 Mass. 72, 75, and cases cited.
This case involves "persons who are engaged in the same industry, trade, craft or occupation." The dispute is "between one or more employers ... and one or more employees or associations of employees." The "case involves ... conflicting or competing interests in a `labor dispute' ... of `persons participating or interested' therein." See G.L.c. 149, § 20C.
The effect of the definitions in G.L.c. 149, § 20C (c), (d), (e), as amended through St. 1950, c. 452, § 2, is to make the procedural safeguards of c. 214, § 9A, applicable to every kind of labor dispute regardless of whether the dispute is lawful or unlawful as a matter of substantive law. The injunction should not have issued without the preliminary findings prescribed in § 9A, and the case should have been reported to the single justice. Davis Brothers Fisheries Co. Inc. v. Pimentel, 322 Mass. 499, 507-508. See Fashion-craft, Inc. v. Halpern, 313 Mass. 385, 390.
The petition asks that a writ issue to direct the judge of the Superior Court "to report any and all questions of law involved in the issuance of a preliminary injunction to a single justice" of the Supreme Judicial Court. It is apparent from the record before us, as well as from the report of the evidence, which contains an agreement as to certain facts (although not in the precise form of those agreed before the single justice) that the judge's finding that there was no labor dispute was based upon rulings of law which were erroneous. See Mengel v. Justices of the Superior Court, 313 Mass. 238, 246-247.
It is provided in G.L.c. 214, § 9A (1): "No court shall have jurisdiction to issue a preliminary or permanent injunction in any case involving or growing out of a labor dispute, *528 as defined in section twenty C of chapter one hundred and forty-nine" except after finding the prescribed facts. The preliminary injunction issued without jurisdiction.
Order of Superior Court reversed.
NOTES
[1] We shall, whenever possible, refer to the parties as in the case in the Superior Court.
[1a] Section 9A (6) reads: "Whenever the court shall issue or deny a preliminary injunction in a case involving or growing out of a labor dispute, the court, upon the request of any party to the proceeding, shall forthwith report any questions of law involved in such issue or denial to the supreme judicial court and stay further proceedings except those necessary to preserve the rights of the parties. Upon the filing of such report, the questions reported shall be heard in a summary manner by a justice of the supreme judicial court, who shall with the greatest possible expedition affirm, reverse or modify the order of the superior court. The decision of such justice of the supreme judicial court upon the questions so raised shall be final, but without prejudice to the raising of the same questions before the full court upon exceptions, appeal or report after a final decree in the case."
[2] The italics indicate words which were added by this amendment to § 20C as previously contained in St. 1935, c. 407, § 1.
[1b] Except for the omission, probably inadvertent, of "the" before "proximate."
| {
"pile_set_name": "FreeLaw"
} |
[Cite as State v. Zimmerman, 2016-Ohio-1475.]
IN THE COURT OF APPEALS OF OHIO
SECOND APPELLATE DISTRICT
CLARK COUNTY
STATE OF OHIO :
:
Plaintiff-Appellee : Appellate Case Nos. 2015-CA-62 &
: 2015-CA-63
v. :
: Trial Court Case Nos. 2015-CR-70 &
RAYMOND ZIMMERMAN : 2015-CR-137
:
Defendant-Appellant : (Criminal Appeals from
: Common Pleas Court)
...........
OPINION
Rendered on the ___8th___ day of ____April____, 2016.
...........
RYAN A. SAUNDERS, Atty. Reg. No. 0091678, Assistant Clark County Prosecuting
Attorney, 50 East Columbia Street, Fourth Floor, Springfield, Ohio 45502
Attorney for Plaintiff-Appellee
BROOKE M. BURNS, Atty. Reg. No. 0080256, Assistant State Public Defender, 250 East
Broad Street, Suite 1400, Columbus, Ohio 43215
Attorney for Defendant-Appellant
.............
WELBAUM, J.
{¶ 1} In these cases, Defendant-Appellant, Raymond Zimmerman, appeals from
his convictions and sentences on one count of Murder, with a gun specification (Clark
County Common Pleas Court Case No. 2015-CR-70), and one count of Aggravated
-2-
Robbery (Clark County Common Pleas Court Case No. 2015-CR-137). In support of his
appeal, Zimmerman contends that the trial court violated his right to due process by
sentencing him to a mandatory prison term of 15 years to life, because the non-rebuttable
sentencing presumption in R.C. 2929.02(B)(1) cannot lawfully be applied to juvenile
offenders. Zimmerman further contends that this automatic and mandatory term violates
his right to be free from cruel and unusual punishment. Finally, Zimmerman contends
that his trial counsel was ineffective because he failed to object to imposition of the
automatic and mandatory term of imprisonment.
{¶ 2} On a plain error basis, we conclude that R.C. 2929.02(B)(1) may be lawfully
applied to juvenile offenders without violating due process, and that the mandatory term
imposed by the statute does not violate Zimmerman’s right to be free from cruel and
unusual punishment. We further conclude that Zimmerman’s trial counsel did not
commit ineffective assistance by failing to raise these arguments in the trial court. Even
if the arguments had been timely raised, they are without merit. Accordingly, the
judgment of the trial court will be affirmed.
I. Facts and Course of Proceedings
{¶ 3} On January 12, 2015, the body of William Henson was discovered in a
residence on Haddix Road in Clark County. When the police arrived, the residence had
been ransacked, and there were signs of a struggle. Henson died as the result of
multiple gunshot wounds. Based on information from statements at the scene, two
suspects were identified. Raymond Zimmerman, Henson’s nephew, was one of the
suspects. The police subsequently discovered information leading to Zimmerman’s
-3-
location and executed a search warrant at an address on Wallace Drive in Fairborn, Ohio,
on January 15, 2015. They located and arrested Zimmerman at that address.
{¶ 4} On January 23, 2015, Zimmerman escaped from detention while in juvenile
custody. The following morning, a 70-year-old woman discovered Zimmerman in her
home. Zimmerman allegedly forced her, at knife point, to drive him to Fairborn, Ohio.
He was arrested in Fairborn later that day.
{¶ 5} At the time of these crimes, Zimmerman was 17 years old. The juvenile
court held probable cause hearings on February 5, 2015, and concluded that there was
probable cause that Zimmerman had committed Murder, a felony of the first degree on
January 12, 2015, in violation of R.C. 2903.02(A), and that transfer to the general division
of the common pleas court was mandatory under R.C. 2152.12.
{¶ 6} On February 9, 2015, Zimmerman was indicted in Clark County Common
Pleas Court Case No. 2015-CR-070, on one count of Aggravated Murder, one count of
Murder, three counts of Felony Murder, one count of Felonious Assault, one count of
Aggravated Robbery, one count of Aggravated Burglary, and one count of Theft of a
Firearm. All the counts carried firearm specifications.
{¶ 7} Subsequently, on March 16, 2015, Zimmerman was indicted in Clark County
Common Pleas Court Case No. 2015-CR-137, on one count of Aggravated Burglary, one
Count of Kidnapping, and one count of Theft, with an elderly person specification. These
charges related to the incident that occurred on the morning of January 24, 2015.
{¶ 8} Counsel was appointed for Zimmerman, and on May 11, 2015, Zimmerman
entered guilty pleas in both cases, pursuant to an agreed plea bargain. In exchange for
a guilty plea to Count Two of the indictment (Murder, with a gun specification) in Case
-4-
No. 2015-CR-070, the State agreed to dismiss the remaining counts in the indictment,
and Zimmerman would be sentenced to a mandatory term of life in prison, with a
possibility of parole after 15 years, plus a three-year sentence on the gun specification.
{¶ 9} In Case No. 2015-CR-137, in exchange for Zimmerman’s guilty plea to
Aggravated Burglary, the State agreed to dismiss the remaining counts of the indictment.
In addition, the parties agreed to a ten-year sentence, and that the sentence would run
consecutive to the sentence in 2015-CR-070. The total sentence, thus, would be life in
prison, with parole eligibility after 28 years.
{¶ 10} After engaging in a Crim.R. 11 colloquy with Zimmerman, the trial court
accepted his guilty pleas, and sentenced him the same day to life in prison, with parole
eligibility after 28 years. Zimmerman timely appeals from his convictions and sentences.
II. Alleged Violation of Due Process
{¶ 11} Zimmerman’s First Assignment of Error states that:
The Clark County Court of Common Pleas Violated Raymond
Zimmerman’s Right to Due Process When It Sentenced Him to a Mandatory
Prison Term of 15 Years to Life Because the Irrebuttable Presumption in
R.C. 2929.02(B)(1) Cannot Be Lawfully Applied to Juvenile Offenders.
Fourteenth Amendment to the U.S. Constitution; Ohio Constitution, Article
I, Section 16.
{¶ 12} Under this assignment of error, Zimmerman argues that Ohio’s mandatory
sentencing requirements for homicide offenders violate due process by imposing
presumptions in sentencing that cannot be rebutted, and improperly result in juvenile
-5-
offenders being treated the same as culpable adult offenders.
{¶ 13} R.C. 2929.02(B)(1) states, in pertinent part, that “whoever is convicted of or
pleads guilty to murder in violation of section 2903.02 of the Revised Code shall be
imprisoned for an indefinite term of fifteen years to life.” Thus, the statute imposes a
specific sentence, no matter what a defendant’s status may be. As Zimmerman
maintains, this statute prevents trial courts from taking a defendant’s youth into
consideration during sentencing. However, Zimmerman forfeited arguments about the
statute’s constitutionality by failing to raise them in the trial court. State v. Quarterman,
140 Ohio St.3d 464, 2014-Ohio-4034, 19 N.E.3d 900, ¶ 15.
{¶ 14} In Quarterman, the defendant challenged the constitutionality of Ohio’s
mandatory bindover provisions. The Supreme Court of Ohio held, however, that the
defendant had forfeited the error because he failed to raise unconstitutionality in the trial
court. Id. at ¶ 8 and 15, citing State v. Awan, 22 Ohio St.3d 120, 122, 489 N.E.2d 277
(1986). (Other citations omitted.) In this regard, the court acknowledged it had
discretion to consider plain error, but noted that in such a situation, a defendant must
show “that but for a plain or obvious error, the outcome of the proceeding would have
been otherwise, and reversal must be necessary to correct a manifest miscarriage of
justice.” Id. at ¶ 16, citing State v. Davis, 127 Ohio St.3d 268, 2010-Ohio-5706, 939
N.E.2d 147, ¶ 29. Ultimately, the court concluded that the defendant had failed to
adequately raise even plain error, and refused to consider the issue the defendant had
presented. Id. at ¶ 17-21.
{¶ 15} Exercising our discretion to consider plain error, we conclude, after
reviewing the issues, that the trial court did not commit plain error, and reversal is not
-6-
required to correct a manifest miscarriage of justice.
{¶ 16} In arguing that R.C. 2929.02(B)(1) is unconstitutional, Zimmerman relies on
the fact that children are not as mature and responsible as adults. He also relies on
decisions of the United States Supreme Court that have drawn “bright-line” distinctions
between punishments for youthful offenders, even where they are transferred to adult
court.
{¶ 17} In Miller v. Alabama, ___ U.S. ___, 132 S.Ct. 2455, 183 L.Ed.2d 407 (2012),
the United States Supreme Court discussed a series of prior cases in which the court had
recognized that “children are constitutionally different from adults for purposes of
sentencing.” Id. at 2464, citing Roper v. Simmons, 543 U.S. 551, 125 S.Ct. 1183, 161
L.Ed.2d 1 (2005), and Graham v. Florida, 560 U.S. 48, 130 S.Ct. 2011, 176 L.Ed.2d 825
(2010). The court stressed its prior explanation that “[b]ecause juveniles have
diminished culpability and greater prospects for reform, * * * ‘they are less deserving of
the most severe punishments.’ ” Id., quoting Graham, 560 U.S. at 68. In addition, the
court emphasized that “the distinctive attributes of youth diminish the penological
justifications for imposing the harshest sentences on juvenile offenders, even when they
commit terrible crimes.” Miller, 132 S.Ct. at 2465.
{¶ 18} Miller was a homicide case in which the defendant had been sentenced to
life imprisonment without parole. Id. at 2457. In view of the factors discussed above,
the United States Supreme Court stated that:
Mandatory life without parole for a juvenile precludes consideration of his
chronological age and its hallmark features—among them, immaturity,
impetuosity, and failure to appreciate risks and consequences. It prevents
-7-
taking into account the family and home environment that surrounds him—
and from which he cannot usually extricate himself—no matter how brutal
or dysfunctional. It neglects the circumstances of the homicide offense,
including the extent of his participation in the conduct and the way familial
and peer pressures may have affected him. Indeed, it ignores that he
might have been charged and convicted of a lesser offense if not for
incompetencies associated with youth—for example, his inability to deal
with police officers or prosecutors (including on a plea agreement) or his
incapacity to assist his own attorneys. See, e.g., Graham, 560 U.S., at ––
––, 130 S.Ct., at 2032 (“[T]he features that distinguish juveniles from adults
also put them at a significant disadvantage in criminal proceedings”); J.D.B.
v. North Carolina, 564 U.S. ––––, ––––, 131 S.Ct. 2394, 2400–2401, 180
L.Ed.2d 310 (2011) (discussing children's responses to interrogation). And
finally, this mandatory punishment disregards the possibility of rehabilitation
even when the circumstances most suggest it.
Miller, 132 S.Ct. at 2468. As a result, the court held that “the Eighth Amendment forbids
a sentencing scheme that mandates life in prison without possibility of parole for juvenile
offenders.” Id. at 2469.
{¶ 19} In a subsequent decision, the Supreme Court of Ohio followed Miller and
held that “[a] court, in exercising its discretion under R.C. 2929.03(A), must separately
consider the youth of a juvenile offender as a mitigating factor before imposing a sentence
of life without parole.” State v. Long, 138 Ohio St.3d 478, 2014-Ohio-849, 8 N.E.3d 890,
paragraph one of the syllabus.
-8-
{¶ 20} After Miller and Long had been decided, we considered whether a trial court
erred in failing to take a defendant’s youth into account when imposing a sentence for
Aggravated Murder under R.C. 2929.03(A). State v. Jones, 2d Dist. Montgomery No.
26333, 2015-Ohio-3506, ¶ 1-2. We held that Miller and Long did not apply, because the
trial court did not impose a life sentence without the possibility of parole. Id. at ¶ 8. We
went on to note that even if Long could arguably be read more broadly to require
evaluation of youth as a mitigating factor, the trial court had, in fact, considered factors
pertaining to the defendant’s youth. Id. at ¶ 9.
{¶ 21} In a subsequent case, we concluded that a trial court did not err in
sentencing a youthful defendant, even when the court specifically stated during the
sentencing hearing that it would not consider the defendant’s youth. State v. Hawkins,
2d Dist. Clark No. 2015-CA-16, 2015-Ohio-5383, ¶ 8. The defendant in Hawkins pled
guilty to Aggravated Murder and was sentenced to life in prison with parole eligibility after
he had served 30 years for the murder charge and three years for a firearm specification.
Id. at ¶ 5-8. He was 17 years old when he committed the crime. Id. at ¶ 2.
{¶ 22} In arguing that the trial court erred by failing to consider his youth, the
defendant relied on Long and Miller. Id. at ¶ 11. We rejected his argument, however.
First, we observed that we had recently discussed both Long and Miller in Jones. Id. at
¶ 12, citing Jones at ¶ 8. We then noted that Jones had also cited to State v. Hammond,
8th Dist. Cuyahoga No. 100656, 2014-Ohio-4673, in which “the Eighth District Court of
Appeals refused to extend the holding in Long to every sentence involving a juvenile
offender.” Id. at ¶ 13, citing Jones at ¶ 9, fn.2. We agreed with this approach, stating
that:
-9-
As the record reveals, like the juvenile offenders in Jones and
Hammond, Hawkins did not receive a life sentence without parole.
Instead, he received a sentence of life in prison with the possibility of parole
after serving 33 years in prison. In turn, the concerns in Long with respect
to culpability and the possibility of rehabilitation do not exist in this case, as
it is still possible for Hawkins to become amenable to rehabilitation as he
matures into adulthood and to potentially be released on parole after serving
33 years in prison. Therefore, because there is no authority extending the
holding in Long to every prison sentence imposed on a juvenile offender,
and because the concerns discussed in Long do not exist here, we do not
find that the trial court erred when it decided not to consider Hawkins's youth
at sentencing.
Hawkins, 2d Dist. Clark No. 2015-CA-16, 2015-Ohio-5383, ¶ 16.
{¶ 23} In the case before us, the trial court did not refuse to consider Zimmerman’s
youth. Instead, the court indicated at the plea hearing that the only possible sentence
the court could impose for Murder was a mandatory sentence of life in prison with parole
eligibility after 15 years. Transcript of Plea and Disposition Hearing, p. 8. The court
assured that Zimmerman was aware of this before the court accepted his guilty plea. Id.
at pp. 8-9.
{¶ 24} In view of our prior authority, we conclude that R.C. 2929.02(B)(1) is not
unconstitutional. The decisions in Long and Miller do not apply, because the case before
us does not involve a sentence of life in prison without parole. Zimmerman will be eligible
for parole, as was noted, when he has served a prison term of 28 years.
-10-
{¶ 25} We also recently rejected a defendant’s argument that mandatory
sentences imposed on juveniles in adult court are invalid as a violation of the Eighth
Amendment. State v. Anderson, 2d Dist. Montgomery No. 26525, 2016-Ohio-135, ¶ 34.
{¶ 26} In Anderson, the defendant was not convicted of homicide, but received
what appeared to be mandatory sentences for aggravated robbery and kidnapping
convictions, due to the fact that a firearm was involved. Id. at ¶ 36. In this regard, we
commented that:
Even accepting, arguendo, that Ohio law compelled the trial court to
impose punishment of at least three years in prison for Anderson's
substantive first-degree felony counts and a consecutive three-year term for
the merged firearm specifications, we see no violation of the Eighth
Amendment to the U.S. Constitution or Article I, Section 9 of the Ohio
Constitution. Contrary to the implication of Anderson's appellate brief, not
all “mandatory” punishment imposed on juveniles in adult court is cruel and
unusual. In State v. Long, 138 Ohio St.3d 478, 2014-Ohio-849, 8 N.E.3d
890, for example, the Ohio Supreme Court considered whether Ohio's
felony sentencing scheme constituted cruel and unusual punishment as
applied to a juvenile convicted of aggravated murder in adult court and
sentenced to life without parole. In Long, the defendant faced a mandatory
minimum sentence of life with parole eligibility after twenty years. Long at
¶ 5. In the course of its ruling, the Ohio Supreme Court recognized that
Miller banned mandatory life-without-parole sentences on juveniles tried in
adult court. Id. at ¶ 8. Nowhere in Long, however, did the court suggest
-11-
that * * * the Eighth Amendment or Article I, Section 9 prohibit any and all
mandatory sentences on juveniles tried in adult court. See also State v.
Reidenbach, 5th Dist. Coshocton No. 2014CA0019, 2015-Ohio-2915
(rejecting argument by juvenile tried in adult court that imposition of punitive
and mandatory Tier III sex-offender requirements on him constituted cruel
and unusual punishment).
(Emphasis sic.) Anderson at ¶ 37.
{¶ 27} As a final matter, our review of cases decided by the Supreme Court of Ohio
and the United States Supreme Court after Miller shows no indication that the holding in
Miller has been extended to situations like the present.
{¶ 28} Accordingly, since there is no plain error, and no manifest miscarriage of
justice requiring reversal, the First Assignment of Error is overruled.
III. Alleged Cruel and Unusual Punishment
{¶ 29} Zimmerman’s Second Assignment of Error states that:
The Clark County Court of Common Pleas Violated Raymond
Zimmerman’s Right to Be Free From Cruel and Unusual Punishments
When It Imposed an Automatic and Mandatory Prison Term of 15 Years to
Life, in Accordance with R.C. 2929.02(B)(1). Eighth Amendment to the
U.S. Constitution; Ohio Constitution, Article I, Section 9; Miller v. Alabama,
___ U.S. ___, 132 S.Ct. 2455, 183 L.Ed.2d 407 (2012).
{¶ 30} Under this assignment of error, Zimmerman makes essentially the same
arguments that he asserted in support of the alleged due process violation. He again
-12-
refers to Miller and Long, and the idea that R.C. 2929.02(B)(1) inappropriately precludes
trial courts from taking a juvenile’s youth into consideration for purposes of sentencing.
{¶ 31} Again, Zimmerman did not raise this issue in the trial court, and we will
review the issue only for plain error. Quarterman, 140 Ohio St.3d 464, 2014-Ohio-4034,
19 N.E.3d 900, at ¶ 15-16. For the reasons already explained in connection with the
First Assignment of Error, we find no plain error nor any manifest miscarriage of justice.
Id. at ¶ 16.
{¶ 32} “[T]he bulk of Eighth Amendment jurisprudence concerns not whether a
particular punishment is barbaric, but whether it is disproportionate to the crime. Central
to the Constitution's prohibition against cruel and unusual punishment is the ‘precept of
justice that punishment for crime should be graduated and proportioned to [the] offense.’ ”
In re C.P., 131 Ohio St.3d 513, 2012-Ohio-1446, 967 N.E.2d 729, ¶ 25, quoting Weems
v. United States, 217 U.S. 349, 367, 30 S.Ct. 544, 54 L.Ed. 793 (1910).
{¶ 33} “Proportionality review falls within two general classifications: the first
involves ‘challenges to the length of term-of-years sentences given all the circumstances
in a particular case.’ The second, which until recently was applied only in capital cases,
involves ‘cases in which the Court implements the proportionality standard by certain
categorical restrictions.’ ” Id. at ¶ 26, quoting Graham, 560 U.S. at 59, 130 S.Ct. 2011,
176 L.Ed.2d 825. Zimmerman urges analysis under the latter category, which requires
courts to engage in a two-step process: “first, the court considers whether there is a
national consensus against the sentencing practice at issue, and second, the court
determines ‘in the exercise of its own independent judgment whether the punishment in
question violates the Constitution.’ ” Id. at ¶ 29, quoting Graham at 60.
-13-
{¶ 34} In this regard, Zimmerman focuses on the “growing consensus against
subjecting children to adult treatment” and the fact that even where cases involving
children are decided in adult court, a defendant’s youth is a consideration in sentencing.
{¶ 35} As was noted, we have previously rejected the contention that mandatory
sentences for juveniles who are tried as adults violates the Eighth Amendment prohibition
against cruel and unusual punishment. Anderson, 2d Dist. Montgomery No. 26525,
2016-Ohio-135, ¶ 34-37. In Jones, we also rejected the argument of the defendant (who
turned 18 just before sentencing) that his 36 years-to-life sentence for Aggravated Murder
and other charges was cruel and unusual punishment. Jones, 2d Dist. Montgomery No.
26333, 2015-Ohio-3506, at ¶ 10-12. The defendant in Jones relied on Graham, and
argued that his sentence, which made him eligible for parole at 54 years old, equated to
a life sentence without parole. He claimed that he must be provided a meaningful
opportunity for release. Jones at ¶ 10. The defendant also argued that statistically, his
life expectancy in prison was 54 years or less. Id.
{¶ 36} We rejected these arguments, stressing that Graham was inapplicable
because the defendant in Jones had not been convicted of a non-homicide offense and
did not receive a life sentence without parole. Id. at ¶ 11. In this regard, we emphasized
that concerning “juvenile homicide offenders such as Jones, the only sentences that have
been found to violate the Eighth Amendment are death sentences and mandatory
sentences of life without parole.” (Citations omitted.) Id. The same reasoning applies
here, and there was neither plain error nor a manifest miscarriage of justice in the
sentence imposed on Zimmerman. In fact, Zimmerman’s sentence is considerably less
than the sentence we affirmed in Jones. Accordingly, the Second Assignment of Error
-14-
is overruled.
IV. Alleged Ineffective Assistance of Counsel
{¶ 37} Zimmerman’s Third Assignment of Error states that:
Raymond Zimmerman Was Denied Effective Assistance of Counsel,
in Violation of the Sixth and Fourteenth Amendments to the United States
Constitution and Article I, Section 10 of the Ohio Constitution.
{¶ 38} Under this assignment of error, Zimmerman contends that his trial counsel
was ineffective because he failed to object to the unconstitutionality of R.C.
2929.02(B)(1).
{¶ 39} Ineffective assistance of trial counsel claims are reviewed under the
analysis established in Strickland v. Washington, 466 U.S. 668, 104 S.Ct. 2052, 80
L.Ed.2d 674 (1984), and adopted by the Supreme Court of Ohio in State v. Bradley, 42
Ohio St.3d 136, 538 N.E.2d 373 (1989). Based on these cases, trial attorneys are
entitled to a strong presumption that their conduct falls within a wide range of reasonable
assistance. Strickland, 466 U.S. at 688. “Counsel's performance will not be deemed
ineffective unless and until counsel's performance is proved to have fallen below an
objective standard of reasonable representation and, in addition, prejudice arises from
counsel's performance.” (Citations omitted.) Bradley, 42 Ohio St.3d at 137, paragraph
two of the syllabus. “To show that a defendant has been prejudiced by counsel's
deficient performance, the defendant must prove that there exists a reasonable probability
that, were it not for counsel's errors, the result of the trial would have been different.” Id.
at paragraph three of the syllabus.
-15-
{¶ 40} Trial counsel was not ineffective in the case before us. Even if
Zimmerman’s counsel had raised due process and cruel and unusual punishment
arguments in the trial court, Zimmerman would not be entitled to relief. For the reasons
previously mentioned, R.C. 2929.02(B)(1) does not violate either due process or
prohibitions against cruel and unusual punishment. The Third Assignment, therefore, is
without merit and is overruled.
V. Conclusion
{¶ 41} All of Zimmerman’s assignments of error having been overruled, the
judgment of the trial court is affirmed.
.............
HALL, J., concurs.
DONOVAN, P.J., dissenting:
{¶ 42} I dissent. After Miller, legislative action affirmatively illustrates its
significance. Miller is not limited to barring mandatory life-without-parole sentences but
also affects discretionary sentencing schemes by requiring the consideration of youth as
a mitigating factor. After Miller, several state legislatures have amended their applicable
statutes to require the consideration of youth and its attendant characteristics and
circumstances as a mitigating factor. See Florida Stat. Ann. § 921.1401; Mich. Comp.
Laws § 769.25; Neb. Rev. Stat. § 28-105.02; Nev. Rev. Stat. Ann. § 176.025 (as
amended, 2015 Nevada Laws Ch. 152 (AB 267)); 18 Pa. Cons. Stat. Ann. § 1102.1;
Wash. Rev. Code § 10.95.030; W. Va. Code Ann. § 61-11-23.
{¶ 43} Accordingly, I would reverse and remand for re-sentencing for the reasons
-16-
articulated in my dissent in Hawkins which addressed Miller and Long in detail.
..........
Copies mailed to:
Ryan A. Saunders
Brooke M. Burns
Hon. Douglas M. Rastatter
| {
"pile_set_name": "FreeLaw"
} |
(\\i\
FILED
SEP 15 2011
Clerk, U.S. District & Bankruptcy
Courts for the District ot Columbia
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
Tyrone Briscoe,
Plaintiff,
v. Civil Action No. lb.?;[
' c
Chief Judge Annice M. Wagner et al.,
\/\/\z\/\/\/\/\/\/
Defendants.
MEMORANDUM OPINION
This action, brought pro se, is before the Court on its initial review of the complaint,
which is accompanied by an application to proceed in forma pauperis. Because the instant
complaint presents claims that were or could have been raised in a previous action, the Court will
dismiss this action on the ground that it is procedurally barred.
Under the doctrine of res judicata, a final judgment on the merits in one action "bars any
further claim based on the same ‘nucleus of facts’ . . . ." Page v. United States, 729 F.2d 818,
820 (D.C. Cir, 1984) (quoting Expert Elec., Inc. v. Levl`ne, 554 F.2d l227, 1234 (D.C. Cir.
1977)). Res judicata bars the relitigation "of issues that were or could have been raised in [the
prior] action" by the same parties or their privies. Drake v. FAA, 291 F.3d 59, 66 (D.C. Cir.
2002) (emphasis in original) (quoting Allen v. McCurry, 449 U.S. 9(), 94 (1980)); see I.A.M
Nat’l Pensz`on Fund v. Indus. Gear Mfg. Co., 723 F.2d 944, 949 (D.C. Cir. 1983) (noting that res
judicata "forecloses all that which might have been litigated previously"); accord Crowder v.
Bz'erman, Geesz`ng, and Ward LLC, 713 F. Supp. 2d 6, 10 (D.D.C. 20lO).
Plaintiff is a District of Columbia prisoner confined at the United States Penitentiary
McCreary in Pine Knot, Kentucky. Invoking 42 U.S.C. § 1983, plaintiff sues former Chief Judge
Annice M. Wagner of the District of Columbia Court of Appeals, former Assistant United States
Attorney ("AUSA") John Fisher, AUSA J ames Sweeney, and attorneys Kenneth A. Rosenau and
Susan H. Rosenau, both of whom were appointed in 2001 to represent the plaintiff in his criminal
appeal before the D.C. Court of Appeals. See Complaint ("Compl.") Attachment (Nov. 21, 2001
Order). ln addition, plaintiff sues the "Clerk, United States Court of Appeals," Compl. Caption,
who is identified in the body of the complaint as the "Chief Clerk" of the District of Columbia
Court of Appeals, Compl. at 6, alleging only that "individuals working as assistant clerk [sic]
discarded and destroyed motions file[d] by [plaintiff] in a timely fashion." Compl. at 5. Plaintiff
"seeks to have the original indictment dismissed [and] feel[s] strongly that he is entitled to obtain
his liberty." 1d. at 6.
The instant complaint presents the same claims that were raised, or could have been
raised, in the prior civil action dismissed on May 5, 2010. See Brz'scoe v. Wagner, Civ. Action
No. 10-07l0 (UNA) (D.D.C., May 5, 20l0) (Order and accompanying l\/Iemorandum Opinion
dismissing case pursuant to 28 U.S.C. § l9l5A(b)(1)). Therefore, this case will be dismissed
with prejudice.' A separate Order accompanies this Memorandum Opinion.
Z:`/C- § />’w</c
September , 2011 United States District Judge
' ln the dismissed action, the Court, in denying plaintiffs motion to reconsider, stated that
plaintiff was free to file a habeas corpus action after he had exhausted his local remedies.
Briscoe v. Wagner, Civ. Action No. 10-0710 (Order) [Dkt. # 8]; see also id. Mem. Op. [Dkt. # 3]
at 2 (concluding that the court lacked jurisdiction to entertain a habeas claim based on ineffective
assistance of appellate counsel when "plaintiff ha[d] not stated that he moved in the D.C. Court
of Appeals to recall the mandate[.]") (citing Willz`ams v. Martinez, 586 F.3d 995, 999 (D.C. Cir.
2009)). Presumably, the dismissal of this civil action does not foreclose plaintiff from seeking
habeas relief through a properly styled and supported petition under 28 U.S.C. § 2254, mindful of
the limited review that statute perrnits. See Williams, 586 F.3d at 1002 (remanding with
instructions for the district court "to consider the merits [of petitioner’s ineffective assistance of
appellate counsel claim] in light of the standard set forth in 28 U.S.C. § 2254.") (citations
omitted). Because the named defendants in this action are not proper respondents to a habeas
action, see 28 U.S.C. § 2243 ("[t]he writ, or order to show cause shall be directed to the person
having custody of the person detained"), the stated facts are sketchy, and plaintiff presumably is
not foreclosed from filing a habeas action, the C ourt does not find it in the interests of justice to
construe this action as brought in habeas.
| {
"pile_set_name": "FreeLaw"
} |
815 F.2d 712
Tylerv.Loock
86-2093
United States Court of Appeals,Eighth Circuit.
2/24/87
1
D.Neb.
AFFIRMED
| {
"pile_set_name": "FreeLaw"
} |
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
ERIC JEROME HUNTER MATHIS,
Plaintiff,
v.
Civil Action No. 16-1712 (TJK)
DEPARTMENT OF JUSTICE et al.,
Defendants.
MEMORANDUM OPINION
Before the Court in this case, which was brought under the Freedom of Information Act
(“FOIA”), 5 U.S.C. § 552, is Defendants’ Renewed Motion to Dismiss and for Summary
Judgment. See ECF No. 28 (“Motion”).1 For the reasons set forth below, the Court will grant
the Motion in its entirety.
I. Background
Plaintiff Eric Jerome Hunter Mathis, incarcerated in a state prison in Georgia and
proceeding pro se, alleges in his complaint that he has been “deprived of his lawful property and
rights as a United States citizen.” Compl. ¶ 3. Specifically, he alleges that the Department of
Justice (“DOJ”) is “holding [his] personal and real property[,] personal papers, childhood
photo[]s and effect[s] not excluding trust fund[] accounts[,] his patent information, financial
accounts (personal, bus[]iness, checking, co[r]porate, and escrow),” id. ¶ 4, “inherited assets,” id.
¶ 5, and benefits he accrued while “working two nine to fives and managing [his] own brake
1
In evaluating Defendants’ Motion, the Court considered all relevant filings including: ECF No.
1 (“Compl.”); ECF No. 11 (“Am. Compl.”); ECF No. 18 (“Pl.’s 1st Opp’n”); ECF No. 19 (“2d
Am. Compl.”); ECF No. 23 (“3d Am. Compl.”); ECF No. 28-1 (“Defs.’ SoMF”); ECF No. 28-2
(“Defs.’ Br.”); ECF No. 31 (“Pl.’s 2d Opp’n”); ECF No. 32 (“Defs.’ Reply”).
repair shop,” id. ¶ 6. He contends that DOJ and the Federal Bureau of Investigation (the “FBI”)
have frozen his bank accounts. See id. ¶¶ 7-8.
In October 2015, Hunter Mathis began his quest for information about his assets by
submitting a request to the FBI under FOIA. See id. ¶¶ 8, 13. DOJ and the FBI allegedly
“refused [his] request” and failed to explain “why [his] accounts remain . . . frozen after so much
time has passed with no criminal or civil action in the matter.” Id. ¶ 7. According to Hunter
Mathis, DOJ and the FBI not only denied his FOIA requests improperly, see id. ¶¶ 7-9; Am.
Compl. ¶ 12, but in so doing, also violated his rights under the Fourth, Fifth and Sixth
Amendments to the Constitution, see Compl. ¶¶ 14, 16-18; Am. Compl. ¶¶ 19-22. He demands a
declaratory judgment “that the acts and omission[s] . . . described [in the complaint] violated
plaintiff[’]s rights under the Constitution,” Compl. ¶ 20, and injunctive relief “enjoin[ing]
Defendant from withholding the information requested,” id. ¶ 21.
As his subsequent amended complaints reflect, Hunter Mathis then expanded his search
for information by allegedly directing FOIA requests to several other entities: the Internal
Revenue Service (“IRS”), a component of the Department of Treasury (“Treasury”), see 2d Am.
Compl. ¶ 10, the Department of Defense (“DoD”), see id. ¶¶ 7, 11; 3d Am. Compl. ¶¶ 20, 31, the
Securities and Exchange Commission (“SEC”), see 3d Am. Compl. ¶¶ 17, 27, the United States
District Court for the Middle District of Georgia, see id. ¶¶ 18, 28, the Social Security
Administration (“SSA”), see id. ¶¶ 19, 29, and the American Red Cross, see id. ¶ 30. The Court
is obliged to construe a pro se litigant’s pleadings liberally. See Haines v. Kerner, 404 U.S. 519,
520 (1972). To this end, the Court construes Hunter Mathis’s various complaints collectively,
and as raising FOIA claims against each of these entities.
2
II. Analysis
A. Defendants’ Motion to Dismiss
For the reasons explained below, the Court will dismiss Hunter Mathis’s (1)
constitutional claims; (2) claim against the Middle District of Georgia; and (3) claim against the
American Red Cross.
1. Hunter Mathis’s Constitutional Claims
Although Hunter Mathis alleges violations of his rights under the Fourth, Fifth and Sixth
Amendments to the United States Constitution, see Compl. ¶¶ 14, 16-18; Am. Compl. ¶¶ 19-22;
3d Am. Compl. ¶ 33, he clarifies elsewhere that “this is not a 1983 suit[] or[] civil rights
complaint,” Pl.’s 1st Opp’n at 4; Pl.’s 2d Opp’n ¶ 26. In fact, the claims he brings are grounded
in FOIA, and it is well settled that “FOIA does not offer a remedy for alleged violations of
constitutional rights arising from the handling of a FOIA request.” Houser v. Church, 271 F.
Supp. 3d 197, 204 (D.D.C. 2017) (citing Johnson v. Exec. Office for U.S. Attorneys, 310 F.3d
771, 777 (D.C. Cir. 2002)). The Court therefore dismisses Hunter Mathis’s constitutional
claims, which similarly arise from the processing of his FOIA requests. See, e.g., Johnson, 310
F.3d at 777; Sanchez-Alanis v. Fed. Bureau of Prisons, 270 F. Supp. 3d 215, 219 (D.D.C. 2017).
2. FOIA Claim Against the Middle District of Georgia
Hunter Mathis asserts that the Middle District of Georgia “refused to disclose the
freezing of [his] accounts and assets in 1996 or 2003.” 3d Am. Compl. ¶ 28. A claim under
FOIA may proceed only as against an agency of the federal government. 5 U.S.C. §§ 551(1),
552(a); see 5 U.S.C. § 552(f). The definition of “agency” expressly excludes “the courts of the
United States.” 5 U.S.C. § 551(1)(B). Thus, Hunter Mathis’s FOIA claim against the Middle
District of Georgia must be dismissed. See Gaydos v. Mansmann, No. 98-5002, 1998 WL
3
389104, at *1 (D.C. Cir. Nov. 13, 1998) (per curiam); United States v. Choate, 102 F. App’x
634, 635 (10th Cir. 2004).
3. FOIA Claim Against the American Red Cross
Hunter Mathis claims to have “donated over a billion dollars” to the American Red
Cross. 3d Am. Compl. ¶ 30. Despite such generosity, the American Red Cross allegedly
“refused plaintiff[’s] request for information” about his contributions. Id. A threshold issue the
Court must resolve to address this claim is whether the American Red Cross is an “agency” for
the purpose of FOIA. Although the D.C. Circuit has not addressed the issue, the Ninth Circuit
concluded in Irwin Memorial Blood Bank of S.F. Med. Soc’y v. Am. Nat’l Red Cross, 640 F.2d
1051 (9th Cir. 1981) that it is not. See id. at 1052, 1057. The Court finds that opinion persuasive
and similarly concludes that the American Red Cross is not an “agency” for FOIA purposes.
Thus, the Court dismisses Hunter Mathis’s FOIA claim against the American Red Cross. 2
B. Defendants’ Motion for Summary Judgment
Hunter Mathis’s FOIA claims that survive Defendants’ motion to dismiss are directed
at: (1) IRS, DoD, SEC, and SSA; and (2) the FBI. The Court considers each in turn and
concludes that summary judgment must be granted in favor of each Defendant.
1. Legal Standard
Under Federal Rule of Civil Procedure 56, a court must grant summary judgment “if the
movant shows that there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “Summary judgment is appropriately
granted when, viewing the evidence in the light most favorable to the non-movants and drawing
2
The Court further notes that Hunter Mathis did not provide proof that he properly served the
American Red Cross in this matter. See Fed. R. Civ. P 4(m).
4
all reasonable inferences accordingly, no reasonable jury could reach a verdict in their favor.”
Lopez v. Council on Am.-Islamic Relations Action Network, Inc., 826 F.3d 492, 496 (D.C.
Cir. 2016).
“[T]he vast majority of FOIA cases can be resolved on summary judgment . . . .”
Brayton v. Office of U.S. Trade Rep., 641 F.3d 521, 527 (D.C. Cir. 2011). In FOIA cases, “to
obtain summary judgment the agency must show that it made a good faith effort to conduct a
search for the requested records, using methods which can be reasonably expected to produce the
information requested.” Mobley v. CIA, 806 F.3d 568, 580 (D.C. Cir. 2015) (quoting Oglesby v.
U.S. Dep’t of Army, 920 F.2d 57, 68 (D.C. Cir. 1990)). “The court may rely on a ‘reasonably
detailed affidavit, setting forth the search terms and the type of search performed, and averring
that all files likely to contain responsive materials (if such records exist) were searched.’” Id. at
580-81 (quoting Oglesby, 920 F.2d at 68). The Court may grant summary judgment “on the
basis of agency affidavits if they contain reasonable specificity of detail rather than merely
conclusory statements, and if they are not called into question by contradictory evidence in the
record or by evidence of agency bad faith.” Judicial Watch, Inc. v. DOJ, 319 F. Supp. 3d 431,
437 (D.D.C. 2018) (quoting Judicial Watch, Inc. v. U.S. Secret Serv., 726 F.3d 208, 215 (D.C.
Cir. 2013)).
“To successfully challenge an agency’s showing that it complied with the FOIA, the
plaintiff must come forward with ‘specific facts’ demonstrating that there is a genuine issue with
respect to whether the agency has improperly withheld extant agency records.” Span v. DOJ,
696 F. Supp. 2d 113, 119 (D.D.C. 2010) (quoting DOJ v. Tax Analysts, 492 U.S. 136, 142
(1989)). Hunter Mathis has not done so here. Rather, his opposition to Defendants’ Motion
largely reiterates the allegations of his complaint, see, e.g., Pl.’s 2d Opp’n ¶¶ 7, 16-20, 23, and
5
opposes summary judgment without legal or factual support of any kind, see, e.g., id. ¶¶ 13-14.
In these circumstances, because Hunter Mathis has not opposed Defendants’ factual assertions,
the Court accepts them as unchallenged, see MacLeod v. DHS, No. 15-cv-1792, 2017 WL
4220398, at *9 (D.D.C. Sept. 21, 2017) (citing Fed. R. Civ. P. 56(e)(2)), “but it must address
[Defendants’] legal arguments on their merits,” King v. DOJ, 245 F. Supp. 3d 153, 158 (D.D.C.
2017) (citing Winston & Strawn, LLP v. McLean, 843 F.3d 503, 508 (D.C. Cir. 2016)).
2. Submissions to IRS, DoD, SEC, and SSA
FOIA requires a covered agency to “make . . . records promptly available to any person”
who submits a “request for records which (i) reasonably describes such records and (ii) is made
in accordance with published rules stating the time, place, fees (if any), and procedures to be
followed[.]” 5 U.S.C. § 552(a)(3)(A). “An agency’s disclosure obligations are not triggered,
however, until it has received a proper FOIA request in compliance with its published
regulations.” Antonelli v. Fed. Bureau of Prisons, 591 F. Supp. 2d 15, 26 (D.D.C. 2008). “[I]t is
well established that a requester’s ‘failure to comply with [such] FOIA regulations is the
equivalent of a failure to exhaust[.]’” MacLeod, 2017 WL 4220398, at *6 (alterations after first
in original) (quoting West v. Jackson, 448 F. Supp. 2d 207, 211 (D.D.C. 2006)). “Exhaustion of
administrative remedies is generally required before seeking judicial review” under FOIA.
Wilbur v. CIA, 355 F.3d 675, 677 (D.C. Cir. 2004) (per curiam). Defendants move for summary
judgment in part on the ground that Hunter Mathis failed to submit proper FOIA requests to
which IRS, DoD, SEC, and SSA were obligated to respond. See Defs.’ Br. at 11-16.3 The Court
agrees.
3
Because Defendants rely on materials outside the pleadings to advance these arguments, the
Court evaluates them under the standard for summary judgment. MacLeod, 2017 WL 4220398,
at *6 n.6; Pinson v. DOJ, 70 F. Supp. 3d 199, 203 (D.D.C. 2014).
6
a. Internal Revenue Service
Hunter Mathis alleges that Treasury and IRS “failed [to comply with his] request” about a
“treaty and contract agreement . . . in March of 1996 concerning plaintiff[’s] diplomatic and
prosecutorial immunity for life.” 2d Am. Compl. ¶ 6. Defendants argue that IRS is entitled to
summary judgment because, despite four apparent efforts to do so, Hunter Mathis never
submitted a proper FOIA request. See Defs.’ Br. at 14-16.
IRS regulations require a FOIA requester to “describe the records [he seeks] in
reasonably sufficient detail” so that “IRS employees . . . familiar with the subject matter of the
request [might] locate the records without placing an unreasonable burden upon the IRS.” 26
C.F.R. § 601.702(c)(5)(i); see 26 C.F.R. § 601.702(c)(4)(D). Generally, the requester satisfies
this requirement “if [he] gives [his] name, taxpayer identification number (e.g., social security
number [(“SSN”)] or employer identification number), subject matter, location, and years at
issue, of the requested records.” 26 C.F.R. § 601.702(c)(5)(i). If IRS determines that the
description of records is not sufficient, the requester must “be afforded an opportunity to refine
the request.” Id. If IRS determines that a request does not comply with its regulations, its staff
must “promptly advise the requester in what respect the request . . . is deficient so that it may be
resubmitted or amended.” 26 C.F.R. § 601.702(c)(1)(i). Separate regulations apply to requests
for tax returns. For example, “[w]ritten requests for a copy of a tax return and attachments or a
transcript of a tax return” must be made using “IRS form 4506, ‘Request for Copy or Transcript
of Tax Form.’” 26 C.F.R. § 601.702(d)(1). IRS processes only those requests which fully
comply with IRS regulations. 26 C.F.R. § 601.702(c)(4)(i).
Hunter Mathis’s first submission to IRS was a request for “[c]omplete discloser [sic] of
[his] financial records from 1983 to 2003 sent to [him] free of charge[.]” ECF No. 28-9
7
(“Valvardi Decl.”) ¶ 9; id., Ex. 1 at 1. IRS deemed Hunter Mathis’s request “imperfect” because
it did not bear his signature or a notary seal, his SSN was incomplete, and he did not agree to pay
the fees associated with his request. See id. ¶¶ 10-12; id., Ex. 5. IRS responded with instructions
informing Hunter Mathis that he needed to describe the records he sought in reasonably
sufficient detail, establish his identity, sign his request, provide his full SSN, and agree to pay
fees (or to request a waiver of fees). Id. ¶ 13; see id., Ex. 6.
Hunter Mathis’s second submission also sought “complete disclosure of [his] financial
records from 1983 to 2003.” Id. ¶ 15; id., Ex. 2 at 1. It was an improvement over the first,
because it bore his signature, included his SSN, and requested a waiver of fees. See id. ¶¶ 16-17;
id., Ex. 2 at 1. But IRS deemed the request “too broadly scoped to allow for a reasonable
search.” Id. ¶ 18; id., Ex. 7. In its view, “tax records could be considered financial records,” id.
¶ 18, but it was not entirely clear whether Hunter Mathis sought tax records. IRS therefore
“could not determine what document, if any, would be responsive,” id. ¶ 20, and under these
circumstances it concluded that its staff “would be unable to perform a search,” id. (internal
quotation marks omitted). IRS notified Hunter Mathis in writing of its decision, and specifically
told him that if he were requesting tax returns, such a request would not be processed under
FOIA. See id., Ex. 8. Rather, pursuant to 26 C.F.R. § 601.702(d), IRS instructed him to do so
“through routine agency procedures using Form 4506.” Valvardi Decl., Ex. 8.
IRS staff considered Hunter Mathis’s third submission, see id., Ex. 3, a duplicate of his
second submission, see id., Ex 9. Thus, for the same reasons specified above, IRS concluded
that this submission “was not a valid request” because it failed to comply with Treasury
regulations. Id. ¶ 29. Aside from sending Hunter Mathis a written acknowledgement of having
received the third submission, see id. ¶¶ 27-28; id., Ex. 10, IRS took no further action.
8
Hunter Mathis’s fourth submission, see id., Ex. 4, requested IRS to send him a copy of
Form 4506-T at his address in prison. Id. ¶ 30. As explained above, such a form allows a
requester to seek tax return information, see id. ¶ 20, and IRS staff understood this to be a
response to the instructions IRS had sent him following his second submission, see id., Ex. 11.
IRS sent Hunter Mathis the form, id. ¶ 34, and again instructed him to follow the procedures set
forth in 26 C.F.R. § 601.702(d), see Valvardi Decl., Ex. 8. But it does not appear that IRS has
any record of receiving the form, and Hunter Mathis does not allege that he sent it. See Defs.’
Br. at 16; 2d Am. Compl.
The Court concludes that none of Hunter Mathis’s four submissions to IRS was a proper
FOIA request. “[O]nly requests for records which fully comply with the [regulations] can be
processed . . . .” 26 C.F.R. § 601.702(c)(4)(i). As IRS asserts, the first three submissions were
deficient, principally because none “[r]easonably describe[d] the records [sought].” 26 C.F.R.
§ 601.702(c)(4)(i)(D). Moreover, IRS otherwise complied with its regulations by notifying
Hunter Mathis “promptly in writing of any requirements which [had] not been met or any
additional requirements to be met.” 26 C.F.R. § 601.702(c)(4)(i). Finally, IRS reasonably
construed Hunter Mathis’s fourth submission as a request for a copy of Form 4506-T. The Court
cannot conclude that IRS ran afoul of FOIA merely because it instructed Hunter Mathis to follow
the routine agency procedures to request tax returns, set forth in 26 C.F.R. § 601.702(d).
Therefore, IRS is entitled to summary judgment.
b. Department of Defense
According to Hunter Mathis, DoD refused to disclose an “agreement made between the
two parties in April of 1996 granting [him] diplomatic and prosecutorial immunity for life.” 2d
9
Am. Compl. ¶ 7. DoD also allegedly “failed to answer any of [Hunter Mathis’s] direct request[s]
or to verify [his] military history[.]” Id. ¶ 11.
According to DoD, Hunter Mathis did not submit a valid FOIA request to the agency.
ECF No. 28-7 (“Carr Decl.”) ¶¶ 10-13. DoD determined that the Office of the Secretary of
Defense (“OSD”) and Office of the Chairman of the Joint Chiefs of Staff (“JS”) were the places
most likely to have received a FOIA request from Hunter Mathis. Id. ¶ 10. A search of the
OSD/JS FOIA database using “Mathis,” “Hunter,” “Eric,” “Jerome,” and “Hunter-Mathis” as
search terms, id. ¶ 12, yielded no results, id. ¶ 13. Thus, DoD concluded that it had “no record of
having received any requests from [him].” Id.
In a circumstance “like this one—‘where agencies allege that they were unable to find . . .
plaintiffs’ requests for information’—the ‘agencies must demonstrate that they conducted
searches reasonably calculated’ to locate the request or any evidence that it was received.”
Burke v. DOJ, 298 F. Supp. 3d 119, 122 (D.D.C. 2018) (quoting Walsh v. FBI, 905 F. Supp. 2d
80, 84 (D.D.C. 2012)), aff’d, No. 12-5386, 2015 WL 1606659 (D.C. Cir. Mar. 9, 2015). Here,
DoD has adequately demonstrated that it conducted a reasonable search for a FOIA request from
Hunter Mathis, and that it did not find one. Therefore, it incurred no obligation to produce
documents under FOIA, and the Court will grant summary judgment in favor of DoD.
c. Securities and Exchange Commission
Hunter Mathis alleges that the SEC refused his attempts “to obtain documentation of
securities, bonds, contracts, licenses or corporate affiliation[s] held by” him. 3d Am. Compl.
¶ 27. SEC identified three databases where a request from Hunter Mathis likely would have
been found. ECF No. 28-5 (“Livornese Decl.”) ¶¶ 2, 4. It searched the Electronic Freedom of
Information Act Processing System as well as the “Tips, Complaints, and Referrals” database
10
using Hunter Mathis’s last name. See id. ¶¶ 2-4; ECF No. 28-4 (“Walker Decl.”) ¶¶ 2-3. The
searches yielded no results. Livornese Decl. ¶¶ 3-4; Walker Decl. ¶¶ 2-3. But a search of a third
database, the Investor Response Information System, located two inquiries Hunter Mathis made
to SEC’s Office of Investor Education and Advocacy (“OIEA”). See ECF No. 28-6 (“Greene
Decl.”) ¶¶ 2-3.
Hunter Mathis’s first inquiry pertained to bank accounts he purportedly held. See
Greene Decl. at 3-8, 12 (page numbers designated by ECF). Hunter Mathis reported to SEC that
he had sent what he described as “FOIA requests” to two banks, the Five Star Credit Union and
the First National Bank of Grady County, asking that each provide him with “[d]ocumentation of
any deposited funds.” Id. at 5, 7. SEC responded, explaining to Hunter Mathis that it had no
jurisdiction over the banks, and suggested that he direct his “concerns to the appropriate banking
regulator.” Id. at 12. Hunter Mathis’s second query pertained to his alleged efforts to redeem
Treasury bonds. Id. at 11. Through it, he asked for information about “how to go about
liquidation [sic] some of [his] bonds[.]” See id. But redemption of Treasury Bonds “is not under
the SEC’s jurisdiction,” and OIEA referred Hunter Mathis to Treasury. Id. at 13.
SEC moves for summary judgment on the ground that it performed an adequate search
which did not locate a proper FOIA request from Hunter Mathis. See Defs.’ Br. at 11-13.
The Court agrees. SEC searched three different databases, including the agency’s FOIA
processing system, and did not locate any such request. Moreover, neither of Hunter Mathis’s
two inquires that were located are properly characterized as FOIA requests. Neither, for
example, sought SEC “agency records” under FOIA. Judicial Watch, Inc. v. U.S. Secret Serv.,
726 F.3d 208, 215-16 (D.C. Cir. 2013). And an unrebutted assertion that an agency does not
maintain records of the type that would be responsive to an inquiry provides an adequate basis
11
for summary judgment, since “[i]t is clear beyond cavil that an agency cannot improperly
withhold records that it does not maintain.” MacLeod, 2017 WL 4220398, at *11.
d. Social Security Administration
Hunter Mathis alleges that SSA “refused [his] numerous request[s] for employment,
account, payment or any history associated with [his] name and social security number,” 3d Am.
Compl. ¶ 19, and “refused to disclose to [him] any of his social security history, [i.e.,] money
paid in or money paid out,” id. ¶ 29.
Ordinarily, SSA “need[s] the person’s full name, date of birth, and SSN” in order to
locate information about him, “such as earnings or benefit information.” ECF No. 28-8 (“Chyn
Decl.”) ¶ 5; 20 C.F.R. § 404.810(b). In this case, Hunter Mathis provided only his name; SSA
had no other identifying information for him. Chyn Decl. ¶ 5. Without more information about
him, SSA’s Division of Earnings and Business Services could not search its records at all. Id.
¶¶ 6-8. It searched its eFOIA database, which “stores requests by the requesters’ names,” id.
¶ 10, but even after using Hunter Mathis’s last name and several variations of his full name as
search terms, SSA “did not locate any requests” from him. Id.
As such, SSA has adequately demonstrated that it conducted a reasonable search for a
FOIA request from Hunter Mathis under FOIA and found none. It, too, is entitled to summary
judgment because it has demonstrated that Hunter Mathis did not submit a proper FOIA request.
See Hand v. U.S. Dep’t of Labor, No. 16-cv-953, 2018 WL 2561038, at *2 (D.D.C. Apr. 10,
2018); Thomas v. FCC, 534 F. Supp. 2d 144, 146 (D.D.C. 2008).
3. FOIA Requests to the Federal Bureau of Investigation
Unlike Hunter Mathis’s claims against IRS, DoD, SEC, and SSA, the parties agree that
Hunter Mathis submitted two proper FOIA requests to the FBI. See Compl. ¶¶ 7-9, 13; Defs.’
12
Br. at 5-6. In response to these requests, the FBI conducted three searches and was unable to
find any responsive records. ECF No. 28-3 (“Hardy Decl.”) ¶¶ 5-10, 25, Ex. D at 1, Ex. F at 1.
Hunter Mathis’s various complaints do not specifically allege that the FBI’s searches were
inadequate, but his opposition to the Motion appears to do so, insofar as it argues that the FBI
“continues to rely upon David M. Hardy’s outdated [G]oogle search dated and done before
[Hunter Mathis] filed leave to amend and gave support of why said info may not be located in
David M. Hardy’s search and where support of said information would be located within thier
[sic] ranks.” Pl.’s 2d Opp’n ¶¶ 9-10; see also id. ¶ 25. For the reasons set forth below, the Court
concludes that the FBI’s search was adequate, and therefore will grant summary judgment on its
behalf.
On or about January 1, 2016, Hunter Mathis submitted a FOIA request to the FBI for the
following information:
[A] full & complete investigation on my (Escrow account), through
and by my Social Security No. [redacted], this specific account was
established through (I.B.M[.]), and [I’m] trying to obtain my
property, and verification of all my lost documentation.
Hardy Decl., Ex. A; see id. ¶ 5 n.1; Compl. ¶ 8. Subsequently, he provided his address, date of
birth, place of birth, and Social Security number to the FBI. Hardy Decl. ¶ 7; see id., Ex. C at 1.
On or about March 1, 2016, id. ¶ 9, Hunter Mathis submitted a second FOIA request to
the FBI, this one seeking “the full disposition on why [his] accounts were federally frozen . . . by
[a] Regional Agent from Albany, Georgia . . . but never remitted, prosecuted[,] resolved [or]
disposed of,” id., Ex. E.
The FBI’s Central Records System (“CRS”) “is an extensive system of records consisting
of applicant, investigative, intelligence, personnel, administrative, and general files compiled and
maintained by the FBI in the course of fulfilling its integrated missions and functions.” Hardy
13
Decl. ¶ 15. According to the FBI’s declarant, agency staff conducted three sets of searches in
CRS for records responsive to Hunter Mathis’s FOIA requests. On March 8, 2016, FBI staff
“conducted a CRS index search for responsive main file records,” id. ¶ 23, meaning an index
search for records carrying the name of an individual or other designated subject of a file, id.
¶ 17(a). FBI staff used “four variations of [his] name”—“Eric Jerome Hunter Mathis,” “Eric
Jerome Mathis,” “Eric Hunter Mathis,” and “Eric Jerome Hunter”—in order to identify files both
responsive to his request and subject to FOIA. Id. ¶ 23. Moreover, the search function
employed by FBI staff also used “a three-way phonetic breakdown of [each of these] names” as
additional search terms. Id. In addition, FBI staff used Hunter Mathis’s date of birth and SSN
“to facilitate the identification of responsive records.” Id. The FBI did not locate any responsive
records. Id.
After receiving the second FOIA request, staff conducted another CRS search, both to
confirm the results of the first search and to identify any potentially responsive cross-reference
records, id. ¶ 24, meaning records that merely mention or reference an individual whose
information is contained in separate “main” file, id. ¶ 17(b). The FBI “located no responsive
records (either main files or cross-reference records) with this additional search.” Id. ¶ 24.
After receiving notice of this lawsuit, the FBI staff conducted a third CRS search, both
“verifying [the] previous search results [and] seeking potentially responsive main files and cross-
reference records.” Id. ¶ 25. This, too, was a “three-way phonetic search,” and it used nine
variations of Hunter Mathis’s name as search terms. Id. No responsive records were found. Id. 4
4
The FBI also informed Hunter Mathis that it could neither confirm nor deny the existence of
records “tend[ing] to indicate whether [he] is or ever was on any government terrorist watch
list.” Hardy Decl. ¶ 8. Hunter Mathis denies any interest in any individual’s placement on a
watch list, see Pl.’s 2d Opp’n ¶ 26, and so the Court need not address this matter further. See
14
“[T]o obtain summary judgment the agency must show that it made a good faith effort to
conduct a search for the requested records, using methods which can be reasonably expected to
produce the information requested.” Mobley, 806 F.3d at 580 (quoting Oglesby, 920 F.2d at 68).
“The Court applies a ‘reasonableness’ test to determine the ‘adequacy’ of a search methodology,
consistent with congressional intent tilting the scale in favor of disclosure.” Campbell v. DOJ,
164 F.3d 20, 27 (D.C. Cir. 1998) (citation omitted) (quoting Weisberg v. DOJ, 705 F.2d 1344,
1351 (D.C. Cir. 1983)). “[T]he issue to be resolved is not whether there might exist any other
documents possibly responsive to the request, but rather whether the search for those documents
was adequate.” Weisberg v. DOJ, 745 F.2d 1476, 1485 (D.C. Cir. 1984) (emphasis omitted).
The Court may grant summary judgment “on the basis of agency affidavits if they contain
reasonable specificity of detail rather than merely conclusory statements, and if they are not
called into question by contradictory evidence in the record or by evidence of agency bad faith.”
Judicial Watch, 319 F. Supp. 3d at 437 (quoting Judicial Watch, 726 F.3d at 215). Agency
affidavits are “accorded ‘a presumption of good faith, which cannot be rebutted by purely
speculative claims about the existence and discoverability of other documents.’” Citizens for
Responsibility & Ethics in Wash. v. DOJ, 535 F. Supp. 2d 157, 161 (D.D.C. 2008) (quoting
SafeCard Services v. SEC, 926 F.2d 1197, 1200 (D.C. Cir. 1991)).
Here, Defendants argue that summary judgment in the FBI’s favor is warranted because it
conducted searches reasonably calculated to locate records responsive to Hunter Mathis’s FOIA
requests. See Defs.’ Br. at 7-8. Hunter Mathis alleges that the FBI denied his FOIA requests
Donoghue v. Office of Info. Policy, DOJ, 157 F. Supp. 3d 21, 25 n.3 (D.D.C. 2016) (declining to
address the FBI’s reliance on Exemption 7(E) where the requester “did not seek information as
to the existence of his name on a watch list . . . or request information about investigative
techniques or methods”); Ryan v. FBI, 113 F. Supp. 3d 356, 363 n.5 (D.D.C. 2015).
15
improperly, but he does not point to any facts to support his argument. See Compl. ¶¶ 7-9; Am.
Compl. ¶ 12. Indeed, both of his oppositions are largely unintelligible, Pl.’s 1st Opp’n; Pl.’s 2d
Opp’n, and the only specific challenge he makes to the FBI’s responses to his inquiries is that
they were allegedly based on outdated internet searches. Pl.’s 2d Opp’n ¶¶ 9-10, 25.
The Court concludes that the FBI is entitled to summary judgment because it conducted
an adequate search. According to David Hardy, the Section Chief of the Record/Information
Dissemination Section, “given [Hunter Mathis’s] request[,] . . . such information would
reasonably be expected to be located in the CRS.” Hardy Decl. ¶¶ 1, 26. In fact, Hardy declared
that CRS is “the only record system where records about [Hunter Mathis] would likely be
maintained, based on the information [he] provided.” Id. ¶ 26. The FBI searched that database
three separate times for variations on Hunter Mathis’s name, DOB, and SSN, and did not find
any records. Id. ¶¶ 23-26. The Court notes that this is not entirely surprising, given that Hunter
Mathis is apparently incarcerated in state prison, Compl. ¶ 3, and nowhere does he allege that he
was ever the subject of a federal investigation or prosecution. And Hardy’s declaration belies
Hunter Mathis’s unsupported assertion that the agency relied on outdated internet searches to
fulfill its FOIA obligations. Thus, the Court concludes that the FBI has met its burden under
FOIA, and summary judgment in its favor is warranted. 5
III. Conclusion
For the reasons explained above, the Court will dismiss Hunter Mathis’s constitutional
claims, as well as his claims against the United States District Court for the Middle District of
5
While Defendants’ Motion was pending, Hunter Mathis also filed a Motion for Summary
Judgment. See ECF No. 37. But his motion simply reiterates the allegations in his various
complaints. As such, and for the reasons set forth in this Opinion, he has failed to identify a
genuine issue of material fact that precludes granting summary judgment for Defendants. See
Fed. R. Civ. P. 56(a). Thus, Hunter Mathis’s motion will be denied.
16
Georgia and the American Red Cross. The Court will also grant summary judgment in favor of
IRS, DOD, SEC, SSA, and the FBI, and deny Hunter Mathis’s motion for summary judgment in
its entirety. A separate Order will issue.
/s/ Timothy J. Kelly
TIMOTHY J. KELLY
United States District Judge
Date: September 27, 2018
17
| {
"pile_set_name": "FreeLaw"
} |
255 B.R. 402 (2000)
In re Richard Etter BISSELL, Debtor.
No. 00-12185-RGM.
United States Bankruptcy Court, E.D. Virginia, Alexandria Division.
November 22, 2000.
*403 *404 Donald F. King, Odin, Feldman & Pittleman, P.C., Fairfax, VA, for Global Advanced Technologies, Inc.
Thomas P. Gorman, Tyler, Bartl, Burke & Gorman, P.L.C., Alexandria, VA, for Debtor.
MEMORANDUM OPINION
ROBERT G. MAYER, Bankruptcy Judge.
The court is called upon to determine the manner in which the exemption of retirement plans is computed under Section 34-34 of the Code of Virginia where a debtor has an interest in an Individual Retirement Account ("IRA"), a Simplified Employer Plan ("SEP")[1] and a pension *405 plan that satisfies the requirements of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq.
The Debtor's Position
The debtor asserts that the maximum exemption allowable under § 34-34 of the Code of Virginia[2] for the IRA and SEP is computed without regard to the ERISA-qualified pension plan. He aggregates the value of the IRA and the SEP and applies the maximum allowable exemption, $52,955.00, against this amount. He acknowledges that since the IRA and SEP have a total value of $71,538.52, the excess over the maximum allowable exemption of the IRA and SEP, $18,583.52, is not exempt under § 34-34.[3] The ERISA-qualified pension plan does not form a part of the computation because it, unlike the IRA and SEP, is not property of the estate. Patterson v. Shumate, 504 U.S. 753, 760, 112 S.Ct. 2242, 2248, 119 L.Ed.2d 519 (1992); 11 U.S.C. § 541(c).
The Creditor's Position
The creditor asserts that the value of the ERISA-qualified pension plan[4] must first be applied to the $52,955.00 amount exempt under § 34-34. Since the ERISA-qualified pension plan has a value of $363,915.13, this method of computing the allowable exemption would exhaust the $52,955.00 exemption allowed under § 34-34. There would be no exemption remaining available for the IRA or the SEP and the full value of the two accounts, $71,538.52, would be turned over to the trustee. The creditor acknowledges that the pension plan is not property of the bankruptcy estate and, therefore, cannot be reached by the trustee. Patterson v. Shumate, 504 U.S. at 760, 112 S.Ct. at 2248.
*406 The creditor's interpretation of § 34-34 rests on two propositions. The first proposition is that an ERISA-qualified pension plan is a "retirement plan" under § 34-34. The creditor points to the statutory definition of "retirement plan." Va.Code Ann. § 34-34(A). The second proposition is that an ERISA-qualified pension plan that is excluded from property of the estate by 11 U.S.C. § 541(c)(2) is nonetheless claimed exempt under § 34-34. These two propositions lead to the creditor's conclusion that the value of the ERISA-qualified pension plan must be deducted from the exemption otherwise allowed by § 34-34 for an IRA or SEP.
The creditor's interpretation of § 34-34 is contrary to the commonly accepted practice. Statewide continuing legal education seminars treat ERISA-qualified pension plans and IRAs separately, the former under 11 U.S.C. § 541(c) and the latter under § 34-34.[5] Debtors routinely compute the exemption under § 34-34 without regard to the amount of any ERISA-qualified pension plan which is excluded from the bankruptcy estate by virtue of § 541(c)(2). Historically, neither chapter 7 trustees nor creditors objected to this method of calculation.[6] Of course, a common practice does not mean that the practice is correct or that it is immune from challenge. See, e.g., In re Heath, 101 B.R. 469, 471 (Bankr. W.D.Va., 1987). The creditor's position recently received judicial support in In re Gurry, 253 B.R. 406 (Bankr.E.D.Va., 2000).
Federal Preemption
The statutory definition of "retirement plan" under § 34-34 appears, at first blush, to include an ERISA-qualified pension plan. The statutory definition is:
"Retirement plan" means a plan, account, or arrangement that is intended to satisfy the requirements of United States Internal Revenue Code §§ 401, 403(a), 403(b), 408, 408A, 409 (as in effect prior to repeal by United States P.L. 98-369) or § 457. Whether a plan, account, or arrangement is intended to satisfy the requirements of one of the foregoing provisions shall be determined based on all of the relevant facts and circumstances including, but not limited to, the issuance of a favorable determination letter by the United States Internal Revenue Service, reports or returns filed with the United States or state agencies, and communications from the plan sponsor to participants.
Va.Code Ann. § 34-34(A).[7] However, the matter is not that simple. The effect of federal preemption of pension plans by ERISA must be considered. See 29 U.S.C. § 1144(a). Federal preemption in this area is pervasive. ERISA totally occupies the field. Section 1144(a) states:
Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter *407 shall supersede . . . any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title.
See Metropolitan Life Ins. Co. v. Mass., 471 U.S. 724, 739, 105 S.Ct. 2380, 2389, 85 L.Ed.2d 728 (1985); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983) ("A law `relates to' an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan."); Powell v. Chesapeake and Potomac Tel. Co. of Va., 780 F.2d 419, 421 (4th Cir., 1985); In re Hanes, 162 B.R. 733, 741 (Bankr.E.D.Va., 1994).
Preemption is so pervasive that state statutes consistent with ERISA but which provide additional protections for workers are preempted. The additional protections are invalidated. New York's Human Rights Law is an example. N.Y. WORK. COMP. LAW § 200-242 (McKinney 1965 and Supp.1982-83). It was "a comprehensive anti-discrimination statute prohibiting, among other practices, employment discrimination" on the basis of gender. Shaw, 463 U.S. at 88, 103 S.Ct. at 2895. The New York statute prohibited an employer from maintaining an employee benefit plan that treated pregnancy differently from other non-occupational disabilities. It "had a reach broader than Title VII." Shaw, 463 U.S. at 89, 103 S.Ct. at 2896.[8] Relying on ERISA's preemption provision, the Supreme Court held that the provisions of New York's Human Rights Law relating to health care coverage of pregnancy were preempted.[9] The additional protection was not effective. In reaching this conclusion, the Supreme Court held that federal preemption by ERISA is not limited to state laws specifically designed to affect employee benefit plans or to state laws dealing only with subject matters covered by ERISA, but includes all state statutes that refer to or affect an ERISA-qualified benefit plan. Shaw, 463 U.S. at 98, 103 S.Ct. at 2900. Preemption encourages employee benefit plans by eliminating a myriad of state and local regulations each with a different scope and all containing potentially conflicting and inconsistent requirements.
A preemption case of particular interest in this case is Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 108 S.Ct. 2182, 100 L.Ed.2d 836 (1988). Georgia enacted a law that prohibited garnishment of employee welfare benefit plans. ERISA treats welfare benefit plans and pension benefit plans differently. Only pension plans are required to contain nonalienability clauses; welfare benefit plans are not. The Supreme Court held that because ERISA occupies the field, the Georgia statute prohibiting garnishment of employee welfare plans was preempted and fully displaced even though it furthered the purposes of ERISA by providing additional protections for workers. The effect of preemption was to permit creditors to garnish employee welfare plans.
In light of the pervasive preemption of ERISA, and particularly in light of Mackey, it is clear that the Virginia General Assembly can pass no law that would affect in any way the ability to garnish an ERISA-qualified pension plan. It can neither permit creditors to recover from an ERISA-qualified pension plan nor add protections *408 for debtors not contained in ERISA, such as limiting the enforceability of qualified domestic relations orders against pension plans.
The definition of "retirement plan" in § 34-34(A) must either include ERISA-qualified pension plans or exclude them. If they are included within the definition, the statute would "relate to" ERISA-qualified pension plans and federal preemption must be considered. The effect of preemption may be harsher than expected. Section 34-34 could be preempted in its entirety, leaving no IRA exemption. It is, therefore, necessary to construe § 34-34 to determine whether ERISA-qualified pension plans are included within the statutory definition of "retirement plans" and, if so, the effect of federal preemption; or, whether ERISA-qualified pension plans are excluded from the statutory definition.
Virginia Rules of Statutory Construction
When an issue of state law has not previously been determined by the state's highest court, as is the situation in this case, a federal court seeks to anticipate how the state's highest court would interpret the statute if it were confronted with it. See Commissioner of Internal Revenue v. Estate of Bosch, 387 U.S. 456, 465, 87 S.Ct. 1776, 1782-83, 18 L.Ed.2d 886 (1967) (Where "the underlying substantive rule involved is based on state law . . . the State's highest court is the best authority on its own law. If there be no decision by that court then federal authorities must apply what they find to be the state law after giving `proper regard' to relevant rulings of other courts of the State. In this respect, it may be said to be, in effect, sitting as a state court."); Food Lion, Inc. v. Capital Cities/ABC, Inc., 194 F.3d 505, 512 (4th Cir., 1999). It should use the resources available to the state court and the state's rules of statutory construction. Wells v. Liddy, 186 F.3d 505, 528 (4th Cir., 1999); Phillips v. Chandler, 215 B.R. 684, 688 (E.D.Va., 1997); 17 MOORE'S FEDERAL PRACTICE § 124.22[6] (3rd ed., 2000). Here, the creditor relies on the plain meaning of the words used in § 34-34. The "plain meaning" rule, though, is but one rule of statutory construction. The Virginia Supreme Court reviewed its rules of statutory construction in Virginia Soc'y for Human Life, Inc. v. Caldwell, 256 Va. 151, 500 S.E.2d 814 (1998). It said:
The rules of statutory construction pertinent to our analysis here are firmly settled. Principal among these rules is that we determine, and adhere to, the intent of the legislature reflected in or by the statute being construed. As an initial and primary proposition, that intent is to be determined by the words in the statute. See Marsh v. City of Richmond, 234 Va. 4, 11, 360 S.E.2d 163, 167 (1987). Where the words used in the statute are not sufficiently explicit, we may determine the intent of the legislature `from the occasion and necessity of the statute being passed [or amended]; from a comparison of its several parts and of other acts in para materia; and sometimes from extraneous circumstances which may throw light on the subject.' Richmond v. Sutherland, 114 Va. 688, 691, 77 S.E. 470, 471 (1913).
Additionally, when, as here, the constitutionality of a statute is challenged, our determination of legislative intent is guided by the recognition that `[a]ll actions of the General Assembly are presumed to be constitutional.' Hess v. Snyder Hunt Corp., 240 Va. 49, 52, 392 S.E.2d 817, 820 (1990). Thus, `a statute will be construed in such a manner as to avoid a constitutional question whenever this is possible.' Eaton v. Davis, 176 Va. 330, 339, 10 S.E.2d 893, 897 (1940); see also Jacobs v. Meade, 227 Va. 284, 287, 315 S.E.2d 383, 385 (1984). In this context, we will narrowly construe a statute where such a construction is reasonable and avoids a constitutional infirmity. Pedersen v. City of Richmond, 219 Va. 1061, 1065, 254 S.E.2d 95, 98 (1979).
*409 Virginia Soc'y, 256 Va. at 156-57, 500 S.E.2d at 816-17. Contrary to other rules of construction, in Virginia, an ambiguity in the language of the statute in question is not a necessary prerequisite for resorting to extrinsic aids in construction of the statute when only a narrow construction preserves the validity of the statute. The Virginia Supreme Court stated:
While an ambiguity of language may serve as the basis for rejecting an unconstitutional interpretation of a statute in favor of one that survives constitutional scrutiny, see, e.g., Miller v. Commonwealth, 172 Va. 639, 648, 2 S.E.2d 343, 347 (1939), a finding of ambiguity is not a prerequisite for applying a narrowing construction to preserve a statute's constitutionality. To the contrary, we may construe the plain language of a statute to have limited application if such a construction will tailor the statute to a constitutional fit. Gooding v. Wilson, 405 U.S. 518, 520, 92 S.Ct. 1103, 31 L.Ed.2d 408 (1972).
Virginia Soc'y, 256 Va. at 157 n. 3, 500 S.E.2d at 817 n. 3. See also United States v. Powers, 307 U.S. 214, 217, 59 S.Ct. 805, 807, 83 L.Ed. 1245 (1939); Bird v. United States, 187 U.S. 118, 124, 23 S.Ct. 42, 44, 47 L.Ed. 100 (1902) ("There is a presumption against a construction which would render a statute ineffective or inefficient."); Earley v. Landsidle, 257 Va. 365, 369, 514 S.E.2d 153, 155 (1999) ("The legislature's intent must be determined from the words used, unless a literal construction of the statute would yield an absurd result.") This is different from the rule that prevails in interpreting contracts where an ambiguity is a prerequisite to resorting to extrinsic evidence of the parties' intent. Great Falls Hardware Co. of Reston v. South Lakes Village Center Assocs., L.P., 238 Va. 123, 380 S.E.2d 642 (1989).
A second rule of statutory construction must also be considered: Exemption statutes are liberally construed in favor of debtors. This rule derives from the fundamental purpose of exemptions which is to "protect the helpless and unfortunate debtor from the importunate and incompassionate creditor." Linkenhoker's Heirs v. Detrick, 81 Va. 44 (1885) (homestead exemption). This rule of construction is well rooted in state law. South Hill Prod. Credit Ass'n v. Hudson, 174 Va. 284, 6 S.E.2d 668 (1940) (Poor Debtor's Exemption);[10]Atlantic Life Ins. Co. v. Ring, 167 Va. 121, 187 S.E. 449 (1936) (disability payments under insurance policy); Brown's Committee v. Western State Hosp., 110 Va. 321, 66 S.E. 48 (1909) (exemption of estate of an insane person from sale, levy or charge for his support in a state mental hospital). It has been faithfully followed by the federal courts. In re Nguyen, 211 F.3d 105, 110 (4th Cir., 2000); Tignor v. Parkinson, 729 F.2d 977, 981 (4th Cir., 1984); Cheeseman v. Nachman, 656 F.2d 60, 63 (4th Cir., 1981); In re Heidel, 215 B.R. 814, 817 (Bankr.E.D.Va., 1997) (Bostetter, C.J.) ("It is settled law that the exemption provisions are to be liberally applied in favor of debtors."); In re Meyer, 211 B.R. 203, 213 (Bankr. E.D.Va., 1997) (Mitchell, J.); In re Hayes, 119 B.R. 86, 88 (Bankr.E.D.Va., 1990) (Shelley, J.); In re Perry, 6 B.R. 263, 264 (Bankr.W.D.Va., 1980). Moreover, exemption statutes are remedial. In re Hasse, 246 B.R. 247, 253-54 (Bankr.E.D.Va., 2000). Remedial statutes must be construed liberally so as to afford all the relief the legislature intended. Virginia Dev. Co. v. Crozer Iron Co., 90 Va. 126, 135, 17 S.E. 806, 809 (1893).
*410 With these principles in mind, and considering the pervasive federal preemption in ERISA matters, it is helpful to examine the legislative history of § 34-34 to determine the General Assembly's intent. Virginia Soc'y, 256 Va. at 157, 500 S.E.2d at 816-17.
Legislative History
Virginia opted out of the federal exemptions provided in § 522(d) as permitted by § 522(b)(1) of the Bankruptcy Code. Simmons v. Peoples Bank of Danville (In re Simmons), 27 B.R. 508, 509 (Bankr. W.D.Va., 1983); In re White, 11 B.R. 775, 776 (Bankr.E.D.Va., 1981); Va.Code Ann. § 34-3.1. Consequently, in Virginia, the exemptions available are those provided by nonbankruptcy law, for example, federal nonbankruptcy law, the laws of Virginia (principally, Title 34 of the Code of Virginia), and as otherwise provided in the Bankruptcy Code. At the time the Virginia General Assembly opted out of the federal exemptions in 1979, there was no systematic statutory scheme of exemptions. There was no Virginia statute exempting private retirement plans nor was there to be for more than ten years. From the effective date of the Bankruptcy Reform Act of 1978 until § 34-34 first became effective on July 1, 1990, exemption of retirement plans was addressed by various federal and state laws that created federal and state retirement systems, ERISA, § 55-19 of the Code of Virginia, and Virginia common law relating to spendthrift trusts.
The Virginia statutory and common law relating to spendthrift trusts was well developed in 1979. Section 55-19 provided that all trust estates were subject to the debts of the beneficiaries unless the trust included the condition that the corpus and income be held for the benefit of the beneficiary without being subject to the liabilities of the beneficiary and without the right of the beneficiary to alienate his interest in the trust. Three further restrictions were also necessary. The trust must have been for the maintenance and support of the beneficiary; the amount exempt from the beneficiary's creditors could not exceed $500,000;[11] and the trust could not "operate to the prejudice of any existing creditor of the creator of such trust." Va.Code Ann. § 55-19. If these requirements were satisfied, the spendthrift provisions would be honored and the trust would be exempt from the beneficiary's creditors. See, e.g., Rountree v. Lane, 155 F.2d 471 (4th Cir., 1946); Allen v. Wilson (In re Wilson), 3 B.R. 439 (Bankr.W.D.Va., 1980); Alderman v. Virginia Trust Co., 181 Va. 497, 25 S.E.2d 333 (1943); Thomas v. House, 145 Va. 742, 134 S.E. 673 (1926).
The restriction that the trust could not "operate to the prejudice of any existing creditor of the creator of such trust" is the "self-settled rule" and has been consistently interpreted by Virginia courts to prevent a self-settled trust from being exempt from the settlor-beneficiary's creditors. A spendthrift trust cannot be created by the beneficiary to shield his own assets from claims of his own creditors.
The self-settled trust rule became a growing concern with the increasing popularity of IRAs. All IRAs are self-settled. Moreover, all IRAs and SEPs permit the beneficiary to withdraw retirement funds at any time.[12] Consequently, neither IRAs nor SEPs are spendthrift trusts and neither is exempt from the claims of the beneficiary's creditors. See Parkinson v. Bradford Trust Co. of Boston (In re O'Brien), 50 B.R. 67, 77 (Bankr.E.D.Va., 1985) (Keogh retirement trust did not *411 qualify as spendthrift trust). More ominously, the bankruptcy status of ERISA-qualified pension plans became uncertain.
ERISA was enacted in 1974 and was clearly intended by Congress to preempt the field. 29 U.S.C. § 1144(a). ERISA requires that all qualified pension plans contain an anti-alienation provision. 29 U.S.C. § 1056(d)(1). See also 26 U.S.C. § 401(a) (tax-exempt status of ERISA-qualified pension plans requires anti-alienation provision). They are clearly beyond the reach of creditors. ERISA's anti-alienation requirement goes beyond § 55-19. Section 55-19 was limited to $500,000 (now $1,000,000). ERISA is not. Section 55-19 is subject to the self-settled trust rule. ERISA is not.
From 1974 until the effective date of the Bankruptcy Reform Act in 1979, ERISA-qualified pension plans were commonly thought to be exempt from creditors' claims both before and after a beneficiary filed a petition in bankruptcy. Turpin v. Wente (In re Turpin), 644 F.2d 472, 474 (5th Cir., 1981); Mason v. Eastman Kodak Co. (In re Parker), 473 F.Supp. 746, 748 (W.D.N.Y., 1979). Initially, the passage of the Bankruptcy Reform Act of 1978 was not thought to alter this result. Clotfelter v. Ciba-Geigy Corp. (In re Threewitt), 24 B.R. 927, 929 (D.Kan., 1982); Warren v. G.M. Scott & Sons (In re Phillips), 34 B.R. 543, 544-45 (Bankr.S.D.Ohio, 1983).
However, this view was not unanimous. Several cases raised questions that threatened the commonly understood exemption of ERISA-qualified plans from the claims of trustees in bankruptcy. See Firestone v. Metropolitan Life Ins. Co. (In re Di Piazza), 29 B.R. 916, 922 (Bankr.N.D.Ill., 1983); Samore v. Graham (In re Graham), 24 B.R. 305, 312 (Bankr.N.D.Iowa, 1982). The new analysis concluded that while ERISA-qualified pension plans were beyond the reach of creditors before bankruptcy, bankruptcy trustees could reach the same ERISA-qualified pension plans when the individual filed a petition in bankruptcy. The proponents argued that the reference in § 541(c)(2) to "applicable nonbankruptcy law" did not include federal law. ERISA was federal law, not "applicable nonbankruptcy law," a term by which the proponents meant "applicable state law." The trustee was, under this argument, able to reach ERISA-qualified plans unless exempt under state law. Therefore, if a state opted out of the federal exemptions in § 522(d), the ERISA anti-alienation provision did not provide the debtor any protection. Thus, a debtor in an opt-out state had less protection in bankruptcy than outside bankruptcy, a result at odds with Congress' clear intention to protect pension plans.
The General Assembly's concerns were not without foundation. In McLean v. Central States, Southeast and Southwest Areas Pension Fund, 762 F.2d 1204 (4th Cir., 1985), the Court of Appeals for the Fourth Circuit was faced with an ERISA-qualified pension plan that had been ordered by a bankruptcy court to pay to the chapter 13 trustee the monthly chapter 13 plan payment. The trustee asserted that § 1325(b)[13] authorized a pay order directed to the pension plan. The pension plan asserted that compliance with such an order would violate the plan's anti-assignment provisions required by 29 U.S.C. § 1056(d)(1) of ERISA and 26 U.S.C. § 401(a) of the Internal Revenue Code, and that the violations would disqualify the pension plan under ERISA and cause it to lose its tax exemption under 26 U.S.C. § 501(a). McLean, 762 F.2d at 1206. The court stated that the dispositive issue was whether "the debtor's interest in the trust fund is property of the bankruptcy estate" under § 541(c)(2). McLean, 762 F.2d at 1206. The court of appeals reversed the bankruptcy court and held that the pension plan was not property of the estate. *412 It did not do so by finding that "applicable nonbankruptcy law" included federal law, that is ERISA, but by finding that the pension plan qualified as a spendthrift trust under Illinois law, the law of the state in which it was organized. McLean, 762 F.2d at 1206. The court of appeals was not forced to face the broader issue of what constitutes "applicable nonbankruptcy law" because a decision on narrower grounds, that applicable state law protected the pension plan, resolved the case before the court. Two things concerned the General Assembly. First, the broader question was left unanswered. This could well indicate that the new trend had some validity. The close factual analysis of the terms of the trust, including the source of the funds and the debtor's control over the pension fund, was unsettling when a broader and simpler holding that all ERISA-qualified retirement funds were exempt in bankruptcy an analysis that does not depend on the factual matters examined in McLean was available. Second, in discussing Illinois law, the court considered the fact that the pension plan was not settled or revocable by a beneficiary and that all contributions were made only by employers. McLean, 762 F.2d at 1207. It concluded that "[p]ublic policy concerns would not therefore prevent enforcement of this restriction under controlling nonbankruptcy state law." Id. at 1207. These factors are also part of the Virginia self-settled trust rule under common law and § 55-19 of the Code of Virginia.
The General Assembly's concerns were heightened in 1988 by the decision of the United States District Court for the Western District of Virginia in Creasy v. Coleman Furniture Corp., 83 B.R. 404 (W.D.Va., 1988). Coleman Furniture Corporation filed a voluntary petition in bankruptcy. The corporation maintained a pension plan that it had the right to terminate. Upon termination, each employee would receive a lump sum distribution with a present value of the life annuity provided under the plan. If the plan were overfunded, that is, if there were any funds remaining after all the beneficiaries received their lump sum distribution, the surplus would revert to the corporation and be an asset of the bankruptcy estate.[14] The chapter 7 trustee, Roy V. Creasy, sought to do this. The principal shareholder, Joseph B. Shumate, intervened and sought to compel Creasy to pay him his benefits under the pension plan. Creasy, 83 B.R. at 405. Shumate was himself in a chapter 7 bankruptcy and his trustee, John R. Patterson, intervened because he claimed ownership of Shumate's interest in the pension plan. Id. The district court found that Shumate's bankruptcy trustee was entitled to Shumate's interest in the pension plan, holding that federal law was not included in the term "applicable non-bankruptcy law" in § 541(c)(2) and that the anti-alienation provisions of the ERISA-qualified pension plan were not effective under Virginia state law as to Shumate because Shumate, as the principal shareholder of Coleman Furniture, could have effected the termination of the pension plan at any time. In addition, as the principal shareholder, he was both settlor and beneficiary of the trust. Id. at 406-09.
The General Assembly found itself in an unsettled and uncertain world in 1989. It was unsure of the extent to which ERISA-qualified pension plans were exempt in bankruptcy. It was satisfied that IRAs were not exempt. There was a clear difference in treatment of statutory retirement plans for state and federal employees, individuals with only IRAs and individuals with ERISA-qualified pension plans. There was no policy reason to treat an individual differently merely based on the nature of his or her employment. In this climate, the House of Delegates and the Senate agreed to House Joint Resolution No. 284 at the 1989 session *413 of the General Assembly which resolved to appoint a joint subcommittee to "study property exemptions available to debtors against claims of creditors in Virginia." The Subcommittee was directed to complete its work in time to submit its recommendations to the 1990 session of the General Assembly. Va.H.J.Res. 284 (1989). The preamble to the resolution specifically referred to bankruptcy, the fact that Virginia had opted out of the federal exemptions and that, "therefore, a debtor's retirement benefits are subject to creditors' claims." It continued, noting that Texas, Michigan and Illinois had enacted statutes expressly exempting qualified retirement plans, by stating that:
[T]he federal policy and statutes of other states seem more equitable because they protect from creditors' claims pension plans of self-employed individuals, small businesses and professional corporations that have devoted years to prudent planning for retirement, and whose retirement benefits are a substantial asset of their estate
Va.H.J.Res. 284 (1989).
A joint subcommittee was appointed, studied the issues presented and reported back to the 1990 General Assembly. See Report of the Joint Subcommittee Studying Virginia's Exemption Statutes, House Doc. No. 77 (1990) (hereinafter called the "Report"). The Report was a comprehensive examination of exemptions available under Virginia law. Its survey of the then-current law on exemptions started with the observation that:
Although often referred to as a plan or a scheme, Virginia's statutory exemptions were not enacted with an eye toward creating a body of law to balance debtor and creditor interests. Exemptions have been adopted one-by-one over the years with seemingly little consideration for existing statutes. Most of the exemptions constitute Title 34 of the Virginia Code, but there are many other exemptions which appear throughout the entire Code.
Report at 2.
The survey grouped exemptions into five categories: (1) homestead and poor debtors' exemptions (§§ 34-4 and 34-26, respectively); (2) life insurance and other insurance exemptions (§§ 38.2-3122 and 38.2-3123); (3) tenants by the entirety exemption (§ 55-37); (4) spendthrift trusts (§ 55-19); and (5) miscellaneous exemptions, such as protection against unlimited garnishment (§ 34-29), and protection of public benefits, such as workers' compensation benefits (§ 65.1-82), unemployment compensation benefits (§ 60.2-600), and awards under the Criminal Injuries Compensation Fund (§ 19.2-368.12). Report at 2-5. The Report continued its examination of exemptions with a brief discussion of exemptions created by federal law, such as Social Security payments (42 U.S.C. § 407); Veteran's Administration payments (38 U.S.C. § 301(a)); wage protections of masters, seamen, apprentices and fishermen (46 U.S.C. § 601); death and disability benefits paid under the Longshoremen's and Harbor Worker's Compensation Act (33 U.S.C. § 916); and, exemptions for various civil service retirement benefits and pensions. Report at 5-6. The discussion of federal exemptions was introduced by the statement that, "Although the Bankruptcy Reform Act of 1978 allowed the states to create their own exemptions in bankruptcy, it did not exempt the states from certain other federal debtor exemptions." Report at 5. See § 522(b)(2)(A).
The Subcommittee specifically addressed retirement benefits. The Subcommittee noted that Virginia government retirement benefits were statutorily exempt from claims of creditors as were federal pension benefits. It then turned to ERISA and noted the requirement under both ERISA and the Internal Revenue Code that "a pension plan is a qualified plan if it specifically provides that plan participants are prohibited from assigning *414 or pledging their interests to creditors." Report at 6. The final three paragraphs of this section of the Report dealt exclusively with retirement plans and are one of the keys to understanding the General Assembly's actions and its intentions in initially enacting § 34-34. These paragraphs address the General Assembly's understanding of the state of the law with respect to ERISA-qualified pension plans in bankruptcy in 1990. The Report states:
[A] Virginia debtor who files a petition in bankruptcy is limited to the exemptions available under state law and "applicable non-bankruptcy law." See 11 U.S.C.A. § 541(c)(2), Bankruptcy Reform Act. All property in which a debtor has a legal or equitable interest, at the time of bankruptcy, is brought into the estate. Under the interpretation of a growing number of federal courts of "applicable non-bankruptcy law," qualified retirement plans have been excluded from a debtor's estate only if the plans are enforceable under the state's spendthrift trust laws. However, spendthrift trust laws, as discussed earlier, do not allow a settlor to create a valid spendthrift trust for his own benefit. This debtor-settlor connection is usually present when a sole practitioner, self-employed individual, or professional corporation sets up a retirement plan for its partners, officers, or directors.
Fewer courts have subscribed to a broader interpretation. The Kansas Bankruptcy Court [In re Ralstin, 61 B.R. 502 (Bankr.D.Kan., 1986)] has held that "applicable non-bankruptcy law" includes both the state's spendthrift trust law and ERISA's anti-alienation provisions. The court reasoned that including a professional corporation's pension plan in the debtor's estate would place the bankruptcy trustee in a better position than general creditors, and that the plan's restriction on alienation should be enforceable against the trustee as against general creditors.
The Fourth Circuit has followed the majority view in its interpretation of "applicable non-bankruptcy law." In a 1985 case, the court ruled that the term makes no reference to federal law and, therefore, funds excluded from a debtor's estate are only those allowed under state law (see McLean v. Central States, Southeast and Southwest Areas Pension Fund, 762 F.2d 1204 (1985)). In Virginia, as in many other states, this translates to an available exemption of retirement funds where, and only where, the plan itself qualifies as a spendthrift trust. In other words, an employee's interest, in general, will survive bankruptcy as excluded property under a spendthrift trust. However, such trusts established by an owner-employee or a self-employed individual would be self-settled trusts and would not qualify as spendthrift.
Report at 6-7 (footnotes omitted).
The Subcommittee considered this state of affairs and found that "Virginia law is inconsistent as to the application of exemptions to Virginia retirees." Report at 7. It also believed that while ERISA-qualified pension plans were exempt from creditor claims outside bankruptcy, "the bankruptcy code contains no provision which honors this ERISA restriction." Report at 7. In applying the self-settled rule, the Subcommittee concluded that:
Virginia law inadvertently categorizes employee-retirees as (i) beneficiaries of spendthrift trusts and entitled to exemption of their retirement benefits, (ii) beneficiaries of the state retirement plan for public employees and entitled to exemption under specific state law, or (iii) beneficiaries of a self-settled trust and, therefore, not entitled to any exemption.
. . . . .
The joint committee decided it is in the best interests of the citizens of the Commonwealth to encourage employers to provide retirement plans for their employees. The adoption of a retirement benefits exemption would place employers *415 and employees on par under the law as retirees and may provide encouragement to employers, as members of the same plan as is established for their employees, to exempt their own retirement funds from the claims of creditors.
Report at 8.
The Subcommittee then reviewed the then-existing exemptions and "unanimously agreed that Virginia's current poor debtor's statute is desperately in need of modernization." Report at 9.[15] Finally, the Subcommittee drafted proposed legislation for consideration by the 1990 General Assembly. The legislation was comprehensive and remedial. It modernized the outdated poor debtor's law and proposed a comprehensive treatment for retirement plans not otherwise exempt by law. The General Assembly accepted the proposals, and on April 2, 1990, passed the Subcommittee's bill with minor revisions. The new legislation became effective July 1, 1990.
At the same time that the General Assembly was addressing the issue of retirement plans and was concerned with the court of appeals' decision in McLean and the district court's decision in Creasy, another case was before the court of appeals, Anderson v. Raine (In re Moore), 907 F.2d 1476 (4th Cir., 1990). The Joint Subcommittee probably was not aware of this case. Moore arose from a bankruptcy case filed in South Carolina. The chapter 7 trustee sought to have the administrator of an ERISA-qualified pension plan turn over the debtors' interest in the pension plan. The bankruptcy court held that "applicable nonbankruptcy law" included ERISA and that the ERISA imposed anti-alienation provision in the pension plan excluded the debtors' interest from the bankruptcy estate. Moore, 907 F.2d at 1479. The bankruptcy court rested its decision solely on ERISA and did not consider whether the pension plan satisfied South Carolina's spendthrift trust rules. The bankruptcy court's decision was affirmed on appeal to the district court. Neither opinion was published. The chapter 7 trustee took a further appeal to the Court of Appeals for the Fourth Circuit. The case was argued in the court of appeals on April 4, 1990, and decided on July 12, 1990.
The court of appeals affirmed. Moore clearly established within the Fourth Circuit the meaning of the term "applicable nonbankruptcy law" as used in § 541(c)(2) to mean "all laws, state and federal, under which a transfer restriction is enforceable." Moore, 907 F.2d at 1477. The court continued, "Nothing in the phrase `applicable nonbankruptcy law' or in the remainder of § 541(c)(2) suggests that the phrase refers exclusively to state law, much less to state spendthrift trust law." Id. at 1477. It did, however, acknowledge that four other courts of appeals had reached a contrary conclusion.[16]McLean was not inconsistent with Moore. Mc- *416 Lean, it said, did not consider whether ERISA constituted "applicable nonbankruptcy law" and had, in fact, rejected a narrow construction of "applicable nonbankruptcy law."[17]
Had the General Assembly known of the pendency of Moore and been able to anticipate the court of appeals' holding, it might well have predicted that, at least in the Court of Appeals for the Fourth Circuit, Creasy would be reversed. But, Moore clearly showed the split of authority at the court of appeals level over the meaning of the phrase "applicable nonbankruptcy law." Although the Fourth Circuit founded its decision on the plain language of § 541(c)(2), four other courts of appeals had found a different meaning. Moore, 907 F.2d at 1478.[18] The split among the circuits presaged a resolution by the Supreme Court.
Meanwhile, Creasy was making its way to the Fourth Circuit. It was argued a year later, on April 10, 1991, and decided on August 12, 1991 under the name Shumate v. Patterson, 943 F.2d 362 (4th Cir., 1991). The Fourth Circuit reversed. The opinion went further than Moore. It held that:
[T]his court's holding in Moore precludes the fact-based state law inquiry urged by appellees. We think it is not giving Moore undue weight to say that it stands for the proposition that all ERISA-qualified plans, which by definition have a non-alienation provision, constitute "applicable nonbankruptcy law" and contain enforceable restrictions on the transfer of pension interests. Id. That conclusion rests not on the reality of the particular beneficiary-settlor-trust relationship in issue, but instead on the status of the plan as ERISA-qualified. Consequently, Shumate's interest in the pension plan should be excluded from the bankruptcy estate under § 541(c)(2).
Shumate v. Patterson, 943 F.2d at 364-65.
The United States Supreme Court resolved the split among the circuits on June 15, 1992. Patterson v. Shumate, 504 U.S. 753, 112 S.Ct. 2242, 119 L.Ed.2d 519 (1992). It affirmed the Court of Appeals for the Fourth Circuit using the same analysis as the Fourth Circuit had used. The state of the law was now clear. All ERISA-qualified pension plans were excluded from the bankruptcy estate of a plan beneficiary by virtue of the ERISA anti-alienation requirement and § 541(c)(2).
The Virginia General Assembly amended and reenacted[19] § 34-34 three times between 1990 and the filing of the petition in this case in 1992, 1996 and most recently in 1999. The 1992 amendment changed subsection E with respect to the enforcement of child and spousal support obligations. This change was part of a broader change in child and spousal support changes in the same bill. 1992 Va. Acts ch. 716.
The 1996 change affected subsection D and was a part of a larger bill that clarified and enhanced exemptions available under §§ 34-21, 34-29 and 34-34 of the Code of Virginia. At that time, there was concern that the homestead exemption might be construed to be a once in a lifetime exemption, even if the $5,000 maximum was not exhausted. That is, if a debtor claimed a *417 homestead exemption of one dollar, he would never be allowed to claim the balance of the homestead available of $4,999. In re Howell, 106 B.R. 99, 104 (Bankr. W.D.Va., 1989) ("[W]e are here dealing with an individual's right to claim the once-in-a-lifetime homestead exemption"). But see In re Waltrip, 260 F.Supp. 448 (E.D.Va., 1966) (decided under the Bankruptcy Act of 1898). In re Edwards, 105 B.R. 10, 11 (Bankr.W.D.Va., 1989) is particularly instructive. The question was whether a chapter 13 debtor was required to actually file a homestead deed. He had not. In chapter 7 cases, the failure to timely file a homestead deed in the proper jurisdiction is fatal. Shirkey v. Leake, 715 F.2d 859 (4th Cir., 1983); Zimmerman v. Morgan, 689 F.2d 471 (4th Cir., 1982). The court stated:
[N]ot only is it unduly expensive to have homestead deeds prepared and to pay the costs of recordation in the local state clerk's offices, it is also burdensome to require a chapter 13 debtor to use his once-in-a-lifetime homestead exemption merely for the purpose of listing property he might exempt in a chapter 7 liquidation when it is also unnecessary. If a chapter 13 debtor's plan is confirmed and ultimately consummated, there would not be a need for the filing and perfecting the homestead exemption. There is, accordingly, no need for perfecting the exemption which might in future years become necessary for the debtor and his or her family.
Edwards, 105 B.R. at 11 (emphasis added).
The chapter 13 timing issue identified in Edwards was resolved in 1990 in the same Act that added § 34-34, but did not resolve the issue of the number of homestead deeds that could be filed. The 1996 General Assembly amended § 34-21 to clarify that while the homestead exemption is limited to a lifetime maximum of $5,000 (plus an additional $500 for each dependent), an individual may claim the exemption in a number of homestead deeds. It is not limited to the filing of a single homestead deed. See Nguyen, 211 F.3d at 111.
In addition, § 34-29(d)(1) was amended to delete a provision that limited the protection of § 34-29 to earnings for only the thirty-day period after the funds have been deposited. The change protects earnings as long as they are identifiable and not commingled with non-exempt funds.
Finally, § 34-34 was amended to change subsection D. Subsection D stated before the amendment:
The exemption provided under subsection B shall not apply to amounts contributed to a retirement plan during the fiscal year of the retirement plan that includes the date on which the individual claims the exemption and for the two preceding fiscal years of the retirement plan. The exemption provided under subsection B shall not apply to the earnings on contributions described in this subsection.
Va.Code Ann. § 34-34(D) (Michie, 1995). The 1996 change added the proviso that the two-year disqualification did not apply if the amounts deposited were exempt prior to being contributed to the retirement plan. This change protected transfers from one IRA to a second IRA and protected those individuals who may have left an employer who maintained an ERISA-qualified pension plan and transferred the pension plan funds to an IRA. Technically, a rollover to a new IRA is a contribution to the new IRA.
The 1996 amendments remedied concerns, furthered the protections already given to Virginia residents and reaffirmed the General Assembly's intention to protect certain assets, especially retirement funds. 1996 Va. Acts ch. 330.
The 1999 amendment added subsection § 34-34(H) which reads:
A retirement plan established pursuant to §§ 408 and 408A of the Internal Revenue Code is exempt to the same extent as that permitted under federal law for *418 a qualified plan established pursuant to § 401 of the Internal Revenue Code. However, an individual who claims an exemption under federal law for any retirement plan established pursuant to §§ 401, 403(a), 403(b), 409 or § 457 of the Internal Revenue Code shall not be entitled to claim the exemption under this subsection for a retirement plan established pursuant to § 408 or § 408A of the Internal Revenue Code.
1999 Va. Acts ch. 766. This change partially corrected the disparate treatment of different beneficiaries, a disparate treatment similar to that which the Subcommittee identified in 1990. With the state of the law clarified within the Fourth Circuit in Moore in 1990 and in Shumate v. Patterson in 1991 and definitively resolved by the Supreme Court in Patterson v. Shumate in 1992, the General Assembly was no longer concerned with the lack of protection of ERISA-qualified pension plans in bankruptcy or the potential for disparate treatment of ERISA-qualified pension plans outside bankruptcy and inside bankruptcy. Now, all ERISA-qualified pension plans were fully free from claims of the beneficiaries' creditors. They stood on the same footing as public employees. However, while IRAs were protected under § 34-34, the protection was limited to a maximum amount based on the age of the beneficiary. Amounts in IRAs over the exemption limit were subject to the claims of creditors outside bankruptcy and of bankruptcy trustees inside bankruptcy. Hasse, 246 B.R. at 250; Vogt, 245 B.R. at 57. Just as in 1990, there was a disparate treatment of beneficiaries. For example, two individuals, each with $100,000 in a retirement fund, could be treated very differently. A debtor who is 54 years old when he files a petition in bankruptcy is entitled to claim $52,955 in an IRA exempt. The remaining $47,045 is not exempt. Another debtor with an ERISA-qualified pension plan would retain the entire $100,000 retirement fund. Whether an individual works for a company that maintains an ERISA-qualified pension plan or an SEP-IRA, or must establish his own IRA because the employer has no retirement plan, is somewhat happenstance. Smaller companies tend not to establish ERISA-qualified pension plans because of the expense and reporting requirements. S. REP. NO. 106-411 (2000). There was no good policy reason to favor one type of employment over another. The 1999 amendment sought to lessen this disparate treatment. As long as an individual had either an IRA or an ERISA-qualified pension plan, the entire plan would be protected. An IRA would be exempt under § 34-34(H). An ERISA-qualified pension plan would be excluded from the bankruptcy estate under § 541(c)(2).
The Creditor's First Proposition: An ERISA-Qualified Pension Plan is a Retirement Plan under § 34-34
The creditor argues that the statutory definition of "retirement plan" is clear and unambiguous and that it includes ERISA-qualified pension plans. However, this construction would be self-defeating. Just as a construction of a statute that renders a statute unconstitutional must be eschewed in favor of a construction that upholds the validity of a statute, so too must a construction that would render a state statute void by reason of federal preemption. Virginia Soc'y, 256 Va. at 156-57, 500 S.E.2d at 816-17. Here, "a literal construction of the statute would yield an absurd result" that the very comprehensiveness of the statute causes its invalidity, that is, to be preempted and of no force or effect. Earley, 257 Va. at 369, 514 S.E.2d at 155. The statute would be rendered "ineffective." Powers, 307 U.S. at 217, 59 S.Ct. at 807.
If § 34-34 had never been amended, the court would be placed on the horns of a dilemma. One horn would be giving effect to the intent of the 1990 General Assembly as expressed in the Subcommittee Report to protect ERISA-qualified pension plans. This would undoubtedly result in application *419 of federal preemption under ERISA, the invalidity of the 1990 statute (at least as to ERISA-qualified pension plans and possibly as to IRAs as well) and the frustration of the very objective sought by the General Assembly. The other horn would be ignoring the 1990 General Assembly's intent. While all acts of the General Assembly are presumed constitutional and effective, in order to give vitality to the statute, the General Assembly's intent would have to be ignored.
However, the General Assembly amended the statute three times: once after the Fourth Circuit clarified the law in the Fourth Circuit and twice after the United States Supreme Court settled the law for the entire United States. The court must, therefore, look for the intent not of the 1990 General Assembly, but of a later General Assembly, that is the 1999 General Assembly which last amended the statute. It is the intent of the 1999 General Assembly that matters, not the intent of its predecessors. The circumstances present in 1990, 1992 and 1996 are helpful in construing the statute, but are not controlling in determining a later General Assembly's intent.
When the original retirement exemption was enacted in 1990, there was significant doubt that ERISA-qualified pension plans would be beyond the reach of bankruptcy trustees. The last two amendments occurred when these uncertainties had been definitively resolved. The 1996 and the 1999 amendments had nothing to do with providing ERISA-qualified pension plans with protection in bankruptcy. Both the 1996 and the 1999 statutes strengthened debtors' protection of their retirement plans, which was consistent with the original intent of § 34-34. The 1996 change protected rollovers and transfers between various pension plans. The 1999 change was more fundamental.
While Patterson v. Shumate eliminated one problem the General Assembly sought to solve in 1990, it created another. The General Assembly's solution to the uncertain status of ERISA-qualified pension plans in bankruptcy was to create a limited exemption for them and other retirement plans. Patterson v. Shumate resulted in the protection of ERISA-qualified pension plans, but without limitation as to amount. Consequently, the nature of one's employment still resulted in different treatment of retirement plans in bankruptcy, a result that the Report sought to change. See Report at 8. Public employee pension funds remained fully exempt by their enabling statutes. ERISA-qualified pension plans were now fully exempt outside bankruptcy and did not become part of the bankruptcy estate. IRAs had only a limited exemption. By 1999, an accepted practice developed. It was well known. An individual with both a 401(k) plan and an IRA would retain the entire 401(k) plan and part, or all, of the IRA, the exact amount depending upon his age. The 1999 amendment was designed to come closer to the original objective of eliminating disparities based on one's employment and placing different retirees on par with each other.
The addition of subsection H in 1999 was designed to place individuals with IRAs on the same footing as individuals with ERISA-qualified pension plans. The subsection clearly demonstrates the knowledge of the General Assembly that ERISA-qualified pension plans are not property of the estate and are fully protected both inside and outside bankruptcy.[20] It explicitly acknowledges that ERISA-qualified plans are exempt pursuant to federal law. IRAs are exempt "to the same extent as that permitted under federal law" for 401(k) plans. Va.Code Ann. § 34-34(H). If 401(k) plans were not *420 exempt under federal law, § 34-34(H) would be meaningless.
The Virginia General Assembly was well aware of the preemption issue. Mackey was handed down two years before the enactment of § 34-34 and the Subcommittee specifically addressed the preemption issue in its Report. The Report stated:
In recommending the adoption of a retirement benefits exemption, the joint subcommittee necessarily considered the issue of whether such an exemption under state law would be preempted by federal law, specifically ERISA. ERISA preempts `any and all state laws insofar as they may now or hereafter relate to any employee benefit plan.' Although a state exemption of retirement benefits would clearly `relate to' employee benefit plans under ERISA, the joint subcommittee concluded that such a state exemption should not be preempted by ERISA for the following reasons. ERISA provides in section 514(d) that the Act may not be construed to `alter, amend, modify, invalidate, impair or supercede any law of the United States . . . or any rule or regulation issued under such law.' By its own terms, the administration of the U.S. Bankruptcy Code depends upon state exemption statutes. Preempting such state statutes would seriously impair the bankruptcy code, therefore, the joint subcommittee believes that a Virginia exemption would withstand a preemption challenge.
Report at 8.
It is clear from the Report and the text of § 34-34 that the General Assembly did not intend to challenge federal preemption authority in enacting § 34-34 but rather to craft a statute around the preempted area. The Report seeks to reconcile the statute with ERISA. An analysis, however, of Shaw and Mackey suggests that the Subcommittee's argument would not have been persuasive even though the intent to protect beneficiaries coincided with the objectives of ERISA. Section 34-34 is not limited to ERISA-qualified pension plans. It encompasses retirement plans intended to qualify under 26 U.S.C. § 401, but fail to do so. It covers 401 plans that may be outside the ambit of ERISA. The Report, the additional language "intended to" and the recognized exemption of ERISA-qualified pension plans in the 1999 amendment reflect that the General Assembly intended to legislate in an area that the federal government had not preempted.
These circumstances lead the court to the conclusion that the 1999 General Assembly intended the definition of "retirement plan" not to include ERISA-qualified plans and intended to exclude ERISA-qualified pension plans from the statutory definition in § 34-34(A).[21] If the definition had included them, federal preemption would have eviscerated the statute and could have rendered the entire statute void. The 1999 change clearly shows that the General Assembly knew that 401 plans derive their exempt status from federal law, not § 34-34. The 1999 amendment which change added subsection H also expanded the scope of protected retirement plans by adding Roth IRAs. See § 34-34(A) and (H). The uncertainty over ERISA-qualified plans that existed in 1990 was gone. The accepted practice of debtors to exclude ERISA-qualified plans from their bankruptcy estate and claim an IRA exempt under § 34-34 was well known to the General Assembly. The General Assembly sought to eliminate the inequality between 401 plans and IRAs by extending to IRAs the same exemption as a 401 plan. Consequently, the creditor's first proposition, that ERISA-qualified plans are retirement plans within the statutory definition in § 34-34(A), cannot be accepted. To hold otherwise would necessarily void § 34-34 by virtue of federal *421 preemption. Section 34-34(A) must be narrowly construed to avoid an otherwise fatal infirmity that would result from federal preemption and that would thwart the statute's purpose and the General Assembly's intent. Virginia Soc'y., 256 Va. at 157, 500 S.E.2d at 816-17; Pedersen, 219 Va. at 1065, 254 S.E.2d at 98.
The Creditor's Second Proposition: An ERISA-qualified Pension Plan is, for Purposes of § 34-34, Claimed Exempt under § 34-34
The creditor's second proposition is that an ERISA-qualified pension plan, although excluded from property of the bankruptcy estate pursuant to § 541(c)(2), is for purposes of § 34-34, claimed exempt under § 34-34. This proposition is necessary for the creditor's position so that under the second paragraph of § 34-34(H) the ERISA-qualified pension plan prohibits the unlimited exemption of the IRA and is aggregated with the IRA. The creditor argues that there is no difference between property that is excluded from the estate and property that is exempted from the estate. It notes that § 34-34 is available for individuals who file bankruptcy as well as individuals who may utilize an exemption but do not file bankruptcy. Because § 34-34 is available to both bankruptcy debtors and nonbankruptcy debtors, the creditor argues that the difference between excluded from the estate and exempted from the estate is a semantic distinction without a difference.
The argument that there is no difference between exclusion and exemption is not supported by the legislative history and ignores the fact that there is a clearly defined and commonly understood distinction. The Subcommittee's Report draws the distinction between exclusion from the estate and exemption from the estate. See Report at 6, 8. The Report discusses the leading cases on the status of pension plans in bankruptcy in 1990. Those cases clearly rely on the difference between exclusion and exemption. Since 1992 when the Supreme Court decided Patterson v. Shumate, the distinction has been well known. The suggestion that the General Assembly did not know of the difference in 1990, 1996 or 1999 cannot be accepted. Had the General Assembly intended to somehow include the value of an excluded pension plan in the computation of the amount of the exemption available for an IRA, it could have easily done so. For example, it could have simply stated that the maximum exemption available is reduced by the amount of ERISA-qualified pension plans or any other federal or state pension plan. This method would be simple, direct and not open to question. It would not need the complicated construction proposed by the creditor.[22]
There is another reason that the proposition cannot be accepted. A debtor is permitted, but not required, to claim property of the estate exempt.[23]In re Ford, 3 B.R. 559, 568 (Bankr.D.Md., 1980), aff'd sub nom. Greenblatt v. Ford, 638 F.2d 14, 15 (4th Cir., 1981); 11 U.S.C. § 522(b) ("an individual may exempt from property of the estate") (emphasis added). Section 34-34(G) also requires that the exemption under § 34-34 be claimed. It states, "The exemption provided under this section [§ 34-34] must be claimed within the time limits prescribed by § 34-17." Va.Code Ann. § 34-34(G). This subsection has been construed to mean that the debtor must schedule the retirement plan on Schedule C of his bankruptcy schedules within five days after the initially scheduled § 341 meeting. Heidel, 215 B.R. at *422 818. In Heidel, the debtor amended his Schedule C more than five days after the first meeting of creditors and added, for the first time, his IRA which had a value of $39,500. Because § 34-17 requires that the exemption be claimed within five days after the first meeting of creditors, the claim of exemption was disallowed. This case illustrates that the § 34-34 exemption is not automatic. The debtor must claim it.
The limitation imposed by the second paragraph of § 34-34(H) which is an exception to the general rule set out in the first paragraph of § 34-34(H) is only activated if a debtor "claims an exemption under federal law for any retirement plan established pursuant to §§ 401, 403(a), 403(b), 409 or § 457." The second paragraph permits a debtor who has such a retirement plan and an IRA to choose not to claim the §§ 401, 403(a), 403(b), 409 or 457 plan exempt and benefit from the unlimited exemption then available for the IRA. There is no comparable voluntary choice available to a debtor for an ERISA-qualified pension plan that is excluded from the bankruptcy estate. The General Assembly still chose a word that implies choice and that requires an affirmative action within a 5-day period, the verb "claim." These concepts are closely associated with exempting property from a bankruptcy estate, but are foreign to excluding property from the estate. The debtor need do nothing to exclude property from the bankruptcy estate. It is excluded by statute. 11 U.S.C. § 541(c)(2).
Choice is very important. It is not difficult to imagine a situation where a debtor has an IRA with a value of $100,000 and an ERISA-qualified pension plan with a value of $100. The creditor's construction would inevitably lead to the conclusion that the IRA may not be claimed exempt under § 34-34(H) because of the existence of the nominal ERISA-qualified pension plan. While the debtor would be able to avail himself of the limited exemption under § 34-34(B), the General Assembly's intent to place IRAs and ERISA-qualified pension plans on an equal footing would be frustrated. Accepting the commonly known distinction between exempting property from a bankruptcy estate and excluding property from a bankruptcy estate prevents this inequitable result.
There are reasons why a debtor may choose not to claim an exemption. While this may be unusual, there may be circumstances where it is desirable. For example, if the debtor knows that he cannot fully exempt both his IRA and his SEP, he may have a preference as to which fund is to be surrendered to the trustee. In these circumstances, he may accomplish this by claiming as exempt the IRA or the SEP that he wishes to retain and not claiming the other exempt. There may be other reasons such as the effect of the relative tax burdens on the debtor individually and on the bankruptcy estate arising from the liquidation of an IRA, particularly if this increases the payment of nondischargeable priority claims.
If a debtor must claim an IRA or an SEP exempt, and may select which IRA or SEP to claim exempt, then it follows that a debtor need not exempt all of his retirement funds. If he need not exempt all of his retirement funds or, indeed any, the distinction between a pension plan that is excluded from the estate and one that is exempted from the estate becomes material. There is no need to claim property exempt from the estate that is excluded from the estate and any such attempt would be unnecessary and futile.[24] Since *423 the General Assembly knew the significance of the difference, it should be given effect.
Conclusion
The definition of "retirement plan" in § 34-34(A) of the Code of Virginia must be read narrowly to exclude ERISA-qualified pension plans. To hold otherwise would invoke federal preemption which would exclude ERISA-qualified pension plans in any event and possibly preempt the entire statute. It would frustrate the General Assembly's intent to protect retirement plans.
The 1990 General Assembly confronted the inherent problems in using § 55-19 and spendthrift trusts (particularly the self-settled rule) to protect retirement plans. It sought for the first time to comprehensively remedy the problems and to provide greater and better protection for retirees' pension plans, in particular ERISA-qualified pension plans (which it believed were not protected in bankruptcy). Its chosen route was the establishment of a uniform exemption for all retirees.[25] The Supreme Court's subsequent decision in Patterson v. Shumate changed one of the underlying assumptions of the General Assembly by definitively holding that ERISA-qualified pension plans were not property of the bankruptcy estate. Had the General Assembly intended to adhere to the uniform exemption for retirees created in 1990, it could have easily amended § 34-34 to expressly reduce the exemption of non-ERISA-qualified pension plans, such as for IRAs and SEPs, that were covered by § 34-34 by the amount of any ERISA-qualified pension plan excluded from the bankruptcy estate or exempt from creditors in a state court proceeding.[26] It did not. It accepted that ERISA-qualified pension plans could be reached by neither bankruptcy trustees in bankruptcy nor creditors in state court and it expanded the exemptions available based, in part, on this premise. The 1996 General Assembly protected rollover contributions. In 1999, the General Assembly added Roth IRAs. With some restrictions, the 1999 amendment also placed IRAs, SEPs and Roth IRAs on the same footing as 401 plans and other ERISA-qualified pension plans. This partially reduced the inequality between these plans, although it did not completely eliminate it. The creditor's position in this case runs counter to the expanding protections provided by the General Assembly over the last decade and the judicial rule of liberal construction of exemption statutes. Its implicit construction contracts the exemption and magnifies the very inequality the General Assembly sought to minimize.
For the foregoing reasons, the creditor's objection to the debtor's claim of exemption will be overruled. The amount of the exemption of the IRA and the SEP under § 34-34 of the Code of Virginia will be computed without regard to the ERISA-qualified pension plan. The IRA and SEP are exempt in the aggregate amount of $52,955 plus any additional amount allowable under § 34-4.
NOTES
[1] The debtor scheduled and claimed exempt four retirement accounts: (1) "TIAA/CREF ERISA" valued at $363,915.13 and claimed exempt pursuant to § 34-34 of the Code of Virginia and 11 U.S.C. § 541(c)(2); (2) "U.S. Government Thrift Savings Plan, ERISA" valued at $164,903.54 and claimed exempt pursuant to 5 U.S.C. § 8437(e); (3) "Schwab SEP-IRA" valued at $38,007.55 and claimed exempt pursuant to § 34-34 of the Code of Virginia and 26 U.S.C. § 408(k); and (4) "Schwab Rollover IRA" valued at $33,530.97 and claimed exempt pursuant to § 34-34 of the Code of Virginia. Global Advanced Technologies, Inc., the debtor's only liquidated unsecured creditor, objected to the claims of exemption of the IRA and the SEP. The parties agree that the federal Thrift Savings Plan is not part of the computation of the maximum exemption allowable under § 34-34 of the Code of Virginia. See In re Hasse, 246 B.R. 247 (Bankr.E.D.Va., 2000).
[2] Section 34-34 provides a limited exemption for retirement plans. It protects retirement plans only to the extent necessary to produce an annual retirement benefit of $17,500. The maximum exemption is derived by multiplying the statutory factor set forth in § 34-34(C), which is based on the age of the debtor at the time the exemption is claimed, by $17,500. In this case, the exemption is $52,955.00. The statute is applied to the aggregate of all "retirement plans" as defined in § 34-34(A) of the Code of Virginia, not to each retirement plan individually. Section 34-34(C) provides:
The exemption provided under subsection B shall not apply to the extent that the interest of the individual in the retirement plan would provide an annual benefit in excess of $17,500. If an individual has an interest in more than one retirement plan, the limitation of this subsection C shall be applied as if all such retirement plans constituted a single plan.
Va.Code Ann. § 34-34(C).
[3] The debtor timely filed a homestead deed and may claim a limited amount of the IRA and SEP exempt under § 34-4 of the Code of Virginia. In re Ekanger, 1999 WL 671866 (Bankr.E.D.Va., 1999) ("In addition to the amount that may be claimed exempt under Va.Code Ann. § 34-34, the debtor may take advantage of the `homestead' exemption provided by Va. §§ 34-4 and 34-17."); In re Cathcart, 203 B.R. 599 (Bankr.E.D.Va., 1996) (Virginia homestead exemption is independent of, and may be claimed in addition to, other available exemptions.)
[4] Two statutes require an anti-alienation provision: ERISA and the Internal Revenue Code. See 29 U.S.C. § 1056(d)(1); 26 U.S.C. § 401(a)(13); Treas.Reg. § 1.403(a)-13(b)(1).
One of the primary means by which ERISA protects workers' pension benefits is through restrictions on the assignment and alienation of these benefits. ERISA provides that `[e]ach pension plan shall provide that benefits provided under the plan may not be assigned or alienated.' 29 U.S.C. § 1056(d)(1). In addition, the Internal Revenue Code conditions qualification under ERISA and thus exemption from federal taxation on the non-transferability of pension benefits:
A trust shall not constitute a qualified trust under this section [26 U.S.C. § 401(a)(13)] unless the plan of which such trust is a part provides that benefits provided under the plan may not be assigned or alienated.
26 U.S.C. § 401(a)(13). The Treasury Regulation issued under 26 U.S.C. § 401(a)(13) [Treas.Reg. § 1.403(a)-13(b)(1)] is even more detailed.
Anderson v. Raine (In re Moore), 907 F.2d 1476, 1480 (4th Cir., 1990).
[5] See, for example, the 1998 Virginia Continuing Legal Education outline which states:
Va.Code § 34-34 was enacted before the U.S. Supreme Court's decision in Patterson v. Shumate, 504 U.S. 753, 112 S.Ct. 2242, 119 L.Ed.2d 519 (1992) which held that all funds in an ERISA-qualified retirement plan are exempt. The effect of Patterson v. Shumate is to limit the applicability of Va. Code § 34-34 to IRAs.
James J. Burns and Donald F. King, "Introduction to Chapter 7 Bankruptcy," Annual Basic Bankruptcy Seminar: Chapters 7 And 13 The Basics and Beyond, (Virginia CLE, 1998) (emphasis added).
See also Kevin R. Huennekens, "Practice Strategies for Debtors' Attorneys in Chapter 7," 10th Annual Bankruptcy Law Seminar: Hot Topics for the New Millennium Chapters 7 and 13, II-A-2 (Virginia CLE, 2000).
[6] In In re Gurry, 253 B.R. 406 (Bankr. E.D.Va., 2000), the chapter 7 trustee objected to the exemption on different grounds, and when satisfied, withdrew his objection. In this case, the trustee did not initially object to the claim of exemption, but now supports the creditor in its objection.
[7] The exemption provided by § 34-34 draws no distinction between IRAs, SEPs and Roth IRAs. While this opinion generally refers only to IRAs, the term includes SEPs and Roth IRAs.
[8] The Supreme Court had previously held that discrimination based on pregnancy was not gender discrimination under Title VII of the Civil Rights Act of 1964. General Electric Co. v. Gilbert, 429 U.S. 125, 97 S.Ct. 401, 50 L.Ed.2d 343 (1976), superseded by statute as cited in Newport News Shipbuilding and Dry Dock Co. v. EEOC, 462 U.S. 669, 676, 103 S.Ct. 2622, 2627, 77 L.Ed.2d 89 (1983).
[9] Congress expanded the scope of Title VII to include pregnancy in the Pregnancy Discrimination Act of 1978, Pub.L. No. 95-555, 92 Stat. 2076 (1978), currently codified at 42 U.S.C. § 2000e(k).
[10] South Hill defines liberal construction, quoting Koy v. Schneider, 110 Tex. 369, 218 S.W. 479 (1920), 110 Tex. 369, 221 S.W. 880, 884 (1920):
Liberal (or equitable) construction . . . expands the meaning of the statute to meet cases which are clearly within the spirit or reason of the law, or within the evil which it was designed to remedy, provided such an interpretation is not inconsistent with the language used; it resolves all reasonable doubts in favor of the applicability of the statute to the particular case.
South Hill, 174 Va. at 287, 6 S.E.2d at 669.
[11] Now $1,000,000. 1998 Va. Acts ch. 214.
[12] There is a penalty for early withdrawal. If the withdrawal is before the year in which the individual reached the age of 59½, there is a ten percent excise tax on the premature withdrawal. 26 C.F.R. § 1.408-1(c)(6) (2000). See also In re Vogt, 245 B.R. 53, 57 (Bankr. E.D.Va., 2000). This is not, however, a sufficient restriction on alienation to create a spendthrift trust. Ekanger, 1999 WL 671866, at *2.
[13] Section 1325(b), which is now § 1325(c), provides that, "After confirmation of a plan, the court may order any entity from whom the debtor receives income to pay all or any part of such income to the trustee."
[14] It was estimated that $561,000 would revert to the Coleman Furniture bankruptcy estate after satisfaction of all claims of the beneficiaries.
[15] At that time, the exemptions allowed under § 34-26 were a list of household goods commonly found in homes in the eighteenth and nineteenth centuries, for example, 1 cow and her calf, 1 horse, 2 basins, 1 pot, 1 loom, 1 spinning wheel, 1 pair of cards, 1 axe, 200 pounds of bacon or pork, and 25 bushels of rye or buckwheat. The Subcommittee commented on a modern use of the outdated exemptions. One debtor claimed his horse exempt a two-year-old thoroughbred bay colt named Boogiewoogie Man valued by the debtor at $640,000 at the time he filed his schedules. After the filing of the schedules, Boogiewoogie Man began to "race and has run poorly, finishing last in one race, and next to last in three others. As a result his value has fallen steeply." The debtor estimated the value of the horse at $50,000 at the time of the hearing on the objection to the claim of exemption. In re Freedlander, 93 B.R. 446, 450 (Bankr.E.D.Va., 1988). The Subcommittee echoed a then-common observation, "Daily life has changed considerably in the years since the adoption of Virginia's poor debtor's statute." Report at 10.
[16] The court acknowledged the contrary results in In re Daniel, 771 F.2d 1352 (9th Cir., 1985); In re Lichstrahl, 750 F.2d 1488 (11th Cir., 1985); In re Graham, 726 F.2d 1268 (8th Cir., 1984); and In re Goff, 706 F.2d 574 (5th Cir., 1983). Moore, 907 F.2d at 1478.
[17] The trustee had argued that § 541(c)(2) was only intended to exclude traditional trusts, not nontraditional spendthrift trusts, that is, modern retirement plans. Moore, 907 F.2d at 1478 (quoting McLean, 762 F.2d at 1207 n. 1).
[18] The district court in Creasy had not anticipated the court of appeals' holding either. It relied on McLean for the proposition that "The Fourth Circuit has interpreted the phrase `nonbankruptcy law' to mean state law." Creasy, 83 B.R. at 406 (citing McLean, 762 F.2d at 1207-08).
[19] Unlike Congress, the General Assembly does not amend an existing statute by adding or deleting specific words; it amends a statute by reenacting the entire statute. In this case, the definition of "retirement plan" contained in § 34-34(A) was reenacted in 1992, 1996 and 1999.
[20] The choice of the word "exemption" in the second paragraph is significant. Nine years earlier, the Report clearly recognized the difference between property that is excluded from the estate and property that becomes property of the estate and is then exempted from the estate. See Report at 6, 8.
[21] The statutory definition controls the use of the term throughout the statute. Words used in a statute, particularly defined terms, have the same meaning in all subsections. See Moore, 907 F.2d at 1478.
[22] Excluding ERISA-qualified pension plans from the statutory definition of "retirement plans" does not render the reference to 26 U.S.C. § 401 in § 34-34(H) of the Code of Virginia meaningless. There are § 401 plans that are not ERISA-qualified. See Kaler v. Craig (In re Craig), 204 B.R. 756 (D.N.D., 1997); Hanes, 162 B.R. at 738-40.
[23] If a debtor fails to claim exemptions, a dependent may claim them. 11 U.S.C. § 522(l).
[24] Under the Bankruptcy Code, if an exemption is claimed and allowed, the exempt property ceases to be property of the estate. Property that is successfully exempted passes through the estate. Property that was never property of the estate, does not. The Bankruptcy Reform Act of 1978 changed the manner in which exemptions were treated in bankruptcy. Under the Bankruptcy Act of 1898, exempt property never became property of the bankruptcy estate. Lockwood v. Exchange Bank of Ft. Valley, 190 U.S. 294, 301, 23 S.Ct. 751, 754, 47 L.Ed. 1061 (1903); Bankruptcy Act of July 1, 1898, ch. 541, § 70, 30 Stat. 544 (repealed 1978).
[25] Section 34-34 did not include federal or state public employees. They were already protected although without limit by statutory exemptions in the statutes that created the pension plans.
[26] The General Assembly knew the difference between exemptions and exclusions from a bankruptcy estate. It chose to use the word "exempt." It could have chosen a related, but not identical term, "excluded from the estate." It did not. The choice of the General Assembly, if plain on its face, must be given effect where the construction will not render the statute void. Shepherd v. F.J. Kress Box Co., 154 Va. 421, 426, 153 S.E. 649, 650 (1930). Compare with discussion, above, where the plain meaning of "retirement plan" would cause the statute to be preempted.
| {
"pile_set_name": "FreeLaw"
} |
762 F.2d 375
RICHMOND, FREDERICKSBURG & POTOMAC RAILROAD COMPANY, Appellant,v.DEPARTMENT OF TAXATION, COMMONWEALTH OF VIRGINIA, Appellee.Association of American Railroads, Amicus Curiae.
No. 84-1774.
United States Court of Appeals,Fourth Circuit.
Argued Feb. 4, 1985.Decided May 22, 1985.
William L.S. Rowe, Richmond, Va. (Douglas W. Davis, Thomas McN. Millhiser, Hunton & Williams, Urchie B. Ellis, Vice President-Law, Richmond, Va., on brief), for appellant.
Barbara M. Rose, Asst. Atty. Gen., Richmond, Va. (Gerald L. Baliles, Atty. Gen. of Va., Kenneth W. Thorson, Sr. Asst. Atty. Gen., Richmond, Va., on brief), for appellee.
(James W. McBride, Gregory G. Fletcher, Marion F. White, Laughlin, Halle, Clark, Gibson & McBride, Memphis, Tenn., on brief), for amicus curiae.
Before SPROUSE and CHAPMAN, Circuit Judges and KISER, United States District Judge for the Western District of Virginia, sitting by designation.
CHAPMAN, Circuit Judge:
1
Plaintiff Richmond, Fredericksburg & Potomac Railroad Company (RF & P) brought this action against defendant Department of Taxation, Commonwealth of Virginia (the Department), alleging that its application of the Virginia corporate net income tax discriminates against railroads in violation of Sec. 306(1)(d) of the Railroad Revitalization and Regulatory Reform Act of 1976, Pub.L. No. 94-210, 90 Stat. 54 (1976), recodified at 49 U.S.C. Sec. 11503 (1982) (the 4-R Act). The district court granted judgment on the pleadings and summary judgment in favor of the Department and RF & P appealed. The district court held that Sec. 306(1)(d) of the 4-R Act does not apply to allegedly discriminatory state net income taxes, the Virginia net income tax, as applied, does not discriminate against railroads, and Sec. 306(2) does not authorize retroactive refund relief. Richmond, Fredericksburg & Potomac R.R. v. Department of Taxation, 591 F.Supp. 209 (E.D.Va.1984). We hold that Sec. 306(1)(d) does apply to discriminatory state net income taxes but that the Virginia net income tax, as applied, does not discriminate against railroads.1 Accordingly, we reverse in part and affirm in part.
2
* A. Background2
3
Virginia imposes a corporate net income tax on railroads and other commercial and industrial corporations. Va.Code Secs. 58-151.032, 58-151.032:1, and 58-151.032:2 (1974 & 1983). The Virginia taxable income for a tax year is based on the corporation's federal taxable income for the tax year subject to certain adjustments set forth in the Virginia Code.
4
From January 1, 1903, to December 31, 1978, RF & P and other railroads in Virginia were subject to a franchise tax measured by gross transportation receipts. Va.Code Sec. 58-519 (1974). RF & P and other railroads were not subject to the Virginia net income tax and their income from sources other than transportation receipts was not taxed. Thus, the gain railroads realized from the sale or exchange of both depreciable and nondepreciable assets was not taxed and, unlike other commercial and industrial taxpayers, railroads were permitted no deductions for losses, expenses or depreciation.
5
During this time other industrial and commercial taxpayers in Virginia were subject to a net income tax. Under the Virginia net income tax as enacted for taxable years prior to 1972, gains or losses from the sale or exchange of property were taken into account in determining the net income subject to tax. A reasonable allowance (depreciation) was allowed for exhaustion, wear and tear of property used in a trade or business or property held for the production of income. See Va.Code Sec. 58-81(i) (1959) (repealed by 1971 Va.Acts, Ex.Sess., ch. 171). For Virginia income tax purposes, a corporate taxpayer had the option of calculating depreciation on a straight-line method or the method by which it calculated depreciation for federal income tax purposes. The additional twenty percent first-year bonus depreciation under federal law was not allowed for Virginia tax purposes. See I.R.C. Sec. 179 (1982). Thus, the depreciation deduction on depreciable assets for Virginia income tax purposes could have been smaller than the corresponding federal deduction. As a result, a corporation would have had slightly higher Virginia taxable income but an asset would have a slightly higher Virginia adjusted basis. Accordingly, when an asset was sold a corporation's Virginia taxable income would be slightly lower than its federal taxable income because of the higher Virginia basis, assuming a gain.
6
In 1971 Virginia amended its income tax laws to conform to federal law effective for taxable years beginning in 1972. 1971 Va.Acts, Ex.Sess., ch. 171 (the Conformity Act). "Federal taxable income" for corporations became the starting point for determining "Virginia taxable income." This conformity tax structure also contained certain transitional modifications. One of those transitional modifications, Sec. 58-151.0111(h) (repealed as obsolete by 1981 Va.Acts, ch. 402), allowed taxpayers to reduce their 1971 Virginia taxable income by:
7
[T]hat amount, if any, by which the adjusted basis of depreciable property determined for Virginia income tax purposes ... exceeds the adjusted basis for the same property for federal income tax purposes determined at the close of the same period.
8
This "Extra Depreciation Deduction" permitted such a large deduction that in 1974 the Virginia General Assembly amended Sec. 58-151.0111(h) to allow a three-year carry-over of any unused portion.
9
The Extra Depreciation Deduction was designed to bring the Virginia "adjusted basis" of a taxpayer's depreciable property "determined for Virginia income tax purposes" into line with the adjusted basis of those assets for federal tax purposes. Differences in the two bases existed, for example, because taxpayers could have used the straight-line method of calculating depreciation for Virginia income tax purposes while using an accelerated calculation for federal tax purposes.
10
In 1978 railroads in Virginia were made subject to the Virginia net income tax and relieved of the franchise tax on gross transportation receipts for taxable years beginning in 1979. 1978 Va.Acts, ch. 784. Accordingly, "federal taxable income" became the starting point for determining "Virginia taxable income" for RF & P and the other railroads. Although Railroads also became subject to certain transitional modifications similar to those enacted in 1972 under the Conformity Act, these transitional modifications did not include an adjustment to the basis of depreciable assets similar to the Extra Depreciation Deduction. Compare Va.Code Sec. 58-151.0111(h) (1974) with Sec. 58-151.03:2 (1983).
B. The 4-R Act
11
In 1976 Congress passed the Railroad Revitalization and Regulatory Reform Act effective February 5, 1979. Pub.L. No. 94-210, 90 Stat. 54 (1976). In 1978 Sec. 306 of the 4-R Act was recodified as part of the Revised Interstate Commerce Act, 49 U.S.C. Sec. 11503 (1982). See Pub.L. No. 95-473, 92 Stat. 1466 (1978). Although the recodification was not intended to effect any substantive change in the meaning of the 4-R Act, the language of the recodification differs significantly from the language of Sec. 306. This court has held previously that the language of Sec. 306 must be used for purposes of statutory analysis. Clinchfield R.R. v. Lynch, 700 F.2d 126, 128-29 n. 1 (4th Cir.1983).
12
Section 306 of the 4-R Act expressly declares that discriminatory state taxation of railroads constitutes an unreasonable and unjust discrimination against, and an undue burden upon, interstate commerce. Section 306(1) forbids a state, subdivision of a state, or any authority acting for a state or subdivision from:
13
(a) The assessment (but only to the extent of any portion based on excessive values as hereinafter described), for purposes of a property tax levied by any taxing district, of transportation property at a value which bears a higher ratio to the true market value of such transportation property than the ratio which the assessed value of all other commercial and industrial property in the same assessment jurisdiction bears to the true market value of all such other commercial and industrial property.
14
(b) The levy or collection of any tax on an assessment which is unlawful under subdivision (a).
15
(c) The levy or collection of any ad valorem property tax on transportation property at a tax rate higher than the tax rate generally applicable to commercial and industrial property in the same assessment jurisdiction.
16
(d) The imposition of any other tax which results in discriminatory treatment of a common carrier by railroad subject to this part.
17
Pub.L. No. 94-210, 90 Stat. 54 (1976) (emphasis added).
C. RF & P's Tax Returns
18
On its 1979 and 1980 Virginia income tax returns, RF & P claimed that it should not be taxed on gain realized on sales of nondepreciable property in 1979 and 1980 to the extent that the gain was attributable to increases in the value of that property prior to 1979 when it became subject to the net income tax. Therefore, RF & P deducted from its Virginia taxable income that portion of the gain from the sale or exchanges of nondepreciable property determined by multiplying the total gain by a fraction, the denominator of which was the total holding period of the property by RF & P and the numerator of which was the holding period of the property prior to 1979.
19
RF & P also claimed on its 1979 and 1980 Virginia income tax returns that it should not be taxed on gain realized from the sale of depreciable property to the extent that the gain was attributable to federal tax depreciation allowed or allowable prior to 1979. None of this depreciation had been allowed or allowable to RF & P as a deduction for Virginia tax purposes. Thus, RF & P deducted from its Virginia taxable income federal tax depreciation allowed or allowable prior to 1979 on depreciable property that it sold or exchanged in 1979 or 1980.
20
The Department denied the adjustments for nondepreciable and depreciable property and assessed additional taxes against RF & P. RF & P then filed an administrative appeal contesting these assessments on the ground that they violated Sec. 306 of the 4-R Act. RF & P also filed an amended Virginia income tax return for 1979 claiming an Extra Depreciation Deduction for its depreciable property owned on December 31, 1978. The amount of the deduction equaled the amount of depreciation claimed by RF & P for the property on its federal income tax returns prior to 1979, but only to the extent that this amount did not exceed the income otherwise taxable in 1979 for Virginia income tax purposes. This Extra Depreciation Deduction resulted in a refund claim of $1,066,475. The Department denied the Extra Depreciation Deduction claimed on RF & P's amended return and reaffirmed the disallowance of the nondepreciable property and depreciable property adjustments. RF & P then brought this action against the Department.
II
21
The first issue on appeal concerns the scope of Sec. 306(1)(d) of the 4-R Act. Section 306(1)(d) prohibits "[t]he imposition of any other tax which results in discriminatory treatment of a common carrier by railroad ..." (emphasis added). The district court interpreted the phrase "any other tax" to include only state and local property taxes and any other taxes enacted in lieu of a discriminatory property tax prohibited by Sec. 306(1)(a) through (c). The district court reached this limited interpretation of Sec. 306(1)(d) based upon its analysis of the legislative history behind Sec. 306, the overall structure and content of Sec. 306, and the principles of comity embodied in the Tax Anti-Injunction Act, 28 U.S.C. Sec. 1341 (1982). Thus, based on this interpretation the district court held that Sec. 306(1)(d) does not apply to allegedly discriminatory state net income taxes.
22
The federal and state courts uniformly have held that the "any other tax" language in Sec. 306(1)(d) is not limited to property taxes and other taxes imposed in lieu of the discriminatory property taxes prohibited by Sec. 306(1)(a) through (c). Alabama Great Southern R.R. v. Eagerton, 663 F.2d 1036 (11th Cir.1981) (Alabama franchise tax on railroads measured by the gross receipts from their intrastate business); Kansas City Southern Railway v. McNamara, 563 F.Supp. 199 (M.D.La.1983) (Louisiana gross receipts tax levied upon public utilities, including railroads); Atchison, Topeka & Santa Fe Railway v. Bair, 535 F.Supp. 68 (S.D.Iowa 1982) (Iowa special excise tax on railroads measured by the amount of fuel consumed to propel railway vehicles in the state); Atchison, Topeka & Santa Fe Railway v. Bair, 338 N.W.2d 338 (Iowa 1983), cert. denied, --- U.S. ----, 104 S.Ct. 1427, 79 L.Ed.2d 751 (1984) (Same). Similarly, the Eighth Circuit has suggested that it would follow the same approach. See Ogilvie v. State Board of Equalization, 657 F.2d 204, 210 (8th Cir.1981), cert. denied, 454 U.S. 1086, 102 S.Ct. 644, 70 L.Ed.2d 621 (1981) (purpose of Sec. 306 "was to prevent tax discrimination against railroads in any form whatsoever"); Trailer Train Co. v. State Board of Equalization, 710 F.2d 468, 472 n. 6 (8th Cir.1983) (Congress most likely intended "to broaden, not narrow, the scope of [Sec. 306] by making it applicable to all forms of state taxation rather than just property taxation"). The district court rejected this overwhelmingly contrary precedent as based upon a misreading or a nonreading of the legislative history.
23
We agree with the Eleventh Circuit that "[i]t would be difficult to imagine statutory language that would be less needful of construction than the 'any other' language used [in Sec. 306(1)(d) ]." Eagerton, 663 F.2d at 1040. Unlike subsections (a), (b), and (c) which deal with taxation of "transportation property," subsection (d) forbids "the imposition of any other tax which results in discriminatory treatment of a common carrier by railroad." (emphasis added). Thus, even without invoking any of the ordinary rules of statutory construction, we conclude that subsection (d) was intended as a catchall provision designed to prevent discriminatory taxation of a railroad carrier by any means. This view is consistent with the purpose of the 4-R Act which was "to prevent tax discrimination against railroads in any form whatsoever." Ogilvie, 657 F.2d at 210; Clinchfield R.R. v. Lynch, 700 F.2d at 128-29 n. 1, 134 (Sec. 306 is remedial legislation designed to eliminate discriminatory state tax practices that unreasonably burden interstate commerce). Accordingly, a journey into the jungle of legislative history is unnecessary because we hold that Sec. 306(1)(d), on its face, clearly and unambiguously prohibits all forms of discriminatory taxation of railroads.
24
In any event, however, the legislative history of the 4-R Act does not support a more limited construction of Sec. 306(1)(d) because nothing in the committee reports, debates, or other legislative history focuses specifically on the purpose of Sec. 306(1)(d).3 It is entirely reasonable to conclude that the legislative history is silent as to the purpose of Sec. 306(1)(d) because that subsection, inserted three weeks before the statute's passage, represented a last minute realization by Congress that prohibiting only discriminatory property taxes would not be enough relief. Both the Eleventh Circuit in Eagerton, 663 F.2d at 1041, and the Iowa Supreme Court in Bair, 338 N.W.2d at 343-46, reached this conclusion. Thus, the Virginia net income tax falls within the definition of "any other tax" prohibited by Sec. 306(1)(d), if it results in the discriminatory treatment of RF & P.
III
25
The second issue presented is whether the application of the Virginia corporate net income tax has discriminated against RF & P in violation of Sec. 306(1)(d). In determining whether the Virginia corporate net income tax discriminated4 against railroads, qua railroads, the district court compared railroads with that class of taxpayers which were newcomers to the corporate net income tax structure: corporations recently organized or foreign corporations moving to Virginia for the first time. The district court concluded that railroads must be compared with this class of taxpayers because, unlike other commercial and industrial taxpayers, railroads were not previously subject to the old Virginia net income tax structure. The district court found that railroads and other corporate newcomers to the Virginia corporate net income tax structure must simply take Virginia's tax structure, conformity and all, as they find it.
26
After comparing Virginia's tax treatment of railroads with its tax treatment of other similarly situated taxpayers, the district court concluded that the Virginia corporate net income tax did not discriminate against RF & P in violation of Sec. 306(1)(d). With respect to depreciable property, the district court found that the Conformity Act granted neither class of taxpayers the Extra Depreciation Deduction permitted other commercial and industrial taxpayers. Similarly, with respect to nondepreciable property, the district court found that gain from the sale or exchange of property is taxed only when the gain is realized, not as it accrues, and that the gain is only realized when it is sold or exchanged. Accordingly, the district court found no discrimination in Virginia's practice of taxing all of the gain realized on RF & P's sale or exchange of nondepreciable property, even though a portion of the gain accrued prior to 1979 when RF & P was not subject to the Virginia corporate net income tax.
27
RF & P argues that the district court erred in this conclusion because the district court compared railroads with the wrong class of taxpayers. According to RF & P, railroads should be compared to all other commercial and industrial taxpayers because, unlike other corporate newcomers to the Virginia corporate net income tax, railroads were previously subject to a franchise tax measured by gross transportation receipts. RF & P argues that when compared with all other commercial and industrial taxpayers, the Virginia corporate net income tax discriminates (as measured by its dollars and cents impact) against railroads as a class because the Conformity Act granted the other commercial and industrial taxpayers an Extra Depreciation Deduction but denied that deduction to railroads. Finally, RF & P contends that the Virginia corporate net income tax discriminates against railroads with respect to nondepreciable property because had RF & P sold its nondepreciable property under Virginia's gross transportation receipts tax, the gain realized on the sale of that property would not have been taxed.
28
The Virginia corporate net income tax does not discriminate against railroads in violation of Sec. 306(1)(d) with respect to their depreciable property. To argue that the railroads are entitled to some equivalent of the Extra Depreciation Deduction on their depreciable property is to argue that the railroads were situated similarly to those commercial and industrial taxpayers who were brought into conformity with the federal income tax structure in 1972. This simply is not the case. In 1972 the railroads were not paying Virginia income tax. As the district court noted, "the Extra Depreciation Deduction was designed for corporate taxpayers moving from one income taxation scheme to another income tax scheme, not from a non income income tax scheme into an income tax scheme for the first time." 591 F.Supp. at 226 (emphasis in original). The Extra Depreciation Deduction had no relevance to railroads in Virginia because prior to January 1, 1979, railroads had no Virginia income tax basis in their depreciable property.
