text
stringlengths 1
1.21M
| meta
dict |
|---|---|
913 N.E.2d 311 (2009)
Peter and Lori COOK, As Parents and Next Best Friend of Lindsey Jo Cook, A Minor, Appellants-Plaintiffs,
v.
FORD MOTOR COMPANY, a Delaware Corporation, Appellee-Defendant.
No. 49A02-0802-CV-130.
Court of Appeals of Indiana.
September 21, 2009.
*315 Lance Wittry, Wittry Law Office, Cheryl Planck, Indianapolis, IN, David V. Scott, New Albany, IN, Attorneys for Appellants.
Kevin C. Schiferl, Nelson D. Alexander, Frost Brown Todd LLC, Indianapolis, IN, Attorneys for Appellee.
OPINION
ROBB, Judge.
Case Summary and Issues
Peter and Lori Cook, as parents and next friends of Lindsey Jo Cook, filed a products liability lawsuit against Ford Motor Company following a motor vehicle accident in which eight-year-old Lindsey suffered serious brain injuries when the airbag in the Cooks' 1997 Ford F-150 pickup truck deployed and struck her in the head. The Cooks alleged that Lindsey's injuries were caused in part by Ford's defective instruction and warnings with respect to the front passenger seat airbag and airbag deactivation switch.
The trial court granted summary judgment to Ford on the Cooks' failure to warn claim, and the Cooks appeal, raising several issues that we restate as three: 1) whether the Cooks' failure to warn claim is preempted; 2) if not, whether a genuine issue of material fact exists regarding Ford's breach of its duty to warn; and 3) whether a genuine issue of material fact exists regarding Ford's breach being a proximate cause of Lindsey's injury. Ford *316 crossappeals the trial court's denial of its motion for fees and costs filed after a mistrial was declared, raising the issue of whether the trial court abused its discretion in failing to find the Cooks in contempt.
Concluding the Cooks' claim is not preempted by federal regulation and there is a genuine issue of material fact as to whether Ford breached its duty to warn and whether Ford was the proximate cause of Lindsey's injury, we reverse the trial court's grant of summary judgment to Ford on the Cooks' failure to warn claim and remand for further proceedings. Further concluding Ford was not entitled to fees and costs incurred during the first trial, we affirm the trial court's denial of Ford's motion for reimbursement.
Facts and Procedural History[1]
In 1999, the Cooks purchased a used 1997 Ford truck that was placed into the stream of commerce in 1996. The truck was equipped with part-time four-wheel drive and a front side passenger airbag which could be manually disabled. Lori was to be the primary driver of the truck, but she did not read the owner's manual nor the warnings printed within the car, specifically on the sun visor. Peter looked at the owner's manual in order to understand how and when to engage the four-wheel drive. He also read page 72 of the owner's manual regarding how and when to turn off the front seat passenger airbag. Page 72 includes the following language in a colored box at the top of the page marked with an exclamation point inside a triangular symbol:
Keep the passenger air bag turned on unless there is a rear-facing infant seat installed in the front seat. When the passenger air bag switch is turned off, the passenger air bag will not inflate in a collision.
Appellant's Appendix at 150. Based on Peter's reading of page 72 of the manual, he believed the only reason to turn off the airbag was if a child was riding in the front passenger seat in a rear-facing child seat. Page 72 also included the following warning in a colored box:
If the passenger air bag switch is turned off, it increases the likelihood of injury to forward facing occupants in the passenger seat.
Id. Peter never saw or read the following warning printed on the vehicle's sun visor:
WARNING TO AVOID SERIOUS INJURY:
For maximum safety protection in all types of crashes, you must always wear your safety belt.
Do not install rearward-facing child seats in any front passenger seat position, unless the air bag is off.
Do not sit or lean unnecessarily close to the air bag.
Do not place any objects over the air bag or between the air bag and yourself.
See the Owner's Manual for further information and explanations.
Id. at 97. In addition to the warning Peter read on page 72, the owner's manual also contained the following warnings and information under the heading "Seating and safety restraints":
All occupants of the vehicle, including the driver, should always wear their safety belts.
*317 To prevent the risk of injury, make sure children sit where they can be properly restrained.
It is extremely dangerous to ride in a cargo area, inside or outside of a vehicle.
In a collision, people riding in these areas are more likely to be seriously injured or killed. Do not allow people to ride in any area of your vehicle that is not equipped with seats and safety belts. Be sure everyone in your vehicle is in a seat and using a safety belt properly.
Id. at 94 (page 59 of the owner's manual; each warning is in a colored box marked with an exclamation point inside a triangular symbol);
Always follow the instruction and warnings that come with any infant or child restraint you might use.
If possible, place children in the rear seat of your vehicle. Accident statistics suggest that children are safer when properly restrained in rear seating positions than when they are restrained in front seating positions.
Children and safety belts
Children who are too large for child safety seats (as specified by your child safety seat manufacturer) should always wear safety belts.
Follow all the important safety restraint and air bag precautions that apply to adult passengers in your vehicle.
If the shoulder belt portion of a combination lap and shoulder belt can be positioned so it does not cross or rest in front of the child's face or neck, the child should wear the lap and shoulder belt. Moving the child closer to the center of the vehicle may help provide a good shoulder belt fit.
If the shoulder belt cannot be properly positioned:
move the child to one of the seats with a lap belt only (if equipped)
OR
if the child is the proper size, restrain the child in a safety seat.
Id. at 95 (page 75 of the owner's manual).
On April 20, 2002, the Cooks drove the truck to a friend's house in Indianapolis. Because Peter was staying to watch a basketball game, Lori moved to the driver's seat of the truck. Peter buckled Lindsey into the front passenger seat and the Cooks' two-year-old son was in a child seat in the back seat of the truck. Shortly after leaving, Lori and the children were involved in a low-speed rear-end collision. At some point prior to the collision, Lindsey had unbuckled her seat belt and was unrestrained at the time of the collision. The air bags deployed as a result of the collision and Lindsey suffered serious head trauma.
On October 23, 2002, the Cooks filed a complaint against, inter alia, Ford Motor Company. The complaint alleged, in relevant part, that Ford was negligent in designing several aspects of the truck. The Cooks also apparently alleged that Ford "failed to warn them of the dangers posed by the airbag to unrestrained children in the front seat of the [truck]." Id. at 24.[2] From February 13 to February 22, 2007, *318 evidence was presented to a jury on the Cooks' complaint. On February 22, 2007, Ford moved for a directed verdict and a mistrial. The trial court granted a mistrial and reset the case for jury trial on January 15, 2008. The trial court subsequently denied Ford's motion for costs incurred due to the mistrial.
On April 9, 2007, Ford filed a motion for summary judgment as to the Cooks' failure to warn claim, maintaining there was no genuine issue of material fact and it was therefore entitled to summary judgment for five reasons:
1. The alleged failure to give adequate warnings was not the proximate cause of the harm because [the Cooks] failed to read the warnings provided.
2. [The Cooks'] biomechanical expert concedes that if [the Cooks] heeded the warnings provided by Ford, Lindsey would not have sustained her injuries.
3. [The Cooks] are required to present expert testimony concerning the specific wording, content, appearance and placement of a "proper" warning, yet [the Cooks] have not retained a warnings expert.
4. [The Cooks'] state law failure-to-warn claim is impliedly pre-empted by federal regulation governing airbag warnings, 49 C.F.R. § 571.208.
5. Compliance with the applicable federal regulation gives rise to a presumption under state law that the product was not defective and that the defendant was not negligent.
Id. at 24-25. Following a hearing, the trial court entered an order granting summary judgment for Ford on the Cooks' failure to warn claim. After additional proceedings not relevant to this appeal,[3] the trial court issued an Entry of Final Judgment on January 16, 2008. The Cooks now appeal the trial court's grant of summary judgment to Ford on their failure to warn claim; Ford cross-appeals the trial court's denial of its motion for costs following the mistrial.
Discussion and Decision
I. The Cooks' Appeal
A. Summary Judgment Standard of Review
Summary judgment is appropriate only when the designated evidence "shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Ind. Trial Rule 56(C). "A genuine issue of material fact exists where facts concerning an issue which would dispose of the litigation are in dispute or where the undisputed facts are capable of supporting conflicting inferences on such an issue." Scott v. Bodor, Inc., 571 N.E.2d 313, 318 (Ind.Ct. App.1991).
We review the grant or denial of a motion for summary judgment de novo. *319 Univ. of S. Ind. Found. v. Baker, 843 N.E.2d 528, 531 (Ind.2006). We examine only those materials properly designated by the parties to the trial court. Trietsch v. Circle Design Group, Inc., 868 N.E.2d 812, 817 (Ind.Ct.App.2007). We construe all facts and reasonable inferences drawn from them in favor of the non-moving party, Am. Home Assurance Co. v. Allen, 814 N.E.2d 662, 666 (Ind.Ct.App.2004), trans. dismissed, and resolve all doubts as to the existence of a material issue against the moving party, Tibbs v. Huber, Hunt & Nichols, Inc., 668 N.E.2d 248, 249 (Ind. 1996). The movant has the initial burden of proving the absence of a genuine issue of material fact as to an outcome determinative issue and only then must the nonmovant come forward with evidence demonstrating the existence of genuine factual issues which should be resolved at trial. Jarboe v. Landmark Cmty. Newspapers of Ind., Inc., 644 N.E.2d 118, 123 (Ind.1994).
The party appealing the trial court's summary judgment decision has the burden of persuading us that the decision was erroneous. Owens Corning Fiberglass Corp. v. Cobb, 754 N.E.2d 905, 908 (Ind. 2001). If the trial court's grant of summary judgment can be sustained on any theory or basis in the record, we will affirm. Beck v. City of Evansville, 842 N.E.2d 856, 860 (Ind.Ct.App.2006), trans. denied.
B. Failure to Warn Claim
1. Background
Indiana's Product Liability Act (the "Act") governs all actions that are brought by a user or consumer against a manufacturer or seller for physical harm caused by a product regardless of the substantive theory or theories upon which the action is brought.[4] Ind.Code § 34-20-1-1; Stegemoller v. ACandS, Inc., 767 N.E.2d 974, 975 (Ind.2002). A product may be defective within the meaning of the Act because of a manufacturing flaw, a design defect, or a failure to warn of dangers in the product's use. Baker v. Heye-America, 799 N.E.2d 1135, 1140 (Ind.Ct.App. 2003), trans. denied. The duty to warn is twofold: 1) to provide adequate instructions for safe use, and 2) to provide a warning as to dangers inherent in improper use. Rushford, 868 N.E.2d at 810. "[I]n an action based on ... an alleged failure to provide adequate warnings or instructions regarding the use of the product, the party making the claim must establish that the manufacturer or seller failed to exercise reasonable care under the circumstances in ... providing the warnings or instructions." Ind.Code § 34-20-2-2. Although the adequacy of warnings, which implicates a breach of duty, is generally a question of fact for the trier of fact to resolve, the nature of the duty to provide warnings is a question of law to be decided by the court. Rushford, 868 N.E.2d at 810.
Cases alleging a failure to adequately warn under the Act sound in negligence. Ford Motor Co. v. Rushford, 845 N.E.2d 197, 200 (Ind.Ct.App.2006), aff'd in relevant part, 868 N.E.2d 806, 809 (Ind. 2007). Negligence has three elements: 1) *320 a duty owed by the defendant to the plaintiff, 2) a breach of that duty, and 3) injury to the plaintiff proximately caused by the defendant's breach. Rhodes v. Wright, 805 N.E.2d 382, 385 (Ind.2004). Summary judgment is rarely appropriate in negligence cases "because negligence cases are particularly fact sensitive and are governed by a standard of the objective reasonable personone best applied by a jury after hearing all of the evidence." Id. at 387. Nonetheless, a defendant is entitled to judgment as a matter of law when the undisputed material facts negate at least one element of the plaintiff's claim. Id. at 385.
2. Preemption
We address first Ford's contention that the Cooks' failure to warn claim is pre-empted by federal law. The preemption doctrine is grounded in the Supremacy Clause of Article VI of the United States Constitution, which establishes federal law as the supreme law of the land. Roland v. General Motors Corp., 881 N.E.2d 722, 725 (Ind.Ct.App.2008), trans. denied. Administrative regulations promulgated pursuant to congressional authorization have the same preemptive effect as federal statutes. Rogers ex rel. Rogers v. Cosco, Inc., 737 N.E.2d 1158, 1163-64 (Ind.Ct.App.2000), trans. denied. State law is preempted only when that is the clear intent of Congress in enacting the federal statute at issue. Id. at 1164. Preemption may be either express or implied, "and is compelled whether Congress' command is explicitly stated in the statute's language or implicitly contained in its structure and purpose." Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 738, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985).
The National Traffic and Motor Vehicle Safety Act (the "Safety Act") was enacted to "reduce traffic accidents and death and injuries to persons resulting from traffic accidents." 49 U.S.C. § 30101. The Safety Act contains the following preemption clause:
When a motor vehicle safety standard is in effect under this chapter, a State or a political subdivision of the State may prescribe or continue in effect a standard applicable to the same aspect of performance of a motor vehicle or motor vehicle equipment only if the standard is identical to the standard prescribed under this chapter.
49 U.S.C. § 30103(b)(1). The Safety Act also contains a state common law savings clause, however, stating that "[c]ompliance with a motor vehicle safety standard under this chapter does not exempt a person from liability at common law." 49 U.S.C. § 30103(e). Reading the preemption clause and the savings clause together, common law tort actions are not expressly preempted. Geier v. American Honda Motor Co., Inc., 529 U.S. 861, 868, 120 S.Ct. 1913, 146 L.Ed.2d 914 (2000). The savings clause "preserves those actions that seek to establish a greater safety than the minimum safety achieved by a federal regulation intended to provide a floor." Id. at 870. The savings clause "does not bar the ordinary working of conflict preemption principles," however. Id. at 869. State law tort actions may be preempted if the state standards in question actually conflict with federal objectives. Id. at 874 (citing Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941) ("Our primary function is to determine whether, under the circumstances of this particular case, [the state] law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.")). There is a general presumption against preemption because respect for the States as "independent sovereigns in our *321 federal system" leads courts to assume that "Congress does not cavalierly preempt state-law causes of action." Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996). When the text of a preemption clause is susceptible of more than one plausible interpretation, courts ordinarily accept the interpretation that disfavors preemption. Bates v. Dow Agrosciences, LLC, 544 U.S. 431, 449, 125 S.Ct. 1788, 161 L.Ed.2d 687 (2005).
The National Highway Traffic Safety Administration was charged with developing and promulgating federal motor vehicle safety standards under the Safety Act. 49 C.F.R. § 1.50(a). On summary judgment, Ford contended that one of these safety standards specifies the airbag warnings to be used by automobile manufacturers and preempted the Cooks' claim. See 49 C.F.R. § 571.208 ("Standard 208"). In its motion for summary judgment, Ford cited generally Standard 208, but argued specifically that the visor warning was mandated. See Appellant's App. at 26 ("The visor warning contained the following language as mandated by [Standard] 208 ....") (emphasis added); at 27 (reproducing the visor warning from the Cooks' truck); at 35 (stating that Standard 208 was amended on September 2, 1993 "to require specified in-car warnings") (emphasis added); at 35-36 (describing "NHTSA's express purpose in mandating a specific, exclusive airbag warning label," and referencing NHTSA's agency decision regarding labels, 58 Fed.Reg. 46551 (Sept. 2, 1993)). Standard 208, as applicable to the Cooks' truck, provided for a specific sun visor label:
(b) Label on sun visor above front outboard seating positions equipped with inflatable restraint.
(1) Each vehicle manufactured on or after September 1, 1994, shall comply with either S4.5.1(b)(1)(i) or S4.5.1(b)(1)(ii), except that the word "WARNING" may be used instead of "CAUTION".
* * *
(ii) If the vehicle is equipped with a cutoff device permitted by S4.5.4 of this standard, each front outboard seating position that provides an inflatable restraint shall have a label permanently affixed to the sun visor for such seating position on either side of the sun visor, at the manufacturer's option. Except as provided in S4.5.1(b)(1), this label shall read:
CAUTION
TO AVOID SERIOUS INJURY:
For maximum safety protection in all types of crashes, you must always wear your safety belt.
Do not install rearward-facing child seats in any front passenger seat position, unless the air bag is off.
Do not sit or lean unnecessarily close to the air bag.
Do not place any objects over the air bag or between the air bag and yourself.
See the owner's manual for further information and explanations.
49 C.F.R. § 571.208 S4.5.1(b)(1) (Oct. 1, 1996). The Cooks did not dispute on summary judgment that the visor warning in their truck said what it was required by federal law to say. See Fisher v. Ford Motor Co., 224 F.3d 570, 574 (6th Cir.2000) (holding that the visor warning language is both a floor and a ceiling as the sole language NHTSA wanted for in-car warnings to avoid "information overload" and a state law claim that would impose a duty to warn by means of additional and different in-car warnings was therefore preempted). The Cooks' concern is with the instruction in the owner's manual that the passenger side air bag should be *322 turned on "unless there is a rear-facing infant seat installed in the front seat."
On appeal, Ford, still relying generally on Standard 208, now cites specifically to S.4.5.4.4, which provides:
The vehicle owner's manual shall provide in a readily understandable format:
(a) Complete instructions on the operation of the cutoff device;
(b) A statement that the [airbag] cutoff device should only be used when a rear-facing infant restraint is installed in the front passenger seating position; and
(c) A warning about the safety consequences of using the cutoff device at other times.
49 C.F.R. § 571.208 S4.5.4.4. The Cooks argue waiver for purposes of this appeal and urge us to impose the "law of the case" doctrine to prohibit Ford from raising S.4.5.4.4 to the trial court in the event of a remand. See Reply Brief of Appellant and Brief of Cross Appellee at 7-13. We note two things with respect to waiver: 1) Ford cited Standard 208 generally to the trial court; and 2) we may affirm a grant of summary judgment on any basis supported by the record,[5]Beck, 842 N.E.2d at 860.[6] Whether the provisions of Standard 208 preempt the Cooks' failure to warn claim was an issue raised to the trial court and is a question of law that can be decided on this record.
Several recent United States Supreme Court preemption cases are relevant to our decision. As discussed above, the Supreme Court held in Geier that the Safety Act's preemption provision did not expressly preempt common law tort actions notwithstanding a manufacturer's compliance with federal standards, but also held that the savings clause did not foreclose operation of ordinary preemption principles on those actions. 529 U.S. at 868-69, 120 S.Ct. 1913. Applying those holdings to an injured motorist's design defect action against a car manufacturer alleging negligence in failing to equip her car with *323 a driver's side airbag, the Court held that the specific action was preempted because it actually conflicted with Standard 208. Id. at 874, 120 S.Ct. 1913. Standard 208 as applicable to the plaintiff's 1987 vehicle required manufacturers to equip some but not all of their 1987 vehicles with passive restraints and did not mandate the type of passive restraint to be installed. The standard "deliberately sought varietya mix of several different passive restraint systems" and "also deliberately sought a gradual phase-in of passive restraints." Id. at 878-79, 120 S.Ct. 1913. Moreover, the standard was conditional, providing for recission if, by September 1, 1989, two-thirds of the states had laws in place requiring seatbelt use. Because the standard specifically gave manufacturers an option in the type of passive restraint system to install and required only 10% of the 1987 fleet be so equipped, plaintiff's action that would have imposed a duty to install an airbag "stood as an obstacle to the accomplishment and execution of the important... federal objectives" and was therefore preempted. Id. at 881, 120 S.Ct. 1913 (quotation omitted);[7]see also Riegel v. Medtronic, Inc., ___ U.S. ___, 128 S.Ct. 999, 1007-08, 169 L.Ed.2d 892 (2008) (holding that the Medical Device Amendments to the Food, Drug, and Cosmetic Act ("FDCA") expressly preempted state "requirements" including common law actions for negligence and strict liability that are different from or in addition to the federal requirements for a medical device that was given premarket approval by the FDA); Hurley v. Motor Coach Indus., Inc., 222 F.3d 377, 383 (7th Cir.2000) (holding that because Standard 208 offers manufacturers a choice as to driver protection systems installed in buses, plaintiff's state law claim that would foreclose one or more of those choices is preempted), cert. denied, 531 U.S. 1148, 121 S.Ct. 1087, 148 L.Ed.2d 962 (2001).
More recently, in Altria Group, Inc. v. Good, ___ U.S. ___, 129 S.Ct. 538, 172 L.Ed.2d 398 (2008), the Court held that a state action by cigarette smokers against tobacco products manufacturers alleging claims that cigarettes were "light" and had "lowered tar and nicotine" was not expressly preempted by the Federal Cigarette Labeling and Advertising Act ("FCLAA"). The FCLAA's stated purposes are "to establish a comprehensive Federal program to deal with cigarette labeling and advertising" by adequately informing the public that cigarette smoking may be hazardous to health and to not impede commerce "by diverse, nonuniform, *324 and confusing cigarette labeling and advertising regulations with respect to any relationship between smoking and health." 15 U.S.C. § 1331. To this end, the FCLAA has two express preemption provisions: 1) prohibiting the requirement of additional statements relating to smoking and health on cigarette packages, 15 U.S.C. § 1334(a); and 2) providing that "[n]o requirement or prohibition based on smoking and health shall be imposed under State law with respect to advertising or promotion of any cigarettes the packages of which are labeled in conformity with the provisions of this chapter," 15 U.S.C. § 1334(b). Construing the phrase "based on smoking and health" "fairly but narrowly," the Court held that the plaintiffs' action arising from a state statutory duty not to deceive did not seek to impose a prohibition "based on smoking and health" and was not therefore expressly preempted. 129 S.Ct. at 549.
Finally, in Wyeth v. Levine, ___ U.S. ___, 129 S.Ct. 1187, 173 L.Ed.2d 51 (2009), the Court held that a state law claim of failure to warn of a specific risk associated with a prescription drug was not preempted. The plaintiff had received an injection of a drug via a method that resulted in gangrene and amputation of her arm. The drug and its warning label had been approved by the FDA pursuant to the FDCA. The plaintiff argued that the manufacturer should have strengthened the approved warning to warn of the risks of administering the drug by that method. The manufacturer argued that it would have been impossible to comply with the state law duty sought to be imposed by the plaintiff to modify the drug warning label and also with its federal labeling duties. The Court held that because a regulation allows a manufacturer to change an approved label to add or strengthen a warning immediately upon filing a supplemental application for the change and without waiting for FDA approval, the manufacturer failed to prove the "demanding defense" of impossibility preemption. Id. at 1199. The manufacturer also argued that requiring it to comply with a state law duty to provide a stronger warning would obstruct the purposes and objectives of federal drug labeling regulation. The manufacturer argued that the FDCA "establishes both a floor and ceiling ...:[o]nce the FDA has approved a drug's label, a state-law verdict may not deem the label inadequate...." Id. However, the absence of an express preemption provision in the FDCA for prescription drugs "is powerful evidence that Congress did not intend FDA oversight to be the exclusive means of ensuring drug safety and effectiveness." Id. at 1200. The FDA's declaration in the preamble to a 2006 regulation governing the content and format of drug labels that the FDCA establishes a floor and a ceiling and that state law failure to warn claims threaten the FDA's statutorily prescribed role as the "expert Federal agency responsible for evaluating and regulating drugs," id., did not merit deference because it was not offered for comment before being finalized, because it was at odds with evidence of Congress' purpose, and because it reversed the FDA's longstanding position that federal labeling standards were a floor only, id. at 1201-02.
At first glance, this case might seem to be controlled by the outcome in Geier, as both Geier and this case concern automobile safety through airbags and the application of Standard 208. However, the specific regulations at issue are sufficiently different that we do not believe the fact the action in Geier was preempted dictates the same result in this case. In Geier, the standard gave manufacturers options from which to choose and a period of time over which to comply; the plaintiff's suit would have foreclosed the options and accelerated *325 the timeline and therefore impermissibly conflicted with the standard. Here, the standard requires an airbag warning to be included in the owner's manual but describes only generally the content that should be covered by the warning; the Cooks' claim that the airbag warnings should have been worded differently in no way conflicts with the standard. When Standard 208 was amended to address front passenger airbags, children, and cutoff devices, NHTSA specifically declined to establish the precise language that must appear in the owner's manual. See 60 Fed.Reg. 27233, 27237 (May 23, 1995) ("NHTSA also proposed to require that manufacturers include information concerning the cutoff device in the owner's manual. NHTSA did not propose specific language which must be included in the owner's manual."); 58 Fed.Reg. 46551, 46557 (Sept. 2, 1993) ("NHTSA noted that it was not proposing to establish the precise language that must appear in the owner's manual. Instead, under the proposal, manufacturers were to be required to provide this information in their owner's manuals, and allowed to choose the language they believe would most effectively convey the information to readers of the owner's manual.... The agency further believes that providing manufacturers flexibility in choosing the language will result in more effective messages that are tailored for individual vehicles. Therefore, the agency is not providing more specific requirements concerning the information that must be provided."). The points addressed in S4.5.4.4 must be included in the owner's manual, but the specific language is not mandated and additional points are not foreclosed. Therefore, contrary to Ford's position, we believe that S4.5.4.4 provides a floor for the warnings to be included in an owner's manual with respect to airbag safety and the use of the cutoff device but not a ceiling.
We believe this case and the applicable federal standard is more akin to Wyeth, even though the regulatory schemes to which Wyeth and this case are subject are different. Like the plaintiff in Wyeth, the Cooks argue Ford should have strengthened its warnings; like the manufacturer in Wyeth, Ford argues that it would be impossible to do so and remain in compliance with the federal standard. The warning in Wyeth was approved by a federal agency, but there was a process by which it could be changed at the manufacturer's request; here, the warning did not even require pre-approval and was left to the manufacturer's discretion. In Wyeth, the Court found no preemption despite the implementing agency's assertions that the suit was preempted because the regulations at issue were both a floor and a ceiling; here, the implementing agency's comments, if not outright stating that the standard is a floor only, strongly imply that such is the case by allowing the manufacturers flexibility to tailor the warning language to their vehicles. Ford has not shown as a matter of law that it would be impossible for it to comply with both Standard 208 and the state law duty the Cooks seek to impose; nor has Ford shown that a stronger or differently-worded warning would obstruct the purposes and objectives of the Safety Act's regulation of automobile manufacturing in order to "reduce traffic accidents and death and injuries to persons resulting from traffic accidents." 49 U.S.C. § 30101. For many of the same reasons Wyeth found no preemption and for several additional reasons as outlined above, we hold that the duty the Cooks seek to impose neither actually conflicts with Standard 208 nor stands as an obstacle to the accomplishment and execution of federal objectives regarding airbag warnings. Therefore, preemption was not a *326 basis on which to grant summary judgment to Ford.
3. Adequacy of Warnings
The Cooks contend that the trial court erred in granting summary judgment to Ford because there is a genuine issue of material fact as to whether the owner's manual instructions regarding airbag deactivation were defective[8] and whether the defective instruction was a proximate cause of Lindsey's injury.
a. Breach of Duty
There can be no doubt that Ford owed a duty to warn the Cooks of the dangers associated with the truck's airbags. As stated above, the duty to warn consists of two duties: 1) to provide adequate instructions for safe use; and 2) to provide a warning as to dangers inherent in improper use. Rushford, 845 N.E.2d at 201. The Cooks contend that the airbag warning on page 72 of the owner's manual that the airbag should be on "unless there is a rear-facing infant seat installed in the front seat" and that turning the passenger airbag off "increases the likelihood of injury to forward facing occupants in the passenger seat" breaches Ford's duty to provide adequate instructions for safe use. Expert testimony designated on summary judgment indicates that airbags pose a danger to all children in the front passenger seat, not just those in a rear-facing child seat. See Appellant's App. at 170 (Testimony of Dr. Carley Ward: "So children are always at risk in the front seat of a vehicle unless they've got the seat all the way back and a pretentioner on the belt.... Unless you give the instruction to the parent to do that, you should have the bag turned off"). Testimony from a Ford engineer indicated that Ford knew airbags were dangerous to children in the mid-1990s and that implementation of the deactivation switch was done in part to help prevent injuries to children as a result of passenger airbag deployment. See id. at 157. Peter testified that his understanding of the proper use of the airbag deactivation switch was that it should be used only when a rear-facing child seat was in the front passenger seat and that the warnings he readeven those he read after the factdid not clearly impart to him the dangers airbags posed to all children in the front seat. Peter testified that even if he had read the instruction that children should be placed in the rear seat of the vehicle if possible and that "[a]ccident statistics suggest that children are safer when properly restrained in rear seating positions than when they are restrained in front seating positions," he would not have altered his conduct because nothing about the instructions contradicted his belief that the presence of the airbag provided greater *327 protection in the front seat. See id. at 134.
Whether a particular act or omission is a breach of duty is generally a question of fact for the jury, but can be a question of law when the facts are undisputed and only a single inference can be drawn from those facts. Rushford, 845 N.E.2d at 202. Given the wording of the airbag instructions in the owner's manual that a passenger airbag should remain on except in the one specific instance of a rear-facing child seat in the passenger seat and the expert testimony designated to the trial court that a passenger airbag poses a risk to all children and should be turned off when any child is in the passenger seat, we cannot say as a matter of law that the instructions were adequate. Even if we presume the Cooks read and heeded all the airbag instructions provided by Ford, there is a question of fact as to whether a reasonable person would have understood from Ford's instructions that injury could occur under these circumstances.[9] The dissent believes that because it is undisputed the Cooks failed to comply with instructions to place children in the backseat and to wear seat belts, Ford has not, as a matter of law, breached its duty to warn.[10] We agree it is undisputed that the owner's manual instructed to place children in the backseat "if possible," and that there was room for Lindsey in the backseat of the Cooks' truck on the day of the accident. We also agree it is undisputed that the owner's manual stated that all *328 vehicle occupants "should" wear their seat belts, but note that when Peter put Lindsey in the front seat, he secured her seat belt.[11] However, we have already concluded that Standard 208 does not preempt the Cooks' claim because the standard leaves the specific language of the warning up to the manufacturer. In this case, the language selected by Ford with respect to the additional warnings was permissive; that is, it equivocally instructed to place children in the backseat "if possible," "suggested" that children are safer there, and that occupants "should" always wear seat belts. Moreover, the warning fails to state that one of the risks from which children are possibly safer is injury from deployment of the front seat passenger airbag. Even if the Cooks had read all the warnings in the owner's manual, the permissive nature of the warnings would not have changed their conduct. See Tr. at 134. In short, Standard 208 allows Ford discretion in crafting a warning and we believe there is at least a question of fact as to whether Ford exercised that discretion in crafting a warning that was strong and specific enough to warn the Cooks that the additional instructions were linked to danger from the airbag. Thus, we hold Ford was not entitled to summary judgment on the issue of breach of its duty to warn.
b. Proximate Cause
A party's act is the proximate cause of an injury if it is "the natural and probable consequence of the act and should have been reasonably foreseen and anticipated in light of the circumstances." Hassan v. Begley, 836 N.E.2d 303, 307 (Ind.Ct.App.2005). In other words, proximate cause requires, at a minimum, that the harm would not have occurred but for the defendant's conduct. Id. "It is not necessary for a defendant's act or omission to be the proximate cause of the plaintiff's injury, so long as the conduct is a proximate cause of the injury." Id. (emphasis in original); see Ind.Code §§ 34-51-2-1 et seq. (Indiana's Comparative Fault Act, apportioning liability among those whose fault caused or contributed to the loss in proportion to their percentages of "fault"). Proximate cause is primarily a question of fact to be determined by the jury and therefore, ordinarily is not properly resolved on summary judgment. Sparks v. White, 899 N.E.2d 21, 29 (Ind.Ct.App. 2008).
The Cooks contend that Lindsey's injury would not have occurred but for the airbag instruction failing to adequately instruct them to deactivate the airbag for all child passengers and/or to specifically warn of the dangers of airbags to children. Ford contends that the airbag instructions are not the proximate cause of the Cooks' injuries, because if the Cooks had heeded the instructions to place children in the backseat and to remain belted at all times, Lindsey's injuries would not have occurred and/or would not have been as severe. Peter's designated testimony is that he belted Lindsey into the front passenger seat when he placed her in the car; that he believed the front seat, equipped with an airbag, was actually safer for her than the back seat; and that had the airbag instruction warned of the dangers of airbag deployment to all children, he would have deactivated it or not seated her in the front seat.
As for Ford's seatbelt assertion, there is no dispute that Lindsey would not have been injured as severely if she had been belted at the time of the accident. See Appellant's App. at 64 (in response to *329 question, "And do you agree that if Lindsey had had her seat belt on, that she wouldn't have been injured by the airbag door," Lori answered, "Yes."); but see id. at 54 (response to request for admission that "Lindsey's injuries would have been less severe in the Accident if she had been wearing a seat belt at the time of the Accident": "Plaintiff admits that Lindsey Cook may not have suffered the same injury if a seatbelt had restrained her closer to the seatback, but Plaintiff affirmatively alleges that substantial injury is caused by Ford airbag deployments in below threshold crashes...."). However, there is also no dispute that Peter belted Lindsey into the truck and that Lindsey subsequently unbelted herself. There is designated evidence that Lindsey had periodically unbelted herself on previous occasions and that she was immediately instructed to re-buckle her seatbelt on those occasions. There is no designated evidence indicating how long Lindsey had been unbelted before the accident occurred.
Lindsey was eight years old at the time of the accident. Children between the ages of seven and fourteen are required to exercise due care for their own safety under the circumstances of a child of like age, knowledge, judgment, and experience and there is a rebuttable presumption they are incapable of negligence.[12]Creasy v. Rusk, 730 N.E.2d 659, 662 (Ind.2000). Reasonably foreseeable intervening acts do not break the chain of causation and the original wrongful act can still be the proximate cause of an injury. Briesacher v. Specialized Restoration and Constr., Inc., 888 N.E.2d 188, 194 (Ind.Ct. App.2008); see Conder v. Hull Lift Truck, Inc., 435 N.E.2d 10, 14 (Ind.1982) (the action of someone or something other than the alleged tortfeasor that affects the chain of causation is an intervening cause; it becomes a superseding cause breaking the chain of causation if it was not forseeable). As the trial court noted, there is no dispute that Peter and Lori followed the seat belt instruction when placing Lindsey in the front seat. See Tr. at 1698 (the trial court, at summary judgment hearing: "[T]he evidence that's in the record is that [Lindsey] immediate [sic]she unbuckled herself split seconds before mom had any awareness of it. So mom followed the instructions, dad followed the instructions on seatbelts...."). Because a child of Lindsey's age is rebuttably presumed incapable of negligence, whether Lindsey failed to exercise the due care required of her for her own safety under these circumstances and, if so, whether her failure was an intervening cause[13] sufficient to break any chain of causation leading back to Ford is, at best, a question of fact for the jury.[14]See Control Techniques, Inc. v. *330 Johnson, 762 N.E.2d 104, 107 (Ind.2002) (whether or not an intervening cause is forseeable "such that liability may be imposed on the original wrongdoer is a question for a jury."); see also Morgen, 797 N.E.2d at 1149-50 (collecting cases holding that it is proper for the jury to decide whether failure to use a seatbelt is misuse); Underly v. Advance Mach. Co., 605 N.E.2d 1186, 1189 (Ind.Ct.App.1993) ("The foreseeability of an intervening misuse is usually a question for the jury."), trans. denied; cf. Bowman v. State, 564 N.E.2d 309, 313 (Ind.Ct.App.1990), aff'd in relevant part, 577 N.E.2d 569, 571 (Ind.1991) ("[I]t is clearly forseeable that an automobile passenger might fail to wear a seatbelt.").[15]
As to Ford's assertion regarding the instruction to place children in the backseat, there is no dispute that Lindsey's injury would not have occurred if she had been in the backseat. See Appellant's App. at 62-63 (in response to question, "And you'd agree that if Lindsey had been in the backseat when this crash occurred, she'd be perfectly fine," Lori answered, "Yes."). However, the Cooks' claim is that the backseat instruction is less than clear about the ramifications of failing to place children in the backseat. The instruction reads:
If possible, place children in the rear seat of your vehicle. Accident statistics suggest that children are safer when properly restrained in rear seating positions than when they are restrained in front seating positions.
Appellant's App. at 95. The instruction uses equivocal language: "if possible," put children in the back seat where statistics "suggest" they are safer. The instruction does not address the role of airbags in either increasing or decreasing the safety of children in the front seat. Peter testified that to him, that language is not a "specific direction" but only "hint[s] at" the backseat as the safest place for a child and the reasons why. Appellant's App. at 142. When asked if, having now read all of the relevant instructions in the owner's manual, he would have put Lindsey in the backseat, Peter testified:
No. Because at the time I didn't think that the airbag could kill her, so ... As a matter of fact, I thought the airbag might be a cushion for her in the front seat, so there would be no reason for me to have her go in the back seat, even reading that....
Id. at 147. Whether the backseat instruction, in conjunction with the airbag instruction, is adequate to warn of the dangers to children of airbag deployment and whether the Cooks' failure to follow the backseat instruction was a reasonably foreseeable intervening cause is, again, a question of fact properly reserved for the jury. Thus, *331 Ford was not entitled to summary judgment on the issue of proximate cause.
Although a jury may very well find for Ford with regard to the breach of its duty to warn or the proximate cause of Lindsey's injury, we cannot say that the designated evidence leads to but a single inference so as to render the issues questions of law, not fact. Ford failed to negate an element of the Cooks' failure to warn claim as a matter of law, and summary judgment was therefore inappropriate. Accordingly, the trial court's grant of summary judgment to Ford on the Cooks' failure to warn claim is reversed and this case is remanded for further proceedings.
II. Ford's Cross-Appeal
A. Facts Relevant to Cross-Appeal
As the parties discussed preliminary jury instructions prior to the start of the first trial in this cause, the Cooks stated that they were alleging, in part, that the airbag in their truck was defective because it should not have deployed at all or should not have deployed as aggressively under the low-speed impact conditions of this accident. Ford objected to this claim of defect, claiming it had not been previously raised. The trial court overruled Ford's objection and instructed the jury that the Cooks alleged, in part, "the passenger air bag system, including the design and location of its sensors, was not properly designed, as the air bag should not have deployed in this accident, and that if it deployed it should have deployed significantly less aggressively." Tr. at 102. In pre-trial evidentiary discussions, Ford objected to the Cooks' use of deposition testimony of certain experts retained by Ford, including Jeffrey Pearson, during the Cooks' case-in chief. The Cooks noted that Pearson's testimony concerning his work on dual-stage airbags in the 1970s was crucial to their case. The trial court took the evidentiary issue under advisement.
During opening statements, the Cooks made the following statements:
There's going to be a lot of evidence in this case that there are a lot of people in America that have been injured by airbags deploying at levels they shouldn't. There's also going to be evidence of other designs of airbags that would deploy airbags with aggressivity, or power, that's lower than was present in this [truck].
Tr. at 138. The Cooks referenced Ford's expected position that the dual-stage or de-powered airbags were not feasible when the Cooks' truck was manufactured and Pearson's expected testimony that such airbags were "well engineered and well tested" in the early 1970s.
Following opening statements, the trial court ruled that if the Cooks wished to present Pearson's testimony in their case-in-chief, they would have to do so by calling him as a witness rather than by introducing excerpts from his deposition. See Tr. at 191 (The Court: "On the issue of the plaintiffs using excerpts of depositions from witnesses who will be called on the defendant's case in chief, those witnesses are clearly available and ... I think you need to get that evidence from them live... unless there's going to be some proof that they are not available to the plaintiff").
Prior to the testimony of the Cooks' biomechanical engineer expert witness, Dr. Carley Ward, the parties and the trial court engaged in a lengthy discussion of the parameters of Dr. Ward's testimony regarding de-powered airbags. The Cooks represented that "there's a large amount of information that would support the foundation for any opinions about de-powering in the defense expert testimony ... that I would like to play in the plaintiffs' *332 case in chief that actually support, in fact lay out unequivocally, that raising thresholds is certainly feasible," id. at 682-83, specifically citing Pearson's deposition testimony. In response to the Cooks' assertion that "there isn't any testimony that it's not feasible to shift thresholds," id. at 702, and their reference to testimony expected from Ford's experts, the trial court noted that evidence of feasibility had to first be introduced in the Cooks' case-in-chief: "You can't rely on their case in chief to prove your case in chief, obviously. I mean, [evidence of feasibility] has to come in before you rest." Id. at 703. The Cooks noted that they "had meant to get most of [the feasibility evidence] in through Jeffrey Pearson." Id. at 909. Dr. Ward was called to make an offer of proof, at the conclusion of which the trial court stated:
I think she laid a sufficient foundation under 702 to testify that the de-powered bag leads to fewer injuries under this kind of accident that we're talking about today to children.
I don't think you can get into the individual cases that you claim are substantially similar, but I thought that her testimony sufficienther education, experience, the literature she reviewed, her involvement in this exact issue of the deployment of airbags, I do think that her testimony can go to the jury on that.
But I still think you have the feasibility issue on the threshold question. * * *
The other aspect, is she the one you're going to rely onI mean, I don't think she can say that her injuries would be twenty percent less. That was a guess.
Tr. at 928-29. The Cooks again expressed their desire to introduce excerpts of Pearson's deposition to lay a foundation for the deployment threshold claim. At some point prior to Dr. Ward's testimony, the court indicated that it was going to go through the Cooks' expert deposition testimony designations and Ford's objections thereto, see tr. at 955, and it was apparently contemplated that at least some of the deposition testimony would be played to the jury, see id. at 962 (Ford's counsel: "I think the most efficient way to do it would be to have you rule, and thenbecause then that will tell us exactly what it is that is going to played."). The trial court indicated that it was going "to revisit the issue of the Pearson deposition.... I think we need to discuss it again." Id. at 964. The trial court subsequently decided that the Cooks could use excerpts of Pearson's deposition. Id. at 1212. Before Dr. Ward testified, the trial court and the Cooks' counsel clarified the acceptable parameters of her testimony with regard to de-powered airbags and deployment thresholds. See Tr. at 1217.
The Cooks subsequently decided not to use Pearson's deposition testimony or call him as a witness in their case-in-chief, instead stating that they were "fine with using him in [Ford's] case in chief." Tr. at 1409. The Cooks called several more witnesses and then rested their case-in-chief. In arguing their motion for directed verdict, Ford eventually moved for a mistrial because Dr. Ward's testimony regarding de-powered airbags was unsupported by any foundational evidence given that Pearson's deposition testimony was not used nor was he called as a witness. The trial court granted the mistrial:
I thoughtclearly thought that we were going to be hearing from Ford employees, and I had an expectation of a certain kind of testimony. And I thought that we were going to hearI mean, I agree that there was a representation that we were going to hear some evidence about threshold deployment was feasible at a higher miles per hour, some *333 other claim along those lines, and also the de-powered bag.
And there's no way this can possibly go to the jury on anything with the evidence that's in with respect to the depowered bag. I think half the evidence that came in really was related to that, and I allowed it in because I thought that we were going to hear some testimony specifically on that point.
... I don't think there was anyI'm not inferring any kind of, you know, misconduct on your behalf, [Cook's counsel], at all.
Id. at 1679-80. Ford subsequently filed a motion seeking reimbursement of the attorney fees and costs it incurred during the first trial.[16] Ford cross-appeals the trial court's denial of this motion.
B. Motion for Costs
Ford's motion for costs apparently alleged that the Cooks failure to lay the foundation for a claim of defect for lack of de-powered airbags constituted contempt of a court order. In order to be held in contempt for failure to follow a court order, a party must have willfully disobeyed the court's order. City of Gary v. Major, 822 N.E.2d 165, 170 (Ind.2005). The order must be so clear and certain that there is no question what the party must do, or not do, so there can be no question whether the order is violated. Id. The determination of whether a party is in contempt is left to the discretion of the trial court. Id. at 171. Once a party has been found in contempt, monetary damages may be awarded to compensate the other party for injuries incurred as a result of the contempt. Id. at 172. This, too, is a matter left to the trial court's discretion. Id.
Ford's argument rests on its belief that the trial court's statement to the Cooks that they had to prove feasibility in their case-in-chief was an order. See Brief of Appellee and Cross-Appellant at 19 (citing Tr. at 703 for the proposition that the trial court "ordered that the Cooks present the foundation evidence during their case-in-chief"); Reply Brief of Cross Appellant at 1 ("the trial court orally ordered Plaintiffs' counsel to present foundation evidence to support their de-powered airbag claim in their case-in-chief"). This interpretation seems to overstate the import of the trial court's remarks. We believe the trial court was making a general comment on the burden of proof rather than ordering the Cooks to introduce specific evidence. Without a clear order, a party may not be held in contempt. See Major, 822 N.E.2d at 170. Further, although Ford characterizes the Cooks' conduct as "willfully disobey[ing]" the trial court's order regarding foundational testimony, see reply brief of cross appellant at 1, the trial court specifically stated when it granted the mistrial that it was not implying any misconduct on the part of the Cooks' counsel. A subsequent written order stated, "The court finds that the plaintiff made misrepresentations regarding the intended presentation of relevant and necessary foundational evidence for a theory of the plaintiff's case when plaintiff knew he could not lay such a foundation in this trial." Appellant's App. at 20.[17] Given that the trial court was involved in several years of pre-trial proceedings *334 and was present for the eight days of testimony and numerous evidentiary arguments, given that the existence of an actual order which the Cooks could be in contempt for failing to obey is at best questionable, and given that, at best, the trial court's findings regarding the Cooks' culpability in disobeying any such order are equivocal, we cannot say that the trial court abused its discretion in denying Ford's motion for fees and costs.
Conclusion
The trial court did not abuse its discretion in denying Ford's motion for fees and costs incurred during the first trial of this cause. Standard 208 as it applies to airbag warnings in the owner's manual provides a minimum standard that does not preempt the Cooks' claim that Ford's warnings were inadequate. There is a genuine issue of material fact as to whether Ford breached its duty to warn and whether its breach, if any, was a proximate cause of Lindsey's injury; the trial court's grant of summary judgment is reversed and we remand for further proceedings consistent with this opinion.
Affirmed in part; reversed and remanded in part.
CRONE, J., concurs.
BROWN, J., concurs in part and dissents in part with separate opinion.
BROWN, Judge, concurring and dissenting.
I respectfully concur in part and dissent in part. I concur with the majority's analysis and determination of the first issue that the duty the Cooks seek to impose was not in conflict with Standard 208, nor was Standard 208 an obstacle to the accomplishment and execution of federal objectives, and therefore the cause of action was not preempted under the Supremacy Clause of the United States Constitution. As to the second issue, I respectfully dissent.
I agree with the majority that Ford owed the Cooks a duty to warn of the dangers associated with their truck's airbags. I disagree with the majority's conclusion that there exists a genuine issue of material fact that Ford was in breach of that duty. As stated by the majority, the duty to warn consists of two parts: (1) to provide adequate instructions for safe use; and (2) to provide a warning as to dangers inherent in improper use. Coffman v. PSI Energy, Inc., 815 N.E.2d 522, 527 (Ind.Ct. App.2004), reh'g denied, trans. denied. In the truck's instruction manual, Ford directed the following, which Peter admits to having read:
Keep the passenger air bag turned on unless there is a rear-facing infant seat installed in the front seat. When the passenger air bag switch is turned off, the passenger air bag will not inflate in a collision.
If the passenger air bag switch is turned off, it increases the likelihood of injury to forward facing occupants in the passenger seat.
Appellant's Appendix at 150. In addition, the manual contained the following additional warnings, which Lori and Peter chose not to read:
All occupants of the vehicle, including the driver, should always wear their safety belts.
To prevent the risk of, [sic] injury, make sure children sit where they can be properly restrained.
It is extremely dangerous to ride in a cargo area, inside or outside of a vehicle, [sic] In a collision, people riding in these areas are more likely to be seriously injured or killed. Do not allow people to ride in any area of *335 your vehicle that is not equipped with seats and safety belts.
Be sure everyone in your vehicle is in a seat and using a safety belt properly.
Always follow the instructions and warnings that come with any infant or child restraint you might use. If possible, place children in the rear seat of your vehicle. Accident statistics suggest that children are safer when properly restrained in rear seating positions than when they are restrained in front seating positions.
Id. at 94-95. Also, Ford put warnings on the truck's sun visor, including:
For maximum safety protection in all types of crashes, you must always wear your safety belt.
Id. at 97. Peter and Lori admit that they also did not read the warnings on the truck's sun visor. Id. at 60, 71-72. Despite the fact that the Cooks had available rear seating, they went against Ford's instructions and placed Lindsey in the front passenger seat. Also, it is undisputed that Lindsey had removed her safety belt at the time of the accident. All parties agree that had Lindsey been in the back seat when the crash occurred, she would not have been injured. Id. at 62-64, 90-92.
The majority cites Ford Motor Co. v. Rushford, 845 N.E.2d 197 (Ind.Ct.App. 2006), rev'd on other grounds, which sets forth the applicable legal standard. In Rushford, we held that failure to warn issues may be evaluated as a question of law "where the facts are undisputed and only a single inference can be drawn from those facts." Id. at 202 (citing Northern Ind. Pub. Serv. Co. v. Sharp, 790 N.E.2d 462, 466 (Ind.2003). Here, there is no dispute that the above warning was contained in the owner's manual for the Cooks' truck. Also, it is undisputed that it was certainly "possible" for the Cooks to have seated Lindsey in the rear seat as they were directed. Based on this evidence I can draw only the single inference that the Cooks failed to comply with Ford's adequate warning to seat children in the rear of the vehicle and to always wear their safety belts. See also In re Air Bag Products Liability Litigation, 7 F.Supp.2d 792, 797-799 (E.D.La.1998) (holding that language from the 1996 Ford Contour's owner manual, which states in part that "[w]hen possible, put children in the rear seat," was an adequate cautionary instruction and therefore a reasonably prudent buyer should have discovered the risk presented by air bags prior to sale).
For these reasons, I respectfully concur in part and dissent in part.
NOTES
[1] We heard oral argument on June 30, 2009, at Indianapolis, Indiana. We thank counsel for their presentations.
[2] This language comes from Ford's brief in support of its motion for summary judgment, citing paragraph 35 of the Cooks' first amended complaint. The complaint, in its entirety, is designated in support of the motion for summary judgment, and is alleged to be attached to the motion as Exhibit A. See id. at 40. Exhibit A, as included in the appendix provided to this court, consists of pages 1-6 and page 10 of the complaint. See id. at 44-50. Paragraph 35 is on one of the missing pages, as page 6 of the complaint ends with paragraph 32 and page 10 of the complaint picks up with paragraph 44. See id. at 49-50. Nonetheless, the parties do not appear to disagree about the basic substance of the Cooks' failure to warn claim.
[3] After entry of summary judgment on the failure to warn claim, the case remained set for jury trial on January 15, 2008, on the Cooks' design defect claims. At a pre-trial conference on December 17, 2007, the trial court considered Ford's motion in limine relating to whether the Cooks could pursue their claims of design defects in the air bag inflation system. The trial court heard argument and reviewed the transcript of the first trial and thereafter ordered that the Cooks show cause as to whether they had any expert evidentiary basis for their claims. At the show cause hearing, the trial court determined there was insufficient evidence to allow the Cooks to pursue their claims of design defects in the airbag inflation system and granted Ford's oral motion for summary judgment as to those claims. The Cooks subsequently withdrew their only remaining claima design defect in the magnetic bias in the air bag sensor systemand the trial court entered final judgment.
[4] As noted in footnote 2, we do not have in the record before us the pages of the complaint on which the Cooks' failure to warn claim was made and therefore do not know whether it was brought in strict liability or negligence. The following principles apply regardless of which theory was advanced, however. See Ford Motor Co. v. Rushford, 868 N.E.2d 806, 810 (Ind.2007) ("Under either [strict liability or negligence] a product may be defective under the Act where the manufacturer fails in its duty to warn of a danger or instruct on the proper use of the product as to which the average consumer would not be aware.").
[5] Although it is often said that a party may not raise an issue for the first time on appeal, see Troxel v. Troxel, 737 N.E.2d 745, 752 (Ind.2000), because we can affirm a grant of summary judgment on any ground supported by the recordnot just on those grounds argued by the partiesthe appellee is not necessarily subject to this rule of issue preservation/waiver on our review of summary judgment proceedings. This is unlike the situation presented in Paramo v. Edwards, 563 N.E.2d 595, 600 (Ind.1990), wherein our supreme court held that the appellee had waived the issue of whether an affidavit contained conclusory allegations that should not have been considered in determining whether summary judgment was appropriate by not objecting to the offending affidavit in the trial court despite the appellee's argument that the court was bound to affirm the grant of summary judgment on any theory or basis found in the record. "Waiver will result if timely objection to documents or exhibits is not raised at the trial court. We therefore conclude that, while trial court consideration of conclusory statements or matters in affidavits otherwise inadequate under T.R. 56(E) would constitute error, the [appellee's] failure to raise a timely objection constitutes waiver of such claim of error." Id. (citations omitted). Here, Ford is not raising an issue omitted before the trial court. Rather, Standard 208 was cited to the trial court as applicable law.
[6] With respect to the Cooks' request that we prohibit consideration of S4.5.4.4 in any further proceedings, we also note that the trial court's grant of a mistrial and order for a new trial resets the case. See United States v. Ayres, 76 U.S. (9 Wall.) 608, 610, 19 L.Ed. 625; 19 L.Ed. 627 (1869) ("[T]he order granting the new trial has the effect of vacating the former judgment, and to render it null and void, and the parties are left in the same situation as if no trial had ever taken place in the cause. This is the legal effect of the new trial by a court competent to grant it."). However, our resolution of the preemption issue herein will be binding on the parties and the trial court in subsequent proceedings.
[7] In so deciding, the Court "place[d] some weight upon DOT's interpretation of [Standard] 208's objectives and its conclusion, as set forth in the Government's brief, that a tort suit such as this one would `stand as an obstacle to the accomplishment and execution' of those objectives." Id. at 883. Because Congress had delegated to DOT authority to implement the statute, the subject matter is technical, and the relevant history and background are complex and extensive, "the agency's own views should make a difference." Id. On May 20, 2009, President Obama issued a "Memorandum for the Heads of Executive Departments and Agencies" stating that "the general policy of my Administration [is] that preemption of State law by executive departments and agencies should be undertaken only with full consideration of the legitimate prerogatives of the States and with a sufficient legal basis for preemption." Heads of departments and agencies were directed not to include in regulatory preambles "statements that the department or agency intends to preempt State law through the regulation except where preemption provisions are also included in the codified regulation"; and not to include "preemption provisions in codified regulations except where such provisions would be justified under legal principles governing preemption." Memorandum for the Heads of Executive Departments and Agencies re: Preemption, May 20, 2009, available at www. whitehouse.gov/the_press_office/ Presidential-Memorandum-Regarding-Preemption/.
[8] Ford contends that the Cooks' admitted failure to read the entire owner's manual defeats their claim. It is true that "[w]here warning is given, the seller may reasonably assume that it will be read and heeded; and a product bearing such a warning, which is safe for use if it is followed, is not in defective condition, nor is it unreasonably dangerous." Dias v. Daisy-Heddon, 180 Ind.App. 657, 662, 390 N.E.2d 222, 225 (1979) (quoting Restatement of Torts (2d) section 402A, comment j (1976)). In Indiana, there is a presumption that an adequate warning would have been read and heeded. Id. However, the Cooks contend that even if they had read all the instructions pointed to by Ford, the instructions as a whole were inadequate to inform them of the dangers airbags pose to children other than those in rear-facing child seats. Their failure to read all instructions is not fatal to their claim that the instructions were inadequate to begin with. Cf. Rushford, 845 N.E.2d at 202 (holding, with respect to claim that Ford failed to provide notice of the airbag warning in the owner's manual, that "Ford has shown that there is not a genuine issue of material fact regarding whether Ford discharged its duty to warn when it provided Rushford with warnings that Rushford concedes were adequate").
[9] Ford argued to the trial court on summary judgment that the Cooks' failure to designate expert testimony regarding an alternate warning was fatal to their claim. Our supreme court has held that "supporting and opposing evidence relevant to a determination of what a proper warning should state ... is indispensable to a rational conclusion that the product was defective and unreasonably dangerous to the user without warnings, and to a rational conclusion that such unreasonably dangerous condition was the proximate cause of the accident and injury." Morgen v. Ford Motor Co., 797 N.E.2d 1146, 1152 (Ind.2003) (quoting Nissen Trampoline Co. v. Terre Haute First Nat'l Bank, 265 Ind. 457, 463-64, 358 N.E.2d 974, 978 (1976) (emphasis omitted)). The court was addressing the trial court's refusal to read plaintiff's tendered instructions regarding Ford's duty to warn of product dangers. Holding first that the instructions were covered by instructions that were given, id. at 1151, the court also held that there was not sufficient evidence in the record to support the tendered instructions because there was "no testimony or evidence ... on the content or placement of a warning that would have prevented the danger posed by the alleged defect.... Without this evidence we are left to hypothesize as to what specific warnings would have made the [vehicle] reasonably safe [and w]e will not find the trial court's instructions inadequate without more," id. at 1152. Although evidence of an alternate adequate warning may be required, an expert is not necessarily the sole source of such evidence. See Cansler v. Mills, 765 N.E.2d 698, 706 (Ind.Ct.App.2002) ("In order to justify dismissing a case because the plaintiff has failed to present expert testimony, a court must find that the facts necessary to establish a prima facie case cannot be presented to any reasonably informed factfinder without the assistance of expert testimony."), trans. denied; Tr. at 1256 (trial court stating, "I know there's caselaw that you have to give an alternate warning, but ... this doesn't seem like anything that would take an expert to do."). There was testimony at the first trial that if the owner's manual had stated that airbags pose a danger to all children, not just those in a rear-facing child seat, or that airbags do not make the front seat safer than the backseat, the Cooks would not have placed Lindsay in the front seat or would not have left the airbag on.
[10] The case cited by the dissent, In re Air Bag Products Liability Litigation, 7 F.Supp.2d 792 (E.D.La.1998) does discuss a Ford instruction to put children in the rear seat when possible. However, that case concerned a claim that the force and speed of airbag deployment was a latent design defect rather than making a claim regarding the warning itself, id. at 795, and we therefore find it distinguishable from the case at bar.
[11] As we discuss below, whether Lindsey unbelting herself in the moments before the accident is an intervening cause is a question of fact. See infra Section I.B.3.b.
[12] Although Creasy used the phrase "contributory negligence" in describing the Indiana standard for determining liability of children for their alleged tortious acts, Creasy actually arose in the context of a comparative fault case. See Creasy v. Rusk, 696 N.E.2d 442, 444 (Ind.Ct.App.1998). There is no indication that the standard is different based upon whether the action is one alleging contributory negligence or comparative fault, Ind.Code §§ 34-51-2 et seq. (effective in 1985), on the part of the child.
[13] We do note that an intervening cause need not be negligence or fault on the part of another. See Collins v. J.A. House, Inc., 705 N.E.2d 568, 573 (Ind.Ct.App.1999) (contractor who left pipe on second floor of building under construction could not have reasonably foreseen that a gust of wind would inflate sheet of visqueen attached to outside scaffolding, cause boards to fall onto the scaffold, and necessitate worker on scaffold to jump through second story window into building; therefore, contractor was not liable for injury caused to worker by pipe), trans. denied.
[14] Also, given Lindsey's age at the time of the accident, the more relevant question may be whether Lori's conduct in not noticing that Lindsey had unbuckled herself or not making sure she was re-buckled quickly enough was a foreseeable intervening cause. However, there is no designated evidence in the record regarding how long Lindsey had been unbuckled prior to the accident, when (or if) Lori noticed that she was unbuckled, or what Lori did upon noticing Lindsey was unbuckled. Lori's conduct also would be a question of fact for the jury.
[15] In fact, the foreseeability of failure to wear a seatbelt is what prompted the requirement that passive restraint systems be installed in vehicles. See Geier, 529 U.S. at 875, 120 S.Ct. 1913 ("In 1967, DOT, understanding that seatbelts would save many lives, required manufacturers to install manual seatbelts in all automobiles. It became apparent, however, that most occupants simply would not buckle up their belts. DOT then began to investigate the feasibility of requiring `passive restraints,' such as airbags and automatic seatbelts. In 1970, it amended [Standard] 208 to include some passive protection requirements....") (citations omitted).
[16] This motion does not appear in the record before us; nor does a written order regarding the mistrial referenced by Ford in its cross-appeal brief. See Brief of Appellee and Cross Appellant at 19 (quoting from a February 23, 2007 order without citation to the record).
[17] The trial court issued a written order on the mistrial that was omitted from the chronological case summary and added at a later date. We do not, as stated above, have a copy of the actual order in the record before us, but have quoted from the corrected CCS entry.
| {
"pile_set_name": "FreeLaw"
} |
779 F.2d 18
39 Fair Empl.Prac.Cas. 873,38 Empl. Prac. Dec. P 35,743, 29 Ed. Law Rep. 46
Janet GREBIN, Appellant,v.SIOUX FALLS INDEPENDENT SCHOOL DISTRICT NO. 49-5, John W.Harris, H.C. Rustad, Ronald L. Becker and ArnoldL. Bauer, Appellees.
No. 84-2576.
United States Court of Appeals,Eighth Circuit.
Submitted Sept. 13, 1985.Decided Dec. 6, 1985.
John N. Gridley, Sioux Falls, S.D., for appellant.
Michael L. Luce, Sioux Falls, S.D., for appellees.
Before HEANEY, JOHN R. GIBSON and FAGG, Circuit Judges.
HEANEY, Circuit Judge.
1
Janet Grebin appeals from an adverse court verdict in her claim under Title VII of the Civil Rights Act of 1964, as amended 42 U.S.C. Sec. 2000e, for sex discrimination and from an adverse jury verdict in her claim under 29 U.S.C. Sec. 626 for age discrimination. For the reasons set forth below, we affirm.
2
I. BACKGROUND.
3
Grebin was forty-three years old when she was considered for the ninth-grade English teaching position at Axtell Park Junior High School for the 1983-84 school year. Grebin's prior teaching experience consisted of one semester as an English teacher in Chester, South Dakota, and three years as a substitute with the defendant Sioux Falls School District (Sioux Falls). For one semester of that three-year period, she taught civics at Axtell Park. Her application for full-time teaching employment had been on file with Sioux Falls since March 1980. The job was not given to Grebin, but instead to twenty-seven-year-old Jeff Herbert. Herbert had three years experience as a full-time teacher and coach. During two of those three years, he taught English.
4
Grebin commenced this action in February, 1984, alleging that she was not hired for the English position at Axtell Park because of her age and her sex. A jury returned a verdict for the defendant on the age discrimination count, and the court dismissed her sex discrimination claim.
5
II. DISCUSSION.
6
Grebin's attack on the trial court's rejection of her sex discrimination claim is twofold. First, she claims the court erred by failing to address certain "admissions" the defendant made at trial. Second, that the content of these "admissions" renders the court's decision "clearly erroneous." For reversal of the jury's determination of her age discrimination claim, Grebin alleges several procedural errors on the part of the trial court: (1) it improperly granted defendants' motion in limine; (2) it improperly instructed the jury on the burden of proof and inferences it could make; and (3) it refused to instruct the jury on the "willfulness" element of a discrimination action. We address each of these contentions in turn.
7
A. The Sex Discrimination Claim.
8
The trial court determined that Grebin established a prima facie case in accordance with McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973). It found that Grebin is a member of a protected minority, she applied for and was qualified for the job in question, she was not hired, and defendant continued to seek applicants with similar qualifications. Id. at 802, 93 S.Ct. at 1824. In response, the defendants asserted that they hired Jeff Herbert because he was the best qualified candidate for the position. Grebin attempted to prove that this reason was a pretext for discrimination, but the trial court concluded that she did not meet this burden.