29
Furthermore, the Virginia corporate net income tax does not discriminate against railroads with respect to their nondepreciable property. It is axiomatic in income tax law that gain is not taxed until realized. Simply because prior to 1979 railroads were not under the Virginia corporate net income tax scheme (and thus any "gain" from the sale of an asset was nontaxable) gives them no logical reason for arguing that the increase in value of that property up to 1979 should somehow be exempt from Virginia income tax. No such deduction is provided by Virginia's income tax law to any other corporation newly coming under Virginia's corporate income tax.
30
Accordingly, the decision of the district court is
31
REVERSED IN PART.
32
AFFIRMED IN PART.
1
Because we hold that the Virginia net income tax, as applied, does not discriminate against railroads in violation of Sec. 306(1)(d) of the 4-R Act, we need not consider whether Sec. 306(2) authorizes or permits federal courts to order retroactive refund relief
2
The parties have stipulated to the facts
3
The district court cited two committee reports and a Conference Committee Report as illustrating Congress' intent that Sec. 306(1)(d) be limited in scope. The two committee reports referred to a House Amendment which contained an "any other tax" clause and stated that this provision would prohibit "the imposition of a discriminatory 'in lieu tax' ". S.Rep. No. 94-585, 94th Cong., 1st Sess. 139 (1975); H.R.Rep. No. 94-725, 94th Cong., 1st Sess. 77 (1975). The Conference Committee Report described the second conference substitute as following the Senate bill "except ... limited the provision to taxation of railroad property." S.Rep. No. 94-595, 94th Cong. 2d Sess. 165-66 (1976), reprinted in [1976] U.S.Code Cong. & Ad.News 14, 148, 180-181; S.Rep. No. 94-585, 94th Cong., 1st Sess. 138-39 (1975) (emphasis added)
We are unconvinced that these pieces of legislative history indicate a congressional intent to limit the scope of Sec. 306(1)(d). First, the two committee reports discussing an "in lieu tax" provision referred only to a House Amendment which was never passed into law. See Rep. No. 94-595, 94th Cong., 2d Sess. 166 (1976), reprinted in [1976] U.S.Code Cong. & Ad.News 148, 181. Second, the Conference Committee Report which stated that the second conference committee followed the Senate bill "except ... limited the provision to taxation of railroad property," reflected nothing more than a limitation on the type of taxpayers to be protected (railroads as opposed to "any common or contract carrier subject to the Interstate Commerce Act") and had nothing to do with limiting the type of taxes prohibited by Sec. 306(1)(d).
4
Both parties agree that "discrimination" must be given its "ordinary meaning": "[T]o make a distinction in favor of or against a person or thing on the basis of the group, class, or category to which the person or thing belongs, rather than according to actual merit." Random House Dictionary 410 (unabridged ed. 1976). In essence, discrimination is a "failure to treat all persons equally where no reasonable distinction can be found between those favored and those not favored." Baker v. California Land Title Co., 349 F.Supp. 235, 238 (C.D.Cal.1972), aff'd, 507 F.2d 895 (9th Cir.1974), cert. denied, 422 U.S. 1046, 95 S.Ct. 2664, 45 L.Ed.2d 699 (1975)
| {
"pile_set_name": "FreeLaw"
} |
148 F.3d 956
127 Ed. Law Rep. 740
LITTLE ROCK SCHOOL DISTRICT, Plaintiff--Appellee,Servicemaster Management Services, Intervenor Plaintiff,Blytheville School District; Bryant School District; FortSmith School District; West Memphis School District;Altus-Denning School District; Ashdown School District;Barton-Lexa School District; Batesville School District;Biggers-Reyno School District; Black Rock School District;Bright Star School District; Brinkley School District;Centerpoint School District; Clarendon School District;Cotton Plant School District; Cutter Morning Star SchoolDistrict; Dewitt School District; Dollarway SchoolDistrict; Foreman School District; Fountain Lake SchoolDistrict; Gillett School District; Glen Rose SchoolDistrict; Guy-Perkins School District; Hoxie SchoolDistrict; Jonesboro School District; Kirby SchoolDistrict; Lavaca School District; Lewisville SchoolDistrict; Magazine School District; Malvern SchoolDistrict; Mammoth Spring School District; Manila SchoolDistrict; Maynard School District; Oden School District;Ozark School District; Plainview-Rover School District;Pocahontas School District; Prairie Grove School District;South Conway School District; Spring Hill School District;Stamps School District; Stephens School District; TurrellSchool District; Van Buren School District; Warren SchoolDistrict; Watson Chapel School District; West Fork SchoolDistrict; White Hall School District; Winslow SchoolDistrict; Wonderview School District; Yellville-SummitSchool District; Alma School District; Alread SchoolDistrict; Beebe School District; Bentonville SchoolDistrict; Bergman School District; Berryville SchoolDistrict; Blevins School District; Booneville SchoolDistrict; Bradford School District; Buffalo Island SchoolDistrict; Caddo Hills School District; Carthage SchoolDistrict; Charleston School District; Corning SchoolDistrict; County Line Public School District; CrossettSchool District; Decatur School District; Dermott SchoolDistrict; Dumas School District; Elaine School District;Fordyce School District; Gosnell School District; GradySchool District; Green County Technical Schools; GreenForest School District; Greenland School District;Greenwood School District; Harrisburg School District;Hamburg School District; Holly Grove School District;Huttig School District; Jackson County School District;Junction City School District; Lakeside School District;Lead Hill School District; Leslie School District; MarionSchool District; Marshall School District; MayflowerSchool District; McGehee School District; MountainburgSchool District; Nettleton School District; Newport SchoolDistrict; Ola School District; Paragould School District;Parkin School District; Pleasant View School District;Quitman School District; Rural Special School District;Saratoga School District; Searcy School District;Smackover School District; Southside School District # 2Bee Branch; Strong School District; Stuttgart SchoolDistrict; Valley Spring School District; Waldron SchoolDistrict; Weiner School District; Wickes School District;and Wynne School District; Intervenor Plaintiffs--Appellants,North Little Rock Classroom Teachers Association; PulaskiCounty Association of Classroom Teachers; Little RockClassroom Teachers Association; Ed Bullington; KhayyamDavis; John Harrison; Alvin Hudson; Tatia Hudson; MiltonJackson; Lorene Joshua; Leslie Joshua; Stacy Joshua;Wayne Joshua; Katherine Knight; Sara Facen; DerrickMiles; Janice Miles; John M. Miles; NAACP; Joyce Person;Brian Taylor; Hilton Taylor; Parsha Taylor; RobertWillingham; and Tonya Willingham, Intervenor Plaintiffs,v.NORTH LITTLE ROCK SCHOOL DISTRICT; and Pulaski CountySpecial School District, Defendants--Appellees,State of Arkansas, Defendant,Office of Desegregation Monitor, Claimant,Northeast Arkansas School District, Movant.Dale CHARLES; Robert L. Brown, Sr.; Gwen Hevey Jackson;Diane Davis; and Raymond Frazier, Plaintiffs,v.PULASKI COUNTY BOARD OF EDUCATION; Patricia Gee,Individually and in Her Official Capacity as a Member of theBoard of Education of the Little Rock School District, aPublic Body; George Cannon, Dr., Individually and in HisOfficial Capacity as Member of the Board of Education of theLittle Rock School District, a Public Body; KatherineMitchell, Dr., Individually and in Her Official Capacity asa Member of the Board of Education of the Little Rock SchoolDistrict, a Public Body; W.D. Hamilton, also known as BillHamilton, Individually and in His Official Capacity as aMember of the Board of Education of the Little Rock SchoolDistrict, a Public Body; Cecil Bailey, Individually and inHis Official Capacity as a Member of the Pulaski CountyBoard of Education, a Public Corporate; Thomas Broughton,Individually and in His Official Capacity as a Member of thePulaski County Board of Education, a Public Corporate; andMartin Zoldessy, Dr., Individually and in His OfficialCapacity as a Member of the Pulaski County Board ofEducation, a Public Corporate, Defendants,Arkansas Department of Education, Respondent.LITTLE ROCK SCHOOL DISTRICT, Plaintiff--Appellee,Servicemaster Management Services; Blytheville SchoolDistrict; Bryant School District; Fort Smith SchoolDistrict; West Memphis School District; Altus-DenningSchool District; Ashdown School District; Barton-LexaSchool District; Batesville School District; Biggers-ReynoSchool District; Black Rock School District; Bright StarSchool District; Brinkley School District; CenterpointSchool District; Clarendon School District; Cotton PlantSchool District; Cutter Morning Star School District;Dewitt School District; Dollarway School District; ForemanSchool District; Fountain Lake School District; GillettSchool District; Glen Rose School District; Guy-PerkinsSchool District; Hoxie School District; Jonesboro SchoolDistrict; Kirby School District; Lavaca School District;Lewisville School District; Magazine School District;Malvern School District; Mammoth Spring School District;Manila School District; Maynard School District; OdenSchool District; Ozark School District; Plainview-RoverSchool District; Pocahontas School District; Prairie GroveSchool District; South Conway School District; Spring HillSchool District; Stamps School District; Stephens SchoolDistrict; Turrell School District; Van Buren SchoolDistrict; Warren School District; Watson Chapel SchoolDistrict; West Fork School District; White Hall SchoolDistrict; Winslow School District; Wonderview SchoolDistrict; Yellville-Summit School District; Alma SchoolDistrict; Alread School District; Beebe School District;Bentonville School District; Bergman School District;Berryville School District; Blevins School District;Booneville School District; Bradford School District;Buffalo Island School District; Caddo Hills SchoolDistrict; Carthage School District; Charleston SchoolDistrict; Corning School District; County Line PublicSchool District; Crossett School District; Decatur SchoolDistrict; Dermott School District; Dumas School District;Elaine School District; Fordyce School District; GosnellSchool District; Grady School District; Greeb CountyTechnical Schools; Green Forest School District; GreenlandSchool District; Greenwood School District; HarrisburgSchool District; Hamburg School District; Holly GroveSchool District; Huttig School District; Jackson CountySchool District; Junction City School District; LakesideSchool District; Lead Hill School District; Leslie SchoolDistrict; Marion School District; Marshall SchoolDistrict; Mayflower School District; McGehee SchoolDistrict; Mountainburg School District; Nettleton SchoolDistrict; Newport School District; Ola School District;Paragould School District; Parkin School District;Pleasant View School District; Quitman School District;Rural Special School District; Saratoga School District;Searcy School District; Smackover School District;Southside School District # 2 Bee Branch; Strong SchoolDistrict; Stuttgart School District; Valley Spring SchoolDistrict; Waldron School District; Weiner School District;Wickes School District; Wynne School District; NorthLittle Rock Classroom Teachers Association; PulaskiAssociation of Classroom Teachers; Little Rock ClassroomTeachers Association; Ed Bullington; Khayyam Davis; JohnHarrison; Alvin Hudson; Tatia Hudson; Milton Jackson;Lorene Joshua; Leslie Joshua; Stacy Joshua; Wayne Joshua;Katherine Knight; Sara Facen; Derrick Miles; JaniceMiles; John M. Miles; NAACP; Joyce Person; Brian Taylor;Hilton Taylor; Parsha Taylor; Robert Willingham; andTonya Willingham, Intervenor Plaintiffs,v.NORTH LITTLE ROCK SCHOOL DISTRICT; and Pulaski CountySpecial School District, Defendants--Appellees,State of Arkansas, Defendant,Office of Desegregation Monitor, Claimant,Northeast Arkansas School District, Movant.Dale CHARLES; Robert L. Brown, Sr.; Gwen Hevey Jackson;Diane Davis; and Raymond Frazier, Plaintiffs,v.PULASKI COUNTY BOARD OF EDUCATION; Patricia Gee,Individually and in Her Official Capacity as a Member of theBoard of Education of the Little Rock School District, aPublic Body; George Cannon, Dr., Individually and in HisOfficial Capacity as Member of the Board of Education of theLittle Rock School District, a Public Body; KatherineMitchell, Dr., Individually and in Her Official Capacity asa Member of the Board of Education of the Little Rock SchoolDistrict, a Public Body; W.D. Hamilton, also known as BillHamilton, Individually and in His Official Capacity as aMember of the Board of Education of the Little Rock SchoolDistrict, a Public Body; Cecil Bailey, Individually and inHis Official Capacity as a Member of the Pulaski CountyBoard of Education, a Public Corporate; and ThomasBroughton, Individually and in His Official Capacity as aMember of the Pulaski County Board of Education, a PublicCorporate; Defendants,Arkansas Department of Education, Respondent--Appellant,Martin Zoldessy, Dr., Individually and in His OfficialCapacity as a Member of the Pulaski County Boardof Education, a Public Corporate, Defendant.LITTLE ROCK SCHOOL DISTRICT, Plaintiff--Appellee,Servicemaster Management Services; Blytheville SchoolDistrict; Bryant School District; Fort Smith SchoolDistrict; West Memphis School District; Altus-DenningSchool District; Ashdown School District; Barton-LexaSchool District; Batesville School District; Biggers-ReynoSchool District; Black Rock School District; Bright StarSchool District; Brinkley School District; CenterpointSchool District; Clarendon School District; Cotton PlantSchool District; Cutter Morning Star School District;Dewitt School District; Dollarway School District; ForemanSchool District; Fountain Lake School District; GillettSchool District; Glen Rose School District; Guy-PerkinsSchool District; Hoxie School District; Jonesboro SchoolDistrict; Kirby School District; Lavaca School District;Lewisville School District; Magazine School District;Malvern School District; Mammoth Spring School District;Manila School District; Maynard School District; OdenSchool District; Ozark School District; Plainview-RoverSchool District; Pocahontas School District; Prairie GroveSchool District; South Conway School District; Spring HillSchool District; Stamps School District; Stephens SchoolDistrict; Turrell School District; Van Buren SchoolDistrict; Warren School District; Watson Chapel SchoolDistrict; West Fork School District; White Hall SchoolDistrict; Winslow School District; Wonderview SchoolDistrict; Yellville-Summit School District; Alma SchoolDistrict; Alread School District; Beebe School District;Bentonville School District; Bergman School District;Berryville School District; Blevins School District;Booneville School District; Bradford School District;Buffalo Island School District; Caddo Hills SchoolDistrict; Carthage School District; Charleston SchoolDistrict; Corning School District; County Line PublicSchool District; Crossett School District; Decatur SchoolDistrict; Dermott School District; Dumas School District;Elaine School District; Fordyce School District; GosnellSchool District; Grady School District; Greeb CountyTechnical Schools; Green Forest School District; GreenlandSchool District; Greenwood School District; HarrisburgSchool District; Hamburg School District; Holly GroveSchool District; Huttig School District; Jackson CountySchool District; Junction City School District; LakesideSchool District; Lead Hill School District; Leslie SchoolDistrict; Marion School District; Marshall SchoolDistrict; Mayflower School District; McGehee SchoolDistrict; Mountainburg School District; Nettleton SchoolDistrict; Newport School District; Ola School District;Paragould School District; Parkin School District;Pleasant View School District; Quitman School District;Rural Special School District; Saratoga School District;Searcy School District; Smackover School District;Southside School District # 2 Bee Branch; Strong SchoolDistrict; Stuttgart School District; Valley Spring SchoolDistrict; Waldron School District; Weiner School District;Wickes School District; Wynne School District; NorthLittle Rock Classroom Teachers Association; PulaskiAssociation of Classroom Teachers; Little Rock ClassroomTeachers Association; Ed Bullington; Khayyam Davis; JohnHarrison; Alvin Hudson; Tatia Hudson; Milton Jackson;Lorene Joshua; Leslie Joshua; Stacy Joshua; Wayne Joshua;Katherine Knight; Sara Facen; Derrick Miles; JaniceMiles; John M. Miles; NAACP; Joyce Person; Brian Taylor;Hilton Taylor; Parsha Taylor; Robert Willingham; andTonya Willingham, Intervenor Plaintiffs,v.NORTH LITTLE ROCK SCHOOL DISTRICT; and Pulaski CountySpecial School District, Defendants--Appellees,State of Arkansas, Defendant,Office of Desegregation Monitor, Claimant,Northeast Arkansas School District, Movant.Dale CHARLES; Robert L. Brown, Sr.; Gwen Hevey Jackson;Diane Davis; and Raymond Frazier, Plaintiffs,v.PULASKI COUNTY BOARD OF EDUCATION; Patricia Gee,Individually and in Her Official Capacity as a Member of theBoard of Education of the Little Rock School District, aPublic Body; George Cannon, Dr., Individually and in HisOfficial Capacity as Member of the Board of Education of theLittle Rock School District, a Public Body; KatherineMitchell, Dr., Individually and in Her Official Capacity asa Member of the Board of Education of the Little Rock SchoolDistrict, a Public Body; W.D. Hamilton, also known as BillHamilton, Individually and in His Official Capacity as aMember of the Board of Education of the Little Rock SchoolDistrict, a Public Body; Cecil Bailey, Individually and inHis Official Capacity as a Member of the Pulaski CountyBoard of Education, a Public Corporate; and ThomasBroughton, Individually and in His Official Capacity as aMember of the Pulaski County Board of Education, a PublicCorporate; Defendants,Arkansas Department of Education, Respondent--Appellant,Martin Zoldessy, Dr., Individually and in His OfficialCapacity as a Member of the Pulaski County Boardof Education, a Public Corporate, Defendant.LITTLE ROCK SCHOOL DISTRICT, Plaintiff--Appellee,Servicemaster Management Services, Intervenor Plaintiff,Blytheville School District; Bryant School District; FortSmith School District; West Memphis School District;Altus-Denning School District; Ashdown School District;Barton-Lexa School District; Batesville School District;Biggers-Reyno School District; Black Rock School District;Bright Star School District; Brinkley School District;Centerpoint School District; Clarendon School District;Cotton Plant School District; Cutter Morning Star SchoolDistrict; Dewitt School District; Dollarway SchoolDistrict; Foreman School District; Fountain Lake SchoolDistrict; Gillett School District; Glen Rose SchoolDistrict; Guy-Perkins School District; Hoxie SchoolDistrict; Jonesboro School District; Kirby SchoolDistrict; Lavaca School District; Lewisville SchoolDistrict; Magazine School District; Malvern SchoolDistrict; Mammoth Spring School District; Manila SchoolDistrict; Maynard School District; Oden School District;Ozark School District; Plainview-Rover School District;Pocahontas School District; Prairie Grove School District;South Conway School District; Spring Hill School District;Stamps School District; Stephens School District; TurrellSchool District; Van Buren School District; Warren SchoolDistrict; Watson Chapel School District; West Fork SchoolDistrict; White Hall School District; Winslow SchoolDistrict; Wonderview School District; Yellville-SummitSchool District; Alma School District; Alread SchoolDistrict; Beebe School District; Bentonville SchoolDistrict; Bergman School District; Berryville SchoolDistrict; Blevins School District; Booneville SchoolDistrict; Bradford School District; Buffalo Island SchoolDistrict; Caddo Hills School District; Carthage SchoolDistrict; Charleston School District; Corning SchoolDistrict; County Line Public School District; CrossettSchool District; Decatur School District; Dermott SchoolDistrict; Dumas School District; Elaine School District;Fordyce School District; Gosnell School District; GradySchool District; Greeb County Technical Schools; GreenForest School District; Greenland School District;Greenwood School District; Harrisburg School District;Hamburg School District; Holly Grove School District;Huttig School District; Jackson County School District;Junction City School District; Lakeside School District;Lead Hill School District; Leslie School District; MarionSchool District; Marshall School District; MayflowerSchool District; McGehee School District; MountainburgSchool District; Nettleton School District; Newport SchoolDistrict; Ola School District; Paragould School District;Parkin School District; Pleasant View School District;Quitman School District; Rural Special School District;Saratoga School District; Searcy School District;Smackover School District; Southside School District # 2Bee Branch; Strong School District; Stuttgart SchoolDistrict; Valley Spring School District; Waldron SchoolDistrict; Weiner School District; Wickes School District;and Wynne School District, Intervenor Plaintiffs--Appellants,North Little Rock Classroom Teachers Association; PulaskiAssociation of Classroom Teachers; Little Rock ClassroomTeachers Association; Ed Bullington; Khayyam Davis; JohnHarrison; Alvin Hudson; Tatia Hudson; Milton Jackson;Lorene Joshua; Leslie Joshua; Stacy Joshua; Wayne Joshua;Katherine Knight; Sara Facen; Derrick Miles; JaniceMiles; John M. Miles; NAACP; Joyce Person; Brian Taylor;Hilton Taylor; Parsha Taylor; Robert Willingham; andTonya Willingham, Intervenor Plaintiffs,v.NORTH LITTLE ROCK SCHOOL DISTRICT; and Pulaski CountySpecial School District, Defendants--Appellees,State of Arkansas, Defendant,Office of Desegregation Monitor, Claimant,Northeast Arkansas School District, Movant.Dale CHARLES; Robert L. Brown, Sr.; Gwen Hevey Jackson;Diane Davis; and Raymond Frazier, Plaintiffs,v.PULASKI COUNTY BOARD OF EDUCATION; Patricia Gee,Individually and in Her Official Capacity as a Member of theBoard of Education of the Little Rock School District, aPublic Body; George Cannon, Dr., Individually and in HisOfficial Capacity as Member of the Board of Education of theLittle Rock School District, a Public Body; KatherineMitchell, Dr., Individually and in Her Official Capacity asa Member of the Board of Education of the Little Rock SchoolDistrict, a Public Body; W.D. Hamilton, also known as BillHamilton, Individually and in His Official Capacity as aMember of the Board of Education of the Little Rock SchoolDistrict, a Public Body; Cecil Bailey, Individually and inHis Official Capacity as a Member of the Pulaski CountyBoard of Education, a Public Corporate; and ThomasBroughton, Individually and in His Official Capacity as aMember of the Pulaski County Board of Education, a PublicCorporate; Defendants,Arkansas Department of Education, Respondent,Martin Zoldessy, Dr., Individually and in His OfficialCapacity as a Member of the Pulaski County Boardof Education, a Public Corporate, Defendants.
Nos. 97-1794, 97-1855, 97-2394 and 97-2406.
United States Court of Appeals,Eighth Circuit.
Submitted Feb. 24, 1998.Decided July 1, 1998.Rehearing Denied Aug. 4, 1998.
Timothy Gauger, Assistant Attorney General, Little Rock, AR, argued (James M. Llewellyn, Jr., on the brief), for Appellants.
Christopher John Heller, Little Rock, AR, argued, for Appellee Little Rock School District.
Stephen W. Jones, Little Rock, AR, argued (John C. Fendley, Jr., Allen Carney, and M. Samuel Jones, III, on the brief), for Appellee North Little Rock School District.
Christopher John Heller, Little Rock, AR, Stephen W. Jones, Little Rock, AR, argued, for Appellee Pulaski County Special School District.
Before RICHARD S. ARNOLD,1 Chief Judge, HEANEY and WOLLMAN, Circuit Judges.
RICHARD S. ARNOLD, Chief Judge.
In these appeals we are asked once again to interpret certain provisions of the agreement by which the parties to the Pulaski County, Arkansas, school-desegregation case settled their dispute. The question presented is whether changes made by the State of Arkansas in the funding of retirement and health insurance for teachers violated that agreement. The Little Rock School District, the Pulaski County Special School District, and the North Little Rock School District (which we shall collectively call "the districts") claim that by making the changes in question the State violated undertakings it made in the settlement agreement. The District Court, Susan Webber Wright, J., held for the districts on summary judgment. We affirm.
I.
1
This case has to do with two important categories of school operating expenses: contributions for teacher retirement and employees' health insurance. When the parties agreed to settle this case, in 1989, the extant system of school funding by the State of Arkansas provided for direct payment by the State of both of these categories of costs. The General Assembly appropriated funds earmarked for these purposes. These funds were separate from another, larger, appropriation for general State aid to public school districts, generally known as Minimum Foundation Program Aid (MFPA). We shall call this system of funding, under which the State separately paid for teacher retirement and health insurance, the Act 34 system, after Act 34 of 1983 (Ex.Sess.), codified as Ark.Code Ann. §§ 6-20-301 et seq. (Michie Repl.1993)(repealed in large part 1995).
2
In 1995, the General Assembly enacted a new system of school funding. Separate appropriations for teacher retirement and health insurance were no longer made. Each local school district, including the districts involved in this case, was required to pay its own contributions for teacher retirement, Act 1194 of 1995, § 13, codified as Ark.Code Ann. § 24-7-103 (Michie Repl.1996), and health insurance, Act 1194 of 1995, § 14, codified as Ark.Code Ann. § 6-17-1117 (Michie Supp.1997). Districts began to receive their State aid in one large pot, so to speak, combining what had been called MFPA with funds that under the previous system had been earmarked for teacher retirement and health insurance. (There were refinements and exceptions to this system, but our general description is sufficient for present purposes.) Under Act 917 of 1995, codified as Ark.Code Ann. §§ 6-20-301 et seq. (Michie Supp.1997)--the Equitable School Finance System Act of 1995, this new general fund was apportioned among the several districts in accordance with two main criteria: the number of pupils, called Average Daily Membership (ADM), and the wealth of the districts, with poorer districts getting relatively more money, in order to reduce the disparity in per-pupil expenditures between the poorer and the wealthier districts across the State. This change was made in response to a decision of the Chancery Court of Pulaski County, Arkansas, which had held the disparity in funding violative of the State Constitution. Lake View Sch. Dist. v. Tucker, No. 92-5318 (Pulaski Co., Ark., Ch. Ct., Nov. 9, 1994).
3
The difficulty with this change, from the point of view of the three Pulaski County districts, was that it affected, to their disadvantage, the basis on which funds from the State would be available to them for teacher-retirement and health-insurance purposes. These districts, as we shall explain further later in this opinion, are "employee heavy." They have proportionally more employees, including teachers, than they have pupils, when compared with school districts generally throughout the State. This is so at least partly because of special desegregation obligations imposed on the districts by the settlement agreement. Funds distributed according to a formula heavily influenced by ADM, therefore, are not so great as they would be if the earlier system, which simply funded retirement and health insurance for all employees, generally speaking, had been continued. During fiscal year 1995-96, the sum total of State aid received by the districts was more, in absolute dollar terms, than it had been in 1994-95 under the Act 34 system, but it was less than it would have been had the Act 34 system, including earmarked funding for retirement and health insurance, been retained.
4
It is now time to describe the provisions of the settlement agreement that, according to the districts, were violated by these changes. Two sections of the agreement are principally at issue,2 Sections II.E and II.L. The relevant part of Section II.E reads as follows:
5
In addition to any payment described elsewhere in this agreement, the State will continue to pay the following costs:
6
* * * * * *
7
(6) The State's share of any and all programs for which the Districts now receive State funding.
Section II.L reads as follows:
8
The State shall take no action (including the enactment of legislation) for the purpose of retaliating against the Districts (including retaliatory failure to increase State aid and retaliatory reduction in State aid) because of this Litigation or this settlement. The State will enact no legislation which has a substantial adverse impact on the ability of the Districts to desegregate. Fair and rational adjustments to the funding formula which have general applicability but which reduce the proportion of State aid to any of the Districts shall not be considered to have an adverse impact on the desegregation of the Districts.
9
The District Court held, in brief, that teacher-retirement and health-insurance funding, as they existed under the former system of public school financing, were "programs" within the meaning of Section II.E. The funding formula for such programs, the Court said, citing our opinion in Little Rock Sch. Dist. v. Pulaski County Special Sch. Dist., 83 F.3d 1013 (8th Cir.1996), could be adjusted in a way that is generally applicable to all districts, but only if the adjustment is "fair and rational," in the words of Section II.L. The changes at issue are not "fair and rational" in the present context because they work to the disadvantage of the three districts. The new funding scheme does not take into account the number of employees, but only ADM and the districts' wealth. The three districts are "employee heavy," as we said in Little Rock Sch. Dist., supra, 83 F.3d at 1018. The changes in funding for teacher retirement and health insurance therefore violate the settlement agreement, the Court held.II.
10
The State, acting through the Arkansas Department of Education, appeals. The Alma School District and 110 other districts from all parts of the State, also appeal, having been allowed by the District Court to intervene for this purpose. The intervenors are apprehensive that if the three Pulaski County districts win, securing additional funding for themselves, the State money going to the intervenor districts will be reduced. (This is not necessarily true, but we understand why the intervenors feel they have an interest to protect.)
11
Appellants' first argument is that it was error to grant summary judgment because there were genuine issues of material fact that needed to be tried. The first such fact, the State says, is whether funds specifically earmarked for teacher retirement and health insurance are now being distributed as part of the new system of Equalization Funding. We cannot see why this "fact"--if it really is a fact, instead of just a description of a legislative change in how the State distributes aid to local school districts--is important or material. The essential nature of the change is undeniable. The State used to pay separately for teacher retirement and health insurance, and it did so on a basis that necessarily took into account the number of each district's employees. Money still goes to the districts that may be used for these purposes, but the amount has been folded into the over-all Equalization Funding system, and it no longer has anything to do with numbers of employees. As the District Court phrased it, "items like teacher retirement and health insurance, which were previously paid directly by the State, were put into one large pool." Little Rock Sch. Dist. v. Pulaski County Special Sch. Dist., No. LR-C-82-866, slip op. 9 (E.D. Ark., memorandum opinion and order filed Feb. 18, 1997). Whether this change is characterized as a complete abandonment of State aid for teacher retirement and health insurance, or simply as a change in the way the State chooses to fund these programs (a description which seems more realistic to us) is not important to the result in this case.
12
The second fact the State claims was in genuine dispute was whether the new funding system distributes funds on a "pure" per-student, or ADM, basis. The State says the districts took that position in the District Court, whereas in fact the new funding system is based not only on ADM but also the wealth of each individual district. In our view, it does not matter what position the districts took below. The important question is on what basis the District Court acted, and that Court clearly did not think or say that the new system was based only on ADM. "[T]he new funding scheme," the Court said, "is based upon ADM, equalized by the wealth of the district." Little Rock Sch. Dist. v. Pulaski County Special Sch. Dist., No. LR-C-82-866, slip op. 5 (E.D. Ark., memorandum opinion and order filed Apr. 22, 1997) (emphasis supplied). The key point is not whether the new system is based only on ADM, but that it gives no weight at all to numbers of employees.
13
So we agree with the District Court that there were no genuine issues of material fact. That being so, was it right to enter judgment for the districts as a matter of law? We think the answer is yes. To begin with, there is no doubt that the teacher-retirement and health-insurance funding systems in effect at the time the settlement agreement was signed, in 1989, are "programs" within the meaning of Section II.E. In Little Rock Sch. Dist., supra, 83 F.3d at 1017-18, we held that the State's payment of workers' compensation costs was such a "program," and we see no way to distinguish the present case. Our opinion in that case points the way towards the proper solution of the present appeal. There, we had before us two distinct actions of the State: first, a decision to discontinue entirely State payments for workers' compensation for employees of school districts, and, second, the State's decision to distribute, as an interim measure, certain sums as "seed money" to help school districts make the transition to paying their own workers' compensation costs. We held that the first decision did not violate the settlement agreement, but that the second one did. Explaining this result, we said:[W]e do not believe that the State's action regarding the "program" necessarily violates the Settlement Agreement. The program in effect at the time of the Settlement Agreement, as we see it, was equal State funding of workers' compensation for all school districts. Thus, the State can change its funding scheme for workers' compensation, so long as the change is, in the words of the Settlement Agreement, "fair and rational" and of "general applicability."
14
We see this portion of the Settlement Agreement as an anti-retaliation clause. Its purpose, by its very words, is to prevent the State from cutting other programs in order to pay for its desegregation commitments. If, for example, the State had passed a statute decreasing or eliminating workers' compensation payments for the settling districts only, while maintaining its system of paying the costs to other school districts, this portion of the Settlement Agreement would clearly have been offended. The State did not do that, however. Rather, it changed the funding formula for all districts in the State. So long as that change affects all districts to the same degree, it does not run afoul of the Settlement Agreement.
15
That, however, does not end our inquiry. When the State disbursed "seed money" to help school districts make the transition to paying their own workers' compensation costs, it paid about one-half of the expense statewide. In the Pulaski County districts, it paid only about one-third of the expense. This disparity arose because the State's formula used enrollment rather than number of employees to determine how much money each district would receive. The Pulaski County districts are employee heavy compared to other districts, increasing their workers' compensation costs. This result is precisely what the anti-retaliation clause was meant to prevent. It funds the Pulaski County districts to a lesser degree than other districts in the state. It is of no moment that the State reached this result in a mathematically consistent manner. The District Court correctly held that the State must disburse seed money to the Pulaski County districts in the same percentage as it does statewide.
16
83 F.3d at 1018.
17
Thus, we read Sections II.E and II.L together, in an attempt to make sense out of them as a unified whole. The State's discontinuance of payment for workers' compensation, because it was made on an even-handed basis and applicable generally to all school districts, was, in our judgment, not a violation of paragraph II.E. Reading E and L together, we took the view that the State could discontinue a funding program if it did so in a generally applicable manner and on a fair and rational basis.3 The State's reason for changing its full, no-questions-asked funding of workers' compensation was to give the individual school districts a financial incentive to reduce workers' compensation premiums, by paying more attention to safety in the workplace, for example. This purpose, combined with the fact that the change affected all school districts equally, convinced us that the change did not violate Section II.E. In effect, we read the last part of Section II.L, referring to "[f]air and rational adjustments to [a] ... funding formula which have general applicability ...," as modifying not only the specific prohibitions of Section II.L, but also the provisions of Section II.E(6).
18
With this previous opinion in mind, we agree with the District Court that the actions taken by the State in the present case closely resemble the "seed money" issue in the previous case. "Seed money" disbursed by the State covered about one-half of workers' compensation costs statewide, while paying only about one-third of this expense for the three Pulaski County districts. The new funding system for teacher-retirement and health-insurance costs produces the same sort of disparity, though the exact amount of the disparity is open to debate. Because the three Pulaski County districts are "employee heavy," as noted above, when compared to school districts in Arkansas generally, the State funds they are now receiving cover proportionally less of their teacher-retirement and health-insurance costs. The District Court explained the matter in terms we find persuasive. We quote from the Court's order on teacher retirement, but the language applies equally to health insurance:
19
The Court thus finds that there is no genuine factual dispute that instead of directly funding each district based upon the number of employees, the State has included funds for teacher retirement in the new funding scheme which distributes funds on a per ADM basis equalized by the wealth of the district. Just as the workers' compensation "seed money" formula worked to the detriment of the employee-heavy Pulaski County school districts, so too does the distribution of teacher retirement contributions through the new funding formula give the districts less money to fund teacher retirement. While the three Pulaski County school districts may fare better under the new funding scheme from a state aid perspective, there is no question that the amount of their teacher retirement funding, previously directly funded by the State based upon the eligible salaries paid to their employees, will be reduced and result in unequal state funding.
20
There is a difference between the State's decision not to fund workers' compensation and to end direct state funding of teacher retirement. The rationale concerning workers' compensation was that the shift of responsibility to the school districts would prompt them to take measures to reduce their workers' compensation costs. Although the State argues the same rationale applies concerning teacher retirement, there are factors, including desegregation obligations, beyond the control of school districts which dictate the number of employees and salaries of teachers. For example, the LRSD desegregation plan obligates the district to implement a four-year-old program, to staff incentive schools with instructional aides, theme specialists, computer aides, art teachers, physical education teachers, social workers, counselors, auxiliary teachers, media specialists, and supervision aides, among many others. The magnet and interdistrict schools require additional staff such as theme and curriculum specialists. In the PCSSD, numerous positions are required to fulfill desegregation plan obligations, such as home school counselors, curriculum coordinators, theme specialists, and staffing for its desegregation division, such as an assistant superintendent and director of desegregation. Likewise, the NLRSD incurs expenditures as a direct result of the requirements of the desegregation plan, such as an assistant superintendent for desegregation, reading tutors and support personnel, HIPPY staffing and support, computer technicians, junior and senior high remedial reading, and homebound teachers. Thus, it is clear that the districts are not in a position to control their teacher retirement costs in the sense that the districts might control workers' compensation costs.
21
Little Rock Sch. Dist. supra, slip op. at 9-11 (memorandum opinion and order filed February 18, 1997) (footnote omitted).
22
For these reasons, we agree with the District Court that the changes in state funding at issue in this case did violate the settlement agreement. In reaching this conclusion, we are mindful that Judge Wright has been responsible for administering and interpreting the settlement agreement for some time now, ever since 1990, when she took over this case. Our review of the District Court's interpretation of the settlement agreement is, as a formal matter, de novo. But we still think it appropriate to pay some heed to the reasoned determinations of the experienced District Judge, who faces decisions in this case every month, if not every week. The orders granting summary judgment on the teacher-retirement and health-insurance issues will be affirmed.
23
On remand, it will be up to the District Court, in the first instance, to decide exactly what relief is appropriate. The three Pulaski County districts should be placed in a position no worse than they would have occupied if the previous system of funding for teacher retirement and health insurance had not been changed. This does not mean that these districts are entitled to receive both an amount equivalent to what the old system would have produced for teacher retirement and health insurance, and the whole amount now paid to them as Equalization Funding. Such a result would be double recovery, a windfall. But the districts are entitled to be held harmless against any adverse effect of the funding change. This means that it will be up to the District Court, after appropriate submissions from the parties, to calculate, as near as may be, the difference between what the old system--MFPA plus teacher retirement plus health insurance--would have produced, and what the new system--Equalization Funding in one lump sum--is producing. The appellants suggest that this effort will necessarily involve speculation. Admittedly it cannot be exact, but we believe that the District Court can make a reasonable and informed estimate.
24
The orders appealed from are affirmed, and the cause remanded to the District Court for further proceedings consistent with this opinion.
25
It is so ordered.
1
The Hon. Richard S. Arnold stepped down as Chief Judge of the United States Court of Appeals for the Eighth Circuit at the close of business on April 17, 1998. He has been succeeded by the Hon. Pasco M. Bowman II
2
NLRSD argues that the State's actions also violate Section II.F, NLRSD Br. at 17-18. This section reads as follows, in pertinent part:
The State will not exclude the Districts from any compensatory education, early childhood development, or other funding programs or discriminate against them in the development of such programs or distribution of funds under any funding programs.
This provision may actually fit the present case better than Sections II.E and II.L, which are the focus of the District Court's opinion and most of the parties' arguments. We are affirming largely on the basis of the District Court's reasoning, however, so we need not pursue the applicability of Section II.F.
3
On the present appeal, NLRSD argues that we were wrong in so interpreting Section II.E. NLRSD brief at 22-23. In NLRSD's view, Section II.E is a free-standing, independent requirement. The State must continue to pay its share of any and all programs in existence at the time of the settlement agreement, whatever its reasons for desiring to change them, and whatever the effect of such changes. Certainly this is one way to read the agreement, and a plausible way, at that. We did not so interpret Sections II.E and II.L in our previous decision, however, and that decision has become the law of this case. We do not choose to reexamine it. We have power to do so, but the arguments now advanced against our prior interpretation do not seem to us sufficiently compelling to enable us to describe our prior opinion as egregiously wrong or unjust, and some such description would be necessary to avoid the law-of-the-case doctrine
| {
"pile_set_name": "FreeLaw"
} |
ILLINOIS OFFICIAL REPORTS
Supreme Court
Standard Mutual Insurance Co. v. Lay, 2013 IL 114617
Caption in Supreme STANDARD MUTUAL INSURANCE COMPANY, Appellee, v.
Court: NORMA LAY, Indiv. and as Ex’r of the Estate of Theodore W. Lay,
d/b/a Ted Lay Real Estate Agency, et al., Appellants.
Docket No. 114617
Filed May 23, 2013
Held Where the federal Telephone Consumer Protection Act, in prohibiting the
(Note: This syllabus sending of unsolicited faxes, provided for liquidated damages of $500 per
constitutes no part of violation, and a class action resulted in a settlement for $1,737,500 plus
the opinion of the court costs, to be paid solely from insurance, the Act was held to be a remedial
but has been prepared statute designed to grant remedies for the protection of rights, with the
by the Reporter of award being remedial rather than uninsurable as punitive.
Decisions for the
convenience of the
reader.)
Decision Under Appeal from the Appellate Court for the Fourth District; heard in that
Review court on appeal from the Circuit Court of Macoupin County, the Hon.
Patrick J. Londrigan, Judge, presiding.
Judgment Affirmed in part and reversed in part.
Cause remanded.
Counsel on Michael T. Reagan, of Ottawa, Brian J. Wanca and David Oppenheim, of
Appeal Anderson + Wanca, of Rolling Meadows, and Phillip A. Bock and Robert
M. Hatch, of Bock & Hatch, LLC, of Chicago, appellants.
Robert Marc Chemers and Peter G. Syregelas, of Pretzel & Stouffer,
Chrtd., of Chicago, for appellee.
Justices JUSTICE FREEMAN delivered the judgment of the court, with opinion.
Chief Justice Kilbride and Justices Thomas, Garman, Karmeier, Burke,
and Theis concurred in the judgment and opinion.
OPINION
¶1 Locklear Electric, Inc. (Locklear), brought an action against Ted Lay Real Estate Agency
(Lay) pursuant to the Telephone Consumer Protection Act of 1991 (TCPA) (47 U.S.C.
§ 227(b)(3) (2006)), which resulted in a court-approved settlement. Lay’s insurer, Standard
Mutual Insurance Company (Standard), filed a complaint for declaratory relief against Lay
and Locklear in the circuit court of Macoupin County. Standard sought a determination of
Lay’s insurance coverage for the underlying lawsuit and settlement. Finding that Lay was not
covered, the circuit court granted summary judgment in favor of Standard.
¶2 The appellate court affirmed. 2012 IL App (4th) 110527. This court allowed Locklear’s
petition for leave to appeal. Ill. S. Ct. R. 315 (eff. Feb. 26, 2010). We now affirm the
judgment of the appellate court in part and reverse in part, and remand the cause to the
appellate court for further proceedings.
¶3 I. BACKGROUND
¶4 In 2006, Lay was a real estate agency located in Girard, Macoupin County, Illinois. Lay
contacted Business to Business Solutions (Business to Business) regarding facsimile message
(fax) advertising. Business to Business offered a “blast fax” service, in which it sends fax
advertisements to thousands of fax machines cheaply. Business to Business represented to
Lay that it had a list of people and entities who wished to receive information by fax. Lay
hired Business to Business, and together they created an advertisement for the sale of a car
wash, which included Lay’s contact information. During June 2006, Business to Business
transmitted the advertisement to approximately 5,000 fax numbers with Illinois area codes
217 and 618. Unbeknownst to Lay, the people and entities on Business to Business’ fax list
did not consent to receive fax advertisements. On June 13, 2006, Locklear received one of
these unsolicited faxes.
-2-
¶5 A. Underlying Class Action and Settlement
¶6 In June 2009, Locklear brought a class action against Lay in the circuit court of Madison
County alleging violations of the TCPA.1 Locklear represented a putative class of 3,478
people and entities to whom Lay faxed the advertisement. Locklear and the other plaintiffs
sought the TCPA-prescribed damages of $500 per violation and injunctive relief (see 47
U.S.C. § 227(b)(3) (2006)).
¶7 Lay tendered its defense to its insurer, Standard, which had issued to Lay a commercial
general liability insurance policy and a primary businessowners liability insurance policy. In
a letter dated July 13, 2009, Standard informed Lay that the insurance policies may not cover
the conduct alleged in the class action complaint. For example, according to Standard, the
TCPA “may constitute a penal statute,” and the policies excluded coverage for willful
violations of penal statutes. Also, according to Standard, the policies excluded coverage for
the allegations of the complaint based on the specific language of several policy provisions.
For these and several other reasons, Standard agreed to defend Lay in the underlying action
subject to a reservation of rights. Standard concluded that a conflict of interest existed for any
attorney that Standard would retain to represent Lay. Due to this conflict, Standard advised
that Lay could: (1) choose its own defense attorney at Standard’s expense; or (2) waive the
conflict of interest and Standard’s possible coverage defenses, and accept counsel provided
by Standard. On that same date, Lay signed a waiver agreeing to accept the attorney hired by
Standard, James Mendillo, to defend Lay in the underlying action.
¶8 In July 2009, Mendillo removed the underlying action to the United States District Court
for the Southern District of Illinois. Lay subsequently retained Edmond H. Rees as its own
chosen counsel.2 In a letter dated October 30, 2009, Rees detailed the conflict of interest
between Standard and Lay, and asked Mendillo to withdraw from the case. On December 3,
2009, Lay and Rees signed a proposed settlement of the class action. Rees thereafter
informed Mendillo that Lay had decided to dismiss Mendillo and settle the case. Rees
subsequently entered his appearance on behalf of Lay. Nevertheless, Mendillo continued to
attend all subsequent court hearings. Mendillo recognized Rees as Lay’s “personal counsel,”
and acknowledged that he was protecting the interests of Standard.
¶9 On September 18, 2010, the federal district court entered a final order approving the class
certification and settlement. The judgment against Lay was for $1,737,500 plus costs.3
1
The complaint also alleged a violation of the Illinois Consumer Fraud and Deceptive
Business Practices Act (815 ILCS 505/2 (West 2006)) and common law conversion.
2
Theodore Lay died while the underlying action was pending. On October 1, 2009, letters
of office were issued to Norma Lay, who, individually and as executor of the estate of Theodore W.
Lay, doing business as Ted Lay Real Estate Agency, was substituted as defendant.
3
The settlement agreement provided for $1,739,000 in damages, based on the $500 TCPA-
prescribed damages for each of the 3,478 class members. However, the class action pleadings
indicate that two persons opted out of the class and the fax broadcaster was excluded.
-3-
Pursuant to the settlement agreement, Locklear would seek satisfaction of the judgment only
from Lay’s insurance policies; Locklear would not now or ever execute against Lay’s
noninsurance assets, even if a determination is made that Lay’s insurer did not owe coverage.
This provision was expressly referenced and incorporated into the final order. Lay assigned
to Locklear all of Lay’s claims against, and rights to payment from, Standard.
¶ 10 B. Instant Declaratory Judgment Action
¶ 11 When Lay accepted Standard’s representation in the underlying action, subject to
Standard’s reservation of rights, Standard filed a complaint for declaratory relief against Lay
and Locklear in the circuit court of Macoupin County. In July 2010, Standard filed the instant
second amended complaint. The eight-count complaint sought a declaration that Standard
had no duty to defend or indemnify Lay. Several counts alleged that Lay was not covered
pursuant to various specific insurance policy provisions. In count V, Standard alleged that
TCPA-prescribed damages of $500 per violation constitute punitive damages, which “are not
insurable as a matter of Illinois law and public policy.” In counts VI and VII, Standard
alleged that it had no duty to indemnify Lay because, inter alia, Lay did not cooperate with
Standard, but rather entered into the settlement agreement with Locklear without Standard’s
consent. In count VIII, Standard sought damages in the amount of the underlying judgment,
which Standard characterized as “insurance coverage to which [Lay and Locklear] were not
entitled.”
¶ 12 In October 2010, Locklear filed an answer and amended counterclaim. Locklear sought
a declaration that the insurance policies required Standard to defend and indemnify Lay for
its alleged conduct in the underlying action, and that the insurance policies covered Lay for
the damages awarded in the underlying action.
¶ 13 Standard and Locklear filed cross-motions for summary judgment. Finding that Lay was
not entitled to coverage, the circuit court granted summary judgment on Standard’s
complaint, and denied summary judgment on Locklear’s counterclaim. The appellate court
affirmed. 2012 IL App (4th) 110527. Locklear appeals to this court.
¶ 14 II. ANALYSIS
¶ 15 This matter is before us on the grant of summary judgment in favor of Standard.
Summary judgment is appropriate only where “the pleadings, depositions, and admissions
on file, together with the affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a matter of law.” 735
ILCS 5/2-1005(c) (West 2010). A circuit court’s entry of summary judgment is reviewed de
novo. Progressive Universal Insurance Co. of Illinois v. Liberty Mutual Fire Insurance Co.,
215 Ill. 2d 121, 128 (2005); Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154
Ill. 2d 90, 102 (1992).
¶ 16 The appellate court addressed only two issues. First, the court concluded that Standard
was not estopped from raising policy coverage defenses. 2012 IL App (4th) 110527, ¶ 26.
Second, the court concluded that the TCPA-prescribed damages of $500 per violation
-4-
constitute punitive damages, which “are not insurable as a matter of Illinois law and public
policy and are not recoverable from Standard.” Id. ¶ 37. The court did not address Locklear’s
additional arguments pertaining to coverage under Lay’s insurance policies. Id. ¶ 28.
Locklear assigns error to both of these conclusions.
¶ 17 A. Estoppel
¶ 18 Locklear contends that Standard is estopped from asserting defenses to its insurance
policy coverage. Locklear specifically argues that Standard’s July 13, 2009, reservation-of-
rights letter did not adequately inform Lay of potential coverage defenses and conflicts of
interest. According to Locklear, a sufficient letter would have enabled Lay to have made a
fully informed decision at the outset of the underlying case as to whether to hire independent
counsel. We disagree.
¶ 19 Generally, where a complaint against an insured alleges facts within or potentially within
the coverage of the insurance policy, and when the insurer takes the position that the policy
does not cover the complaint, the insurer must: (1) defend the suit under a reservation of
rights; or (2) seek a declaratory judgment that there is no coverage. If the insurer fails to take
either of these actions, it will be estopped from later raising policy defenses to coverage.
State Farm Fire & Casualty Co. v. Martin, 186 Ill. 2d 367, 371 (1999); Clemmons v.
Travelers Insurance Co., 88 Ill. 2d 469, 475 (1981). However, where an insurer assumes an
insured’s defense without a reservation of rights, the insurer will not be equitably estopped
from denying coverage unless prejudice exists. Prejudice will not be presumed from the
insurer’s mere entry of appearance and assumption of the defense. Rather, prejudice will be
found if the insurer’s assumption of the defense induces the insured to surrender her right to
control her own defense. Maryland Casualty Co. v. Peppers, 64 Ill. 2d 187, 195-96 (1976);
see United Farm Family Mutual Insurance Co. v. Frye, 381 Ill. App. 3d 960, 969-70 (2008)
(collecting cases).
¶ 20 When an insurer defends a claim against its insured under a sufficient reservation of
rights, the insured then can intelligently choose between retaining her own counsel, or
accepting defense counsel provided by the insurer, and cannot so easily claim that it was
prejudiced by the insurer’s conflict of interest. Bare notice of a reservation of rights is
insufficient. The reservation of rights must specifically refer to the policy defense that may
be asserted and to the potential conflict of interest. See Royal Insurance Co. v. Process
Design Associates, Inc., 221 Ill. App. 3d 966, 973 (1991). If the insurer adequately informs
the insured that it is proceeding under a reservation of rights, identifying the policy
provisions that may preclude coverage, and the insured accepts defense counsel provided by
the insurer, then the insurer is not estopped from asserting policy defenses. See State Farm
Fire & Casualty Co. v. Martinez, 384 Ill. App. 3d 494, 498 (2008); Stoneridge Development
Co. v. Essex Insurance Co., 382 Ill. App. 3d 731, 741 (2008); Royal Insurance, 221 Ill. App.
3d at 974.
¶ 21 In the case at bar, Standard’s reservation-of-rights letter specifically referred to the
coverage defense and conflict of interest regarding violations of penal statutes. Also, the 12-
page letter included an extensive list of policy defenses Standard planned to assert. 2012 IL
-5-
App (4th) 110527, ¶¶ 7-8, 24-25. Thus, Lay knowingly and intelligently chose to accept
defense counsel provided by Standard. Further, Locklear does not, and cannot, argue that Lay
was prejudiced by the representation of Standard’s retained attorney, Mendillo, between July
and October 2009. Indeed, despite Mendillo’s participation in the case, Lay retained its own
counsel and negotiated the settlement in the underlying action. Although the issue of whether
an insured has been prejudiced is generally a question of fact for a jury, it is properly decided
on a motion for summary judgment if there is no factual basis from which a jury could find
prejudice. See American States Insurance Co. v. National Cycle, Inc., 260 Ill. App. 3d 299,
310 (1994); Mid-State Savings & Loan Ass’n v. Illinois Insurance Exchange, Inc., 175 Ill.
App. 3d 265, 271-72 (1988).
¶ 22 Standard availed itself of both of its only available options to ascertain its rights and
responsibilities pursuant to the terms of the insurance policies. Standard agreed to defend Lay
subject to a thoroughly discussed reservation of rights, and it filed a declaratory judgment
action. We uphold the appellate court’s conclusion that Standard is not estopped from
asserting coverage defenses.
¶ 23 B. Insurability of TCPA Damages
¶ 24 Locklear next contends that the TCPA-prescribed damages of $500 per violation are
insurable under Illinois law. An insurance policy is a contract, and the general rules
governing the interpretation of contracts also govern the interpretation of insurance policies.
If the policy language is unambiguous, the policy will be applied as written unless it
contravenes public policy. Nicor, Inc. v. Associated Electric & Gas Insurance Services Ltd.,
223 Ill. 2d 407, 416-17 (2006); Hobbs v. Hartford Insurance Co. of the Midwest, 214 Ill. 2d
11, 17 (2005). In the case at bar, the appellate court did not base its decision on the language
of Lay’s insurance policies, but rather on its conclusion that the TCPA-prescribed damages
of $500 per violation constitute punitive damages, which are uninsurable as a matter of
Illinois public policy. 2012 IL App (4th) 110527, ¶ 37.
¶ 25 Assigning error to this conclusion, Locklear offers several alternative arguments. First,
Locklear advances that punitive damages are uninsurable under Illinois law as a matter of
public policy, but argues that the TCPA is a remedial and not a penal statute, and the
statutory damages of $500 per violation are not punitive damages. Second, Locklear again
advances that punitive damages are uninsurable in Illinois, but argues that the facts of this
case fall within an exception to the rule of uninsurability. Third, Locklear urges this court to
declare that all punitive damages are insurable under Illinois law. Our resolution of
Locklear’s first argument is dispositive of this contention. Whether the TCPA is a penal
statute and the statutory damages of $500 per violation are punitive damages is a matter of
statutory interpretation, which is reviewed de novo. Progressive Universal Insurance, 215
Ill. 2d at 128; Williams v. Staples, 208 Ill. 2d 480, 487 (2004).
¶ 26 The guiding principles are familiar. “ ‘Our task is to give effect to the will of Congress,
and where its will has been expressed in reasonably plain terms, that language must
ordinarily be regarded as conclusive.’ ” Negonsott v. Samuels, 507 U.S. 99, 104 (1993)
(quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 570 (1982)). A court construes
-6-
statutory language in light of its surrounding terms. Federal Communications Comm’n v.
AT&T Inc., 562 U.S. ___, ___, 131 S. Ct. 1177, 1183 (2011). Thus, in construing a statute,
a court must not focus exclusively on a single sentence or phrase, but must view the statute
as a whole. The court may consider the reason for the law, the problems sought to be
remedied, and the purposes to be achieved. United States National Bank of Oregon v.
Independent Insurance Agents of America, Inc., 508 U.S. 439, 454-55 (1993). Each word,
clause and sentence of a statute must be given reasonable meaning, if possible, and should
not be rendered superfluous. TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001). Accord Williams,
208 Ill. 2d at 487; In re Detention of Lieberman, 201 Ill. 2d 300, 307-08 (2002).
¶ 27 Several courts have recounted the reasons for the TCPA and the problems sought to be
remedied. In enacting the TCPA, Congress made several pertinent findings. Unrestricted
telemarketing was regarded as an intrusive invasion of privacy. Mims v. Arrow Financial
Services, LLC, 565 U.S. ___, ___, 132 S. Ct. 740, 745 (2012); accord Valley Forge
Insurance Co. v. Swiderski Electronics, Inc., 223 Ill. 2d 352, 365 (2006) (concluding that
“[t]he receipt of an unsolicited fax advertisement implicates a person’s right of privacy
insofar as it violates a person’s seclusion”). Many consumers were outraged by the
proliferation of intrusive, nuisance telemarketing calls to their homes. At least 40 states had
enacted legislation restricting unsolicited telemarketing. However, those state laws had
limited effect because states lack jurisdiction over interstate calls. Thus, many states
expressed a desire for federal legislation. Mims, 565 U.S. at ___, 132 S. Ct. at 745.
Accordingly, Congress enacted the TCPA to address telemarketing abuses attributable to the
use of automated telephone calls to devices including telephones, cellular telephones, and
fax machines. The purposes of the TCPA are to protect the privacy interests of residential
telephone customers by restricting unsolicited automated telephone calls to the home, and
facilitating interstate commerce by restricting certain uses of fax machines and automatic
dialers. Italia Foods, Inc. v. Sun Tours, Inc., 2011 IL 110350, ¶ 13.
¶ 28 The TCPA outlaws four practices. The Act: (1) makes it unlawful to use an automatic
telephone dialing system, or an artificial or prerecorded voice message, without the prior
express consent of the called party, to call any emergency telephone line, hospital patient,
pager, cellular telephone, or other service for which the receiver is charged for the call; (2)
forbids using artificial or prerecorded voice messages to call residential telephone lines
without prior express consent; (3) proscribes sending unsolicited advertisements to fax
machines; and (4) bans using automatic telephone dialing systems to engage simultaneously
two or more telephone lines of a business. 47 U.S.C. § 227(b)(1)(A) through (D) (2006);
Mims, 565 U.S. at ___, 132 S. Ct. at 745. The TCPA provides three complementary means
of enforcement. First, a state Attorney General may bring a civil action on behalf of a state’s
residents. 47 U.S.C. § 227(f)(1) (2006). Second, the Federal Communications Commission
(FCC) may intervene as of right in such actions, and may institute civil actions for violations
of the implementing regulations. Id. § 227(f)(3), (f)(7). Federal district courts have exclusive
jurisdiction over TCPA actions brought by state attorneys general and the FCC. Id.
§ 227(f)(2). Third, persons may bring actions on their own behalf in state courts. Id.
-7-
§ 227(b)(3); Mims, 565 U.S. at ___, 132 S. Ct. at 746.4
¶ 29 The TCPA describes the private right of action as follows:
“A person or entity may, if otherwise permitted by the laws or rules of court of
a State, bring in an appropriate court of that State—
(A) an action based on a violation of this subsection or the regulations
prescribed under this subsection to enjoin such violation,
(B) an action to recover for actual monetary loss from such a violation, or to
receive $500 in damages for each violation, whichever is greater, or
(C) both such actions.
If the court finds that the defendant willfully or knowingly violated this subsection
or the regulations prescribed under this subsection, the court may, in its discretion,
increase the amount of the award to an amount equal to not more than 3 times the
amount available under subparagraph (B) of this paragraph.” 47 U.S.C. § 227(b)(3)
(2006).
¶ 30 In the case at bar, the appellate court observed that a statute is penal if it (1) imposes
automatic liability for a violation of its terms; (2) sets forth a predetermined amount of
damages; and (3) imposes damages without regard to the actual damages suffered by the
plaintiff. 2012 IL App (4th) 110527, ¶ 36; see Landis v. Marc Realty, L.L.C., 235 Ill. 2d 1,
12-13 (2009). The court concluded that the TCPA is a penal statute, reasoning as follows:
“The ‘actual’ damages incurred by a violation of the TCPA are more in the nature of
an irksome nuisance, and liability is not predicated on proving them. In fact, in the
event of minuscule damages, the TCPA provides for a finding of the amount of
damage or $500 per occurrence, whichever is greater. Actual damages to any one
individual are likely to be small. Five hundred dollars then becomes a predetermined
amount of damages and is clearly not meant to compensate for any actual harm.”
2012 IL App (4th) 110527, ¶ 36.
We disagree. The manifest purpose of the TCPA is remedial and not penal.
¶ 31 The TCPA is “clearly within the class of remedial statutes which are designed to grant
remedies for the protection of rights, introduce regulation conducive to the public good, or
cure public evils.” Scott v. Association for Childbirth at Home, International, 88 Ill. 2d 279,
288 (1981). We earlier recounted that Congress enacted the TCPA to address telemarketing
abuses attributable to the receipt of unsolicited faxes. Congress clearly identified the
animating purpose of the TCPA: to prevent advertisers from unfairly shifting the cost of their
advertisements to consumers while simultaneously preventing the use of their fax machines
for legitimate purposes. Terra Nova Insurance Co. v. Fray-Witzer, 869 N.E.2d 565, 575
4
Resolving a split among federal courts of appeals, the United States Supreme Court has held
that federal district courts have federal-question jurisdiction over private TCPA claims. Mims, 565
U.S. at ___, 132 S. Ct. at 747; see Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 449-51 (7th
Cir. 2005) (same).
-8-
(Mass. 2007); Universal Underwriters Insurance Co. v. Lou Fusz Automotive Network, Inc.,
401 F.3d 876, 881 (8th Cir. 2005); Missouri ex rel. Nixon v. American Blast Fax, Inc., 323
F.3d 649, 654-55 (8th Cir. 2003). “Although the monetary impact of a single unsolicited fax
is minor, it is nevertheless a cost borne by the recipient and recognized by Congress as a
compensable harm.” Universal Underwriters, 401 F.3d at 880. The harms identified by
Congress, e.g., loss of paper and ink, annoyance and inconvenience, while small in reference
to individual violations of the TCPA are nevertheless compensable and are represented by
a liquidated sum of $500 per violation. Id. at 881.
¶ 32 Also, Congress intended the $500 liquidated damages available under the TCPA to be,
at least in part, an incentive for private parties to enforce the statute. This added incentive is
necessary because the actual losses associated with individual violations of the TCPA are
small. Whether we view the $500 statutory award as a liquidated sum for actual harm, or as
an incentive for aggrieved parties to enforce the statute, or both, the $500 fixed amount
clearly serves more than purely punitive or deterrent goals. Penzer v. Transportation
Insurance Co., 545 F.3d 1303, 1311 (11th Cir. 2008); Universal Underwriters, 401 F.3d at
881; Melrose Hotel Co. v. St. Paul Fire & Marine Insurance Co., 432 F. Supp. 2d 488, 509
& n.10 (E.D. Pa. 2006), aff’d sub nom. Subclass 2 v. Melrose Hotel Co., 503 F.3d 339 (3d
Cir. 2007); Motorists Mutual Insurance Co. v. Dandy-Jim, Inc., 912 N.E.2d 659, 667 (Ohio
Ct. App. 2009); Terra Nova Insurance, 869 N.E.2d at 576.
¶ 33 Further, the fact that Congress provided for treble damages separate from the $500
liquidated damages indicates that the liquidated damages serve additional goals than
deterrence and punishment and were not designed to be punitive damages. Penzer, 545 F.3d
at 1311; Universal Underwriters, 401 F.3d at 881. We observe that the possible imposition
of treble damages does not make the TCPA a penal statute. Rather, this possible penalty “is
but one part of the regulatory scheme, intended as a supplemental aid to enforcement rather
than as a punitive measure.” Association for Childbirth, 88 Ill. 2d at 288 (explaining section
7 of Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/7 (West 2010))).
We hold that the TCPA is a remedial and not a punitive statute, and that the $500 liquidated
damages per violation are not punitive damages.
¶ 34 We disagree with decisions concluding that the TCPA-prescribed damages of $500 per
violation constitute penal or punitive damages. See US Fax Law Center, Inc. v. iHire, Inc.,
362 F. Supp. 2d 1248, 1253 (D. Colo. 2005), aff’d, 476 F.3d 1112 (10th Cir. 2007); Kruse
v. McKenna, 178 P.3d 1198, 1201 (Colo. 2008) (en banc); Kaplan v. Democrat & Chronicle,
698 N.Y.S.2d 799, 800 (App. Div. 1999) (mem.) Rather, we believe that the cases to which
we have cited ascertained the true intent of Congress in enacting the TCPA. See State Bank
of Cherry v. CGB Enterprises, Inc., 2013 IL 113836, ¶ 53 (explaining that if the federal
courts are split on how they construe a federal statute, then the importance of uniformity
recedes and this court will follow the line of cases it believes to be properly decided).
¶ 35 As earlier noted, Locklear alternatively argues: the facts of this case fall within an
exception to Locklear’s advanced rule of uninsurability of punitive damages; and all punitive
damages should be insurable. However, we have held that the TCPA is remedial and not
penal, and the TCPA-prescribed damages of $500 per violation are not punitive damages.
-9-
The alternative arguments that Locklear presents are not necessary to the disposition of this
case. The rule that Locklear suggests for either of these arguments would have no bearing
on the remedial TCPA and its nonpunitive liquidated damages of $500 per violation. “We
will not decide an issue that has no bearing on the case before this court.” Barth v. Reagan,
139 Ill. 2d 399, 419 (1990). Therefore, we need not and do not address these alternative
arguments. See Italia Foods, 2011 IL 110350, ¶ 41 (collecting cases); Nicor, 223 Ill. 2d at
438; Condon v. American Telephone & Telegraph Co., 136 Ill. 2d 95, 99 (1990).
¶ 36 Further, the appellate court did not address all of the issues that Locklear raised on appeal
because the court concluded that the TCPA-prescribed damages of $500 per violation were
uninsurable punitive damages. 2012 IL App (4th) 110527, ¶ 28. Because we hold that they
are not, we remand the cause to the appellate court for consideration of Locklear’s remaining
contentions. See, e.g., Carter v. SSC Odin Operating Co., 237 Ill. 2d 30, 51 (2010); Pooh-
Bah Enterprises, Inc. v. County of Cook, 232 Ill. 2d 463, 503 (2009).
¶ 37 III. CONCLUSION
¶ 38 For the foregoing reasons, the judgment of the appellate court is affirmed in part and
reversed in part, and the cause remanded to the appellate court for further proceedings
consistent with this opinion.
¶ 39 Affirmed in part and reversed in part.
¶ 40 Cause remanded.
-10-
| {
"pile_set_name": "FreeLaw"
} |
125 F.Supp.2d 481 (2000)
Mary NOBLE, Sabrina Conyers, Rosetta Horne, and Trumella James, Plaintiffs,
v.
Brian TOOLEY, as Chief of Police, City of Sanford; the City of Sanford, Florida; the Housing Authority of the City of Sanford; and Timothy D. Hudson, Executive Director, in his official capacity, Defendants.
No. 6:00-CV-900-ORL-31A.
United States District Court, M.D. Florida. Orlando Division.
November 21, 2000.
*482 Catherine D. Reischmann, William Colbert, Stenstrom, McIntosh, Colbert Whigham & Simmons P.A., Sanford, FL, for Defendants.
Christopher Hill, Richard Geller, Thomas Slogar, Rumberger, Kirk & Coldwell, Orlando, FL, for Sanford Housing Authority and Timothy Hudson.
ORDER
PRESNELL, District Judge.
This cause came on for consideration after a hearing on Plaintiffs' Motion for a Preliminary Injunction (Doc. 2, filed July 14, 2000) and the responses thereto by Defendants The Housing Authority of the City of Sanford ("the Housing Authority") and Timothy D. Hudson (Doc. 38, filed August 25, 2000) and by Defendants the City of Sanford and Brian Tooley (Doc. 42, filed August 25, 2000), as well as various memoranda and affidavits filed in conjunction with these documents.
As a preliminary matter, Defendants Hudson and the Housing Authority have objected to, or in the alternative moved to strike (Doc. 41, filed August 25, 2000), certain exhibits attached to the Plaintiffs' Motion for Preliminary Injunction and the Complaint. The Defendants argue that all of the exhibits to which they *483 object are "immaterial, impertinent, and prejudicial." The only ground upon which the Defendants elaborate in their motion is that of materiality. Most of the documents they seek to strike, they argue, concern Housing Authority residents who are not a part of this case. Although this is true, the documents, with one exception, are relevant to the issue of the existence of the allegedly unconstitutional Housing Authority practice at issue in this case.[1] The Defendants have failed to demonstrate that mere prejudice to a party can serve as grounds for striking of evidence, and have failed to demonstrate any "impertinence" on the part of these documents.
In addition, the Defendants' hearsay objections to these exhibits are ill-taken at this stage of the proceedings. "At the preliminary injunction stage, a district court may rely on affidavits and hearsay materials which would not be admissible evidence for a permanent injunction, if the evidence is `appropriate given the character and objectives of the injunctive proceeding.'" Levi Strauss & Co. v. Sunrise International Trading, Inc., 51 F.3d 982, 985 (11th Cir.1995) (quoting Asseo v. Pan American Grain Co., 805 F.2d 23, 26 (1st Cir.1986)). The Defendants' objection or, in the alternative, motion to strike (Doc. 41, filed August 25, 2000), will be denied.
BACKGROUND
The Plaintiffs are indigent tenants of Defendant Housing Authority, whose executive director is Defendant Hudson. The Plaintiffs seek injunctive relief in regard to an alleged policy by which all four Defendants make use of a standard lease provision to conduct warrantless searches of Housing Authority residences in violation of the Fourth Amendment to the United States Constitution. The lease provision at issue paragraph XII(b)2 of the "Housing Authority of Sanford, Florida Residential Lease Agreement" reads as follows: "The Authority may enter Tenant's dwelling unit at any time without advance notification when there is reasonable cause to believe that an emergency exists." It is undisputed that all four of the Plaintiffs' leases contain this clause.
According to the Plaintiffs, Defendant Hudson contends that a suspicion of criminal activity is "reasonable cause to believe that an emergency exists" and thus, pursuant to the lease clause quoted above, in such a situation he has their consent to enter their residence and search it, either alone or accompanied by law enforcement officers, even in the absence of a search warrant or exigent circumstances such as being in hot pursuit of a fleeing felon. Although they raise a host of arguments in defense of their actions and this suit, Defendants Hudson and the Housing Authority argue principally that "the emergency entry provision is not unconstitutional" (Doc. 38 at 13) because "an emergency, reasonably so identified, makes such an entry `reasonable'" (Id., quoting Archibald v. Mosel, 677 F.2d 5 (1st Cir.1982)). All of the Defendants also challenge the Plaintiffs' standing to seek an injunction.
STANDARDS AND APPLICATION
1. Standing
Standing is a threshold jurisdictional question that must be addressed prior to and independent of the merits of a party's claims. See Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 102, 118 S.Ct. 1003, 1016, 140 L.Ed.2d 210 (1998); Florida Assoc. of Med. Equip. Dealers v. Apfel, 194 F.3d 1227, 1230 (11th Cir.1999). Courts are obliged to consider standing sua sponte even if the parties have not raised the issue. See United States v. Hays, 515 U.S. 737, 742, 115 S.Ct. 2431, 2435, 132 L.Ed.2d 635 (1995); University *484 of South Alabama v. American Tobacco Co., 168 F.3d 405, 410 (11th Cir.1999).
To satisfy the constitutional requirements of standing, a plaintiff must make three showings:
First, the plaintiff must have suffered an "injury in fact" an invasion of a legally protected interest which is (a) concrete and particularized, and (b) "actual or imminent, not `conjectural' or `hypothetical.'" Second, there must be a causal connection between the injury and the conduct complained of the injury has to be "fairly ... trace[able] to the challenged action of the defendant, and not ... th[e] result [of] independent action of some third party not before the court." Third, it must be "likely" as opposed to merely "speculative," that the injury will be "redressed by a favorable decision."
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 2136, 119 L.Ed.2d 351 (1992) (internal citations and footnotes omitted). See also Church v. Huntsville, 30 F.3d 1332, 1335 (11th Cir. 1994).
Clearly, in the instant case, any Fourth Amendment violation would be traceable to the alleged policy of the Defendants to conduct warrantless searches, and an injunction against such searches seems likely to redress such an injury. However, the Defendants challenge the "injury in fact" requirement, arguing that, at best, the Plaintiffs have alleged a hypothetical threat that their civil rights will be violated. See, e.g., City of Los Angeles v. Lyons, 461 U.S. 95, 104, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983) (Plaintiff who had been subjected to choke hold by police officer lacked standing to challenge policy of choke hold use where there was no indication that he might (1) violate law again and, (2) while being arrested, be subjected to an unconstitutional chokehold). However, this Court concludes that the Plaintiffs' prospects of being subjected to a warrantless search is far less remote than those of the plaintiff in Lyons. Here, the Plaintiffs' submissions demonstrate that illegal activity is not a prerequisite to being subjected to such a search. Instead, the evidence suggests that Defendant Hudson is willing to take such a step based on a single phone call alleging the presence of narcotics in someone's home. Further, the Defendants Hudson and the Housing Authority contend in their Response to Proposed Preliminary Injunction Order Submitted by Plaintiffs (Doc. 74, filed October 18, 2000) that, if they were to be informed that a suspected arsonist has entered a residence, they would have "every right" to enter "for the protection and preservation of the premises". In other words, the Defendants herein continue to argue that a mere suspicion of criminal activity justifies a warrantless search of the Plaintiffs' residences. To the extent such a search would violate the Fourth Amendment, it would result from circumstances beyond the Plaintiffs' control, unlike the situation in Lyons. See Honig v. Doe, 484 U.S. 305, 320, 108 S.Ct. 592, 602, 98 L.Ed.2d 686 (1988).
2. The Fourth Amendment and Preliminary Injunction
The Fourth Amendment to the United States Constitution provides that "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation and particularly describing the place to be searched, and the persons or things to be seized."
As the Supreme Court recently reiterated in Wilson v. Layne, 526 U.S. 603, 609-610, 119 S.Ct. 1692, 1697, 143 L.Ed.2d 818 (1999), the Fourth Amendment embodies the centuries-old principle of respect for the family home, a principle that predates the founding of the United States: "The law of England has so particular and tender a regard to the immunity of a man's house, that it stiles it his castle, and will *485 never suffer it to be violated with impunity: agreeing herein with the sentiments of ancient Rome.... For this reason no doors can in general be broken open to execute any civil process; though, in criminal causes, the public safety supersedes the private." William Blackstone, 4 Commentaries on the Laws of England 223 (1765-1769). Both 42 U.S.C. § 1983 and Bivens actions allow for the recovery of monetary damages against government officials for violations of Fourth Amendment rights. Wilson v. Layne, 526 U.S. at 609, 119 S.Ct. at 1696, 143 L.Ed.2d 818.
To support a preliminary injunction, a district court need not find that the evidence positively guarantees a final verdict in plaintiffs' favor. Levi Strauss & Co. v. Sunrise International Trading, Inc., 51 F.3d 982, 985 (11th Cir.1995). Instead, it must determine whether the evidence establishes (1) a substantial likelihood of success on the merits; (2) a substantial threat of irreparable injury if the injunction were not granted; (3) that the threatened injury to the plaintiffs outweighs the harm an injunction may cause the defendant; and (4) that granting the injunction would not disserve the public interest. Id.
The Defendants challenge all four factors. This Court has little difficulty in concluding that the Plaintiffs have established a substantial likelihood of success on the merits. See, e.g., Chapman v. United States, 365 U.S. 610, 616, 81 S.Ct. 776, 779, 5 L.Ed.2d 828 (1961) (rejecting landlords' argument that he had absolute right to enter rented premises to "view waste" and bring officers with him on grounds that the purpose in entering was not to view waste but to search for evidence of illegal activity and because upholding such an entry and search without a warrant would reduce the Fourth Amendment to a nullity and leave tenants' homes secure only in the discretion of landlords) and Blanco v. Florida, 438 So.2d 404, 404 (Fla. 4th DCA 1983) (Finding that search of apartment illegal and stating that "[t]he State argues that under the terms of the agreement the landlord had the right to enter. We agree, but that right was for reasonable access for inspection purposes and in order to spray for infestations. Inviting the police to enter and search the apartment is another matter altogether").
This Court also concludes that the Plaintiffs have made a sufficient showing as to the substantial threat of an irreparable injury. The Defendants argue that the exclusionary rule and the prospect of monetary damages in a Bivens or § 1983 action nullifies the irreparability of the injury. This Court disagrees. As the Fourth Circuit Court of Appeals explained in Lankford v. Gelston, 364 F.2d 197, 202 (4th Cir.1966):
There can be little doubt that actions for money and damages would not suffice to repair the injury suffered by the victims of [illegal] searches.... In any event, the wrongs inflicted are not readily measurable in terms of dollars and cents. Indeed, the Supreme Court itself has already declared that the prospect of pecuniary redress for the harm suffered is `worthless and futile'. Moreover, the lesson of experience is that the remote possibility of money damages serves as no deterrent to future police invasions.
Defendants' arguments as to the final two points merit little discussion. The Defendants have demonstrated no harm that might come to them as a result of a ban on conducting searches pursuant to the above-quoted lease provision. The order sought would not implicate warrantless police searches that rely on probable cause, consent, or exigent circumstances. Thus, it will not result in harm to the public interest. And, despite Defendants' repeated arguments on this point, the order is not so broad and non-specific as to constitute a prohibited "obey the law" injunction. See Hughey v. JMS Development Corp., 78 F.3d 1523, 1531 (11th Cir. 1996) (Dissolving injunction that simply prevented developer from discharging *486 stormwater "if such discharge would be in violation of the Clean Water Act"). The fact that compliance with an injunction would also result in compliance with the law is no barrier to its issuance.
In consideration of the foregoing, it is hereby ORDERED AND ADJUDGED that the Plaintiffs' Motion for a Preliminary Injunction (Doc. 2, filed July 14, 2000) is hereby GRANTED, as follows:
1. The Defendants the Sanford Housing Authority; its executive director, Timothy Hudson; the City of Sanford, Florida; and Brian Tooley, Chief of Police for the Sanford Police Department and their agents, employees, and all those acting in concert with them, are hereby ENJOINED from using Paragraph XII(b)(2) of the "Housing Authority of Sanford, Florida Residential Lease Agreement" as a substitute for consent or probable cause to search the public housing apartments of Sanford Housing Authority tenants Mary Noble, Sabrina Conyers, Rosetta Horne, and Trumella James for criminal activity.
2. The Sanford Housing Authority and Timothy Hudson, their agents, employees, and those acting in concert with them are hereby ENJOINED from consenting on behalf of Mary Noble, Sabrina Conyers, Rosetta Horne, or Trumella James to a warrantless search of their public housing apartments.
3. Because the plaintiffs are indigent and compliance with this preliminary injunction will cause the defendants no monetary injury, bond is hereby WAIVED.
4. The Objection or, in the alternative, Motion to Strike by Defendants Hudson and the Housing Authority (Doc. 41, filed August 25, 2000) is DENIED.
5. Nothing in this order is intended to enjoin the City of Sanford, its Chief of Police, or the City of Sanford Police Department from (1) carrying out all law enforcement duties and obligations under state law; (2) conducting searches pursuant to lawfully issued search warrants; (3) conducting searches pursuant to resident consent, oral or written, except for any "consent" allegedly shown by the Defendants' signing of a lease containing Paragraph XII(b)(2); (4) conducting searches in response to an existing emergency when there is probable cause to believe a crime has occurred; (5) conducting searches reasonably required to assure the safety of any individual or law enforcement officer while law enforcement officers are engaged in a lawful search.
6. Similarly, nothing in this order is intended to enjoin the Sanford Housing Authority from (1) carrying out all duties and obligations under its Residential Lease Agreement, federal regulations, or state law; (2) entering the apartments of the Plaintiffs to respond to an emergency that concerns the physical integrity of the property, such as flooding, natural gas leaks, fire or other hazards or for any other lawful reason consistent with state and federal law; (3) conducting searches pursuant to lawfully issued search warrants.
7. Further, nothing in this order is intended to diminish or interfere with the authority of City of Sanford police officers to enforce the criminal laws, to make arrests, searches, inquiries, or investigations consistent with constitutional requirements.
NOTES
[1] The one exception is the newspaper article attached to the complaint as Exhibit "J," which details Sanford Mayor Larry Dale's position on certain social welfare issues. The Court has determined the article is not relevant to the dispute currently before it, and has not taken it into consideration in deciding the instant motion. However, striking of the document is not warranted.
| {
"pile_set_name": "FreeLaw"
} |
377 B.R. 471 (2007)
In re the IT GROUP, INC., et al., Debtors.
Integrated Water Resources, Inc., Plaintiff,
v.
Shaw Environmental, Inc., and Alixpartners LLC, as Trustee of the IT Litigation Trust, Defendants.
Bankruptcy No. 02-10118 (MFW), Adversary No. 06-50785 (MFW).
United States Bankruptcy Court, D. Delaware.
October 31, 2007.
*472 *473 Kathleen P. Makowski, Mark Minuti, Saul Ewing LLP, Wilmington, DE, for Plaintiff.
Joseph C. Handlon, Ashby & Geddes, Eric Michael' Sutty, The Bayard Firm, Wilmington, DE, for Defendants.
OPINION[1]
MARY F. WALRATH, Bankruptcy Judge.
Before the Court is the Motion of Integrated Water Resources, Inc. ("IWR") for summary judgment in its complaint against Shaw Environmental Inc. ("Shaw") seeking a declaratory judgment that Shaw has no claim against IWR.[2] For the reasons set forth below, the Court will grant the motion.
I. BACKGROUND
In April 2001, IWR was a subcontractor to a prime contractor to the United States. IWR retained the IT Group, Inc. (the "Debtor") as a sub-subcontractor to perform environmental remediation of government facilities in Cape Canaveral, Florida. The Debtor and IWR executed a Subcontractor Agreement (the "Cape Canaveral Contract") on October 17, 2001, setting forth the details of the project.
On January 16, 2002 (the "Petition Date"), the Debtor and several of its affiliates (collectively, the "Debtors") filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code.
On January 23, 2002, the Debtors and Shaw entered into an Asset Purchase Agreement (the "APA"), wherein Shaw agreed to purchase substantially all the Debtors' assets. The sale was subject to Court approval after consideration of higher and better bids that might be submitted.
As part of the sale process, on March 15, 2002, the Debtors served IWR with a Notice of Amounts Necessary to Cure Defaults Under Contracts and Leases Proposed to be Assumed and Assigned to The Shaw Group Inc. or a Successful Bidder (the "Cure Notice"). On April 12, 2002, IWR filed a limited objection to the Cure Notice in which IWR opposed the assumption and assignment of the Cape Canaveral Contract because the Contract involved specialized expertise of an unusual nature. Further, in both the limited objection and its accompanying declaration, IWR alleged that the Debtors had materially breached the Cape Canaveral Contract by failing to perform certain tasks at critical points. On April 17, 2002, the Debtors served IWR with a Revised Notice (the "Revised Notice") informing IWR that the Debtors did not intend to assume and assign any of IWR's contracts to Shaw.[3]
On April 25, 2002, the Court entered an Order Approving the APA and Authorizing (I) Sale of Substantially All of Debtors' Assets Free and Clear of Liens, Claims, *474 Interests and Encumbrances, (II) Assumption and Assignment of Certain Executory Contracts and Unexpired Leases, and (III) Assumption of Certain Liabilities (the "Sale Order"). The Sale Order excluded from assumption and assignment to Shaw "any executory contract or unexpired lease to which an Objector ... is a party." (Sale Order ¶ 12.) The Objectors, including IWR, were listed on an exhibit attached to the Sale Order. (Sale Order Ex. D.) Shaw and the Debtors closed the sale on May 3, 2002.
On November 12, 2002, Shaw sent IWR a demand for payment of an account receivable totaling $387,345 arising under the Cape Canaveral Contract (the "Cape Canaveral Receivable"). On November 18, 2002, IWR replied that the Cape Canaveral Contract was excluded from the Sale Order and, therefore, the Cape Canaveral Receivable was not assigned to Shaw. Shaw did not respond.
The Debtors' Plan of Reorganization was confirmed on April 6, 2004, and became effective on April 30, 2004. Pursuant to the Plan, the IT Trust was created to liquidate the remaining assets of the estate for the benefit of creditors.
On July 18, 2005, the IT Trust and IWR executed a Settlement Stipulation, which resolved the proof of claim filed by IWR in the amount of $1 million for the alleged breach of the JMA. The Settlement Stipulation also contained general releases, whereby IWR and the IT Trust relinquished "any and all judgments, claims, demands, actions, debts, controversies, damages, and causes of action whatsoever, of any kind or nature, whether known or unknown, or suspected or unsuspected, which the Trustee and the Debtors [and IWR] and each of them now own, hold, held, had or claimed to have." (Settlement Stipulation ¶ 3.) The Settlement Stipulation was approved by the Court on July 19, 2005.
Thereafter, on October 27, 2005, Shaw filed a complaint against IWR in the Superior Court of California, seeking $387,345 for the "completed sub-contract receivable assigned by [the Debtors] to [Shaw]" stemming from the Cape Canaveral Contract. (Cal.Compl. ¶ 11.)
On July 24, 2006, IWR commenced this adversary proceeding against Shaw to enjoin the California action, contending that Shaw has no claims against IWR, particularly under the Cape Canaveral Contract. Alternatively, IWR seeks indemnification from the IT Trust, should this Court find that the Cape Canaveral Contract or the Cape Canaveral Receivable was transferred to Shaw by the Sale Order. On August 16, 2006, the Court granted IWR's Motion for Preliminary Injunction, and the California action was stayed pending a determination of the validity of Shaw's claim to the Cape Canaveral Receivable.
IWR was granted leave to file an Amended Complaint, which it did on March 20, 2007. On March 30, 2007, Shaw filed its answer to the Amended Complaint and a counterclaim for a determination that the Cape Canaveral Receivable was "properly assigned to Shaw." (Shaw Countercl. ¶ 9.) Shaw further sought a judgment on the Cape Canaveral Receivable in the amount requested in the California action.
On June 29, 2007, IWR filed the instant motion for summary judgment. Shaw opposes the motion. Briefing on the motion is complete, and the matter is now ripe for decision.
II. JURISDICTION
The Court has subject matter jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 1334 & 157(b)(1). This *475 is a core matter. 28 U.S.C. § 157(b)(2)(A), (B), (L), (N), & (0).
III. DISCUSSION
A. Standard of Review
Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c). The Court must review all the evidence and "draw all reasonable inferences in favor of the non-moving party." Fields v. Thompson Printing Co., 363 F.3d 259, 265 (3d Cir.2004). The moving party bears the burden of establishing that no genuine issue of material fact exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585 n. 10, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). A fact is material when it could "affect the outcome of the suit." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). If the moving party establishes the absence of a material fact, the non-moving party must present facts demonstrating that there is a "genuine issue for trial." Matsushita, 475 U.S. at 587, 106 S.Ct. 1348. "Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no `genuine issue for trial'" and summary judgment may be granted. Id. (citations omitted).
B. Sale of the Contract
IWR asserts that it does not owe anything to Shaw under the Cape Canaveral Contract because that Contract was specifically excluded from the Sale Order. (Sale Order ¶ 12.) IWR further contends that the Settlement Stipulation executed between IWR and the IT Trust released all claims the IT Trust or the Debtors had against IWR, including any claims relating to the Cape Canaveral Contract. (Settlement Stipulation ¶ 3.)
Shaw disagrees, arguing that the Debtors' obligations under the Cape Canaveral Contract were substantially complete at the time of the Sale Order. As a result, Shaw contends that the Cape Canaveral Receivable was a "Completed Contract Receivable" that was transferred to Shaw as an "Asset" under the Sale Order. In the alternative, Shaw asserts that even if the Cape Canaveral Contract was not completed, the Receivable was transferred to Shaw as an Accounts Receivable. Shaw further argues that the IT Trust was unable to release IWR from its payment obligations under the Cape Canaveral Contract in the Settlement Stipulation, because the Cape Canaveral Receivable had already been transferred to Shaw in the Sale Order.
1. Completed Contract versus Executory Contract
Shaw relies on the terms of the APA, which specified that the "Assets" transferred to Shaw included "Completed Contracts Receivable," defined by the APA as "all Accounts Receivable related to Completed Contracts." (APA 2, 5.) "Completed Contracts" were defined as "Contracts of Sellers ... under which substantially all of the contractual work effort of Sellers has been completed, even if such Contracts have continuing warranty obligations, administrative matters or work related to warranty or other claims." (APA 4-5.) Thus, Shaw contends that the Cape Canaveral. Contract was a "Completed Contract," the Receivable of which was sold to Shaw.
The Court disagrees. Shaw's argument that the Cape Canaveral Contract was completed is undermined by the fact that both the Cure Notice and the Revised Notice issued by the Debtors to IWR stated that IWR's contracts were executory. Moreover, the Revised Notice, which informed *476 IWR that its contracts were not being assumed and assigned to Shaw, advised IWR that its contracts were executory and that the rights and obligations outstanding on them were not being transferred to Shaw. Finally, the Sale Order itself treated the Cape Canaveral Contract as executory, and one not being assigned to Shaw, a characterization to which Shaw did not object.
2. Sale Order Exclusion
Even if the Cape Canaveral Contract was a Completed Contract, it was not assigned to Shaw. The Sale Order states that "[t]o the extent any provision of the [APA] is inconsistent with the terms of this Sale Order, the terms of this Sale Order shall govern." (Sale Order ¶ 41.) The Sale Order expressly excluded IWR's contracts from being assumed and assigned to Shaw. (Sale Order ¶ 12, Ex. D.) Thus, even if the Cape Canaveral Contract was included in the APA as an "Asset," its exclusion in the Sale Order means the APA and the Sale Order are inconsistent. By the terms of the Sale Order, the Sale Order governs.
Even in the absence of that express language in the Sale Order, the Sale Order terms would govern. It is a "fundamental axiom of contract interpretation that specific provisions control general provisions." Baton Rouge Oil & Chem. Workers Union v. ExxonMobil Corp., 289 F.3d 373, 377 (5th Cir.2002). In addition, "a subsequent specification impliedly limits the meaning of a preceding generalization." Affiliated Food Distribs., Inc. v. Local Union No. 229, 483 F.2d 418, 420 (3d Cir.1973) (citations omitted). Thus, the Court finds that the Sale Order's subsequent express exclusion of the Cape Canaveral Contract from the assumption and assignment of contracts to Shaw controls over the APA's general definition of "Assets" purchased by Shaw.
3. Settlement Stipulation
In addition to the specific exclusion of the Cape Canaveral Contract from the Sale Order, the Settlement Stipulation confirms that neither that Contract nor claims or receivables related to it were sold to Shaw. In the Settlement Stipulation, the IT Trust represented that'"neither the Trustee nor the Debtors have assigned any claim against IWR." (Settlement Stipulation ¶ 10.) This is consistent with the Sale Order, which states that the contracts of IWR, including the Cape Canaveral Contract, were not assigned to Shaw,
4. Allegations of Breach of Contract
Further evidence of the invalidity of Shaw's contention that the Cape Canaveral Contract was a "Completed Contract" are IWR's allegations of breach. Shaw concedes that "there are genuine issues of material fact regarding whether the Cape Canaveral Contract was a `Completed Contract' as defined in the APA." While there may be a dispute over the status of the Contract as completed or executory, IWR's allegations that the Debtor was in breach of the Contract point to a conclusion that the Contract was not, as Shaw argues, "substantially completed" at the time of the sale. Moreover, whether the Contract was in fact breached or completed is not a determination that the Court must make in order to rule on IWR's instant motion. Because the Cape Canaveral Contract was specifically excluded from the Sale Order, questions of breach or obligations outstanding are irrelevant.
C. Transfer of the Cape Canaveral Receivable
Shaw alternatively asserts that "even if the Court were to conclude that *477 the Cape Canaveral Contract was not a `Completed Contract,' the Cape Canaveral Receivable would nevertheless still constitute an `Accounts Receivable' and therefore part of the Assets transferred to Shaw." In essence, Shaw contends that even if the Cape Canaveral Contract was an excluded contract under the Sale Order, Shaw bought the Receivable of that Contract independent of the Contract itself.
The Court does not find this to be the case. First, as noted, the Sale Order expressly excluded the Cape Canaveral Contract from the sale. Contrary to what Shaw suggests, the exclusion provision of the Sale Order did not function to exclude only some of the claims associated with the contracts of the Objectors, it excluded those contracts in their entirety from the sale. Therefore, exclusion of the Cape Canaveral Contract from the Sale Order had an effect beyond that of merely preserving IWR's objection to assumption and assignment. Rather, the exclusion operated just as the Sale Order indicated to exclude "contracts held by the Objectors listed on Exhibit D." (Sale Order 2 n. 2.)
At the Sale Hearing held on April 25, 2002, counsel for the Debtors confirmed the breadth of the exclusion by stating that, for parties indicated on Exhibit D, "their contracts or their assets are not affected by this order." (Hr'g Tr. 8:8-9, Apr. 25, 2002.) Shaw's counsel was present at the hearing and did not object to this characterization. Thus, the Court concludes that the Cape Canaveral Contract and any "assets" related to it (including the Cape Canaveral Receivable) were excluded from the sale to Shaw by virtue of the express language of the Sale Order.
Further support for the Court's conclusion is the fact that IWR received no notice of any intent of the Debtors to sell IWR's Account Receivable under the Sale Order. Indeed, the only notice pertaining to the sale that IWR received was the initial Cure Notice and the subsequent. Revised Notice. The latter informed IWR that its contracts would not be assumed and assigned to Shaw. Thus, IWR had no notice that the Cape Canaveral. Receivable was being sold to Shaw.
Even the provisions of the APA do not support Shaw's argument. Whereas Shaw emphasizes the extensive scope of the term "Assets," Shaw neglects to note that the APA defines the term "Excluded Assets" to encompass "Excluded Contracts," which are "all Contracts other than Completed Contracts and Immaterial Contracts (i) which are designated as such on Schedule 5.15(b) ... or (ii) which are not listed on Schedule 3.1.7." (APA 6, 14.) The Cape Canaveral Contract was not listed on Schedule 5.15(b) or 3.17. Consequently, the Contract was an "Excluded" one under the APA. By the terms of the APA, "all Accounts Receivable related to Excluded Contracts" were "Excluded Contracts Receivable" and therefore "not a part of the sale and purchase contemplated by [the APA] and ... [consequently], excluded from the Assets." (APA 6, 14.)
Thus, for the reasons set forth above, the Court concludes that the Cape Canaveral Receivable was neither a Completed Contract Receivable nor an Accounts Receivable sold to Shaw.
D. Validity of the Settlement Stipulation
IWR contends that the Settlement Stipulation executed between IWR and the IT Trust operated to resolve and release all claims between the Debtors and IWR, including those related to the Cape Canaveral Contract.
Shaw argues that the IT Trust was unable to waive the Cape Canaveral Receivable because it had previously been transferred *478 to Shaw under the Sale Order. In addition, Shaw asserts that IWR and the IT Trust failed to provide Shaw with notice of the Settlement Stipulation or include Shaw in negotiation and resolution of the claims arising from the Cape Canaveral Contract and Receivable. As a result, Shaw argues, the Settlement Stipulation is ineffective against Shaw.
As discussed above, the Court finds that the Cape Canaveral Contract and Receivable were specifically excluded by the Sale Order and the APA from the sale to Shaw. Consequently, the Court concludes that IWR and the IT Trust were free to resolve the issues and claims remaining between them as of confirmation including the Cape Canaveral Contract and Receivable. Shaw's contention that it did not have notice of the Settlement Stipulation is irrelevant because Shaw had no interest in the settlement negotiations and agreements between IWR and the IT Trust.
Thus, the Court concludes that the Settlement Stipulation between IWR and the IT Trust is valid with respect to all claims relating to the Cape Canaveral Contract.
IV. CONCLUSION
For the reasons set forth above, the Court will grant IWR's motion for summary judgment.
An appropriate order is attached.
ORDER,
AND NOW, this 31st day of OCTOBER, 2007, upon consideration of the Motion of Integrated Water Resources, Inc. for summary judgment and the response thereto and for the reasons set forth in the accompanying Opinion, it is hereby
ORDERED that the Motion for summary judgment is GRANTED; and it is further
ORDERED that Integrated Water Resources, Inc. is entitled to a declaratory judgment that the Cape Canaveral Contract and Receivable were not assigned to Shaw Environmental, Inc.
NOTES
[1] This Opinion constitutes the findings of fact and conclusions of law of the Court pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure.
[2] IWR does not seek summary judgment on its claims that; if Shaw has a claim against IWR, the IT Litigation Trust (the "IT Trust") has breached a settlement agreement with IWR and must indemnify it. IWR states that it will dismiss its claims against the IT Trust if it is successful in its action against Shaw.
[3] IWR was also a party to a Joint Marketing Agreement (the "JMA") with the Debtors.
| {
"pile_set_name": "FreeLaw"
} |
585 N.E.2d 696 (1992)
Scott Willis YEAGER and Merlyn and Lorraine Yeager, Appellants-Plaintiffs,
v.
BLOOMINGTON OBSTETRICS and Gynecology, Inc., Dr. Walter Owens, Dr. William R. Anderson, Dr. Leland Matthews, and Dr. Brandt Ludlow and Local Counsel of Women, Inc., d/b/a Bloomington Hospital, Appellees-Defendants.
No. 53A01-9110-CV-309.
Court of Appeals of Indiana, First District.
February 4, 1992.
Vernon J. Petri, David Schalk, Vernon J. Petri, P.C., Indianapolis, for appellants-plaintiffs.
David J. Mallon, Jr., Gloria A. Aplin, Indianapolis, Gary J. Clendening, J. Suzette Vandivier, Harrell, Clendening & Coyne, Bloomington, for appellees-defendants.
ROBERTSON, Judge.
Scott Willis Yeager[1] brings this consolidated appeal of the decisions of two trial courts to dismiss Scott's two medical malpractice complaints which are based on a "preconception tort" theory. The trial courts assumed jurisdiction and dismissed Scott's complaints under Ind. Code 16-9.5-10-1 before the medical review panel had rendered its written opinion regarding Scott's proposed complaints. In his complaint, Scott alleges that his mother's doctors' *697 failure to administer the drug RhoGAM during and after his mother's pregnancy with his older brother caused his mother to become sensitized to Rh-positive blood which ultimately resulted in his own serious personal injuries. The defendants of Scott's first lawsuit are the Bloomington Obstetrics and Gynecology, Inc., Dr. Walter Owens, Dr. William R. Anderson, Dr. Leland Matthews, and Dr. Brandt Ludlow. The defendant in Scott's second lawsuit is the Local Counsel of Women, Inc., d/b/a Bloomington Hospital. The trial courts below dismissed Scott's claims based upon our third district's decision in Walker v. Rinck (1991), Ind. App., 566 N.E.2d 1088 (Staton, J. dissenting), trans. pending. We disagree with the majority in Walker and hold that Scott's complaint sufficiently states a cognizable claim. Therefore, we reverse.
FACTS
Scott's complaint alleges that his mother, Lorraine Yeager, has Rh-negative blood. When Lorraine gave birth to the Yeagers' third child, Scott's older brother, Merlyn II, she was exposed to Merlyn's Rh-positive blood and developed the antibodies which attack Rh-positive blood. The defendant doctors provided Scott's mother with prenatal care and delivered Merlyn II.
Scott is the Yeagers' fourth child and also has Rh-positive blood. During Lorraine's pregnancy with Scott, her Rh-antibodies attacked Scott's Rh-positive blood. These antibodies continued to attack Scott's blood cells after his birth until the antibodies finally cleared his system. Scott suffered serious permanent personal injuries, including brain damage, as a result of the attack of his mother's Rh-antibodies upon his blood cells.
The drug RhoGAM (brand name of Rh-immune globulin) is specifically designed to prevent the types of injuries suffered by Scott. RhoGAM can prevent an Rh-negative woman from developing the sensitivity to Rh-positive blood when administered during the pregnancy and delivery of her first Rh-positive child.
Scott alleges that his mother's doctors' failure to administer RhoGAM during and after his mother's pregnancy with his older brother constituted medical malpractice which ultimately resulted in the personal injuries for which he seeks compensation. Obviously, this alleged act of malpractice occurred before Scott's conception; thus, it is described as a "preconception tort."
DECISION
Last year, the third district of our court decided the case of Walker v. Rinck (1991), Ind. App., 566 N.E.2d 1088 (Staton, J., dissenting), trans. pending, which, for all legally relevant purposes, is factually indistinguishable from the present case. In Walker, the child plaintiffs sued their mothers' doctor, alleging that his failure to administer RhoGAM during and after their mother's earlier pregnancy with an Rh-positive sibling resulted in their serious personal injuries. The Walker children also sued a medical laboratory alleging that the doctor's failure to administer RhoGAM was caused by the lab's erroneous analysis of their mother's blood.
The Walker majority noted that the case was one of first impression in Indiana and relied on the New York case of Albala v. City of New York (1981), 54 N.Y.2d 269, 445 N.Y.S.2d 108, 429 N.E.2d 786, in holding that "preconception torts" will not be recognized in Indiana. Id. at 1089. The rationale of the Walker majority and the Albala decision is, in a nutshell, that the recognition of preconception torts "would require the extension of traditional tort concepts beyond manageable bounds." Id. at 1089.
Distinguished Professors Prosser and Keeton have criticized the Albala decision, describing it as a "thinly reasoned case." W. Keeton, Prosser and Keeton on the Law of Torts, § 55, at p. 369 (5th ed. 1984). Prosser and Keeton suggest that some hypothetical preconception tort claims, especially those arising from toxic chemicals or radioactive waste, should not be recognized because of serious inherent problems related to proof and proximate causation. However, Prosser and Keeton note:
*698 These are indeed staggering problems, that will have to be dealt with carefully in future toxic tort contexts such as these, but they by no means require that a blanket no-duty rule be applied in preconception injury cases where such [proof and proximate causation] problems do not exist.
Id.
We agree with Prosser & Keeton that a blanket no-duty rule which disallows all claims based upon preconception tort theories (as established in Walker, 566 N.E.2d 1088) is unnecessary when problems related to proof and proximate causation are nonexistent. We also agree with Judge Staton's well-reasoned dissenting opinion in Walker in which he opined that, under traditional and fundamental principles of Indiana tort law, the Walker children had sufficiently stated a cognizable claim.
We believe that the approach taken by our supreme court in Webb v. Jarvis (1991), Ind., 575 N.E.2d 992, in determining whether a physician owed a third party the duty of reasonable care under a peculiar set of facts and circumstances is the appropriate method to employ in determining whether Scott's mother's doctors owed the duty of reasonable care to Scott under the facts and circumstances alleged in Scott's complaint.
In Webb, our supreme court held that the professional liability of a physician would not extend to the shooting victim of the doctor's patient who was alleged to have become a toxic psychotic unable to control his rages as the result of the physician's negligent overprescription of anabolic steroids. In reaching this conclusion, our supreme court balanced the following three (3) factors in determining whether the shooting victim had stated a cognizable claim: (1) the relationship between the parties, (2) the reasonable foreseeability of harm to the person injured, and 3) public policy concerns. With respect to the first factor to be balanced, the relationship between the physician and the third party, our supreme court noted:
[W]e have recognized that a duty may be owed to a beneficiary of the consensual [physician/patient] relationship, akin to that of a third party beneficiary of a contract, where the professional has actual knowledge that the services being provided are, in part, for the benefit of such third persons.
575 N.E.2d at 996. With respect to the second factor to be balanced, the reasonable foreseeability of harm to the person injured, our supreme court noted:
Imposition of a duty is limited to those instances where a reasonably foreseeable victim is injured by a reasonably foreseeable harm. Thus, part of the inquiry into the existence of a duty is concerned with exactly the same factors as is the inquiry into proximate cause. PROSSER & KEETON ON TORTS, § 53 (5TH ED. 1984). Both seek to find what consequences of the challenged conduct should have been foreseen by the actor who engaged in it. We examine what forces and human conduct should have appeared likely to come on the scene, and we weigh the dangers likely to flow from the challenged conduct in light of these forces and conduct. HARPER, JAMES & GRAY, The Law of Torts Vol. 3 § 18.2 (2d ed. 1986).
575 N.E.2d at 997. With respect to the third factor to be balanced, the public policy involved, our supreme court stated:
`Duty is not sancrosanct [sic] in itself, but is only an expression of the sum total of those considerations of policy which lead the law to say that the plaintiff is entitled to protection.' PROSSER AND KEATON [sic], supra, § 53. We conclude that public policy considerations weigh heavily against finding a duty here.
575 N.E.2d at 997.
We will attempt to balance the three (3) above-mentioned factors to test the sufficiency of Scott's complaint. At the outset, we would note that, when compared to many common recognized medical malpractice claims, the problems of proof and proximate causation inherent under the present circumstances do not impress us as particularly *699 onerous. We believe that Judge Staton succinctly balanced the first two factors in his dissenting opinion in Walker, 566 N.E.2d at 1090. Judge Staton gave the following reasons in support of his opinion that the Walker children's cause of action should be recognized:
Applying traditional concepts of duty to this case, it is clear that the defendants knew or should have known of the risk occasioned by the failure to administer RhoGAM to [the Rh-negative mother]. It is equally clear that [the mother's] later-born children are those who might reasonably be foreseen as being subject to injury by breach of the duty; indeed, the drug which should have been administered to [the mother] was specifically designed to reduce the risk of injury suffered by children in this situation. The defendants also maintained the requisite relationship with the children which gives rise to the duty. The defendants rendered medical service to [the mother], of the plaintiffs. Considering traditional notions of negligence law, the defendants owed a duty of reasonable care to the Walker children.
566 N.E.2d at 1090, 1091. As we cannot improve upon the analysis contained in Judge Staton's dissenting opinion, we will simply incorporate the rest of its reasoning into the analysis of our present decision by reference.
Moreover, we cannot conclude that public policy considerations weigh against the finding of a duty running from Scott's mother's doctors to Scott under the facts in this case. The appellees suggest that preconception torts should not be recognized because:
Insuring the risk of loss for [preconception] torts will be impossible to calculate. The incurred cost of insurance premiums, if insurance can even be obtained, may force physicians, especially obstetricians and gynecologists, out of practice. Smaller hospitals might also have to close their doors or deny obstetrical care to the community.
(Brief of Local Counsel of Women, Inc. d/b/a Bloomington Hospital, p. 12).
We agree that such concerns are of paramount importance. We would note, however, that our legislature has vigorously intervened in the area of medical malpractice by enacting the Indiana Medical Malpractice Act, I.C. § 16-9.5-1-1 et seq., out of concern for these very policy considerations. Garrison v. Foy (1985), Ind. App., 486 N.E.2d 5; Winona Memorial Foundation of Indianapolis v. Lomax (1984), Ind. App., 465 N.E.2d 731, trans. denied. In furtherance of these policies, the Indiana Medical Malpractice Act provides, among several provisions designed to protect the practice of medicine from malpractice claims, for 1) an "occurrence" rather than a "discovery" statute of limitations, I.C. 16-9.5-3-1; 2) a "cap" on the total amount recoverable, I.C. 16-9.5-2-2; 3) a medical review panel to review all proposed medical malpractice complaints, I.C. § 16-9.5-9-1. We believe that these protections, among others, help to ensure that traditional tort concepts remain within manageable bounds.
Considering the vigorous manner in which the legislature has intervened in the area of medical malpractice, we believe it would be inappropriate for us to adopt a blanket no-duty rule which would disallow all medical malpractice claims based upon preconception tort theories in order to advance the very policies underlying the Indiana Medical Malpractice Act. We believe that the legislature has preempted this area and that all further "blanket" type protections designed to ensure that tort claims remain within manageable bounds should be implemented by our legislature.
Finally, we note that our supreme court recently held that "wrongful life" damages are not cognizable in Indiana. Cowe v. Forum Group, Inc. (1991), Ind., 575 N.E.2d 630. However, in doing so, the Cowe court carefully distinguished "wrongful life" cases from "cases which allege a defendant's tortious conduct as the cause of abnormalities in infants that would otherwise have been born normal and healthy." Id. at 634 (n. 2). Our supreme court cited, among other preconception tort *700 cases from other jurisdictions, the case of Renslow v. Mennonite Hosp. (1977), 67 Ill.2d 348, 10 Ill.Dec. 484, 367 N.E.2d 1250. In Renslow, an Illinois court recognized a cause of action for an Rh-positive child who alleged he was injured by his Rh-negative mother's sensitization to Rh-positive blood which resulted from an improper blood transfusion administered before that child's conception. Judge Staton relied extensively on the Renslow decision in his dissenting opinion in Walker, 566 N.E.2d at 1091.
We agree with Professors Prosser and Keeton, and Judge Staton, that a blanket no-duty rule disallowing all claims based upon alleged preconception torts is unnecessary, unjust, and contrary to fundamental and traditional principles of Indiana tort law. Based on the above, we hold that Scott Yeager's complaint sufficiently states a cognizable claim. Therefore, we reverse and remand with instructions that Scott's proposed complaint be permitted to proceed before the medical review panel.
Judgment reversed.
BARTEAU and SHARPNACK, JJ., concur.
NOTES
[1] Scott Yeager's parents, Merlyn and Lorraine Yeager, are listed as appellants in the caption of this case. However, in the appellants' brief, Merlyn and Lorraine Yeager have indicated that they have abandoned their claims, conceding that their claims are time-barred. Accordingly, we will refer to Scott as the only appellant in this case.
Scott has similarly abandoned his claim based on a "wrongful life" theory, recognizing that our supreme court has recently held that damages based on the theory are not cognizable in Indiana. Cowe v. Forum Group, Inc. (1991), Ind., 575 N.E.2d 630.
| {
"pile_set_name": "FreeLaw"
} |
760 F.Supp. 1036 (1991)
MEADOWS INDEMNITY COMPANY LIMITED, Plaintiff,
v.
BACCALA & SHOOP INSURANCE SERVICES, INC., G.L. Hodson & Sons, Inc., Corroon & Black of Illinois, Inc., Corroon & Black Corporation, Puritan Insurance Company, Insco Limited, National Excess Insurance Company, the Mutual Fire, Marine and Inland Insurance Company, Old Republic Insurance Company, Nutmeg Insurance Company, Twin City Fire Insurance Company, Hartford Casualty Insurance Company, Ltd., Pacific Insurance Company, Ltd. and Hartford Fire Insurance Company, Defendants.
No. CV 89-4289.
United States District Court, E.D. New York.
March 29, 1991.
*1037 Anderson Costigan (A. Broadus Anderson III, Sheldon P. Pressman, of counsel), New York City, for plaintiff.
Parker Chapin Flattau & Klimpl (Alvin M. Stein, of counsel), New York City, for defendants Baccala & Shoop, G.L. Hodson, Corroon & Black, and Nat. Excess.
Buchalter, Nemer, Fields & Younger (Vincent J. Vitkowsky, of counsel), New York City, for defendants Insco, Nutmeg, Twin City, Hartford and Pacific.
Frank Kehrwald, Overland Park, Kan., for defendant Puritan Ins. Co.
Fleming, Merrill & Roth (Thomas G. Roth, of counsel), Newark, N.J., for defendant Old Republic.
MEMORANDUM OF DECISION AND ORDER
MISHLER, District Judge.
Defendants Insco Limited, Old Republic Insurance Company, Nutmeg Insurance Co., Twin City Fire Insurance Co., Hartford Casualty Insurance Co., Pacific Insurance Co., and Hartford Fire Insurance Co. (collectively the "Issuing Company defendants") move to stay this action in favor of arbitration based on the arbitration clauses in their reinsurance contracts with plaintiff, Meadows Indemnity Company Limited ("Meadows"). Defendants Baccala & Shoop Insurance Services, G.L. Hodson and Sons, Inc., Corroon & Black of Illinois, Inc., Corroon & Black Corporation, and National Excess Insurance Co. (collectively the "Managing Agent defendants"), move to stay the claims against them pending the *1038 arbitration between the Issuing Company defendants and Meadows or, alternatively, to dismiss the complaint pursuant to Fed.R. Civ.P. 12(b)(1) (lack of subject matter jurisdiction), 12(b)(6) (failure to state a claim upon which relief can be granted), and failure to satisfy the pleading requirements of Rule 9(b). Meadows opposes the motions.
BACKGROUND
This suit arises out of Meadows' participation with the Issuing Company defendants in a "reinsurance pool" from 1979 to 1984. Reinsurance is a transaction whereby an insurance company agrees to indemnify another insurance company against all or part of the loss which the latter may sustain under policies which it has issued. Reinsurance provides the means by which insurance companies spread among other companies the risks they have underwritten. Through reinsurance in such a "pool," the ultimate loss liability on a particular policy or loss is spread among a number of insurance market entities.
The following facts are alleged by Meadows in the complaint. Meadows is an insurance company organized and existing under the laws of Guernsey.[1] Meadows is a wholly owned subsidiary of Gould, Inc., which is headquartered in Ohio.
The Managing Agent defendants, as intermediaries, established and managed a reinsurance pool for the Issuing Company defendants and other primary insurers (the "Pool"). Meadows engaged Corroon & Black of Illinois to provide consulting services in connection with Meadows' entry into the reinsurance business. The Managing Agent defendants, primarily Corroon & Black Corporation, provided information and advice to Meadows inducing Meadows to contract with the Issuing Company defendants into the Pool and to renew such reinsurance contracts. The initial information and subsequent renewal information consistently indicated that the Pool was acquiring profitable business in accordance with the stated goals, and that the Pool was well managed by Baccala & Shoop Insurance Services. Meadows and the Issuing Company defendants executed thirty-four reinsurance contracts between 1979 and 1984.
Meadows alleges that, unbeknownst to it, the Managing Agent defendants managed the Pool for the purpose of reaping risk-free commissions to the detriment of the reinsurers, and without regard to their fiduciary obligations to manage the Pool in the best interests of all of the Pool participants, including Meadows. The Managing Agent defendants allegedly manipulated the underwriting and administration of the Pool to the detriment of Meadows, and failed to disclose information material to Meadows' decision whether or not to renew its yearly contracts with the other members of the Pool.
Meadows alleges that when the Issuing Company defendants became primary insurers in the Pool, they manipulated the underwriting of the Pool for their own ends, without the knowledge and to the detriment of Meadows and its co-reinsurers. In addition, the Issuing Company defendants, working in concert with the Managing Agent defendants, allegedly developed or became apprised of information material to Meadows' decision to renew its participation in the Pool, which they failed to disclose to Meadows, thereby inducing Meadows' yearly execution of Pool contracts.
Meadows alleges the following causes of action against defendants:
(1) violation of and conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1962(a), (c), (d) ("RICO");
(2) civil conspiracy;
(3) fraud in the inducement;
(4) breach of fiduciary duties;
(5) malpractice;
(6) negligence;
(7) unjust enrichment;
(8) breach of contract as against Corroon & Black of Illinois.
All thirty-four reinsurance contracts between Meadows and the Issuing Company *1039 defendants executed between 1979 and 1984 contain arbitration clauses. However, there are two versions of the arbitration clause. Thirty-two of the contracts contain the following arbitration clause:
As a condition precedent to any right of action hereunder, any dispute arising out of this contract shall be submitted to the decision of a board of arbitration composed of two arbitrators and an umpire....
Two of the contracts[2] provide:
If any dispute shall arise between the reinsured and the reinsurer, either before or after the termination of this contract, with reference to the interpretation of this contract or the rights of either party with respect to any transactions under this contract, the dispute shall be referred to three arbitrators, one to be chosen by each party and the third by the two so chosen....
The Issuing Company defendants assert that the court should stay the claims against them and order arbitration pursuant to the arbitration clauses in the contracts between them and Meadows. The Managing Agent defendants contend that the court, in the exercise of its discretion, should also stay this action as to them (though they are not parties to the contracts containing the arbitration clauses) because the claims asserted against the Issuing Company defendants are the same claims asserted against the Managing Agent defendants.
Meadows argues that the whole controversy centers around the fraud cause of action which it claims is not an arbitrable subject matter, under the law of Guernsey. Alternatively, Meadows asserts that its fraud, RICO and civil conspiracy claims are not within the scope of the arbitration clauses. Meadows also argues that if the court finds the claims against the Issuing Company defendants arbitrable, the court, in the exercise of its discretion, should not stay the action as against the Managing Agent defendants.
Although Meadows contends that its fraud, RICO, and civil conspiracy claims (collectively the "fraud claim") are not arbitrable subject matters or within the scope of the arbitration clauses, Meadows apparently concedes that its remaining claims for breach of fiduciary duty, malpractice, negligence, and unjust enrichment are arbitrable and within the scope of the agreement to arbitrate. Even were we to agree with Meadows that the fraud claim should not be arbitrated, we would still stay the action pending arbitration of the other claims. Nederlandse Erts-Tankersmaatschappij v. Isbrandtsen Co., 339 F.2d 440, 441 (2d Cir.1964) (district court has discretion whether to stay nonarbitrable claims pending arbitration of the arbitrable claims); Landis v. North America Co., 299 U.S. 248, 255, 57 S.Ct. 163, 166, 81 L.Ed. 153 (1936) (same); Moses H. Cone, Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20 n. 23, 103 S.Ct. 927, 939 n. 23, 74 L.Ed.2d 765 (1983) (same). In any event, as discussed below we conclude that Meadows' fraud claim against the Issuing Company defendants is arbitrable and within the scope of the arbitration agreements.
DISCUSSION
I. The Issuing Company Defendants
"[F]ederal policy strongly favors arbitration as an alternative dispute resolution process." David L. Threlkeld & Co. v. Metallegesellschaft Ltd., 923 F.2d 245, 248 (2d Cir.1991). "The policy in favor of arbitration is even stronger in the context of international business transactions." Threlkeld, 923 F.2d at 248; Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 629-31, 105 S.Ct. 3346, 3355-56, 87 L.Ed.2d 444 (1985); Scherk v. Alberto-Culver Co., 417 U.S. 506, 516-18, 94 S.Ct. 2449, 2455-57, 41 L.Ed.2d 270 (1974). The enforcement of international arbitral agreements "promotes the smooth flow of international transactions by removing the threats and uncertainty of time-consuming and expensive litigation. The parties may agree in advance as to how their disputes will be expeditiously and inexpensively resolved should their business *1040 relationship run sour." Threlkeld, 923 F.2d at 248; Scherk, 417 U.S. at 516-17, 94 S.Ct. at 2455-56.
The question of arbitrability is a two-fold inquiry: whether there is an enforceable agreement to arbitrate a subject matter capable of settlement by arbitration, and if so, whether the scope of that agreement encompasses the claim. Threlkeld, 923 F.2d at 249; Fleck v. E.F. Hutton Group, Inc., 891 F.2d 1047, 1050 (2d Cir. 1989).
A. Enforceable Agreement to Arbitrate Subject Matter Capable of Settlement by Arbitration
Meadows argues that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 21 U.S.T. 2517, T.I. A.S. No. 6997, 330 U.N.T.S. 38 (June 10, 1958) (the "Convention"), applies to the arbitration clauses, and that under the Convention Meadows' fraud claim is not a "subject matter capable of settlement by arbitration" (Convention Art. II(1)), and the arbitration agreement itself is "null and void" (Convention Art. II(3)).
The United States is a signatory to the Convention. In addition, Congress implemented the Convention through Chapter Two of the Federal Arbitration Act, 9 U.S.C. §§ 201-208. The Convention is "a specific unit of the Arbitration Act." Threlkeld, 923 F.2d at 250.[3]
We must first determine whether the Convention applies to the instant arbitration clauses. Article II of the Convention provides:
(1) Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.
* * * * * *
(3) The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.
Furthermore, Section 202 of the Arbitration Act implements the Convention by providing:
An arbitration agreement or arbitral award arising out of a legal relationship, whether contractual or not, which is considered as commercial, including a transaction, contract, or agreement described in section 2 of this title, falls under the Convention. An agreement or award arising out of such a relationship which is entirely between citizens of the United States shall be deemed not to fall under the Convention unless that relationship involves property located abroad, envisages performance or enforcement abroad, or has some other reasonable relation with one or more foreign states. For the purpose of this section a corporation is a citizen of the United States if it is incorporated or has its principal place of business in the United States.
Section 208 of the Arbitration Act provides that Chapter One of the Arbitration Act (9 U.S.C. §§ 1-14) applies to actions and proceedings brought under Chapter Two (9 U.S.C. §§ 201-208) to the extent it is not in conflict with Chapter Two or the Convention.
The Convention, in addition to the other portions of the Arbitration Act, applies to the arbitration clauses because they arose out of commercial contractual legal relationships not entirely between citizens of *1041 the United States. Arbitration Act §§ 202, 208; Convention Art. II(1).
Meadows asserts that its fraud claim is not a "subject matter capable of settlement by arbitration" under Article II(1) and that the arbitration clauses are "null and void" under Article II(3). In examining these two exceptions the court is guided by the principle that "[t]his treaty to which the United States is a signatory makes it clear that the liberal federal arbitration policy `applies with special force in the field of international commerce.'" Threlkeld, 923 F.2d at 248 (quoting Mitsubishi, 473 U.S. at 631, 105 S.Ct. at 3356).[4]
Subject Matter Capable of Settlement by Arbitration (Article II(1))
Although it is well settled federal arbitration law that a fraud in the inducement claim is arbitrable unless the arbitration clause itself was allegedly fraudulently induced, Prima Paint Corp. v. Flood & Conklin Manuf. Co., 388 U.S. 395, 403-05, 87 S.Ct. 1801, 1806, 18 L.Ed.2d 1270 (1967); Manning v. Energy Conversion Devices, Inc., 833 F.2d 1096, 1103 (2d Cir.1987), Meadows argues that its fraud claim is not a "subject matter capable of settlement of arbitration" under Article II(1) of the Convention because fraud claims allegedly are not arbitrable under the law of Guernsey where Meadows is incorporated.
There is little case law addressing the issue of what country's law governs whether a subject matter is "capable of settlement by arbitration" under Article II(1) of the Convention. Meadows points to Article V(2)(a) of the Convention, which governs the enforcement of arbitral awards, and argues that the law of the country where enforcement of the award will be sought (which Meadows claims is Guernsey) governs whether the subject matter is arbitrable under Article II(1).
Article V(2) provides that the country where enforcement is sought need not recognize and enforce an arbitral award if the subject matter is not arbitrable under its own laws or if enforcement of the award would be contrary to its own public policy:
Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
(b) The recognition or enforcement of the award would be contrary to the public policy of that country.
According to Meadows, in determining whether a claim is a "subject matter capable of settlement by arbitration" under Article II(1) the court should look to the law of the country where enforcement of the arbitration award will be sought (which Meadows claims is Guernsey) pursuant to Article V's language addressing the enforcement of arbitration awards. However, the absence in Article II of any reference to the law where enforcement will be sought and the presence of such language in Article V may compel the opposite conclusion, i.e., that the delegates to the Convention deliberately excluded any such reference from Article II and intended that the law where enforcement is sought is dispositive only of the question whether to enforce an arbitral award and not the question whether to order arbitration under Article II. In fact, the German delegate to the Convention noted the omission in Article II(3) of any reference to the law where enforcement will be sought in determining whether an arbitration agreement is "null and void," and proposed that the article be amended so that arbitral agreements would be related to arbitral awards that were enforceable. The German proposal was voted upon and rejected. G. Haight Convention on the Recognition and Enforcement of Foreign Arbitral Awards: Summary Analysis of Record of United Nations Conference, May/June 1958 at 27-28. See Rhone Mediterranee Compagnia *1042 Francese v. Lauro, 555 F.Supp. 481, 485 (D.V.I.1982) ("the Convention's mandate to refer parties to arbitration is not necessarily negated because an arbitral award would be unenforceable under a foreign forum's law"), aff'd, 712 F.2d 50 (3d Cir. 1983).
In Mitsubishi the circuit court adopted the reasoning now urged upon us by Meadows and held that antitrust claims were not a "subject matter capable of settlement by arbitration" under Article II(1) because any award, were such to be issued, could not be enforced in the United States. 723 F.2d 155, 162-66 (1st Cir.1983). The United States Supreme Court reversed, holding that the emphatic federal policy in favor of arbitral dispute resolution, the purpose of the Convention and Chapter Two of the Arbitration Act to encourage the recognition and enforcement of commercial arbitration agreements, and the necessity of subordinating domestic notions of arbitrability to the international policy favoring arbitration required arbitration of the antitrust claims. 473 U.S. at 628-40, 105 S.Ct. at 3355-61. The Court did not specifically reject or adopt the circuit court's reasoning. The Court refused to find subject matter exemptions to Article II(1) in the absence of a specific direction by Congress to do so:
Doubtless, Congress may specify categories of claims it wishes to reserve for decision by our own courts without contravening this Nation's obligations under the Convention. But we decline to subvert the spirit of the United States' accession to the Convention by recognizing subject-matter exceptions where Congress has not expressly directed the courts to do so.
Mitsubishi, 473 U.S. at 639 n. 21, 105 S.Ct. at 3360 n. 21.
Although the Supreme Court in Mitsubishi held that a nonarbitrable subject matter under United States law is (absent a specific direction by Congress) still a "subject matter capable of settlement by arbitration" under Article II(1), even where enforcement of the award would be in the United States, the Court did not address the situation where the claimed subject matter exception is grounded in a foreign country's law, and the Court did not delineate what subject matters are not "capable of settlement by arbitration" under Article II(1). Counsel have not cited any cases holding that a subject matter was not capable of settlement by arbitration under Article II(1).
We find that reference to the domestic laws of only one country, even the country where enforcement of the arbitral award will be sought, does not resolve whether a claim is "capable of settlement by arbitration" under Article II(1) of the Convention. Cf. Mitsubishi, 473 U.S. at 639, 105 S.Ct. at 3360 ("national courts [must] subordinate domestic notions of arbitrability to the international policy favoring commercial arbitration"); Scherk, 417 U.S. at 520 n. 15, 94 S.Ct. at 2457 n. 15 ("the delegates to the Convention voiced frequent concern that courts of signatory countries in which an agreement to arbitrate is sought to be enforced should not be permitted to decline enforcement of such agreements on the basis of parochial views of their desirability or in a manner that would diminish the mutually binding nature of the agreements"). The determination of whether a type of claim is "not capable of settlement by arbitration" under Article II(1) must be made on an international scale, with reference to the laws of the countries party to the Convention. Cf. Mitsubishi, supra; Scherk, supra; Rhone, 712 F.2d at 53 (whether the arbitration agreement is "null and void" under Article II(3) turns on whether the agreement is "subject to an internationally recognized defense such as duress, mistake, fraud, or waiver") (emphasis added); Tennessee Imports, Inc. v. Filippi, 745 F.Supp. 1314, 1322 (M.D.Tenn.1990) (same); Oriental Commercial and Shipping v. Rosseel, 609 F.Supp. 75, 77-78 (S.D.N.Y.1985) (same). The purpose of the Convention, to encourage the enforcement of commercial arbitration agreements, and the federal policy in favor of arbitral dispute resolution require that the subject matter exception of Article II(1) is extremely narrow.
*1043 Meadows merely points to Guernsey law in support of its contention that its fraud claim is not "capable of settlement by arbitration" under Article II(1). This does not establish that, on an international scale, fraud claims are not arbitrable.[5]
In addition, even if we were to accept Meadows' position that the law of the country where enforcement of the award will be sought determines whether claims are arbitrable under Article II(1), there has been no showing that enforcement of the arbitration award would be in Guernsey. Meadows is seeking over $17 million in compensatory damages and $100 million in punitive damages from the Issuing Company defendants, which are headquartered in the United States. Should Meadows prevail in arbitration, enforcement of the award would presumably be against assets of defendants in the United States. Thus, the United States, not Guernsey (where Meadows is incorporated) would be the forum for the enforcement of Meadows' claims.[6]
In light of the emphatic federal policy embodied in the Arbitration Act in favor of arbitral dispute resolution, and the "goal of the Convention ... to promote the enforcement of arbitral agreements in contracts involving international commerce so as to facilitate international business transactions on the whole," Threlkeld, 923 F.2d at 250; Scherk, 417 U.S. at 520 n. 15, 94 S.Ct. at 2457 n. 15, we find that Meadows' claims, including its fraud claim, are "capable of settlement by arbitration" under Article II(1) of the Convention.
Null and Void (Article II(3))
Under Article II(3) of the Convention the court may not order arbitration if it finds that the arbitration agreement is "null and void, inoperative or incapable of being performed." This is a narrow exception limited to cases in which the arbitration clause itself (1) is "subject to an internationally recognized defense such as duress, mistake, fraud, or waiver" or (2) "contravenes fundamental policies of the forum state." Rhone, 712 F.2d at 53; Tennessee Imports, 745 F.Supp. at 1322; Oriental Commercial and Shipping, 609 F.Supp. at 77-78. See Marchetto v. DeKalb Genetics Corp., 711 F.Supp. 936, 939 (N.D.Ill.1989). There has been no showing that the arbitration clauses are within this narrow "null and void" exception of Article II(3).
B. Scope of the Arbitration Agreement
The next question is whether Meadows' fraud claim falls within the scope of the arbitration agreement. While parties may not be compelled to submit a commercial dispute to arbitration unless they have contracted to do so, federal policy "requires us to construe arbitration clauses as broadly as possible," S.A. Mineracao Dea Trindade-Samitri v. Utah Int'l, Inc., 745 F.2d 190, 194 (2d Cir.1984), and "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Threlkeld, 923 F.2d at 248 (quoting Moses H. Cone, 460 U.S. at 24-25, 103 S.Ct. at 941-42). "[L]anguage excluding certain disputes from arbitration must be `clear and unambiguous' or `unmistakably clear' and ... arbitration should be ordered `unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.'" Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 847 (2d Cir.1987) (quoting S.A. Mineracao, 745 F.2d at 194); Threlkeld, 923 F.2d at 950.
Thirty-two of the thirty-four Pool reinsurance contracts state that "[a]s a condition precedent to any right of action hereunder, any dispute arising out of this contract shall be submitted" to arbitration. *1044 Two of the Pool reinsurance contracts provide that "if any dispute shall arise between the reinsured and the reinsurer, either before or after the termination of this contract, with reference to the interpretation of this contract or the rights of either party with respect to any transactions under this contract, the dispute shall be referred" to arbitration.
In In re Kinoshita & Co., 287 F.2d 951, 952-53 (2d Cir.1961), the Second Circuit found that a clause requiring arbitration of "any dispute or difference ... aris[ing] under" the contract was not sufficiently broad to encompass a claim of fraudulent inducement.
In S.A. Mineracao, 745 F.2d at 193-94, the Second Circuit re-examined Kinoshita. The court found that Kinoshita is inconsistent with the federal policy favoring arbitration. In addition, the court observed that in Scherk, 417 U.S. at 508, 94 S.Ct. at 2452, the Supreme Court held that an arbitration clause requiring arbitration of "any controversy or claim ... aris[ing] out of this agreement" covered the plaintiffs' fraudulent misrepresentation claim (though the scope of the arbitration clause was not raised by the parties). However, rather than overrule Kinoshita, the S.A. Mineracao court "confine[d] Kinoshita to its precise facts." S.A. Mineracao, 745 F.2d at 194. The court found that the arbitration clause providing for arbitration of "any question or dispute aris[ing] or occur[ring] under" the contract was not within the "precise facts" of Kinoshita's clause requiring arbitration of "any dispute or difference aris[ing] under" the contract. Id.
Similarly, in Genesco, 815 F.2d at 854, the Second Circuit found that the arbitration clause requiring arbitration of "all claims and disputes of whatever nature arising under the contract" was distinguishable from Kinoshita.[7] Although the court again declined the invitation to explicitly overrule Kinoshita, it reiterated that Kinoshita was inconsistent with the federal policy and that it was limited to its own precise facts. Id. The court also hinted, by its citation to Scherk, that the authority of Kinoshita is questionable.[8]
The decisions in other circuits, since the confinement of Kinoshita to its own facts by S.A. Mineracao and Genesco, call the continued authority of Kinoshita into even further doubt. See Mar-Len of La., Inc. v. Parsons-Gilbane, 773 F.2d 633, 637 (5th Cir.1985) (arbitration clause requiring arbitration of "any dispute arising under" the contract or any dispute "with respect to the interpretation or performance of" the contract included plaintiff's economic duress claim); Peoples Security Life Ins. Co. v. Monumental Life Ins. Co., 867 F.2d 809, 813-14 (4th Cir.1989) (arbitration clause requiring arbitration of any issue "believed to constitute a breach or violation of" the contract included plaintiff's fraud in the inducement claim).[9]
Assuming Kinoshita, though confined to its facts, is still viable in this circuit, the agreement of the parties to arbitrate in the instant case does not fall within the precise facts of Kinoshita. Of the thirty-four Pool contracts signed by Meadows, two contracts require arbitration of "any dispute ... either before or after termination of this contract, with reference to the interpretation of this contract or the rights of either party with respect to any transactions under this contract." This clause is clearly different from and broader than the clause in Kinoshita. The other Pool contracts requiring arbitration of "any dispute arising out of" the contract bears a potentially broader reading than the clause in Kinoshita providing for arbitration of "any *1045 dispute or difference ... aris[ing] under" the agreement.
In addition, the two versions of arbitration clauses in Meadows' reinsurance Pool contracts can be read together. The "arising out of" arbitration clause should be read in light of the even broader arbitration clause contained in Meadows' two other Pool contracts. It is doubtful that Meadows and the Issuing Company defendants intended to arbitrate only fraud claims with regard to two of the Pool contracts and not fraud claims relating to the other Pool contracts. Meadows' contracts with defendants for Meadows' participation in the Pool should be read together rather than separately. We cannot "read each of these [arbitration] provisions in a vacuum." Threlkeld, 923 F.2d at 251.
"[A]ny ambiguity surrounding the clause's language `should be resolved in favor of arbitrability.'" Genesco, 815 F.2d at 854 (quoting Moses H. Cone, 460 U.S. at 24-25, 103 S.Ct. at 941). "[A]rbitration should be ordered `unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.'" Genesco, 815 F.2d at 847; Threlkeld, 923 F.2d at 250. We find that Meadows' claims, including its fraud claim, fall within the scope of Meadows' agreement to arbitrate. S.A. Mineracao, 745 F.2d at 194-95; Genesco, 815 F.2d at 854; Scherk, 417 U.S. at 508, 94 S.Ct. at 2451; Mar-Len, 773 F.2d at 637; Peoples Security, 867 F.2d at 813-14.
II. The Managing Agent Defendants
The decision whether to stay the action as to the Managing Agent defendants, pending arbitration between Meadows and the Issuing Company defendants, is within this court's discretion. Nederlandse, 339 F.2d at 441; Landis, 299 U.S. at 255, 57 S.Ct. at 166.
We believe the arbitration of Meadows' claims against the Issuing Company defendants might at least partially determine issues forming the basis of the claims asserted against the Managing Agent defendants, e.g., Lawson Fabrics, Inc. v. Akzona, Inc., 355 F.Supp. 1146, 1151 (S.D.N.Y.), aff'd, 486 F.2d 1394 (2d Cir.1973); Societe Nationale Pour La Recherche v. General Tire & Rubber Co., 430 F.Supp. 1332 (S.D. N.Y.1977), and may provide the court with insight into the issues of fact and law involved in the claims against the Managing Agent defendants. E.g., Hikers Indus. v. William Stuart Indus., 640 F.Supp. 175, 178 (S.D.N.Y.1986); Janmort Leasing, Inc. v. Econo-Car Int'l, Inc., 475 F.Supp. 1282, 1293 (E.D.N.Y.1979). A stay of the claims as against the Managing Agent defendants would promote judicial economy, avoidance of confusion and possible inconsistent results, American Home Assurance Co. v. Vecco Concrete Constr. Co., 629 F.2d 961, 964 (4th Cir.1980), and would not work undue hardship or prejudice against Meadows. Nederlandse, 339 F.2d at 442. Accordingly, we order the stay of Meadows' claims against the Managing Agent defendants and the defenses thereto pending the arbitration of Meadows' claims against the Issuing Company defendants.
ORDER
Meadows and the Issuing Company defendants are directed to submit their respective claims and defenses to arbitration pursuant to the arbitration clauses in the reinsurance contracts.
Meadows' claims against the Managing Agent defendants and the defenses thereto are stayed pending the arbitration of Meadows' claims against the Issuing Company defendants.
SO ORDERED.
NOTES
[1] Guernsey is located in the Channel Islands and is under the control of the United Kingdom.
[2] The 1979 and 1980 contracts between Meadows and defendant Insco Limited.
[3] The Arbitration Act applies in federal court to suits which relate to contracts involving interstate or international commerce. Threlkeld, 923 F.2d at 249. Meadows concedes that the reinsurance contracts involve international commercial relationships. (Opposing Memorandum at p. 28, n. 30, 30).
[4] Meadows agrees that the reinsurance contracts involve international commerce. (Opposing Memorandum at p. 28 n. 30, 30).
[5] As discussed above, fraud claims are arbitrable under federal arbitration law unless the arbitration clause itself was allegedly fraudulently induced. Prima Paint, 388 U.S. at 403-05, 87 S.Ct. at 1806; Manning, 833 F.2d at 1103.
[6] Furthermore, if defendants were to seek sums allegedly due from Meadows and were successful in arbitration, it is not clear that enforcement of the award would be in Guernsey. Defendants could seize Meadows' assets in the United States or in other countries, or seek enforcement against Meadows' parent corporation, Gould, Inc., which is headquartered in Ohio.
[7] The district court had found such language to be the equivalent of the Kinoshita language.
[8] The court stated:
Because the instant case is distinguishable from the Kinoshita clause, we need not discuss the continued viability of Kinoshita. See Scherk, 417 U.S. at 508, 94 S.Ct. at 2451 (clause requiring arbitration of "any controversy or claim ... aris[ing] out of this agreement" held to cover fraudulent misrepresentations claim).
Genesco, 815 F.2d at 854 n. 6.
[9] The goal of S.A. Mineracao was to provide stable and predictable background law for parties to arrange for arbitration of their disputes. This goal is undermined by differing results depending on what circuit the suit is brought in.
| {
"pile_set_name": "FreeLaw"
} |
T.C. Summary Opinion 2017-66
UNITED STATES TAX COURT
KURT HICKAM AND MICHELLE HICKAM, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3901-16S. Filed August 17, 2017.
Kurt Hickam and Michelle Hickam, pro se.
Sandeep Singh and Thomas R. Mackinson, for respondent.
SUMMARY OPINION
LEYDEN, Special Trial Judge: This case was heard pursuant to the
provisions of section 7463 of the Internal Revenue Code in effect when the
petition was filed.1 Pursuant to section 7463(b), the decision to be entered is not
1
Unless otherwise indicated, all section references are to the Internal
(continued...)
-2-
reviewable by any other court, and this opinion shall not be treated as precedent
for any other case.
In a notice of deficiency dated December 16, 2015, respondent determined
deficiencies in petitioners’ Federal income tax of $9,752 and $16,475 for 2011 and
2012, respectively. Respondent also determined accuracy-related penalties under
section 6662(a) of $1,950.40 and $3,295 for 2011 and 2012, respectively.
The issues for decision are whether petitioners2 are: (1) entitled to deduct
rental real estate losses for 2011 and 2012 and (2) liable for accuracy-related
penalties under section 6662(a) for 2011 and 2012.
Petitioners’ rental real estate loss deductions for 2011 and 2012 are limited
by the passive activity loss rules in section 469, and they are not liable for an
accuracy-related penalty under section 6662(a) for 2011 or 2012.
1
(...continued)
Revenue Code in effect for the relevant years, and all Rule references are to the
Tax Court Rules of Practice and Procedure.
2
Michelle Hickam did not appear in Court at trial, but the Court’s decision
will be binding upon both spouses.
-3-
Background
Some of the facts are stipulated and are so found. The stipulation of facts
and the attached exhibits are incorporated herein by this reference. Petitioners
resided in California when they timely filed their petition.
I. Mortgage Brokerage Services and Loan Origination Services During 2011
and 2012
During 2011 and 2012 Mr. Hickam brokered real estate mortgages and other
loans as an independent contractor for a mortgage brokerage company where he
was a branch manager. During 2012 Mr. Hickam was also paid wages by an
employer for originating loans.3 In both positions Mr. Hickam’s brokered or
originated loans were secured by real estate. For 2011 and 2012 Mr. Hickam was
a licensed real estate agent, but the record does not show whether he worked as a
real estate agent during those years.
During 2011 and 2012 Mr. Hickam brokered and originated mortgage loans
for clients to buy real estate; refinance existing loans; and secure reverse
mortgages, commercial loans, and, occasionally, construction loans. Mr. Hickam
3
Mr. Hickam did not explain why he was paid as an independent contractor
for his role as a branch manager in 2011 and 2012 and as an employee of his
employer in 2012.
-4-
did not operate, develop, redevelop, construct, reconstruct, or rent real estate in
brokering mortgages or originating loans.4
When he brokered mortgages and originated loans, Mr. Hickam followed a
structured work routine which he referred to as the “Core Coaching System”.
Under this system he engaged in certain activities on a given day. On Mondays he
followed up with realtors as to whether they had had any open houses and client
referrals during the preceding weekend. On Tuesdays he called realtors to get file
status updates. On Wednesdays he updated clients. On Thursdays he engaged in
“referral partner interactions”. On Fridays he followed up with realtors to ask
whether they needed any materials for their upcoming open houses.
Mr. Hickam’s duties also included overseeing one to three other
independent contractors and working with processors or assistants on his client
files. Occasionally, he would meet with an appraiser or inspect the condition of a
property that was to secure a loan.
The company for which Mr. Hickam worked as a branch manager provided
him with an office. Mr. Hickam’s work hours were flexible, and he was not
always required to perform his work at the office.
4
On a handful of occasions over the years Mr. Hickam advised former
clients for whom he had brokered a mortgage on how to lease property and
reviewed their leases.
-5-
During 2011 and 2012 Mr. Hickam did not record the amount of time he
spent brokering mortgages and originating loans.
II. Rental Real Estate Activity During 2011 and 2012
In addition to brokering mortgages and originating loans, Mr. Hickam
managed and maintained the following three rental real estate properties (three
properties):
Address City State
1285 Norval Way San Jose Cal.
4625 Topaz St. Capitola Cal.
918 Del Mar Ave. San Jose Cal.
The properties at 1285 Norval Way (Norval property) and 4625 Topaz
Street (Topaz property) were single-family homes, and the property at 918 Del
Mar Avenue (Del Mar property) was a nine-unit apartment building. In 2011 and
2012 Mr. Hickam lived approximately two miles from the Norval and Topaz
properties. The record does not show who owned the Norval property or the
Topaz property during the years at issue.
Mr. Hickam equally owned the Del Mar property with his brother and his
parents. However, his brother and his parents did not participate in the
management or maintenance of the Del Mar property because they did not reside
-6-
in the area. Instead, they paid Mr. Hickam $6,000 per year to look after the
property. He reported that amount as “other income” on petitioners’ joint Federal
income tax returns for 2011 and 2012.
During 2011 Mr. Hickam placed ads to lease the three properties and
reviewed lease applications. He met with prospective tenants, obtained their credit
reports, called their references and prior landlords, and prepared their leases.
After a tenant vacated a property or a unit, Mr. Hickam inspected the property or
unit for damage.
Mr. Hickam also periodically inspected the conditions of the three
properties during the terms of the leases to see whether the properties had any
damage or needed any repairs, spoke with the tenants and the gardeners, and
ensured that garbage cans were returned to their appropriate locations after the
garbage was collected.
If a property or a unit sustained minor damage, Mr. Hickam would purchase
the materials and perform the required repairs. If the property sustained major
damage, Mr. Hickam would seek bids, meet with contractors, and oversee the
repairs.
-7-
Most of the units in the Del Mar property were remodeled during 2011 and
2012. Mr. Hickam took advantage of a unit’s turnover to complete its remodeling.
Four units and five units turned over in 2011 and 2012, respectively.
Mr. Hickam did not keep contemporaneous records of the hours he spent or
the services he performed with respect to the three properties. When the Internal
Revenue Service (IRS) audited petitioners’ 2011 and 2012 tax returns, and in
response to the audit, Mr. Hickam prepared a log of his hours and his services with
respect to the three properties.
Sometime after 2011 Mr. Hickam prepared a document titled “Non
Contemporaneous Recreation [sic] of Time” (2011 log) with handwritten entries.
The 2011 log grouped services with respect to the three properties into five
categories: “Del Mar, Norval, Topaz, P.O. Box, and Bills/Paperwork/Bids/Apps”.
Mr. Hickam wrote the number of hours he estimated he had spent for each
category on a particular day of the month. For instance, for Saturday, January 8,
2011, Mr. Hickam wrote that he spent one hour with respect to “Del Mar”, one
hour with respect to “Norval Way”, and two hours with respect to
“Bills/Paperwork/Bids/Apps”. The 2011 log does not explain the particular
services performed in any of the five categories.
-8-
The 2011 log also grouped Mr. Hickam’s mortgage brokerage services and
his loan origination services into six categories: “Pipeline Review,
Marketing/Promo, Client Interface, Office/Bills/Documentation,
Training/Licensing, and Referral Partners/Phase”. As with the entries with respect
to the three properties, Mr. Hickam wrote the number of hours he estimated he had
spent for each category for a particular day of the month. These entries also do not
explain the particular services performed in any of the six categories.
Sometime after 2012 Mr. Hickam prepared a noncontemporaneous calendar
for each month (collectively, 2012 calendars). The 2012 calendars contained
entries in one-hour increments followed by one word or a two-word phrase. The
entries referred to the three properties or Mr. Hickam’s mortgage brokerage
services and his loan origination services. However, none of the phrases explains
the services Mr. Hickam performed.
III. Petitioners’ 2011 and 2012 Tax Returns
Petitioners timely filed their 2011 and 2012 tax returns, reporting gross
income of $170,644 and $266,447 for 2011 and 2012, respectively. Mr. Hickam
included in each year’s reported gross income the $6,000 his brother and his
parents had paid him in that year for managing the Del Mar property.
-9-
Each included a Schedule E, Supplemental Income and Loss, reporting
gross rental income and expenses for the three properties. In those Schedules E
petitioners reported net losses for the Norval and Topaz properties and net profits
for the Del Mar property. Petitioners did not report any other income from other
rental real estate services or other property management services for 2011 or 2012.
In their Schedules E petitioners claimed rental real estate loss deductions of
$47,730 and $48,945 for 2011 and 2012, respectively, for the three properties.5
Petitioners attached to their 2011 tax return an election to treat the three properties
as one activity.
Discussion
I. Burden of Proof
Generally, the Commissioner’s determination of a deficiency is presumed
correct, and the taxpayer bears the burden of proving it incorrect. See Rule
5
In the Schedules E petitioners reported nonpassive income, unrelated to a
rental real estate activity, from “KM Hickam Partnership” totaling $126,270 and
$71,065 for 2011 and 2012, respectively. Petitioners subtracted the reported net
rental real estate losses for the three properties for 2011 and 2012 from the
reported partnership income. The resulting net total income of $78,540 and
$22,120 for 2011 and 2012, respectively, was reported on line 17 of petitioners’
2011 and 2012 tax returns. Petitioners each filed Schedules SE, Self-Employment
Tax, for 2011 and 2012, calculating the self-employment tax on their respective
portions of the partnership income. Mr. Hickam did not testify about the work he
or Mrs. Hickam had performed for the partnership.
- 10 -
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Morever, deductions are a
matter of legislative grace, and the taxpayer bears the burden of proving
entitlement to any deduction claimed. See INDOPCO, Inc. v. Commissioner, 503
U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
Under section 7491(a), the burden of proof may shift to the Commissioner if the
taxpayer produces credible evidence with respect to any relevant factual issue and
meets other requirements. Petitioners have neither argued that section 7491(a)
applies nor established that its requirements are met. The burden of proof remains
with petitioners.
II. Whether Mr. Hickam’s Rental Real Estate Activity Was a Passive
Activity
Sections 162(a) and 212(1) generally permit a taxpayer to deduct ordinary
and necessary expenses paid or incurred in carrying on a trade or business or for
the production of income. In the case of an individual section 469 generally
disallows any current deduction for a passive activity loss. Sec. 469(a)(1)(A),
(2)(A). A passive activity loss is equal to the aggregate losses from all passive
activities for a taxable year over the aggregate income from all passive activities
for that year. Sec. 469(d)(1).6
6
The effect of the passive activity loss disallowance rule is that deductions
(continued...)