9
Grebin claims this conclusion is erroneous because the court did not refer, in its memorandum, to certain admissions by the defendants. The import of the alleged admissions is that Jeff Herbert's football coaching ability was a factor in the district's decision to hire him.
10
At the outset, we note that the trial court's failure to explicitly consider, in its memorandum, evidence supporting Grebin's claim does not, in itself, render its decision suspect. A trial judge need not make specific findings on all facts nor refer to every item of evidence introduced in a lengthy trial. Smith v. Honeywell, Inc., 735 F.2d 1067, 1069 (8th Cir.1984). The issue, therefore, is whether sufficient evidence supported the court's determination that the school district's stated reason was not pretextual and that it did not employ discriminatory criteria in the selection process. After reviewing the record, we conclude that the trial court's conclusion is not clearly erroneous.
11
Applicant Grebin had only spent one semester as a regular teacher, and three years as a substitute. Jeff Herbert, on the other hand, had three years of regular teaching experience. He came to the school district with outstanding recommendations for his ability to work with young people. Additionally, that one of the factors in the employment decision involved Herbert's ability to coach is not sufficient to establish discrimination. Carlile v. South Routt School District RE-3J, 739 F.2d 1496, 1499 (10th Cir.1984). Accordingly, the trial court's finding that Sioux Falls had a legitimate, non-discriminatory reason for not hiring Grebin is not clearly erroneous.
12
B. The Age Discrimination Claim.
13
1. The motion in limine.
14
Grebin claims the trial court erred by granting defendants' motion in limine which prevented her from introducing any evidence of alleged discriminatory conduct which occurred 180 days or more before she filed charges with the EEOC. The evidence she points to concerns the selection process for several teaching positions which opened up during the period in which she had her application on file with the district.
15
This Court will not disturb evidentiary rulings absent a showing that prejudice resulted. Sedco International, S.A. v. Cory, 683 F.2d 1201, 1207 (8th Cir.), cert. denied, 459 U.S. 512, 103 S.Ct. 379, 74 L.Ed.2d 512 (1982). Here, we need not consider whether the alleged evidence of prior discrimination was improperly excluded because Grebin was not prejudiced by its exclusion. In at least two of those openings the person hired was over forty, and in a third opening, Grebin conceded that the selection was "fair." This evidence, had it been admitted, would not have furthered Grebin's action for age discrimination. Therefore, the ruling was not prejudicial and must not be disturbed.
16
2. The alleged errors in the jury instructions.
17
Grebin argues that the trial court did not properly instruct the jury as to the shifting burdens of proof and the inference created by establishing a prima facie case of discrimination. Specifically, Grebin claims the court should have incorporated the three-part McDonnell-Douglas analysis of prima facie case, answer, and rebuttal into instruction 10.1 We do not accept Grebin's claim. McDonnell-Douglas was not a jury case and its ritual is not well suited as a detailed instruction to the jury. "[T]o read its technical aspects to the jury * * * will add little to the juror's understanding of the case and, even worse, may lead jurors to abandon their own judgment and to seize upon poorly understood legalisms to decide the ultimate question of discrimination." Loeb v. Textron, 600 F.2d 1003, 1016 (1st Cir.1979). Instruction 10 represented a proper, complete charge to the jury.
18
Finally, Grebin claims the trial court erred by not submitting a "willfulness" instruction to the jury. Grebin argues the jury would have determined that defendants' willfully discriminated against her and thus she would have been entitled to liquidated damages.
19
The trial court determined that Grebin had not presented sufficient evidence of willful discrimination to warrant such an instruction. We need not determine the propriety of this ruling. If the court erred in not instructing the jury on willfulness, that error could not have been prejudicial in this case because the jury found the defendants not liable. The jury determined that the defendants' did not discriminate against Grebin. Thus, they never would have reached the question of whether defendants "willfully" discriminated against her. Fed.R.Civ.P. 61 provides that errors which do not affect the substantial rights of parties shall be disregarded. We find that Grebin's substantial rights could not possibly have been affected by the absence of a "willfulness" instruction since the jury had no cause to consider this question.
20
We affirm.
1
Jury Instruction 10:
Under federal law, it is unlawful for an employer to fail or refuse to hire any individual because of such individual's age, when that individual's age is between 40 and 70.
In order to prevail on her claim, the plaintiff must prove, by a preponderance of the evidence:
1
That she was within the protected age group, that is, between the ages of 40 and 70;
2
That she applied for and was qualified to perform the teaching position in question at Axtell Park Junior High School;
3
That she was not hired; and
4
That her age was a determining factor in the decision not to hire her
"Determining factor" means that you must find that but for the motive of Defendants to discriminate against Plaintiff because of her age, Plaintiff would have been hired by Defendants. Determining factor does not mean that it was the sole or exclusive motivation for the decision made by the Defendants.
The Age Discrimination in Employment Act is not intended as a vehicle for judicial review of employment decisions which are made in good faith and are not actuated by age bias. An employer may make a subjective judgment that adversely affects an applicant for employment for any reason that is not discriminatory because of age.
That Act required that an employer reach employment decisions without regard to age, but it does not place an affirmative duty upon an employer to accord special treatment to members of the protected age group.
You are instructed that the focus of your consideration must be on the Defendants' motivation, and the issue is whether or not the Defendants discriminated against the Plaintiff because of her age, and not on your own consideration of the Defendants' business judgment regarding who is the best qualified applicant for the job.
To summarize, it is the burden of the Plaintiff to prove to your satisfaction by a preponderance of the evidence that the Defendants discriminated against her because of her age, and that but for such discrimination, she would have been hired. If you are not so convinced, you should find for the Defendants. If you are so convinced, you should find for the Plainiff and then determine that amount of damages that Plaintiff has sustained.
| {
"pile_set_name": "FreeLaw"
} |
850 So.2d 232 (2002)
Wood BYRD, and Bacadam, Inc.
v.
Mark BENTLEY.
1010528.
Supreme Court of Alabama.
August 23, 2002.
Rehearing Denied November 8, 2002.
*233 Robert Hayes of Hayes & Swinford, Birmingham; and Sterling L. DeRamus, Birmingham, for appellants.
Charles A. Dauphin of Baxley, Dillard, Dauphin & McKnight, Birmingham, for appellee.
HARWOOD, Justice.
Wood Byrd, and Bacadam, Inc. (hereinafter jointly referred to as "the defendants"), appeal from the trial court's judgment on a $1,350,000 jury verdict in favor of Mark Bentley. We affirm.
On March 9, 1999, Bentley sued the defendants seeking to recover damages on claims of fraud and breach of contract. Bentley, who had been employed as manager of Bacadam, which was owned by Byrd, alleged that an oral contract of employment existed between him and the defendants in which he was to receive an 8 percent commission from his sales[1] and a 30 percent ownership interest in Bacadam in the event that he met certain goals in increasing Bacadam's business. He also asserted that the parties had agreed that, in order to expand Bacadam's business, he would receive a 50 percent ownership interest in any company he located for Bacadam *234 to purchase, and that he had arranged for the purchase by Bacadam of another company, Reach Advertising. Bentley further alleged that Byrd sold all the assets of Bacadam and purchased Reach Advertising, but that Bentley never received an ownership interest in Bacadam or Reach Advertising.
On December 30, 1999, the defendants filed an answer denying Bentley's claims and asserting counterclaims alleging breach of contract, fraud, and violations of the Alabama Trade Secrets Act, § 8-27-1 et seq., Ala.Code 1975, based upon their allegations that Bentley had not devoted his full attention to Bacadam as agreed and that he had engaged in business in competition with Bacadam. After the completion of discovery, a jury trial began on August 6, 2001. On August 7, 2001, at the close of Bentley's case-in-chief, the defendants filed a motion for a judgment as a matter of law, with a supporting memorandum. The trial court took the defendants' motion under advisement and allowed the defendants to present their case. At the close of the defendants' case, Bentley filed a motion for a judgment as a matter of law in regard to the defendants' counterclaims; the trial court granted that motion. The defendants also renewed their motion for a judgment as a matter of law, and the trial court denied it as to Bentley's breach-of-contract claim but reserved ruling on it as to Bentley's fraud claim. Following Bentley's presentation of rebuttal testimony, he voluntarily dismissed his fraud claim. Thus, the only claim presented to the jury was Bentley's breach-of-contract claim. On August 9, 2001, the jury returned the following verdict:
"We, the jury, find in favor of Plaintiff, Mark Bentley, and against the Defendants, Wood Byrd and Bacadam, Inc., and assess the Plaintiff's damages at One Million Three Hundred Fifty Thousand dollars ($1,350,000.00)."
On that same day, the trial court entered a judgment on the jury's verdict.
On September 5, 2001, the defendants renewed their motion for a judgment as a matter of law, and also filed, in the alternative, a motion for a new trial; Bentley filed a response in opposition on September 24, 2001. On September 28, 2001, the defendants filed a memorandum in support of their postjudgment motion; Bentley filed a supplemental response on October 10, 2001. On October 22, 2001, the trial court entered an order that stated, in pertinent part:
"THIS CAUSE was heard on the Defendants['] Motion for Judgment [as a matter of law] and/or Motion for New Trial. On August 9, 2001, the jury in this cause returned a verdict in favor of [Bentley] and against the Defendant[s] in the sum of One Million Three Hundred Fifty Thousand and 00/100 Dollars ($1,350,000.00). The evidence submitted by [Bentley] is that the parties entered into an agreement whereby [Bentley] would leave his job in Huntsville and manage Bacadam, Inc., which was owned by [Byrd]. The consideration for [Bentley's] employment would be a salary and in addition the transfer of a thirty (30%) percent interest in the company conditioned upon [Bentley's] meeting certain financial and growth goals. [Bentley's] evidence was that although he met those goals, the Defendant refused to transfer a thirty (30%) percent interest in the company to [Bentley] and, in fact, sold the company to another corporation for the approximate sum of Six Million Dollars ($6,000,000.00), without the knowledge or consent of [Bentley]. [Byrd] emphatically denies that he ever agreed to transfer an interest in Bacadam, Inc., to [Bentley] and further, that such an agreement for the transfer *235 of stock would be unenforceable under the Statute of Frauds because it is undisputed that the alleged agreement was never reduced to writing. At the conclusion of [Bentley's] evidence and at [the] conclusion of all of the evidence, the Defendant[s] made an appropriate motion for a judgment as a matter of law which motion was overruled.
"Although disputed, there was sufficient evidence which, if believed by the jury, would support a judgment in the amount of the verdict. The evidence offered by [Bentley] that he fully performed his part of the agreement in that he met the financial and growth goals that would entitle him to a transfer of a thirty (30%) percent interest in Bacadam, Inc., was apparently believed by the jury and reflected in its verdict. [Bentley's] full performance of the oral agreement with the Defendant[s] took the contract out of the Statute of Frauds and was, accordingly, enforceable. Ingram v. Omelet Shoppe, Inc., 388 So.2d 190 (Ala.1980). The Defendant[s] also argue that an employment contract which was not reduced to writing is unenforceable and further, that the alleged contract was a sale of securities which was also unenforceable as being in violation of the Statute of Frauds. The Court has not been directed to an Alabama case specifically on this point[;] however, other jurisdictions have addressed similar issues. In Hiller v. Franklin Mint, Inc., 485 F.2d 48 [(3d Cir.1973)], the [United States Court of Appeals for the Third Circuit] held that the transfers of securities pursuant to an employment contract did not constitute `sales of securities' within the purview of the Pennsylvania Statute of Frauds dealing with the sale of securities. The Supreme Court of Pennsylvania held, in a case factually similar to the instant case, that an oral contract for an employee to quit his job and work for a new employer in exchange for an annual salary plus ten (10%) percent of its stock was not a sale of securities and was enforceable. In Jones v. Cecil Sand & Gravel, Inc., [97 Md.App. 87,] 627 A.2d 60 [(1993)], the Court of Special Appeals of Maryland found that the Statute of Frauds requiring contracts for sale of securities to be in writing did not apply to oral employment contracts agreeing to exchange of stock for services. Where the only consideration for the stock was acceptance of employment, an oral contract is not prohibited by the section of the Statute of Frauds providing that a contract for sale of securities is not enforceable unless there is some writing signed by [the] party against whom enforcement is sought. Bowers Steel, Inc. v. DeBrooke, 557 S.W.2d 369 [(Tex.Civ.App.1977)]. Finally, the Court of Appeal[s] of Georgia held that the Statute of Frauds requirement that there be a writing before a contract was enforceable did not apply to an alleged arrangement under which employer was to transfer corporate stock to employee in consideration for services rendered. Thompson v. Kohl, [216 Ga.App. 148,] 453 S.E.2d 485 [(1994)].
"In this case there was substantial evidence presented from which the Jury could conclude that there was an employment contract between [Bentley] and the Defendant[s] for which the consideration was the exchange or transfer of stock in Bacadam, Inc.
"Accordingly, the Defendants' Motion for Judgment [as a matter of law] and/or Motion for New Trial is OVERRULED."
On November 28, 2001, the defendants filed a notice of appeal.
The record shows that at trial, Bentley testified that the agreement between him *236 and the defendants was that, in exchange for his increasing Bacadam's profits, he would receive a 30 percent ownership interest in the company, the value of which was to be determined as of the date he began work for Bacadam and was to be paid for by the increased profits he generated. He further testified that when he began work, Bacadam was receiving monthly revenues of $35,000-$36,000 and that Byrd set a goal for Bentley to increase that amount to $70,000 per month. Bentley stated that the $70,000 goal was reached, and in some months even surpassed.
Bentley's testimony regarding his employment agreement with the defendants was supported by the testimony of Dwight Jennings. Jennings was Bentley's former employer and an acquaintance of Byrd's. Jennings testified that Byrd had telephoned him in an effort to find someone to hire as manager of Bacadam. Jennings recommended Bentley and arranged a meeting between them, but told Byrd that Bentley would most likely require an ownership interest as part of his compensation for employment. Jennings further testified as follows:
"Q. After the meeting took place, did you have a conversation with Wood Byrd
"A. Yes.
"Q.about how the meeting went. And if you would tell us what he said in this conversation.
"A. He was very impressed with Mark [Bentley]. He was very happy that he had had the conversation with Mark. He said that he thought they either had a deal or could work out a deal; that Mark had wanted 50 percent ownership in the company, but he thought that they could work it out somewhere in the range of 30 percent; that he was going to pay Mark a salary; if Mark got the job done, he would pay him a bonus, and that bonus would go towards helping him buy some ownership in the company."
Jennings also testified that after subsequent conversations with Bentley relating to Byrd's failure to offer him an ownership interest, he spoke to Byrd. Jennings testified that Byrd confirmed the agreement, saying that he was close to giving Bentley his ownership interest. It is undisputed that Bentley never received an ownership interest in Bacadam although he worked for that company continuously from the time of his employment in early 1994 until the company was sold in November 1998.
After Bentley learned of Byrd's sale of Bacadam in 1998, he tape-recorded a conversation between him and Byrd on a microcassette recorder. A copy of that microcassette recording was transferred to a larger cassette so that, as Bentley's attorney stated at trial, it could be more fully amplified for the jury; the copy was played for the jury and admitted into evidence. A transcript of that recording was also presented to the jury. The defendants objected to the admission of the copy of the tape recording, and prior to its being played to the jury, the trial court and attorneys listened to the tape recording and compared it to the transcript, outside the presence of the jury. The defendants' attorney questioned certain portions of the tape recording in which he thought some conversation was missing, and the trial court allowed the defendants the opportunity to have an expert witness testify concerning alleged "discontinuities" on the tape recording. That expert witness testified that he and an assistant marked 12 places on the recording at which they believed a discontinuity existed. During the expert's testimony, a compact disc or "CD" recording the expert had made from the *237 tape recording was also played for the jury and admitted into evidence.
On appeal, the defendants argue (1) that an oral contract for the sale of securities pursuant to an employment contract violates the Statute of Frauds; (2) that Bentley failed to present sufficient evidence to establish that a contract existed between him and the defendants; and (3) that the duplicate tape recording should not have been admitted into evidence when the original was available. No issue concerning the amount of the verdict is raised by the defendants in their brief, except for the single statement that, "Assuming [Bentley's] version of the contract [is] correct, then he would only be entitled to $519,000, or 30% of the difference between the cost of the company in 1993 and the sales price of [$]5.6 million." However, the defendants' postjudgment motion asserted only that Bentley was not entitled to recover at all and raised no issue of excessive or unproven damages.
I. Statute of Frauds
The defendants first argue that an oral contract for the sale of securities pursuant to an employment contract violates the Statute of Frauds. As was the case with their presentation to the trial court, they have not cited any Alabama case on point in their brief to this Court. They state in that brief that "[t]he only real issue is whether in fact the transaction described by [Bentley] can be properly described as a `sale' of securities." The defendants assert that if we were to consider the alleged agreement to employ Bentley solely as a "sale of securities," Bentley's breach-of-contract claim would be barred by the Statute of Frauds.
In 1994, when the alleged agreement took place, § 7-8-319, Ala.Code 1975, read as follows:
"A contract for the sale of securities is not enforceable by way of action or defense unless:
"(a) There is some writing signed by the party against whom enforcement is sought or by his authorized agent or broker sufficient to indicate that a contract has been made for sale of a stated quantity of described securities at a defined or stated price; or
"(b) Delivery of the security has been accepted or payment has been made but the contract is enforceable under this provision only to the extent of such delivery or payment; or
"(c) Within a reasonable time a writing in confirmation of the sale or purchase and sufficient against the sender under paragraph (a) has been received by the party against whom enforcement is sought and he has failed to send written objection to its contents within 10 days after its receipt; or
"(d) The party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract was made for sale of a stated quantity of described securities as a defined or stated price."
Section 7-8-319 was repealed on January 1, 1997, and was replaced by § 7-8-113, Ala.Code 1975, which states:
"A contract or modification of a contract for the sale or purchase of a security is enforceable whether or not there is a writing signed or record authenticated by a party against whom enforcement is sought, even if the contract or modification is not capable of performance within one year of its making."
However, the Alabama Comment to § 7-8-113 explains that this section is applicable only to transactions in the organized securities market, e.g., the sale or purchase *238 of securities through a stock exchange or the over-the-counter securities market, and that all other agreements are subject to Alabama's general Statute of Frauds, § 8-9-2, Ala.Code 1975. Section 8-9-2 was also amended January 1, 1997, to provide, in pertinent part:
"In the following cases, every agreement is void unless such agreement or some note or memorandum thereof expressing the consideration is in writing and subscribed by the party to be charged therewith or some other person by him thereunto lawfully authorized in writing:
"....
"(8) Notwithstanding Section 7-8-113, every agreement for the sale or purchase of securities other than through the facilities of a national stock exchange or of the over-the-counter securities market."
The evidence supports an inference that part of Bentley's employment contract with the defendants was that, in consideration of Bentley's acceptance of employment and upon his increasing Bacadam's monthly revenues as its manager, Byrd would transfer an ownership interest in Bacadam to Bentley. Whether this type of arrangement constitutes a "sale of securities" under the Statute of Frauds has not been addressed in this State; we therefore consider how other jurisdictions have answered it.
In Hiller v. Franklin Mint, Inc., 485 F.2d 48 (3d Cir.1973), the United States Court of Appeals for the Third Circuit, relying on Baldassarre v. Singer, 444 Pa. 100, 282 A.2d 262 (1971), held that a similar agreement was a contract of employment and not a contract for the sale of securities in violation of New York's or Pennsylvania's Statute of Frauds. In Hiller, as is the case here, if the agreement had been considered a "sale of securities," it would have been in violation of those Statutes of Frauds. In Baldassarre, pursuant to an oral contract, two chemists agreed to accept employment with a company, each receiving an annual salary of $13,000 and an equal division of 10 percent of the stock of the company, i.e., each would receive 5 percent of the stock. The company and its owner appealed from a lower court's order requiring the ownership interest to be transferred to the chemists, arguing, in part, that the agreement was a "sale of securities," and was in violation of the Statute of Frauds. The Supreme Court of Pennsylvania stated:
"By its own terms, § 8-319 [of the Uniform Commercial Code] only applies to `a contract for the sale of securities.' We are not convinced that this section is applicable to the transaction in question. Although `sale of securities' is nowhere defined, § 2-106 defines `sale' as: `A "sale" consists in the passing of title from the seller to the buyer for a price.' There is no `price' for stock transferred pursuant to an employment contract. The only consideration is the employment itself. If appellants are correct that an employment contract is a sale for purposes of § 8-319, the Uniform Commercial Code's statute of frauds on securities, then the two chemists, by leaving their previous employment and working for Rare Metals, have made `payment' for the stock, and thus are entitled to enforce their oral contract under the terms of § 8-319(b). However, we do not believe that such an awkward use of language is necessary. We believe it much more reasonable to state that the contract in question is simply not a contract of sale."
444 Pa. at 103, 282 A.2d at 264.
In Bowers Steel, Inc. v. DeBrooke, 557 S.W.2d 369 (Tex.Civ.App.1977), an employee sued his employing corporation alleging *239 that it had breached an oral contract of employment by failing to transfer 20 percent of the stock in the corporation to him. A jury returned a verdict in favor of the employee. On appeal, the Texas Court of Civil Appeals stated, in pertinent part:
"It is noted that the appellant treats the oral contract as requiring future payment by appellee of the stock, while appellee claims that he is entitled to the stock as consideration for his accepting employment with appellant. The question was determined by the jury adversely to appellant, and, therefore, we hold that the prohibition of § 8.319 does not apply. By the terms of § 8.319(2), the prohibition does not apply where payment has been made. Baldassarre v. Singer, 444 Pa. 100, 282 A.2d 262 (1971)."
557 S.W.2d at 374.
In Jones v. Cecil Sand & Gravel, Inc., 97 Md.App. 87, 627 A.2d 60 (1993), the Maryland Court of Special Appeals also addressed this issue, and after setting out the same language quoted earlier from Baldassarre, stated further:
"Several courts have employed the same approach and treated such transactions as contracts for employment rather than as contracts for the sale of stock. See McDermott v. Russell, 523 F.Supp. 347, 350-51 (E.D.Pa.1981)(court refused to dismiss action based on evidence of an oral contract for the delivery of stock in exchange for services); Hiller v. Franklin Mint, Inc., 485 F.2d 48, 51 (3d Cir.1973)(arrangement treated as contract for employment); Spinney v. Hill, 81 Minn. 316, 84 N.W. 116 (1900)(in an action to recover damages and the par value of promised stock the court rejected defendant's argument that the compensation in stock shares was a sale of chattel). In Spinney v. Hill, 81 Minn. 316, 84 N.W. 116 (1900), the Supreme Court of Minnesota decided that `[a]n agreement to pay for one's services in goods, chattels, or choses in action is not a sale, within the letter or the spirit of the statute of frauds. It is a mere agreement as to the method of compensation.' Id. 84 N.W. at 117. We are compelled by the forceful logic of this statement. Other courts have construed `payment' to include the act made in reliance on the contract. See Cumming v. Johnson, 616 F.2d 1069, 1073 n. 4 (9th Cir.1979)."
97 Md.App. at 92-93, 627 A.2d at 62. See also Thompson v. Kohl, 216 Ga.App. 148, 151, 453 S.E.2d 485, 488 (1994)("Although the question is debatable, we hold that an oral agreement by an employer to transfer corporate stock to an employee for a non-monetary consideration is not a `sale' within the meaning of UCC § 8-319.").
The Bowers Steel court distinguished two cases cited by the defendants, Mildfelt v. Lair, 221 Kan. 557, 561 P.2d 805 (1977), and Scarpinato v. National Patent Development Corp., 75 Misc.2d 94, 347 N.Y.S.2d 623 (Sup.Ct.1973), by stating that in those two cases "the oral promise was an option to purchase in the future for a price." 557 S.W.2d at 374. As was the case in Bowers Steel, the evidence here supports an inference, which was accepted by the jury, that in consideration for his acceptance of employment and increasing Bacadam's monthly revenues, Bentley would receive a 30 percent ownership in the company. Accordingly, this case also is distinguishable from those situations in which an employee is offered an "option to purchase [stock] in the future for a price."
The Jones court discussed Burns v. Gould, 172 Conn. 210, 374 A.2d 193 (1977), a case also cited by the defendants to this Court, stating as follows:
"In Burns v. Gould, ... the Supreme Court of Connecticut found the Baldassarre *240 court's rationale regarding the price term to be unpersuasive. The Connecticut court treated `price' as `something which one ordinarily accepts voluntarily in exchange for something else ... the consideration given for the purchase of a thing,' quoting Black's Law Dictionary (Rev. 4th Ed.), and concluded that the plaintiff's action met the requirements of this definition. In Burns, the plaintiff, who had joined with the defendant in developing a convalescent home and forming a corporation for it, received 25% of the stock of the corporation with an option to buy an additional 24% of the stock for $12,000. The defendant later formed another corporation to develop a nursing home, but none of its stock was issued to the plaintiff. The plaintiff alleged that the parties had an oral agreement concerning the second corporation, in which plaintiff was to receive for his services in developing the project the same percentage of stock ownership25% immediately with an option to purchase 24% of the stock for $12,000. The Connecticut appellate court, reversing the trial court, held that the statute of frauds section of the UCC was applicable to the transaction. The court apportioned plaintiff's recovery based on the amount of stock actually paid for by plaintiff through his services.
"In Burns, the court analogized the treatment of contracts for the sale of goods in exchange for a price paid in realty or goods under Article 2 (Sale of Goods) of the UCC to the employment contract situation. We believe that a contract for employment is substantially different from a contract in which the price is paid in realty or goods."
97 Md.App. at 93-94, 627 A.2d at 63. Other cases cited by the defendants to support their argument that the agreement between Bentley and the defendants was a "sale of securities" are Bentley v. ASM Communications, Inc., No. 91 CIV. 0086 (S.D.N.Y., June 11, 1991) (not published in F.Supp.), and Cooling Tower Erectors, Inc. v. Williams, No. 81 C 6678 (N.D.Ill., October 1, 1984)(not published in F.Supp.).
While Bentley and Cooling Tower Erectors, both unpublished opinions by federal district courts, do support the defendants' argument, we are most persuaded by those jurisdictions that view similar agreements not as "sales of securities," but as employment contracts, and we conclude that the agreement between Bentley and the defendants was an employment contract and was not subject to § 8-9-2, Ala.Code 1975, Alabama's Statute of Frauds.
II. Sufficient Evidence to Support a Contract
The defendants further argue that there was not sufficient evidence to prove that a contract existed between Bentley and the defendants. The jury's verdict and the trial court's denial of the defendants' postjudgment motion creates a strong inference that there was sufficient evidence to establish the existence of a contract. This Court has stated:
"A jury verdict carries a strong presumption of correctness, and no ground for a motion for new trial will be more carefully scrutinized or more rigidly limited than an assertion that the verdict is contrary to the weight of the evidence. The presumption in favor of the verdict is strengthened when the circuit court denies a motion for a new trial. On appeal, this Court will not reverse the denial of a motion for a new trial unless, after allowing all reasonable inferences in favor of the verdict, it concludes that the weight and preponderance of the evidence is so decidedly against the verdict as to convince the Court that the verdict is plainly and palpably wrong and unjust. Delchamps, Inc. v. Larry, *241 613 So.2d 1235, 1239 (Ala.1992); S.S. Kresge Co. v. Ruby, 348 So.2d 484, 488-89 (Ala.1977); Merchants Bank v. Cotton, 289 Ala. 606, 609, 269 So.2d 875, 878 (1972)."
Reed v. Boyd, 642 So.2d 448, 450 (Ala. 1994).
As previously discussed, testimony was presented at trial by Bentley and Jennings from which the jury could have reasonably inferred that a contract existed between Bentley and the defendants. Accordingly, we conclude that there was sufficient evidence to support the jury's verdict and the trial court's denial of the defendants' postjudgment motion.
III. Admissibility of Duplicate Tape Recording
The defendants' last argument is that a duplicate tape recording should not be admissible when the original recording is available. As subissues of their argument, the defendants argue that the admission of the duplicate tape recording violated the best evidence rule and that the recording was not properly authenticated. In their brief to this Court, the defendants state that the original tape recording was not admitted into evidence. However, our review of the record reveals that the original tape recording was admitted into evidence. The record contains the following dialogue between the trial court and Bentley's attorney:
"THE COURT: Now, you offer the tape, which is Number 1 and the transcript, which is number 1A.
"[Bentley's attorney]: Well, I want to offer the small tape as number 1. [The record reflects that Exhibit 1 was admitted into evidence at this point.]
"THE COURT: Do it this way, then, rather than that. Do the small tape as 1.
"[Bentley's attorney]: All right.
"THE COURT: The large tape as 2, not 1A.
"[Bentley's attorney]: All right.
"THE COURT: And you want the transcript as 3?
"[Bentley's attorney]: That will be fine and better. [The record next reflects that Exhibits 2 and 3 were admitted into evidence at this point.]"
The defendants also offered a CD made by their expert witness from the duplicate tape; the offering of the CD into evidence appears in the record as follows:
"THE COURT: Well, we've got these exhibits you're offering Robert [defendants' attorney].
"[Defendants' attorney]: Yes, sir.
"THE COURT: You're offering 2.
"[Defendants' attorney]: Yes, sir. I offered 1, 2, and 3.
"THE COURT: What was 3?
"[Defendants' attorney]: I thought the CD waswell, I said 3 when I was talking about the charts. My apologies.
"THE COURT: It's just two.
"[Defendants' attorney]: 1 and 2, yes, sir, the entire 1.
"THE COURT: The CD is in...."
The record also shows that the trial court delivered all exhibits to the jury for its deliberation, and among the exhibits included in that record is the original microcassette tape recording, marked as "Plaintiff's Exhibit 1." Also, the defendants acknowledge in their brief to this Court that a portion of the original recording was played for the jury; they state, however, that "[o]nly a portion was played, and that was at least one day after there was an objection by [Defendants'] Counsel concerning certain discontinuities on the tape." Obviously, once the original microcassette recording was admitted into evidence as plaintiff's exhibit *242 1, and played partially for the jury, there was nothing to prevent the defendants during trial, or the jury during its deliberations, from playing it in its entirety. The jury had before it as trial exhibits three different recordingsthe original microcassette recording, the larger cassette that had been copied from the microcassette recording, and the CD made by the defendants' expert witness and a transcription of the contents of the larger cassette recording that it could compare to any of the recordings for inconsistencies and "discontinuities" and from which it could assign the appropriate weight to give the recordings, as it saw fit. See, e.g., Avery v. State, 589 So.2d 1313, 1315 (Ala.Crim.App.1991)("The fact that parts of a tape recording were inaudible would not affect the admissibility of the recording but the weight which the jury places on the evidence."). Thus, we conclude that there is no basis for the defendants' argument that the original recording was not admitted into evidence.
The defendants argue that the admission of the duplicate recording violates the best evidence rule. However, our review of the record shows that the defendants failed to object to the admissibility of the duplicate recording on that ground. The only mention of an objection based on the best evidence rule was to the admissibility of the transcript of the recording. Moreover, Alabama's best evidence rule, Rule 1002, Ala. R. Evid., is not applicable to tape recordings. The Advisory Committee's notes to Rule 1001(1), Ala. R. Evid., which defines "writings," state, in pertinent part:
"Alabama's best evidence rule continues applicable to writings only. Adoption of this rule is a rejection of the corresponding federal rule, which expands the best evidence principle to cover recordings and photographs. See Fed.R.Evid. 1001(1). Chattels generally remain outside the scope of the best evidence principle. See Jones v. Pizza Boy, Oxford, Inc., 387 So.2d 819 (Ala.1980). Tape recordings, for example, present no best evidence issue. O'Daniel v. O'Daniel, 515 So.2d 1248 (Ala.Civ.App.), rev'd, 515 So.2d 1250 (Ala.1987)(holding re-recording of taped conversation admissible without accounting for unavailability of the original tape). See C. Gamble, McElroy's Alabama Evidence § 212.01 (4th ed.1991)."
See also Ex parte O'Daniel, 515 So.2d 1250 (Ala.1987), and Withee v. State, 728 So.2d 684 (Ala.Crim.App.1998).
The defendants further contend that Bentley failed to properly authenticate the recording. Before the recording was played to the jury, Bentley testified as to the identification of the voices on the tape. The trial court then further questioned Bentley as follows:
"THE COURT: Mr. Bentley, did you make this recording yourself?
"THE WITNESS: Yes, sir.
"THE COURT: After you made the recording, what did you do with the tape?
"THE WITNESS: I took it to my attorney's office.
"THE COURT: That attorney being who?
"THE WITNESS: That being Buck
"[Bentley's attorney]:Watson.
"THE WITNESS:Watson. I couldn't think of it. Buck Watson in Huntsville, Alabama.
"THE COURT: Do you know what he did with the tape?
"THE WITNESS: He told me that he transcribed it. We played it in his office.
"THE COURT: You did?
"THE WITNESS: Yes, sir.
*243 "THE COURT: What happened to the tape after you gave it to Mr. Watson, if you know.
"THE WITNESS: To the best of my knowledge, Mr. Watson wanted toI don't know what the term is, but wanted to enjoin [sic] a Birmingham law firm, and that was Mr. Dauphin [Bentley's attorney]. And they forwarded the tape here and the transcript.
"THE COURT: Are you going to be able to tie up the tape?
"[Bentley's attorney]: Yes, sir.
"THE COURT: All right. With that condition, what I'm going to do, ladies and gentlemen, is let you hear the tape. And there's been a transcription made by Mr. Dauphin's office that reportedly reflects what you will hear on the tape.
"Now we've been listening to the tape and looking at the transcript. You and you alone, though, are the sole and exclusive judges of what you hear on the tape and what you see on the transcription and whether or not they are one and the same. This goesand you will be the judges as to the credibility and to what weight you want to give this testimony. But I'm going to give you ladies and gentlemen an opportunity to hear it. So go ahead. Pass out your transcripts."
Counsel for the defendants then renewed a previous objection to the admission of the tape recording into evidence. Bentley further testified, in response to questions from his attorney, as follows:
"Q.... Mr. Bentley, you have listened to the tape and listened to theand compared it to the transcription.
"A. Yes.
"Q. And is both the tape and the transcription an accurate recording of the conversation that you had with Mr. Byrd?
"A. It's an exact recording."
Rule 901, Ala. R. Evid., deals with the "Requirement of Authentication or Identification." Rule 901(a) states that "[t]he requirement of authentication or identification as a condition precedent to admissibility is satisfied by evidence sufficient to support a finding that the matter in question is what its proponent claims." The Advisory Committee's notes further state, in pertinent part:
"The question of authenticity or proper identification is, in the first instance, for the trial judge as a preliminary matter. See Ala. R. Evid. 104(a). The required foundational showing must consist of evidence `sufficient to support a finding that the matter in question is what its proponent claims.' The evidence of authentication or identification, as under prior Alabama practice, does not have to be conclusive or overwhelming; rather it must be strong enough for the question to go to the jury. Any weaknesses in the foundational showing, insufficient to call for exclusion, go to the weight that the trier of fact is to give the evidence. See Tidwell v. State, 496 So.2d 109 (Ala. Crim.App.1986)."
Under the circumstances of this case, we conclude that the required foundational showing was made to allow for the proper admission of the recording. Any weakness in that showing was subject to the jury's determination of the evidentiary weight to give the recording. Tidwell v. State, 496 So.2d 109 (Ala.Crim.App.1986).
For the foregoing reasons, we affirm the trial court's judgment.
AFFIRMED.
MOORE, C.J., and SEE, BROWN, and STUART, JJ., concur.
NOTES
[1] Apparently Bentley was paid the eight percent commission. He makes no argument on appeal relating to that part of the agreement.
| {
"pile_set_name": "FreeLaw"
} |
192 F.2d 7
SUNBEAM CORP.v.WENTLING.
No. 10280.
United States Court of Appeals Third Circuit.
Reargued October 15, 1951.
Filed November 1, 1951.
Rehearing Denied November 19, 1951.
S. A. Schreckengaust, Jr., Harrisburg, Pa., for appellant.
Herman T. VanMell, Chicago, Ill. (William H. Peace, II., Ira Jewell Williams, Jr., Thomas Raeburn White and Ira Jewell Williams, all of Philadelphia, Pa., George M. Chapman, New York City, and Stanley A. Weigel, San Francisco, Cal., on the brief), for appellee.
Before MARIS, GOODRICH and KALODNER, Circuit Judges.
GOODRICH, Circuit Judge.
1
This case is before us for the second time. It was previously reported in 3 Cir., 185 F.2d 903 and the opinion there gives the background of the case. It is here again because of the Supreme Court decision in Schwegmann Brothers v. Calvert Distiller's Corp., 1951, 341 U.S. 384, 71 S.Ct. 745, 95 L.Ed. 1035. That decision held that a retailer who did not sign a contract for price maintenance is not to be subjected to the schedule of a price maintenance plan. In our former decision we denied Sunbeam protection against Wentling in interstate sales but did affirm the granting of the injunction against intra-state sales at less than the price Sunbeam had fixed. It is now clear in view of the Supreme Court decision that even when we cut down the protection Sunbeam wanted we still gave it more than it should have had. The Supreme Court's conclusion is perfectly clear. One who does not sign a price maintenance contract cannot be subjected to the non-signer provisions of a state fair trade law where interstate commerce is involved. So it would seem, then, that Sunbeam is entitled to no protection at all against Wentling, a non-signer.
2
But Sunbeam comes into court upon rehearing with a second string to its bow. It says that it has valuable trade-mark rights in its razors. It sells these razors through retailers a large number of whom have signed price maintenance contracts. These retailers have to spend a large percentage of their gross receipts in selling costs. If merchandise is sold at a lower price than these retailers can afford to sell they cannot compete successfully against the price cutters and will turn to someone else's razors instead of selling Sunbeam Shave-masters. This is an injury, it is argued, to Sunbeam's trade-mark and should be prevented by law.
3
The consequences of accepting the argument almost take one's breath away. It is perfectly true that a trade-mark is entitled to protection. Nor does it require any fair trade act to give such protection.
4
For instance, if Wentling sold his own or someone else's razors as those of Sunbeam he would be in trouble. One of the best established forms for relief against unfair competition is that given against one palming off his goods as those of another.1 But Wentling does not sell Sunbeam's razors as Wentling's; he sells Sunbeam's razors as Sunbeam's.2 There is no deception or palming off. Sunbeam says that if Wentling wants to sell its razors below the established price he should take off the identifying trade-mark. Suppose he did. He certainly could not put on his own mark and sell Sunbeam razors as his, Wentling's. And if he sold them with no mark at all but just as "good electric razors" could not Sunbeam, on the very argument it makes here, complain that Wentling was interferring with its trade-mark by not allowing the customer to know that the good razor which he buys from Wentling is in fact made by Sunbeam? If Sunbeam's argument made to us is sound, we do not see why the other conclusion would not follow. Yet this is the very thing which the Supreme Court, and others, have said Wentling could do.3
5
It would, indeed, be a remarkable result to reach in a competitive economy if we were to say that a manufacturer could make everyone submit to the price he imposes upon sales to the consumer. Even a contract to maintain prices was unlawful prior to the Miller-Tydings amendment to the Sherman Act, 15 U.S.C.A. § 1, as the famous Dr. Miles and Hartman decisions show.4 To the extent that a manufacturer can get the same result without contract because of some theory of trade-mark protection, competition at the retail level in the sale of trade-marked goods is obviously going to be very much lessened.
6
A patentee is given a monopoly by legal grant. But even a patentee, who can exclude everyone else from making his patented article, cannot control the price at which others may sell his articles to consumers.5 The protection given to the owner of a trade-mark certainly should not be greater than that given to the holder of a legal monopoly, the patentee.
7
Our conclusion here is free from doubt. Sunbeam's rights under the fair trade act against a non-signer are shown by the decision in the Schwegmann case. There are no such rights. Sunbeam's rights against Wentling based on the common law of trade-mark protection are certainly to be recognized but they do not go so far as Sunbeam urges here. The injunction against Wentling must be dissolved.
8
Wentling put in a counter-claim in the trial court when this case was brought up. That counter-claim was dismissed without consideration because of the position taken with regard to Sunbeam's rights under the fair trade acts. The counter-claim is to be restored and Wentling given an opportunity to make what proof he can under it. We do not pass in any way upon the merits of his counter-claim.
9
The judgment of the District Court is reversed and the case remanded for further proceedings consistent with this opinion.
Notes:
1
See Restatement of Torts, §§ 712, 717
2
Which, according to the Restatement of Torts, § 736, he has an affirmative right to do
3
See, Old Dearborn Co. v. Seagram Corp., 299 U.S. 183, 195, 57 S.Ct. 139, 145, 81 L.Ed. 109. "Section 2 of the act does not prevent a purchaser of the commodity bearing the mark from selling the commodity alone at any price he pleases."
The Supreme Court has also held that one may use the manufacturer's trademark when he repacks and resells the trade-marked goods so long as he does not deceive the public thereby. Prestonettes, Inc. v. Coty, 1924, 264 U.S. 359, 44 S.Ct. 350, 68 L.Ed. 731. One may also use the trade-mark on the goods when they are sold second hand so long as he indicates clearly that they are "used" products. Champion Spark Plug Co. v. Sanders, etc., 1947, 331 U.S. 125, 67 S.Ct. 1136, 91 L.Ed. 1386. Moreover, one may buy trade-marked goods and use them in the manufacture of new products which may be advertised to show the use of trade-marked materials in them. Forstmann Woolen Co. v. J. W. Mays Co., D.C. E.D.N.Y.1947, 71 F.Supp. 459, and D.C. E.D.N.Y.1950, 89 F.Supp. 964. See also Restatement of Torts, §§ 736, 737.
4
Dr. Miles Medical Company v. John D. Park & Sons Co., 1911, 220 U.S. 373, 31 S.Ct. 376, 55 L.Ed. 502; John D. Park & Sons v. Hartman, 6 Cir., 1907, 153 F. 24, 12 L.R.A.,N.S., 135
5
See Bauer v. O'Donnell, 1913, 229 U.S. 1, 33 S.Ct. 616, 57 L.Ed. 1041; Straus, etc., R. H. Macy & Co. v. Victor Talking Machine Co., 1917, 243 U.S. 490, 37 S.Ct. 412, 61 L.Ed. 866; United States v. Univis Lens Co., Inc., 1942, 316 U.S. 241, 62 S.Ct. 1088, 86 L.Ed. 1408. A patentee may, however, fix by contract the price at which his licensees may sell the patented article. See Bement v. National Harrow Co., 1902, 186 U.S. 70, 22 S.Ct. 747, 46 L.Ed. 1058 and United States v. General Electric Co., 1926, 272 U.S. 476, 47 S.Ct. 192, 71 L.Ed. 362
| {
"pile_set_name": "FreeLaw"
} |
436 F.2d 747
Bryce BEATTIE, Plaintiff, Appellant,v.Frances W. ROBERTS et al., Defendants, Appellees.
No. 7695.
United States Court of Appeals, First Circuit.
Jan. 6, 1971.
Charles P. Barnes II, Portland, Me., with whom James R. Flaker and Linnell, Perkins, Thompson, Hinckley & Thaxter, Portland, Me., were on brief, for plaintiff, appellant.
Barnett I. Shur, Portland, Me., with whom Wilson, Steinfeld, Murrell & Lane, Henry Steinfeld, Charles A. Lane, Bernstein, Shur, Sawyer & Nelson, Gregory A. Tselikis, and George M. Shur, Portland, Me., were on brief, for defendants, appellees.
Before ALDRICH, Chief Judge, McENTEE and COFFIN, Circuit Judges.
COFFIN, Circuit Judge.
1
This case concerns the procedural rights of tenured public school teachers whose employment contracts are not renewed. Plaintiff, a tenured teacher, taught for five years in the Windham, Maine, school system. On November 18, 1969, the Superintending School Committee voted not to renew his contract. The Superintendent of Schools notified plaintiff of the Committee's decision in a letter dated December 13. Plaintiff requested a list of reasons for the Committee's action and a hearing before the Committee. In a letter dated December 31, the Superintendent responded, setting a hearing date for January 21, 1970, and the Committee's counsel furnished a list of reasons on January 14.
2
On January 21 the Committee met in executive session for the purpose of conducting the requested hearing. Both the Committee and plaintiff were represented by counsel; witnesses were present; and a stenographer recorded the proceedings. Plaintiff's counsel raised several procedural objections. He protested because the hearing was not public, because the witnesses were sequestered, and because he was denied permission to cross-examine members of the Committee. The Committee refused to sustain any of these objections, and plaintiff declined to participate further in the proceedings. The merits of the list of reasons were never reached; the Committee's initial decision not to reemploy plaintiff remained in effect. Plaintiff brings this action, under 42 U.S.C. 1983, against the Superintendent and the members of the School Committee alleging that he was denied due process. Summary judgment was entered by the district court after a finding that the Committee had afforded plaintiff procedural due process and that plaintiff had failed to exhaust his administrative remedies. From that decision, plaintiff appeals.
3
Initially, we are confronted with the question of exhaustion of administrative remedies: can plaintiff bring this action, having refused to participate in the January 21 hearing? This court has recently indicated that plaintiffs who bring 1983 actions must normally exhaust available administrative remedies. Dunham v. Crosby, 435 F.2d 1177, n. 2 (1st Cir. 1970); Drown v. Portsmouth School District, 435 F.2d 1182, n. 10 (1st Cir. 1970). We require exhaustion, in part, because we hesitate to hold members of school committees liable for tentative dismissal decisions when they are denied the opportunity to view the issue in the light of the facts and argument which the affected teachers might introduce in a formal hearing. Plaintiff argues, however, that the procedure followed by the Committee in considering his case was not the procedure required by state statute. Having recently held that 1983 defendants who short circuit a plaintiff's statutory procedural rights cannot assert the defense of failure to exhaust administrative remedies, Dunham v. Crosby, supra, we must consider plaintiff's statutory argument.
4
A tenured teacher's procedural rights are set forth in 20 Me.Rev.Stat.Ann. 161(5):
5
'After a probationary period of 3 years, any teacher, who receives notice in accordance with this section (i.e., at least 6 months before the terminal date of the contract) that his contract is not going to be renewed, may during the 15 days following such notification request a hearing with the school committee or governing board. He may request reasons. The hearing shall be private except by mutual consent and except that either or both parties may be represented by counsel. Such hearing must be granted within 30 days of the receipt of the teacher's request.'
6
Plaintiff presently asserts that the Committee violated this procedure in two ways. First, he reads the statute to require the Superintendent to notify a teacher before he recommends to the Committee that the teacher's contract not be renewed. According to plaintiff's theory, the teacher would then be afforded the opportunity to request the Superintendent's reasons for so recommending and a hearing before the entire Committee. If he requested such a hearing, the Committee would initially consider the issue of his non-renewal at the date of the hearing; presumably it would be improper for the Committee to consider dismissing a teacher even preliminarily if the teacher were not present.
7
We see no basis in the above statute for plaintiff's interpretation. Under the statute, a teacher is entitled to notice 'that his contract is not going to be renewed * * *', not notice that the Superintendent has recommended non-renewal. The language contemplates action by the entire Committee before the teacher is notified. Moreover, plaintiff's interpretation assumes that there is no occasion for the Committee itself to initiate a dismissal, yet the Committee is expressly granted the power to initiate a dismissal under the Maine statute. 20 Me.Rev.Stat.Ann. 473(4).
8
Plaintiff says, secondly, that he was not given an adequate statement of the Committee's reasons as required by the statute. He protests that the list of reasons came from the Committee's attorney and not from the Committee. Plaintiff's claim that the Committee must furnish its reasons before it holds a hearing is inconsistent with the interpretation of the statute urged in his first argument. The Committee could not furnish its reasons before the hearing unless it had previously considered the matter. The statute says only that the teacher has the right to 'reasons', but we assume the requirement is designed primarily to assist the teacher in preparing for the hearing before the Committee. In this case, the Committee's attorney submitted to plaintiff a detailed list of 17 incidents which underlay the Committee's November 18 action. The same attorney instructed the members of the Committee at the January 21 hearing that they were to consider only those reasons on the list. Plaintiff was clearly put on notice of the charges against him. Although the Committee preferred to characterize the list as a list of unproven charges rather than reasons, that fact did not prejudice plaintiff in any way; indeed, regarding the list as charges to be proven instead of reasons to be rebutted may have eased plaintiff's burden of proof and should have eased his mind of the matter initially discussed, namely, that the Committee had prejudged its case.
9
Nor are we able to attach material significance to the fact that two of the events included in the list of reasons occurred after the November 18 meeting when the Committee voted to dismiss plaintiff. We see no reason why the Committee should have ignored incidents occurring after November 18 as long as plaintiff was put on notice before the January 21 hearing of all such events the Committee would consider. The Committee could have considered those incidents, after November 18, which indicated a continuing course of improper conduct.
10
In fact, the Committee may have afforded plaintiff more procedural protection than he was entitled to under the statute. For example, a stenographic record of the January 21 hearing was kept. Under these circumstances, we see no justification for plaintiff's refusal to follow the proceedings through to the end.
11
Alternatively, plaintiff claims that the procedure was constitutionally objectionable. He argues that due process requires a completely neutral decision-maker at the hearing and that the Committee, having already made an initial decision not to renew plaintiff's contract, was not impartial. This contention is raised for the first time on appeal. At no point before or during the aborted hearing before the Committee did plaintiff suggest that it was constitutionally incompetent. His sole efforts were to achieve a public hearing, the non-sequestration of witnesses, and cross-examination of Committee members. The complaint similarly addressed alleged procedural deficiencies, not only excluding any complaint as to the incompetence of the Committee, but, as in the instance of charging its refusal to conduct a public hearing, at least in substantial part inconsistent with any claim of incompetency. Of even greater pertinence is the fact that at no point does the record show that this matter was argued or even alluded to before the district court. After full oral argument was had and after the court read the transcript of the Committee hearing, the court accompanied its bench ruling on defendants' motion to dismiss with a summary of plaintiff's contentions-- the three we have noted above-- and the applicable law. On concluding, the court inquired of counsel if there were any misstatements. Plaintiff's counsel then called the court's attention to its omission of a fourth contention: that the Committee had refused to state whether it adopted any or all of the reasons contained in the January 14 letter of the Committee's counsel. The court responded and the hearing concluded.
12
Notwithstanding the obvious inappropriateness of considering an issue neither pleaded nor argued below, which was never called to the district court's attention, see, e.g., Hap Corp. v. Heyman Mfg. Co., 361 F.2d 329, 331 n. 3 (1st Cir. 1966), we might on rare occasion consider it if the facts pleaded, proved, or sworn to clearly pointed to a blatant and clear deprivation of constitutional rights. This, however, is not such a case. Such law as exists on the constitutional requirement and definition of an 'impartial tribunal' in cases of teacher dismissals is varied and murky. The policy implications are vast.
13
We have recently recognized that a determination of what procedures afford dismissed teachers due process requires a complex balancing of interests. Drown v. Portsmouth School District, 435 F.2d 1182 (1st Cir. 1970). In Drown we considered the dismissal of a nontenured teacher, but we have not yet confronted a case involving a tenured teacher. There is some authority for plaintiff's proposition, Pickering v. Board of Education, 391 U.S. 563, 578 n. 2, 88 S.Ct. 1731, 20 L.Ed.2d 811 (1968) (dictum), but we note that no court has required a school system to create the procedure plaintiff seeks.1
14
We see serious problems with this procedure because it would either prevent a Committee from initiating a dismissal or permit it to initiate a dismissal but then require another body of neutral outsiders to review personnel decisions that are properly the responsibility of the Committee. See Drown, supra at 1187. A requirement that the Superintendent serve as prosecutor and bring a proposed dismissal before the Committee for the first time in an adversary proceeding is inconsistent with the Maine statute authorizing the Committee to initiate dismissals. 20 Me.Rev.Stat.Ann. 473(4). There would still be no guarantee that the Committee would not already have learned of the case in carrying out its duties. The separation of function might well be only facial and insubstantial. There would also be a greater chance of an unwise initial decision to dismiss because only one man, as opposed to the entire School Committee, would have been involved. If we required the state or municipalities to create neutral bodies to which the Committee's decision to dismiss could be appealed, we would be engrafting into educational administration an appellate layer of enormous complexity, and might well exceed the boundaries of our judicial authority and trespass into legislative territory.
15
Furthermore, plaintiff's dual failures to exhaust his administrative remedies and to present the issue to the district court have foreclosed any analysis of the workings of the present Maine procedures, an exploration we would deem essential to any sensible balancing of the interests of tenured teachers and school committees.
16
Affirmed.
1
There is, however, some case law to the effect that due process requires an impartial tribunal. E.g,, Ferguson v. Thomas, 430 F.2d 852, 856 (5th Cir. 1970); Wasson v. Trowbridge, 382 F.2d 807, 813 (2d Cir. 1967); Esteban v. Central Missouri State College, 277 F.Supp. 649, 651 (W.D.Mo.1967). Some of these cases concern the expulsion of college students for disciplinary reasons where the interests to be balanced are different-- perhaps materially different-- from this case. E.g., Wasson, supra; Esteban, supra. On the other hand, some cases concerning the procedural rights of dismissed teachers are silent on the nature of the tribunal. E.g., Roth v. Board of Regents, 310 F.Supp. 972 (W.D.Wisc.1970); Lucia v. Duggan, 303 F.Supp. 112 (D.Mass.1969) (both cited with approval by plaintiff). In none of these cases is there any discussion of what is meant by an 'impartial tribunal'. Must an impartial tribunal have had no previous contact with the case, as plaintiff urges, or is a tribunal impartial if none of its members are personally interested in the outcome, cf. Pangburn v. C.A.B., 311 F.2d 349, 356-358 (1st Cir. 1962)? See generally Wright, The Constitution on the Campus, 22 Vanderbilt L.Rev. 1027, 1080-81 (1969)
| {
"pile_set_name": "FreeLaw"
} |
571 N.E.2d 507 (1991)
213 Ill. App.3d 126
156 Ill.Dec. 723
In re J.S., T.S. and S.S., Minors (The People of the State of Illinois, Petitioner-Appellee,
v.
Janet Slater, Respondent-Appellant).
No. 3-90-0330.
Appellate Court of Illinois, Third District.
April 30, 1991.
*508 William C. Davis, Jr. (argued), Lewistown, for Janet Slater.
Gary F. Gnidovec, States' Attys. Appellate Prosecutor, Ottawa, Joan Scott, State's Atty., Lewistown, for the People.
Justice BARRY delivered the opinion of the court.
Janet Slater appeals from orders entered by the circuit court of Fulton County finding her an unfit person pursuant to sections 1(D)(m) and (p) of the Adoption Act (Ill.Rev.Stat.1989, ch. 40, par. 1501(D)(m) and (p)) and terminating her parental rights to her four natural children. For purposes of this opinion, we will refer to the children as J(son), J.S., T.S. and S.S.
Janet was born in 1963. She has a history of mental illness diagnosed as bipolar disorder and antisocial personality disorder with poly drug abuse since the age of 17. Her first child, J(son), was born in 1982. Thereafter she gave birth to J.S. in 1983, T.S. in 1985 and S.S. in 1986.
Within a few months of the birth of T.S., Janet was taken involuntarily to Zeller Mental Health Center (ZMHC) when she was found with J(son) near a pool of muddy water and fertilizer and was unwilling or unable to speak to either the child or the police. The child had been playing in the polluted water. The children's father, Donald ("Tater") Slater, had been drinking. He became intoxicated, threatened to commit suicide and passed out. Subsequently, an aunt provided temporary shelter for the children. However, as a consequence of the incident and the parents' subsequent refusal to cooperate with the Department of Children and Family Services (DCFS), in August, 1985, DCFS brought suit for an adjudication of wardship and temporary custody on the ground of neglect.
The parties stipulated to a finding of neglect, and the children were placed in foster care with guardianship in the Guardianship Administrator of DCFS. The children were returned to the Slaters' custody in February, 1986.
Then, within a couple of months after the birth of her fourth child, S.S., Janet was readmitted to ZMHC when she became violent, and a second petition was filed by DCFS seeking custody of the children on grounds of abuse and Janet's mental health problems. Pursuant to the parties' stipulation, a second adjudicatory order was entered in November, 1986 finding the children dependent and abused. The children were returned to their parents' custody after Janet's release from ZMHC. Janet and Tater were divorced in December of that year.
On March 30, 1987, before the matter came back up for a dispositional hearing, Janet was once again admitted to ZMHC for aggressive, hostile behavior. The children were again placed in foster care. Janet was released on May 15, but was returned on May 27 after verbally abusing and physically assaulting her DCFS caseworker during a scheduled supervised visit with the children. This hospitalization lasted until June 16.
On May 21, 1987 the children were placed together in the foster home where they have remained ever since. Within six weeks of their placement, Mrs. Douglas, the foster mother, reported to DCFS that the children appeared to have been sexually abused.
Mrs. Douglas' report was investigated, abuse was indicated, and the children were given physical and psychological examinations *509 and child sexual abuse therapy. Visitation between Janet and the children was terminated and a second supplemental petition was filed alleging, inter alia, sexual abuse and seeking a termination of the Slaters' parental rights by reason of depravity (Ill.Rev.Stat.1989, ch. 40, par. 1501(D)(i)), failure to protect the children from an injurious environment (par. 1501(D)(g)) and failure to make reasonable progress toward the return of the children (par. 1501(D)(m)).
The adjudicatory hearing on this petition was continued on the Slaters' motions for various reasons, including Janet's readmission to ZMHC on November 20, 1988. Prior to that admission, however, the court heard testimony in camera of J.S. and J(son). The children's testimony was taperecorded so that it could be reviewed by Janet and her attorney before the children were cross-examined. J.S.' testimony, direct, cross and redirect was completed in this manner on November 1, 1988; however, the cross-examination of J(son) was not pursued before the court recessed for the day. As a result of Janet's involuntary readmission, the adjudicatory hearing was again continued. Janet was released December 13, but readmitted December 23, 1988, and remained at ZMHC this time until March 3, 1989. During this period, Donald ("Tater") voluntarily consented to the termination of his parental rights.
A third supplemental petition was then filed in January, 1989, naming only Janet and seeking the termination of her parental rights on grounds of depravity, failure to make reasonable progress and Janet's inability to discharge parental responsibilities by reason of her "periodic mental disability" (Ill.Rev.Stat. 1989, ch. 40, par. 1501(D)(p)). After numerous mesne motions and continuances, the adjudicatory hearing on the third supplemental petition was held in September, October and November, 1989 and February, 1990.
At the adjudicatory hearing, Mrs. Douglas described the circumstances that led to her report to DCFS of suspected sexual abuse. She testified that initially the baby, S.S., would scream and push away when she tried to hold him. He did not respond positively to touching until about six months after his placement in her home. T.S. during this period used to awaken during the night wet with perspiration and crying. He told her that Janet and Tater hurt him and that he was afraid. J.S. displayed an extreme fear of loud noises, especially fireworks, and was unusually flirtatious with strangers. She tried to fondle Mrs. Douglas' breasts and said that she wanted to have a "booby party." After visitation with Janet, Mrs. Douglas stated, J.S. would act out sexually, taking T.S.' pants down and playing with his penis and poking her finger into his anus "to see if he had any poop." J.S. also tried to disconnect or break the Douglas' V.C.R., reportedly because she had seen pictures of herself and her brothers being hurt at her mother's house. J(son) confided that the Slaters had taken pictures of the children in the nude, that during the filming Tater had urinated and defecated on him, and that Janet had put a lighted match up to T.S.' penis. Mrs. Douglas' testimony of J(son)'s and J.S.' descriptions of other acts of depravity, human and animal torture and sexual abuse during their life with Janet appears in the record on appeal, but need not be repeated to any greater extent for purposes of this opinion.
The foster parents indicated their willingness to adopt all four children in the event they become legally available for adoption.
Expert evidence introduced by DCFS in support of the petition established that J(son) and J.S. had been traumatized by their experiences while living in Janet's home. Based on his physical examination of the children on January 20, 1988, Dr. Richard Miller testified that J.S.' hymenal membrane was missing and that this finding was consistent with the child's report to her foster mother that objects had been forced into her vagina. It was his opinion that J.S. had been sexually abused. The doctor's examination of the other children neither confirmed nor rebutted their reports of abuse.
The children's counselor, Diane Ramer, conducted nine sexual abuse therapy sessions *510 with J(son) and twelve with J.S. She helped them to talk about their feelings, fears and pain and to alleviate their guilt. Based on what the children said and how they acted as they opened up during their sessions with the counselor, it was her opinion that the children were not lying about the abuse they had suffered in the Slater home and that they had been emotionally traumatized.
J(son) testified about his recollection of the experiences of physical and sexual abuse that he had seen and participated in in the Slater home. He expressed fear and anger toward Janet. J(son)'s 14-year-old foster brother, G.W. Douglas, testified that he had shared his bedroom with J(son) since his placement in 1987 and the two boys had had private conversations about J(son)'s life in the Slaters' home. Many of the incidents of abuse related by J(son) to the court had been revealed to G.W. during these discussions which began as early as June or July, 1987. G.W. also testified that while changing T.S.' diapers, he had observed that the baby's penis was scarred. Mrs. Douglas also testified in some detail about J.S.' private talks with her about abuse in the Slater home. The details in many respects coincided with G.W.'s testimony of reports given by J(son) to G.W. and with J(son)'s testimony as received by the court in camera.
Expert witnesses who had treated Janet at ZMHC and at the Community Mental Health Center for Fulton and McDonough Counties testified to Janet's mental illness. Although these witnesses had not observed Janet with her children, they generally testified to her long-term unstable, anti social behavior, periodic bouts with out-of-control aggression apparently related to stress and her substantial history of drug abuse.
In her defense, Janet established that since her most recent hospitalization, she had acknowledged her mental illness, was taking her medication, and had learned to recognize symptoms of periodic relapses (pacing, preoccupation with religion and insomnia) which indicated that increased medication was needed. DCFS homemakers who had supervised visitation prior to November, 1987 testified that on most occasions Janet had acted appropriately toward the children and they had not appeared afraid of her. Finally, Janet and her father and stepmother testified to Janet's love and affection for her children and their show or affection for her.
At the conclusion of all evidence, the court took the matter under advisement and issued a memorandum opinion on February 26, 1990, finding that the evidence clearly and convincingly established that: 1) with respect to Janet's inability to discharge her parental responsibilities, "a regression is probable and that Janet is not even remotely able to discharge her parental responsibilities;" and 2) with respect to her failure to make reasonable progress toward the return of her children, "there has been virtually no progress ... [and] there seems to be no prospects of the children returning in the foreseeable future." (emphasis in original) With respect to depravity, the court found "that although there was bothersome evidence, it probably did not rise to the level of clear and convincing." An order adjudicating Janet an unfit person pursuant to sections 1(D)(m) and (p) of the Adoption Act was entered on March 1, 1990.
The matter then proceeded to a dispositional hearing. After receiving DCFS' updated report and further testimony from Mrs. and Mr. Douglas, Janet and her father and stepmother, the court found by clear and convincing evidence that "it is in the best interests of [the] minors that the parental rights of Janet Slater be terminated." Having reviewed the entire record before us in this appeal, we now affirm the circuit court's adjudicatory and dispositional orders.