- 11 -
Generally, a passive activity is any trade or business in which the taxpayer
does not materially participate. Sec. 469(c)(1). Rental activity is generally treated
as per se passive regardless of whether the taxpayer materially participates unless
the taxpayer qualifies as a real estate professional under the exception provided by
section 469(c)(7)(B).7 See sec. 469(c)(2), (4). If a taxpayer qualifies as a real
estate professional, the section 469(c)(2) disallowance does not apply and the
taxpayer’s rental real estate activity, if conducted as a trade or business or for the
production of income, is not treated as a passive activity if the taxpayer materially
participates in the activity. Sec. 469(c)(1), (7)(A); Fowler v. Commissioner, T.C.
6
(...continued)
related to passive activities are allowed against income from passive activities and
the excess (i.e., the amount by which the deductions related to the passive
activities exceed the income from passive activities) cannot be deducted from
income from activities other than passive activities. See Krukowski v.
Commissioner, 279 F.3d 547, 549 (7th Cir. 2002), aff’g 114 T.C. 366 (2000).
7
There is an additional exception under sec. 469(i) allowing the taxpayer to
deduct rental real estate losses. Under sec. 469(i), a taxpayer who actively
participates in rental real estate activities may deduct up to $25,000 per year for
related passive activity losses. See sec. 469(i)(1) and (2). The $25,000 deduction
amount begins to phase out when the taxpayer’s adjusted gross income (AGI),
determined without regard to any passive activity loss (modified AGI), exceeds
$100,000 and is phased out entirely when the taxpayer’s AGI reaches $150,000.
Sec. 469(i)(3). The Court does not need to decide whether petitioners qualify for
this exception because petitioners’ AGI before the disallowance of the passive
activity losses was $170,644 and $266,447 for 2011 and 2012, respectively, which
exceeded the $150,000 ceiling under sec. 469(i)(3) for both of the years at issue.
- 12 -
Memo. 2002-223, 2002 Tax Ct. Memo LEXIS 230, at *10-*11; sec. 1.469-9(e),
Income Tax Regs.
Whether the disallowed rental real estate loss deductions petitioners claimed
for 2011 and 2012 are deductible without limitation under the passive activity loss
rules depends on whether Mr. Hickam8 met the definition of a real estate
professional under section 469(c)(7)(B) for the years at issue.
The Court holds that neither Mr. Hickam’s mortgage brokerage services nor
his loan origination services are performed in a real property trade or business
within the meaning of section 469(c)(7)(C), that the hours he spent performing his
mortgage brokerage services and his loan origination services are not included for
purposes of the real estate professional test, and that he did not meet the definition
of a real estate professional under section 469(c)(7)(B) for 2011 or 2012.
Therefore, the Court does not need to address the definition of “material
participation” set forth in section 469(h).
8
In the case of a joint Federal income tax return, the requirements are met if
either spouse separately satisfies the requirements. Sec. 469(c)(7)(B)(ii).
Petitioners have conceded that Mrs. Hickam did not engage in any services with
respect to the three properties during 2011 or 2012.
- 13 -
A. Mr. Hickam’s Mortgage Brokerage Services and Loan
Origination Services
Mr. Hickam argues that the Court should treat his mortgage brokerage
services and his loan origination services as performed in real property trades or
businesses and any hours he spent performing those services should be included
for purposes of satisfying the real estate professional test. The Court disagrees.
Section 469(c)(7)(C) defines a real property trade or business for purposes
of the real estate professional test as follows:
(C) Real property trade or business.--For purposes of this
paragraph, the term “real property trade or business” means any real
property development, redevelopment, construction, reconstruction,
acquisition, conversion, rental, operation, management, leasing, or
brokerage trade or business. [Emphasis added.]
Mr. Hickam focuses on the word “operation” and argues that his mortgage
brokerage services and his loan origination services are performed in trades or
businesses in real property operation because the underlying assets in both
services are real property. Mr. Hickam also argues that respondent erred in
retroactively applying an IRS Chief Counsel Advice (CCA) issued in 2014 to
disallow petitioners’ 2011 and 2012 rental real estate loss deductions. See CCA
201504010 (Dec. 17, 2014) (concluding that a mortgage broker who is a broker of
financial instruments is not in a real property brokerage trade or business).
- 14 -
Respondent contends that the statute is clear that mortgage brokerage and
loan origination services are not real property trades or businesses. Respondent
further contends that the CCA, rather than establishing a new interpretation of the
law, correctly relied upon the statute.
Mr. Hickam’s mortgage brokerage services and his loan origination services
relate to brokering and originating residential and commercial loans and not to the
operation or brokerage of real property. The Court holds that neither Mr.
Hickam’s mortgage brokerage services and his loan origination services constitute
real property trades or businesses for purposes of section 469(c)(7)(C). The
Court’s holding is based on its interpretation of section 469(c)(7)(C) and not on
the CCA.
Mr. Hickam’s argument that his mortgage brokerage services and his loan
origination services are performed in trades or businesses in “real property
operation” because the underlying assets are real property is too attenuated. His
argument ignores the words “real property” that precede the specific activities
listed in the statute; those words modify each of those activities, including
“operation”. Although the loans he brokered and originated were secured by real
property, Mr. Hickam’s mortgage brokerage services and his loan origination
services did not involve operating the real properties that secured those loans.
- 15 -
Further, while Mr. Hickam’s mortgage brokerage services constitute a
“brokerage” trade or business, they does not constitute a “real property brokerage”
trade or business. Mr. Hickam did not broker real estate during either year at
issue. Rather, he brokered loans between buyers and financial institutions.
The legislative history of the statute supports the consequence of this
distinction. Congress considered including “finance operations” in the activities
listed in section 469(c)(7)(C) but specifically did not do so. See H.R. 2264, 103d
Cong., sec. 13143 (1993); H.R. 1414, 102d Cong. (1991); S. 1257, 102d Cong.
(1991); H.R. 3732, 101st Cong. (1989); S. 2384, 101st Cong. (1989).
Mr. Hickam relies on Perez v. Commissioner, T.C. Memo. 2010-232, 2010
Tax Ct. Memo LEXIS 270, to argue that a loan agent qualifies as a real estate
professional and therefore a mortgage broker qualifies as a real estate professional.
Mr. Hickam’s reliance on Perez is misplaced. In Perez, the taxpayer was a self-
employed real estate loan agent and broker for the year at issue and reported her
income and deductions in a Schedule C, Profit or Loss From Business. Id., 2010
Tax Ct. Memo LEXIS 270, at *2. She also owned three residential real estate
properties independent of her profession as a real estate loan agent and broker. Id.
She deducted a loss from the three residential rental properties in a Schedule E.
Id.
- 16 -
The parties in that case agreed that during the tax year at issue the taxpayer
was a real estate professional under section 469(c)(7)(B) with respect to the three
residential rental properties she owned independent of being a real estate loan
agent and broker. Id. As a result, the Court was asked to decide whether the
taxpayer was subject to and had to satisfy the “material participation” requirement
set forth in section 469(h). Id. at *4-*5. The Court did not consider whether the
taxpayer’s services as a real estate loan agent and broker constituted a real
property trade or business for purposes of section 469(c)(7)(B) because the parties
had agreed on that issue. See id. at *2. In this case the parties have not agreed,
and the Court must consider the issue. Perez does not support petitioners’
argument.
Mr. Hickam neither operated real property nor brokered real property as part
of his mortgage brokerage services and his loan origination services. Accordingly,
the Court holds that neither service constitutes a real property trade or business.
B. Mr. Hickam’s Qualification As a Real Estate Professional
To qualify as a real estate professional a taxpayer must own at least one
interest in rental real estate and meet both tests under section 469(c)(7)(B).9 The
9
In applying the two tests the taxpayer may elect to treat all interests in
rental real estate as one activity. Sec. 469(c)(7)(A) (flush language). Petitioners
(continued...)
- 17 -
first test requires that “more than one-half of the personal services performed in
trades or businesses by the taxpayer during such taxable year are performed in real
property trades or businesses in which the taxpayer materially participates.” Sec.
469(c)(7)(B)(i). The second test requires that the taxpayer perform more than 750
hours of services during the taxable year in real property trades or businesses in
which the taxpayer materially participates. Sec. 469(c)(7)(B)(ii). Failure to satisfy
either test for 2011 or 2012 means for the corresponding year that Mr. Hickam was
not a real estate professional and that the losses from Mr. Hickam’s rental real
estate activity are not deductible under the section 469(c)(7)(A)(i) exception to the
passive activity loss limitations.
On the basis of the record the Court determines that Mr. Hickam’s rental
real estate activity with respect to the three properties constituted a real property
trade or business for 2011 and 2012. See sec. 469(c)(7)(C). However, petitioners
have failed to prove how much time Mr. Hickam spent on his rental real estate
activity during 2011 and 2012.
9
(...continued)
elected with their 2011 tax return to treat the three properties as one activity for
2011. See sec. 1.469-9(g)(1), Income Tax Regs. (“This election is binding for the
taxable year in which it is made and for all future years”.). The election was also
effective for 2012. See id. Therefore, the Court applies the tests under sec.
469(c)(7)(B) to Mr. Hickam’s combined rental real estate activities for the three
properties.
- 18 -
To satisfy the first test under section 469(c)(7)(B)(i), petitioners have to
prove how much time Mr. Hickam spent on his mortgage brokerage services and
his loan origination services--his other personal service trades or businesses--in
2011 and 2012. To satisfy the second test petitioners have to prove that Mr.
Hickam performed more than 750 hours of services in 2011 and 2012 in real
property trades or businesses in which he materially participated. The Court holds
that petitioners have not met their burden of proving that Mr. Hickam satisfied the
two tests under section 469(c)(7)(B) to meet the definition of a real estate
professional for 2011 or 2012.
A taxpayer may use any reasonable means to establish his hours of
participation. Sec. 1.469-5T(f)(4), Temporary Income Tax Regs., 53 Fed. Reg.
5727 (Feb. 25, 1988). “Contemporaneous daily time reports, logs, or similar
documents are not required if the extent of such participation may be established
by other reasonable means.” Id. Reasonable means “may include but are not
limited to the identification of services performed over a period of time and the
approximate number of hours spent performing such services during such period,
based on appointment books, calendars, or narrative summaries.” Id. The Court
has observed that the regulations “concerning the records to be maintained by
taxpayers * * * by no means allow a postevent ‘ballpark guesstimate’”. Carlstedt
- 19 -
v. Commissioner, T.C. Memo. 1997-331, 1997 Tax Ct. Memo LEXIS 390, at *24
(citing Speer v. Commissioner, T.C. Memo. 1996-323).
Using the 2011 log and the 2012 calendars, Mr. Hickam testified that he had
performed 1,583 and 1,200 hours of services in 2011 and 2012, respectively, with
respect to his mortgage brokerage services and his loan origination services and
836 and 759 hours of services in 2011 and 2012, respectively, with respect to the
three properties. Mr. Hickam began reconstructing the hours of services he
performed with respect to the mortgage brokerage services and the loan
origination services and the three properties after his 2011 and 2012 tax returns
were audited. He prepared the 2011 log and the 2012 calendars in response to the
audit. Mr. Hickam testified that he had created the 2011 log and the 2012
calendars using leases, bank statements, checkbooks, bills, and receipts to
reconstruct the amount of time he spent leasing, operating, and maintaining the
three properties, but he did not present any of this corroborating evidence at trial.
Mr. Hickam also testified that his accountant had suggested he estimate the
amount of time for each activity performed to prepare the 2011 log and the 2012
calendars.
According to respondent the 2011 log and the 2012 calendars are not
reliable and therefore do not establish the amount of time Mr. Hickam dedicated to
- 20 -
his mortgage brokerage services and his loan origination services or the three
properties. The Court agrees with respondent and does not find the 2011 log or
the 2012 calendars to be reliable. They were prepared well after the years at issue
with vague, nondescriptive entries and ballpark estimates of the time dedicated to
the three properties.
Petitioners did not provide any other credible evidence10 to support Mr.
Hickam’s testimony that he had performed 1,583 hours and 1,200 hours of
services in 2011 and 2012, respectively, with respect to his mortgage brokerage
services and his loan origination services and 836 and 789 hours of services in
2011 and 2012, respectively, with respect to the three properties.
A taxpayer’s uncorroborated testimony need not be relied upon. Bailey v.
Commissioner, T.C. Memo. 2001-296, 2001 Tax Ct. Memo LEXIS 332, at *16.
The Court is not required to accept unverified testimony of taxpayers in the
absence of adequate documentation. See, e.g., Lum v. Commissioner, T.C. Memo.
2012-103, 2012 Tax Ct. Memo LEXIS 102, at *9; Estate of Stangeland v.
Commissioner, T.C. Memo. 2010-185, 2010 Tax Ct. Memo LEXIS 221, at *35.
10
Even though the parties stipulated leases for the units in the Del Mar
property, the leases did not provide any indication of the amount of time Mr.
Hickam devoted to the respective units listed for the property.
- 21 -
While the Court believes that Mr. Hickam dedicated time to his mortgage
brokerage services, his loan origination services, and the three properties during
the years at issue, he did not persuade the Court that the amount of time he listed
on the 2011 log and the 2012 calendars accurately represented his hours of
services for 2011 or 2012.
Petitioners have failed to sustain their burden of proving that Mr. Hickam
was a real estate professional for 2011 or 2012. Accordingly, petitioners may not
deduct the rental real estate losses claimed on their 2011 or 2012 tax return under
the real estate professional exception provided under section 469(c)(7).
III. Section 6662(a) Accuracy-Related Penalties
Respondent determined accuracy-related penalties for 2011 and 2012
because petitioners’ underpayments were due to substantial understatements of
income tax or negligence or disregard of rules and regulations. Sec. 6662(a) and
(b)(1) and (2). Only one section 6662 accuracy-related penalty may be imposed
with respect to any given portion of an underpayment, even if that portion is
attributable to more than one type of conduct listed in section 6662(b). See New
Phoenix Sunrise Corp. v. Commissioner, 132 T.C. 161, 187 (2009), aff’d, 408 F.
App’x 908 (6th Cir. 2010); sec. 1.6662-2(c), Income Tax Regs. Nevertheless, the
Court considers both grounds for imposition of the penalty.
- 22 -
Under section 7491(c) the Commissioner bears the burden of production
with regard to the liability of individuals for penalties. See Higbee v.
Commissioner, 116 T.C. 438, 446 (2001). To meet that burden the Commissioner
must produce sufficient evidence to show that it is appropriate to impose the
accuracy-related penalty. See id. As explained below the Court concludes that
respondent has met his burden of production with respect to a substantial
understatement of income tax under section 6662(b)(2) or, in the alternative, with
respect to negligence or disregard of rules or regulations under section 6662(a)
and (b)(1), for 2011 and 2012.
Once the Commissioner meets his burden of production, a taxpayer must
come forward with persuasive evidence that the Commissioner’s determination is
incorrect. Rule 142(a); see Higbee v. Commissioner, 116 T.C. at 447. The
taxpayer may meet this burden by proving that he or she acted with reasonable
cause and in good faith with respect to the underpayment. See sec. 6664(c)(1);
Higbee v. Commissioner, 116 T.C. at 447; sec. 1.6664-4(b)(1), Income Tax Regs.
As explained below, petitioners provided persuasive evidence that they acted with
reasonable cause and in good faith with respect to the underpayment of tax for
2011 and 2012.
- 23 -
A. Substantial Understatement
The Court has sustained the disallowed deductions in the notice of
deficiency for 2011 and 2012. The result is a substantial understatement of
income tax for 2011 and 2012. An “understatement” means the excess of the
amount of the tax required to be shown on the tax return over the amount of tax
that is shown on the tax return, reduced by any rebate. Sec. 6662(d)(2)(A). There
is a substantial understatement of income tax for any taxable year if the amount of
the understatement exceeds the greater of 10% of the tax required to be shown on
the tax return or $5,000. Sec. 6662(d)(1)(A).
Petitioners’ 2011 tax return showed a tax of $18,358. Respondent
determined the amount of tax required to be shown on petitioners’ 2011 tax return
was $28,110. Thus, the understatement of tax that respondent determined for
2011 was $9,752. That amount exceeds $5,000, which is greater than $2,811.80,
10% of the tax required to be shown on petitioners’ 2011 tax return.
Petitioners’ 2012 tax return showed a tax of $39,244. Respondent
determined the amount of tax required to be shown on petitioners’ tax return was
$55,719. Thus, the understatement of tax that respondent determined for 2011
was $16,475. That amount exceeds $5,571.90, 10% of the tax required to be
shown on petitioners’ 2012 tax return, which is greater than $5,000.
- 24 -
Therefore, petitioners have substantially understated their income tax for
2011 and 2012 and are liable for the accuracy-related penalties under section
6662(a) and (b)(2) for 2011 and 2012.
B. Negligence or Disregard of Rules or Regulations
The accuracy-related penalty may also be imposed under section 6662(a)
because of negligence or disregard of rules or regulations. Sec. 6662(b)(1). In the
alternative petitioners are liable for the accuracy-related penalties for 2011 and
2012 because they were negligent and disregarded rules or regulations.
Negligence includes any failure to make a reasonable attempt to comply
with the provisions of the Internal Revenue Code and any failure to keep adequate
books and records or to substantiate items properly. Sec. 6662(c); see Higbee v.
Commissioner, 116 T.C. at 448; sec. 1.6662-3(b)(1), Income Tax Regs.
Negligence has also been defined as the failure to exercise due care or the failure
to do what a reasonable person would do under the circumstances. See Neely v.
Commissioner, 85 T.C. 934, 947 (1985). “Disregard” includes any careless,
reckless, or intentional disregard of rules or regulations. Sec. 6662(c); see Higbee
v. Commissioner, 116 T.C. at 448.
Respondent has met his burden of production with respect to petitioners’
negligence and disregard of rules or regulations because Mr. Hickam failed to
- 25 -
maintain adequate records to substantiate the rental real estate loss item underlying
the deduction for 2011 or 2012.
C. Reasonable Cause for the Underpayment of Tax
A penalty will not be imposed under section 6662(a), however, if a taxpayer
establishes that he or she acted with reasonable cause and in good faith. Sec.
6664(c)(1). Circumstances that indicate reasonable cause and good faith include
reliance on the advice of a tax professional or an honest misunderstanding of the
law that is reasonable in the light of all the facts and circumstances. Sec. 1.6664-
4(b), Income Tax Regs.; see Higbee v. Commissioner, 116 T.C. at 449. Relevant
facts and circumstances for the Court to consider include the knowledge and
experience of the taxpayer. Sec. 1.6664-4(b)(1), Income Tax Regs.
Petitioners argued that they relied in good faith on their accountant’s
recommendation and that this reliance was reasonable cause for their
underpayment of tax for 2011 and 2012. The question of whether Mr. Hickam
was a real estate professional was partially resolved on technical grounds--whether
his mortgage brokerage services and loan origination services constituted real
property trades or businesses under section 469(c)(7)(C). Although the Court
found that neither service constituted a real property trade or business and
notwithstanding his failure to maintain adequate records, the Court finds that Mr.
- 26 -
Hickam acted reasonably and in good faith in taking that position for the years at
issue. Petitioners are therefore not liable for a section 6662(a) accuracy-related
penalty for 2011 or 2012.
The Court has considered all of the parties’ arguments, and, to the extent not
addressed herein, the Court concludes they are moot, irrelevant, or without merit.
To reflect the foregoing,
Decision will be entered for
respondent as to the deficiencies and for
petitioners as to the section 6662(a)
penalties.
| {
"pile_set_name": "FreeLaw"
} |
Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit
8-20-2008
Robert Porter v. Dave Blake
Precedential or Non-Precedential: Non-Precedential
Docket No. 08-2173
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2008
Recommended Citation
"Robert Porter v. Dave Blake" (2008). 2008 Decisions. Paper 635.
http://digitalcommons.law.villanova.edu/thirdcircuit_2008/635
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
University School of Law Digital Repository. It has been accepted for inclusion in 2008 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact [email protected].
DLD-258 NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 08-2173
________________
ROBERT R. PORTER,
Appellant
v.
DAVE BLAKE, Corrections Officer;
BARRY WRIGHT, Corrections Officer;
MARK CAPOZZA, Unit Manager
____________________________________
On Appeal From the United States District Court
For the Western District of Pennsylvania
(D.C. Civ. No. 04-cv-00464)
District Judge: Honorable Nora Barry Fischer
_______________________________________
Submitted For Possible Dismissal Pursuant to 28 U.S.C. § 1915(e)(2)(B) or
Summary Action Under Third Circuit LAR 27.4 and I.O.P. 10.6
July 24, 2008
Before: BARRY, CHAGARES and COWEN, Circuit Judges
Filed: August 20, 2008
_______________________
OPINION
_______________________
PER CURIAM
Appellant, Robert Porter, appeals from the final order of the United States District
Court for the Western District of Pennsylvania granting summary judgment in favor of
the defendants. For essentially the reasons provided by the Magistrate Judge, in a Report
and Recommendation that was adopted as the opinion of the District Court, we will
dismiss the appeal pursuant to 28 U.S.C. 1915(e)(2)(B).
Porter, an inmate previously incarcerated at the State Correctional Institution at
Greene (“SCI-Greene”), filed the underlying civil action against SCI-Greene correctional
officers Donald Blake, Barry Wright and Mark Capozza. Porter alleged that sometime in
mid to late March 2002, defendants Blake and Wright gave him an opened container of
milk that they had contaminated with Hepatitis C and A blood. Porter claimed that this
contaminated milk caused him to contract Hepatitis that same month. Porter further
alleged that defendant Capozza, the Unit Manager, failed to report the incident despite
his responsibility for supervising the officers.
The defendants ultimately filed motions for summary judgment, arguing that
Porter had not exhausted administrative remedies and/or procedurally defaulted his
claims insofar as the only grievance he filed (Grievance # 26070 submitted on July 13,
2002) merely complained that his health had been put in jeopardy as a result of his
contraction of Hepatitis from an unknown source at SCI-Greene, and because it was
rejected by the grievance officer as untimely. The Magistrate Judge to whom the action
was referred agreed with the defendants that Porter failed to properly exhaust his
administrative remedies, and recommended that the defendants’ motions be granted.
Over Porter’s objections, the District Court adopted the recommendation, granting
2
summary judgment in favor of defendants. This timely appeal followed.
We exercise plenary review over the District Court’s decision to grant summary
judgment. See Torres v. Fauver, 292 F.3d 141, 145 (3d Cir. 2002). Under 42 U.S.C. §
1997e(a), prisoners are required to exhaust available administrative remedies before
bringing a civil rights action concerning prison conditions, regardless of whether these
remedies can provide the inmate with the relief sought. See Booth v. Churner, 532 U.S.
731, 741 (2001). The Pennsylvania Department of Corrections has a three-tier grievance
system, set forth in Policy Statement DC-ADM 804, which serves as a prisoner’s
administrative remedy. See Spruill v. Gillis, 372 F.3d 218, 232 (3d Cir. 2004). In order
to avoid a procedural default, an inmate is required at the initial level to, inter alia,
“identify any persons who may have information that could be helpful in resolving the
grievance,” and to submit the grievance “within fifteen (15) working days after the
events on which the claims are based.” Id. at 234, quoting DC-ADM 804, Part VI.A.1.d
and VI.A.1.e.
Porter appears to contend that he exhausted his administrative remedies because
he appealed Grievance # 26070 to final review. That contention, however, is erroneous.
While Porter did in fact proceed with his grievance through all three tiers of the
grievance system, the grievance officer rejected Grievance # 26070 as untimely while
also noting that Porter failed to provide a date on which the medical issue allegedly
occurred. The Superintendent thereafter denied Porter’s appeal, specifically finding that,
3
insofar as Porter alleged he received his Hepatitis blood test results on April 11, 2002,
his grievance dated July 13, 2002 was clearly outside the time requirements established
by DC-ADM 804. The responses Porter received on initial review and from the
Superintendent were upheld on final review by the Chief Grievance Coordinator. See
Defendants’ Brief in Support of Summary Judgment, Exhibit A 1-6. As the Supreme
Court has explicitly held, an untimely “or otherwise procedurally defective administrative
grievance or appeal” does not satisfy the mandatory exhaustion requirement of the Prison
Litigation Reform Act. Woodford v. Ngo, 548 U.S. 81, 83 (2006). See also Spruill, 372
F.3d at 230.
Finally, Porter’s contention that he is entitled to an exception to the exhaustion
requirement because “defendants’ misconduct evaded [his] perception,” and because,
after receiving his test results on April 11, 2002, he had “to recollect back to the incident
of being given a funny tasting milk,” is unavailing. As defendants asserted in their
summary judgment motions, Porter’s own allegations indicate that he suspected
defendants Blake and Wright of contaminating his milk in March 2002 or, at the latest, in
April after he learned the results of his blood test. This is a full three months prior to his
submission of Grievance # 26070, wherein he claimed the source of his contraction of
Hepatitis was unknown. Moreover, despite Porter’s argument to the contrary, the
exhaustion requirement is not excused merely because a prisoner alleges that the
correctional defendants engaged in misconduct (unrelated to the grievance process itself)
4
and should be estopped from raising the exhaustion defense. The Supreme Court has
stated, “[t]he benefits of exhaustion can be realized only if the prison grievance system is
given a fair opportunity to consider the grievance.” Woodford v. Ngo, 548 U.S. at 95.
The administrative system was simply never given that opportunity with respect to a
timely grievance against the named defendants in this case.
The record clearly reflects that Porter did not properly exhaust administrative
remedies as required by 42 U.S.C. § 1997e(a). Summary judgment was thus appropriate
because Porter failed to come forward with any evidence to rebut the record evidence
that he committed a procedural default. See Fed. R. Civ. P. 56(e); see also Spruill, 372
F.3d at 230. We, therefore, discern no error in the District Court’s decision granting
summary judgment in favor of defendants. Accordingly, we will dismiss the appeal as
lacking in merit pursuant to 28 U.S.C. § 1915(e)(2)(B)(i). See Neitzke v. Williams, 490
U.S. 319 (1989). Appellant’s motion for the appointment of counsel is denied. Tabron
v. Grace, 6 F.3d 147, 155-58 (3d Cir. 1993).
5
| {
"pile_set_name": "FreeLaw"
} |
113 B.R. 494 (1990)
In re Jeremy S. HAZARD and Marget M.L. Hazard, Debtors.
Jeremy S. HAZARD and Marget M.L. Hazard, Appellants-Debtors,
v.
OVERHEAD DOOR COMPANY OF MADISON, INC., Appellee-Creditor.
No. 89-C-813-C.
United States District Court, W.D. Wisconsin.
April 26, 1990.
*495 Michael E. Kepler, Madison, Wis., for appellants-debtors.
Kenneth J. Doran, Middleton, Wis., for appellee-creditor.
ORDER
CRABB, Chief Judge.
This is an appeal from an order of the United States Bankruptcy Court for the Western District of Wisconsin denying appellants' motion pursuant to 11 U.S.C. § 522(f)(1) to avoid the judicial lien on their homestead property held by appellee. Section 522(f)(1) allows a debtor to avoid a judicial lien if the lien impairs an exemption to which the debtor would have been entitled but for the lien.
Pursuant to 11 U.S.C. § 522(b)(2), appellants elected to calculate their exemption under Wisconsin law. Wisconsin's homestead exemption statute, Wis.Stat. § 815.20, provides that an owner may exempt the first $40,000 of his homestead from the attachment of judgment liens, but not from mortgages, tax liens and other enumerated security interests. For the reasons that follow, I conclude that appellants are entitled to an exemption of approximately $20,000 and that because the equity in their homestead (that amount of the property value not encumbered by liens) is smaller than the exemption, they *496 may avoid appellee's judgment lien. Accordingly, the bankruptcy court's decision to deny appellant's motion to avoid appellee's judgment lien will be reversed.
In considering an appeal of a bankruptcy court decision, the district court is to review de novo the legal conclusions of the bankruptcy judge. In re Ebbler Furniture and Appliances, Inc., 804 F.2d 87, 89 (7th Cir.1986). Findings of fact made in core proceedings are governed by the clearly erroneous standard. Bankruptcy Rule 8013. Under 28 U.S.C. § 157(b)(2)(B), orders concerning the disposition of exemptible property involve core proceedings. Under the clearly erroneous standard, the reviewing court is required to search the entire record but will reverse the lower court only if it "is left with the definite and firm conviction that a mistake has been committed." In re Osborne, 42 B.R. 988, 944 (W.D.Wis.1984), quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 541-42, 92 L.Ed. 746 (1948).
The bankruptcy court made the following findings of fact, none of which are challenged on appeal.
FACTS
Appellants Jeremy S. Hazard and Marget M.L. Hazard filed for relief under Chapter 7 of the Bankruptcy Code. Appellants have a homestead interest in a house located at 3031 Cottage Grove Road in Cottage Grove, Wisconsin. The house is worth $90,000 and against it are the following liens which appear to have been docketed properly with the Dane County Register of Deeds:
Date of Amount
Lienholder Recording Secured
Carteret (mortgage) 2/15/83 $35,000.00
Overhead (judgment lien) 6/09/87 6,366.99
IRS (tax lien) 9/08/87 34,971.78
The appellants claimed a homestead exemption in the property in the amount of $40,000, pursuant to Wis.Stat. § 815.20 and 11 U.S.C. § 522(b)(2).
OPINION
Pursuant to 11 U.S.C. § 522(f)(1), the appellants moved the bankruptcy court for an order avoiding the judgment lien of Overhead Door Company of Madison, Inc. Appellee Overhead opposed this motion. The bankruptcy court denied appellants' motion and appellants' motion and this appeal followed.
11 U.S.C. § 522(f)(1) provides that a debtor may avoid the fixing of a judicial lien "on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section." 11 U.S.C. § 522(b)(2) allows a debtor to exempt from property of the bankruptcy estate any property that is exempt under federal law or under state law. In this case, appellants elected to have their exempt property rights determined under Wisconsin law. The legislative history of § 522(f)(1) makes clear that the intent behind this provision was to provide the debtor a fresh start by allowing him to avoid certain encumbrances that prevented him from realizing the full amount of his exemption.
Subsection (f) protects the debtor's exemptions, his discharge, and thus his fresh start by permitting him to avoid certain liens on exempt property. The debtor may avoid a judicial lien on any property to the extent that the property could have been exempted in the absence of the lien.
H.R.Rep. No. 595, 95th Cong., 1st Sess. 362 (1977), reprinted in 1978 U.S.Code Cong. & Ad.News, 5787, 5963, 6318 (emphasis added). In other words, under § 522(f)(1), a debtor may avoid a judicial lien "only where the debtor would have had an exemptible interest in the property, but for the attachment of a judicial lien or liens." In re Baldwin, 84 B.R. 394, 397 (Bkrtcy.W. D.Pa.1988). Therefore, to determine whether appellants should have been allowed to avoid appellee's judicial lien, the following questions must be answered: (1) How much does Wisconsin law permit appellants to exempt?; (2) If appellants are entitled to an exemption, is this exemption impaired (that is, is there sufficient equity in the property to cover this exemption)?; and (3) If there is an impairment, to what *497 extent is it attributable to appellee's judicial lien?
A. Exemption
The analysis begins with Wisconsin's Homestead Exemption Statute, Wis.Stat. § 815.20. Unlike its federal counterpart in 11 U.S.C. § 522(d)(1), this provision does not allow a lump sum exemption, but rather reserves the first $40,000 of the property from the operation of judgment liens. This sum is not immunized from the attachment of other security interests such as mortgages and tax liens.
An exempt homestead . . . shall be exempt from execution, from the lien of every judgment . . . of such owner to the amount of $40,000, except mortgages, laborers', mechanics' and purchase money liens and taxes as otherwise provided.
Wis.Stat. § 815.20.
The effect of this distinction between exemptible and nonexemptible creditors is the subordination of senior judgment creditors to junior but nonexemptible lienholders upon the sale of the property. This subordination interferes with the usual prioritization scheme in Wisconsin, which generally gives priority to encumbrances on property in the order of their recording. Wis.Stat. § 706.08(1).
The Supreme Court for the State of Wisconsin recognized the exemption statute's mandate to subordinate the security interests of exemptible creditors to those of nonexemptible lienholders in Lueptow v. Guptill, 56 Wis.2d 396, 202 N.W.2d 255 (1972). The court had to determine the proper distribution of approximately $5,000 to a judgment lienholder and a junior mortgagee after a foreclosure sale on the homestead. After determining that the owners were entitled to the homestead exemption, the court concluded that the owners could exercise this exemption to preclude the judgment lienholder from payment and to elevate the mortgagee to a priority position. "[T]he [owners] could validly exercise their [$10,000] homestead exemption in the proceeds of a sale of such homestead in order to forward such surplus to their mortgagee." Id. at 403, 202 N.W.2d 255.
The judgment creditor argued that this result defeated the purpose of the exemption statute because the owners' exemption was usurped by the mortgagee. In response, the court noted that such an outcome, however irregular, was mandated by "the statute itself," which "expressly excepts mortgagees from the operation of the exemption." Id. at 406, 202 N.W.2d 255.
Lueptow stands for the proposition that a junior, nonexemptible creditor is not prevented by the homestead exemption from acquiring proceeds that would otherwise be withheld from a senior, exemptible lienholder. However, Lueptow does not address the situation in this case in which the value of the homestead exceeds the combined total of the liens against it, but does not exceed the sum of the liens plus the owner's claimed exemption (in this case $40,000).
The Wisconsin supreme court provided guidance for handling such a situation in Anchor Savings & Loan Association v. Week, 62 Wis.2d 169, 213 N.W.2d 737 (1974). In that case, a foreclosed homestead was subjected to three encumbrances: a judgment lien, a tax lien, and a mortgage. Without indicating the sequence in which these liens were filed and without stating the amounts due on them, the court explained how the exemptible creditor (the judicial lienholder) was to be treated.
Once the judgment was entered in this case, finding the homestead exemption as it did, the only rights that could thereafter be asserted by any general judgment creditor would be to that portion of the surplus which was in excess of the statutory limits of the homestead exemption. In the instant case, once the foreclosure judgment was entered, the claim of the [judgment creditor] was subordinate to that portion of surplus which was statutorily exempt as homestead and subordinate to the tax liens to which the homestead exemption does not apply.
Id. at 174, 213 N.W.2d 737 (emphasis added).
From this I conclude that an exemptible creditor (such as a judicial lienholder) may receive proceeds from the foreclosure *498 sale of a homestead only after the nonexemptible creditors have been paid and the owner has received her exemption. If the nonexemptible creditors have not left an amount greater than the statutory exemption, the exemptible creditors will not be paid.
Therefore, under Wisconsin's homestead exemption statute, the appellant's exemption is $20,028.22. If the homestead were the subject of foreclosure, the nonexemptible creditors, Carteret and the IRS, would take before Overhead, an exemptible creditor, leaving $20,028.22. Because this amount is less than $40,000, Overhead would receive nothing and the exemption remains at $20,028.22.
Value of the property: $90,000.00 (50,000 surplus and 40,000
exemption reserve)
Carteret (mortgage) 35,000.00
IRS (tax lien) 34,971.78 (depletes $50,000 surplus
and cuts into the 40,000
exemption by 19,971.78
leaving 20,028.22)
Appellants (exemption) 20,028.22
Overhead (judgment lien) 0.00
B. Impairment
To determine whether there is an impairment of an exemption under 11 U.S.C. § 522(f)(1), it must be ascertained whether there is sufficient equity in the property to cover the exemption. Adding together all the liens levied against the appellants' homestead, the equity remaining is $13,961.23 (90,000 - 76,038.77). Because this amount does not cover the state law exemption of $20,028.22, there is an impairment.
C. The Effect of the Judicial Lien
Courts are divided over the proper method for determining whether an impairment is caused by the presence of a judicial lien. The conflict revolves around the question whether the priority of the liens should be considered when determining whether an exemption has been impaired. More specifically, the issue is whether a debtor should be allowed to avoid a senior judgment lien when the equity for the homestead exemption is depleted by the attachment of a junior, unavoidable lien.
Three lines of authority have emerged on this issue. One holds that the priority of the liens under state law must be maintained under § 522(f)(1). See, e.g., In re Duncan, 43 B.R. 833, 838 (Bkrtcy.D.Alaska 1984); In re Register, 37 B.R. 708, 712 (Bkrtcy.N.D.Ga.1983). The liens are subtracted from the value of the property in the order of their priority. Those liens that reduce the equity of the property below the homestead level are the ones that impair the exemption. If these liens are judicial, they may be avoided.
Under another line of cases, the result is that a judicial lien may not be avoided when the debtor voluntarily subjects his property to a lien after the attachment of a judicial lien such that the junior, but unavoidable lien depletes the equity that otherwise would have covered the homestead exemption. See, e.g., In re Baldwin, 84 B.R. 394, 399 (Bkrtcy.W.D.Pa.1988) ("We therefore interpret the legislative history to show an intent that where a debtor voluntarily subjects his property to the lien of an unavoidable subordinate mortgagee, the debtor's act insulates the prior judgment liens from avoidance for exemption purposes"); In re Fiore, 27 B.R. 48, 50 (Bkrtcy.D.Conn.1983).
Under the third approach, the priority of the liens is disregarded. If the total value of the liens held against the property reduces the equity below the exemption level, any judicial liens may be avoided. See, e.g., In re Magosin, 75 B.R. 545, 547 *499 (Bkrtcy.E.D.Pa.1987); In re Green, 64 B.R. 462, 464 (Bkrtcy.S.D.Ind.1986) ("[T]his Court . . . holds that irrespective of the chronology in which secured debt and judicial liens are incurred, the judicial liens are subject to avoidance under 11 U.S.C. § 522(f) to the extent that such judicial liens impair debtor's exemption"). Cf. In re Simonson, 758 F.2d 103, 105 (3d Cir. 1985) (disregard priority of liens but if the unavoidable liens exhaust the equity in the property, the judicial liens are not avoidable because there is no equity that could be applied towards an exemption).
This last method appears to be in greatest conformance with the language and legislative history of § 522(f)(1). As mentioned at the outset, the overriding purpose of this provision is to enhance the fresh start of the debtor by allowing her to exempt certain liens that reduce the amount of an exemption to which she otherwise would be entitled. This purpose would be thwarted at times if the state law priority positions of the liens had to be considered when determining the impairment. Also, nothing in the language of the provision suggests that the priority of the liens must be maintained. Nor is there language indicating that an exception to the usual process for determining an impairment arises when the debtor voluntarily encumbers the property subsequent to the attachment of a judicial lien. See 11 U.S.C. § 522(g) (allowing exemptions for transfers of property not made voluntarily).
Rather, the language and legislative history indicate that the bankruptcy estate should be treated in terms of encumbered and unencumbered property for purposes of calculating an exemption. The order in which the encumbrances attached does not appear to be relevant.
Under proposed [§] 541, all property of the debtor becomes property of the estate, but the debtor is permitted to exempt certain property of the estate under this section. Property may be exempted even if it is subject to a lien, but only the unencumbered portion of the property is to be counted in computing the "value" of the property for the purposes of exemption. Thus, for example, a residence worth $30,000 with a mortgage of $25,000 will be exemptable[sic] to the extent of $5,000. . . .
H.R.Rep. No. 95-595, 2nd Sess. 360-361 (1977), reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 6316-6317 (emphasis added).
It is true that under this approach a debtor may preserve his exemption up to the value of senior judicial liens by voluntarily encumbering his property with a junior mortgage that exhausts the remaining equity in the property. However, this possibility is not such a concern that the court should ignore both the dominant purpose of the provision to enhance the debtor's fresh start and Congress's failure to mention the importance of preserving the state law priority of the liens in the legislative history or the language of the statute itself.
. . . Congress intended to give the debtor a fresh start to the extent a judicial lien impairs an exemption even if it means reordering the priority of creditors. Just because the debtor has the power to affect secured creditors in this way is not sufficient reason to write into the provision a limitation which Congress did not see fit to express.
In re West, 68 B.R. 647, 650 (Bkrtcy.C.D. Cal.1986).
I conclude that appellee's judicial lien impairs appellants' exemption. The unavoidable liens reduce the equity in the property to $20,028.22 (90,000 - 35,000 - 34,971.78). But for the judicial lien, the exemption of $20,028.22 to which to appellants are appellants are entitled under state law would not be impaired. Because this lien does impair the exemption, appellants may avoid it under 11 U.S.C. § 522(f)(1).
ORDER
IT IS ORDERED that the bankruptcy court's order of August 11, 1989 denying appellants' motion to avoid appellee's judgment lien is REVERSED.
| {
"pile_set_name": "FreeLaw"
} |
709 So.2d 953 (1998)
KING'S FARM, INC., Plaintiff-Appellee,
v.
CONCORDIA PARISH POLICE JURY, Defendant-Appellant.
No. 97-1056.
Court of Appeal of Louisiana, Third Circuit.
March 6, 1998.
Rehearing Denied April 28, 1998.
*954 Virgil Russell Purvis, Jr., Jonesville, for King's Farm, Inc.
Madeline Cross Gibbs, Asst. Dist. Atty., for Concordia Parish Police Jury.
Before YELVERTON, THIBODEAUX and PETERS, JJ.
YELVERTON, Judge.
This appeal is from an action brought by King's Farm, Inc. (King's Farm) to have a boundary between properties owned by it and the Concordia Parish Police Jury judicially determined. The land in dispute is a 105.78 acre tract of land situated in Township 7 North, Range 7 East (T7N-R7E), Concordia Parish, Louisiana. Black Lake, stipulated by the parties to have always been non-navigable, encloses several hundred acres within its meander lines as shown on the Government Land Office Township Map of 1842. The land in dispute is on the north bank of Black Lake. King's Farm owns 110.90 acres in the northeast corner of Section 14 of the township down to the meander line of the lake. There is some considerable distance between the meander line of the lake, as shown on old government surveys, and the north shore of the lake itself. Between the meander line and the north shore line there is a strip of land across Section 14 containing an area approaching 200 acres. The eastern 105.78 acres of that strip is the land in dispute. It was stipulated that the police jury owns Black Lake, the property to the south of the land in dispute. The trial court held that the boundary should be set on the southern boundary of the land in dispute, thus ruling in favor of King's Farm. The police jury appeals. We reverse and render judgment in favor of the police jury fixing the boundary as the north meander line of Black Lake as shown on the government township map of 1842.
We will use an enlarged tracing of Section 14 as shown on the 1842 township map to show approximately where the disputed area is. We do this solely for the benefit of the reader's better understanding of the problem. The 1842 map reflects an 1838 subdivision by the government of the public land, or upland of Section 14, into five lots. Four of these lots, numbers 1, 2, 3, and 4, lie across the north portion of Section 14 north of Black Lake. These lots contain 213.9 acres. Lot 5 lies to the southwest, across Black Lake, in the extreme southwest corner of Section 14. It contains 7.1 acres. Our tracing of Section 14 from the 1842 survey depicts these lots and the acreage of each. Using King's Farm's Exhibit No. 1, a survey of the disputed area, we have drawn in, for illustrative purposes only, an outline of the disputed area represented by dash lines on the west and south sides, the meander line on the north, and the section line on the east:
*955
Boundary Action
King's Farm contends that it has been in possession of the 105.78 acre disputed area since only as recently as 1992, when it acquired Lots 1 and 2 of Section 14 to the north of the disputed area. King's Farm does not seriously claim title. The police jury claims ownership under a title going back to 1853 under a patent from the United States which, by the formalities proclaimed by patents, recognized the separation of the property from the public domain.
The precise issue is whether the police jury proved ownership of the land in dispute in this boundary action. In a boundary action, the court must fix the boundary according to the ownership of the parties. La.Civ.Code art. 792. If neither party proves ownership, the court must fix the boundary according to possession. Id. A political subdivision of the state, including a police jury, cannot acquire property through acquisitive prescription. Parish of Jefferson v. Bonnabel Properties, 620 So.2d 1168 (La. 1993). Thus, for a court to fix the boundary in favor of a police jury, it must find that the police jury has proved ownership of the property within the boundary. When both parties rely on titles only, the boundary shall be fixed according to titles. La.Civ.Code art. 793. When the parties trace their titles to a common author preference shall be given to *956 the more ancient title. Id. In a boundary action, "[a] party that proves ownership by an unbroken chain of transfers from a previous owner or by virtue from a more ancient title from a common author prevails, unless the adverse party proves ownership by acquisitive prescription." Yiannopoulos, Property, § 268 in 2 La.Civ.L. Treatise 527 (3rd ed. 1991). A patent regularly issued by the government is the best and only perfect title. Young v. Miller, 125 So.2d 257 (La.App. 3 Cir.1960). In this case the police jury claims to have acquired ownership through an unbroken chain of title going back to the separation of the property from the public domain.
The trial court found that the land in dispute was not a part of Section 14 in T7N-R7E and, therefore, was not included in the police jury's title. As we will explain, this finding of fact was clear error because the public records reveal that the police jury became the owner of all but 7.1 acres of Section 14 of the township by a title traceable to the patent and that its ownership includes the land in dispute.
The trial judge also found that King's Farm had failed to establish ownership to the land in dispute either through title or acquisitive prescription of thirty years, but that it had established facts sufficient to prove actual possession of the disputed property for over one year, i.e., since its acquisition of the property north of it in 1992. The trial court therefore fixed the boundary according to King's Farm's possession, which was to the southern boundary of the land in dispute, the southern boundary being the water's edge of Black Lake.
The trial court's finding that King's Farm did not prove ownership of the disputed strip is correct, and that is not an issue before us. Because of our resolution of this case in favor of the police jury, King's Farm's possession is not an issue either, and we will not discuss it.
The Police Jury's Title Chain
It is axiomatic that titles are based on public records, and according to the public records of Concordia Parish, the police jury's title begins with a patent from the United States issued to Thomas Curry and Rice Garland on October 1, 1853. The patent was based upon a confirmation judgment granted Curry & Garland by the United States District Court for the District of Louisiana in 1846. Their title was confirmed to land conveyed, under a Spanish Grant to Louis Bringier, before the Louisiana Purchase. The patent was based on a survey, and the land included nearly all of T7N-R7E and all of Section 14 of that township. The property recognized in the patent was meticulously described both in arpents and in acres. Other parties acquired undivided interests in the Bringier Grant, and on July 10, 1855, the Bringier land was sold at a sale by licitation to effectuate a partition. The Estate of William C. Micou, one of the co-owners, was the purchaser out of T7N-R7E of "All of section fourteen in the same township & range (except a small fraction in the South West corner) containing Six hundred & thirty-two 90/100 acres."
On November 11, 1856, the Estate of William Micou conveyed out "of Township Seven, Range Seven East ... all of Section Fourteen in the same Township and Range (except seven 10/100 in the South West corner thereof) containing Six hundred and thirty-two 90/100 at the price of Nineteen hundred and Sixty Seven dollars for the Section." The conveyance was to the Police Jury of Concordia, and it is recorded in Conveyance Book N at page 87 of the public records of Concordia Parish.
Retired Judge W.C. Falkenheiner testified at the trial of this case as an expert for the police jury. It was stipulated that he was an expert title examiner (not, as referred to in King's Farm's brief, an expert title abstractor). He testified that during the 1950s, before he was elected to the bench, he represented oil companies which leased this property from the police jury for oil and gas exploration and that he became very familiar with the property at that time. After retiring from the bench, he did further legal work involving the property. He reviewed some 21 exhibits in evidence which constitute the chain of title.
*957 Judge Falkenheiner was the only expert in title examinations to testify in the case. His qualifications as an expert were never disputed. We have carefully reviewed the exhibits constituting the chain of title, and we find that Judge Falkenheiner correctly interpreted the public records and was correct in his legal opinion that the police jury is the record owner of this property today.
Judge Falkenheiner explained this chain and stated that when the police jury acquired the property, it acquired all of Section 14 as shown on an 1842 government survey of the township. The only exception was 7.1 acres in the southwest quarter. Its acquisition by conveyance was stated in the deed to be 632.9 acres. This township plat shows two big geographical features named Cypress Brake and Black Lake. As to Section 14, the 1842 plat shows 221 acres of public land consisting of a subdivision creating Lots 1 and 2 of the fractional Northeast Quarter, Lots 3 and 4 of the fractional Northwest Quarter, and the 7.1 acre Lot 5 in the Southwest Quarter. Judge Falkenheiner interpreted the dimensions of Section 14 on the plat to be a regular section containing 640 acres. He compared Section 14 containing Black Lake to other parts of the township plat, notably the sections containing Cypress Brake, which was also part of his title examination in the 1950s, and noted that the drafters of the 1842 plat treated the Cypress Brake sections the same, i.e., the areas of the brake and the lake were encompassed in the section lines where they lay.
Thereafter, the police jury made two sales of the upland portions of Section 14. One sale was a "fractional" North Quarter sold to the authors in title of Fisher Lumber Company, containing 110.9 acres. Although the police jury did not convey it as Lots 1 and 2, the conveyance was of the exact same acreage as Lots 1 and 2, and it is clear that that was the property actually sold. Later the police jury sold the "fractional Northwest Quarter," which subsequent documents in the chain reflected were Lots 3 and 4. We will mention the first of these two sales again under our discussion of King's Farm's title chain because the police jury, obviously, was one of King's Farm's ancestors in title.
These were the basic outlines upon which Judge Falkenheiner testified. It was his opinion that the public records indicated the police jury had acquired in private ownership the entire Section 14, except for 7.1 acres, that the section contained 640 acres more or less, and that after the sales in 1952 the police jury has continued to own approximately 420 acres (actually 419).
Judge Falkenheiner also testified that the Micou deed was the source of the police jury's ownership of considerable acreage in Concordia Parish, much more than the acreage involved in this case. We reiterate that the Micou deed is also in the chain of King's Farm's title to Lots 1 and 2.
King's Farm, Inc.'s Title Chain
King's Farm's ancestor in title is the police jury. Its title derives from a number of conveyances beginning with one dated January 20, 1858, when the police jury conveyed to John G. Neelly, executor of the Stacy estate, "land situated ... in the Parish of Concordia, being the East half of Section Eleven, and North fractional quarter of Section Fourteen, township Seven, Range Seven East containing in all [431.90] acres...." Half of Section 11 is 341 acres according to the 1842 government survey. This sale translates to 110.9 acres of Section 14. Through a series of transactions the same property, but described as "the fractional Northeast quarter of Section 14," passed to Richard H. Malone, receiver for Fidelity Savings Association. This was in 1904. In 1908, Cliff Walker purchased the "fractional NE1/4" of section 14. The deed stated that the land contained 110.90 acres. The property was described the same when purchased by George Balch in 1909. In 1910 the Tensas River Lumber Co. purchased what was described as Lots 1 and 2 of Section 14, T7N-R7E, still stated as containing 110.90 acres. With the same description, the property passed through several transfers to the Fisher Lumber Corporation in 1926. On February 22, 1991, by an act of exchange, the Resource and Land Partnership acquired ownership of what was by that time described merely as Lots 1 and 2 of Section 14 in T7N-R7E. The same was purchased by *958 Hal J. Scott on January 31, 1992. Finally, under the same description, King's Farm purchased the property from Scott on March 11, 1992. There is nothing in any of these sales that purports to transfer any land south of the meander line as clearly fixed on the government survey. The meander line of Black Lake is the same as the south boundary lines of Lots 1 and 2. King's Farm did not establish ownership of any land south of Lots 1 and 2.
Trial Court's ruling
In its reasons for judgment the trial court held that the Parish (Police Jury) had failed to prove ownership by title because "[t]he lands in dispute are not in Section 14, Township 7 NorthRange 7 East." We hold that this finding of fact was clearly wrong.
The thrust of King's Farm's argument to affirm the trial judge's ruling is that Section 14 consists of 221 acres and no more, and that more acreage than that in the area of Section 14, as shown on the 1842 map, never has and never can be separated from the public domain under a description referencing Section 14 because a greater-than-221-acre Section 14 simply does not exist. For this argument they use the technicality that the 1853 map replaced the 1842 map.
The fallacy of King's Farm's logomachy on "sections" can be demonstrated in two ways. First, the actual land that was once shown in this township as a typical 640 acre section and assigned the number 14 does indeed exist. One Hundred Five and 78/100ths acres of it is what the parties are quarreling about today. The other way that the fallacy can be demonstrated is by an understanding of the two government township maps of 1842 and 1853. The terms "meander line" and "public land" as shown on those maps are assigned different meanings by the parties in this case. It is our opinion that the true meaning and significance of these terms are apparent from a study of the surveys themselves. Moreover, our opinion is solidly supported by McDade v. Bossier Levee Board, 33 So. 628, 109 La. 625 (La.1902), which we will discuss later. Once "meander line" and "public land" are put in the proper perspective, it becomes clear that the 140-year chain of title and Judge Falkenheiner's title opinion establish ownership in the police jury. The land in dispute is in Section 14, and the police jury has established its ownership of that land.
We mention here what should be obvious: a boundary dispute presupposes that the contestants are claiming ownership of property on opposite sides of the questioned boundary. The trial judge recognized a stipulation that the police jury was the owner of the lake. So the fallacy of King's Farm's position is readily apparent in the inconsistency of its contention that the police jury cannot now own any acreage in Section 14. The report of Tooke Engineering, which the trial judge relied on in its reasons for judgment, suffers from the same inconsistency.[1]
The 1842 and 1853 Township Maps
According to the 1853 survey, which was approved by the office of the Surveyor General of Louisiana on March 19, 1853, T7N-R7E contains 22,797.92 acres. A township is 36 sections. A section contains 640 acres. A perfect township contains 23,040 acres. It is true, as testified by the surveyors in this case, that rarely is there a perfect section, but it is also true that most are pretty close and a few are on the dime. All 36 sections on the 1853 survey appear, by looking at them on the scale survey, to be uniform in size. The police jury's surveyor saw Section 14 as 640 acres.
On the legend of the 1842 survey there is a list of the township's 36 sections, and beside *959 each section there is the area in acreage described as "Contents of the Public Land." On the left side of the legend is the plat of the township and its 36 sections. Two large lowland areas, the larger Cypress Brake and the smaller Black Lake, stand out. Numerous other lowlands shown as rivers, bayous, and cane brakes, some with names and some without names, also appear on the map. It is very easy from a simple inspection of this survey to correlate the lowland features with the sections containing less "Public Land" than 640 acres. For example, almost the entirety of Section 21 is in Cypress Brake; an area of only 1.62 acres is listed in the legend by that section as "Public Land." Next to it is Section 22, less than half of which is in Cypress Brake, and it is listed as having 420.32 acres of "Public Land." The Tensas River cuts across Sections 2 and 3, reducing their area respectively to 598.43 and 573.90 acres of "Public Land." Similarly, and getting to the issue in this case, about two-thirds of Section 14 is engulfed by the meander line around Black Lake, leaving the northern third and a very small portion in the southwest corner, shown as a total of 221 acres in area, as "Public Land." The sections unaffected by these lowlandsSections 1, 5, 8, 9, 11, 12, 25, 30, 33, 34, 35, and 36are listed as full acreage sections and are all shown as "Public Land."
The township involved in this case is only 242.08 acres shy of containing an ideal 23,040 acres. Taking into account that the 12 sections totally unaffected by lowlands, all being listed as "public land," together comprise acreage of full 640 acre sections plus 40 acres, it is impossible, mathematically, for the 24 remaining sections to have greatly reduced acreage and still add up to 22,797.92 acres.
These observations and calculations clearly demonstrate that the reference to "Public Land" in the legend of the 1842 map distinguishes uplands from lowlands in the township. The list could not have been intended to limit the total acreage within each numbered section.
That the term "Public Land" as used on these maps cannot have the meaning assigned to it by King's Farm is further abundantly illustrated by the government survey of 1853. This survey of the township also contains a Legend described as Table of Contents, and it lists separately "Public Land" and "Private Claims." The total "Public Land" in the township is shown as 1,785.79 acres and consists of acreage in eight sections in the township. Every single acre shown as "Public Land" is upland. None of it is in Black Lake, Cypress Brake, Tensas River, or Black River. Under the heading "Private Claims" on that map it is shown that Curry & Garland, under L. Bringier, claimed 20,258.98 acres out of the township's total of 22,797.92 acres. This survey also makes reference to the United States District Court's rulings of May 2 and June 26, 1846, confirming the Spanish Grant, which rulings we know became the basis for the patent issued to Curry & Garland. The patent description clearly included the bed of Black Lake and all of the remainder of the 640 acre Section 14, T7N-R7E. The 1853 map done in connection with the patent grant of T7N-R7E to Curry & Garland showed the boundaries of the lands that had previously passed by grant from the United States to other persons. The map does not define the boundaries of all of the individual sections within the township, as did the 1842 survey. Instead, it shows one mega-section numbered 39, used to designate the township itself, containing 20,263.98 acres, and the 1,785.95 acres from regular sections 2, 3, 4, 10, 16, 24, 31, and 32, and two other parcels assigned numbers 37 and 38 claimed by John Henry, that had been subdivided into lots and conveyed as uplands to other persons by the United States. The "Public Land," together with Curry & Garland's land, and the claims of John Henry add up to the total acreage within T7N-R7E of 22,797.92 acres.
By the time of the United States patent there were several owners with undivided interests in the tract. William Micou was one of those. In dealing with the property, the co-owners took the practical step of using the 1842 government map, because of its grid and section lines, to facilitate descriptions. Without these description aids, descriptions would have been extremely complicated if not impossible.
*960 Section 14 as conveyed to the police jury from Micou contained 640 acres less 7.1 acres in the southwest corner. Any idea that it contained only 221 acres is refuted by both the description of the property as conveyed and the 1853 map accompanying the patent from the United States. Both the patent and the map accompanying it cover the entirety of the section outside and inside Black Lake. It is true that the 1853 map, which did not show all the sections, superseded the 1842 map which did. However, it is not true that the government surveyors intended thereby to make the land embraced by what had theretofore been designated Section 14, or the land under any other section, disappear. It is clear that the land theretofore embraced by Section 14 passed with the patent into the private ownership of Curry & Garland, then to Micou, then (except for 7.1 acres) to the police jury. Courts may not correct errors in official government surveys, but courts are completely competent to locate the lines of surveys on the ground and to locate any given tract of land in relation thereto. Texas Intern. Petro. v. Delacroix Corp., 94-1426 (La.App. 4 Cir. 1/31/95); 650 So.2d 815, writ denied, 95-0467 (La.4/21/95); 653 So.2d. 567.
In Louisiana a non-navigable lake is a private thing subject to ownership by private persons. La.Civ.Code art. 453; Shell Oil Co. v. Pitman, 476 So.2d 1031 (La.App. 3 Cir. 1985). The case of Hardin v. Jordan, 140 U.S. 371, 11 S.Ct. 808, 35 L.Ed. 428, (1891), held that patents by the United States of lands bounded by streams and other waters are to be construed, as to their effect, according to the law of the state in which the land lies. The case also explains "meander lines" and "public lands" appearing on surveys during the same time period a century and a half ago, which is when the plats before us were put together.
The plaintiff in McDade, 33 So. 628, 109 La. 625, raised an issue like King's Farm has done here, arguing that because the bed of a lake had not been surveyed in 1836, the lake did not pass to the state. We quote from that case the court's narration of the facts and response to that argument:
Township 16 N., range 12 W., N.W. district of Louisiana, in which the bed of this lake is situated, was duly and regularly surveyed under authority of the general government in 1836. The township and section corners were established, and the township and section lines were run, except that the latter were run only to the margin of the lake. The contour of the lake was meandered, and the meander points were marked by posts.
This survey was duly platted, and we have the map before us. The lake lies diagonally across the northeast corner of the township. It is about seven miles in length, by a width varying from a few acres to about a mile; its area being 1,077 1/7 acres. It does not cover any single section, but cuts off the corners of some, and passes through the bodies of others. The sections are all laid off as regular sections, except that the space occupied by the lake is left blanknot traversed by any lines.
....
The reason why the traverse of this lake was not surveyed, and its acreage ascertained, is fully explained by the remarks made by the Supreme Court of the United States in the case of Hardin v. Jordan, 140 U.S. [371] 380, 11 Sup.Ct. [808] 811, 35 L.Ed. 428 [(1891)]. Speaking of a similar survey, the court there said: `It has been the practice of the government, from its origin, in disposing of the public lands, to measure the price to be paid for them by the quantity of upland granted; no charge being made for the lands under the bed of the stream, or other body of water. The meander lines run along or near the margin of such waters are run for the purpose of ascertaining the exact quantity of the upland to be charged for, and not for the purpose of limiting the title of the grantee to such meander lines.'
The survey we are dealing with was made in 1836 ... at a time ... when the purpose of making the survey was to ascertain the area of the dry land; no reckoning at all being taken of the water-covered land, which passed to the future grantee or patentee as an accessory of the dry land. As observed by the court in the same case ([at] page 381, 140 U.S., [at] *961 page 811, 11 Sup.Ct., 35 L.Ed. 428): `It has never been held that the lands under water in front of such grants are reserved to the United States, or that they can be afterwards granted out to other persons, to the injury of the original grantees.'
....
Not having ascertained the acreage of the lake, the surveyor naturally left this acreage out of his computation of the acreage of the sections bordering on the lake, and as naturally the sections and their acreage were put in the selection list in accordance with the survey (that is, minus the acreage of the lake), and the list was approved as made. Plaintiff contends that the effect of this was that not the entire sections passed to the state, but only the acreage specified as their contents, and that the water-covered area passed, if at all, only as an accessory to the dry land, and that, if so, it also passed to his authors in the same way when the state conveyed to them the same dry land.
Id., 33 So. at 629-630.
The Louisiana Supreme Court rejected the plaintiffs' contention in that case, and we reject the plaintiff's similar contention in this case. What passed in the patent was all 640 acres of Section 14, both upland and lowlands, and the police jury is today the owner of 419 acres of it, including the 105.78 acres in dispute.
Summary of Where the Boundary is
The place where we will fix the boundary, which is the southern boundary line of Lots 1 and 2 of Section 14, has been consistently marked on the ground and mapped on surveys. It is the meander line of Black Lake.
The police jury, as owner of 632.9 acres (all but the 7.1 acres in the southwest corner) in Section 14, acquired from the Micou estate, first sold the upland portions, as we described earlier, retaining 419 acres. These sales correctly described the conveyances as "fractional Northwest quarter" and "fractional Northeast quarter" of Section 14, T7N-R7E. In the sale from Fisher Lumber Co. to Resource and Land Partnership in 1991, the descriptions finally dropped the acreage references and described the sales only as Lots 1 and 2 in Section 14, Township 7 North, Range 7 East. Never in the public records are Lots 1 and 2 described in relationship to Black Lake. The lake is never mentioned in any document. The meander line is the boundary of the lots.
The police jury has historically dealt extensively with the land in dispute and the remainder of its 419 acres in Section 14. It has leased its mineral rights in the section to oil companies. These dealings were publicized in the official journal of the parish, the Concordia Sentinel, and in the Baton Rouge State Times. The minutes of meetings of the police jury recording these activities, and copies of the recorded oil and gas leases themselves, are in evidence. The police jury has never excluded the public access to the surface and has encouraged the public to hunt freely on the land.
In 1959 the then owner of Lots 1 and 2, Fisher Lumber Company, made a survey of the two lots. The southern boundary was marked on the survey and painted by employees of Fisher Lumber Company. Ray Adams, a senior forester and resident representative of the company, testified that after the boundary was determined, no activities were conducted by the company south of that boundary. There are title opinions in the record rendered by attorneys years ago recognizing the survey and the fact that it established the southern boundary of Lots 1 and 2. After he retired, Adams went back on the property in 1992 as a consultant for Fisher Lumber Company and stated that the boundary was still clearly visible. It was also clearly visible in 1995 to Lee Jones, a registered forester who testified that he examined the property in that year. Not only was the boundary painted, but there were witness trees, tenpenny nails, and concrete corner monuments marking it. Mark Tooke, the surveyor, testified that he found every mark, monument, and witness tree that had been put there in 1959 by the surveyor for Fisher Lumber Company. He also found the yellow paint, in addition to the monuments, along the meander line. The evidence clearly demonstrates that the boundary had been marked, surveyed, and established along the *962 south boundary line of Lots 1 and 2, which is the same line as the north meander line of Black Lake, and that that boundary has been honored as far back as any record reveals.
For the foregoing reasons the judgment of the trial court is reversed, and judgment is rendered ORDERING that the boundary between the parties in this action be and it is hereby fixed as is shown on "Map of Portion of Resource and Land Partnership Lands (Fisher Lumber Corp. Lands) Situated in Sections 1, 2, 11, 12, 13, & 14, T7NR7E, Sections 7 & 18, T7NR8E., Concordia Parish, Louisiana, by Malcolm G. Barlow, Registered Land Surveyor," dated January 1992, described as follows:
Commencing at the Northeast corner of Section 14, T7N-R7E, Concordia Parish, Louisiana, run S 0 degrees 12' E, 1352.02 feet to a 100 d/n found in place at the POINT OF BEGINNING; THEN RUN S 46 degrees 10' W, 415.64 feet to a 100 d/n found in place; THEN RUN S 70 degrees 04' W, 660.01 feet to a 100 d/n found in place; THEN RUN S 82 degrees 03' W, 1121.48 feet to a 100 d/n found in place; THEN RUN N 89 degrees 56' W, 616.63 feet to a 100 d/n found in place.
Costs of court both here and below will be paid by King's Farm, Inc.
REVERSED AND RENDERED.
NOTES
[1] The finding of the trial court that the disputed area is not in Section 14 is based on a "REPORT" of Tooke Engineering attached to a plat of survey it prepared in 1995. In the trial court's Reasons for Judgment it quoted two paragraphs from that report. In the first paragraph, the surveyor expressed the opinion that the 19th Century government surveys showed Black Lake was "apparently" part of the public domain and was "not to be severed to the public." The second paragraph, which appears to contradict the first one, gives Tooke's interpretation of turn-of-the-century letters from the government land office (which are not part of the chain of title and not in the record) to mean that all of Section 14 had passed to private owners and therefore could not be claimed by the State of Louisiana under the Swamplands Act of 1849.
| {
"pile_set_name": "FreeLaw"
} |
912 F.2d 1467
Martinv.Horizon Federal*
NO. 90-4183
United States Court of Appeals,Fifth Circuit.
AUG 21, 1990
1
Appeal From: W.D.La.
2
REVERSED.
*
Fed.R.App.P. 34(a); 5th Cir.R. 34.2
| {
"pile_set_name": "FreeLaw"
} |
76 F.3d 957
Ross FULLER, as Trustee of the International Association ofEntrepreneurs of America Benefit Trust, Appellant,v.James E. ULLAND, as Commissioner of Commerce of the State ofMinnesota, Appellee.
No. 94-2940.
United States Court of Appeals,Eighth Circuit.
Submitted Nov. 2, 1995.Decided Feb. 21, 1996.
Appeal from the United States District Court for the District of Minnesota, Richard Kyle, U.S.D.C. Judge.
Steven Z. Kaplan of Minneapolis, Minnesota (Richard D. Snyder of Minneapolis, Minnesota and Joseph A. Jordano of Omaha, Nebraska, on the brief), for appellant.
Prentiss Cox of St. Paul, (Minnesota (Hubert H.) Humphrey, III, as Attorney General for the State of Minnesota, on the brief), for appellee.
Before WOLLMAN and MORRIS SHEPPARD ARNOLD, Circuit Judges, and BOGUE,* District Judge.
WOLLMAN, Circuit Judge.
1
Ross Fuller, as Trustee of the International Association of Entrepreneurs of America Benefit Trust (the "Trustee"), appeals from the district court's1 judgment dismissing his action against James E. Ulland, Commissioner of Commerce of the State of Minnesota (the "Commissioner") for injunctive and declaratory relief under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461 (1988). The district court rejected the Trustee's claim of exclusive federal jurisdiction and dismissed the action under the abstention doctrine of Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971). Fuller v. Ulland, 858 F.Supp. 931 (D.Minn.1994). Although we are essentially in accord with the district court's reasoning, we conclude that the case should have been stayed rather than dismissed, and thus we remand for entry of a stay. See International Ass'n of Entrepreneurs of America v. Angoff, 58 F.3d 1266, 1271 (8th Cir.1995), cert. denied, --- U.S. ----, 116 S.Ct. 774, 133 L.Ed.2d 726 (1996).I.
2
The International Association of Entrepreneurs of America Benefit Trust (the "Trust") provides a plan of workers' compensation insurance to numerous employers in twenty-one states, including Minnesota. After requesting certain information from the Trust to determine whether it was complying with Minnesota insurance law, the Commissioner issued a cease and desist order requiring the Trust to stop offering or selling its insurance program in Minnesota until it complied with appropriate Minnesota licensure requirements.
3
The cease and desist order gave the Trust thirty days in which to request a contested case hearing in the matter, the order to become final if no such request was filed. The Trustee requested a hearing, but noted that he was doing so only to prevent the cease and desist order from becoming final. Simultaneously, the Trustee filed a federal court action for declaratory and injunctive relief under 29 U.S.C. §§ 1132(a)(3), claiming ERISA preemption of the state court regulations.2
4
Specifically, the Trustee sought a judgment declaring that (1) the Trust and the plan administered by it constitute an "employee welfare benefit plan" as defined by ERISA, 29 U.S.C. § 1002(1), and that the Trust and plan also constitute a "multiple employer welfare arrangement" as described in ERISA, 29 U.S.C. § 1002(40)(A), and (2) the regulatory process underlying the order, as it relates to the plan, is inconsistent with, and preempted by, ERISA. The Trustee further sought a judgment enjoining the Commissioner from: (1) prohibiting the Trust from conducting business in Minnesota; (2) subjecting the Trust to the regulatory scheme applied to insurance companies, including requirements for purchasing workers' compensation insurance; or (3) taking any action inconsistent with the provisions of ERISA. Finally, the Trustee asserted a claim under 42 U.S.C. § 1983, alleging that the Commissioner's actions and the regulatory scheme itself violate the United States Constitution.
5
The district court dismissed the Trustee's action under the principles of Younger abstention. Younger directs federal courts to abstain from hearing cases when (1) there is an ongoing state judicial proceeding which (2) implicates important state interests, and when (3) that proceeding affords an adequate opportunity to raise the federal questions presented. Middlesex County Ethics Comm. v. Garden State Bar Ass'n, 457 U.S. 423, 432, 102 S.Ct. 2515, 2521, 73 L.Ed.2d 116 (1982). The district court found that the state proceeding brought by the Commissioner satisfied each of the Younger preconditions.
II.
6
We review a district court's decision to abstain under Younger principles for abuse of discretion. See Warmus v. Melahn, 62 F.3d 252, 257 (8th Cir.1995) (applying abuse of discretion standard to (Younger) decision); see also Wilton v. Seven Falls Co., --- U.S. ----, ----, 115 S.Ct. 2137, 2144, 132 L.Ed.2d 214 (1995) (holding that a district court's decision to dismiss or stay a federal declaratory judgment action in favor of a parallel state proceeding is reviewed only for abuse of discretion).
7
The first two requirements of Younger abstention are clearly satisfied here. The state civil enforcement proceeding was ongoing at the time the suit was filed,3 and the state's interest in enforcing its insurance laws is important, see California State Auto Ass'n v. Maloney, 341 U.S. 105, 109-10, 71 S.Ct. 601, 603-604, 95 L.Ed. 788 (1951) (noting that the nature of the insurance industry necessitates pervasive state regulation). The controversy, then, centers on the third requirement --whether the state court action affords an adequate opportunity to present the Trustee's ERISA preemption defense. ERISA provides generally that its provisions shall preempt state laws that relate to a covered plan and which are not specifically exempt from preemption. 29 U.S.C. § 1144(a). The Trustee contends that federal courts have exclusive jurisdiction over claims resolving issues of ERISA preemption of state law and that thus the ERISA claims cannot be resolved in the state proceedings. Specifically, the Trustee relies on 29 U.S.C. § 1132(a)(3), which empowers participants to sue to enjoin any act or practice that violates any provision of ERISA, and 29 U.S.C. § 1132(e)(1), which grants federal district courts exclusive subject matter jurisdiction over such injunctive actions.
8
To benefit from ERISA preemption, however, a plan must first establish that it is an ERISA-covered plan, fund or program. Wisconsin Educ. Ass'n Ins. Trust v. Iowa State Bd., 804 F.2d 1059, 1060 (8th Cir.1986); Williams v. Wright, 927 F.2d 1540, 1543 (11th Cir.1991). In Wisconsin Education Ass'n, we noted Congress' concern that certain entrepreneurs would claim ERISA status in an attempt to use the ERISA preemption doctrine to escape state insurance regulation. 804 F.2d at 1063 (citing H.R.Rep. No. 1785, 94th Cong., 2d Sess. 48 (1977)). Some courts have minimized this problem by premising federal jurisdiction to determine ERISA preemption on a finding of ERISA status. See MDPhysicians & Assoc., Inc. v. State Bd. of Ins., 957 F.2d 178, 182 (5th Cir.), cert. denied, 506 U.S. 861, 113 S.Ct. 179, 121 L.Ed.2d 125 (1992); ELCO Mechanical Contractors, Inc. v. Builders Supply Assoc. of West Virginia, 832 F.Supp. 1054 (S.D.W.Va.1993); Plog v. Colorado Ass'n of Soil Conservation Dists., 841 F.Supp. 350 (D.Colo.1993). Whether we view a finding of ERISA-covered status to be a prerequisite to establishing federal jurisdiction or simply a hurdle to cross before moving on to the preemption issues, a finding of non-coverage will eliminate the need for any further federal involvement. Thus, if the state court finds that the Trust is not an ERISA-covered plan, the preemption issues will be moot.4
9
We need not determine whether federal jurisdiction over the preemption issues exists in this case because our recent decision in Angoff, 58 F.3d at 1269, establishes that, at the very least, the state court has concurrent jurisdiction to determine ERISA status. In Angoff we held that although ERISA establishes the right of an ERISA fiduciary to an injunction against practices violative of ERISA and permits only federal courts to issue such injunctions, the statute nowhere makes federal courts the exclusive forum for deciding ERISA status of plans or fiduciaries. Id. As we stated in Angoff, "what [appellant] asserts to be an exclusive federal jurisdiction to decide ERISA status by declaration is actually an exclusive federal jurisdiction to grant certain types of declaratory and injunctive relief once ERISA status has been established by either a state or federal court." Id. at 1270. Accordingly, given the presumption in favor of concurrent jurisdiction absent congressional instructions to the contrary, and the statute's silence with respect to the power to declare ERISA status, a claim of ERISA status can be asserted defensively in a state court action. Id.
10
Because the state court is competent to decide the threshold issue of ERISA status, and because a finding that the Trust is not an ERISA-covered plan will moot the remaining federal claims, the third Younger requirement is satisfied. Thus, the district court did not abuse its discretion in abstaining in this case.
III.
11
We next address whether the district court should have dismissed the federal action or stayed it until the state court resolved the issue of ERISA status. In Angoff, we stated that "so long as a possibility of return to federal court remains, a stay rather than a dismissal is the preferred mode of abstention." 58 F.3d at 1271 (citing Wilton, --- U.S. at ----, 115 S.Ct. at 2143 n. 2). We find this principle to be equally applicable to the present case. A state court determination that the Trust is not an ERISA-covered plan will end the matter. However, if the state court decides otherwise, return to federal court to determine whether the Commissioner's actions are preempted by ERISA will be appropriate.
12
The judgment of dismissal is vacated, and the case is remanded to the district court for entry of a stay.
*
The HONORABLE ANDREW W. BOGUE, United States District Judge for the District of South Dakota, sitting by designation
1
The Honorable Richard H. Kyle, United States District Judge for the District of Minnesota
2
Section 1132(a)(3) provides that a civil action may be brought "by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of [ERISA] or the terms of the plan or (B) to obtain other equitable relief (i) to redress such violations or (ii) to enforce any provisions of [ERISA] or the terms of the plan."
3
The Trustee claims, for the first time on appeal, that the state action was not ongoing at the time of the filing of the federal action. We reject this claim. The state proceedings began with the issuance of the Cease and Desist Order one month before the trustee filed his federal action
4
In fact, one court has found that the International Association of Entrepreneurs, as operating in Virginia, is not an ERISA covered plan. See Int'l Ass'n of Entrepreneurs of Am. Ben. Trust v. Foster, 883 F.Supp. 1050, 1061 (E.D.Va.1995)
| {
"pile_set_name": "FreeLaw"
} |
71 Mich. App. 340 (1976)
248 N.W.2d 263
PEOPLE
v.
LOWE
Docket No. 25144.
Michigan Court of Appeals.
Decided September 27, 1976.
Frank J. Kelley, Attorney General, Robert A. Derengoski, Solicitor General, William L. Cahalan, Prosecuting Attorney, Edward R. Wilson, Research, Training and Appeals, and Thomas A. Ziolkowski, Assistant Prosecuting Attorney, for the people.
Doherty & Thomas, P.C., for defendant.
Before: J.H. GILLIS, P.J., and T.M. BURNS and W. VAN VALKENBURG,[*] JJ.
J.H. GILLIS, P.J.
Defendant was tried by a jury and convicted of armed robbery. MCLA 750.529; MSA 28.797. He was sentenced to a prison term of 5 to 10 years and appeals.
*342 The defense theory was based upon mere presence at the scene of the robbery. Defendant testified that he and two acquaintances, James McGill and Adrian Brooks, entered the Fairlane Market. Adrian Brooks purchased a package of cigarettes. When the clerk opened the cash register, Adrian produced a pistol and proceeded, with the assistance of James McGill, to take money from the cash register. Defendant stated that he had no prior knowledge of or intent to commit the robbery. He further testified that when the pistol was produced he "froze" momentarily and then ran out of the store.
During cross-examination the prosecutor asked the defendant if he ever tried to explain his theory of noninvolvement to the store owner, Mr. Wilson.[1] Defendant responded: "No, I didn't go back, but my mother did." On re-direct examination defense counsel questioned the defendant as to the purpose of his mother's visit. Defendant replied: "To try to get an understanding with him [presumably, Mr. Wilson], to tell him that I didn't have anything to do with it." Defendant also stated that his mother went to the store about one week after the robbery occurred. Finally, on re-cross-examination the following exchange took place between the prosecutor and the defendant:
"Q. I see, as a matter of fact, isn't it true that this understanding that your mother tried to reach with Mr. Wilson was that she offered him the $15.00 which represented your share of the proceeds of the robbery for restitution and that he refused it, $15.00, that was your share of the robbery, that she offered back?
"A. No.
*343 "Q. That he didn't want?
"A. No.
"Q. Isn't that the way it really was?
"A. No."
Thereafter, the prosecutor requested that he be allowed to put Mr. Wilson back on the stand to rebut the defendant's denial that his mother made such an offer of restitution. The defense counsel objected vigorously, arguing that any testimony by Mr. Wilson concerning the mother would be inadmissible hearsay relating to collateral matters. After lengthy arguments by both attorneys, the trial judge allowed the recall of Mr. Wilson.
The prosecutor proceeded to elicit from Mr. Wilson that the defendant's mother did indeed visit him. However, Mr. Wilson stated the time of the visit was approximately one week before trial and not a week after the robbery. Mr. Wilson then testified as to the content of his conversation with the mother. Finally, the prosecutor asked this witness whether he had been offered any money. Mr. Wilson replied:
"Oh, yes, she [defendant's mother] did say, `He only got $15.00 out of the situation, and he didn't have anything to do with it. They gave it to him and he would like to return the money.' So I told her that I couldn't receive any money like that and I wish she wouldn't come by talking like that because it just makes matters worse."
Defendant argues that this testimony constitutes improper impeachment of the defendant on a collateral matter. We agree.
In an attempt to buttress his argument that he never formulated the necessary intent to participate in the robbery, defendant stated that he sent *344 his mother back to the store to explain that he had nothing to do with the robbery. At this point we think it was proper to allow Mr. Wilson to testify in rebuttal as to whether the mother did visit and the pertinent times involved. Such testimony could tend to refute evidence relevant and material to the defense theory. See People v Bennett, 393 Mich 445; 224 NW2d 840 (1975), People v McGillen # 1, 392 Mich 251; 220 NW2d 677 (1974), People v Atkins, 58 Mich App 503; 228 NW2d 435 (1975). However, in the instant case the prosecutor exceeded the scope of legitimate rebuttal by eliciting hearsay testimony in an attempt to impeach the defendant on a collateral matter. People v Culver, 280 Mich 223; 273 NW 455 (1937), People v Dellabonda, 265 Mich 486; 251 NW 594 (1933), People v Drew, 67 Mich App 295; 240 NW2d 776 (1976).
People v Culver, supra, dealt with the improper impeachment of a witness during a rape trial. The prosecutor asked the defendant's wife whether her brother-in-law, in her presence, offered the prosecutrix's mother $100 to get the prosecutrix to change her story. The witness responded in the negative, and the prosecutor subsequently elicited testimony from the prosecutrix's mother indicating such an offer was in fact made in the presence of the prior witness. The Supreme Court reversed the conviction upon the following analysis:
"The testimony unquestionably prejudiced the jury against defendant; it raised a collateral issue which he was not bound to meet. A witness may not be impeached on a collateral matter. People v Root, 231 Mich 239 [203 NW 872 (1925)], People v Dellabonda, 265 Mich 486 [251 NW 594 (1933)].
"The testimony was highly prejudicial to defendant, particularly in such a case where the credibility of *345 witnesses is so vital to the issue and where the jury might infer that defendant was responsible for the alleged proffer of a bribe." 280 Mich at 226; 273 NW at 457.
Similarly, in the case at bar whether or not the defendant's mother offered Mr. Wilson a sum of money is a collateral[2] matter which the defendant was not bound to meet. Defendant was not present during the conversation between his mother and Mr. Wilson. Further, there is really nothing to indicate that the defendant had any knowledge of the contents of that conversation or was in any way responsible for it.
We perceive the real thrust of the conversation between defendant's mother and Mr. Wilson to be that of an admission[3] which the prosecutor has related to the jury through Mr. Wilson. As an admission this testimony would properly belong in the case in chief. People v Bennett, supra. However, *346 we do not think that the subject testimony is admissible through Mr. Wilson, notwithstanding the people's argument that Mr. Wilson's testimony on rebuttal is admissible under an adopted admission theory. In effect the people argue on appeal that the defendant adopted, as an admission, the statement made by his mother that $15 was defendant's share of the robbery proceeds.
This theory is untenable. Adopted admissions are admissible when it clearly appears that the defendant understood and unambiguously assented to the statements made. Naples v United States, 120 US App DC 123, 126-127; 344 F2d 508, 511-512 (1964), stated the foundation requirements that must be met before an adoptive admission could be admitted:
"Testimony that an accused adopted statements of another person as his own admissions may be let in under this exception if it clearly appears that the accused understood and unambiguously assented to those statements. * * * `[T]he question of fact whether the party's conduct manifested his assent to the statement of the other person is a preliminary question for the judge. Unless he so finds, the statement is excluded.' In the present case, the trial court was not requested to consider this question and it did not." (Footnote omitted.)
See also, United States v Coppola, 526 F2d 764, 769 (CA 10, 1975).
We conclude that the rebuttal testimony of Mr. Wilson exceeded the scope of permissible rebuttal and in addition constitutes inadmissible hearsay which was highly prejudicial to the defendant.
Reversed and remanded for a new trial.
NOTES
[*] Former circuit judge, sitting on the Court of Appeals by assignment pursuant to Const 1963, art 6, § 23 as amended in 1968.
[1] The crime was committed on October 24, 1974. Defendant was not arrested until December 17, 1974. The trial occurred on May 6 and 7, 1975.
[2] Facts which can properly be admitted during the case-in-chief are not collateral. See McCormick, Evidence, § 47, p 100; 3A Wigmore, Evidence (Chadbourn Revision), § 1021, p 1011. The offer of money by a third party (defendant's mother) to a witness (Mr. Wilson) in order to induce that witness to change his story would appear to be inadmissible under People v Culver, 280 Mich 223; 273 NW 455 (1937), during the case-in-chief. "The device of eliciting a denial of some statement not properly in the case at the time of denial will not serve to inject an issue." People v Bennett, 393 Mich 445, 449; 224 NW2d 840 (1975).
[3] During the argument on the record the prosecutor stated that Mr. Wilson's rebuttal statements should not be binding upon the defendant, but should be admitted to show the basis for the prosecutor's question about the offer of money by the mother to Mr. Wilson. The prosecutor also mentions an agency theory, i.e., the mother acted as an agent of the defendant by tendering the proceeds of the crime to Mr. Wilson. Finally, the people's brief states that Mr. Wilson's final testimony falls within the adoptive admission exception to the hearsay rule. We also note that the trial court gave a limiting instruction stating that Mr. Wilson's testimony was not binding upon the defendant. It was not made clear to the jury, however, for exactly what purpose they were to consider the testimony. It is difficult for us to consider the testimony as anything other than an attempt to get a purportedly adopted admission before the jury.
| {
"pile_set_name": "FreeLaw"
} |
491 F.Supp. 15 (1980)
J. W. BURRESS, INCORPORATED, Plaintiff,
v.
JLG INDUSTRIES, INC. (formerly known as Fulton Industries, Inc.), Defendant.
Civ. A. No. 79-0170.
United States District Court, W. D. Virginia, Roanoke Division.
March 11, 1980.
Charles D. Fox, III, Woodward, Fox & Wooten, Roanoke, Va., for plaintiff.
Edward Fitzpatrick, Lord, Bissell & Brook, Chicago, Ill., James F. Johnson, Woods, Rogers, Muse, Walker & Thornton, Roanoke, Va., for defendant.
*16 OPINION
TURK, Chief Judge.
Plaintiff, J. W. Burress, Inc., sues JLG Industries, Inc., alleging violations of the federal antitrust laws and breach of contract. The case is now before the court on JLG's motion for judgment on the pleadings as to certain of Burress's claims of price discrimination in alleged violation of the Robinson-Patman Act. 15 U.S.C. § 13 et seq.
To the extent relevant here, the Robinson-Patman Act provides as follows:
It shall be unlawful for any person . . to discriminate in price between different purchasers of commodities of like grade or quality . . .; [However,] nothing herein contained shall prevent persons engaged in selling goods, wares or merchandise in commerce, from selecting their own customers in bona fide transactions and not in restraint of trade....
15 U.S.C. § 13(a).
The court, for purposes of ruling on defendant's motion, must assume of course that the plaintiff's factual allegations are true. 2A Moore's Federal Practice ¶ 12.15 (2d ed. 1979).
Defendant JLG, a Pennsylvania corporation, is a manufacturer of self-lifting work platforms. These platforms are designed to position men, tools, or materials in elevated work areas. Pursuant to a contract with JLG, plaintiff Burress was a distributor for these products in southwestern Virginia until April 30, 1978.
In advancing its claims of unlawful price discrimination, plaintiff focuses on a time period commencing on March 22, 1976, the date of the execution of the final distributorship agreement between JLG and Burress, and ending on April 30, 1978, the date contractual relations ceased. Plaintiff Burress asserts basically two Robinson-Patman violations, both arising from events of this period of time.
The sufficiency of the first set of Burress's factual allegations of unlawful price discriminationthe allegations of paragraph 10 of the complaintapparently is not disputed.[1] It will be useful briefly to review those allegations as a backdrop to the dispute now before the court. Paragraph 10 of the complaint alleges that during the latter half of 1977 and thereafter the plaintiff purchased several of the platform lift units from JLG. It is alleged that JLG provided these units to the plaintiff under different terms than it provided similar units to other purchasers. This practice, it is alleged, "had the effect of discriminating in price" between the plaintiff as a purchaser of the lift units and other purchasers of similar lift units of like grade and quality. These other purchasers allegedly were in competition with the plaintiff in interstate commerce. As noted already, the adequacy of these allegations is apparently not controverted.
The real dispute at this stage of the case concerns the viability of the allegations of paragraph 11 of the complaint.
In paragraph 11, the complaint sets forth another set of incidents which are said to give rise to liability under the Robinson-Patman Act. It is alleged that in September 1977 JLG "attempted to coerce" the plaintiff into entering a new distributorship agreement. The terms of the proposed new agreement "differed substantially" from those of the March 22, 1976 agreement, which in September 1977 was still in effect. The complaint states that "JLG offered this new contract to Burress while it was offering contracts which were substantially different in their terms to other purchasers *17 and distributors in competition with Burress. . . ." The contracts of other purchasers, it is alleged, were "discriminatory toward Burress" and the defendant's conduct "had the effect of increasing the price of the items Burress had purchased in the past or would purchase in the future. . . ."
Burress never accepted JLG's September 1977 offer of a new distributorship contract. The complaint does not allege that any purchases were ever undertaken pursuant to that proposal. Throughout the period of time concerned in paragraph 11 of the complaint, Burress apparently was still purchasing lift units pursuant to the terms of the old contract of March 22, 1976. Ultimately, the old distributorship agreement expired, whereupon contractual relations between Burress and JLG ceased.
Defendant JLG's dismissal motion rests on the language of the Robinson-Patman Act making it unlawful "for any person . . . to discriminate in price between different purchasers . . .." 15 U.S.C. § 13(a). The defendant argues that since Burress never signed the proposed new contract of September 1977, Burress cannot be a "purchaser" as required by the Robinson-Patman Act. Defendant thus urges that the allegations of paragraph 11, depending, as they do, merely on the offer of a new distributorship agreement, must fail.
Defendant relies on cases such as Shaw's, Inc. v. Wilson-Jones Co., 105 F.2d 331 (3d Cir. 1939) which disallow recovery where the plaintiff is only a potential purchaser and not an actual purchaser. In Shaw's the court was interpreting the portion of the Robinson-Patman Act upon which this case turns. The court said that
The discrimination in price referred to must be practiced "between different purchasers". Therefore at least two purchases must have taken place. The term purchaser means simply one who purchases, a buyer, a vendee. It does not mean one who seeks to purchase, a person who goes into the market-place for the purpose of purchasing. In other words, it does not mean a prospective purchaser, or one who wishes to purchase . . ..
105 F.2d at 333. In response to the argument of the plaintiff in Shaw's that it had been a customer and therefore had "purchaser" status under the Act, the Shaw's court stated: "Past purchases or conversations in respect to possible future purchases are insufficient." Id. Courts often have followed Shaw's in declining to equate offers to discriminate with actual price discrimination.[2]
Plaintiff Burress, on the other hand, maintains that the protection afforded by the Robinson-Patman Act is broader. Plaintiff concedes that there have been no purchases undertaken pursuant to the September 1977 proposed contract. Plaintiff's theory of recovery rests on the language of the Fifth Circuit in American Can Co. v. Bruce's Juices, Inc., 187 F.2d 919 (5th Cir.), op. mod. and pet. for reh'g denied, 190 F.2d 73, app. dismissed, 342 U.S. 875, 72 S.Ct. 165, 96 L.Ed. 657 (1951): "[P]laintiff was not bound to purchase the 3.12 Iscan upon [discriminatory] terms in order to attain the status of a competing purchaser under the Act, as its failure to do so was directly attributable to defendant's own discriminatory practice." 187 F.2d at 924. Thus, Burress contends that Bruce's Juices permits a Robinson-Patman plaintiff "who is currently purchasing goods from the defendant and competing with other purchasers of goods from the defendant at the time of the price discrimination, to recover when the failure of plaintiff to purchase at the discriminatory price is directly attributable to the actions of the defendant...."
Before analyzing the applicability of Bruce's Juices to the plaintiff's situation in this case, it may be useful to recall that the Robinson-Patman Act forbids discrimination in price only as it occurs between "different *18 purchasers."[3] The question for decision, then, is simply whether Burress can assert status as a "purchaser" solely on the basis of the September 1977 proposal.
It cannot meaningfully be said that a "purchase" has occurred until buyer and seller have completed their negotiations and have in some way expressed their mutual assent that legally enforceable expectations and commitments arise. In short, there must be a contract. It is sufficient that the contract be merely executory; actual delivery and payment are not essential to a "purchase" for Robinson-Patman purposes. Aluminum Co. of America v. Tandet, 235 F.Supp. 111 (D.Conn.1964). But legally enforceable commitments must be in existence.
The exact nature of the contractual relations between the plaintiff and the defendant in Bruce's Juices is not spelled out in the Fifth Circuit's 1951 opinion with extreme precision. It is far from clear that the opinion, in light of the facts of the case, permits recovery in the absence of purchases. It is apparent, though, as was observed in Tandet, 235 F.Supp. at 114, that Bruce's Juices cannot be read "to authorize any prospective buyer or offeree in the open market to be a beneficiary under the Act."
In Bruce's Juices, the plaintiff discovered that the defendant, a can manufacturer, had been selling a particular type of can to plaintiff's competitors at a secret discount.[4] This can was known as the "3.12 Iscan." When plaintiff learned of the secret discount, it sought for itself the same low price on the 3.12 Iscan or, in lieu of that, an equivalent low price on a similar can. The defendant refused to allow the plaintiff the same low price on 3.12 Iscans as the plaintiff's competitors were getting. This, the court said, "made it financially impossible for plaintiff to purchase that particular Iscan . . .." 187 F.2d at 923 (emphasis added). It does not appear from the Fifth Circuit's opinion that the plaintiff ceased purchasing cans from the defendant when the defendant refused to allow the plaintiff a lower price.[5] On the contrary, it would appear that the plaintiff was purchasing some other, similar size cans at the same time as competitors were purchasing at a discount the 3.12 Iscan.[6] This seems clear from the court's statement, in summing up the nature of the injury to the plaintiff in Bruce's Juices, that "the discriminatory higher price paid by plaintiff for an Iscan of like grade and quality diminished its profits and helped destroy its ability to withstand competition." 187 F.2d at 922 (emphasis added).
Thus, liability in Bruce's Juices was not premised solely on the defendant's refusal to sell 3.12 Iscans to the plaintiff at the price the plaintiff desired. The court simply recognized that the failure of the parties to consummate a sale of 3.12 Iscans in particular did not preclude recovery with respect to the discriminatory pricing in sales that did occur. And, as this court reads Bruce's Juices, liability was based on sales that did occur.
In sum, Bruce's Juices does not, in this court's view, stand for the proposition *19 that a plaintiff in Burress' position may recover under the Robinson-Patman Act without having contracted to purchase goods at a discriminatory price. The court has found no case that would go so far as to allow recovery for what the plaintiff here terms a "continuing discriminatory offer to sell." The threshold of Robinson-Patman liability is not reached until there have been two purchasesbinding commitments to buy and sellat discriminatory prices. Absent such binding commitments, the plaintiff suffers no injury for which the Robinson-Patman Act affords a remedy.
Paragraph 11 of the complaint in this case seeks to predicate Robinson-Patman Act liability upon the allegedly discriminatory offer of September 1977. That proposed new contract was never signed; it obviously created no legal commitments whatever; certainly no purchases transpired under it. In light of all the foregoing, this court is convinced beyond doubt that the plaintiff could prove no set of facts upon the allegations of paragraph 11 of the complaint which would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101, 102, 2 L.Ed.2d 80 (1957). Accordingly, the motion of the defendant for judgment on this portion of pleadings will be granted and the plaintiff will not, in further proceedings in this cause, be permitted to predicate any alleged violation of the Robinson-Patman Act upon the proposed new contract of September 1977.[7]
NOTES
[1] Defendant moves to dismiss the complaint to the extent that it alleges discrimination merely in the "terms" of a contract, not a discrimination in price. Paragraph 10 of the complaint is not objectionable on that ground since plaintiff does allege there that purchases of the units were made by plaintiff and other purchasers and that defendant's providing the units to plaintiff under "different terms" than it provides them to other purchasers "had the effect of discriminating in price...." This adequately states a claim of price discrimination. See Corn Products Co. v. Federal Trade Commission, 324 U.S. 726, 740, 65 S.Ct. 961, 968, 89 L.Ed. 1320 (1945).
[2] E. g., Klein v. Lionel Corp., 237 F.2d 13, 15 (3d Cir. 1956); Naifeh v. Ronson Metal Works, 218 F.2d 202, 206 & n. 6 (10th Cir. 1954); Chicago Seating Co. v. S. Karpen & Bros., 177 F.2d 863, 867 (7th Cir. 1949). See Bay City-Abraham Bros. Inc. v. Estee Lauder, Inc., 375 F.Supp. 1206, 1218 (S.D.N.Y.1974).
[3] 15 U.S.C. § 13(a). Bruce's Juices, of course, does not relax the "purchasers" requirement. In allowing recovery, the court in Bruce's Juices found the statutory mandate that the plaintiff be a "purchaser" satisfied because the plaintiff there had purchased other products which were of "like grade and quality" as the "3.12 Iscan" which plaintiff declined to purchase. 187 F.2d at 924.
[4] The facts of Bruce's Juices are reported in 187 F.2d at 920-23 and in the district court's opinion in Bruce's Juices v. American Can Co., 87 F.Supp. 985, 987-91 (S.D.Fla.1949).
[5] Nor does it so appear from any of the numerous other published opinions in the extended litigation between the Bruce's Juices firm and the American Can Company. See Bruce's Juices v. American Can Co., 330 U.S. 743, 67 S.Ct. 1015, 91 L.Ed. 1219 (1947) aff'g 155 Fla. 877, 22 So.2d 461 (1946); Bruce's Juices v. American Can Co., 87 F.Supp. 985 (S.D.Fla. 1949).
[6] The district court's opinion indicates that Iscans were available in four slightly different sizes. All Iscans were the same diameter, 2.02 inches, and they varied in height as follows: 3.00 inches, 3.09 inches, 3.12 inches, and 3.14 inches. 87 F.Supp. at 990.
[7] This ruling, of course, leaves plaintiff's other antitrust and contract claims unscathed.
| {
"pile_set_name": "FreeLaw"
} |
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 04-4322
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
FERRELL BENJAMIN GIBBS,
Defendant - Appellant.
Appeal from the United States District Court for the District of
South Carolina, at Greenville. G. Ross Anderson, Jr., District
Judge. (CR-03-609)
Submitted: April 29, 2005 Decided: June 3, 2005
Before NIEMEYER, LUTTIG, and SHEDD, Circuit Judges.
Affirmed in part, vacated in part, and remanded by unpublished per
curiam opinion.
David B. Betts, Columbia, South Carolina, for Appellant. J. Strom
Thurmond, Jr., United States Attorney, Kevin F. McDonald, Assistant
United States Attorney, Greenville, South Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:
Following a jury trial, Ferrell Benjamin Gibbs was
convicted of “knowingly and fraudulently endeavoring to obtain a
sum in excess of $1,000 in the public stocks of the United States
and to have a part thereof transferred, assigned, and conveyed by
virtue of false, forged, and counterfeited instruments,” in
violation of 18 U.S.C. § 1003 (2000) (Count One), and mail fraud,
in violation of 18 U.S.C.A. § 1341 (West 2000 & Supp. 2004) (Count
Two). The district court sentenced Gibbs under the federal
sentencing guidelines to seventy-eight months in prison. Gibbs
timely appealed.
I.
Gibbs’ counsel asserts on appeal that the district court
erred by denying his motion to dismiss Count Two on the ground that
the evidence was not sufficient to show that Gibbs had designed a
scheme to defraud anyone. We review the district court’s decision
to deny a motion for judgment of acquittal de novo. United
States v. Gallimore, 247 F.3d 134, 136 (4th Cir. 2001). Where, as
here, the motion was based on insufficient evidence, “[t]he verdict
of a jury must be sustained if there is substantial evidence,
taking the view most favorable to the Government, to support it.”
Glasser v. United States, 315 U.S. 60, 80 (1942). This court
“ha[s] defined ‘substantial evidence,’ in the context of a criminal
- 2 -
action, as that evidence which ‘a reasonable finder of fact could
accept as adequate and sufficient to support a conclusion of a
defendant’s guilt beyond a reasonable doubt.’” United States v.
Newsome, 322 F.3d 328, 333 (4th Cir. 2003) (quoting United
States v. Burgos, 94 F.3d 849, 862-63 (4th Cir. 1996) (en banc)).
In evaluating the sufficiency of the evidence, this court does not
review the credibility of the witnesses and assumes that the jury
resolved all contradictions in the testimony in favor of the
government. United States v. Romer, 148 F.3d 359, 364 (4th Cir.
1998). In addition, the court considers circumstantial and direct
evidence, and allows the government the benefit of all reasonable
inferences from the facts proven to those sought to be established.
United States v. Tresvant, 677 F.2d 1018, 1021 (4th Cir. 1982).
The elements of mail fraud under 18 U.S.C. § 1341 are:
(1) the existence of a scheme to defraud; (2) the use of the mails
in furtherance of the scheme; and (3) a material statement or
omission in furtherance of the scheme. Neder v. United States, 527
U.S. 1, 25 (1999); United States v. Godwin, 272 F.3d 659, 666 (4th
Cir. 2001). To establish the scheme to defraud element, the
government must prove beyond a reasonable doubt that the defendant
acted with specific intent to defraud. United States v. Ham, 998
F.2d 1247, 1254 (4th Cir. 1993). “Fraudulent intent may be
inferred from the totality of the circumstances and need not be
- 3 -
proven by direct evidence.” Id. at 1254; see also Godwin, 272 F.3d
at 666.
Gibbs’ counsel argues that the evidence failed to show
that he had intent to defraud. However, after Gibbs first
attempted in 2002 to use bills of exchange to purchase cars and
real estate, the Federal Bureau of Investigation (“FBI”) informed
him these bills were fictitious and that the United States Treasury
accounts he purportedly believed existed in fact did not. The FBI
also provided Gibbs with a list of websites where he could verify
the information they gave him. Despite this warning from the FBI,
in 2003 Gibbs again attempted to make a real estate purchase using
a fictitious bill of exchange. We find that the evidence was
sufficient to support Gibbs’ conviction on Count Two.
II.
Citing Blakely v. Washington, 124 S. Ct. 2531 (2004),
Gibbs’ counsel asserts for the first time on appeal that his
sentence is unconstitutional because it is based on facts that were
neither charged in the indictment nor proven beyond a reasonable
doubt. In United States v. Booker, 125 S. Ct. 738 (2005), the
Supreme Court held that the mandatory manner in which the federal
sentencing guidelines required courts to impose sentencing
enhancements based on facts found by the court by a preponderance
of the evidence violated the Sixth Amendment. Id. at 746, 750
- 4 -
(Stevens, J., opinion of the Court). The Court remedied the
constitutional violation by severing two statutory provisions, 18
U.S.C.A. § 3553(b)(1) (West Supp. 2004) (requiring sentencing
courts to impose a sentence within the applicable guideline range),
and 18 U.S.C.A. § 3742(e) (West 2000 & Supp. 2004) (setting forth
appellate standards of review for guideline issues), thereby making
the guidelines advisory. United States v. Hughes, 401 F.3d 540,
546 (4th Cir. 1995) (citing Booker, 125 S. Ct. at 756-67 (Breyer,
J., opinion of the Court)). Although Gibbs did not raise this
challenge at sentencing, this court has held that an enhancement
imposed under the mandatory guidelines scheme resulting in a
sentence exceeding the maximum sentence that could have been
imposed based solely on the jury’s findings constitutes plain error
warranting correction.1 Hughes, 401 F.3d at 546-48.
In light of Booker and Hughes, we find that the district
court plainly erred in sentencing Gibbs and that the error warrants
correction. Therefore, although we affirm Gibbs’ convictions, we
vacate his sentence and remand for proceedings consistent with
1
Just as we noted in Hughes, 401 F.3d at 545 n.4, “[w]e of
course offer no criticism of the district judge, who followed the
law and procedure in effect at the time” of Gibbs’ sentencing. See
generally Johnson v. United States, 520 U.S. 461, 468 (1997)
(stating that an error is “plain” if the “law at the time of trial
was settled and clearly contrary to the law at the time of
appeal”).
- 5 -
Hughes.2 We deny as moot Gibbs’ motion to remand and dispense with
oral argument because the facts and legal contentions are
adequately presented in the materials before the court and argument
would not aid the decisional process.
AFFIRMED IN PART,
VACATED IN PART, AND REMANDED
2
In addition to the brief submitted by counsel, Gibbs filed a
motion to submit a pro se supplemental brief. We grant the motion.
Having reviewed the pro se supplemental brief, we find that all of
Gibbs’ challenges to his conviction are meritless. Because Gibbs’
sentence must be vacated and remanded in light of Booker and
Hughes, we express no opinion on the sentencing issue Gibbs raises
in his pro se supplemental brief.
- 6 -
| {
"pile_set_name": "FreeLaw"
} |
571 F.3d 353 (2009)
Francoise Anate GOMIS, Petitioner,
v.
Eric H. HOLDER, Jr., Attorney General, Respondent.
No. 08-1389.
United States Court of Appeals, Fourth Circuit.
Argued: March 25, 2009.
Decided: July 6, 2009.
*354 ARGUED: Kell Enow, Enow & Patcha, Silver Spring, Maryland, for Petitioner. Andrew B. Insenga, United States Department of Justice, Office of Immigration Litigation, Washington, D.C., for Respondent. ON BRIEF: Gregory G. Katsas, Assistant Attorney General, Civil Division, M. Jocelyn Lopez Wright, Assistant Director, United States Department of Justice, Office of Immigration Litigation, Washington, D.C., for Respondent.
Before NIEMEYER and GREGORY, Circuit Judges, and EUGENE E. SILER, JR., Senior Circuit Judge of the United States Court of Appeals for the Sixth Circuit, sitting by designation.
Petition denied by published opinion. Judge NIEMEYER wrote the opinion, in which Senior Judge SILER joined. Judge GREGORY wrote a separate opinion concurring in part and dissenting in part.
OPINION
NIEMEYER, Circuit Judge:
Francoise Anate Gomis, a native and citizen of Senegal, petitions for review of an order of the Board of Immigration Appeals (BIA) that affirmed the decision of the immigration judge denying her applications for asylum, withholding of removal, and relief under the Convention Against Torture. Gomis contends (1) that even though her asylum application was not filed within the one-year statutory deadline, the BIA erred in finding that she had not demonstrated changed or extraordinary circumstances that excused the delay and (2) that the BIA's finding that it is not more likely than not that Gomis will be subjected to female genital mutilation if returned to Senegal is not supported by substantial evidence and thus the BIA's denial of withholding of removal is manifestly contrary to law.
For the reasons that follow, we conclude that we lack jurisdiction to review the BIA's determination that Gomis did not meet the changed or extraordinary circumstances exception and that the BIA's findings underlying its denial of withholding of removal are supported by substantial evidence. Accordingly, we deny Gomis' petition for review.
*355 I
Gomis arrived in the United States on January 30, 2001, coming to work as a nonimmigrant domestic servant for an employee of the International Monetary Fund. She was authorized to remain in the United States until April 30, 2003. Over two years later, in June 2005, Gomis filed an application for asylum in which she claimed that she fled Senegal because her family wanted her to undergo female genital mutilation (FGM or circumcision) and participate in an arranged marriage. After the Department of Homeland Security refused to grant Gomis' application, it issued a notice to appear on July 27, 2005, for removal proceedings and referred the matter to an immigration judge. At the hearing before the immigration judge, Gomis admitted removability and renewed her application for asylum, withholding of removal, and protection under the U.N. Convention Against Torture.
At the hearing before the immigration judge, Gomis testified that she was born in 1978 in Dakar, Senegal, and lived with her family in the outskirts of Dakar. She is single and does not have any children. Gomis and her family are members of the Djola ethnic group, which still practices FGM, and her father, who is a businessman, has two wives, both of whom are circumcised.
Relating her circumstances, Gomis testified that in June 1999, her parents took her from school so that she could undergo FGM and become married to a man in his sixties. In exchange for this marriage commitment, her parents accepted gifts from the man. Because Gomis desired to finish school and retain her independence, she went to the police to report her parents' intentions, but the police told her to return home and try to resolve the problem. When Gomis informed her uncle, who lives in France, of the situation, he tried to persuade her father, unsuccessfully, to allow Gomis to return to school. On her uncle's advice, Gomis obtained a passport and left home in November 2000, initially hiding at a friend's house in Senegal. After Gomis obtained a visa at the embassy, one of her uncle's friends drove her to the airport to leave Senegal. Once in the United States, Gomis worked for an employee of the International Monetary Fund for three years.
While in the United States, Gomis learned that her parents had forced her 15-year-old sister to undergo FGM before marriage and that when Gomis' brother filed a complaint with the police, he was told to go home.
Gomis gave her opinion that 80 to 100% of the Djola women have undergone FGM and have been forced to marry older men. According to Gomis, when a woman's parents were ready to have her undergo FGM, they would come to her room with other family members when she was asleep and take her away. She noted that some families have FGM performed on their daughters when they are young, while other families wait until just before their daughters' marriage.
She acknowledged, however, that the Senegalese government is against the practice. Yet, families continue the practice of performing FGM because of tradition. Gomis stated that because her family wanted her to undergo FGM, there was nowhere in Senegal she could live without fear of being subjected to it. She stated that her family is widely dispersed throughout Senegal and that the country is small, where everyone knows each other.[*]
*356 Gomis submitted a letter from her sister dated September 12, 2006, stating that she underwent FGM in February 2005 and that as a result she became infected and still suffers persistent pain. According to her sister, Gomis' father is still angry with Gomis and wants her to return home.
In addition, Gomis presented other letters and documents confirming some of her testimony. She submitted her sister's medical file documenting her sister's visit to the doctor with medical complications after the circumcision; an attestation from her uncle stating that he helped Gomis leave Senegal to go to the United States; an attestation from the person who hired Gomis as a domestic servant, claiming that Gomis' uncle arranged for the employment; a letter sent to Gomis from her aunt in Senegal, who stated that her fiance provided a dowry and that all the other women her age have been circumcised; a letter from her mother telling her that she cannot avoid customs, that her fiance is losing patience with her, and that the entire village is laughing at her family; a letter from her father ordering her to return home so that she can be circumcised and marry her fiance; and finally a letter from her uncle stating that he had seen her parents, and they had not changed their minds and continue to want Gomis to undergo the procedure.
The Department of State's report on FGM in Senegal, dated June 1, 2001, which was entered into the record, states that FGM is most common among Muslim groups in the eastern part of the country, but that most Senegalese women have not undergone the procedure and that it is becoming less common due to urbanization and education. The report refers to a study published in 1988, which found that only 20% of Senegalese women have undergone the procedure and which noted that other estimates place the figure between 5 and 20%. The report related that FGM is hardly practiced in populated urban areas. Regarding Gomis' ethnic group, the Djolas, the report states that rural elements of the Djola group practice FGM as a puberty initiation rite. For all of Senegal, 90% of the women who had undergone the procedure were between two and five years old at the time of the procedure, but for others it was part of a puberty initiation rite.
In 1998, Senegal's president called for the eradication of FGM, and since 1999, there have been programs and seminars to educate the public about it. Many rural villages have issued declarations against the practice. In January 1999, Senegal enacted a law criminalizing FGM with a sentence of one to five years' imprisonment. The report added that there had been no convictions under this law, and, because many of those circumcised were very young, they were not in a position to report violations.
Gomis also included in the record a State Department report on human rights conditions in Senegal, issued in March 2006, which stated that FGM was practiced in thousands of rural villages. It estimated that nearly 100% of the women in the northern Fouta region were FGM victims and that nearly 60-70% of the women in the south and southeast were. The report confirmed that FGM is a criminal offense, carrying a sentence of six months to five years' imprisonment, and stated that there have been criminal prosecutions under the law. In addition, the report noted that 140 villages have renounced FGM but nonetheless, many people were still practicing it.
In denying Gomis relief, the immigration judge found that Gomis was "genuinely credible" but that Gomis' opinion testimony regarding the prevalence of FGM, both in general and within her ethnic group, *357 was at odds with the State Department reports. The judge allowed that this could be the result of Gomis' lack of knowledge of the actual facts, "rather than an effort to deceive."
The immigration judge also found Gomis' asylum application untimely because it was filed more than one year after she entered the United States and Gomis did not establish changed or extraordinary circumstances warranting an extension of the filing period. Gomis' evidence about her sister's circumcision, on which Gomis relied to prove changed circumstances, merely confirmed the condition Gomis claimed existed when she left Senegal.
The immigration judge further found that Gomis did not meet her burden of establishing that it was more likely than not that she would face FGM if she returned to Senegal. The judge allowed that there was "some small chance, perhaps what even amount[s] to a reasonable possibility" that Gomis will become a victim of the practice, but not a more-likely-than-not chance. The judge found that most Senegalese women have not undergone the procedure; that the practice is becoming less common in Senegal; and that it is rarely practiced in urban areas. In addition, the judge found that the "mostly rural elements of the Djola" groups who practice FGM do so "as a puberty initiation rite," but Gomis was well past the age of puberty, and she "lived in Dakar, a very large city." The judge noted that FGM is a criminal offense in Senegal and that the government has begun prosecuting people for the offense. Moreover, because Gomis was 28 years old and "relatively well-educated," she "would be better able to relocate in a safe place in Senegal than [would] a younger or less educated" woman. Accordingly, the judge denied Gomis' petition to withhold removal, stating that "based on a totality of the record of evidence in the case I simply cannot conclude that [Gomis] has met her burden of proof of establishing that it is more likely than not she would be subjected to this horrible practice."
With respect to relief under the Convention Against Torture, the immigration judge found that even if FGM constituted torture, it was not more likely than not that Gomis will be subjected to it. And moreover, any risk that Gomis faces from her family is not with the consent or acquiescence of the Senegalese government.
The BIA affirmed the immigration judge's determinations. It agreed that Gomis "failed to meet her burden of establishing that it is objectively more likely than not that she would be subjected to [FGM] if returned to Senegal." The BIA found that FGM is becoming less common in Senegal and is rare in large urban areas. In addition, it found that FGM is criminalized by the government of Senegal; that there are prosecutions under the law; and that the government has collaborated with groups to educate the public on the inherent dangers of the practice. The BIA also found that 90% of the women who undergo FGM in Senegal are between the ages of two and five. Because Gomis was 28 years old, she might have a subjective fear of undergoing FGM upon returning to Senegal, but the BIA found that the record does not objectively support that it is more likely than not that she would have to undergo the procedure. The BIA thus upheld the denial of withholding of removal. And finally, the BIA upheld the denial of relief under the Convention Against Torture.
From the BIA's order, Gomis petitions this court for review.
II
Gomis contends first that even though she did not file her application for asylum *358 within one year of the date of her arrival in the United States, as required by 8 U.S.C. § 1158(a)(2)(B), "she meets both the extraordinary circumstances and changed circumstances exception[s]" of 8 U.S.C. § 1158(a)(2)(D). Gomis claims that she did not file within one year because she believed that with the passage of criminal laws prohibiting FGM in Senegal, the practice would change. She argues that when her sister had the procedure performed on her in 2005 and the police failed to respond, she realized she was in danger of FGM if she returned to Senegal.
The immigration judge found that the FGM performed on Gomis' sister in February 2005 did not constitute either extraordinary or changed circumstances under 8 U.S.C. § 1158(a)(2)(D) because the threat of FGM was the very reason Gomis claims to have left Senegal in 2001, and the BIA "[found] no error in the Immigration Judge's decision for the reasons stated therein."
An alien applying for asylum must show "by clear and convincing evidence that the application has been filed within 1 year after the date of the alien's arrival in the United States." 8 U.S.C. § 1158(a)(2)(B). An asylum application may be considered after one year "if the alien demonstrates to the satisfaction of the Attorney General either the existence of changed circumstances which materially affect the applicant's eligibility for asylum or extraordinary circumstances relating to the delay in filing an application within the period specified." Id. § 1158(a)(2)(D). But 8 U.S.C. § 1158(a)(3) provides that "[n]o court shall have jurisdiction to review any determination of the Attorney General under paragraph (2)," which includes both the Attorney General's decision whether an alien has complied with the one-year time limit and whether there are changed or extraordinary circumstances excusing the delay. Id. § 1158(a)(3) (emphasis added).
Thus, under the express language of § 1158(a)(3), we lack jurisdiction to review the immigration judge's determination. See Zaidi v. Ashcroft, 377 F.3d 678, 680-81 (7th Cir.2004) (holding that the jurisdiction-stripping provision of 8 U.S.C. § 1158(a)(3) precludes review of the immigration judge's determination that the alien had not demonstrated "changed circumstances" or "extraordinary circumstances" under 8 U.S.C. § 1158(a)(2)(D) and collecting cases).
Although 8 U.S.C. § 1252(a)(2)(D), added by the REAL ID Act of 2005, provides that "[n]othing ... in any other provision of this chapter ... which limits or eliminates judicial review, shall be construed as precluding review of constitutional claims or questions of law," the question whether the changed or extraordinary circumstances exception applies to excuse an alien's delay in filing her asylum application is a discretionary determination based on factual circumstances. Therefore, absent a colorable constitutional claim or question of law, our review of the issue is not authorized by § 1252(a)(2)(D). Nearly every circuit that has analyzed § 1158(a)(3) in light of § 1252(a)(2)(D) has held that even after the REAL ID Act, the federal courts continue to lack jurisdiction over the determination whether the alien demonstrated changed or extraordinary circumstances that would excuse an untimely filing. See, e.g., Jarbough v. Attorney Gen., 483 F.3d 184, 188-90 (3d Cir. 2007); Ferry v. Gonzales, 457 F.3d 1117, 1130 (10th Cir.2006); Almuhtaseb v. Gonzales, 453 F.3d 743, 747-48 (6th Cir.2006); Chen v. U.S. Dep't of Justice, 434 F.3d 144, 154-55 (2d Cir.2006); Mehilli v. Gonzales, 433 F.3d 86, 92-94 (1st Cir.2005); Ignatova v. Gonzales, 430 F.3d 1209, 1214 (8th Cir.2005); Chacon-Botero v. U.S. Attorney *359 Gen., 427 F.3d 954, 956-57 (11th Cir.2005) (per curiam); Vasile v. Gonzales, 417 F.3d 766, 768-69 (7th Cir.2005). But see Ramadan v. Gonzales, 479 F.3d 646, 649-54 (9th Cir.2007) (per curiam) (finding jurisdiction to review whether an alien has demonstrated "changed circumstances" to excuse a late asylum application, characterizing the issue as a mixed question of law and fact).
We join the majority of courts who have reached this issue and hold that we lack jurisdiction to review the immigration judge's discretionary determination, as affirmed by the BIA, that Gomis had not demonstrated changed or extraordinary circumstances to excuse her untimely filing.
III
Gomis also contends that the BIA's finding that it is not more likely than not that Gomis will be subjected to FGM if she is returned to Senegal "is speculative and not based on the substantial evidence in the record." She argues that there "is clear evidence in the record that she will be excised if she were to return to Senegal" and therefore that the BIA's denial of withholding of removal is manifestly contrary to law.
Withholding of removal is available under 8 U.S.C. § 1231(b)(3) if the alien shows that it is more likely than not that her life or freedom would be threatened in the country of removal because of her "race, religion, nationality, membership in a particular social group, or political opinion." 8 U.S.C. § 1231(b)(3)(A); 8 C.F.R. § 208.16(b)(2); see also Haoua v. Gonzales, 472 F.3d 227, 232 (4th Cir.2007). The alien bears the burden of demonstrating that her life or freedom would be threatened on account of a protected ground. See 8 C.F.R. § 208.16(b)(2). Because withholding of removal is mandatory if the alien meets the standard of proof, see INS v. Stevic, 467 U.S. 407, 426, 429-30, 104 S.Ct. 2489, 81 L.Ed.2d 321 (1984); Camara v. Ashcroft, 378 F.3d 361, 367 (4th Cir.2004), the alien must meet a higher standard for withholding of removal than for asylum. See Camara, 378 F.3d at 367.
On review, we afford the BIA's determination of eligibility for withholding of removal a high degree of deference. In fact, "a decision that an alien is not eligible for admission to the United States is conclusive unless manifestly contrary to law." 8 U.S.C. § 1252(b)(4)(C). We review the administrative findings of fact under the substantial evidence standard, see INS v. Elias-Zacarias, 502 U.S. 478, 481, 112 S.Ct. 812, 117 L.Ed.2d 38 (1992), and these "findings of fact are conclusive unless any reasonable adjudicator would be compelled to conclude to the contrary." 8 U.S.C. § 1252(b)(4)(B); see Gandziami-Mickhou v. Gonzales, 445 F.3d 351, 354 (4th Cir. 2006) ("[T]he substantial evidence test for review of the BIA's conclusions mandates affirmance if the evidence is not `so compelling that no reasonable factfinder could' agree with the BIA's factual conclusions." (quoting Huaman-Cornelio v. BIA, 979 F.2d 995, 999 (4th Cir.1992))). Even "[t]he possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency's finding from being supported by substantial evidence." Gonahasa v. INS, 181 F.3d 538, 541 (4th Cir.1999) (quoting Consolo v. Fed. Maritime Comm'n, 383 U.S. 607, 620, 86 S.Ct. 1018, 16 L.Ed.2d 131 (1966)) (internal quotation marks omitted).
Where the BIA adopts and supplements the immigration judge's decision, "the factual findings and reasoning contained in both decisions are subject to judicial review." Anim v. Mukasey, 535 F.3d 243, 252 (4th Cir.2008) (quoting *360 Niang v. Gonzales, 492 F.3d 505, 511 n. 8 (4th Cir.2007)) (internal quotation marks omitted).
The immigration judge denied Gomis' application for withholding of removal, finding that "there is some small chance, perhaps what even amounts to a reasonable possibility, given her parents['] interest and desire in having her undergo FGM, that she would be subjected to this practice," but that "it is not ... anything close to a more likely than not chance." (Emphasis added). The judge detailed the evidence in the record that supported his finding. On appeal, the BIA likewise determined that Gomis failed to demonstrate a clear probability that she would be forced to undergo FGM and found no clear error in the immigration judge's factual findings. The BIA stated that "while people continue to practice FGM in Senegal in the rural areas, the practice of FGM is growing less common and is rare in large urban areas, and the government of Senegal has enacted laws criminalizing the practice." It noted that "[t]he record reflects that the government has prosecuted those caught engaging in the practice of FGM and has fought to end the practice by collaborating with other groups to educate people about the inherent dangers," emphasizing that "140 villages renounced the use of FGM." "Further, the record reflects that FGM is hardly practiced in the most heavily populated urban areas such as that where respondent is from and that 90 percent of the females who undergo FGM are between 2 and 5 years of age." Thus, the BIA concluded: "we acknowledge that the 28-year-old respondent may have a subjectively genuine fear of FGM if she is returned to Senegal; however, we agree that she has failed to meet her burden of establishing that it is objectively more likely than not that she would be subjected to the procedure if returned to Senegal."
Because substantial evidence supports the immigration judge and BIA's findings, we affirm the denial of Gomis' application for withholding of removal because a reasonable adjudicator would not be compelled to conclude to the contrary. See 8 U.S.C. § 1252(b)(4)(B). The record shows that the incidence of FGM in Senegal is low and that the practice hardly occurs in urban areas, such as Dakar. Further, most women have not been forced to undergo FGM, and the incidence of FGM is decreasing. Gomis, as an adult, is even less likely to be forced to undergo FGM because 90% of the women who undergo the procedure are between two and five years old at the time of the procedure. In addition, both practicing FGM and ordering FGM to be carried out on a third party are crimes, and prosecutors now bring criminal charges against perpetrators. Gomis was 29 years old when the BIA dismissed her appeal, and her family lives in Dakar. She is relatively well educated, especially in a country where the adult illiteracy rate approaches 40%, having had 12 years of schooling. The weight of the record evidence, including her age, her education, and the decreased incidence of FGM in Senegal, specifically in Dakar, supports the immigration judge and BIA's finding that it is not more likely than not that Gomis will face persecution.
Although there is evidence in the record that tends to support Gomis' claim that if she returns to Senegal, she will face a risk of FGM, we do not find that "any reasonable adjudicator would be compelled to conclude" that she would, more likely than not, be subjected to FGM. See 8 U.S.C. § 1252(b)(4)(B). The agency's finding is supported by substantial evidence, and even if this court would be inclined to decide differently in the first instance, it must affirm under the deferential standard *361 of review. See Niang, 492 F.3d at 511 ("[W]here the `record ... plausibly could support two results: the one the IJ chose and the one [the petitioner] advances,' reversal is only appropriate where the court `find[s] that the evidence not only supports [the opposite] conclusion, but compels it.'") (quoting Balogun v. Ashcroft, 374 F.3d 492 (7th Cir.2004) (alterations in original)); Gonahasa, 181 F.3d at 541 ("[T]he possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency's finding from being supported by substantial evidence." (alteration in original) (citation and internal quotation marks omitted)).
Gomis argues that this court's decision in Haoua v. Gonzales, 472 F.3d 227 (4th Cir.2007), entitles her to relief. In Haoua, the alien, a native and citizen of Niger, petitioned for review of the BIA's affirmance of the immigration judge's denial of her application for asylum, withholding of removal, and relief under the Convention Against Torture. While the alien, Mahaman Haoua, was living in the United States, her parents arranged for her to marry the elderly chieftain of a neighboring village, accepted a large dowry as consideration for the wedding promise, and conducted the wedding in her absence. Haoua, 472 F.3d at 229-30. In accordance with the customs of the ethnic group of which Haoua was a member, her parents planned on subjecting her to FGM before she joined her husband's household. Id. The evidence adduced at Haoua's hearing showed that one in five Nigerian women undergo FGM and that certain ethnic groups still practice FGM despite a new law criminalizing it. Id. at 230. Haoua testified that her ethnic group continues to practice FGM, requiring the procedure be performed before a woman marries, and that the Nigerian government's efforts to suppress FGM have been ineffective in rural Nigeria, where her family resides. Id. The immigration judge found that Haoua had "at least a 10 percent chance" of undergoing FGM if she returned to her family in Niger. Id. The immigration judge also found, however, that Haoua could relocate within Niger, concluding that her "reasonably available internal relocation alternative overcomes the 10 percent fear of FGM at the hands of her family." Id. at 231. On that basis, the immigration judge denied Haoua's application for asylum, withholding of removal, and relief under the Convention Against Torture. Id. The BIA affirmed the immigration judge without opinion.
On appeal, we held that "the 10% finding was not supported by substantial evidence," id. at 232, noting that the 10% finding "was necessarily premised on speculation and conjecture, in that there was no evidentiary basis for it." Id. We placed considerable importance on the fact that "the Attorney General conceded this very point during oral argument, acknowledging that, contrary to the [immigration judge's] finding, if [Haoua] returned to her family, her likelihood of suffering FGM would approach 100%." Id. Even though the immigration judge had found that Haoua could relocate in Niger to avoid FGM, which was an alternative basis for denying her application for asylum, "the [immigration judge]'s finding regarding relocation was specifically predicated on the 10% finding" inasmuch as he found that Haoua's "reasonably available internal relocation alternative overcomes the 10 percent fear of FGM at the hands of her family." Id. (first emphasis added). We found it problematic that the immigration judge did not consider whether Haoua's relocation alternative could overcome a risk of FGM that was greater than 10%, in light of both the immigration judge's finding that she had "at least a 10 percent chance" of undergoing FGM if she returned to Niger *362 and the government's concession on appeal that the risk approached 100%. Id. at 232-33. Accordingly, we vacated the immigration judge's order denying her applications for asylum and withholding of removal and remanded the case to the BIA for further proceedings. Id. at 233.
Although there are factual similarities between Haoua and the case before us, the case before us is distinguishable inasmuch as there is substantial evidence to support the agency's finding that it is not more likely than not that Gomis will be subjected to FGM. In Haoua, we held that the 10% finding, on which the immigration judge based his conclusion, was speculative and not based on substantial evidence in the record, particularly in light of the government's concession at oral argument that her risk approached 100%. Here, the immigration judge's findings that there is "some small chance" that she will undergo FGM, but that "it is not ... anything close to a more likely than not chance," findings which were affirmed by the BIA, are supported by substantial evidence in the record. This finding, quite unlike the 10% finding, is not mere speculation or conjecture. As discussed above, the evidence in this record shows that the incidence of FGM in Senegal is low; that 90% of the victims of FGM in Senegal are between two and five years of age at the time of the procedure; that FGM is hardly practiced in urban areas like Dakar; and that the criminal law forbidding FGM is enforced. By contrast, Gomis is an adult, she is relatively well educated in light of her 12 years of schooling, and her family lives in Dakar.
Because the BIA's determination in this case is not manifestly contrary to law and its finding that there is not a more-likely-than-not chance that Gomis will be subjected to FGM is supported by substantial evidence, we affirm its decision to deny Gomis' application for withholding of removal.
Having rejected Gomis' arguments, we deny her petition for review and affirm the BIA's order.
PETITION DENIED
GREGORY, Circuit Judge, concurring in part and dissenting in part:
Although the majority fairly characterized the facts in this case, it errs in attempting to distinguish an indistinguishable case: Haoua v. Gonzales, 472 F.3d 227 (4th Cir.2007). In Haoua, this Court found that substantial evidence did not support the IJ's and the BIA's finding that if petitioner were sent back to her country she would have a ten percent likelihood of facing FGM. Like Gomis, the petitioner in Haoua received great pressure from her family to marry a man who had paid a dowry for her and expected her to be circumcised. As in the case at bar, Haoua's future husband was growing impatient waiting for her return. Haoua, like Gomis, was an adult woman who was well past puberty. In fact, Haoua, at forty years of age, was substantially older than Gomis. The only distinguishable fact in Haoua was that the Attorney General conceded at oral argument that if returned to her country, the likelihood of the petitioner suffering FGM would approach 100%. Although there is no such concession here, Gomis presents a mountain of evidence that clearly demonstrates that the likelihood of her being forced to undergo FGM is certainly 100%. Unfortunately, the majority repeats the erroneous analysis of the IJ and BIA in denying Gomis's petition for withholding of removal. I respectfully dissent from this portion of the opinion, but concur in the majority's judgment as to the remaining issues.
*363 I.
Like the IJ and the BIA before it, the majority incorrectly focuses on general statistics without applying the relevant information specific to Gomis's situation.[1] While the State Department's report finds that only 20% of Senegalese women have undergone FGM and that 90% of the women who had undergone the procedure were between the ages of two and five, this does not contradict Gomis's testimony that 80% to 100% of women in her specific ethnic group have undergone FGM either as a puberty rite or just before they were married. As the majority points out, Senegal has a population of over 12 million people.[2] If we estimate that half of the population is female, then at least 1.2 million women have undergone FGM in Senegal and 120,000 of those women were over the age of five when they underwent the procedure. Senegal is made up of a wide variety of ethnic groups. Gomis's ethnic group is one of the smaller ethnic groups,[3] which makes her testimonythat a large percentage of a small percentage of the population practices circumcisioneven more compatible with the State Department's report. The IJ found Gomis to be credible but discredited her testimony because of a nonexistent conflict between her stated percentages and those in the State Department's report.
The majority seems to accept the IJ's and the BIA's assertion that Gomis's age will save her from circumcision, despite the fact that her family sent her many letters while she was in her twenties indicating that they continued to insist that she be circumcised. It is clear that Gomis's age will provide no protection. Further, the logic that her urban upbringing will protect her is also fallacious. Considering that her ethnic group is largely from rural areas, her family likely adheres to deeprooted cultural practices that exist outside of her immediate family's urban location.
The majority emphasizes that "[t]he BIA stated that `while people continue to practice FGM in Senegal in rural areas, the practice of FGM is growing less common and is rare in large urban areas, and the government of Senegal has enacted laws criminalizing the practice.'" (Maj.Op. 360.) Yet, the IJ, who found Gomis credible, heard testimony that both Gomis and her brother attempted to report her parents to the authorities for their practice of FGM, and their urban area police told *364 them that it was beyond their jurisdiction, as FGM is a family affair. This testimony is not surprising. The State Department's report, which the IJ relied upon, stated that although Senegal banned FGM in 1999, since the passage of the law there have been no convictions. The report provides that "although the government has been active in seeking to eradicate the practice, we are unaware of any protection in place that might help a woman who wished to avoid it." (J.A. 225.) Additionally, the report mentions that a family was arrested for forcing a five-year-old child to undergo FGM; however, "the cases were not pursued and no convictions resulted" because of an "emotional public outcry" against the criminalization of such practices. (Id.)
It was unreasonable for the IJ to rely on the portion of the country report that says that FGM is outlawed in a country and ignore the other evidence from the report, and elsewhere, that the country in question is not enforcing such laws. See Agbor v. Gonzales, 487 F.3d 499, 504 (7th Cir. 2007) (finding that despite the fact that Cameroon officially opposed FGM and publicly endorsed the efforts of NGO to end the practice, the BIA could not "simply seize on a few `flowery bromides' of governmental concern over human rights violations when the remainder of the report describes incidents of persecution consistent with a petitioner's claim." (internal citation omitted)). Gomis has put forth a substantial amount of evidence that the Senegalese police will not help protect her from FGM despite the illegality of the practice in Senegal. Therefore, the record before this Court indicates not only that Gomis will more likely than not be forcibly circumcised, but also that she will have little recourse or hope of bringing her assailants to justice.
Next, although the majority notes that Gomis offered a letter from her father, the majority appears to miss the grave circumstances she will face should she return to Senegal. The certainty of her persecution is made clear in her father's letter dated September 20, 2006, where he wrote:
Francoise, I will advise you [in] this last letter very seriously.... I am ashamed and humiliated because of what you did to me an [sic] the entire Gomis family. You know the gravity on [sic] what you've caused. I guarantee you that you'll not get from this situation. I think all means will be necessary to bring you back in Senegal, and I mean it. You'll be circumcised and sent into marriage before my death. I will never forgive you, if you don't return to Dakar for the circumcision.
(J.A. 98.) It is difficult to understand how the majority can essentially nullify the unequivocal language in her father's letter. This is a rare case where we need not speculate on percentages. Her father clearly states, "I guarantee you that you'll not get from this situation.... You'll be circumcised and sent into marriage before my death." Therefore, if this Court found that the likelihood of Haoua suffering FGM if returned to her home country "would approach 100%," Haoua, 472 F.3d at 232 (emphasis added), then the likelihood that Gomis will be circumcised if returned to Senegal is 100%.
The IJ found Gomis credible, which means that her testimony regarding the practices of her specific ethnic group should have been properly considered, along with the abundance of evidence from her family that she will be circumcised upon her return. Only by reading the State Department's report generally, and isolating Gomis's age and urban upbringing in order to apply them blindly to the statistics presented, can one possibly conclude *365 that Gomis is unlikely to undergo FGM. To deny her withholding of removal and send her back to Senegal, to virtually certain circumcision, would be a great miscarriage of justice. If we choose to ignore the blatant evidence before us of her specific situation by shielding our eyes with general statistics, then we will be sending her to a torturous future of which I shudder to imagine. Thus, I dissent.
NOTES
[*] The population of Senegal is over 12 million people with more than 1 million living in Dakar proper and some 2.5 million living in the Dakar metropolitan area.
[1] We would be remiss if we discussed in distant legalese the underlying act, which can only be fully appreciated in plain language:
Female genital mutilation, commonly called FGM, is the designation generally given to a class of surgical procedures involving the removal of some or all of the external genitalia performed primarily on girls and young women in Africa and Asia. Often performed under unsanitary conditions with highly rudimentary instruments, FGM is extremely painful, permanently disfigures the female genitalia, [and] exposes the girl or woman to the risk of serious, potentially life-threatening complications, including bleeding, infection, urine retention, stress, shock, psychological trauma, and damage to the urethra and anus. FGM can result in the permanent loss of genital sensation in the victim and can adversely affect sexual function.
Haoua, 472 F.3d at 228 n. 5 (internal citation and quotations omitted). Where there is such a threat of permanent harma harm that also includes Gomis's real fear of exposure to HIV/AIDS-there is no room for error or speculation.
[2] The population is currently closer to 14 million, yet for the purpose of this dissent I will use the figures asserted by the majority, which likely refer to the period of Gomis's petition. See https://www.cia.gov/library/publications/the-world-fact-book/geos/sg.html (last visited May 22, 2009).
[3] Gomis's ethnic group represents only 3.7% of the population of Senegal. (Id.)
| {
"pile_set_name": "FreeLaw"
} |
FILED
NOT FOR PUBLICATION APR 11 2013
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
PROGRESSIVE WEST INSURANCE No. 11-57033
COMPANY,
D.C. No. 3:08-cv-00180-H-CAB
Plaintiff-counter-defendant -
Appellant,
MEMORANDUM *
v.
CRAIG TISCARENO; TERESA
TISCARENO,
Defendants-counter-claimants
- Appellees.
Appeal from the United States District Court
for the Southern District of California
Marilyn L. Huff, District Judge, Presiding
Submitted April 9, 2013 **
Pasadena, California
Before: BERZON, TALLMAN, and M. SMITH, Circuit Judges.
*
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).
Progressive West Insurance Company (“Progressive”) appeals from a final
judgment entered by the district court in favor of Craig Tiscareno and Teresa
Tiscareno. The district court entered judgment after a jury found, in a special
verdict, that Progressive had unreasonably failed to accept the Tiscarenos’
settlement demand. Progressive contends that the district court erred in denying its
pre-verdict motion for judgment as a matter of law, and argues that the jury’s
verdict is not supported by sufficient evidence. We have jurisdiction under 28
U.S.C. § 1291, and we affirm the district court’s judgment.
“[A] post-verdict motion under [Federal Rule of Civil Procedure] 50(b) is an
absolute prerequisite to any appeal based on insufficiency of the evidence.” Nitco
Holding Corp. v. Boujikian, 491 F.3d 1086, 1089 (9th Cir.2007); see also
Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc., 546 U.S. 394, 400–01 (2006).
Because Progressive failed to file a post-verdict Rule 50(b) motion, Progressive
has forfeited its right to challenge the jury’s verdict based on sufficiency of the
evidence. In the absence of a Rule 50(b) motion, an “appellate court [i]s without
power to direct the District Court to enter judgment contrary to the one it had
permitted to stand.” Cone v. W. Virginia Pulp & Paper Co., 330 U.S. 212, 218
(1947). As a result, we are precluded from granting the relief sought by
Progressive, entrance of judgment notwithstanding the verdict.
2
Even if we were to consider the merits of Progressive’s arguments on
appeal, we would conclude that the district court’s judgment was not erroneous as
a matter of law and the jury’s verdict was supported by sufficient evidence. There
was a legally sufficient evidentiary basis for a reasonable jury to find that
Progressive “unreasonably fail[ed] to accept a reasonable settlement demand for an
amount within the policy limits between April 16, 2007 and May 18, 2007.”
Judgment, Progressive West Ins. Co. v. Tiscareno, No. 3:08–cv–00180–H–CAB,
Dkt. No. 138 (S. D. Cal. Oct. 26, 2011); see Fed. R. Civ. P. 50(a); see also Bell v.
Clackamas Cnty., 341 F.3d 858, 865 (9th Cir. 2003).
AFFIRMED.
3
| {
"pile_set_name": "FreeLaw"
} |
524 F.Supp.2d 1057 (2007)
Henry JENKINS, Plaintiff,
v.
UNITED STATES of America, Defendant.
No. 07 C 2197.
United States District Court, N.D. Illinois, Eastern Division.
October 22, 2007.
Henry Jenkins, Lisbon, OH, Pro se.
Daniel D. Rubinstein, United States Attorney's Office, Chicago, IL, for Defendant.
MEMORANDUM OPINION AND ORDER
ELAINE E. BUCKLO, District Judge.
Petitioner Henry Jenkins pled guilty to participating in a drug conspiracy by the Black Disciple street gang in violation of 21 U.S.C. § 846 on February 25, 2005. Petitioner's plea agreement was based in part on Rule 11(c)(1)(C) and the government agreed to recommend a sentence of one-half of the low end of petitioner's applicable guideline range in exchange for his cooperation. Petitioner was sentenced to 146 months imprisonment in the Federal Bureau of Prisons, a special assessment of $100, and term of five years supervised release. Jenkins presently moves to vacate, set aside, or correct his sentence, pursuant to 28 U.S.C. § 2255. For the following reasons, his petition is denied.
I.
Petitioner raises three substantive claims in support of his petition and a request for an evidentiary hearing. All except claim one involve challenges to his sentence on grounds that he did not receive certain downward adjustments. In claim one, petitioner argues he suffered from ineffective assistance of counsel "at sentencing and during the plea negotiations." Petitioner alleges in his petition that his attorney "did not argue any issues that would help me reduce my sentence. Also, there was a conflict of interest between us concerning the issues and other members in the conspiracy." (Pet. at 6, ¶ 13.) In support petitioner provides his affidavit and a letter from his attorney, in which Jenkins claims his attorney was sent *1058 the wrong document. The affidavit does not add any allegations in support of his claim and Jenkins' alleged letter did not involve plea negotiations but was a request for his sentencing transcripts. The letter from his attorney enclosed a copy of the judgment.
II.
Petitioner's plea agreement contained a waiver of his rights to appeal and collaterally attack his sentence in a § 2255 petition. Paragraph 13 of petitioner's plea agreement reads
Defendant waives his right to challenge his sentence or the manner in which it was determined in any collateral attack, including but not limited to a motion brought under Title 28, United States Code, Section 2255. The waiver in this paragraph does not apply to a claim of involuntariness, or ineffective assistance of counsel, which relates directly to this waiver or to its negotiation.
(Govt.Resp.Ex. A, ¶ 13.) Accordingly, I may only consider petitioner's ineffective assistance claim to the extent it relates directly to his waiver or plea negotiation. See Nunez v. United States, 495 F.3d 544, 548-49 (7th Cir.2007).
Jenkins has failed sufficiently to allege any facts in support of his ineffective assistance claim. Although Jenkins provides the conclusory allegation that his counsel was ineffective during plea negotiations, he does not identify a single instance of ineffectiveness prior to his plea agreement. The closest petitioner comes to making any allegation which would support his claim is when he states that "there was a conflict of interest between us concerning the issues and other members in the conspiracy." However, this statement is too vague and conclusory and does not allow me to determine any facts that may underlie his, claim. See Galbraith v. United States, 313 F.3d 1001, 1008-09 (7th Cir. 2002); Bruce v. United States, 256 F.3d 592, 597 (7th Cir.2001). Accordingly, the petition is denied.
III.
For the foregoing reasons, Jenkins' § 2255 petition and request for an evidentiary hearing are denied.
ENTER ORDER.
| {
"pile_set_name": "FreeLaw"
} |
Order Michigan Supreme Court
Lansing, Michigan
May 22, 2020 Bridget M. McCormack,
Chief Justice
161326 & (56) David F. Viviano,
Chief Justice Pro Tem
Stephen J. Markman
Brian K. Zahra
PEOPLE OF THE STATE OF MICHIGAN, Richard H. Bernstein
Plaintiff-Appellee, Elizabeth T. Clement
Megan K. Cavanagh,
Justices
v SC: 161326
COA: 349566
Barry CC: 2018-000305-FH
JAMES ALLEN REED, JR.,
Defendant-Appellant.
_________________________________________/
On order of the Court, the motion for immediate consideration is GRANTED. The
application for leave to appeal the April 30, 2020 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.
May 22, 2020
p0519
Clerk
| {
"pile_set_name": "FreeLaw"
} |
Case: 14-15752 Date Filed: 07/16/2015 Page: 1 of 2
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 14-15752
Non-Argument Calendar
________________________
D.C. Docket No. 1:13-cr-00417-WSD-JSA-1
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
TONY MAURICE GRAVES,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
________________________
(July 16, 2015)
Before MARCUS, WILLIAM PRYOR, and ROSENBAUM, Circuit Judges.
PER CURIAM:
Case: 14-15752 Date Filed: 07/16/2015 Page: 2 of 2
Mary Erickson, appointed counsel for Tony Maurice Graves in this direct
criminal appeal, has moved to withdraw from further representation of Graves and
has filed a brief prepared pursuant to Anders v. California, 386 U.S. 738, 87 S. Ct.
1396 (1967). Our independent review of the entire record reveals that counsel’s
assessment of the relative merit of the appeal is correct. Because independent
examination of the entire record reveals no arguable issues of merit, counsel’s
motion to withdraw is GRANTED, and Graves’s conviction and sentence are
AFFIRMED.
2
| {
"pile_set_name": "FreeLaw"
} |
330 Mich. 353 (1951)
47 N.W.2d 643
MONROE
v.
BIXBY.
Docket No. 32, Calendar No. 45,057.
Supreme Court of Michigan.
Decided May 14, 1951.
Linsey, Shivel, Phelps & Vander Wal, for plaintiff.
Earl Glocheski (Robert B. Burns, of counsel), for defendant.
BOYLES, J.
Plaintiff, the owner of a house and lot on Clancy street in the city of Grand Rapids, on September 1, 1937, entered into a written land contract to sell it to her daughter, the defendant, for $4,000. $60.60[*] was paid on the purchase price and the balance of $3,039.40,[*] with interest at the rate of 6 per cent. per annum, was to be paid in monthly installments of $30 or more per month the first year, then $35 or more each month. Defendant's then husband *355 was also named as a vendee but some time later defendant and her husband were divorced and assignment of his interest in the contract was made to the defendant. Plaintiff shows that some time later defendant asked to have the monthly payments and the interest reduced. Plaintiff drew up a purported agreement which is as follows:
"AGREEMENT
"First party, Anna V. Wiley Monroe; second party, Hazel May Bixby;
"First party agrees to accept 5% interest on contract. The first party agrees to accept $30 a month payment instead of $35 a month. The first party agrees to give the second party a deed when the first party has received $2,500 from September 1, 1939.
"The second party is not to transfer the contract unless the first party agrees to the transfer.
"(S) MRS. ANNA V. WILEY MONROE
"Subscribed and sworn to before me this 5th day of November, 1940.
"(S) CATHARINE M. MAY,
"Notary Public,
"My comm. expires Nov. 23, 1940"
"(SEAL)
This paper was signed by plaintiff but not by defendant. After it was executed by the plaintiff, the defendant made monthly payments until January 25, 1950, when defendant refused to make further payments.
Plaintiff claims when the $2,500 was paid upon the contract she was to give a deed and have a mortgage to secure her for the balance of the $4,000 purchase price. Defendant claims that she was entitled to a deed after paying the $2,500 upon the contract and was under no obligation to pay the balance of the $4,000 purchase price.
When the contract showed an unpaid balance of $1,178.08, defendant refused to pay more, and plaintiff *356 filed the instant bill of complaint praying for a foreclosure of the land contract and an accounting for certain furniture. She claimed that the aforesaid "agreement" was invalid because of lack of consideration and failure to comply with the statute of frauds. After a hearing on the merits, the court entered a decree dismissing plaintiff's bill of complaint but decreeing that there was $32.08 still due her on the contract and directing plaintiff to execute a deed to defendant upon payment of that amount, as prayed for by the defendant in her cross bill. Plaintiff appeals.
Assuming that defendant's position was supported by the proofs, and that the plaintiff had agreed to accept less than the full amount of the purchase price, such an agreement must be considered as unenforceable for lack of consideration. Plaintiff's claim of $1,178.08, balance of the purchase price and interest, was a liquidated demand, and any agreement to accept less than the full amount could not be considered as a compromise and settlement of an unliquidated or doubtful claim. The defendant makes no claim of having actually given the plaintiff any consideration for said "agreement," except to claim that subsequently the defendant made improvements on the property. They were made by the defendant for her own benefit. They did not constitute a payment to the plaintiff and there was no new agreement that plaintiff should reduce the land contract payments on account of improvements made by defendant. The land contract was not assignable by the vendee without the vendor's assent, and provided that the vendee might make improvements on the premises which should remain as added security, to be forfeited as stipulated damages for nonperformance. The contract also gave plaintiff the option to declare due immediately all sums unpaid, should default in payment be made. The entire unpaid balance *357 became liquidated, due and unpaid, whereupon plaintiff filed the instant bill of foreclosure.
"Under the law in this State there is no doubt that a payment of less than the full amount of a past-due liquidated and undisputed debt, although accepted and receipted for as in full satisfaction, is only to be treated as a partial payment, and does not estop the creditor from suing for and recovering the balance." People, for use of Zeeland Brick Co., v. Fidelity & Deposit Co., 195 Mich 738.
"We have many times held that part payment of a past due, liquidated and undisputed claim, even though accepted in full satisfaction thereof, does not operate to discharge the debt but constitutes a payment pro tanto only." Aston v. Elkow, 279 Mich 232.
The purported "agreement" in this case was signed by plaintiff in 1940, hence, PA 1941, No 238 (CL 1948, § 566.1 [Stat Ann 1949 Cum Supp § 26.978 (1)]), effective January 10, 1942, does not apply.
"Prior to PA 1941, No 238 ([CL 1948, § 566.1], CLS 1945, § 13433-1, Stat Ann 1946 Cum Supp § 26.978[1]), it was settled law in this State that when the amount claimed was liquidated, a purported release for a lesser amount was without consideration and void." Thal v. Detroit Board of Education, 316 Mich 351.