Janet first contends that section 1(D)(p) of "an Act in relation to the adoption of persons, and to repeal an act therein named" (Adoption Act) is unconstitutional because it deprives her of equal protection and due process of law. Contrary to Janet's argument, we find that the statute is neither vague nor inherently confusing and incapable of reasonable application. The constitutional challenges advanced here *511 were generally addressed in In re I.D. (4th Dist.1990), 205 Ill.App.3d 543, 549-50, 151 Ill.Dec. 94, 563 N.E.2d 1200. In our opinion, the court's rationale in I.D. adequately responds to Janet's constitutional arguments. In holding that the statute is not constitutionally defective the court stated:
"The State as parens patriae has a right and duty, as well as the authority, to legislate for the protection and welfare of children within its jurisdiction. (Regenold [v. Baby Fold, Inc. (1977)], 68 Ill.2d 419, 437, [12 Ill.Dec. 151, 159] 369 N.E.2d 858, 866.) Our legislature has done so by enacting the Juvenile Court Act and the Adoption Act. These have created a comprehensive scheme to ensure children receive the proper care and training. They authorize the removal of the children from the home if necessary. The ultimate goal is to reunite the families. However, the legislature recognizes there are those cases wherein this cannot be readily done. In such situations, it is the intent of the acts to avoid placement of children in long-term or permanent foster care with the accompanying detrimental impacts to the children by encouraging placement in a permanent, stable adoptive home. Section 1(D)(p), the section in question, is clearly rationally related to this goal. Not all parents with these disabilities are affected. It is only those who cannot discharge their parental responsibility due to these disabilities and whose inability to do so will extend beyond a reasonable time. In such circumstances, it is necessary to ensure stability and an appropriate family life for the minor in a permanent family relationship. There is no constitutional defect." (emphasis in original)
We embrace the foregoing analysis and reject accordingly Janet's constitutional challenges.
Janet next contends that the circuit court's findings of unfitness are contrary to the manifest weight of the evidence.
As a general rule, the trial court has broad discretion in matters of family relationships and its evaluations of questions of credibility and weight assignable to the evidence should not be disturbed on appeal unless they are palpably contrary to the manifest weight of the evidence or the court abuses its discretion. (In Interest of Grotti (5th Dist.1980), 86 Ill.App.3d 522, 42 Ill.Dec. 150, 408 N.E.2d 728.) Particularly where, as here, it is apparent that the parent is treading a precarious line in dealing with the stresses of her life and it is clear from the record on appeal that the trial court fully grasped the magnitude of its decision, this court should be loath to upset the lower court's rulings.
Based on the totality of the evidence before it, the trial court concluded that Janet's mental illness was such that she could not be expected to be able to discharge parental responsibilities within a reasonable period of time. The trial court also concluded that Janet had made "virtually no progress" toward the return of her children.
Janet places heavy reliance on the fact that expert witnesses who testified concerning her mental illness could not conclusively state that respondent could not perform her parental duties if she continued in remission and took her medication.
While it is true that most of the experts who testified had either never seen Janet with her children or had seen her with them only during supervised visitation and had not noticed any mistreatment, it is also true that the expert witnesses observed that Janet's prognosis was not favorable for maintaining sufficient control to function outside of the hospital for a significant period of time. Expert testimony also established that given Janet's history it was not likely that she would be able to provide adequate parenting for four young children and that it was highly probable that Janet would resume her abuse of drugs and/or alcohol. Janet's history in dealing with stress is well documented during the period that this case has languished in the circuit court. From mid-1985 until a few months prior to the completion of the adjudicatory hearing in 1990, Janet's anti social conduct required that she be confined on no less than seven occasions. The record bespeaks *512 of only two occasions on which Janet acknowledged the onset of renewed symptoms of her illness and sought psychiatric help in adjusting her medication without having to be re-committed to the hospital. Both occasions occurred within a few months of the 1989-90 adjudicatory proceedings.
Dr. Iwashita, a clinical psychologist who testified for petitioner, provided a report of his 1989 evaluation of Janet in which he stated:
"In terms of Symptomatic Pattern, the client is immature, impulsive and hedonistic, and she frequently rebels against authority. She is hostile, quite aggressive and often frustrated. She seems unable to learn from punishing experiences and repeatedly gets into the same type of problems. Many individuals with this profile develop severely addictive problems and frequently have legal, family and work difficulties. In terms of interpersonal relations, she may appear charming and tends to make a good first impression, but she is superficial, selfish, hedonistic and untrustworthy in interpersonal relations, apparently only interested in people for how they can be used. She seems interested only in fulfilling her own pleasures, and is not interested in or sensitive to the needs of others. She seems unable to experience guilt over causing others trouble. Because she is unable to form stable, warm relationships, her current relationships are likely to be quite strained. In addition, she is likely to be openly hostile and resentful."
J(son)'s poignant replies during his in camera cross-examination reinforce the expert's evaluation:
"Q. Would you laugh and have fun with Janet on those visits at the Department office?
"A. No.
"Q. What would you do when Janet was around in those visits?
"A. Usually she, she pretends she is being nice, but I know she ain't."
The trial court, in rejecting Janet's position that she is in remission and now, after more than three years of not having cared for her children, can take responsibility for them, summarized his findings as follows:
"[Janet's counsel] points out that Janet is recovering from her unfortunate illness and the Court certainly applauds her effort and hopes it is true. However, the Court's mandate is to determine if there is in fact a likelihood, based upon the testimony (which is in the record and familiar to the parties) that she may resume and discharge her parental responsibilities. Sadly the Court must conclude that by clear and convincing evidence a regression is probable and that Janet is not even remotely able to discharge her parental responsibilities."
Our review of the record on appeal reveals neither an abuse of the trial court's discretion nor that the court's determination of unfitness was contrary to the manifest weight of the evidence. Janet's acknowledgement in court of her mental illness, as the court aptly noted, represents a great stride in her personal life, but does not translate into progress toward the return of her children. The record before us is replete with evidence of Janet's neglect, abusesexual as well as physical and emotional torture of her own children. Even disregarding those uncorroborated aspects of the charges that appear only in the testimony of J(son) and his sister, J.S., the evidence presented to the court clearly and convincingly establishes that Janet abused and neglected all four children. Janet, however, has never admitted any wrongdoing or expressed any guilt, remorse or sorrow for the serious harm done to her children. Whether this factor is a function of Janet's illness or her personality and upbringing is not revealed and need not be determined, but it does lend support to the court's finding of parental unfitness. In sum, without reiterating all of the pathetic factual details underlying this cause, suffice it to say we find adequate evidence to support the trial court's findings of unfitness pursuant to sections 1(D)(m) and (p) of the Adoption Act.
*513 The judgment of the circuit court of Fulton County is affirmed.
Affirmed.
STOUDER, P.J., and McCUSKEY, J., concur.
| {
"pile_set_name": "FreeLaw"
} |
877 F.Supp. 618 (1995)
HILLSBOROUGH COUNTY, a political subdivision of the State of Florida, et al., Plaintiffs,
v.
A & e ROAD OILING SERVICE, INC., et al., Defendants.
No. 92-1648-CIV-T-17B.
United States District Court, M.D. Florida, Tampa Division.
February 17, 1995.
Andrea E. Zelman, Icard, Merrell, Cullis, Timm, Furen & Ginsburg, P.A., Tampa, FL, William W. Merrill, III, Icard, Merrill, Cullis, Timm, Furen & Ginsburg, P.A., Sarasota, FL, for Hillsborough County et al.
Ann D. Samuels, Law Office of Ann D. Samuels, Oak Brook, IL, for Waste Resources of Tampa Bay, Inc.
Wayne E. Ripley, Jr., Law Office of Wayne E. Ripley, Jacksonville, FL, for Winn Dixie Stores, Inc.
William C. Ballard, Fisher & Sauls, P.A., St. Petersburg, FL, for A & e Road Oiling Service, Inc., et al.
Emmett Abdoney, Law Office of Emmett Abdoney, Tampa, FL, for Acme Sanitary Services, Inc.
William Barrett Taylor, IV, Macfarlane, Ausley, Ferguson & McMullen, Tampa, FL, for Acorn Contractors, a subsidiary of Spring-Lock Scaffolding Co. et al.
Julie A. Weisman, Swidler & Berlin, Washington, DC, for American Cyanamid Co.
Robert W. Boos, Honigman, Miller, Schwartz & Cohn, Tampa, FL, for Ashland Petroleum, a division of Ashland Oil, Inc.
Lyle Wethington, Law Office of Lyle Wethington, Pinellas Park, FL, for Bay Area Septic Systems.
Peter James Hobson, Law Office of Peter J. Hobson, Tampa, FL, for CDB Pizza, Inc.
Clemons Septic Cleaners, pro se.
Joseph W. Clark, William A. Gillen, Jr., Shackleford, Farrior, Stallings & Evans, P.A., Tampa, FL, for Continental Can Co.
James Michael Porter, Holland & Knight, Miami, FL, for Cralle-Hall Motor Co. et al.
Dale W. Vash, Ronald H. Noble, Fowler, White, Gillen, Boggs, Villareal & Banker, P.A., Tampa, FL, for Tank Welding & Service Co., Inc.
Kelly H. Scoffield, T. Dean Simmons, Houston, TX, for Exxon Co., U.S.A.
*619 James Michael Porter, Holland & Knight, James P. Ahrens, Law office of James F. Ahrens, Miami, FL, for Florida Power Corp.
Martin Lee Garcia, Karen E. Ross, Daniel J. Gibby, Hill, Ward & Henderson, P.A., Tampa, FL, for Fredco, Inc. dba Friendly Toyota.
Robert H. Mackenzie, Law Office of Robert H. Mackenzie, Wesley Chapel, FL, for Gaffin Environmental Services, Inc.
Walter C. Hall, Jr., Law office of Walter C. Hall, Jr., Clearwater, FL, for Golden Triangle Portable Toilet Co., Inc.
Enola T. Brown, Annis, Mitchell, Cockey, Edwards & Roehn, P.A., Tampa, FL, for Hillsborough County Bd. of Public Instruction.
Reynold L. Caleen, Jr., Oertel, Hoffman, Fernandez, Cole & Edenfield, P.A., Tallahassee, FL, for International Petroleum Corp. dba National Oil Service et al.
Jimbo's Pit Bar-B-Que of Tampa, Inc., pro se.
Latin Village Cafe, pro se.
Lee Kirk & Sons, pro se.
Kenneth F. Darrow, Law Office of Kenneth F. Darrow, Miami, FL, for Lum's Restaurant Corp.
William Barrett Taylor, IV, Macfarlane, Ausley, Ferguson & McMullen, Karen E. Ross, Tampa, FL, for Miller Septic Tank Co., Inc.
John W. Berry, Jr., Law Office of John W. Berry, New Port Richey, FL, for Need A Diver Marine Service, Inc.
Patricia Lamont, Law Office of Patricia Lamont, Tampa, FL, for Nick's Restaurant.
Robert B. Alpaugh, Law Office of Robert B. Alpaugh, Temple Terrace, FL, for Pasco Plumbing fka Septic Tank Service.
Peak Oil Co., pro se.
Pinellas Septic Service, pro se.
Redi-Strip of Central Florida, Inc., pro se.
William A. Gillen, Jr., Shackleford, Farrior, Stallings & Evans, P.A., Tampa, FL, for Redwing Carriers Inc.
Scott I. Steady, Taub & Williams, P.A., Tampa, FL, Gregory P. Holder, Russell S. Thomas, Williams, Reed, Weinstein, Schifino & Mangione, P.A., Tampa, FL, for Roto-Rooter Corp. aka Roto-Rooter Sewer Service.
Seabreeze Restaurant, pro se.
Craig Alan Minegar, Bush, Ross, Gardner, Warren & Rudy, P.A., Tampa, FL, for Southeast Oil and Development Corp.
Alice Ruth Huneycutt, Stearns, Weaver, Miller, Weissler, Alhadeff & Sitterson, P.A., Tampa, FL, Daniel E. Vineyard, Law Office of Daniel E. Vineyard, Houston, TX, for Warren Petroleum Co., a division of Chevron U.S.A., Inc.
Gary J. Takacs, U.S. Atty.'s Office, M.D. FL, Tampa, FL, Russell M. Young, U.S. Dept. of Justice, Environment & Natural Resources Div., Washington, DC, for U.S. et al.
Robert E. Hogfoss, Catherine D. Little, Hunton & Williams, Atlanta, GA, for All-waste Services fka Bryson Environmental Service, Inc.
Craig Alan Minegar, Bush, Ross, Gardner, Warren & Rudy, P.A., Tampa, FL, for Southeast Oil and Development Corp.
Joseph W. Clark, William A. Gillen, Jr., Shackleford, Farrior, Stallings & Evans, P.A., William Albert Gillen, Fowler, White, Gillen, Boggs, Villareal & Banker, P.A., Tampa, FL, Kathryn B. Fuller, Beveridge & Diamond, New York City, John S. Guttmann, Beveridge & Diamond, P.C., Washington, DC, for Redwing Carriers Inc.
Andrea E. Zelman, Icard, Merrell, Cullis, Timm, Furen & Ginsburg, P.A., Tampa, FL, William W. Merrill, III, Icard, Merrill, Cullis, Timm, Furen & Ginsburg, P.A., Sarasota, FL, A. Bruce White, Karaganis & White, Ltd., Chicago, IL, for Safety Kleen Corp.
Andrea E. Zelman, Icard, Merrell, Cullis, Timm, Furen & Ginsburg, P.A., Tampa, FL, William W. Merrill, III, Icard, Merrell, Cullis, Timm, Furen & Ginsburg, P.A., Sarasota, FL, Robert Charles Davis, Law Office of Robert C. Davis, Detroit, MI, for Stroh Brewery Co. fka Schlitz Brewing Co.
*620 ORDER ON MOTION FOR SUMMARY JUDGMENT
KOVACHEVICH, District Judge.
This action is before the Court on a motion for summary judgment filed by the defendant, Acme Sanitary Service, Inc., July 26, 1994, (Docket No. 577) and Plaintiff's response thereto, filed August 3, 1994 (Docket No. 579).
STANDARD OF REVIEW
This circuit clearly holds summary judgment is only entered when the moving party has sustained its burden of showing the absence of a genuine issue as to any material fact, when all the evidence is viewed in the light most favorable to the non-moving party. Sweat v. The Miller Brewing Co., 708 F.2d 655 (11th Cir.1983). All doubt as to the existence of a genuine issue of material fact must be resolved against the moving party and in favor of the non-moving party. Hayden v. First National Bank of Mt. Pleasant, 595 F.2d 994 (5th Cir.1979). Factual disputes preclude summary judgement.
In Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), the Supreme Court of the United States held:
In our view the plain language of Rule 56(c) mandated the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Id. at 322, 106 S.Ct. at 2552, 91 L.Ed.2d at 273.
The Court also said, "Rule 56(e) therefore requires the non-moving party to go beyond the pleading and by her own affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing there is a genuine issue for trial.'" Celotex Corp., at 324, 106 S.Ct. at 2553, 91 L.Ed.2d at 274. A dispute is genuine, and summary judgment inappropriate, if a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).
STATEMENT OF FACTS
This case is one involving the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. 9601-9657, ("CERCLA") in which Plaintiff, HILLSBOROUGH COUNTY, seeks to recover several million in costs they incurred and continue to incur in cleaning up the environmental contamination at a site known as the Sydney Mine Waste Disposal Site, operated by Plaintiff during the years 1974-81. Defendant, ACME SANITARY SERVICE, INC. ("ACME"), is among those potentially responsible parties Plaintiff alleges transported waste to the Site during its eight (8) year period of operation. ACME, in its Motions for Summary Judgement, now argues that it cannot be held liable for such actions.
ACME asserts ACME SANITARY SERVICE, INC. was incorporated on June 12, 1990, and declared inactive by the Secretary of the State of Florida on November 11, 1991. ACME, further asserts that the entity named on assorted documents as "Acme Septic Tank," "Acme Septic Tank Service," or "Acme Sanitary Service" was owned as a sole proprietorship by Raleigh Watkins, an individual who died on April 27, 1994. ACME argues that the fact it was not in existence or in business during any time set forth in the complaint precludes this Court from imposing liability upon the corporation. Rather, ACME points to the decedent owner of the sole proprietorship as the responsible party for purposes of CERCLA liability.
Plaintiff asserts that Rule 17(b) Fed.R.Civ. P., provides the basis for analyzing whether a dissolved corporation has the capacity to sue or be sued. Section 607.1405(2)(e), Fla.Stat. (1993), explicitly states "[d]issolution of a corporation does not [p]revent commencement of a proceeding by or against the corporation in its corporate name...."[1] Additionally, Plaintiff asserts that regardless of whether Florida law allows commencement of a proceeding against a dissolved corporation, *621 ACME's dissolved status does not preclude a cause of action under the broad liability of CERCLA. Plaintiff argues that the theory of successor liability allows this Court to honor the intent of CERCLA and impose liability on ACME for the hazardous dumping of the sole proprietor, Raleigh Watkins.
DISCUSSION
CERCLA was enacted by Congress in December 1980 to "provide for liability, compensation, clean-up, and emergency response for hazardous substances released into the environment and the cleanup of inactive hazardous waste disposal sites." Pub.L. No. 96-510, 94 Stat. 2767 (1980).[2] CERCLA's intent is to "[w]herever possible ... place[] the ultimate financial burden of toxic waste cleanup on those responsible for creating the harmful conditions." Allied Corp., et al. v. Acme Solvents Reclaiming, Inc., et al., 1990 WL 322940 (N.D.Ill.1990), (quoting Artesian Water Co. v. Government of New Castle County, 659 F.Supp. 1269, 1276 (D.Del. 1987)). Further, CERCLA's intent is to be both remedial and retroactive in nature. U.S. v. Northeastern Pharmaceutical & Chemical Co., 810 F.2d 726, 746 (8th Cir. 1986), cert. denied, 484 U.S. 848, 108 S.Ct. 146, 98 L.Ed.2d 102 (1987).
This Court is disinclined to agree with the parties' postulation of the issue before the Court. The parties have characterized this dispute as whether ACME is liable under CERCLA in spite of the fact ACME was not incorporated during the time period in which the hazardous dumping occurred. This Court, however, believes the relevant question is whether ACME is a "dead and buried," dissolved corporation or a merely "dead," dissolved corporation. See U.S. v. Sharon Steel Corp., 681 F.Supp. 1492 (D.Utah 1987).
"Person" is defined broadly in § 101 and includes "corporations." 42 U.S.C. 9601(21). However, the statute is silent on the liability of dissolved corporations. The issue of a dissolved corporation's liability under CERCLA was addressed by the District Court for the District of Utah in U.S. v. Sharon Steel Corp., 681 F.Supp. 1492 (D.Utah 1987).[3] In Sharon Steel, the corporation was, though dissolved, still in the process of winding up its affairs. Sharon Steel, supra at 1498. The court described that corporation as still in the funeral process and distinguished that corporation from a corporation who was "not only dead but also buried." Id. Thus, the court found the corporation liable under CERCLA. Sharon Steel, supra at 1500.
Hence, the terminology used by the Sharon Steel court provides the basis for the federal common law surrounding this particular CERCLA issue. In Chatham Steel Corp., et al. v. Brown, et al., 858 F.Supp. 1130 (N.D.Fla.1994), the court utilized the Sharon Steel language to determine "[t]he `dead and buried' rule properly defines when a dissolved corporation should be subject to suit under CERCLA." Chatham Steel Corp., at 1152.
In Traverse Bay Area Intermediate School District v. Hitco, Inc., 762 F.Supp. 1298 (W.D.Mich.1991), the court held plaintiff was entitled to "determine whether the corporation ha[d] been `buried'" and was not merely "dead." Hitco, Inc., at 1301. The Hitco court stated that if the corporation was determined to hold no assets, the corporation no longer exists and is not a "person" for CERCLA purposes. Id. at 1302. See also BASF Corp., et al. v. Central Transport, Inc., et al., 830 F.Supp. 1011 (E.D.Mich.1993) (where the court utilized to Hitco analysis to grant plaintiffs' opportunity to conduct discovery in order to determine whether the corporation still possessed assets). But see Allied Corp., et al., v. Acme Solvents Reclaiming, Inc., et al., 1990 WL 322940 (N.D.Ill.1990) (where the court held a corporation *622 is subject to suit under CERCLA without regard to its current status).
The court in Stychno v. Ohio Edison Co., 806 F.Supp. 663, 670 (N.D.Ohio 1992) held that "[w]hether a [sic] inactive corporation falls within the scope of the definition of `person' under CERCLA necessarily depends upon whether that corporation still holds assets." The Stychno court relied heavily on the holding of the court in U.S. v. Distler, 741 F.Supp. 643 (W.D.Ky.1990). The Distler court held there was "no precedent for imposing liability on a dissolved corporation ... after it ha[d] wound down and distributed its assets." Id. at 647.[4]
This Court agrees with the enumerated holdings which preclude CERCLA from resurrecting dead and buried "persons," even corporate "persons," and imposing liability upon them long after the funeral. However, in the instant case, whether the assets of ACME have been distributed and the corporation permanently laid to rest is not an uncontroverted question. Thus, there exists a genuine issue of material fact. The plaintiff is entitled to determine whether the defendant corporation is conclusively dead and buried. Accordingly, it is
ORDERED that Defendant's motion for summary judgment be denied.
Done and Ordered.
NOTES
[1] Since Florida law makes dissolved corporations amenable to suit, the issue of whether CERCLA preempts state law is irrelevant.
[2] Congress amended CERCLA in October of 1986. See Superfund Amendment and Reauthorization Act of 1986, Pub.L. No. 99-499, 100 Stat. 1613. ("SARA"). Unless otherwise noted, SARA does not change those portions of CERCLA quoted in this opinion.
[3] Although the issue of a dissolved corporation's liability under CERCLA was also addressed by the Ninth Circuit in Levin Metals v. Parr-Richmond Terminal Co., 817 F.2d 1448 (9th Cir. 1987), the primary issue of that case was preemption, not relevant to this discussion. See supra note 1.
[4] The corporation in Distler had wound down nine years previously. Distler, at 647.
| {
"pile_set_name": "FreeLaw"
} |
6 F.Supp.2d 1371 (1998)
AMERMED CORPORATION, a Georgia corporation, Plaintiff,
v.
DISETRONIC HOLDING AG, a Swiss corporation; Disetronic Medical Systems AG, A Swiss corporation; and Disetronic Medical Systems, Inc., a Minnesota corporation, Defendants.
No. CIV.A.1:1997-CV-2270-RWS.
United States District Court, N.D. Georgia, Atlanta Division.
July 21, 1998.
*1372 Daniel I. MacIntyre, IV, Samuel Tillman Brannan, Wilson, Strickland & Benson, Atlanta, GA, for Plaintiff.
William Henry Boice, William Franklin Long, III, Kilpatrick Stockton, Atlanta, GA, for Defendants.
OPINION and ORDER
STORY, District Judge.
This diversity breach of contract and business tort action is before the Court on Defendants' Motion [6-1] to Dismiss, Plaintiff's Motion [14-1] to Dismiss Counterclaims, and various motions [12-1, 19-1, 27-1] requesting leave to file lengthy or supplemental briefs.
I. Background
According to the allegations of the Complaint, this action arises out of a business relationship in which Plaintiff AmerMed Corporation ("AmerMed") contracted with Defendant Disetronic Medical Systems AG ("DMSAG") to act as a distributor in the United States of its medical infusion pump (the "pump"). DMSAG is a Swiss corporation and wholly-owned subsidiary of Defendant Disetronic Holding AG (DHAG), also a Swiss corporation, which also wholly owns Defendant Disetronic Medical Systems, Inc. ("DMSI"), a Minnesota corporation.
AmerMed contends that DMSI maintains offices and staff in the State of Georgia and that it acted as agent for DMSAG and DHAG in inducing AmerMed to enter into the Distribution Agreement dated April 22, 1996, and in other matters relative to performance under the Distribution Agreement. AmerMed further contends that in all matters relevant to this action the various defendants acted in concert and under common control in a common endeavor and as mutual agents and partners, as evidenced by the participation of employees of all three corporate entities in various aspects of the business relationship. AmerMed contends that several employees of the Swiss corporations, identified by name in the Complaint, traveled to Georgia in connection with the events described in the Complaint.
According to AmerMed, the pumps which DMSAG delivered did not meet the specifications or performance terms contained in the Distribution Agreement. Again according to AmerMed, it strove to resolve the disputes regarding the adequacy of the pump, but failed, resulting in its inability to market the pump in the United States and resulting in damages to AmerMed of approximately $9,000,000. Thus, AmerMed has asserted claims for breach of warranty and breach of contract. In addition, AmerMed has asserted a claim for anticipatory breach of contract based on a letter from DMSAG stating, among other things, "Disetronic hereby declares the distribution contract of April 22, 1996, including all agreements made in connection therewith and following thereupon ... to be nonbinding or declares withdrawal from these contracts." Finally, based on representations regarding the specifications and performance of the pump, made in connection with negotiations leading up to the execution of the Distribution Agreement and thereafter, AmerMed has asserted claims for fraudulent and negligent misrepresentations.
II. Discussion
The Defendants have moved [6-1] to dismiss for improper venue, pursuant to Fed. R.Civ.P. 12(b)(3), and under the doctrine of *1373 forum non conveniens.[1] They base their motion on a forum selection clause contained in the Distribution Agreement that reads as follows:
13.2 Forum: For the sole benefit of Disetronic the parties agree, that the courts of the canton of Berne, Switzerland, shall have jurisdiction for all disputes arising out between the parties and waive any claim to the contrary.
AmerMed contends that the forum selection clause is permissive, not mandatory, and that in any event the Defendants are barred from relying on it by their repudiation of the contract.
A. Venue
As jurisdiction in this action is based solely in diversity, the initial question is whether state or federal law governs resolution of the motion to dismiss for improper venue. See Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965); Erie R. R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).
Defendants contend that this Court should determine, first, whether the forum selection clause is exclusive or permissive based upon the contractual choice of Swiss law, which they contend Georgia would apply, and, second, whether the clause is enforcible under federal law, applying the criteria outlined in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15, 92 S.Ct. 1907, 1916, 32 L.Ed.2d 513 (1972). Without explicitly discussing Erie, or its progeny, AmerMed contends that the issue is one of "procedure" to be determined by reference to federal common law, but then relies upon Georgia law for the proposition that Defendants have waived or are estopped from relying on the forum selection clause.
The apparent confusion as to the applicable law is understandable. Federal courts are split as to whether state or federal law should govern enforcement of a forum selection clause when a federal court is sitting in diversity.[2] Scholars are similarly adrift.[3]
The primary federal venue statute, 28 U.S.C. § 1391 permits a diversity action to be brought in "a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred." 28 U.S.C. § 1391(a)(2). Certainly, within the meaning of those provisions of federal law permitting dismissal for "improper" venue, see Fed. R.Civ.P. 12(b)(3), or of a case laying venue in the "wrong" division or district, see 28 U.S.C. § 1406(a), venue in this Court is not statutorily defective. See Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 28 n. 8, 108 S.Ct. 2239, 2243 n. 8, 101 L.Ed.2d 22 (1988) (dicta).
*1374 In M/S Bremen v. Zapata Off-Shore Co., 407 U.S. at 15, 92 S.Ct. at 1916, however, the Supreme Court, sitting in admiralty, held that a mandatory forum selection clause reading, "Any dispute arising must be treated before the London Court of Justice," was prima facie valid and enforcible through a motion to dismiss absent a showing by the complaining party "that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching."
Thereafter, the Eleventh Circuit applied The Bremen in diversity actions, without considering whether the determination of applicable law in any way raised issues under Erie. See Citro Florida, Inc. v. Citrovale, S.A., 760 F.2d 1231 (11th Cir.1985); Keaty v. Freeport Indonesia, Inc., 503 F.2d 955 (5th Cir.1974).
In 1988, however, in a case involving a motion to enforce a domestic forum selection clause through transfer to another federal forum pursuant to 28 U.S.C. § 1404(a), the Supreme Court insisted on an Erie analysis of the issue. See Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988). In such an analysis, the first question is whether a federal statute controls the issue. 487 U.S. at 28-29, 108 S.Ct. at 2243. "If no federal statute or Rule covers the point in dispute, the district court then proceeds to evaluate whether application of federal judge-made law would disserve the so-called `twin aims of the Erie rule: discouragement of forum shopping and avoidance of inequitable administration of the laws.' If application of federal judge-made law would disserve these two policies, the district court should apply state law." 487 U.S. at 27 n. 6, 108 S.Ct. at 2243 n. 6 (quoting Hanna v. Plumer, 380 U.S. at 468, 85 S.Ct. at 1142).
Here, we are faced with the situation described in the footnote in Ricoh, in which no federal statute or Rule covers the point in dispute. Contrary to 28 U.S.C. § 1404(a), at issue in Ricoh, which outlines criteria pursuant to which a court must determine whether to transfer an action to another federal court, the provisions governing dismissal for "improper" or "wrong" venue are silent as to dismissal for any ground other than statutorily deficient venue. See 28 U.S.C. § 1406(a); Fed.R.Civ.P. 12(b)(3). Thus, it is necessary to evaluate the outcome under both the federal judge-made law The Bremen and its progeny and Georgia state law. As The Bremen has been applied in the Eleventh Circuit, the first step is to determine whether the clause is mandatory or merely permissive, a determination which is made without reference to the contractual choice of law clause. See, e.g., Creative Tile Marketing, Inc. v. SICIS International, S.r.L., 922 F.Supp. 1534, 1538 (S.D.Fla.1996). Accord Caldas & Sons, Inc. v. Willingham, 17 F.3d 123, 127-28 (5th Cir.1994). See also The Bremen, 407 U.S. at 20, 92 S.Ct. at 1918 (rejecting the argument that the clause at issue did not provide for an "exclusive" forum and characterizing the clause as "clearly mandatory and all-encompassing"). Where a forum selection clause is ambiguous regarding exclusivity, it will be construed more strongly against the party who drafted the clause. See Citro Florida, 760 F.2d at 1231-32 (the clause, "Place of jurisdiction is Sao Paulo/Brazil," was construed against the drafter as permissive, not mandatory); Keaty, 503 F.2d at 956-57 (the clause, "the parties submit to the jurisdiction of the courts of New York," was construed as permissive, not mandatory); Creative Tile (without reference to the contractually applicable law of Italy, the court construed the clause, "all disputes arising from or connected with this Agreement, except those referred to Article 3, sub 3, shall fall within the jurisdiction of the competent judge of 47023 Ronta Cesena, Italy," as permissive, not mandatory). If the forum selection clause is merely permissive, the action will not be dismissed; if the forum selection clause is mandatory, it will be enforced as required by The Bremen. See Citro Florida, 760 F.2d at 1231; Keaty, 503 F.2d at 956-57.
Similarly, Georgia has adopted the rule of The Bremen in cases where no Georgia law specifically governs venue and where more than one state and its citizens are involved. See Brinson v. Martin, 220 Ga.App. 638, 469 S.E.2d 537 (1996); Harry S. Peterson Co., Inc. v. National Union Fire Ins. Co., 209 Ga.App. 585, 434 S.E.2d 778 (1993). Again, such clauses are interpreted without reference *1375 to the contractual choice of law clause. Brinson, 220 Ga.App. at 638-39, 469 S.E.2d at 538. While Georgia courts apparently have not applied the same permissive/mandatory analysis as the Eleventh Circuit, the Georgia Court of Appeals has refused to enforce a forum selection clause that was so broad it failed to reflect that the parties had reached agreement on the applicable forum. See Central Ohio Graphics, Inc. v. Alco Capital Resource, Inc., 221 Ga.App. 434, 472 S.E.2d 2, cert. denied (1996). Thus, it does not appear that application of federal law under the circumstances of this case would lead to forum shopping or inequitable administration of law.
Here, the forum selection clause was put in final form by DMSAG, and the clause does not use language indicating exclusivity. Accordingly, this Court finds that the forum selection clause at issue in this litigation is permissive, permitting litigation in Switzerland but not requiring such, and that it therefore is not enforcible through the vehicle of a motion to dismiss for improper venue.
B. Forum non conveniens
The doctrine of forum non conveniens permits a United States court to decline to exercise its jurisdiction over a case when a foreign tribunal can more appropriately conduct the litigation. See Piper Aircraft Co. v. Reyno, 454 U.S. 235, 248-61, 102 S.Ct. 252, 262-68, 70 L.Ed.2d 419 (1981); Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1947). See also American Dredging Co. v. Miller, 510 U.S. 443, 448 n. 2, 114 S.Ct. 981, 986 n. 2, 127 L.Ed.2d 285 (1994) (federal doctrine of forum non conveniens has continuing application only where alternative forum is abroad).
The Supreme Court has identified the competing private and public interests to be considered in determining whether to dismiss an action on the ground of forum non conveniens.
If the combination and weight of factors requisite to given results are difficult to forecast or state, those to be considered are not difficult to name. An interest to be considered, and the one likely to be most pressed, is the private interest of the litigant. Important considerations are the relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witnesses; possibility of view of premises, if view would be appropriate to the action; and all other practical problems that make trial of a case easy, expeditious and inexpensive. There may also be questions as to the enforcibility of a judgment if one is obtained. The court will weigh relative advantages and obstacles to fair trial. It is often said that the plaintiff may not, by choice of an inconvenient forum, "vex," "harass," or "oppress" the defendant by inflicting upon him expense or trouble not necessary to his own right to pursue his remedy. But unless the balance is strongly in favor of the defendant, the plaintiff's choice of forum should rarely be disturbed.
Factors of public interest also have place in applying the doctrine. Administrative difficulties follow for courts when litigation is piled up in congested centers instead of being handled at its origin. Jury duty is a burden that ought not to be imposed upon the people of a community which has no relation to the litigation. In cases which touch the affairs of many persons, there is reason for holding the trial in their view and reach rather than in remote parts of the country where they can learn of it by report only. There is a local interest in having localized controversies decided at home. There is an appropriateness, too, in having the trial of a diversity case in a forum that is at home with the state law that must govern the case, rather than having a court in some other forum untangle problems in conflict of laws, and in law foreign to itself.
Gulf Oil, 330 U.S. at 508-09, 67 S.Ct. at 843.
AmerMed opposes the motion to dismiss for forum non conveniens on the grounds that the Swiss law would require it to pay in advance a bond for court costs in the amount of approximately $38,000, as well as a bond for Defendants' legal fees in the amount of approximately $255,000, because the bulk of relevant witnesses and physical evidence are located in Georgia, because the bulk of the documents are written in English, and because *1376 federal and Georgia law apply to this action based on DMSAG's repudiation of the agreement.
Certainly this Court is cognizant of the weight to be accorded AmerMed's choice of this forum and the cost attendant to any dismissal based on forum non conveniens. Most of the cost to litigate this international action, however, will exist regardless of the forum in which it is litigated. Even if the action is litigated in the United States, AmerMed will face the cost of experts on Swiss law and international discovery,[4] as is amply indicated by the influx of affidavits regarding Swiss law on the issues raised in the pending motion to dismiss. In any event, AmerMed contemplated that cost and inconvenience, and presumably bargained with that cost in mind, when it agreed to submit to the jurisdiction of Swiss courts. See, e.g., Stewart Org., Inc. v. Ricoh Corp., 810 F.2d 1066, 1075 (11th Cir.1987) (Tjoflat, J. concurring), aff'd on other grounds, 487 U.S. 22, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988) ("The law of contracts presumes that Ricoh has already compensated Stewart, through lowered costs or some other method, for any inconvenience that Stewart or its witnesses might suffer by trying the case in New York."). Moreover, Defendants have offered to waive the bond for attorneys' fees, reducing the bond requirement to $38,000, a cost AmerMed is likely to incur in any event in connection with parallel litigation already in process in Switzerland.
In addition, despite the extensive affidavits from experts on Swiss law, this Court is left with diametrically opposed information regarding how Swiss courts would interpret and enforce the forum selection and choice of law clauses as well as whether Swiss courts would enforce against the Swiss defendants any judgment that this Court might render on the merits of the claims asserted here. This inability of the parties to agree even on the governing law as to these issues, much less on how that law should be interpreted and applied, does not bode well for future litigation in this forum, in which the Court will be dependent upon the parties for information as to the applicable Swiss law.
At best, this Court is left with grave doubts as to the enforcibility in Switzerland of any judgment it might render. While AmerMed has stated to the Court in oral argument that it has little concern for that problem because it anticipates being able to execute against the American defendant DMSI, this Court is disinclined to engage in complex international litigation on the chance that a judgment in this action might be enforcible against an entity that is not a party to the Distribution Agreement. The resources of this Court ought not to be depleted as this case would require for what is likely to be an academic exercise.
Nevertheless, the Court is concerned that AmerMed not suffer unnecessary prejudice as a result of any change in forum. Therefore, this Court will grant the motion to dismiss for forum non conveniens subject to the conditions described below. See generally Piper Aircraft, 454 U.S. at 257 n. 25, 102 S.Ct. at 267 n. 25 ("In the future, where similar problems are presented, district courts might dismiss subject to the condition that defendant corporations agree to provide the records relevant to the plaintiff's claims."). See also Magnin v. Teledyne Continental Motors, 91 F.3d 1424, 1429-31 (11th Cir.1996) (affirming conditional dismissal).
III. Conclusion
For the foregoing reasons, it is hereby ORDERED that:
1. The parties' motions [12-1, 19-1, 27-1] to file supplemental or lengthy briefs are GRANTED:
2. Defendant's Motion [6-1] to Dismiss for forum non conveniens is GRANTED, subject to the following conditions, to which Defendants will be deemed to have agreed unless they file a timely motion for reconsideration of this Order:
a. Each Defendant agrees to submit to the jurisdiction of the Swiss courts and to accept service of process therefrom;
*1377 b. Each Defendant will, if so served, be bound to pay final judgments rendered against it by the Swiss courts relating to the claims raised in this action;
c. Each such defendant will not, in raising any statute of limitations or similar defense in the Swiss courts, include the period that this action was pending against it in this Court;
d. Each Defendant agrees to make available in the Swiss forum all relevant witnesses, depositions, and documents within its possession, custody, or control to the same extent they would be available in this forum;
e. All Defendants agree to waive the bond for attorneys' fees permitted under Swiss law; and
3. Plaintiff's Motion [14-1] to Dismiss Counterclaims is DENIED as MOOT.
The Clerk is directed to enter final judgment accordingly.
NOTES
[1] Defendants have withdrawn that portion of their motion to dismiss based on AmerMed's alleged failure to comply with an arbitration clause.
[2] See, e.g., Lambert v. Kysar, 983 F.2d 1110, 1116 (1st Cir. 1993) (calling the application of the Erie doctrine to domestic forum selection clause a "daunting question" and declining to decide the issue because all potentially applicable law would yield the same result); Spradlin v. Lear Siegler Mgmt. Serv, Co., Inc., 926 F.2d 865, 867-68 (9th Cir.1991) (applying federal common law to clause selecting Saudi Arabian forum); Jones v. Weibrecht, 901 F.2d 17, 18-19 (2d Cir.1990) (applying federal common law to clause selecting state-court forum); Instrumentation Assoc., Inc. v. Madsen Electronics (Canada) Ltd., 859 F.2d 4, 6-8 (3d Cir.1988) (declining to decide the issue with respect to clause selecting Canadian forum because all potentially applicable law, including Canadian, would yield the same result); Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 512-13 (9th Cir.1988) (holding that the issue is procedural and governed by federal law); Farmland Industries v. Frazier-Parrott Commodities, Inc., 806 F.2d 848, 851-52 (8th Cir.1986) (applying state law); General Engineering Corp. v. Martin Marietta Alumina, Inc., 783 F.2d 352, 356-57 (3d Cir.1986) (applying state law). See also Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 38-41, 108 S.Ct. 2239, 2248-49, 101 L.Ed.2d 22 (1988) (Scalia, J., dissenting) (Justice Scalia would apply state law to 28 U.S.C. § 1404(a) motion to transfer).
[3] See, e.g., George A. Davidson, Jurisdiction Over Non-U.S. Defendants, in Practicing Law Institute Litigation and Administrative Practice Course Handbook Series; Litigation International Commercial Litigation at 74-82 (1998); Young Lee, Note, Forum Selection Clauses: Problems of Enforcement in Diversity Cases and State Courts, 35 Colum. J. Transnational Law 663 (1997); Leandra Lederman, Note, Viva Zapata: Toward a Rational System of Forum-Selection Clause Enforcement in Diversity Cases, 66 N.Y.U. L.Rev. 422 (1991); Richard D. Freer, Erie's Midlife Crisis, 63 Tulane L.Rev. 1087 (1989); Robert A. deBy, Forum Selection Clauses: Substantive or Procedural for Erie Purposes, 89 Colum. L.Rev. 1068 (1989); Linda S. Mullenix, Another Choice of Forum, Another Choice of Law; Consensual Adjudicatory Procedure in Federal Court, 57 Fordham L.Rev. 291 (Dec.1988).
[4] Implicit in this finding is the conclusion that AmerMed has failed to persuade the Court that the Defendants' purported repudiation of the Distributorship Agreement would permit the Court to overlook the Swiss choice of law provision.
| {
"pile_set_name": "FreeLaw"
} |
244 Pa. Superior Ct. 452 (1976)
368 A.2d 808
METROPOLITAN FEDERAL SAVINGS AND LOAN ASSOCIATION OF EASTERN PENNSYLVANIA
v.
John P. BAILEY et al.
Appeal of FIDELITY AMERICA FINANCIAL CORPORATION.
Superior Court of Pennsylvania.
Argued September 20, 1976.
Decided December 15, 1976.
*454 Roderick D. Mathewson, Norristown, for appellant.
Anthony F. List, Media, for appellees.
Before WATKINS, President Judge, and JACOBS, HOFFMAN, CERCONE, PRICE, VAN der VOORT and SPAETH, JJ.
*455 HOFFMAN, Judge:
Appellant, Fidelity America Financial Corporation, and appellees, James S. and Ethel C. Faires, are lien creditors of John and Marian Bailey (hereinafter referred to as "Bailey"). Appellees filed exceptions to the proposed schedule for distribution of proceeds of a sheriff's sale of Bailey's house, on the basis that judgments held by appellant had been previously stricken. Believing that the two judgments were subject to challenge, the lower court stayed distribution pending the outcome of litigation in connection with the judgment liens held by appellant. Because we find that this appeal is interlocutory, we quash.
This case involves four separate actions by several parties against Bailey: a mortgage foreclosure by Metropolitan Federal Savings and Loan Association of Eastern Pennsylvania (hereinafter "Metropolitan"), appellant's action on a promissory note, appellant's suit in assumpsit, and appellees' action on a note. A discussion of the relevant procedural history and status of each action follows.
Metropolitan filed a complaint in mortgage foreclosure on December 6, 1974. Metropolitan entered judgment by default and issued a writ of execution on February 21, 1975. On March 27, 1975, the Delaware County Sheriff sold Bailey's house at 412 Ridge Lane, Springfield Township, for $50,000. On April 15, 1975, the Sheriff posted the following proposed schedule of distribution: transfer tax due the Commonwealth of Pennsylvania, $500.00; Sheriff's cost, $860.80; transfer tax due the Township and/or School District of Springfield, $500.00; real estate tax for the year 1974 (School), $826.25; real estate tax for the year 1975 (County and Township), $433.10; sewer rents (1975), $53.45; Metropolitan Federal Savings and Loan Association of Eastern Pennsylvania on the judgment entered February 21, 1975, $22,096.54; balance of fund to appellee on judgment note recorded *456 against Bailey on June 30, 1970. The instant case involves the apropriate distribution of the $24,729.86 balance. Appellees argued that the liens in favor of appellant were not valid and that their lien for $21,460.50 should be given priority. The conflicting claims of appellant and appellees arise from three separate actions.
On June 3, 1970, appellant recorded a judgment note against Bailey in the amount of $40,000. Appellant assessed damages on May 7, 1974, in the amount of $25,452.26. On May 14, 1975, Bailey filed a petition to strike judgment.[1] Appellant filed its answer on May 29, 1975. No further action on this petition is indicated in the docket entries.
Appellant's second lien derives from the following action. On February 24, 1972, appellant filed a complaint in assumpsit against Bailey, alleging a written contract with a Connecticut corporation, Stafford Technical Associates, *457 Inc., for which Bailey agreed to act as guarantor in the event of default. No answer was filed by Bailey; and, on November 19, 1973, appellant entered judgment by default. On December 4, 1973, Bailey filed a petition to stay the sheriff's sale and to open or strike judgment. On November 6, 1974, the Delaware County Court of Common Pleas entered the following order: "AND NOW, this 6th day of November, 1974, the Defendant's Petition to Strike Judgment,[2] Stay Sheriff's Sale and Vacate Writ of Execution be and the same is hereby granted. Defendants may plead over to Plaintiff's Complaint within twenty days of this Order." When Bailey failed to file an answer, appellant entered a second default judgment and caused a second writ of execution to be issued.[3] On February 13, 1975, Bailey filed a second petition to strike judgment, which the court granted on July 3, 1975.[4] Appellant did not appeal from either order "striking" judgment. On July 10, 1975, Bailey filed an answer containing new matter to appellant's complaint; appellant filed its reply to new matter on July 29, 1975. No further proceedings of record appear on the docket.
The third proceeding relevant to the instant appeal began when appellees recorded their judgment note against Bailey in the amount of $21,460.50 on February 5, 1973. On April 24, 1974, the appellees filed for a writ of execution, but they took no further action until April 17, 1975, when they filed exceptions to the distribution of the proceeds of the Sheriff's sale of Bailey's house. However, *458 appellees captioned their exceptions with the term and number of their own action against Bailey rather than with the heading of the mortgage foreclosure proceeding by Metropolitan.
The lower court determined that the exceptions filed by appellees should be considered even though docketed to the wrong proceeding. It therefore ordered the prothonotary to file the exceptions in the proper proceeding. Because the lower court determined that appellant's judgment liens "face[d] an uncertain future" in the light of pending proceedings in both cases, it ordered that the distribution of the proceeds of sheriff's sale be stayed and that the proceeds be segregated in an interest-bearing account pending the outcome of the litigation between appellant and Bailey on appellant's two judgment liens. The lower court also directed all parties to proceed "with all due haste in bringing their cases to final disposition." This appeal followed.
Appellant contends that the appellees are barred from raising challenges to its lien priorities because the rights of lien creditors are determined by their status on the record at the time of the sheriff's sale; that appellee lacked standing to attack collaterally the validity of appellant's liens and did not allege fraud or collusion; and that appellee did not comply with Rule 3136, Pa.R.C.P., which requires proper and timely filing of all exceptions to a sheriff's schedule. We do not reach the merits of appellant's contentions because we do not have jurisdiction to entertain this appeal.
The method and procedure by which competing lien creditors may litigate their claims to sale proceeds is established by Rule 3136, Pa.R.C.P. See Concord-Liberty Savings and Loan Assoc. v. NTC Properties, 454 Pa. 472, 312 A.2d 4 (1973); Sklaroff v. Weiner, 204 Pa.Super. 273, 203 A.2d 366 (1964); 4A Anderson Pa. Civil Practice, Enforcement of Judgments § 3136 (1962). Rule 3136(g) implicitly recognizes the right of appeal by *459 any person aggrieved by the court's final disposition of exceptions to the sheriff's schedule of distribution. It authorizes the entry of an order that the sheriff invest the proceeds of sale "pending final disposition of the exceptions or an appeal therefrom." See 4A Anderson Pa. Civil Practice, supra at § 3136.8. It is clear that an appeal will lie from a final order sustaining or dismissing exceptions to a sheriff's schedule of distribution. See e. g. Concord-Liberty Savings and Loan Assoc. v. NTC Properties, supra; Sklaroff v. Weiner, supra; Farmers National Bank v. Kern, 194 Pa.Super. 479, 168 A.2d 620 (1961). An appeal from an order staying distribution pending further proceedings, however, is interlocutory. Reed's Appeal, 71 Pa. 378 (1872).
Generally, an appeal may not be taken from an interlocutory order unless permitted by statute. Ventura v. Skylark Motel, Inc., 431 Pa. 459, 246 A.2d 353 (1968); Calvin v. Somat Corporation, 230 Pa.Super. 118, 326 A.2d 590 (1974), Appellate Court Jurisdiction Act, July 31, 1970, P.L. 673, No. 223, art. III, § 302; 17 P.S. § 211.302 (1976 Supp.). Because there is no statutory exception allowing the appeal of an order staying a decision on the exceptions to a schedule of distribution, this Court is without jurisdiction to entertain this appeal. We must, therefore, quash.
Appeal quashed.
NOTES
[1] The parties and the lower court have denominated Bailey's petition as a petition to strike when it is clear that it is a petition to open. A petition to open a default judgment entered in an assumpsit action will not be granted unless it has been promptly filed, satisfactorily explains the defendant's failure to plead within the required time limit and sets forth a meritorious defense. McEvilly v. Tucci, 239 Pa.Super. 474, 362 A.2d 259 (1976). A judgment does not lose its status by being opened; it is still a lien, and a levy previously made on an execution outstanding thereon also retains its lien priority and may not be discharged. Markofski v. Yanks, 297 Pa. 74, 146 A. 569 (1929). By contrast, a petition to strike a judgment will not be granted unless a fatal defect in the judgment appears on the face of the record. If the record is self-sustaining, the judgment will not be stricken. Malakoff v. Zambar, Inc., 446 Pa. 503, 288 A.2d 819 (1972); Fleck v. McHugh, 241 Pa.Super. 307, 361 A.2d 410 (filed June 28, 1976). A judgment which is stricken is a nullity and without legal effect; the party never had a valid judgment since the prothonotary had no power to enter it. Haverford Township School District v. Herzog, 314 Pa. 161, 164, 171 A. 455, 456 (1934); Fleck v. McHugh, supra.
In the instant case, Bailey never attacked the appellant's judgment for defects of record; rather, his petition to "strike" rested on allegations of excuse for failure to file an answer and of a meritorious defense. Thus, an order of the lower court, if granted, "striking" appellant's judgment would more properly be denominated an order opening judgment.
[2] See note 1, supra.
[3] Apparently, Bailey believed that he had filed his answer because local rules require that a party attach a copy of his pleading to a petition to strike or to open. Bailey complied with this rule but did not realize that this did not constitute filing his answer.
[4] The lower court opened judgment because it determined that appellant should be granted leave to file his answer properly. See also note 1, supra.
| {
"pile_set_name": "FreeLaw"
} |
838 F.2d 1205
Carroll (Timothy)v.Best Foods, CPC International, Inc., Best Foods Employees Assoc.
NO. 87-5472
United States Court of Appeals,Third Circuit.
JAN 26, 1988
Appeal From: D.N.J.,
Lechner, J.
1
AFFIRMED.
| {
"pile_set_name": "FreeLaw"
} |
Fourth Court of Appeals
San Antonio, Texas
March 4, 2020
No. 04-19-00677-CV
Graciela GARCIA and Jesus Garcia,
Appellants
v.
Roberto SALINAS, Jose Lozano, and State Farm Mutual Automobile Insurance Company,
Appellees
From the 229th Judicial District Court, Starr County, Texas
Trial Court No. DC-17-716
Honorable Baldemar Garza, Judge Presiding
ORDER
In accordance with this court’s opinion of this date, this appeal is dismissed for lack of
jurisdiction. Costs of the appeal are taxed against appellants Graciela Garcia and Jesus Garcia.
It is so ORDERED on March 4, 2020.
_____________________________
Rebeca C. Martinez, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 4th day of March, 2020.
_____________________________
Michael A. Cruz, Clerk of Court
| {
"pile_set_name": "FreeLaw"
} |
219 F.3d 930 (9th Cir. 2000)
REX K. DEGEORGE, Petitioner,v.UNITED STATES DISTRICT COURT FORTHE CENTRAL DISTRICT OF CALIFORNIA, Respondent, UNITED STATES OF AMERICA, Real Party in Interest.
No. 99-71446
Office of the Circuit Executive
U.S. Court of Appeals for the Ninth Circuit
Argued and Submitted March 6, 2000--Pasadena, CaliforniaFiled July 18, 2000
[Copyrighted Material Omitted][Copyrighted Material Omitted]
Richard Marmaro, McCambridge, Deixler & Marmaro, LLP, Los Angeles, California, for the petitioner.
David C. Marcus and Eileen M. Decker, Assistant United States Attorneys, Criminal Division, Los Angeles, California, for the real party in interest.
Appeal from the United States District Court for the Central District of California, Lourdes G. Baird, District Judge, Presiding; D.C. No. CR-99-38-LGB
Before: J. Clifford Wallace, Harry Pregerson, and Sidney R. Thomas, Circuit Judges.
WALLACE, Circuit Judge:
1
Rex K. DeGeorge petitions this court for a writ of mandamus commanding the United States District Court for the Central District of California to (1) vacate its order denying DeGeorge's motion to dismiss certain counts for which he has been indicted as time barred, and (2) enter an order dismissing those counts. We have jurisdiction pursuant to the All Writs Act, 28 U.S.C. S 1651. Because DeGeorge's case does not meet the strict prerequisites for extraordinary relief, we deny his petition.
2
* In January 1999, a federal grand jury returned a fourteen-count indictment charging DeGeorge with various federal crimes related to his participation in an alleged insurance fraud scheme. In late 1992 and early 1993, DeGeorge and a partner purportedly purchased a 76-foot motor yacht in Italy, artificially inflated its value through sham sales and purchases, insured it at the inflated value, and attempted to collect insurance proceeds after scuttling it on its maiden voyage from Italy. In April 1993, the insurer filed a declaratory relief action in the Central District Court of California seeking to rescind the policy and avoid payment. After extensive discovery, the district court alerted the United States Attorney about a possible perjury investigation. Eventually, the district court rescinded the policy and entered judgment for the insurer. Cigna Prop. & Cas. Ins. Co. v. Polaris Pictures Corp., 1997 WL 382108 (C.D. Cal. Feb. 20, 1997), aff'd, 159 F.3d 412 (9th Cir. 1998), cert. denied, 120 S. Ct. 53 (1999).
3
An Assistant United States Attorney investigated the perjury claim for a brief time before resigning. The matter was reassigned in April 1997 to another Assistant United States Attorney, who investigated the perjury claim as well as the alleged conduct surrounding the yacht's sinking. On August 18, 1997, as part of his investigation, the Assistant United States Attorney made a formal request to the Italian government for relevant documentary evidence and for assistance in obtaining interviews with eight witnesses in Italy who allegedly had first-hand information. A grand jury subpoena was issued on August 25, 1997, to one of the insurer's attorneys, ordering all documents from the civil case to be provided to the government by October 7, 1997. Most critical to DeGeorge's petition for a writ of mandamus, on August 26, 1997, the Assistant United States Attorney filed an ex parte, in camera application, pursuant to 18 U.S.C. S 3292, for an order suspending the running of the statute of limitations for any federal offenses related to DeGeorge's alleged conduct pending the government's foreign evidence request. A district court judge granted the section 3292 request on September 3, 1997, suspending the statute of limitations period as of August 18, 1997, the date of the foreign evidence request.
4
After DeGeorge was indicted, his case was assigned to a different district court judge than the one who made the section 3292 order. DeGeorge filed a motion to dismiss, arguing that the section 3292 order was invalid, that counts one through twelve of the indictment were time barred or otherwise defective, and that they should therefore be dismissed. The district court denied the motion. It is the district court's denial of DeGeorge's motion to dismiss that he challenges in this petition for a writ of mandamus.
II
5
A writ of mandamus is "an extraordinary or drastic remedy," Calderon v. United States Dist. Court , 163 F.3d 530, 534 (9th Cir. 1998) (en banc) (internal quotation omitted), used "only to confine an inferior court to a lawful exercise of its prescribed jurisdiction or to compel it to exercise its authority when it is its duty to do so." Will v. United States, 389 U.S. 90, 95 (1967) (internal quotation omitted). The petitioner has the burden to establish "that its right to issuance of the writ is clear and indisputable." Bankers Life & Cas. Co. v. Holland, 346 U.S. 379, 384 (1953) (internal quotation omitted). We typically examine five factors, first enumerated in Bauman v. United States District Court, 557 F.2d 650 (9th Cir. 1977), to evaluate whether a petitioner carries its burden:
6
(1) The party seeking the writ has no other adequate means, such as a direct appeal, to attain the relief he or she desires. (2) The petitioner will be damaged or prejudiced in a way not correctable on appeal . . . . (3) The district court's order is clearly erroneous as a matter of law. (4) The district court's order is an oft-repeated error, or manifests a persistent disregard of the federal rules. (5) The district court's order raises new and important problems, or issues of law of first impression.
7
Id. at 654-55 (citations omitted). The Bauman factors are "guidelines," id. at 655, to be "weighed together, as is appropriate, based on the facts of the individual case. " Calderon, 163 F.3d at 534. Usually, "the absence of factor three -clear error as a matter of law -will always defeat a petition for mandamus. . . . [F]actors one and two usually travel together, while factors four and five seldom do." Id. (citations omitted).
A.
8
We first examine whether DeGeorge has any other adequate means, such as direct appeal, to attain the relief he seeks, which is the dismissal of counts one through twelve of his indictment as time barred. We are guided in this issueby United States v. Rossman, 940 F.2d 535, 536 (9th Cir. 1991) (per curiam), which held that the denial of a motion to dismiss an indictment as time barred was not a final order appealable pursuant to 28 U.S.C. S 1291, or an interlocutory order appropriate for immediate review pursuant to Abney v. United States, 431 U.S. 651, 656-58 (1977). It is implicit in Rossman, and the decisions of the Third and Sixth Circuits upon which it relies, that the denial of a motion to dismiss an indictment as time barred may be reviewed on direct appeal after trial. See Rossman, 940 F.2d at 536, citing United States v. Davis, 873 F.2d 900, 908-09 (6th Cir. 1989), and United States v. Levine, 658 F.2d 113, 126 (3d Cir. 1981). Since direct appeal is available to DeGeorge for obtaining the relief he seeks, this factor weighs against granting mandamus.
9
DeGeorge, citing Credit Suisse v. United States District Court, 130 F.3d 1342, 1345-46 (9th Cir. 1997), argues that since the denial of his motion to dismiss is not immediately appealable, he is entitled to mandamus relief. In that case, we issued a writ of mandamus compelling the district court to vacate its denial of a motion to dismiss and also to dismiss the action. In so doing, we did state that "immediate review of the denial of the[ ] motion to dismiss" was not available. Id. at 1346. However, a careful reading of Credit Suisse confirms that we granted the writ only after consideration of other relevant Bauman factors that weighed heavily in favor of granting the writ -specifically, "severe prejudice that could not be remedied on direct appeal," id., and a clear error of law. Id. at 1346-48. A careful reading of Credit Suisse demonstrates that it does not stand for the proposition that the first Bauman factor is always satisfied when a motion to dismiss is denied because that order is not immediately appealable. The Credit Suisse analysis of the first Bauman test is the exception, not the rule, because direct appeal after trial, as opposed to immediate review, is the typically adequate means of review. Bauman, 557 F.2d at 654, 656. If writs of mandamus could be obtained merely because an order was not immediately appealable, as DeGeorge argues, mandamus would eviscerate the statutory scheme established by Congress to "strictly circumscrib[e] piecemeal appeal," Bankers Life, 346 U.S. at 383, citing 28 U.S.C. SS 1291, 1292, and mandamus would "become a substitute for the normal appellate process. " Calderon, 163 F.3d at 534, citing Kerr v. United States District Court, 426 U.S. 394, 402 (1976), and Bankers Life, 346 U.S. at 383. We therefore disagree with DeGeorge's argument, and hold that direct appeal is an adequate means for him to obtain the relief he seeks. Thus, the first Bauman factor weighs against DeGeorge.
B.
10
We next address whether DeGeorge will suffer damage or prejudice that cannot be corrected on direct appeal. This factor is closely related to the preceding one. Bauman, 557 F.2d at 654. A mandamus petitioner "must demonstrate some burden . . . other than the mere cost and delay that are the regrettable, yet normal, features of our imperfect legal system." Calderon, 163 F.3d at 535. Prejudicial harm serious enough to require mandamus relief includes situations in which one's "claim will obviously be moot by the time an appeal is possible," or in which one "will not have the ability to appeal." Id.
11
DeGeorge's prejudice argument involves his detention pending trial, without bail, because the district court found him to be "a substantial flight risk." DeGeorge argues, without citing any supporting legal authority, that the district court's denial of his motion to dismiss prejudices him because (1) his detention aggravates health problems and inhibits his relationship with his wife and newborn child, and (2) he will incur substantial legal expenses and delay from trial and appeal.
12
This is not the type of prejudice that is relevant in determining mandamus relief. Being forced to stand trial despite the running of the statute of limitations on certain charges is not inherently prejudicial: " `The limitations statute . . . creates a safeguard against unfair convictions arising from delinquent prosecutions but does not entail a right to be free from trial . . . .' " Rossman, 940 F.2d at 536 (emphasis added), quoting Levine, 658 F.2d at 126. Further, "unnecessary cost and delay" resulting from "an erroneous ruling of the district court," Calderon, 163 F.3d at 534, are not prejudice correctable through use of the writ of mandamus. Id. at 534-35 (citations omitted); see also Bankers Life, 346 U.S. at 383. While we are sympathetic to the hardships that DeGeorge's detention pending trial poses to his personal and family life, these hardships are not the type that we weigh in determining whether mandamus relief should be granted. Cf. Calderon, 163 F.3d at 535 (describing prejudicial situations as ones actually limiting petitioner's ability to bring direct appeal later). Thus, the second Bauman factor weighs against DeGeorge.
C.
13
We next consider whether the district court's denial of DeGeorge's motion to dismiss was clearly erroneous. The absence of clear error is usually fatal to a petition for writ of mandamus. Id. at 534. In a case like this one involving statutory interpretation, the clearly erroneous standard is met only if we have a definite and firm conviction that the district court's interpretation of the statute was incorrect. See In re Cement Antitrust Litig., 688 F.2d 1297, 1306 (9th Cir. 1982). If, on the other hand, the question is a close one, and we are "not firmly convinced, either way, as to what the correct result should be," we cannot hold the district court's interpretation to be clearly erroneous, and thus we cannot issue the writ, even though the district court's interpretation might be overruled later on direct appeal. See id., citing Bauman, 557 F.2d at 660.
14
The district court denied DeGeorge's motion to dismiss, holding that his charges were not time barred because the previous order suspending the statute of limitations on his charges complied with 18 U.S.C. S 3292. It is undisputed that, but for the section 3292 suspension order, counts one through twelve of DeGeorge's indictment would be time barred. There is a five year limit on the charges, 18 U.S.C. S 3282; the factual events surrounding those charges occurred in late 1992 and early 1993; and the indictment was returned in January 1999. DeGeorge challenges the district court's interpretation of section 3292, arguing that the statute: (1) disallows ex parte, in camera applications; (2) requires that the foreign evidence sought be documentary, unobtainable in the United States, and essential to bringing charges against the target of the investigation; and (3) mandates that a grand jury actually be impaneled and hearing evidence on the target's offenses before the statute of limitations is suspended.
15
Before analyzing each of these arguments, we first review the basic principles of statutory construction:
16
The purpose of statutory construction is to discern the intent of Congress in enacting a particular statute. The first step in ascertaining congressional intent is to look to the plain language of the statute. To determine the plain meaning of a particular statutory provision, and thus congressional intent, the court looks to the entire statutory scheme. If the statute uses a term which it does not define, the court gives that term its ordinary meaning.
17
The plain meaning of the statute controls, and courts will look no further, unless its application leads to unreasonable or impracticable results. If the statute is ambiguous -and only then -courts may look to its legislative history for evidence of congressional intent.
18
United States v. Daas, 198 F.3d 1167, 1174 (9th Cir. 1999) (citations omitted). We thus start with the language of the statute itself.