We conclude that the claimed "agreement" to accept less than the amount due for principal and interest on the contract, being without consideration, was void. That being true, there is no occasion to consider the claim that it also was void because of the statute of frauds.[**]
Plaintiff claims that the defendant should pay for some furniture that plaintiff left in an apartment when plaintiff sold the place to the defendant and *358 gave possession. We have examined the record and there is an absence of any proof that the defendant either purchased or promised to pay for any furniture. CL 1948, § 608.1 (Stat Ann § 27.591), prohibits the joining of legal and equitable causes of action. The court properly held that plaintiff's cause of action for the value of the household goods could not be joined with the foreclosure suit. Peczeniuk v. Danielak, 277 Mich 151.
The decree dismissing the bill of complaint is set aside and the case remanded for further action appropriate to the foreclosure, with costs to appellant.
REID, C.J., and NORTH, DETHMERS, BUTZEL, CARR, and SHARPE, JJ., concurred with BOYLES, J. BUSHNELL, J., concurred in the result.
NOTES
[*] Apparently an error in the record.
[**] CL 1948, § 566.108 (Stat Ann § 26.908).
| {
"pile_set_name": "FreeLaw"
} |
834 F.2d 1232
10 Fed.R.Serv.3d 1, 24 Fed. R. Evid. Serv. 553
WEST WIND AFRICA LINE, LTD., Plaintiff-Appellee,v.CORPUS CHRISTI MARINE SERVICES COMPANY, and Saber PetroleumCorp., Defendants-Appellants.
No. 86-2925.
United States Court of Appeals,Fifth Circuit.
Jan. 6, 1988.
Stanley Renneker, Steve A. Bryant, Bryant & Renneker, Houston, Tex., for defendants-appellants.
Tobi A. Tabor, Royston, Rayzor, Vickery & Williams, Houston, Tex., for plaintiff-appellee.
Appeal from the United States District Court for the Southern District of Texas.
Before CLARK, Chief Judge, and GEE and RUBIN, Circuit Judges.
ALVIN B. RUBIN, Circuit Judge:
1
The M/V TRADEWIND, a vessel owned by the Westwind Africa Line, ordered fuel from Corpus Christi Marine Services and Saber Petroleum Corporation for its return voyage from Corpus Christi, Texas, to Lagos, Nigeria. Twenty hours after leaving Corpus Christi, at a time when more than 50% of the fuel source was being drawn from the Corpus Christi bunkers, the ship's pump started to malfunction. Twice the engine room crew cleaned, repaired, or replaced affected parts, but, because of the damage, the ship's operations manager, after consulting with the chief engineer, decided to divert the vessel to Tampa, Florida, to take on substitute bunkers and replenish the supply of spare parts.
2
In Tampa, the ship discharged some of the Corpus Christi bunkers and sold them to a wholesaler. Westwind sent the money received for these bunkers to Marine Services and Saber. After taking on new bunkers and extra spare parts, the M/V TRADEWIND continued its voyage to Lagos. It chemically treated the portion of Corpus Christi bunkers that had been retained and used them as fuel, but it suffered some further difficulty en route.
3
Westwind brought an action against Marine Services and Saber, alleging that the fuel loaded in Corpus Christi had caused the M/V TRADEWIND's engine problems. Marine Services and Saber filed a counterclaim seeking to recover the full contract price of the bunkers they had furnished. The district court found that the fuel provided by Marine Services and Saber was neither merchantable nor fit for its intended use. It therefore held them liable for damages to the M/V TRADEWIND based on negligence and breach of contract. The court further held that Westwind was liable to Marine Services and Saber for the price realized for the fuel it resold in Tampa, but was not liable for the fuel retained on board and consumed. The court taxed costs against Marine Services and Saber, including costs of originals and copies of several deposition transcripts; travel expenses of a court reporter who went to Sweden to transcribe a deposition; and fees, travel expenses, and subsistence for two witnesses who came to Houston to have depositions taken rather than remaining in their hometowns and having the deposing attorneys come to them.
4
On appeal, Marine Services and Saber contend that:
5
1) Westwind's action was barred by laches;
6
2) The trial court's findings of fact are conclusory and thus violate Federal Rule of Civil Procedure 52;
7
3) The trial court's findings of fact are clearly erroneous;
8
4) Two expert witnesses offered by Westwind were unqualified to testify about the subjects concerned;
9
5) The trial court erred in denying Marine Services recovery of the price of that portion of the fuel that was loaded in Corpus Christi and not off-loaded in Tampa;
10
6) The trial court abused its discretion in allowing certain items as taxable costs.
I.
11
The party who pleads laches as a defense must show not only unreasonable delay but also resultant undue prejudice.1 Marine Services and Saber contend that they were unduly prejudiced because Westwind did not arrange for a timely joint survey of the damages allegedly caused by their fuel. They assert that, by the time Westwind filed suit fourteen months after the incident, much relevant evidence was no longer available.
12
Although Westwind may not have arranged a formal joint survey, it gave Marine Services and Saber ample opportunity to protect their interests. Westwind kept them fully informed of the difficulties at sea, the damages that had been sustained on board the vessel, and the necessity for diverting the vessel to Tampa. Before the M/V TRADEWIND had reached Tampa, Southern Star Shipping, an agent for Westwind, sent a telex to Marine Services "to put you on notice and hold you responsible for any damages and/or expenses resulting to the vessel and her engines due to the quality of fuel supplied by Corpus Christi Marine at Corpus Christi." This telex described the engine problems and thus gave Marine Services and Saber adequate notice of the damage claim.
13
When the M/V TRADEWIND arrived in Tampa, a representative of Marine Services and Saber boarded the vessel to obtain samples of the fuel for analysis. The representative also examined and photographed the damaged engine parts and discussed with the chief engineer the engine problems that the vessel had encountered. The information given Marine Services and Saber afforded them both notice of the claim and ample opportunity to investigate, so they were not prejudiced by the delay thereafter in filing suit.
II.
14
The findings of fact made by the trial court do not leave us "to speculate as to the factual basis for the district court's conclusion."2 The trial court found that "the bunkers sold by [Marine Services and Saber] were not fit for their intended use through contamination, excess bottom sediment and water, and inadequate mixing of their component fluids." This single sentence expresses both the legal conclusion that the fuel was not fit for its intended use and the findings of fact on which the court based that conclusion: that the fuel was contaminated, contained excess bottom sediment and water, and contained inadequately mixed component fluids. The findings of fact adequately support the trial court's ultimate legal conclusion. The analysis behind the trial court's decision is sufficiently clear; we do not require " 'unnecessary and unhelpful recital of nonessential details of evidence.' "3
15
With regard to the evidentiary support for the district court's findings, Rule 52 declares and limits our function: we are not to decide whether we would have made the same findings, but whether on the entire evidence we are left with the definite and firm conviction that a mistake has been committed.4
16
The record contains ample evidence to support the conclusion that the Corpus Christi bunkers caused the damage to the M/V TRADEWIND. Various analyses of the fuel confirmed that it contained excessive amounts of sodium, water, particulate matter, and ash, and that the components of the fuel oil were not properly blended to provide consistent viscosities or components from fuel sample to fuel sample. Shore tanks, from which the bunkers were constituted, showed high amounts of water and solids in the form of bottom sediment. Examination of the damaged engine parts and analysis of the residue found in them indicated that salt water and particulate in the fuel damaged the engine components and caused the injector nozzles to freeze up.
17
Marine Services and Saber would have this court reweigh the evidence produced at trial. That is not our duty. We must give deference to the trial court, for it is the trial court's province to weigh the evidence and assess the credibility of witnesses.5 The trial court chose to credit the testimony offered by Westwind and accepted its version of the facts. That choice is the essence of the decisional process, and we cannot say that that decision was wrong merely because there was evidence to the contrary.
18
The trial court did, however, make one finding that requires correction. Finding of Fact 18(e) included an expense item of $2,371.40 for crew overtime in Westwind's recovery of damages. Westwind had withdrawn this expense item, so it should not have been included in the award.
III.
19
The trial court admitted the testimony of Matthew Winkler and George Glytsis, two witnesses tendered by Westwind as experts. Rule 702 of the Federal Rules of Evidence specifies that a witness may be qualified as an expert by knowledge, skill, experience, training, or education. It is the trial court's role to determine whether a witness is thus qualified. Its decision will not be disturbed on appeal unless it is manifestly erroneous.6
20
Winkler is a marine engineer and consultant, and an officer of a marine engineering company. He works with fuels, lubricants, and the relationship between those products and the power plants that use them. He is a member of various professional societies, including the American Society of Testing Materials, and is a member of various committees of ASTM, including the Marine Fuel Committee. Captain Glytsis was Operations Manager for Southern Star Shipping Company and was responsible for all operational aspects of all the vessels the company managed. He ordered the M/V TRADEWIND to divert to Tampa and therefore could testify about the necessity of the expenses incurred as a result of that deviation, including items such as port entrance fees and pilotage. He made the arrangements for and consummated the sale of the contaminated bunkers and the purchase of the new bunkers. There was ample basis for the trial court to admit the testimony of both Winkler and Glytsis.
IV.
21
Marine Services and Saber delivered 523.14 metric tons of bunkers in Corpus Christi for $91,549.50, plus transportation charges of $2,600, which included the delivery of another item. The M/V TRADEWIND sent Marine Services and Saber $65,168.80, the full amount received for the bunkers sold in Tampa. But the unsold bunkers were kept on board the M/V TRADEWIND and used on its voyage. Equity demands that Westwind pay for this remaining fuel, for Westwind received the benefit of its use.
22
Westwind argues that Customs regulations dictated that the remaining fuel be left on board. What matters, however, is not why the fuel remained on the vessel but that it was in fact used. The record, however, does not enable us readily to compute the amount retained on board and the price paid for this amount. We therefore remand the case to the district court for this computation, after receiving such additional memoranda and, if necessary, evidence, as it may find appropriate.
23
Westwind also argues that, even if it owes Marine Services and Saber the cost of the fuel consumed, it is entitled to an offset for the cost of chemicals used to treat the fuel. While the action of Westwind in treating the fuel was reasonable under the circumstances, the record does not provide a sufficient showing that the chemicals added to the fuel were necessary and useful. Without such a specific showing, we cannot allow for an offset.
V.
24
We turn to the amounts allowed as taxable costs. In Crawford Fitting Co. v. J.T. Gibbons, Inc.7 the Supreme Court held that, in cases in which there is no basis for an award of attorney's fees: 1) absent explicit statutory or contractual authorization to the contrary, courts may not tax items other than those listed in 28 U.S.C. Sec. 1920 as costs against the losing party; 2) Federal Rule of Civil Procedure 54(d) allows trial courts to refuse to tax costs otherwise allowable, but it does not give them the power to tax items not elsewhere enumerated; and 3) insofar as there are statutory limits to the amounts that may be taxed as costs, Rule 54(d) does not empower courts to exceed those limits. Because neither of the prevailing parties contends that there was contractual authorization for any of the disputed costs, the relevant question is whether there was any statutory authorization.
25
Title 28 U.S.C. Sec. 1821(a)(1),8 expressly authorizes the payment of a witness fee and a travel and subsistence allowance for attendance by a witness "before any person authorized to take his deposition." Under this authority, the district court taxed as costs the fees and allowances paid two expert witnesses for attendance at a deposition.
26
In order to attend the deposition, the witnesses travelled more than 100 miles. Although Sec. 1821(c)(4) authorizes the taxation of "[a]ll normal travel expenses within and outside the judicial district," many courts have not allowed travel expenses for witnesses who travel more than 100 miles9 on the basis that, because a district court cannot use its subpoena power to compel a witness to travel more than 100 miles, a party who persuades witnesses to do so by paying their transportation expenses should not be able to tax those expenses to his adversary.10
27
The statute contains no such limitation. Section 1821(c)(4) expressly states that "travel expenses within and outside the judicial district shall be taxable as costs...." (emphasis added). When the deposition of a witness who resides more than 100 miles outside the district must be taken, the lawyers must choose either to travel to the witness or to induce the witness to travel to the district. The witness's willingness to make the trip reduces litigation expenses, even if it increases taxable costs.
28
In Farmer v. Arabian American Oil Co.,11 the Court, in considering the taxation of the cost of transporting witnesses from Saudi Arabia to the United States, refused to "accept either the extreme position ... that the old 100-mile rule has no validity for any purpose or [the] argument that a federal district court can never under any circumstances tax as costs expenses for transporting witnesses more than 100 miles." While it affirmed the district court's exercise of discretion in refusing to allow that expense, it stated that Rule 54(d) "quite plainly" vests some power in the court to allow such costs. As we have previously held, the allowance of expenses for travelling a distance in excess of one hundred miles is to be determined by trial courts using their usual sound discretion.12 In doing so, the trial court should consider the length of the journey, the necessity of the testimony, and the possibility of averting that expense. In this case, considering the necessity of the testimony of these witnesses and the expense saved by having them come to the lawyers rather than requiring the lawyers to go to them, we cannot say that the district judge abused his discretion.
29
Westwind also seeks to tax the the cost of transporting a local court reporter to Sweden to transcribe the deposition of one of Westwind's witnesses. Section 1920 permits recovery only of the court reporter's fee for a transcript, not of the reporter's travel expenses. No other statutory provision defines court reporter's fees as including travel expenses in the way that Sec. 1821 defines the amount allowed for the fees and expenses of witnesses. Accordingly, this item should have been disallowed.
30
Although Sec. 1920 does not specifically mention depositions,13 a number of courts have interpreted Sec. 1920(2), which refers to "fees of the court reporter" and Sec. 1920(4), which refers to "fees for exemplification and copies of papers necessarily obtained for use in [a] case," to authorize taxing the costs of deposition originals and deposition copies.14 In United States v. Kolesar,15 this court held that the cost of a deposition copy was taxable as a matter of statutory construction under Sec. 1920(4),16 if the copy was necessarily obtained for use in the case.17 The trial judge is particularly qualified to decide whether a copy is necessary,18 and we reverse such a determination only for abuse of discretion. Gibbons limits judicial discretion with regard to the kind of expenses that may be recovered as costs; it does not, however, prevent courts from interpreting the meaning of the phrases used in Sec. 1920.
31
The trial court awarded Westwind the costs of making copies of three depositions. The originals of two of those depositions were made part of the trial record and the copies were therefore necessary for use by Westwind during trial. Westwind expected that the third deposition would be made a part of the trial record and the copy would be used at trial. Under these circumstances, we cannot say that it was an abuse of discretion to award costs for the deposition copies. Accordingly, the cost of the deposition copies was properly taxed.
32
To summarize, Marine Services and Saber are entitled to:
33
reduction of $2,371.40 for crew overtime in the damages the district court mistakenly awarded Westwind;
34
reduction in damages for the value of the fuel used by the M/V TRADEWIND on its voyage from Tampa to Lagos;
35
reduction of the costs by $1,814.00, the cost of the court reporter's travel to Sweden.
36
The case is remanded for further proceedings consistent with this opinion.
1
See, e.g., Mecom v. Levingston Shipbuilding Co., 622 F.2d 1209 (5th Cir.1980); Esso Int'l, Inc. v. SS Captain John, 443 F.2d 1144 (5th Cir.1971)
2
Salinas v. Roadway Express, Inc., 735 F.2d 1574, 1578 (5th Cir.1984)
3
Golf City, Inc. v. Wilson Sporting Goods Co., 555 F.2d 426, 433 (5th Cir.1977) (quoting 9 C. Wright & A. Miller, Federal Practice and Procedure 2579, at 711 (1971))
4
United States v. United States Gypsum, 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948)
5
See, e.g., Pavlides v. Galveston Yacht Basin, Inc., 727 F.2d 330 (5th Cir.1984); Harrison v. Flota Mercante Grancolombiana, S.A., 577 F.2d 968 (5th Cir.1978)
6
Holmes v. J. Ray McDermott & Co., 734 F.2d 1110, 1115 (5th Cir.1984); Perkins v. Volkswagen of Am., Inc., 596 F.2d 681, 682 (5th Cir.1979)
7
--- U.S. ----, 107 S.Ct. 2494, 96 L.Ed.2d 385 (1987)
8
(a)(1) Except as otherwise provided by law, a witness in attendance at any court of the United States ... or before any person authorized to take his deposition pursuant to any rule or order of a court of the United States, shall be paid the fees and allowances provided by this section
9
See, e.g., Linneman Constr. Inc. v. Montana-Dakota Util. Co., 504 F.2d 1365 (8th Cir.1974); Sperry Rand Corp. v. A-T-O, Inc., 58 F.R.D. 132 (E.D.Va.1973)
10
See Farmer v. Arabian Am. Oil Co., 379 U.S. 227, 85 S.Ct. 411, 13 L.Ed.2d 248 (1964)
11
Id
12
See, e.g., Goodwin Bros. Leasing, Inc. v. Citizens Bank, 587 F.2d 730 (5th Cir.1979)
13
1920 reads as follows:
A judge or clerk of any court of the United States may tax as costs the following:
(1) Fees of the clerk and marshal;
(2) Fees of the court reporter for all or any part of the stenographic transcript necessarily obtained for use in the case;
(3) Fees and disbursements for printing and witnesses;
(4) Fees for exemplification and copies of papers necessarily obtained for use in the case;
(5) Docket fees under section 1923 of this title;
(6) Compensation of court appointed experts, compensation of interpreters, and salaries, fees, expenses, and costs of special interpretation services under section 1828 of this title.
14
See J. Moore, W. Taggart & J. Wicker, 6 Moore's Federal Practice 54.77 (2d ed. 1987)
15
313 F.2d 835 (5th Cir.1963)
16
Id. at 838-39
17
See, e.g., Studiengesellschaft Kohle mbH v. Eastman Kodak Co., 713 F.2d 128 (5th Cir.1983); SCA Servs., Inc. v. Lucky Stores, 599 F.2d 178 (7th Cir.1979); Kolesar, 313 F.2d 835 (5th Cir.1963)
18
Kolesar, 313 F.2d at 840
| {
"pile_set_name": "FreeLaw"
} |
67 So.3d 201 (2011)
THE FLORIDA BAR
v.
FERRER ROO (JULIO).
No. SC10-2183.
Supreme Court of Florida.
July 1, 2011.
DECISION WITHOUT PUBLISHED OPINION
Suspended.
| {
"pile_set_name": "FreeLaw"
} |
34 Ill. App.3d 815 (1975)
341 N.E.2d 59
MANUEL LEE LOPEZ et al., Plaintiffs-Appellees,
v.
GIBSON GALEENER et al., Defendants-Appellants.
No. 74-382.
Illinois Appellate Court Fifth District.
December 22, 1975.
*816 Burton C. Bernard, of Bernard & Davidson, of Granite City (G. Gordon Burroughs, of Burroughs, Simpson and Wilson, of counsel), for appellants.
C.E. Heiligenstein, of Belleville, for appellees.
Judgment affirmed.
Mr. JUSTICE GEORGE J. MORAN delivered the opinion of the court:
The defendants, Gibson Galeener and Lawrence Hess, appeal from a judgment of the circuit court of Madison County which was entered upon a jury verdict that was rendered in favor of the plaintiffs, Richard Schuette and the administrator of Douglas Lopez's estate. The defendants request a judgment notwithstanding the verdict, or in the alternative, a new trial.
The critical issue in this appeal is whether Richard Schuette and Douglas Lopez were engaged in the line of their duty as employees of Gibson Galeener when they were injured in an automobile accident, so that they were precluded from recovering from the defendants on the theory of common law tort liability by section 5(a) of the Workmen's Compensation Act (Ill. Rev. Stat. 1969, ch. 48, par. 138.5(a)), which states in pertinent part:
"No common law or statutory right to recover damages from the employer * * * for injury or death sustained by any employee while engaged in the line of his duty as such employee, other than the compensation herein provided, is available to any employee who is covered by the provisions of this Act, * * * the legal representatives of his estate, or any one otherwise entitled to recover damages for such injury."
The facts were as follows. Gibson Galeener operated a feed store in St. Jacob, Illinois, and a poultry farm which was about one and one-half miles north of St. Jacob. Galeener employed one or two young men steadily to help him in the operation of his feed store and poultry farm. Lawrence Hess was one of Galeener's steady employees. Galeener also employed several young men on a part-time basis.
In April of 1970, Galeener gave part-time jobs to Douglas Lopez and Richard Schuette. Lopez and Schuette were hired to shovel the droppings from beneath the chicken cages on Galeener's poultry farm. At his feed store in town, Galeener provided a shower room where the young men who did this kind of work could change their clothes. On the afternoon of April 14, 1970, Lopez and Schuette went to Galeener's feed store after school. They arrived at the feed store about 2:45. Two other young men who worked for Galeener, Jeff Straube and Lawrence Hess, were also present in the feed store. Lopez and Schuette changed their clothes, and *817 Straube and Hess loaded Galeener's station wagon with sacks of feed. Hess, Lopez, and Schuette left together in the station wagon and headed for Galeener's poultry farm north of town.
On the way to the poultry farm, the young men stopped at Bloomer's Cafe in St. Jacob. They remained in the cafe about 20 minutes, drinking soda and talking with their friends. After they left the cafe, Hess drove the station wagon on the road that led north out of town. Schuette road in the middle of the front seat, and Lopez sat on the right in the front seat of the automobile. The road on which Hess drove the station wagon crossed a railroad track and U.S. 40 on the north side of St. Jacob. As the station wagon approached the railroad track, the crossing gate began to go down. Hess swerved the station wagon to miss the crossing gate, and then approached the intersection of the road with U.S. 40. At the intersection Hess had a stop sign. Whether he stopped at the stop sign is not clear. He drove the station wagon into the intersection, where it was hit by an automobile traveling west on U.S. 40. The west-bound automobile was being driven by Michael Mickle. Lopez was killed in the collision and Schuette was injured. These facts were not disputed.
There was contradictory evidence concerning the nature of the employment of Lopez and Schuette. Schuette indicated in his testimony that he and Lopez were not required to report at the feed store in town before beginning their work on the poultry farm north of town. Schuette and Lopez had worked for Galeener for only four days before the accident. Schuette testified that on one or two of those days he went straight to the poultry farm from school without stopping at the feed store. Schuette testified that he had no duties to perform at the feed store and that his only job was to shovel the droppings from beneath the chicken cages on the poultry farm. Schuette said that when he and Lopez did go by the feed store, their pay did not begin until they reached the poultry farm. Moreover, Schuette testified that Hess had told him that Galeener did not mind if the young men stopped at the cafe on the way to the poultry farm because they were on their own time when they stopped.
The testimony of Jeff Straube corroborated Schuette's testimony in several respects. Straube said that Lopez and Schuette had reported directly to the poultry farm rather than to the feed store on one or two occasions. Straube said that the young men had talked to Galeener and that Galeener had said that it was permissible for them to stop at the cafe on their way to the poultry farm.
The testimony of Gibson Galeener and his wife, Ruby Galeener, disagreed with the testimony of Straube and Schuette. The Galeeners said that the young men were always supposed to report to the feed store *818 before beginning their work on the poultry farm. They said that this was necessary in order for Ruby Galeener to keep track of the hours that the young men worked. The Galeeners said that the young men were paid from the time they reported to the feed store until the time that they returned to the feed store from the poultry farm. The Galeeners testified that they did not know about the visit that the young men paid to the cafe in St. Jacob. The Galeeners said that they had not authorized the young men to stop at the cafe.
Schuette and the administrator of Douglas Lopez's estate sued Hess and Mickle on the theory that Hess and Mickle had negligently caused the collision of the automobiles. Because Hess was Gibson Galeener's employee, Schuette and the administrator of Douglas Lopez's estate sued Gibson Galeener on the theory of respondeat superior. The defense raised by Galeener and Hess was that Schuette and Lopez were injured in the line of their duty as employees of Galeener, and that they were therefore prevented by section 5(a) of the Workmen's Compensation Act from recovering from the defendants on a theory of common law tort liability.
The case was tried before a jury in the circuit court of Madison County. A special interrogatory was submitted to the jury which required the jury to state whether Schuette and Lopez were in the line of their duty as employees of Gibson Galeener at the time of the accident. The jury answered the special interrogatory "No" and awarded damages against Galeener and Hess to both Schuette and the administrator of Douglas Lopez's estate. The jury also found that Mickle had not been negligent. A judgment was entered in accordance with the jury's verdict.
Galeener and Hess appeal from the circuit court's denial of their post-trial motion and ask for a judgment notwithstanding the verdict on the ground that the evidence proved, as a matter of law, that they had a valid defense based upon section 5(a) of the Workmen's Compensation Act. Galeener and Hess also request a new trial on the grounds that the counsel for Schuette and the administrator of Douglas Lopez's estate made prejudicial remarks in the course of his closing argument and improperly told the jury how to answer the special interrogatory, and thereby deprived the defendants of a fair trial.
1 A circuit court should grant a motion for a judgment notwithstanding the verdict only in those cases in which all of the evidence, when viewed in its aspect most favorable to the opponent of the motion, so overwhelmingly favors the movant that no contrary verdict based upon that evidence could ever stand. (Pedrick v. Peoria & Eastern R.R. Co., 37 Ill.2d 494, 229 N.E.2d 504.) Moreover, when a defendant asserts that *819 a plaintiff's action is barred by section 5(a) of the Workmen's Compensation Act, the defendant has the burden of persuading the trier of fact that the plaintiff was engaged in the line of his duty as an employee at the time he was injured. Meador v. City of Salem, 51 Ill.2d 572, 284 N.E.2d 266.
The evidence in this case must therefore be viewed in the light most favorable to Schuette and Lopez. Viewing the evidence most favorably to Schuette and Lopez requires that the testimony of Straube and Schuette be believed instead of the testimony of Gibson Galeener and Ruby Galeener. The testimony of Straube and Schuette indicated that when Schuette and Lopez were working for Galeener they were not required to report at the feed store in town before going to the poultry farm, and that they could go directly to the poultry farm from school if they chose to do so. The testimony of Straube and Schuette further indicated that Schuette and Lopez were paid only for the time that they worked on the poultry farm, and that they were not paid for the time spent traveling from the feed store in town to the poultry farm. The testimony of Straube and Schuette also indicated that Gibson Galeener knew of the stops that the young men made at the cafe in town and that he had given them his permission to stop on the basis that their pay would not begin until they reached the poultry farm and commenced working there. The question is whether this view of the evidence so overwhelmingly proves that Schuette and Lopez were engaged in the line of their duty to Galeener at the time of the accident that the verdict of the jury that Schuette and Lopez were not engaged in the line of their duty could never stand.
2, 3 A general rule has been developed in workmen's compensation cases that accidents that occur while an employee is going to or from his place of employment do not arise out of and in the course of his employment and are therefore not compensable. The reason is that the employee's trip to and from work is the product of his own decision as to where he wants to live, a matter in which his employer ordinarily has no interest. (Browne v. Industrial Com., 38 Ill.2d 193, 230 N.E.2d 181; Sjostrom v. Sproule, 33 Ill.2d 40, 210 N.E.2d 209.) An exception to this rule has been recognized by the Illinois Supreme Court, which is that an employee will be considered to have been engaged in the line of his duty even while going to or coming from work if the course or method of his travel was determined by the demands or exigencies of his job rather than by his own personal preferences as to where he desired to live. (See Sjostrom v. Sproule.) The defendants, Galeener and Hess, have argued that the travel of Schuette and Lopez from the feed store to the poultry farm was occasioned by the demands or exigencies of their employment with Galeener. The evidence, when viewed most favorably to plaintiffs *820 shows they were not required by their employment to go to the feed store, and that they were not required by their employment to travel from the feed store to the poultry farm. The most that can be said about the relationship of Schuette and Lopez to the feed store is that Schuette and Lopez could go to the feed store to change their clothes if they desired to do so. This certainly does not overwhelmingly prove that the presence of Schuette and Lopez at the feed store or that the traveling by Schuette and Lopez from the feed store to the poultry farm was brought about by the demands or exigencies of the employment. The verdict of the jury that Schuette and Lopez were not engaged in the line of their duty at the time of the accident was therefore supported by the evidence. The defendants, Galeener and Hess, are not entitled to a judgment notwithstanding the verdict.
Galeener and Hess also ask for a new trial because of certain remarks that were made by the counsel for Schuette and the administrator of Douglas Lopez's estate in his closing argument. The defendants object to a statement that was made by the plaintiffs' counsel that the inapplicability of the section 5(a) defense under the Workmen's Compensation Act was shown by the fact that the medical and funeral bills of the family of Douglas Lopez had not been paid by workmen's compensation insurance. The defendants also object to a statement by the plaintiffs' counsel in his closing argument that the defendants' section 5(a) defense under the Workmen's Compensation Act was "a bunch of bunk," and to the suggestion that the plaintiffs' counsel made in his closing argument that the jury answer the special interrogatory "No" in order to award damages to Schuette and the administrator of Douglas Lopez's estate. The defendants objected to the comment about the medical and funeral bills during the course of the closing argument of the plaintiffs' counsel. Their objection was sustained and the jury was told to disregard the remark. The defendants did not object during the course of the closing argument to the other comments that they now assert were objectionable. In their post-trial motion, the defendants asked for a new trial on the ground that the remark of the plaintiffs' counsel about the medical and funeral bills not being paid by workmen's compensation insurance was prejudicial. The post-trial motion did not include any reference to the "bunch of bunk" remark or to the suggestion concerning the appropriate finding on the special interrogatory. These latter contentions were, therefore, waived by the defendants, Galeener and Hess, and cannot be considered as a basis for granting a new trial. Lindsey v. Dean Evans Co., 11 Ill. App.3d 432, 297 N.E.2d 8.
The circuit court rejected the defendants' argument that the comment about the medical and funeral bills by the plaintiffs' counsel had prejudiced *821 the defendants, and, consequently, denied the defendants' motion for a new trial. The decision on the question whether conduct by counsel for one party has prejudiced opposing parties rests within the sound discretion of the circuit court and will not be disturbed unless the circuit court has clearly abused its discretion in making its decision. This is because the circuit court is in the unique position of hearing all the testimony, all the arguments, and of observing the parties, their counsel, and the effect of all this on the jury. Martin v. Kralis Poultry Co., 12 Ill. App.3d 453, 297 N.E.2d 610.
4 Because the defendant's objection to the comment about the medical and funeral bills was immediately sustained by the court during the closing argument of the plaintiffs' counsel, and because the jury was told to disregard the comment, the court did not abuse its discretion by deciding on the post-trial motion that the remark had not prejudiced the defendants. A new trial should therefore not be granted on the basis of this remark by the plaintiffs' counsel.
For the foregoing reasons the judgment of the circuit court of Madison County is affirmed.
Judgment affirmed.
EBERSPACHER and KARNS, JJ., concur.
| {
"pile_set_name": "FreeLaw"
} |
359 F.2d 149
Edgar W. DAWSON, Appellant,v.C. C. PEYTON, Superintendent of the Virginia State Penitentiary, Appellee.
No. 10313.
United States Court of Appeals Fourth Circuit.
Argued February 10, 1966.
Decided April 8, 1966.
1
R. Larry Lambert, Norfolk, Va. (Court-assigned counsel), (Preston & Preston, Norfolk, Va., on brief), for appellant.
2
Reno S. Harp, III, Asst. Atty. Gen. of Virginia (Robert Y. Button, Atty. Gen. of Virginia, on brief), for appellee.
3
Before SOBELOFF and BELL, Circuit Judges, and HUTCHESON, District Judge.
4
STERLING HUTCHESON, District Judge.
5
This is a petition for habeas corpus filed in forma pauperis in the District Court at Norfolk by Petitioner who is an inmate of the Virginia State Penitentiary. Petitioner complains of a conviction in the Circuit Court of Greene County, Virginia on September 18, 1961. He alleges that he was arrested and placed in jail without a warrant, that he was not apprehended at the scene of the crime; that he was held incommunicado, that he was not allowed to communicate with his relatives, that he was interrogated "to the extreme" and not allowed to call an attorney. He alleges further that two weeks later he was given a preliminary hearing and allowed counsel; that he did not again see this attorney until after his conviction. When he was brought to trial his attorney did not appear; he alleges that the court refused to continue the trial until his personally employed attorney was present and appointed an attorney to represent Petitioner within the same hour he was convicted. It was further alleged that court appointed counsel was not on friendly terms with Petitioner's father, which fact counsel made known to him; that Petitioner was abused and cursed by the last mentioned attorney who did not say one word in behalf of Petitioner. It is further contended that upon his arrest, Petitioner's automobile was seized and confiscated along with radio, gun and other properties belonging to him; that he was not compensated for those items and they were not returned to him. So much for the allegations set forth in the petition which was filed pro se and verified.
6
Petitioner has heretofore applied for a writ of habeas corpus in the Circuit Court of Greene County which was denied. Upon appeal, the Supreme Court of Appeals of Virginia reversed the Circuit Court, following which there was a hearing in that Court on March 21, 1963 when the writ was again denied. Thereupon, this application was filed on October 6, 1964 in the United States District Court at Norfolk, before which a hearing was held on July 1, 1965, when Petitioner was present with counsel appointed by the District Court. Transcript of the proceedings before the Circuit Court of Greene County and the United States District Court at Norfolk were filed as parts of the record.
7
These transcripts reveal facts strikingly at variance with the allegations contained in the petition. The witnesses at both hearings consisted of Petitioner, his parents and David F. Berry, Esquire, of Madison, Virginia, counsel appointed by the Circuit Court of Greene County to represent Petitioner, who also maintains an office for the practice of law at Standardsville, the county seat of Greene County.
8
From that testimony, the following pertinent facts emerge. Petitioner and three other individuals were charged with breaking and entering two business establishments in Greene County, Virginia on the 18th and 26th of June, 1961 respectively and of the larceny of certain personal property. They were confined in the Albemarle County jail at Charlottesville until the morning of the trial. These offenses were a part of a series of such activities on the part of Petitioner and his associates, including acts in Albemarle County. An attorney in Charlottesville had been retained to represent Petitioner in connection with charges pending in Albemarle County.
9
On the morning of the trial, the Honorable C. Champion Bowles, Judge of the 9th Judicial Circuit who resides in Goochland, was sitting in Greene by designation in the absence of Honorable Lyttleton Waddell of Charlottesville, Judge of the Circuit Court of Albemarle, Madison and Greene Counties. Judge Bowles appointed Mr. Berry to represent all the defendants. After making inquiry, Mr. Berry realized there would be a conflict of interest. He reported this to the Court who thereupon appointed other counsel for the other defendants. Mr. Berry discussed the case with the Petitioner in the conference room of the court. He talked with the Sheriff of Greene County and with Petitioner's parents. He interviewed the other defendants and after that interview talked with Petitioner and the other defendants as a group.
10
Briefly stated, the story revealed was that at the time of the breaking and entering, the defendants were together travelling in Petitioner's automobile. They decided as a group to break into these premises and they divided the stolen goods, some of which were later seized in possession of Petitioner and others in his automobile. Petitioner informed Mr. Berry that his participation was caused by threats made against him by one of the co-defendants and as a result he was coerced into committing the acts. He would not make this charge in the presence of the other defendants but contended that he had trouble with his car and while he was making repairs the other defendants committed the offense.
11
One of Petitioner's parents had told Mr. Berry that Petitioner stated that he was held at gun point in connection with the breaking and entering but Petitioner denied this in talking with Mr. Berry and contended in a general way that he had been threatened over a period of time. Mr. Berry called to Petitioner's attention that he had made untrue statements to either him or to his parents and he recommended that petitioner file a plea of guilty and request leniency. Petitioner insisted upon entering a plea of not guilty. Such plea was entered and the case was heard before Judge Bowles without a jury. It is contended that certain witnesses should have been called but by the evidence it is shown that Petitioner's purpose in suggesting they be called was to prove his reputation. Mr. Berry was aware of the fact that Petitioner had been convicted of grand larceny in 1948 and for breaking and entering in 1956 and again in 1956 for simple assault against his mother-in-law and his wife. In view of this he realized that the introduction of character evidence would be highly damaging and he wisely decided to submit the case to Judge Bowles who presumably was unaware of these facts. It was also his wise decision to try the case on that day since nothing could be gained by a continuance.
12
The other defendants pleaded guilty and all defendants testified. In his summation, Judge Bowles expressed the opinion that Petitioner was the ring-leader and imposed upon him a heavier sentence than upon the co-defendants.
13
One final word with reference to the criticism of court appointed counsel. It is revealed by the record that Mr. Berry had represented Petitioner in a previous similar case in Madison County and that he had had some contacts with his parents principally, Petitioner's father. The elder Dawson testified somewhat vaguely concerning an alleged argument with Mr. Berry in regard to the release in 1960 of a deed of trust in which Mr. Berry was trustee. Mr. Berry recalled that in October, 1960 he was called upon to obtain releases of some 12 or 15 obligations of Mr. Dawson, there was some delay caused by difficulty in obtaining necessary papers and he recalled some conversation with Mr. Dawson but there was no disagreement about it of any kind. Mr. Berry had been a practicing attorney of Madison and Greene Counties, both of which have small populations, engaged in general practice over a period of about 11 years. Naturally he was familiar with the background, including the prior convictions of Petitioner along with those of the co-defendants. It is clear that he used sound judgment in his conduct of the case. He examined the witnesses and he sought leniency for his client.
14
The facts of this case have been exhaustively explored by both the Circuit Court of Greene County and the United States District Court. No material variance occurs in the proof offered, although, as pointed out, there is a striking variance between the allegations of the petition and the facts developed at these hearings.
15
It is clear that the judges of both these courts have reached the correct conclusion.
16
The judgment of the District Court is affirmed.
17
Affirmed.
| {
"pile_set_name": "FreeLaw"
} |
Order issued August 18, 2016
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-16-00251-CV
———————————
LAURA ZARAGOZA RODRIGUEZ DE REYES, ET AL., Appellants
V.
EVANGELINA LOPEZ GUZMAN ZARAGOZA, Appellee
On Appeal from the 245th District Court
Harris County, Texas
Trial Court Case No. 2014-30215
MEMORANDUM ORDER
Laura Zaragoza Rodriguez de Reyes, an appellant in this case, has filed an
unopposed motion to dismiss her individual appeal. We grant the motion and dismiss
the appeal filed by Laura Zaragoza Rodriguez de Reyes. See TEX. R. APP. P.
42.1(a)(1). The appeals of all other appellants remain pending.
PER CURIAM
Panel consists of Chief Justice Radack and Justices Bland and Lloyd.
2
| {
"pile_set_name": "FreeLaw"
} |
T.C. Summary Opinion 2007-33
UNITED STATES TAX COURT
MARC PERKEL, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 5619-04S. Filed March 5, 2007.
Marc Perkel, pro se.
Catherine G. Chang, for respondent.
DEAN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code as in
effect at the time the petition was filed. Unless otherwise
indicated, subsequent section references are to the Internal
Revenue Code of 1986, as amended, and all Rule references are to
the Tax Court Rules of Practice and Procedure. The decision to
be entered is not reviewable by any other court, and this opinion
should not be cited as authority.
- 2 -
The petition in this case was filed in response to a Notice
of Determination Concerning Collection Action(s) Under Section
6320 and/or 6330 (Notice of Determination). Pursuant to sections
6320(c) and 6330(d), petitioner seeks review of respondent's
filing of a Notice of Federal Tax Lien (NFTL) for his tax
liability for 1998. This case is now before the Court on
respondent’s motion for summary judgment under Rule 121.
Background
At the time the petition in this case was filed, petitioner
resided in San Bruno, California.
Respondent issued to petitioner a Final Notice of Intent to
Levy on June 18, 2002, for his 1998 tax liability. On June 20,
2002, respondent issued to petitioner a Notice of Federal Tax
Lien Filing And Your Right To A Hearing Under IRC 6320 for 1997
and 1998. Petitioner’s Form 12153, Request for a Collection Due
Process Hearing, concerning 1998 was filed July 31, 2002, and was
timely as to the filing of the NFTL but was not timely as to the
proposed levy action.
Petitioner’s hearing was conducted by way of written and
oral communications between the Appeals officer and petitioner’s
representative. Although petitioner’s representative submitted
two versions of Form 433-A, Collection Information Statement for
Wage Earners and Self-Employed Individuals, to the Appeals
officer, in April and October 2003, the representative never
- 3 -
submitted a Form 656, Offer In Compromise (OIC). The Appeals
officer notified petitioner and his representative that
additional information was required for approval of an OIC, but
petitioner and his representative continued to fail to provide
it.
On March 9, 2004, respondent issued to petitioner both a
Decision Letter Concerning Equivalent Hearing Under Section 6320
and/or 6330 (Decision Letter) with respect to the proposed levy,
and the Notice Of Determination with respect to the NFTL, both of
which upheld respondent’s collection actions.
Petitioner filed his petition in this case as a result of
the Appeals Office approval of respondent’s collection actions.
Attached to the petition is a copy of the Decision Letter and a
copy of the Notice of Determination concerning 1998. Petitioner
objects to respondent’s filing of the NFTL, in paragraph 4 of the
petition, because he has proposed an “offer and compromise” as an
alternative to the “levy”.
On October 15, 2004, a Notice Setting Case For Trial was
issued, and this case was set for trial in January of 2005. On
December 6, 2004, respondent filed a motion for continuance of
trial. Respondent alleged in the motion that petitioner had
informed respondent on December 2, 2004, that petitioner had been
unaware that his OIC was incomplete. Respondent further alleged
that petitioner had offered to file the necessary information for
- 4 -
an OIC to resolve his outstanding tax liabilities. On the same
date as his motion for continuance, respondent filed a motion for
remand. Both motions were granted by the Court.
Respondent’s status report, filed March 7, 2005, reported
that as of the date of the report, no OIC had been submitted to
respondent. Attached to the report is a copy of a letter from
petitioner to respondent in which petitioner suggests that “it
would be better to include the 2004 year in the offer” and
asking: “Can you give me some more time?”. Respondent’s status
report requested an additional 30 days to “settle” the case. By
Order dated April 8, 2005, the Court granted an additional 30
days for the parties to discuss settlement. The Order also
required the filing of a status report on or before April 29,
2005, specifically stating whether petitioner had yet submitted
an OIC.
Petitioner sent to the Court a letter dated April 21, 2005,
in which he stated that “I am still gathering information to
finish my 2004 filings.” Respondent’s status report received and
filed May 4, 2005, reported: (a) Petitioner’s representative
sent to the Appeals officer considering petitioner’s case an
electronic facsimile of Form 656 that did not include Form 433-A;
(b) as of the date of the report, no signed original Form 656 had
been submitted; and (c) no Federal income tax return for 2004 had
been filed. Respondent once again requested an additional 30
- 5 -
days in which to attempt to settle the case. The Court on May 5,
2005, granted respondent’s request and ordered the parties to
file status reports by May 31, 2005.
The Court on May 10, 2005, received petitioner’s letter
dated April 28, 2005, in which he stated: “On April 14th I was
rushed to file a crudely and quickly assembled offer in
compromise in which I offered $15,000 to settle the outstanding
debt.” According to petitioner’s letter, he was still “in the
process” of filing his Federal income tax return for 2004.
Another letter was received by the Court from petitioner on May
24, 2005, in which he alleged that he had filed his 2004 income
tax return, completed all the forms for his OIC, and had paid his
filing fee for the OIC.
Prior to the Court’s receipt of those letters, respondent
issued on May 5, 2005, a Supplemental Notice Of Determination
Concerning Collection Action(s) Under Section 6320 and/or 6330
sustaining respondent’s collection action.
In respondent’s status report to the Court dated May 31,
2005, respondent acknowledges receiving, on or about May 20,
2005, an OIC package from petitioner with supporting
documentation and a $150 processing fee. Respondent’s report
requested guidance from the Court on how to proceed.
By Order dated June 2, 2005, the Court restored the case to
the general docket for trial or other disposition. The case was
- 6 -
subsequently set for trial at the San Francisco, California,
trial session beginning October 31, 2005. By Order dated October
25, 2005, however, the case was again continued subject to
further direction of the Court.
In respondent’s status report filed December 28, 2005, he
represented that while petitioner’s OIC package was
“processable”, it was incomplete; additional financial
information would be requested. By Order dated January 3, 2006,
the Court restored the case to the general docket.
Respondent’s motion for summary judgment was filed on May
15, 2006. On May 22, 2006, petitioner filed what the Court
styled as a motion for remand. Among the attachments to the
motion is a letter from respondent to petitioner dated January
19, 2006, advising petitioner that his OIC is incomplete and
advising petitioner of the items that he should submit. Also
attached to petitioner’s motion is a letter from petitioner to
respondent dated March 29, 2006, in which petitioner apologized
for his late response to respondent’s letter of January 19, 2006.
By notice dated March 22, 2006, the case was again set for
trial at the San Francisco trial session beginning June 12, 2006.
By Court Order, petitioner’s motion for remand and respondent’s
motion for summary judgment were set for hearing at the Trial
Session scheduled for June 12, 2006.
At the hearing on June 12, 2006, respondent alleged that
- 7 -
petitioner had continued to fail to produce all the information
needed to determine if petitioner is entitled to an OIC. In
response, petitioner stated that he had “one more document to
present”. When queried by the Court as to what that might be, he
replied: “It’s my latest offer and compromise.” Petitioner also
argued that he is disputing the underlying tax because he
disagrees with, apparently, the assessed accuracy-related
penalty.
The Court denied petitioner’s motion for remand, took
respondent’s motion under advisement, and allowed petitioner 30
days in which to submit a response to respondent’s motion that
would show the Court that there is a material issue for trial.
Discussion
Respondent reasons that because the only issue that
petitioner raised at the hearing under sections 6320 and 6330 was
with respect to an alternative collection method, an OIC, the
requirements for which were never fulfilled, respondent is
entitled to a ruling in his favor as a matter of law.
Petitioner’s argument now appears to be focused on disputing
the underlying tax liability.
Summary Judgment
The standard for granting a motion for summary judgment
under Rule 121 is stated in paragraph (b) of the Rule as follows:
- 8 -
A decision shall * * * be rendered if the pleadings,
answers to interrogatories, depositions, admissions,
and any other acceptable materials, together with the
affidavits, if any, show that there is no genuine issue
as to any material fact and that a decision may be
rendered as a matter of law. * * *
The moving party has the burden of showing the absence of a
genuine issue as to any material fact. See Espinoza v.
Commissioner, 78 T.C. 412, 416 (1982) (and cases cited therein).
The evidence of the nonmovant is to be considered in the
light most favorable to him, and all justifiable inferences are
to be drawn in his favor. Adickes v. S.H. Kress & Co., 398 U.S.
144, 158-159 (1970). There is, however, no issue for trial
unless there is sufficient evidence for the finder of fact to
find in favor of the nonmoving party. First Natl. Bank of Ariz.
v. Cities Serv. Co., 391 U.S. 253, 288-289 (1968). The
nonmovant’s evidence must be more than merely colorable.
Dombrowski v. Eastland, 387 U.S. 82, 84 (1967) (per curiam). If
the nonmovant’s evidence is not significantly probative, summary
judgment may be granted. First Natl. Bank of Ariz. v. Cities
Serv. Co., supra at 290.
Contesting Collection Action
Section 6321 imposes a lien in favor of the United States
upon all property and rights to property of a person where there
exists a failure to pay any tax liability after demand for
payment. The lien generally arises when the assessment is made.
Sec. 6322.
- 9 -
Section 6320 entitles a person to notice of his right to
request a hearing after a notice of lien is filed by the
Commissioner in furtherance of the collection from the person of
unpaid Federal taxes. If one is requested, the administrative
hearing is before the Appeals Office of the Internal Revenue
Service. Sec. 6330(b)(1). The person requesting the hearing may
raise any relevant issue with regard to the Commissioner’s
intended collection activities, including spousal defenses,
challenges to the appropriateness of the Commissioner’s intended
collection action, and alternative means of collection. Secs.
6320(b) and (c); 6330(c); see Sego v. Commissioner, 114 T.C. 604,
609 (2000); Goza v. Commissioner, 114 T.C. 176, 180 (2000).
Section 6330(c)(2)(B) provides that the existence or the
amount of the underlying tax liability can be contested at an
Appeals Office hearing if the person did not receive a notice of
deficiency or did not otherwise have an earlier opportunity to
dispute such tax liability. Sego v. Commissioner, supra; Goza v.
Commissioner, supra at 180-181.
Petitioner’s Current Argument
The disagreement expressed by petitioner at the June 12,
2006, hearing, and in his subsequently filed response to
respondent’s motion, appears to concern the applicability of the
accuracy-related penalty. Because petitioner self-assessed his
tax for the year at issue, no statutory notice of deficiency was
- 10 -
issued. See sec. 6201(a)(1). Petitioner therefore could have
challenged the existence or amount of the underlying tax
liability, including any penalty,1 during the Appeals Office
hearing. Petitioner, however, did not do so, and he is
accordingly precluded from challenging the underlying tax
liability in this proceeding. Sec. 301.6320-1(f)(2), Q&A-F5,
Proced. & Admin. Regs.; see Miller v. Commissioner, 115 T.C. 582,
589 n.2 (2000), affd. 21 Fed. Appx. 160 (4th Cir. 2001); Magana
v. Commissioner, 118 T.C. 488, 493-494 (2002); see also sec.
301.6330-1(f)(2), Q&A-F5, Proced. & Admin. Regs.
Petitioner’s Alternative to Collection
The only issue petitioner raised at the hearing and in his
petition was his desire for respondent’s acceptance of an OIC as
an alternative to the “levy”. A petition for review of a
collection action must clearly specify the errors alleged to have
been committed in the notice of determination. Rule 331(b)(4).
Any issues not raised in the assignments of error are deemed to
be conceded by petitioner. Rule 331(b)(4); see Goza v.
Commissioner, supra at 183; see also Lunsford v. Commissioner,
117 T.C. 183, 185-186 (2001).
Under section 7122, the Secretary is authorized to
compromise civil or criminal tax liabilities. An offer to
1
The assessed tax liability includes any additions to tax.
Sec. 6201(a); sec. 301.6201-1(a), Proced. & Admin. Regs.
- 11 -
compromise a tax liability must be submitted according to the
procedures and in the form and manner described by the
Commissioner. Sec. 301.7122-1(d)(1), Proced. & Admin. Regs. The
offer must contain all of the information prescribed or requested
by the Commissioner. Id.
It is notable that petitioner has not denied that he has
failed to provide all the necessary information for consideration
of his OIC and in fact offered to the Court at the June 12, 2006,
hearing his “latest” OIC. The Court finds that petitioner did
not offer to Appeals an alternative means of collection. See
Chandler v. Commissioner, T.C. Memo. 2005-99; AllGlass Sys., Inc.
v. Commissioner, 330 F. Supp. 2d 540, 547 (E.D. Pa. 2004).
In the absence of a valid issue for review, the Court
concludes that respondent is entitled to judgment as a matter of
law sustaining the notice of determination dated March 9, 2004.
Respondent’s determination to proceed with collection action was
not an abuse of discretion. The Court will grant respondent’s
motion for summary judgment.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
An appropriate order and
decision will be entered.
| {
"pile_set_name": "FreeLaw"
} |
CAROLINA PRIDE CARWASH, INC., Plaintiff,
v.
TIM KENDRICK, Defendant.
No. COA04-451
North Carolina Court of Appeals
Filed September 20, 2005
This case not for publication
Person County No. 02 CVS 12.
Ramsey, Ramsey & Long, by James E. Ramsey, for plaintiff-appellee.
Holt, Longest, Wall & Blaetz, P.L.L.C., by Frank A. Longest, Jr., for defendant-appellant.
CALABRIA, Judge.
Tim Kendrick ("defendant") appeals from summary judgment entered in favor of Carolina Pride Carwash, Inc. ("Carolina Pride") for breach of an employment contract. We reverse and remand for entry of summary judgment in favor of defendant.
Carolina Pride is a car wash maintenance provider and distributor of car wash equipment and supplies. Carolina Pride employs approximately forty-five people and operates in North Carolina, South Carolina, and the southern half of Virginia, east of the Blue Ridge Parkway. In late 1999, Carolina Pride was negotiating for the purchase of PDQ Carolina ("PDQ"), a car wash equipment distributor, where defendant was employed as a service technician earning approximately $15.00 per hour. On 20 December 1999, defendant met with the president of Carolina Pride and entered into an employment contract. The contract provided that Carolina Pride would pay defendant $500.00 after signing, employ him beginning in January 2000 as a service technician at $15.00 per hour, and pay him a $1,000.00 bonus after one year of employment. The sixth and seventh provisions of the contract contained a covenant not to compete and a provision for liquidated damages:
SIXTH: [Defendant] hereby agrees and guarantees to [Carolina Pride], that during the term of this contract and for three years after termination of this contract, [defendant] will not on his own account or as agent, employee or servant of any other person, firm or corporation engage in or become financially interested in the same line of business or any other line of business which could reasonably be considered as being in competition with [Carolina Pride] within North Carolina, South Carolina, or Virginia to-wit: Carwash sales and service of equipment, supplies, parts and any and all related merchandise; and further, that during this period, [defendant] will not directly or indirectly or by aid to others, do anything which would tend to divert from [Carolina Pride] any trade or business with any customer with whom [defendant] has made contracts or associations during the period of time in which he is employed by [Carolina Pride].
SEVENTH: That in the event [defendant] violates the provision of the preceding paragraphs, then [Carolina Pride] shall be entitled to liquidated damages in the amount of $50,000.00 to be paid by [defendant] to [Carolina Pride].
In March 2000, defendant started employment as a technician with Carolina Pride and served customers predominantly in North Carolina and occasionally in South Carolina. The following year, in 2001, defendant left Carolina Pride's employ and took a position with Water Works Management Company, L.L.C. ("Water Works") as manager of repair, maintenance, and supply for several of their car wash facilities in Greensboro, Mt. Airy, Elkin, and Boone.
In January 2002, Carolina Pride filed suit alleging defendant interfered with its customer relationships in violation of the covenant not to compete. In the spring of 2002, Water Works discharged defendant due to Carolina Pride's lawsuit. Defendant answered Carolina Pride's complaint and included counterclaims for the following: (1) fraud; (2) negligent misrepresentation; (3) unfair and deceptive trade practices; and (4) wrongful or tortious interference with business relations.
Both defendant and Carolina Pride subsequently moved for summary judgment, and on 17 October 2003, the trial court granted Carolina Pride's motion based on defendant's alleged breach of the covenant not to compete. In addition, the trial court ordered that defendant pay $50,000.00 in liquidated damages.
Defendant assigns error to the trial court's denial of his motion for summary judgment and grant of Carolina Pride's motion for summary judgment. Defendant argues the covenant not to compete was unenforceable as a matter of law because the time and territorial restrictions of the covenant were unreasonable. We agree, under these facts, that the time and territorial restrictions were greater than reasonably necessary to protect Carolina Pride's legitimate interests. Summary judgment is appropriate where there is no genuine issue of material fact and a party is entitled to judgment as a matter of law. Robinson, Bradshaw & Hinson, P.A. v. Smith, 129 N.C. App. 305, 314, 498 S.E.2d 841, 848 (1998). See also N.C. Gen. Stat. § 1A-1, Rule 56(c) (2003). The moving party "bears the burden of showing either that (1) an essential element of the non-movant's claim is nonexistent; (2) the non-movant is unable to produce evidence which supports an essential element of its claim; or, (3) the non-movant cannot overcome affirmative defenses raised in contravention of its claims." Anderson v. Demolition Dynamics, Inc., 136 N.C. App. 603, 605, 525 S.E.2d 471, 472 (2000). When ruling on a motion for summary judgment the evidence must be "viewed in the light most favorable to the nonmoving party." Combs & Assocs. v. Kennedy, 147 N.C. App. 362, 368, 555 S.E.2d 634, 639 (2001).
"[A] covenant not to compete is valid and enforceable if it is `(1) in writing; (2) reasonable as to terms, time, and territory; (3) made a part of the employment contract; (4) based on valuable consideration; and (5) not against public policy.'" Precision Walls, Inc. v. Servie, 152 N.C. App. 630, 636, 568 S.E.2d 267, 272 (2002) (quoting Triangle Leasing Co. v. McMahon, 327 N.C. 224, 228, 393 S.E.2d 854, 857 (1990)). Whether the terms, time, and territory are reasonable is a matter of law and reviewable de novo. See Beasley v. Banks, 90 N.C. App. 458, 460, 368 S.E.2d 885, 886 (1988). "In evaluating reasonableness as to time and territory restrictions, we must consider each element in tandem[.]" Farr Assocs., Inc. v. Baskin, 138 N.C. App. 276, 280, 530 S.E.2d 878, 881 (2000). "Although either the time or the territory restriction, standing alone, may be reasonable, the combined effect of the two may be unreasonable. A longer period of time is acceptable where the geographic restriction is relatively small, and vice versa." Id.
A central purpose of a covenant not to compete is the protection of an employer's customer relationships. Hartman v. W.H. Odell & Assocs., Inc., 117 N.C. App. 307, 312, 450 S.E.2d 912, 917 (1994). Therefore, to prove that a covenant's territorial restriction is reasonable, "an employer must . . . show where its customers are located and that the geographic scope of the covenant is necessary to maintain those customer relationships." Id. "Furthermore, in determining the reasonableness of [a] territorial restriction[], when the primary concern is the employee's knowledge of customers, the territory should only be limited to areas in which the employee made contacts during the period of his employment." Manpower of Guilford County, Inc. v. Hedgecock, 42 N.C. App. 515, 522, 257 S.E.2d 109, 114-15 (1979). "If the territory is too broad, `the entire covenant fails since equity will neither enforce nor reform an overreaching and unreasonable covenant.'" Hartman, 117 N.C. App. at 312, 450 S.E.2d at 917 (quoting Beasley, 90 N.C. App. at 460, 368 S.E.2d at 886). Accordingly, taking the evidence in the light most favorable to Carolina Pride, we review de novo the covenant's provisions concerning time and territory. In the instant case, the covenant not to compete applied to all areas of North Carolina, South Carolina, and Virginia for a term of three years. However, the president of Carolina Pride testified that Carolina Pride's territory included North Carolina, South Carolina, and "the lower half of Virginia east of the Blue Ridge Parkway." Therefore, by including all of Virginia, the territorial restriction of the covenant encompassed a greater region than necessary to protect Carolina Pride's legitimate interest in maintaining its customer relationships. Moreover, while employed by Carolina Pride, defendant only contacted customers in North and South Carolina but never in Virginia. Therefore, the covenant was unreasonable not only for encompassing a greater region than necessary but also for encompassing any portion of Virginia because defendant never contacted customers in that state while employed by Carolina Pride. Additionally, although the covenant's three-year time period may be valid standing alone, it was unreasonable in this case when coupled with the unnecessarily broad territorial restriction. Accordingly, we hold the covenant not to compete was unenforceable as a matter of law, and the trial court erred by entering summary judgment for Carolina Pride and failing to enter summary judgment for defendant with respect to Carolina Pride's breach of contract claim. We likewise reverse that portion of the trial court's order requiring defendant to pay liquidated damages and remand the case to the trial court for further proceedings not inconsistent with this opinion. Reversed and remanded.
Judges HUNTER and LEVINSON concur.
Report per Rule 30(e).
| {
"pile_set_name": "FreeLaw"
} |
Filed 1/16/15 P. v. Kelly CA3
NOT TO BE PUBLISHED
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
THIRD APPELLATE DISTRICT
(San Joaquin)
----
THE PEOPLE, C074486
Plaintiff and Respondent, (Super. Ct. No. SF084590A)
v.
JOSEPH FREDERICK KELLY,
Defendant and Appellant.
Defendant Joseph Frederick Kelly appeals from an order denying a petition
to recall his so-called “three strikes” sentence of 25 years to life, brought pursuant to
the provisions of the Three Strikes Reform Act of 2012, codified at Penal Code
section 1170.126.1 (See Teal v. Superior Court (2014) 60 Cal.4th 595.)
Defendant’s petition to recall his sentence and for resentencing was denied,
defendant having admitted personally using or being armed with a deadly weapon in the
1 Undesignated statutory references are to the Penal Code.
1
course of the commitment offense. (See §§ 667, subd. (e)(2)(C)(iii), 1170.12,
subd. (c)(2)(C)(iii), 1170.126, subd. (e)(2).)
Counsel was appointed to represent defendant on appeal. Counsel filed an
opening brief setting forth the facts of the case and requesting this court to review the
record and determine whether there are any arguable issues on appeal. (People v. Wende
(1979) 25 Cal.3d 436.) Counsel advised defendant of his right to file a supplemental
brief within 30 days of the date of filing of the opening brief.
Defendant timely filed a supplemental brief, arguing first that there was not
substantial evidence that the knife was used as a weapon. Having admitted the weapons
enhancement, defendant is precluded from denying the knife was a deadly weapon.
(People v. Voit (2011) 200 Cal.App.4th 1353, 1364.) Defendant’s other argument is that
the weapons enhancement had been stricken at the time he waived preliminary hearing.
However, the information was thereafter amended to again include the weapons
enhancement at the time of plea, when the robbery charge was reduced to grand theft, and
defendant then admitted the weapons enhancement.
Having undertaken an examination of the entire record, we find no arguable error
that would result in a disposition more favorable to defendant.
DISPOSITION
The judgment (order) is affirmed.
RAYE , P. J.
We concur:
BLEASE , J.
NICHOLSON , J.
2
| {
"pile_set_name": "FreeLaw"
} |
People v Gustavo-Cano (2017 NY Slip Op 03193)
People v Gustavo-Cano
2017 NY Slip Op 03193
Decided on April 26, 2017
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 April 26, 2017
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
RANDALL T. ENG, P.J.
L. PRISCILLA HALL
SHERI S. ROMAN
SYLVIA O. HINDS-RADIX, JJ.
2015-10339
(Ind. No. 14-00259)
[*1]The People of the State of New York, respondent,
vJose Gustavo-Cano, appellant.
Gary E. Eisenberg, New City, NY, for appellant.
Thomas P. Zugibe, District Attorney, New City, NY (Itamar J. Yeger of counsel), for respondent.
DECISION & ORDER
Appeal by the defendant from a judgment of the Supreme Court, Rockland County (Kelly, J.), rendered March 18, 2015, convicting him of attempted assault in the second degree, upon his plea of guilty, and imposing sentence.
ORDERED that the judgment is affirmed.
The defendant's contention that the Supreme Court failed to inform him of the immigration consequences of his plea of guilty is unpreserved for appellate review (see People v Peque, 22 NY3d 168, 183; People v Stewart, 142 AD3d 629, 629; People v Egbunike, 133 AD3d 776, 777; People v DiPietro, 115 AD3d 977). In any event, the record reveals that the court advised the defendant of the possibility that he might be deported as a result of his plea of guilty (see People v Martial, 125 AD3d 688, 689; People v Taveras, 123 AD3d 745, 745; People v DiPietro, 115 AD3d at 977).
Inasmuch as the record does not conclusively demonstrate whether the defendant's counsel advised him of the immigration consequences of his plea of guilty, the defendant's contention that his counsel was ineffective for failing to do so cannot be resolved without reference to matter outside the record. Accordingly, a CPL 440.10 proceeding is the appropriate forum for reviewing the defendant's ineffective assistance of counsel claim in its entirety (see People v Taveras, 123 AD3d at 745-746; People v Rodriguez, 115 AD3d 884; People v Drammeh, 100 AD3d 650, 651).
ENG, P.J., HALL, ROMAN and HINDS-RADIX, JJ., concur.
ENTER:
Aprilanne Agostino
Clerk of the Court
| {
"pile_set_name": "FreeLaw"
} |
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 98-50209
Summary Calendar
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
VERSUS
VERONICA MARTINEZ,
Defendant-Appellant.
- - - - - - - - - -
Appeal from the United States District Court
for the Western District of Texas
USDC No. W-97-CV-157
USDC No. W-88-CR-130-2
- - - - - - - - - -
May 17, 2000
Before DAVIS, EMILIO M. GARZA, and DENNIS, Circuit Judges.
PER CURIAM:*
Veronica Martinez appeals the district court’s dismissal of
her 28 U.S.C. § 2255 motion to vacate her sentence. Initially, the
district court dismissed Martinez’s § 2255 motion as successive.
After Martinez filed her notice of appeal from that dismissal, she
sought a certificate of appealability from the district court.
Apparently believing that it retained jurisdiction over the case
and that it had erred in earlier dismissing Martinez’s § 2255
motion, the district court denied the COA motion without prejudice
and vacated its earlier order dismissing Martinez’s § 2255 motion
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
No. 98-50209
-2-
as successive. (The court evidently construed Martinez’s COA
application as a motion for Fed. R. Civ. P. 60(b) relief.) In the
same order, the court directed the Government to file an answer to
Martinez’s § 2255 motion within 60 days. After considering the
arguments of both parties, and denying Martinez’s request to amend
her § 2255 motion, the court denied and dismissed Martinez’s § 2255
motion a second time.
Meanwhile, this court was considering Martinez’s motion to
dismiss her appeal. This court construed it as a motion to remand
the case to the district court for consideration of a Fed. R. Civ.
P. 60(b) motion, and granted it, albeit months after the district
court had purportedly granted such relief, and two days after the
district court’s second dismissal of Martinez’s § 2255 motion.
Martinez timely filed a notice of appeal from the second denial of
§ 2255 relief, and this court granted COA as to two issues, one of
which was whether the district court retained jurisdiction over the
case after Martinez filed her first notice of appeal on July 8,
1997, and whether the district court’s actions after that date were
void.
We now hold that the district court lacked jurisdiction to
grant a Rule 60(b) motion after Martinez filed her notice of appeal
on July 8, 1997. Creations Unlimited, Inc. v. McCain, 112 F.3d
814, 816-17 (5th Cir. 1997). Accordingly, all actions, orders, and
judgments by the district court since the filing of Martinez’s
first notice of appeal on July 8, 1997, are void. See Winchester
v. United States Atty. for Southern Dist. of Texas, 68 F.3d 947,
948-49 (5th Cir. 1995). This case is hereby REMANDED and the
No. 98-50209
-3-
district court is instructed to either reenter its order striking
Martinez’s proposed amendment and its judgment dismissing
Martinez’s § 2255 motion, or again set up a briefing schedule to
reconsider the pleadings before it.
Martinez is advised that in order to appeal, she must file a
new notice of appeal from whatever action is taken by the district
court.
REMANDED WITH INSTRUCTIONS.
| {
"pile_set_name": "FreeLaw"
} |
Filed 10/30/13 P. v. Lowder CA3
NOT TO BE PUBLISHED
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
THIRD APPELLATE DISTRICT
(Sacramento)
----
THE PEOPLE, C070831
Plaintiff and Respondent, (Super. Ct. No. 09F03901)
v.
TIMOTHY LOWDER,
Defendant and Appellant.
Two juries each convicted defendant Timothy Lowder of two counts of lewd acts
against a child under the age of 14, and the second jury sustained a multiple-victim
allegation. (Pen. Code, §§ 288, subd. (a), 667.61, former subd. (e)(5) [now subd. (e)(4)].)
The trial court sentenced defendant to prison for an unstayed term of 38 years to life, and
defendant timely appealed.
On appeal, defendant raises a number of claims of evidentiary error, challenges
one instruction, and also challenges certain monetary impositions. Finding no error, we
shall affirm the judgment.
1
FACTUAL AND PROCEDURAL BACKGROUND
The first jury convicted defendant of two lewd act counts against M., defendant’s
niece, but deadlocked on two lewd act counts involving L., defendant’s daughter, and a
mistrial was declared as to those counts. The second jury convicted defendant of two
lewd act counts against L., and sustained the multiple-victim allegation.
The evidence at the two trials largely overlapped. We first will describe the
evidence from the first trial. We will not repeat substantially similar evidence introduced
at the second trial, but instead describe the material differences at that second trial.
First Trial
L.
L., defendant’s daughter, was born in 2001 and was nine at the time of trial. On
Christmas Eve or the night of Christmas, when she was seven and after her parents were
divorced, defendant visited the family home and spent the night. While her mother and
brother were asleep, L. was on the couch with defendant in the living room, watching
television. Defendant touched her “private part” with his hand, under a blanket (count I).
She told him to stop and moved to a chair. Defendant sat in the chair and touched her
private part again, over her clothes (count II). She again told him to stop, and she went to
bed. When she was about four or five, she was watching a movie on the couch and
defendant accidentally touched her “privates” over her clothes, when he was rubbing her
belly. She finally told her mother about the incidents because, “I was just hurting inside,
because I don’t like keeping secrets.”
L.’s prior statements
On April 13, 2009, Detective Mims monitored an interview of L. at the “SAFE
Center,” referring to “Special Assault Forensic Evaluation.” A recording of this
2
interview was played for the jury.1 L. said defendant touched her “inside the wrong
place[,]” and first did it by accident while “he was just trying to rub my belly, but the
second time he did it on purpose.” This second incident had been at Christmas, and she
had told him to stop “and then he [kept] on doing it again and again.” Contrary to her
trial testimony, she said he first touched her in the swivel chair, and then touched her on
the couch, but then she said, “Actually, first it was on the couch and then I moved to the
swirly chair and then he went to the swirly chair and he [kept] on touching me in the
wrong place and I said, ‘Stop it,’ and he [kept] on doing it and then I just said, ‘Good
night.’” She again said it started on the chair, but later repeatedly said it started on the
couch. He touched her over her pajamas, multiple times because she would try to move
his hand away and he would put his hand back on her.
L.’s mother Anne-Marie
On March 13, 2009, L. told her mother that defendant “had touched her privates”
when she was four, before Anne-Marie and defendant had divorced. Anne-Marie asked
L. if it could have been an accident, but L. “was very adamant and said, ‘No.’” L. cupped
her hands over her vagina to show where defendant had touched her, and at one point L.
covered her face with her hands. A couple of days later, L. mentioned the Christmas
incident. When Anne-Marie asked L. why she had waited to say anything “she cried and
said, ‘Because I didn’t want to get Daddy in trouble, and I didn’t want Daddy to go to
jail.’” Anne-Marie called defendant around March 14 or 15, 2009, and told him L. had
said he touched her privates, and he did not deny the allegation, instead, “[t]here was a
long silence on the phone, and then he said, ‘Wow. Whoa. Wow.’” When defendant
called sometime later to ask when he could see his children and when they could discuss
________________________________________________________________
1 Various recordings introduced at the two trials are not in the appellate record. Because
the parties quote from written transcripts of the recordings used at trial, which are in the
record, and do not contend they are inaccurate, we, too, quote from those transcripts.
3
L.’s claims, he did not deny the claims, but “begged me and told me that he would go get
help[,]” and said he did not think L. would lie about such a matter. Anne-Marie had
noticed that L. had been less “enthusiastic to see” defendant before then.
Later, Anne-Marie initiated a recorded pretext telephone call to defendant. In that
call, defendant said he did not remember why he did “anything” and did not know what
happened, but “all I can think of is it was in a drunken stupor, and I didn’t know what the
fuck I was doing.” He admitted he did not think L. would lie about this, and then said he
was tickling her, “And then I was like, ‘Whoa, sorry.’ And I was touching her chest, and
I didn’t mean to. And I was like whoa.” When Anne-Marie referred to an incident when
defendant videotaped “Kara” “and zoomed in an out of her behind[,]” and then asked
defendant about M., defendant said, “That was when I was like 17 or something like that.
I told you about that. I told you I had talked about that with M., and I tried to work that
out. And I was wrong.” He then referenced abuse he had suffered and stated “I just was
trying to pass on the shame. . . . And it wasn’t right.” When asked if he touched L.’s
vagina, he could not remember, but then admitted that, “A couple of years ago, I think I
was grabbing her on her inner thigh, and I was like whoa, and I tried -- and I backed off.
But I don’t know what happened.” Defendant promised to obtain counseling.
At trial, Anne-Marie explained that Kara was a 13-year-old former next-door
neighbor, and Anne-Marie had found a videotape defendant had shot in which he “was
zooming in and out on her bottom.” Later, after defendant had the camera, Anne-Marie
tried to play the tape back but “I got snow.” In 2008, defendant stayed at Anne-Marie’s
house for several days around Christmas. Although he drank Christmas Day and passed
out in the early afternoon, by the time she and her son went to bed at about 9:30 p.m.,
he was not drunk, and he and L. were still awake.
Cheyenne
Cheyenne was born in 1980, and when she was between 12 and 14, defendant had
been her mother’s boyfriend. When she was about 13, when defendant was telling her a
4
story and brushing her hair “he kind of just kind of kept going down, and then he just
kind of rested his hand on my backside for awhile. I just had a kind of a weird feeling, so
I just kind of pretended I was asleep, and then he left.” He rested his hand on her
backside, over her clothing, for “two minutes.” Sometimes when he would hug
Cheyenne or her sister, “he’d make it so he could put his hands kind of on our chest.”
She told her mother about the brushing incident the next day and defendant left “probably
that night or the next day,” but eventually came back.
Detective Carol Mims
Detective Mims spoke with M. on the telephone on April 16, 2009, and M. “was
emotional[,]” and she spoke with M. in person on May 7, 2009.
Detective Mims interrogated defendant on April 29, 2009, and a videorecording
was played for the jury. Defendant said he was “mortified” and “pretty sad” about the
fact his daughter said he touched her inappropriately, and he could not figure out what
could have happened to cause her to say so, though he admitted to alcohol blackouts.
He conceded he had touched L. on the chest while cuddling with her and rubbing her, and
that she had given him a “weird” look which caused him to stop. He did not remember
touching her vagina, as she had reported. He admitted he had had “other issues” with
teenage girls, including Kara, who was about 14: Around 1997 or 1998, he had been
videotaping the children playing ball, but his wife “felt like I was zooming in on Kara[,]”
on her breasts. He also mentioned that when he was possibly not quite 18 but maybe
while in his 20’s, there was an incident with M., but “we’ve worked it out. We talked
about it.” In this incident, when M. was about eight or nine, they were wrestling, he got
aroused, as did she, and she rubbed his penis under his pants until he ejaculated. Both
apologized for what happened, and they were “close after that still.” Defendant claimed
M. started it, and wanted to straddle him and rub her vagina on him. “It was exhilarating,
but it wasn’t -- I don’t know. There was a lot of shame afterwards.” When Detective
Mims explained that M. had described defendant putting his finger in her vagina,
5
defendant said he had never done that. Defendant had a girlfriend (Lisa) who had two
daughters, and once defendant was brushing the hair of the older daughter, who was 12 or
13, when she became upset, apparently because defendant told her she was beautiful.
When told that Cheyenne had reported he had “touched her butt on the outside of her
clothing[,]” defendant replied, “Um. I don’t think it was intentional.” He conceded Lisa
was distraught about the incident and he had to leave. When Detective Mims stated that
defendant had a history, “in that you get aroused by younger girls.” Defendant replied:
“To a point, yeah.” But he denied being aroused by his own daughter, continued to deny
remembering doing anything to her, but agreed he needed therapy and asked if the
detective had “any references as far as counselors or therapists that would be good for
me?” When Detective Mims later repeated that defendant was aroused by younger girls,
defendant said, “I’ve tried to deal with that over the years.” He was “nodding in
agreement” when she said he was aroused by young girls.
M.
M., born in 1983, was defendant’s niece. When she was about four or five, she
was visiting defendant, in the bed with him, when he touched her vagina under her
clothing, but did not penetrate her vagina. She did not report this, “Because I didn’t want
him to get in trouble.” When she was about seven or eight, at the American River,
defendant tried to get her to go into the bushes with him, and rubbed her back and
“behind area” over her clothing, but defendant got scared when M.’s brother rode by on a
bicycle. M. did not report this incident because she thought it was not important. When
M. was about 13, at defendant’s apartment, lying on his bed, he came in and put his hand
on her vagina, under her clothes, for about four or five minutes, and moved his hand
around, but did not penetrate her vagina (count III). M. didn’t say anything because she
was scared. Then he took her hand and made her feel his “hard” penis on the outside of
his clothing, and moved her hand around, just “for a couple of seconds,” until M.’s
brother came in the room (count IV). When she was 13 or 14, at the apartment defendant
6
shared with Anne-Marie, when she was standing in the computer room, defendant
“placed his hand on my butt” and moved it around, stating, “I wish that I could be with
you.” When asked why she continued to be in defendant’s presence after he molested
her, M. testified she loved him, he was her uncle, and he had been her only consistent
male role model. However, she also testified she was scared to report him and hated him
at the same time she loved him. After the last incident, when she was 15, M.’s mother
sent her to live with defendant and Anne-Marie in Oregon for several months, and she did
not tell her mother about what had happened because she did not want defendant to get
into trouble, but did tell her mother she did not want to live there. She had no memory of
an alleged incident (as described by defendant in his statement to Detective Mims) when
she was about eight in which she was wrestling with defendant and she rubbed his penis.
Defendant
Defendant claimed that at the time of his police interrogation, he was depressed,
possibly suicidal, and had been drinking heavily and using methamphetamine. He
claimed he was rubbing L.’s stomach while they watched TV, she looked at him and he
realized his hand “had lingered at her chest,” so he apologized. He never intentionally
touched her vaginal area. He had no sexual interest in his daughter, or in other young
girls. He never intentionally touched Cheyenne’s buttocks. He denied any incident with
M. when she was three or four, and denied a sexual interest in her. The incident he
described to Detective Mims in which he ejaculated as he wrestled with M. happened
when she was about five or six (not eight, as he had said before) and was “quite
disgusting.” He admitted it was “exhilarating” at the time, as he had told Detective
Mims, and claimed that was the issue on which he requested a referral to a counselor.
He denied the incident M. described at the American River. He claimed he denied
touching L. inappropriately when Anne-Marie first called him to ask about it. He
claimed Kara, aged 13, had been infatuated with him, which he found flattering. He
denied zooming in and out on Kara’s breasts when he videotaped Kara.
7
The first jury convicted defendant of the two counts involving M., but deadlocked
on the counts involving L., and the trial court declared a mistrial on those counts.
Second Trial
The principal differences at the second trial were that the second trial judge
admitted additional uncharged act evidence regarding Destiny and evidence that
defendant made sexual modifications to Barbie dolls that the first trial judge had
excluded, M. did not testify (but the parties stipulated that defendant had been convicted
of molesting her), and an expert testified about Child Sexual Abuse Accommodation
Syndrome (CSAAS).
Anne-Marie
Anne-Marie testified at the second trial consistent with her earlier testimony. She
also testified that she had purchased Barbie dolls for L.’s birthday, they went missing,
and Anne-Marie found them in February or March of 2007, in a work shed, with added
nipples, “Areolas that looked very realistic[,]” and vaginas and labia. Barbie dolls do not
come with such features.2
In the second trial, a longer version of the pretext call Anne-Marie made to
defendant was played for the jury. In the newly admitted portions on the call, Anne-
Marie referenced “the dolls that [defendant] mutilated and created vaginas out of them,
and then Destiny.” Defendant said, “the dolls had nothing to do with anything” and that
Destiny “was trying to hump my foot.” He claimed he did not know they were his
daughter’s dolls, and claimed he found them in the shed, or in the back room. He
claimed the dolls were not “about the kids” and he “was tweaking out of my fucking
mind and bored.”
________________________________________________________________
2 Contrary to some indications in the appellate record, the parties assume that the actual
dolls were not admitted into evidence, and that only color pictures of them were
introduced at trial. We need not resolve the point, because it makes no difference to our
analysis.
8
To “give context” to that portion of the pretext call, Anne-Marie testified that
Destiny was an eight-year-old neighbor who had told Anne-Marie about inappropriate
touching by defendant, and M. had also told Anne-Marie about inappropriate touching by
defendant. Anne-Marie also testified L. told her she waited to reveal the abuse because
she did not want defendant “getting mad at me and I didn’t want daddy to get in trouble
and go to jail.”
L.’s grandmother
L.’s grandmother testified L. told her defendant had touched her privates over her
clothes, she had “told him no” and moved to the swivel chair, but defendant followed her
there, touched her again, and she again said to stop, and left the room.
L.
L. testified that during the Christmas incident, defendant touched her first on the
couch and then on the chair, and long before there was an incident when he accidentally
touched her privates when he was rubbing her belly.
Detective Mims
Detective Mims’s testimony was largely consistent with the first trial. More parts
of her recorded interrogation of defendant were played for the jury than at the first trial.
In particular, defendant discussed Destiny, about age eight, “humping” his foot more than
once. He denied the dolls had anything do with children, claiming he had been trying to
get Anne-Marie interested in a hobby. He thought he “did a great job. And I wish I
could get the damn Barbie just so I could see if I could sell it on EBay.” He made
“nipples on her and made a vagina out of like this rubber stuff” “basically just seeing if
I could do it.”
Cheyenne
Cheyenne’s testimony at the second trial was largely consistent with the first trial.
9
Dr. Anthony Urquiza
Dr. Urquiza was a psychologist who ran a child abuse treatment program at UC
Davis Medical Center, and a professor in the pediatrics department. He had testified as
an expert in CSAAS “probably a little over” 200 times, mostly for the prosecution.
CSAAS was a teaching tool for therapists treating sexually abused children, not a
diagnostic tool to determine if abuse has occurred. He knew nothing about the facts of
this case.
CSAAS has five components: (1) secrecy, (2) helplessness, (3) entrapment and
accommodation, (4) delayed and unconvincing disclosure, and (5) retraction (not an issue
in this case, as L. did not retract her testimony). Secrecy refers to the fact that in most
child sexual abuse cases the child knows the abuser, who is usually bigger or stronger and
often in a position of authority over or danger towards the child or loved ones, or a source
of special attention, and therefore the child will not disclose the abuse; it is a common
myth that most abuse occurs at the hands of strangers. Typically abusers “groom” their
victims by starting in small ways and progressing to more serious abuse. Helplessness
refers to the fact that it can be psychologically difficult for a child to report an abuser.
Entrapment and accommodation refers to how children deal with the feelings of
helplessness because of the secret abuse, such as by wearing extra clothing or pretending
to be asleep during the abuse, or by dissociation, where they shut down their feelings to
cope with the experience. Delayed and unconvincing disclosure refers to the fact that it is
common for children to delay disclosing for months and years, by which time their
memory of the details may have degraded. Generally, the closer the relationship between
the abuser and the child, the longer it will be before the child discloses.
Defendant
Defendant testified he bought Anne-Marie craft supplies because she was
interested in a Barbie doll Website, but admitted he had added the nipples and genitalia to
the dolls, while he was using methamphetamine, to try to sell “risqué” dolls on the
10
Internet because “sex sells.” When asked if he was proud of his work, he testified he
thought he “did a decent job on the nipples.” He hid the dolls so his children would not
find them, not because they were inappropriate. Anne-Marie found the dolls early in
2007, became angry, and they separated a month later.
Kara was helping him film L.’s first steps walking towards him, he put the camera
on a couch, and Kara walked in front of the camera “and bent over, and I guess it looked
down at her cleavage.”
Destiny “would run up and grab” defendant, and it made him “uncomfortable”
when she sat on his foot and “was rubbing her crotch on my foot.”
He brushed Cheyenne’s hair, after he had been up for days using
methamphetamine, and she avoided him thereafter, but he did not think he had touched
her inappropriately.
He was rubbing L.’s stomach on the couch at Christmas and accidentally touched
her chest, and moved his hand when she looked at him. He never touched her vaginal
area. In the incident when L. was four or five “I accidentally was reaching for the far
side of her legs and I went between her legs for a second like that. ‘Whoops, sorry.’
It was like that.”
Defendant ejaculated when M., aged eight, was rubbing on him. He denied
touching M.’s vagina, but conceded he had been convicted of it.
Stipulations
The parties stipulated “that the defendant was convicted of putting his hand on his
niece M[.]’s vagina and having her put her hand on his penis between September 20,
1995 and September 19, 1997.”
The parties also stipulated defendant was not under the influence of alcohol or
methamphetamine during the Christmas Day incident.
DISCUSSION
We address defendant’s contentions in a different order than he briefs them.
11
I
Barbie Doll Evidence
The first trial judge excluded the Barbie Doll evidence. The second trial judge
admitted this evidence. In separate claims, defendant contends the second trial judge
should not have reconsidered the earlier ruling, and contends that the evidence was
unduly prejudicial.
A. Reconsideration by Second Trial Judge
Defendant contends the second trial court should not have reconsidered the ruling
made by the first trial court, excluding the Barbie dolls. We disagree.
1. Background
The first trial court granted a defense in limine motion to exclude evidence of the
Barbie dolls, finding the conduct was not unlawful, Barbie and Ken dolls are adult
figurines, and “what was done to these figurines, in my view, the prejudicial effect of that
evidence outweighs the probative value[.]”
The second trial court found the dolls “provide a window into the Defendant’s
mind. It shows his intent towards his daughter.” The trial court agreed they were
“extremely prejudicial” and Barbie dolls were “an iconic symbol in our society[,]” but
also found that sexualizing his daughter’s dolls was highly probative of his intent, so that
excluding them would misrepresent defendant. Later, the trial court emphasized the facts
about the dolls were for the jury to decide, in that Anne-Marie claimed they “were
purchased for her daughter and were modified shortly [before] the allegation of the
molest. Mr. Lowder says he was in a drug-induced state and modified the dolls that had
been purchased years before.”
In argument to the jury, the defense dismissed the Barbie dolls as “nonsense[,]”
and argued “Barbie dolls are . . . depictions of adult women, albeit admittedly unrealistic”
and argued that they had been introduced to inflame the jury.
12
2. Analysis
First, we agree with the People that defendant has forfeited his contention, because
he never argued the second trial court was precluded from reconsidering the ruling of the
first trial court. (See Evid. Code, § 353, subd. (a) [objections must be timely and
specific]; People v. Neely (1999) 70 Cal.App.4th 767, 781-782 [law of the case objection
forfeited].) Defendant’s in limine motion replicated verbatim the motion he made before
the first trial. During argument on the in limine motion before the second trial, defense
counsel mentioned the first trial court’s ruling, but did not argue that ruling precluded
reconsideration of the issue by the second trial court, and the second trial court stated in
part, without objection, “I do appreciate a prior judge’s ruling, [but] I’m not bound by it.”
By failing to object on the ground now urged, defendant has forfeited the claim.
Second, as summarized by a case cited by defendant:
“[T]here are exceptions to the rule one judge may not overrule the order of
another.fn. Of significance here, our Supreme Court has held reversal of a
judgment on appeal and remand for a new trial ‘permits [the] renewal and
reconsideration of pretrial motions and objections to the admission of evidence.’.
The court did not limit the power of reconsideration to the same judge who made
the orders in the first trial. It is difficult to see why a new trial after a mistrial
should be treated differently in this respect from a new trial after a reversal on
appeal. We recognize a new trial after the unqualified reversal of a judgment on
appeal is conceptually distinguishable from a mistrial. In the former the issues
have been litigated to finality. In the latter, no issues have been decided
definitively. The former is a ‘do over.’ The latter is a ‘never done.’ But this
distinction, we believe, strengthens the justification for reconsideration after a
mistrial. In the case of a mistrial the issues remain in flux, the rulings remain
interlocutory and the outcome remains undetermined.” (People v. Riva (2003) 112
Cal.App.4th 981, 991-992 (Riva).)
Nonetheless, defendant contends there was error in this case, because a trial court
should not lightly “reverse” the ruling of another judge. (See, e.g., Riva, supra, 112
13
Cal.App.4th at pp. 992-993 [“comity” militates against reversing another judge’s ruling
absent “a highly persuasive reason for doing so--mere disagreement” insufficient].)3
We agree with the People that, at best for defendant, Riva states a prudential rule
cautioning against reopening all issues previously decided in a case. Here, defendant had
notice of the People’s intent to seek admission of the Barbie doll evidence, and had an
opportunity to oppose that evidence, fully comporting with due process, therefore the
ruling was not arbitrary. “Absent a statutory provision precluding relitigation, a
stipulation by the parties, or an order by the court that prior rulings made in the prior trial
will be binding at the new trial, objections must be made to the admission of evidence
(Evid. Code, § 353), and the court must consider the admissibility of that evidence at the
time it is offered. [Citations.] In limine rulings are not binding.” (People v. Mattson
(1990) 50 Cal.3d 826, 849-850; see People v. Sons (2008) 164 Cal.App.4th 90, 100 [“law
of the case” applies to prior appellate court rulings, but trial judges “are not bound by
rulings made at trial by a previous trial court judge. Trial court judges are independent
judicial officers. They have both the right and the duty, consistent with their oaths of
office, to exercise their best judgment, not to abandon it to previous trial court rulings”].)
Thus, the second trial court here had an independent duty to consider the
admissibility of the Barbie doll evidence, and exercised that duty. We find no error based
on any alleged preclusion--absolute or prudential--against reconsideration of the issue.
B. Undue Prejudice
Defendant contends the Barbie doll evidence was unduly inflammatory and
prejudicial and therefore should have been excluded. We disagree.
________________________________________________________________
3 In his reply brief, defendant argues the rule stated in Riva is so clear that his failure to
object to reconsideration by the second trial court is excused because the second trial
court was bound to overrule that objection, therefore objection to reconsideration would
have been futile. But he also argues this case fits within the prudential exception to Riva,
undermining his claim that futility excused an objection.
14
First, we reject defendant’s view that the evidence was irrelevant, or minimally
relevant. The People had to prove defendant touched the victim with lewd intent. (§ 288,
subd. (a).) Defendant’s not guilty plea placed his intent at issue, and the Barbie dolls
rationally tended to prove that disputed fact of intent. (See People v. Rowland (1992) 4
Cal.4th 238, 260; Evid. Code, §§ 210 [relevant evidence has “any tendency in reason to
prove or disprove any disputed fact that is of consequence”], 1101, subd. (b) [evidence of
prior acts not inadmissible if used to prove, inter alia, “intent”].)
Although the inference is not compelled, and defendant testified to an alternate
inference, a rational jury could infer that the addition of genitalia to the dolls reflected a
sexual interest in young girls. Indeed, defendant himself admitted the modifications were
sexual, although he denied that the dolls reflected his sexual interests. Further, although
again the inference is not compelled, the jury could rationally credit the disputed
testimony and find that these dolls had belonged to L., and therefore that these
modifications reflected defendant’s sexual interest in her in particular. Either or both of
these rational inferences would bolster the People’s theory that when defendant touched
L. as she testified, he did so with lewd intent. (See People v. Memro (1995) 11 Cal.4th
786, 864-865 (Memro) [sexually explicit photographs and stories about young males,
including children, admitted to show lewd intent towards boys]; People v. Bales (1961)
189 Cal.App.2d 694, 701 [nude photograph of victim tended to show lewd intent].) It
was for the jury to determine whether the dolls illuminated defendant’s lewd intent.
Defendant’s objection that a Barbie doll depicts an adult character, not a child
character, goes to the weight of the evidence. Such dolls are designed for use by children
and their physical unrealism is manifested in part by a lack of genitalia. The jury could
rationally infer that by modifying those dolls in what defendant conceded was a sexual
way, they reflected his intent to sexualize children. And the fact Anne-Marie testified she
found the dolls before the charged offenses does not make them irrelevant, because the
15
jury could rationally conclude that defendant’s sexual interest in young girls was
longstanding.
Second, we reject defendant’s view that the dolls were too inflammatory.
Evidence Code section 352 (§ 352) provides in full: “The court in its discretion
may exclude evidence if its probative value is substantially outweighed by the probability
that its admission will (a) necessitate undue consumption of time or (b) create substantial
danger of undue prejudice, of confusing the issues, or of misleading the jury.”
“The two crucial components of section 352 are ‘discretion,’ because the trial
court's resolution of such matters is entitled to deference, and ‘undue prejudice,’ because
the ultimate object of the section 352 weighing process is a fair trial.” (Harris, supra, 60
Cal.App.4th at p. 736.) “‘Prejudice’ does not mean a result which is unfavorable, it
means a result which is unfair.” (Zellerino v. Brown (1991) 235 Cal.App.3d 1097, 1109;
see People v. Yu (1983) 143 Cal.App.3d 358, 377.) “‘The prejudice which exclusion of
evidence under . . . section 352 is designed to avoid is not the prejudice or damage to a
defense that naturally flows from relevant, highly probative evidence.’ [Citations.]
‘Rather, the statute uses the word in its etymological sense of “prejudging” a person or
cause on the basis of extraneous factors.’” (People v. Zapien (1993) 4 Cal.4th 929, 958.)
As we recently pointed out: “Evidence is not inadmissible under section 352
unless the probative value is ‘substantially’ outweighed by the probability of a
‘substantial danger’ of undue prejudice or other statutory counterweights.” (People v.
Holford (2012) 203 Cal.App.4th 155, 167 (Holford).) Moreover, “Trial courts enjoy
‘“broad discretion”’ in deciding whether the probability of a substantial danger of
prejudice substantially outweighs probative value. [Citations.] A trial court’s exercise of
discretion ‘will not be disturbed except on a showing the trial court exercised its
discretion in an arbitrary, capricious, or patently absurd manner that resulted in a
manifest miscarriage of justice.’” (Holford, supra, 203 Cal.App.4th at pp. 167-168.)
16
In the second trial, the parties stipulated that defendant had been convicted of
putting his hand on M.’s vagina and having her put her hand on his penis. Further, the
jury heard L.’s testimony and prior statements about the charged acts. The record on
appeal includes color photographs of the dolls. The modified dolls were not so
distasteful or upsetting that they would cause jurors to become inflamed against
defendant so that they would unfairly assess all of the trial evidence.4 Further, the dolls
did not “prey on the emotions of the jury” (McKinney v. Rees (9th Cir. 1993) 993 F.2d
1378, 1385) as defendant claims. (AOB 26-27) Far more disturbing evidence admitted
to prove sexual intent has been held to fall within the trial court’s broad discretion. (See
Memro, supra, 11 Cal.4th at pp. 864-865 [photos of “young boys in sexually graphic
poses”]; People v. Clark (1992) 3 Cal.4th 41, 129 [depiction of “a decapitated head orally
copulating a severed penis”].)
Thus, the trial court did not abuse its discretion by finding the probative value of
the Barbie dolls was not “‘substantially’ outweighed by the probability of a ‘substantial
danger’ of undue prejudice[.]” (Holford, supra, 203 Cal.App.4th at p. 167.)
Finally, to the extent defendant contends the evidence violated federal due process
principles, we disagree. “Only if there are no permissible inferences the jury may draw
from the evidence can its admission violate due process. Even then, the evidence must
‘be of such quality as necessarily prevents a fair trial.’ [Citation.] Only under such
circumstances can it be inferred that the jury must have used the evidence for an
improper purpose.” (Jammal v. Van de Kamp (9th Cir. 1991) 926 F.2d 918, 920; see
People v. Kelly (2007) 42 Cal.4th 763, 787; cf. People v. Partida (2005) 37 Cal.4th 428,
439 [even if evidence should be excluded under state law, its admission “results in a due
process violation only if it makes the trial fundamentally unfair”].) As explained, there
________________________________________________________________
4 As we said in a similar context, “Painting a person faithfully is not, of itself, unfair.”
(People v. Harris (1998) 60 Cal.App.4th 727, 737 (Harris).)
17
were two inferences the jury permissible could draw--but were not compelled to draw--
from the Barbie doll evidence, viz., that defendant had a lewd intent toward young girls
generally, and that he had a lewd intent toward his daughter in particular.
II
Uncharged Acts for Propensity
Defendant challenges the constitutionality of Evidence Code section 1108
(§ 1108), and claims the trial courts each abused their respective discretion in admitting
evidence of uncharged acts pursuant to that statute.
A. Constitutionality of Section 1108
Section 1108, subdivision (a) provides: “In a criminal action in which the
defendant is accused of a sexual offense, evidence of the defendant’s commission of
another sexual offense or offenses is not made inadmissible by Section 1101, if the
evidence is not inadmissible pursuant to Section 352.” Thus, section 1108 allows the
introduction of evidence that a defendant committed prior uncharged sexual offenses in
order to prove her or his propensity to commit such offenses, notwithstanding the general
rule that makes character evidence inadmissible to prove a person’s “conduct on a
particular occasion.” (Evid. Code, § 1101, subd. (a).)
Defendant attacks the constitutionality of section 1108 on due process and equal
protection grounds, conceding his claims have previously been rejected by California
courts, including this court. (See People v. Falsetta (1999) 21 Cal.4th 903, 918-919
[explicitly resolving due process challenge and discussing with approval Fitch’s rejection
of equal protection challenge]; Holford, supra, 203 Cal.App.4th at pp. 182-186 [due
process and equal protection]; People v. Fitch (1997) 55 Cal.App.4th 172 (Fitch) [due
process and equal protection].) We again reject his claim.
B. Admission of Uncharged Acts at Each Trial
Defendant contends each trial court abused its discretion in admitting section 1108
evidence at each trial. We disagree.
18
1. The Law
In Fitch, we explained the role of section 352 in decisions to admit section 1108
evidence as follows:
“[S]ection 1108 has a safeguard against the use of uncharged sex offenses
in cases where the admission of such evidence could result in a fundamentally
unfair trial. Such evidence is still subject to exclusion under . . . section 352.
[Citation.] By subjecting evidence of uncharged sexual misconduct to the
weighing process of section 352, the Legislature has ensured that such evidence
cannot be used in cases where its probative value is substantially outweighed by
the possibility that it will consume an undue amount of time or create a substantial
danger of undue prejudice, confusion of issues, or misleading the jury. [Citation.]
This determination is entrusted to the sound discretion of the trial judge who is in
the best position to evaluate the evidence.” (Fitch, supra, 55 Cal.App.4th at p.
183.)
In Harris, we elaborated on that role by detailing appropriate factors a trial court
should ordinarily weigh in assessing whether particular uncharged act evidence should be
properly admitted pursuant to section 1108 in a particular trial, including the
inflammatory nature of the uncharged act evidence as compared to the charged evidence,
the probability of jury confusion, the remoteness of the uncharged act evidence, the
consumption of trial time, and the probative value of the uncharged act evidence.
(Harris, supra, 60 Cal.App.4th at pp. 737-741.)
2. Background
The first trial court admitted the prior uncharged acts involving M., Kara, and
Cheyenne, but excluded references to Destiny, as being too “tenuous” to be admissible.
The second trial court permitted the introduction of evidence of the Destiny incident,
finding Destiny and L. were of the same age (eight), both incidents involved over-the-
clothing vaginal contact, defendant “freely admitted to law enforcement” what occurred
with Destiny, and the incident was not substantially more prejudicial than probative.
However, in the second trial, M. did not testify, but the parties stipulated “that the
defendant was convicted of putting his hand on his niece M[.]’s vagina and having her
19
put her hand on his penis between September 20, 1995 and September 19, 1997.” Unlike
the first jury, the second jury did not hear about the alleged acts against M. occurring
when she was 4 or 5, and when she was 7 or 8 (at the American River). The second trial
court found the Cheyenne evidence similar to the charged evidence, defendant admitted
touching her, and it was “substantially more probative than it is prejudicial[.]” The
second trial court also admitted the Kara evidence.
3. Analysis
On appeal, defendant contends each trial court abused its discretion in admitting
some--but not all--of the uncharged act evidence. In reality, his briefing amounts to a
tacit invitation for us to reweigh the relevant section 352 factors.5
The evidence that defendant complains of consists of: (1) Evidence at both trials
that defendant videotaped Kara and “zoomed in” on either her breasts or her bottom; (2)
evidence at both trials that defendant touched Cheyenne’s bottom; and (3) evidence at the
second trial that defendant allowed eight-year-old Destiny to “hump” defendant’s foot.
Contrary to defendant’s view, none of these challenged incidents was particularly
inflammatory when compared to the charged offenses. The incidents were not remote,
because they demonstrated a consistent history of sexual misconduct towards young girls.
(See People v. Branch (2001) 91 Cal.App.4th 274, 284-285 (Branch); cf. Harris, supra,
60 Cal.App.4th at p. 739 [apart from misdemeanor drunk driving conviction, defendant
had led “unblemished” life for 23 years after earlier, highly dissimilar, sexual offense].)
________________________________________________________________
5 In the opening brief, defendant also appeared to argue that the first trial court was
required to state its section 352 analysis on the record. However, there is no such
requirement. (See Quail Lakes Owners Assn. v. Kozina (2012) 204 Cal.App.4th 1132,
1140.) In the reply brief, defendant appears to concede the point. Defendant also claims
in passing that the Kara evidence did not qualify as a “sexual offense” (see § 1108, subd.
(d)(1)). But because he does not show where this claim was raised in the trial court, and
provides no legal analysis for it, we decline to address it. (See In re S.C. (2006) 138
Cal.App.4th 396, 408 (In re S.C.).)
20
There was no likelihood of jury confusion, because each incident as described by the
evidence was relatively straightforward, the jury in each trial was given the pattern
limiting instruction on section 1108, CALCRIM No. 1191 and the parties made
appropriate arguments about the evidence.
We do agree with defendant that the fact defendant had not been punished for the
prior acts arguably was a factor favoring--but not compelling--exclusion, as it might have
tended to confuse the jury. (See Harris, supra, 60 Cal.App.4th at pp. 738-739 [jury
learned Harris was convicted of burglary with great bodily injury, not rape, in prior case,
“leaving the rape victim unrevenged”].) But there was no indication that either jury in
this case actually was confused about this point, and the prior incidents were not so
shocking as to be likely to inflame the jury and deter them from following their
instructions. (See Branch, supra, 91 Cal.App.4th at p. 284.) And, inevitably, the
uncharged evidence did consume some trial time in each case, though not so much that it
dwarfed other testimony. These two factors, singly or in combination, even if viewed in
defendant’s favor, did not strongly weigh against admission of the evidence.
As we have explained before, the point of section 1108 was to eliminate the
similarity requirement previously applicable in assessing the admissibility of character
evidence, which required that the prior and current incidents had to be highly similar.
(People v. Britt (2002) 104 Cal.App.4th 500, 504-506 [“the ‘signature test’ is no longer
the yardstick”]; see also People v. Escudero (2010) 183 Cal.App.4th 302, 310 (Escudero)
[section 1108 ensures “‘the trier of fact would be made aware of the defendant’s other
sex offenses in evaluating the victim’s and the defendant’s credibility’”].) In this case, all
of the incidents were broadly similar, in that all of the alleged victims were young girls
defendant knew, and that similarity in the nature and accessibility of the victim was
relevant to show his propensity to prey on such victims. (See Escudero, supra, 183
Cal.App.4th at p. 311 [“significant similarities” found because, “In each instance,
defendant took advantage of his female victims when they were vulnerable”].)
21
Unlike in Harris, emphasized by defendant, the uncharged acts were not so
different than the charged acts as to render them of little probative worth, and were not so
shocking as to inflame either jury. In Harris, we summarized the charged offenses as
follows: “Without minimizing the trauma suffered by each [charged] victim, at worst
defendant licked and fondled an incapacitated woman and a former sexual partner, both
of whom were thereafter on speaking terms with him. Although the assaults described by
Tracy and Brenda are criminal, involving a breach of trust by a caregiver, the abuse the
victims suffered is, unfortunately, not unusual or shocking.” (Harris, supra, 60
Cal.App.4th at p. 738.) The uncharged evidence was that over 20 years before defendant
had attacked a woman, beat her unconscious, and left her partly naked and bleeding from
the mouth and vagina. (Harris, supra, at pp. 734-735.) We held, “The [uncharged]
evidence did little more than show defendant was a violent sex offender. The evidence
that defendant committed a violent rape of a stranger, as the jury was led to believe, did
not bolster Tracy’s or Brenda’s credibility nor detract from the evidence impeaching their
stories.” (Id. at p. 740.) For that reason we found, “The lack of any significant probative
value on a disputed issue weighs strongly in favor of excluding this evidence.” (Id. at p.
741.)
Compared to the differences between the charged and uncharged acts in Harris,
the differences here were minor, and the similarity in age, gender, and accessibility of the
alleged victims were sufficient to make those incidents relevant to defendant’s intent.
In short, neither trial court abused its discretion under section 352 in admitting the
challenged evidence. (See Holford, supra, 203 Cal.App.4th at pp. 167-168; Escudero,
supra, 183 Cal.App.4th at p. 312.)
III
Child Sexual Abuse Accommodation Syndrome
Defendant attacks the admission of CSAAS evidence in this case, and attacks the
instruction on that evidence given by the trial court. We reject both claims.
22
A. Admission of CSAAS Evidence
Defendant contends CSAAS evidence should be held inadmissible in California
for all purposes, arguing that “[b]ecause of the amorphous and indefinite characteristics
of the syndrome, the jury invariably will use the evidence against the defendant and in
favor of conviction.”
This court and other courts have rejected this argument. “[I]t has long been held
that in a judicial proceeding presenting the question whether a child has been sexually
molested, CSAAS is admissible evidence for the limited purpose of disabusing the fact
finder of common misconceptions it might have about how child victims react to sexual
abuse.” (In re S.C., supra, 138 Cal.App.4th at p. 418; see People v. Sandoval (2008) 164
Cal.App.4th 994, 1001-1002; People v. Wells (2004) 118 Cal.App.4th 179, 188; see also
People v. Brown (2004) 33 Cal.4th 892, 905-907.)
We adhere to the view that CSAAS is admissible for the limited purposes of
debunking commonly-held myths about how children react to sexual abuse.6
B. Instruction on CSAAS Evidence
Defendant faults the pattern instruction on CSAAS evidence, CALCRIM No.
1193. As given in this case, that instruction provided as follows:
“You have heard testimony from Dr. Anthony Urquiza regarding child
sexual abuse accommodation syndrome.
“Dr. Anthony Urquiza’s testimony . . . is not evidence that the defendant
committed any of the crimes charged against him.
“You may consider this evidence only in deciding whether or not L[.]’s
conduct was not inconsistent with the conduct of someone who has been molested,
and in evaluating the believability of his [sic] testimony.”
________________________________________________________________
6 Defendant’s reliance on sister-state and lower federal court cases is unavailing; we are
not bound by those decisions. We note with approval, however, that defendant cites a
number of sister-state cases that militate against his position, and properly acknowledges
our prior decision in In re S.C., supra, 138 Cal.App.4th 396.
23
On appeal, defendant contends the instruction was erroneous because there was no
true claim of a gap in reporting, and the gap in this case was shorter than in most cases,
therefore there was “no need to rehabilitate” the victim’s credibility “because appellant
never challenged her credibility in that regard.” But L.’s credibility was placed in issue
because she delayed reporting the abuse, and it was not necessary for the People to wait
for the defense to explicitly challenge her credibility on this point. “Identifying a ‘myth’
or ‘misconception’ has not been interpreted as requiring the prosecution to expressly state
on the record the evidence which is inconsistent with the finding of molestation. It is
sufficient if the victim’s credibility is placed in issue due to the paradoxical behavior,
including a delay in reporting a molestation.” (People v. Patino (1994) 26 Cal.App.4th
1737, 1744-1745.) The jury might still wonder why L did not report the abuse
immediately, the moment it happened, or the next day. That some children wait longer
than L. did does not change the fact that she delayed reporting.7
Contrary to defendant’s claim, the instruction did not lighten the People’s burden
of proof by inducing the jury to assume the molestation occurred. To the contrary, the
jury was instructed that the CSAAS testimony was not evidence that abuse occurred, but
could be--but did not have to be--considered in assessing whether L. was making the
story up or delayed reporting for the reasons explained by Dr. Urquiza. We presume the
jury understood and followed this instruction. (See People v. Sanchez (2001) 26 Cal.4th
834, 852; People v. Zack (1986) 184 Cal.App.3d 409, 416.)
VI
Fines and Fees
Defendant challenges various monetary orders made by the trial court. We reject
each of his contentions of error.
________________________________________________________________
7 We also note that Cheyenne testified she pretended to be asleep when defendant
touched her, a typical “accommodation” mechanism Dr. Urquiza described.
24
A. Restitution Fine
The probation report recommended a restitution fine pursuant to section 1202.4 in
the amount of $10,000. The trial court imposed a $10,000 restitution fine, payable as
provided by Penal Code section 2085.5, subdivision (a).
On appeal, defendant contends the trial court could not impose more than the then-
statutory minimum fine of $200, in the absence of jury findings authorizing a higher fine.
In support of this contention, he relies on Apprendi v. New Jersey (2000) 530 U.S. 466
[147 L.Ed.2d 435] (Apprendi) and Southern Union Co. v. United States (2012) 567 U.S.
___ [183 L.Ed.2d 318] (Southern Union).
At sentencing, defense counsel began by stating “Request that the fines and fees
be minimized to the greatest extent possible.” But counsel did not claim that the
minimum fine was compelled. Accordingly, the point now raised is forfeited for lack of
objection in the trial court. (See People v. Gamache (2010) 48 Cal.4th 347, 409.)
Moreover, People v. Kramis (2012) 209 Cal.App.4th 346 (Kramis), rejected the
claim that Apprendi and Southern Union had any effect on a trial court’s discretion to
select an appropriate fine between $200 and $10,000, because those cases “do not apply
when, as here, the trial court exercises its discretion within a statutory range.” (Kramis,
supra, 209 Cal.App.4th at p. 351.) We agree. (See also People v. Urbano (2005) 128
Cal.App.4th 396, 405-406 [defendant presumptively able to pay fine out of future
earnings; Apprendi does not require jury findings on amount of fine]; People v. Frye
(1994) 21 Cal.App.4th 1483, 1487 [absent objection “the trial court could presume the
fine would be paid out of defendant’s prison wages”].) And in Kramis, as in this case,
the trial court imposed a $10,000 fine. Therefore Kramis is directly on point and we shall
follow it.8
________________________________________________________________
8 We note that Lowder’s appellate counsel was also Kramis’s appellate counsel. In his
reply brief, counsel argues Kramis was wrongly decided. We disagree.
25
B. Booking and Jail Classification Fees
The probation report recommended that the trial court order defendant to pay jail
booking and classification fees of $ 263.85 and $ 28.75, respectively, pursuant to
Government Code section 29550.2. The trial court imposed the recommended fees.
On appeal, defendant contends the trial court did not determine his ability to pay
these fees, failed to submit the issue of his ability to pay to the jury, and failed to
determine the actual administrative costs to the county. We reject each of these
contentions.
1. Finding of Ability to Pay
As stated, defense counsel asked that “the fines and fees be minimized to the
greatest extent possible.” But counsel did not contend defendant lacked the ability to pay
any particular fines or fees. We have repeatedly held that failure to object in the trial
court based on lack of ability to pay forfeits the contention of error. (See People v.
Crittle (2007) 154 Cal.App.4th 368, 371; People v. Hodges (1999) 70 Cal.App.4th 1348,
1357; People v. Gibson (1994) 27 Cal.App.4th 1466, 1468-1469; see also People v.
McMahan (1992) 3 Cal.App.4th 740,749-750 [defendant knowledgeable about his ability
to pay, and his failure to object to fine recommended by probation officer or offer
contrary evidence forfeited claim].) Recently, our Supreme Court agreed with this view.
(People v. McCullough (2013) 56 Cal.4th 589.)
2. Submitting Ability to Pay to the Jury
Defendant contends the administrative fees are “punishment” and therefore his
ability to pay them must be submitted to the jury, generally replicating the Apprendi and
Southern Union claims regarding the restitution fine.
Again, these challenges to the fees are forfeited. Further, by imposing the
mandated fees, “The trial court did not make any factual findings that increased” amount
of the administrative fees, “beyond what the jury’s verdict--the fact of the conviction--
26
allowed. Therefore, Apprendi and its progeny” did not preclude their imposition.”
(Kramis, supra, 209 Cal.App.4th at p. 352.)
3. Evidence of Administrative Costs
Defendant contends the record is devoid of evidence of the costs incurred by the
county to support the amounts of the jail booking and classification fees.
The probation officer’s report set forth those costs. Because defendant did not
object to the probation report, we presume the facts contained therein are accurate.
(See People v. Evans (1983) 141 Cal.App.3d 1019, 1021.)
DISPOSITION
The judgment is affirmed.
DUARTE , J.
We concur:
BLEASE , Acting P. J.
MURRAY , J.
27
| {
"pile_set_name": "FreeLaw"
} |
137 B.R. 452 (1991)
In re GILLETT HOLDINGS, INC., Employer Tax I.D. XX-XXXXXXX, Debtor.
Bankruptcy No. 91-12465-SBB.
United States Bankruptcy Court, D. Colorado.
August 23, 1991.
*453 Douglas M. Tisdale, L. Louise Romero-Atwood, Brownstein, Hyatt, Farber & Madden, Denver, Colo., Lewis Rosenbloom, Winston & Strawn, Chicago, Ill., for debtor.
Craig Christensen, Sherman and Howard, Denver, Colo., for George Gillett.
Bernard Shapiro, Gendel, Raskoff, Shapiro & Quittner, Los Angeles, Cal., for Unsecured Creditors' Committee.
Virginia Grogan, Latham & Watkins, Los Angeles, Cal., for Smith Barney, Harris Upham & Co.
JoAnne Spiers, Denver, Colo., for U.S. Trustee's Office.
Bryan Krakauer, Sidney & Austin, Chicago, Ill., for First Nat. Bank of Chicago.
Bruce H. Spector, Stutman, Treister & Glatt, Los Angeles, Cal., for Apollo Inv. Fund & Altus Finance.
Stephen W. Seifert, Fairfield & Woods, Denver, Colo., for First Trust.
James Burghardt, Moye, Giles, O'Keefe, Vermeire & Gorrell, Denver, Colo., for Unsecured Creditors' Committee.
Edwin G. Perlmutter, Frances Cetrulo, Berenbaum & Weinshienk, Denver, Colo., for Executive Life.
MEMORANDUM OPINION AND ORDER
SIDNEY B. BROOKS, Bankruptcy Judge.
THIS MATTER comes before the Court upon the "Application of Debtor for Authority *454 to Employ Smith Barney, Harris Upham & Co. Inc." ("Smith Barney Application") and the "Application of Debtor for Authority to Employ Donaldson, Lufkin & Jenrette Securities Corporation" ("DLJ Application"), both filed June 21, 1991, and objections to the two applications filed by the United States Trustee on July 22, 1991, Norwest Bank Minnesota, N.A. on July 23, 1991, and Equitable[1] on July 23, 1991. (Smith Barney and DLJ collectively referred to as "Investment Bankers" or "Investment Banking Firms.")[2]
The central issue before the Court is: On what terms and conditions may the Debtor-in-Possession employ the Investment Banking Firms pursuant to 11 U.S.C. § 327? Gillett Holdings, Inc., the Debtor-in-Possession ("Debtor"), and the Investment Bankers argue that their employment and fee agreements are standard for and customary in the industry and the Court must approve employment on those terms. Certain creditors and the U.S. Trustee object to various terms of those agreements.
The Court concludes that the Debtor may not employ the Investment Bankers under the terms and conditions proffered despite assertions that the terms and conditions are "customary" in the investment banking business and in other similar Chapter 11 cases.[3] This is an issue of first impression in this District. The Court, having reviewed the file, the record, and being advised in the premises, issues the following findings of fact, conclusions of law, and order.[4]
I. Background.
This case was commenced on February 27, 1991 by the filing of an involuntary Petition for relief pursuant to Chapter 11 of the Bankruptcy Code. Following time extensions, the Debtor[5] consented to the entry of an Order for Relief on June 25, 1991 and has continued as a Debtor-in-Possession since that time.
The Debtor requests that the Court approve the employment of Smith Barney and DLJ to act as Investment Bankers and financial advisors pursuant to certain employment and fee letter agreements ("Employment Agreements"). Under the terms of the Employment Agreement as set forth in the Smith Barney Supplemental Application, Smith Barney would receive $200,000 for work done in May and June, 1991, $150,000 per month for each month beginning July 5, 1991, $1,000,000 upon the Debtor's receipt of an agreement in principle with the holders of its various securities, and $3,000,000, as a "success fee," upon the confirmation of a Plan of Reorganization under Chapter 11.[6] Total fees for Smith Barney would not exceed $5,000,000 unless the Debtor, with Court approval, retains Smith Barney to render further as-of-yet unspecified professional services. Smith Barney would also be entitled to *455 reimbursement for all of its reasonable and necessary out-of-pocket expenses, including fees and disbursements of Smith Barney's own attorneys.[7] The Smith Barney Employment Agreement also proposes, in part, that the Debtor will indemnify Smith Barney against losses, claims, damages, liabilities, and expenses except those which might arise out of Smith Barney's own "willful misconduct, gross negligence or malfeasance." Appendix A to Employment Agreement between Debtor and Smith Barney dated May 17, 1991.[8]
With respect to DLJ, the Debtor proposes to pay a cash fee of $100,000 for the period of February 15, 1991 through May 15, 1991, and a monthly fee of $25,000 thereafter. The Debtor desires to pay DLJ $1,000,000 upon consummation of the Debtor's proposed exchange offers, subject to certain enumerated offsets. Similarly, under the DLJ Employment Agreement, DLJ would be entitled to reimbursement for all of its reasonable and necessary out-of-pocket expenses, including payment of DLJ's attorney's fees[9] and expenses. DLJ would, as well, be indemnified by the Debtor against losses, claims, damages, liabilities and expenses except those which might arise out of its own "willful misconduct, gross negligence or malfeasance." DLJ Employment Agreement dated June 10, 1991, p. 3.
II. Discussion.
This Court will address several major areas of concern with the Investment Bankers' Employment Agreements and the two subject applications. The proper starting point for this process, however, is to recognize that "[t]he burden of proof to establish that proposed terms and conditions of employment are reasonable is on the moving party. The Court must be persuaded that the terms and conditions are in the interest of the estate." In re C & P Auto Transport, Inc., 94 B.R. 682, 686 (Bankr.E.D.Cal.1988). Accord, In re Chas. A. Stevens & Co., 109 B.R. 853, 854 (Bankr. N.D.Ill.1990). In the within case, this Court is not so persuaded.
A. Reporting Standards and Monthly Fees. Smith Barney and DLJ do not propose to (1) render their professional services in exchange for an hourly fee but for the bargained-for fee of $175,000 per month, and (2) apply for their fees, as do other professionals, with detailed, descriptive, legally sufficient time records and fee applications. This compensation arrangement, it is argued, is entirely consistent with the standards and procedures of the investment banking industry and other similar Chapter 11 cases.[10] They argue this fee arrangement comports with statutory compensation criteria and procedures, and the fees to be paid are equal to the cost of comparable services. 11 U.S.C. § 330. See, Matter of Aminex Corp., 15 B.R. 356, 361 (Bankr.S.D.N.Y.1981) (Act case) ("Although we view time spent as a major criterion in our determination, we do not agree with the learned District Judge from Pennsylvania that such factor is to be assigned the paramount role in our fee determinations.... *456 We view time spent in tandem with the results achieved....").
Smith Barney and DLJ argue that their services, unlike the services of attorneys or accountants, are not susceptible to valuation on the basis of the number of hours spent and assure this Court that neither the hours worked nor the tasks performed each month will be de minimis. Investment bankers do not customarily keep detailed records of the time spent and the tasks performed by each individual each day. The Investment Bankers, joined by the Debtor, believe that the investment banking profession should not be burdened by extraordinary recordkeeping, and should not be required to file detailed fee applications in form and with substance as are routinely required of all other professionals employed by a debtor-in-possession. They argue that investment bankers, if required to do so, will be driven out of the bankruptcy business.[11]See, generally, In re Nucorp Energy, Inc., 764 F.2d 655, 658 (9th Cir.1985).
Although due deference should be given to the standards applicable to certain professions outside of the bankruptcy context and professionals are entitled to compensation in bankruptcy cases comparable to that earned in non-bankruptcy cases this Court is not bound absolutely to those standards. Rather, it is bound, first, by the dictates of the Bankruptcy Code. See, the recent compensation guidelines promulgated by the Southern District of New York; In re NBI, Inc., 129 B.R. 212 (Bankr.D.Colo.1991) ("Reasonableness ... is typically evaluated in relation to the time, nature, extent, and value of services rendered, and, within appropriate limits, to the cost of comparable services outside the bankruptcy context.") (emphasis added). Accord, In re Century Foods, Inc., 39 B.R. 602, 605 (Bankr.M.D.Pa.1984) (the amount of compensation that a professional person would receive in private employment is a point of reference, but not a controlling determinant of what should be allowed as compensation to such a person in a bankruptcy case). The overwhelming tendency toward allowing special treatment for investment bankers and perhaps other selected professionals that has customarily been prevalent heretofore, must give way to new notions of fairness, bankruptcy equity, and recognition of changed economic circumstances of the 1990's.
With respect to the Code requisite of professionals filing legally sufficient fee applications, the Court is not at all persuaded that investment bankers are entitled to separate, and special treatment. If, indeed, a particular profession desires extraordinary treatment, this Court must be persuaded that it is justly deserved. Compare, Matter of Federated Dep't Stores, Inc., 114 B.R. 501, 506 (Bankr.S.D.Ohio 1990) ("proposed ... record keeping plan ... is reasonable and [the investment bankers] need not follow the plan applicable to attorneys and other professionals"); with In re Hillsborough Holdings Corp., 125 B.R. 837, 840 (Bankr.M.D.Fla.1991) ("This Court is unable to find any authority supporting the proposition that investment advisors are not subject to the mandate of Bankruptcy Rule 2016(a).... While this Rule may not please the community of investment advisors, this Court is constrained to conclude that the Bankruptcy Code and Rules are controlling, not the general policy or custom of the investment advisors which prevails in the operation of the business of investment bankers or advisors.");[12] and Matter of Baldwin-United *457 Corp., 79 B.R. 321, 351 (Bankr.S.D.Ohio 1987) ("While its private clients may be satisfied with this arrangement, it fails to comply with this Court's fee guidelines and applicable caselaw [sic].").
This Court is persuaded that Smith Barney and DLJ must file legally sufficient applications for fees in the same manner and subject to the same basic statutory requirements as other professionals. As a general rule, investment bankers must be treated as other Section 327 professionals and should not be given extraordinary treatment, absent a compelling reason to do so.[13]See generally, Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir.1974); Matter of Permian Anchor Services, Inc., 649 F.2d 763 (10th Cir.1981).
Smith Barney and DLJ have already been paid some $1,400,000 for their contributions to the draft Plan of Reorganization prior to the submission of the instant applications to employ. The monthly fees allowed by the Employment Agreements total $175,000, a not insubstantial sum, and they are not, under the current suggested arrangements, subject to any real creditor review, accountability, or limitations. This Court does not here find that flat monthly payments are never permissible, or per se invalid, only that such payments have not been justified in this case. Accord, In re Mortgage & Realty Trust, 123 B.R. 626, 633 (Bankr.C.D.Cal.1991). See, generally, In re Public Service Co. of New Hampshire, 88 B.R. 518 (Bankr.D.N.H.1988) (summarily allowed); Baldwin-United, supra at 351 (same); In re Knudsen Corp., 67 B.R. 254, 255 (Bankr.C.D.Cal.1986) (same); In re White Motor Credit Corp., 50 B.R. 885, 901 (Bankr.N.D.Ohio 1985) (same). But see, e.g., NBI, supra (court denied approval of "earned upon receipt" retainer in bankruptcy case, an analogous situation).
In summation, the Investment Bankers will be held to the same basic practice and standards of other professionals if they wish to be employed in this case; this includes filing informative, legally sufficient fee applications which allow for scrutiny and accountability as to the services rendered and fees requested. It also includes application of the "reasonable compensation" standard to fees paid. 11 U.S.C. § 330(a)(1).
B. Indemnification. This Court has grave concerns regarding the gross negligence carve-out from the Debtor's broad indemnification obligations under the Employment Agreements with each of the Investment Bankers. Smith Barney and DLJ argue that the broad protections granted them by the Employment Agreements are customary in their industry. Characterizing the provisions as small concessions in exchange for their services, they maintain that the terms were agreed to by the Debtor in good faith, after arms-length negotiations, and that "it would be unfair, after the negotiation, to require [an investment banker] to abandon this customary but critical part of its agreement." Smith Barney Supplemental Application, p. 7 and Memorandum of Law in support thereof, p. 7.
Smith Barney adds that this Court should approve the terms of the indemnification agreement because it has previously been retained in several major Chapter 11 cases pursuant to indemnification arrangements which were substantially identical to the one at issue.[14] Smith Barney was unsuccessful, *458 however, in persuading at least one other court as to the reasonableness of this argument. In re Allegheny Int'l Inc., 100 B.R. 244 (Bankr.W.D.Pa.1989).[15] Initially, the Allegheny court found that, despite the arguments of the investment bankers to the contrary, "Section 328(a) empowers a debtor in possession or official committee to employ professionals on any reasonable terms and conditions of employment, subject to court approval." Id., at 246 (emphasis in original). Upon review of the terms of the proposed indemnity provisions, the court found:
Although we will allow some form of indemnification to continue, the present indemnification provisions are too broad ... [and] [w]e think the exemption from indemnification for gross negligence is much too narrow.... Smith Barney expect[s] to receive handsome compensation for their services. At those rates of compensation, we do not think that it is unreasonable for their services to be presented with a high standard of professionalism. Indemnification and professionalism are not entirely consistent.
Id., at 246 (emphasis added).
The Debtor as a debtor-in-possession is a fiduciary. Commodity Futures Trading Commission v. Weintraub, 471 U.S. 343, 355, 105 S.Ct 1986, 1994, 85 L.Ed.2d 372 (1985). Investment bankers and financial advisors hired by the Debtor are also fiduciaries. Accord, Allegheny, supra at 246.
As such, they `have obligations of fidelity, undivided loyalty and impartial service in the interest of the creditors they represent' ... indemnification for negligence may be acceptable in `the workaday world for those acting at arm's length.' However, holding a fiduciary harmless for its own negligence is shockingly inconsistent with the strict standard of conduct for fiduciaries.... The present indemnification language also proscribes indemnification for acts of willful misconduct. Although willful misconduct may also encompass a breach of fiduciary duty, we now hold that the debtor may not indemnify Smith Barney ... for acts or omissions, which are found by this bankruptcy court or other court of competent jurisdiction, to be a breach of a fiduciary duty.
Id., at 246-247 (quoting In re Mesta Machine Co., 67 B.R. 151, 156 (Bankr.W.D.Pa. 1986) and Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545, 546 (1928)).
Smith Barney and DLJ are, effectively, asking this Court to shield them, as agents and fiduciaries of the Debtor, from their own errors and omissions, their own negligence. That is entirely improper and unacceptable to this Court. They are entitled to no more, and no less, protection than that afforded to other professionals employed by the Debtor. The estate and creditors are, likewise, entitled to no less.
This Court agrees with the analysis of the court in Allegheny. Smith Barney and DLJ, as fiduciaries, may not absolve themselves of such a broad range of potential liability or responsibility for their own actions which might constitute negligence or misfeasance.[16] This Court will not go so far as to hold that indemnity provisions per se are either unacceptable or unnecessary in these circumstances. See, Mortgage & Realty Trust, supra at 631-632. Indemnity provisions must be analyzed on a caseby-case *459 basis and, as such, the terms of the indemnity provisions presently before this Court are simply unacceptable.[17]
C. "Success Fees." For purposes of this Opinion, this Court will refer to the $5,000,000[18] payable to the Investment Bankers upon the occurrence of specified contingencies as "success fees."[19] Similar compensation has been awarded to professionals based on criteria such as exceptional performance, extraordinary or unexpected benefit conferred on creditors of the estate, unusually effective and successful nature of Chapter 11 proceedings, and time frame within such successful results are accomplished.[20]Compare, In re Summit Communities of Florida, Inc., 84 B.R. 863, 867 (Bankr.S.D.Fla.1988) with Baldwin-United Corp., supra at 351.
While such an award may indeed become justified based upon the results of this Chapter 11 case, it is impossible for this Court to determine whether a success fee is earned until the services are performed and are found to qualify under the Bankruptcy Code. See, 11 U.S.C. § 330(a)(1) (such compensation must be based upon "the nature, the extent, and the value of such services, the time spent on such services, and the cost of comparable services other than in a [bankruptcy] case."). This Court does not consider it at all inappropriate or improper for a professional to ask for a success fee or bonus in an appropriate case, or for a court to award such a fee based upon a showing that it has been earned. The Court also recognizes the propriety and value of contingency fee arrangements. However, such a determination of a bonus and award of millions of dollars of fees, as a bonus, in tandem with a fixed monthly fee, embodied in a Court Order is improper at the onset of a case; it must await a successful conclusion of the services and a proper showing of entitlement. Accord, Mortgage & Realty Trust, supra at 632.
The inclusion of an automatic success fee as a fixed, definite, unqualified, contracted-for right upon the occurrence of specified future events coupled with a proposed fixed, definite, unqualified, contracted-for monthly fee of $175,000 is unacceptable. At the suggestion of the Court, the parties have indicated that they may subsequently decide to include the success fee in the Employment Agreements as an "anticipated" fee, or agreed "target" fee, and provide that it will be requested in the event that certain conditions precedent occur. As long as the determination of final and actual entitlement awaits a proper evaluation by creditors and consideration by the Court, this would be entirely acceptable.[21] It may be true that, given the time *460 saved by utilizing the Investment Bankers' skills, the entire request, including success fees, is reasonable. The Court will deal with the issue at the appropriate time.[22] Today it is speculative and premature.
D. Attorneys' Fees of Investment Bankers to be Paid by Debtor. Smith Barney and DLJ have required that their own attorneys' fees and expenses be paid by the Debtor on a monthly basis as an expense of their own investment banking and financial consulting services supplied to the Debtor. This too, it is argued, is standard procedure in the investment banking world and customary in other similar Chapter 11 cases.
This Court disagrees with the practice, as structured, and concludes that the Investment Bankers' attorneys must (1) be disinterested, (2) not hold or represent interests adverse to the estate, and (3) apply for and seek approval of all such fees and expenses just as will all other professionals requesting compensation from and being paid by this Debtor's estate. This Court cannot and will not summarily, and without any justification or accountability whatsoever, approve Debtor's payment of the attorneys' fees incurred by the Investment Bankers as a cost of estate administration. See, In re Land, 116 B.R. 798, 803-804 (D.Colo.1990).
Neither the Bankruptcy Code nor the Rules provide specific procedures or practices for payment of fees, or employment of professionals who are themselves employed by a debtor's professionals. Under the circumstances in this case, however, the Debtor is paying, albeit indirectly, the fees of their professionals' professionals. The Court will, thus, adopt and implement procedures and practices for payment of these fees which are parallel to and serve the same purposes of those set forth in the Code.
The Court thus concludes that (1) employment of the Investment Bankers' attorneys who are to be paid by the Debtor as a cost of administration must be subject to the Code standards of "disinterestedness" and absence of conflicts of interest, and (2) fees of the attorneys hired by the Debtor's Investment Bankers, which are to be paid by the Debtor as a cost of administration, will be subject to the standards and scrutiny governing payment of professionals' fees and costs of administration provided for in the Bankruptcy Code and Bankruptcy Rules. See, 11 U.S.C. §§ 328, 330, 331 and 503(b); B.R. 2016.
E. Possible Duplication of Efforts. The Debtor maintains that the two Investment Banking Firms are necessary; they will be dealing with distinct, yet concededly intertwined, types of corporate debt. Even though one firm might be able to competently deal with the situation in its entirety, the Debtor feels that its genuinely complex financial structure and convoluted inter-company debt situation justifies its desire to use the best available resource for a timely reorganization and that means using two firms. Moreover, the Debtor argues that the two Investment Banking Firms, working as a "team,"[23] have invested substantial lead time, are each intimately familiar with the particular type of debt *461 with which they plan to work, and, if one firm is forced to take upon itself the entire burden, a prompt and hopefully successful reorganization will necessarily be delayed by the imposition of a "learning curve." Finally, the Debtor states that the total anticipated compensation to both Investment Banking Firms performing their respective distinct tasks is comparable to that which would be legitimately earned by one firm doing all the work.
This Court, after initial hearing, has yet to be persuaded that the services of both Investment Banking Firms are now necessary. Furthermore, this Court is not persuaded that many of the tasks to be performed by Smith Barney and DLJ, as described, are not more properly the duty of the Debtor's attorneys. See, generally, In re Glosser Bros. Inc., 102 B.R. 38, 41 (Bankr.W.D.Pa.1989). Absent the Debtor demonstrating an actual need and benefit to hiring both Investment Banking Firms and a scheme for elimination of, or limitations on, duplication of work, the Court will not employ both firms.
III. Conclusion.
For investment bankers and certain other professionals, the line between reasonable and acceptable employment and fee agreements and unreasonable, or unacceptable, agreements is not defined or clearly drawn by the Bankruptcy Code. Case law is not much additional help.
This Court elects to be cautious in approving the Investment Bankers' engagement and fee agreements, in part, because of the precedent it sets in this case and others.
Whenever special terms and conditions are requested [in employment agreements], it is important for the court to focus upon them because, once approved, they are difficult to unravel. Changes are permitted only if the terms and conditions originally approved `prove to have been improvident in light of developments not capable of being anticipated at the time of the fixing of such terms and conditions.'
C & P Auto Transport, supra at 685 (quoting 11 U.S.C. § 328(a)). Accord, In re Cal Farm Supply Co., 110 B.R. 461, 465 (Bankr.E.D.Cal.1989).
The Court concludes that under the circumstances of this case, the Debtor-in-Possession cannot employ the two Investment Banking Firms because of important deficiencies in, or unreasonable terms of, their employment and fee agreements. The Investment Bankers and Debtor are entitled to reconsideration of this matter, however, the Investment Banking Firms, must first (1) agree to comply with and be subject to standard bankruptcy fee practices and procedures, (2) modify their indemnification arrangements to comport with those putting them on a more comparable basis with other professionals employed by Debtor, (3) make alternative provisions for potential award of success, or bonus, fees, (4) make suitable arrangements for payment of their own attorneys' fees, and (5) make a more persuasive showing of the need and benefit of employing two investment banking firms.
Accordingly, it is ORDERED as follows:
1. The "Application of Debtor for Authority to Employ Smith Barney, Harris Upham & Co. Inc." filed June 21, 1991 is hereby DENIED.
2. The "Application of Debtor for Authority to Employ Donaldson, Lufkin & Jenrette Securities Corporation" filed June 21, 1991 is hereby DENIED.
3. The "Supplemental Application of Debtor for Authority to Employ Smith Barney, Harris Upham & Co. Inc." filed July 19, 1991 is hereby DENIED.
NOTES
[1] EQJ Partnership and the Equitable Life Assurance Society of the United States are collectively referred to as "Equitable."
[2] Additional pleadings filed and considered include: "Supplemental Application of Debtor for Authority to Employ Smith Barney, Harris Upham & Co. Inc." ("Smith Barney Supplemental Application") and "Memorandum of Law" in support thereof filed July 19, 1991, "Statement of Donaldson, Lufkin & Jenrette Securities Corporation in Support of Application for Retention" filed July 23, 1991, and responses to both applications filed by the "Bank Group" on June 26, 1991. The "Bank Group" consists of the following institutions: First National Bank of Chicago, First National Bank of Boston, Manufacturers Hanover Trust Co., Wells Fargo Bank, N.A., The Toronto Dominion Bank, Continental Bank, N.A., NCNB Texas National Bank, and First Wisconsin National Bank of Milwaukee.
[3] Smith Barney and DLJ are presently working for the Debtor under an interim Order entered June 27, 1991 and extended August 12, 1991, pending submission and approval of employment agreements whose terms comply with the guidelines set forth herein.
[4] A hearing was held on July 29, 1991, at which time this Court denied from the bench both of the applications without prejudice and reserved the right to issue this formal written opinion.
[5] The Debtor is a multi-level holding company with over 50 subsidiaries, primarily in the resort, meatpacking, and media industries.
[6] At the Court's urging, the Smith Barney Supplemental Application amended the original Smith Barney Application by removing the condition that the $3,000,000 would also be earned even in a conversion to and liquidation under Chapter 7.
[7] Estimated by the Debtor to be $30,000 for the period June 11, 1991 to July 31, 1991 and "no more than $7,500 per month" thereafter.
[8] Smith Barney suggests that it is willing to provide a reciprocal indemnification provision which provides that Smith Barney will indemnify the Debtor against all losses, claims, damages, liabilities, and expenses arising out of or based upon any untrue or alleged untrue statement of a material fact or any omission or alleged omission to state a material fact in certain documents; provided, however, that the aggregate amount of the indemnification shall not exceed the amount of the fees actually received by Smith Barney.
[9] The DLJ Application contains this express provision even though counsel for the Debtor stated at the July 29, 1991 hearing that DLJ will not seek reimbursement of its attorney fees. DLJ Application, p. 3, ¶ 8.
[10] Smith Barney cites the following cases in support of its argument: In re Frontier Airlines, Inc., 74 B.R. 973, 974 (Bankr.D.Colo.1987) (allowed counsel to be paid on monthly basis with subsequent application for court approval of fees); In re Kaiser Steel Corp., 74 B.R. 885, 892 (Bankr.D.Colo.1987) (same); In re Knudsen, 84 B.R. 668, 671 (9th Cir.BAP 1988) (agrees with Frontier Airlines and Kaiser Steel in controlled liquidation cases); In re Shelly's, Inc., 91 B.R. 803, 807 (Bankr.S.D.Ohio 1988) (same, in dicta).
[11] One court dealt with this argument as follows:
Dean Witter may decide that it does not want to do bankruptcy work. If it does want to do bankruptcy work, it must live with the terms of employment as authorized by the court in which the case is pending. Furthermore, Dean Witter may not withdraw without Court approval, which could be denied at this point in the case.
In re Mortgage & Realty Trust, 123 B.R. 626, 631 (Bankr.C.D.Cal.1991).
[12] The Hillsborough Holdings court further observed,
This Court is not unaware that the world of investment banking is indeed a strange but wonderful place where a large amount of money is spent, generally at the expense of debtors in Chapter 11. Nevertheless, this Court is satisfied that in the absence of time record, it is almost impossible to determine the reasonable value of the services rendered.
In re Hillsborough Holdings Corp., 125 B.R. 837, 840 (Bankr.M.D.Fla.1991).
[13] Certain concessions in these reporting standards may be necessary to account for the time of some individuals in the investment banking firms. Alternative means of accounting for such "hidden resources" as trading floor personnel need, perhaps, to be developed.
[14] Smith Barney refers this Court to unreported decisions in the following bankruptcies: Eastern Air Lines, Inc. (Lifland, J.; S.D.N.Y.); Continental Airlines, Inc. (Balick, J.; D.Del.); Greyhound Lines, Inc. (Schmidt, J.; S.D.Tex.); Siliconix Incorporated (King, J.; N.D.Cal.). This Court adopts the following response: "The Court is not persuaded by this type of authority. Unreported bankruptcy court decisions have very little weight as precedent. When a bankruptcy judge wants a decision to serve as precedent, the judge publishes the decision. Unpublished decisions do not establish case law and do not serve as precedent." Mortgage & Realty Trust, supra at 630.
[15] While Smith Barney cited various Chapter 11 cases in which this type of indemnification was allowed, they failed to cite In re Allegheny Int'l, Inc., 100 B.R. 244 (Bankr.W.D.Pa.1989) to this Court; a case in which Smith Barney was a party and the judge issued a written opinion rejecting Smith Barney's position.
[16] Both of the indemnity provisions at issue except from their scope acts amounting to negligence and "misfeasance." Black's Law Dictionary describes misfeasance as "[t]he improper performance of some act which a man may lawfully do. `Nonfeasance' means the omission of an act which a person ought to do; `misfeasance' is the improper doing of an act which a person might lawfully do; and `malfeasance' is the doing of an act which a person ought not to do at all." Black's Law Dictionary 902 (5th ed. 1979). The inclusion of this term by the Investment Bankers does not remove the instant applications from the scope of the cogent analysis by the Allegheny court.
[17] Although Smith Barney has proposed to offer a reciprocal indemnity arrangement, the concession does not go far enough. In addition to the shortcomings cited above, this Court cannot ignore that Smith Barney also intends to limit their liability to a disgorgement of fees previously received. See, In re Glosser Bros. Inc., 102 B.R. 38, 42 (Bankr.W.D.Pa.1989).
[18] The sum of $1,000,000 to Smith Barney upon the receipt of an agreement in principle with security holders, $3,000,000 to Smith Barney upon the confirmation of a Plan, and $1,000,000 to DLJ upon consummation of the proposed exchange offers.
[19] Other appropriate synonyms might include: "premium," "reward," "bonus," or "enhancement." See, Matter of Aminex Corp., 15 B.R. 356, 362 n. 33 (Bankr.S.D.N.Y.1981) (an Act case).
[20] Smith Barney argues that the success fee is actually more akin to a "contingency fee" than a bonus because the goal is known. Whatever label is put upon the anticipated compensation, this Court's analysis remains the same.
[21] The existence of the significant success fees is illustrative of a pervasive problem with the Employment Agreements as negotiated. The standards of reasonableness and excessiveness are not only quantitative, but qualitative in nature. The Bankruptcy Code provisions "protect against the danger that a prospective debtor, willing to do whatever necessary to secure the counsel of its choice, may bargain away more than is reasonable ... unknowingly or otherwise. [Citation omitted.] The complexity of a prospective debtor's financial affairs and the business sophistication incident thereto may well render such a debtor more vulnerable not less, to making concessions deemed essential to obtain[ing] counsel sufficiently qualified to manage and complete a successful reorganization." In re NBI, Inc., 129 B.R. 212 (Bankr. D.Colo.1991) (emphasis added). Moreover, "[f]reedom of contract is necessarily limited in the bankruptcy context ... debtors are not at liberty to bargain away the rights and responsibilities of a debtor-in-possession, nor the protections afforded creditors and other parties in interest in a bankruptcy case, under the guise of freedom of contract. They cannot evade the jurisdiction of the Court by choice, nor limit exercise of the Court's discretion by fiat. They cannot negate or defer application of the Bankruptcy Code and Rules by design." Id. Accord, In re Chas. A. Stevens & Co., 109 B.R. 853, 854 (Bankr.N.D.Ill.1990); Glosser Bros., supra at 42.
[22] The Court is not persuaded by the Debtor's and Investment Bankers' argument that Section 328(a) allows the Court the option to reduce the contracted-for "success fees," at the conclusion of the case and this assures a "reasonable fee." Careful examination of the language in Section 328(a) reveals, at least arguably, a qualified and limited Court option to reduce fees at the conclusion of the case, i.e., fees may be reduced if "such terms prove to have been improvident in light of developments not capable of being anticipated at the time of the fixing of such terms and conditions."
[23] Interestingly, the Debtor formerly utilized the services of numerous investment banking firms, presumably all performing necessary services to the Debtor, and has now decided that these two Investment Banking Firms form a sufficient "team" for its present needs.
| {
"pile_set_name": "FreeLaw"
} |
People v Cortes (2016 NY Slip Op 03994)
People v Cortes
2016 NY Slip Op 03994
Decided on May 24, 2016
Appellate Division, First 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 May 24, 2016
Sweeny, J.P., Renwick, Moskowitz, Kapnick, Gesmer, JJ.
1229 4641/08
[*1]The People of the State of New York, Respondent,
v Jaime Cortes, Defendant-Appellant.
Seymour W. James, Jr., The Legal Aid Society, New York (Adrienne M. Gantt of counsel), for appellant.
Cyrus R. Vance, Jr., District Attorney, New York (Jeffrey A. Wojcik of counsel), for respondent.
Order, Supreme Court, New York County (Thomas Farber, J.), entered on or about September 11, 2013, which adjudicated defendant a level two sex offender pursuant to the Sex Offender Registration Act (Correction Law art 6-C), unanimously affirmed, without costs.
The court properly exercised its discretion in granting an upward departure based on egregious conduct that was not adequately accounted for in the risk assessment instrument, and that outweighed the mitigating factors cited by defendant (see People v Gillotti, 23 NY3d 841 [2014]). To the extent defendant is challenging the factual predicate for the departure, that claim is unpreserved and without merit (see e.g. People v Irizarry, 124 AD3d 429 [1st Dept 2015], lv denied 25 NY3d 907 [2015]).
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: MAY 24, 2016
CLERK
| {
"pile_set_name": "FreeLaw"
} |
107 F.3d 862
Leroy Mathisv.Lt. Rager, Sgt. Adams, Officer Verbosky, as Correctional Officers
NO. 96-3624
United States Court of Appeals,Third Circuit.
Feb 13, 1997
Appeal From: W.D.Pa. ,No.95cv00057j ,
Smith, J.
1
Affirmed.
| {
"pile_set_name": "FreeLaw"
} |
{
"pile_set_name": "FreeLaw"
} |
|
520 F.3d 737 (2008)
Christina SOLTYS and Danuta Pauch, Plaintiffs-Appellants,
v.
Yvonne COSTELLO, Defendant-Appellee.
No. 06-3175.
United States Court of Appeals, Seventh Circuit.
Argued September 21, 2007.
Decided March 25, 2008.
*738 *739 Benjamin O. Nwoye (argued), Nwoye & Associates, Chicago, IL, for Plaintiffs-Appellants.
Garrett V. Conover (argued), Bokota Ehrhardt McCloskey Wilson & Conover, Merrillville, IN, for Defendant-Appellee.
Before EASTERBROOK, Chief Judge, and KANNE and ROVNER, Circuit Judges.
KANNE, Circuit Judge.
Christina Soltys and Danuta Pauch were seriously injured in a car accident caused by Yvonne Costello, who, at the time, was driving under the influence of alcohol. Soltys and Pauch sued Costello, who admitted liability; trial was limited to the amount of damages owed to Soltys and Pauch. The district court denied Soltys and Pauch's eleventh-hour motion to amend their complaint to add a count for punitive damages. After the jury returned its verdict, the district court denied Soltys and Pauch's motion for a new trial. The district court did not abuse its discretion on either of these issues, so we affirm.
I. HISTORY
The facts of the accident underlying this case are simple enough: in the early-morning hours of February 27, 2004, Soltys and Pauch were traveling north on *740 U.S. Highway 41 in Hammond, Indiana, when their vehicle was struck by an oncoming vehicle driven by Costello. Costello, who had been driving south on the highway, crossed the center line and caused a head-on collision. Both Pauch and Soltys suffered serious injuries. In a later criminal proceeding arising out of the incident, Costello pled guilty to driving under the influence.
The facts of the litigation surrounding the accident, on the other hand, are muddled and chock-full of attorney blunders. Soltys and Pauch hired attorney Benjamin Nwoye, who filed a complaint in federal court against Costello in June 2004, on the basis of diversity jurisdiction. The complaint included negligence counts, and averred that Costello was legally intoxicated at the time of the accident. Unfortunately for Soltys and Pauch, Nwoye made numerous mistakes after the pleading stage of the litigation, some of which led to the imposition of sanctions against Soltys and Pauch. But Nwoye was not the only attorney committing errors in the case. Counsel for Costello committed a grand oversight by failing to file an answer until nearly two years after the suit commenced.
Part of the confusion for the attorneys on both sides stemmed from an early (albeit routine) change of venue requested by Costello from the Northern District of Illinois to the Northern District of Indiana. According to Nwoye, when the case was transferred he was not yet admitted to practice in Indiana, and he could not access the pertinent documents on the court's electronic system. Nwoye assumed that Costello had filed an answer, and he proceeded with his representation of Soltys and Pauch even though he had no knowledge of the defendant's position. As for Costello's attorney, he inherited the case from an Illinois law firm upon transfer; he, too, thought the complaint had been answered and he proceeded with discovery.
Between the scheduling conference on February 2, 2005, and December 12, 2005 (the originally-scheduled trial date), Nwoye defaulted in responding to discovery requests. He was ordered to disclose Soltys's and Pauch's medical reports, expert witnesses, and expert reports, but failed to do so. This, in turn, affected Costello's discovery obligations; Costello filed a motion seeking an extension of time to disclose her expert witnesses because she was still waiting on the plaintiffs' disclosure of the same. In early July, the district court ordered Soltys and Pauch to satisfy their discovery obligations within the next two-and-a-half weeks. But the plaintiffs and Nwoye did nothing.
Costello forced Nwoye's hand in October by filing a motion to dismiss on the ground that he still had not complied with discovery orders. Shortly thereafter, Costello filed a motion for sanctions, again because of Nwoye's obstinance with respect to discovery. Consistent with previous behavior, Nwoye did not respond to either of these motions. The district court gave Nwoye additional time to respond until the end of November. But it was not until January 2006 that Nwoye finally responded to the pending motions. In that response, Nwoye explained that a death in his family had kept him from complying with the discovery schedule. However, Nwoye failed to explain the exact dates he was away from work, why he did not ask for an extension, or why he delayed so long in responding to the motions.