Section 3292 states:
19
Upon application of the United States, filed before return of an indictment, indicating that evidence of an offense is in a foreign country, the district court before which a grand jury is impaneled to investigate the offense shall suspend the running of the statute of limitations for the offense if the court finds by a preponderance of the evidence that an official request has been made for such evidence and that it reasonably appears, or reasonably appeared at the time the request was made, that such evidence is, or was, in such foreign country.
20
18 U.S.C. S 3292(a)(1).
1.
21
DeGeorge first argues that the government's section 3292 application was invalid because it was ex parte and in camera. However, there is no basis in the statute for such an argument. Section 3292(a)(1) refers to the government making an "application," not a "noticed application." 18 U.S.C. S 3292(a)(1). Nowhere in the section does it state that the party whose statute of limitation is being suspended is entitled to notice or a hearing.
22
DeGeorge argues that because section 3292(a)(1) refers to the court making certain findings "by a preponderance of the evidence," he was entitled to appear at a section 3292 hearing and present evidence. However, to follow that interpretation would be to ignore the traditionally non-adversarial and secret nature of grand jury investigations. See, e.g., United States v. Calandra, 414 U.S. 338, 343-44 (1974). Rather, we read the phrase "if the court finds by a preponderance of the evidence" in section 3292(a)(1) to mean that the government has some burden to establish, as opposed to being able merely to assert without support, that the foreign evidence it seeks meets the section's requirements.
23
DeGeorge cites one district court opinion denying a section 3292 application because it was ex parte. In re Grand Jury Investigation, 3 F. Supp. 2d 82 (D. Mass. 1998). However, this opinion is not precedential and, as the district court stated, another district court has implicitly allowed an ex parte application. Id. at 83, citing United States v. Neill, 940 F. Supp. 332, 335 (D.D.C. 1996), vacated on other grounds , 952 F. Supp. 831, 831 (D.D.C. 1996). Finally, DeGeorge cites United States v. Ordonez, 722 F.2d 530, 540 (9th Cir. 1983), and In re Intermagnetics America, Inc., 101 B.R. 191, 192-93 (C.D. Cal. 1989), which discuss the hazards of ex parte and in camera proceedings. However, neither of these cases is on point as they do not involve grand jury proceedings which, as Calandra makes clear, 414 U.S. at 343-44, are unique proceedings in the criminal justice system. Thus, there is no clear error in this aspect of the district court's order.
2.
24
DeGeorge next argues that the word "evidence" in section 3292(a)(1) means admissible, documentary evidence that is unobtainable in the United States and that is essential to bringing charges against the target of the investigation. He argues that the government improperly used the section 3292 application as a dilatory tactic because much of the evidence it sought was obtainable in the United States from the discovery taken in the civil declaratory judgment case. However, DeGeorge's interpretation of "evidence" in section 3292(a)(1) is entirely without textual support in the statute or in the reality of grand jury investigations.
25
Section 3292(a)(1) does not define "evidence"; thus, we interpret it according to "its ordinary meaning. " Daas, 198 F.3d at 1174. The ordinary definition of evidence is broad: "Something (including testimony, documents and tangible objects) that tendsto prove or disprove the existence of an alleged fact." Black's Law Dictionary 576 (7th ed. 1999). "Evidence" in the context of a grand jury investigation is especially broad, encompassing many types of evidence inadmissible at trial:
26
The grand jury may compel the production of evidence or the testimony of witnesses as it considers appropriate, and its operation generally is unrestrained by the technical procedural and evidentiary rules governing the conduct of criminal trials. It is a grand inquest, a body with powers of investigation and inquisition, the scope of whose inquiries is not to be limited narrowly by questions of propriety or forecasts of the probable result of the investigation, or by doubts whether any particular individual will be found properly subject to an accusation of crime.
27
Calandra, 414 U.S. at 343 (internal quotation omitted). Congress easily could have limited the type of evidence the government could seek pursuant to section 3292 in the manner DeGeorge suggests above, but it did not. The only limits Congress imposed on the type of evidence sought pursuant to a section 3292 application were that the evidence be "of an offense" and that it "reasonably appear[ ] . . . that such evidence is . . . in [a] foreign country." 18 U.S.C. S 3292(a)(1).
28
DeGeorge also argues for limitations on section 3292 applications. DeGeorge argues that "evidence" means documentary evidence, citing legislative history that he argues shows Congress's intent to limiting section 3292 applications to situations in which the government is seeking foreign business records. However, because Congress used the unlimited word "evidence" in section 3292(a)(1), not "foreign records," this aspect of the statute is plain, and we disregard DeGeorge's legislative history argument. Ratzlaf v. United States, 510 U.S. 135, 147-48 (1994) ("[W]e do not resort to legislative history to cloud a statutory text that is clear."); Daas, 198 F.3d at 1174 (same). DeGeorge also argues that, unlike this case, every other decided section 3292 case involves requests for documentary evidence alone; however, that is incorrect. See United States v. Meador, 138 F.3d 986, 989 (5th Cir. 1998) (indicating government sought interviews in addition to documents). In any event, it is clear from the record that the government's section 3292 application indicated that it sought documentary evidence, as well as testimonial evidence, in its request to Italian authorities.
29
DeGeorge next argues that "evidence" in section 3292(a)(1) means evidence that would be admissible at trial. He cites United States v. Bischel, 61 F.3d 1429, 1433 (9th Cir. 1995), contending that our statement " `Evidence of an offense' is essentially worthless unless admissible " is the holding of the case. That is not the holding in Bischel; that case addressed the interpretation of the phrase "final action" in section 3292. Id. at 1434 ("We therefore conclude that `final action' for purposes of S 3292 means. . . ."). The statement upon which DeGeorge relies is thus not a holding but dicta and does not necessarily apply in other contexts. The district court was not clearly erroneous in rejecting the theory that section 3292 may only be used when the government seeks foreign evidence that is admissible at trial.
30
DeGeorge asserts that any evidence the government seeks must be essential to bringing charges against the target of the government's investigation. The only support he offers for this interpretation is legislative history, which we disregard because, as we stated earlier, of the plain language of the statute. The statute clearly states that the government need only establish that "evidence of an offense," not evidence essential to bringing charges on an offense, is "in [a] foreign country." 18 U.S.C. S 3292(a)(1). DeGeorge's proposed interpretation of the statute would require district courts to make a determination of the value of the foreign evidence the government seeks -to second-guess the government'sinvestigation -which the statute simply does not contemplate.
31
Finally, DeGeorge argues that the foreign evidence the government seeks to qualify for a section 3292 suspension must be unavailable in the United States. He argues that all the evidence the government used in its eventual grand jury proceeding against him was available in the discovery records from the civil trial, filed in the same building in which the United States Attorney's office is located, making the section 3292 suspension request an abusive stalling tactic to allow the government more time to investigate DeGeorge's alleged crimes. The record indicates, however, that the government did seek evidence that was unavailable in the United States. For example, while transcripts of the depositions of two persons the government sought to question in Italy were available in the United States as part of the record in the civil suit, there were six other individuals the government sought to question who had not been previously deposed.
32
The district court's interpretation of "evidence" for purposes of section 3292(a)(1) was not clearly erroneous.
3.
33
DeGeorge finally argues that section 3292(a)(1) requires that a specific grand jury be investigating the defendant's underlying offenses before the district court may suspend one's statute of limitations. It is factually undisputed that the Assistant United States Attorney investigating DeGeorge's alleged offenses had not presented evidence regarding those offenses before one of the several grand juries impaneled at the time in the Central District of California before making the section 3292 application, but that one day before making the section 3292 application, he served a grand jury subpoena on one of the attorneys for the insurer in the civil trial for documentary evidence related to that trial.
34
In support of his argument, DeGeorge points to the following language in section 3292(a)(1): "Upon application of the United States . . . , the district court before which a grand jury is impaneled to investigate the offense shall suspend the running of the statute of limitations for the offense .. . ." 18 U.S.C. S 3292(a)(1) (emphasis added). The district court rejected DeGeorge's argument, stating that there is nothing "in the statute or the legislative history, for that matter, that requires that a grand jury be impaneled and investigating the offense at the time that a [section] 3292 request is made." The district court stated that it was sufficient that grand juries were impaneled in the Central District of California at the time, and that a grand jury subpoena had been issued before the section 3292 request was made.
35
No case has been cited to us, nor have we found one, deciding this issue. It appears that this is an issue of first impression for the federal courts. There is scant case law interpreting section 3292, and the opinions that exist interpret other aspects of that section. See, e.g., Meador, 138 F.3d 992 (interpreting "final action"); Bischel, 61 F.3d at 1434 (same); United States v. Miller, 830 F.2d 1073, 1076 (9th Cir. 1987) (holding section 3292 applies when suspension request made after government already obtained foreign evidence). One case, United States v. Neill, 952 F. Supp. 831, 833 (D.D.C. 1996), vacating 940 F. Supp. 332 (D.D.C. 1996), states: "The government can only request that statutes of limitation be tolled for offenses under investigation by the grand jury . . . ." However, it is clear that this statement was neither Neill's central holding nor essential to its disposition, and is thus dicta.
36
The use of the phrase "the district court before which a grand jury is impaneled to investigate the offense " in section 3292(a)(1) is ambiguous. A statute is ambiguous if it "gives rise to more than one reasonable interpretation. " A-Z Int'l v. Phillips, 179 F.3d 1187, 1192 (9th Cir.1999). The phrase could be read merely as a venue-type provision, indicating Congress's intent was only to limit which court could issue the order suspending the statute of limitations. This is the district court's interpretation of the statute, and it is entirely plausible. On the other hand, section 3292(a)(1) might be held to require implicitly that before an application is brought to suspend the statute of limitations for the offense, a grand jury already be impaneled to investigate an offense. This is also a reasonable interpretation, because the phrase "a grand jury is impaneled to investigate the offense" is phrased in the active and present voice, suggesting an implicit requirement.
37
This ambiguous phrase is not clarified by looking "to the entire statutory scheme" surrounding statutes of limitations and grand juries. Daas, 198 F.3d at 1174. The United States Code sections concerning statutes of limitations, 18 U.S.C. SS 3281-95, and grand juries, 18 U.S.C. SS 3321-22; Fed. R. Crim. P. 6, do not contain language similar to the phrase "the district court before which a grand jury is impaneled to investigate the offense" in section 3292(a)(1).
38
In light of this ambiguity, we turn to the legislative history. Daas, 198 F.3d at 1174. Only House Report No. 98907 discusses section 3292(a)(1). The report states in part:
39
Subsection (a)(1) of new section 3292 authorizes a Federal court, upon application of a Federal prosecutor that is made before the return of an indictment and that indicates that evidence of an offense is located in a foreign country, to suspend the running of the applicable statute of limitation. If the court finds by a preponderance of the evidence that (1) an official request has been made for the evidence and (2) it appears (or reasonably appeared at the time the official request was made) that the evidence is (or was) in that country, the court must order such suspension.
40
H. Rep. No. 98-907, at 7 (1984), reprinted in 1984 U.S.C.C.A.N. 3578, 3584. At the very least, this scant legislative history does not contradict the district court's interpretation.
41
The district court faced a difficult statutory interpretation question. Because this was a question of first impression regarding an ambiguous statute, and because the limited legislative history did not compel an interpretation different than the district court's, we cannot hold that the district court clearly erred. The third Bauman factor therefore weighs against DeGeorge.
D.
42
We finally consider the last Bauman factors, which are usually alternative -if one is present, the other probably will not be. Calderon, 163 F.3d at 534. DeGeorge only argues that his case raises new and important problems or issues of law of first impression; he does not argue that the court's order perpetuates an oft-repeated error or manifests a persistent disregard of the federal rules.
43
We have already stated that DeGeorge's petition raises issues of first impression. They do not, however, appear to be particularly important or pressing to the courts as a whole, because no court in the fifteen years since section 3292(a)(1) became effective has been forced to address them. Even if they were important issues, we would not issue a writ of mandamus in this case because the district court's decision was not clearly erroneous. See id. (stating absence of clear error usually fatal to petition for writ of mandamus). Having failed to show that he has a "clear and indisputable " right to the writ, DeGeorge's petition fails. Bankers Life , 346 U.S. at 384.
III
44
DeGeorge also petitions, on a separate ground, for a writ of mandamus concerning the district court's denial of his motion to dismiss count three of the indictment,alleging mail fraud in violation of 18 U.S.C. S 1341. DeGeorge argues that the district court should have granted his motion to dismiss because the document the indictment avers he mailed was sent after the alleged insurance scheme was complete.
45
Even without examining whether the district court's decision was clearly erroneous as a matter of law, it is clear that the other Bauman factors weigh heavily against DeGeorge: he can raise this issue on direct appeal, he is not prejudiced by having to defend himself on count three, and the district court's decision does not involve an oft repeated error or an important issue of first impression.
46
Because DeGeorge has not carried his burden to establish "that [his] right to issuance of the writ is clear and indisputable," id., we deny it.
47
PETITION DENIED.
| {
"pile_set_name": "FreeLaw"
} |
362 S.W.2d 49 (1962)
James W. BILLINGS
v.
A. A. DUGGER.
Court of Appeals of Tennessee, Middle Section.
March 2, 1962.
Certiorari Denied November 9, 1962.
*50 James H. Bateman, R. B. Parker, Jr., Nashville, for plaintiff in error.
Elmer D. Davies, Jr., Nashville, for defendant in error.
Certiorari Denied by Supreme Court November 9, 1962.
SHRIVER, Judge.
I
James W. Billings sued A.A. Dugger for $50,000 damages for personal injuries sustained when he, the plaintiff, stepped upon a platform, or porch, which collapsed causing him to fall approximately 8 feet into the basement of a house which was being constructed by the defendant.
Plaintiff's declaration charges that the defendant was guilty of common law negligence in maintaining this dangerous condition and in failing to provide warnings or barricades to prevent persons from using said porch floor.
The plea of the defendant was that he was not guilty of negligence and that, at the time in question, he was operating under the provisions of the Tennessee Workmen's Compensation Act and that plaintiff was an employee of a sub-contractor, hence, plaintiff's rights, if any, were governed exclusively by the terms of said Workmen's Compensation Act.
The case was tried before the Honorable Byrd Douglas, Judge of the Second Circuit Court, of Davidson County, Tennessee and a jury, in August 1961 and resulted in the Court's sustaining a motion for a directed verdict in favor of the defendant. A motion for a new trial was seasonably filed and overruled and an appeal granted to this Court and assignments filed.
II
As counsel for the appellant state in their brief, the sole question presented by this appeal is whether or not under the facts the defendant is immune, as a matter of law, to action at common law for negligence because of Section 15, of the Workmen's Compensation Act, T.C.A. § 50-915. If defendant is a principal contractor within the meaning of this section then he is immune, otherwise he is not.
It is the contention of plaintiff that the record does not support a finding that he is such contractor as a matter of law.
Counsel for defendant states the question this way: "The determinative question in this case is whether the Workmen's Compensation Act covers the relationship between the plaintiff and the defendant in this case, thus precluding an action at common law."
III
The Facts
Counsel for appellant summarize the testimony of plaintiff and several witnesses substantially as follows:
The plaintiff testified that on July 9, 1959, he was injured on defendant's property, specifically Lot No. 16 in Orchard Hills Subdivision, and that he was on that date employed by Warren Brothers Company, a firm of furnishers of glass and woodwork to builders; that he and his supervisor, Mr. Grady Osborne, had gone upon defendant's property to deliver and install a mirror in defendant's house; that the steps in the *51 front stoop were unfinished but that forms had been erected for the pouring of concrete; that there were no warnings or barricades to indicate that the porch was in an unsafe condition but that the platform on the top of the porch appeared to be solid and substantial; that Mr. Osborne walked across the platform and entered the house; and that when the plaintiff stepped upon the platform it collapsed and he fell approximately eight (8) feet to the basement floor, then and there sustaining the injuries complained of.
Upon cross-examination, the plaintiff testified that he had previously delivered mirrors, sash, and other materials to several houses, including the house where he was injured, all of which were being constructed by the defendant in the same subdivision. He further was allowed to testify over the objections of counsel, that Warren Brothers Company was covered by the Workmen's Compensation Act, and that he had drawn benefits under the employer's coverage for the injuries complained of.
Mr. Grady Osborne testified that he was the plaintiff's supervisor, that he had accompanied plaintiff to the house for the purpose of installing the mirror and generally corroborated plaintiff's testimony.
On cross-examination, Mr. Osborne testified that he had delivered a good many items to the defendant in the houses in this particular subdivision, including doors, window frames, inside woodwork, and other materials. Over plaintiff's objection, he was allowed to state that he knew Mr. Dugger the defendant, to be a general contractor.
Howard D. Farmer, Jr., testified that he had purchased from the defendant, A.A. Dugger, the house and lot described as Lot No. 16 in the Orchard Hills Subdivision on September 8, 1959; that he first met Mr. Dugger to arrange the purchase of the house four or five days prior to September 8, 1959; and that he had no contract of any kind with the defendant at the time the house was being built.
On cross-examination, Loyd Hunter stated that he had been defendant's foreman approximately three years prior to the date of the accident; that the defendant had been in the business of building homes for sale; and that he had participated in building about fourteen (14) houses in Orchard Hills Subdivision.
He further testified that Warren Brothers Company were furnishing all the window frames, door frames, etc., for the houses in Orchard Hills Subdivision; that in building houses for sale the defendant would make contracts with such workmen as concrete finishers, electricians, painters, etc., and that those individuals would have their own employees do the work.
James Linebaugh testified that he was an attorney employed by the American Insurance Company, which company carried the Workmen's Compensation insurance for the Warren Brothers Company, and that the company had paid certain benefits to and on behalf of the plaintiff on account of the accident herein complained of. He stated that the American Insurance Company expected to be reimbursed for these payments in the event of a recovery by the plaintiff.
Defendant, A.A. Dugger, testified that his occupation was that of "Builder" which occupation he had followed for about eight years on his own behalf and that prior to that time he was a carpenter. He stated that his plan of operation was to build and sell houses to purchasers using F.H.A. and G.I. loans. It was his practice to let out by contract the concrete work, block work, brick work, plumbing, roofing, etc., but he did the wood work himself with the aid of men he hired.
He testified that he was qualified and carried insurance under the Workmen's Compensation Act of Tennessee which fact was corroborated by the testimony of Mrs. Mildred Johnson, Assistant Director of the Workmen's Compensation Division of the State.
*52 He testified that the house where the injury occurred was under construction at the time of the accident. This house was in the Orchard Hills Subdivision located near Bordeaux in Davidson County and that the subdivision was made and developed on land which the defendant Dugger had bought, and that he built some twenty-one houses for sale in this subdivision, including the house on lot 16, which is the one in question here. He stated that he and his employees were doing the carpenter work on this house and that other parts of the work were let out to subcontractors, which included the construction of the porch where the accident happened.
He testified that he bought materials from Warren Brothers for the Orchard Hills houses including windows, doors, trim, molding, and mirrors. The plaintiff was delivering a mirror for installation in the house on lot No. 16 as an employee of Warren Brothers when the accident happened.
The lot on which the house was being built was in the name of A.A. Dugger and his wife as tenants by the entireties, but the house was being built for sale and was sold shortly after it was completed. In the course of his business it was his practice to build houses and sell them at any stage of construction. The house on Lot No. 15, next door to the house in question, was being built by defendant under a contract with the purchaser at the time plaintiff was injured.
IV
Under these facts, what is the applicable rule?
In Maxwell v. Beck, 169 Tenn. 315, 87 S.W. (2d) 564, our Supreme Court held that the Workmen's Compensation Act must be liberally construed to accomplish the ends intended, and words used therein cannot be given a restricted or literal meaning. It was said by the Court that the Workmen's Compensation Act is remedial, intended to burden industry with the responsibility of industrial accidents by requiring compensation to injured employees, and is to be applied fairly and broadly to accomplish the ends intended.
In referring to Section 15 of the Act, which is under consideration in the case at bar, the Court said;
"The clear intent and purpose of the Legislature in the enactment of the above section was to insure, as far as possible, to all workmen, so engaged, payment according to the schedule of benefits provided elsewhere in the act, when injured in the course of their employment."
In McVeigh et al. v. Brewer, 182 Tenn. 683, 189 S.W.2d 812, it was earnestly urged that a furnisher of materials was not a contractor within the meaning of the statute. However, the Court held to the contrary, saying that the driver of one of the trucks of a furnisher of materials along with the corporate owner of the trucks were subcontractors within the provision of the Workmen's Compensation Act which provided that principal or intermediate contractors or subcontractors should be liable for compensation of his subcontractor's injured employees to the same extent as immediate employers.
In Brady et ux. v. Reed, 186 Tenn. 556, 212 S.W.2d 378, the Court held that employers were in the "building business" for the purpose of applying the Compensation Act though the house in connection with which a carpenter was injured, and which was the first one of a number constructed by the defendant, was being built for use by the employer as his own home.
The Court further said (pages 560-561, 212 S.W.2d page 380) that it was not material that one house, the first one constructed, was to be the home of the employers (man and wife) and that the others were to be sold. The defendants contended that all the evidence as to the business they carried on subsequent to the construction of the house on McIntyre Avenue was inadmissible, and *53 that it was error to consider it. But the Court stated that it was competent as showing the nature and general course of the business of the employers. And the Court pointed out further that, while it was the original intention of the employers to build a home, nevertheless, in acquiring material for that purpose, they were compelled to purchase certain old houses and, having a surplus of material, they, thereupon, decided to erect other houses for sale, and, "They thus were engaged in contracting and building houses." Clendening v. London Assurance Company, 206 Tenn. 601, 336 S.W.2d 535, 337 S.W.2d 603, and (on petition to rehear) 206 Tenn. 613, 337 S.W.2d 603, is a case dealing with a similar question.
In opinions written by Mr. Justice Sam Felts, the Court held, among other things, that, under the Statute providing that a principal contractor shall be liable for compensation to any employee injured while in the employ of any of his subcontractors engaged upon the subject matter of the contract to the same extent as the immediate employer, the principal contractor is liable for compensation for an injury occuring to an employee of his subcontractor even though the subcontractor is an independent contractor.
The Court further held that, although the builder of the house where the accident occurred owned the lot on which the house was being built, where he was building a number of houses for others, including the one in which the accident occurred, and he was in control of the project when the injury occurred, that the builder was the principal contractor within the meaning of the statute and the injured bricklayer was entitled to look to him or his insurer for compensation.
In the course of the opinion the Court stated;
"It is insisted for defendant, however, and the Trial Judge seems to have held, that Trammel, by taking the title to this lot in the name of himself and wife became the owner and was building the house as `owner,' and not as `principal or intermediate contractor or subcontractor,' within section 15; and that, therefore, neither he nor his insurer was liable under the Workmen's Compensation Act.
* * * * * *
"To construe this section so as to exempt a contractor in such circumstances would enable principal contractors to evade the Act and defeat its purpose, simply by taking title in themselves pending performance of their contracts."
The Court also quoted with approval from Brady v. Reed, supra, and went on to say that it is the duty of the Court to construe the Workmen's Compensation Act liberally in favor of those entitled to its benefits and that merely by taking title to a lot on which a house was being built, during the performance of the construction work, the building contractor may not avoid the Workmen's Compensation Act provision which would make builders liable as principal contractors for Workmen's Compensation to a subcontractor's employee.
Under the above authorities and for reasons which seem obvious we hold that defendant Dugger was engaged in the building business and that the mere fact that the title to the lot on which the house in question was being built was in Dugger and wife, did not alter the fact that he was subject to the provisions of the Tennessee Workmen's Compensation Act and that the plaintiff's remedy was, therefore, under the Compensation Act and not in an action at common law.
It results that the assignments of error are overruled and the judgment of the trial Court is affirmed.
Affirmed.
HUMPHREYS, J., and CROWNOVER, Special Judge, concur.
| {
"pile_set_name": "FreeLaw"
} |
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 06-4649
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
TEMEKA LASHELLE TANN,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh. Malcolm J. Howard, Senior
District Judge. (5:06-cr-00005-H)
Submitted: January 31, 2007 Decided: March 1, 2007
Before MOTZ, TRAXLER, and DUNCAN, Circuit Judges.
Affirmed by unpublished per curiam opinion.
Mitchell G. Styers, BANZET, THOMPSON & STYERS, P.L.L.C., Warrenton,
North Carolina, for Appellant. George E. B. Holding, United States
Attorney, Anne M. Hayes, Christine Witcover Dean, Assistant United
States Attorneys, Raleigh, North Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Temeka Lashelle Tann appeals her eighty-month sentence
after pleading guilty to one count of conspiracy to distribute and
possess with intent to distribute more than five grams of cocaine
base, in violation of 21 U.S.C. §§ 841(a)(1), 846 (2000). Tann
asserts the Government breached the plea agreement and committed
prosecutorial misconduct. We affirm.
Tann asserts the Government breached the plea agreement
by arguing at sentencing that Tann was not entitled to receive the
stipulated reductions it contained. The Government counters that
Tann’s continued criminal conduct breached the plea agreement and,
pursuant to the terms of the agreement, released the Government
from its stipulations. Tann did not object to the Government’s
actions at sentencing, and she must therefore demonstrate plain
error before she can obtain any relief. See United States v. Fant,
974 F.2d 559, 562 (4th Cir. 1992) (applying plain error analysis in
context of breach of plea agreement).
We find the Government did not breach the plea agreement.
The plea agreement clearly stated, “if [Tann’s] conduct prior to
sentencing changes the circumstances with respect to any such
factors, the Government is no longer bound to its position as to
those factors.” Tann does not deny that she sold drugs after
signing the plea agreement. Thus the Government was released from
any further obligations in the plea agreement.
- 2 -
Tann also contends that the Government committed
prosecutorial misconduct by knowingly allowing her to enter into a
plea agreement while it withheld information that it used to
justify its subsequent refusal to file a substantial assistance
motion pursuant to U.S. Sentencing Guidelines Manual § 5K1.1. A
claim of prosecutorial misconduct is reviewed “to determine whether
the conduct so infected the trial with unfairness as to make the
resulting conviction a denial of due process.” United States v.
Scheetz, 293 F.3d 175, 185 (4th Cir. 2002) (internal quotation
marks and citation omitted). To prevail under this standard, Tann
must show that “the prosecutor’s remarks or conduct were improper
and, second . . . that such remarks or conduct prejudicially
affected [her] substantial rights” so as to deprive her of a fair
trial. Id.
We find that Tann cannot meet this standard. The plea
agreement clearly stated that the Government did not promise to
file a § 5K1.1 motion. Moreover, at the Rule 11 hearing, Tann
stated no one made undisclosed promises to induce her to plead
guilty. She also confirmed that the plea agreement was the entire
agreement between herself and the Government.
Accordingly, we affirm Tann’s sentence. 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.
- 3 -
AFFIRMED
- 4 -
| {
"pile_set_name": "FreeLaw"
} |
622 F.3d 487 (2010)
Timothy HOFFNER, Petitioner-Appellant,
v.
Margaret BRADSHAW, Warden, Respondent-Appellee.
No. 08-4013.
United States Court of Appeals, Sixth Circuit.
Argued: November 18, 2009.
Decided and Filed: September 23, 2010.
*491 ARGUED: David L. Doughten, Cleveland, Ohio, for Appellant. Sarah L. Leatherman, Office of the Ohio Attorney General, Columbus, Ohio, for Appellee. ON BRIEF: David L. Doughten, Cleveland, Ohio, Michael Montgomery, Baker and Hostetler, LLP, Cleveland, Ohio, for Appellant. Sarah L. Leatherman, Thomas E. Madden, Office of the Ohio Attorney General, Columbus, Ohio, for Appellee.
Before: BOGGS, GIBBONS, and SUTTON, Circuit Judges.
OPINION
JULIA SMITH GIBBONS, Circuit Judge.
Petitioner-appellant Timothy Hoffner appeals the district court's order denying his petition for habeas corpus. Hoffner was convicted of aggravated murder, aggravated kidnapping, and robbery and was sentenced to death. In his petition, he claims that the trial court improperly weighed aggravating and mitigating circumstances, that he received ineffective assistance of trial and appellate counsel, that statements were admitted at trial in violation of his Miranda rights, and that the cumulative effect of the errors at trial violated his constitutional rights. For the reasons set forth below, we now affirm the district court's decision and deny Hoffner's habeas petition.
I.
The Ohio Supreme Court summarized the facts of the case as follows:
{¶ 1} On September 22, 1993, Timothy L. Hoffner, defendant-appellant, and Archie Dixon kidnapped and robbed Christopher Hammer, then drove Hammer to a remote area where they buried him alive in a shallow grave and left him to die.
{¶ 2} Hoffner was convicted of the aggravated murder, aggravated robbery, and kidnapping of Hammer, and he was sentenced to death.
{¶ 3} Hoffner and Hammer met in August 1993. For a short period of time in mid-August 1993, Hoffner, Hammer, and Dixon lived at the Toledo home of Kirsten Wilkerson, Dixon's girlfriend.
{¶ 4} In early September 1993, Michael Elting, a friend of Hammer, Hoffner, and Dixon, borrowed Hammer's car, a 1987 Dodge Daytona, to go to the movies with Hoffner and Dixon. According *492 to Elting, Hoffner and Dixon discussed "how to get rid of [Hammer's] car," and Hoffner said that he knew a place where he could take the car, presumably after Hammer was killed. Approximately one month after Hammer's disappearance, Elting discovered Hammer's car at a used car lot in Toledo.
{¶ 5} On the afternoon of September 21, Dixon told Wilkerson that he and Hoffner were going to "get [Hammer] tonight." Wilkerson understood this to mean that Dixon and Hoffner were going to kill Hammer.
{¶ 6} In the early morning of September 22, Hoffner, Dixon, and Hammer went to Wilkerson's house. Once there, Hoffner and Dixon attacked Hammer. Hoffner restrained Hammer in a headlock while Dixon beat him. Hoffner tried to break Hammer's neck, and Dixon struck Hammer in the head with a wine bottle. Hoffner and Dixon then tied Hammer to a bunk-bed ladder, and Dixon went through Hammer's wallet, taking out his money, birth certificate, and Social Security card. Then Hoffner and Dixon discussed how they should dispose of Hammer's body.
{¶ 7} While Hammer remained tied to the bunk-bed ladder, Hoffner and Dixon left Wilkerson's house to dig a grave. Hoffner and Dixon returned to Wilkerson's house and they, along with Wilkerson, drove Hammer, blindfolded, to the gravesite in Hammer's car. Wilkerson stayed at the car while Hoffner and Dixon walked Hammer into the woods, where they permitted Hammer to smoke a cigarette. Then they gagged and again blindfolded Hammer, tied his hands and feet behind his back, grabbed him by his arms and legs, and dropped him into the grave, still alive. At one point, Hammer was able to remove the gag from his mouth and free one of his legs. Hoffner jumped into the grave and placed his foot over Hammer's mouth when Hammer yelled for help. Hoffner and Dixon then held Hammer down and covered him with dirt. After Hammer was completely buried, Hoffner and Dixon walked back and forth across the grave, packing down the dirt. Hoffner, Dixon, and Wilkerson then returned to Wilkerson's house in Hammer's car.
{¶ 8} After killing Hammer, Hoffner and Dixon carried out their plan to sell his car. On September 25, Dixon obtained a state of Ohio identification card with his photograph but in Hammer's name. On September 30, Hoffner and Dixon went to the automobile title bureau, where Dixon obtained a duplicate certificate of title for Hammer's car using the fraudulent ID card. Hoffner and Dixon then took Hammer's car to a used car lot, where they sold the car for $2,800.
{¶ 9} By November 8, 1993, police officers investigating Hammer's disappearance had located his Dodge Daytona at a used car lot in Toledo, had confirmed its unauthorized sale on September 30, and had identified Dixon as the prime suspect in the vehicle transaction. On November 9, police went to Wilkerson's home and arrested Dixon for forgery. The police also executed a search warrant at Wilkerson's home. During the search, police questioned Hoffner regarding Hammer's disappearance. Hoffner denied involvement but made statements implicating Dixon. Hoffner agreed to accompany police detectives downtown to make a statement. On the way to the station, Hoffner told police that Dixon had shown him the location of Hammer's body, and he then led police to the gravesite.