The district court did not-dismiss the case, but it did impose sanctions on Soltys and Pauch on January 12, 2006, for their refusal (that is, their attorney's refusal) to respond to discovery requests. As its sanction, the district court excluded "all plaintiffs' experts, expert reports, and personal *741 medical records from the evidence pursuant to [Fed.R.Civ.P.] 37(b)(2) except the 43 pages [already] produced in discovery." Trial was set for May 30, 2006.
In the spring of 2006 after discovery and shortly before trial Nwoye reviewed the court record and saw that there was no answer. He contacted Costello's attorney and their exchange revealed to both parties that Costello had never filed an answer. On March 24, 2006, Nwoye filed a motion for default judgment, based on the lack of an answer. That same day, Costello filed her answer, in which she admitted liability for the accident. The district court denied Nwoye's motion for default judgment, characterizing Costello's failure to timely file an answer as a "technical deficiency."
About a month before trial, Costello filed a motion in limine, seeking to exclude at trial any evidence of her conviction for driving under the influence. Her position was that Soltys and Pauch's complaint only sought compensatory damages, and as such, evidence of her conviction would be prejudicial and irrelevant. Once again, Nwoye did not file a response to Costello's motion.
After the final pretrial conference, Nwoye filed a motion to amend Soltys and Pauch's complaint to add a claim for punitive damages. In this motion, Nwoye opposed Costello's motion in limine. He argued that Costello's intoxication was relevant to the new claim for punitive damages, so it should not be excluded at trial. The district court denied Nwoye's motion to amend, without explanation, but it later explained the denial in a post-trial opinion and order. The court decided that Nwoye had unduly delayed in filing the motion to amend and that Costello would be prejudiced if the complaint was amended just two weeks before trial.
At trial, Soltys and Pauch were prohibited from testifying about medical expenses that had been excluded by the January 12 sanction. Soltys and Pauch refrained from such testimony, but Costello's attorney referenced the excluded evidence in his opening statement. Specifically, Costello's attorney told the jury: "The Court has made several rulings before this trial about what evidence you will hear and will not hear . . . you must suspend that desire to have all the information because not all the information available in this case is going to be presented to you in evidence." Nwoye objected to this, and the court sustained his objection. The court specifically instructed Costello's attorney to comment only on the admissible evidence.
The evidence at trial showed that Soltys and Pauch suffered serious injuries. Pauch could not work for two weeks due to back and leg injuries. Soltys broke both hands and was in casts for three months. This made it difficult for her to continue as the sole caregiver for her child and her elderly mother. Both women had medical expenses.
In Costello's closing argument, her attorney repeatedly drew the jury's attention to the lack of evidence produced by Soltys and Pauch at trial. He pointed out that doctors did not testify, that medical records were absent, and that there was no accident reconstructionist. He called the plaintiffs' evidence "flimsy." Nwoye did not object to any of Costello's closing statements pertaining to the lack of evidence.
The judge told the jury twice that attorneys' comments are not evidence and should not be weighed as such. The judge instructed the jury not to consider exhibits or testimony that was not admitted into evidence, and not to consider "testimony to which an objection was sustained." Additionally, the jury was told not to "speculate or draw an inference from the fact that one attorney made such an objection."
*742 After deliberation, the jury returned a $10,000 verdict in favor of Soltys, and a $5,000 verdict for Pauch Costello's attorney had suggested these amounts to the jury, while Nwoye had argued that Soltys deserved at least $300,000 and Pauch was due at least $100,000. Nwoye then made a motion for a new trial based on (1) the court's denial of the motion to amend the complaint, and (2) the comments of Costello's attorney during his opening and closing statements that related to the lack of medical evidence. The district court denied the motion on these two grounds, but lamented that the verdicts for Soltys and Pauch were clearly "inadequate" and "unfair." The court commented that, "for some inexplicable reason, the plaintiffs' attorney did not request a new trial based upon the amount of the jury verdict."
II. ANALYSIS
On appeal, Soltys and Pauch challenge the district court's denial of their motion to amend their complaint to add a claim for punitive damages. They also argue that they were denied a fair trial because of statements made by Costello's attorney during his opening and closing statements, which alluded to the pretrial sanction.
A. Denial of the motion to amend the complaint
After Costello filed her answer and admitted liability due to her intoxication, Soltys and Pauch requested leave to amend their complaint to add a count for willful and wanton conduct, a prayer for punitive damages, and a claim for property damages. In response, Costello argued that she would be prejudiced if the the amendments were allowed, because she had made the tactical decision of admitting liability specifically to avoid punitive damages and to limit the issue at trial to compensatory damages.
As an initial matter, we note that it is unclear whether Soltys and Pauch even needed to amend their complaint in order to pursue punitive damages from Costello. Federal Rule of Civil Procedure 54(c) provides that every final judgment (other than default judgments) "should grant the relief to which each party is entitled, even if the party has not demanded that relief in its pleadings." Fed.R.Civ.P. 54(c). Thus, Rule 54(e) contemplates an award of punitive damages if the party deserves such relief whether or not a claim for punitive damages appears in the complaint. Rule 9(g), on the other hand, requires that "[i]f an item of special damage is claimed, it must be specifically stated" in the complaint. Fed.R.Civ.P. 9(g).
Our court has not squarely addressed the question of whether punitive damages are considered "special damages," which must be specifically pled in a complaint, but some of our sister circuits have considered the issue. See, e.g., Newell v. Wis. Teamsters Joint Council No. 39, No. 05-C-552, 2007 WL 484594, slip op. at 2-5 (E.D.Wisc. Sept. 28, 2007); see also Bowles v. Osmose Utils. Servs., 443 F.3d 671, 675 (8th Cir.2006); Scutieri v. Paige, 808 F.2d 785, 790-93 (11th Cir.1987); Guillen v. Kuykendall, 470 F.2d 745, 748 (5th Cir.1972). But given our stance that "district courts should afford the prevailing party the relief to which it is entitled without regard to errors in the pleadings," Old Republic Ins. Co. v. Employers Reinsurance Corp., 144 F.3d 1077, 1080 (7th Cir.1998), the fundamental legal error in this case may have been the parties' and the district court's shared assumption that a prayer for punitive damages had to appear in the complaint in order to sustain an award of such damages. If that assumption was mistaken, then Nwoye had solid grounds to oppose the motion in limine that sought to bar evidence of Costello's intoxication at trial the intoxication certainly would have been relevant to Soltys's *743 and Pauch's recovery of punitive damages. But, alas, Nwoye did not raise this challenge below or on appeal, so we have no occasion to explore the interplay of Rule 54(c) and Rule 9(g) with respect to punitive damages. Instead, we will merely consider, as Nwoye asks us to, whether it was an abuse of discretion for the district court to deny Soltys and Pauch's motion for leave to amend their complaint.
We review the district court's denial of a motion for leave to amend a complaint under the highly deferential abuse of discretion standard. Trustmark Ins. Co. v. Gen. & Cologne Life Re of Am., 424 F.3d 542, 553 (7th Cir.2005). "[T]he decision to grant or deny a motion to file an amended pleading is a matter purely within the sound discretion of the district court." Brunt v. Serv. Employees Int'l Union, 284 F.3d 715, 720 (7th Cir.2002). We will overturn a denial of a motion for leave to amend a complaint only if the district court "abused its discretion by refusing to grant the leave without any justifying reason." Id.; see also J.D. Marshall. Int'l Inc. v. Redstart, Inc., 935 F.2d 815, 819 (7th Cir.1991).
Federal Rule of Civil Procedure 15(a) provides that if a party is not entitled to amend a pleading as a matter of course, it may amend "with the opposing party's written consent or the court's leave." The court "should freely give leave when justice so requires." Fed.R.Civ.P. 15(a)(2). "Although the rule reflects a liberal attitude towards the amendment of pleadings, courts in their sound discretion may deny a proposed amendment if the moving party has unduly delayed in filing the motion, if the opposing party would suffer undue prejudice, or if the pleading is futile." Campania Mgmt. Co. v. Rooks, Pitts & Poust, 290 F.3d 843, 848-49 (7th Cir.2002). Delay on its own is usually not reason enough for a court to deny a motion to amend. Dubicz v. Commonwealth Edison Co., 377 F.3d 787, 792-93 (7th Cir.2004); Perrian v. O'Grady, 958 F.2d 192, 194 (7th Cir.1992). But "`the longer the delay, the greater the presumption against granting leave to amend.'" King v. Cooke, 26 F.3d 720, 723 (7th Cir.1994) (quoting Tamari v. Bache & Co., 838 F.2d 904, 908 (7th Cir. 1988)).
The district court based its denial of the leave to amend largely on the long delay. It explained that the amended complaint was filed over 14 months after the original complaint, and "after the close of discovery, the [defendant's] motion in limine admitting liability, the filing of the final pretrial order, and the final pretrial conference." The trial date had already been postponed once because of Nwoye's conduct. Additionally, the court decided that it "would have been unduly prejudicial to the defendant to permit the amendment two weeks before the scheduled trial."
We agree with the district court that the motion to amend was unduly delayed and could have further deferred the already postponed trial. Soltys and Pauch had alleged in their original complaint that Costello was intoxicated at the time of the accident. With this allegation, Nwoye could have sought to amend the complaint much earlier, to add a punitive damages count. As far as we can tell, Nwoye simply seemed to have "`mistakenly or inadvertently' failed to address everything in [the] original complaint," Conyers v. Abitz, 416 F.3d 580, 586 (7th Cir.2005), and "failed to act with diligence," Campania, 290 F.3d at 848.
"Eleventh hour additions . . . [are] bound to produce delays that burden not only the parties to the litigation but also the judicial system and other litigants.'" Perrian, 958 F.2d at 195 (quoting Campbell v. Ingersoll Milling Mach. Co., 893 F.2d 925, 927 (7th Cir.1990).) Nwoye had already caused a postponement of the trial *744 because of discovery violations; we do not find that the district court abused its discretion by denying the motion for leave to amend the complaint. See Campania Mgmt. Co., 290 F.3d at 850.
In light of this holding, we pause to note that we do not credit Costello's argument that her "tactical" choice of admitting fault "in an effort to render the fact of her intoxication irrelevant" would have been thwarted and thus Costello would have been prejudiced had the district court allowed Nwoye to amend the complaint. Costello clearly was to blame for the accident; she was convicted in a criminal proceeding of driving under the influence. To have denied fault would have been dishonest and, for her attorney, likely a breach of his ethical duties. Costello's success here had more to do with poor lawyering by Nwoye, and possibly with a mistaken assumption shared by all involved, than it had to do with her own, arguably sanctionable, "tactical" maneuvering. We do not base our decision upholding the district court's denial of Soltys and Pauch's motion to amend the complaint on the theory that Costello would have been unduly prejudiced because she had to defend against a punitive-damages count. Any prejudice she might have suffered because of such a claim was due her. But, looking back, we find no abuse of discretion in the district court's denial of Soltys and Pauch's motion to amend their complaint on the eve of trial.
B. Denial of the motion for a new trial
Soltys and Pauch argue that they were denied a fair trial because Costello's attorney (1) alluded, in his opening statement, to the district court's January 12 order prohibiting the plaintiffs' submission of additional medical records, and (2) commented on, in his closing argument, the lack of medical evidence introduced at trial to support Soltys and Pauch's claims. Because of these comments, Nwoye filed a motion for a new trial, which the district court denied. We review the district court's denial of a motion for a new trial for abuse of discretion. Chlopek v. Fed. Ins. Co., 499 F.3d 692, 699 (7th Cir.2007).
With respect to the statements made by Costello's attorney in his opening statement, the district court agreed that it was improper for the attorney to have brought attention to the discovery defects, but decided that the misconduct was not prejudicial to Soltys and Pauch. Any harm that may have occurred because of the opening statements suggesting that some evidence had been excluded by the judge was undone when the court sustained Nwoye's objection and admonished Costello's attorney to stick to the admissible evidence. See Miksis v. Howard, 106 F.3d 754, 764 (7th Cir.1997). The court's instructions to the jury to disregard issues for which objections had been sustained likewise negated any possible prejudice to Soltys and Pauch. See Jones v. Lincoln Elec. Co., 188 F.3d 709, 732 (7th Cir.1999) ("Moreover, any potential prejudice to [plaintiff] by defense counsel's argument . . . was lessened considerably by the fact that the district court instructed the jury that statements and arguments made by counsel were not to be considered evidence and that the jury slfould base its verdict solely on the evidence admitted in the case. We have repeatedly found that jury instructions of this sort mitigate any prejudicial effect of potentially improper remarks made by counsel. . . ."); see also Whiting v. Westray, 294 F.3d 943, 946 (7th Cir.2002).
We presume that juries follow the instructions given them by the court. Chlopek, 499 F.3d at 702. There is no indication here that the jury was unable or unwilling to follow the court's instructions to refrain from treating the testimony of the attorneys as evidence, and to avoid *745 drawing inferences from sustained objections. The opening statements made by Costello's attorney, though improper, were, nonetheless, not prejudicial.
Soltys and Pauch also challenge the statements made by Costello's attorney in his closing argument. However, Nwoye did not object to these statements at the time, so this part of Soltys and Pauch's challenge is waived. Miksis, 106 F.3d at 764 ("Because defendants did not object to any other comments, they did not preserve them for appellate review."); Gonzalez v. Volvo of Am. Corp., 752 F.2d 295, 298 (7th Cir.1985).
Even had Nwoye tendered an appropriate objection when the statements were made, the challenge would still fail because the statements were not improper. Unlike Costello's attorney's improper comments during his opening statement, the closing-argument comments pointed to the lack of evidence offered by Soltys and Pauch, without suggesting why the evidence was not offered (that is, because of a discovery sanction). Attorneys have more leeway in closing arguments to suggest inferences based on the evidence, highlight weaknesses in the opponent's case, and emphasize strengths in their own case. Jones, 188 F.3d at 731. In his closing argument, Costello's attorney pointed out the weaknesses in Soltys and Pauch's case in a manner that did not draw attention to the court's sanction. The comments, therefore, were not improper, and would not warrant a new trial for Soltys and Pauch.
Finally, even if the statements made in closing had been improper, Soltys and Pauch would still not be entitled to a new trial. "`This court has repeatedly explained that improper comments during closing argument rarely rise to the level of reversible error.'" Miksis, 106 F.3d at 764 (quoting Doe v. Johnson, 52 F.3d 1448, 1465 (7th Cir.1995)). As is the case with the improper statements made in the opening statement, curative instructions to the jury mitigate harm that may otherwise have resulted from improper comments during closing argument. See Jones, 188 F.3d at 732. The judge twice instructed the jury that attorney statements did not constitute evidence; we presume that the jury obeyed the court, see Chlopek, 499 F.3d at 702.
Because the district court remedied any harm done by Costello's attorney in the opening statement with curative instructions to the jury, and because the statements by Costello's attorney in the closing argument were not improper, we do not find an abuse of discretion in the district court's denial of Soltys and Pauch's motion for a new trial.
The outcome of this case seems unfortunate, as the district court noted. Two individuals were hit by an intoxicated driver and suffered serious injuries but were denied proper relief because their attorney did not comply with discovery orders and did not raise valid legal issues that would likely have led to adequate relief for his clients. But, being constrained as we are to review only the issues properly before us on appeal, we cannot remedy this situation. As the district court noted, "any blame lies with the plaintiffs' attorney." If Soltys and Pauch have any hope of securing additional relief, they must look to Benjamin Nwoye.
III. CONCLUSION
The judgment of the district court is AFFIRMED.
| {
"pile_set_name": "FreeLaw"
} |
Filed 1/12/15 in re Dontae R. CA2/3
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 THREE
In re DONTAE R., a Person Coming Under B253356
the Juvenile Court Law.
_____________________________________ (Los Angeles County
Super. Ct. No. MJ22185)
THE PEOPLE,
Plaintiff and Respondent,
v.
DONTAE R.,
Defendant and Appellant.
APPEAL from a judgment (order of wardship) of the Superior Court of Los
Angeles County,
Nancy S. Pogue, Judge. Affirmed.
Lynette Gladd Moore, Esq., for Defendant and Appellant.
Kamala D. Harris, Attorney General, Lance E. Winters, Assistant Attorney
General, Steven D. Matthews, Analee J. Brodie and Garett Gorlitsky, Deputy Attorneys
General, for Plaintiff and Respondent.
_____________________
Dontae R., a minor, appeals from an order of wardship entered following a
determination he committed a lewd act upon a child (Welf. & Inst. Code, § 602;
Pen. Code, § 288, subd. (a)). The court ordered appellant suitably placed. We affirm the
judgment (order of wardship).
FACTUAL SUMMARY
Viewed in accordance with the usual rules on appeal (In re Dennis B. (1976)
18 Cal.3d 687, 697), the evidence presented at the adjudication established as follows.1
On February 23, 2013, six-year-old Joshua D. (Joshua) lived with his mother R.D. (R.) in
her Lancaster home. Appellant, who was 13 years old and R.’s nephew, also lived there.
R. testified as follows. Prior to about 3:45 p.m. on February 23, 2013, Joshua, R.,
and appellant were in R.’s bedroom watching television. About 3:45 p.m., R. fell asleep
on her bed in her bedroom after putting her niece to sleep.
About 4:00 p.m., R. awoke. Joshua and appellant were at the foot of the bed and
Joshua was “like on his knees” over appellant. Joshua was orally copulating appellant.2
R. testified when she first awoke and saw appellant’s face, “He looked like he was scared
because he just got caught.” When R. awoke, she asked, “what are you guys doing?” and
appellant replied, “Nothing.”
R. saw Joshua’s head rising over appellant’s lap, and she jumped up. R. testified
when she jumped up, “[appellant] was pulling his shirt over – my son just had a scared
little face.” Appellant was wearing a T-shirt and cargo shorts.
Appellant’s shirt was pulled down enough to cover his lap, and there was a bulge
in the shirt. The bulge was caused by appellant’s erect penis. When appellant was
1
At the beginning of the adjudication, before the presentation of evidence, appellant
admitted he was born on January 21, 2000. The facts set forth in this Factual Summary
are based on the evidence presented during the People’s case-in-chief alone. In light of
the issue presented in this appeal, there is no need to recite the defense or rebuttal
evidence.
2
Appellant concedes the “prosecution proved the commission of the offense
through the testimony of Joshua and [R.].” We accept the concession.
2
pulling his shirt down, his hands were holding his shirt and his covered erect penis was
between his hands. The prosecutor asked if R. remembered what, besides the bulge, she
saw underneath the shirt. R. replied no and added, “He never would show anything . . . .”
When R. saw what was happening, she became upset, wanted to know what was going
on, and spoke loudly. Joshua’s eyes were big after R. arose, said something, and
approached him.
R. told appellant to sit there and she was going to get his mother, Lillian S.
(Lillian). Lillian lived in the home and was in the living room. As R. went to get Lillian,
appellant jumped up, then appellant and Joshua “jumped up all the way up.” Appellant
was fixing his pants, buttoning them.
Immediately before Lillian entered the bedroom, R. asked appellant what
happened. Appellant replied, “Nothing.” R. did not believe appellant. The following
colloquy later occurred between the prosecutor and R.: “Q. Did [appellant] change his
story with you? [¶] A. Meaning? [¶] Q. Meaning did he – when you asked him
initially and he said nothing happened, did you later find out that that in fact was not
true? [¶] A. Yeah. [¶] Q. How was that? [¶] A. My son.” After R. located Lillian,
Lillian became angry, entered R.’s bedroom, grabbed appellant, and took him into the
bathroom. Lillian’s husband and her children also lived in the house.
Joshua testified as follows. Joshua had seen appellant’s penis three times.
Appellant had shown it to Joshua months prior to the adjudication. Appellant three times
told Joshua to orally copulate appellant. On February 23, 2013, Joshua was in R.’s
bedroom while she was sleeping. Appellant told Joshua to suck appellant’s penis and
Joshua complied once. Appellant’s penis was kind of hard. Joshua felt bad when
appellant asked Joshua to orally copulate appellant, and Joshua did not want to do it.
The next day, appellant told Joshua to drink Joshua’s urine. Appellant told Joshua
that Joshua could drink it twice. Joshua did and regurgitated. R. was not home at the
time. Appellant told Joshua to urinate in a cup and appellant made Joshua do so. The
prosecutor asked Joshua what appellant did to make Joshua do so, and Joshua testified,
3
“then [appellant] got the hot water and put it on my it [sic].” (During his testimony,
Joshua repeatedly referred to a penis as an “it.”)
Los Angeles County Sheriff’s Deputy Michael Gelardo testified he investigated
the February 23, 2013 incident. Joshua told Gelardo that appellant “made” Joshua “suck
[appellant’s] dick.”
ISSUE
Appellant claims there was insufficient evidence at the close of the People’s case-
in-chief appellant knew the wrongfulness of his act.
DISCUSSION
There Was Sufficient Evidence Based on the People’s Case-in-Chief Appellant Knew the
Wrongfulness of His Act.
1. Pertinent Facts.
Count 1 of appellant’s petition alleged the present offense. After the People
presented their case-in-chief, appellant, pursuant to Welfare and Institutions Code section
701.1, moved to dismiss the petition, in part on the ground the People had not proven, as
required by Penal Code section 26, paragraph One, that appellant knew the wrongfulness
of his act at the time of the offense. The court denied the motion. Following the
presentation of the defense and rebuttal evidence, appellant renewed his argument the
People had not proven the requisite knowledge of wrongfulness. The court found true
beyond a reasonable doubt appellant committed the alleged offense and the court
sustained the petition.
2. Analysis.
Appellant claims there was insufficient evidence at the close of the People’s case-
in-chief appellant knew the wrongfulness of his act. We reject the claim.
Penal Code section 26, paragraph One, states, “All persons are capable of
committing crimes except those belonging to the following classes: [¶] One--Children
under the age of 14, in the absence of clear proof that at the time of committing the act
charged against them, they knew its wrongfulness.” “Clear proof” is proof by clear and
convincing evidence. (In re Manuel L. (1994) 7 Cal.4th 229, 232 (Manuel L.).)
4
Penal Code section 26, paragraph One establishes a “ ‘presumption of a minor’s
incapacity.’ ” (People v. Lewis (2001) 26 Cal.4th 334, 378 (Lewis).) “However, ‘the
presumption of a minor’s incapacity [may] be rebutted by clear and convincing evidence’
that the minor defendant knew the act’s wrongfulness.” (Ibid.) The People bear the
burden of proof to satisfy the clear and convincing evidence standard of proof. (Manuel
L., supra, 7 Cal.4th at pp. 232, 234, 239.) This standard is not the standard of proof
beyond a reasonable doubt. (Id. at pp. 231, 233-234, 238.) Penal Code section 26,
paragraph One applies to proceedings under Welfare and Institutions Code section 602.
(In re Gladys R. (1970) 1 Cal.3d 855, 867.)
a. We Assume a Welfare and Institutions Code Section 701.1 Motion Lies to
Challenge Whether the People Have Proven a Minor Knew the Wrongfulness of the
Minor’s Acts for Purposes of Penal Code Section 26, Paragraph One.
Welfare and Institutions Code section 701.1 states, in relevant part, “At the
hearing, the court, on motion of the minor . . . , shall order that the petition be
dismissed . . . , after the presentation of evidence on behalf of the petitioner has been
closed, if the court, upon weighing the evidence then before it, finds that the minor is not
a person described by Section . . . 602.” (Italics added.) Courts have “held that [Welfare
and Institutions Code] section 701.1 is substantially similar to Penal Code section 1118
governing motions to acquit in criminal trials.” (In re Anthony J. (2004) 117 Cal.App.4th
718, 727, fn. omitted.)
Thus, when Welfare and Institutions Code section 701.1 applies, the juvenile court
must determine whether the burden and standard of proof have been satisfied based on
the People’s case-in-chief alone. The motion lies, for example, to permit a trial court to
determine whether the People have proven the elements of an offense beyond a
reasonable doubt. However, the fact Penal Code section 26, paragraph One applies to
Welfare and Institutions Code section 602 proceedings does not necessarily mean a
Welfare and Institutions Code section 701.1 motion lies to challenge, at the close of the
People’s case-in-chief, whether Penal Code section 26, paragraph One has been satisfied.
5
Appellant argues a motion pursuant to Welfare and Institutions Code section 701.1
lies in the juvenile court to challenge whether, based on the People’s case-in-chief alone,
the People have proven by clear and convincing evidence appellant had the knowledge of
wrongfulness required by Penal Code section 26, paragraph One. Respondent suggests
the contrary.3 Neither party cites controlling authority on this issue.
We assume without deciding a Welfare and Institutions Code section 701.1 motion
lies to permit a juvenile court to determine whether the People’s case-in-chief alone has
proven by clear and convincing evidence a minor had the knowledge required by Penal
Code section 26, paragraph One.
b. We Accept Appellant’s Concession That We Review Whether There Was
Sufficient Evidence of Clear Proof Appellant Knew the Wrongfulness of His Acts.
The “standard for review of the juvenile court’s denial of a motion to dismiss
[pursuant to Welfare and Institutions Code section 701.1] is whether there is substantial
evidence to support the offense charged in the petition.” (In re Man J. (1983)
149 Cal.App.3d 475, 482; In re Andre G. (1989) 210 Cal.App.3d 62, 66, fn. 5 [accord].)
The parties agree appellate review of the sufficiency of the evidence appellant had the
knowledge required by Penal Code section 26, paragraph One is governed by the
substantial evidence standard.
3
Respondent argues a Welfare and Institutions Code section 701.1 motion is like a
Penal Code section 1118 motion in that they both lie to challenge in the trial court
whether the People’s case-in-chief alone has proven the elements of an offense beyond a
reasonable doubt. Respondent therefore argues that because a minor’s knowledge of the
wrongfulness of the minor’s acts (required by Penal Code section 26, paragraph One) is
not an element of an offense, and because the above knowledge must be established only
by clear proof (not by proof beyond a reasonable doubt), a Welfare and Institutions Code
section 701.1 motion does not lie to challenge whether the People have proven that
knowledge. In support of respondent’s argument, respondent relies on, inter alia, People
v. Cottone (2013) 57 Cal.4th 269, but that case concluded that when determining the
admissibility of evidence of a minor’s unadjudicated sexual offense, the trial court
determines the preliminary question of whether, at the time the minor committed said
offense, the minor had the knowledge required by Penal Code section 26, paragraph One.
However, the present case does not involve an admissibility issue.
6
It is not clear the parties agree concerning the trial court standard of proof to
which the substantial evidence standard of appellate review relates. Appellant concedes
an appellate court must determine whether the People presented “substantial evidence
from which a juvenile court could conclude that there was clear proof that appellant
appreciated the wrongfulness of his conduct.”
However, appellant also cites authority for the proposition an appellate court
determines whether there is “ ‘substantial evidence . . . such that a reasonable trier of fact
could find the defendant guilty beyond a reasonable doubt.’ ” The latter is a more
demanding standard. Respondent too cites this more demanding standard. The parties do
not clearly explain how, if at all, this more demanding standard applies to appellate
review of the sufficiency of the evidence of the knowledge required by Penal Code
section 26, paragraph One. Neither party cites controlling authority governing a case
such as this, involving appellate review of a denial of a Welfare and Institutions Code
section 701.1 motion challenging whether the People proved by clear and convincing
evidence a minor had the knowledge required by Penal Code section 26, paragraph One.
We accept appellant’s concession an appellate court must determine whether the
People presented “substantial evidence from which a juvenile court could conclude that
there was clear proof [i.e., clear and convincing evidence] that appellant appreciated the
wrongfulness of his conduct.” Indeed, we conclude, for reasons discussed post, there was
substantial evidence of proof beyond a reasonable doubt appellant had the requisite
knowledge.
c. We Assume the Scope of the Evidence Subject to Our Appellate Review is
Limited to the Evidence Presented During the People’s Case-in-Chief.
The parties disagree concerning the scope of the evidence to be considered upon
appellate review of the sufficiency of the evidence of the knowledge required by Penal
Code section 26, paragraph One. Appellant argues an “appellate court must review the
evidence as it stood at the close of the prosecution’s case.” Respondent argues, “[w]hen
reviewing whether the evidence shows appellant understood the wrongfulness of his
conduct, this Court should be able to consider all of the evidence presented by the
7
prosecution.” Similarly, respondent argues, “The policies governing motions to dismiss
do not compel this Court to limit its review to the state of the evidence at the close of the
People’s case in chief.”
We assume without deciding the scope of the evidence properly considered upon
appellate review of the sufficiency of the evidence of the knowledge required by Penal
Code section 26, paragraph One is limited to the evidence presented during the People’s
case-in-chief and does not include defense or rebuttal evidence.
d. Application of the Law to This Case.
Having addressed the above threshold issues, we note the following. A minor’s
knowledge of the wrongfulness of the minor’s act for purposes of Penal Code section 26,
paragraph One may not be inferred from the commission of the act itself. (Lewis, supra,
26 Cal.4th at p. 378.) Moreover, a minor’s knowledge of the wrongfulness must often be
shown by circumstantial evidence. (In re Tony C. (1978) 21 Cal.3d 888, 900 (Tony C.).)
A “minor’s ‘age is a basic and important consideration [citation], and, as recognized by
the common law, it is only reasonable to expect that generally the older a child gets and
the closer [he] approaches the age of 14, the more likely it is that [he] appreciates the
wrongfulness of [his] acts.’ [Citation.]” (Lewis, at p. 378.) Other pertinent
considerations include the minor’s conduct, knowledge, and the attendant circumstances
of the crime, such as its preparation, the particular method of its commission, and
circumstances demonstrating a consciousness of guilt, such as concealment, or false
statements regarding the offense. (Cf. Id. at pp. 378-379; Tony C., at p. 900.)
Appellant argues the only evidence presented during the People’s case-in-chief
appellant knew the wrongfulness of his act for purposes of Penal Code section 26,
paragraph One was “Joshua’s mother’s statement that appellant appeared fearful when
confronted,” and this evidence did not address the issue of whether appellant knew the
wrongfulness of his act previously at the time of the offense. However, in the present
case, there was substantial evidence, based on the People’s case-in-chief alone, as
follows.
8
Appellant was nearly 14 years old. Joshua, R., and appellant were watching
television in R.’s bedroom. In preparation for the crime, appellant waited until after R.
put her niece to sleep, and R. herself fell asleep, before appellant had Joshua orally
copulate him. Although multiple people lived in the house, no one except appellant and
Joshua knew appellant was having Joshua orally copulate him before R. awoke. When R.
awoke and saw appellant’s face, he looked like “he was scared because he just got
caught.” R. had made no statement to appellant, and had not confronted him, before
appellant looked that way. The way he looked was evidence of his consciousness of
guilt.
R. asked what appellant and Joshua were doing, and appellant replied “Nothing.”
However, R. later learned from Joshua that this reply by appellant was false. Appellant’s
false statement was evidence of consciousness of guilt. When R. jumped up, appellant
was “pulling his shirt over.” Appellant’s shirt was pulled down enough to cover his lap,
and his covered erect penis was between his hands. R. testified appellant would never
show anything. Appellant’s particular method of committing the offense and efforts to
conceal his erect penis during the offense evidenced consciousness of guilt.
When R. went to get Lillian, appellant jumped up and began fixing his pants,
buttoning them. This was evidence of consciousness of guilt his erect penis had been
exposed. Appellant again said nothing had happened, again making a false statement
evidencing consciousness of guilt.
Joshua testified appellant had shown appellant’s penis to Joshua multiple times,
and appellant had asked Joshua to orally copulate him multiple times. Joshua felt bad
when appellant asked Joshua to orally copulate appellant, and Joshua did not want to do
it. In fact, Joshua orally copulated appellant once. The trial court reasonably could have
concluded appellant knew from the previous multiple, unsuccessful efforts to have Joshua
orally copulate him that appellant knew Joshua did not want to do it because it was
wrong. The trial court also reasonably could have concluded appellant therefore knew it
was wrong when Joshua orally copulated appellant once. According to Gelardo’s
testimony during the People’s case-in-chief, appellant “made” Joshua orally copulate
9
appellant. The trial court reasonably could have concluded from the fact appellant
compelled Joshua to orally copulate him that appellant knew the oral copulation was
wrong.
The trial court reasonably also could have concluded appellant made Joshua do the
repugnant act of drinking his own urine (when R. was not at home), appellant knew this
was wrong, and this provided additional evidence appellant knew the repugnant act of a
six-year-old child orally copulating appellant was wrong.
Finally, on the issue of whether Joshua orally copulated appellant, the trial court
reasonably could have concluded the testimony of R., Joshua, and Gelardo presented on
that issue during the People’s case-in-chief, and the evidence of appellant’s statements
presented on that issue during the People’s case-in-chief, were so dramatically different
that either (1) said testimony of R., Joshua, and Gelardo, or (2) said statements of
appellant, were fabricated. The court also reasonably could have concluded it was
appellant who was fabricating and this was evidence of his consciousness of guilt. (See
People v. Beyah (2009) 170 Cal.App.4th 1241, 1249-1250; People v. Barber (1959) 166
Cal.App.2d 735, 741).)
In light of the above and based on the People’s case-in-chief alone, we conclude
there was substantial evidence of proof beyond a reasonable doubt “that at the time of
committing the act charged against [appellant], [he] knew its wrongfulness” within the
meaning of Penal Code section 26, paragraph One.4 A fortiori, we conclude the standard
of review appellant concedes applies here, namely, whether the People presented
“substantial evidence from which a juvenile court could conclude that there was clear
proof [i.e., clear and convincing evidence] that appellant appreciated the wrongfulness of
his conduct” was satisfied, and we so hold. The trial court did not err by denying
appellant’s Welfare and Institutions Code section 701.1 motion.
4
Appellant does not dispute there was substantial evidence, based on the entirety of
the evidence presented during the adjudication, appellant had the knowledge required by
Penal Code section 26, paragraph One.
10
DISPOSITION
The judgment (order of wardship) is affirmed.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
KITCHING, Acting P. J.
We concur:
ALDRICH, J.
KUSSMAN, J.*
*
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
11
| {
"pile_set_name": "FreeLaw"
} |
329 So.2d 562 (1976)
UNITED SERVICES AUTOMOBILE ASSOCIATION
v.
Joseph B. SMITH.
Civ. 732.
Court of Civil Appeals of Alabama.
March 24, 1976.
*563 Ford, Caldwell, Ford & Payne and W. Stanley Rodgers, Huntsville, for appellant.
Gary K. Grace, Huntsville, for appellee.
WRIGHT, Presiding Judge.
Defendant appeals from a judgment permitting stacking of medical benefits in a policy of automobile insurance wherein four automobiles were insured and separate premiums charged for medical benefits as to each vehicle. We reverse.
Plaintiff received injuries in an accident while operating one of four automobiles insured by defendant in a single policy of insurance. As a result of his injuries plaintiff incurred medical costs of over $8,000.00. Plaintiff's policy of insurance contained an endorsement, the pertinent portions of which are as follows:
"PART IICOVERAGE C-1 MEDICAL BENEFITS
"INSURING AGREEMENTS
"COVERAGE C-1-MEDICAL BENEFIT
"To pay to the insured, who becomes legally obligated to pay therefor, all reasonable expenses for necessary prosthetic devices, medical, surgical, X-ray, dental, ambulance, hospital, professional nursing and funeral services actually rendered within two years from the date of accident, subject to the limit of liability stated in the Declarations.
. . . . . .
"DEFINITIONS. The definitions under PART I of the policy apply to this endorsement and under this endorsement.
"LIMITS OF LIABILITY. The limit of liability stated for Coverages C-1, C-2, C-3, and C-4 in the Declarations as applicable to `each person' is the limit of the company's liability for all benefits to accrue to each person who sustains bodily injury as the result of any one accident. The inclusion of more than one automobile under Item 3 in the Declarations of the policy, or the issuance to the same named insured of two or more policies with this endorsement, shall not operate to increase the limit of the company's liability per person beyond that stated in the Declarations."
After claim, defendant issued to plaintiff its draft for $2,000.00, representing the maximum medical benefits stated in Coverage C-1 of the policy declaration to be payable per person for one accident. Plaintiff refused to accept the draft and filed suit claiming the maximum benefit for each vehicle insured under the policy or a total of $8,000.00. The trial court, after agreed stipulation of fact by the parties, *564 granted judgment for plaintiff for $8,000.00.
Defendant appeals. The issue on appeal is: Do the terms of the policy permit or authorize the insured to collect the sum of the medical benefits declared to be payable for each vehicle insured in the policy? In the vernacular, does the policy permit stacking of medical benefits when more than one vehicle is insured?
This is a case of first impression in Alabama. Stacking of benefits in a policy or of policies providing uninsured motorist coverage was first permitted in Alabama in 1970, with the decision of the Supreme Court in the case of Safeco Insurance Co. of America v. Jones, 286 Ala. 606, 243 So.2d 736. That decision has been followed by many others involving claims arising from uninsured motorist coverage. We will not set out those citations. Contrary to one of plaintiff's points of argument, we are convinced there is no corollary between the basis for stacking in uninsured motorist cases and the issue of the case at hand.
Stacking of uninsured motorist coverage is founded upon the statute requiring automobile insurers to provide such coverage. Title 36, Section 74(62a) Code of Alabama (1941). Plaintiff has stated in brief that there is no provision in the statute which "requires or even suggests that uninsured motorist coverage should be `stacked'." He further states,
"All that this Code section does is set up the legal requirement that insurers provide uninsured motorist coverage unless the named insured specifically rejects said coverage in writing. Therefore, even though many of the . . . cases cite this Statute as requiring the `stacking'. . ., this statute, in fact, does not require that said coverage be `stacked'."
We agree with plaintiff that the statute does not "require or even suggest" "stacking." However, the statute does require the insurer to provide in its policy coverage "with respect to any motor vehicle registered or principally garaged in this state. . . for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom." The appellate courts of this state and a majority of the other states which have similar statutes, have construed the legislative purpose of the statute to be that an insured, under every such required coverage for which a premium has been paid, is entitled to collect within the limits of the policy, all damages which he is "legally entitled to recover." Since the statute does not include exceptions or exclusions, it has been determined that none were intended to be permitted.
Plaintiff has argued that the key to permitting stacking in uninsured motorist cases is not the statute but the phrase often used by the courts in the cases"coverage for which the premium has been paid." We do not agree with that argument. Such phrase has been used often, but only in relation to payment of the premium for the statutorily required coverage. Justice Merrill said in Safeco, "The key words in our statute are `coverage' . . . for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles."
It is clear that there is no valid analogy between coverage statutorily required and that obtained in a freely negotiated contract.
Defendant submits that the issue in this case is to be determined by the rules of construction of insurance contracts. We perceive that defendant is correct.
There are a number of cases from other jurisdictions which have construed policies covering more than one automobile with medical pay benefits attending each automobile with specified premium charge for *565 each, as permitting stacking.[1] These cases have been decided by applying rules for construction of insurance contracts. None of the policies in these cases have contained language comparable to that of the policy before us. Without attempting analysis on an individual case basis here, it is our conclusion that the courts construed the policies most favorably to the insured because of the presence therein of conflicting and/or ambiguous provisions.
An examination of plaintiff's policy discloses no ambiguity. A reading of the medical benefit endorsement to the policy, previously quoted herein, clearly states that the limit of liability as coverage for medical benefits in the declaration is the limit to be allowed under the endorsement. It unequivocally states that the inclusion of more than one policy or the issuance of more than one policy, shall not operate to increase the limit of liability per person stated in the declaration.
Presence of the "two or more automobile" condition is stated by the courts in the cases permitting stacking to be the basis of conflict and ambiguity. That condition is as follows:
"When two or more automobiles are insured hereunder, the terms of this policy shall apply separately as to each,. . . ."
The medical benefits endorsement of plaintiff's policy excludes that condition both by its terms and by omission of application.
In the cases denying stacking,[2] (some occurring in jurisdictions which have permitted it), it is made clear that the denial turned on the clear language of limitation or the absence of the "two or more automobile" clause. Some of the cases permitting stacking have acknowledged that the presence of terms of limitation such as are in plaintiff's policy would have brought a different result.
The objective of construction of the terms in an insurance policy is to arrive at the intent of the parties when the policy was issued. Alabama Farm Bureau Mutual Cas. Co. v. Goodman, 279 Ala. 538, 188 So.2d 268. Unless the language of the policy is fairly and reasonably susceptible to more than one construction, there is no basis for a court interpretation. Need for construction arises only from the presence of ambiguous, uncertain or conflicting terms. Michigan Mutual Liability Co. v. Carroll, 271 Ala. 404, 123 So.2d 920. If no ambiguity exists in the terms of the policy, the court cannot remake the contract but must enforce it as the parties made it. Colonial Life & Accident Insurance Company v. Collins, 280 Ala. 373, 194 So.2d 532.
Finding no uncertainty or ambiguity in this policy, we find the trial court erred in its judgment. The judgment is reversed and we render judgment in favor of plaintiff and against defendant in the amount of $2,000.00.
REVERSED AND RENDERED.
BRADLEY and HOLMES, JJ., concur.
NOTES
[1] Government Employees Insurance Company v. Sweet, 186 So.2d 95 (Fla.App.1966); Kansas City Fire & Marine Insurance Co. v. Epperson, 234 Ark. 1100, 356 S.W.2d 613; Travelers Indemnity Company v. Watson, 111 Ga.App. 98, 140 S.E.2d 505; Southwestern Fire & Casualty Company v. Atkins, 346 S.W.2d 892 (Tex.Civ.App.1961); Virginia Farm Bureau Mutual Insurance Co. v. Wolfe, 212 Va. 162, 183 S.E.2d 145; Harris v. Employers Mutual Casualty Company, 33 Colo.App. 314, 519 P.2d 1227 (1974); see also, Annotation, 21 A.L.R.3d 900.
[2] Hansen v. Liberty Mutual Fire Insurance Company, 116 Ga.App. 528, 157 S.E.2d 768; Wachovia Bank & Trust Company v. Westchester Fire Insurance Company, 276 N.C. 348, 172 S.E.2d 518; Nationwide Mutual Insurance Company v. Bair, 257 S.C. 551, 186 S.E.2d 410; Sullivan v. Royal Exchange Assurance, 181 Cal.App.2d 644, 5 Cal.Rptr. 878.
| {
"pile_set_name": "FreeLaw"
} |
IN THE COURT OF CRIMINAL APPEALS OF TENNESSEE
AT NASHVILLE
Assigned on Briefs June 20, 2001
STATE OF TENNESSEE v. JEFFREY SCOTT PETTY
Direct Appeal from the Circuit Court for Bedford County
No. 14658 Lee Russell, Judge
No. M2000-01739-CCA-R3-CD - Filed July 10, 2001
The Appellant, Jeffrey Scott Petty, was indicted by a Bedford County Grand Jury for one
count of driving under the influence. On May 30, 2000, a jury convicted the Appellant of DUI, first
offense, a class A misdemeanor. On that same day, the trial court sentenced the Appellant to eleven
months, twenty-nine days, all suspended except for thirty days incarceration. The trial court further
ordered that the thirty days be served periodically on weekends. On appeal, the Appellant raises one
issue for our review: Whether the trial court properly ordered the Appellant to serve thirty days of
his eleven month, twenty-nine day sentence in periodic incarceration. Upon review, we find no
error. Thus, the judgment of the Bedford County Circuit Court is affirmed.
Tenn. R. App. P. 3; Judgment of the Circuit Court Affirmed.
DAVID G. HAYES, J., delivered the opinion of the court, in which THOMAS T. WOODALL , J., and L.
T. LAFFERTY, SP . J., joined.
Robert L. Marlow, Shelbyville, Tennessee, for the Appellant, Jeffrey Scott Petty.
Paul G. Summers, Attorney General and Reporter, Michael Moore, Solicitor General, Elizabeth T.
Ryan, Assistant Attorney General, and Michael Randles, Assistant District Attorney General, for the
Appellee, State of Tennessee.
OPINION
Background
On July 4, 1999, Shelbyville police officer, Cody King, observed the Appellant driving in
a reckless manner. Although the officer used his siren and lights in an attempt to get the Appellant
to stop, the Appellant drove at speeds exceeding 78 m.p.h. down a busy street in Shelbyville before
eventually pulling over. Upon approaching the Appellant’s vehicle, Officer King smelled a strong
odor of alcohol and noticed the Appellant’s speech was slurred. Officer King further observed that
the Appellant was unsteady on his feet during the field sobriety tests. The Appellant was transported
to the police department where he refused to submit to a breathalyser test. Based upon these facts,
he was convicted of driving under the influence, first offense.
Analysis
The Appellant contends that the trial court’s imposition of a thirty-day period of confinement
is excessive and that he should have received the minimum sentence of forty-eight hours
incarceration. In addressing the Appellant's challenge, we are mindful that our de novo review is
conditioned with the presumption that the sentencing determination of the trial court is correct. See
Tenn. Code Ann. § 40-35-401(d). Moreover, the Appellant bears the burden of establishing that the
sentence imposed by the trial court is improper. Sentencing Commission Comments, Tenn. Code
Ann. § 40-35-401(d).
Our legislature has provided that a defendant convicted of first offense DUI "shall be
confined . . . for not less than forty-eight hours nor more than eleven months and twenty-nine days."
Tenn. Code Ann. § 55-10-403(a)(1). Furthermore, "all persons sentenced under subsection (a) shall,
in addition to the service of at least the minimum sentence, be required to serve the difference
between the time actually served and the maximum sentence on probation." Tenn. Code Ann. §
55-10-403(c). In effect, the DUI statute mandates a maximum sentence for a DUI conviction with
the only function of the trial court being to determine what period above the minimum period of
incarceration established by statute, if any, is to be suspended. Tenn. Code Ann. § 40-35-302(d); see
State v. Troutman, 979 S.W.2d 271, 273 (Tenn. 1998).
In the present case, the Appellant contends the trial court erred by ordering him to serve thirty
days of his eleven month, twenty-nine day sentence in periodic incarceration. Our statutory
sentencing scheme is designed to provide the trial court with continuing jurisdiction in the
misdemeanor case and a wide latitude of flexibility. In imposing a misdemeanor sentence, the trial
court is required to impose a sentence consistent with the purposes and principles of the Sentencing
Reform Act of 1989. Tenn. Code Ann. § 40-35-302(b). The misdemeanant, unlike the felon, is not
entitled to the presumption of a minimum sentence. State v. Creasy, 885 S.W.2d 829, 832 (Tenn.
Crim. App.1994). In misdemeanor sentencing, the trial court should consider the nature and
circumstances of the criminal conduct involved. See Tenn. Code Ann. § 40-35-102(1)(seriousness
of the offense) and § 40-35-103(1)(b). Moreover, our sentencing law permits consideration of the
defendant’s prior criminal history in arriving at the appropriate sentence. See generally Tenn. Code
Ann. § 40-35-102(3)(b) and § 40-35-103(1)(2).
The Appellant contends that his thirty-day period of incarceration is excessive as it was based
upon the trial court’s application of an improper enhancing factor, namely that his actions
endangered the safety of others. At sentencing, the trial court considered the following factors:
Some of the concerns I have: Number One, the record of other involvement in
criminal activity that we’ve heard about. The concern I have is the fact that this
occurred on what’s without a doubt the busiest street in Shelbyville in Bedford
-2-
County. Certainly with the disregard for the safety of other folks involved in driving
intoxicated on that particular street, it gives me a lot of concern in this situation. I
don’t think it’s a case for the statutory minimum.
Prior to his arrest for DUI, the Appellant, a former Shelbyville police officer, had engaged in
criminal conduct which resulted in federal convictions for drug violations.1 As acknowledged by
the Appellant, the trial court properly considered the Appellant’s past criminal history. See
generally Tenn. Code Ann. § 40-35-102(3)(b) and § 40-35-103(1)(2). Additionally, the trial court
properly considered the circumstances of the offense in finding that the Appellant’s actions
endangered the safety and lives of others. See Tenn. Code Ann. § 40-35-102(1) and § 40-35-
103(1)(b). We also note that the trial court accommodated the Appellant when imposing the term
of incarceration by permitting confinement to be served periodically on “off-duty” weekends so that
the Appellant could fulfill his National Guard and employment obligations.
Upon de novo review, and in observance of the less stringent procedures attached to
misdemeanor sentencing, we cannot conclude that the trial court's imposition of a thirty-day period
of confinement was improper. Accordingly, the judgment of the trial court is affirmed.
__________________________________________
DAVID G. HAYES, JUDGE
1
On March 24, 2000, the Appe llant pled guilty in the United States District Court, Eastern District of Tennessee,
to the federa l offenses of (1) possession with the intent to distrib ute marijuan a; and (2) p ossession o f marijuana.
-3-
| {
"pile_set_name": "FreeLaw"
} |
937 S.W.2d 164 (1997)
327 Ark. 159
Bryan Hank COLLINS, Appellant,
v.
Florida HINTON, Appellee.
No. 96-171.
Supreme Court of Arkansas.
February 3, 1997.
*165 Phil Hicky, Rita Reed Harris, Forrest City, for appellant.
B. Michael Easley, Forrest City, for appellee.
CORBIN, Justice.
Appellant Bryan Hank Collins appeals the jury's verdict awarding damages of $150,000 to Appellee Florida Hinton from the St. Francis County Circuit Court. Because this case involves a question concerning the law of torts, this court has jurisdiction of the appeal pursuant to Ark. Sup.Ct. R. 1-2(a)(15) (as amended by per curiam July 15, 1996). Appellant raises four points on appeal, two of which are components of one argument: (1) The trial court erred in allowing Dr. Raymon Lopez to give expert testimony concerning Appellee's injuries; (2) the trial court erred in excluding the testimony of one of Appellant's witnesses; and (3) the damages awarded by the jury are excessive. Because we find no merit to any of Appellant's arguments, we affirm.
This case involves an automobile accident that occurred on December 10, 1992. According to the facts presented at trial, Appellee had just left the home of Mrs. Betty Proctor, where she worked in a domestic capacity, and had walked across the street to her car. As she began to get into her car, her car was struck from behind by Appellant's truck. As a result of the impact of the collision, Appellee's car was forced forward approximately forty-eight feet from where it had been originally parked, dragging Appellee with it. Appellee was taken to the hospital emergency room where she was treated and ultimately hospitalized overnight.
The emergency-room diagnosis revealed that Appellee had a hematoma to the right thigh as well as various abrasions and contusions. Appellee also complained of pain in *166 her right hip. The x-rays taken at the hospital revealed that Appellee had degenerative arthritis in some of her joints. In January of 1993, Appellee consulted a chiropractor, Dr. Xavier Haymer, and began receiving regular treatments from him. According to Dr. Haymer, Appellee complained about pain in her lower back, her right hip and thigh area, and her right knee. Additionally, Dr. Haymer observed that Appellee's right knee and ankle were swollen. Appellee stated to Dr. Haymer that the pain in her knee had resulted from the accident and that she had not had any pain in her knee before that time. Dr. Haymer continued to treat Appellee for just over a year, at which time he referred her to an orthopedic surgeon, Dr. Raymon Lopez, concerning the injury to her knee.
After reviewing the information supplied to him by Dr. Haymer and taking a patient history from Appellee, Dr. Lopez examined Appellee's knee. Appellee informed Dr. Lopez that she began experiencing pain in her knee after being involved in the automobile accident. As a result of his examination and the other pertinent information, Dr. Lopez recommended that Appellee undergo surgery to replace her knee. In an affidavit filed with the trial court, Appellee confirmed that she wished to undergo the knee surgery, but that she did not have insurance and that Medicare would not cover the procedure.
Appellee filed suit against Appellant in September of 1993 alleging that he was negligent in the operation of his vehicle and that she was injured as a result. Trial was conducted on June 28 and 29, 1995. Subsequent to her examination by Dr. Lopez but before trial in this matter had begun, Appellee suffered a stroke, and was confined to a wheelchair and unable to talk for the duration of the trial. Appellee was only able to testify through a deposition taken before her stroke. At the conclusion of the case, the jury returned with a verdict finding Appellant negligent and awarding compensatory damages to Appellee in the amount of $150,000. This appeal followed.
I. Testimony of Dr. Lopez
Appellant argues on appeal that it was error for the trial court to allow Dr. Lopez to testify as an expert witness on two grounds: (1) His opinion and evaluation were based in part on the hearsay statement of Appellee concerning the cause of her knee injury; and (2) the doctor's examination and recommendation of knee surgery, which preceded Appellee's stroke, may have no longer been valid because there was no indication that Appellee would ever walk again after the stroke.
In the present case, Appellee was referred by her chiropractor to seek an evaluation of her injuries by Dr. Lopez. Dr. Lopez testified that in reaching his conclusion that Appellee needed to undergo knee-replacement surgery, he relied upon the patient history given by Appellee, as well as his physical examination of her and the information provided to him by Dr. Haymer. Dr. Lopez testified further that it was common practice for a physician to rely at least in part on the patient's history of the injuries. Dr. Lopez related that as to the symptoms of pain experienced by Appellee in her back and knee, Appellee stated the symptoms started after a motor vehicle accident that she had been involved in about a year prior to seeing Dr. Lopez. Specifically, Appellee told Dr. Lopez that she was experiencing pain, swelling, and stiffness in her right knee.
Appellant argues that Dr. Lopez's opinion as to the cause or aggravation of Appellee's knee injury was based entirely on Appellee's statement, and that such a statement was hearsay and not included as an exception to the hearsay rule found in A.R.E. Rule 803(4) because it was made to the doctor after litigation had begun and was, therefore, self-serving. Appellee responds that Dr. Lopez's testimony, including statements made to him by Appellee, was admissible under A.R.E. Rule 703 and that there is no provision in Rule 803(4) that prohibits statements given after litigation has begun. Appellee responds further that Appellant's objection to Dr. Lopez's testimony goes to the weight of the evidence, rather than its admissibility, and that there was no evidence presented at trial indicating that Appellee would never be able to walk again. We find no error in the trial court's decision to permit Dr. Lopez to testify on either ground raised by Appellant.
*167 This court has long recognized that the admissibility of expert testimony rests largely within the broad discretion of the trial court and the appellant bears the burdensome task of demonstrating that the trial court abused its discretion. See, e.g., Sims v. Safeway Trails, Inc., 297 Ark. 588, 764 S.W.2d 427 (1989); Dildine v. Clark Equipment Co., 282 Ark. 130, 666 S.W.2d 692 (1984). In support of his argument, Appellant asserts that Dr. Lopez was not Appellee's treating physician, and thus, he should not have been allowed to provide hearsay testimony concerning Appellee's patient history because such hearsay falls outside the medical-diagnosis exception found in Rule 803(4). Additionally, Appellant relies heavily on this court's decision in Ben M. Hogan Co., Inc. v. Nichols, 254 Ark. 771, 496 S.W.2d 404 (1973), in support of his contention that only a treating physician, as opposed to a medical expert witness consulted solely for the purpose of providing trial testimony, may give opinion testimony pertaining to injury. Appellant also cites this court to its decision in Carton v. Missouri Pac. R.R. Co., 303 Ark. 568, 798 S.W.2d 674 (1990), in support of his contention that statements made by persons as to pain for the sole purpose of furnishing an expert with information on which to base his opinion are not admissible.
Rule 702 of the Arkansas Rules of Evidence provides:
If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise.
Rule 703 provides:
The facts or data in the particular case upon which an expert bases an opinion or inference may be those perceived by or made known to him at or before the hearing. If of a type reasonably relied upon by experts in the particular field in forming opinions or inferences upon the subject, the facts or data need not be admissible in evidence. [Emphasis added.]
Pursuant to Rule 703, an expert witness may base his opinion on facts or data in evidence, which may otherwise be inadmissible, if they are of a type reasonably relied upon by experts in the particular field; the test is whether the expert's reliance on such information is reasonable. Scott v. State, 318 Ark. 747, 888 S.W.2d 628 (1994); Dixon v. Ledbetter, 262 Ark. 758, 561 S.W.2d 294 (1978). In Wolner v. Bogaev, 290 Ark. 299, 718 S.W.2d 942 (1986), this court held that "obviously the requirement of personal knowledge has no application to an expert witness who is, in many instances, testifying to an opinion based entirely on assumed facts." Id. at 303, 718 S.W.2d at 944. In Scott, 318 Ark. 747, 888 S.W.2d 628, this court stated:
The very purpose of Rule 703 is to allow the courts to follow the same practice as do experts themselves in forming their opinions, illustrated, for example, by allowing a physician to base his diagnosis on reports from other medical sources. Moreover, when an expert's testimony is based on hearsay, the lack of personal knowledge on the part of the expert does not mandate the exclusion of the testimony, rather it presents a jury question as to the weight of the testimony.
Id. at 749, 888 S.W.2d at 629 (citations omitted). Similarly, the court of appeals observed in Arkansas State Hwy. Comm'n v. Schell, 13 Ark.App. 293, 683 S.W.2d 618 (1985), that under Rule 703 "an expert must be allowed to disclose to the trier of fact the basis facts for his opinion, as otherwise the opinion is left unsupported in midair with little if any means for evaluating its correctness." Id. at 298, 683 S.W.2d at 621. Rules 702 through 705 emphasize the function of cross-examination, with the burden being placed upon the opponent of the testimony to show that the expert's conclusion lacks adequate support in order for the testimony to be subject to being stricken by the trial court. Id. at 299, 683 S.W.2d at 622.
In Carton, 303 Ark. 568, 798 S.W.2d 674, this court held that a portion of the plaintiff's statement to a doctor concerning the cause of her injury should have been excluded as it did not fall within the hearsay exception in Rule 803(4). Appellant relies on that holding in support of his argument, but *168 the facts presented in that case differ greatly from those presented below. In fact, the holding in Carton clearly supports the trial court's decision in this case to admit the testimony of Dr. Lopez. In Carton, the plaintiff sued the railroad company claiming that she was injured when she slipped on some spilled diesel fuel and fell. The doctor's medical report, which was admitted into evidence, stated that, "[a]t the time she was in the process of getting out of the truck her foot slipped having apparently accumulated some diesel fuel on her sole[.]" Id. at 574, 798 S.W.2d at 677. This court held that the underlined words should have been excluded as that portion of her statement was not relevant for diagnosis and attempted only to fix blame. This court noted, however, that, "`a patient's statement that he was struck by an automobile would qualify but not his statement that the car was driven through a red light.'" Id. at 575, 798 S.W.2d at 677 (quoting Cotchett and Elkind, Federal Courtroom Evidence 144 (1986)). The challenged information given by Dr. Lopez in the present case would likewise qualify as an exception to the hearsay rule found in Rule 803(4).
In Hogan Co., 254 Ark. 771, 496 S.W.2d 404, which was rendered before this court adopted the Arkansas Rules of Evidence in 1986, the expert witness was a doctor who had been retained for purposes of testifying at trial. The doctor stated that the plaintiff had been referred to him by his attorney and that when the plaintiff consulted him, the plaintiff's wife and his attorney were also present and assisted the plaintiff in reciting his patient history. The doctor also stated that he had not intended to treat the plaintiff's condition. This court held that the trial testimony conclusively established that the witness was not a treating physician, but that he occupied the exclusive role of a medical expert witness whose testimony was secured for purposes of giving an opinion at trial. The facts presented below starkly contrast the facts presented in the Hogan Co. case since Appellee consulted Dr. Lopez for possible treatment.
Contrary to Appellant's argument, Dr. Lopez was a treating physician for purposes of testifying as to the nature, extent, and cause of her injuries. His expert testimony was not sought by Appellee or her attorney for the purpose of testifying at trial; rather, Dr. Lopez examined Appellee's injuries upon referral by Dr. Haymer. That Appellee had not actually had the knee-replacement surgery prior to trial does not change the fact that Dr. Lopez examined Appellee for the purpose of diagnosing her injuries, and that the doctor made suggestions as to the proper treatment of those injuries. Ultimately, Dr. Lopez testified that in his opinion, Appellee's knee injury was not caused by the collision, but that it was very possible that her preexisting condition of degenerative arthritis was aggravated by the trauma of the collision. Likewise, Dr. Haymer also testified that he believed Appellee's condition was aggravated in the accident.
Appellant has not met his heavy burden of demonstrating that the trial court abused its discretion by permitting the witness to testify or that he was unfairly prejudiced by Dr. Lopez's testimony, especially in light of the fact that Dr. Haymer had also testified as to the cause or aggravation of Appellee's injuries. The pertinent provisions of the Arkansas Rules of Evidence and case law clearly support the trial court's decision to admit the testimony. Furthermore, Appellant conducted extensive cross-examination of Dr. Lopez in an attempt to show that his opinion was unreasonable in that it was not supported by the facts. The fact that the jury chose to believe the testimony of the doctor is insufficient to meet Appellant's burden on appeal.
As for Appellant's remaining contention that Dr. Lopez should not have been permitted to testify as to Appellee's need for knee-replacement surgery because she had since suffered a stroke, we agree with Appellee that such an argument is more properly directed toward the weight to be attached to the evidence, rather than its admissibility. As Appellee points out, Appellant could have chosen to put on evidence that Appellee would never be able to walk again, had such evidence existed, in an attempt to demonstrate that the surgery was no longer necessary. We find no error in the trial court's ruling upon either argument presented by Appellant.
*169 II. Exclusion of Defense Witness
Appellant argues that the trial court erred in refusing to allow him to present the testimony of Mrs. Kelly Henson on the ground that he had failed to notify Appellee that she would be called as a defense witness. Appellant further argues that the trial court abused its discretion in excluding this witness's testimony absent some showing that his attorney knowingly concealed the name and address of the witness from Appellee's counsel. We do not agree with Appellant's assessment of our standard of review in these cases, nor are we convinced that the trial court did not find that Appellant's counsel had knowingly concealed the identity of this witness.
Rule 26 of the Arkansas Rules of Civil Procedure provides in pertinent part:
(b)(1) ... Parties may obtain discovery regarding any matter, not privileged, which is relevant to the issues in the pending actions, ... including the existence, description, nature, custody, condition, identity and location of persons who have knowledge of any discoverable matter or who will or may be called as a witness at the trial of any cause.
....
(e)(1) A party is under a duty seasonably to supplement his response with respect to any question directly addressed to (A) the identity and location of persons having knowledge of discoverable matters, and (B) the identity and location of each person expected to be called as a witness at trial....
(2) A party is under a duty seasonably to amend a prior response if he obtains information upon the basis of which (A) he knows that the response was incorrect when made, or (B) he knows that the response though correct when made is no longer true and the circumstances are such that a failure to amend the response is in substance a knowing concealment.
The standard of appellate review of decisions by the trial court to exclude or permit the testimony of any witness at trial is whether the trial court has abused its discretion. Marvel v. Parker, 317 Ark. 232, 878 S.W.2d 364 (1994); F.L. Davis Builders Supply, Inc. v. Knapp, 42 Ark.App. 52, 853 S.W.2d 288 (1993). In light of the facts and circumstances demonstrated below, the trial court did not abuse its discretion in excluding the testimony of Mrs. Henson.
At the conclusion of Appellee's case as plaintiff, Appellee's counsel informed the trial court that he had learned through the course of the trial that Appellant intended to call Mrs. Henson as a witness. Appellee's counsel objected to her being allowed to testify on the ground that he had no prior notice of her testimony. Appellee's counsel stated further that he had specifically requested the names and addresses of Appellant's witnesses in interrogatories and that in both the initial and supplemental answers to the interrogatories, Appellant had failed to mention Mrs. Henson.
Appellant's counsel argued below, as he does on appeal, that although he did not actually list Mrs. Henson as a witness in either request by Appellee, Appellee nonetheless had notice of the witness because she was mentioned, not by name, but only by a reference to the wife of Lester Henson, in a deposition conducted by Appellee's counsel with Mrs. Betty Proctor. Appellant's counsel argued further that he indicated in both answers to interrogatories that he was continuing to investigate the case and that he reserved the right to call additional witnesses who surfaced as a result of his investigation or through the discovery process. Appellant's counsel also asserted that he had announced Mrs. Henson as a witness during voir dire, and that Appellee was at least put on notice as of the first day of the trial. Appellant's counsel alternatively argued that even though Appellee had not received proper notice of the witness, Appellee's case would not be prejudiced by Mrs. Henson's testimony, as she was present at the scene of the accident and would only tell the truth as to what she saw. In response, Appellee's counsel stated that Mrs. Henson's anticipated testimony would directly contradict Appellee's proof and would force him to secure additional witnesses, including her husband and son, for rebuttal.
*170 After considerable argument between counsel for both sides, the trial court stated:
I don't like for you all to put me in this situation. I would like to say a whole lot more than I'm going to because I don't want to mess up this record but Mr. Hicky, I'm not going to let her testify because I don't think this is just a lack of response.
In response to the trial court's ruling, Appellant's counsel denied trying to "sandbag" Appellee's counsel and argued that he had only learned of the location of Mrs. Henson approximately two days before trial. Appellant's counsel stated that the reason that he had not called opposing counsel to inform him of the witness's name and address as soon as he had learned of the information was because he "was actually getting ready for trial[.]" We can only assume that by his remarks Appellant's counsel was telling the trial court that he was too busy or occupied with trial preparation to notify Appellee's counsel by telephone of this witness's existence. It is significant, then, that Appellant's counsel did apparently have time to have the clerk's office issue a trial subpoena for Mrs. Henson on the day before trial. Under the circumstances, we conclude that the trial court did not abuse its discretion in excluding the witness's testimony.
III. Damages
Appellant asserts that he is entitled to a new trial, or at least a remittitur of the damages, because the jury's award of $150,000 is excessive and is not supported by the evidence presented at trial. Appellant further stresses that the jury was impermissibly swayed by compassion for Appellee, who sat through the trial in a wheelchair. Appellee asserts that the jury's award was not excessive and not wholly unsupported by the evidence.
When an award of damages is alleged to be excessive, we review the proof and all reasonable inferences most favorably to the appellee and determine whether the verdict is so great as to shock the conscience of this court or demonstrate passion or prejudice on the part of the trier of fact. Builder's Transp., Inc. v. Wilson, 323 Ark. 327, 914 S.W.2d 742 (1996). In determining whether the amount of damages is so great as to shock the conscience, we consider such elements as past and future medical expenses, permanent injury, loss of earning capacity, scars resulting in disfigurement, and pain, suffering, and mental anguish. Id. We make such determinations on a case-by-case basis, as precedents are of little value in appeals of this kind, with the understanding that a jury has much discretion in awarding damages in personal injury cases. Id. In the present case, we conclude that the damages awarded to Appellee were not so great as to shock this court's conscience and, thus, we affirm.
Appellee, who was seventy-two years old, testified in her deposition that when Appellant's truck crashed into her car, she "hugged" the driver's seat and held on all the while she was being dragged backwards for some fifty feet. She stated that she was in constant pain and that she is in "misery" at night because the pain was coming up into her arms and had "messed up" that whole side of her body. In her affidavit, Appellee stated that she had no medical insurance to cover any of the recommended treatments for her injuries.
Mrs. Betty Proctor testified that before the accident, Appellee was active for her age and got around well. She also stated that after the accident, Appellee was in constant pain and had to wear a knee brace and walked with the assistance of a cane. She stated that after the accident, Appellee's working days were finished. She further stated that Appellee's lack of mobility because of the knee injury was such that she could no longer perform such simple tasks as picking up her own laundry basket and carrying it to the washer.
The jury was also furnished medical evidence through Dr. Haymer that the pain in Appellee's lower back and knee will continue into the future. Dr. Lopez testified that when he examined her, Appellee could hardly get up from a sitting position without assistance and that her knee was "completely gone." Moreover, Appellant does not challenge that the actual medical expenses presented to the jury exceeded $20,000 or that Appellee's average life expectancy exceeded *171 eleven years. Finally, contrary to Appellant's arguments, there was no indication whatsoever that Appellee would not recover from her stroke and walk again. In fact, there was some indication through Appellee's cross-examination of Dr. Turner that she had made progress in her rehabilitation.
From the above-cited testimony, we cannot conclude that the damages awarded by the jury were unfairly prompted by the jurors' compassion for Appellee, who was confined to a wheelchair, nor can we conclude that the sum of $150,000 was so great as to shock the conscience or demonstrate passion or prejudice on the part of the trier of fact.
Affirmed.
| {
"pile_set_name": "FreeLaw"
} |
2019 IL App (1st) 161573
No. 1-16-1573
Opinion filed April 30, 2019
Second Division
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
FIRST DISTRICT
______________________________________________________________________________
THE PEOPLE OF THE STATE OF ILLINOIS, ) Appeal from the
) Circuit Court of
Plaintiff-Appellee, ) Cook County.
)
v. ) No. 14 CR 21025
)
OMEGA MOON, ) Honorable
) Maura Slattery Boyle,
Defendant-Appellant. ) Judge, presiding.
JUSTICE HYMAN delivered the judgment of the court, with opinion.
Justices Lavin and Pucinski concurred in the judgment and opinion.
OPINION
¶1 After a bench trial, the judge convicted Omega Moon of aggravated battery and
sentenced her to 18 months’ probation. On appeal, Moon argues that the trial court (i) improperly
considered a fact not in evidence, (ii) failed to accurately recall evidence, (iii) assumed the role
of prosecutor by sua sponte objecting to testimony, and (iv) allowed the State to elicit repetitive
answers from Moon on cross-examination. While Moon acknowledges that she failed to raise
these issues both at trial and in a written posttrial motion, she asserts that we can consider them
under the plain error doctrine. We find that none of the alleged errors amount to reversible error
and affirm.
No. 1-16-1573
¶2 Background
¶3 Moon was charged by information with three counts of aggravated battery causing great
bodily harm or permanent disability or disfigurement (720 ILCS 5/12-3.05(a)(1) (West 2014))
and one count of aggravated battery on a public way (720 ILCS 5/12-3.05(c) (West 2014)).
Before trial, the State nol-prossed the count alleging permanent disability. Moon asserted the
affirmative defense of self-defense.
¶4 At trial, Michelle Johnson testified that on November 12, 2014, at about 6 p.m., she went
with her friend Tara Sahara to pick up Sahara’s children’s report cards from Barton School, 7600
South Wolcott Avenue, Chicago. Sahara parked and entered the school, while Johnson remained
in the car. Moon, who is Sahara’s sister-in-law, drove by Johnson and asked where Sahara was.
Johnson told Moon that Sahara went into the school, and Moon drove away. Johnson noticed a
male passenger in Moon’s car.
¶5 When Sahara returned to the car, Moon jogged toward her and chased her around the car.
Johnson got out, told Sahara to stop, and tried “to talk some sense into” Moon. Then Moon took
Johnson’s purse from the car; Johnson grabbed the purse’s handle with one hand. Moon hit
Johnson’s right eye with her closed fist three or four times with “[a] lot of force” until Johnson
felt blood on her cheek. Johnson did not see a weapon in Moon’s hand when Moon hit her. Moon
drove away, and Johnson called the police. After attempting to follow Moon, Johnson and
Sahara encountered police officers, and Johnson was taken to a hospital. Johnson agreed with the
prosecutor that Moon struck her “[i]n the middle” of Wolcott Avenue, “right in front *** or right
in the area of” Barton.
¶6 The State entered into evidence a photograph of Johnson’s right eye that was taken on the
way to the hospital. According to Johnson, her right upper eyelid was “split open all the way to
-2-
No. 1-16-1573
the eyeball.” Due to the severity of the cut, Johnson had to see a plastic surgeon at a second
hospital. Johnson stated that she also had cuts on the side of her nose and under her eyelid, and
that she developed scars in the same areas. She acknowledged that, in 2012, she was convicted of
identity theft and unlawful possession of credit or debit cards.
¶7 On cross-examination, Johnson testified that report card pickup ended at 6 p.m. There
were no other people on South Wolcott Avenue picking up report cards, and Sahara was the only
person leaving the school. When Moon approached Sahara, the man Johnson saw in Moon’s car
stood “on the corner” of Wolcott. The following colloquy then occurred:
“Q. So during these two minutes that they were running around the car, Tara
could have gotten in the car, right?
THE COURT: Sustained, speculative.”
Johnson added that, after Moon struck her, she hit Moon in self-defense and was grabbed by the
man who was with Moon.
¶8 Sahara testified that Moon’s brother was the father of her child. She agreed that, on the
date of the altercation, her relationship with Moon was “not good” due to a dispute over custody.
At around 5:30 p.m., she picked up her children’s report cards from Barton while Johnson
remained in the car. When Sahara left the school, she saw Moon running up to her “three cars
away from [Sahara’s] vehicle” with a sharp, silver object in her fist and her boyfriend trailing
behind her. Sahara ran around her car, and Johnson left the car to “defuse the situation.” Moon
took Johnson’s purse from Sahara’s car and walked away. Johnson grabbed the purse, and Moon
hit her in the forehead near the eye with her fist, causing Johnson to bleed. Moon drove away,
and Sahara and Johnson drove after her and called the police. Then, an ambulance took Johnson
to the hospital.
-3-
No. 1-16-1573
¶9 On cross-examination, Sahara testified that Moon had guardianship of the child for 7½
years, which ended around the date of the altercation. She parked her car “[a]cross the street
from the school” and saw teachers and other parents picking up report cards inside the building,
but no one else left the building while Moon and her boyfriend chased her around the car. Sahara
confirmed that Moon ran at her “with something sharp in her hand,” which she thought was a
weapon. She acknowledged that her car was unlocked when Moon chased her around it about 10
times, but she did not try to get into the car.
¶ 10 The State entered a stipulation between the parties that, if called, Dr. Kimberly Clawson,
a doctor at Mount Sinai Hospital, would testify that Johnson was treated for periorbital swelling
and multiple lacerations in the area of her right eye. The State rested, and the court denied
Moon’s motion for directed finding.
¶ 11 The defense called Jalen Carter, who testified that on November 12, he and Moon, his
girlfriend, drove to the house of Moon’s cousin, Kisha Gladney, on 75th Street and Wolcott.
When they got out and approached Gladney’s house, a car pulled up, and Sahara and another
woman jumped out, calling Moon derogatory names from 10 feet away. The other woman
removed her shoes and “took the first swing” at Moon, who “defended” herself. Sahara
attempted to join in, and Carter tried to separate the women. He stated that the confrontation
occurred “right in front” of Gladney’s house, and denied that Moon had a weapon. Carter and
Moon then went to the police station, where Moon reported that two women attacked her.
Afterwards, they picked up Moon’s son from Saint Sabina Academy. On cross-examination,
Carter testified that he did not see any blood drawn and that no one at the police station asked
him what he observed. On November 19, 2014, he met with Detective Jesus Gonzalez and
-4-
No. 1-16-1573
denied being present at the altercation. Carter acknowledged that he was convicted of aggravated
unlawful use of a weapon in 2012.
¶ 12 Lakisha Gladney, Moon’s cousin, testified that Moon was supposed to pick her up around
6 p.m. to go to karaoke (Lakisha Gladney and Kisha Gladney are the same person.) Ten minutes
before 6 p.m., Gladney received two calls from Moon and then heard a “commotion” outside her
house. She opened her door and heard Moon sounding upset, but could not see what was
happening. Barton is located near her house, and she knew it was report card day because she sat
on the school council. Her neighbor was the only other person outside her house. On cross-
examination, Gladney stated that her vision is impaired, and she could not see what happened
when Moon was outside her house.
¶ 13 Moon testified that she drove with her boyfriend, Carter, to pick up Gladney at her home,
which was “down the street” from Barton. Moon thought she was being followed. When she got
out of the car at Gladney’s house and saw Sahara and Johnson walking toward her, Sahara called
Moon names and told Johnson to hit Moon. Johnson removed her boots and hit Moon’s left
cheek with her right hand. As Moon struck back in defense, Sahara approached her from behind,
and with Johnson, pulled Moon’s hair, scratched her, and hit her with their fists. Carter pulled
Moon away, and she ran to Gladney’s house and spoke with Gladney. Then, she drove to the
police station and filed a report. Moon testified that she suffered “[a] great deal of loss of hair in
several spots in [her] head,” as well as “scratches and bruises” on her face, thighs, and hands.
Moon was shown six photographs taken when she got out of jail one week after the altercation
and stated they depicted bald spots on her scalp, a bruise on her face, and scratches and bruises
on her leg.
-5-
No. 1-16-1573
¶ 14 On cross-examination, Moon denied that Johnson’s eye was split open after the
altercation. At the police station, she told a police officer named Barnes that she was picking up
her son from Saint Sabina, that she was also picking up her cousin, and that two women attacked
her. She denied telling Barnes that she was attacked at Saint Sabina.
¶ 15 The State then showed Moon each photograph depicting her injuries and asked whether
she showed each injury to Barnes. During this line of questioning, this colloquy occurred:
“Q. I am showing you first what your attorney marked Defendant’s Exhibit No. 1.
This is a photo you took, right?
A. Yes.
Q. This shows injury to your scalp, correct?
A. Yes.
***
Q. You didn’t show Officer Barnes that, did you?
A. Yes, I did.
Q. You did show Officer Barnes that?
A. I didn’t have these pictures but I was standing there, she could see.
Q. So you showed Officer Barnes—
A. No, I didn’t say look at these—
THE COURT: Ma’am, woe, woe, we’re right here. Answer the questions, just
answer the questions asked you. Ms. McMahon, ask the question again.
BY MS. McMAHON [(ASSISTANT STATE’S ATTORNEY)]:
Q. Did you show Officer Barnes that injury?
A. No, I showed her my hands and my bruises.
-6-
No. 1-16-1573
¶ 16 Later, this exchange took place:
Q. Here’s Defense Exhibit No. 2. Here’s another area where you claim that your
hair was ripped out?
A. Yes.
***
Q. You didn’t show that to Officer Barnes?
A. I showed her my bruises.
THE COURT: No, ma’am, that’s not the question. The question is did you show
her where the bald spots w[ere], whatever is indicated in No. 2, *** at the scene or at the
police station, did you show that to her?
THE WITNESS: No.
***
Q. This photo [marked as People’s Exhibit No. 2] shows really a huge bald spot
covering a large portion of your scalp, right?
A. Yes.
Q. This hair was missing when you claim you went to go talk to Officer Barnes
about what had happened, correct?
A. Correct.
Q. You did not show this to Officer Barnes—
A. I thought she could see it—
THE COURT: Ma’am, ma’am, you’ve got to calm—first sit up, sit up, you’ve got
to sit up. Okay. Just answer the question that’s asked. Mr. Gottreich—
BY THE WITNESS:
-7-
No. 1-16-1573
A. No.
¶ 17 During this line of questioning, defense counsel twice objected to the State’s questions as
“asked and answered,” and the trial court overruled the objections. Ultimately, Moon testified
that she showed Barnes “my arms and my hands, the scars that was on my face, [and] everything
that was visible” and that she thought Barnes could see the bald spots on her scalp. Moon denied
telling Detective Gonzalez that she was picking up her son from Saint Sabina with Gladney
when Sahara and Johnson attacked her. She also confirmed that on November 19, 2014,
Detective Gonzalez approached her while she was sitting in a van at Saint Sabina, and she
showed him her scalp injuries and bruises. She denied showing Gonzalez the area outside Saint
Sabina where she was attacked. The defense rested.
¶ 18 In rebuttal, the State called Chicago police officer Sharon Barnes. On the evening of
November 12, Moon and a man approached Barnes at the police station. Moon told her she was
the victim of a battery at Saint Sabina, where she was picking up her child. Although she said she
was injured, Moon did not mention missing hair, or scratches or bruises on her face, thighs, and
hands. She only reported that she was struck with open and closed hands, a purse, and keys, and
that she had scratches on her hands. Moon told Barnes she did not need medical treatment;
Barnes did not see missing hair or bruises or scratches on her face, arms, and hands.
¶ 19 Detective Gonzalez testified that on November 18, he and Sergeant Emmitt McClendon
went to Moon’s residence to speak with her about an aggravated battery that occurred in the area
of 7600 South Wolcott. Moon told Gonzalez that she had gone with Gladney to pick up her son
from Saint Sabina. Moon then reported that she parked her car at 78th Street and Racine Avenue
when Sahara and another woman “approached her, punched her, kicked her and scratched her
before they left.” Moon never told Gonzalez that her hair was ripped from her scalp or that the
-8-
No. 1-16-1573
altercation occurred outside Gladney’s house, although she claimed that Gladney was present the
entire time. The next day, Gonzalez saw Moon in a van near Saint Sabina, and Moon pointed out
where she claimed the battery occurred, at “approximately 1222 West 78th Street.” Gonzalez
testified that this area was visible in a surveillance recording that he had reviewed, which was
taken the evening of November 12, between 5:45 p.m. and 8:30 p.m. In the video, he did not see
Moon, Johnson, Sahara, or a physical altercation. Gonzalez also did not see injuries on Moon’s
person on November 18 or 19. On cross-examination, Gonzalez said the report filed by Moon
stated that the altercation happened at Barton, but on re-direct examination, he clarified that
Moon reported that the altercation occurred at Saint Sabina, and Johnson’s report gave an
address near Barton School. The State rested.
¶ 20 In closing arguments, defense counsel asserted that a reasonable doubt existed because of
the conflicting testimony, the felony convictions of witnesses for both parties, and the lack of
credibility of Johnson and Sahara. Defense counsel further argued that Johnson and Sahara were
picking up report cards “at a time of day where presumably there would be other people picking
up report cards.” He claimed that Moon and Carter were going to Gladney’s house, “who lives
right across from” Barton, when Sahara and Johnson approached and the altercation ensued. The
State argued that the testimony had credibly shown that Moon waited for Sahara to leave the
school, pursued her “with a shiny object in her hand,” and sliced Johnson’s eye open. The State
also asserted that Moon lied when she told Barnes and Gonzalez that the altercation occurred at
Saint Sabina. Additionally, the State noted that neither Barnes nor Gonzalez saw the injuries that
Moon claimed to have reported to them.
¶ 21 The trial court found Moon guilty of the three remaining counts of aggravated battery.
The court noted there was “some discrepancy” as to where the altercation happened, since Moon
-9-
No. 1-16-1573
originally told police that it occurred at Saint Sabina but other testimony suggested Barton.
According to the trial court, “[a]t one point then, *** Miss Moon hit [Johnson] several times ***
I believe with a key resulting in a laceration in the eyelid area.” The trial court noted that
although Moon claimed to have suffered several injuries, “[t]here was *** no documentation or
the police were never shown ripped hair, which would be profound and would be easy to view by
the police officers as well as marks.”
¶ 22 Additionally, the trial court stated:
“I know there has been some discussion about weren’t there a lot of people
around, it was a Chicago public school day to pick up report cards, and weren’t there a lot
of people around. And *** the defense said, no, and the witnesses for the state said, yes.
Well, the sad state of affairs is most parents don’t pick up report cards. I wish I could say
that was different.”
The trial court stated that it found the conduct of the witnesses troubling, but concluded that
Moon was not acting in self-defense and that “[n]o matter how mad you get, you have no right to
hit another person with keys.”
¶ 23 Moon filed a motion for new trial, arguing that due to the conflicting testimony and
credibility issues on both sides, reasonable doubt existed. The trial court denied Moon’s motion
and sentenced her to 18 months’ probation.
¶ 24 Analysis
¶ 25 Fact Not in Evidence
¶ 26 Moon first argues that the trial court improperly relied on a fact not in evidence when it
said “most parents don’t pick up report cards.” According to Moon, the trial court used this
observation to bolster Sahara and Johnson’s testimony that the altercation occurred at Barton, to
- 10 -
No. 1-16-1573
discredit the defense witnesses’ testimony that it occurred outside Gladney’s house. The State
responds that this statement did not affect the outcome because (i) neither the witnesses for the
State nor the defense precisely established where the altercation occurred, (ii) Moon did not raise
those discrepancies as part of her theory of the case, and (iii) to the extent the trial court
acknowledged conflicting testimony, the statement indicates that Johnson and Sahara testified
that the altercation occurred at Barton, while Detective Gonzalez testified that Moon told him it
occurred at Saint Sabina.
¶ 27 Moon acknowledges that she forfeited this issue by having failed to raise it both at trial
and in a written posttrial motion. She asserts, nevertheless, that we can consider it under the plain
error doctrine. People v. Naylor, 229 Ill. 2d 584, 592-93 (2008). The plain error doctrine will
apply where a clear or obvious error occurred and one of two circumstances exist: (i) “the
evidence is so closely balanced that the error alone threatened to tip the scales of justice against
the defendant, regardless of the seriousness of the error” or (ii) the “error is so serious that it
affected the fairness of the defendant’s trial and challenged the integrity of the judicial process,
regardless of the closeness of the evidence.” (Internal quotation marks omitted.) People v. Sebby,
2017 IL 119445, ¶ 48. Before considering the plain error doctrine, we must first determine
whether an error occurred. People v. Sims, 192 Ill. 2d 592, 621 (2000).
¶ 28 During a bench trial, a trial judge’s deliberations are “limited to the record made before
him or her during the course of the trial.” People v. Dunn, 326 Ill. App. 3d 281, 286 (2001). “A
judge’s determination, based upon a private investigation or private knowledge of the court,
untested by cross-examination or any of the rules of evidence, constitutes a denial of due
process.” Id. In a bench trial, we presume the trial court “considered only competent evidence in
- 11 -
No. 1-16-1573
reaching its verdict, unless that presumption is rebutted by affirmative evidence in the record.”
People v. Simon, 2011 IL App (1st) 091197, ¶ 91.
¶ 29 Moon was convicted of aggravated battery under sections 12-3.05(a)(1) and 12-3.05(c) of
the Criminal Code of 2012 (Code) (720 ILCS 5/12-3.05(a)(1), (c) (West 2014)). Section 12-3(a)
of the Code (720 ILCS 5/12-3(a) (West 2014)) provides that “[a] person commits battery if he or
she knowingly without legal justification by any means (1) causes bodily harm to an individual
or (2) makes physical contact of an insulting or provoking nature with an individual.” Under
section 12-3.05(a)(1) of the Code (720 ILCS 5/12-3.05(a)(1) (West 2014)), “[a] person commits
aggravated battery when, in committing a battery, *** he or she knowingly *** [c]auses great
bodily harm or permanent disability or disfigurement.” Section 12-3.05(c) of the Code (720
ILCS 5/12-3.05(c) (West 2014)) provides that “[a] person commits aggravated battery when, in
committing a battery, *** he or she is or the person battered is on or about a public way.”
¶ 30 While Moon argues that the issue of the presence of other people at Barton picking up
report cards affected the court’s factual determination of where the altercation took place, the
evidence at trial showed little discrepancy in terms of the altercation’s location. Johnson testified
that she and Sahara parked on the corner of Wolcott and 76th Street, “on an angle from the
school”; Sahara testified that she parked “[a]cross the street from the school.” Similarly, Moon
testified that she parked at Gladney’s house on the corner of 75th and Wolcott, which was “down
the street” from Barton, and the altercation took place in front of Gladney’s house. During
closing arguments, defense counsel even described Gladney’s house as “right across from”
Barton. Thus, the only evidence that the altercation occurred somewhere other than the vicinity
of Barton came from Moon’s statements to Barnes and Gonzalez that she was attacked at Saint
Sabina, and those statements, as noted, were contradicted by Moon’s trial testimony. Given this
- 12 -
No. 1-16-1573
testimony and defense counsel’s closing argument, the record does not show that there was a
factual dispute about where the altercation took place or that Moon developed her theory of the
case around that issue. See People v. Hunt, 234 Ill. 2d 49, 56 (2009) (“the theory under which a
case is tried in the trial court cannot be changed on review” (internal quotation marks omitted)).
¶ 31 Also, during closing arguments, defense counsel asserted that Johnson and Sahara picked
up report cards “at a time of day where presumably there would be other people picking up
report cards.” Viewing the record as a whole, the trial court may have been simply responding to
this statement, explaining why defense counsel’s presumption is not necessarily true. But, to the
extent that the trial court’s statement reflected information not in evidence, the record does not
show that the observation regarding report card pickups factored into the outcome. At trial,
Johnson and Sahara testified that Johnson waited in Sahara’s car while Sahara went into the
school to pick up her children’s report cards. As Sahara left the school, Moon approached her,
chased her around Sahara’s car, and then took Johnson’s purse out of the car. Johnson grabbed
her purse by the handle and was struck by Moon near her eye, causing her to bleed. The State
presented evidence of the injuries Johnson suffered, as reflected in photographs taken while
Johnson was on her way to the hospital, as well as in the stipulated testimony of a doctor who
saw Johnson’s injuries. The strength of this evidence did not depend on the trial court’s
tangential statement.
¶ 32 Moreover, the State elicited testimony challenging the credibility of Moon’s witnesses.
Carter testified that he told Detective Gonzalez that he was not present when the battery
occurred, despite the consensus between both parties’ witnesses that he was there. Although
Moon’s witnesses testified that the altercation took place in front of Gladney’s house near
Barton, Gonzalez’s rebuttal testimony showed that Moon initially reported a battery occurring at
- 13 -
No. 1-16-1573
Saint Sabina. Additionally, Moon testified that during her struggle, her hair was torn out in
multiple places, and she suffered several scratches and bruises. Yet, Barnes and Gonzalez both
testified that Moon did not show them the injuries she claimed to have suffered, and they did not
see injuries on Moon. While Moon presented photographs of her alleged injuries, these
photographs were taken after she was out of jail, one week after the altercation. In its ruling, the
trial court noted the inconsistencies in Moon’s original police report, as well as Moon’s failure to
show Barnes that her hair was ripped out. “[I]n a bench trial, it is for the trial judge, sitting as the
trier of fact, to determine the credibility of witnesses, to weigh evidence and draw reasonable
inferences therefrom, and to resolve any conflicts in the evidence.” People v. Siguenza-Brito,
235 Ill. 2d 213, 228 (2009). Having heard the State’s corroborated evidence, and the evidence
challenging Moon’s credibility, the trial court concluded that Moon was not acting in self-
defense, and convicted her of aggravated battery.
¶ 33 We must presume that the trial court considered only competent evidence unless
affirmative evidence in the record demonstrates otherwise. Simon, 2011 IL App (1st)
091197, ¶ 91. Because the record as a whole does not affirmatively show that the trial court
relied on its statement regarding report card pickups in making its determinations of credibility
or guilt, the court’s comment did not constitute a violation of Moon’s due process rights. People
v. Jenk, 2016 IL App (1st) 143177, ¶ 55 (affirming defendant’s conviction where trial court’s
“benign comment” regarding fact not in evidence “did not form the basis of the court’s finding”
of witness credibility or guilt); People v. Barnes, 48 Ill. App. 3d 226, 230-31 (1977) (affirming
defendant’s conviction where record did not show trial court based its determination on fact not
in evidence). Accordingly, we find that the trial court did not commit error in basing its
- 14 -
No. 1-16-1573
determination on facts outside of evidence and we need not consider Moon’s argument under
plain error review. Sims, 192 Ill. 2d at 621.
¶ 34 Inference That Defendant Struck Complainant With Key
¶ 35 Moon also argues that the trial court inaccurately recalled that she struck Johnson with a
key. In response, the State asserts that the evidence presented at trial supported a reasonable
inference that Moon was holding a key when she struck Johnson. Moon also acknowledges she
did not preserve this issue on appeal but asserts that we may review it under the plain error
doctrine. Thus, we must first determine whether an error occurred. Naylor, 229 Ill. 2d at 593.
¶ 36 “The trial court’s failure to recall and consider testimony crucial to defendant’s defense”
will result “in a denial of defendant’s due process rights.” People v. Mitchell, 152 Ill. 2d 274, 323
(1992); see also People v. Bowie, 36 Ill. App. 3d 177, 180 (1976). So in reviewing a conviction
following a bench trial, we must presume the trial court “considered only competent evidence in
reaching its verdict,” unless shown otherwise “by affirmative evidence in the record.” Simon,
2011 IL App (1st) 091197, ¶ 91. “Where the record affirmatively shows that the trial court failed
to recall crucial defense evidence when entering judgment, the defendant did not receive a fair
trial.” People v. Williams, 2013 IL App (1st) 111116, ¶ 75. In a bench trial, it is the trial court’s
responsibility “to weigh evidence and draw reasonable inferences therefrom, and to resolve any
conflicts in the evidence.” People v. Kiertowicz, 2013 IL App (1st) 123271, ¶ 19. The State has
the benefit of all reasonable inferences. Id. Whether a defendant’s due process rights have been
denied constitutes an issue of law, which we review de novo. Williams, 2013 IL App (1st)
111116, ¶ 75.
¶ 37 We find the trial court’s statement that Moon struck Johnson with a key was not a
misstatement of fact but, rather, a reasonable inference supported by the evidence. The evidence
- 15 -
No. 1-16-1573
at trial showed that while sitting in Sahara’s car, Johnson saw Moon drive by her before
approaching Sahara on foot, and Sahara saw Moon holding a sharp, silver object in her hand.
When Moon hit Johnson, Johnson’s “eyelid was split open all the way to the eyeball.” During
closing arguments, the State recalled Sahara’s testimony that Moon chased Sahara “with a shiny
object in her hand.” Based on the evidence and arguments, the trial court could have reasonably
inferred that Moon, having gotten out of her car, took her car key with her and hit Moon with the
key still in her hand, cutting Johnson’s eyelid. See Kiertowicz, 2013 IL App (1st) 123271, ¶ 19.
Accordingly, the trial court did not err by stating its belief that Moon struck Johnson with a key,
and plain error review of this issue is unmerited. Sims, 192 Ill. 2d at 621.
¶ 38 Trial Court’s Sua Sponte Objection During Defense Counsel’s Cross-examination
¶ 39 Moon next argues that the trial court improperly assumed a prosecutorial role by
sua sponte objecting to a question in defense counsel’s cross-examination of Johnson. As a result
of this objection, Moon claims that critical evidence was not admitted, and so this case should be
remanded for a new trial. Even if the trial court did not assume a prosecutorial role, Moon asserts
that we still should remand because the trial judge “created the appearance that she was assisting
the prosecution.” Moon also did not preserve this issue for appeal, but again, seeks review under
the plain error doctrine. Again, we must first determine whether the trial court actually
committed an error. Naylor, 229 Ill. 2d at 593.
¶ 40 “A trial court abuses its discretion when it adopts the role of advocate for one of the
parties.” People v. Jackson, 409 Ill. App. 3d 631, 647 (2011). Nonetheless, “a judge is not a mere
referee, and she has wide discretion to control the course of the trial.” People v. Jackson, 250 Ill.
App. 3d 192, 204 (1993). The trial court generally “has discretion to raise objections and to
question witnesses” (People v. Wiggins, 2015 IL App (1st) 133033, ¶ 46), and it “is permitted to
- 16 -
No. 1-16-1573
make rulings without objections from counsel” (People v. Thigpen, 306 Ill. App. 3d 29, 40
(1999)). Even where a court’s conduct is improper, “reversal [is] warranted only if the court’s
conduct played a material role in defendant’s conviction or prejudiced him.” Jackson, 250 Ill.
App. 3d at 204.
¶ 41 We find that in making a sua sponte objection, the trial court did not assume a
prosecutorial role or create the appearance of supporting the prosecution. Defense counsel sought
to elicit testimony from Johnson as to whether Sahara could have entered her car while she was
being chased, a matter of which Johnson would not have had personal knowledge. The trial court
had discretion to control the course of trial and was permitted to bar inadmissible testimony. Id.;
Thigpen, 306 Ill. App. 3d at 40; see also Ill. R. Evid. 602 (eff. Jan. 1, 2011) (“A witness may not
testify to a matter unless evidence is introduced sufficient to support a finding that the witness
has personal knowledge of the matter.”). Moreover, defense counsel was able to effectively elicit
the same testimony to which the trial court sua sponte objected. During cross-examination,
Sahara testified that she did not try to enter the car when Moon chased her around it, even though
her car door was unlocked. Based on this testimony, we find the trial court did not abuse its
discretion, and in any event, the objection had no impact. Jackson, 250 Ill. App. 3d at 204.
Because no error occurred, we need not address this issue under plain error review. Sims, 192 Ill.
2d at 621.
¶ 42 Repetitive Testimony
¶ 43 Next, Moon argues that the trial court impermissibly allowed the State to elicit repetitive
testimony from her regarding whether she showed Barnes the bald spots on her head when
reporting the battery. The State responds that the issue of whether Moon showed Barnes her
injuries required a longer line of questioning, since Moon testified that she suffered multiple
- 17 -
No. 1-16-1573
injuries, which were depicted by several exhibits. Because Moon also failed to preserve this
issue, we will determine whether an error occurred before considering the plain error doctrine.
Naylor, 229 Ill. 2d at 593.
¶ 44 Evidence is cumulative when it adds nothing to what was already before the trier of fact.
People v. Ortiz, 235 Ill. 2d 319, 335 (2009). But, the admission of unnecessarily repetitive
testimony is not, by that fact, reversible error. People v. Fields, 285 Ill. App. 3d 1020, 1027-28
(1996). “The admissibility of evidence at trial is a matter within the sound discretion of the trial
court, and that court’s discretion may not be overturned on appeal absent a clear abuse of
discretion.” People v. Illgen, 145 Ill. 2d 353, 364 (1991); see also People v. Cookson, 215 Ill. 2d
194, 213 (2005).
¶ 45 The State showed Moon the six photographs depicting her injuries and asked whether
Moon had shown each injury to Barnes. People v. Stevens, 2014 IL 116300, ¶ 16 (observing
defendant who takes stand to testify on own behalf in criminal case subjects herself to legitimate
cross-examination). Moon answered unclearly or unresponsively when asked about her scalp.
For instance, after confirming that she showed her scalp injuries to Barnes, she stated, “I didn’t
have these pictures but I was standing there, she could see.” This prompted the assistant state’s
attorney to reiterate her questions, and the trial court at one point intervened to tell Moon to “just
answer the questions,” as it had wide discretion to do. People v. Shaw, 98 Ill. App. 3d 682, 688
(1981) (“It is the duty of the presiding judge to insure that orderly proceedings are conducted and
proper decorum is maintained in the courtroom.”). At multiple points, Moon avoided the State’s
questions as to whether she showed Barnes her scalp injuries, stating she showed Barnes her
other injuries. The trial court attempted to keep Moon on subject, stating, “No, ma’am, that’s not
the question. The question is did you show her where the bald spots w[ere], *** did you show
- 18 -
No. 1-16-1573
that to her?” Moon ultimately testified that she did not show Barnes the bald spots on her scalp;
she thought Barnes could see them. In light of the number of exhibits, and Moon’s unclear and
unresponsive answers, the State did not improperly elicit repetitive testimony. Accordingly, we
find the trial court did not abuse its discretion by allowing the State to elicit repetitive testimony
that Moon did not show her bald spots to Barnes. Because no error occurred, plain error review
is unnecessary. Sims, 192 Ill. 2d at 621.
¶ 46 Cumulative Prejudicial Effect
¶ 47 Lastly, Moon argues that the cumulative prejudicial effect of the trial court’s alleged
errors requires reversal under the plain error doctrine or, alternatively, under a theory of
ineffective assistance of counsel. Because we have found that the trial court did not commit any
errors, we need not consider this argument. People v. Land, 2011 IL App (1st) 101048, ¶ 146
(declining to consider ineffective assistance of counsel argument where there was no error).
¶ 48 Affirmed.
- 19 -
| {
"pile_set_name": "FreeLaw"
} |
694 F.Supp. 949 (1988)
CABOT CORPORATION, Plaintiff,
v.
UNITED STATES, Defendant,
Hules Mexicanos, S.A., and Negromex, S.A., Defendant-Intervenors.
Court No. 86-09-01109.
United States Court of International Trade.
July 21, 1988.
Stewart and Stewart (Eugene L. Stewart, Terence P. Stewart, D. Scott Nance, Geert De Prest, and William A. Fennell, Washington, D.C., on the motion), for plaintiff.
Richard K. Willard, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civ. Div., Dept. of Justice (Sheila N. Ziff, Washington, D.C., on the motion), for defendant.
Rogers & Wells (Eugene T. Rossides, Washington, D.C., on the motion), for defendant-intervenors.
MEMORANDUM OPINION
CARMAN, Judge:
Plaintiff moves pursuant to Rule 56.1 of the rules of this Court for judgment on the agency record. Plaintiff challenges the final affirmative determination by the United States International Trade Administration (ITA) in the first administrative review in Carbon Black From Mexico, 51 Fed.Reg. 30385 (Aug. 26, 1986). The administrative review covered the period April 8, 1983 to September 30, 1983. It was completed pursuant to section 751 of the Tariff Act of 1930 [the Act], as amended, 19 U.S.C. § 1675 (1986) [751 review].
Plaintiff contends the ITA's determination is unsupported by substantial evidence *950 on the record or otherwise not in accordance with law within the meaning of section 516A of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(b)(1)(B) (1982). As its principal contention, plaintiff asserts the decision in Cabot Corp. v. United States, 9 CIT 489, 620 F.Supp. 722 (1985), appeal dismissed, 788 F.2d 1539 (Fed.Cir. 1986), vacated in part (CIT Nov. 20, 1986) [Cabot I] collaterally estops the ITA from arguing that the nonconforming approach taken by it was correct.
The defendant United States and the defendant-intervenors oppose the motion for judgment on the agency record. They urge that the decision in Cabot I has neither collateral estoppel nor stare decisis effect. The defendant and intervenors request a remand, however, solely for the purpose of recalculating the benefits conferred by the FOMEX and FONEI loans[1] with the use of effective rather than nominal interest rates.
The Court finds that while collateral estoppel does not apply against the government in this 751 review, the principles of Cabot I and PPG Industries, Inc. v. United States, ___ CIT ___, 662 F.Supp. 258 (1987), appeal docketed, No. 88-1175 (Fed. Cir. Dec. 28, 1987) apply perforce to the like facts of this case. As was held in the Cabot I and PPG decisions, "general availability" is not the prevailing standard under 19 U.S.C. § 1303 and 1677(5) (1982). To ensure that these statutory requirements are met, the Court directs a remand for a redetermination consistent with Cabot I and PPG.
FACTS
The countervailing duty investigation in this case culminated with the publication by the ITA of a final affirmative determination and order on carbon black[2] from Mexico. 48 Fed.Reg. 29564 (June 27, 1983). That determination was the subject of the Court's decision in Cabot I.
In Cabot I, the Court held that "the generally available benefits rule as developed and applied by the ITA is not an acceptable legal standard for determining the countervailability of benefits under section 1303." Cabot I, 9 CIT at 498, 620 F.Supp. at 732. The Court ordered a remand for further investigation and redetermination regarding Mexico's provision of carbon black feedstock [CBFS] and natural gas at government-set rates. 620 F.Supp. at 734.
At the time the Court issued the decision in Cabot I, the 751 review which is the subject of this action was proceeding. Following *951 an appeal which was dismissed as premature, 788 F.2d 1539, the ITA moved for an extension of more than 150 days in which to file the remand redetermination.[3] A few days before the final results of the 751 review were published in the Federal Register, the government moved to vacate the remand order in Cabot I and stay the proceedings pending the outcome of the motion to vacate. The Court granted the motion to vacate and affirmed final judgment except for those matters for which the action was remanded in Cabot I. See Order dated Nov. 20, 1986.
The 751 review which is the subject of this action covered the period April 8, 1983 to September 30, 1983. One of the primary issues raised in the review concerned the provision of CBFS in Mexico. CBFS is provided by Petroleos Mexicanos [PEMEX], the government-controlled petroleum monopoly in Mexico. It is sold to only two producers of Mexican carbon black at prices not offered to any non-Mexican companies and at prices substantially below those elsewhere in the world. During the period under review, Mexican CBFS was sold to Mexican carbon black companies for $16 a ton in the second quarter of 1983 and $27 a ton in the third quarter. During the same timeframe, CBFS sold for approximately $130 and $136 a ton respectively in the United States. Public Document at 823, Cabot Corp. v. United States (No. 86-09-01109) [Pub.Doc.]. The import price of CBFS to the European Community [EC] during the period of review was approximately $151 per ton while the export price from the EC was $156 per ton. Pub.Doc., supra, at 952. Plaintiff's Brief in Support of Motion for Judgment on Agency Record at 5, Cabot Corp. v. United States, (No. 86-09-01109) [Plaintiff's Brief].
In the preliminary determination, the ITA determined that there were too few users of CBFS to find it was "generally available." Pub.Doc., supra, at 677-78. The ITA therefore proceeded to determine whether or not CBFS was preferentially priced to carbon black producers. Id. at 678.
Because CBFS was used by only one industry in Mexico, the ITA was unable to utilize its standard preferentiality test. In accordance with this test, the ITA would have examined the PEMEX price of CBFS to carbon black producers to determine if this price was more favorable than the PEMEX price to other purchasers of CBFS in Mexico. Id. The ITA instead compared the PEMEX price of CBFS to the price charged by PEMEX for a generally available "similar or related good."
Finding that No. 6 fuel oil and CBFS were related products, and that a correlation existed between the prices of these two products, id. at 679, the ITA selected No. 6 fuel oil as the most appropriate "similar or related good." Adjustments were made to reflect the differences in costs between the two products. Id. at 679-80.
After examining the price of No. 6 fuel oil, the ITA preliminarily determined that CBFS was not preferentially priced to carbon black producers and therefore did not confer a countervailable subsidy. Id. at 680. In the final determination, the ITA employed the same methodology used in the preliminary determination except that it used quarterly price differentials between CBFS and No. 6 fuel oil instead of average differentials for the entire period. See id. at 1413. The ITA found a subsidy of 1.90 percent ad valorem. Id.
Concerning the provision of natural gas, the ITA preliminarily determined that natural gas was available on a non-specific basis. Id. at 676. The ITA therefore found that the differential between high export prices and low domestic prices of natural gas did not constitute a domestic subsidy. Id. at 677. The ITA's conclusions regarding the non-countervailability of natural gas apparently remained unchanged in the final determination. The ITA also found that three FOMEX export loans had been inadvertently excluded from the preliminary results. Id. at 1405. After including these loans, the ITA found the total FOMEX *952 benefit to be 0.52 percent ad valorem. Id. The ITA found the total bounty or grant during the period of review to be 3.18 percent ad valorem. Id. at 1415.
Plaintiff contends that since the agency failed to comply with the requirement of the countervailing duty law as articulated in Cabot I, the ITA's valuation of the extent of the benefit from the provision of CBFS to Mexican producers and its conclusions regarding natural gas are not supported by substantial evidence or are otherwise contrary to law. In the plaintiff's view, the Court's decision in Cabot I collaterally estops the agency from arguing that the non-conforming approach utilized by it to measure the subsidy from the provision of CBFS and to determine the existence of a subsidy from the provision of natural gas was correct.
In addition, plaintiff contends that the ITA erroneously limited its examination of CBFS pricing to a consideration of whether such pricing was "preferential" within the agency's interpretation of 19 U.S.C. § 1677(5)(B)(ii). Plaintiff urges that the ITA's interpretation of what constitutes a good or service at a preferential rate was unsupported by substantial evidence and was otherwise contrary to law.
Plaintiff argues that the ITA should have examined other alternatives for determining the extent of preferentiality. According to the plaintiff, the ITA should have utilized U.S. export prices of CBFS to Mexico during 1981-1983 or U.S. or world prices for CBFS as the best measure of preferentiality. Plaintiff's Brief, supra, at 15-16.
Plaintiff maintains the ITA incorrectly selected No. 6 fuel oil as a "similar or related" product. In the plaintiff's view, the ITA should have used substitute products for CBFS available within Mexico instead of "similar or related" products. Id. at 10-15.
Plaintiff contends the ITA improperly failed to obtain cost of production information from PEMEX for CBFS. Plaintiff urges this failure to obtain information amounts to the kind of failure to investigate that was held to be an abuse of discretion in Timken Co. v. United States, ___ CIT ___, ___, 630 F.Supp. 1327, 1336-39 (1986).
Plaintiff also maintains that the ITA incorrectly utilized nominal interest rates to compute the benefit to Mexican carbon black exporters from FOMEX and FONEI loans. Plaintiff asserts that "[b]y using nominal rates, and not taking into consideration the true cost of commercial borrowing, the agency seriously understated the benefit accorded to Mexican carbon black producers." Plaintiff's Brief, supra, at 21.
Finally, plaintiff criticizes the government for its undue haste in completing the 751 review so that it could move to have the remand order vacated. In its haste, plaintiff urges, the government failed to investigate CBFS cost of production and interest rates, and failed to properly review comments submitted on the agency's proposed methodology. Id. at 24-28.
Defendant United States contends the decision in Cabot I has neither collateral estoppel nor stare decisis effect in the first 751 review. In the defendant's view, the ITA properly determined that the provision of natural gas by the Mexican government at a controlled price did not constitute a countervailable subsidy. Defendant further urges that the ITA properly measured the preference received by the carbon black producers from the provision of carbon black feedstock at controlled prices. Defendant urges the methodology utilized by the agency to determine the extent of the preference accorded the carbon black producers was reasonable and in accordance with the law.
Defendant urges the ITA properly selected No. 6 fuel oil as a "similar or related good." Defendant further contends that the application of a world price benchmark would have been impractical and unreasonable. Finally, the defendant contends, the ITA acted properly in issuing the final results of the review prior to the statutory deadline. The defendant-intervenor essentially concurs with the defendant's position.
DISCUSSION
A. Standard of review
A review of a final determination under 19 U.S.C. § 1675 is not de novo but must *953 be made upon the administrative record. Luciano Pisoni Fabbrica Accessori v. United States, ___ CIT ___, ___, 640 F.Supp. 255, 256 (1986). In reviewing the record, the Court must not permit the agency, under the guise of lawful discretion or interpretation, to contravene or ignore the intent of Congress. Ceramica Regiomontana, S.A. v. United States, ___ CIT ___, ___, 636 F.Supp. 961, 966 (1986), aff'd, 810 F.2d 1137 (Fed.Cir.1987) (citing Chevron U.S.A., Inc. v. Natural Res.Def. Council, Inc., 467 U.S. 837, 843-44, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984), reh'g denied, 468 U.S. 1227, 105 S.Ct. 28, 82 L.Ed.2d 921 (1984); Board of Governors, Fed. Reserve Sys. v. Dimension Fin. Corp., 474 U.S. 361, 368, 106 S.Ct. 681, 686, 88 L.Ed.2d 691 (1986)). The Court must hold unlawful any determination, conclusion, or finding found to be unsupported by substantial evidence on the record, or otherwise not in accordance with law. 19 U.S. C. § 1516a(b)(1)(B) (1982). Substantial evidence has been held to be more than a "mere scintilla." Such evidence must be sufficient to reasonably support a conclusion. Ceramica Regiomontana, ___ CIT at ___, 636 F.Supp. at 966.
Further, the agency's interpretation of the statute it administers is entitled to substantial weight. American Lamb Co. v. United States, 785 F.2d 994, 1001 (Fed.Cir. 1986) (citing Zenith Radio Corp. v. United States, 437 U.S. 443, 450-51, 98 S.Ct. 2441, 2445, 57 L.Ed.2d 337 (1978); Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1964), reh'g denied, 380 U.S. 989, 85 S.Ct. 1325, 14 L.Ed.2d 283 (1965)). The Court should not reject the agency interpretation unless there are compelling reasons why it should not be followed. Wilson v. Turnage, 791 F.2d 151, 156 (Fed. Cir.1986), cert. denied, 479 U.S. 988, 107 S.Ct. 580, 93 L.Ed.2d 583 (1986). As a "master of the subject," the agency is afforded considerable deference in the exercise of its expertise. Consumer Prod. Div., SCM Corp. v. Silver Reed America, Inc., 753 F.2d 1033, 1039 (Fed.Cir.1985).
If Congress has not directly addressed a specific issue, the Court may not impose its own construction of the statute. Rather, the Court must decide if the agency's interpretation is based upon a permissible construction of the statute. Chevron, U.S.A., 467 U.S. at 843, 104 S.Ct. at 2781.
In light of the above principles, the Court must now determine if the decision in Cabot I collaterally estops the ITA from using the "general availability test" in this case.[4]
B. Collateral Estoppel
Under the doctrine of collateral estoppel[5] sometimes referred to as issue preclusion, *954 issues which were actually and necessarily determined by a court of competent jurisdiction are treated as conclusive in a subsequent suit involving the parties to the prior litigation. Mother's Restaurant, Inc. v. Mama's Pizza, Inc., 723 F.2d 1566, 1569 (Fed.Cir.1983). The doctrine is applicable, however, only where the issue determined in the prior litigation has resulted in a final judgment on the merits. Equitable Trust Co. v. CFTC, 669 F.2d 269, 272 (5th Cir. 1982). Collateral estoppel does not apply unless the party against whom the earlier decision was made has had a full and fair opportunity to litigate the issue. Kremer v. Chemical Constr. Corp., 456 U.S. 461, 480-81, 102 S.Ct. 1883, 1896-97, 72 L.Ed.2d 262 (1982), reh'g denied, 458 U.S. 1133, 103 S.Ct. 20, 73 L.Ed.2d 1405 (1982). Although collateral estoppel once required mutuality of parties, that rule has been substantially modified in federal practice. Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326-31, 99 S.Ct. 645, 649-52, 58 L.Ed.2d 552 (1979).
In Cabot I, upon defendant United States' motion for vacatur of part of the court's decision, the court vacated the remand and ordered entry of a final judgment sustaining the final affirmative countervailing duty determination and order on carbon black from Mexico. The final judgment covered all matters except those for which the action had been remanded. See Cabot I (Order dated Nov. 20, 1986). While a final judgment entered, this judgment was only partial. This judgment also favored the government. There was therefore no appealable judgment on the merits from which the government could have obtained review.[6] The Court holds that since *955 Cabot I culminated in a final judgment from which there was no effective appeal on the merits available to the defendant United States, collateral estoppel does not apply against the government in this 751 review.
It is nevertheless clear that the ITA applied "general availability" in making its determination in this case. See supra note 4. In an extensive opinion in Cabot I, the Court discussed the "general availability rule" and its validity under the countervailing duty laws. Although the Court vacated the order in Cabot I, the Court did not abrogate the legal reasoning and principles of Cabot I. The order was vacated because the completion of the first 751 review rendered moot the question of duty deposit rates which were set in the original countervailing determination. See PPG Industries, Inc. v. United States, ___ CIT ___, ___, 660 F.Supp. 965, 973 (1987). While collateral estoppel does not apply to the outcome of this litigation, the reasoning of Cabot I applies perforce to the facts of this case. A substantial portion of the reasoning of Cabot I is therefore incorporated herein for convenience:
A. Applicable Law: The Interplay Between Section 1303 and Section 1671.
As the "direct descendant" of earlier countervailing duty laws, Bethlehem Steel Corp. v. United States, 7 CIT [339, 341], 590 F.Supp. 1237, 1239 (1984), section 1303 applies to countervailing duty investigations "[e]xcept in the case of an article or merchandise which is the product of a country under the Agreement." 19 U.S.C. § 1303(a)(1). For articles from countries under the Agreement, however, section 1677(5) applies. Mexico was not a country under the Agreement during the period of this investigation, therefore section 1303 is the applicable statute. The ITA stated in its determination, nevertheless, that "[w]hile [the] investigation is governed procedurally by section 303 of the Act, the analysis of programs is based on Title VII of the Act ...," and therefore applied § 1677(5)(B). 48 Fed.Reg. at 29,566. This position is not supported by a careful examination of the statutes and the decisions of this court.
Section 1677(5) states first that "subsidy" has the same meaning as "bounty or grant." Thus there is "complete harmony and continuity between the two provisions." Bethlehem Steel Corp. v. United States, 7 CIT [at 341], 590 F.Supp. [at 1240] (1984). In section 1677(5), added to the Tariff Act of 1930 by the [Trade] Agreements Act of 1979, Pub.L. No. 96-39, § 101, 93 Stat. 144, 151 (1979), Congress enumerated certain countervailable practices. This did not imply a repeal of section 1303 and its interpretation.7 Thus, the same analysis applies regardless of which statute controls, and the law defining the term bounty or grant informs the interpretation of the term subsidy. Section 1677(5) does not subsume "bounty or grant."
In sum, section 1303 supplies the substantive law in this case. The administrative, legislative, and judicial pronouncements pertaining to section 1303 are accordingly apt. The Court may nevertheless refer to 19 U.S.C. § 1677(5) in interpreting section 1303. See Carlisle, 5 CIT [229], 564 F.Supp. 834; Bethlehem, 7 CIT 339, 590 F.Supp. 1237.
B. The Legal Standard: Countervailability of Generally Available Benefits
The chief issue presented to the Court is whether benefits that are available on a nonpreferential basisthat is, benefits obtainable by any enterprise or industry can be bounties or grants within the meaning of section 1303 and therefore countervailable. Since any industrial user in Mexico could purchase carbon black feedstock and natural gas at the same price (disregarding the regional discount, see infra p. 728), the ITA viewed PEMEX's provision of these inputs at well below world market prices as not constituting a countervailable practice. 48 Fed.Reg. at 29,566. The ITA view was based on the "generally available benefits rule," which has evolved within the administrative agency and was *956 adopted by the court in Carlisle Tire & Rubber Co. v. United States, 5 CIT 229, 564 F.Supp. 834 (1983). Two other decisions of this court, however, have rejected the rule as contrary to the countervailing duty statutes, most specifically section 1303, and as therefore unlawful. Agrexco, Agricultural Export Co. v. United States, 9 CIT 40, 604 F.Supp. 1238 (1985); Bethlehem Steel Corp. v. United States, 7 CIT 339, 590 F.Supp. 1237 (1984). This Court thus faces considerable controversy regarding the rule that generally available benefits provided within the relevant jurisdiction are not countervailable.
The generally available benefits rule as articulated by the defendant is essentially that benefits available to all companies and industries within an economy are not countervailable subsidies. Defendant's conclusions are primarily drawn from 19 U.S.C. § 1677(5)(B), which refers to countervailable domestic subsidies as being provided to "a specific enterprise or industry, or group of enterprises or industries...." (emphasis added). Thus, argues defendant, benefits "generally available" to all enterprises or industries are not subsidies under section 1677(5)(B), and therefore do not fall within the meaning of "bounty or grant" as used in section 1303. Defendant bolsters its interpretation by citing Carlisle Tire & Rubber Co. v. United States, 5 CIT 229, 564 F.Supp. 834.
In Carlisle, the court upheld the ITA's interpretation of section 1303 as being reasonable. Id. at 233, 564 F.Supp. at 838. The court relied in part on older case law which described a bounty or grant as a "special advantage," citing Nicholas & Co. v. United States, 249 U.S. 34, 39 S.Ct. 218, 63 L.Ed. 461 (1919), or "an additional benefit" conferred upon a "class of persons," citing Downs v. United States, 187 U.S. 496, 501, 23 S.Ct. 222, 223, 47 L.Ed. 275 (1903). Apparently the ITA and the court in Carlisle view the noncountervailability of generally available benefits as the opposite side of the coin from the countervailability of benefits conferred upon a specific class. There is a distinction, however, which has not been clearly deciphered by the ITA or in prior judicial opinions, but which disrupts the apparent symmetry of the two sides of the coin.
The distinction that has evaded the ITA is that not all so-called generally available benefits are alikesome are benefits accruing generally to all citizens, while others are benefits that when actually conferred accrue to specific individuals or classes. Thus, while it is true that a generalized benefit provided by government, such as national defense, education or infrastructure, is not a countervailable bounty or grant, a generally available benefitone that may be obtained by any and all enterprises or industriesmay nevertheless accrue to specific recipients. General benefits are not conferred upon any specific individuals or classes, while generally available benefits, when actually bestowed, may constitute specific grants conferred upon specific identifiable entities, which would be subject to countervailing duties.
The court in Carlisle recognized the absurdity of a rule that would require the imposition of countervailing duties where producers or importers have benefited from general subsidies, as "almost every product which enters international commerce" would be subject to countervailing duties.8 See 5 CIT at 234, 564 F.Supp. at 838 (citing Barcelo, Subsidies and Countervailing DutiesAnalysis and a Proposal, 9 L. & Pol'y in Int'l Bus. 779, 836 (1977)). Alternatively, the court in Bethlehem recognized the absurdity of a law that would transform an obvious subsidy into a non-countervailable benefit merely by extending the availability of the subsidy to the entire economy. 7 CIT at 345, 590 F.Supp. at 1242. Thus, although a bounty or grant is preferential in nature, bestowed upon an individual class, the generally available benefits rule as developed and applied by the ITA is not an acceptable legal standard for determining the countervailability of benefits under section 1303.
*957 The appropriate standard focuses on the de facto case by case effect of benefits provided to recipients rather than on the nominal availability of benefits. The case must therefore be remanded for further investigation and redetermination. The definition of "bounty or grant" under section 1303 as intended by Congress remains as it is embodied in the case law and later affirmed by Congress in section 1677(5). This definition requires focusing only on whether a benefit or "competitive advantage" has been actually conferred on a "specific enterprise or industry, or group of enterprises or industries." In the case before the Court, the availability of carbon black feed-stock and natural gas at controlled prices does not determine whether the benefits actually received by these two carbon black producers are countervailable subsidies.
The programs appear to effect specific quantifiable provisions of carbon black feedstock and natural gas to specific identifiable enterprises. That additional enterprises or industries can participate in the programs, whether theoretically or actually, does not destroy the programs as subsidies. The programs are apparently available to all Mexican enterprises, but in their actual implementation may result in special bestowals upon specific enterprises.
Once it has been determined that there has been a bestowal upon a specific class, the second aspect of the definition of bounty or grant requires looking at the bestowal and determining if it amounts to an additional benefit or competitive advantage. If so, the benefit might fit within one of the illustrative examples of 19 U.S.C. § 1677(5)(B). The ITA, however, prematurely concluded that "the provision of carbon black feed-stock and natural gas clearly involves the provision of goods within the meaning of subsection (ii)," 48 Fed.Reg. at 29568, that is, the subsidy example of providing goods or services at preferential rates. The ITA asserted, "[t]he standard contained in subsection (ii) is [`]preferential,' which normally means only more favorable to some within the relevant jurisdiction than to others within the jurisdiction." 48 Fed.Reg. at 29,568. Thus, concluded the ITA, "even if carbon black feedstock and natural gas were not generally available, we would not find this rate to be a subsidy, because this rate is not preferential...." Id.
The ITA has engaged in a tautology, merely extending its generally available benefits rule into the illustrative example of subsection (ii). Although preferential pricing clearly is a countervailable subsidy, subsection (ii), as only one such example of a subsidy, does not include all pricing programs constituting subsidies. The ITA's attention must therefore be directed to the broader question of whether the Mexican pricing programs for carbon black feedstock and natural gas are additional benefits or competitive advantages within the scope of section 1303.9
7 By leaving the § 1303 term "bounty or grant" undefined, Congress intended that the "metes and bounds of that term be staked out judicially and through administrative practice." Carlisle Tire & Rubber Co. v. United States, 5 CIT 229, 233, 564 F.Supp. 834, 837 (1983) (citing United States v. Zenith Radio Corp., 64 CCPA 130, 140 & n. 14, 562 F.2d 1209, 1217 & n. 14 (1977), aff'd, 437 U.S. 443, 98 S.Ct. 2441, 57 L.Ed.2d 337 (1978).
8 A chief concern of the court in Carlisle was avoiding the absurd result of countervailing "such things as public highways and bridges, as well as a tax credit for expenditures on capital investment even if available to all industries and sectors." Carlisle, 5 CIT at 233, 564 F.Supp. at 838. The court's concern seemed directed toward "general subsidies that most governments confer such as national defense, government-subsidized education and infrastructure, and sufficient public health and agricultural extension programs." G. Bryan, Taxing Unfair International Trade Practices 297 (1980). Such subsidies are distinguished from selective subsidies, examples of which are outlined in 19 U.S.C. § 1677(5). Id.
"General subsidies" may also be looked at in economic terms as provisions of public goods. Governments provide many such goods and services because of the inability of the price system to effectively provide these goods, which tend to be indivisible and collectively consumable by all citizens whether they pay for them or not. E. Mansfield, Economics Principles, Decisions 68, 74-78 (4th ed. 1983). This public good *958 analysis is in alignment with the analysis under § 1303. A public good provided by government benefits society in a collective manner. It is not conferred upon any specific enterprise or industry.
With respect to the tax laws such as credits, accelerated methods of depreciation, and special depreciation recapture rules, issues may be more complicated. Each program must therefore be examined on a case-by-case basis to determine if the benefit accrues to specific beneficiaries or generally to society.
9 Plaintiff argues that a price below the world market price is a per se countervailable benefit. The matter is more complex. The availability of inputs at low prices to foreign producers may be the result of various non-countervailable factors such as comparative advantage. See T. Pugel, The Fundamentals of International Trade and Investment, in Handbook of International Business 1-2, 4 (I. Walter ed. 1982). The facts of this case indicate that the Mexican carbon black producers have located themselves (although perhaps pursuant to the NIDP) to take advantage of available carbon black feedstock with specific qualities. This arrangement might allow PEMEX to sell a byproduct which would otherwise go unsold. Thus, prices below the world market price or the export price may simply be the result of a symbiotic industrial relationship. Further, PEMEX's refusal to sell carbon black feedstock abroad to plaintiff might be on account of limited Mexican domestic supply.
On the other hand, "generally available" benefits are not necessarily the result of the exercise of comparative advantage. It cannot be concluded merely on the basis of nominal availability and absent further investigation that the prices of carbon black feedstock and natural gas as set by PEMEX are the result of factors such as excess supply and low production cost. See contra Note, Upstream Subsidies and U.S. Countervailing Duty Law: The Mexican Ammonia Decision and the Trade Remedies Reform Act of 1984, Law and Pol'y in Int'l Bus. 263, 291 & n. 126 (1985).
Cabot Corp., 9 CIT at 495-99, 620 F.Supp. at 730-33.
The ITA's formulation of the general availability rule appears to be the result of an erroneous decision to paraphrase the applicable statute. It is never wise for courts or administrative agencies to paraphrase statutes. As the Court has held in both the Cabot I and PPG decisions, Congress intended § 1677(5) to be the definitive test of countervailable benefits. Whether or not a subsidy is generally available is only some evidence that a program is countervailable. It is not the only factor. All relevant factors must be properly examined by the agency to determine whether or not countervailing duties should be imposed. See PPG Industries, ___ CIT at ___, 662 F.Supp. at 265. One might posit that the term "general availability" is synonomous with the phrase "provided to or required by government action to a specific enterprise or industry, or group of enterprises or industries." The Court observes, however, that there has been extensive litigation concerning "general availability" and a painstaking effort to articulate the applicable standard as specified by Congress. See, e.g., Cabot I, 9 CIT 489, 620 F.Supp. 722; PPG Industries, ___ CIT ___, 662 F.Supp. 258; Can-Am Corp. v. United States, ___ CIT ___, 664 F.Supp. 1444 (1987). While reference to these decisions would certainly be appropriate, the language of § 1677(5) is the primary determinant of congressional intent:
(5) Subsidy.The term "subsidy" has the same meaning as the term "bounty or grant" as that term is used in section 1303 of this title, and includes, but is not limited to, the following:
....
(B) The following domestic subsidies, if provided or required by government action to a specific enterprise or industry, or group of enterprises or industries, whether publicly or privately owned, and whether paid or bestowed directly or indirectly on the manufacture, production, or export of any class or kind of merchandise:
(i) The provision of capital, loans, or loan guarantees on terms inconsistent with commercial considerations.
(ii) The provision of goods or services at preferential rates.
(iii) The grant of funds or forgiveness of debt to cover operating losses sustained by a specific industry.
(iv) The assumption of any costs or expenses of manufacture, production, or distribution.
19 U.S.C. § 1677(5) (1982) (emphasis added).
Although the Court will normally accord substantial weight to the agency's interpretation of the statute it administers, American *959 Lamb, 785 F.2d at 1001, "th[e] Court will not allow [the] agency, under the guise of lawful discretion, to contravene or ignore the intent of the legislature or the guiding purpose of the statute." Ceramica Regiomontana, ___ CIT at ___, 636 F.Supp. at 966. Accordingly, this action is remanded to the ITA for a redetermination in accordance with this opinion.[7]
CONCLUSION
Since all of the parties concur on the issue, the plaintiff's motion for a remand to the ITA for the purpose of recalculating the benefits conferred by FOMEX and FOMEX loans is granted. The Court further holds that since the "general availability rule" as developed and applied by the ITA pervades the entire final affirmative determination, a remand for the purpose of reconsideration by the ITA of the 751 review determination in accordance with this opinion is appropriate.
NOTES
[1] FOMEX (Fund for the Promotion of Exports of Mexican Manufactured Products) is a governmental trust which provides low interest loans to Mexican companies to promote the manufacture and sale of exported products. See 47 Fed.Reg. 7866, 7867 (Feb. 23, 1982). FONEI (Fund for Industrial Development) "is a specialized fund, administered by the Bank of Mexico, which grants long-term credit at below-market rates for the creation, expansion or modernization of enterprises in order to foster the efficient production of industrial goods, the production of goods capable of competing in the international market, and industrial decentralization." See 48 Fed.Reg. 43063, 43065 (Sept. 21, 1983).
[2] In Cabot I, the Court defined carbon black as: elemental carbon with incidental or planned surface oxidation that is formed under the controlled cracking, heating and quenching of a petroleum derivative feedstock, commonly referred to as carbon black feedstock. Carbon black is used primarily in the rubber industry, but is also used in the production of paints, inks, plastics and carbon paper.
Carbon black feedstock, along with natural gas and water, is essential for the production of carbon black. The feedstock is one of many types of petroleum products obtainable from crude oil, but results relatively early in the refining process. After crude oil is heated to cause a breakdown into its constituent parts, one of the constituent parts, "gas oil" or "heavy gas oil" is refined further in a catalytic cracker. In the typical catalytic cracking process, a catalyst is introduced into the heating treatment of the gas oil. At extremely high temperatures and pressures, the gas oil breaks down cracks and yields gasoline. Catalytic cracking is a crucial process in the production of gasoline and the prime goal is to produce gasoline.
Cabot Corp., 9 CIT at 491, 620 F.Supp. at 727 (citing 14 Encyclopedia Britannica Petroleum Refining 183 (15th ed. 1982). For a general discussion of Mexico's National Industrial Development Plan [NIDP] and its interaction with Mexico's carbon black industry, see Cabot Corp., 9 CIT at 493, 620 F.Supp. at 728.
[3] Although the agency requested an extension of more than 150 days in which to file the remand results, this extension was reduced upon agreement among the parties to 135 days.
[4] The Court finds evidence that the ITA clearly applied the general availability rationale from the ITA's conclusion that: "[w]e continue to maintain that No. 6 fuel oil is a generally-available similar or related product to CBFS." 51 Fed.Reg. at 30386 (Aug. 26, 1986) (emphasis added). In analyzing the comments received by it, the ITA further stated:
Cabot ... argues that (1) The Court of International Trade has held that the Department's general availability test is contrary to law; and (2) even if that were not the case, the Department under its own standards must determine that a benefit is generally available in fact as well as in name.
Department's position. We believe that the test is not contrary to law but agree with Cabot that, in applying the specificity test for domestic subsidies, we must be concerned with both nominal and de facto availability.
Id. (emphasis added).
[5] Collateral estoppel is one of several doctrines that limit reconsideration of judicial decisions. While related, these doctrines reflect a distinct mix of policy considerations. These doctrines include stare decisis, law of the case, res judicata, collateral estoppel or issue preclusion, and full faith and credit. See 1B J. Moore, J. Lucas & T. Currier, Moore's Federal Practice ¶ 0.401 (2d ed. 1988) [1B Moore]. These doctrines are understood to mean the following:
1. Stare decisis: Provides that "a decision on an issue of law embodied in a final judgment is binding on the court that decided it and such other courts as owe obedience to its decisions, in all future cases." Id. at ¶ 0.402[1]. It is expected that "like facts will receive like treatment in a court of law.... [The court] may not disregard binding precedent absent an intervening Supreme Court or en banc circuit decision." Flowers v. United States, 764 F.2d 759, 761 (11th Cir.1985) (citations omitted). Stare decisis "plays an important role in orderly adjudication," and "serves the broader societal interests in evenhanded, consistent and predictable application of legal rules." Thomas v. Washington Gas Light Co., 448 U.S. 261, 271, 100 S.Ct. 2647, 2655, 65 L.Ed.2d 757 (1980). In regard to this doctrine, Chief Judge Re has stated:
The decided case is said to establish a principle, and it is indeed a principium, a beginning, in the true etymological sense.... A principle is a fundamental assumption that does not foreclose further inquiry. As a point of departure or beginning, the common law judge affirms or asserts the pertinence of a principle extracted from the precedent found to be in point. He then proceeds to apply it by molding or shaping that principle to meet the needs of deciding the case at bar. The process of application, whether it results in an expansion or a restriction of the principle, is more than a mere gloss; it represents the judge's distinct contribution to the growth and development of the law.
Re, Stare Decisis and the Judicial Process, 79 F.R.D. 509, 510 (1979).
2. Law of the Case: This principle provides that the law applied in decisions at various stages of the same litigation become the governing principles at later stages. It is distinguishable from stare decisis which applies a binding precedent principle to a final judgment. 1B Moore, supra, ¶ 0.401. In Arizona v. California, 460 U.S. 605, 618, 103 S.Ct. 1382, 1391, 75 L.Ed. 2d 318 (1983) the Court pointed out that unlike res judicata, law of the case is an amorphous concept, is directed to the court's discretion, and does not limit the tribunal's power.
3. Res Judicata: This doctrine applies when there is a valid judgment on the merits between the parties. Such a judgment operates as an absolute ban of a subsequent action of the same claim or demand between the same parties or those in privity with them. NLRB v. United Technologies Corp., 706 F.2d 1254, 1259 (2nd Cir.1983). In considering the terms res judicata, collateral estoppel, and claim preclusion, the United States Court of Appeals for the Federal Circuit has adopted the following analysis:
we will be guided by the Restatement (Second) of Judgments (1982) which, in introductory note to § 13, provides the following statement:
The concepts developed in this Chapter are: mergerthe extinguishment of a claim in a judgment for plaintiff (§ 18) barthe extinguishment of a claim in a judgment for defendant (§ 19) and issue preclusionthe effect of the determination of an issue in another action between the parties on the same claim (direct estoppel) or a different claim (collateral estoppel) (§ 27). The term "res judicata" is here used in a broad sense as including all three of these concepts. When it is stated that "the rules of res judicata are applicable," it is meant that the rules as to the effect of a judgment as a merger or a bar or as a collateral or direct estoppel are applicable.
Young Engineers v. United States Int'l Trade Comm'n, 721 F.2d 1305, 1314 (Fed.Cir.1983).
4. Collateral estoppel or issue preclusion (See infra text).
5. Full Faith and Credit is the term used to define what each state is constitutionally required to afford to the judicial proceedings of every other state. U.S. Const., art. IV, § 1. The purpose of this requirement is "to give transjurisdictional effect to the doctrine of res judicata, and within limits, to the doctrine of collateral estoppel." 1B Moore, supra, ¶ 0.401. It is a constitutional and statutory command made necessary by the multiplicity of jurisdictions in the federal system. Id.
[6] If litigants were permitted to appeal decisions in which they were successful but dissatisfied with the lower court's reasoning, appellate courts would be unduly burdened and presumably asked to issue advisory opinions which would be unconstitutional. See U.S. Const., art. III, § 2.
[7] With respect to the natural gas issue, it may well be that upon remand, the ITA's application of the specificity test in accordance with § 1677(5), Cabot I, and PPG will resemble the test employed by the agency in the preliminary 751 review determination. Because a "general availability" rationale pervades the entire final 751 review determination, however, the Court is unwilling to speculate.
| {
"pile_set_name": "FreeLaw"
} |
United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 98-3579
___________
United States of America, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* Western District of Missouri.
Gerald D. Scurlock, *
* [UNPUBLISHED]
Appellant. *
___________
Submitted: April 7, 1999
Filed: April 13, 1999
___________
Before BEAM, LOKEN, and MORRIS SHEPPARD ARNOLD, Circuit Judges.
___________
PER CURIAM.
Gerald D. Scurlock pleaded guilty to being a felon in possession of a firearm,
in violation of 18 U.S.C. § 922(g)(1). The district court1 sentenced Mr. Scurlock to
27 months imprisonment and three years supervised release. On appeal, counsel filed
a brief pursuant to Anders v. California, 386 U.S. 738 (1967), arguing that the district
court imposed too harsh a sentence. We note Mr. Scurlock’s sentence falls at the
bottom of the Guidelines range to which the parties stipulated in their plea agreement,
1
The Honorable D. Brook Bartlett, Chief Judge, United States District Court
for the Western District of Missouri.
see United States v. Nguyen, 46 F.3d 781, 783 (8th Cir. 1995) (defendant who
explicitly and voluntarily exposes self to specific sentence may not challenge his
sentence on appeal), and in any event, the argument lacks merit, see Neal v.
Grammer, 975 F.2d 463, 465 (8th Cir. 1992).
In accordance with Penson v. Ohio, 488 U.S. 75, 80 (1988), we have reviewed
the record for any nonfrivolous issues and have found none.
Accordingly, we affirm.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
-2-
| {
"pile_set_name": "FreeLaw"
} |
United States Court of Appeals
For the Eighth Circuit
___________________________
No. 15-3591
___________________________
United States of America,
lllllllllllllllllllll Plaintiff - Appellee,
v.
Timothy Jerome Bailey,
lllllllllllllllllllll Defendant - Appellant.
____________
Appeal from United States District Court
for the District of Minnesota - St. Paul
____________
Submitted: May 20, 2016
Filed: August 5, 2016
____________
Before RILEY, Chief Judge, COLLOTON and KELLY, Circuit Judges.
____________
COLLOTON, Circuit Judge.
Timothy Bailey appeals from his conviction for possession of a firearm as a
previously convicted felon. Bailey contends that the district court1 erred in denying
1
The Honorable Patrick J. Schiltz, United States District Judge for the District
of Minnesota.
a motion to suppress his recorded post-arrest statements, and that the government
produced insufficient evidence to support a judgment of conviction. We affirm.
I.
On March 25, 2014, Officer Daniel Irish of the Champlin Police Department
stopped a vehicle because Bailey, who was riding in the front passenger seat, was not
wearing a seatbelt. After the vehicle stopped, Bailey got out and ran through a nearby
residential neighborhood, with Irish giving chase. Bailey jumped over a fence into
a yard owned by the Xiong family, stumbling and falling to the ground as he landed.
Irish testified that before jumping the Xiongs’ fence, Bailey was running with
his left hand holding up the waistband of his pants. Shortly after Bailey fell, Irish
noticed that Bailey was no longer holding onto his waistband. Bailey jumped over
another fence out of the Xiongs’ yard and crossed the street, where he was able to
evade Irish’s pursuit.
Irish called for back up, and a police canine unit eventually found Bailey hiding
behind a garage. Police arrested Bailey and placed him in the back of Irish’s squad
car. The car was equipped with an internal video-recording device that recorded
Bailey’s actions and words.
Because Bailey was not carrying identification, Irish parked in front of the
Xiongs’ house and asked for headquarters to send a mobile fingerprinting unit. While
he waited for the fingerprinting unit to arrive, Irish asked Bailey his name, why he ran
away, whether he had a criminal history, and whether there were any warrants for his
arrest. Irish also asked Bailey whether he knew about other crimes in the
neighborhood, suggesting that he might be able to “stay out of jail” by cooperating.
Irish did not read Bailey his rights under Miranda v. Arizona, 384 U.S. 436, 444
(1966).
-2-
While Bailey and Irish sat in the squad car, Chia Koua Xiong ran up to the
vehicle and told Irish that his grandchildren had found a gun in his yard. Irish
followed Xiong into his home, where Xiong showed him the gun. Irish asked Xiong
to show him where the gun was recovered, and Xiong took Irish into the backyard
and pointed toward the fence on the west side of the yard. Irish recognized it as the
fence that Bailey had stumbled over earlier. Irish walked over to the fence and
discovered a cellular telephone near where the gun was discovered. Irish collected
the gun and the phone as evidence and returned to his squad car.
While Irish was investigating the Xiongs’ discovery of a gun, Bailey remained
in Irish’s squad car with the internal video-recording device activated. Immediately
after Irish exited the squad car and followed Xiong to his home, the camera captured
Bailey saying, “Damn, they found that gun. F***. Damn. F***. Oh, man. Damn.”
The recording also shows that Bailey was exasperated and upset when Xiong reported
finding the gun. Bailey talked to himself in the back of the squad car for
approximately two minutes, repeatedly swearing and complaining that Xiong was a
“bitch” and “nosy.”
After Irish returned to his squad car, the mobile fingerprinting unit arrived, and
Irish identified Bailey. Irish then transported Bailey to the local detention center. As
Irish was turning Bailey over to detention staff, Bailey asked about the cell phone in
a manner that, according to Irish, indicated that the phone was Bailey’s.
A grand jury charged Bailey with possession of a firearm as a previously
convicted felon, in violation of 18 U.S.C. §§ 922(g)(1) and 924(a)(2). Bailey
stipulated that he was a convicted felon and that the firearm had traveled in interstate
commerce, so the only disputed issue for trial was whether Bailey knowingly
possessed the firearm. Bailey moved to suppress the statements he made while in the
squad car after Irish left the vehicle, contending the statements were made in response
-3-
to custodial interrogation. The district court found that Bailey’s statements were not
in response to interrogation and denied the motion to suppress.
At trial, Irish testified consistent with the facts described above, and the
government presented the recorded statements that Bailey made while he sat alone
in Irish’s squad car. Chia Xiong and his wife, Kia Xiong, testified about how their
grandchildren discovered the firearm in their yard. The jury convicted Bailey, and
the court sentenced him to 120 months’ imprisonment.
II.
Bailey argues that the district court erred in denying his motion to suppress the
statements he made while sitting alone in Irish’s squad car. Because Bailey
challenges only the district court’s legal conclusion that the statements were
admissible, we review de novo. United States v. Ochoa-Gonzalez, 598 F.3d 1033,
1038 (8th Cir. 2010).
Bailey contends that the court should have suppressed his statements because
Irish did not administer a Miranda warning before Bailey made the statements.
Miranda warnings are required, however, only when police interrogate a defendant
in custody. Voluntary statements unprompted by interrogation are admissible with
or without Miranda warnings. United States v. McGlothen, 556 F.3d 698, 701 (8th
Cir. 2009).
Interrogation occurs only when there is express police questioning or its
“functional equivalent,” which means “words or actions on the part of the
police . . . that the police should know are reasonably likely to elicit an incriminating
response from the suspect.” Rhode Island v. Innis, 446 U.S. 291, 300-01 (1980)
(emphasis added; footnote omitted). The actions that prompted Bailey’s
incriminating statements were taken by Xiong, a private citizen, and there is no
-4-
evidence that Xiong was acting in concert with the police. See Arizona v. Mauro, 481
U.S. 520, 528 (1987). Xiong’s report to Irish was not an interrogation of Bailey, so
Bailey was not entitled to a Miranda warning.
Bailey argues the statements were the result of interrogation because Irish did
question him before Xiong approached the vehicle. Even assuming that Irish’s
questions—most of which were in the nature of permissible “routine booking
question[s],” see Pennsylvania v. Muniz, 496 U.S. 582, 601-02 (1990)—rose to the
level of interrogation, the government did not introduce any statement that Bailey
made in response to those questions. Irish’s conversation with Bailey ended before
Xiong approached the vehicle. An unwarned statement is admissible if it is made
voluntarily after police questioning has ended. See, e.g., United States v. Briones,
390 F.3d 610, 612-13 (8th Cir. 2004).
Bailey also argues that Irish sought to elicit incriminating statements by leaving
him alone in the squad car near the alleged crime scene with the video-recording
device turned on. Irish’s act of leaving Bailey in that situation did not constitute
interrogation. United States v. Hernandez-Mendoza, 600 F.3d 971, 976-77 (8th Cir.),
as amended 611 F.3d 418 (8th Cir. 2010). Irish might have hoped or even expected
that Bailey would say something if left alone, “but an expectation of voluntary
statements does not amount to deliberate elicitation of an incriminating response.”
Id. at 977. “Officers do not interrogate a suspect simply by hoping that he will
incriminate himself.” Mauro, 481 U.S. at 529. The district court properly denied
Bailey’s motion to suppress.
Bailey argues alternatively that the government did not present sufficient
evidence to prove that he possessed the firearm. We must view the evidence in the
light most favorable to the verdict, accepting all reasonable inferences in favor of the
verdict. United States v. Gutierrez, 757 F.3d 785, 789 (8th Cir. 2014). We will
reverse only if no reasonable juror could have convicted Bailey. Id.
-5-
The evidence supporting the conviction was substantial. When Irish stopped
the vehicle in which Bailey was a passenger, Bailey immediately fled through a
residential neighborhood. The Xiongs’ grandchildren located the firearm in a fenced
yard along the route of Bailey’s flight, and the discovery was reported to police
within forty-five minutes of Bailey’s apprehension. Irish testified that he saw Bailey
fall down near where the firearm was discovered, and that shortly after his fall, Bailey
was no longer holding his waistband as he ran. When Xiong led Irish to the area
where his grandchildren discovered the gun, Irish also found a cell phone that Bailey
later indicated was his. Bailey’s recorded reaction to Xiong’s discovery of the
firearm demonstrated consciousness of guilt. From this evidence, a jury reasonably
could have inferred that Bailey, a convicted felon, fled to avoid detection of the
handgun, that he was holding the firearm in his waistband as he ran initially, and that
he dropped the firearm and the cell phone when he fell.
* * *
The judgment of the district court is affirmed.
______________________________
-6-
| {
"pile_set_name": "FreeLaw"
} |
27 So.3d 39 (2010)
TROPIC SUPERMARKET, INC.
v.
PRUSA, INC.
No. 3D09-1482.
District Court of Appeal of Florida, Third District.
February 22, 2010.
Decision Without Published Opinion Appeal dismissed.
| {
"pile_set_name": "FreeLaw"
} |
116 Ga. App. 706 (1967)
158 S.E.2d 431
AMERICAN OIL COMPANY
v.
McCLUSKEY et al.
42734.
Court of Appeals of Georgia.
Argued April 5, 1967.
Decided October 25, 1967.
Rehearing Denied November 21, 1967.
*708 Edwards, Bentley, Awtry & Parker, Scott S. Edwards, Jr., A. Sidney Parker, for appellant.
Mundy & Gammage, William W. Mundy, E. Lamar Gammage, Fullbright & Duffey, for appellees.
DEEN, Judge.
1. A motion to dismiss the appeal was made on grounds that: the notice of appeal filed November 17, 1966, failed to state whether the transcript of evidence was to be transmitted as part of the record; the copy of the record was not transmitted within 30 days; no court order was taken granting an extension of time; the costs were not paid until after a motion to dismiss was filed on January 31, 1967; the attempted effort to amend the notice of appeal by specifying the transcript for inclusion in the record filed February 3 is void, as well as a second amendment filed February 8, and the notice did not contain enough to amend by.
As to these objections: A. Failure to specify whether or not the transcript of evidence is to be included in the record on appeal is not one of the grounds for dismissal of the appeal listed in Code Ann. § 6-809. "No appeal shall be dismissed or its validity affected for any other cause." In any event, nothing in the law prohibits the addition of such specification of record by amendment. Amendments to pleadings are generally allowed in the trial court. The notice of appeal when amended complied with the provisions of Code Ann. § 6-802.
B. The notice of appeal was filed November 17, 1966. The certificate of the clerk of court states that: "The transcript of evidence was filed August 25, 1966, and the delay in transmitting this transcript is due to the stress of business in this office." Obviously, there was no delay in filing the transcript so as to bring the ruling under Davis v. Davis, 222 Ga. 579 (151 SE2d 123) or Joiner v. State, 223 Ga. 367 (155 SE2d 8). As stated in Elliott v. Leathers, 223 Ga. 497 (156 SE2d 440), the Constitution forbids dismissal of any case where the delay is attributable to the clerk of court rather than to counsel. Even where there is a delay in the filing of the transcript, if it does not delay the docketing and hearing of the case in the appellate court it is *709 not cause for dismissal. Hornsby v. Rodriguez, 116 Ga. App. 234 (156 SE2d 830).
C. Where the record in the lower court is forwarded prior to payment of costs in that court, and the failure to pay costs has not worked a delay here, there is no ground for dismissal. City of Atlanta v. Akins, 116 Ga. App. 230 (156 SE2d 665).
None of the grounds of the motion to dismiss is meritorious.
2. Where the court has no jurisdiction over the subject matter of the suit, jurisdiction cannot be waived or conferred by the parties to the litigation. Ga. R. & Bkg. Co. v. Redwine, 208 Ga. 261 (1) (66 SE2d 234). An action such as this one by a parent for the homicide of a minor child under Code Ann. § 105-1307 is statutory in origin, and may be maintained only within the purview of the legislative grant. Burns v. Brickle, 106 Ga. App. 150 (126 SE2d 633). By virtue of another statute (Code § 114-103), if the plaintiff's decedent was an employee of the defendant within the purview of the Workmen's Compensation Act, all other rights and remedies of the plaintiff are excluded. The plaintiff in her brief concedes that the plea in bar filed by the defendant attacks the jurisdiction of the superior court over the subject matter of the action. Where the attack is successful, the only proper judgment of the court is one of dismissal. Bartram v. City of Atlanta, 71 Ga. App. 313 (1) (30 SE2d 780), and where the trial would, for lack of jurisdiction, end in a worthless judgment, the objection may be made at any stage. Brown v. Redwyne, 16 Ga. 67, 79. The plea in bar raising this question was not filed too late. "Consent of parties, however, can not give a court jurisdiction of a subject matter when it has none by law; and when this court discovers from the record that a judgment has been rendered by a court having no jurisdiction of the subject matter and the case is brought here for review upon writ of error, this court will of its own motion reverse the judgment." Smith v. Ferrario, 105 Ga. 51,53 (31 SE 38).
3. There is no merit in the insistence that the defendant did not authorize its servant to employ the deceased. This servant, Mr. Disharoon, testified that he was given general authority to hire such labor as was necessary to assist him in cleaning and *710 removing the defendant's property from the service station, and that he was not instructed to employ only those who had social security cards. Moreover, there was no evidence that the information of any such limitation upon Disharoon's authority was given either to the plaintiffs, the parents of the deceased, or to the boy himself. The defendants gave Disharoon the indicia of authority to employ the deceased to do the work he was engaged in when killed. He was apparently a general agent for the purpose. In Thomas v. Case, 84 Ga. App. 564, 568 (66 SE2d 434), that term is defined: "A general agent is one who has authority to act for his principal in all matters connected with the particular matter or business, or he may be one who is given entire and general control and management of the matter or business of a particular nature." No private limitation upon the agent's apparent authority is binding upon third persons. Mason v. Rice, 47 Ga. App. 502 (1) (170 SE 829); Smith v. Holbrook, Glazier & Co., 99 Ga. 256 (1) (25 SE 627).
The defendant's contention that the deceased was not an employee or invitee on the premises where he was killed because he had, at the time, completed the duties he was employed to perform is contrary to the evidence and the principle of law applicable to the relationship of master and servant. It has been uniformly held that a servant's relationship with his master does not end the moment he finishes the task allotted to him or the period of his employment expires, but that the servant must be given reasonable time to depart his master's premises before the relationship of master and servant ceases. U. S. Cas. Co. v. Russell, 98 Ga. App. 181 (105 SE2d 378). A servant also continues to occupy the status after he finishes his work and while he is waiting to be paid. 99 CJS 857, Workmen's Compensation, § 241.
4. It is a basic rule that appellate courts in construing testimony should not lean to strained or illogical constructions but should place on it the meaning manifestly intended and adopted on the trial of the case where this is possible. Here the defendant's employee Disharoon was called by the plaintiff for cross examination concerned entirely with the events of July 14, 1964, when plaintiff's decedent was killed. Immediately *711 thereafter defendant's counsel examined him as to his obtaining a gun about a year prior to that date; his showing it to a superior about six months prior; who else had seen the gun; whether he was drinking on the morning of the mishap; when during that morning plaintiff's decedent was employed and how long he worked; whether he had a social security card; how much of the job had been completed when the accident occurred; and whether he ever drank on the job. Here Disharoon replied that one time he and other employees worked all night putting up banners for a party at the Biltmore Hotel several years ago. He stated: "There were several of us there" (putting up the banners.) "Q. Do you know approximately how many employees the American Oil Company has? Just make a rough guess. A. If I was going to guess, I would guess about 75,000. Q. Within the State of Georgia? A. There's over 300 in the regional office. Q. In Atlanta? A. Yes, sir."
Referring to this testimony after the evidence had closed, counsel for the defendant stated while urging its plea in bar based on the contention that the Board of Workmen's Compensation had exclusive jurisdiction: "The testimony by Mr. Disharoon shows that American Oil Company employed more than 10 employees and would be within the Act on it. His sole remedy at law would be a workmen's compensation claim." In reply counsel for the plaintiff, without taking issue with this interpretation of Disharoon's testimony, argued: "We take the position that it is not compensable because there is no standard to measure what like laborers would earn . . . his labor was so casual that he could not by any stretch of the imagination be held to be under the Workmen's Compensation Law." The judge's question indicated that he, too, was assuming the defendant to be under the Act, and was interested in the legal status of the deceased as an employee.
Disharoon was a maintenance man for service stations located in a section of Georgia running from Gainesville to the Alabama and Tennessee lines. He had worked for 17 years. He had a supervisor, Stewart, who had been employed for 11 years, traveling to American Oil Company installations from place to place, and over him there was an area engineer, Brock, who had worked *712 for 20 years. Mention was specifically made of an American Oil Company Bulk Plant at Rome, for which another man, Baker, was distributor, and a station at Dalton, where Disharoon had the pistol shortly before this incident. As to the scope of operations, American Oil Co. is a Maryland Corporation. Regarding its slogan on decals, which Disharoon was in the course of removing at a Rome, Ga., filling station, the following occurred: "Q. Is this slogan for the purpose of encouraging public confidence in your company to buy your products? A. Yes. Q. And millions of dollars are spent by your company in advertising this on television, radio, and in the newspapers to encourage the confidence of the people? A. Yes."
This testimony, although circumstantial in part, is sufficient to establish that the defendant American Oil Company had more than 10 employees in Georgia on the date of the accident, and to demand a finding that the State Board of Workmen's Compensation had exclusive jurisdiction in any action resulting from his death.
Judgment reversed. Bell, P. J., Hall and Eberhardt, JJ., concur. Felton, C. J., and Jordan, P. J., concur specially in Division 4. Pannell, J., concurs specially in Division 1. Quillian and Whitman, JJ., dissent.
FELTON, Chief Judge, and JORDAN, Presiding Judge, concurring specially. We concur in the judgment insofar as it embodies the question whether American Oil Company had ten employees at the time of the injuries involved on the ground that we are of the opinion that this court can take judicial notice of the fact that American Oil Company had ten employees and more at the time of the death of petitioner's son. In all other respects we concur in the majority opinion and judgment.
PANNELL, Judge, concurring specially. I concur in the judgment and concur in the conclusion reached in Division 1 of the opinion, that the motion to dismiss the appeal is without merit, but solely on the grounds (1) that the failure to specify in the notice of appeal whether the transcript was to be transmitted is not jurisdictional, and (2) the transcript of the proceedings was filed in the lower court within the time required by law and the failure of the clerk to transmit the record and transcript to this *713 court within the time required was not occasioned by the fault of the appellant to so specify the transcript in the notice of appeal or otherwise, the clerk's certificate showing the delay was occasioned solely by the press of business in his office.
I do not concur in the following rulings in Division 1 of the opinion: (a) That Section 13 (b) of the Appellate Practice Act of 1965 (Ga. L. 1965, pp. 18, 29) as amended by Section 10 of the Act of 1966 (Ga. L. 1966, pp. 493, 500; (Code Ann. § 6-809) providing that no appeal shall be dismissed except for the reasons therein given is controlling on this court. It is my opinion that the legislature has no right to determine the grounds for dismissal of an appeal from this court where the cause for dismissal pertains to jurisdictional matters which the legislature itself has provided. That this concept is correct is exemplified by the rulings of both this court and the Supreme Court dismissing appeals because of the late filing of the transcript resulting in a late transmission of an appeal to this court, and dismissing appeals because of a late filing of enumerations of error, neither of which are grounds for dismissal provided by statute.
(b) That a notice of appeal can be amended because there is no statute prohibiting such amendment. A notice of appeal is not a pleading within the meaning of our statutes allowing freedom of amendment as to pleadings, and the mere fact that no statute prohibits an amendment to a notice of appeal does not ipso facto permit such an amendment. If this be a valid rule there would be no necessity for numerous Code provisions, such as §§ 3-115; 6-303; 81-210; 81-402; 81-1201 through 81-1207; 81-1301 through 81-1313; 24-104; 24-2815, 24-2816; 39-1005; 67-2216; 70-302; 70-309; and others. The provisions permitting an amendment to a bill of exceptions (Code §§ 6-1401, 6-1309) were repealed by the Appellate Practice Act of 1965. If an amendment to a notice of appeal is permissible, it is only permissible under the language of Section 13 of the Appellate Practice Act of 1965, as amended, which in part, Paragraph (b), states "[a]t any stage of the proceedings, either before or after argument, the court shall by order, either with or without motion, provide for all necessary amendment, require the trial *714 court to make corrections in the record or transcript or certify what transpired below which does not appear from the record on appeal, require that additional portions of the record or transcript of proceedings be sent up, or require that a complete transcript of evidence and proceedings be prepared and sent up, or take any other action to perfect the appeal and record so that the appellate court can and will pass upon the appeal and not dismiss it." The attempted amendment here was not a necessary amendment to perfect the appeal so as to prevent its dismissal. Whether or not the amendment be allowed, the appeal is not subject to dismissal, so it is not necessary to determine this question relating to amendments.
(c) That where a delay in transmitting the appeal and transcript to this court is caused by the appellant such delay is not cause for dismissal, if the case can be docketed and heard at the same call at which it would have been heard had it been filed on the last day of the time required for its transmittal. I realize that this court in a division opinion has so held (Hornsby v. Rodriguez, 116 Ga. App. 234 (156 SE2d 830)); however, I am not in agreement with that opinion for the reason that the question is whether or not there was a late filing rather than a late hearing and further that the case of Fort Oglethorpe v. Catoosa County, 80 Ga. App. 188, 192 (55 SE2d 753) does not support the ruling made in the Hornsby case. In the Fort Oglethorpe case it did not appear that the delay was caused by the appellant, and one of the grounds for the motion to dismiss was that the certificate of the trial judge required the clerk to send the record in time for the "current term" rather than a later named term. As to this, the court merely held that the Constitution and statutes and rules of court involved controlled the term at which the case was returnable rather than the language in the judge's order, and that the case, because of the time of docketing, was actually returnable to the proper term. No question was decided in that case as was decided in the Hornsby case. Further, it is not necessary to reiterate the doubtful ruling in the Hornsby case to decide the present case.
QUILLIAN, Judge, dissenting from Division 4. I can not agree that the Workmen's Compensation Board had exclusive jurisdiction *715 of any action resulting from the deceased's death. The petition did not disclose, nor was there in my opinion sufficient evidence, circumstantial or otherwise, to support a finding that on the day the deceased was killed the defendant had in its employ as many as ten employees within the State. Borochoff v. Fowler, 98 Ga. App. 411 (1), 414 (105 SE2d 764). While the witness, Mr. Disharoon, testified that at the time the case was tried the defendant had over three hundred employees in its Atlanta office, this was nearly two years subsequent to the date on which the deceased sustained the fatal injury.
Although the rule of evidence is well established that a status once proved to exist continues until there is proof of a change or adequate cause for assuming there has been a change (Roberts v. Hill, 81 Ga. App. 185 (2) (58 SE2d 465)), there is, however, no presumption that a present proven status existed in the past. This is made clear in Glenn v. Tankersley, 187 Ga. 129, 130 (7) (200 SE 709): "The doctrine of continuity, that is, that a state of things proved to have once existed is presumed to have continued to exist until a change or some adequate cause of change appears (Anderson v. Blythe, 54 Ga. 507, 508), does not include a presumption either that something shown to exist will continue in the future, or that it had previously existed. The doctrine is limited to the presumption that something which has been shown to have existed has thereafter continued to exist."
In the writer's opinion this court has no authority to take judicial notice that American Oil Company or any other corporation has ten or more employees within this State.
I am authorized to state that Judge Whitman concurs in this dissent.
| {
"pile_set_name": "FreeLaw"
} |
603 F.2d 224
Kacherv.Ward
No. 77-2413
United States Court of Appeals, Ninth Circuit
8/13/79
1
W.D.Wash.
AFFIRMED
| {
"pile_set_name": "FreeLaw"
} |
749 F.Supp. 1011 (1990)
Carlos A. SOLER, Petitioner,
v.
IMMIGRATION AND NATURALIZATION SERVICE, Respondent.
No. CIV 90-157 GLO-WDB.
United States District Court, D. Arizona.
September 4, 1990.
*1012 Carlos A. Soler, Sheridan, Or., pro se.
Gerald S. Frank, Asst. U.S. Atty., Tucson, Ariz., for respondent.
ORDER
WILLIAM D. BROWNING, Chief Judge.
Petitioner has filed a pro se writ of habeas corpus. His writ is construed liberally. See Haines v. Kerner, 404 U.S. 519, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972).
Petitioner, in custody at the Federal Correction Institute at Safford, has had an Immigration and Naturalization Service ("INS") detainer lodged against him.[1] The detainer states, in relevant part:
This is for notification purposes only and does not limit your discretion in any decision affecting the prisoner's classification, work, and quarters assignments or other treatment which he would otherwise receive....
Notify this office of the time of release at least 30 days prior to release or as much in advance as possible.
Petitioner asks the Court to order the INS to hold Petitioner's deportation hearing forthwith. Petitioner argues that the detainer affects his confinement status and, as such, violates his equal protection rights.
A. Custody Status
Petitioner argues that he is being denied his equal protection rights under the fourteenth amendment because the federal prison authorities allegedly accord him different treatment as an INS detainee.
To the extent Petitioner seeks to have this Court change his classification or programming in this habeas corpus proceeding based on a violation of his equal protection rights, he has named the wrong parties. As the Court holds below, Petitioner is not in the custody of the INS. In order to invoke this Court's habeas corpus jurisdiction, Petitioner needs to name the party holding him in custody. The Court, therefore, will dismiss this aspect of the petition without prejudice.
B. Detainer
Petitioner argues that INS should hold a prompt hearing to determine his deportation status. The Court will deny relief.
This Court's 28 U.S.C. § 2241 habeas corpus jurisdiction depends on whether Petitioner can be characterized as in the custody of the INS. Although this Circuit has not directly addressed the issue, the Eighth Circuit in Campillo v. Sullivan, 853 F.2d 593 (1988), rejected habeas corpus relief under identical circumstances. At least one district court in this Circuit has adopted the Campillo analysis. See, e.g., D'Ambrosio v. INS, 710 F.Supp. 269 (N.D. Cal.1989).
Like the Campillo and D'Ambrosio courts, this Court finds that Petitioner is not yet in the custody of the INS. The detainer does not subject Petitioner to INS custody. Rather, it merely indicates that Petitioner may, following release from his present incarceration, be subject to INS custody.
Similarly, 8 U.S.C. § 1252(a) (1970 & Supp.1990), which permits this Court in a habeas corpus proceeding to determine whether the Attorney General is proceeding with "reasonable dispatch," requires the Petitioner to be arrested and taken into custody.[2] Accordingly, Petitioner's noncustodial *1013 status divests the Court of 8 U.S.C. § 1252(a)(1) jurisdiction. E.g., D'Ambrosio, 710 F.Supp. at 271.
Finally, as the Campillo Court notes, a "strong analogy" can be drawn to the facts of Moody v. Daggett, 429 U.S. 78, 97 S.Ct. 274, 50 L.Ed.2d 236 (1976). Campillo, 853 F.2d at n. 2. In Moody, the United States Supreme Court rejected a federal parolee's claim that he was entitled to a prompt revocation hearing upon the lodging of a detainer where he was incarcerated. The Moody Court rejected the parolee's claim that the delayed hearing violated his due process rights. The Court found that liberty interests sufficient for due process rights to attach were not implicated until the warrant underlying the detainer had been executed upon. Moody, 429 U.S. at 87, 97 S.Ct. at 279. Here, like Moody, liberty interests are not sufficiently implicated because there is no INS custody.
C. Conclusion
IT IS ORDERED THAT the Petition is DISMISSED WITHOUT PREJUDICE insofar as it seeks change of custody status and the Petition, insofar as it seeks this Court's review of the INS detainer is DISMISSED WITH PREJUDICE for lack of jurisdiction.
NOTES
[1] In the pleadings there is some discussion of why two detainers were lodged against Petitioner and Petitioner's belief that he had exonnerated one of the detainers. The discussion is irrelevant. There is no dispute that there is only one detainer pending and that detainer is the subject of this Petition.
[2] 8 U.S.C. § 1252(a)(1) (1970 & Supp.1990) states in relevant part:
Pending a determination of deportability n the case of any alien as provided in subsection (b), such alien may, upon warrant of the Attorney General, be arrested and taken into custody.... Any court of competent jurisdiction shall have authority to review or revise any determination of the Attorney General concerning deportation ... upon a conclusive showing in habeas corpus proceedings that the Attorney General is not proceeding with such reasonable dispatch as may be warranted. ...
| {
"pile_set_name": "FreeLaw"
} |
907 So.2d 419 (2005)
Burt F. BAKER
v.
METROPOLITAN LIFE INSURANCE COMPANY and Gary Baldridge.
1031803.
Supreme Court of Alabama.
January 14, 2005.
Donald R. Jones, Jr., Montgomery, for appellant.
Edward A. Hosp of Maynard, Cooper & Gale, P.C., Montgomery, for appellee Metropolitan Life Insurance Company.
Robert B. Reneau of Reneau & Thornton, Wetumpka, for appellee Gary Baldridge.
*420 LYONS, Justice.
Burt F. Baker appeals from a summary judgment entered by the Montgomery Circuit Court in favor of defendants Metropolitan Life Insurance Company ("MetLife") and Gary Baldridge. We affirm.
I. Facts and Procedural History
In October 1989, Baker purchased a whole-life insurance policy from MetLife. In his complaint, Baker alleges that Baldridge, MetLife's agent who sold Baker the policy, represented to Baker that after he paid the annual premium on the policy for 11 years, the policy would become self-sufficient and that he would not have to pay any additional out-of-pocket premiums. In this sort of premium-payment plan, interest and dividends earned from the investment of the previously paid premiums can be used to pay future premiums, thus relieving the insured of the duty to pay those premiums directly. According to Baker, in deciding to purchase the policy he relied on Baldridge's representation that the policy would become self-sufficient after he had paid the annual premium for 11 years.
Baker paid 11 annual premiums. The amount of interest earned on those premiums was insufficient to fund payment of future premiums. Accordingly, MetLife informed Baker that he would be required to pay additional annual premiums. Baker sued MetLife and Baldridge in the Montgomery Circuit Court, alleging fraudulent misrepresentation, fraudulent omission, negligent misrepresentation, and negligent supervision. MetLife and Baldridge moved for a summary judgment based on their arguments that the statutory period of limitations had run on Baker's claims and that Baker could not prove that he had relied on Baldridge's alleged misrepresentations, an essential element of a fraud claim. The trial court granted the motion but did not explain its reasoning. Because we hold that Baker did not produce substantial evidence indicating that he relied on Baldridge's alleged fraudulent actions, we need not address MetLife and Baldridge's statute-of-limitations defense.
II. Standard of Review
In reviewing an order granting a motion for a summary judgment, we apply the same standard the trial court applied in ruling on the motion. Hoover, Inc. v. State Dep't of Revenue, 833 So.2d 32, 34 (Ala.2002).
"`"To grant [a summary-judgment] motion, the trial court must determine that the evidence does not create a genuine issue of material fact and that the movant is entitled to a judgment as a matter of law. Rule 56(c)(3), Ala. R. Civ. P. When the movant makes a prima facie showing that those two conditions are satisfied, the burden shifts to the nonmovant to present `substantial evidence' creating a genuine issue of material fact."'"
833 So.2d at 34 (quoting Payton v. Monsanto Co., 801 So.2d 829, 833 (Ala.2001), quoting in turn Ex parte Alfa Mut. Gen. Ins. Co., 742 So.2d 182, 184 (Ala.1999)). "[S]ubstantial evidence is evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved." West v. Founders Life Assurance Co. of Florida, 547 So.2d 870, 871 (Ala.1989).
III. Analysis
"[I]n order to recover for fraud, [Baker] must establish (1) that [Baldridge] made a false representation, (2) that the misrepresentation involved a material fact, (3) that [Baker] relied on the misrepresentation, and (4) that the misrepresentation damaged [Baker]." Liberty National Life Ins. Co. v. Ingram, 887 So.2d 222 (Ala. 2004). In addressing in Ingram the nature *421 of the reliance required to support a fraud claim, we quoted Foremost Insurance Co. v. Parham, 693 So.2d 409, 421 (Ala.1997):
"[W]e conclude that the `justifiable reliance' standard adopted in Hickox [v. Stover, 551 So.2d 259 (Ala.1989)], which eliminated the general duty on the part of a person to read the documents received in connection with a particular transaction (consumer or commercial), should be replaced with the `reasonable reliance' standard most closely associated with Torres v. State Farm Fire & Casualty Co., 438 So.2d 757 (Ala.1983). The `reasonable reliance' standard is, in our view, a more practicable standard that will allow the factfinder greater flexibility in determining the issue of reliance based on all of the circumstances surrounding a transaction, including the mental capacity, educational background, relative sophistication, and bargaining power of the parties."
Therefore, in order to satisfy the reliance element of his fraud claim Baker must show not only that he relied on Baldridge's alleged misrepresentation regarding the number of premiums required, but also that that reliance was reasonable in light of the facts surrounding the transaction in question. See also Brushwitz v. Ezell, 757 So.2d 423, 429 (Ala.2000) ("The elements of fraud are: (1) a misrepresentation of a material fact, (2) made willfully to deceive, recklessly, without knowledge, or mistakenly, (3) that was reasonably relied on by the plaintiff under the circumstances, and (4) that caused damage as a proximate consequence." (emphasis added)).
In Ingram, supra, an insured claimed that the insurance company guaranteed that his insurance policy would be completely "paid up" in 10 years and that thereafter he would not be required to pay any further premiums. When the plaintiff learned that payments in excess of what he had expected to pay would be required to keep the policy in effect, he sued the insurance company, alleging fraud. We held that the plaintiff, who had a seventh-grade education and could read and write, had not presented substantial evidence of his reliance on alleged misrepresentations by the insurance company regarding how many premium payments would be required. We based our holding on the existence of evidence that contradicted what the plaintiff said the insurance agent had allegedly promised and that should have put the plaintiff on notice of the alleged misrepresentations. We noted that, in determining whether to purchase the policy in question, the plaintiff had access to tables indicating both the guaranteed and the projected cash values and the current interest rates applicable to the policy. That evidence contradicted the plaintiff's assertion that the insurance company had represented to him that the policy was guaranteed to earn interest at a rate of 9.75%, which would generate sufficient interest to "pay up" the policy after 10 years. Another table setting forth the premium schedule contained a column entitled "`years payable,'" under which the word "`life'" was written.
In Alfa Life Insurance Corp. v. Green, 881 So.2d 987 (Ala.2003), the plaintiffs claimed that Alfa's agent had promised them that they would be required to make only nine annual premium payments in return for a life insurance policy, after which they would not be required to pay any additional premiums. We held that Alfa should have been granted a judgment as a matter of law because the plaintiffs had not shown that they had reasonably relied on the alleged misrepresentation of Alfa's agent. The evidence showed that the plaintiffs had been provided with a premium schedule containing two separate columns. One column, entitled "GUARANTEED," *422 showed that premiums would be required until the insured was 75 years old, which would have resulted in the plaintiffs' making substantially more payments than they had allegedly been told they would have to pay. The table contained another column, entitled "PROJECTED VANISH," that showed the number of premiums that the plaintiffs would have to pay if the interest rate remained at 8.5%. The evidence also showed that one of Alfa's agents had explained to the plaintiffs that if the interest rate decreased, more time would be required for the policy to "pay for itself." One of the plaintiffs in Green had an eleventh-grade education while the other was a high-school graduate. Both could read and write.
In the instant case, Baker was presented with a premium schedule containing the heading "years payable," under which is written "73." In his complaint, Baker alleges that he understood that further premiums would have to be paid on the policy after 11 years, but that he was under the impression that those premiums would not be paid directly by him. In other words, according to Baker's complaint, "Defendants represented that the policy would become self-sustaining for the Plaintiff's life after eleven (11) years of out-of-pocket premiums." Baker argues that "[i]t was certainly reasonable for him to believe that the policy dividends would continue to fund any additional premiums and the fact that the policy states that premiums are `payable' for 73 years does not contradict the misrepresentations that `he' would only have to pay 11 times...."
In addition to the "years payable" table, Baker was also presented with another document containing the heading, "ACCELERATED PAYMENT PLAN," which states:
"After premiums for your policy have been paid for 11 years, the Accelerated Payment Plan allows you to choose to pay future premiums as they fall due through the use of dividends, by withdrawing from the cash value of additional insurance or accumulated dividends with interest an amount which, together with the current dividend, will pay the current premium. When you wish to start this procedure, ask your Metropolitan Sales Representative to confirm that the dividends credited to your policy together with dividends based on the scale then in effect are sufficient to accomplish this objective. If dividends are sufficient, the procedure requires that future premium payments be paid annually (no outlay by you). Your Sales Representative will assist you in making this change, if necessary, and in putting this procedure in effect.
"The number of years that premium payments in cash are required under the Accelerated Payment Plan is based on the dividend scale in effect at the time the policy is issued. Dividends, however, are not guaranteed. Changes in dividend scales after issue may increase or decrease the number of years shown. Also, if future dividend scales decrease after this payment procedure is started, it is possible that dividends may not be sufficient in some future years to pay the then full current premium.
"The Accelerated Payment Plan increases your flexibility. When dividends are sufficient, you may stop your cash outlay, or continue to pay your premiums as you normally do. Even if you have chosen to pay premiums by the Accelerated Payment Plan, you may return to paying your premiums as you previously did at any time."
(Emphasis added.)
Baker was 27 years old when he applied for the insurance policy in question. He is *423 a high-school graduate; he can read and write; and he owns his own railroad construction company. In light of the language contained in the documents surrounding this transaction, and in light of Ingram and Green, supra, we conclude that Baker has not produced substantial evidence indicating that his reliance, if any, on Baldridge's alleged misrepresentation was reasonable. Baker and Baldridge do not share the sort of special relationship that was present between the plaintiff and the defendant in Potter v. First Real Estate Co., 844 So.2d 540 (Ala.2002) (involving a real estate agent and a buyer). In light of the conflict between Baldridge's alleged misrepresentations and the documents presented to Baker when he entered into the transaction in question, it cannot be said that Baker reasonably relied on the Baldridge's representations.
Because Baker has not produced substantial evidence indicating that, in purchasing the insurance policy, he reasonably relied on Baldridge's alleged misrepresentation regarding the number of out-of-pocket premiums required to fund the policy, the trial court was correct in entering a summary judgment for Baldridge and MetLife on Baker's fraud claims. Baker does not argue that the trial court erred in entering a summary judgment in favor of Baldridge and MetLife on Baker's claim of negligent hiring/supervision; therefore, he has waived that argument.
IV. Conclusion
Because, in the absence of evidence of reasonable reliance by Baker on any alleged misrepresentation by Baldridge and MetLife, the trial court was correct in entering a summary judgment in favor of Baldridge and MetLife, we need not address whether the statute of limitations precludes Baker's claims.
AFFIRMED.
NABERS, C.J., and HOUSTON, JOHNSTONE, and WOODALL, JJ., concur.
| {
"pile_set_name": "FreeLaw"
} |
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 06-2305
MEHDI KHAN,
Petitioner,
versus
ALBERTO R. GONZALES, Attorney General,
Respondent.
On Petition for Review of an Order of the
Board of Immigration Appeals
(A72-167-476)
Submitted: May 30, 2007 Decided: July 10, 2007
Before GREGORY and SHEDD, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Petition denied by unpublished per curiam opinion.
Richard W. Chang, WASSERMAN, MANCINI & CHANG, Washington, D.C., for
Petitioner. Peter D. Keisler, Assistant Attorney General, Mary
Jane Candaux, Senior Litigation Counsel, Anh-Thu P. Mai, Office of
Immigration Litigation, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, D.C., for Respondent.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Mehdi Khan, a native and citizen of Pakistan, petitions
for review an order of the Board of Immigration Appeals (“Board”)
denying his motion to reconsider and/or reopen. Insofar as Khan
challenges the Board’s prior orders, we lack jurisdiction because
Khan did not file a timely petition for review from those orders.
See 8 U.S.C. § 1252(b)(1) (2000); Stone v. INS, 514 U.S. 386, 405
(1995). While Khan’s brief raises challenges to both of those
prior orders, he fails to raise any issue with respect to the
November 14, 2006, order, the only order from which his petition
for review is timely. Issues not briefed on appeal are deemed
abandoned. Pleasurecraft Marine Engine Co. v. Thermo Power Corp.,
272 F.3d 654, 657 (4th Cir. 2001); 11126 Baltimore Blvd. v. Prince
George’s County, Md., 58 F.3d 988, 993 n.7 (4th Cir. 1995) (relying
on Federal Rule of Appellate Procedure 28(a)(6) and holding that
issues not briefed or argued in federal appeal are deemed
abandoned). Accordingly, we deny the petition for review.
We note the Board did not abuse its discretion denying
Khan’s motion to reconsider or reopen. Jean v. Gonzales, 435 F.3d
475, 481 (4th Cir. 2006); Stewart v. INS, 181 F.3d 587, 595 (4th
Cir. 1999).
We deny the petition for review. We dispense with oral
argument because the facts and legal contentions are adequately
- 2 -
presented in the materials before the court and argument would not
aid the decisional process.
PETITION DENIED
- 3 -
| {
"pile_set_name": "FreeLaw"
} |
144 Ga. App. 519 (1978)
241 S.E.2d 627
LEE
v.
SAFECO INSURANCE COMPANY.
54265.
Court of Appeals of Georgia.
Argued September 14, 1977.
Decided January 12, 1978.
Arthur P. Tranakos, for appellant.
Dennis, Corry, Webb, Carlock & Williams, Dennis J. Webb, for appellee.
QUILLIAN, Presiding Judge.
Burges H. Lee filed a complaint for breach of an insurance contract against Safeco Insurance Company, alleging defendant failed to pay the full amount of loss to certain property, occasioned by fire, and also sought an additional amount pursuant to Code Ann. § 56-1206 (Ga. L. 1960, pp. 289, 502; 1962, p. 712) for failure to pay the claim allegedly due under the insurance contract entered into by the parties. The defendant's answer denied the material allegations of the plaintiff's complaint, and also set out that the suit was barred because there was a 12-months limitation from date of loss for bringing an action contained in the insurance policy. The plaintiff filed an amendment to the complaint and the defendant amended its motion to dismiss by changing to a motion for summary judgment based on an affidavit of an insurance adjuster and certain exhibits. The plaintiff added a count to the complaint which alleged that repairs made by the defendant and its agent were completed in an unworkmanlike manner and sought damages in that regard. The plaintiff also filed affidavits in opposition to the motion for summary judgment.
The plaintiff's motion for summary judgment came on for a hearing after which the trial judge entered an order in favor of the defendant, granted defendant's motion, and dismissed the plaintiff's complaint. Appeal was taken from that order. Held:
The insurance contract entered into between Safeco and Lee contained the provision: "No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity ... unless commenced within twelve months next after inception of the loss." The policy also provided that the insurance company would pay for loss occasioned by fire or "It shall be optional with this *520 Company ... to repair, rebuild or replace the property destroyed or damaged with other of like kind and quality within a reasonable time..."
On November 14, 1974 a fire occurred at Lee's home which was insured under the policy. The loss was reported and certain repairs were authorized by Safeco. According to the plaintiff's affidavit the defendant insurance company's adjuster engaged individuals to make the necessary repairs and clean damaged items as the result of the fire. On March 7, 1975, defendant's adjuster wrote Lee and informed him of Safeco's position as to what they would pay and that they were satisfied that repairs had been accomplished. Other communication between the parties was exchanged, the plaintiff contending that he was not satisfied with the quality of the work and the repairs accomplished and the defendant insurance company declining to take any further action. On July 29, 1975 defendant insurance company reiterated its stance and its intent not to change its position in the matter. The plaintiff then attempted to obtain the aid of the office of insurance commissioner and engaged in correspondence with that office up until December 1975, when he was informed by the office of insurance commissioner that no further action could be taken and that he would be forced to seek recourse from the courts. On April 8, 1976, the plaintiff filed the present action.
1. The plaintiff contends that defendant by its conduct had waived the 12-months limitation provision or is estopped to assert it. This 12-months limitation period provided for in the policy is enforceable even though it provides for less time than that contained in the statute. Melson v. Phoenix Ins. Co., 97 Ga. 722, 723 (25 SE 189); Walton v. Am. Mut. Fire Ins. Co. of Charleston, S. C., 109 Ga. App. 348 (2) (136 SE2d 168) and cits. However, such provision may be waived by the conduct of the insurance company in continuing negotiations or otherwise inducing the insured to believe that reliance on the policy provision will not be forthcoming. Stanley v. Sterling Mut. Life Ins. Co., 12 Ga. App. 475 (77 SE 664); Knights of the Ku Klux Klan v. Fidelity & Deposit Co., 47 Ga. App. 12 (169 SE 514); Sentinel Fire Ins. Co. v. McRoberts, 50 Ga. App. 732 (179 SE 256).
*521 As held in Ga. Farm Bureau Mut. Ins. Co. v. Mikell, 126 Ga. App. 640, 642 (191 SE2d 557): "... a waiver may result where the company leads the insured by its actions to rely on its promise to pay, express or implied..." In this case the insurance company promised to pay certain amounts to the insured and insofar as these amounts constitute any part of the amount sought by the plaintiff they would not be barred by the one-year statute of limitation. See Nee v. State Farm Fire &c. Co., 142 Ga. App. 744, 746 (236 SE2d 880). See also New York Underwriters Ins. Co. v. Noles, 101 Ga. App. 922 (115 SE2d 474). The complaint, with regard to Counts 1 and 2, however, appear to be seeking amounts in excess of the payments offered by the company. There being nothing to establish a waiver or to estop the insurance company from asserting the 12-months limitation, the trial judge correctly dismissed the complaint as to the first two counts insofar as recovery of amounts in excess of the sums offered in settlement by the insurance company is sought.
2. The third count of the complaint seeks recovery for damages resulting from the failure of the defendant to properly repair and restore the home to its former condition. While this action may very well arise out of the contract it is not an action on the contract within the meaning of the language used in imposing a 12-months limitation on the time during which an action might be brought. An almost identical situation arose before the Court of Appeals of the District of Columbia. Winston v. Arlington Fire Insurance Co., 32 App. D. C. 61. While not in any way bound by that opinion, we find the reasoning contained therein to be persuasive. It was therein held: "The contract of insurance bound the defendant to pay the loss or damage occasioned by fire, not to exceed the stipulated amount. But it reserved an option to the defendant to repair and replace the building. By the exercise of this option and election, in which the plaintiff was bound to acquiesce, the original contract of the parties was converted into a new one on the part of the defendant to repair the building and restore it to its former condition. The contract to pay the loss was thus superseded by the contract to repair. Plaintiff no longer *522 had a right of action upon the former; his sole remedy was upon the new contract. [Cits.] Plaintiff's declaration set out the contract for insurance, with the stipulation therein for the option to contract to repair, and alleged the election so to do; but this was by way of inducement to the statement of the cause of action, which is the failure to perform the new undertaking created by that election. As the action, then, is not upon the contract of insurance, we think that the limitation clause of that contract cannot be made to apply to the action upon the undertaking to repair by which it was superseded."
This court gave recognition to a similar principle in Zappa v. Allstate Ins. Co., 118 Ga. App. 235, 238 (2) (162 SE2d 911).
We therefore find that with regard to Count 3, the 12-months limitation provided in the policy did not apply as a matter of law. Hence, it was error to dismiss the entire complaint as summary judgment on the third count was not authorized. See Smith v. Allen, 115 Ga. App. 80 (153 SE2d 648); Smith v. General Apt. Co., 133 Ga. App. 927, 930 (213 SE2d 74); Cato v. English, 228 Ga. 120 (1) (184 SE2d 161).
Judgment reversed. Shulman and Banke, JJ., concur.
| {
"pile_set_name": "FreeLaw"
} |
ACCEPTED
01-15-00500-CV
FIRST COURT OF APPEALS
Appellate Docket Number: 01-15-00500-CV HOUSTON, TEXAS
6/30/2015 10:41:11 AM
CHRISTOPHER PRINE
Appellate Case Style: Paul T. Young CLERK
Vs.
William Heins
Companion Case No.:
FILED IN
1st COURT OF APPEALS
HOUSTON, TEXAS
6/30/2015 10:41:11 AM
Amended/corrected statement: DOCKETING STATEMENT (Civil) CHRISTOPHER A. PRINE
Clerk
Appellate Court:1st Court of Appeals
(to be filed in the court of appeals upon perfection of appeal under TRAP 32)
I. Appellant II. Appellant Attorney(s)
Person Organization (choose one) Lead Attorney
First Name: Ronald
First Name: Paul Middle Name: Milton
Middle Name: T. Last Name: Hall
Last Name: Young Suffix:
Suffix: Law Firm Name: Ron Hall, Attorney at Law
Pro Se: Address 1: 2830 Triway Lane
Address 2:
City: Houston
State: Texas Zip+4: 77043
Telephone: 832-969-7335 ext.
Fax:
Email: [email protected]
SBN: 00787627
III. Appellee IV. Appellee Attorney(s)
Person Organization (choose one) Lead Attorney
First Name: Christopher
First Name: William Middle Name: R.
Middle Name: Last Name: Mugica
Last Name: Heins Suffix:
Suffix: Law Firm Name: Jackson Walker, L.L.P.
Pro Se: Address 1: 100 Congress Ave., Suite 1100
Address 2:
City: Austin
State: Texas Zip+4: 78701
Telephone: 512-236-2016 ext.
Fax: 512-391-2133
Email: [email protected]
SBN: 24027554
Page 1 of 10
III. Appellee IV. Appellee Attorney(s)
Person Organization (choose one) Lead Attorney
First Name: Christopher
First Name: Emily Middle Name: R.
Middle Name: Last Name: Mugica
Last Name: Lueck Suffix:
Suffix: Law Firm Name: Jackson Walker, L.L.P.
Pro Se: Address 1: 100 Congress Ave., Suite 1100
Address 2:
City: Austin
State: Texas Zip+4: 78701
Telephone: 512-236-2016 ext.
Fax: 512-391-2133
Email: [email protected]
SBN: 24027554
III. Appellee IV. Appellee Attorney(s)
Person Organization (choose one) Lead Attorney
First Name: Christopher
First Name: Leah Middle Name: R.
Middle Name: Last Name: Mugica
Last Name: Vidrine Suffix:
Suffix: Law Firm Name: Jackson Walker, L.L.P.
Pro Se: Address 1: 100 Congress Ave., Suite 1100
Address 2:
City: Austin
State: Texas Zip+4: 78701
Telephone: 512-236-2016 ext.
Fax: 512-391-2133
Email: [email protected]
SBN: 24027554
III. Appellee IV. Appellee Attorney(s)
Person Organization (choose one) Lead Attorney
First Name: Brian
First Name: Wayde Middle Name:
Middle Name: Last Name: Miller
Last Name: Shipman Suffix:
Page 2 of 10
Suffix: Law Firm Name: Royston Rayzor Vickery & Williams, L.L.P.
Pro Se: Address 1: Frost Bank Plaza, Suite 1300
Address 2: 802 N. Carancahua St.
City: Corpus Christi
State: Texas Zip+4: 78401
Telephone: 361-884-8808 ext.
Fax: 361-884-7261
Email: [email protected]
SBN: 24002607
Page 3 of 10
V. Perfection Of Appeal And Jurisdiction
Nature of Case (Subject matter or type of case): Personal Injury
Date order or judgment signed: March 4, 2015 Type of judgment: Summary Judgment
Date notice of appeal filed in trial court: June 1, 2015
If mailed to the trial court clerk, also give the date mailed:
Interlocutory appeal of appealable order: Yes No
If yes, please specify statutory or other basis on which interlocutory order is appealable (See TRAP 28):
Accelerated appeal (See TRAP 28): Yes No
If yes, please specify statutory or other basis on which appeal is accelerated:
Parental Termination or Child Protection? (See TRAP 28.4): Yes ■ No
Permissive? (See TRAP 28.3): Yes No
If yes, please specify statutory or other basis for such status:
Agreed? (See TRAP 28.2): Yes No
If yes, please specify statutory or other basis for such status:
Appeal should receive precedence, preference, or priority under statute or rule: Yes No
If yes, please specify statutory or other basis for such status:
Does this case involve an amount under $100,000? Yes No
Judgment or order disposes of all parties and issues: Yes No
Appeal from final judgment: Yes No
Does the appeal involve the constitutionality or the validity of a statute, rule, or ordinance? Yes No
VI. Actions Extending Time To Perfect Appeal
Motion for New Trial: Yes No If yes, date filed: March 30, 2015
Motion to Modify Judgment: Yes No If yes, date filed:
Request for Findings of Fact Yes No If yes, date filed:
and Conclusions of Law:
Yes No If yes, date filed:
Motion to Reinstate:
Yes No If yes, date filed:
Motion under TRCP 306a:
Other: Yes No
If other, please specify:
VII. Indigency Of Party: (Attach file-stamped copy of affidavit, and extension motion if filed.)
Affidavit filed in trial court: Yes No If yes, date filed:
Contest filed in trial court: Yes No If yes, date filed:
Date ruling on contest due:
Ruling on contest: Sustained Overruled Date of ruling:
Page 4 of 10
VIII. Bankruptcy
Has any party to the court's judgment filed for protection in bankruptcy which might affect this appeal? Yes No
If yes, please attach a copy of the petition.
Date bankruptcy filed: Bankruptcy Case Number:
IX. Trial Court And Record
Court: 56TH DISTRICT COURT Clerk's Record:
County: GALVESTON COUNTY, TEXAS Trial Court Clerk: District County
Trial Court Docket Number (Cause No.): 13-CV-0293-A Was clerk's record requested? Yes No
If yes, date requested: June 23, 2015
Trial Judge (who tried or disposed of case): If no, date it will be requested:
First Name: LONNIE Were payment arrangements made with clerk?
Middle Name: Yes No Indigent
Last Name: COX
(Note: No request required under TRAP 34.5(a),(b))
Suffix:
Address 1: 600 59TH STREET
Address 2 :
City: GALVESTON
State: Texas Zip + 4: 77551
Telephone: 409-766-2226 ext.
Fax: 409-770-5364
Email: [email protected]
Reporter's or Recorder's Record:
Is there a reporter's record? Yes No
Was reporter's record requested? Yes No
Was there a reporter's record electronically recorded? Yes No
If yes, date requested:
If no, date it will be requested: July 1, 2015
Were payment arrangements made with the court reporter/court recorder? Yes No Indigent
Page 5 of 10
Court Reporter Court Recorder
Official Substitute
First Name: DALE
Middle Name:
Last Name: LEE
Suffix:
Address 1: 600 59TH STREET
Address 2:
City: GALVESTON
State: Texas Zip + 4: 77551
Telephone: 409-766-2227 ext.
Fax:
Email: [email protected]
X. Supersedeas Bond
Supersedeas bond filed: Yes No If yes, date filed:
Will file: Yes No
XI. Extraordinary Relief
Will you request extraordinary relief (e.g. temporary or ancillary relief) from this Court? Yes No
If yes, briefly state the basis for your request:
XII. Alternative Dispute Resolution/Mediation (Complete section if filing in the 1st, 2nd, 4th, 5th, 6th, 8th, 9th, 10th, 11th, 12th, 13th,
or 14th Court of Appeal)
Should this appeal be referred to mediation?
Yes No
If no, please specify:
Has the case been through an ADR procedure? Yes No
If yes, who was the mediator? Pam Hoerster
What type of ADR procedure? Mediation
At what stage did the case go through ADR? Pre-Trial Post-Trial Other
If other, please specify:
Type of case? Personal Injury
Give a brief description of the issue to be raised on appeal, the relief sought, and the applicable standard for review, if known (without
prejudice to the right to raise additional issues or request additional relief):
Trial court erred in granting MSJ because Defendants did not have immunity and Appellant's pleadings sufficient to support claims. Appellant seeks
reverse/remand and review is de novo.
How was the case disposed of? Summary Judgment
Summary of relief granted, including amount of money judgment, and if any, damages awarded.
If money judgment, what was the amount? Actual damages:
Punitive (or similar) damages:
Page 6 of 10
Attorney's fees (trial):
Attorney's fees (appellate):
Other:
If other, please specify:
Will you challenge this Court's jurisdiction? Yes No
Does judgment have language that one or more parties "take nothing"? Yes No
Does judgment have a Mother Hubbard clause? Yes No
Other basis for finality? Severance from main case after final summary judgment.
Rate the complexity of the case (use 1 for least and 5 for most complex): 1 2 3 4 5
Please make my answer to the preceding questions known to other parties in this case. Yes No
Can the parties agree on an appellate mediator? Yes No
If yes, please give name, address, telephone, fax and email address:
Name Address Telephone Fax Email
Languages other than English in which the mediator should be proficient:
Name of person filing out mediation section of docketing statement:
XIII. Related Matters
List any pending or past related appeals before this or any other Texas appellate court by court, docket number, and style.
Docket Number: Trial Court:
Style:
Vs.
Page 7 of 10
XIV. Pro Bono Program: (Complete section if filing in the 1st, 3rd, 5th, or 14th Courts of Appeals)
The Courts of Appeals listed above, in conjunction with the State Bar of Texas Appellate Section Pro Bono Committee and local Bar
Associations, are conducting a program to place a limited number of civil appeals with appellate counsel who will represent the appellant in
the appeal before this Court.
The Pro Bono Committee is solely responsible for screening and selecting the civil cases for inclusion in the Program based upon a number of
discretionary criteria, including the financial means of the appellant or appellee. If a case is selected by the Committee, and can be matched
with appellate counsel, that counsel will take over representation of the appellant or appellee without charging legal fees. More information
regarding this program can be found in the Pro Bono Program Pamphlet available in paper form at the Clerk's Office or on the Internet at
www.tex-app.org. If your case is selected and matched with a volunteer lawyer, you will receive a letter from the Pro Bono Committee within
thirty (30) to forty-five (45) days after submitting this Docketing Statement.
Note: there is no guarantee that if you submit your case for possible inclusion in the Pro Bono Program, the Pro Bono Committee will select
your case and that pro bono counsel can be found to represent you. Accordingly, you should not forego seeking other counsel to represent you
in this proceeding. By signing your name below, you are authorizing the Pro Bono committee to transmit publicly available facts and
information about your case, including parties and background, through selected Internet sites and Listserv to its pool of volunteer appellate
attorneys.
Do you want this case to be considered for inclusion in the Pro Bono Program? Yes No
Do you authorize the Pro Bono Committee to contact your trial counsel of record in this matter to answer questions the committee may have
regarding the appeal? Yes No
Please note that any such conversations would be maintained as confidential by the Pro Bono Committee and the information used solely for
the purposes of considering the case for inclusion in the Pro Bono Program.
If you have not previously filed an affidavit of Indigency and attached a file-stamped copy of that affidavit, does your income exceed 200% of
the U.S. Department of Health and Human Services Federal Poverty Guidelines? Yes No
These guidelines can be found in the Pro Bono Program Pamphlet as well as on the internet at http://aspe.hhs.gov/poverty/06poverty.shtml.
Are you willing to disclose your financial circumstances to the Pro Bono Committee? Yes No
If yes, please attach an Affidavit of Indigency completed and executed by the appellant or appellee. Sample forms may be found in the Clerk's
Office or on the internet at http://www.tex-app.org. Your participation in the Pro Bono Program may be conditioned upon your execution of
an affidavit under oath as to your financial circumstances.
Give a brief description of the issues to be raised on appeal, the relief sought, and the applicable standard of review, if known (without
prejudice to the right to raise additional issues or request additional relief; use a separate attachment, if necessary).
XV. Signature
Signature of counsel (or pro se party) Date: June 30, 2015
Printed Name: Ronald M. Hall State Bar No.: 00787627
Electronic Signature: /s/ Ronald M. Hall
(Optional)
Page 8 of 10
XVI. Certificate of Service
The undersigned counsel certifies that this docketing statement has been served on the following lead counsel for all parties to the trial
court's order or judgment as follows on June 30, 2015
Signature of counsel (or pro se party) Electronic Signature: /s/ Ronald M. Hall
(Optional)
State Bar No.: 00787627
Person Served
Certificate of Service Requirements (TRAP 9.5(e)): A certificate of service must be signed by the person who made the service and must
state:
(1) the date and manner of service;
(2) the name and address of each person served, and
(3) if the person served is a party's attorney, the name of the party represented by that attorney
Please enter the following for each person served:
Date Served: June25,
une 30,2015
2015
Manner Served: eServed
First Name: Christopher
Middle Name:
Last Name: Mugica
Suffix:
Law Firm Name: Jackson Walker, L.L.P.
Address 1: 100 Congress, Suite 1100
Address 2:
City: Austin
State Texas Zip+4: 78701
Telephone: 512-236-2016 ext.
Fax: 512-391-2133
Email: [email protected]
If Attorney, Representing Party's Name: William Heins, Leah Vidrine and Emily Lueck
Please enter the following for each person served:
Page 9 of 10
Date Served: eJune
25, 30,
20152015
Manner Served: eServed
First Name: Brian
Middle Name:
Last Name: Miller
Suffix:
Law Firm Name: Royston Rayzor Vickery & Williams, L.L.P.
Address 1: Frost Bank Plaza, Suite 1300
Address 2: 802 N. Carancahua St.
City: Corpus Christi
State Texas Zip+4: 78401
Telephone: 316-884-8808 ext.
Fax: 361-884-7261
Email: [email protected]
If Attorney, Representing Party's Name: Wayde Shipman
Page 10 of 10
| {
"pile_set_name": "FreeLaw"
} |
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 02-6535
TIMMY TERRON,
Plaintiff - Appellant,
versus
ROBERT KUPEC, Warden; JOSEPH COLBURN, Captain;
R. T. WELLS, Sergeant; L. R. VANN, Captain;
EDWIN TURNER, Principal; VICTOR ELBECK, Adj.
H.O.; ROBERT D. RITCHEY; MARVIN N. ROBBINS,
I.G.O.,
Defendants - Appellees.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. Andre M. Davis, District Judge. (CA-01-
2155-AMD)
Submitted: October 2, 2002 Decided: October 16, 2002
Before WILKINS and TRAXLER, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Affirmed by unpublished per curiam opinion.
Timmy Terron, Appellant Pro Se.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:
Timmy Terron seeks to appeal the district court’s order
denying reconsideration of the denial of his 42 U.S.C. § 1983
(2000) complaint. We have reviewed the record and find no
reversible error. Accordingly, we affirm on the reasoning of the
district court. See Terron v. Kupec, No. CA-01-2155-AMD (D. Md.
July 30, 2001 & Jan. 15, 2002). We dispense with oral argument
because the facts and legal contentions are adequately presented in
the materials before the court and argument would not aid the
decisional process.
AFFIRMED
2
| {
"pile_set_name": "FreeLaw"
} |
501 F.3d 154 (2007)
Carol A. POST, Appellant
v.
HARTFORD INSURANCE COMPANY.
No. 05-4927.
United States Court of Appeals, Third Circuit.
Argued January 17, 2007.
Opinion Filed September 13, 2007.
*155 *156 Donald P. Russo, Esquire (Argued), Bethlehem, PA, for Appellant.
Brian P. Downey, Esquire (Argued), Pepper Hamilton, Harrisburg, PA, Stacey I. Gregory, Esquire, Pepper Hamilton, Philadelphia, PA, for Appellee.
Before: McKEE, AMBRO and STAPLETON, Circuit Judges.
*157 OPINION OF THE COURT
AMBRO, Circuit Judge.
Carol Post believes that she is entitled to long term disability benefits under her former employer's disability plan. Her treating physicians maintain that she is disabled. On the other hand, Hartford Insurance Company, the plan administrator (who also happens to fund the plan), has hired reviewing physicians who maintain that Post is not disabled. In other words, the central issue in this case whether Post is disabledis a "battle of the experts."
"Battle-of-the-experts" cases are often easy for a reviewing court. If the trial court's standard of review is arbitrary and capricious, then Hartford usually wins when it has produced sufficient evidence supporting its position. It cannot be said to have acted arbitrarily, and summary judgment in its favor is appropriate. On the other hand, if the standard is de novo, then summary judgment for either party must be vacated because there is credible evidence on both sides of the key fact question.
But this case, a claim that ERISA benefits were improperly denied, is anything but easy, for the trial court's standard of review is neither arbitrary and capricious (at least in its traditional form) nor de novo. In these cases, district courts must select a standard of review that accords with the extent to which the plan administrator operates under a conflict of interest. Here we conclude that the District Court did not select the proper standard of review, and so we vacate and remand for consideration under the standard we deem to apply.
We affirm, however, the Court's grant of summary judgment on Post's claim for breach of fiduciary duty because it is barred by res judicata.
I. Facts and Procedural History
Carol Post was in a serious car accident in November 1993, just a few days after having major dental surgery. At the time, she was employed as a dentist by Overlook Hospital in Summit, New Jersey. She sustained a whiplash injury in the accident, but she nonetheless attempted to return to work soon afterward. After six days of working, she was forced to stop because of intractable pain. Overlook, however, offered for her to try working as a pharmacist for a while (as she has both dentistry and pharmacy degrees), and she accepted. She returned to work in December 1993, but was forced to take nearly a day off each week because of pain. After nine months of off-and-on working, she resigned due to pain in September 1994. During this period, she tried numerous physical therapy treatments, none of which significantly improved her condition. She returned to work again in January 1995, but resigned four months later because of continuing pain. She has not worked since.
Post's medical record is voluminous. Between 1993 and 2003, she visited 14 doctors. Her pain management regimens ranged from traditional treatments like prescription drug combinations, trigger-point injections, and various forms of physical therapy, to more exotic treatments like acupuncture and biofeedback. She reports that none has given her significant relief. Her primary treating physician is currently Dr. Carolyn Britton, a professor of neurology at Columbia University. According to Dr. Britton, Post suffers from chronic post-traumatic pain syndrome characterized by severe myofacial pain; regular, debilitating headaches accompanied by sensitivity to light, nausea, and vomiting; irritable bowel syndrome; and insomnia. Dr. Britton believes that this syndrome is *158 directly attributable to Post's car accident and that it renders her disabled from any sustained employment.
In keeping with Dr. Britton's determination, Post's view of the record is that it indicates that she sustained a traumatic whiplash injury that sensitized her central nervous system, thus triggering the development of chronic pain syndrome. This is Dr. Britton's diagnosis, and it is supported by a number of other evaluations in the record.
Hartford, on the other hand, believes that the record indicates that Post suffered no more than a whiplash injury that has now healed. While it concedes that Post continues to report pain, it contends that the record contains no reliable diagnosis of a recognized debilitating condition. In support of its view, Hartford primarily relies on the reports of Dr. Ekaterina Malievskaia, its reviewing physician, and Dr. Christopher Lynch, who performed an independent medical examination. Hartford also cites the opinions of Drs. Michael John Fiore and Joel Harris,[1] who evaluated Post in 1994 and 1996, respectively.
This case is governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461, because Overlook Hospital's disability plan (the "Plan") is an "employee welfare benefit plan" as defined by 29 U.S.C. § 1002(1). Post filed a disability claim with Hartford, Overlook's disability carrier, soon after she ceased working in 1995. Hartford approved her claim, subject to periodic renewal. To be considered "totally disabled" under the Plan after December 6, 1997, she had to be "prevented by [d]isability from doing any occupation or work for which [she was] or could become qualified."
From 1995 until 2002, Hartford paid out benefits. In August 1998, the Social Security Administration approved Post's application for disability benefits, citing intractable cervical pain, chronic pain syndrome, and fibromyalgia[2] as the relevant diagnoses. *159 Soon after Post was approved for Social Security benefits, Hartford asked her to submit a copy of the administrative decision so that it could offset her benefits. She responded through counsel that Hartford was not entitled to an offset under the plain language of the Plan, but she did provide Hartford with a copy of the decision. Hartford eventually relented and accepted Post's reading of the Plan.
For reasons not apparent from the record, sometime in late 1999 Hartford took a renewed interest in Post's claim. The company surveilled her and reported in its claim notes that surveillance was unsuccessful, as she was not seen leaving her house. Hartford also began requesting copies of Post's tax records, ostensibly to take a non-Social Security income offset, as the Plan allowed. It provides that "Hartford has the right to require, as part of Proof of Loss: (1) your [Post's] signed statement identifying all Other Income Benefits, and (2) [s]atisfactory proof to the Hartford that you and your Dependents have duly applied for all Other Income Benefits which are available. The Hartford reserves the right to determine if proof of loss is satisfactory." Hartford contends that the "proof . . . that you . . . have duly applied for all Other Income Benefits" language gives it the right to demand tax returns, though it is not clear how a tax return would reflect whether Post had applied for other income benefits. The plain language of this provision does not authorize the review of tax returns. (Incidentally, the tax returns confirm that Post was not receiving any income during the disputed period.)
In June 2001, Hartford determined that Post should submit to an independent functional capacity evaluation to confirm her disability. This was permissible under the Plan. Hartford hired a third-party service to notify Post of its request and to set up the evaluation. Because Post had requested that all communication go through counsel, the service's operator phoned her attorney to schedule the evaluation. Here, the confusion began. As Hartford's counsel explained at oral argument, apparently the service's operator told Post's attorney that Post had requested that he be phoned to schedule the evaluationmeaning simply that Post had requested that all communication go through him. Post's attorney took the statement to mean that Post had requested the evaluation; thus, when he spoke with Post and found that she knew nothing about it, he relayed to the service that she had not requested it. It then reported to Hartford that Post had refused an evaluation in violation of the Plan. No written request was ever made.
In lieu of a functional capacity evaluation, Hartford referred Post's file to its medical director, Dr. Malievskaia. She conducted a paper review and concluded that Post was not disabled because of a *160 lack of objective findings, specifically the absence of 11 of 18 potential trigger points that would support a diagnosis of fibromyalgia.
In January 2002, Hartford terminated Post's benefits. In its termination letter, Hartford quoted the Plan's termination triggers, putting the following in bold font: "the date you refuse to be examined, if The Hartford requires an examination." The letter went on to cite as the bases for termination Post's alleged failure to submit to an evaluation at Hartford's request and Dr. Malievskaia's conclusion that Post was not disabled. The letter also invited Post to file an appeal within 60 days and to send any documents that she believed relevant. In March 2002, Hartford denied Post's appeal. Hartford, however, recognized the confusion over scheduling the evaluation and offered to revisit its decision if she agreed to one. In the meantime, Post had sued Hartford for wrongful denial of benefits, and undergoing an evaluation became part of a settlement agreement. The settlement fully resolved that lawsuit.
Because Post's treating physicians refused to write a prescription for a full-scale functional capacity evaluation, citing the damage it might cause given Post's condition, Hartford agreed to a less strenuous examination. To perform the exam, Hartford hired Dr. Christopher Lynch. The record does not reflect any board certifications or specialties, only that he is a physician. His examination consisted primarily of testing Post for the 18 trigger points for fibromyalgia. Finding tenderness but no definite trigger points, Dr. Lynch concluded that she did not have fibromyalgia or any other disabling condition. After he submitted his report, Hartford issued a final denial of Post's claim. Hartford specifically directed Dr. Lynch not to submit his report to Post, so she had no opportunity to respond to it.
Post then filed this suit in the District Court. In it, she claims that Hartford violated 29 U.S.C. § 1132(a)(1) and (2). Subparagraph 1132(a)(1)(B) allows an ERISA plan beneficiary to sue "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." Paragraph 1132(a)(2) allows a beneficiary to sue for breaches of fiduciary duties that cause losses to the plan.
The District Court granted summary judgment in Hartford's favor on the § 1132(a)(1)(B) claim, ruling that Post could not establish that Hartford acted arbitrarily and capriciously in denying her benefits. The Court also granted Hartford summary judgment on the § 1132(a)(2) claim on the ground that it was barred by res judicata. Specifically, the Court noted that it had dismissed that claim with prejudice in Post's previous suit, and so she could not revive it in this suit. Post appeals both rulings.[3]
II. Deciding § 1132(a)(1)(B) Claims
A. The Sliding Scale Standard of Review
ERISA does not specify the standard of review that a trial court should apply in an action for wrongful denial of benefits. In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 113, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), the Supreme Court held that the default standard of review in all § 1132(a)(1)(B) cases is de novo. The Court noted in a dictum that when a plan by its terms gives the administrator discretion, *161 which the plan at issue in Firestone did not, the administrator's decisions are upheld unless they abuse that discretion. Id. at 115, 109 S.Ct. 948. On the issue of conflicts of interest, the Court noted that "if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a `facto[r] in determining whether there is an abuse of discretion.'" Id. (quoting Restatement (Second) of Trusts § 187 cmt. d (1959)).
Addressing conflicts of interest in the post-Firestone era, most courts of appeals have adopted a "sliding scale" standard of review. This approach grants the administrator deference in accordance with the level of conflict. Thus, if the level of conflict is slight, most of the administrator's deference remains intact, and the court applies something similar to traditional arbitrary and capricious review; conversely, if the level of conflict is high, then most of its discretion is stripped away. Doe v. Group Hospitalization & Med. Servs., 3 F.3d 80, 87 (4th Cir.1993).
In Judge Becker's scholarly opinion in Pinto v. Reliance Standard Life Insurance Co., 214 F.3d 377, 392 (3d Cir.2000), we cast our lot with the sliding scale approach. Among the eleven courts of appeals that have reported decisions in this area, six have adopted some version of the sliding scale.[4]Id.; Vega v. Nat'l Life Ins. Servs., Inc., 188 F.3d 287, 296 (5th Cir. 1999) (en banc); Woo v. Deluxe Corp., 144 F.3d 1157, 1161-62 (8th Cir.1998); Chojnacki v. Georgia-Pacific Corp., 108 F.3d 810, 815 (7th Cir.1997); Doe, 3 F.3d at 87; Miller v. Metro. Life Ins. Co., 925 F.2d 979, 984 (6th Cir.1991). In addition, the Ninth Circuit Court of Appeals follows a "substantially similar" approach, though it rejects the sliding-scale metaphor. Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 967 (9th Cir.2006) (en banc) (choosing simply to note that "[a] district court, when faced with all the facts and circumstances, must decide in each case how much or how little to credit the plan administrator's reason for denying insurance coverage"). In Pinto, we held that the sliding scale approach was most faithful to Firestone's command that the level of conflict be considered as a factor in shaping arbitrary and capricious review. 214 F.3d at 392.
B. Contours of the Sliding Scale
The premise of the sliding scale approach is that courts should examine benefit denials on their facts to determine whether the administrator abused its discretion. Id. at 391. To apply the approach, courts first consider the evidence *162 that the administrator acted from an improper motive and heighten their level of scrutiny appropriately. Id. at 392. Second, they review the merits of the decision and the evidence of impropriety together to determine whether the administrator properly exercised the discretion accorded it. Id. at 394. If so, its decision stands; if not, the court steps into the shoes of the administrator and rules on the merits itself.
At its best, the sliding scale reduces to making a common-sense decision based on the evidence whether the administrator appropriately exercised its discretion. This theme, rather than getting bogged down in trying to find the perfect point on the sliding scale, should be district courts' touchstone.
C. Sorting Individual Cases
Determining how to apply heightened arbitrary and capricious review requires considering both structural and procedural factors. Pinto, 214 F.3d at 392-93. The structural inquiry focuses on the financial incentives created by the way the plan is organized, whereas the procedural inquiry focuses on how the administrator treated the particular claimant. While there is no magic to the order in which these inquiries are conducted, our previous cases have considered structure first. We do the same.
1. Structural factors
Our concern with structure derives from the common law of trusts. As the Supreme Court noted in Firestone, the law of trusts requires that courts take a trustee's self-interest into account. 489 U.S. at 115, 109 S.Ct. 948 (quoting Restatement (Second) of Trusts § 187 cmt. d (1959)). The Court based this pronouncement primarily on the Second Restatement. Since then, the ALI has published the Third Restatement, which further clarifies that while it is permissible for a trustee to act under a structural conflict of interest, its discretionary decisions "will be subject to especially careful scrutiny." Restatement (Third) of Trusts § 37 cmt. f(1) (2003). Under ERISA, plan administrators are, for most purposes, treated like common-law trustees. Firestone, 489 U.S. at 110, 109 S.Ct. 948. Like common-law trustees, plan administrators are accorded discretion and judicial deference (if the plan so provides); in return, they assume fiduciary duties of care and loyalty to their beneficiaries. 29 U.S.C. § 1104(a). So long as we have no reason to doubt the administrator's faithfulness to those duties, this model works well. We, however, are wary of according a fiduciary deference when the structure of the plan gives it financial incentives to act against the participants' interest. See Restatement (Third) of Trusts § 50 illus. 1.
As an initial note, federal courts of appeals are split on the issue of what is a structural conflict. We have long held that a structural conflict arises when the administrator has a non-trivial financial incentive to act against the interests of the beneficiaries. Pinto, 214 F.3d at 389. Such a conflict is, by itself, sufficient to heighten our review.[5]Id. at 390. Our Court's holdings are in line with black-letter trust law. The Second Restatement, on which the Supreme Court relied in Firestone, defines a "conflict" as merely *163 "an interest in the trustee conflicting with that of the beneficiaries." Restatement (Second) of Trusts § 187 cmt. d (1959). This statement is worded broadlyalmost to the point of being tautologicalbut it applies by its own terms to a situation in which the administrator has an interest (e.g., in profit or a better bottom line) that is adverse to the interests of beneficiaries seeking payment.
In sharp disagreement, the Court of Appeals for the Seventh Circuit holds that it is improper to label those situations "conflicts of interest." See Rud v. Liberty Life Assur. Co. of Boston, 438 F.3d 772, 776 (7th Cir.2006) (Posner, J.). The problem, it argues, is that we generally assume that parties to a contract are self-interested, and it is inimical to the law of contracts to confuse self-interest with a conflict of interest. Id. This is no doubt logical, yet the Supreme Court has held that ERISA places us in the realm of trust law, not contract law. Firestone, 489 U.S. at 110-11, 109 S.Ct. 948. Moreover, were we to apply contract law, we would review plans de novo from the start, for there is no analog to fiduciary discretion in the common law of contracts. But we are not, and our position, in strict accordance with Supreme Court precedent, follows the common law of trusts.
Pinto listed four non-exclusive structural factors for courts to consider: (1) the sophistication of the parties, (2) the information accessible to the beneficiary, (3) the financial arrangement between the employer and administrator, and (4) the financial status of the administrator. 214 F.3d at 392. In subsequent cases, we have also considered the administrator's claim evaluation process, according more deference to administrators that use an independent body to evaluate claims (thus lessening the effect of any conflict). Stratton v. E.I. DuPont De Nemours & Co., 363 F.3d 250, 255 (3d Cir.2004). All of these factors relate to whether the plan is set up so that the administrator has strong financial incentives routinely to deny claims in close casesin short, whether the administrator's incentives make treating it as an unbiased fiduciary counterintuitive. Pinto, 214 F.3d at 388. We emphasize that courts should focus on this question and not get bogged down in factors, for this is anything but a mechanistic test. Rather, it is a broad-based inquiry into whether the structure of the plan raises concerns about the administrator's financial incentive to deny coverage improperly. This makes sense, as ERISA plans come in many forms.
We have held that two aspects of some plans' financial structure raise particular concern: (1) when a plan is funded on a case-by-case basis, Skretvedt v. E.I. DuPont de Nemours & Co., 268 F.3d 167, 174 (3d Cir.2001), and (2) when it is funded and administered by an outside insurer, Pinto, 214 F.3d at 390. Case-by-case funding simply means that the administrator pays claims out of its operating budget, rather than from segregated monies that the employer sets aside according to an actuarial formula. This raises concerns because it means that each dollar paid out is a dollar out of the administrator's pocket. Stratton, 363 F.3d at 254. Thus, the administrator has a financial incentive to deny claims.
This concern is compounded when it is an outside insurer, rather than the employer, that funds and administers the plan, for we presume that employers have at least some self-interest in seeing that benefits are paid fairly. After all, employees' morale will suffer if they perceive that their benefits are illusory. When the plan is funded by an outside insurer, however, the employer is a step removed from the process, making it less likely to feel the *164 full effects of employee dissatisfaction with claims handling. Pinto, 214 F.3d at 389.[6]
We have also noted that when the claimant is a former employee, any dissatisfaction with the claims handling process is less likely to translate into a significant financial disincentive for the employer. Id. at 388. In addition, when the employer is in financial difficulty, the dissatisfaction of employees is less likely to be an incentive favoring them because paying off creditors will probably take priority over keeping up employee morale. Id. at 392.
Importantly, under Pinto, the structural analysis does not ask about the administrator's behavior. Indeed, as Pinto held, the structure alone can require heightened review. 214 F.3d at 390. Pinto itself concerned a structure in which the plan administrator was an outside insurance company that received an actuarial premium from the employer. Id. Thus, what the insurer/administrator paid out came directly off its bottom line. Pinto noted that this structure creates a high level of financial conflict of interest, as the insurer/administrator has a strong incentive to construe claims in a light most favorable to it. Id. at 389. Thus, Pinto held that this structure alone gives rise to heightened scrutiny. Id. at 390.
When there is a structural conflict of interest mitigated by independent claim evaluation and no evidence of procedural bias, we have heightened our review only slightly. Stratton, 363 F.3d at 254-56. The animating logic of that case is that while there was a conflict of interest, there was also good reason to believe that it was of little moment, and so we held that we would defer to the administrator unless its decision was clearly unreasonable or not a product of an exercise of discretion at all.
When structural bias is not mitigated by independent claim evaluation, we have heightened our review a bit more. See Smathers v. Multi-Tool, Inc./Multi-Plastics, Inc. Employee Health & Welfare Plan, 298 F.3d 191, 199 (3d Cir.2002). There, we emphasized that we were not free to substitute our judgment for that of the fiduciary. Nevertheless, because the record revealed that the administrator had not adequately supported its decision, we concluded that it had not properly exercised its discretion. Id. at 200.
It is worth noting that we have not reported a case in which structural factors alone warranted anything more than moderately heightening our review. This is not fortuitous. Structural conflicts of interest warrant more searching review, but in the absence of evidence that bias infected the particular decision at issue, we defer to an administrator's reasonable and carefully considered conclusions. See Orvosh v. Program of Group Ins. for Salaried Employees of Volkswagen of Am., Inc., 222 F.3d 123, 129 (3d Cir.2000).
2. Procedural Factors
As Pinto held, courts must also examine the process by which the administrator came to its decision to determine whether there is evidence of bias. 214 F.3d at 393. This sort of evidence can come in many forms, and a review of the caselaw reveals that we have identified numerous procedural irregularities that can raise suspicion. The following is an illustrative, not exhaustive, list of the irregularities identified: (1) reversal of position *165 without additional medical evidence, id.; (2) self-serving selectivity in the use and interpretation of physicians' reports, id.; (3) disregarding staff recommendations that benefits be awarded, id. at 394; and (4) requesting a medical examination when all of the evidence indicates disability, Kosiba v. Merck & Co., 384 F.3d 58, 67 (3d Cir.2004).
In considering procedural factors, the focus is whether, in this claimant's case, the administrator has given the court reason to doubt its fiduciary neutrality. If it has, then the court must decide how much to heighten its scrutiny. If the irregularities are minor, few in number, and not sustained, then they may not counsel for raising the level much at all, for minor glitches reasonably can be chalked up to low-level carelessness. If, however, they are more serious, numerous, or regular, then they should raise more suspicion. Kosiba, 384 F.3d at 66; Pinto, 214 F.3d at 393. Given the administrator's familiarity with the claims process and the duties of a fiduciary, marked deviations from procedural norms cannot but raise questions about its neutrality.
In the face of significant evidence of procedural bias, we have reviewed its decision closely. Pinto, 214 F.3d at 394. When an ERISA administrator is not acting in accord with its fiduciary status, we are naturally wary of according it much of the deference that it would otherwise receive as a result of that status. Id. Evidence that an administrator's decision was incorrect, coupled with evidence it was biased, can add up to a conclusion that its decision was not the product of reasoned discretion, but of anti-claimant bias, in which case the decision should be reversed. Id. at 395.
In the face of non-trivial evidence of procedural bias, the standard of review should be raised; the more difficult question is how much. In Kosiba, we discerned non-trivial evidence of procedural bias but, as it was neither egregious nor coupled with evidence of structural bias, we heightened our scrutiny only a moderate amount. 384 F.3d at 68. In Pinto, on the other hand, we found that the evidence of procedural bias was coupled with evidence of structural bias, and so we heightened our review substantially. 214 F.3d at 394.
III. Applying the Sliding Scale to This Case
A. Structural Factors
Addressing the structural factors, the District Court seemed to confuse the structural analyses in Pinto and Stratton. Pinto held that a non-trivial structural conflict gives rise to heightened scrutiny that is, it pushes the standard of review above the low end of the sliding scale. 214 F.3d at 393. Stratton added that when the structural conflict is trivial, the low end of the scale is appropriate. 363 F.3d at 254-55. What made the conflict trivial in Stratton was that the employer/administrator, while conflicted, was a step removed from the claim evaluation process. Id. Here, on the other hand, the administrator is an outside insurer that makes claims decisions itself. This is the very sort of conflict that Pinto declared to be substantial and worthy of raising the standard of review. 214 F.3d at 393. In addition, Post is a former employee, so it is doubtful that her dissatisfaction with the claims-handling process will filter back to Overlook and translate into pressure on Hartford to deal more precisely with claims.
The District Court correctly noted that the other factors mentioned in Pinto sophistication of the parties, accessibility of information, and the financial status of *166 the administratorseem not to counsel in favor of heightened scrutiny. Following Pinto, however, the structural factors that do present a conflict of interest are sufficient to require at least moderately heightened review. Id. We now proceed to whether procedural factors counsel us to increase even more our degree of review.
B. Procedural Factors
On the issue of procedural irregularities, the District Court wrote that "procedural anomalies appear to form a pattern of Hartford being overly aggressive in its attempts to reduce or eliminate Post's [disability] benefits and then attempting to rectify the situation when it realized its error." The Court named four aspects of the process that appeared irregular, yet it ultimately concluded that they were too minor to heighten further its scrutiny. We address each in turn and two additional matters brought up by Post.
First, Hartford attempted to use Post's Social Security benefits to offset her disability benefits, despite the Plan not allowing such an offset. After Post's attorney protested, Hartford relented. This, of course, may have been a good-faith mistake on Hartford's part, but it is a plan administrator's responsibility to know the contents of the plan. Our dissenting colleague believes that the Plan itself was confusing enough that Hartford's mistake was understandable. But Hartford is a large, sophisticated insurance company, and the Plan is its own design. Thus, we are less willing to draw such benign inferences (particularly at the summary judgment stage, where we draw all reasonable inferences in Post's favor) from Hartford's supposed confusion about the contents of its own contract.
Second, Hartford terminated Post's benefits in part because she allegedly refused to undergo a functional capacity evaluation. The record suggests, however, that Post had not refused an evaluation and that Hartford was quick to conclude that she had despite never making a written request. During the appeals process, however, Hartford relented and agreed to reconsider Post's appeal if she would agree to undergo an evaluation. Of concern is that Hartford did not allow Post to see Dr. Lynch's report before making its final decision to terminate. Thus she had no opportunity to allow her treating physicians to comment on it.
Third, Hartford's decision to terminate benefits relied heavily on Dr. Malievskaia's report, which was not based on a physical examination. While the District Court correctly noted that ERISA does not require that plan administrators give the opinions of treating physicians special weight, Black & Decker Disability Plan v. Nord, 538 U.S. 822, 823-24, 123 S.Ct. 1965, 155 L.Ed.2d 1034 (2003), courts must still consider the circumstances that surround an administrator ordering a paper review. On one hand, nothing in the record specifically suggests that Hartford ordered this review in bad faith, as, we assume, periodic reviews are typical in the industry. On the other hand, we note that at the time of the review the overwhelming weight of evidence in Post's record argued in her favor.[7]
Fourth, Hartford surveilled Post. As the District Court noted, while surveillance is *167 an aggressive tactic, nothing prohibits its use. Post argues that the bothersome point is that Hartford continued to investigate her claim despite its surveillance revealing that she did not leave her home. We agree. The fact that Post did not leave her home while she was under surveillance is perfectly consistent with, and corroborative of, her claim for disability. Yet Hartford was undeterred in continuing to pursue evidence that Post was not disabled. Indeed, the very fact that its employees characterized the results of the surveillance as "unsuccessful" suggests that its motive was to find evidence to deny Post's claim.
In addition to these incidents, Post cites Hartford's request for her tax returns as evidence of bad faith. As the District Court pointed out, the Plan did allow Hartford to reduce Post's benefits by the amount of any income she was receiving from working; thus Hartford's request for proof that she was receiving none was not beyond the pale. Nonetheless, Hartford's pursuit of Post's tax returns in the face of ambiguous Plan language is accurately characterized as an aggressive tactic.[8]
Post also cites Hartford's denial of benefits despite a favorable Social Security decision as evidence of bad faith. Our Court has not passed on the relevance of Social Security decisions in determining the appropriate standard of review, but other courts of appeals and some district courts have held that a disagreement with the Social Security Administration is a relevantthough not dispositivefactor. See Glenn v. MetLife, 461 F.3d 660, 669 (6th Cir.2006) ("[A]n ERISA plan administrator's failure to address the Social Security Administration's finding that the claimant was `totally disabled' is yet another factor that can render the denial of further longterm disability benefits arbitrary and capricious."); Lopes v. Metro. Life Ins. Co., 332 F.3d 1, 6 n. 9 (1st Cir.2003); Whatley v. CNA Ins. Co., 189 F.3d 1310, 1314 n. 8 (11th Cir.1999) (per curiam); Edgerton v. CNA Ins. Co., 215 F.Supp.2d 541, 549 (E.D.Pa.2002); Dorsey v. Provident Life & Accident Ins. Co., 167 F.Supp.2d 846, 856 n. 11 (E.D.Pa.2001). We agree that a disagreement is relevant though not dispositive, particularly (as here) when the administrator rejects the very diagnoses on which the Social Security benefits determination is based.[9]
In sum, we agree with the District Court that, on this record, each irregularity here *168 may appear minor. But given their number and regularity, the standard of review should be further heightened. As in Kosiba, we recognize that Hartford may offer plausible explanations for those irregularities, but in setting the standard of review the issue is merely whether the process raises questions. See 384 F.3d at 68. In this case, the sheer number of irregularities coupled with Hartford's aggressive posture raise concerns, and so the standard of review must be heightened. This procedural posture suggests that we move toward the high end of the sliding scale, much as we did in Pinto. 214 F.3d at 394.
C. Conclusion
Both structural and procedural factors favor a more searching standard of review than was used here. In light of what we believe the standard of review should be, the District Court erred by applying only slightly heightened review. Moving toward the high end of the sliding scale, the District Court must searchingly review both the merits and the process to determine if Hartford's decision was not the product of reasoned, disinterested discretion. No doubt the evidence on the merits appears close. But a factfinder reviewing the merits could yet determine that the weight of the medical evidence supports Post and that it, coupled with the evidence of bias, yields the conclusion that Hartford did not properly exercise its discretion.
IV. Other Issues
A. Closure of the Record
Generally, only evidence in the administrative record is admissible for the purpose of determining whether the plan administrator's decision was arbitrary and capricious. Kosiba, 384 F.3d at 67 n. 5; Mitchell v. Eastman Kodak Co., 113 F.3d 433, 440 (3d Cir.1997); Abnathya v. Hoffmann-La Roche, Inc., 2 F.3d 40, 48 n. 8 (3d Cir.1993).
In the wake of Pinto, however, we have modified that holding to allow the consideration of extrinsic evidence when deciding how much to heighten our review. Kosiba, 384 F.3d at 67 n. 5. That evidence must show "potential biases and conflicts." Id. In particular, we have noted that considering evidence of a plan's funding mechanism would be appropriate. Id. Here, however, Post's supplemental exhibits are all medical reports. The first five are reports from doctors that Post consulted between 1993 (just after the accident) and 1996. See Appellant's Br. 6-9. The last two are summaries of Post's condition prepared by her current doctors at the request of counsel in May 2005 (nearly two years after Hartford issued its final denial of benefits). Id. at 18-19, 28. Post has provided no explanation why the reports produced between 1993 and 1996 were not sent to Hartford for its consideration. Similarly, if she wanted Hartford to consider her treating physicians' responses to Dr. Lynch's report or their summaries of her medical condition, she should have submitted them (and thus made them part of the administrative record) soon after she received Hartford's denial of benefits, but she did not. Because all of these documents are medical reports, they are not relevant to the issue of bias; rather, *169 they are only relevant to whether Hartford reached the right decision. Under Mitchell, they cannot be considered for that purpose because they were not submitted to Hartford and made part of the record. 113 F.3d at 440. Thus, the District Court acted properly in not considering them.
B. The Section 1132(a)(2) Claim
The doctrine of res judicata "protect[s] litigants from the burden of relitigating an identical issue with the same party or his privy and . . . promot[es] judicial economy by preventing needless litigation." Parklane Hosiery Co. v. Shore, 439 U.S. 322, 327, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979). To apply, the following three prongs must be met: "(1) a final judgment on the merits in a prior suit involving (2) the same parties or their privies and (3) a subsequent suit based on the same cause of action." Lubrizol Corp. v. Exxon Corp., 929 F.2d 960, 963 (3d Cir.1991). Here, the parties agree that prongs two and three are met; their dispute is over whether the Court rendered a final judgment on the merits in their previous suit.
In that suit, the District Court dismissed a cause of action alleging violation of 29 U.S.C. § 1132(a)(2) for failure to state a claim. See Post v. Hartford Life & Accident Ins. Co., No. CIV.A. 02-1917, 2002 WL 31741470, at *2 (E.D.Pa. Dec.6, 2002). Dismissal for failure to state a claim is a final judgment on the merits for res judicata purposes. Federated Dep't Stores v. Moitie, 452 U.S. 394, 399 n. 3, 101 S.Ct. 2424, 69 L.Ed.2d 103 (1981). Moreover, res judicata bars not only claims that were brought in the previous action, but also claims that could have been brought. CoreStates Bank, N.A. v. Huls America, Inc., 176 F.3d 187, 194 (3d Cir.1999). Thus, for Post to maintain a § 1132(a)(2) claim, she would have to explain to the Court why it could not have been brought in 2002. She has made no attempt to do so.
As Hartford notes, Post's claim has the additional problem that it, too, fails properly to allege a violation of § 1132(a)(2). Post seeks to recover individually for Hartford's alleged breach of fiduciary duty. Under § 1132(a)(2) this is impossible, for that section allows beneficiaries to recover assets on behalf of the plan only. Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 140, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985). In other words, § 1132(a)(2) does not authorize suits for the recovery of individual benefits. Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1162 n. 7 (3d Cir.1990) ("Because plaintiffs here seek to recover benefits allegedly owed to them in their individual capacities, their action is plainly not authorized by either § 409 or § 502(a)(2).").[10]
V. Conclusion
We conclude that the District Court should have applied a more searching review to this case because of the non-trivial evidence of structural and procedural bias. Because that was not the standard applied here, we vacate the District Court's grant of summary judgment in Hartford's favor on the § 1132(a)(1)(B) claim and remand for further proceedings.
We affirm, however, its grant of summary judgment on the § 1132(a)(2) claim because principles of res judicata bar that claim.
*170 STAPLETON, Circuit Judge, dissenting:
I agree with the Court that Post's claim under ERISA § 502(a)(2) is barred by principles of res judicata and that in determining whether an administrator's denial of benefits is arbitrary or capriciousas contrasted with deciding the appropriate standard of reviewa district court is limited to consideration of the evidence that was before the administrator. I therefore join Section IV of the Court's opinion. I disagree, however, with the Court's analysis of Post's claim under ERISA § 502(a)(1)(B), and with the Court's decision to reverse and remand the summary judgment on that claim. I would affirm the judgment of the District Court.
I. Merits Evidence
The benefits decision we are asked to review was communicated to Post in a letter dated October 2, 2003. That letter explains at length the administrator's reasons for declining to continue disability benefits. It describes and principally relies upon an investigation conducted by Dr. Christopher G. Lynch, M.D. Dr. Lynch was engaged by Hartford in order to secure independent evaluation of Post's claim to "total disability" benefits.[11] In the course of his investigation, Dr. Lynch physically examined Post and reviewed all of the medical records accumulated over the preceding ten years.
The administrator's letter accurately reflects Dr. Lynch's report and, like that report, is reasoned, thorough and makes a persuasive case for the conclusion that Post, while suffering from chronic pain syndrome, is not totally disabled. It concludes with the following quotations from Dr. Lynch's report:
Dr. Lynch found that "multiple physical exams have shown nothing more than tender muscles at times and occasional trigger points." According to Dr. Lynch: "An equal number of examinations have found no tender muscles or trigger points. Thus, there can be no consistent physical disability over this period of time."
With respect to the need to assign physical restrictions and limitations, Dr. Lynch provided these remarks: "Given the multiple normal examinations, including my own of today,[12] I feel she *171 could perform sedentary to light work as usually definedlight work, lifting up to 20 pounds maximum with frequent lifting or carrying of objects weighing up to 10 pounds. She should have the ability to change posture at fairly frequent intervals."
Citing the restrictions and limitations identified by Dr. Lynch, Ms. Post would not be prevented by disability from doing any occupation or work for which she is qualified by training, education or experience.
JA 289-90 (footnote added).
While Post stresses that several treating physicians had expressed the opinion that she was unable to work and that the Social Security Administration found her disabled in 1998, she does not point to any segment of her medical records that contradicts Dr. Lynch's characterizations of those records in these quotations. Nor can Post dispute the fact that Dr. Lynch is the only physician having no continuing relationship with Hartford or Post who physically examined her and studied all of her medical records.
II. Standard of Review Evidence
A. Structural Factors
Under the teachings of Pinto, it is clear that Hartford has a material conflict of interest. It serves as both payor and decision maker and there are no other factors that ameliorate the incentive thus created to deny benefits. This calls for a "heightening" of the "arbitrary or capricious" standard of review which is applicable in all cases where an ERISA plan vests discretion in the administrator.
[A] heightened standard of review would appear to be appropriate when a plan funder like an insurance company "incurs a direct expense," the consequences to it are direct and contemporary, and, while it has incentives to maintain good business relationships, it lacks the incentive to "avoid the loss of morale and higher wage demands that result [for an employer] from a denial of benefits."
* * *
For all the foregoing reasons, we believe that a higher standard of review is required when reviewing benefits denials of insurance companies paying ERISA benefits out of their own funds.
Pinto, 214 F.3d at 389, 390; see also Kosiba v. Merck & Co., 384 F.3d 58, 65-66 (3d Cir.2004).
B. Procedural Factors
It is equally clear from Pinto that the "heightened" review arising from this structural conflict of interest would be "ratcheted upward" if there were anomalies in the procedure by which the administrator's decision was reached that give the Court reason to doubt its fiduciary neutrality. Pinto, 214 F.3d at 394; Kosiba, 384 F.3d at 66. I believe a fair reading of the record in this case fails to suggest anything other than neutrality, however. To the contrary, the record affirmatively suggests that Hartford's search for the answer to the "total disability" issue was conducted in a fair, impartial and cooperative manner. Each of the anomalies that trouble the Court appear troubling only if one engages in speculation having no record support.
It is true, as the Court notes, that Hartford requested a copy of Post's social security award so that it could offset her social security benefits against her disability benefits. This mistake was understandable, *172 however, and promptly corrected when the error was called to Hartford's attention. The ERISA plan of Post's former employer, which Hartford administers, appears to be a standard form, but with an attached state-specific section titled "Statutory Provisions," which, the Plan states, "are included to bring your booklet-certificate into conformity with . . . state law." JA 78. If one reads Post's benefits Plan without paying careful attention to the statutory provisions, the Plan would appear to allow Hartford to use Post's Social Security benefits to offset her disability benefits. In the portion of the Plan titled "Calculation of Monthly Benefit," part of step 2 of the calculation is to "subtract all Other Income Benefits, including those for which you could collect but did not apply." JA 99. In the definitions section of the Plan, "Other Income Benefits" is defined by a list, of which item (4) of the first paragraph is "[t]he amount of disability or retirement benefits under the United States Social Security Act to which you may be entitled because of disability retirement." JA 86. The "statutory provisions" of the Planreflecting New Jersey lawstate, however, that "[i]tems (3) and (4) of the first paragraph of the definition of Other Income Benefits are deleted." JA 78. After Hartford requested the award letter, Post's counsel responded with a letter calling Hartford's attention to the error:
As promised, here is the Notice of Award, and the language in the policy deleting Social Security Benefits from the definition of "Other Income Benefits," as well as the deleted language itself. As you can see, pursuant to New Jersey law, the situs of this contract, Hartford has no right to take a credit or deduction for or from its obligation due to Social Security's payments.
JA 216. An internal communication at Hartford reflects that Hartford then researched the issue, agreed with Post's counsel's assessment, and determined to "change case management" accordingly "so that [it could] correctly administer claims under this Policy." JA 231.
It is also true, as the Court notes, that Hartford at one point stated that benefits were being terminated in part because Post had declined to undergo a functional capacity evaluation ("FCE"). While Post had not at that point declined to take an FCE, Hartford's error clearly cannot be attributed to a lack of neutrality on its part. On June 18, 2001, Hartford was advised in writing by Empire Medical Management ("EMM"), an independent medical firm that had attempted to arrange an FCE through Post's counsel, that she had refused such an examination. In short, Hartford was not a party to the miscommunication that led to this misunderstanding and ultimately revised its position. Moreover, when one of Post's physicians later expressed concern about whether an FCE would aggravate her symptoms, Hartford accommodated those concerns by agreeing to settle for the less strenuous independent medical evaluation ("IME") that was conducted by Dr. Lynch.
The Court cites as its second anomaly Hartford's failure to afford Post an opportunity to comment on Dr. Lynch's report before sending its October 3, 2003, letter. While the Court correctly notes that no explanation for this appears in the record, that is not surprising in light of the fact that Post did not maintain before the District Court or before us that this was a matter of concern for her. Post was given a full opportunity to develop a record before the administrator, and neither the section of the Plan addressing her appeal rights nor ERISA § 503(2) (addressing internal appeal rights) provides a right to comment on the report of an independent *173 medical consultant under the circumstances of this case.
Third, the majority finds evidence of bad faith in the fact that Hartford's initial decision to terminate Post's benefits "relied heavily on Dr. Malievskaia's report," because (1) Dr. Malievskaia's report was not based on a physical examination, and (2) "the overwhelming weight of evidence in Post's record argued in her favor." Dr. Malievskaia was an Associate Medical Director of Medical Advisory Group ("MAG"), a medical consulting firm that Hartford engaged in the summer of 2001 following EMM's June 18, 2001, letter advising of Post's refusal to submit to an FCE, to "review [Post's] medical records and speak to [Post's] primary care physician in order to identify [her] functional capabilities and address the claimant's ability to perform [a] sedentary to light occupation." JA 339. Dr. Malievskaia did interview two treating physicians and submitted her report on September 20, 2001. That report was not relied upon in the October 3, 2003, decision letter that we are reviewing. It was, however, relied upon in Hartford's original decision letter of January 4, 2002, the same letter that relied in part on what Hartford then understood to be Post's refusal to be examined. This context, in my view, precludes drawing an inference against Hartford from its reliance on Dr. Malievskaia's report. Given that Hartford believed that Post had refused to be examined, and that that fact alone was a sufficient reason to terminate her benefits, it makes little sense to penalize Hartford for taking additional steps to ascertain Post's medical condition. Moreover, as that report and Hartford's January 4th letter evidence, the overwhelming weight of evidence in Post's record did not argue in her favor.[13]
*174 Fourth, the Court holds that a Hartford employee's use of the term "unsuccessful" in an internal e-mail to describe Hartford's surveillance of Post counsels heightened review. The only evidence in the record on this point is one line of an internal e-mail stating "Surveillance was unsuccessful as the claimant was not observed leaving her home." JA 227. In the Court's view, the use of the word "unsuccessful" suggests that Hartford's "motive was to find evidence to deny Post's claim." I do not agree.
As the Court recognizes, surveillance by an insurance company is not per se suspicious. See, e.g., Delta Family-Care Disability & Survivorship Plan v. Marshall, 258 F.3d 834, 841 (8th Cir.2001) ("[T]here is nothing procedurally improper about the use of surveillance."); Tsoulas v. Liberty Life Assurance Co. of Boston, 454 F.3d 69, 76-77 (1st Cir.2006) (district court properly held that surveillance was for the purpose of objective documentation of disability rather than to deny benefits). Hartford's employee's description of the surveillance as "unsuccessful" may support an inference of bias only if one supposes that Post's leaving her home could only produce evidence that would undermine her claim. If Post left her home to jog or play sports, that would certainly undermine her claim to disability benefits. On the other hand, if she used a wheelchair to move from her door to a waiting wheelchair transport vehicle, or hobbled gingerly on crutches, that would support her claim to disability benefits. The only reasonable inferenceif any inference may be drawn with confidenceis that the use of the word "unsuccessful" meant that Hartford's surveilleur was unable to observe Post at all due to the fact that she did not leave her home, and thus could neither confirm nor deny her disability.
Unlike the Court, I am unwilling to characterize Hartford's request for tax returns as an "aggressive tactic." The Plan entitles Hartford to reduce Post's benefits by the amount of income she received from working. Contrary to the majority's suggestion, there is nothing "ambiguous" about the Plan in that respect. In Hartford's May 12 and June 19, 2000, letters to Post and her attorneys requesting tax returns, Hartford quoted the language of the policy pertaining to the calculation of Post's benefits, specifically emphasizing the text that directed Hartford to subtract "all other income from any employer or for any work." JA 214, 219. At the time Hartford requested Post's returns, Post was collecting "total disability" benefits under the theory that she was prevented from doing any work by a disabling condition. In that light, it hardly seems unreasonable or suggestive of bad faith for Hartford to request tax returns, as Post's report to the government of her employment status during her period of alleged total disability would be probative evidence of whether Post was in fact "prevented by Disability *175 from doing any occupation or work for which [she is] or could become qualified."
Finally, the Court suggests that a disagreement between Hartford's October 3, 2003, decision and the August 11, 1998, decision of the Social Security Administration "is relevant though not dispositive" of whether the former was arbitrary and capricious. Op. at 167. Suffice it to say, the administrative law judge in 1998 did not have the benefit of the record before Hartford in 2003, and no review of Post's continued eligibility for social security benefits has been undertaken since 1998. See Pari-Fasano v. ITT Hartford Life & Acc. Ins. Co., 230 F.3d 415, 420 (1st Cir.2000). In Pinto and other cases in which courts have applied heightened scrutiny to an administrator's denial of benefits in the face of a social security award, they have done so not because of the mere fact of conflict with the SSA's determination, but because there is something suspicious about the manner in which the SSA decision is disregarded or disagreed with. In Pinto, for example, we were concerned with the fact that the administrator showed inexplicably greater deference to the SSA's determination that the claimant was not disabled than to the SSA's subsequent reversal of its initial determination. Pinto, 214 F.3d at 393-94. Similarly, in Harden v. Am. Express Fin. Corp., 384 F.3d 498, 500 (8th Cir.2004), the court applied greater scrutiny where the insurance company led the claimant to believe that it was considering his SSA records when it in fact was not. In other instances, where a plan requires the beneficiary to apply for Social Security benefits and takes an offset if the Social Security claim succeedswhich Hartford does not do here because of New Jersey state law courts have applied heightened scrutiny to ensure that the administrator does not make self-servingly selective use of the SSA's determinations by giving weight only to those determinations that go against the claimant. See Calvert v. Firstar Fin., Inc., 409 F.3d 286, 294-95 (6th Cir.2005) (finding that where the plan at issue had such a requirement, an administrator's disagreement with the SSA's determination "counsel[ed] a certain scepticism" that the court should consider as a factor in determining whether the administrator's decision was arbitrary and capricious); Wilkerson v. Reliance Std. Life Ins. Co., No. 99-4799, 2001 WL 484126 at *1 (E.D.Pa. Mar.6, 2001) ("[D]efendant is in the seemingly anomalous position of requiring plaintiff to refund some of the disability benefits received from the defendant because offset by Social Security disability benefits, and then failing to give any consideration to the continuation of Social Security benefits as evidence of continued total disability.")
I disagree with the Court's suggestion that any of these "anomalies," either alone or in combination, should alter our standard of review in this case.
C. Resulting Standard of Review
I thus view this as a case in which the decision maker had a material, inherent conflict of interest, but in which there is no significant evidence regarding its processing of the claim to benefits which suggests anything other than an impartial exercise of fiduciary discretion. It is clear from Pinto that such a situation calls for a "heightened" application of the arbitrary and capricious standard of review.
In Pinto, we adopted a "sliding scale" approach that "allows each case to be examined on its facts." It teaches that district courts "should consider the nature and degree of apparent conflicts with a view to shaping their arbitrary and capricious review of benefit determinations of discretionary decisionmakers." Pinto, 214 *176 F.3d at 393. As Pinto expressly acknowledged, however, "the routine legal meaning of an arbitrary and capricious decision is . . . a decision `without reason, unsupported by substantial evidence or erroneous as a matter of law,'" and "[o]nce the conflict becomes a `factor' . . . it is not clear how the process required by the typical arbitrary and capricious review changes." Id. at 392. The standard of review we ultimately adopted in Pinto was of necessity an imprecise one: the review is to be "more penetrating the greater the suspicion of partiality, less penetrating the smaller the suspicion is." Id. at 392-93 (quoting from Wildbur v. ARCO Chem. Co., 974 F.2d 631 (5th Cir.1992)). District courts, we instructed, must "approximately calibrat[e] the intensity of [their] review to the intensity of the conflict." Id. at 393.
It must be kept in mind, however, that the arbitrary and capricious standard, even when heightened, remains a deferential one. See Stratton v. E.I. DuPont De Nemours & Co., 363 F.3d 250, 256 (3d Cir.2004); Gritzer v. CBS, Inc., 275 F.3d 291, 295 & n. 3 (3d Cir.2002). The sliding scale, throughout its entire range, measures the deference to be afforded the decision of an administrator upon whom the plan has conferred discretion regarding benefits. Even where the conflict and/or procedural irregularities are most serious, this means only that the Court will "require that the record contain substantial evidence bordering on a preponderance to uphold [the administrator's] decision." Woo v. Deluxe Corp., 144 F.3d 1157, 1162 (8th Cir.1998). Stated conversely, if the evidence in the administrative record renders it more likely than not that the administrator's decision is correct, it necessarily follows that the decision must stand wherever on the arbitrary and capricious sliding scale the case may fall. In short, if the decision withstands de novo review, it matters not how little deference is accorded. See Williams v. BellSouth Telecommunications, Inc., 373 F.3d 1132, 1139 (11th Cir.2004) ("Because no grounds exist to disturb Kemper's determination under the de novo review standard, we need not review it under the more deferential (`mere' or `heightened' arbitrary and capricious) standard.").
As the Court recognizes, while Hartford's structural conflict calls for "heightened" review, in the absence of evidence of procedural bias it does not place this case at the upper end of the scale. Under our case law, as the Court explains, "[s]tructural conflicts of interest warrant more searching review, but in the absence of evidence that bias infected the particular decision at issue, we defer to an administrator's reasonable and carefully considered conclusions." Op. at 164. I agree with this reading of our jurisprudence, and because I believe no court reviewing the record before Hartford and affording its decision this kind of deference, or indeed deference of any significant degree, could appropriately overturn that decision, I would affirm the summary judgment in its favor.
III. Disposition
Post's case presented difficult issues for an administrator to resolve. She originally suffered a "whiplash injury," which Dr. Fiore described as a "cervical [neck] sprain/strain." JA 196-98. She had no bruises, lacerations, or broken bones, and magnetic resonance imagery revealed no tears, nerve damage, or slipped or herniated discs. Post nevertheless complained, over the next decade, of total body pain sufficiently severe to prevent her from any employment. Throughout that period, she was treated by physicians who prescribed medications and other therapy which were expected by them to alleviate this pain, but to no avail. Her condition did not improve. *177 Post's treating physicians did not reach a consensus with regard to the cause of her pain. Several suggested psychiatric or psychological therapies be undertaken, but Post declined to pursue that course. Two physicians suggested Post suffered from fibromyalgia, but their records did not reflect anything approaching the clinical evidence necessary to support that diagnosis. While several treating physicians expressed the opinion that Post was unable to perform any work, those opinions were based solely upon the patient's report of her symptoms. No clinical or other personal observations of Post were reported in support of those opinions.
Given this medical history, Hartford reasonably sought information to confirm or negate Post's claims to continued benefits. It did so by requesting additional information from Post and her treating physicians and by seeking the counsel of an independent consultant, Dr. Lynch. As I have earlier noted, his report indicates that his investigation was thorough and impartial. Dr. Lynch addressed the conclusions of Post's prior treating physicians, contrasted those conclusions with the medical records and with his own findings after a physical examination, and ultimately concluded that although she was disabled by some kind of pain disorder, she was not sufficiently disabled as to meet the plan definition of total disability. Dr. Lynch's report is not unassailable, but it is reasoned, consistent with the rest of Post's medical records, persuasively establishes that there is no objective evidence to support Post's claim of total disability, and clearly provides a rational basis for concluding that she is able to perform sedentary work.
In short, the administrative record before Hartford on October 3, 2003 provides clear and convincing support for the conclusion that Post had not established entitlement to continuing benefits. That conclusion of the administrator was reasonable and carefully considered, and I believe any reviewing court would be required by our case law to defer to it. Accordingly, I would affirm the District Court's summary judgment in favor of Hartford.[14]
NOTES
[1] Dr. Harris's conclusion on the issue of disability is, at best, unclear. On a Hartford form, he indicated that Post could sit, stand, walk, and drive for one hour each in an eight-hour workday. The form asked that he circle for each activity a number between one and eight. Zero was not an option. In any event, his responses indicate that she could sit, stand, walk, and drive for a total of four of eight hours. It is unclear how she could maintain employment without sitting, standing, walking, or driving for the other four hours of a typical day.
In addition Dr. Harris noted that Post could not lift or carry any weight at all, not even one pound. Nor could she climb, balance, stoop, kneel, crouch, crawl, reach, handle, finger, or feel.
Hartford and our dissenting colleague focus on the fact that, in a section asking what degree of work Post could tolerate, Harris checked "sedentary work." This was the least intensive option available. The form did not provide a way of responding that the patient could not tolerate work at all.
In the comments section of the form, Dr. Harris wrote:
Severe pain head, neck, & lower jaw.
Back pain limits any mobility without severe pain. Cannot sit in chair for treatment without pain.
These comments and responses render the form, at the least, ambiguous as to Post's condition. Read most fairly, the great weight of the form indicates a significant level of disability. It takes a highly selective reading to conclude that it indicates that Post was capable of working (without sitting, standing, walking, or driving, for half of the workday).
[2] In the words of Judge Posner, fibromyalgia is
a common, but elusive and mysterious, disease, much like chronic fatigue syndrome, with which it shares a number of features. See Frederick Wolfe et al., "The American College of Rheumatology 1990 Criteria for the Classification of Fibromyalgia: Report of the Multicenter Criteria Committee," 33 Arthritis & Rheumatism 160 (1990); Lawrence M. Tierney, Jr., Stephen J. McPhee & Maxine A. Papadakis, Current Medical Diagnosis & Treatment 1995 708-09 (1995). Its cause or causes are unknown, there is no cure, and, of greatest importance to disability law, its symptoms are entirely subjective. There are no laboratory tests for the presence or severity of fibromyalgia. The principal symptoms are "pain all over," fatigue, disturbed sleep, stiffness, andthe only symptom that discriminates between it and other diseases of a rheumatic character multiple tender spots, more precisely 18 fixed locations on the body (and the rule of thumb is that the patient must have at least 11 of them to be diagnosed as having fibromyalgia) that when pressed firmly cause the patient to flinch. All these symptoms are easy to fake, although few applicants for disability benefits may yet be aware of the specific locations that if palpated will cause the patient who really has fibromyalgia to flinch.
Sarchet v. Chater, 78 F.3d 305, 306-07 (7th Cir.1996).
[3] The District Court had jurisdiction under 28 U.S.C. § 1331; we have jurisdiction under 28 U.S.C. § 1291. Because this is an appeal from a grant of summary judgment, our review is plenary. Vitale v. Latrobe Area Hosp., 420 F.3d 278, 281 (3d Cir.2005).
[4] The Tenth and Eleventh Circuit Courts, rather than adjusting the level of scrutiny, shift the burden of proof to the administrator when the employee presents evidence of a conflict of interest. Fought v. UNUM Life Ins. Co. of Am., 379 F.3d 997, 1004-07 (10th Cir. 2004); Williams v. BellSouth Telecomms., Inc., 373 F.3d 1132, 1138 (11th Cir.2004). The Second Circuit Court of Appeals holds that once the claimant has shown the potential for bias, the court strips away the administrator's discretion and reviews its decision de novo. Sullivan v. LTV Aerospace & Defense Co., 82 F.3d 1251, 1256 (2d Cir.1996). The First Circuit Court of Appeals applies unvarnished arbitrary and capricious review, Doe v. Travelers Ins. Co., 167 F.3d 53, 57 (1st Cir. 1999), though two of the six active judges on that Court have criticized this approach. Denmark v. Liberty Life Assur. Co. of Boston, 481 F.3d 16, 31 (1st Cir.2007) (Opinion of Lipez, J.) (urging adoption of the sliding scale); id. at 41 (Howard, J., dissenting) (agreeing that the arbitrary and capricious standard should be reconsidered). But see id. at 40 (Opinion of Selya, J.) (defending arbitrary and capricious review). The D.C. Circuit Court of Appeals has not yet decided the issue. See Wagener v. SBC Pension Benefit PlanNon Bargained Program, 407 F.3d 395, 402 (D.C.Cir.2005) (noting the circuit split).
[5] In this regard, we share the view of the Fourth, Fifth, Eighth, Tenth, and Eleventh Circuit Courts of Appeals. See Fought, 379 F.3d at 1006; Vega, 188 F.3d at 295 n. 8; Armstrong v. Aetna Life Ins. Co., 128 F.3d 1263, 1265 (8th Cir.1997); Doe, 3 F.3d at 86; Brown v. Blue Cross & Blue Shield of Alabama, Inc., 898 F.2d 1556, 1561 (11th Cir. 1990).
[6] It is worth noting that we have held that when the employer both funds and administers the plan, but pays benefits out of a fully funded and segregated ERISA trust fund rather than its operating budget, no structural conflict of interest is created. Vitale, 420 F.3d at 282; Bill Gray Enters., Inc. Employee Health & Welfare Plan v. Gourley, 248 F.3d 206, 217-18 (3d Cir.2001).
[7] Our dissenting colleague views the record differently on this point as well. At the time of the paper review, all of Post's treating physicians' reports save one argued in her favor. It is true that Dr. Fiore in 1994 (before she filed for, and was granted, disability benefits the first time) labeled her "not disabled" after a single examination, but every other doctorand we include Dr. Harris in this group, see supra note 1indicated a high level of disability through Hartford's 2002 denial of benefits. Given the regular reports indicating disability from her treating physicians, we believe that the record was far in Post's favor at the time of Hartford's paper review.
[8] In this context we note that on February 29, 2000, Hartford demanded that Post submit her 1999 tax return within 30 days. As any taxpayer knows, that return was not due to the IRS until April 15, 2000. Perhaps this was an oversight on Hartford's part, but it reinforces the impression that Hartford was on the offense in its demands for information.
We further note that we cannot agree with our dissenting colleague that the Plan clearly allowed demanding tax returns on penalty of forfeiture. In the Plan, Hartford specifically reserved itself "the right to require, as part of Proof of Loss: (1) your [Post's] signed statement identifying all Other Income Benefits, and (2) [s]atisfactory proof to the Hartford that you and your Dependents have duly applied for all Other Income Benefits which are available." Tax returns do not easily fit into either category. As this was Hartford's contract, it had every opportunity expressly to provide for the right to demand tax returns if it wished to do so. But it did not require this expressly. Thus, we believe that threatening forfeiture for refusing to provide information to which the Plan did not give it a right was, at the least, aggressive.
[9] Hartford argues that its conclusion is not necessarily inconsistent with the Social Security Administration's determination, as Post's intractable cervical pain, chronic pain syndrome, and fibromyalgia might have healed between 1998 (when the Social Security Administration awarded her benefits) and 2002 (when Hartford denied them). Perhaps, but neither Dr. Malievskaia nor Dr. Lynch directly addressed the Social Security decision, nor did either of them posit that Post had these disorders but recovered from them. Rather, both seemed to conclude that Post was never totally disabled. JA 296 (Dr. Lynch's conclusions) & 343-44 (Dr. Malievskaia's conclusions). As their conclusions appear to be in tension with those of the Social Security Administration, we believe the disagreement is relevant.
[10] While we have held that individuals can recover in their own capacity for breaches of fiduciary duties under § 1132(a)(3), see Bixler v. Cent. Pa. Teamsters Health & Welfare Fund, 12 F.3d 1292, 1298 (3d Cir.1993), Post brought her claims only under § 1132(a)(1)(B) and (a)(2).
[11] Under the Plan, to be considered "totally disabled" after December 6, 1997, Post would have to be "prevented by Disability from doing any occupation or work for which [she is] or could become qualified by: (1) training; (2) education; or (3) experience." JA 77. When Post was originally granted benefits, the applicable definition of "totally disabled" was that she was "prevented by Disability from doing all the material and substantial duties of [her] own occupation." Under the terms of the Plan, the definition changed once Post had been disabled for 24 months plus 180 days. JA 76-77, 83.
[12] Dr. Lynch's report described his observations during his examination of Post as follows:
On examination today, she is alert, cooperative and in no distress. Affect is a bit flat. She appeared to be in no distress although she stated she had total body pain.
Examination of the upper extremities reveals no deformities. There is no focal motor, reflex or sensory loss. She has normal pain free range of motion in all upper extremity joints including the shoulders. There was no tenderness over the forearm or upper arm musculature.
Examination of the head, neck and back reveals no deformities. Range of motion in the cervical spine was 15-20 degrees of left and right lateral rotation with normal flexion and extension. Range of motion in the low back was 60+ degrees of flexion with 5-10 degrees of extension. Palpation over the cervical and thoracic regions reveals no definite tenderness and no trigger points were palpated. Palpation over the lumbosacral spine reveals no tenderness. She was somewhat tender over the greater trochanters bilaterally. Motor, reflex and sensory exams were normal in the lower extremities. She has normal pain free range of motion in all lower extremity joints. Gait is normal.
JA 292-93.
[13] While the evidence in Post's record indicated that she suffered from chronic pain, to be eligible for benefits at that point, Post had to be "prevented by Disability from doing any occupation or work for which [she is] or could become qualified by: (1) training; (2) education; or (3) experience." JA 77 (emphasis added). In 1994, ten months after her initial injury, Dr. Michael Fiore noted that Post had no lacerations, bruises, swelling or broken bones, diagnosed her with a "cervical sprain/strain," and concluded that she was "not disabled" and "may participate in full activity as tolerated." JA 196-98. In 1996, Dr. Joel Harris examined Post and concluded that although she had severe pain in her head and neck area, she was capable of doing sedentary work. JA 265. The Court notes that sedentary work was the "least intensive option available," but nothing prevented Dr. Harris from indicating, as Dr. Britton did on the same form, JA 256, that Post was incapable of doing sedentary work. New Jersey's medical examiner found that Post "could perform medium exertional work with limited reaching." JA 46.
Although several of Post's doctors tested her for "trigger points" and diagnosed her with fibromyalgia, their ultimate diagnoses were based on self-reported symptoms, and none of the doctors ever found the requisite eleven of eighteen trigger points needed to support such a diagnosis. There are several references in Post's medical records to "trigger points," all of which indicate that she had fewer than eleven. JA 262 (Dr. Mulford in March 1995, finding "some trigger points in the sternocleidomastoid and scalenes"); JA 259 (Dr. Mulford in November 1995, finding "several trigger points in the upper cervical spine at the occiput and over the cervical facets"); JA 258 (Dr. Mulford in 1996, finding "no palpable muscle spasm or trigger points at this time"); JA 318-19 (Dr. Kaufman in May 2000, finding "trigger points on the right side . . . [and] Another trigger point in the infraspinatous region on the left side," but none in several other places); JA 317 (Dr. Kaufman in October 2000 finding two trigger points); JA 293-95.0 The "trigger point" test is recognized in the case law and the medical literature as a prerequisite to a diagnosis of fibromyalgia. See Sarchet v. Chater, 78 F.3d 305, 306-07 (7th Cir.1996) (discussing the trigger point test); Chronister v. Baptist Health, 442 F.3d 648, 656 (8th Cir.2006) (same, citing Sarchet); Stup v. UNUM Life Ins. Co. of Am., 390 F.3d 301, 303 (4th Cir. 2004) (same); Hawkins v. First Union Corporation Long-Term Disability, 326 F.3d 914, 919 (7th Cir.2003) (same); Stedman's Concise Medical Dictionary for the Health Profession 361 (4th ed.2001) (defining fibromyalgia as "a condition of chronic diffuse widespread aching and stiffness affecting muscles and soft tissues; diagnosis requires 11 of 18 specific tender points. . . ."). Admittedly, Post's file contained the opinions of several treating physicians to the effect that she was completely disabled, but it is not a fair assessment of the record to say that the evidence in her favor was sufficiently overwhelming as to raise a legitimate inference of bad faith when Hartford's administrator disagreed with those conclusions. This is not, therefore, a situation like Kosiba, where the claimant's "physician's reports uniformly supported her contentions" of disability, and there was no comparable evidence supporting the insurer's contrary view at the time it ordered an examination. 384 F.3d at 67.
[14] I would not remand for further proceedings. Our review of the District Court's summary judgment is plenary and, as the Court recognizes, the merits decision must be made on the basis of the administrative record. Given that record, the District Court would have no basis on remand for doing anything other than accepting Hartford's decision. While it is not material to my decision to affirm, rather than remand, I note that Post, of course, has no right to a jury review of the administrator's decision. Turner v. CF & I Steel Corp., 770 F.2d 43 (3d Cir.1985).
| {
"pile_set_name": "FreeLaw"
} |
496 Pa. 119 (1981)
436 A.2d 181
Genevieve ANTHONY, Administratrix of the Estate of Robert D. Anthony; Vernell Brown, Administratrix of the Estate of William H. Brown; Emily L. Mellott, Administratrix of the Estate of Ralph L. Mellott; Mabel Sharp, Administratrix of the Estate of Gilbert C. Sharp; Elizabeth Straver, Administratrix of the Estate of Kelvin Straver,
v.
KOPPERS COMPANY, INC., Allied Chemical Corporation, and Salem Corporation,
v.
BETHLEHEM STEEL CORPORATION.
Appeal of KOPPERS COMPANY, INC. and Bethlehem Steel Corporation at 37.
Appeal of ALLIED CHEMICAL CORPORATION at 38.
Supreme Court of Pennsylvania.
Argued September 15, 1981.
Decided October 29, 1981.
Application for Reargument Denied December 22, 1981.
*120 Patrick R. Riley, Avrum Levicoff, Egler & Reinstadtler, Pittsburgh, for Koppers Co., Inc.
Blair S. McMillin, Lawrence E. Flatley, Reed, Smith, Shaw & McClay, Pittsburgh, for Bethlehem Steel Corp.
Herbert Bennett Connor, Dickie, McCamey & Chilcote, Pittsburgh, for Salem Corp.
John W. Jordan, IV, Thomson, Rhodes & Grigsby, Pittsburgh, for Allied Chemical Corp.
*121 John Alan Conte, Scott L. Melton, Conway, for Genevieve Anthony et al.
OPINION OF THE COURT
WILKINSON, Justice.
These appeals[1] are from an order of the Superior Court affirming an interlocutory order denying motions for summary judgment. The issue is whether appellees' wrongful death and survival actions were barred by the applicable statutes of limitation. We hold that they were and reverse the judgment of the Superior Court.
Appellees are each administrators of the estates of their deceased husbands, who had been employed by Bethlehem[2] as coke oven workers. Appellees commenced these actions on December 13, 1977. Their amended complaint alleges that emissions from the coke ovens, which had been "manufactured, sold, constructed and installed" by Koppers, Allied, and Salem Corporation (Salem), had caused the decedents to contract lung cancer, which resulted in their deaths. The causes of action were grounded in negligence, strict liability in tort and breach of warranty and were based upon alleged defects in the coke ovens.
It was revealed during discovery that all decedents had died more than two years before the actions were brought.[3] In fact, the instant litigation was instituted more than five years after the most recent death. Koppers, Allied, and Salem filed motions for summary judgment, arguing that the one year statute of limitations applicable to wrongful death actions, Section 2 of the Act of April 26, 1855, P.L. *122 309, 12 P.S. § 1603,[4] and the two year statute of limitations applicable to survival actions, Section 2 of the Act of June 24, 1895, P.L. 236, 12 P.S. § 34,[5] barred appellees' suits. The Court of Common Pleas of Allegheny County denied the motions and certified the question for interlocutory appeal. The Superior Court granted permission to appeal and subsequently affirmed the denial of summary judgment. Anthony v. Koppers Co., 284 Pa.Super. 81, 425 A.2d 428 (1980).
The Superior Court determined that the statutory periods did not start to run until the decedents' representatives knew or reasonably should have known of the causal connection between the coke oven emissions and the decedents' lung cancer, and that there exists a genuine issue of material fact, as to that date, so as to prevent the entry of summary judgment.[6] The Superior Court thus approved the application of the "discovery rule" to wrongful death and survival actions in Pennsylvania. Appellants, of course, argue that the "discovery rule" is inapplicable and that the statutory periods began to run, at the latest, on the dates of the decedents' deaths. We agree.
The statute of limitations applicable to appellees' wrongful death actions provides as follows: "The declaration *123 shall state who are the parties entitled in such action; the action shall be brought within one year after the death, and not thereafter." 12 P.S. § 1603.
We are mindful that "[w]hen [, as here,] the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit." Section 1921(b) of the Statutory Construction Act of 1972, 1 Pa.C.S. § 1921(b). The statute here is quite specific that the one year runs from the date of death.
The Superior Court, however, reasoned that the "discovery rule" "is not derived from, and does not depend upon, the language of a particular statute but instead is a judicially created rule generally applicable to all statutes of limitation and to all cases where the injury or its cause is not immediately evident." Anthony v. Koppers Co., supra, 284 Pa.Super. at 91-92, 425 A.2d at 436. We cannot accept this proposition and conclude that the "discovery rule" does not prevent the running of the statute of limitations in a wrongful death action brought under 12 P.S. § 1603.
This Court has never addressed this precise issue.[7] There have, however, been a number of Pennsylvania cases which have applied the "discovery rule" in other settings. The Superior Court discusses and relies upon several of these, e. g., Ayers v. Morgan, 397 Pa. 282, 154 A.2d 788 (1959) and its progeny, in reaching its conclusion. Those cases, however, cannot be considered dispositive as they have involved clearly distinguishable statutes of limitation. The personal injury statute of limitations at issue in Ayers v. Morgan, id., provided that actions must be commenced "within two years from the time when the injury was done . . . ." 12 P.S. *124 § 34.[8] Statutory references to the occurrence of an "injury" or the accrual of a "cause of action" are subject to judicial interpretation as to the degree of knowledge a plaintiff must possess before the statute will start to run. In contrast, the requirement that a wrongful death action be brought within two years after a definitely established event, "death" leaves no room for construction.
We are convinced that when the legislature said that a cause of action exists for "one year after the death, and not thereafter," it did not mean "one year from the date of discovery of the cause of death." Cadieux v. International Telephone & Telegraph Corp., 593 F.2d 142, 144 (1st Cir. 1979) (applying this reasoning to a similarly worded Rhode Island statute).
The principle we adopt here is not without support in Pennsylvania case law. In Workmen's Compensation Appeal Board v. Chobanian, 19 Pa.Cmwlth. 632, 339 A.2d 126 (1975), the Commonwealth Court, in construing a similar statute,[9] held that the sixteen month limitation period for the filing of a death claim under the Pennsylvania Occupational Disease Act, runs from the date of death, not from the date when the claimant knew that the death resulted from an occupational disease.
We will now address the application of the "discovery rule" to the survival actions. The statute of limitations applicable to these actions provides as follows:
*125 Every suit hereafter brought to recover damages for injury wrongfully done to the person, in case where the injury does not result in death, must be brought within two years from the time when the injury was done and not afterwards; in cases where the injury does result in death the limitation of action shall remain as now established by law.
12 P.S. § 34. The Superior Court concluded that where, as alleged here, the decedents did not know or reasonably should not have known of the cause of their injuries before their deaths, 12 P.S. § 34 did not start to run until their administrators became aware or should have become aware of the cause. Anthony v. Koppers Co., supra, 284 Pa.Super. at 100, 425 A.2d at 438. We must again disagree.
As distinguished from the wrongful death statutes,[10] the survival statutes[11] do not create a new cause of action; they simply permit a personal representative to enforce a cause of action which had already accrued to the deceased before his death. Cf. Pezzulli v. D'Ambrosia, 344 Pa. 643, 647, 26 A.2d 659, 661 (1942). Here, by arguing that their decedents were not "injured" until some time after their deaths, appellees concede that no valid cause of action existed at the time of death which could be preserved under the survival statutes. The survival claims were clearly barred.
The decision of the Superior Court is reversed and the motions for summary judgment granted.
NIX, J., did not participate in the consideration or decision of this case.
LARSEN and KAUFFMAN, JJ., concurred in the result.
O'BRIEN, C.J., filed a dissenting opinion.
*126 O'BRIEN, Chief Justice, dissenting.
The majority's reliance upon the rules of statutory construction in summarily refusing to extend the applicability of the "discovery rule" to the instant wrongful death and survival actions is misplaced. As Judge Spaeth made clear in the cogent and well-considered Superior Court decision,
"application of the discovery rule is not based upon any specific wording in the particular statute of limitations in question. Instead, application of the rule has been based upon the recognition that if a party, despite the exercise of diligence, cannot ascertain his injury, the statute of limitations should not run against his claim. In short, the discovery rule is a judicial creation; fashioned to solve a specific problem, namely, whether the law should preclude recovery for an injury that not even a diligent party may reasonably be expected to discover."
Anthony v. Koppers Co., Inc., 284 Pa.Super. 81, 89, 425 A.2d 428, 432 (1980) (emphasis in original).
The discovery rule, therefore, is best seen as a judicial response to the anomalies which inevitably result from the wooden application of statutes of limitations. This solution has heretofore found favor in this Court's decisions, and there is a recognized trend toward widening its applicability. See Anthony v. Koppers Co., Inc., supra, 284 Pa.Super. at 95, 425 A.2d at 434-435 and cases cited therein. Suddenly, however, the majority chooses to declare in effect that the statutes of limitations relevant to the instant actions run in a vacuum, impervious to the considerations which would accompany the decision whether or not to invoke the discovery rule. Moreover, the fact that the rule has been embraced by the courts of this Commonwealth demonstrates that there must be more to deciding such cases than merely construing the relevant statutes of limitations.
On a sheerly practical level, the majority's newly announced principle is likely to encourage the commencement of a rash of law suits filed to protect potential causes of action which are not yet and may never become meritorious. *127 The potential increase in litigation under an extended discovery rule pales by comparison.
I would affirm.
NOTES
[1] We are presented with (1) the appeals of Koppers Company, Inc. (Koppers) and Bethlehem Steel Corporation (Bethlehem); and (2) the appeal of Allied Chemical Corporation (Allied).
[2] In August, 1978, Allied joined Bethlehem as an additional defendant.
[3] Answers to interrogatories indicated that decedents had died on the following dates: Robert D. Anthony on August 5, 1967; Kelvin Straver on October 11, 1969; William H. Brown on October 24, 1969; Gilbert C. Sharp on December 12, 1969; and Ralph L. Mellott on July 5, 1972.
[4] Repealed by Section 2(a) [310] of the Judiciary Act Repealer Act, Act of April 28, 1978, P.L. 202, effective June 27, 1978. See Section 5524(2) of the Judicial Code, 42 Pa.C.S. § 5524(2) (now providing a two year limitation).
[5] Repealed by Section 2(a) [807] of the Judiciary Act Repealer Act. See 42 Pa.C.S. § 5524(2).
[6] The appellees have argued throughout that because medical science had not previously recognized this causal connection, they did not know and reasonably should not have known of the causal link until October 19, 1976, when the Secretary of Labor promulgated health standards governing employee exposure to coke oven emissions pursuant to the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq. (1970). A discussion of the administrative and scientific background of these standards is set forth in American Iron & Steel Inst. v. O.S.H.A., United States Dep't. of Labor, 577 F.2d 825 (3d Cir. 1978), cert. dismissed, 448 U.S. 917, 101 S.Ct. 38, 65 L.Ed.2d 1180 (1980). We do not reach the question of whether advances in medical science may be applied retroactively to resuscitate causes of action previously barred by statutes of limitation.
[7] The Superior Court cites our opinion in Schaffer v. Larzelere, 410 Pa. 402, 189 A.2d 267 (1963) as recognizing that the "discovery rule" applies to wrongful death actions. That case, however, merely applied the rule that an amendment which does not change the cause of action but merely amplifies that which has already been averred should be allowed even if the statute of limitations has run, and held that the lower court had erred in not permitting the amendment. The references to the applicability of the "discovery rule", therefore, constitute dicta and are in no way binding. See Anthony v. Koppers Co., supra, 284 Pa.Super. at 104, 425 A.2d at 439-40.
[8] The Superior Court correctly noted that the "discovery rule" has been applied in this state to several other statutes of limitation in addition to 12 P.S. § 34 ("injury"): Ciabattoni v. Birdsboro Steel Foundry & Machine Co., 386 Pa. 179, 125 A.2d 365 (1956) (statute used phrase "after disability begins"); A.J. Aberman, Inc. v. Funk Bldg. Corp., 278 Pa.Super. 385, 420 A.2d 594 (1980) (statute used phrase "after the cause of such actions"); Irrera v. SEPTA, 231 Pa.Super. 508, 331 A.2d 705 (1974) (statute provided "from the date. . . the cause of action accrued"). Anthony v. Koppers Co., supra 284 Pa.Super. at 98, 425 A.2d at 436.
[9] Section 315 of The Pennsylvania Occupational Disease Act, Act of June 21, 1939, P.L. 566, as amended, 77 P.S. § 1415 provides that: "In cases of death all claims for compensation shall be forever barred, . . . unless, within sixteen months after the death, one of the parties shall have filed a petition. . . ." (emphasis added).
[10] Section 19 of the Act of April 15, 1851, P.L. 669, 12 P.S. § 1601; Section 1 of the Act of April 26, 1855, P.L. 309, 12 P.S. § 1602; and Section 1 of the Act of May 13, 1927, P.L. 992, 12 P.S. § 1604. Repealed by § 2(a) [279], [310] and [1094] of the Judiciary Act Repealer Act, currently 42 Pa.C.S. § 8301.
[11] Section 3371 of the Probate, Estates, and Fiduciaries Act of 1972 (Act), as amended, 20 Pa.C.S. § 3371 and Section 3373 of the Act, 20 Pa.C.S. § 3373, currently 42 Pa.C.S. § 8302.
| {
"pile_set_name": "FreeLaw"
} |
Velva L. Price
Travis County District Clerk
Travis County Courthouse Complex
P.O. Box 679003
Austin, Texas 78767-9003
June 3, 2015
Mr. Jeffrey D. Kyle
Third Court of Appeals
P.O. Box 12547
Austin, Texas 78711-2547
Dear Mr. Kyle,
A clerk’ s record in cause number, D-1-GN-11-003205 and Court of Appeals number
03-15-00248-CV, styled, RAYMOND BOYTIM V BRIGHAM EXPLORATION COMPANY, was
due in your office May 7, 2015. Due to a clerical error by the clerk’ s office in calculating the due
date for submission of the record, the record will be submitted to the 3rd Court of Appeals by the
close of business on June 15, 2015.
Thank you for your consideration.
If you have any questions, please contact me at (512) 854-4309
Sincerely,
Trish Winkler
Deputy Court Clerk II
(512) 854-4309
Administrative Offices Civil and Family Division Criminal Division Jury Office
(512) 854-9457 (512) 854-9457 (512) 854-9420 (512) 854-9669
fax: 854-4744 fax: 854-9549 fax: 854-4566 fax: 854-4457
| {
"pile_set_name": "FreeLaw"
} |
Case: 11-30011 Document: 00511787192 Page: 1 Date Filed: 03/13/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
March 13, 2012
No. 10-31186 Lyle W. Cayce
Consol. w/ No. 11-30011 Clerk
FREDDIE R. LEWIS,
Plaintiff - Appellant
v.
SHERIFF’S DEPARTMENT BOSSIER PARISH; BOSSIER PARISH;
GEORGE HENDERSON; MARK TOLOSO; Warden WEAVER; Assistant
Warden LEE; Assistant Warden STOKES; Sergeant SHELTON; Deputy
GRIFFIN; Deputy ORR; Deputy HAWN; STEVE BROADENSKY, Bossier
Sheriff’s Department Medical Staff; DAVID, Bossier Sheriff’s Department
Medical Staff; Sheriff LARRY DEAN, Bossier Parish Sheriff; Deputy HALL;
Dentist HAVERTON, Louisiana State University Dentist; JONES; Deputy
MARTIN; Deputy J MARTIN; Sergeant PARISH; Sergeant PIERCE;
PORTER; Deputy PRATHER; Doctor ROBERT RUSSELL, Louisiana State
University Doctor; THORNHILL, Bossier Sheriff’s Department Medical Staff;
Sergeant WADSWORTH,
Defendants - Appellees
Appeals from the United States District Court
for the Western District of Louisiana
USDC No. 5:07-CV-394
Before REAVLEY, ELROD, and HAYNES, Circuit Judges.
PER CURIAM:*
*
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.
Case: 11-30011 Document: 00511787192 Page: 2 Date Filed: 03/13/2012
Nos. 10-31186, 11-30011
Appellant Freddie R. Lewis, Louisiana prisoner # 395306, filed two
appeals in this court contesting the district court’s dismissal of his claims under
42 U.S.C. § 1983. First, he appeals the district court’s refusal to certify as final
its order dismissing approximately half of Lewis’s claims, as well as its refusal
to stay the proceedings so that Lewis could pursue an interlocutory appeal
(hereinafter “Appeal No. 10-31186”). Lewis also appeals the dismissal of
approximately half of his claims as frivolous or prescribed, the denial of his
various discovery motions as premature, and the dismissal of his remaining
claims for failure to prosecute (hereinafter “Appeal No. 11-30011”).
We have consolidated Lewis’s appeals because of their related nature.
However, we DISMISS Appeal No. 10-31186 for lack of jurisdiction, as Lewis
filed the notice of appeal prior to the entry of a final judgment, and an order
denying a motion to certify a prior decision as final is not an appealable order.
As for the issues raised in Appeal No. 11-30011, we find that Lewis waived all
of his challenges other than his argument that the district court erred in
dismissing his remaining claims for failure to prosecute, and we AFFIRM the
district court’s decision to dismiss his remaining claims for that reason. Because
we conclude that the district court did not err in dismissing Lewis’s lawsuit, we
DENY Lewis’s motion to remand the case to the district court and his motion for
reimbursement of costs and fees.
I. FACTS AND PROCEDURAL HISTORY
In early 2007, Lewis filed a pro se and in forma pauperis (“IFP”) complaint
against numerous defendants, complaining of his 2005 arrest and of the
conditions of his confinement. Over the course of the next several years, Lewis
filed several discovery motions and a motion to serve the defendants, all of which
were denied as premature.
In February 2010, the magistrate judge to whom this case was referred
recommended that approximately half of Lewis’s claims against various
2
Case: 11-30011 Document: 00511787192 Page: 3 Date Filed: 03/13/2012
Nos. 10-31186, 11-30011
defendants be dismissed pursuant to 28 U.S.C. § 1915(e)(2)(B)(i) and (ii) as
frivolous or for failure to state a claim because, inter alia, the claims were
prescribed, the defendants were immune from suit, the claims were not
cognizable under § 1983, no constitutional violation was alleged, or the claims
were barred by Heck v. Humphrey, 512 U.S. 477 (1994).1 Lewis objected, arguing
that his claims were timely filed and not prescribed.
The district court overruled the objections, adopted the magistrate judge’s
report and recommendation, and dismissed these seventeen claims. The district
court noted that Lewis had claims remaining against numerous defendants,
whom it named in a footnote of the opinion. Lewis filed a notice of appeal from
this order of partial dismissal, but we dismissed the appeal for lack of
jurisdiction, as the district court’s opinion did not dispose of all of Lewis’s claims
and therefore lacked finality. See Lewis v. Sheriff’s Dep’t Bossier Parish, 396 F.
App’x 102, 102-03 (5th Cir. 2010) (per curiam) (unpublished).
A. Facts Relevant to Appeal No. 10-31186
After we dismissed Lewis’s appeal, Lewis asked the district court to certify
the order dismissing half of Lewis’s claims for immediate appeal pursuant to 28
U.S.C. § 1292(b). Lewis also asked the district court to stay the proceedings
pending the outcome of his “interlocutory appeal.” The district judge interpreted
Lewis’s motion for an interlocutory appeal as a request for certification pursuant
to Federal Rule of Civil Procedure 54(b) and denied the motion. Several days
later, the district judge denied Lewis’s motion for a stay, and his second motion
for an interlocutory appeal—which the district judge again treated as a request
1
In Heck, the Supreme Court held that if a plaintiff desires to recover monetary
compensation for an allegedly unconstitutional sentence or conviction, or for “harm caused by
actions whose unlawfulness would render a conviction or sentence invalid,” the plaintiff must
show that the conviction has been reversed on direct appeal, expunged by executive order,
declared invalid by a state tribunal, or called into question because a federal court issued a
writ of habeas corpus. Id. at 486-87.
3
Case: 11-30011 Document: 00511787192 Page: 4 Date Filed: 03/13/2012
Nos. 10-31186, 11-30011
for certification under Rule 54(b). Lewis filed a notice of appeal from the district
court’s denial of his motion to stay and his request for certification on November
22, 2010—five days before the district court entered a final judgment in the case.
B. Facts Relevant to Appeal No. 11-30011
Approximately two weeks after the district judge dismissed half of Lewis’s
claims, the magistrate judge summarized the claims against the remaining
defendants, ordered Lewis to file one copy of the complaint and two completed
summonses for each defendant with the clerk within 30 days, and directed the
U.S. Marshal to serve these defendants. In response, Lewis moved to have the
clerk serve the summonses he had previously filed, to waive the requirement
that he file two copies of each summons, and to have the clerk provide a copy of
the complaint at no cost to Lewis. On March 1, 2010, the magistrate judge
denied Lewis’s “request to waive the requirement that he provide completed
summons forms to the clerk” and directed Lewis to comply with the previous
order.
On March 18, 2010, Lewis requested a copy of his complaint and ten more
copies of “Form USM-285, Process Receipt and Return, for the remainder of the
‘defendant’s’ [sic] to be served.” On August 9, 2010, the magistrate judge denied
Lewis’s motion to show just cause, in which Lewis had asked for the service of
his previously filed summonses, because Lewis failed to comply with the
magistrate judge’s order requiring him to file one copy of the complaint and two
completed summonses for each defendant. The next day, the magistrate judge
granted his request for copies of the complaint and the forms.
On August 31, 2010, Lewis again filed a motion for service of the
summonses, stating that he had made a good faith effort to provide the
appropriate number of documents for each defendant and asking the court to
provide the necessary copies of the complaint to accompany the “summons [sic]
attached hereto.” However, any summonses that were attached are not part of
4
Case: 11-30011 Document: 00511787192 Page: 5 Date Filed: 03/13/2012
Nos. 10-31186, 11-30011
the record on appeal. The magistrate judge granted Lewis’s request to have the
clerk provide copies of the complaint to be served with the completed summonses
and service forms and allowed Lewis until September 17, 2010, to deliver his
completed paperwork to the clerk. However, the judge warned that “[i]f Plaintiff
does not timely submit service papers with respect to any defendant, the court
will construe that as a voluntary dismissal of that defendant.”
An unnumbered docket entry on September 7, 2010 states that the clerk
sent Lewis “a copy of doc 77, 56, more USM 285 forms and summons [sic], the
incomplete service documents he submitted, and a copy of the complaint for
service and docket sheet,” and the clerk advised Lewis to file two summonses
and a service form for each defendant against whom Lewis still had claims
pending. In September 2010, Lewis requested an extension of time to file the
completed summonses and service forms, noting that, for reasons that were not
clear to him, the court had returned thirteen of the twenty-six completed service
documents he had submitted. The magistrate judge granted another extension
until October 14, 2010 and explained in the order that the clerk reported that
Lewis had submitted service papers for some persons who had never been named
as defendants and that other papers were otherwise deficient.
On November 10, 2010, the magistrate judge recommended that all of the
remaining claims be dismissed without prejudice for failure to prosecute because
“[t]he October 14, 2010 deadline [to provide the completed forms] passed about
one month ago, but Plaintiff has not submitted any service papers for any
defendant.” The magistrate judge noted that the service forms were
self-explanatory and required only basic information, Lewis had adequate
language skills to complete the forms, and the court had attempted to assist
Lewis and had given him numerous opportunities over eight months to complete
the forms.
5
Case: 11-30011 Document: 00511787192 Page: 6 Date Filed: 03/13/2012
Nos. 10-31186, 11-30011
Over Lewis’s objection, the district court concurred with the magistrate
judge’s findings and dismissed all of the remaining claims without prejudice for
failure to prosecute. Lewis filed a timely notice of appeal. He moved for leave
to proceed IFP on appeal, which the district court granted.
II. JURISDICTION
Although Lewis does not raise the issue of jurisdiction, Lewis’s notice of
appeal in Appeal No. 10-31186 was filed before the entry of a final judgment.
“[W]e are obligated to examine the basis for our jurisdiction, sua sponte, if
necessary.” In re Cortez, 457 F.3d 448, 453 (5th Cir. 2006) (internal quotation
marks and citation omitted). Lewis’s notice of appeal indicates that he intended
to appeal the district court’s refusal to certify its decision dismissing half of his
claims pursuant to Rule 54(b), and its decision not to stay the action pending
Lewis’s appeal. We have jurisdiction over final decisions under 28 U.S.C. § 1291;
certain interlocutory decisions under 28 U.S.C. § 1292; partial judgments
certified as final pursuant to Federal Rule of Civil Procedure 54(b); and certain
decisions under the collateral order doctrine. Dardar v. Lafourche Realty Co.,
849 F.2d 955, 957 (5th Cir. 1988); Save the Bay, Inc. v. U.S. Army, 639 F.2d
1100, 1102 (5th Cir. 1981) (per curiam).
Although we have not squarely addressed the question of whether a denial
of a Rule 54(b) certification motion is immediately appealable, our sister circuits
have repeatedly held that the denial of a Rule 54(b) certification is not
appealable. See, e.g., McCall v. Deeds, 849 F.2d 1259, 1259 (9th Cir. 1988)
(“[T]he denial of Rule 54(b) certification is not appealable.”); Makuc v. Am.
Honda Motor Co., 692 F.2d 172, 173 (1st Cir. 1982) (finding that the denial of
motion for Rule 54(b) judgment is not appealable); Robert Stigwood Grp., Ltd.
v. Hurwitz, 462 F.2d 910, 913-14 (2d Cir. 1972) (concluding that since the district
court refused to certify the dismissal of a complaint against some, but not all,
defendants as final, the appellate court had no jurisdiction to review it); Cruey
6
Case: 11-30011 Document: 00511787192 Page: 7 Date Filed: 03/13/2012
Nos. 10-31186, 11-30011
v. Early, 396 F. App’x 940, 941 (4th Cir. 2010) (per curiam) (unpublished)
(finding that court had no jurisdiction to review dismissal of some claims and
denial of Rule 54(b) certification); Brunswick Bowling & Billiards Corp. v.
Mendes, Inc., No. 95-2209, 1995 U.S. App. LEXIS 35538 (6th Cir. Nov. 21, 1995)
(unpublished order) (finding that an “order denying Rule 54(b) certification is not
an appealable order”). Dicta in a prior Fifth Circuit opinion, Swope v.
Columbian Chemicals Co., 281 F.3d 185 (5th Cir. 2002), states that the denial
of a Rule 54(b) motion is “reviewable for abuse of discretion,” without explaining
when such a review would take place and under what circumstances. Id. at 193.
However, Swope fails to cite any authority to support this proposition, nor does
it cite to the many circuit decisions finding such a ruling not to be appealable.
We find it unlikely that this court would create a circuit split without analyzing
the issue in detail or mentioning the numerous cases that reach the opposite
result; thus, we construe this as a reference to the abuse of discretion standard
underlying a petition for writ of mandamus.2 In re Volkswagen of America, Inc.
505 F.3d 304, 310 (5th Cir. 2008)(en banc) (“[M]andamus is entirely appropriate
to review for an abuse of discretion that clearly exceeds the bounds of judicial
discretion.”). We now hold that the denial of a motion for a Rule 54(b) judgment
is not appealable by way of interlocutory appeal.
Additionally, even if Lewis could appeal the district court’s refusal to
certify its decision dismissing half of Lewis’s claims, he failed to file the notice
of appeal within 30 days after the order he intended to appeal was entered. See
FED. R. APP. P. 4(a)(1)(A) (“In a civil case, . . . the notice of appeal required by
Rule 3 must be filed with the district clerk within 30 days after the judgment or
order appealed from is entered.”). The first order denying Lewis’s motion for
certification was entered on October 14, 2010, and the second order was entered
2
Lewis has come nowhere near meeting the test for issuance of a writ of mandamus
and, in any event, such relief would be moot now that the final judgment has been entered.
7
Case: 11-30011 Document: 00511787192 Page: 8 Date Filed: 03/13/2012
Nos. 10-31186, 11-30011
on October 19, 2010. Because the notice of appeal is dated November 22, 2010,
it could not have been deposited in the prison’s mail system within thirty days
of either order. See FED. R. APP. P. 4(c) (2008) (stating that a prisoner’s pro se
notice of appeal is deemed timely filed if deposited in the prison’s internal mail
system on or before the last day for filing). The time limitation for filing a notice
of appeal in a civil case is jurisdictional. Bowles v. Russell, 551 U.S. 205, 212-13
(2007). Thus, we do not have jurisdiction over Appeal No. 10-31186.
In contrast, the court does have jurisdiction over Appeal No. 11-30011
pursuant to 28 U.S.C. § 1291. Lewis timely filed a notice of appeal after the
district court entered a final judgment dismissing the lawsuit.
III. DISCUSSION
In Appeal No. 11-30011, Lewis argues that the district court erred by: (1)
refusing to stay the action after he filed a “notice of appeal of interlocutory
decision”; (2) denying as premature his discovery motions and his motion to
serve the defendants; (3) dismissing approximately half of his claims as frivolous
or time-barred; and (4) dismissing his remaining claims for failure to prosecute.
We address each issue in turn.
A. Whether the district court erred by: (1) refusing to stay the action after he
filed a “notice of appeal of interlocutory decision”; (2) denying as
premature his discovery motions and his motion to serve the defendants;
and (3) dismissing approximately half of his claims as frivolous or time-
barred.
Liberally construing his complaint, Lewis contends that the district court
erred by failing to stay the proceedings pending his “interlocutory appeal,”
delaying his suit by denying as premature his discovery motions and his motion
to serve the defendants, and dismissing approximately half of his claims as
frivolous or time-barred. However, Lewis cites no legal authority in support of
his allegations. By failing to address the basis for his challenges, Lewis has
waived these arguments on appeal. See Yohey v. Collins, 985 F.2d 222, 225 (5th
8
Case: 11-30011 Document: 00511787192 Page: 9 Date Filed: 03/13/2012
Nos. 10-31186, 11-30011
Cir. 1993) (“Although we liberally construe the briefs of pro se appellants, we
also require that arguments must be briefed to be preserved.” (internal quotation
marks and citation omitted)); Brinkmann v. Dallas Cnty. Deputy Sheriff Abner,
813 F.2d 744, 748 (5th Cir. 1987) (holding that failure to identify an error in the
district court’s analysis is the same as if no appeal were filed).
B. Whether the district court erroneously dismissed Lewis’s remaining claims
for failure to prosecute.
Lewis’s sole remaining claim is that the district court erroneously
dismissed his remaining claims for failure to prosecute. A district court may sua
sponte dismiss a lawsuit for failure to prosecute pursuant to Federal Rule of
Civil Procedure 41(b). Berry v. CIGNA/RSI-CIGNA, 975 F.2d 1188, 1190 (5th
Cir. 1992). “This authority is based on the ‘courts’ power to manage and
administer their own affairs to ensure the orderly and expeditious disposition
of cases.’” Id. at 1190-91 (quoting Link v. Wabash R.R. Co., 370 U.S. 626, 630-31
(1962)).
While the district court’s dismissal order reflects that Lewis’s case was
dismissed without prejudice, where the applicable statute of limitations bars
further litigation, the district court’s dismissal should be reviewed as if the
dismissal had been with prejudice. Gray v. Fid. Acceptance Corp., 634 F.2d 226,
227 (5th Cir. 1981) (per curiam). The statute of limitations for a § 1983 claim is
the same as the statute of limitations in a personal injury action in the state in
which the claim accrues. See Wallace v. Kato, 549 U.S. 384, 387 (2007). In
Louisiana, the applicable prescriptive period is one year. LA. CIV. CODE ANN. art.
3492. We have also applied Louisiana’s statutes regarding the interruption of
prescription to determine if a second complaint would be prescribed when the
first complaint was dismissed without prejudice under Federal Rule of Civil
Procedure 4(m) for failure to timely serve the defendants. Cruz v. Louisiana,
528 F.3d 375, 378 (5th Cir. 2008). Louisiana law provides that the pendency of
9
Case: 11-30011 Document: 00511787192 Page: 10 Date Filed: 03/13/2012
Nos. 10-31186, 11-30011
a suit in a court of competent jurisdiction and venue interrupts prescription. LA.
CIV. CODE ANN. art. 3463. However, “[i]nterruption is considered never to have
occurred if the plaintiff abandons, voluntarily dismisses the action at any time
either before the defendant has made any appearance of record or thereafter, or
fails to prosecute the suit at the trial.” Id. Here, because Lewis’s claims that
survived the district court’s dismissal order would be barred by prescription
should he attempt to refile this lawsuit, we treat the dismissal without prejudice
as a dismissal with prejudice. See Millan v. USAA Gen. Indem. Co., 546 F.3d
321, 325-26 (5th Cir. 2008).
A dismissal with prejudice is an extreme sanction that deprives the
petitioner of the opportunity to pursue his claim further. Id.; Gray, 634 F.2d at
227. Consequently, district courts have limited discretion to dismiss a claim
with prejudice, and such a dismissal is inappropriate unless the history of the
case indicates both: (1) “a clear record of purposeful delay or contumacious
conduct by the plaintiff”; and (2) that the interests of justice would not be better
served by lesser sanctions. Millan, 546 F.3d at 326 (internal quotation marks
and citation omitted); Long v. Simmons, 77 F.3d 878, 880 (5th Cir. 1996). In
addition, when affirming dismissals with prejudice, we have usually found at
least one of three aggravating factors: (1) the extent to which the plaintiff, not
his attorney, was personally responsible for the delay; (2) the degree of actual
prejudice to the defendant; and (3) whether the delay was caused by intentional
conduct. Millan, 546 F.3d at 326. We review an involuntary dismissal with
prejudice for failure to prosecute or to obey court orders for an abuse of
discretion. Callip v. Harris Cnty. Child Welfare Dep’t, 757 F.2d 1513, 1519 (5th
Cir. 1985) (per curiam).
1. Clear Record of Purposeful Delay or Contumacious Conduct
We have recognized that a delay warranting dismissal with prejudice must
be longer than a few months [and] is usually characterized by “‘significant
10
Case: 11-30011 Document: 00511787192 Page: 11 Date Filed: 03/13/2012
Nos. 10-31186, 11-30011
periods of total inactivity.’” Millan, 546 F.3d at 326-27 (citation omitted); see
also John v. Louisiana, 828 F.2d 1129, 1131 (5th Cir. 1987). In fact, dismissals
with prejudice have generally been reserved for “‘egregious and sometimes
outrageous delays.’” Millan, 546 F.3d at 327 (citation omitted). We have
generally held that the district court abuses its discretion when it dismisses a
case with prejudice where the plaintiff “fail[s] only to comply with a few court
orders.” Berry, 975 F.2d at 1192 n.6 (citing cases). “[I]t is not a party’s
negligence—regardless of how careless, inconsiderate, or understandably
exasperating—that makes conduct contumacious; instead it is the stubborn
resistance to authority which justifies a dismissal with prejudice.” Millan, 546
F.3d at 327 (internal quotation marks and citation omitted).
The record demonstrates that the district court did not abuse its discretion
in dismissing Lewis’s remaining claims. Lewis repeatedly asked the court for
extensions, modifications of its orders requiring him to file certain documents,
and explanations of its orders. The initial order requiring him to file two
completed summonses for each defendant and one copy of the complaint was
issued on February 22, 2010. Just three days later, Lewis asked the court to
waive its requirement that he file these documents, which the court promptly
denied, noting that “Plaintiff is directed to timely comply with the Memorandum
Order.” Lewis asked the court for certain documents three times—March 15,
August 11, and August 31, 2010. Each time, the court acceded to his requests.
While some of the delays were those of the court in responding, Lewis’s repeated
requests for more time were granted. However, instead of using the additional
time to prepare the summons documents requested by the court, Lewis used the
time to pursue frivolous appeals and motions. The third time that Lewis
requested additional documents, the court warned that “[i]f Plaintiff does not
timely submit service papers with respect to any defendant, the court will
construe that as a voluntary dismissal of that defendant.”
11
Case: 11-30011 Document: 00511787192 Page: 12 Date Filed: 03/13/2012
Nos. 10-31186, 11-30011
Several days after the order containing this warning was issued, the
docket indicates that the clerk sent Lewis a copy of the court’s September 3, 2010
order, a copy of the complaint and the docket sheet, and more USM 285 forms
and summonses. The Clerk also highlighted the defendants for whom Lewis
needed to complete service documents. On September 14, 2010, Lewis moved for
an extension of time and asked the court to clarify “what the USM 285 forms and
completed summons [sic] are lacking.” In this motion, Lewis alleges that he sent
twenty-six completed summonses to the clerk’s office, but when the clerk
returned the forms to him for completion, it only sent thirteen of the twenty-six
forms.3
The court granted the motion and extended the time for filing the
summonses until October 14, 2010. The court noted that the “Clerk highlighted
for Plaintiff those defendants for whom he had not submitted proper service
papers. Thus, completion of the service papers should be a simple task for
Plaintiff.” The court again warned Lewis that if he failed to timely submit
service papers, “the court will construe that as a voluntary dismissal of that
defendant.”
On November 10, 2010, the magistrate judge recommended that Lewis’s
lawsuit be dismissed for failure to prosecute, on the grounds that he had been
given numerous opportunities to comply with the court’s order to file adequate
service documents, but he failed to do so. The magistrate judge noted that the
forms in question were “routinely completed” by other inmates in a thirty-day
period and sought only basic information for each defendant, such as name and
3
Lewis does not identify the thirteen defendants for whom he asserts he submitted
completed summonses and service forms, nor does he assert that he resubmitted the forms
after the clerk returned them to him. Additionally, the exhibits Lewis submitted to this court
in support of his argument contain a date of February 22, 2011—several months after final
judgment in this case—and reflect some defendants who had been dismissed from the suit
while failing to fill out summonses for some of the defendants who remained.
12
Case: 11-30011 Document: 00511787192 Page: 13 Date Filed: 03/13/2012
Nos. 10-31186, 11-30011
address. Lewis objected, apparently taking issue with the prior dismissal of half
of the defendants from the case. The district judge overruled Lewis’s objections
and adopted the magistrate judge’s decision dismissing Lewis’s suit.
The record clearly shows that Lewis sought and was granted multiple
extensions of time to file his service documents, and he missed the October 14,
2010 deadline while he continued to challenge the dismissal of half of the
defendants, despite the district court’s refusal to reinstate those defendants and
its refusal to certify an interlocutory appeal from the court’s previous dismissal
of the claims against various defendants. The magistrate judge rejected Lewis’s
attempt to circumvent its order, acceded to Lewis’s multiple requests for various
documents, clearly instructed Lewis to file service documents for each of the
remaining defendants, and twice warned Lewis that failure to do so would be
construed as a voluntary dismissal of such defendant.
Whatever his motivations, Lewis ignored the repeated admonitions of the
court and used the intervening time to pursue a frivolous interlocutory appeal
and a stay of the district court proceedings, to no avail. Although this is a close
case given the relatively short period of delay, we cannot find an abuse of
discretion in the district court’s implicit conclusion that Lewis’s continuing
failure to submit the proper service document for the remaining defendants and
his persistence in submitting documents for already-dismissed and unnamed
defendants transcends mere negligence. Despite two warnings that failure to
timely and properly provide these documents would result in dismissal of those
defendants, Lewis still had not filed these documents by
November—approximately one month past the deadline set by the court. This
indicates that the district court did not abuse its discretion in dismissing Lewis’s
suit.
13
Case: 11-30011 Document: 00511787192 Page: 14 Date Filed: 03/13/2012
Nos. 10-31186, 11-30011
2. Futility of Lesser Sanctions
Lesser sanctions include “assessments of fines, costs, or damages against
the plaintiff . . ., conditional dismissal, dismissal without prejudice, and explicit
warnings.” See Rogers v. Kroger Co., 669 F.2d 317, 321 (5th Cir. 1982). Because
Lewis was proceeding IFP, any monetary sanctions would have been fruitless.
However, the record clearly shows that the magistrate judge granted numerous
continuances and explicitly warned Lewis several times that his failure to
submit the appropriate summonses and service forms for the remaining
defendants would result in voluntary dismissals of those defendants. See Callip,
757 F.2d at 1521-22 (noting that where the district court repeatedly warned of
the possibility of dismissal, it was not necessary for the court to consider other,
lesser sanctions). It is clear that despite the amount of time Lewis was given
and despite warnings that his suit would be dismissed, Lewis did not comply
with the court’s order. He has not articulated any untried “lesser sanction” that
would have been effective. Therefore, we conclude that the district court did not
abuse its discretion in dismissing Lewis’s lawsuit.
IV. CONCLUSION
For the reasons stated above, we DISMISS Appeal No. 10-31186 for lack
of jurisdiction, and we AFFIRM the district court’s judgment in Appeal No. 11-
30011. Because we conclude that the district court did not err in dismissing
Lewis’s lawsuit, we DENY Lewis’s motion to remand the case to the district
court and his motion for reimbursement of costs and fees.
14
| {
"pile_set_name": "FreeLaw"
} |
MEMORANDUM OPINION
No. 04-09-00050-CV
IN THE ESTATE OF CLIFFORD EUGENE EVERETT, Deceased
From the County Court at Law, Val Verde County, Texas
Trial Court No. 5688
Honorable Sergio J. Gonzalez, Judge Presiding
Opinion by: Rebecca Simmons, Justice
Sitting: Catherine Stone, Chief Justice
Sandee Bryan Marion, Justice
Rebecca Simmons, Justice
Delivered and Filed: October 13, 2010
AFFIRMED
This appeal arises out of a will contest surrounding the disposition of the Estate of
Clifford Eugene Everett (Cliff). Cliff executed three wills dated: March 21, 2006 (the first will),
April 13, 2007 (the second will), and April 24, 2007 (the third will). After Cliff’s death, his
oldest son, Appellant Joe Everett, filed an Application to Probate Will and For Issuance of
Letters Testamentary regarding the third will. 1 Appellee James McIntire, Cliff’s step-grandson,
filed an Opposition to Probate the Will, and filed an Application to Probate Will and For
Issuance of Letters Testamentary regarding the first will. The jury found that Joe procured the
1
Geneie Everett, one of Cliff’s daughters, sought to probate a copy of the second will, the original of which was
never located. The jury found that the will dated April 13, 2007 was not a true and correct copy of the original will.
Based on the jury’s answer, they did not answer additional questions pertaining to fraud and undue influence
regarding the second will. The trial court denied probate of the second will, and no one appeals this decision.
04-09-00050-CV
third will by undue influence and fraud. On appeal, Joe argues the evidence presented was
neither legally nor factually sufficient to support the jury’s findings. We affirm the judgment of
the trial court.
FACTUAL BACKGROUND
Cliff was seventy-nine years old when he died. He had four children from his first
marriage, Geneie, Joe, Geri, and Janet, and four step-children with his second wife. Over the
years, Cliff spent a great deal of money and energy developing and operating the Holiday Travel
Park (the Park) in Del Rio. By all accounts, Cliff did not see his children regularly, and none of
his children exhibited any interest in taking over the Park. Although Gary, Cliff’s step-son,
worked at the Park from time to time, it was Gary’s son, James, who assisted Cliff in the daily
operations. In fact, in the last six years of his life, Cliff relied more and more on James to run
various phases of operations. Moreover, there was significant testimony that James and Cliff had
a “close relationship” based substantially on James’s help with the day-to-day operations at the
Park. In contrast, Joe testified that he did not see his father regularly and that prior to Cliff’s
hospitalization in April of 2007, Joe had not seen his father since 2002.
Cliff’s health began to seriously decline in the spring of 2007. He suffered from
congestive heart failure, and was in and out of the hospital with pneumonia and other issues. In
March and April he began having colon problems. On August 13, 2007, Cliff’s doctors in Del
Rio performed a colonoscopy-type procedure. Based on continued problems, Cliff was
transferred to a hospital in San Angelo for further treatment and underwent surgery for a colon
problem on April 24th. Cliff never recovered from the surgery and subsequently died on May 9,
2007.
-2-
04-09-00050-CV
A. The Wills
At trial, all three wills were presented to the jury. The first will, executed March 21,
2006, was prepared by a local attorney and devised $100.00 to each of Cliff’s four children and
four step-children, with the residuary estate to James. 2 The residuary estate included ownership
of the Park, the source of this dispute. The second will, executed April 13, 2007, was prepared
by Geneie’s husband and devised Cliff’s entire estate—including the Park—equally between
James and Cliff’s four children: Joe, Geneie, Geri, and Janet, with each receiving a 20% share.
The second will appointed Geneie as independent executor of the estate. The third will, executed
April 24, 2007, and prepared by Joe’s wife, had the same disposition as the second will, but
James and Joe were named as co-executors.
B. The Jury Verdict
With respect to the third will, the jury found it was procured by undue influence and
fraud by Joe. Accordingly, the trial court denied probate of the third will, and admitted the first
will to probate and issued Letters Testamentary to James. 3 Joe subsequently filed a motion for
new trial challenging the sufficiency of the evidence of undue influence and fraud. The trial
court denied Joe’s motion for new trial.
STANDARD OF REVIEW
An appellate court reviews a legal sufficiency point by reviewing the evidence in the light
most favorable to the verdict and indulging every reasonable inference that would support it.
City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005). Additionally, we credit favorable
2
James testified Cliff intended that James disburse additional funds to each of Cliff’s children and step-children
from his second marriage. According to James, following any necessary repairs to the Park and taxes to be paid, he
was under the impression that each of the children and step-children would receive payments in the amount of
$75,000.00 over the course of a few years.
3
The trial court likewise denied probate of the second will based on the jury’s finding that the document presented
to them at trial was not a true and correct copy of the will. Again, no one complains on appeal about this finding or
the effect of signing the second will may have had on the first will.
-3-
04-09-00050-CV
evidence if a reasonable fact-finder could and disregard contrary evidence unless a reasonable
fact-finder could not. Id. at 827; accord Ingram v. Deere, 288 S.W.3d 886, 893–94 (Tex. 2009).
In evaluating a factual sufficiency challenge, we consider and weigh all of the evidence
and determine whether the evidence in support of a finding is so weak as to be clearly wrong and
unjust. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001); Pool v. Ford Motor Co.,
715 S.W.2d 629 (Tex. 1986). The review considers both the evidence supporting and contrary to
the judgment. See Dow Chem., 46 S.W.3d at 242; Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d
442, 445 (Tex. 1989); Madrigal, 115 S.W.3d at 34 (citing Tex. Dep’t of Mental Health & Mental
Retardation v. Rodriguez, 63 S.W.3d 475, 480 (Tex. App.—San Antonio 2001, pet. denied)).
Additionally, we remain cognizant that the jury is the sole judge of witnesses’ credibility. See
Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 761 (Tex. 2003).
UNDUE INFLUENCE
At trial, James sought to set aside Cliff’s third will based on the undue influence of Joe.
Generally, to justify setting aside a will because of undue influence, a contestant must prove the
(1) existence and exertion of an influence (2) that subverted or overpowered the testator’s mind
at the time he executed the instrument (3) so that the testator executed an instrument he would
not otherwise have executed but for such influence. Rothermel v. Duncan, 369 S.W.2d 917, 922
(Tex. 1963); see also In re Estate of Lathem, No. 11-04-00041-CV, 2005 WL 2036563, at *8
(Tex. App.—Eastland Aug. 25, 2005, pet. denied); Cobb v. Justice, 954 S.W.2d 162, 165 (Tex.
App.—Waco 1997, pet. ref’d). In this case, however, the parties disagree as to the relevant
factors this court must consider in our review of the evidence to support the jury’s undue
influence finding.
-4-
04-09-00050-CV
Joe argues the evidence should be weighed under the Rothermel factors set forth above.
Rothermel, 369 S.W.2d at 922. James, on the other hand, asserts that we must measure the
sufficiency of the evidence against the jury charge actually given to the jury when the opposing
party fails to object to the charge. Ingram v. Deere, 288 S.W.3d 886, 905 (Tex. 2009); see also
Crone v. Brumley, 219 S.W.3d 65, 68 (Tex. App.—San Antonio, 2006, no pet.). In the present
case, the jury charge was specifically directed to the undue influence of Joe, and instructed the
jury as follows:
“Undue Influence” as used in the preceding question, is such influence or
domination by excessive importunities, imposition of fraud exercised at the time
of the making of said instrument as destroys the free agency of the testator and
overcomes his wishes in regard to the disposition of his property to such an extent
that the instrument does not in fact express his wishes as to the disposition of his
property, but those of the person exercising such influence. It may stem from fear,
the desire for attention or peace, or some other feeling that the testator is unable to
resist. . . . you may consider the condition of the testator’s mind, age, weakness of
body or mind if any, whether produced by the infirmities of his age or by disease;
and the opportunity to exert undue influence.
In determining if there was undue influence you may also consider the following:
1. The circumstances surrounding the execution of the instrument;
2. The relationship of the testator and recipients of the bounty;
3. The motive, character, and conduct of the persons benefitted;
4. The opportunity of the beneficiary to influence the testator;
5. The beneficiary’s participation in the drafting and execution of the
instrument;
6. The words and acts of the parties;
7. The improvident, unjust, unreasonable, and unnatural disposition of the
property.
Because the jury’s undue influence finding was made against only Joe, and Joe did not object to
the charge as given, the sufficiency of the evidence is measured against the charge of the court.
Ingram, 288 S.W.3d at 905. In reviewing the no-evidence issue, we must, therefore, consider
evidence supporting the finding of undue influence, as defined by the jury charge, and uphold
-5-
04-09-00050-CV
that finding if there is more than a scintilla of evidence in support thereof. City of Keller, 168
S.W.3d at 810.
B. The Evidence
In determining the existence of undue influence, it is proper to consider all evidence of
relevant matters that occurred within a reasonable time before or after the will’s execution.
Watson v. Dingler, 831 S.W.2d 834, 837 (Tex. App.—Houston [14th Dist.] 1992, writ denied).
We, therefore, look at the circumstances within a reasonable time of the April 24th execution of
the third will. According to testimony, the execution of the third will was a more formal version
of the second will that was executed a mere eleven days before the third will. Consequently, we
will examine the circumstances leading to the execution of both the second and third wills.
Much of the testimony at trial focused on Cliff’s obsession with the Park. The Park was
clearly a focus of Cliff’s life, and he desperately wanted the Park to remain intact after his death.
In March of 2006, while in good health, Cliff executed the first will leaving the Park to James.
At trial, Cliff’s closest friends, JoAnn Ellis, Bobby Smalley, and Bill Clucas confirmed Cliff’s
intention to leave the Park to James.
1. Circumstances Surrounding the Second Will
Following Cliff’s admission to the Del Rio hospital on April 8, 2007, James called
Geneie and informed her of Cliff’s admission. After arriving at the hospital on the 12th, Geneie
and James went to dinner. Unbeknownst to James, that night Geneie’s husband drafted a two
page will, from internet sources, for Geneie to present to Cliff the following day. The next day,
Geneie told James not to come to the hospital as Cliff was tired from a colonoscopy-type
procedure, and did not want to see anyone. However, within hours after Cliff’s sedation for the
-6-
04-09-00050-CV
procedure, Geneie presented Cliff with the second will that devised Cliff’s estate, including the
Park, equally among his children and James, with Geneie as the executor.
James learned of the new will only after Geneie called the Park searching for a notary.
This news prompted James to go to the hospital. Prior to the execution of the second will, it is
undisputed that Geneie told Cliff about a friend that had to pay a 50% inheritance tax. Cliff was
surprised by the large amount. Geneie also told James, in Cliff’s presence, that as the devisee of
the entire interest in the Park, James would have to come up with $500,000.00, or sell the Park.
Geneie asked James where he was going to come up with the money. James testified that his
grandfather cried over Geneie’s remarks. 4 After Geneie informed James that Cliff was executing
a new will, Cliff reassured James that nothing was going to change regarding the Park because
his children did not want anything to do with the business. Cliff also told James that Joe and
Geneie were trying to figure out what to do about the inheritance tax. James never read the will.
Based on Geneie’s request, James proceeded to contact two of Cliff’s friends to witness the
execution of the will.
Bobby Smalley witnessed Cliff execute the second will. He described the execution as
being under the direction of Geneie, and as a “hurry up job,” because there was an air of
immediacy surrounding the execution of the will. Bobby described Cliff as fairly meek; he was
ill and not his usual self. Significantly, after the signing, Cliff reconfirmed to Bobby that he
intended to give the Park to James. Richard Scoggins, another of Cliff’s friends, and witness to
the execution, testified that Geneie and her husband appeared to be directing the signing of the
second will.
4
At trial one of the exhibits reflected the estate taxes actually amounted to approximately $50,000.00, significantly
less than what Geneie told Cliff they would be. See Holcomb v. Holcomb, 803 S.W.2d 411, 415 (Tex. App.—Dallas
1991, writ denied) (testator mislead by beneficiary).
-7-
04-09-00050-CV
2. Circumstances Surrounding the Third Will
Cliff’s health continued to deteriorate, and he was moved to a hospital in San Angelo.
Eleven days after Cliff signed the second will, Joe presented Cliff with a third will, this time
prepared by Joe’s wife, which again devised Cliff’s estate equally among his four children and
James. As opposed to the second will, which followed a colonoscopy-type procedure, the
execution of the third will occurred thirty minutes prior to Cliff’s unsuccessful surgery that
ultimately led to his death. Joe arranged for the witnesses and notary to be present at the hospital
for the execution. See In re Estate of Riley, 824 S.W.2d 305 (Tex. App.—Corpus Christi 1992,
writ denied) (beneficiary obtained pre-printed kit day before surgery leaving all property to her).
The execution of the third will was never revealed to James prior to Cliff’s death. See Tieken v.
Midwestern State Univ., 912 S.W.2d 878, 886 (Tex. App.—Fort Worth 1995, no writ) (kept
testator isolated from friends and other influences).
One of Cliff’s close friends, Bill Clucas, testified that contrary to the terms of the second
and third wills, Cliff often talked about his desire for James to take over the Park. Bill arrived at
the hospital within a half-hour of Cliff’s execution of the third will. As the hospital staff was
taking Cliff to surgery, Bill described Cliff as “sedated” and further relayed that he was not even
sure that Cliff recognized him. Contrary to Joe’s assertion that nothing would change,
immediately after Cliff’s death, Joe and Geneie fired personnel, changed bank accounts, and
changed locks at the Park.
3. Condition of the Testator’s Mind and Body
The record reflects that during the month of April, 2007, Cliff was very ill and in a lot of
pain. He spent most of April in the ICU unit at the hospitals in Del Rio and San Angelo. He had
been told that he could survive with a colostomy procedure, or he could undergo a very
-8-
04-09-00050-CV
dangerous surgical procedure that most likely would cause his death. He did not want to die, but
he chose the more dangerous surgery. Cliff signed the second will while in the ICU resting after
a colonoscopy, and signed the third will shortly before heading into surgery that he most likely
would not survive. The family was aware of Cliff’s overarching desire to keep the Park intact
and under the control of James. Cliff was obviously concerned about the taxes on the property,
particularly after Geneie made the representation that the taxes could amount to $500,000.00—
far more than James could pay without having to sell the Park.
4. Relationship of the Testator and Recipients of the Bounty and the Motive and Conduct
of the Persons Benefitted
At the time of his death, Cliff had a close relationship with James, but did not have one
with his biological children, and he had not even seen Joe in approximately five years. 5 In
contrast, several of Cliff’s friends confirmed Cliff’s close relationship with James. JoAnn Ellis
testified that she visited Cliff regularly during his last months. Cliff confirmed to JoAnn his
intention that the Park go to James after his death. Cliff’s friend, Bobby Smalley, testified that
after the execution of the second will, he discussed Cliff’s intentions for the Park around the time
Cliff signed the third will. Cliff told him he did not want the Park sold and was just going to let
James take over the Park. Bobby understood that Cliff had prepared a will giving everything to
James. James testified that he worked hard at the Park and saw his grandfather almost every day.
They discussed the Park extensively and the plans to expand and improve the Park. He was
under the impression that the Park would be left to him.
5. Analysis
We remain cognizant that the exertion of undue influence is usually subtle, and by its
very nature usually involves an extended course of dealings, contacts, and circumstances. Under
5
During trial, Joe and Geneie confirmed that they each charged and received from Cliff’s estate $10,000 for the
time they spent with Cliff in the two weeks before his death.
-9-
04-09-00050-CV
the charge given in this case, the trial court instructed the jury to consider a number of factors
including an individual’s weakness of mind and body, whether produced by advanced age or
illness, as evidence of the individual’s susceptibility to be influenced. See In re Estate of
Lathem, 2005 WL 2036563, at *9–10. The evidence, however, must show more than merely the
opportunity to exert influence, but that, in fact, influence was exerted with respect to the making
of the testament itself. Id.; compare Cobb, 954 S.W.2d at 165–66 (beneficiary had decedent
traveling to attorney’s office, then to insurance company to change insurance policies, then back
to attorney’s office, all without necessary oxygen, decedent lapsed into a coma died the
following day), with Guthrie, 934 S.W.2d at 832 (“A testatrix’s weakened physical and mental
condition is only indicative of her susceptibility to influence; it is no evidence that such influence
exists in fact.”). When enough evidence is before the fact-finder that reasonable minds could
differ on the meaning of the evidence or the conclusions or inferences to be drawn from that
evidence, the court may not substitute its judgment for that of the jury. Herbert v. Herbert, 754
S.W.2d 141, 144 (Tex. 1988).
The evidence surrounding the execution of the wills is conflicting, and the jury could
believe or disbelieve the witnesses based on the opportunity to observe the witnesses’ demeanor.
Golden Eagle Archery, Inc., 116 S.W.3d at 761. In our analysis, we turn to the elements as
outlined in the jury charge. James argues that the circumstances surrounding the execution of the
second and third wills, supports the jury’s verdict. The evidence supports that Geneie played on
Cliff’s anxieties regarding inheritance taxes and the potential that such taxes would necessitate
the sale of the Park. Because the second will was only two pages and lacked formalities, Joe’s
wife drafted a third will with identical dispositions for Joe to present to Cliff before his surgery
- 10 -
04-09-00050-CV
on the 24th. Joe was in a position to influence Cliff, who was clearly upset about his medical
condition and concerned about whether he would even survive the surgery.
Additionally, the close proximity in time of the second and third wills, and the fact both
wills were drafted by a beneficiary’s spouse, support the jury’s findings of undue influence.
There is little question that both Geneie and Joe, neither of whom were very close to their father,
stood to benefit from both the second and third wills, and participated in both the drafting and the
execution thereof. See Peralez v. Peralez, No. 13-09-259-CV, 2010 WL 2543894, at *6 (Tex.
App.—Corpus Christi Jun 24, 2010, no pet. h.); In re Estate of Reno, 06-09-00040-CV, 2009
WL 4877542, at *8 (Tex. App.—Texarkana Dec. 18, 2009, no pet.) (focusing on the daughter’s
involvement in the preparation of the self-serving will); Lathem, 2005 WL 2036563, at *9–10; In
re Estate of Richardson, No. 11-92-180-CV, 1993 WL 13141661, at *203 (Tex App.—Eastland
July 1, 1993, no writ).
The testimony of Cliff’s close friends reveals Cliff’s intentions to leave the Park to
James, and the weakness of Cliff’s body and mind support the jury’s finding, as well as the
conclusion that Cliff was susceptible to undue influence. See In re Estate of Lathem, 2005 WL
2036563, at *9. Reviewing the evidence in its entirety, the testimony could reasonably have led
a jury to conclude that Joe exercised undue influence over Cliff in the execution of the third will.
See Kutchinsky v. Zillion, 183 S.W.2d 237, 239 (Tex. Civ. App.—Galveston 1944, writ ref’d
w.o.m.); see also Lowery v. Saunders, 666 S.W.2d 226, 234 (Tex. App.—San Antonio 1984, writ
ref’d n.r.e.) (holding that it is proper to receive evidence of all relevant matters that occurred
within a reasonable time before or after execution of the will being offered). Looking at the
evidence supporting the jury’s verdict, we conclude that there is more than a scintilla to support
the conclusion that the third will was procured by undue influence. Madrigal, 115 S.W.3d at 34.
- 11 -
04-09-00050-CV
There was conflicting testimony before the jury including testimony that sometime before
his death, Cliff and his step-grandson James had a disagreement that strained their relationship.
Both Geneie and Joe testified that their father told them what to put in the wills and the second
and third wills reflect their father’s desires. After reviewing both the supporting and contrary
evidence, the record supports the jury’s findings and is not so clearly wrong and manifestly
unjust to warrant a reversal. Id. at 34. We, therefore, overrule Joe’s legal and factual sufficiency
challenges with regard to undue influence.
FRAUD
Joe next contends that the evidence was neither legally nor factually sufficient to support
the jury’s finding that the third will was procured by fraud. Because we hold there is factually
and legally sufficient evidence to uphold the jury’s finding of undue influence we need not
address the issue regarding the jury’s finding of fraud. See Tex. R. App. P. 47.1 (requiring
concise opinions addressing only those issues “necessary to final disposition of the appeal”).
CONCLUSION
The testimony of Cliff’s close friends reveals Cliff’s intention of preserving the Holiday
Travel Park and bequeathing the same to James. As we previously stated, undue influence is
often shown by subtle and multiple circumstances. Here, the jury could reasonably rely on: (1)
the close proximity in time of the second and third wills; (2) the fact both wills changed the
disposition of Cliff’s estate; (3) the plethora of witnesses’ testimony that Cliff’s body and mind
were weakened when both wills were signed; (4) Geneie and Joe’s involvement in the
preparation and execution of the second and third wills; and (5) Geneie and Joe’s motive,
character, and conduct surrounding the incidents in question.
- 12 -
04-09-00050-CV
Based on a review of the evidence supporting the jury’s verdict, we conclude that there is
more than a scintilla to support the conclusion that the third will was procured by undue
influence. After reviewing both the supporting and contrary evidence, the record supports the
jury’s findings and is not so clearly wrong and manifestly unjust to warrant a reversal. We,
therefore, hold that the evidence presented was legally and factually sufficient to support the
jury’s finding that the third will was procured by undue influence. Accordingly, the judgment of
the trial court is affirmed.
Rebecca Simmons, Justice
- 13 -
| {
"pile_set_name": "FreeLaw"
} |
[Cite as Bryant v. Ohio Dept. of Transp., 2011-Ohio-5729.]
Court of Claims of Ohio
The Ohio Judicial Center
65 South Front Street, Third Floor
Columbus, OH 43215
614.387.9800 or 1.800.824.8263
www.cco.state.oh.us
KEVIN BRYANT, : Case No. 2011-05327-AD
Plaintiff,
v. : Acting Clerk Daniel R. Borchert
OHIO DEPT. OF TRANSPORTATION,
Defendant. : MEMORANDUM DECISION
{¶ 1} On March 14, 2011, at approximately 7:15 a.m., plaintiff, Kevin Bryant,
was traveling westbound on State Route 2 “just past the Lost Nation Bridge” when he
struck a series of potholes and damaged his passenger side front and rear tires.
Plaintiff asserted that the damage to his automobile was proximately caused by
negligence on the part of defendant, Department of Transportation (DOT), in
maintaining a hazardous roadway condition on SR 2 in a construction area. Plaintiff
filed this complaint seeking to recover damages in the amount of $214.85, the cost of
two replacement tires, and reimbursement of the filing fee. The filing fee was paid.
{¶ 2} Defendant acknowledged that the roadway area where plaintiff’s property
damage incident occurred was located within the limits of a working construction project
under the control of DOT contractor, Anthony Allega Cement Contractor/Great Lakes
Construction (Allega). Defendant explained that the construction project “dealt with
grading, draining, paving with asphalt concrete on an asphalt concrete base in part,
paving with reinforced concrete paving in part, noise barrier, reinforced concrete
retraining walls, MSE walls and rehabilitating existing structures between mileposts 3.32
and 7.75 in Lake County.” Defendant asserted that this particular construction project
was under the control of Allega and consequently, DOT had no responsibility for any
damage or mishap on the roadway within the construction project limits. Defendant
argued that Allega, by contractual agreement, was responsible for maintaining the
roadway within the construction zone. Therefore, DOT reasoned that Allega is the
proper party defendant in this action. Defendant implied that all duties, such as the duty
to inspect, the duty to warn, the duty to maintain, and the duty to repair defects were
delegated when an independent contractor takes control over a particular section of
roadway. Furthermore, defendant contended that plaintiff failed to introduce sufficient
evidence to prove his damage was proximately caused by roadway conditions created
by DOT or its contractors. All construction work was to be performed in accordance
with DOT requirements and specifications and subject to DOT approval. Also, DOT
personnel maintained an onsite inspection presence throughout the construction project
limits.
{¶ 3} For plaintiff to prevail on a claim of negligence, he must prove, by a
preponderance of the evidence, that defendant owed him a duty, that it breached that
duty, and that the breach proximately caused his injuries. Armstrong v. Best Buy
Company, Inc., 99 Ohio St. 3d 79, 2003-Ohio-2573, 788 N.E. 2d 1088, ¶8 citing
Menifee v. Ohio Welding Products, Inc. (1984), 15 Ohio St. 3d 75, 77, 15 OBR 179, 472
N.E. 2d 707. Plaintiff has the burden of proving, by a preponderance of the evidence,
that he suffered a loss and that this loss was proximately caused by defendant’s
negligence. Barnum v. Ohio State University (1977), 76-0368-AD. However, “[i]t is the
duty of a party on whom the burden of proof rests to produce evidence which furnishes
a reasonable basis for sustaining his claim. If the evidence so produced furnishes only
a basis for a choice among different possibilities as to any issue in the case, he fails to
sustain such burden.” Paragraph three of the syllabus in Steven v. Indus. Comm.
(1945), 145 Ohio St. 198, 30 O.O. 415, 61 N.E. 2d 198, approved and followed. This
court, as trier of fact, determines questions of proximate causation. Shinaver v.
Szymanski (1984), 14 Ohio St. 3d 51, 14 OBR 446, 471 N.E. 2d 477.
{¶ 4} Defendant has the duty to maintain its highways in a reasonably safe
condition for the motoring public. Knickel v. Ohio Department of Transportation (1976),
49 Ohio App. 2d 335, 3 O.O. 3d 413, 361 N.E. 2d 486. However, defendant is not an
insurer of the safety of its highways. See Kniskern v. Township of Somerford (1996),
112 Ohio App. 3d 189, 678 N.E. 2d 273; Rhodus v. Ohio Dept. of Transp. (1990), 67
Ohio App. 3d 723, 588 N.E. 2d 864. The duty of DOT to maintain the roadway in a safe
drivable condition is not delegable to an independent contractor charged with roadway
construction. Cowell v. Ohio Department of Transportation, Ct. of Cl. No. 2003-09343-
AD, jud, 2004-Ohio-151. Despite defendant’s contentions that DOT did not owe any
duty in regard to the construction project, defendant was charged with duties to inspect
the construction site and correct any known deficiencies in connection with particular
construction work. See Roadway Express, Inc. v. Ohio Dept. of Transp. (June 28,
2001), Franklin App. 00AP-1119.
{¶ 5} Defendant denied that either DOT or Allega had any knowledge of the
particular damage-causing roadway defect plaintiff’s car struck. Defendant contended
plaintiff failed to offer any evidence of negligent roadway maintenance on the part of
ODOT. Defendant submitted an email from Allega representative, Carmen Carbone,
who explained that the “pothole occurred in the old existing pavement, not our new or
replaced pavement as shown in the attached photos. The attached investigation and
daily reports will demonstrate that the work zone had been reviewed every day prior to
the occurrence. The attached work zone review reports document road repairs were
made on Thursday March 10, 2011, and reviewed by ODOT.” Carbone noted that the
road was inspected on March 11, 12, and 13, 2011, and that no potholes were found.
Carbone explained that “sometime during the late night due to the weather conditions
(see attached weather reports) there occurred some melting and freezing which caused
the potholes to pop.” Carbone reiterated the DOT position that neither DOT nor Allega
had any knowledge of the potholes prior to the morning of March 14, 2011. Carbone
denied that the defect plaintiff’s car struck was caused by any direct act of Allega
personnel.
{¶ 6} Plaintiff filed a response essentially reiterating the allegations contained in
his complaint.
{¶ 7} In order to find liability for a damage claim occurring in a construction
area, the court must look at the totality of the circumstances to determine whether DOT
acted in a manner to render the highway free from an unreasonable risk of harm for the
traveling public. Feichtner v. Ohio Dept. of Transp. (1995), 114 Ohio App. 3d 346, 683
N.E. 2d 112. In fact, the duty to render the highway free from unreasonable risk of harm
is the precise duty owed by DOT to the traveling public both under normal traffic
conditions and during highway construction projects. See, e.g. White v. Ohio Dept. of
Transp. (1990), 56 Ohio St. 3d 39, 42, 564 N.E. 2d 462, 465. Defendant’s documents
suggest that the areas previously patched on March 10, 2011, were located in the
eastbound right lane of SR 2.
{¶ 8} Generally, in order to recover in a suit involving damage proximately
caused by roadway conditions including potholes, plaintiff must prove that either: 1)
defendant had actual or constructive notice of the pothole and failed to respond in a
reasonable time or responded in a negligent manner, or 2) that defendant, in a general
sense, maintains its highways negligently. Denis v. Department of Transportation
(1976), 75-0287-AD.
{¶ 9} In this case, upon review, insufficient evidence has been produced to infer
that the roadway was negligently maintained. Denis. The trier of fact notes one of the
photographs submitted by defendant shows a large area of pavement deterioration
which spans several feet in length and another depicts a large, circular patched area
surrounded by severely cracked and uneven asphalt. A patch that deteriorates in less
than ten days is prima facie evidence of negligent maintenance. See Matala v. Ohio
Department of Transportation, 2003-01270-AD, 2003-Ohio-2618;Schrock v. Ohio Dept.
of Transp., Ct. of Cl. No. 2005-02460-AD, 2005-Ohio-2479.
{¶ 10} However, a pothole patch which may or may not have deteriorated over a
longer time frame does not constitute, in and of itself, conclusive evidence of negligent
maintenance. See Edwards v. Ohio Department of Transportation, District 8, Ct. of Cl.
No. 2006-01343-AD, jud, 2006-Ohio-7173. Plaintiff has failed to prove when the
pothole that damaged his car had been previously patched or that the patching material
was subject to rapid deterioration. Plaintiff has not proven negligent maintenance by
providing evidence of multiple repairs. Plaintiff has not produced any evidence to infer
that defendant, in a general sense, maintains its highways negligently or that
defendant’s acts caused the defective condition. Herlihy v. Ohio Department of
Transportation (1999), 99-07011-AD. Plaintiff has failed to prove that his damage was
proximately caused by any negligent act or omission on the part of ODOT or its agents.
See Wachs v. Dept. of Transp., Dist. 12, Ct. of Cl. No. 2005-09481-AD, 2006-Ohio-
7162; Nicastro v. Ohio Dept. of Transp., Ct. of Cl. No. 2007-09323-AD, 2008-Ohio-
4190.
Court of Claims of Ohio
The Ohio Judicial Center
65 South Front Street, Third Floor
Columbus, OH 43215
614.387.9800 or 1.800.824.8263
www.cco.state.oh.us
KEVIN BRYANT, : Case No. 2011-05327-AD
Plaintiff,
v. : Acting Clerk Daniel R. Borchert
OHIO DEPT. OF TRANSPORTATION,
Defendant. :
ENTRY OF ADMINISTRATIVE DETERMINATION
Having considered all the evidence in the claim file and, for the reasons set forth
in the memorandum decision filed concurrently herewith, judgment is rendered in favor
of defendant. Court costs are assessed against plaintiff.
________________________________
DANIEL R. BORCHERT
Acting Clerk
Entry cc:
Kevin Bryant Jerry Wray, Director
Department of Transportation
1980 West Broad Street
Columbus, Ohio 43223
7/13
Filed 7/21/11
Sent to S.C. reporter 11/4/11
| {
"pile_set_name": "FreeLaw"
} |
76 Wis.2d 224 (1977)
251 N.W.2d 38
KABAT, Plaintiff in error,
v.
STATE, Defendant in error.
No. 75-864-CR.
Supreme Court of Wisconsin.
Submitted on briefs February 2, 1977.
Decided March 1, 1977.
*227 For the plaintiff in error the cause was submitted on the briefs of Howard B. Eisenberg, state public defender, and Melvin F. Greenberg, assistant state public defender.
For the defendant in error the cause was submitted on the brief of Bronson C. La Follette, attorney general, and Marguerite M. Moeller, assistant attorney general.
HANLEY, J.
The single issue raised on this appeal is whether the evidence was sufficient to support the conviction for possession of marijuana.
[1]
To convict an individual of possession of a controlled substance, the prosecution must prove not only that the defendant was in possession of a dangerous drug but also that he knew or believed he was. State v. Christel, 61 Wis.2d 143, 159, 211 N.W.2d 801 (1973).
In this case, the issue is not whether Kabat possessed a controlled substance but whether he knew he did. There is no dispute that the ash in the pipe contained ingredients of marijuana or that Kabat possessed the pipe.
Kabat contends the evidence was insufficient because the amount and form of the drug in the pipe did not permit the trier of fact to infer that Kabat had knowledge of its presence.
In People v. Melendez, 225 C.A.2d 67, 37 Cal. Rptr. 126 (1964), and People v. Aguilar, 223 C.A.2d 119, 35 Cal. Rptr. 516 (1963), California District Courts of Appeal reversed convictions where the quantity and form of the drugs were such that it could not be said their presence reasonably imputed knowledge to the defendants. In Aguilar, a chemist found that scrapings from *228 two spoons contained heroin. In Melendez, a chemist found that a black substance scraped from a bamboo pipe contained active ingredients from marijuana. In Melendez, the court relied on and explained the rationale of Aguilar:
"It is not scientific measurement and detection which is the ultimate test of the known possession of a narcotic, but rather the awareness of the defendant of the presence of the narcotic. Guilt or innocence on a charge of illegal possession may not be determined solely by the skill of the forensic chemist in isolating a trace of the prohibited narcotic in articles possessed by the defendant. (Pp. 122-123.) Accordingly, the essence of the holding in Aguilar is that `[t]he presence of the narcotic must be reflected in such form as reasonably imputes knowledge to the defendant.' (P. 123; italics added.) " Melendez, supra, at 71 quoting from Aguilar, supra.
In United States v. Jeffers, 524 F.2d 253 (7th Cir. 1975), the court rejected the "usable quantity" doctrine and explained it was not necessary because:
"An adequate instruction on what inferences with regard to a defendant's knowing possession can be drawn from the fact of physical possession of a controlled substance in such circumstances solves the problem without reference to the `usable quantity' doctrine." Jeffers, supra, at 257.
[2]
The Seventh Circuit then quoted with approval the statement from Aguilar that the awareness of the defendant of the presence of the narcotic, not scientific measurement and detection, is the ultimate test of the known possession of a narcotic.
[3, 4]
In the instant case, the pipe contained less than onehalf of a gram of ash material. Under the circumstances of the case it cannot be said that the presence of the narcotic was reflected in such a form as reasonably imputed knowledge to Kabat that it was marijuana. Melendez, *229 supra, at 73. A lay person could not be expected to know whether the burnt material in the pipe still contained ingredients of the controlled substance. Melendez, supra, at 69-70, n. 4. Accordingly, a finding that Kabat "possessed" marijuana is not warranted within the requirement of knowing possession, and the evidence is not sufficient to sustain a conviction of knowing possession of the narcotic.
This result does not overrule Fletcher v. State, 68 Wis. 2d 381, 384-85, 228 N.W.2d 708 (1975), or State v. Dodd, 28 Wis.2d 643, 651, 137 N.W.2d 465 (1965), which rejected the "usable amount" test and held that possession of a modicum of an illegal drug is sufficient to bring the defendant within the purview of the statute.
This case holds only that the amount and form of the substance found in the pipe is not sufficient to impute to Kabat knowledge that the substance contained ingredients of marijuana.
[5]
The State has pointed out that Kabat obtained not only a writ of error to review the order of the circuit court but also a writ of error to review the judgment in the county court; and correctly notes that the error to review the judgment should be dismissed.
By the Court.The order of the circuit court is reversed, with directions to dismiss the complaint. The writ of error to review the judgment of the county court is dismissed.
| {
"pile_set_name": "FreeLaw"
} |
102 F.3d 553
Provident Life & Accident Ins. Co.v.Signer
NO. 95-4356
United States Court of Appeals,Eleventh Circuit.
Nov 15, 1996
1
Appeal From: S.D.Fla., No. 94-00005-CV-EBD
2
AFFIRMED IN PART, REVERSED IN PART.
| {
"pile_set_name": "FreeLaw"
} |
838 F.2d 462
127 L.R.R.M. (BNA) 2496
National Labor Relations Boardv.Pottsville Bleaching and Dyeing Company
NO. 87-3382
United States Court of Appeals,Third Circuit.
DEC 15, 1987
Appeal From: Dept. of Labor
1
ENFORCEMENT GRANTED.
| {
"pile_set_name": "FreeLaw"
} |
371 F.Supp.2d 52 (2005)
MUNICIPALITY OF SAN JUAN, et al., Plaintiffs
v.
HUMAN RESOURCES OCCUPATIONAL DEVELOPMENT COUNCIL, et al., Defendants.
Civil No. 04-2123(SEC).
United States District Court, D. Puerto Rico.
May 20, 2005.
*53 Eric R. Ronda-Del-Toro, Johanny Martinez, Juan B. Soto-Balbas, Ricardo Pascual-Villaronga, Mercado & Soto, San Juan, PR, for Plaintiffs.
*54 Luis E. Vazquez-Rodriguez, Cruz Niemiec & Vazquez, San Juan, PR, for Defendants.
OPINION AND ORDER
CASELLAS, District Judge.
Pending before the Court is Defendants' motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6) (Dockets 11 & 15). Plaintiffs timely opposed Defendants' motion (Docket # 17) and Defendants replied (Docket # 22). After carefully reviewing the parties' filings and the applicable law, for the reasons set forth herein, we find that Defendants' motion must be GRANTED.
Procedural Background
Plaintiffs, the Municipality of San Juan and its Mayor, Jorge A. Santini-Padilla, filed the instant suit in the Commonwealth's courts requesting injunctive relief against Defendants, the Human Resources Occupational Development Council ("HRODC"), the Department of Labor and Human Resources ("DOL"), Roman Velasco-Gonzalez, Secretary of the DOL, and the Commonwealth of Puerto Rico.[1] Per Plaintiffs' allegations, this action arose out of the HRODC's decision to audit the San Juan Puerto Rico International Fashion Center pursuant to the provisions of the Federal Workforce Investment Act ("WIA"), 29 U.S.C. §§ 2801 et seq. Plaintiffs contend that Defendants' monitoring and audit procedures of the Municipality of San Juan as a designated Local Area for the participation and allocation of funds under the WIA have denied them of due process of law and have been discriminatory on the basis of political affiliation in violation their constitutional rights secured by the United States' and Commonwealth of Puerto Rico's constitutions. Plaintiffs request that the Court order: (1) Defendants to provide due process of law to Plaintiffs prior to issuing any determination affecting their proprietary interest in the WIA funds they presently receive and those that may be assigned in the future; (2) that all proceedings before the HRODC be stayed until Defendants agree to afford Plaintiffs due process of law[2]; (3) Defendants to abstain from divulging confidential information and to cease and desist from disclosing conclusions that have not been analyzed pursuant to the process of law due to Plaintiffs; (4) that the assignment of funds to the Training and Employment Program of the Municipality of San Juan continues to be the same as the present assignment[3]; (5) Defendants to cease and desist from making determinations, recommendations, and statements motivated by political discrimination against Plaintiffs; and (6) any other relief applicable under the law.
Subsequently, Defendants sought removal of this matter claiming that the Court has original jurisdiction since it arises under a federal law, the WIA, and necessarily involves the interpretation of its provisions and applicable regulation *55 (Docket # 1). Defendants then moved to dismiss Plaintiffs' action for failure to exhaust administrative remedies (Docket # 11). Plaintiffs opposed averring that the case involves exceptions to said doctrine (Docket # 17) and Defendants replied (Docket # 22).
Standard of Review
In general terms, a defendant may move to dismiss an action for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1). In this type of jurisdictional challenge, "the standard applied to a 12(b)(1) motion is similar to the standard applied to a 12(b)(6) motion, namely, the court must take all of plaintiff's allegations as true and must view them, along with all reasonable inferences therefrom, in the light most favorable to plaintiff." Pejepscot Indus. Park v. Maine Cent. R.R., 215 F.3d 195, 197 (1st Cir.2000); Freiburger v. Emery Air Charter, Inc., 795 F.Supp. 253, 257 (N.D.Ill., 1992). See also Hart v. Mazur, 903 F.Supp. 277 (D.R.I.1995) ("Motions under Rule 12(b)(1) and Rule 12(b)(6) are subject to the same standard of review.") However, once the jurisdictional challenge has been raised, the plaintiff carries the burden of demonstrating the existence of the Court's jurisdiction. P.R. Tel. v. Telecom. Regulatory Bd., 189 F.3d 1, 7 (1st Cir.1999).
In assessing whether dismissal is appropriate, "the trial court, must accept as true the well-pleaded factual allegations of the complaint, draw all reasonable inferences therefrom in the plaintiff's favor, and determine whether the complaint, so read, limns facts sufficient to justify recovery on any cognizable theory." LaChapelle v. Berkshire Life Ins. Co., 142 F.3d 507, 508 (1st Cir.1998) (citations omitted). But "[a]lthough this standard is diaphanous, it is not a virtual mirage." Berner v. Delahanty, 129 F.3d 20, 25 (1st Cir.1997) citing Gooley v. Mobil Oil Corp., 851 F.2d 513, 515 (1st Cir.1988). In order to survive a motion to dismiss, "a complaint must set forth `factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory.' "Id. In judging the sufficiency of a complaint, courts must "differentiate between well-pleaded facts, on the one hand, and `bald assertions, unsupportable conclusions, periphrastic circumlocution, and the like,' on the other hand; the former must be credited, but the latter can safely be ignored." LaChapelle, 142 F.3d at 508 (quoting Aulson v. Blanchard, 83 F.3d 1, 3 (1st Cir.1996)). See also Rogan v. Menino, 175 F.3d 75, 77 (1st Cir.1999). Courts, moreover, "will not accept a complainant's unsupported conclusions or interpretations of law." Wash. Legal Found. v. Mass. Bar Found., 993 F.2d 962, 971 (1st Cir.1993).
Applicable Law and Analysis
In their motion to dismiss, Defendants assert that Plaintiffs' claims must be dismissed for lack of subject matter jurisdiction in as much as Plaintiffs have failed to exhaust the administrative remedies provided by the WIA Regulation, Subpart F, Grievance Procedures, 20 C.F.R. § 667.600. Said proceedings have commenced and have not concluded. Thus, Defendants aver that there is no final determination to be reviewed by the Court. Moreover, in the event of a final determination, said determination would be reviewable by the Court of Appeals and not the District Court as set forth by the WIA and its regulations. 29 U.S.C. § 2937(a)(1); 20 C.F.R. § 667.850.
The doctrine of exhaustion of administrative remedies is well established in federal and local jurisprudence. It "provides that `no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy *56 has been exhausted.'" Ezratty v. Commonwealth of Puerto Rico, 648 F.2d 770, 774 (1st Cir.1981)(quoting Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51, 58 S.Ct. 459, 82 L.Ed. 638 (1938)). This is so because exhaustion "serves the twin purposes of protecting administrative agency authority and promoting judicial efficiency." McCarthy v. Madigan, 503 U.S. 140, 146, 112 S.Ct. 1081, 117 L.Ed.2d 291 (1992).
In Ezratty, the First Circuit stressed the important interests that exhaustion serves as noted by the Supreme Court in McKart v. United States, 395 U.S. 185, 89 S.Ct. 1657, 23 L.Ed.2d 194 (1969).
It allows the agency to develop a factual record, to apply its expertise to a problem, to exercise its discretion, and to correct its own mistakes, all before a court will intervene. Insofar as specialized administrative understanding is important, the doctrine thereby promotes accurate results, not only at the agency level, but also by allowing more informed judicial review. By limiting judicial interruption of agency proceedings, the doctrine can encourage expeditious decision making. Insofar as Congress has provided that an agency will decide a matter in the first instance, to apply the doctrine normally furthers specific Congressional intent. And, as a general matter, the doctrine promotes a sensible division of tasks between the agency and the court: litigants are discouraged from weakening the position of the agency by flouting its processes, while court resources are reserved for dealing primarily with those matters which could not be resolved administratively. Thus, the doctrine serves interests of accuracy, efficiency, agency autonomy and judicial economy.
Ezratty, 648 F.2d at 774. Moreover, "[t]he interest in avoiding judicial involvement is heightened [in cases such as this one] where the plaintiffs raise a constitutional challenge to agency action .... where a controversy may be resolved on some independent nonconstitutional ground...." Ticor Title, Inc. v. F.T.C., 814 F.2d 731 (D.C.Cir.1987).
Congressional intent is of paramount importance to the application of the doctrine. McCarthy, 503 U.S. at 145, 112 S.Ct. 1081. Consequently, courts have differentiated between permissive and mandatory administrative remedies, stating that "[w]hen Congress explicitly requires that administrative remedies must be pursued before seeking judicial relief, litigants must obviously follow that mandate" but "`where Congress has not clearly required exhaustion, sound judicial discretion governs.'" Trafalgar Capital Assocs., Inc. v. Cuomo, 159 F.3d 21, 36 (1st Cir.1998) (quoting McCarthy, 503 U.S. at 145, 112 S.Ct. 1081). However, when exhaustion is not explicitly required, courts must give the "appropriate deference to Congress' power to prescribe the basic procedural scheme under which a claim may be heard." McCarthy, 503 U.S. at 145, 112 S.Ct. 1081. Therefore, exhaustion principles must be fashioned "in a manner consistent with congressional intent and any applicable statutory scheme." Id. at 144.
The WIA and its regulation establish a comprehensive administrative scheme for monitoring and audit processes as well as for the resolution of grievances and claims resulting from audit proceedings such as the present one. Subparts E, F, and G of the WIA regulations set forth the procedures for the resolution of findings from monitoring and oversight reviews, grievances and complaints, and sanctions and corrective action, respectively. 20 C.F.R. Part 667. Section 667.500 of Subpart E *57 establishes that "[t]he Secretary uses the DOL audit resolution process" and that "[a] final determination issued by a Grant Officer under this process may be appealed to the DOL Office of Administrative Law Judges." 20 C.F.R. § 667.500(b)(2-3). Pursuant to Part F, each WIA recipient, the HRODC in this case, "must establish and maintain a procedure for grievances and complaints." 20 C.F.R. § 667.600. However, certain procedures are mandated. Section 667.600 contains a list of procedures that the local area must provide, including: (1) "[a] process for dealing with grievances and complaints from participants"; (2) "[a]n opportunity for an informal resolution and a hearing to be completed within 60 days of the filing of the grievance or complaint"; and (3) "[a]n opportunity for a local level appeal to a State entity when ... [e]ither party is dissatisfied with the local hearing decision." Id. The HRODC avers that it has those proceedings and that they are currently being followed in the instant controversy.[4]See Dockets 11 & 22.
In the present case, the final determination by the HRODC will be reviewed by a Grant Officer, an Administrative Law Judge, and by the Administrative Review Board, if requested. Thereafter, the determination may be reviewed by the Court of Appeals for the First Circuit pursuant to Section 2937 of the WIA. Said section establishes that any final order of the Secretary of the DOL directing corrective action or imposing sanctions for violating WIA provision(s), may be reviewed by the "United States Court of Appeals having jurisdiction over the applicant or recipient of funds involved, by filing a review petition within 30 days after the date of issuance of such final order." 29 U.S.C. § 2937(a)(1).
Given the existence of this ongoing administrative review, including the option of judicial review by the Court of Appeals, Defendants argue that the case should be dismissed insofar as Congress has provided for initial agency determination. Thus, Defendants argue, requiring completion of the administrative process would further Congressional intent.
In turn, Plaintiffs do not contest the applicability of the exhaustion doctrine, but aver that their case falls under two exceptions to the doctrine: (1) futileness of the agency's administrative proceedings and (2) clear violation of a constitutional right due to the agency's involvement. We disagree. Let us explain.
Plaintiffs allege that Defendants have acted in a manner that denotes their predetermination to find that the Municipality is at fault in the handling of federal funds. In support, Plaintiffs stress that they have never received the preliminary evaluation report, despite repeated requests for the same, and that they have not had the opportunity to be heard with regard to the same. Plaintiffs emphasize that the recommendation that an independent audit firm be hired to perform a second intervention was based on said preliminary evaluation after the first intervention. Plaintiffs also allege that the proceedings have been plagued with irregularities, to wit, that they were not notified of the date and time of the audit, that the contracted auditor requested, but never collected, numerous documentation in order to prepare the pre-accorded proceedings report, and that the report was incomplete since it was prepared without *58 the required complete "field samples" and requested documentation. Therefore, Plaintiffs aver, said acts, among others, evince that the HRODC is predetermined to find Plaintiffs at fault with the regulations pertaining to the allocation of WIA funds and deny them due process of law.
As to Plaintiffs' contention that they have been deprived of an opportunity to be heard, Plaintiffs requested and were granted an informal hearing. However, they failed to attend the informal hearing after their eleventh hour request for a continuance based on supposed calendar conflicts was denied. Moreover, as to notification of reports, by letter dated July 7, 2004 Plaintiffs acknowledge receipt of the pre-Agreed Procedures Report carried out by the accounting firm (Docket # 8, Exhibit 6). Again, on July 8, 2004, the HRODC sent Plaintiffs the preliminary report of the Pre-Agreed Procedures carried out by the CPA firm (Docket # 8, exhibit 7). Said letter specified that the Local Area should answer the subject matters raised within the next thirty (30) days of receipt. Then, by letter dated August 26, 2004, after several exchanges of correspondence between the parties, the HRODC clarified that there was only one Preliminary Report which was the result of the intervention started by the HRODC and completed by the CPA firm (Docket # 8, Exhibit 11). On that same letter, the HRODC granted the Municipality's request for an extension of time to answer the findings included in the Preliminary Report of Agreed Procedures, warning the Municipality that failure to answer would result in the issuance of a Final Report with the corresponding resolution process. Consequently, after the expiration of the term, and without response from the Municipality, the HRODC issued its Final Report (Docket # 8, Exhibit 12). The Municipality responded to said letter stating that the short extension granted was insufficient, that its requests for discussions were ignored, and restating its concerns regarding the procedures followed by the HRODC. Then, since the Municipality did not respond to the Final Report, on October 20, 2004 the HRODC notified the Municipality that it had issued an Initial Determination of the audit (Docket # 11, Attachment 2). Thereafter, the Municipality requested an informal hearing as to the Initial Determination. The HRODC granted said request and scheduled the same for December 27, 2004 (Docket # 15, Attachment 1). As previously mentioned, the Municipality failed to attend said meeting.
As stated by the First Circuit in Ezratty, exhaustion of administrative remedies is not required when agency proceedings are futile and only "delay the ultimate question." Ezratty, 648 F.2d at 774. Notwithstanding the strained exchanges between the Municipality and the HRODC, we cannot assume, without more, that exhaustion of the administrative remedies would be futile. This conclusion is buttressed by the comprehensive multi-tiered scheme of review provided by the WIA. Moreover, Plaintiffs bear the burden of establishing the applicability of an exception to the exhaustion requirement. Rose v. Yeaw, 214 F.3d 206, 211 (1st Cir.2000)(citing Honig v. Doe, 484 U.S. 305, 327, 108 S.Ct. 592, 98 L.Ed.2d 686 (1988)). Since Plaintiffs have proffered no convincing evidence to the effect that further agency proceedings would be futile, we cannot reach such a conclusion, particularly when Plaintiffs themselves have disregarded the established proceedings. Plaintiffs'"decision to boycott the administrative process does not compel this Court to interrupt what is an ongoing process towards a final resolution." City of New Orleans v. U.S. Dept. of Labor, 825 F.Supp. 120 (E.D.La.1993)(dismissing suit for failure to exhaust administrative remedies *59 under the JTPA). The futility exception is reserved for cases in which the plaintiffs will "receive no review at all, [] where the administrative process is fundamentally flawed because of a pattern and practice of administrative agency abuse, [] where the agency's behavior is utterly lawless." Eastern Bridge, LLC v. Chao, 320 F.3d 84, 89 (1st Cir.2003). Furthermore, as noted by the Ticor Court,
I think it unwise to embrace an exception to the exhaustion doctrine that would permit interruption of ongoing agency proceedings whenever a litigant raises a non-frivolous challenge to the legitimacy of those proceedings. Such an exception would encourage litigants to bypass the orderly processes of administrative agencies and would intolerably interfere with the ability of those agencies to perform the tasks assigned to them by Congress. The principal countervailing interest in favor of immediate judicial review is the litigant's interest in not being forced to defend itself in an allegedly unauthorized proceeding. That interest, however, is far less weighty than the court's interest in conserving its judicial resources and discouraging the flouting of administrative procedures. The litigant, of course retains its right to challenge the final agency determination on the ground that the agency acted outside its statutory authority or in violation of the Constitution.
Ticor Title, Ins., 814 F.2d at 741-42.
Having found absence of futility in the instant case, we consider Plaintiffs' argument that their inclusion of constitutional claims, to wit, that they have been denied due process and subjected to political discrimination, exempts them from having to exhaust administrative remedies. However, as expressed by the D.C. Circuit Court, "the fact that the appellants raise both constitutional and nonconstitutional claims does not in itself affect the application of the exhaustion doctrine." Andrade v. Lauer, 729 F.2d 1475 (D.C.Cir.1984). As previously resolved in this District, "[m]erely raising a constitutional issue in its complaint for declaratory judgment, when full appellate review of the administrative proceedings is available and in the absence of any extenuating circumstances, is insufficient to give the district court jurisdiction over the subject matter in the face of the well established doctrine of exhaustion of administrative remedies." Colon-Collazo v. Cordero-Santiago, 698 F.Supp. 30 (D.Puerto Rico 1988).
The same argument raised by Plaintiffs was previously raised before and rejected by the First Circuit in Eastern Bridge, LLC, 320 F.3d 84. The plaintiffs in Eastern Bridge had brought their claims directly to the district court. The district court in turn dismissed the complaint for lack of subject matter jurisdiction. Dissatisfied, the plaintiffs appealed, averring that they did not have to exhaust administrative remedies because they had raised constitutional claims. The First Circuit disagreed, holding that the "invocation of constitutional authority, without more, cannot breathe life into a theory already pronounced dead by the Supreme Court in binding precedent."[5]Id. at 91. Quoting the Supreme Court's decision in Thunder Basin Coal Co. v. Reich, 510 U.S. 200, 215, 114 S.Ct. 771, 127 L.Ed.2d 29 (1994), the First Circuit continued to state, as is true in the instant case, that "[a]t the termination of administrative review, plaintiffs' constitutional claims `can be *60 meaningfully addressed in the Court of Appeals.'" Id. Thus, if Plaintiffs in the instant case are dissatisfied with the outcome of the administrative process, they may raise their regulatory and constitutional claims before the First Circuit Court as provided for by the WIA's regulatory scheme. 29 U.S.C. § 2937(a)(1); 20 C.F.R. § 667.850.
The Fourth Circuit reached the same conclusion regarding exhaustion in a suit brought by a recipient of funds under the Comprehensive Employment Training Act ("CETA"), one of the WIA's predecessor statutes. Eastern Band of Cherokee Indians v. Donovan, 739 F.2d 153 (4th Cir.1984). The Fourth Circuit affirmed the district court's dismissal of plaintiff's action, including its due process claim, because the plaintiff had failed to exhaust its administrative remedies. In doing so, the Circuit Court made reference to the CETA's administrative remedies and its multi-tiered system of review, determining that the controversy over the CETA funding seemed "particularly suitable for internal resolution" and that "it seems clear from the language ... that Congress intended judicial review to occur in the court of appeals after the Secretary's action upon such grievances." Id. at 157.
The same conclusion was reached previously in this District in an action against the CETA program administrator for violations of rights under the CETA and the Fourteenth Amendment. Colon Collazo v. Cordero-Santiago, 698 F.Supp. 30 (D.P.R.1988). The District Court dismissed the complaint, noting that exhaustion was particularly appropriate when it could eliminate the necessity of deciding the constitutional questions and of "particular force where the interlocutory order sought to be reviewed relates to the agency's case-handling procedures." Id. at 34. We find this case to be particularly persuasive.
Although not mentioned by Plaintiffs, we feel that we should address case law from this District in which the court has retained subject matter jurisdiction absent exhaustion of administrative remedies under the WIA. Torres Ramos v. Consorcio De La Montana, 286 F.Supp.2d 126 (D.P.R.2003); Delgado Greo v. Trujillo, 270 F.Supp.2d 189 (D.Puert Rico 2003); Lugo Torres v. Torres Maldonado, 257 F.Supp.2d 477 (D.Puerto Rico 2003)(JTPA); Borrero-Rodriguez v. Montalvo-Vazquez, 275 F.Supp.2d 127 (D.Purto Rico 2003). However, all of said cases involved Section 1983 actions for political discrimination filed by former employees of WIA fund recipients allegedly dismissed because of their political affiliation.
This case is distinguishable. First, this is not the case of a suit brought by a terminated employee of a WIA participant against his or her former employer alleging that he or she was terminated for discriminatory reasons. This is a suit brought by a WIA funds recipient against the funds administrator. Second, administrative proceedings in this case have already begun. Third, potential sections against Plaintiffs are yet to materialize in an actual administrative order issued against them. Fourth, completion of administrative review may render Plaintiffs' constitutional claims moot. Fifth, Plaintiffs are not deprived of a remedy because judicial review remains available after the DOL issues a final order. See Goya de P.R., Inc., v. Herman, 115 F.Supp.2d 262, 268 (D.P.R.2000)(citing said factors in support of its conclusion that administrative remedies must be exhausted despite the presence of constitutional claims). Thus, we find that "ordinary principles of exhaustion require us to defer to an administrative process that is already in motion." Eastern Bridge LLC, 320 F.3d at 92 (citing Sturm, Ruger & Co. v. OSHA, 186 F.3d 63, 64-65 (1st Cir.1999)). When Congress *61 provides for an elaborate scheme for remedies and review, courts "should not be anxious to allow a circumvention of that process absent extraordinary circumstances." Consortium of Cmty. Based Orgs. v. Donovan, 530 F.Supp. 520, 531 (E.D.Ca.1982). No such circumstances are present here.
Moreover, Defendants challenge, and the Court questions, the viability of Plaintiffs' constitutional claims. Plaintiffs' political discrimination claim rests on their assertion that Co-plaintiff Mayor of San Juan is affiliated to the New Progressive Party and because of that, the Municipality of San Juan has been targeted and has received disparate treatment in relation to other municipalities. In addition, Defendants aver that Plaintiffs do not have a property interest over the WIA funds. This is yet another obstacle faced by Plaintiffs. See Eastern Band of Cherokee Indians, 739 F.2d at 159 (holding that "[s]ince the Tribe's allegations of constitutional violations do not merit meaningful consideration, the district court was without jurisdiction to entertain them.").
Finally, we note that even if we were to consider Plaintiffs' request for injunctive relief, this Court cannot grant Plaintiffs prospective equitable relief under the WIA. Narragansett Indian Tribe of R.I. v. Chao, 248 F.Supp.2d 48, 51 (D.R.I.2003)(citing United Urban Indian Council, Inc. v. U.S. Dept. of Labor, 31 Fed.Appx. 627, 2002 WL 442378 (10th Cir.2002)).
Conclusion
For the reasons set herein, Defendants' motion to dismiss is GRANTED and the above-captioned action will be DISMISSED WITHOUT PREJUDICE.
SO ORDERED.
NOTES
[1] Although Plaintiffs assert in their complaint that damages are claimed pursuant to Articles 1802 and 1803 of the Puerto Rico Civil Code, 31 L.P.R.A. § 5141 and § 5142, no such relief is requested (Docket # 6, Attachment 2).
[2] There being no substantial justification to enjoin the local proceedings initiated by Plaintiffs and absence of irreparable harm, said request was denied on December 23, 2004 (Docket # 19).
[3] This request is inapposite. Pursuant to the procedures set forth by the WIA, Plaintiffs will continue to receive funds until review is finalized. That is, until the Court of Appeals issues its ruling or the time to appeal expires without any action. 20 C.F.R. § 667.650(a)(1).
[4] In their reply Defendants informed that Plaintiffs failed to attend to the informal hearing scheduled for December 27, 2004. The hearing was scheduled on December 7, 2004 (Docket # 22). Plaintiffs unsuccessfully requested a continuance of the same by letter dated December 22, 2004.
[5] The First Circuit also dismissed the plaintiffs' request for an injunction against the use of information determining that said alternative prayer for relief could not afford them with jurisdiction where the primary theory had failed.
| {
"pile_set_name": "FreeLaw"
} |
115 Cal.Rptr.2d 511 (2002)
95 Cal.App.4th 410
Robert HART, Plaintiff and Appellant,
v.
Linda AVETOOM, Defendant and Respondent;
David D. Ribeiro et al., Objectors and Appellants.
No. G025656.
Court of Appeal, Fourth District, Division Three.
January 18, 2002.
As Modified February 14, 2002.
*512 Law Offices of Silverstein & Huston, Orange, and Mark W. Huston, for Plaintiff and Appellant.
Ronald P. Kaplan, Los Angeles, for Objectors and Appellants, David D. Ribeiro and Ribeiro Law Corporation.
Steven L. Stern, Newport Beach, for Defendant and Respondent, Linda Avetoom.
OPINION
BEDSWORTH, J.
Robert Hart and his former attorney, David D. Ribeiro, challenge an order awarding Robert's ex-wife, Linda Avetoom, sanctions under Code of Civil Procedure section 128.7.[1] Hart and Ribeiro raise a variety of contentions, but two are dispositive: sanctions were improper because the motion filed was different from the motion that was served, violating the "safe harbor" requirements of the sanctions statute and the sanctions were impermissibly sought after the underlying lawsuit was dismissed. We therefore reverse.
* * *
Robert and Linda Hart were divorced sometime before the inception of this action, and she resumed the use of her maiden name (Avetoom). In April 1996, Hart, a physician, was ordered to make monthly child support payments for his three children. Five months later, after various attempts to collect overdue payments failed, Avetoom turned to the Orange County District Attorney's office for assistance. (Former Welf. & Inst.Code, § 11475; see Fam.Code, § 17200 et seq.)
Hart retained Attorney Ribeiro to handle the issue of his support obligations. At a May 1997 support hearing, following a chambers conference with both attorneys, Avetoom endorsed over to the district attorney's *513 office money orders Hart had mailed to her. All future child support payments were to be made directly to the district attorney's office.
But what seemed like an ending turned out to be only the beginning. In September 1997, Hart, aided by Ribeiro, sued Avetoom for abuse of process, and both intentional and negligent infliction of emotional distress, alleging she had falsely reported she was not receiving her child support payments. On December 3, 1997, Avetoom served a proposed motion for sanctions under section 128.7. A 30-day safe harbor period commenced, during which Hart was free to amend or dismiss his complaint without penalty. Hart did not respond to this motion.
Ribeiro withdrew as Hart's counsel of record in April 1998. Four months later, Avetoom filed a motion for summary judgment. Hart apparently saw the writing on the wall. Acting in propria personain the wake of a second attorney's departurehe voluntarily dismissed his suit without prejudice before the motion's scheduled hearing date in October. Avetoom filed her motion for section 128.7 sanctions more than a month later, on November 20, 1998. Included as exhibit A was the original motion, memorandum of points and authorities, and a supporting declaration, all served on December 3, 1997. The motion also included supplemental points and authorities, as well as additional declarations and a copy of the motion for summary judgment.
Hart and Ribeiro arguedsomehow unsuccessfullythat the sanctions motion filed was different from the motion served in December 1997, noting it was based on new evidence and different legal theories. Because Avetoom had not served that motion 30 days before filing, there was no compliance with the safe harbor provision of the sanctions statute.
Nonetheless, the court granted the motion for sanctions, finding Hart's lawsuit was brought for an improper purpose, frivolous, and bereft of evidentiary support. Concluding the 30-day "safe harbor" period had expired, the court awarded $30,811 in sanctions against Hart and $6,000 against his former attorney, Ribeiro.
Hart contends the sanctions motion violated the safe harbor provision of section 128.7, subdivision (c)(1). The statute requires service of the motion on the offending party at least 30 days before filing. During the "safe harbor" period, the recipient may avoid sanctions by correcting its conduct and withdrawing the offending paper, claim or contention. Hart is correct.
Preliminarily, we note the sanctions statute, section 128.7, is "modeled, almost word for word, on rule 11 of the Federal Rules of Civil Procedure. In examining the provisions of section 128.7, California courts may look to federal decisions interpreting the federal rule." (Laborde v. Aronson (2001) 92 Cal.App.4th 459, 467, 112 Cal.Rptr.2d 119; see Barnes v. Department of Corrections (1999) 74 Cal.App.4th 126, 132, 87 Cal.Rptr.2d 594.)
We turn first though, to Cromwell v. Cummings (1998) 65 Cal.App.4th Supp. 10, 76 Cal.Rptr.2d 171 (Cromwell), an opinion issued by the appellate division of our own Orange County Superior Court. Cromwell held a defendant who filed his section 128.7 motion only 21 days after it was served on plaintiff's counsel violated the statute's safe harbor provision. The court went on to explain that even if the requisite 30-day period had elapsed, the request for sanctions was rendered moot by a ruling sustaining a demurrer without leave to amend. (Id. at Supp. p. 13, 76 Cal.Rptr.2d 171.) The court noted "the central purpose of the `safe harbor' provision is to provide an adequate opportunity *514 for withdrawal (i.e., voluntary dismissal) without penalty once the impropriety of the pleading and the consequence of nonwithdrawal have been made clear." (Id. at Supp. pp. 14-15, 76 Cal.Rptr.2d 171.)
The defendant argued letters to counsel giving advance notice of the sanctions motion were evidence that the moving party was in "substantial compliance" with the essential elements of the sanctions statute. In its discussion of the doctrine of "substantial compliance," the court reviewed federal authority construing rule 11 of the Federal Rule of Civil Procedure, noting the safe harbor provision has been strictly construed: "`To stress the seriousness of a motion for sanctions and to define precisely the conduct claimed to violate the rule, the [revised rule] provides that the "safe harbor" period begins to run only upon service of the motion.' [Citation.] By specifically requiring service of the `motion' and `notice of motion,' the Legislature made clear that the papers to be served on the opposing party are the same papers which are to be filed with the court no less than SO days later." (Cromwell, supra, 65 Cal.App.4th at Supp. 15, 76 Cal. Rptr.2d 171, italics added.)
This, in our view, is where this train went off the tracks. The record confirms the motion filed in November 1998 was not the same motion served in December 1997. The November 1998 version contained additional declarations and supplemental points and authorities not present in the original version. In fact, a copy of December 1997 motion was attached as an "exhibit" to the revised version. This, in and of itself, should have been enough to put all concerned on notice that something was wrong. True, the two motions were similar, but the problem is they were not the same. "Close" is good enough in horseshoes and hand grenades, but not in the context of the sanctions statute.
Avetoom's "new and improved" sanctions motion was both served and filed on November 20, 1998. The December 17 hearing date left no "safe harbor" during which Hart was free to modify or withdraw his complaint. To make matters worse, Hart had, by that time, already voluntarily dismissed his lawsuit, and there was no further action he could take to avoid an award of sanctions.
On this point, the case law is quite clearallowing a party to serve and file a sanctions motion after the conclusion of the case would completely defeat the purpose of the safe harbor provision. We are reminded the "purpose of section 128.7 is to deter frivolous filings, not to punish parties. [Citation.] This purpose is forwarded by allowing the offending party to avoid sanctions altogether by appropriately correcting the sanctionable conduct after being alerted to the violation." (Barnes v. Department of Corrections, supra, 74 Cal.App.4th at p. 133, 87 Cal. Rptr .2d 594; Cromwell, supra, 76 Cal. Rptr.2d 171, 65 Cal.App.4th Supp. at p. 14 ["sanctions under section 128.7 are not designed to be punitive in nature but rather to promote compliance with the statutory standards of conduct."]; Malovec v. Hamrell (1999) 70 Cal.App.4th 434, 443, 82 Cal.Rptr.2d 712 ["[w]e can discern no situation in which sanctions following a voluntary dismissal or settlement would not be precluded by both the safe harbor provisions and the voluntary dismissal/settlement provisions (of section 128.7)"]; see Goodstone v. Southwest Airlines Co. (1998) 63 Cal.App.4th 406, 73 Cal.Rptr.2d 655 [party cannot wait until the conclusion of the case to file motions for sanctions].) It is difficult to imagine a more "appropriate correction" than voluntary dismissal.
The federal courts have followed the same course. Interpreting rule 11, a *515 panel of the Sixth Circuit Court of Appeals held the "service and filing [of the motion] must occur prior to final judgment or judicial rejection of the offending contention. Quite clearly then, a party cannot wait until after summary judgment to move for sanctions under Rule 11." (Ridder v. City of Springfield (6th Cir.1997) 109 F.3d 288, 297.) Along the same lines, we note "a party may not bring a motion for sanctions unless there is some action the offending party may take to withdraw the improper pleading." (Malovec v. Hamrell, supra, 70 Cal.App.4th at p. 441, 82 Cal.Rptr.2d 712.)
In sum, Avetoom's failure to file her sanctions motion before Hart dismissed the case is dispositive of this appeal. So is the fact the sanctions motion filed was different from the one served.[2] In this particular context, at least, the court was without authority to act, and the order imposing sanctions was an abuse of discretion.
The order imposing sanctions against Hart and attorney Ribeiro is reversed. The parties shall bear their own costs on appeal.
WE CONCUR: RYLAARSDAM, Acting P.J., and MOORE, J.
NOTES
[1] All further statutory references are to the Code of Civil Procedure unless otherwise noted.
[2] We note Avetoom's appellate counsel did not join the fray until Hart filed his notice of appeal, and played no part in the proceedings below.
| {
"pile_set_name": "FreeLaw"
} |
373 So.2d 123 (1979)
CENTRAL LOUISIANA ELECTRIC COMPANY, INCORPORATED
v.
LOUISIANA PUBLIC SERVICE COMMISSION et al.
No. 63142.
Supreme Court of Louisiana.
June 25, 1979.
Rehearing Denied August 2, 1979.
Order on Further Consideration October 18, 1979.
*125 William O. Bonin, Landry, Watkins & Bonin, New Iberia, for plaintiff-appellant.
Michael R. Fontham, Stone, Pigman, Walther, Wittmann & Hutchinson, New Orleans, Marshall B. Brinkley, Gen. Counsel, L. P. S. C., Baton Rouge, for defendant-appellee.
Stephen M. Irving, Baton Rouge, for intervenor, La. Consumer's League.
DENNIS, Justice.[*]
Central Louisiana Electric Company, Incorporated (CLECO) applied to the Louisiana Public Service Commission (Commission) for an increase in its electric rates.[1] The Commission denied the application.[2] CLECO appealed its case to the district court of the domicile of the Commission, but the district court affirmed the Commission's order. In the instant proceeding the utility exercises its right to a direct appeal to this Court from the judgment of the district court. La.Const. art. 4, § 21(E).
CLECO is a Louisiana corporation domiciled in Rapides Parish. The utility provides electric service to approximately 148,000 customers in a 22-parish area centered in west-central Louisiana. The requested electric rate would have produced $13,827,707.00 in additional annual revenues for the utility. The Commission denied the requested rate increase, finding that the existing rate structure produced adequate revenues for a fair rate of return.
Adjustments Based on Gas Purchases from Subsidiary
In arriving at the figures it used to make the final calculation of CLECO's actual rate of return, the Commission adjusted CLECO's rate base and operating income to attribute to it more than $7,000,000 in revenues *126 earned by Louisiana Intrastate Gas Corporation (LIG). Although the Commission did not seek to exercise jurisdiction over LIG in this case, the agency contends the action was justified because LIG is a wholly owned subsidiary which realized a 45% rate of return on its average book equity in the test year; and its income was derived in substantial part from sales of gas to CLECO. The major issue in this case is whether there is warrant in the record and a rational basis in law for the adjustments, despite the absence of any finding by the Commission that CLECO manipulated its subsidiary or that the price paid LIG for gas was unreasonable.
The facts are not in dispute. Louisiana Intrastate Gas Corporation (LIG), a separate corporate entity wholly owned by CLECO, was incorporated in 1955. Its officers, headquarters and employees are separate and distinct from those of CLECO. Although LIG supplied nearly all of CLECO's fuel in the test year, 66% of LIG's sales of gas and 78% of its pipeline throughput were to non-affiliated industrial and municipal customers. In fact, LIG owns and operates the most extensive intrastate gas pipeline system in Louisiana, serving approximately 62 towns and communities and 51 non-affiliated industrial customers.
Although the Commission has the power to disallow as an operating expense amounts paid by the utility which are "unjust or unreasonable and designed for the purpose of concealing, abstracting or dissipating the net earnings of the public utility," La.R.S. 45:1176, the Commission in the instant case did not determine that the prices paid by CLECO to its subsidiary for gas were unjust or unreasonable. Indeed, the evidence of record indicates that the prices were fair, reasonable and comparable to the prices which LIG charges its other non-affiliated customers in arm's length transactions. Of LIG's 52 industrial customers CLECO's price for boiler fuel ranked 40th when prices were arranged in descending order. Moreover, the price charged CLECO for boiler fuel was identical to the price charged two of LIG's non-affiliated electric utility customers.
The Commission contends that it has not attempted to regulate the price of gas sold by LIG in the present case. In its order the Commission declared that it is "obligated to insure that the earnings on investment in LIG used to produce fuel for CLECO are not improperly excessive," p. 3, and that it "must insure that these fuel costs generate no more than a fair profit." p. 4. In furtherance of these perceived duties, the Commission concluded that "[t]o insure that the rate payers of CLECO are treated fairly, the Commission will allow CLECO and LIG to earn only the fair rate of return on the investment in LIG used to produce fuel for CLECO." p. 4. To effectuate this policy the Commission made regulatory adjustments by, first, determining the ratio that LIG's sales to CLECO bear to LIG's total sales and, second, by including this percentage of CLECO's investment in LIG in CLECO's rate base; and by including the same percentage of LIG's income from gas sales in CLECO's operating income. The adjustments resulted in additions of $8,160,000 to CLECO's rate base and $4,739,000 to its operating income. CLECO contends that but for these adjustments the Commission would have been required to grant it a rate increase to provide $7,281,000 in additional annual revenue.
Manipulation by a parent utility of a subsidiary for the purpose of creating excessive profits at the expense of the rate payer would provide a reason for the regulatory agency to disregard corporate entity and attribute subsidiary assets and earnings to the parent. See, City of Los Angeles v. California Public Utilities Comm'n., 94 PUR 3d 226, 7 Cal.3d 331, 102 Cal.Rptr. 313, 497 P.2d 785 (1972); Illinois Bell Telephone Co. v. Illinois Commerce Comm'n., 3 PUR 4th 36, 55 Ill.2d 461, 303 N.E.2d 364 (1973); Washington Water Power Co. v. Washington Utilities & Transportation Comm'n., ___ PUR 4th ___, No. 59791 (Wash. Superior Ct., Nov. 2, 1978).
In the present case, however, there is no evidence that the subsidiary corporation has been used as a mere instrumentality or *127 adjunct for such a purpose. LIG was organized as a gas pipeline company in 1955 for the purpose of assuring CLECO an adequate supply of natural gas. However, because of CLECO's limited fuel requirements, LIG was required to develop additional customers who have no affiliation with CLECO in order to sustain an operation of sufficient size to have competitive gas purchasing power. As noted, LIG's separate management has developed Louisiana's most extensive intrastate pipeline and relies on CLECO as a market for only 34% of its gas sales and 22% of its pipeline throughput. The Commission does not question the wisdom or legitimate motives of CLECO in organizing a separate corporation for the purpose of developing a dependable source of fuel. In short, LIG seems to have acquired a vigorous and somewhat independent corporate character, and if the subsidiary receives substantial profits for its gas, the record in this case suggests that it is probably due to the energy crisis and not by the design or manipulation of CLECO.
Unreasonably high charges by a subsidiary for its products or services, even if provided for by legally enforceable contract, may afford a rational basis for adjustments by the agency in the rate making process. Clearly, as mentioned above, the Commission has the power to disallow any unreasonable or unjust operating expense paid by a parent utility in fixing rates. La.R.S. 45:1176. Before the regulatory body can make this type of adjustment, however, there must be warrant in the record of the rate case for a factual finding, or at least a reasonable inference, that the charges or expenses, are in fact unreasonable. In the instant case the Commission failed to find that the prices were unreasonable when compared with LIG's prices charged non-affiliated utilities or with prices charged by independent suppliers; and the evidence would not have supported such a finding.
Notwithstanding the absence of manipulation or payment of unreasonable gas prices by CLECO, the Commission argues that its action was justified simply because LIG is a wholly owned subsidiary which profited substantially from the sale of gas to its parent and earned approximately 45% on its average book equity during the test year.
CLECO contends that, although its rate of return is lower than LIG's, the Commission has erroneously overstated LIG's actual return and wrongly assumed that it exceeded LIG's fair rate of return. Moreover, CLECO contends that under the circumstances of this case the subsidiary's earnings or return should not in any way be attributed to the parent corporation.
The power of a public service commission to inquire into contracts between the company furnishing the service or commodity, the rates for which are under inquiry, and its corporate affiliate has been the subject of judicial inquiry in a number of cases. Although there is general agreement that the commission has power to inquire into the reasonableness of such contracts, the courts differ widely as to the findings required before the commission may disallow an expense or make other adjustments.
Several judicial opinions have favored a narrow scope of inquiry by the regulatory agency. In these cases the courts have said that a commission cannot ignore an operating expense unless there is an abuse of discretion in that regard by the corporate officers; Southwestern Bell Tel. Co. v. Public Service Commission, 262 U.S. 276, 43 S.Ct. 544, 67 L.Ed. 981 (1923); that common ownership is not of itself sufficient ground for disregarding intercorporate agreements when it appears that, although an affiliated corporation may be receiving the larger share of the profits, the regulated company is still receiving substantial benefits from the contract and probably could not have secured better terms elsewhere. United Fuel Gas Co. v. Railroad Commission of Kentucky, 278 U.S. 300, 49 S.Ct. 150, 73 L.Ed. 390 (1929); and that a commission, operating under a state statute similar to La.R.S. 45:1176, could have disallowed an excessive price paid by a utility to its subsidiary, but the evidence would not *128 support a finding of excessiveness where a commodity was purchased at its fair market value, and under no circumstances could the commission apportion a part of the subsidiary's profits to the parent utility. Re Montana-Dakota Utilities Co., N.D., 102 N.W.2d 329, 33 PUR 3d 531 (1960). However, such a limited ambit of inquiry is incongruous with the Louisiana Commission's broad constitutional power and authority to supervise, govern, regulate and control all common carriers and public utilities. La.Const. art. 4, § 21; cf. City of Plaquemine v. Louisiana Public Service Commission, 282 So.2d 440 (La.1974).
The Commission relies on a line of cases in which courts and regulatory agencies concluded that expense payments to affiliates of a regulated utility should not produce a profit in excess of its parent's fair rate of return. Illinois Bell Telephone Co. v. Illinois Commerce Comm'n., 3 PUR 4th 36, 50, 55 Ill.2d 461, 303 N.E.2d 364 (1973); City of Los Angeles v. California Public Utilities Comm'n., 94 PUR 3d 226, 236, 7 Cal.3d 331, 344, 102 Cal.Rptr. 313, 497 P.2d 785 (1972); Pacific Northwest Bell Telephone Co. v. Sabin, 8 PUR 4th 159 (Or.Ct. App.1975); Re New England Telephone & Telegraph Co., 13 PUR 4th 65 (Me.Pub.Util. Comm'n., 1976); Re New England Telephone & Telegraph Co., 10 PUR 4th 132 (R.I.Pub.Util.Comm'n., 1975); Re The New York Telephone Co., 7 PUR 4th 496 (N.Y. Pub.Serv.Comm'n., 1974); Re General Telephone Co. of Illinois, 6 PUR 4th 90 (Ill.Commerce Comm'n., 1974); Re Michigan Bell Telephone Co., 3 PUR 4th 1 (Mich.Pub.Serv. Comm'n., 1973); Re New York Telephone Co., 2 PUR 4th 1, 10-12 (N.Y.Pub.Serv. Comm'n., 1973); Re The Pacific Telephone & Telegraph Co., 95 PUR 3d 1 (Cal.Pub. Util.Comm'n., 1972). However, all of the cases cited by the Commission involve telephone companies and are clearly distinguishable.
The majority of cases cited by the Commission involve the Bell System and Western Electric, a wholly owned subsidiary which manufactures and supplies telephone equipment. In these cases the rate making body pursued a policy of adjusting the prices Western Electric actually charges its Bell affiliate to reflect no greater rate of return than would be reasonable for the regulated utility. But see, Re Northwestern Bell Telephone Co., 8 PUR 4th 75 (Minn.Pub.Serv.Comm'n., 1974). To allow a higher rate of return is considered by these jurisdictions as imposing on Bell's rate payers the burden of providing to the parent company, American Telephone & Telegraph, excessive returns on sales by Western to Bell. See, Illinois Bell Telephone Co. v. Illinois Commerce Commission, 3 PUR 4th 36, 50, 55 Ill.2d 461, 303 N.E.2d 364 (1973).
This policy may be justified in light of the corporate structure of American Telephone & Telegraph, but the intercorporate relationship of CLECO and LIG does not warrant such an inflexible treatment. In the telephone cases, it was recognized that Western Electric has a unique relationship in the Bell System. Excluding government business, approximately 98% of Western Electric's total sales are made to AT&T and Western Electric virtually monopolizes the market for equipment used by the Bell System. The integrated nature and unified control of this structure effectively immunizes any transaction between Western Electric and the Bell System operations from competitive market prices and renders a comparison of its prices and profits with other manufacturers inadequate. Re New England Telephone and Telegraph, 10 PUR 4th 132 (R.I.Pub.Util.Comm'n., 1975).
These unique elements are not present in the CLECO-LIG relationship. LIG and CLECO carry on different types of enterprises with separate control and a minimum of integration. 66% of LIG's total sales are made to non-affiliated purchasers at prices comparable to those charged CLECO. Since LIG does not hold a monopoly on the sale of natural gas, it is possible to realistically determine just and reasonable prices for natural gas in its competitive market. CLECO introduced undisputed evidence that the prices it paid to LIG for boiler fuel were reasonable in comparison with prices charged other LIG customers. Accordingly, *129 the telephone company cases based upon the relationship between AT&T and its totally dominated and integrated subsidiary, Western Electric, are distinguishable and not controlling in the instant proceedings.
We conclude that the Commission has the power and authority to investigate and make adjustments to assure that the utility's stockholders, through the subsidiary company, do not receive a greater return than warranted upon sales made to the utility and costs passed along to the rate payer. However, in a case such as the instant proceeding, in which the subsidiary's operations are not closely integrated in those of the parent but include substantial dealings with non-affiliated customers, and in which the subsidiary encounters business risks markedly different from its parent's, the fair rate of return of the subsidiary and not that of the parent should be the touchstone for determining if the subsidiary's profits are unreasonable and for making any indicated adjustments. Of course, in a case involving a wholly owned subsidiary, the Commission's inquiry is not concluded by the fact that comparable prices are charged by the affiliate to other utilities, or by comparable rates charged by independent suppliers. The Commission's proper concern is not the level of price at which the inter-affiliate transaction is accomplished in comparison with prices in non-affiliated transactions, but instead whether there is a level of earnings by the wholly owned subsidiary at a rate higher than the subsidiary's fair rate of return. See generally, Western Distributing Co. v. Public Service Commission of Kansas, 285 U.S. 119, 52 S.Ct. 283, 76 L.Ed. 655 (1932); Mississippi River Fuel Corp. v. Federal Power Commission, 102 U.S.App.D.C. 238, 252 F.2d 619 (1957); Washington Util. and Transp. Comm'n. v. Wash. Water Power Co., 24 PUR 4th, 427, reversed, ___ PUR 4th ___, No. 59791 (Wash.Super.Ct. Nov. 2, 1978); Wichita Gas Co. v. Public Service Commission, 2 F.Supp. 792 (D.C.Kan.1933).
Turning to the record of the instant case before the Public Service Commission we find that the Commission made no determination of the fair rate of return of LIG. In fact, we cannot find in the record any financial, cost and risk data which would warrant the determination that LIG's test year rate of return was excessively unreasonable. Indeed, even the finding that LIG earned approximately 45% on its average book equity during the test year was supported only by the conclusory and sketchy testimony of a single witness. The Commission's adjustments to CLECO's rate base and operating income, therefore, were neither warranted by this record nor founded upon a rational basis in law.
Accordingly, we must remand the case to permit the Commission, if it desires, to inquire into the fair rate of return of LIG during the test year and to make adjustments based thereon if indicated by the additional evidence to be presented by the parties.
Working Capital
The primary purpose of the rate making process is to set rates at such a level that the utility's revenue will be sufficient to permit the utility both to pay its legitimate operating expenses and to provide a return on investment adequate to compensate existing investors and attract new capital as it is required. The total amount of investment in a utility employed in providing its service, the utility's rate base, is determined by adding the investment in physical properties to an allowance for working capital. See, South Central Tel. Co. v. Louisiana Public Service Commission, 352 So.2d 964, 968 (La.1977) and authorities cited.
Because a utility enterprise, like a grocery store, cannot be operated without continuously available cash, an allowance for cash working capital to purchase materials and supplies has been added to the rate base as a matter of course throughout the history of regulation. However, in recent times regulatory agencies have come to recognize the need for more critical examination in making a working capital allowance in order to determine the amount of working cash that is actually necessary and whether this amount will be provided by *130 investors or is being supplied by customers and other non-investors. See, 1 A. Priest, Principles of Public Utility Regulation, 183 (1969). One pronouncement of the more modern view by the Pennsylvania Supreme Court has been widely quoted:
"Cash working capital ordinarily is the amount of cash required to operate a utility during the interim between the rendition of service and the receipt of payment therefor. ... It can readily be seen that initially, at the commencement of operation, capital supplied by investors must, in order that the Company can function, include such working cash in addition to the amount required for physical plant and facilities. ... Almost invariably, however, its allowance has been determined by the actual necessity therefor existent when disputed rates of an established and going concern are before the Commission. ...
"To the extent that the customers are providing revenues before the utility pays its costs, the investors are not supplying the funds to carry on .... If the financial situation of an operating company shows that sufficient funds are readily available to bridge the gap between rendition of and payment for services, no cash working capital is required and none should be allowed by the Commission." Pittsburgh v. Pennsylvania Pub. Util. Comm'n., 370 Pa. 305, 309, 88 A.2d 59, 61-62 (1952).
One of the tools that may be employed by a regulatory agency in making a cash working capital allowance is the lead-lag study. Just as there is a lag period between the time customers are billed and the time payment is made, so also there is a lag between the time operating and maintenance expenses are incurred by the company and the time the company pays its bill. A lead-lag study reflects the lag in the number of days for payment of operating expenses and uses this as an offset to the lag experienced by the company in receiving revenue from its customers. See, e. g., Pa. Public Utility Co. v. Quaker State Telephone Co., 26 PUR 4th 20 (1978).
In the instant case CLECO, at the insistence of the Commission, performed a lead-lag study. The results of the study were generally accepted by the Commission, but upon the recommendation of its expert, Mr. Louiselle, the Commission made two significant adjustments of the utility's figures. The company contends that these adjustments were arbitrary and unreasonable and for its proof relies upon the testimony of its expert, Mr. Peterson. Resolution of the controversies depends, therefore, upon the testimony of these experts which, unfortunately, is sketchy.
In its first adjustment the Commission eliminated depreciation expense from the lead-lag study. Although the testimony is not clear, it appears that the company's expert contended that this item should have been included to compensate for the lag in collection of revenues needed for the replacement of fully depreciated assets. However, the Commission's expert pointed out that depreciation expense does not represent a cash expenditure and that the company's study included no offsetting entry for the lag between the time a depreciated asset is replaced and the time the company pays for it. He testified that if components were included properly reflecting lags with respect to depreciation and interest the cash working capital would be smaller than that allowed by the Commission.
Based on the evidence in the record, the Commission's determination appears to be reasonable. As we understand the company's contention, it does not complain that the Commission disregarded any depreciation expense in determining the company's operating expenses. Thus, we assume that the company's annual depreciation expenses were fully considered in setting rates at a level which would enable the utility to pay all of its operating expenses, including depreciation. The company argues, instead, that depreciation expenses should be considered a second time in the lead-lag study because the company will experience a delay in the replacement of depreciated assets due to a lag in its collection of revenues. The record does not demonstrate, *131 however, that the replacement of depreciated assets is tied to the collection of any particular revenues or that any lag in the collection of revenues was omitted from the lead-lag study. Accordingly, if all of the company's lags in collecting and paying out revenues have been considered, it is difficult to understand why the company should be entitled to additional working capital allowance because of depreciation. Moreover, if depreciation expense could be included logically within the lead-lag study, the Commission's expert, Mr. Louiselle, gave cogent reasons, which were not refuted by the utility's evidence, why the company's depreciation data was incomplete and did not require the Commission to make a greater cash working capital allowance.
The second adjustment made by the Commission to the lead-lag study concerned the company's inclusion of fuel cost adjustment lag in the working capital requirement. Mr. Louiselle, the Commission's expert, explained the adjustment as follows:
"The second difference between Mr. Peterson [CLECO's expert] and myself concerns the lag on the collection of fuel clause revenues. Mr. Peterson assumes that those fuel costs recovered through the fuel clause are not collected for a total of some 102 days. This reflects the average revenue lag and the two month fuel adjustment clause lag. This item is in essence what is normally called deferred fuel costs. Under deferred fuel cost accounting, the difference between the cost of fuel in a month and the fuel costs recovered in that month are deferred.
"I made an analysis of CLECO's fuel costs for 1976. Since my analysis indicates that CLECO did not have an earnings deficiency, CLECO recovered its total costs including the cost of fuel. While CLECO has recovered the total cost of fuel in 1976, given its level of earnings, these data provide an indication of what amount of fuel costs would not be recovered were similar increases in fuel costs to occur in the future.
"The analysis I made was to compute what the year end balance of deferred fuel costs would have been had CLECO practiced deferred fuel cost accounting. This study indicated a year end balance of approximately $1.5 million on a Louisiana retail basis and an average year amount of approximately $750,000. I will include $750,000 as a separate component of working capital. This amount provides reasonable protection for the possibility that actual fuel costs will not be recovered in the future due to the two month fuel adjustment clause lag."
In an attempt to rebut the Commission's case for the adjustment Mr. Peterson, CLECO's expert, testified:
"Q. Mr. Peterson, is recovery of fuel expense the only aspect of fuel utilization to be considered in a cost of service analysis?
"A. No. Even on a simplified basis, fuel utilization involves operating revenues, operating expenses, return, and rate base. Recovery of the O & M expense for fuel is only one consideration. Other considerations include determination of proper fuel inventory levels, payment schedules for fuel purchases, and the billing and collection cycles for the related service rendered. As established in the Working Capital Analysis as filed, collections under the fuel adjustment clauses as currently approved are distinct from base rate collections, and additional working capital is necessary due to the delay between expense incurrence and related collection.
"Mr. Louiselle's assumption of a deferred fuel cost accounting practice that is not in fact practiced by the Company, and his very incomplete fuel utilization analysis invalidates his working capital conclusions."
The foregoing is all the explanatory testimony contained in the record pertaining to the fuel cost adjustment. The record leaves much to be desired by one who has no expertise in the field.
As we understand the evidence, the utility argues that although only a brief delay was involved in the recovery of the "base" fuel rate, there was an additional two months delay in the recovery of fuel cost *132 adjustments. Mr. Louiselle acknowledged that there was an additional recurring two-month lag in the collection of revenues attributable to the fuel adjustment clause. However, rather than allow the full amount claimed by CLECO, the Commission accepted Mr. Louiselle's recommendation and included only the amount which was equal to the year end balance of deferred fuel costs which would have resulted had CLECO practiced deferred fuel cost accounting.
CLECO complains that this adjustment was unreasonable because, among other reasons, it does not practice deferred fuel cost accounting. This complaint has merit. The Commission has failed to show either in its evidence or its opinion why the actual accounting practice of the utility should be disregarded. There is no explanation of how deferred fuel cost accounting differs from the company's practice or why it is fair or more accurate from a regulatory standpoint. Accordingly, under the circumstances presented by the record herein, we find that the Commission's actions were unsupported by the evidence.
Other Specifications of Error
We have reviewed the other specifications of error filed by CLECO and find them to be without merit. The district court's affirmance of the Commission's order, with respect to the remaining issues was correctly based on well-settled principles of law expressed in the lower court opinion.[3]
Decree
For the reasons assigned, the judgment of the district court is reversed, the order of the Commission is vacated and set aside, and the case is remanded to the Public Service Commission for further proceedings.
REVERSED AND REMANDED.
ON APPLICATION FOR REHEARING
PER CURIAM.
Both appellant and appellee applied for rehearing. The applications are denied.
Our original opinion and decree are amended, however, to provide that the case shall be remanded to the public service commission to permit it to inquire into the fair rate of return of LIG during the test year and to make adjustments based thereon as indicated by the additional evidence to be presented by the parties; and to permit the parties to introduce additional evidence on the computation of working capital by the Commission. Furthermore, the determinations on these issues by the Commission shall be made within sixty days from this decision on the applications for rehearings, and this Court will retain jurisdiction of this matter under our supervisory jurisdiction for expeditious review; if the Company is dissatisfied with the Commission's decision on remand, it may by motion filed in this Court within fifteen days following the Commission's action bring the matter before us for further consideration.
REHEARING DENIED; OPINION AND DECREE AMENDED.
ORDER
It is ordered that this matter be brought before this Court for further consideration and that the entire record in this case, including that compiled by the Louisiana Public Service Commission on remand, be filed with the Clerk of this Court at the earliest possible date. Oral argument not contemplated. Movant to file brief within 15 days after transcript is lodged. Opponent shall have 30 days from lodging of transcript to file brief.
NOTES
[*] Judge Pike Hall, Jr., Louisiana Court of Appeal, Second Circuit, participated in this decision as an Associate Justice Ad Hoc.
[1] The Louisiana Consumer League, Incorporated was permitted to intervene in the instant proceeding pursuant to an order by this Court. Louisiana Consumer League, Inc. v. Louisiana Public Service Commission, 351 So.2d 128 (La. 1977).
[2] CLECO also applied for an increase in its gas rates. The Commission's denial of the gas rate application was affirmed by the district court, and CLECO appealed. However, the parties have informed the court that the appeal in the gas case has been rendered moot by a subsequent rate increase granted by the Commission.
[3] The district court's opinion made no mention of the company's charges that certain members of the Commission should be recused for bias. These charges border on being frivolous and do not deserve an extended answer. The company alleges only that some of the Commissioners have preconceived views about law or policy, not that they have attitudes of favoritism or animosity toward a particular party. Bias in the sense of crystallized point of view about issues of law or policy is almost universally deemed no ground for disqualification. See, K. Davis, Administrative Law Text, §§ 12.01-12.06 (3d ed. 1972).
| {
"pile_set_name": "FreeLaw"
} |
619 F.Supp.2d 854 (2009)
Constance LONDON, Plaintiff,
v.
SEARS, ROEBUCK & COMPANY, Defendant.
No. C 07-05148 JW.
United States District Court, N.D. California, San Jose Division.
May 28, 2009.
*857 Michael Paul Guta, John E. Hill, Law Offices of John E. Hill, Oakland, CA, for Plaintiff.
Todd Kenneth Boyer, Dennis M. Brown, Nathalie A. Le Ngoc, Littler Mendelson, San Jose, CA, for Defendant.
*858 ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT; GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
JAMES WARE, District Judge.
I. INTRODUCTION
Constance London ("Plaintiff") brings this diversity action against Sears, Roebuck and Co. ("Defendant" or "Sears"), alleging, inter alia, violations of the California Fair Employment and Housing Act ("FEHA"), Cal. Gov't.Code §§ 12900, et seq., and wrongful termination. Plaintiff alleges that Defendant improperly terminated her after she purchased baby clothes for her great granddaughter using her employee discount card.
Presently before the Court are the parties' cross-motions for summary judgment.[1] The Court conducted a hearing on March 16, 2009. Based on the papers submitted to date and oral argument, the Court DENIES Plaintiff's Motion for Summary Judgment and GRANTS in part and DENIES in part Defendant's Motion for Summary Judgment.
II. BACKGROUND
A. Undisputed Facts
On February 28, 2001, Plaintiff began working for Defendant as a sales associate; she was 68 years old.[2] Plaintiff worked for Defendant for six years, and was always paid on a commission basis. (London Depo. at 55-56.) Through her job as a sales associate, Plaintiff had a Sears Associate Discount Card ("Discount Card"), which she could use to obtain discounts on merchandise purchased in one of Defendant's stores. (Id. at 164-165, 212-13.) Defendant's Discount Card policy limited the use of Discount Cards to "personal use." (London Depo., Ex. 19 at 28.) Defendant's employees are allowed to purchase gifts with their Discount Card, but are prohibited from accepting reimbursements or making purchases that are not for their own personal use. (Id., Ex. 19 at 28, Ex. 23.)
On January 29, 2007, Plaintiff received a gift card from her granddaughter in Defendant's store and used the gift card in conjunction with her Discount Card to purchase baby clothes for her great granddaughter.[3] A few days later, Plaintiff was fired for improper use of her Discount Card because Defendant believed that she had used her employee discount with someone else's gift card.[4]
B. Procedural History
Plaintiff filed this action on August 3, 2007 in the Superior Court of California, County of Monterey. (Notice of Removal, *859 Ex. A, Docket Item No. 1.) Plaintiff alleges five causes of action: (1) Age Discrimination under the FEHA; (2) Wrongful Termination in Violation of Public Policy; (3) Recovery of Unpaid Wages; (4) Defamation; and (5) Intentional Infliction of Emotional Distress. On October 5, 2007, Defendant removed this action to federal court based on diversity jurisdiction. (Id.)
III. STANDARDS
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R.Civ.P. 56(c). The purpose of summary judgment "is to isolate and dispose of factually unsupported claims or defenses." Celotex v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
The moving party "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying the evidence which it believes demonstrates the absence of a genuine issue of material fact." Id. at 323, 106 S.Ct. 2548. The non-moving party must then identify specific facts "that might affect the outcome of the suit under the governing law," thus establishing that there is a genuine issue for trial. Fed.R.Civ.P. 56(e).
When evaluating a motion for summary judgment, the court views the evidence through the prism of the evidentiary standard of proof that would pertain at trial. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The court draws all reasonable inferences in favor of the non-moving party, including questions of credibility and of the weight that particular evidence is accorded. See, e.g. Masson v. New Yorker Magazine, Inc., 501 U.S. 496, 520, 111 S.Ct. 2419, 115 L.Ed.2d 447 (1991). The court determines whether the non-moving party's "specific facts," coupled with disputed background or contextual facts, are such that a reasonable jury might return a verdict for the non-moving party. T.W. Elec. Serv. v. Pac. Elec. Contractors, 809 F.2d 626, 631 (9th Cir.1987). In such a case, summary judgment is inappropriate. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. However, where a rational trier of fact could not find for the non-moving party based on the record as a whole, there is no "genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
Although the district court has discretion to consider materials in the court file not referenced in the opposing papers, it need not do so. See Carmen v. San Francisco Unified School District, 237 F.3d 1026, 1028-29 (9th Cir.2001). "The district court need not examine the entire file for evidence establishing a genuine issue of fact." Id., at 1031. However, when the parties file cross-motions for summary judgment, the district court must consider all of the evidence submitted in support of both motions to evaluate whether a genuine issue of material fact exists precluding summary judgment for either party. The Fair Housing Council of Riverside County, Inc. v. Riverside Two, 249 F.3d 1132, 1135 (9th Cir.2001).
IV. DISCUSSION
Plaintiff moves for summary judgment on her Second Cause of Action for wrongful termination in violation of public policy. Defendant moves for summary judgment on all of Plaintiff's causes of action. The Court considers Plaintiff's causes of action in turn.
*860 A. First Cause of Action: Age Discrimination in Violation of FEHA
Defendant moves for summary judgment on Plaintiff's FEHA claim on the ground that Plaintiff cannot produce any evidence creating a triable issue of fact as to whether she was discriminated against on the basis of her age. (Defendant's Motion at 9-10.)
"A person suffers disparate treatment in [his or her] employment when he or she is singled out and treated less favorably than others similarly situated on account of race." Cornwell v. Electra Central Credit Union, 439 F.3d 1018, 1028 (9th Cir.2006). To prevail on a claim of discrimination based on disparate treatment, a plaintiff must first establish a prima facie case that gives rise to an inference of unlawful discrimination. If the plaintiff succeeds in establishing a prima facie case, the burden then shifts to the defendant to articulate a legitimate, nondiscriminatory reason for its allegedly discriminatory conduct. If the defendant provides such a reason, then the burden shifts back to the plaintiff to show that the employer's reason is a pretext for discrimination. McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802-05, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973); Vasquez v. County of Los Angeles, 349 F.3d 634, 640 (9th Cir.2003). The McDonnell Douglas burden-shifting framework is also applicable to claims of discrimination pursuant to California law under FEHA. See Guz v. Bechtel Nat. Inc., 24 Cal.4th 317, 354, 100 Cal.Rptr.2d 352, 8 P.3d 1089 (2000).
A plaintiff may establish a prima facie case of disparate treatment by showing that: (1) she belongs to a protected class; (2) she performed her job satisfactorily; (3) she suffered an adverse employment action; and (4) her employer treated her differently than a similarly situated employee who does not belong to the same protected class. Cornwell, 439 F.3d at 1028 (citing McDonnell Douglas Corp., 411 U.S. at 802, 93 S.Ct. 1817). The only significant difference in the FEHA analysis is that, to establish a prima facie case, a plaintiff must demonstrate some other circumstances which suggest discriminatory motive. See Guz, 24 Cal.4th at 355, 100 Cal.Rptr.2d 352, 8 P.3d 1089. "The requisite degree of proof necessary to establish a prima facie case ... on summary judgment is minimal and does not even need to rise to the level of a preponderance of the evidence." Cordova v. State Farm Ins. Co., 124 F.3d 1145, 1148 (9th Cir.1997).
Since the four requirements of establishing a prima facie case under the McDonnell Douglas test are conjunctive, the Court first considers the evidence presented regarding the fourth factor, as it may be dispositive. Here, to show that Plaintiff cannot meet her burden of establishing a prima facie case, Defendant produces excerpts of Plaintiff's deposition testimony in which she repeatedly answers "No" when asked if she ever heard other Sears employees making comments about her age. (See London Depo. at 123, 131, 141-47, 248-50.)
Defendant also provides evidence regarding the events leading up to Plaintiff's termination. Luz Yanez, Defendant's Loss Prevention Detective and David Jackson, Defendant's Manager, observed Plaintiff taking a gift card and baby clothes from a female customer, walking to a register in another department of the store and using the gift card and her Discount Card to purchase the baby clothes. (Yanez Decl. ¶ 3; Boyer Decl., Ex. D at 18-19.) Yanez and Jackson also declare that they observed Plaintiff handing the baby clothes and gift card back to the female customer. (Yanez Decl. ¶ 3; Boyer Decl., Ex. D at 20.) Nathan Tate, Defendant's Loss Prevention Assistant Manager, conducted a *861 subsequent investigation.[5] Tate learned that the gift card used by Plaintiff was issued by a store in Pleasanton, California at the same time that Plaintiff was working at the store in Salinas, California. (Tate Decl. ¶ 3.) Tate conducted an interview of Plaintiff, during which she initially denied using her Discount Card, but later admitted she had used it. (Tate Decl. ¶ 6.) Tate presented the results of his investigation to Michael Peck, Defendant's General Manager at the location where Plaintiff was employed, who determined that Plaintiff had violated Defendant's Discount Card Policy and therefore terminated her employment. (Peck Decl. ¶ 8.)
Plaintiff attempts to rebut Defendant's evidence in three ways. First, Plaintiff provides the deposition testimony of her former supervisor John Ely, who admitted that Plaintiff had informed him that she owned the gift card that was used in conjunction with her Discount Card.[6] Second, Plaintiff provides the 30(b)(6) deposition testimony of Michael Peck, in which Peck admits that Defendant does not have a policy regarding the use of gift cards by associates. (Guta Opposition Decl., Ex. J at 52.) Third, Plaintiff provides her own declaration stating that Michael Peck was rude and did not acknowledge her when she said good morning. (London Decl. ¶ 2.) Plaintiff further states that, after she explained to Peck that it would be polite for him to say "good morning," he appeared angry and afterwards would leave the entrance door of the store open when it was cold despite her being over 70 years old. (Id.)
Plaintiff's evidence fails to establish that she was treated differently on account of her age. First, Ely's testimony that Plaintiff told him she owned the gift card does not suggest that her termination for misuse of her Discount Card was pretextual. Ely's testimony is only evidence of what Plaintiff told her supervisor. Plaintiff does not connect this testimony with evidence tending to show that her supervisor did not believe her story because of her age. Similarly, Defendant's lack of a policy regarding associates' use of Sears gift cards does not establish that the grounds for Plaintiff's termination was pretextual. Defendant's evidence shows that it terminated Plaintiff because it found that she violated the Discount Card policy, not the gift card policy. The lack of a gift card policy is irrelevant to whether Defendant had a discriminatory motive. Finally, Plaintiff's declaration that her store manager, Michael Peck, refused to greet Plaintiff in the morning and would leave the entrance door open when it was cold does not show she was treated differently than other similarly situated employees. Plaintiff provides no evidence as to how other employees were treated relative to her.
The Court finds that Plaintiff has failed to produce specific facts to raise triable issues as to whether Defendant treated her differently than a similarly situated employee who does not belong to the same protected class. The evidence submitted by Plaintiff are not the type of evidence that "might affect the outcome of the suit" because they are unrelated and irrelevant conjectures. Fed.R.Civ.P. 56(e). Thus, the Court finds that Plaintiff has failed to establish a prima facie case of age discrimination in violation of the FEHA.
*862 Accordingly, the Court GRANTS Defendant's Motion for Summary Judgment as to Plaintiff's First Cause of Action for age discrimination.
B. Second Cause of Action: Wrongful Termination in Violation of Public Policy
Plaintiff moves for summary judgment on her wrongful termination claim on the ground that there are no genuine issues of material fact as to whether Plaintiff was fired in violation of her fundamental right under California law to use a gift card. (Plaintiff's Motion at 5.) Defendant moves for summary judgment on the ground that Plaintiff cannot establish that she was terminated in violation of a public policy because there is no evidence that she was terminated for using a gift card.[7] (Defendant Sears, Roebuck, and Co.'s Reply Brief in Support of Its Motion for Summary Judgment, hereafter, "Reply," Docket Item No. 79.)
To prevail on a claim for wrongful discharge in violation of public policy, a plaintiff must prove (1) an employer-employee relationship; (2) the termination of plaintiff's employment was a violation of public policy; (3) the termination was a legal cause of plaintiff's damage; and (4) the nature and extent of plaintiff's damage. Holmes v. Gen. Dynamics Corp., 17 Cal. App.4th 1418, 1427 n. 8, 22 Cal.Rptr.2d 172 (1993). An employer can rebut evidence that it terminated a plaintiff in violation of public policy by showing that it acted in good faith and with a reasonable belief that good cause for terminating plaintiff existed. Cotran v. Rollins Hudig Hall Int'l, Inc., 17 Cal.4th 93, 103, 69 Cal. Rptr.2d 900, 948 P.2d 412 (1998).
Here, the public policy Plaintiff relies on is Cal. Civ.Code § 1749.6(a) which provides, in relevant part, that a "gift certificate constitutes value held in trust by the issuer of the gift certificate.... The value represented by the gift certificate belongs to the beneficiary, or the legal representative of the beneficiary." According to Plaintiff, since the value of a gift card belongs to the "beneficiary" or the "legal representative of the beneficiary," an issuer of a gift certificate cannot lawfully limit its use to the actual purchaser of the gift card. (Plaintiff's Motion at 5-6.) Thus, since Plaintiff had a right under § 1749.6(a) to use the gift card, Defendant violated this policy by terminating her in connection with that use. (Plaintiff's Motion at 6-7.)
However, Plaintiff concedes that it "is undisputed that [D]efendant terminated [P]laintiff ... claiming that she improperly used her Associate Discount Card when she made a purchase of a gift after receiving a gift card from her granddaughter...." (Plaintiff's Motion at 5.) Further, Defendant presents evidence that, after conducting an investigation, it determined in good faith that Plaintiff had violated the Sears' Discount Card policy. (See London Depo. at 167-72, 217-19; Tate Decl. ¶¶ 3-5; Peck Decl. ¶ 8; Boyer Decl., Ex. B at 25, 29-30.) The Court finds that the evidence is clear that Plaintiff was terminated because she violated Defendant's internal Associate Discount Card policy. Thus, Plaintiff cannot rely on the California gift card policy to assert her claim for wrongful termination.
Since the Court has found that Plaintiff has failed to make a prima facie showing *863 that Defendant discriminated against her because of her age, and that Plaintiff's reliance on the California gift card policy is unavailing, there is no predicate public policy upon which Plaintiff can base her wrongful termination claim.
Accordingly, the Court GRANTS Defendant's Motion for Summary Judgment on Plaintiff's Second Cause of Action.
C. Third Cause of Action: Recovery of Unpaid Wages
Plaintiff's wage claims are based on violations of Cal. Lab.Code §§ 201 and 226. (Notice of Removal, Ex. A ¶¶ 37-38.) Defendant moves for summary judgment on the following grounds: (1) Plaintiff was not entitled to her commission on the day she was terminated because she had not yet earned it; (2) Plaintiff's unpaid wages claims are based on events that occurred in 2004 and are thus barred by the statute of limitations; and (3) Defendant is not required to provide an actual copy of Plaintiff's pay stubs under Cal. Lab.Code. § 226. (Defendant's Motion at 19-21; Defendant's Reply at 15.)
1. Section 201
With respect to Plaintiff's claim under § 201, Defendant contends that Plaintiff signed a contract on the date of her termination under which she agreed to be paid her remaining commission at the end of the next period. (Defendant's Motion at 21.)
Under Cal. Lab.Code § 201, "[i]f an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately." Under California law, commission-based wages are not earned until all conditions precedent for receiving the commission are satisfied. Division of Labor Standards v. Dick Bullis, Inc., 72 Cal. App.3d Supp. 52, 57, 140 Cal.Rptr. 267 (1977). Thus, determining when a commission is earned "is dependent upon the terms of [an employee's] contract for compensation." Id. However, an employee's right to receive all wages earned on her last date of employment cannot be waived by contract. Cal. Lab.Code. § 206.5.
Here, Plaintiff's claim has two bases. Plaintiff contends that she was never paid wages for certain hours worked and that she was entitled to receive her entire outstanding commission on the date of her termination. With respect the first theory, Defendant presents evidence that, other than Plaintiff's commission wages, Plaintiff's claim that she was never paid certain wages concerns only work performed prior to May 6, 2004. (London Depo. at 63-64; 231-35; Boyer Decl., Exs. I, J.) Plaintiff does not provide any evidence indicating Defendant failed to pay her on any other occasion. The statute of limitations for wage claims under § 201 is three years. Cal. Civ.Code § 338. Plaintiff filed this action on August 3, 2007. Thus, the Court finds that Plaintiff may not recover for any wages she claims she was not paid prior to August 3, 2004.
Second, with respect to Plaintiff's commission that was paid after she was terminated in January 2007, Defendant provides the statement signed by Plaintiff on the date of her termination showing that she agreed to collect her commission on the last date of the following pay period. (London Depo. Ex. 35.) According to Defendant, this statement constitutes a contract under which Plaintiff agreed that she had not yet earned her commission. However, it is unclear whether the statement is an actual contract. Further, the statement does not set out any conditions precedent concerning when Plaintiff's commission is "earned." The statement merely provides that Plaintiff agrees she was *864 "not forfeiting [her] commission," and that she would receive her commission pay during the next "normal payroll distribution day." (Id.) Thus, the Court finds this statement is insufficient evidence to determine whether Plaintiff was owed her commission on the date she was terminated.
2. Section 226
With respect to Plaintiff's § 226 claim, Defendant contends that it provided Plaintiff with the required information. (Defendant's Reply at 14.)
Under Cal. Lab.Code § 226(a), an employer is required to provide its employees "semimonthly or at the time of each payment of wages" with certain enumerated information, including gross wages earned, total hours worked and all deductions.
In this case, Plaintiff attaches a document to the declaration of Plaintiff's counsel an itemized list containing the information required by § 226(a). (See Guta Decl., Ex. I.) Defendant contends that there can be no genuine issue of material fact that Plaintiff received the information required under § 226 since Plaintiff herself has produced such evidence. (Defendant's Reply at 15.) However, the declaration of Plaintiff's counsel explains that "On December 19, 2008, I made a request of [D]efendant to produce the records specified in the California Labor Code § 226. On January 13, 2009, [D]efendants [sic] counsel Todd Boyer produced [Exhibit I.]." Thus, there is no evidence indicating that Defendant provided Plaintiff with the necessary information "at the time" that Plaintiff received her payments. Specifically, there is no evidence in the record indicating that Plaintiff received this information when she was paid her commission after being terminated. Thus, the Court finds that there are triable issues of fact as to whether Defendant complied with § 226(a).
Accordingly, the Court DENIES Defendant's Motion for Summary Judgment as to Plaintiff's Third Cause of Action.
D. Fourth Cause of Action: Defamation
Defendant moves for summary judgment on Plaintiff's defamation claim on the ground that, inter alia, Defendant's communications to its employees concerning Plaintiff's termination are privileged against liability for defamation. (Defendant's Motion at 18-19.)
"Defamation is an invasion of the interest in reputation. The tort involves the intentional publication of a statement of fact which is false, unprivileged, and has a natural tendency to injure or which causes special damage." Ringler Associates Inc. v. Maryland Cas. Co., 80 Cal.App.4th 1165, 1179, 96 Cal.Rptr.2d 136 (2000). "Publication, which may be written or oral, is defined as a communication to some third person who understands both the defamatory meaning of the statement and its application to the person to whom reference is made." Id. Publication to a single individual is sufficient to satisfy the publication element of a defamation claim. Id.; see Smith v. Maldonado, 72 Cal.App.4th 637, 645, 85 Cal.Rptr.2d 397 (1999); see also Cal. Civ.Code § 46.
Cal. Civ.Code § 47(c) extends a conditional privilege against defamation claims to communication made without malice on a subject of mutual interest. "[B]ecause an employer and its employees have a common interest in protecting the work place from abuse, an employer's statements to employees regarding the reasons for termination of another employee generally are privileged." King v. United Parcel Service, Inc., 152 Cal. App.4th 426, 440, 60 Cal.Rptr.3d 359 (2007); see also Fisher v. Lucky Stores, *865 Inc., No. C 93-1019 FMS, 1994 WL 125104, at *6 (N.D.Cal. Apr. 4, 1994).
In this case, Plaintiff's defamation claim centers on Defendant's allegedly false statements made to Plaintiff and other Sears employees that Plaintiff received money from a woman and used it to make a purchase in conjunction with her Discount Card.[8] Any statements concerning Plaintiff taking money from someone and subsequently being fired are privileged communications as long as they are not made with malice. Here, Plaintiff fails to provide any evidence tending to show that Defendant made such statements with malice. Thus, the Court finds that any statements regarding the reason Defendant terminated Plaintiff are privileged from a defamation claim under California law.
Accordingly, the Court GRANTS Defendant's Motion for Summary Judgment as to Plaintiff's Fourth Cause of Action.
E. Fifth Cause of Action: Intentional Infliction of Emotional Distress Claim
Defendant moves for summary judgment on Plaintiff's intentional infliction of emotional distress claim on the ground that, inter alia, Plaintiff's claim is part in parcel with her FEHA claim, and therefore she has failed to provide any evidence showing extreme and outrageous conduct. (Defendant's Motion at 22-23.)
To prove a claim for intentional infliction of emotional distress, a plaintiff must show (1) extreme and outrageous conduct by the defendant either with intent or reckless disregard, (2) severe and extreme emotional distress suffered by the plaintiff, and (3) actual and proximate causation. Christensen v. Superior Court, 54 Cal.3d 868, 903, 2 Cal.Rptr.2d 79, 820 P.2d 181 (1991). To be outrageous, conduct "must be so extreme as to exceed all bounds of that usually tolerated in a civilized community." Davidson v. City of Westminster, 32 Cal.3d 197, 209, 185 Cal. Rptr. 252, 649 P.2d 894 (1982). In the employment context, a plaintiff must show that the defendant's conduct went "beyond what is to be expected from a normal employment relationship." Jersey v. John Muir Medical Center, 97 Cal.App.4th 814, 830, 118 Cal.Rptr.2d 807 (2002).
Here, as discussed above, Plaintiff has failed to provide sufficient evidence to establish triable issues of facts regarding discrimination against her on the basis of age or that she was terminated in violation of public policy. Other than the three unconnected pieces of evidence that Plaintiff has introduced in an attempt to create trial issues, the Court finds that in general, Plaintiff has failed to introduce specific facts to counter Defendant's evidence. On the contrary, Defendant has produced evidence showing that Defendant conducted an investigation and determined, on good faith, that Plaintiff had violated its Discount Card policy. Based on the record as a whole, a reasonable jury could not find that Defendant engaged in extreme and outrageous conduct in terminating Plaintiff.
Accordingly, the Court GRANTS Defendant's Motion for Summary Judgment as to Plaintiff's Fifth Claim for Relief.
V. CONCLUSION
The Court DENIES Plaintiff's Motion for Summary Judgment. The Court GRANTS in part and DENIES in part *866 Defendant's Motion for Summary Judgment as follows:
(1) The Court GRANTS Defendant's Motion for Summary Judgment as to Plaintiff's First, Second, Fourth and Fifth Causes of Action.
(2) The Court DENIES Defendant's Motion for Summary Judgment as to Plaintiff's Third Cause of Action.
With respect to the Third Cause of Action, the Court orders the parties to meet and confer and to make a good faith effort to resolve this claim. On or before June 15, 2009, the parties shall file a Joint Status Report to update the Court on their efforts. In the event that the parties cannot resolve this claim on their own, the Court will refer the parties to the Court's ADR program.
NOTES
[1] (Plaintiff's Points and Authorities in Support of Motion for Summary Adjudication, hereafter, "Plaintiff's Motion," Docket Item Nos. 35, 36; Defendant Sears, Roebuck and Co.'s Notice of Motion and Memorandum of Points and Authorities in Support of Its Motion for Summary Judgment, or in the Alternative, Partial Summary Judgment, hereafter, "Defendant's Motion," Docket Item No. 42.)
[2] (Declaration of Todd Boyer in Support of Defendant's Motion for Summary Judgment, Ex. A, hereafter, "London Depo.," Docket Item No. 49.)
[3] (Declaration of Constance London in Support of Motion for Summary Adjudication ¶ 4, hereafter, "London Decl.," Docket Item No. 3 8; Declaration of Luz Yanez in Support of Defendant's Motion for Partial Summary Judgment ¶ 3, hereafter, "Yanez Decl.," Docket Item No. 44.)
[4] (London Decl. ¶ 6; Declaration of Michael Peck in Support of Defendant's Motion for Summary Judgment ¶¶ 8-9, hereafter, "Peck Decl.," Docket Item No. 48.)
[5] (Declaration of Nathan Tate in Support of Defendant's Motion for Summary Judgment ¶¶ 3, hereafter, "Tate Decl.," Docket Item No. 46.)
[6] (Declaration of Michael P. Guta in Opposition to Motion for Summary Judgment, Ex. K, hereafter, "Guta Opposition Decl.," Docket Item No. 74.)
[7] Defendant also contends that Plaintiff cannot show that she was fired because of her age. (Defendant's Motion at 16.) However, in light of the above discussion concerning Plaintiff's First Cause of Action, the Court need not further consider Plaintiff's evidence of age discrimination.
[8] (Plaintiff's Opposition to Defendant's Motion for Summary Judgment at 8-9, Docket Item No. 63.)
| {
"pile_set_name": "FreeLaw"
} |
IN THE COURT OF APPEALS OF THE STATE OF IDAHO
Docket No. 39133
IN THE MATTER OF THE APPLICATION )
FOR HABEAS CORPUS. )
DOUGLAS WILLIAM FRIEDMAN, ) 2012 Unpublished Opinion No. 311
)
Petitioner-Appellant, ) Filed: January 6, 2012
)
v. ) Stephen W. Kenyon, Clerk
)
PAM SONNEN, SOUTH IDAHO ) THIS IS AN UNPUBLISHED
CORRECTIONAL INSTITUTION, IDAHO ) OPINION AND SHALL NOT
DEPARTMENT OF CORRECTION, ) BE CITED AS AUTHORITY
)
Respondent. )
)
Appeal from the District Court of the Fourth Judicial District, State of Idaho, Ada
County. Hon. Daniel C. Hurlbutt, District Judge.
Order dismissing petition for writ of habeas corpus, affirmed.
Douglas William Friedman, Boise, pro se appellant.
Hon. Lawrence G. Wasden, Attorney General, Boise, respondent, did not
participate on appeal.
________________________________________________
MELANSON, Judge
Douglas William Friedman appeals from the summary dismissal of his petition for writ of
habeas corpus relief. For the reasons set forth below, we affirm.
The writ of habeas corpus is a constitutionally mandated mechanism to effect the
discharge of an individual from unlawful confinement. See IDAHO CONST. art. I, § 5; I.C. §§ 19-
4201 to 19-4229; Mahaffey v. State, 87 Idaho 228, 231, 392 P.2d 279, 280 (1964); Gawron v.
Roberts, 113 Idaho 330, 333, 743 P.2d 983, 986 (Ct. App. 1987). The essence of habeas corpus
is an attack upon the legality of a person’s detention for the purpose of securing release where
custody is illegal and is an avenue by which relief can be sought where detention of an individual
is in violation of a fundamental right. In re Robison, 107 Idaho 1055, 1057, 695 P.2d 440, 442
(Ct. App. 1985). An in-state prisoner may file a petition for writ of habeas corpus to request that
1
a court inquire into state or federal constitutional questions concerning conditions of
confinement, the revocation of parole, miscalculation of a sentence, loss of good time credits, or
detainers lodged against the prisoner. I.C. §§ 19-4203(2)(a)-(e). Habeas corpus should not be
used as a substitute for, or in addition to, a direct appeal of a criminal conviction or proceeding
under Idaho Criminal Rule 35 or the Uniform Post-Conviction Procedures Act. I.C. § 19-
4203(4).
The decision to issue a writ of habeas corpus is a matter within the discretion of the court.
Johnson v. State, 85 Idaho 123, 127, 376 P.2d 704, 706 (1962); Brennan v. State, 122 Idaho 911,
914, 841 P.2d 441, 444 (Ct. App. 1992). When we review an exercise of discretion in a habeas
corpus proceeding, we conduct a three-tiered inquiry to determine whether the lower court
rightly perceived the issue as one of discretion, acted within the boundaries of such discretion,
and reached its decision by an exercise of reason. Brennan, 122 Idaho at 914, 841 P.2d at 444;
Sivak v. Ada County, 115 Idaho 762, 763, 769 P.2d 1134, 1135 (Ct. App. 1989). If a petitioner is
not entitled to relief on an application for a writ of habeas corpus, the decision by the petitioned
court to dismiss the application without an evidentiary hearing will be upheld. Brennan, 122
Idaho at 917, 841 P.2d at 447. When a court considers matters outside the pleadings on an
I.R.C.P. 12(b)(6) motion to dismiss, such motion must be treated as a motion for summary
judgment. Hellickson v. Jenkins, 118 Idaho 273, 276, 796 P.2d 150, 153 (Ct. App. 1990).
Friedman argues that he was improperly convicted because he was never indicted by a
grand jury. Friedman does not demonstrate how not being indicted by a grand jury affects the
conditions of his confinement, revocation of his parole, miscalculation of his sentence, loss of
good time credits, or a detainer lodged against him. See I.C. §§ 19-4203(2)(a)-(e). Friedman
cannot use a habeas proceeding to challenge the validity of his conviction or his sentence.
Therefore, we hold the district court did not abuse its discretion in summarily dismissing
Friedman’s petition.
Judge LANSING and Judge GUTIERREZ, CONCUR.
2
| {
"pile_set_name": "FreeLaw"
} |
864 F.Supp. 142 (1994)
In re IMMUNEX SECURITIES LITIGATION.
No. C92-548WD.
United States District Court, W.D. Washington, at Seattle.
August 29, 1994.
*143 Lynn Lincoln Sarko, Keller Rohrback, Seattle, WA, for Frank Laumer.
Anthony D. Shapiro, Rohan, Goldfarb & Shapiro, Seattle, WA, for Darmex Indus. Corp. Profit Sharing Trust, Maurice Rozenlum, and Nancy F. Sachs.
Steve W. Berman, Hagens & Berman, Seattle, WA, for Christopher S. Merriam-Leith, Howard B. Sirota, Bruce Murphy, Steven Ackerman, Martin Deutch, Daniel S. Choy, M.D. Pension Fund, Howard Rosen, Marsha Rubin, I.R.A. and Kurt Bailey.
John H. Bright, Lynn Lincoln Sarko, Keller Rohrback, Seattle, WA, for Frank Copeland and Cecil McGavern.
Steven Bert Frank, Frank & Rosen, Seattle, WA, for Henry Cole and Joanne Cole.
Ronald L. Berenstain, Perkins Coie, Seattle, WA, for Immunex Corp., Steven Gillis, Stephan Duzan, Michael L. Kranda, Kirby L. Cramer, C. Richard Kramlich and defendant Michael L. Kranda.
ORDER ON MOTION FOR AWARD OF ATTORNEY FEES AND REIMBURSEMENT OF EXPENSES
DWYER, District Judge.
I. INTRODUCTION
Following notice and hearing in accordance with Fed.R.Civ.P. 23, this securities class action has been settled for a compromise payment of $14,000,000. See Order of Dismissal With Prejudice (July 18, 1994) (Dkt. # 331). Counsel for the plaintiffs and class members now apply for an award of attorney fees, and reimbursement of litigation expenses, to be paid from the common fund. The notice sent to the class members advised them that the fee applied for would not exceed 30% of the settlement fund, plus interest earned thereon at the same rate interest is earned on the settlement fund. The statement in the notice referred to the gross settlement fund before deduction of litigation expenses. In response to this court's practice of awarding percentage contingent fees based on the net recovery after expenses, counsel have amended their application to seek 33 1/3 % of the net. The application as first filed showed only the percentage sought and the litigation expenses; it did not set forth counsel's hours of work performed or customary hourly rates. This additional information, which permits a "lodestar" computation, has now been provided at the court's request.
II. STANDARD TO BE APPLIED
No class member has objected to the fee request. Counsel have performed capably and have managed the work so as to avoid duplicative effort among the several firms on the plaintiffs' side. The court must nevertheless be careful to protect the interests of the settlement fund beneficiaries. As stated in In re WPPSS Litigation, 19 F.3d 1291, 1302 (9th Cir.1994):
Because in common fund cases the relationship between plaintiffs and their attorneys turns adversarial at the fee-setting stage, courts have stressed that when awarding attorneys' fees from a common *144 fund, the district court must assume the role of fiduciary for the class plaintiffs.
The fee awarded must be reasonable under the circumstances. Id. at 1295-96. In making the decision the court in a common fund case has discretion to use either the lodestar method or the percentage method. Id. The Ninth Circuit has summarized these approaches, and how they should be used, as follows:
Under the lodestar/multiplier method, the district court first calculates the "lodestar" by multiplying the reasonable hours expended by a reasonable hourly rate. Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 478 U.S. 546, 565, 106 S.Ct. 3088, 3098, 92 L.Ed.2d 439 (1986). The court may then enhance the lodestar with a "multiplier," if necessary, to arrive at a reasonable fee. Blum v. Stenson, 465 U.S. 886, 888, 104 S.Ct. 1541, 1543, 79 L.Ed.2d 891 (1984). Under the percentage method, the court simply awards the attorneys a percentage of the fund sufficient to provide plaintiffs' attorneys with a reasonable fee. Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 268, 272 (9th Cir.1989). Whether a court applies the lodestar or the percentage method, "we require only that fee awards in common fund cases be reasonable under the circumstances." Florida v. Dunne, 915 F.2d 542, 545 (9th Cir.1990) (emphasis added). Because a reasonable fee award is the hallmark of common fund cases, and because arbitrary, and thus unreasonable, fee awards are to be avoided, neither method should be applied in a formulaic or mechanical fashion.
Id. at 1294, n. 2.
The court's duty in this area corresponds to counsel's duty to their clients. In the State of Washington, for example, the canons of professional ethics require that "[a] lawyer's fee shall be reasonable." Washington Rule of Professional Conduct 1.5(a).
In the present case the lodestar method will be used as a cross-check on the percentage method, as often must be done to assure a fair and reasonable result. See In re WPPSS, 19 F.3d at 1296-98.
III. PERCENTAGE METHOD BASED ON NET RECOVERY AFTER DEDUCTION OF LITIGATION EXPENSES
For many years the plaintiffs' bar in this district customarily charged contingent fees as a percentage of the net recovery, i.e., the amount remaining after litigation expenses (costs of depositions, document copying, travel, expert witnesses, and so on) were reimbursed. That is still true of some firms but others now charge contingent fees based on the gross recovery. The difference is important, because the latter approach can result in a disproportionately high fee, or even in one which wipes out the client's recovery altogether.[1]
The American Bar Association Action Commission to Improve the Tort Liability System, in recommending that fees be based on the net, has stated:
Clients rarely think about the difference between net and gross recoveries when they enter contingent fee agreements (or indeed even when a case is settled), and the difference can be quite substantial and seriously affect the ratio of the plaintiff's recovery to that of the attorney.
American Bar Association, Report of the Action Commission to Improve the Tort Liability System 26 (1987).
For these reasons, some jurisdictions now require that percentage contingent fees relate to net awards, not gross. The United States District Court for the Eastern District of Texas, for example, has adopted the following provision:
Expenses incurred by attorneys that are directly related to the costs of litigation of individual cases shall be deducted from the award or settlement before any calculation or distribution is made for attorneys' fees. *145 No deduction is permitted for general office overhead expenses.
Civil Justice Expense and Delay Reduction Plan (E.D.Tex.1991), at Article Five.
Similarly, the State of Michigan provides by court rule that "[t]he amount [of the final fee] shall be computed on the net sum recovered after deducting from the amount recovered all disbursements properly chargeable to the enforcement of the action." Mich. Ct.R. 8.121(C).
A number of reported decisions have awarded fees as a percentage of the gross, without discussing and apparently without considering the alternative. See, e.g., Torris v. Tucson Elec. Power Co., 8 F.3d 1370, 1376 (9th Cir.1993); Six Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301, 1311 (9th Cir.1990). But a contingent fee is justified as a sharing of the benefit the lawyer has achieved for the client; and that consists, in turn, not of amounts paid to deposition reporters and hotels and airlines, but of what remains after such expenses. Thus the better approach, where the court is exercising discretion to award a reasonable fee, is that taken in Morganstein v. Esber, 768 F.Supp. 725, 727-28 (C.D.Cal.1991), i.e., "to award the percentage fee on the net award to the class, that is after deduction of costs." As the Morganstein court noted, this also encourages diligence in controlling expenses; the lawyer and the client share the goal of maximizing the net recovery.
IV. REIMBURSEMENT OF EXPENSES, INCENTIVE AWARD TO CLASS REPRESENTATIVES, AND COMPUTATION OF FEE BY PERCENTAGE METHOD
The record substantiates $501,840.76 in plaintiffs' litigation expenses, plus $443,356.18 in experts' fees and costs, making total out-of-pocket expenses of $945,196.94.
Plaintiffs also seek a $25,000 incentive award to be divided among the eleven class representatives whose lawsuit obtained benefits for their fellow shareholders. Such an award is proper, see, e.g., In re Dun & Bradstreet Credit Services Customer Litigation, 130 F.R.D. 366 (S.D.Ohio 1990), and is hereby approved.
The addition of $25,000 to the expense items summarized above makes a total of $970,196.94 to be deducted from the gross recovery of $14,000,000. The net recovery is thus $13,029,803.06.
Counsel's request for 33 1/3 % of that amount would yield a fee of $4,342,833, a figure higher than the maximum of 30% of the gross mentioned in the notice to class members. Under the circumstances of this case, an appropriate fee would be 30% of the net. The resulting fee of 30% of $13,029,803.06, or $3,908,940.90, should be checked by the lodestar method to make sure it is reasonable.
V. LODESTAR COMPUTATION WITH MULTIPLIER
The declarations and other materials filed by plaintiffs' counsel show that their fees for work done on this case, if charged at current hourly rates, would come to $2,463,752.70. The rates, which vary considerably according to counsel's age, experience, and geographic location, will be accepted for purposes of this order. Nothing in the record suggests that any of the hours claimed should be disallowed. The lodestar is thus $2,463,752.70.
Counsel for the class took a major risk in handling this litigation on a contingency basis. To restrict counsel to the hourly rates they customarily charge for non-contingent workwhere payment is assuredwould deprive them of any financial incentive to accept contingent-fee cases which may produce nothing. Counsel are therefore entitled to a multiplier for risk. See In re WPPSS, 19 F.3d at 1301-02. The fee produced by the percentage method, above, is equivalent to the lodestar figure multiplied by about 1.6. A multiplier of 1.6 would be reasonable in this case.
VI. CONCLUSION
For the reasons stated, it is ordered that:
1. Counsel for plaintiffs and the class are awarded reimbursement of litigation expenses in the amount of $945,196.94;
*146 2. The eleven named plaintiffs are granted an incentive award totalling $25,000;
3. Counsel for plaintiffs and the class are awarded a total fee equal to 30% of the net recovery after deduction of litigation expenses and the incentive award, i.e., 30% of $13,029,803.06;
4. The recipients of the above-awarded items will be entitled to their proportionate shares of interest earned by the settlement fund from and after the date of this order; and
5. The amounts awarded will be paid upon the expiration of the time for appeal from this order, or when any appeal is concluded, whichever is later.
NOTES
[1] For example, suppose that a contingent-fee case produced a disappointing award of $900,000 after $600,000 of litigation expense. If a one-third fee were charged against the gross, the lawyer would get $300,000 and the client would get nothing. If the fee were based on the net, the client would get $200,000 and the lawyer $100,000.
| {
"pile_set_name": "FreeLaw"
} |
287 F.Supp.2d 576 (2002)
SMITHKLINE BEECHAM CORPORATION and Beecham Group, P.L.C.
v.
GENEVA PHARMACEUTICALS, INC.
SmithKline Beecham Corporation
v.
Apotex Corporation, Apotex, Inc. and Torpharm, Inc.
SmithKline Beecham Corporation and Beecham Group, P.L.C.
v.
Zenith Goldline Pharmaceuticals, Inc.
SmithKline Beecham Corporation
v.
Apotex Corporation, Apotex, Inc. and Torpharm, Inc.
SmithKline Beecham Corporation and Smithkline Beecham, P.L.C.
v.
Geneva Pharmaceuticals, Inc.
SmithKline Beecham Corporation and SmithKline Beecham, P.L.C.
v.
Zenith Goldline Pharmaceuticals, Inc.
SmithKline Beecham Corporation and SmithKline Beecham, P.L.C.
v.
Apotex Corporation, Apotex, Inc. and Torpharm, Inc.
SmithKline Beecham Corporation and Beecham Group, P.L.C.
v.
Alphapharm Pty, Ltd.
SmithKline Beecham, P.L.C.
v.
Apotex Corporation, Apotex, Inc. and Torpharm, Inc.
SmithKline Beecham, P.L.C.
v.
Zenith Goldline Pharmaceuticals, and Sumika Fine Chemicals Co., Ltd.
SmithKline Beecham Corporation and Beecham Group, P.L.C.
v.
Andrx Pharmaceuticals, Inc., Andrx Pharmaceuticals, L.L.C. and Basf Corporation
SmithKline Beecham Corporation and SmithKline Beecham, P.L.C.
v.
Alphapharm Pty, Ltd.
SmithKline Beecham, P.L.C.
v.
Geneva Pharmaceuticals, Inc. and Sumika Fine Chemicals Co., Ltd.
Nos. 99-CV-02926, 99-CV-4303, 00-CV-1393, 00-CV-4888, 00-CV-5953, 00-CV-6464, 01-CV-159, 01-CV-10278, 01-CV-2169, 01-CV-2602, 01-CV-2981, 01-CV-3364, 01-CV-1484.
United States District Court, E.D. Pennsylvania.
September 30, 2002.
*577 *578 Arthur Makadon, Jamie B. Bischoff, Ballard, Spahr, Andrews & Ingersoll, Philadelphia, PA, Sally A. Steffen, Ballard, Spahr, Andrews & Ingersoll LLP, Philadelphia, PA, Ford F. Farabow, Jr., Walter Y. Boyd, Jr., Finnegan, Henderson, Farabow, Garrett & Dunner, Atlanta, GA, Kenneth M. Frankel, Richard B. Racine, Robert D. Bajefsky, Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, DC, for Plaintiffs.
Alan K. Cotler, Peggy B. Greenfeld, Reed Smith LLP, Philadelphia, PA, Patricia E. Campbell, Klett, Lieber, Rooney & Schorling, Philadelphia, PA, Peter F. Marvin, Marvin, Larsson, Hankin & Scheuritzel, Philadelphia, PA, Arlene Fickler, Hoyle, Fickler, Herschel & Mathes LLP, Wendi S. Meltzer, Hoyle, Morris & Kerr, Philadelphia, PA, John B. Starr, Jr., John C. Vetter, Lynne Darcy, Melissa L. Paddock, Steven J. Lee, Kenyon & Kenyon, New York, NY, Richard D. Kelly, William T. Enos, Oblon, Spivak, McClelland, Maier and Neustadt, P.C., Alexandria, VA, for Defendants.
MEMORANDUM AND ORDER
SURRICK, District Judge.
Presently before the Court are the Motions of Plaintiffs SmithKline Beecham Corp., Beecham Group, P.L.C. and SmithKline Beecham, P.L.C. (collectively, "SmithKline") for Leave to Amend the Complaint and Join a Party Defendant in Civil Action Nos. 99-CV-2926 (Doc. No. 26), 00-CV-1393 (Doc. No. 34), 00-CV-5953 (Doc. No. 11) and 00-CV-6464 (Doc. No. 34 in 00-CV-1393). For the reasons that follow, Plaintiffs' Motions will be granted.
I. Factual and Procedural Background[1]
SmithKline is the owner of a series of patents relating to its drug Paxil®, an anti-depressant that is among the most widely prescribed prescription drugs in the United States. Defendants Geneva Pharmaceuticals, Inc. ("Geneva") and Zenith Goldline Pharmaceuticals, Inc. ("Zenith") are generic drug manufacturers who have submitted Abbreviated New Drug Applications ("ANDA") to the federal Food and Drug Administration ("FDA") seeking approval to produce and market generic forms of Paxil®.[2]
Pursuant to the statutory framework of the 1984 Drug Price Competition and Patent Term Restoration Act (referred to herein as the "Hatch-Waxman Act" or the "Act"), Geneva's and Zenith's ANDAs were accompanied by "Paragraph IV" certifications that the applicable patents related to Paxil® are "invalid or will not be infringed by the manufacture, use or sale of the new drug for which the [ANDA] is submitted ..."[3]See 21 U.S.C. *579 § 355(j)(2)(A)(vii).
SmithKline filed the instant lawsuits against Geneva and Zenith, alleging that the filing of their respective ANDAs constitutes infringement of several of SmithKline's patents related to Paxil®. Specifically, in Civil Action No. 99-CV-2926, SmithKline's initial Complaint alleges that Geneva's submission of its ANDA infringed U.S. Patent No. 4,721,723 (the "'723 Patent"); No. 5,872,132 (the "'132 Patent"); and No. 5,900,423 (the "'423 Patent").[4] SmithKline subsequently filed a second action against Geneva (Civil Action No. 00-CV-5953), alleging infringement of U.S. Patent No. 6,080,759 (the "'759 Patent") and No. 6,113,944 (the "'944 Patent").[5] With respect to Zenith, SmithKline filed Civil Action No. 00-CV-1393, alleging infringement of the '723, '132 and '423 Patents, and Civil Action No. 00-CV-6464, alleging infringement of the '759 and '944 Patents.
In the instant Motions, SmithKline seeks leave to file an Amended Complaint in each case to add Sumika Fine Chemicals Co., Inc. ("Sumika") as a defendant. SmithKline asserts that the ANDAs submitted by Geneva and Zenith, which SmithKline has received in discovery, identify Sumika as the manufacturer of the paroxetine hydrochloride active ingredient used in the tablets that are the subject of the ANDAs. The following facts supporting the addition of Sumika are taken from SmithKline's proposed Amended Complaints.
Sumika is a corporation organized under the laws of Japan, and maintains offices in Osaka, Japan, as well as Chicago and New York. See Complaints, No. 00-CV-1393 at ¶ 9 and No. 00-CV-5953 at ¶ 13. Sumika is in the business of manufacturing and selling chemicals, including bulk pharmaceutical compounds, for distribution throughout the United States, including in this District. Id. SmithKline alleges that "Sumika provided paroxetine hydrochloride, information, and technical assistance that formed the basis of [Geneva's and Zenith's] ANDA for commercial marketing of paroxetine hydrochloride as an antidepressant." *580 See Complaints, No. 00-CV-1393 at ¶ 21 and No. 00-CV-5953 at ¶ 30. Upon providing the paroxetine hydrochloride, information and assistance, Sumika was aware of, at least, SmithKline's '723, '759 and '944 Patents. Id. SmithKline further alleges that in support of the ANDAs, Sumika filed Drug Master File ("DMF") No. 13,888 with the FDA for paroxetine hydrochloride and authorized the FDA to rely on the DMF in support of the ANDAs.[6]Id. Geneva and Zenith relied on Sumika's DMF "for a complete description of the paroxetine hydrochloride, including the physical and chemical characteristics and stability of the paroxetine hydrochloride," and if the ANDAs are approved, Sumika will make and sell the paroxetine hydrochloride used as the active ingredient in Geneva's and Zenith's generic product. Id.
Based on these allegations, SmithKline seeks to amend its Complaints to add claims against Sumika alleging that it infringed, induced the infringement of and/or contributed to the infringement of the '723, '132, '423, '759 and '944 Patents by submitting, or actively and knowingly aiding, abetting and inducing the submission of Geneva's and Zenith's ANDAs before the expiration of those patents. SmithKline further asserts that the manufacture, use, import, offer for sale, or sale of paroxetine hydrochloride tablets as an antidepressant upon approval of the ANDAs will directly infringe the claims of SmithKline's patents. See Complaints, No. 99-CV-2926 at ¶ 26; No. 00-CV-1393 at ¶ 22; No 00CV-5953 at ¶ 31; and No. 00-CV-6464 at ¶ 31. SmithKline alleges that Sumika's manufacture and sale of the paroxetine hydrochloride for the generic tablets will constitute, at the least, inducement of Geneva's and Zenith's direct infringement. See Complaints, No. 00-CV-1393 at ¶ 22; No 00CV-5953 at ¶ 31; and No. 00-CV-6464 at ¶ 31.
Geneva and Zenith have opposed SmithKline's Motions for leave to amend, arguing, inter alia, that the proposed amendments are futile because Sumika cannot be liable for the "artificial" act of infringement implicated by the submission of an ANDA under the Hatch-Waxman Act.[7]
II. Legal Standard
Pursuant to Fed.R.Civ.P. 15(a), leave to amend a complaint should be "freely given when justice so requires." In this Circuit, the Court of Appeals has instructed lower courts to apply a very liberal standard in considering whether to *581 grant leave to amend. Dole v. Arco Chem. Co., 921 F.2d 484 (3d Cir.1990). Nonetheless, a court may deny leave based on certain factors, such as "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by allowance of the amendment, futility of amendment, etc." Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962).
Futility is analyzed under the same standard of legal sufficiency as a motion to dismiss under Fed.R.Civ.P. 12(b)(6). See In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410 (3d Cir. 1997). In other words, leave to amend should not be denied based on futility unless the proposed amended complaint would "fail to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). When reviewing a claim of futility, the court assumes the truth of all the complaint's factual allegations. See Freedom Int'l. Trucks, Inc. of New Jersey v. Eagle Enterprises, Inc., 182 F.R.D. 172, 175 (E.D.Pa.1998).
III. Discussion
A. Statutory Framework
The claims in this litigation and, specifically, the proposed claims against Sumika, require application of certain provisions of the Hatch Waxman Act.[8] In order to expedite the approval of lower-cost generic drugs, the Act authorizes the submission of ANDAs, see 21 U.S.C. § 355(j)(2)(A) and note 3, supra, and creates an exemption or "safe harbor" for activities that would otherwise constitute patent infringement, to permit generic drug companies to experiment with a patented drug product for the purpose of obtaining regulatory approval for eventual commercial sale of the generic product.[9] That exemption is *582 set forth in 35 U.S.C. § 271(e)(1), which states:
It shall not be an act of infringement to make, use, offer to sell, or sell within the United States or import into the United States a patented invention (other than a new animal drug or veterinary biological product (as those terms are used in the Federal Food, Drug, and Cosmetic Act and the Act of March 4, 1913) which is primarily manufactured using recombinant DNA, recombinant RNA, hybridoma technology, or other processes involving site specific genetic manipulation techniques) solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products.
35 U.S.C. § 271(e)(1).
At the same time, the Hatch-Waxman Act includes provisions to guard against infringement of patents for pioneer drugs. See Eli Lilly, 496 U.S. at 676-77, 110 S.Ct. 2683. These provisions include the requirement that ANDA filers make one of four certifications regarding the term, validity and/or infringement of any patents related to the pioneer drug. See Note 3, supra. In addition, Section 271(e)(2) of the Act provides a remedy to the patent holder by permitting "the commencement of a legal action for patent infringement before the generic drug maker has begun marketing." H.R. Rep. 98-857(I), 1984 U.S.C.C.A.N. 2647, 2660-61. (See also Eli Lilly, 496 U.S. at 677-78, 110 S.Ct. 2683) (in order to enable the judicial adjudication upon which the ANDA scheme depends, the Act creates an "artificial" act of infringement consisting of the submission of an ANDA with an erroneous Paragraph IV certification). Section 271(e)(2) of the Act provides:
It shall be an act of infringement to submit -
(A) an application under section 505(j) of the Federal Food, Drug, and Cosmetic Act or described in section 505(b)(2) of such Act for a drug claimed in a patent or the use of which is claimed in a patent, ...
if the purpose of such submission is to obtain approval under such Act to engage in the commercial manufacture, use, or sale of a drug or veterinary biological product claimed in a patent or the use of which is claimed in a patent before the expiration of such patent.
35 U.S.C. § 271(e)(2)(A).
The forms of relief available under the Act are prescribed in Sections 271(e)(3) and (e)(4), which provide as follows:
(3) In any action for patent infringement brought under this section, no injunctive or other relief may be granted which would prohibit the making, using, offering to sell, or selling within the United States or importing into the United States of a patented invention under paragraph (1).
(4) For an act of infringement described in paragraph (2)-
(A) the court shall order the effective date of any approval of the drug or veterinary biological product involved in the infringement to be a date which is not earlier than the date of the expiration of the patent which has been infringed,
(B) injunctive relief may be granted against an infringer to prevent the commercial manufacture, use, offer to sell, *583 or sale within the United States or importation into the United States of an approved drug or veterinary biological product, and
(C) damages or other monetary relief may be awarded against an infringer only if there has been commercial manufacture, use, offer to sell, or sale within the United States or importation into the United States of an approved drug or veterinary biological product.
The remedies prescribed by subparagraphs (A), (B), and (C) are the only remedies which may be granted by a court for an act of infringement described in paragraph (2), except that a court may award attorney fees under section 285.
35 U.S.C. § 271(e)(3) and (4). In other words, in Section 271(e)(3), the Act precludes a remedy for the otherwise infringing activity expressly permitted by Section 271(e)(1). However, "[i]f a manufacturer goes beyond mere preparation, the remedies under Section 271(e)(4) are available." Upjohn Co. v. Mova Pharm. Corp., 899 F.Supp. 46, 49 (D.P.R.1995) (permitting drug manufacturer to seek injunctive relief under the Act because, even though manufacturer did not allege that the competitor was currently engaging in the commercial manufacture, use or sale of the infringing product, manufacturer's fear that competitor would do so was implicit in lawsuit.).
B. Analysis
In its proposed Amended Complaints, SmithKline seeks to bring claims against Sumika for direct infringement under Section 271(e)(1) and inducement of infringement under Section 271(b).[10] We address these claims seriatim.
*584 1. Direct Infringement
Geneva and Zenith argue that the proposed claim against Sumika under Section 271(e)(2) is futile because such a claim can only be stated against the party that submits the ANDA. We agree. Under Section 271(e)(2), the act of infringement is the submission of the ANDA for the purpose of obtaining FDA approval to commercially make, use or sell a drug claimed in a patent or the use of which is claimed in a patent before the patent's expiration. By its terms, the Act limits liability for direct infringement to the party submitting the ANDA.
This precise issue was considered by a court in the Northern District of Illinois in another case brought by SmithKline against a generic drug manufacturer that submitted an ANDA for its generic paroxetine hydrochloride product. Smithkline Beecham Corp. v. Pentech Pharm., Inc., No. 00 C 2855, 2001 WL 184804 (N.D.Ill. Feb.20, 2001). In the Pentech case, SmithKline sought leave to amend its complaint to add Asahi Glass ("Asahi"), the pharmaceutical chemical company that supplied the active ingredient and provided other assistance for the submission of Pentech's ANDA.[11]
The Court rejected SmithKline's contention that Asahi could be directly liable for infringement under Section 271(e)(2). The court explained:
Asahi cannot be held liable as a direct infringer under section 271(e)(2)(a) because Asahi did not submit the ANDA at issue. Rather, Asahi is the bulk manufacturer of the paroxetine hydrochloride active ingredient in Pentech's drug product and submitted a DMF to the FDA describing the manufacture of paroxetine hydrochloride used in Pentech's generic version of Paxil®. Smithkline's interpretation of section 271(e)(2)(a) as allowing a person other than the ANDA filer to be held liable for direct infringement under that section is not supported by the plain language of the statute. The plain language of the statute controls. VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1579 (Fed.Cir.1990). There is no reference in section 271(e)(2)(A) to suppliers of ingredients of generic drug products or preparers of DMFs relied on by ANDA *585 filers. Section 271(e)(2)(A) unambiguously refers only to persons who submit ANDAs.
Pentech, 2001 WL 184804 at *2. We find this reasoning persuasive. Moreover, as the court in Pentech noted, SmithKline has not offered any authority to support the proposition that a third party can be liable as a direct infringer under Section 271(e)(2) based its "participation" in another party's filing of an ANDA.
2. Inducement of Infringement
While we are satisfied that Sumika cannot be liable as a direct infringer, we conclude that SmithKline can state a claim against Sumika for inducement of infringement. See Pentech, 2001 WL 184804 at *3 (denying motion to dismiss claim for inducement of infringement against Asahi); Smithkline Beecham Corp. v. Pentech Pharm., Inc., No. 00 C 2855, 2002 WL 535082, *3-4 (N.D.Ill. April 10, 2002) ("Pentech II") (denying motion for summary judgment based on material dispute of fact regarding whether Asahi induced infringement of patents). Initially, we note that SmithKline's inducement claim against Sumika is not based merely on its provision of the paroxetine hydrochloride used in connection with the preparation of Geneva's and Zenith's ANDA's. SmithKline alleges that Sumika submitted its DMF for paroxetine hydrochloride in support of the ANDAs. According to SmithKline, Sumika authorized Geneva and Zenith to rely on the DMF in their submissions, which expressly incorporate and rely upon the DMF for a complete description of the paroxetine hydrochloride that is the sole active ingredient in their proposed products. The ANDAs further include Sumika's certificates of analysis and testing for the paroxetine hydrochloride. If Geneva's and Zenith's ANDAs are approved, Sumika will allegedly manufacture and sell the generic drug products that are the subject of the ANDAs. In short, SmithKline's theory is that Sumika collaborated as a partner with Geneva and Zenith, and actively and knowingly induced the act of infringement committed with the submission of their ANDAs.
As set forth above, Section 271(b) provides that "[w]hoever actively induces infringement of a patent shall be liable as an infringer." 35 U.S.C. § 271(b). The Federal Circuit Court of Appeals has explained that "actively inducing" under § 271(b) requires an affirmative act of some kind.
Of course inducement has connotations of active steps knowingly takenknowingly at least in the sense of purposeful, intentional as distinguished from accidental or inadvertent. But with that qualifying approach, the term is as broad as the range of actions by which one in fact causes, or urges, or encourages, or aids another to infringe a patent.
Tegal Corp. v. Tokyo Electron Co., Ltd., 248 F.3d 1376, 1378-79 (Fed.Cir.2001) (quoting Fromberg, Inc. v. Thornhill, 315 F.2d 407, 411, 137 USPQ 84, 87 (5th Cir. 1963)). See also Pentech II, 2002 WL 535082 at *3 ("Liability under § 271(b) attaches if a party `actively and knowingly aid[s] and abet[s] another's direct infringement."') (quoting Water Technologies Corp. v. Calco, Ltd., 850 F.2d 660, 668, (Fed.Cir.1988)). To be liable for inducing infringement, there must be an act of direct infringement by the party being induced, see Crystal Semiconductor Corp. v. TriTech Microelectronics Intern., Inc., 246 F.3d 1336, 1351 (Fed.Cir.2001), and the inducing party must (1) knowingly act and (2) specifically intend to aid in the infringement. Pentech II, 2002 WL 535082 at *3 (citing Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 553 (Fed.Cir. 1990)).
*586 Geneva and Zenith contend that inducement of infringement under § 271(b) requires direct infringement as defined in § 271(a). According to Defendants, the filing of an ANDA with a Paragraph IV certification is not an act of direct infringement. Rather, Defendants argue, the act of infringement defined in Section 271(e)(2) merely "employs a `legal fiction of a defined act of infringement' to create jurisdiction."[12]See Zenith Mem. in Opposition to Plaintiffs' Motion in Civil Action Nos. 00-CV-1393 and 00-CV-6464 (quoting Zeneca Ltd. v. Mylan Pharm., Inc., 173 F.3d 829, 836 (Fed.Cir.1999)) (Rader, concurring) (discussing nature of § 271(e)(2) infringement in the context of personal jurisdiction analysis).
Contrary to Defendants' arguments, we are not convinced that "direct infringement" is limited to the acts proscribed in § 271(a). Defendants cite Hoechst-Roussel Pharm., Inc. v. Lehman, 109 F.3d 756, 759 (Fed.Cir.1997), for the proposition that direct infringement is limited to "making, using, offering to sell, or selling the invention defined by the claims of a patent, without the authority of the patent owner." However, the quoted passage from Hoechst-Roussel simply recites a general definition offered in the context of an analysis of patent term extensions. The opinion contains no discussion of infringement under § 271(e)(2) or any particular provision of § 271.
Moreover, we have found nothing in the statutory language or legislative history that limits the application of § 271(b) to claims of infringement under § 271(a) or that treats the "act of infringement" defined in § 271(e)(2) as anything other than "direct infringement." Rather, the legislative history states that "[t]he purpose of Sections 271(e)(1) and (2) is to establish that experimentation with a patented drug product, when the purpose is to prepare for commercial activity which will begin after a valid patent expires, is not a patent infringement." H.R. Rep. 98-857(I), 1984 U.S.C.C.A.N. 2647, 2678 (emphasis added). By limitation, the foregoing suggests that experimentation with a patented drug for the purpose of beginning commercial activity before the patent expires is an act of direct patent infringement.
In our view, the legislative history indicates that while Congress intended to protect the pre-submission activity exempted under § 271(e)(1), the act of submitting an ANDA with a Paragraph IV certification or the active inducement of such a submission is a remediable act of infringement. The House Report explains:
The Committee expects that infringement actions pursuant to this section will only be brought in the instance described in Section 271(e)(2), where a party submitting an Abbreviated New Drug Application under Title I of this Bill certifies that a patent is invalid or noninfringed and gives the required notice of that certification to the patent owner. In the event the patent is found to be valid and infringed, so that the act of infringement described in Section *587 271(e)(2) has occurred, the remedies available to the court are three-fold.
If the infringing party has not begun commercial marketing of the drug, injunctive relief may be granted to prevent any commercial activity with the drug and the FDA would be mandated to make the effective date of any approved ANDA not earlier than the expiration date of the infringed patent.
H.R. Rep. 98-857(I), 1984 U.S.C.C.A.N. 2647, 2679 (emphasis added).
Accordingly, in the case of an act of infringement under § 271(e)(2), "injunctive relief may be granted against an infringer to prevent the commercial manufacture, use, offer to sell, or sale within the United States or importation into the United States of an approved drug...." 35 U.S.C. § 271(e)(4)(B). The language of this provision does not limit the availability of injunctive relief to the "direct infringer" or to the ANDA filer. Where neither the terms of the Act nor its legislative history contain any express language precluding inducement liability under § 271(b) for the act of infringement defined in § 271(e)(2), we will not write such a provision into the law. In short, we conclude that relief may be available against Sumika for its alleged inducement of infringement and, therefore, the proposed Amended Complaints are not futile.
IV. Conclusion
For the foregoing reasons, we will grant SmithKline's Motions for Leave to Amend its Complaints and permit the addition of claims for inducement of infringement against Sumika in Civil Action Nos. 99-CV-2926, 00-CV-1393, 00-CV-5953 and 00-CV-6464.
An appropriate order follows.
ORDER
AND NOW, this 30th day of September, 2002, upon consideration of the Motions of Plaintiffs SmithKline Beecham Corp., Beecham Group, P.L.C. and SmithKline Beecham, P.L.C. (collectively, "SmithKline") for Leave to Amend the Complaint and Join a Party Defendant in Civil Action Nos. 99-CV-2926 (Doc. No. 26), 00-CV-1393 (Doc. No. 34), 00-CV-5953 (Doc. No. 11) and 00-CV-6464 (Doc. No. 34 in 00-CV-1393), and all papers filed in support thereof or in opposition thereto, it is ORDERED that the above Motions are GRANTED. Within ten (10) days hereof, Plaintiff may join Sumika Fine Chemicals Co., Inc. ("Sumika") as a Defendant and may allege claims for inducement of infringement pursuant to 35 U.S.C. § 271(b) against Sumika in the above-captioned cases.
NOTES
[1] Additional background regarding these cases and the applicable statutory framework is set forth in the Court's September 29, 2001 Order consolidating the above-captioned actions for pretrial purposes.
[2] Geneva submitted ANDA No. 75-566, and Zenith subsequently submitted ANDA No. 75-691.
[3] The Hatch-Waxman Act provides the process by which a generic pharmaceutical manufacturer may file an ANDA to obtain expedited approval for a generic drug that is the equivalent of a drug previously approved by the FDA pursuant the New Drug Application process. See 21 U.S.C. § 355(j). The ANDA applicant must include, for each of the patents applicable to the previously approved "pioneer drug", a certification:
(I) that such patent information has not been filed [a "Paragraph I" certification],
(II) that such patent has expired [a "Paragraph II" certification],
(III) of the date on which such patent will expire [a "Paragraph III" certification], or
(IV) that such patent is invalid or will not be infringed by the manufacture, use, or sale of the new drug for which the application is submitted [a "Paragraph IV" certification]; ...
35 U.S.C. § 355(j)(2)(A)(vii). An ANDA applicant submitting a Paragraph IV certification must give detailed notice to the patent holder, who may then file an infringement action against the ANDA applicant within 45 days of receipt of the notice. If the patent holder does not file suit within 45 days, approval of the ANDA is effective immediately. 35 U.S.C. § 355(j)(5)(B)(iii).
[4] The "'723 Patent" claims, inter alia, "crystalline paroxetine hydrochloride hemihydrate and its use in treating depression;" the '132 Patent claims "a particular form of paroxetine hydrochloride hemihydrate (`Form C');" and the '423 Patent claims "a particular form of paroxetine hydrochloride anhydrate (`Form A')." See Complaint, No. 99-CV-2926 at ¶¶ 4, 6-7.
[5] The '759 Patent claims, inter alia, "paroxetine hydrochloride anhydrate Form A made according to a process set forth in the Patent, and a process for making paroxetine hydrochloride anhydrate Form A." See Complaint, No. 00-CV-5953 at ¶ 7. The '944 Patent claims, inter alia, "a pharmaceutical composition in tablet form containing paroxetine, produced on a commercial scale by a defined process." Id. at ¶ 9.
[6] A DMF is defined, in pertinent part, as:
[A] submission of information to the [FDA] by a person (the drug master file holder) who intends it to be used for one of the following purposes: to permit the holder to incorporate the information by reference when the holder submits an investigational new drug application under Part 312 or submits an application or an abbreviated application or an amendment or supplement to them under this part, or to permit the holder to authorize other persons to rely on the information to support a submission to FDA without the holder having to disclose the information to the other person. FDA ordinarily neither independently reviews drug master files nor approves or disapproves submissions to a drug master file. Instead, the agency customarily reviews the information only in the context of an application under Part 312 or this part.
21 C.F.R. § 314.420.
[7] In Civil Action No. 99-CV-2926, Geneva also argues that SmithKline has failed to allege sufficient facts to establish personal jurisdiction over Sumika. As SmithKline responds, and we agree, Geneva lacks standing to contest personal jurisdiction on Sumika's behalf. See Duttle v. Bandler & Kass, No. 82 Civ. 5084, 1992 WL 162636 (S.D.N.Y. June 23, 1992). Morever, we note that SmithKline named Sumika as an original defendant in Civil Action No. 01-CV-2602. While Sumika has filed a motion to dismiss the claims against it in that action, it has not raised lack of personal jurisdiction as a defense.
[8] As the Supreme Court explained in Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661, 669-70, 110 S.Ct. 2683, 2688-89, 110 L.Ed.2d 605 (1990):
[The Hatch-Waxman Act] was designed to respond to two unintended distortions of the 17-year patent term produced by the requirement that certain products must receive premarket regulatory approval. First, the holder of a patent relating to such products would as a practical matter not be able to reap any financial rewards during the early years of the term. When an inventor makes a potentially useful discovery, he ordinarily protects it by applying for a patent at once. Thus, if the discovery relates to a product that cannot be marketed without substantial testing and regulatory approval, the "clock" on his patent term will be running even though he is not yet able to derive any profit from the invention.
The second distortion occurred at the other end of the patent term. In 1984, the Court of Appeals for the Federal Circuit decided that the manufacture, use, or sale of a patented invention during the term of the patent constituted an act of infringement, ... even if it was for the sole purpose of conducting tests and developing information necessary to apply for regulatory approval. See Roche Products, Inc. v. Bolar Pharmaceutical Co., 733 F.2d 858, cert. denied, 469 U.S. 856, 105 S.Ct. 183, 83 L.Ed.2d 117 (1984). [Footnote omitted] Since that activity could not be commenced by those who planned to compete with the patentee until expiration of the entire patent term, the patentee's de facto monopoly would continue for an often substantial period until regulatory approval was obtained. In other words, the combined effect of the patent law and the premarket regulatory approval requirement was to create an effective extension of the patent term.
[9] Pursuant to 35 U.S.C. § 271(a), "whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent." As noted, supra, the Federal Circuit Court of Appeals held, in Roche, that the experimental use of a patented invention during the patent term constituted infringement. Roche Prods., Inc. v. Bolar Pharm. Co., Inc., 733 F.2d 858 (Fed.Cir.1984). Provisions of the Hatch-Waxman Act effectively overruled that decision. See H.R. Rep. 98-857(I), 1984 U.S.C.C.A.N. 2647, 2678-79 (referencing Roche and expressing Congress' intent to permit experimental use of a patented drug product and prevent the de facto patent extension that results when a generic drug maker cannot begin experimental use until the expiration of patents for the product).
[10] In Civil Action No. 99-CV-2926, SmithKline's proposed Amended Complaint also alleges contributory infringement under Section 271(c). Pursuant to that section,
Whoever offers to sell or sells within the United States or imports into the United States a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.
35 U.S.C. § 271(c).
It would appear that under this provision, any liability on the part of Sumika must necessarily be predicated upon its supply of the paroxetine hydrochloride used in the development and submission of Geneva's ANDA. However, under Section 271(e)(1), it is not an act of infringement to manufacture, use, offer to sell, sell or import a patented invention "solely for uses reasonably related to the development and submission of [an ANDA]." 35 U.S.C. § 271(e)(1). Rather, the infringement occurs when the activities go beyond mere preparation and the ANDA is submitted for the purpose of engaging in the commercial manufacture, use or sale of a patented product before the expiration of the patent. See 35 U.S.C. § 271(e)(2); Upjohn Co. v. Mova Pharm. Corp., 899 F.Supp. 46, 49 (D.P.R. 1995). Moreover, Section 271(c)(3) provides that:
In any action for patent infringement brought under this section, no injunctive or other relief may be granted which would prohibit the making, using, offering to sell, or selling within the United States or importing into the United States of a patented invention under paragraph (1).
35 U.S.C. § 271(e)(3).
Based on the plain language of these provisions, it appears that Sumika's activity of supplying a non-staple component of a patented invention, which would otherwise constitute contributory infringement under Section 271(c), is specifically protected by Section 271(e)(1)'s exemption and Section 271(e)(3)'s limitation on relief, because the component was supplied for the development of Geneva's ANDA. In this regard, we note that SmithKline does not allege contributory infringement in the Amended Complaints subsequently submitted with its Motions to Amend in Civil Action Nos. 00-CV-1393, 00-CV-5953 and 00-CV-6464. Moreover, the parties' briefs focus on the issue of inducement of infringement and do not provide more than a cursory analysis of contributory infringement in the context of Section 271(e). For the foregoing reasons, and because SmithKline appears to have abandoned contributory infringement as a theory of liability, we will assume that such a claim cannot be stated against Sumika.
[11] The grounds for SmithKline's claims against Asahi, which are virtually identical to the instant allegations regarding Sumika, were summarized by the Pentech court as follows:
Smithkline alleges that Asahi collaborated with Pentech in the research and development of Pentech's generic version of Paxil®, provided Pentech with paroxetine hydrochloride for use in clinical studies in support of Pentech's ANDA, and directed and encouraged Pentech and the FDA to rely on information that Asahi submitted to the FDA in support of Pentech's ANDA, specifically, Asahi's Drug Master File ("DMF") No. 14432 for paroxetine hydrochloride. [Footnote omitted]. Smithkline further alleges that Pentech relied before the FDA upon Asahi's DMF for a complete description of the paroxetine hydrochloride, including the manufacturing facilities and process, physical and chemical characteristics, and stability of the paroxetine hydrochloride made for Pentech. Smithkline believes that the Asahi DMF describes the production of crystalline paroxetine hydrochloride which infringes Smithkline's '723, '132, and/or '423 patents. If the FDA approves Pentech's ANDA, Asahi will be Pentech's solely approved manufacturer of the paroxetine hydrochloride to be used as the active ingredient in Pentech's generic drug product.
Pentech, 2001 WL 184804 at *1 (citations to complaint omitted).
[12] Geneva makes the similar argument that because "[t]here is no reference in § 271(e) to inducing infringement ... it would be improper to expand the carefully calibrated `highly artificial' act of infringement of § 271(e)(2) to include these additional causes of action." See Geneva's Mem. in Opposition to Plaintiffs' Motion in Civil Action Nos. 99-CV-2926 and 00-CV-5953 at 9 and 10, respectively. This assertion ignores the fact there is also no mention of inducing infringement in § 271(a), the provision Geneva relies on for its definition of "direct infringement." Likewise, the terms of the inducement provision, § 271(b), do not limit its application to particular acts of infringement defined under the Act.
| {
"pile_set_name": "FreeLaw"
} |
43 Cal.2d 512 (1954)
THOMAS H. KENNALEY, Petitioner,
v.
SUPERIOR COURT OF SAN MATEO COUNTY, Respondent; FRANK D. HILL, Real Party in Interest.
S. F. No. 19071.
Supreme Court of California. In Bank.
Oct. 22, 1954.
Sidney L. Berlin and Byron J. Snow for Petitioner.
No appearance for Respondent.
Hancock, Elkington & Rothert and Frank V. Kington for Respondent and Real Party in Interest. *514
TRAYNOR, J.
Petitioner Kennaley brought an action for damages against Frank D. Hill for assault and battery, false arrest, and malicious prosecution. Hill filed an answer and a cross-complaint alleging a cause of action for slander, which occurred as part of the transaction set forth in the complaint as the foundation of petitioner's claim. Petitioner then filed a notice of motion to dismiss the cross-complaint on the ground that no undertaking had been filed by the cross-complainant as required by section 830 of the Code of Civil Procedure. [fn. *] The motion was denied, and petitioner applies for a writ of prohibition.
[1] The writ of prohibition may issue, if there is no other adequate remedy and the lower court is proceeding in excess of its jurisdiction. (Code Civ. Proc., 1102, 1103; Housing Authority v. Superior Court, 35 Cal.2d 550, 556 [219 P.2d 457].)
[2] Petitioner does not have another adequate remedy, if the court is required under section 830 to compel the filing of the undertaking or dismiss the cross-complaint. [3] The order denying petitioner's motion to dismiss was not appealable. (Code Civ. Proc., 963.) Although it could be reviewed on an appeal from a final judgment, that relief would be inadequate. [4] If petitioner were forced to trial without the required security and had to await relief on an appeal from the final judgment, he would not have the benefit of the security "in the progress of the action," and the purpose of the statute would be defeated.
We therefore reach the question whether the court is proceeding in excess of its jurisdiction in refusing to dismiss the cross-complaint upon the cross-complainant's failure to file an undertaking pursuant to section 830. [5] A court acts in excess of its jurisdiction, as that term is used in determining whether the writ of prohibition will issue, if it acts in violation of a statute defining its powers. (Abelleira v. District Court of Appeal, 17 Cal.2d. 280, 291, 303 [109 P.2d 942, 132 A.L.R. 715].) [6] Section 830 provides that an *515 action for slander "shall be dismissed," if an undertaking is not filed, and it is clear that prohibition will lie in cases where the plaintiff in a slander action, after timely objection, fails to file the required undertaking. (Shell Oil Co. v. Superior Court, 2 Cal.App.2d 348, 352 et seq. [37 P.2d 1078]; see Abelleira v. District Court of Appeal, supra, 17 Cal.2d 288, 289.) [7] Although the filing of an undertaking is not necessary to vest jurisdiction in the first instance, and the defendant can waive the undertaking (Shell Oil Co. v. Superior Court, supra, 2 Cal.App.2d 348, 353-354; cf. Bried v. Superior Court, 11 Cal.2d 351, 354 [79 P.2d 1091]), no question of waiver is involved here, for the motion to dismiss was filed the day after the filing of the cross- complaint. We must therefore determine whether section 830 applies to a cross-complaint for slander as it does to a complaint alleging such a cause of action.
[8] The undertaking provided for in section 830 must be filed "Before issuing the summons in an action for libel or slander." (Italics added.) Section 832 provides "Within 10 days after the service of summons, any defendant may give to the plaintiff or his attorney notice that he excepts to the sureties. ..." (Italics added.) Thus both sections speak of the undertaking in connection with the summons, and under the plain language of section 830, the filing of the undertaking is made a condition to the issuing of the summons. [9] No such condition applies to a cross-complainant, for no summons issues on a cross-complaint unless new parties are brought in. (Code Civ. Proc., 442.)
[10] Petitioner stresses the last sentence of section 830, "An action brought without filing the required undertaking shall be dismissed," and, relying on section 22 of the Code of Civil Procedure [fn. *] and McKean v. German-American Sav. Bank, 118 Cal. 334, 341 [50 P. 656], contends that the word "action" therein includes a cross-complaint. The sentence in section 830 on which petitioner relies, however, must be read with the rest of the section. The sentence expressly refers to an action brought without filing the "required" undertaking, which is the undertaking required as a condition to issuing the summons. Since issuing summons is not required on a *516 cross-complaint such as we have here, the undertaking is not required.
Petitioner contends that the purpose of section 830 is to prevent the indiscriminate filing of defamation actions in bad faith to embarrass a defendant (Smith v. McDermott, 93 Cal. 421 [29 P 34]) and that cross-complaints are included within that purpose. [11] Cross-complaints, however, are filed only after a defendant has been brought into court by the filing of a complaint against him. [12] Furthermore, petitioner's argument would apply to counterclaims, yet a defendant having a legitimate cause of action for defamation may be forced to counterclaim to prevent the barring of a later action under section 439 of the Code of Civil Procedure, and such a counterclaim clearly would not come within the purpose of section 830. [13] Many claims can be pleaded as either cross-complaints or counterclaims and "It is only when the defendant's claim must necessarily be pleaded as a cross-complaint that 'the failure to assert it does not bar a later action.' " (Schrader v. Neville, 34 Cal.2d 112, 115 [207 P.2d 1057].) Hill's claim does not appear to be one that must necessarily be pleaded as a cross- complaint, but even if it were the undertaking would not be required. Had the Legislature intended the section to apply to either cross-complaints or counterclaims, it would have used language appropriate to that end. (See Code Civ. Proc., 1858.)
Keller Research Corp. v. Roquerre, 99 F.Supp. 964, on which petitioner relies, is not controlling here. The federal court there assumed, without discussing the provisions of section 830, that the section applies to a cross-complainant. Section 830 does not admit of that assumption.
The alternative writ is discharged, and the peremptory writ is denied.
Gibson, C.J., Shenk, J., Edmonds, J., Carter, J., Schauer, J., and Spence, J., concurred.
NOTES
[fn. *] *. "Before issuing the summons in an action for libel or slander, the clerk shall require a written undertaking on the part of the plaintiff in the sum of five hundred dollars ($500), with at least two competent and sufficient sureties, specifying their occupations and residences, to the effect that if the action is dismissed or the defendant recovers judgment, they will pay the costs and charges awarded against the plaintiff by judgment, in the progress of the action, or on an appeal, not exceeding the sum specified. An action brought without filing the required undertaking shall be dismissed."
[fn. *] *. "An action is an ordinary proceeding in a court of justice by which one party prosecutes another for the declaration, enforcement, or protection of a right, the redress or prevention of a wrong, or the punishment of a public offense."
| {
"pile_set_name": "FreeLaw"
} |
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 01-7918
BART FITZGERALD MCCLAIN,
Plaintiff - Appellant,
versus
NORTH CAROLINA DEPARTMENT OF CORRECTION,
Avery-Mitchell Facility; OFFICER FOX; OFFICER
EDWARDS; CODY BLAKE STEWART, Correctional
Officer; BRUCE C. CARPENTER, Correctional
Officer; JAY CARTER, Lieutenant,
Defendants - Appellees,
and
MARTY LOUDERMILK, Detective; CHRIS WARREN,
Detective at Alexander County Sheriff’s
Department,
Defendants.
No. 01-7999
BART FITZGERALD MCCLAIN,
Plaintiff - Appellant,
versus
NORTH CAROLINA DEPARTMENT OF CORRECTION,
Avery-Mitchell Facility; OFFICER FOX; OFFICER
EDWARDS; CODY BLAKE STEWART, Correctional
Officer; BRUCE C. CARPENTER, Correctional
Officer; JAY CARTER, Lieutenant,
Defendants - Appellees,
and
MARTY LOUDERMILK, Detective; CHRIS WARREN,
Detective at Alexander County Sheriff’s
Department,
Defendants.
Appeals from the United States District Court for the Western
District of North Carolina, at Asheville. Graham C. Mullen, Chief
District Judge. (CA-01-20-1-MU-2)
Submitted: April 18, 2002 Decided: April 25, 2002
Before MOTZ, TRAXLER, and GREGORY, Circuit Judges.
Dismissed by unpublished per curiam opinion.
Bart Fitzgerald McClain, Appellant Pro Se. Deborrah Lynn Newton,
Assistant Attorney General, James Philip Allen, Roy Cooper, OFFICE
OF THE ATTORNEY GENERAL OF NORTH CAROLINA, Raleigh, North Carolina,
for Appellees.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
2
PER CURIAM:
Bart Fitzgerald McClain appeals the district court’s orders
dismissing fewer than all the claims and parties in McClain’s
complaint filed pursuant to 42 U.S.C.A. § 1983 (West Supp. 2001)
(No. 01-7918), and dismissing McClain’s “Motion to Show Cause For
the Removal of Counsel” (No. 01-7999). We dismiss the appeals for
lack of jurisdiction because the orders are not appealable. This
court may exercise jurisdiction only over final orders, 28 U.S.C.
§ 1291 (1994), and certain interlocutory and collateral orders, 28
U.S.C. § 1292 (1994); Fed. R. Civ. P. 54(b); Cohen v. Beneficial
Indus. Loan Corp., 337 U.S. 541 (1949). The orders here appealed
are neither final orders nor appealable interlocutory or collateral
orders.
We dismiss the appeals as interlocutory. We dispense with oral
argument because the facts and legal contentions are adequately
presented in the materials before the court and argument would not
aid the decisional process.
DISMISSED
3
| {
"pile_set_name": "FreeLaw"
} |
674 P.2d 288 (1983)
ALASKA STATEBANK, Appellant,
v.
FAIRCO, a partnership d/b/a Clowntown, and James L. Dodson, Ronald M. Henry, and Andrew S. Warwick, Appellees.
No. 6720.
Supreme Court of Alaska.
November 25, 1983.
David W. Oesting, Davis, Wright, Todd, Riese & Jones, Anchorage, and Mary A. Nordale, Fairbanks, for appellant.
*289 James A. Parrish and Lance C. Parrish, Parrish Law Office, Fairbanks, for appellees.
Before BURKE, C.J., RABINOWITZ, MATTHEWS and COMPTON, JJ., and TUNLEY, Superior Court Judge.[*]
OPINION
RABINOWITZ, Justice.
In this case Fairco, the debtor, filed suit against Alaska Statebank (Statebank), the secured creditor, for damages allegedly sustained when Statebank proceeded against the collateral which secured Fairco's delinquent obligation to the bank. Fairco claimed that the course of negotiations between the parties had altered Statebank's rights under Alaska's version of the Uniform Commercial Code (UCC) and the written security agreement, precluding the bank from proceeding against the collateral without giving prior notice to Fairco. Statebank disputed Fairco's characterization of the effect of the negotiation process, relying upon the terms of the security agreement and the provisions of the Alaska UCC. After a nonjury trial the superior court ruled in favor of Fairco and this appeal followed.
I. FACTS
Fairco is a partnership formed by James L. Dodson, Ronald M. Henry and Andrew S. Warwick. Fairco owns and runs a retail store in the Bentley Mall in Fairbanks, operating under the tradename "Clowntown."
On February 2, 1977, Statebank loaned Fairco $120,000 with interest at 10 1/4.[1] A year later, in February 1978, Statebank made a second loan, in the amount of $50,000, to Fairco.[2] The security agreement given in connection with this $50,000 loan contained the following standard provision:
If borrower shall fail to pay when due any amount payable on any of the loans made hereby or on any other indebtedness of Borrower's secured hereby, or shall fail to observe or perform any of the provisions of this agreement, Borrower shall be in default hereunder. When Borrower is so in default, all of such loans and other indebtedness secured hereby shall become immediately due and payable at Bank's option without notice to Borrower, and Bank may proceed to enforce payment of the same and to exercise any or all rights and remedies afforded to Bank by the Uniform Commercial Code of Alaska or otherwise possessed by Bank.
The $50,000 note stated it was payable on demand or in installments $10,000 on June 15, 1978, $3,000 payments on September 15, October 15 and November 15,1978, and the balance by December 15, 1978.
The June 15 payment on the $50,000 note was not made. A revision agreement, executed by the partners and Fosheim on June 30, 1978, provided that the $3,000 payments would be made as scheduled and that the balance would be due December 15, 1978. Thus, the $10,000 payment was postponed until the end of the year under the new contract but other provisions remained unaltered.
The September 15 payment on the $50,000 note was not made. On October 1, the delinquency came to the attention of John Houlihan, senior vice president of Statebank and Fosheim's supervisor regarding loan-making and collection. He arranged for transfer of the account to Anchorage.
*290 The payment due on October 15, 1978 was not made. At this point, Houlihan obtained financial statements from Clowntown and discovered that it had insufficient income to pay its debts as they came due, that the original equity in the company had been eliminated by operating losses, and that the value of the collateral was diminishing more rapidly than the indebtedness to Statebank was being retired. Houlihan met with the partners on October 16 to discuss the delinquency. Fairco suggested that the Bank "roll" the note to delay repayment until after the Christmas selling season. Houlihan rejected the proposal and requested further financial information.[3]
Responsibility for the Fairco loans was assigned to Gerald Lewis, vice president of credit administration at Statebank, shortly after October 16.[4] On November 3, 1978, Lewis presented Fairco with a written proposal for granting the extension it sought for payment of the $50,000 loan. It required the partners to provide Statebank with deeds of trust on their personal residences as collateral for the note, stated that the note was in default, and extended repayment, $20,000 being due on January 15, 1979 and the balance on June 30, 1979. The deeds of trust were to be released upon payment in full of the $50,000 sum, provided that at that time the value of Clowntown's inventory exceeded its outstanding indebtedness to Statebank by 20%. The offer stated that it would expire at 1:00 p.m. on November 8, 1978.
Lewis contacted Henry and Dodson on November 6, 1978 and was informed that the partnership had agreed to a counter-proposal. By its terms, Fairco's outstanding indebtedness to Statebank of $130,000 would be refinanced over a five-year period with monthly payments of $2,900 at 12% interest. The proposal offered no additional collateral. There is a conflict between the testimony of Lewis and Dodson regarding the verbal exchange which followed. Dodson testified that Lewis simply thanked Dodson and hung up. Lewis testified that he said "Is this the only thing that you are able to do?", indicated that the proposal would not be agreeable to Statebank, thanked him and hung up. The trial judge accepted Dodson's version, but concluded that neither account of the exchange constituted a notice of default or demand for payment.
It was at this point that Lewis decided to proceed against the collateral. On November 6 at 8 p.m., accompanied by Fosheim and two other representatives of the Fairbanks branch, a locksmith and a police officer, Lewis proceeded to Clowntown. He identified himself to the manager and informed him that the store was being closed. Customers were asked to leave, but were not informed why the store was being closed. According to two of the local Statebank representatives and two customers who were present, Lewis conducted himself with an air of self-importance and appeared to be "charged up" by the takeover. The locks on the store were changed and receipts and accounts secured. Statebank set off Fairco's checking account against the sum it owed the bank. Outstanding checks presented for payment were not accepted, and the payees were informed that the account had been "closed."
On the morning of November 7, Fairco retook possession of the collateral and opened the store. Statebank presented the partnership with a written demand for payment of the two notes. On November 8, the partners executed the agreement which had been proposed by Statebank on November 3. Fairco's account at Statebank was charged $822.45 for the title insurance policies purchased on the partners' residences *291 which partially secured the new agreement. No notice was given to the partners that this sum would be deducted from their account.
Fairco refinanced the loan at another institution and paid its obligation to Statebank in full on January 16, 1979. On January 25, 1979, the deeds of trust on two of the residences were released. After repeated demands from Henry the encumbrance on his house was finally released on June 7, 1979, two weeks after the instant suit was filed. Henry testified that Lewis admitted to him that Statebank was holding the deed of trust because of difficulties he was experiencing in repaying unrelated obligations, and that the failure to release it earlier had been an "oversight on purpose."
II. PROCEEDINGS IN THE SUPERIOR COURT
Fairco filed suit against Statebank, alleging that the Bank had acted unreasonably in repossessing the collateral, damaging the partners' business and personal reputations and causing various unnecessary expenditures. Fairco argued that Statebank had breached the duty of good faith imposed by the Alaska UCC at AS 45.01.203 by closing the store in order to coerce the partners to put up additional security. Fairco sought both compensatory and punitive damages.
After a trial without a jury, the superior court concluded that by their course of dealing the parties had modified the contract to relieve Fairco of its obligation to pay sums due under the note. The court found that Fairco was not in default at the time Statebank took possession of its collateral and thus held that the breach did not give rise to remedies under the UCC and written security agreement. Alternatively, the superior court concluded that even if a default existed, Statebank had waived its right to seize the collateral or was estopped to assert this right until after the Christmas selling season without making a prior demand for payment and giving notice of default. In failing to provide prior notice of its intention to take possession of the store, Statebank had, the superior court found, violated its duty under the UCC to conduct itself in good faith in its dealings with Fairco. Statebank was held liable for defamation in publicizing Fairco's justified failure to pay its debts and wrongfully dishonoring checks drawn on its account. Finally, the superior court found that Statebank had converted funds in Fairco's account by charging it for title insurance without giving the partners prior notice of its intention to do so.
Plaintiffs Henry and Warwick were awarded $3,000 and $10,000 respectively as compensatory damages for harm to their business reputations, and Fairco was awarded $4,800 for labor expended in correcting problems arising from the repossession, $822.25 for sums withdrawn to pay for the title insurance and $35,000 in exemplary and punitive damages. The superior court also awarded costs and attorney's fees. This appeal followed.
III. STATEBANK'S STATUTORY AND CONTRACTUAL RIGHT TO PROCEED AGAINST ITS COLLATERAL WAS ABROGATED BY VIRTUE OF PRINCIPLES OF MODIFICATION, WAIVER AND ESTOPPEL
There is no dispute that payments due on the $50,000 note on September 15, 1978 and October 15, 1978 had not been made by November 6, 1978, when Lewis took possession of Clowntown. Thus, it is indisputable that Fairco was in default under the terms of the February 1978 written agreement, as revised.[5]
*292 The issue here is whether the oral statements and conduct of the parties between September 15, 1978 and November 6, 1978 had modified the written agreement so that prerepossession notice was required. Statebank argues that the conduct and statements of the parties were "mere negotiations" which did not result in an offer and acceptance and thus did not affect the legal relations established by the written agreement. In National Bank of Alaska v. J.B.L. & K. of Alaska, Inc., 546 P.2d 579, 586-87 (Alaska 1976), we observed that modification of a written contract may be effected either through subsequent conduct or oral agreements. Whether a modification has occurred is a question of fact. The superior court found that the parties had agreed to such a modification, "[g]iven the course of dealings between the parties, the fact of the continued negotiation and the lack of outstanding demand for payment."[6] More particularly, the superior court, in part, found the following:
The partners left the October 16, 1978 meeting with the objectively and subjectively reasonable impression that Fairco would not be required to make payments on the $50,000 note until after the Christmas selling season.[7]
... .
By its conduct and course of dealing Alaska Statebank led the principals into believing that payments on the $50,000 note were not currently required and that no default existed. Fairco reasonably relied on that belief.
... .
Given the course of dealing between the parties, the fact of the continued negotiation and the lack of outstanding demand for payment, no default existed on either the $50,000 note or the $120,000 note on the date possession was taken. Even if a default on the $50,000 [note] did exist, Alaska Statebank waived the default and was further estopped to rely on any default as a ground for taking possession without first demanding payment or giving notice of default.
Our review of the record in the case at bar fails to persuade us that the superior court's findings of fact are clearly erroneous. Several courts on fact situations similar to that presented in the instant case have held that the course of dealings between the parties altered rights established under pre-existing agreements so that prerepossession notice was required. In the absence of such notice, a repossession was held to be wrongful. In Nevada National Bank v. Huff, 94 Nev. 506, 582 P.2d 364, 369 (1978), the court reasoned that:
[I]t is clear that even though no outright waiver of a secured party's right to rely upon [a clause in the agreement authorizing him to declare a default and repossess the chattel] occurs through a course of dealing involving the acceptance of late payments, a secured party who has not insisted upon strict compliance in the past, who has accepted late payments as a matter of course, must, before he may validly rely upon such a clause to declare a default and effect repossession, give notice to the debtor (lessee) that strict compliance with the terms of the contract *293 will be demanded henceforth if repossession is to be avoided.[8]
(Emphasis by the court.) Similarly, in Pierce v. Leasing International, Inc., 142 Ga. App. 371, 235 S.E.2d 752 (1977), the court held that a creditor was estopped from repossessing its collateral without giving the debtor notice that arrearages were immediately due and payable:
[I]f [the creditor] has given the debtor the reasonable impression that late payments will be accepted or that an arrearage need not be paid immediately, then the creditor may be estopped to engage in self-help repossession until he has given notice, demanded payment or otherwise indicated to the debtor that he is considered to be in default.
Id. at 754 (citations omitted).
On the basis of the foregoing, we affirm the superior court's conclusion that in the particular factual context of this case Statebank's repossession and closure of the Clowntown store were wrongful.[9]
IV. STATEBANK UNJUSTIFIABLY DELAYED IN RELEASING THE DEED OF TRUST ON HENRY'S PROPERTY
The agreement signed by Statebank and Fairco on November 8, 1978 provided that the deeds of trust on the partners' residences would be released upon payment of the underlying obligations they secured. Those loans were paid in full on January 16, 1979. Despite the repeated oral demands, the deed of trust on Mr. Henry's residence was not released until June 7, 1979, although the remaining two had been released on January 25, 1979. The superior court concluded that Statebank breached a legal duty to Henry in failing to release the deed on his house promptly.
Statebank argues on appeal that its conduct was justified under AS 34.20.050, which requires that a mortgagee make a written request to the mortgagor before the mortgagor may be penalized for failing to discharge the mortgage after the underlying obligation has been paid in full. Since Henry failed to make a written request, Statebank argues it did not have a legal obligation to release the deed.
Fairco does not controvert Statebank's claim that AS 34.20.050 governs deeds of trust, but argues that Statebank's duty to release the property was founded upon the parties' contract rather than a statutory provision. The November 8 agreement did not state that a written request was a prerequisite to the release of the partners' deeds of trust. All preconditions to release contained therein were fulfilled on January 16, 1979. We agree with Fairco that Statebank's duty to request release of the deed of trust matured on that date. Its failure to fulfill this obligation constituted a breach of the agreement embodied in the November 8 contract. Thus, we hold that the superior court was correct in its ruling that Statebank unjustifiably delayed in releasing the deed of trust on Henry's property.
V. DAMAGES
The three acts which gave rise to the damages awarded in this case were Statebank's "repossession" of the collateral contained in Clowntown (the closure lasted from 8 p.m. to 11 p.m. on November 6, 1978), its refusal to honor checks drawn by Fairco presented to it for payment on November 7, 1978 (Statebank marked them "Account Closed"), and its failure to notify Fairco that it would charge its account for title insurance taken out on the partners' residences. The superior court decided that these acts gave rise to causes of actions sounding in tort conversion and defamation. Two of the Fairco partners were *294 awarded compensatory damages for harm done to their business reputations by the closure of Clowntown and dishonor of Fairco checks. Fairco was awarded compensatory damages for time spent remedying the problem arising from the foreclosure, for wrongful dishonor and for sums withdrawn from its account for title insurance. Fairco was also awarded $35,000 in punitive damages.
A. Award for time spent remedying problems arising from foreclosure and dishonor
Fairco was awarded $4,800 as compensation for time spent remedying problems arising from the repossession and dishonor. Our review of the record has persuaded us that the evidence in support of this award is insufficient. Therefore, this portion of the superior court's damage award must be reversed and set aside.[10]
B. Damages for defamation
The superior court concluded that the repossession of Clowntown and seizure of its deposit account damaged the business reputations of Henry and Warwick.[11] The superior court awarded Warwick $10,000 and Henry $3,000 in compensatory damages for harm done to their business reputations. Review of the record indicates that Warwick was alleging harm arising primarily out of the repossession, while Henry based his claim on both the repossession and the wrongful dishonor.[12] We have concluded that the compensatory damage awards made to Henry and Warwick for injury to their business reputations should be sustained since we are of the opinion that Statebank's repossession of the collateral closure of Clowntown constituted conduct which was defamatory per se and that the size of the defamation award was not manifestly unjust.
Statebank's conduct was clearly defamatory despite the fact that the statement communicated by the repossession was not actually verbalized. In M & S Furniture Sales Co., Inc. v. Edward J. De Bartolo Corp., 249 Md. 540, 241 A.2d 126 (Md. App. 1968), a commercial tenant in a shopping center sued his landlord for defamation after the landlord locked him out of the store. The tenant alleged that customers and business associates would interpret the lockout as a statement that the tenant had failed to honor his commercial obligations. *295 In fact, all rent had been paid and there was no justification for the defendant's conduct. The court held that this action, unaccompanied by words, could sustain a suit for defamation. 241 A.2d 126 at 128. See also Schultz v. Frankfort Marine Accident & Plate Glass Ins. Co., 151 Wis. 537, 139 N.W. 386, 390 (1913) (actual pursuit and public surveillance of a person and his home are actionable as being defamatory).[13]
Similarly, in the case before us, Statebank's act of closing Clowntown was suggestive of Fairco's failure to honor financial obligations, constituting a "statement" that spread throughout the business community and impaired Henry's and Warwick's relationships with customers, clients, employees, business associates and suppliers.[14]
We now turn to an assessment of the propriety of the damage award. As a threshold matter, it is necessary to determine whether the offensive statement was defamatory per se or per quod.[15] The general rule is that a plaintiff need not allege or prove (special) damages resulting from publication of a statement that is libelous per se[16] whereas evidence of specific harm suffered must be adduced if the statement is not defamatory on its face. It has been held that statements injurious to plaintiff's business reputation are defamatory per se, Cook v. Safeway Stores, Inc., 266 Or. 77, 511 P.2d 375, 378 (1973) (en banc), and, in particular, that where "the words spoken by the defendant were such as to either impute a crime to the plaintiff or to affect his credit and financial reputation by imputing financial difficulty or dishonesty" recovery is permitted without proof of special damages. Cinquanta v. Burdett, 154 Colo. 37, 388 P.2d 779, 780 (1963) (en banc). Proof of actual damages was therefore not necessary to support the awards to Henry and Warwick for harm done to their business reputation by closure of the store.
Appellate courts permit the trier of fact a great deal of latitude in determining the magnitude of such damage awards. Since proof of damages is not required if words are deemed actionable per se, they clearly cannot be computed with mathematical certainty. Eslinger v. Henderson, 80 N.M. 479, 457 P.2d 998, 1000 (1969). In Bertero v. National General Corp., 13 Cal.3d 43, 118 Cal. Rptr. 184, 529 P.2d 608 (1974), the court observed that:
The fixing of ... damages [for harm suffered to intangible interests such as *296 reputation] has long been vested in the sound discretion of the trier of fact ... subject only to the passion and prejudice standard.
Id. at 624 (citations omitted). Similarly, in American National Watermattress Corp. v. Manville, 642 P.2d 1330, 1340 (Alaska 1982), we reiterated with approval the standard to be used in deciding whether a damage award is excessive which was enunciated in Beaulieu v. Elliott, 434 P.2d 665 (Alaska 1967). In Beaulieu, a judge-tried case, the court stated:
We shall not set aside an award on a claim of excessiveness unless it is so large as to strike us that it is manifestly unjust, such as being the result of passion or prejudice or a disregard of the evidence or rules of law.
642 P.2d at 1340, quoting 434 P.2d at 676 (footnote omitted) (emphasis added by American National court). In light of the above we conclude neither award is excessive.[17]
C. Punitive Damages
The superior court awarded Fairco $35,000 in punitive damages. Implicit in the superior court decision is its conclusion that Statebank's wrongful repossession and dishonor constituted the principal bases for its award of punitive damages. Thus, the issue on appeal is whether punitive damages may be awarded for the wrongful repossession and dishonor of checks.[18]
Statebank's position that the punitive damage award must be reversed since the wrongful conduct constituted breach of contract is simply incorrect. Punitive damage awards have been sustained in several wrongful repossession cases. The propriety of these judgments has been gauged according to principles generally invoked when exemplary damage judgments are challenged. In Sturm, Ruger & Co., Inc. v. Day, 594 P.2d 38 (Alaska 1979), on rehearing, 615 P.2d 621 (Alaska 1980), on rehearing, 627 P.2d 204 (Alaska 1981), cert. denied, 454 U.S. 894, 102 S.Ct. 391, 70 L.Ed.2d 209 (1981), it was observed that in order to recover punitive damages, the plaintiff must prove that the wrongdoer's conduct was outrageous, such as acts done with malice or bad motives or a reckless indifference to the interests of another. Actual malice need not be proved. 594 P.2d at 46. Accord, Bridges v. Alaska Housing Authority, 375 P.2d 696, 702 (Alaska 1962). Courts considering the propriety of exemplary damage awards in cases such as the instant one, have refused to countenance arguments that they were inappropriate in these situations:
We conclude that there was sufficient evidence from which the jury could have concluded that defendant's conduct amounted to deliberate disregard of or reckless indifference to plaintiff's rights in the trailer. The trial court did not err in submitting the issue of punitive damages to the jury.
Compton v. Creager Trucking Co., Inc., 282 Or. 521, 579 P.2d 1297, 1301 (1978) (footnote omitted). See also Ford Motor Credit Co. v. Milline, 137 Ga. App. 585, 224 S.E.2d 437, 440 (1976) (punitive damages will be allowed *297 upon a showing of wantonness or oppression).
In some instances, courts have conditioned an award of punitive damages for wrongful repossession upon a showing of actual malice. See Henderson v. Maryland National Bank, 278 Md. 514, 366 A.2d 1, 4 (1976); Lawrence v. Graham, 29 Md. App. 422, 349 A.2d 271, 275 (1975); Sopkin v. Premier Pontiac Inc., 539 P.2d 1393, 1397 (Okl.App. 1975). A finding that the creditor was acting under a mistaken belief that it had the legal right to repossess the collateral has led these courts to conclude that punitive damage awards were unjustified. The Lawrence court found that the defendant had acted under an honest but mistaken assertion of a right and disallowed punitive damages. Even when courts have not explicitly required a showing of actual malice, they have not permitted punitive damages to be awarded in cases of honest mistake. See, e.g., Ford Motor Credit Co. v. Milline, 137 Ga. App. 585, 224 S.E.2d 437, 440 (1976); Compton v. Creager Trucking Co., Inc., 282 Or. 521, 579 P.2d 1297, 1301 (1978) (no punitive damages permitted if it is clear that defendants' acts were prompted by a misunderstanding by them of their legal rights).[19]
Our review of the entire record has led us to the conclusion that the superior court's award of punitive damages arising from Statebank's wrongful repossession should be sustained. The superior court found "as a reasonable inference" that Statebank intended to take possession of the Fairco premises "in order to accomplish its objective of obtaining additional collateral not only on the $50,000 loan, but also on the $120,000 loan." The superior court further concluded in part that:
(29) Given all the facts and the circumstances, the bank's conduct in the handling of the negotiations and in taking possession, its motive, and purpose, this Court finds that the Bank was not acting "honestly in fact" and was specifically acting for the purpose of setting an example and putting plaintiffs under duress to coerce them to agree to terms to which the plaintiffs were not obligated to agree. As such, the Bank's conduct was willful, wanton, outrageous, reckless, and without regard to the interests of the plaintiffs.[20]
*298 The record shows that Statebank violated standard banking practices in taking collateral for purposes other than insuring its availability to satisfy debts. Statebank acted to make an example of Fairco, and to subject Fairco to duress in order to coerce Fairco into agreeing to terms which a creditor had no right to force upon its debtors. The foregoing demonstrates that the superior court had an adequate evidentiary basis for holding that Fairco was entitled to punitive damages.
The second basis for the superior court's award of punitive damages is that of wrongful dishonor. As a rule, tort actions (and concomitant damage remedies) may be pursued in cases of wrongful dishonor. "[T]he general rule that the relationship between a bank and depositor is contractual ... does not apply to the special situation of wrongful dishonor." Shaw v. Union Bank and Trust Co., 640 P.2d 953, 956 (Okl. 1981). However, the Alaska UCC limits damages to those "actually proved" if the dishonor is wrongful but mistaken.[21] Case law indicates that a "mistaken" dishonor is one which results from bookkeeping errors and similar inadvertent conduct. See Elizarraras v. Bank of El Paso, 631 F.2d 366, 376-77 (5th Cir.1980); Yacht Club Sales and Service, Inc. v. First National Bank of North Idaho, 101 Idaho 852, 623 P.2d 464 (1980):
On the other hand, where a dishonor is caused by a setoff or charge made by a bank under an erroneous belief that it had a legal right to do so, the wrongful dishonor resulting from the improper setoff or charge is not classified as mistaken.
Id. at 471-72. In the absence of mistake, there is no statutory ceiling on damage awards.[22]
AS 45.04.402 would not permit an award of punitive damages if the wrongful dishonor occurred through a mistake.[23] However, the statute indicates that a payor bank is liable for "proximate" damages if the dishonor was not inadvertent. The permissible scope of "proximate" damages has not been delineated in Alaska. However, this provision is identical to the parallel UCC section, 4-402, which has been construed in other states to permit liability for punitive damages, providing the bank's conduct "may be said to [have been] maliciously intentional, fraudulent, oppressive, or committed recklessly or with a wanton disregard of the depositor's rights." 3 Anderson, Uniform Commercial Code § 4-402:4, at 306 (2d ed. 1971) (footnote omitted). Anderson cites Loucks v. Albuquerque National Bank, 76 N.M. 735, 418 P.2d 191 (1966), where the court indicated that punitive *299 damages would have been appropriate had the dishonor in that case been malicious, meaning "that the defendant not only intended to do the act which is ascertained to be wrongful, but that he knew it was wrong when he did it." 418 P.2d at 199 (citation omitted). The Loucks court concluded that the trial court had properly dismissed the claim for punitive damages, since the plaintiff had adduced no evidence of willful or wanton conduct. Id. In Shaw v. Union Bank and Trust Co., 640 P.2d 953 (Okl. 1981), the court did remand a case for a trial on the issue of punitive damages, observing that:
[The] general rule [that the relationship between a bank and depositor is not contractual] ... does not apply to the special situation of wrongful dishonor.
... .
Appellant here alleges in his petition that appellee bank "acted in a wrongful, malicious, and grossly negligent manner in refusing to release the funds." Appellant should be given the opportunity to prove these allegations.
Id. at 956, 957. Similarly, the Idaho Supreme Court held in Yacht Club Sales and Service, Inc. v. First National Bank of North Idaho, 101 Idaho 852, 623 P.2d 464, 476 (1980), that a customer would be entitled to punitive damages upon a showing that the defendant bank's conduct was wanton, malicious or gross and outrageous, or where the facts are such as to imply malice or oppression. 623 P.2d at 476.
Given the foregoing, our review of the entire record leads us to the conclusion that Statebank's wrongful dishonor furnishes additional justification for the superior court's award of punitive damages. In regard to the question of wrongful dishonor the superior court found in part that:
(15) Following the taking of possession of Clowntown on November 6, 1978 Alaska Statebank willfully and with reckless disregard of the consequences of its actions refused payment on outstanding Fairco checks presented for payment, returned the checks to Clowntown's suppliers and vendors, and marked the checks "account closed." At this time the account was not closed, Alaska Statebank was aware the account was not closed, and these actions were not the result of mistake or inadvertence, but rather were designed to further the Bank's interest. Alaska Statebank had no legitimate reason to refuse payment.
There is ample evidentiary support for the above. Thus, we conclude that the superior court's award of punitive damages should be affirmed.
The superior court's judgment is AFFIRMED in part, and REVERSED in part, in accordance with this opinion.
MOORE, J., not participating.
NOTES
[*] Tunley, Superior Court Judge, sitting by assignment made pursuant to article IV, section 16 of the Constitution of Alaska.
[1] The loan was handled by Ivan Fosheim, a vice president and branch manager of Statebank at that time. The agreement was memorialized in a promissory note and a security agreement creating a security interest in Clowntown's inventory and accounts receivable. The loan was payable in monthly installments beginning in May 1977. The payments were made regularly, though they were untimely.
[2] This transaction was also handled by Fosheim. The rate of interest was 11%, and the agreement was evidenced by a promissory note and a security agreement covering inventory and accounts receivable. Repayment was also secured by the guarantee of each partner.
[3] In a memorandum to the file composed after the meeting, Houlihan suggested that repayment be delayed until after Christmas, provided Statebank obtained proper collateralization to support the personal guarantees of the partners.
[4] Lewis had been hired by Statebank in mid-September 1978. He contacted the partners and learned that Fairco was losing money at the rate of $6,000 per month and that the value of the Clowntown inventory was deteriorating without a commensurate reduction in Statebank's loans.
[5] The Alaska UCC does not define "default," although remedies for a default are set out at AS 45.09.501-.507. Rather, a "default" is to be defined by the terms of the security agreement signed by the parties at the time the security interest is created. AS 45.09.501(a) provides, in relevant part:
If a debtor is in default under a security agreement, a secured party has the rights and remedies provided in AS 45.09.501-AS 45.09.507 and, except as limited by (c) of this section, those provided in the security agreement.
[6] This determination may be reversed only if this court "arrive[s] at a definite and firm conviction, in light of the entire record, that [the] trial court was clearly mistaken." Price v. S.S. Fuller, Inc., 639 P.2d 1003, 1008 (Alaska 1982).
[7] Also of relevance here is the following finding of the superior court:
Although the specific terms and conditions of the $120,000 note required payments on the 10th of the month, in accordance with standard bank practice and the course of dealing with the partnership the bank consistently allowed payments by the 30th of the month. By its acts and statements, the Bank modified the terms of the note such that the $120,000 note had not been delinquent or in default by virtue of payments being made between the 10th and 30th of the month. In any event, the November payment could not have been delinquent or in default at the time of taking possession, November 6, 1978, because even under the documents, the November payment was not due until November 10, 1978... . The Court finds that at the time possession was taken, the $120,000 note was current.
[8] In support of this ruling the Supreme Court of Nevada cited the following authorities: Ford Motor Credit Company v. Waters, 273 So.2d 96 (Fla.App. 1973); Fontaine v. Industrial National Bank of Rhode Island, 111 R.I. 6, 298 A.2d 521 (1973); Varela v. Wells Fargo Banks, 15 Cal. App.3d 741, 93 Cal. Rptr. 428 (1971).
[9] Our holding has made it unnecessary to address appellant's argument pertaining to any of the other bases of liability upon which the superior court grounded its decision.
[10] Alternatively, we note that these damages were in the nature of special damages which were not alluded to in the complaint. Statebank argues that Fairco's failure to comply with Civil Rule 9(h) precludes such an award.
In Anchorage Asphalt Paving Co. v. Lewis, 629 P.2d 65, 70 (Alaska 1981), we observed that special damages must be pleaded to put the other party on notice of specific sums claimed and that failure to raise the issue in the pleadings or at trial precluded consideration of it on appeal. Special damages "must be specifically claimed and described if recovery for them is to be allowed." C. McCormick, Law of Damages § 8 at 33 (1935). Fairco presented some testimony from Warwick regarding the amount of time devoted to "straightening [the] matter out":
A substantial amount, and when we sit down and try to explain why its hard to. But I would imagine we have oh, in this period of time between the between the closure and refinancing, probably several man weeks. Forty, eighty, a hundred and twenty hours, maybe.
This testimony cannot be regarded as sufficient to have put Statebank on notice that the issue was being presented or to support the actual award.
[11] In regard to this defamation issue the superior court made the following findings:
By taking possession of Clowntown Alaska Statebank made and publicized a statement that plaintiffs had unjustifiably failed to pay their debts to Alaska Statebank. Such statement was false and was communicated to the people present at the repossession, other Bentley Mall merchants, the Fairbanks business community and to the suppliers of both Clowntown and Fairbanks Office Supply. This action constitutes defamation.
... By wrongfully dishonoring checks drawn on Fairco's account and marking checks "account closed," Alaska Statebank made and publicized statements that Fairco had issued bad checks. This action constitutes defamation.
[12] Warwick offered no proof of injuries sustained as a result of the wrongful dishonor, so dishonor cannot furnish a basis for his $10,000 damage award.
[13] The Schultz court reasoned that:
[T]he acts here complained of are the analogue of libel, except the writing, printing, and passing around. But these elements are supplied by the public, notorious, and continued character of the surveillance. We must hold that rough or open shadowing as here described and defined is an unlawful act resulting in legal injury to the reputation of the person who is the object of such attentions. Actual pursuit and public surveillance of person and home are suggestive of criminality fatal to public esteem and productive of public contempt or ridicule.
139 N.W. at 390.
[14] The testimony of two customers present at the closure reveals that the lockup itself (if not the reason for it) was public. The partners supplied testimony regarding the extent of the damages suffered. Henry indicated that he had problems with customers and employees after news of the closure spread around town. Warwick stated that potential clients in tax matters in early 1979 were deterred from consulting him because of the closure.
[15] We described (although not in so many words) the distinction between statements which are defamatory per se and per quod in Fairbanks Publishing Co. v. Pitka, 376 P.2d 190 (Alaska 1962):
For a publication to be libelous per se the words used must be so unambiguous as to be reasonably susceptible of only one interpretation that is, one which has a natural tendency to injure another's reputation... . But if the language used is capable of two interpretations, one of which would be defamatory and the other not, then it is for the jury to determine which meaning would be given the words by those who read them.
Id. at 194 (footnotes omitted). If the latter alternative is applicable, the statement is defamatory per quod.
[16] See, e.g. Inter-State Detective Bureau, Inc. v. Denver Post, Inc., 29 Colo. App. 313, 484 P.2d 131, 133 (1971); Getchell v. Auto Bar Systems Northwest, Inc., 73 Wash.2d 831, 440 P.2d 843, 848 (1968) (if defamation is actionable per se, and pertinent defense is not established, substantial damages may be awarded without proof of actual damages).
[17] In regard to the $3,000 award to Henry for the bank's wrongful dishonor of checks drawn on Fairco's account, the superior court did not distinguish between sums awarded for damages caused by wrongful dishonor and those caused by the repossession and closure of the store. Since we have held that proof of actual damages was not necessary in relation to the harm done to Henry's business reputation by the wrongful repossession, we in turn find it unnecessary here to address any issues relating to the bank's acts of wrongful dishonor.
[18] See, e.g., Lawrence v. Graham, 29 Md. App. 422, 349 A.2d 271 (1975), a case involving wrongful repossession of collateral, where the court observed that punitive damages were available in such cases, although on a more limited basis than in other tort actions:
As a general rule, punitive damages may be awarded where there is an element of fraud, or malice, or evil intent, or oppression entering into and forming part of the wrongful act... .
A more stringent rule applies, however, where the tort arises out of a contractual relationship. In such a case, punitive damages are recoverable only upon a showing of actual malice.
Id. at 274-75 (citations omitted).
[19] Punitive damages have often not been allowed in cases when the wrongfulness of the repossession arose from the fact that the creditor was estopped from asserting its rights under a written security agreement. Thus, in Ford Motor Credit Co. v. Washington, 573 S.W.2d 616 (Tex.Civ.App. 1978), the court followed the "rule that a party, having once waived by its conduct strict compliance with the terms of a contract, can assert its right to strict compliance in the future [only] by notifying the other party of its intent to do so and by allowing a reasonable time for the other party to comply" in upholding damages awarded for a conversion. Id. at 618. However, it found that the waiver had taken place by conduct and was not a voluntary relinquishment of a known right, and thus reversed an award of punitive damages on the ground that there had been no showing of wantonness or malice. Id. at 618-19. Similarly, in Cobb v. Midwest Recovery Bureau Co., 295 N.W.2d 232 (Minn. 1980), the court observed that in light of the split in authority regarding the necessity for prior notice when there has been a waiver by conduct of specific provisions of a security agreement, punitive damages should not be awarded against the defendant creditor who could not be said to have intentionally violated the debtor's rights. Id. at 237-38.
[20] In this regard the superior court also found that:
(30) Alaska Statebank did not take possession of the collateral on November 6, 1978 for the purpose of preventing the plaintiffs from selling, stealing or removing the inventory. Such purpose, although expressed by Mr. Lewis, was not a true concern of the Bank at the time of the taking of possession.
(31) The facts and circumstances surrounding the actual taking of possession of Clowntown on November 6, 1978, the manner of the taking of possession and the timing of it demonstrate an improper motive, could be expected to and did cause unnecessary damage and embarrassment, and therefore the Court concludes that Alaska Statebank breached its obligation of good faith and the obligation of fair dealing by taking possession of Clowntown.
Also relevant to the punitive damages issue are the following findings of the superior court:
(21) Up and through November 6, 1978, the date of the taking of possession, Lewis knew very little about the principals in Fairco. He did not request input from Mr. Rienekka or Mr. Fosheim, Alaska Statebank's representatives in Fairbanks who were familiar with the principals, their reputations and financial condition, and made no effort to learn anything about the principals. By failing to acquaint himself with the financial condition of the borrowers as individuals, prior to taking possession, Lewis violated standard banking practice.
(22) ... The Court does not accept the Bank's contention that the plaintiffs were being uncooperative. The Court specifically finds to the contrary. The plaintiffs were making an honest effort to negotiate and arrive at terms of payment of their obligations, to the mutual benefit and satisfaction of all parties.
(25) Alaska Statebank did not initiate or conclude the taking of possession for the purpose of insuring that the collateral would be available for the satisfaction of the notes.
[21] See AS 45.04.402:
A payor bank is liable to its customer for damages proximately caused by the wrongful dishonor of an item. If the dishonor occurs through mistake, liability is limited to actual damages proved. If so proximately caused and proved, damages may include damages for an arrest or prosecution of the customer or other consequential damages. Whether consequential damages are proximately caused by the wrongful dishonor is a question of fact to be determined in each case.
[22] Some courts have held that a plaintiff must prove actual damages proximately caused by the dishonor even if the bank's conduct was intentional, Yacht Club, 623 P.2d at 474, while others have held that in the absence of mistake the common-law "trader rule" applies. Elizarraras, 631 F.2d at 376.
Because of the difficulty of proving that an injury was "proximately caused" by a wrongful dishonor, the law formerly allowed damages without proof under the "trader's rule". The customer, especially a commercial depositor, was presumed to be injured.
Shaw, 640 P.2d at 956 n. 3 (citation omitted) (emphasis by the court).
[23] For text of AS 45.04.402 see supra note 21.
| {
"pile_set_name": "FreeLaw"
} |
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.
ATTORNEYS FOR APPELLANTS: ATTORNEYS FOR APPELLEES:
ERIC S. PAVLACK ANTHONY W. OVERHOLT
COLIN E. FLORA SARAH STEELE RIORDAN
Pavlack Law, LLC MAGGIE L. SMITH
Indianapolis, Indiana Frost Brown Todd LLC
Indianapolis, Indiana
Apr 25 2013, 9:33 am
IN THE
COURT OF APPEALS OF INDIANA
JESSICA and GERSON URBINA, )
)
Appellants-Plaintiffs, )
)
vs. ) No. 06A01-1210-CT-464
)
TINA KLINKOSE-KYLER, LARONDA )
SOUTHWORTH, and A BOND OF LIFE )
ADOPTIONS, LLC, )
)
Appellees-Defendants. )
APPEAL FROM THE BOONE SUPERIOR COURT
The Honorable Matthew C. Kincaid, Judge
Cause No. 06D01-1206-CT-384
April 25, 2013
MEMORANDUM DECISION - NOT FOR PUBLICATION
FRIEDLANDER, Judge
Jessica and Gerson Urbina engaged the services of A Bond of Life Adoptions, LLC
(ABLA) to assist them in their efforts to adopt a child. Ultimately, a prospective match was
found with the unborn child of a woman in Indiana and things progressed to the point that the
child was born. Several days after the child was born, and before the child left the hospital,
the Urbinas were informed that the child might be addicted to drugs by virtue of the birth
mother’s drug use during pregnancy. The Urbinas learned at the same time this information
had been conveyed to ABLA several days before. Upon learning of the possibility of drug
dependency, the Urbinas withdrew from the adoption process and filed the present lawsuit
against ABLA, alleging multiple theories of recovery. ABLA filed a motion to dismiss under
Ind. Trial Rule 12(B)(6). The Urbinas appeal from the granting of ABLA’s motion,
presenting the following consolidated and restated issues for review:
1. Taking all factual allegations in the Urbinas’ complaint as true and
drawing all reasonable inferences in their favor for purposes of a
motion to dismiss under T.R. 12(B)(6), did the trial court err in
concluding that the Urbinas would not be able to establish under any set
of facts admissible under the allegations of their complaint that ABLA
breached a duty to divulge to the Urbinas the substance of the phone
call advising ABLA that the baby might be suffering from chemical
withdrawal?
2. Did the Urbinas contractually release any claim of breach of fiduciary
duty based upon the operative facts in this case?
3. Did the allegations in the Urbinas’ complaint state a claim for
intentional infliction of emotional distress such that dismissal under
T.R. 12(B)(6) is inappropriate?
We reverse and remand with instructions.
As we will explain below, in addressing this appeal, we will take as true the facts
2
alleged in the Urbinas’ complaint. Pursuant to this version of the facts, the Urbinas, residents
of Canada, decided to adopt a child and employed ABLA, an adoption agency, to aid in this
endeavor. The contractual agreement entered into by the parties, which set forth the terms by
which their mutual endeavor would be governed, was denominated “Agency Agreement”
(the Agreement). Appellants’ Appendix at 19. During the adoption screening and matching
processes, the Urbinas “indicated to [ABLA] in writing and verbally that under no
circumstances were they interested in being matched with a prospective birthmother who was
abusing narcotics, alcohol, or other drugs.” Id. at 3. The Urbinas were matched with a
prospective birth mother in Noblesville, Indiana. On February 2, 2012, the Urbinas were
notified that the birth mother had gone to the hospital for the purpose of inducing labor. On
the morning of February 3, Jessica flew to Chicago and then drove to a hospital near
Indianapolis, where the child was born. 1 At 8:30 a.m. on February 3, “a social worker
involved in the adoption” informed ABLA that the baby was being monitored for withdrawal
caused by the birth mother’s methadone use during pregnancy. Id. at 9. When ABLA
personnel met Jessica at the hospital upon her arrival, they did not inform her of the
information communicated in the social worker’s call. 2
1
The complaint alleges that Jessica’s flight landed in Chicago at 10:30 a.m. and then she drove three and one-
half hours to the hospital, where she arrived at – 10:30 a.m. Obviously, at least one of these factual allegations
cannot be true. For purposes of the issues under consideration in this appeal, however, the inaccuracy will not
impact our analysis.
2
In their appellate brief, the Urbinas phrase it thus: “[W]hen Jessica arrived at the hospital on February 3 at
approximately 10:30 a.m., she interacted with [ABLA], who behaved as if everything was perfectly fine.” Id.
at 9. When considered in the context of other factual allegations in the Urbinas’ complaint, we interpret this
rather hyperbolic turn-of-phrase to mean that ABLA did not divulge the contents of the call at this early
juncture.
3
From the time of her arrival on Friday morning, Jessica, and later Gerson, spent time
with the baby, chose a name, and emailed photos of the baby to their friends, family, and co-
workers. “During this time, the baby exhibited behavior such as extreme and jerky reaction
to touch, extreme hunger, and unusually frequent bowel movements[.]” Id. at 10. On
Monday morning, the Urbinas learned for the first time that the birth mother used methadone
during her pregnancy and that the baby was experiencing withdrawal. This information was
conveyed in a phone call from a social worker, who also informed the Urbinas “that the
possibility of the birthmother’s withdrawal had been discussed with [ABLA] on the morning
of February 3”, 3 before Jessica first met the baby. Id. at 11.
This new information was apparently a game-changer for the Urbinas. In light of their
subsequent claim for intentional infliction of emotional distress, we think it appropriate to
quote from the complaint the Urbinas’ own description of their response to the information:
Having spent three days bonding with [the] baby[] and thinking they were
finally parents, the Urbinas were forced to make the gut-wrenching decision of
whether to keep the baby. Following 24 hours of agonizing, the Urbinas made
the most difficult decision of their lives, and decided that [the] baby [] would
be better off with adoptive parents who were better equipped to deal with her
possible special needs caused by her mother’s addiction.
Id.
On April 17, 2012, the Urbinas filed a six-count complaint for damages alleging:
Count I – breach of contract; Count II – breach of fiduciary duty; Count III – negligence;
3
We presume the Urbinas here meant to reference either the mother’s drug use or the baby’s withdrawal, or
perhaps both, because the birth mother’s withdrawal symptoms would be irrelevant to this appeal. Moreover,
the complaint does not allege that ABLA was apprised of the possibility of the birth mother experiencing
withdrawal symptoms.
4
Count IV – gross negligence; Count V – common-law fraud/fraudulent misrepresentation;
and Count VI – intentional infliction of emotional distress. On August 7, 2012, ABLA filed
a T.R. 12(B)(6) motion to dismiss the Urbinas’ complaint and a memorandum in support
thereof. The Urbinas filed their response on August 17, 2012. On September 24, 2012, trial
court entered the following order granting ABLA’s motion to dismiss:
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS
Defendants Tina Klincose-Kyler, Laronda Southworth, and A Bond of
Life Adoptions, LLC (“ABL”), having filed their Motion to Dismiss and the
Court being so advised finds that such request should be granted.
IT IS HEREBY ORDERED THAT Defendants’ Motion to Dismiss is
GRANTED.
IT IS SO ORDERED.
This dismissal is without prejudice.
Appellants’ Brief at 32.
Before we address the individual questions presented in this appeal, we observe that
the procedural posture in which this case arrives is of particular significance in leading us to
the conclusions we have reached. Accordingly, we will begin there. This case was resolved
below by dismissal of the complaint on T.R. 12(B)(6) grounds. 4 T.R. 12 authorizes litigants
to present certain defenses by motion. One such defense is set out in subsection 12(B)(6),
which authorizes dismissal of a complaint for “[f]ailure to state a claim upon which relief can
4
We are compelled here to take the parties’ word for it that ABLA’s motion to dismiss was premised upon
this basis. The appellate appendix contains essentially only two documents: the complaint, and a copy of the
Agreement. We therefore are not privy to the substance of ABLA’s motion. the trial court’s order granting the
motion did not articulate the court’s reasoning.
5
be granted, which shall include failure to name the real party in interest under Rule 17.” A
motion to dismiss submitted on this basis challenges the legal sufficiency of a complaint.
Meyers v. Meyers, 861 N.E.2d 704 (Ind. 2007).
When ruling upon a T.R. 12(B)(6) motion to dismiss, “‘a court is required to take as
true all allegations upon the face of the complaint and may only dismiss if the plaintiff would
not be entitled to recover under any set of facts admissible under the allegations of the
complaint.’” Id. at 705 (quoting Huffman v. Office of Envtl. Adjudication, 811 N.E.2d 806,
814 (Ind. 2004)). When reviewing a ruling on such motions, we draw all reasonable
inferences in favor of the nonmoving party, in this case, the Urbinas. Meyers v. Meyers, 861
N.E.2d 704. Our review of a trial court’s grant or denial of a T.R. 12(B)(6) motion is de
novo. Ankeny v. Governor of State of Ind., 916 N.E.2d 678 (Ind. Ct. App. 2009), trans.
denied. With these principles in mind, and stressing that we are bound to take as true the
allegations in the complaint, we proceed to an examination of the issues.
1.
The Urbinas’ complaint for damages alleged six separate theories of recovery, three of
which include the element of “duty.” Those are: under Count II – breach of fiduciary duty;
Count III – negligence; and Count IV – gross negligence. The Urbinas identify three
separate bases for the existence of a duty. The first is that “ABLA assumed a duty to disclose
all information regarding the health of the child.” Appellants’ Brief at 14. The short
argument offered in support of this assertion makes it clear that this argument is premised
upon the Agreement. That is, the duty arose as a result of the relationship established in the
6
contract between ABLA and the Urbinas. According to the Urbinas, the second source of a
duty was the fact that ABLA “was the agent of the Urbinas and thus had a duty to act with
good faith.” Id. Third, the Urbinas claim ABLA owed them a fiduciary duty.
It seems to us that all three bases share a common origin – i.e., the Agreement. That
is, ABLA’s duty to immediately divulge to the Urbinas what the social worker told ABLA on
the morning of February 3, ultimately arose because of the contractual relationship between
ABLA and the Urbinas. We need not address each argument – or basis – separately, but
instead conclude that the viability of each argument depends upon a common source – the
Agreement – which was the contract that governed the parties’ relationship. Therefore, we
must look to the Agreement to determine whether it may fairly be construed so as to impose
such a duty. Rephrased in terms of our standard of review, we must decide whether the
Urbinas would be entitled to establish under any set of facts admissible under the allegations
of the complaint that the Agreement imposed upon ABLA a duty to divulge the contents of
the social worker’s call at some point between the time ABLA was apprised of it and when
the Urbinas discovered independently that the infant might be suffering from chemical
withdrawal.
The construction of the terms of a written contract is a pure question of law, therefore
we review de novo a trial court’s conclusions in this regard. Green Tree Servicing, LLC v.
Brough, 930 N.E.2d 1238 (Ind. Ct. App. 2010). We attempt to determine the parties’ intent
at the time the contract was made, and do so by examining the language the parties used to
express their rights and duties. Niezer v. Todd Realty, Inc., 913 N.E.2d 211 (Ind. Ct. App.
7
2009), trans. denied. When interpreting a contract, we give the language of the contract its
plain and ordinary meaning. Green Tree Servicing, LLC v. Brough, 930 N.E.2d 1238. If a
contract is ambiguous or its meaning uncertain, its construction is a matter for the fact-finder.
Niezer v. Todd Realty, Inc., 913 N.E.2d 211. We read the contract as a whole when
determining the parties’ intent. Id. The court will make every attempt to construe the
contractual language such that no words, phrases, or terms are rendered ineffective or
meaningless. Id. We must accept an interpretation of the contract that harmonizes its
provisions, versus one that causes its provisions to conflict. Id.
It is well established that a duty of care may arise where one party gratuitously or
voluntarily assumes the duty. See, e.g., Delta Tau Delta, Beta Alpha Chapter v. Johnson, 712
N.E.2d 968 (Ind. 1999). An assumption of a duty creates a special relationship between the
parties, as well as a corresponding duty to act as a reasonably prudent person. Id. Although
the existence and extent of an assumed duty is generally a question of fact for the jury, it may
be resolved as a matter of law if the designated evidence is insufficient to establish such a
duty. Id. The Restatement (Second) Of Torts § 324A(b) (1965) states:
One who undertakes, gratuitously or for consideration, to render services to
another which he should recognize as necessary for the protection of a third
person or his things, is subject to liability to the third person for physical harm
resulting from his failure to exercise reasonable care to protect his undertaking,
if
(a) his failure to exercise reasonable care increases the risk of such
harm, or
(b) he has undertaken to perform a duty owed by the other to the third
person, or
8
(c) the harm is suffered because of reliance of the other or the third
person upon the undertaking.
“The actor must specifically undertake to perform the task he is charged with having
performed negligently, for without the actual assumption of the undertaking there can be no
correlative legal duty to perform the undertaking carefully.” American Legion Pioneer Post
No. 340 v. Christon, 712 N.E.2d 532, 535 (Ind. Ct. App. 1999), trans. denied. Thus, the
defendant must have undertaken the duty both “specifically and deliberately.... [I]t is also
important that the party on whose behalf the duty is being undertaken relinquish control of
the obligation; the party who adopts the duty must be acting ‘in lieu of’ the original party.”
Griffin v. Simpson, 948 N.E.2d 354, 360 (Ind. Ct. App. 2011), trans. denied).
ABLA offered its adoption services to the Urbinas, and their respective rights and
duties were set out in the Agreement – the contract in this case. In it, ABLA accepted the
duty to perform certain specific services, some of which are also established by statute, others
of which are found exclusively in the Agreement. The Agreement contains no provision that
explicitly obligates ABLA to notify its client immediately upon receipt of the information. In
fact, there is no provision that explicitly imposes a duty upon ABLA to share information that
it acquired about the medical condition of the baby or the birth parents. The Agreement does,
however, contain the following provision:
The Agency cannot guarantee information provided to the Agency by a birth
mother, birth father, medical professionals, or medical testing such as
ultrasounds. The Agency will work with the birth mother and birth father to
gather all relevant information, but cannot guarantee the accuracy of the
information we receive. The Clients if concerned about the background
9
information forms that are completed by or on behalf of a birth mother or birth
father should have them reviewed by a medical professional whom the Clients
can trust. In the event the birth mother consents, her prior medical records can
be requested at your expense. Please be aware some birth mothers are more
than willing to consent, but some interpret such a request as intrusive and
untrusting and this request could jeopardize the match.
Appellants’ Appendix at 22 (emphasis supplied). Thus, in this particular situation, ABLA
had a contractual obligation to “work with the birth mother to gather all relevant
information.” Id. The use of the definite article “the” indicates that the birth mother and
birth father referred to in this provision are the biological parents of a particular child that has
been identified for adoption by the Urbinas. In the context of the nature of the relationship
between an adoption agency and the Urbinas, we can think of no purpose for gathering such
information other than to share it with the Urbinas. This would enable them to make
informed decisions. Therefore, the duty to keep its clients apprised of the information
gathered during the adoption process is inferred from the language of the contract whereby
ABLA agreed to gather the information in the first place.
Having found the existence of a duty to divulge pertinent medical information to the
Urbinas on contractual grounds, we need not determine whether such a duty arose upon
alternate bases such as the duties of an agent to its principal or fiduciary duties that arose by
virtue of the relationship between the Urbinas and ABLA. We reiterate that those theories of
duty ultimately derive from the contract that we have concluded imposed a duty upon ABLA
to disclose to the Urbinas any information it gathered about an identified candidate for
adoption.
10
All of that said, we express no opinion as to the merits of the Urbinas’ claim for
damages based upon the breach of that duty with respect to any of the theories of recovery in
the Urbinas’ complaint for damages. We merely hold that in the current posture, i.e., a T.R.
12(B)(6) motion to dismiss, and considering only the facts alleged by the Urbinas in the
complaint, the Urbinas might be entitled to establish under some set of facts that the
Agreement imposed upon ABLA a duty to divulge to the Urbinas the contents of the social
worker’s call. In so doing, we stress that we may not even consider the alleged facts
supporting ABLA’s arguments that the “information” was not medically reliable (i.e., it came
from a social worker and was never conveyed or confirmed by medical personnel treating the
birth mother or baby), or that ABLA’s action did not contravene the relevant statutory
adoption guidelines that governed this process, or anything else offered by either party that
was not included in, or submitted with, the complaint. 5 In view of the context in which this
case is presented, i.e., a T.R. 12(B)(6) motion, we are constrained to consider only the
complaint and the facts set forth therein. These were sufficient to survive a T.R. 12(B)(6)
motion to dismiss.
2.
ABLA contends that even assuming a duty existed, the Urbinas contractually released
any claim for breach thereof in the following paragraph of the Agreement, entitled
5
For instance, ABLA alleged in a brief in opposition to a motion to strike that the child indeed never did
develop any special needs. While these and other alleged facts might have some significance if this case were
before us in a different posture, e.g., the granting of a motion for summary judgment, such is not the case here.
Because they are not in the complaint, we may not consider them.
11
“Assumption of Risk and Release”:
The [Urbinas] understand[] that in many adoption placement situations there
are risks that may or may not be known to the [Urbinas], the Agency, its staff,
consultants, independent contractors or others involved in assisting the Agency
in this matter. The [Urbinas] in consideration of the mutual covenants herein,
agree that the Agency, its staff, consultants, independent contractors, officers,
[sic] board members shall not be liable at law or in equity nor shall the
[Urbinas] bring, encourage to be brought, or instigate any legal action against
the Agency[,] its staff, consultants, independent contractors, officers, [sic]
board members regarding but not limited to, the medical or health condition of
the birth mother, birth father, or child, representations made on or behalf [sic]
of birth mother, birth father, or child history, or any other matter concerning
the placement of the child with the [Urbinas] or finalization of the adoption of
the child by the [Urbinas].
Appellants’ Appendix at 24.
As with any other contract, the interpretation of a release “is determined by the terms
of the particular instrument, considered in light of all facts and circumstances.” Prall v.
Indiana Nat’l Bank, 627 N.E.2d 1374, 1377 (Ind. Ct. App. 1994). Absent some ambiguity,
release agreements are generally interpreted as a matter of law. Prall v. Indiana Nat’l Bank,
627 N.E.2d 1374. If there is no ambiguity, we look only to the instrument to ascertain the
parties’ intent. Id.
The foregoing release provision explicitly would shield ABLA from liability arising
from a claim premised upon an unknown medical condition of the child, birth mother, or
birth father. The question is, unknown to whom? ABLA would have us construe the release
to mean - unknown to the Urbinas. There are certainly circumstances where this would be
true. The Agreement makes it clear that participants in the process of adoption must be
aware that unknowns might arise and that the prospective adoptive parents are ultimately
12
beholden to the birthparents for information relating to the infant’s medical history. That
information is not always forthcoming, nor is it always reliable when it is provided. We have
already held, however, that the Agreement obligates ABLA to share with the Urbinas
whatever medical “information” it acquires about the infant or the birth parents. Thus, it
does not contemplate that ABLA would “know” something about the infant that the Urbinas
did not also know. In other words, for purposes of this provision of the contract, “risks that
may or may not be known” must be construed to presume that the Urbinas’ knowledge is
coterminous with ABLA’s knowledge.
Understood in this way, the interpretation that ABLA advocates would eviscerate the
previously discussed contractual duty to disclose to the Urbinas any information ABLA
obtains with respect to medical information about the child and birth parents. Such an
interpretation would contravene our duty to read the contract as a whole and to harmonize its
various provisions when possible. See Niezer v. Todd Realty, Inc., 913 N.E.2d 211. The
provision upon which ABLA relies would not shield ABLA from liability arising from a
determination that ABLA wrongfully withheld information from the Urbinas. We reiterate
that we express no opinion on the question of whether ABLA breached the duty to disclose
information to the Urbinas in the first place.
3.
The Urbinas contend that the trial court erred in dismissing their claim for intentional
infliction of emotional distress. The Indiana Supreme Court first recognized the tort of
intentional infliction of emotional distress in Cullison v. Medley, 570 N.E.2d 27 (Ind. 1991).
13
“The requirements to prove this tort are ‘rigorous.’” Creel v. I.C.E. & Assocs., Inc., 771
N.E.2d 1276, 1282 (Ind. Ct. App. 2002) (quoting Ledbetter v. Ross, 725 N.E.2d 120, 124
(Ind. Ct. App. 2000)). Intentional infliction of emotional distress arises “when a defendant:
(1) engages in ‘extreme and outrageous’ conduct that (2) intentionally or recklessly (3)
causes (4) severe emotional distress to another.” Id. (quoting Bradley v. Hall, 720 N.E.2d
747, 752 (Ind. Ct. App. 1999)). “The intent to harm emotionally constitutes the basis of this
tort.” Id. Moreover, conduct that satisfies this definition “must exceed all bounds usually
tolerated by a decent society and cause mental distress of a very serious kind.” Id. Section
46 of the Restatement (Second) of Torts describes the extreme and outrageous conduct
required to sustain a cause of action for this tort, as follows:
d. Extreme and outrageous conduct. The cases thus far decided have found
liability only where the defendant’s conduct has been extreme and outrageous.
It has not been enough that the defendant has acted with an intent which is
tortious or even criminal, or that he has intended to inflict emotional distress,
or even that his conduct has been characterized by “malice,” or a degree of
aggravation which would entitle the plaintiff to punitive damages for another
tort. Liability has been found only where the conduct has been so outrageous in
character, and so extreme in degree, as to go beyond all possible bounds of
decency, and to be regarded as atrocious, and utterly intolerable in a civilized
community. Generally, the case is one in which the recitation of the facts to an
average member of the community would arouse his resentment against the
actor, and lead him to exclaim, “Outrageous!”
There are instances in which the question of whether certain conduct constitutes
extreme and outrageous conduct within the meaning of this tort can be decided as a matter of
law. See, e.g., Dietz v. Finlay Family Jewelry Corp., 754 N.E.2d 958 (Ind. Ct. App. 2001)
(the court found no outrageous conduct where a store security manager accused an employee
14
of substance abuse, shoplifting, and dishonesty in a gruff and intimidating manner, where the
security manager’s actions occurred in the context of a detainment for the purpose of
determining the extent of the employee’s unauthorized conduct); Conwell v. Beatty, 667
N.E.2d 768 (Ind. Ct. App. 1996) (the court found no outrageous conduct where a sheriff
announced a deputy’s arrest at a press conference and refused to assist that deputy in
completing retirement forms); Gable v. Curtis, 673 N.E.2d 805, 807 (Ind. Ct. App. 1996) (the
court determined there was no outrageous conduct where a contractor’s wife telephoned a
purchaser seven times in one hour, and “screamed and yelled,” threatening to repossess the
home and stating repeatedly that the purchasers “would pay”).
As was the case with the question discussed above concerning whether ABLA
breached a duty to disclose, considering only the facts alleged by the Urbinas in the
complaint, the Urbinas might be able to establish under some set of facts that the failure to
disclose might satisfy the elements necessary to prevail in their complaint under this theory.
Again, we stress that we may consider only the allegations of fact contained in the Urbinas’
complaint for damages. We express no opinion as to whether this issue is ripe for
determination as a matter of law after further development of the facts. We hold merely that,
with respect to this theory of the Urbinas’ complaint, dismissal under a T.R. 12(B)(6) motion
to dismiss was not warranted. We therefore reverse and remand this cause with instructions
to reinstate the complaint for damages.
Judgment reversed and remanded with instructions.
NAJAM, J., concurs.
15
BRADFORD, J., concurs with a separate opinion.
16
IN THE
COURT OF APPEALS OF INDIANA
JESSICA and GERSON URBINA, )
)
Appellants-Plaintiffs, )
)
vs. ) No. 06A01-1210-CT-464
)
TINA KLINKOSE-KYLER, LARONDA )
SOUTHWORTH, and A BOND OF LIFE )
ADOPTIONS, LLC, )
)
Appellees-Defendants. )
)
BRADFORD, Judge, concurring
While I fully concur with the majority’s disposition of this case, I write separately
only to further emphasize what I consider the most significant holding of this case. I agree
that the Agreement required ABLA to disclose to the Urbinas any relevant information
gathered during the adoption process. In short, you get it–you pass it on. I also agree that the
release in the Agreement does not cover nondisclosure and that it shields ABLA only from
liability for any information that turns out to be incorrect. Quite simply, disclosure of
incorrect information and nondisclosure are just not the same thing. Were we to accept
ABLA’s argument on this point, it would render the disclosure requirement meaningless.
| {
"pile_set_name": "FreeLaw"
} |
140 F.2d 852 (1944)
SYLVAN BEACH, Inc.,
v.
KOCH et al. PETERS et al.
v.
SAME. PETERSEN
v.
SAME. PEVELY DAIRY CO.
v.
SAME.
Nos. 12577-12580.
Circuit Court of Appeals, Eighth Circuit.
February 25, 1944.
*853 *854 Harry S. Gleick, of St. Louis, Mo. (Gleick & Strauss, of St. Louis, Mo., on the brief), for appellant Sylvan Beach, Inc., in No. 12577, and for appellants L. W. Peters, Ralph L. Peters, A. H. Peters, C. Lew Gallant and William Faisst, in No. 12578.
Charles D. Long, of St. Louis, Mo. (Frederick A. Judell and Rassieur, Long & Yawitz, all of St. Louis, Mo., on the brief), for appellant A. L. Petersen, in No. 12579.
William H. Allen, of St. Louis, Mo., for appellant Pevely Dairy Company, in No. 12580.
George O. Durham, of St. Louis, Mo. (Douglas H. Jones and Barak T. Mattingly, both of St. Louis, Mo., on the brief), for appellees Kenneth Koch and Richard Dalton, trustees.
Douglas H. Jones, of St. Louis, Mo. (Barak T. Mattingly, of St. Louis, Mo., on the brief), for appellees Frank S. Wiemeyer and Ethel L. Wiemeyer.
Before SANBORN and WOODROUGH, Circuit Judges, and HULEN, District Judge.
SANBORN, Circuit Judge.
These appeals challenge the "findings, conclusions and judgment" of the District Court entered December 5, 1942, in a proceeding for the reorganization of Sylvan Beach, Inc., under Chapter X of the Bankruptcy Act, 11 U.S.C.A. § 501 et seq. The "judgment" actually consists of several judgments determinative of distinct controversies thought by the District Court to be germane to the reorganization proceeding.
Broadly stated, the principal questions presented are: (1) Whether, after dismissing the proceeding, the court had power to adjudge that the debtor, Sylvan Beach, Inc., was a partnership and to enter money judgments against the persons found by the court to be partners and in favor of persons to whom they were found to be indebted; (2) whether the court, after having authorized the temporary trustee of the debtor to borrow money on certificates of indebtedness, could dispose of all of the assets of the insolvent estate without notice to a certificate holder and without making any provision for the payment of the unpaid certificates out of the estate; and (3) whether the court, in dismissing the proceeding, was required to conform to the provisions of § 236(2) of the Bankruptcy Act, 11 U.S.C.A. § 636(2), which, in effect, require that if no plan of reorganization is approved or accepted, the *855 judge shall, after hearing all persons in interest, adjudge the debtor a bankrupt or dismiss the proceeding as he may decide is in the interests of creditors and stockholders.
While the attacks upon the "judgment" raise mainly questions relating to jurisdiction and to due process, we find it impossible to avoid a somewhat detailed statement of the facts.
Sylvan Beach, Inc., the debtor, was incorporated under the laws of Missouri in April, 1932, for the purpose of leasing a tract of land consisting of about 32 acres on the Meramec River near St. Louis, Missouri, and of operating an amusement park thereon.[1]
On April 26, 1932, the debtor leased the land from Frank S. Wiemeyer and Ethel L. Wiemeyer, his wife, for the term of ninety-nine years, at an annual net rental of $5,000, payable in equal quarterly instalments. The lease provided that, in case of a default in the payment of rent or in other conditions of the lease, it might, upon notice, be declared forfeited. A restaurant, swimming pool and bath house were built upon the land, and other improvements were made. The park was opened for business about July 4, 1932. The debtor had little, if any, cash or credit, and Louis W. Peters, its promoter and president, was in substantially the same situation. The venture was not profitable, and rents due under the lease were frequently in default, and creditors accumulated. In the fall of 1934, the Wiemeyers brought a suit to cancel the lease, but before it came to trial, the debtor, on March 14, 1935, filed a petition for reorganization under Section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207. This proceeding was dismissed on June 6, 1935, by agreement between the debtor and most of its creditors. This agreement resulted from an arrangement made by the debtor with the Farmers and Merchants Bank of Fenton, Missouri, and with Kenneth Koch, a director of the bank, and Richard Dalton, its cashier. The bank loaned the debtor $7,000 to enable it to pay $5,900 delinquent rent to the Wiemeyers and to meet other obligations, the payment of which could not be postponed. The debtor gave to the bank and all other creditors notes payable on or before October 15, 1938. To secure the payment of these notes and to provide management for the business of the debtor satisfactory to the bank and the other creditors, the debtor on May 31, 1935, executed a deed of trust conveying all its property to Koch and Dalton, as trustees, with the right to take possession of and to operate the business until October 15, 1938 unless the notes and obligations secured by the deed of trust should be paid before that time either by the debtor or out of the proceeds of the business. The deed of trust provided that if all the secured obligations were not paid by October 15, 1938, the trustees might foreclose. Profits from the business, if any, were to be applied by the trustees first upon the note to the bank, and, when that was paid, upon the other notes.
Koch and Dalton, as trustees, took over the property and business of the debtor in accordance with the terms of the deed of trust, and conducted the business until July 30, 1938. While they were in possession they paid the rent, taxes and all of the *856 expenses of the business promptly, and by July 30, 1938, had, out of the profits of the business, applied $4,000 upon the debtor's note to the bank. Nothing had been paid upon the notes to other creditors. The trustees employed Louis W. Peters as manager of the business until the spring of 1937, when they discharged him and procured another manager. Peters and his son Ralph were operating the restaurant upon the premises, which restaurant they owned or claimed to own and which they continued to operate during the time the trustees were in possession and control of the business of the debtor.
On July 30, 1938, the debtor filed a petition for reorganization under Section 77B of the Bankruptcy Act.[2] In the petition, which was verified by Louis W. Peters, the debtor's president, it was stated that the debtor was engaged in the public amusement business; that it had assets, consisting of the leasehold and the improvements thereon, of the approximate value of $50,000; that the debtor was indebted in the amount of about $28,000 and that sublessees had erected improvements upon the leasehold of the reasonable value of $25,000; that the debtor had been handicapped by lack of working capital; that about $13,000 of its indebtedness was secured by a deed of trust to Koch and Dalton, as trustees; that they were threatening foreclosure and were applying the income of the debtor "to the balance due the said Farmers-Merchants Bank of Fenton, of which they are officers, without protecting the requirements of the aforesaid leasehold under which the debtor company is holding the aforesaid property and to the danger and irreparable injury and loss of the total investment of said debtor company."
The petition for reorganization was, on July 30, 1938, approved by the court as properly filed, and Louis W. Peters was appointed temporary trustee, with power to operate the business. The order appointing Peters required Koch and Dalton, trustees under the deed of trust, to deliver to him as temporary trustee the property of the debtor, together with the books of account, securities, moneys, etc. The order enjoined Koch and Dalton from interfering with the operation of the debtor's estate by Peters as temporary trustee. The order directed the temporary trustee to notify creditors and stockholders of a hearing to be held on August 30, 1938, to determine whether the appointment of the temporary trustee should be made permanent or terminated.
The record does not disclose what, if anything, took place at the hearing on August 30, 1938, but Peters continued to act as temporary trustee. On September 30, 1938, the court authorized him to pay $1250 rent due October 1, 1938, out of $1,988.84 which he represented that he had on hand. On January 16, 1939, he was authorized to issue certificates of indebtedness to borrow $1500 to pay rent and taxes. On March 24, 1939, the Wiemeyers moved the court for possession of their property because of a default in the payment of rent due January 1, 1939. On October 23, 1939, Peters was authorized to issue certificates of indebtedness in order to borrow $2500 to pay rent and taxes. On April 24, 1940, Peters was authorized to issue certificates in order to borrow $600 for repairs. On November 4, 1940, Peters procured authority to borrow $3,000 to pay rent and taxes. On May 14, 1941, he obtained authority to borrow $600 to pay out "a concessionaire" and for other purposes.[3]
On March 29, 1940, Koch and Dalton, trustees, filed a motion to dismiss the reorganization proceeding on the ground that *857 the court lacked jurisdiction. They stated in their motion the facts relative to the deed of trust of May 31, 1935, and the circumstances under which it was given, and alleged that they were in possession of the debtor's property and business on July 30, 1938, at the time the debtor filed its petition for reorganization. Their motion showed that at that time the debtor had neither the possession nor right to possession of any of the property covered by the deed of trust, and that the debtor had not been engaged in any business since March, 1935. Koch and Dalton, trustees, submitted their motion upon the pleadings. On August 5, 1940, the District Court denied the motion and also denied a pending petition of Frank S. Wiemeyer and wife for possession of their property, the rent being again in default. The court, in its order denying these motions, reserved jurisdiction "at some future date, to pass upon the question whether the appointment of temporary trustee be made permanent or be terminated." Koch and Dalton, trustees, appealed to this Court from the order denying their motion to dismiss the reorganization proceeding. In affirming the order appealed from, this Court ruled, in effect, that it did not appear from the pleadings as a matter of law that the deed of trust amounted to a conveyance for the benefit of creditors which would prevent the District Court from entertaining and approving a petition for reorganization. See Dalton v. Peters, 8 Cir., 119 F.2d 494.
On October 27, 1941, Koch and Dalton, trustees, filed a second motion to dismiss the reorganization proceeding, again stating in detail the facts surrounding the giving of the deed of trust, and asserting, in effect, that the reorganization proceeding was a fraud upon them, their beneficiaries and the court. They alleged that, since June 6, 1935, the debtor had been a mere corporate shell, without business and assets, and that it was wholly insolvent and was not subject to reorganization under the Bankruptcy Act. The relief prayed for in the motion was:
"(1) Either to dismiss this proceeding and to order Debtor and its President, L. W. Peters, as temporary trustee, to redeliver to movants the property, assets and business constituting the trust res of movants' trust as the same was, under force of order of this Court of July 28, 1938, delivered and surrendered by movants to Debtor and said Peters on or about the said date; or (2) to order and direct Debtor and said Peters to redeliver the said property, assets and business to movants as said trustees; or (3) to find that debtor has no equity in the said property and to order all the same to be delivered to movants as trustees for the beneficiaries of their trust, other than debtor, and free of any claim of debtor for any residue of recovery; and (4) in either alternative, to order Debtor and said Peters to account fully to movants for the said property, assets and business."
On October 30, 1941, Frank Wiemeyer and wife filed a petition for possession of their property on the ground that the rent was again in default to the extent of about $2,000. They asserted in the petition that the debtor's petition for reorganization had not been filed in good faith. The prayer of the Wiermeyers' petition was:
"Wherefore, the premises considered, your petitioners pray the Court for an order discharging the temporary trustee herein and dismissing its petition, thereby permitting these petitioners to enforce their rights under the terms of their lease or that the Court vacate the said restraining order as to these petitioners and grant these petitioners leave to proceed at law to regain possession of their property or direct the trustee to deliver the possession of said property to these petitioners and for such other orders as the Court may deem meet and proper."
On December 1, 1941, the temporary trustee filed a "plan of reorganization", the details of which need not be stated. On May 8, 1942, Koch and Dalton, trustees, filed objections to the plan, again asserting, in effect, that the debtor had perpetrated a fraud in filing its petition for reorganization and was wholly insolvent and was not a fit subject for reorganization. On May 23, 1942, they amended their objections by adding assertions that the debtor was not a corporation which under the laws of Missouri might engage in business, and that if it was a corporation it was without stockholders holding stock issued under the laws of Missouri.
The issues raised by the petition of the Wiemeyers for possession of their property, by the motion of Koch and Dalton, trustees, to dismiss the reorganization proceeding, by the plan of reorganization, and by the objections of Koch and Dalton, trustees, to the plan, came on for hearing on May 8, *858 1942. Frank Wiemeyer and wife appeared, as did also Koch and Dalton, trustees. The debtor was represented by its counsel. There were no other appearances. The hearing lasted for a number of days, and much testimony was taken. We shall not discuss the evidence in detail. It showed that, at the time of the hearing, the rent was in arrears to the extent of $4,400; that, when the petition for reorganization was filed, on July 30, 1938, the debtor had no property in its possession and no business; and that there had, in fact, been no justification or excuse for requiring Koch and Dalton, as trustees, to turn over to the debtor and its temporary trustee the property held by Koch and Dalton under the deed of trust. The evidence also indicated that the debtor probably had received nothing of susbtantial value in exchange for its capital stock, and that the stock had, in effect, been issued virtually without consideration, to Louis W. Peters, who had distributed it as he saw fit.
The District Court, on December 5, 1942, after making detailed findings of fact and conclusions of law, adjudged: (1) That the cause be terminated and dismissed as a cause for corporate reorganization, but that jurisdiction be retained "to adjudge and decree the equities between Sylvan Beach, Incorporated, and the persons doing business in that name, Kenneth Koch and Richard Dalton, as trustees, and Frank Wehmeyer and Ethel Wehmeyer, as lessors, and arising out of the institution and maintenance of this proceeding"; (2) that Sylvan Beach, Inc., "be held not to be a corporation authorized to do business in the State of Missouri or the subject of corporate reorganization under Section 77B of the National Bankruptcy Act or Chapter X of the Chandler Act, or to prosecute or defend any action in a Federal Court"; that its shares are void and that it has neither stockholders, directors nor officers; (3) that Sylvan Beach, Inc., "be held to be the business name in which C. Lew Gallant, L. W. Peters, Ralph L. Peters, A. H. Peters, P. M. Perkinson, A. L. Petersen, Bessie Brenneman, J. C. Moore, William Faisst, F. M. Brenneman and Harry Stockman, prior to March 12, 1935," conducted the business in St. Louis County, Missouri, and that they "took all the proceedings and actions and did all acts in issue appearing to have been taken or done in that name"; (4) that the purported directors and officers of Sylvan Beach, Inc., are "in fact, in law and in equity, the duly authorized agents and representatives in all matters in issue of the individuals named"; (5) that the motion of Koch and Dalton, trustees, be sustained; (6) that Koch and Dalton, as trustees, have and recover of Sylvan Beach, Inc., and "said co-partners" the sum of $26,435.74, and have and recover from it and them the trust property, assets and business conveyed by the deed of trust; (7) that the restaurant property and fixtures on the premises, operated by Ralph L. Peters, are a part of the trust estate of the Koch and Dalton trust; that an automobile held in the name of Louis W. Peters is a part of the trust estate, and that Koch and Dalton, trustees, have and recover both the restaurant and the automobile, and have and recover from Louis W. Peters, Ralph L. Peters and C. Lew Gallant $7,000 for the use and detention thereof; (8) that the petition of the Wiemeyers be granted; that they have and recover from Sylvan Beach, Inc., and said co-partners $9,400 ($6,900 in rent up to January, 1943, and $2,500 expenses of litigation), and that the lease be cancelled and possession of the property be awarded to the Wiemeyers; (9) that the contingent beneficial interest of Sylvan Beach, Inc., and of the co-partners in the trust estate has, "due to their wrongful acts and defaults," no value and is cancelled; (10) that Koch and Dalton, as trustees, pay to the attorney for the Wiemeyers the sum of $2,500 as fees and a like amount to their own counsel, for his services, out of the trust assets delivered to them; (11) that Sylvan Beach, Inc., and the "co-partners" pay and refund all costs and administration expenses of the proceeding; (12) that leave be given to the Wiemeyers and to Koch and Dalton, as trustees, to amend their pleadings to conform "to the issues tried, the proof, the findings and to this judgment and its effect";[4] (13) that the court reserve jurisdiction to take further proceedings and make further orders in aid of its "judgment"; (14) that a copy of the "findings and conclusions and of this judgment" be delivered within four days to each of the *859 "co-partners". Several orders in aid of the "judgment" entered on December 5, 1942, were made shortly thereafter.
On December 15, 1942, Louis W. Peters, Ralph L. Peters, A. H. Peters, C. Lew Gallant and William Faisst filed a special appearance and motion to vacate the "judgment" against them, upon the ground that the court was without power, in a summary proceeding, to enter such a judgment, and that they had been denied due process of law in that the "judgment" had been entered without giving them either notice or a hearing. A. L. Petersen, on the same day, filed a similar appearance and motion. On December 23, 1942, the Pevely Dairy Company filed a motion that the "judgment" of December 5, 1942, be modified so as to provide for the payment to the Dairy Company of certificates of indebtedness issued to it by the temporary trustee under authority of the court. In its motion, the Dairy Company stated that it was the holder of three such certificates aggregating $1,000, which represented money loaned by it to the temporary trustee to cover expenses of administration, and that it was entitled to have provision made for the payment of these certificates out of the insolvent estate. The motion of Louis W. Peters and others to vacate the "judgment", the motion of A. L. Petersen to vacate the "judgment", and the motion of the Dairy Company to modify the "judgment", were heard together on December 23, 1942. It then appeared that Koch and Dalton, as trustees, had obtained under the "judgment", from the temporary trustee, approximately $6,700 in cash, which apparently represented all of the liquid assets then remaining in the estate.
After hearing the motions to vacate and the motion to modify the "judgment", the court, on January 4, 1943, filed additional findings. It found that A. L. Petersen had been a purported stockholder and director of the debtor; that he knew of the conveyance of all of the debtor's property to Koch and Dalton, trustees; that he paid nothing for the stock of the debtor transferred to him by Louis W. Peters; and that Petersen had participated in initiating the fraudulent reorganization proceeding commenced on July 30, 1938. The court also found that Louis W. Peters, Ralph L. Peters, A. H. Peters, C. Lew Gallant, and William Faisst were in substantially the same situation as A. L. Petersen. With respect to the Pevely Dairy Company, the court found that it had made loans "to the purported temporary trustee evidenced by his purported Trustee's Certificates"; that a part of the consideration for the loans was an agreement that the products of the Dairy Company be sold on the premises of the debtor, to the exclusion of other dairy products; that the loans were made at a time when the motion of Koch and Dalton, trustees, to have the property in the hands of the temporary trustee restored to them was pending; that, of $6,000 loaned by the Dairy Company to the temporary trustee, $1,000 remained unpaid; that payment of it as an administration expense was adjudged to be paid by the persons found to be partners under the name Sylvan Beach, Inc., and that the court was "without jurisdiction to charge the res of Messrs. Koch's and Dalton's trust with payment of this loan, or to recapture, sequester and impound the res or any part thereof to that end, and in equity ought not to do so." In these additional findings, the court states:
"The court has not presumed, and does not presume, to determine one way or the other the question of the corporate existence of Sylvan Beach, Incorporated, but limits its consideration to starting at the point that the corporation, if a corporation, has not and never has had any valid shares issued and outstanding."
The motions to vacate and the motion to modify the "judgment" were denied. These appeals from the "judgment" followed.
It is of course obvious, from what has been said, that counsel who represented Koch and Dalton, as trustees, in the court below, misconceived the powers and functions of that court as a court of bankruptcy, and induced it to make findings and to enter judgments which cannot be sustained. We could, no doubt, reverse the "judgment" in its entirety and order the restoration of the status which existed at the time it was entered, but that would complicate the situation for the Wiemeyers, who were undoubtedly entitled to recover possession of their real estate.
We agree with the court below that the giving of the deed of trust and the delivery of the debtor's property and business to Koch and Dalton, as trustees, in 1935, constituted, in practical effect, a reorganization of the debtor and rendered the debtor an unfit subject for a subsequent corporate reorganization under Chapter X of the Bankruptcy Act. We also agree that the petition of the debtor for reorganization *860 filed July 30, 1938, presented a false picture of the debtor's situation and constituted a breach of faith, amounting to a fraud upon Koch and Dalton, as trustees, and upon the beneficiaries of their trust.[5] The only possible justification for the filing by the debtor of the petition for reorganization on July 30, 1938, was that the time when the deed of trust could be foreclosed was approaching and that the management of the business by Koch and Dalton, trustees, had been sufficiently successful to indicate that there was a possible equity for the debtor in the trust property. While those circumstances might perhaps have justified such a proceeding for the purpose of securing an extension of the time of foreclosure, they did not justify taking from Koch and Dalton, trustees, the assets and business and placing them in the hands of Louis W. Peters. The fact remains, however, that the court below approved the debtor's petition, appointed Louis W. Peters temporary trustee, authorized him to take over the assets and conduct the business, and compelled Koch and Dalton, as trustees, to deliver the property and business to Peters. This Court affirmed that action on the part of the lower court as being within its power on the face of the pleadings.
We are satisfied that the judgment of this Court in Dalton v. Peters, 8 Cir., 119 F.2d 494, is res judicata of nothing except the exact question of jurisdiction which was presented and decided. In Freeman on Judgments, 5th Ed., Vol. 2, § 740, pages 1561-1562, it is said: "A judgment on the pleadings is on the merits if it determines the merits of the controversy as distinguished from the merits of the pleadings. But such a judgment is not conclusive as to matters which could only be determined on evidence." See, also, 30 Am.Jur., Judgments, § 208, pages 944-945; Swift v. McPherson, 232 U.S. 51, 55, 56, 34 S.Ct. 239, 58 L.Ed. 499; Mayor and Aldermen of City of Vicksburg v. Henson, 231 U.S. 259, 269, 273, 34 S.Ct. 95, 58 L.Ed. 209; Dennison Mfg. Co. v. Scharf Tag, Label & Box Co., 6 Cir., 121 F. 313, 318. The decision of this Court in Dalton v. Peters could not in any event tie the hands of the lower court in the performance of its continuing duty to prevent Chapter X of the Bankruptcy Act from being used by a hopelessly insolvent corporation to defraud or harass creditors. See First National Bank v. Conway Road Estates Co., 8 Cir., 94 F.2d 736, 739; Price v. Spokane Silver & Lead Co., 8 Cir., 97 F.2d 237, 246. We are of the opinion, however, that the court below was not without jurisdiction, under Chapter X, to proceed with the administration of the business and property which it had taken over from Koch and Dalton, as trustees, upon the apparent assumption that the debtor had a substantial equity to protect.
We think it is unnecessary for this Court to decide whether the debtor was a corporation which could properly engage in business under the laws of Missouri, or whether its stockholders, as partners or otherwise, are liable to its creditors. The jurisdiction of the Federal Courts is not controlled by State law. Davis v. Ensign-Bickford Co., 8 Cir., 139 F.2d 624. Any corporation which could be adjudged a bankrupt can petition for reorganization under Chapter X of the Bankruptcy Act. See 11 U.S.C.A. § 506(3). "Corporations", as defined in § 1(8), Chapter I, of the Bankruptcy Act, 11 U.S.C.A. § 1(8), "include all bodies having any of the powers and privileges of private corporations not possessed by individuals or partnerships and shall include partnership associations organized under laws making the capital subscribed alone responsible for the debts of the association, joint-stock, companies, unincorporated companies and associations, and any business conducted by a trustee or trustees wherein beneficial interest or ownership is evidenced by certificate or other written instrument." Section 1(23) of Chapter I of the Bankruptcy Act, 11 U.S.C.A. § 1(23) provides that "persons" shall include corporations except where otherwise specified. Section 4 sub. a of Chapter III of the Act, 11 U.S.C.A. § 22, sub. a, provides: "Any person, except a municipal, railroad, insurance, or banking corporation or a building and loan association, shall be entitled to the benefits of this Act as a voluntary bankrupt."
There is nothing in the record to support a finding that the debtor was not a corporation which could file a petition for reorganization under Chapter X of the Bankruptcy Act. It had a certificate of incorporation from the State of Missouri, and made contracts, paid taxes, and incurred indebtedness as a corporation. It *861 was publicly and privately recognized as such. The Supreme Court of Missouri in Boatmen's Bank v. Gillespie, 209 Mo. 217, 108 S.W. 74, 86, said:
"* * * Moreover, whatever may be the rule in other jurisdictions, we understand the law in this state to be that a certificate of incorporation issued by the Secretary of State is a final determination of the corporation's right to do business as such, and that thereafter the state only, by a direct proceeding, can challenge its corporate existence or its right to do business as a corporation, even though fraud should be practiced upon the Secretary of State in obtaining the certificate. Nor, should the corporation or its incorporators fail to comply with the conditions or duties subsequent to the granting of the certificate, would that invalidate the incorporation or render the incorporators liable as partners or as individuals."
See, also, First National Bank of Deadwood v. Rockefeller, 195 Mo. 15, 93 S.W. 761, 767; Drake Hotel Co. v. Crane, 210 Mo.App. 452, 240 S.W. 859, 861; and A. W. Mendenhall Co. v. Booher, 226 Mo.App. 945, 48 S.W.2d 120, 122.
At the time the petition of the Wiemeyers to recover their real estate, and the motion of Koch and Dalton, trustees, to dismiss the reorganization proceeding and to recover the property covered by the deed of trust, were heard, the court below had power to determine whether the Wiemeyers were entitled to the return of their real estate and to the cancellation of their lease, and to decide whether the estate of the debtor had assets which belonged to Koch and Dalton, as trustees, and which should be delivered to them. The court also had power to determine whether the debtor could or could not be reorganized under the Bankruptcy Act, and whether the proceeding had been conducted in good faith or was a fraud upon the court and upon the creditors. Those matters were all related to the administration of the estate and were within the issues presented by the motions then pending. The court could not, however, in a summary proceeding, render personal judgments against the debtor and against its stockholders in favor of Koch and Dalton, trustees, and the Wiemeyers, or decide controversies not within the issues presented.
A court of bankruptcy is a court of equity within a limited field. It has, however, no plenary jurisdiction in equity. Smith v. Chase National Bank, 8 Cir., 84 F.2d 608, 614, 615; United States v. Killoren, 8 Cir., 119 F.2d 364, 366. It has jurisdiction to adjudicate controversies relating to property of which it has actual or constructive possession. Thompson v. Magnolia Petroleum Co., 309 U.S. 478, 481, 60 S.Ct. 628, 84 L.Ed. 876. It has no jurisdiction to hear and determine controversies between adverse third parties which are not strictly and properly part of the proceedings in bankruptcy. Brumby v. Jones, 5 Cir., 141 F. 318, 320; Chauncey v. Dyke Bros., 8 Cir., 119 F. 1, 3; Brockett v. Winkle Terra Cotta Co., 8 Cir., 81 F.2d 949, 952; Smith v. Chase National Bank, 8 Cir., 84 F.2d 608, 615; Morrison v. Rockhill Imp. Co., 10 Cir., 91 F.2d 639, 642.
In the absence of (1) notice to a party of the claim made against him, and (2) of a hearing or an opportunity to be heard in opposition thereto, a judgment entered upon the claim is a nullity. Galpin v. Page, 85 U.S. 350, 18 Wall. 350, 368, 369, 21 L.Ed. 959; Windsor v. McVeigh, 93 U.S. 274, 277, 278, 23 L.Ed. 914; Coe v. Armour Fertilizer Works, 237 U.S. 413, 423, 35 S.Ct. 625, 59 L.Ed. 1027; Twining v. State of New Jersey, 211 U.S. 78, 110, 111, 29 S.Ct. 14, 53 L.Ed. 97; Ochoa v. Hernandez, 230 U.S. 139, 161, 33 S.Ct. 1033, 57 L.Ed. 1427; Postal Telegraph Cable Co. v. City of Newport, 247 U.S. 464, 476, 38 S.Ct. 566, 62 L.Ed. 1215; Truax v. Corrigan, 257 U.S. 312, 332, 42 S.Ct. 124, 66 L.Ed. 254, 27 A.L.R. 375; Gentry v. United States, 8 Cir., 101 F. 51; In re Rosser, 8 Cir., 101 F. 562, 567, 570; In re Noell, 8 Cir., 93 F.2d 5, 6, 7.
A court may not, without the consent of all persons affected, enter a judgment which goes beyond the claim asserted in the pleadings. Standard Oil Co. v. State of Missouri, 224 U.S. 270, 281, 34 S.Ct. 406, 56 L.Ed. 760, Ann.Cas.1913D, 936; Barnes v. Chicago, M. & St. P. R. Co., 122 U.S. 1, 14, 7 S.Ct. 1043, 30 L.Ed. 1128; Reynolds v. Stockton, 140 U.S. 254, 265, 266, 11 S.Ct. 773, 35 L.Ed. 464; Clark v. Arizona Mut. Savings & Loan Ass'n, D.C., 217 F. 640, 642-644; Gentry v. United States, 8 Cir., 101 F. 51. Unless all parties in interest are in court and have voluntarily litigated some issue not within the pleadings, the court can consider only the issues made by the pleadings, and the judgment may not extend beyond such issues nor beyond the scope of the relief demanded. A party is no more entitled to recover upon *862 a claim not pleaded than he is to recover upon a claim pleaded but not proved.
The foregoing rules are all fundamental and state nothing more than the essentials of due process and of fair play. They assure to every person his day in court before judgment is pronounced against him. They cannot be circumvented by allowing amendments to pleadings to change a cause of action after judgment or by giving notice of the entry of judgment or by entertaining motions to vacate a judgment after it has been entered.
The money judgments in favor of the Wiemeyers and in favor of Koch and Dalton, trustees, were void for want of jurisdiction and want of due process. The judgment granting to the Wiemeyers possession of their real estate and cancelling the ninety-nine year lease should, we think, be sustained. It is true that the "judgment" dismissed, for want of jurisdiction, the proceeding as one for corporate reorganization, before granting the relief requested by the Wiemeyers in their petition, but, as we have pointed out, the court had jurisdiction to grant the Wiemeyer's petition for possession of their real estate and did grant it. So far as the motion of Koch and Dalton, trustees, for the recovery of the assets of their trust and the dismissal of the reorganization proceeding is concerned, we do not doubt that they are entitled to any residue of the insolvent estate remaining after the payment of claims (if any) superior to their claims. We think, however, that before the residue can be delivered to them, the claim of the appellant Pevely Dairy Company against the estate for money loaned to the temporary trustee and evidenced by the certificates of indebtedness issued under the authority of the court, must be heard and adjudicated.
We are also of the opinion that the court must, in terminating this reorganization proceeding, conform to § 236 (2) of the Bankruptcy Act, 11 U.S.C.A. § 636(2), which provides that if no plan is approved or accepted, the judge shall, "after hearing upon notice to the debtor, stockholders, creditors, indenture trustees, and such other persons as the judge may designate, enter an order either adjudging the debtor a bankrupt and directing that bankruptcy be proceeded with pursuant to the provisions of this Act, or dismissing the proceeding under this chapter, as in the opinion of the judge may be in the interests of the creditors and stockholders." The Supreme Court of the United States has said that this statute "does not contemplate a liquidation in a Chapter X proceeding but a liquidation in ordinary bankruptcy or a dismissal outright." Fidelity Assurance Ass'n v. Sims, 318 U.S. 608, 621, 63 S.Ct. 807, 813.
The judgment appealed from, in so far as it restored to the Wiemeyers possession of their real estate and cancelled their lease with the debtor is affirmed. In every other respect the judgment is reversed. The appellants shall recover two-thirds of their costs on appeal in this Court. The case is remanded with directions for further proceedings in conformity with this opinion.
NOTES
[1] The incorporators were Louis W. Peters, Ralph L. Peters, E. R. Breneman, P. M. Perkinson, Frank S. Wiemeyer, C. Lew Gallant and Michael J. Carroll. The articles of incorporation were dated April 13, 1932. The amount of capital stock was $15,000, being 100 shares of preferred of the par value of $100 per share, and 50 shares of common of equal par value. The articles stated that ninety per cent of the capital stock had been subscribed for and paid in cash and property ($1500 in cash and $11,900 in property, consisting of an agreement for a ninety-nine year lease on the tract of land described in the articles, which agreement was valued at $10,000, and the balance of the $11,900 consisting of four automobiles and miscellaneous items of personal property).
The Secretary of State of Missouri, on April 19, 1932, issued a certificate of incorporation to Sylvan Beach, Inc., which stated that "said association has on the date hereof become a body corporate duly organized under the name of Sylvan Beach, Inc., located at Kirkwood, and is entitled to all the rights and privileges granted to Manufacturing and Business Corporations under the laws of this State for a term of perpetual years * * *." The Secretary of State, on May 10, 1932, issued to Sylvan Beach, Inc., a certificate of authority to commence business, stating that it had complied with the requirements of law. The certificate of incorporation granted by the State has not been revoked. Sylvan Beach, Inc., has functioned as a corporation since the certificate was issued, and all parties to this proceeding are shown to have dealt with it as such.
[2] The filing of the petition was first authorized at a meeting of the Board of Directors of the debtor on May 5, 1938. Louis W. Peters, P. M. Perkinson, Ralph L. Peters, and C. Lew Gallant voted in favor. A. L. Petersen, A. H. Peters and William F. Faisst voted against it. At a directors' meeting held on July 20, 1938, at which all directors were present except A. L. Petersen, it was unanimously voted that the action of the Board at its meeting on May 5, 1938, be ratified, and the officers of the company were instructed to file the petition.
Section 77B of the Bankruptcy Act was, on September 22, 1938, superseded by Chapter X of the Bankruptcy Act, which, by § 276, sub. c(1), thereof, 11 U.S.C.A. § 676, sub. c(1), became applicable to this proceeding. See Bankers Securities Corp. v. Ritz Carlton Restaurant & Hotel Co., 3 Cir., 99 F.2d 51, 52, 53.
[3] The orders authorizing the temporary trustee to issue certificates of indebtedness stated "that said certificates should take priority in payment over existing obligations, debts, encumbrances and liens of the said Sylvan Beach, Incorporated, debtor, * * *."
[4] On January 4, 1943, Koch and Dalton filed an amendment to their "Motion to Dismiss Proceedings, or for Order and Restitution to Movants of Assets and Business; and for Accountings," to conform their pleading to the proof and to the judgment.
[5] Counsel who represent Sylvan Beach, Inc., on this appeal did not represent it prior to the entry of the judgment appealed from and did not participate in the proceedings below until after the judgment was entered.
| {
"pile_set_name": "FreeLaw"
} |
NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 18a0529n.06
Case No. 17-3205
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
JOSEPH ROYSTER, ) Oct 24, 2018
) DEBORAH S. HUNT, Clerk
Petitioner-Appellant, )
) ON APPEAL FROM THE UNITED
v. ) STATES DISTRICT COURT FOR
) THE SOUTHERN DISTRICT OF
WARDEN, Chillicothe Correctional ) OHIO
Institution, )
)
Respondent-Appellee. )
)
BEFORE: SILER, GRIFFIN, and STRANCH, Circuit Judges.
SILER, Circuit Judge. In this habeas corpus matter, Joseph Royster appeals the district
court’s denial of his petition. Royster argues that the Ohio Court of Appeals unreasonably applied
clearly established federal law—namely, Jackson v. Virginia, 443 U.S. 307 (1979)—in
determining that his child endangerment conviction was supported by “evidence necessary to
convince a trier of fact beyond a reasonable doubt of the existence of every element of the offense.”
Id. at 316. For the following reasons, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Between the summer of 2010 and April 2011, Royster lived in Dayton, Ohio with his
girlfriend and her two minor children. One of the children, eight-year-old J.J., alleged that Royster
raped and physically abused her while he lived with the family. In September 2012, Royster was
Case No. 17-3205, Royster v. Warden
charged with three counts of rape of a child less than ten years old, in violation of Ohio Rev. Code
§ 2907.02(A)(1)(b), and one count of child endangerment (corporal punishment), in violation of
Ohio Rev. Code § 2919.22(B)(3). Royster pleaded not guilty to all four counts and proceeded to
a trial by jury.
At trial, the prosecution presented the testimony of J.J., her physician, and her grandmother
in support of the child endangerment charge. J.J.’s physician testified that J.J. said “she doesn’t
like to wear dresses and doesn’t like to show her legs.” J.J. had linear scarring on her legs, which
did not appear to have resulted from accidental injuries. She explained that the scarring was “from
falling down.” When the physician asked J.J. “if she had ever been hurt by anyone,” J.J. responded
that her “mom’s boyfriend hit [her] with a belt and a . . . buckle on [her] legs.” The pediatrician
opined that the scars on J.J.’s legs were consistent with being hit with a belt. During the testimony
of J.J.’s grandmother, she began to explain to the jury about “when [J.J.] started telling [her] about
being hit,” but the prosecutor interrupted and never returned to the issue. Finally, J.J. testified that
Royster would hit her with a belt on her bottom and legs when she misbehaved. She said that these
beatings sometimes left welts.
Following the prosecution’s case, Royster moved for acquittal pursuant to Rule 29, which
the court granted as to one of the rape counts. The three remaining charges were left for jury
determination. During closing arguments, the prosecution noted that the jury must conclude the
punishment inflicted by Royster was “excessive under the circumstances” in order to convict
Royster of child endangerment. The prosecutor stated, “Ladies and gentlemen, she talks about,
and this is important, he leaves welts, welts on her leg. Ladies and gentlemen, that’s excessive.”
The jury returned guilty verdicts on the remaining three counts. Royster was sentenced to 15 years
-2-
Case No. 17-3205, Royster v. Warden
to life on each rape conviction and 36 months on the child endangerment conviction, to run
concurrently.
Royster appealed to the Ohio Court of Appeals, arguing that the prosecution had failed to
produce sufficient evidence that his use of corporal punishment was excessive under the
circumstances. He contended that, “[i]n determining whether corporal punishment is ‘excessive,’
courts have held that one must consider the ‘totality of the circumstances.’” Factors to be
considered, according to Royster, included the child’s age, her behavior leading up to the
discipline, her response to prior non-corporal punishment, the location and severity of the
punishment, and the discipliner’s state of mind when administering the punishment. Because the
prosecution did not present evidence of all of these factors, “the jury had absolutely no
circumstances to consider when assessing the charge,” and “the evidence produced at trial [wa]s
insufficient to uphold a guilty verdict as a matter of law.” In response, the state argued that beating
an eight-year-old child with a belt until she formed welts was per se unreasonable, regardless of
the circumstances.
The Ohio Court of Appeals affirmed Royster’s conviction, finding that the prosecution had
presented sufficient evidence to prove each element of the child endangerment charge beyond a
reasonable doubt. State v. Royster, No. 25870, 2015 WL 5173534, at *12 (Ohio Ct. App. Sept. 4,
2015). The court explained,
If the jury believed J.J.’s testimony that Royster beat her with a belt
and buckle to such an extent that welts remained visible on her skin,
and credited [the physician’s] testimony regarding the nature and
pattern of the scarring as inconsistent with a typical childhood
injury, the jury could have found the essential elements of
[§] 2919.22(B)(3) proven beyond a reasonable doubt.
Id. The Ohio court also factually distinguished State v. Rosa, 6 N.E.3d 57 (Ohio Ct. App. 2013),
upon which Royster relied, because it dealt with “the unique nature of the parent/child relationship,
-3-
Case No. 17-3205, Royster v. Warden
including the parent’s right to discipline their child, including the use of corporal punishment,”
and Royster was not J.J.’s parent. See Royster, 2015 WL 5173534, at *12 (quoting Rosa, 6 N.E.3d
at 62). The Supreme Court of Ohio declined to hear Royster’s appeal. State v. Royster, 42 N.E.3d
764 (Ohio 2015). Royster then filed a motion for reconsideration and an application for re-
opening, which the Ohio Court of Appeals denied. The Supreme Court of Ohio again declined to
exercise jurisdiction. State v. Royster, 44 N.E.3d 289 (Ohio 2016).1
Thereafter, Royster filed a pro se habeas petition pursuant to 28 U.S.C. § 2254 in the
Southern District of Ohio. The magistrate judge recommended that the district court deny the
petition, determining that “expert testimony that the beatings had left permanent scars [was]
certainly sufficient to ground a finding that the discipline had been excessive.” Thus, the
magistrate judge found that “the Second District’s decision was not an objectively unreasonable
application of Jackson.” The district court adopted the magistrate judge’s recommendations and
denied Royster’s habeas petition, finding that “[t]here [wa]s enough evidence for a reasonable trier
of fact to conclude that the State had proven all sub-elements of Corporal Punishment—and thus,
Endangering a Child—beyond a reasonable doubt.” Royster v. Jenkins, No. 3:16-cv-59, 2017 WL
663556, at *4 (S.D. Ohio Feb. 17, 2017).
On appeal, Royster continues to argue that the government failed to present sufficient
evidence that Royster’s corporal punishment of J.J. was excessive under the circumstances.
1
Royster also filed a state-court petition for post-conviction relief, asserting ineffective
assistance of counsel and a Brady violation. The Ohio Court of Appeals denied this petition, State
v. Royster, No. 26378, 2015 WL 751663, at *1 (Ohio Ct. App. Feb. 20, 2015), and the Supreme
Court of Ohio declined to consider his claims, State v. Royster, 31 N.E.3d 656 (Ohio 2015).
-4-
Case No. 17-3205, Royster v. Warden
STANDARD OF REVIEW
We conduct de novo review of the district court’s ruling on Royster’s petition for habeas
corpus. See Armstrong v. Morgan, 372 F.3d 778, 781 (6th Cir. 2004). Under the Antiterrorism
and Effective Death Penalty Act (“AEDPA”), we must defer to the decision of the Ohio Court of
Appeals concerning Royster’s claim, unless its judgment “was contrary to, or involved 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).
This standard is “difficult to meet,” and Royster carries the burden of proof. Metrish v.
Lancaster, 569 U.S. 351, 357–58 (2013). State court decisions must be “given the benefit of the
doubt.” Renico v. Lett, 559 U.S. 766, 773 (2010). Thus, in order to obtain relief, Royster must
demonstrate that the Ohio court “was so lacking in justification that there was an error well
understood and comprehended in existing law beyond any possibility for fairminded
disagreement.” Harrington v. Richter, 562 U.S. 86, 103 (2011).
DISCUSSION
The Due Process Clause of the Fourteenth Amendment requires that the prosecution
present sufficient evidence “to convince a trier of fact beyond a reasonable doubt of the existence
of every element of the offense” in order to sustain a conviction. Jackson, 443 U.S. at 316. The
reviewing court may not reassess witness credibility or reweigh the evidence in making this
determination. United States v. Talley, 164 F.3d 989, 996 (6th Cir. 1999). Thus, “the law
commands deference at two levels in this case”: (1) deference to the jury verdict under Jackson,
and (2) deference to the state court’s analysis under AEDPA. Tucker v. Palmer, 541 F.3d 652,
656 (6th Cir. 2008).
-5-
Case No. 17-3205, Royster v. Warden
The specific statute of conviction in this case is Ohio’s child endangerment provision,
which submits that no one shall “[a]dminister corporal punishment . . . which . . . is excessive
under the circumstances and creates a substantial risk of serious physical harm to the child.” Ohio
Rev. Code Ann. § 2919.22(B)(3). “The propriety and reasonableness of corporal punishment in
each case must be judged in light of the totality of the circumstances.” State v. Hart, 673 N.E.2d
992, 995 (Ohio Ct. App. 1996). The Third, Seventh, and Ninth Districts of the Court of Appeals
of Ohio have listed the following factors that may be considered when examining the
circumstances surrounding corporal punishment: (1) the child’s age, (2) her behavior leading up
to the discipline, (3) her response to non-corporal punishment, (4) the location and severity of the
punishment, and (5) the defendant’s state of mind while administering the punishment. See
Bowman v. Bowman, No. 13CA0064-M, 2014 WL 2957475, at *2 (Ohio Ct. App. June 30, 2014);
Rosa, 6 N.E.3d at 67; In re J.L., 891 N.E.2d 778, 788 (Ohio Ct. App. 2008); Hart, 673 N.E.2d at
995. According to Royster, the prosecution in his case failed to demonstrate that his conduct was
“excessive under the circumstances” because they did not present evidence of the above-listed
factors and relied “exclusively on a theory that the administration of punishment was categorically
excessive.”
On direct appeal, the Second District Court of Appeals determined that a reasonable juror
could have assessed the excessiveness of Royster’s conduct without specifically analyzing each of
the factors set forth in Bowman, 2014 WL 2957475, at *2, and Rosa, 6 N.E.3d at 67. See Royster,
2015 WL 5173534, at *12. Indeed, Royster has cited no binding Ohio authority supporting the
proposition that all of these factors must be proven by the prosecution in every child endangerment
case. We, therefore, defer to the Ohio court’s reasonable conclusion that a rational juror could
find Royster’s punishment of J.J. excessive under the circumstances demonstrated at trial. See
-6-
Case No. 17-3205, Royster v. Warden
Renico, 559 U.S. at 773 (explaining the “highly deferential standard for evaluating state-court
rulings” under AEDPA).
Royster heavily relies upon In re J.L., in which the Third District Court of Appeals found
that it could not “say, as a matter of law, that the punishment was excessive when viewed in the
totality of the circumstances.” 891 N.E.2d at 790. In that case, the trial court found the defendant
guilty of endangering a 35-month-old child by whipping him with a belt. Id. at 786–87. The
reviewing court stated that, although “striking a child with a belt on back of the legs support[ed] a
finding that the punishment was excessive,” id. at 790, “the location and severity of the physical
punishment . . . is only one factor that the court must consider when determining if the punishment
was excessive under the circumstances,” id. at 789–90. Thus, “corporal punishment on parts of
the body other than the buttocks may be proper and reasonable” under certain circumstances. Id.
at 790. But simply because another district of the Court of Appeals of Ohio might have reached a
different conclusion in Royster’s case does not make the Second District’s decision at issue an
unreasonable application of Jackson.
Royster also contends that the Ohio Court of Appeals upheld the jury verdict “based on the
single fact that Royster was not J.J.’s parent.” This assertion mischaracterizes the Ohio court’s
decision. Although the court noted this factor in distinguishing Royster’s case from Rosa, 6 N.E.3d
57, it reviewed each of Royster’s arguments in detail and concluded “that a rational finder of fact
could have found the essential elements of endangering children proven beyond a reasonable
doubt.” Royster, 2015 WL 5173534, at *12. The evidence at trial was certainly scant, but we
cannot conclude that no “fairminded jurists” could agree with the state court’s decision. See
Harrington, 562 U.S. at 101-02.
-7-
Case No. 17-3205, Royster v. Warden
“[U]nder the strict standards applied to habeas petitions, we cannot ignore the principles of
federalism that undergird deference to the state court’s findings.” Tucker, 541 F.3d at 661.
Because the Ohio Court of Appeals did not unreasonably apply clearly established federal law, see
Jackson, 443 U.S. at 318, the district court properly denied Royster’s habeas petition.
AFFIRMED.
-8-
| {
"pile_set_name": "FreeLaw"
} |
United States Court of Appeals
Fifth Circuit
F I L E D
March 3, 2004
UNITED STATES COURT OF APPEALS
Charles R. Fulbruge III
FIFTH CIRCUIT Clerk
_________________
No. 03-60494
(Summary Calendar)
_________________
LAURIE HAMLIN PICOU,
Plaintiff - Appellee-Cross-Appellant,
versus
CITY OF JACKSON MISSISSIPPI,
Defendant - Appellant-Cross-Appellee.
Appeal from the United States District Court
For the Southern District of Mississippi
USDC No. 3:99-CV-604
Before BARKSDALE, EMILIO M. GARZA, and DENNIS, Circuit Judges.
PER CURIAM:*
Following a remand from this Court, Laurie Hamlin Picou was awarded one dollar in nominal
*
Pursuant to 5th Cir. R. 47.5, the court has determined t hat this opinion should not be
published and is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4.
damages based on a jury verdict finding that the City of Jackson had engaged in sex discrimination
and retaliation. Picou was also awarded $10,000 in attorney’s fees. The City of Jackson contends
that the attorney’s fees award constitutes an abuse of discretion. Picou contends that the district
court abused its discretion in granting the City of Jackson’s motion to reopen the time to file an
appeal. We find that the district court did not abuse its discretion, and therefore AFFIRM.
Picou, a Jackson police officer, sued the City under Title VII for sex discrimination and
retaliation. The jury found in her favor and awarded $400,000 in emotional distress damages. The
district court granted remittitur to $50,000 which was accepted by Picou. The district court also
awarded $40,000 in attorney’s fees. On appeal, this Court vacated the emotional distress damages,
finding there was insufficient evidence of emotional distress. On remand, the district court awarded
Picou one dollar in nominal damages, and reduced her attorney’s fees award to $10,000. The court
found that, although she did not receive compensatory damages, she established sex discrimination
which would deter future discrimination. Picou’s success was thus limited and her attorney’s fees
were reduced to reflect her degree of success.
We review the award of attorney’s fees for abuse of discretion. Hopwood v. State of Texas,
236 F.3d 256, 277 (5th Cir. 2000). “When a plaintiff recovers only nominal damages because of his
failure to prove an essential element of his claim for monetary relief . . . the only reasonable fee is
usually no fee at all.” Farrar v. Hobby, 506 U.S. 103, 115 (1992). However, plaintiffs who do not
receive requested specific injunctive or monetary relief may be entitled to attorney’s fees when they
achieve a compensable goal such as deterring unconstitutional behavior. See Hopwood, 236 F.3d at
278. Attorney’s fees are appropriate when such goals are achieved because “Section 1988 is a tool
that ensures the vindication of important rights, even when large sums of money are not at stake, by
-2-
making attorney’s fees available under a private attorney general theory.” Id. (internal quotation
marks and citations omitted).
Here, the district court found that Picou had achieved a compensable goal, she established
discrimination based on sex, which should serve as a deterrent to the Jackson Police Department in
the future. Furthermore, contrary to the district court in Farrar, here the district court considered
the relat ionship between the extent of success and the amount of the attorney’s fee award. The
district court weighed Picou’s overall degree of success, co nsidered her lack of compensatory
damages, but still found she succeeded in deterring future discrimination. The district court ultimately
reduced her attorney’s fee award by one-fourth. The district court therefore awarded attorney’s fees
designed to reflect Picou’s degree of success. We cannot conclude that this careful consideration was
an abuse of discretion.
Picou argues that the district court abused its discretion in granting the City of Jackson’s
motion to reopen the time to file an appeal. A district court may grant a timely motion to reopen the
time to file an appeal if it finds the moving party was entitled to notice of entry of the judgement or
order, but did not receive notice from the district court or any party within 21days after entry, and
the court finds no party would be prejudiced. Picou contends that the City of Jackson’s failure to
receive notice was attributable to its own lack of diligence in notifying the court of its address
changes. Although a district court can deny a motion to reopen when a party’s failure to receive
notice is due to its own lack of diligence, it is not required to do so. See Jones v. W.J. Services, Inc.
970 F.2d 36 (5th Cir. 1992); Latham v. Wells Fargo Bank, 987 F.2d 1199 (5th Cir. 1993). Picou
does not allege that she was prejudiced by reopening the time to file an appeal. Therefore, the district
court did not abuse its discretion in granting the motion to reopen the time to file an appeal.
-3-
AFFIRMED.
-4-
| {
"pile_set_name": "FreeLaw"
} |
751 F.2d 1259
*Atlas Publishingv.U.S. Postal
83-5627
United States Court of Appeals,Eleventh Circuit.
12/28/84
1
S.D.Fla.
AFFIRMED
2
---------------
* Fed.R.App.P. 34(a); 11th Cir.R. 23.
| {
"pile_set_name": "FreeLaw"
} |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.