{¶ 10} Once at the station, police read Hoffner his Miranda rights, but Hoffner was not placed under arrest. Hoffner waived his rights and gave a taped account of Dixon's involvement in Hammer's *493 murder. After Hammer's body was discovered, Dixon confessed to Hammer's murder and also implicated Hoffner. Police subsequently arrested Hoffner on November 10 at his mother's home. At police headquarters, detectives read Hoffner his Miranda, rights, and Hoffner signed a waiver-of-rights form. Hoffner then gave a taped statement confessing to his part in Hammer's death.
{¶ 11} Cynthia Beisser, Deputy Coroner of Lucas County, performed an autopsy and concluded that Hammer had died of asphyxiation. According to Dr. Beisser, Hammer likely died within five minutes of being buried alive, and he might have remained conscious during the first two to three minutes.
{¶ 12} A grand jury indicted Hoffner, Dixon, and Wilkerson for the aggravated murder, kidnapping, and aggravated robbery of Hammer. Hoffner was indicted on three counts of aggravated murder. Count One of the indictment charged Hoffner with aggravated murder involving prior calculation and design. [Ohio Rev.Code Ann. §] 2903.01(A). Count Two charged Hoffner with aggravated murder while committing kidnapping, and Count Three charged Hoffner with aggravated murder while committing aggravated robbery, both pursuant to [Ohio Rev.Code Ann. §] 2903.01(B). Hoffner was additionally indicted for kidnapping in Count Four, aggravated robbery in Count Five, and three counts of forgery in Counts Six, Seven, and Eight.
{¶ 13} The three counts of aggravated murder each contained two [Ohio Rev. Code Ann. §] 2929.04(A)(7) death penalty specifications. The first specification charged aggravated murder during a kidnapping, and the second charged aggravated murder during an aggravated robbery.
{¶ 14} The jury convicted Hoffner as charged and recommended the death penalty. Thereafter, the trial court sentenced Hoffner to death for the murder, to ten to 25 years each for kidnapping and aggravated robbery, and to 18 months for each forgery charge. On appeal, the court of appeals affirmed Hoffner's convictions and death sentence.
State v. Hoffner (Hoffner II), 102 Ohio St.3d 358, 811 N.E.2d 48, 51-52 (2004).
After considering the thirteen propositions of law Hoffner raised on direct appeal, the Supreme Court of Ohio rejected each of them and affirmed Hoffner's conviction and sentence on July 14, 2004. Id. at 67. The Supreme Court denied Hoffner's petition for a writ of certiorari. Hoffner v. Ohio, 543 U.S. 1058, 125 S.Ct. 870, 160 L.Ed.2d 784 (2005). While his direct appeal was pending, Hoffner also sought state post-conviction relief under Ohio Revised Code § 2953.21 on three grounds. His petition was dismissed by the trial court, and the dismissal was affirmed by the Ohio Court of Appeals on September 30, 2002. State v. Hoffner (Hoffner III), No. L-01-1281, 2002 WL 31162813 (Ohio Ct.App. Sept. 30, 2002). The Ohio Supreme Court denied leave to appeal. State v. Hoffner, 103 Ohio St.3d 1425, 814 N.E.2d 489 (2004). On June 6, 2006, Hoffner applied to reopen his appeal under Ohio Appellate Rule 26(B) in order to assert a claim of ineffective assistance of appellate counsel. As Hoffner filed the petition roughly five years after his conviction became finallong after the ninety-day window provided for by statute, see Ohio App. R. 26(B)(1)the Ohio Court of Appeals recognized that the petition was untimely but nonetheless denied the petition on the merits. State v. Hoffner (Hoffner IV), No. L-95-181, slip op. at 3, 15, 2001 WL 279768 (Ohio Ct.App. Aug. 24, 2006). The Ohio Supreme Court affirmed *494 the lower court's judgment but did so on untimeliness grounds only. State v. Hoffner (Hoffner V), 112 Ohio St.3d 467, 860 N.E.2d 1021, 1023 (2007).
On January 6, 2006, Hoffner filed a habeas petition in federal district court raising thirteen grounds for relief. Hoffner v. Bradshaw (Hoffner VII), No. 3:05-cv-00687, slip op. at 6 (N.D.Ohio July 23, 2008). On February 8, 2006, the district court held the case in abeyance to allow Hoffner to file his Rule 26(B) motion. Hoffner v. Bradshaw (Hoffner VI), No. 3:05-cv-00687, 2007 WL 3046464, at *1 (N.D.Ohio Oct. 16, 2007). After the state filed its return of writ, Hoffner withdrew two of the claims, conceding that they were procedurally defaulted. Hoffner VII, slip op. at 54-55. The district court rejected the remainder of Hoffner's claims, finding that they were either meritless or procedurally defaulted, and denied the petition. Id. at 12-65. The court then granted a certificate of appealability ("COA") as to all of Hoffner's claims except one. Id.
On appeal, Hoffner failed to brief four of the ten claims for which the district court granted a COA and therefore has abandoned them. See Fed. R.App. P. 28(a)(9)(A); Geboy v. Brigano, 489 F.3d 752, 767 (6th Cir.2007). Thus, we will address the six issues that Hoffner has preserved:
1. Whether Hoffner's death sentence violated his due process rights because it was based on the consideration of improper aggravating circumstances.
2. Whether trial counsel's performance at the guilt phase of trial was constitutionally ineffective.
3. Whether trial counsel's performance at the penalty phase of trial was constitutionally ineffective.
4. Whether appellate counsel's performance was constitutionally ineffective.
5. Whether Hoffner's conviction is invalid because it was based on statements obtained in violation of his Miranda rights.
6. Whether the cumulative effect of the errors in this case violated Hoffner's constitutional rights.
II.
The Antiterrorism and Effective Death Penalty Act of 1996 ("AEDPA"), 28 U.S.C. § 2241 et seq., governs all habeas petitions filed after April 24, 1996. See Lindh v. Murphy, 521 U.S. 320, 326-27, 117 S.Ct. 2059, 138 L.Ed.2d 481 (1997). AEDPA provides:
An application for a writ of habeas corpus on behalf of a person in custody pursuant to the judgment of a State court shall not be granted with respect to any claim that was adjudicated on the merits in State court proceedings unless the adjudication of the claim
(1) resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States; or
(2) resulted in a decision that was based on an unreasonable determination of the facts in light of the evidence presented in the State court proceeding.
28 U.S.C. § 2254(d).
A state court adjudication is "contrary to" Supreme Court precedent under § 2254(d)(1) "if the state court arrives at a conclusion opposite to that reached by [the Supreme] Court on a question of law" or "if the state court confronts facts that are materially indistinguishable from a relevant Supreme Court precedent and arrives at [an opposite result]." Williams v. Taylor, 529 U.S. 362, 405, 120 S.Ct. 1495, 146 L.Ed.2d 389 (2000). A state court makes "an unreasonable *495 application of" Supreme Court precedent under § 2254(d)(2) "if the state court identifies the correct governing legal rule from [the Supreme] Court's cases but unreasonably applies it to the facts of the particular ... case" or if the court unreasonably extends or refuses to extend existing Supreme Court precedent to new factual situations where it should apply. Id. at 407, 120 S.Ct. 1495. Under AEDPA, the question for this court to answer "is not whether a federal court believes the state court's determination was incorrect but whether that determination was unreasonablea substantially higher threshold." Schriro v. Landrigan, 550 U.S. 465, 473, 127 S.Ct. 1933, 167 L.Ed.2d 836 (2007). Factual findings made by state courts based on the trial record are entitled to a presumption of correctness that may be rebutted by clear and convincing evidence. 28 U.S.C. § 2254(e)(1); Warren v. Smith, 161 F.3d 358, 360-61 (6th Cir.1998).
However, federal courts need not review every point of error raised by a habeas petitioner. When a "state prisoner has defaulted his federal claims in state court pursuant to an independent and adequate state procedural rule, federal habeas review of the claims is barred unless the prisoner can demonstrate cause for the default and actual prejudice ... or demonstrate that failure to consider the claims will result in a fundamental miscarriage of justice." Coleman v. Thompson, 501 U.S. 722, 750, 111 S.Ct. 2546, 115 L.Ed.2d 640 (1991). In this circuit, to determine whether a federal claim has been procedurally defaulted, we apply the three-prong test initially laid out in Maupin v. Smith, 785 F.2d 135 (6th Cir.1986):
First, the court must determine that there is a state procedural rule that is applicable to the petitioner's claim and that the petitioner failed to comply with the rule.... Second, the court must decide whether the state courts actually enforced the state procedural sanction.... Third, the court must decide whether the state procedural forfeiture is an "adequate and independent" state ground on which the state can rely to foreclose review of a federal constitutional claim....
Jacobs v. Mohr, 265 F.3d 407, 417 (6th Cir.2001) (quoting Maupin, 785 F.2d at 138). If the state procedural rule was not complied with and that rule was an "adequate and independent" ground for default, we may still excuse the default if the petitioner can demonstrate "that there was `cause' for him not to follow the procedural rule and that he was actually prejudiced by the alleged constitutional error." Maupin, 785 F.2d at 138.
III.
Hoffner claims that the trial court violated his due process rights by improperly weighing the statutory aggravating factors of his crime. This argument has two sub-claims. First, Hoffner argues that the trial court wrongly considered the nature and circumstances of the offense to be an aggravating factor. Second, Hoffner argues that the trial court considered various elements of the charged statutory aggravating factor as separate aggravating factors, thus multiplying the value of what should have been one factor.
"[I]t is not the province of a federal habeas court to reexamine state-court determinations on state-law questions." Estelle v. McGuire, 502 U.S. 62, 67-68, 112 S.Ct. 475, 116 L.Ed.2d 385 (1991). State-law errors may warrant habeas relief if the errors "rise for some other reason to the level of a denial of rights protected by the United States Constitution." Barclay v. Florida, 463 U.S. 939, 957-58, 103 S.Ct. 3418, 77 L.Ed.2d 1134 (1983). Nonetheless, if a trial court considers unconstitutional aggravating factors, the Supreme *496 Court has held that this error can be cured by the state appellate court "independently `reweighing' aggravating and mitigating factors and reaching a sentence without the consideration of the factors found impermissible at the trial level." See Lundgren v. Mitchell, 440 F.3d 754, 783 (6th Cir.2006) (citing Clemons v. Mississippi, 494 U.S. 738, 740, 110 S.Ct. 1441, 108 L.Ed.2d 725 (1990)); Ohio Rev.Code Ann. § 2929.05(A) ("The ... supreme court ... shall review and independently weigh all of the facts ... and consider the offense and the offender to determine whether the aggravating circumstances the offender was found guilty of committing outweigh the mitigating factors in the case, and whether the sentence of death is appropriate.").
A.
In support of his claim that the trial court improperly considered the nature and circumstances of his crime, Hoffner points to various parts of the sentencing opinion where the trial judge used several "inflammatory" adjectives to describe Hoffner's conduct. For example, the trial court described Hoffner's crime as "graphic," "macabre," "sinister," and "depraved." State v. Hoffner (Hoffner I), No. CR93-7212A, slip op. at 4-6 (Ct. Com. Pl. June 7, 1995). Further, Hoffner claims, the trial court explicitly considered impermissible factors when it allegedly explained that its job was to "weigh[ ] the relative heinousness" of his crime. Appellant Br. at 18. He claims that the trial judge's conclusion is evidence of improper consideration:
Sympathy for the defendant's mistreatment as a child, however, can in no way excuse the depraved, violent and calculated nature of the acts he committed against Christopher Hammer. It was, and is the conclusion of this Court that the aggravating circumstances so clearly demonstrated by the evidence at trial, far, far outweighed the modest cumulative mitigating circumstances presented in this case and during the penalty phase.
Hoffner I, slip op. at 8. Hoffner claims that the trial court's actions violated his due process rights under the Fourteenth Amendment and Hicks v. Oklahoma, 447 U.S. 343, 346, 100 S.Ct. 2227, 65 L.Ed.2d 175 (1980).
Hoffner properly preserved this claim by raising it on direct appeal, but the Ohio Supreme Court found the claim to be meritless. The court noted that the trial court never referred to the nature and circumstances of the crime as an aggravating circumstance and that the sentencing opinion "reflect[ed] the trial court's understanding of the difference between statutory aggravating circumstances and facts describing the nature and circumstances of the offense." Hoffner II, 811 N.E.2d at 60-61. Further, the court explained that the trial court can evaluate the nature and circumstances in order to conclude that "no mitigating feature can be extracted." Id. at 61 (quoting State v. Steffen, 31 Ohio St.3d 111, 509 N.E.2d 383, 390 (1987)) (internal quotation marks omitted). The court also conducted an extensive review of the penalty-phase evidence, independently weighed the aggravating and mitigating factors, and concluded that the death penalty was appropriate. Id. at 62-66.
We agree with the district court that there was no violation, or unreasonable application, of clearly established Supreme Court law. As noted above, a violation of state law is not grounds for habeas relief unless it rises to the level of a due process deprivation. Estelle, 502 U.S. at 67-68, 112 S.Ct. 475. We find no such deprivation; we agree with the Ohio Supreme Court that no violation of state law occurred, let alone one of such magnitude as to violate due process. Furthermore, the Ohio Supreme Court's independent reweighing *497 of the relevant evidence cured any error that the trial court may have committed. Hoffner has made no showing of fundamental unfairness, and we affirm the district court's denial of relief on this sub-claim.
B.
Hoffner also argues that the trial court improperly multiplied the statutory aggravating circumstances at sentencing. Hoffner was charged in the indictment with three separate counts of murdermurder with prior calculation and design, murder in the course of kidnapping, and murder in the course of aggravated robbery. For each count, the indictment provided two death penalty specifications: that the offense was committed while committing kidnapping and that the offense was committed while committing aggravated robbery, both pursuant to Ohio Rev.Code Ann. § 2929.04(A)(7). The specification requires that, in addition to proving that the murder was committed in the course of an enumerated violent felony, the government must also prove that "either the offender was the principal offender in the commission of the aggravated murder or, if not the principal offender, committed the aggravated murder with prior calculation and design." Ohio Rev.Code Ann. § 2929.04(A)(7). The jury found Hoffner guilty of all three counts of murder and of both specifications for each count. However, the trial court held that the two counts of murder during the commission of kidnapping and aggravated robbery constituted allied offenses of similar import under Ohio Rev.Code Ann. § 2941.25(A) and sentenced Hoffner only for murder with prior calculation and design.
Hoffner argues that, under Ohio law, the court could not have used the kidnapping and aggravated robbery as separate aggravating circumstances because they both fall under the same statutory provision. See Ohio Rev.Code Ann. § 2929.04(A)(7). As evidence that the aggravating circumstances were multiplied, Hoffner points to the trial court's sentencing opinion, where it wrote that "it was established beyond a reasonable doubt that the aggravated murder... was committed by ... Hoffner in the commission of both a kidnapping and an aggravated robbery, and that he also committed the aggravated murder with prior calculation and design." Hoffner I, slip op. at 4. In the next sentence, however, the court writes that "[t]hese findings, of course, merely reiterate the jury's verdicts." Id. Hoffner also points out that the trial court referred to the death penalty specification under subsection (A)(7) as "aggravating circumstances" throughout the opinion. Hoffner cites to State v. Green, 90 Ohio St.3d 352, 738 N.E.2d 1208, 1222 (2000), in which the Ohio Supreme Court held that it was improper for the trial court to have "consider[ed] as two separate and distinct aggravating circumstances [the defendant's] involvement in committing `both an aggravating robbery and a kidnapping'" when the indictment had charged a single death specification of "murder while committing or attempting to commit `kidnapping or aggravated robbery.'"
The district court rejected this sub-claim on the grounds that it is a violation of state, not federal, law and that even if the trial court's alleged error rose to the level of a due process violation, the state supreme court cured it through independent reweighing. Hoffner VII, slip op. at 17-18. We agree. In the first instance, as the Ohio Supreme Court held, see Hoffner II, 811 N.E.2d at 61, two separate death penalty specifications were listed in the indictment, rather than just one as in Green. Thus, it was not improper for the trial court to refer to "aggravating circumstances." The trial court's conjunctive reference to Hoffner's prior calculation and *498 design in its sentencing opinion was in reference to the jury's verdict finding such facts beyond a reasonable doubt. But even if this were error, the Ohio Supreme Court conducted a detailed independent review of the evidence presented at the penalty phase. It found that "the evidence established beyond a reasonable doubt the two [§] 2929.04(A)(7) aggravating circumstances" and concluded that "Hoffner's collective mitigation evidence is relatively modest when compared with the aggravating circumstances." Hoffner II, 811 N.E.2d at 65, 66 (emphasis added). Hoffner does not object to the Ohio Supreme Court's reweighing of the evidence. We therefore affirm the district court's denial of habeas on this sub-claim.
IV.
Hoffner's second claim is that his trial counsel performed ineffectively at the guilt phase of trial by: (1) failing to argue that Dixon, not Hoffner, was the principal offender and (2) failing to move to suppress Hoffner's taped confession on the ground that he had previously requested counsel. Hoffner raised both of these arguments for the first time in his state post-conviction petition.[1]See Hoffner III, 2002 WL 31162813, at *3 (third and sixth sub-claims). Because the claims did not involve evidence outside of the record and therefore could have been raised on direct appeal, the court of appeals found both sub-claims to be barred by res judicata. Id. at *5 (citing State v. Cole, 2 Ohio St.3d 112, 443 N.E.2d 169, syllabus (1982)). The Supreme Court of Ohio denied review.
Under Ohio's doctrine of res judicata,
a final judgment of conviction bars the convicted defendant from raising and litigating in any proceeding, except an appeal from that judgment, any defense or any claimed lack of due process that was raised or could have been raised by the defendant at the trial which resulted in that judgment of conviction or on an appeal from that judgment.
State v. Perry, 10 Ohio St.2d 175, 226 N.E.2d 104, 108 (1967). In Cole, 443 N.E.2d at 171, "the Ohio Supreme Court held that res judicata is a proper basis upon which to dismiss an ineffective-assistance claim in a petition for post-conviction relief where a defendant who is represented by new counsel on direct appeal fails to raise that claim and the basis for that claim `could fairly be determined without examining evidence outside the record.'" Fautenberry v. Mitchell, 515 F.3d 614, 633 (6th Cir.2008). Thus, in Fautenberry we held that "Ohio's application of res judicata pursuant to Cole is an actually enforced, adequate and independent state ground upon which the Ohio state courts consistently refuse to review the merits of a defendant's claims." Id. The district court followed this rule and held that this claim was procedurally defaulted. We agree.
The first three prongs of the Maupin test for procedural default are all met in this instance. As discussed, (1) Hoffner failed to raise these ineffective-assistance subclaims on direct appeal, thus failing to comply with a state procedural rule; (2) the court of appeals enforced the rule by holding the claim barred by res judicata; and (3) res judicata is an adequate and independent state ground on which to foreclose federal review. See Maupin, 785 F.2d at 138.
In his reply brief, however, Hoffner offers two reasons why his claim is not procedurally defaulted. First, he claims that the state court improperly applied res *499 judicata because his claim was, in fact, based on evidence outside the record. See Hill v. Mitchell, 400 F.3d 308, 320 (6th Cir.2005) ("[T]he Ohio Court of Appeals' improper application of its res judicata rule does not bar our review [of a federal habeas claim.]"). Hoffner's outside evidence consists of "an expert affidavit concerning the standards of representation in a capital case." (Reply Br. at 10.) In order to excuse the procedural default, the proffered affidavit must have been required, in addition to the original record, to bring Hoffner's claim for ineffective assistance on direct appeal. See State v. Gibson, 69 Ohio App.2d 91, 430 N.E.2d 954, 957 (1980) (citing Ohio Rev.Code Ann. § 2953.21). Yet, nothing in the sub-claims brought here suggests that the affidavit was necessary and that they could not have been brought without it. Thus, procedural default is not excused on this ground.
Hoffner also argues that procedural default should be excused because his appellate counsel's deficient performance in not raising these claims on direct appeal constitutes cause and prejudice under the fourth part of the Maupin test.[2]See Maupin, 785 F.2d at 138 ("Once the court determines that [the first three parts of the test have been met], then the petitioner must demonstrate under Sykes that there was `cause' for him to not follow the procedural rule and that he was actually prejudiced by the alleged constitutional error." (citing Wainwright v. Sykes, 433 U.S. 72, 87, 97 S.Ct. 2497, 53 L.Ed.2d 594 (1977)) (additional citations omitted)). Ineffective assistance of appellate counsel can constitute cause to excuse a procedural default. See Murray v. Carrier, 477 U.S. 478, 492, 106 S.Ct. 2639, 91 L.Ed.2d 397 (1986); Howard v. Bouchard, 405 F.3d 459, 478 (6th Cir.2005).
Appellate counsel's failure to raise these guilt-phase ineffective-assistance claims does not establish cause to excuse the default, however, because the underlying claims are meritless. To establish a claim of ineffective assistance of trial or appellate counsel, see Smith v. Robbins, 528 U.S. 259, 285, 120 S.Ct. 746, 145 L.Ed.2d 756 (2000), Hoffner must show (1) that his counsel's performance was deficient and (2) that the deficiency prejudiced his defense. Strickland v. Washington, 466 U.S. 668, 687-88, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984). To prove deficiency, Hoffner must show that "counsel's representation fell below an objective standard of reasonableness." Id. at 688, 104 S.Ct. 2052. Prejudice can be shown by proving "that there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome." Id. at 694, 104 S.Ct. 2052.
Hoffner's first sub-claimthat trial counsel were deficient for failing to argue that Hoffner was not a principal offenderis meritless because, as the district court found, "ample evidence showed that Hoffner and Dixon fully collaborated in burying Hammer alive." Hoffner VII, slip op. at 22. "To be eligible for the death penalty under [Ohio Rev.Code Ann. §] 2929.04(A)(7) as `the principal offender,' the defendant must have been the actual killer." State v. Taylor, 66 Ohio St.3d 295, 612 N.E.2d 316, 325 (1993) (citing State v. Penix, 32 Ohio St.3d 369, 513 N.E.2d 744, 746 (1987)). Substantial evidence at trial shows that Hoffner was intimately involved in the planning and execution of the murder. Hoffner and Dixon discussed killing Hammer and selling his car well in advance of the murder. Hoffner held *500 Hammer in a headlock and tried to break his neck while Dixon beat him. While Dixon was burying Hammer, Hoffner jumped into the grave and put his foot on Hammer's mouth to prevent Hammer from crying for help.
The record is replete with evidence that Hoffner was the "actual killer" of Hammer. Hoffner's arguments that, because Hoffner followed Dixon, only Dixon could have been the principal offender are irrelevant because, under Ohio law, two defendants can be considered principal offenders when they act in concert to cause the death of another. See State v. Franks, No. 18767, 1998 WL 696777, at *6 (Ohio Ct.App. Oct. 7, 1998) (citing State v. Keene, No. 14375, 1996 WL 531606, at *34-35 (Ohio Ct.App. Sept.20, 1996)). Especially considering the deference given to counsel's tactical choices, it is clear that counsel's decision not to argue that Hoffner was not a principal offender was not deficient. Furthermore, trial counsel's failure to raise this argument could not have been prejudicial because, under Ohio Rev.Code Ann. § 2929.04(A)(7), a non-principal offender is eligible for the death penalty if he acted with prior calculation and design. Hoffner does not argue that counsel were ineffective for failing to argue that he did not act with prior calculation and design, and the record clearly supports the jury's finding that his actions were premeditated. We affirm the district court's holding that this sub-claim was procedurally defaulted.
Hoffner's second sub-claim is that trial counsel were constitutionally deficient for failing to move to suppress his taped confession under Minnick v. Mississippi, 498 U.S. 146, 111 S.Ct. 486, 112 L.Ed.2d 489 (1990), on the ground that Hoffner had requested counsel before giving the confession. The only evidence Hoffner offers in support of this claim is his own affidavit, which states that he had requested an attorney before being interrogated and that trial counsel's "response was, in effect, that the denial of my right to an attorney prior to the interrogation didn't matter." This self-serving affidavit carries little weight, especially in light of the copious evidence in the record to contradict it. The transcripts of Hoffner's statements to the police reveal that he was advised of his Miranda rights, voluntarily waived those rights, and chose not to request an attorney prior to interrogation. At the suppression hearing before the trial court, the investigating officers both testified that Hoffner never requested to speak to an attorney. Counsel's decision not to pursue suppression of Hoffner's confession was not unreasonable, nor was appellate counsel's decision not to argue trial counsel's ineffectiveness on these grounds. We affirm the district court's denial of this sub-claim on the basis that it was procedurally defaulted.
V.
Hoffner's third ground for reliefineffective assistance of counsel at the penalty phaseis based on three allegations. First, Hoffner claims that trial counsel deficiently advised him to show no emotion throughout the proceedings, thus dehumanizing him in the jurors' eyes. Second, Hoffner argues that counsel ceased functioning as his advocate at closing argument when counsel cast Hoffner in a negative light instead of arguing for mitigation. Third, Hoffner claims that counsel were deficient in failing to object to the court's response to a jury question requesting the definition of a "preponderance." We find that the state courts' resolutions of the first two claims were not an unreasonable application of federal law and therefore affirm the district court's denial of habeas relief on these grounds. Hoffner has defaulted his third argument and we therefore *501 affirm the district court's rejection of that claim as well.
A.
Hoffner claims that trial counsel advised him to show no emotion "throughout the entire trial" and specifically during his unsworn statement in the mitigation phase. He claims that this adversely affected his chances of avoiding the death penalty because it "dehumanized [him] to the jury." In support of this claim, he offers the affidavit of juror Eve Gimple. The affidavit states that the jury "wanted to know why Mr. Hoffner appeared to show no emotion during his unsworn statement. It was this lack of emotion which also was a factor in my vote to recommend the death penalty for Mr. Hoffner."
Because this claim was based on an affidavit outside the trial record, Hoffner properly raised it for the first time in his state post-conviction petition. See Hoffner III, 2002 WL 31162813, at *4-5. The Ohio Court of Appeals applied Ohio's aliunde rule, under which "jurors are not competent to testify about their deliberations or their mental processes during deliberations without first establishing this evidence from an outside (nonjury) source." Id. at *4 (citing Ohio R. Evid. 606(B)). Ohio courts have applied this rule to "juror testimony in postconviction proceedings where the defendant alleges ineffective assistance of counsel." Id. at *5; see also Doan v. Brigano, 237 F.3d 722, 730 (6th Cir.2001), overruled on other grounds by Wiggins v. Smith, 539 U.S. 510, 123 S.Ct. 2527, 156 L.Ed.2d 471 (2003) (discussing the differences between the Ohio rule and its federal analogue); State v. Hessler, No. 01AP-1011, 2002 WL 1379249, at *8 (Ohio Ct.App. June 27, 2002) (applying the aliunde rule in state post-conviction proceedings to exclude consideration of a juror affidavit). The state court ruled that "the juror was not competent to testify as to her mental processes during the trial" and rejected Hoffner's claim. Hoffner III, 2002 WL 31162813, at *5.
The district court found that this ruling was not an unreasonable application of constitutional law, noting also that the affidavit was weak evidence of prejudice anyway as the juror had specified that Hoffner's affect was only a "factor" but had crossed out the modifier "significant." Hoffner VII, slip op. at 28. We agree. The affidavit does not allege that the jury was influenced by any "extraneous" information, and therefore the juror's testimony was properly excluded from consideration by the Ohio courts. This court has previously held that there is no "constitutional impediment to enforcing" Ohio's aliunde rule, and Hoffner has cited no authority to the contrary. See Brown v. Bradshaw, 531 F.3d 433, 438 (6th Cir. 2008); see also Tanner v. United States, 483 U.S. 107, 117-27, 107 S.Ct. 2739, 97 L.Ed.2d 90 (1987) (chronicling the legal history of and policy underlying Federal Rule of Evidence 606(b)). Without the affidavit, Hoffner cannot establish that trial counsel's advice regarding his demeanor was prejudicial under Strickland. We affirm the denial of habeas on this ground.
B.
Hoffner also claims that some of the comments trial counsel made during closing argument at mitigation rendered counsel's assistance constitutionally ineffective. At summation, counsel stated the following:
This is a heinous crime, it's unbelievable. As [the prosecutor] said, I can't begin to put it into words, and it's really rather difficult.
Please don't mistake any of my remarks as an attempt to evoke sympathy on behalf of Timothy L. Hoffner, because I don't feel any, not a bit. I feel revulsion and confusion in equal parts *502 because of everything that we have heard, these amazingly gruesome photographs, and they're hard to look at. I've looked at them for 17 months. And how is it that one young man can find it within himself to commit an act of homicide on his friend?
....
Please understand at the outset what I'm asking of you. There are three sentences available.... There is death, life imprisonment with possibility of parole after serving the first 30 full years, and then life imprisonment with the possibility of servingor possibility of parole eligibility after serving the first 20 years. Don't even think about that. To stand before you and ask for 20 full years to the parole board is an abomination and it's an insult to you, to me and to the Hammers.
(JA at 73.) Hoffner claims that, through these comments, "trial counsel essentially ceased functioning as Hoffner's advocate during the penalty phase" and "failed to subject the prosecution's penalty case to meaningful adversarial testing" in violation of his Sixth Amendment rights. See United States v. Cronic, 466 U.S. 648, 659, 104 S.Ct. 2039, 80 L.Ed.2d 657 (1984).
The Ohio Supreme Court "determine[d] that defense counsel's comments do not reflect deficient performance and that they were not prejudicial. Rather than an abandonment of Hoffner's mitigation defense, counsel's comments were an apparent attempt to acknowledge the particularly gruesome nature of the crime and to preserve credibility between counsel and the jury." Hoffner II, 811 N.E.2d at 57. The court applied "highly deferential" scrutiny to "the strategic decisions of trial counsel" under Strickland and reasoned that trial counsel "apparently believed that any attempt to seek the lesser sentence of life with the possibility of parole after 20 years would have alienated the jury." Id. at 57-58. The court concluded that the "tactic was not unreasonable in light of the particularly heinous nature of the aggravated murder committed here." Id. at 58. The district court held that the Ohio Supreme Court's decision was not contrary to or an unreasonable application of federal law and denied relief. Hoffner VII, slip op. at 29-30.
We affirm the district court's ruling. Trial counsel's comments quoted above constitute only a small portion of the entirety of the closing argument, roughly the first page and a half of the transcript. For the remainder of the argumentapproximately twenty-one transcript pages counsel recounted at length the mitigating evidence that had been presented at the penalty phase in an attempt to prove that "there is indeed sufficient evidence to diminish the appropriateness of the death penalty." (JA at 73.) Counsel's decision to cast Hoffner's crime in a negative light only briefly at the start of argument was clearly a strategic decision aimed at maintaining the trust of the jury. The Ohio Supreme Court's decision to that effect was not unreasonable.
The cases Hoffner cites in support of his claim are of no avail. Hoffner relies heavily on Rickman v. Bell, 131 F.3d 1150, 1160 (6th Cir.1997), in which we held that counsel's strategy of attacking his own client constructively deprived his client of representation to the extent that prejudice could be presumed. In Rickman, however, the hostility and disgust that counsel exhibited toward his client was far more extensive than in this case. Counsel's performance in Rickman "convey[ed] to the jurors an unmistakable personal antagonism toward Rickman, characterized both by attacks on Rickman and by repeatedly eliciting information detrimental to Rickman's interests." Id. at 1158. The lawyer "portray[ed] [Rickman] as crazed and dangerous" *503 throughout the trial and "paint[ed] a picture of [his] client even more frightening than the prosecution could paint." Id. at 1159. We characterized the lawyer's conduct as "combin[ing] a total failure to actively advocate his client's cause with repeated expressions of contempt for his client for his alleged actions." Id. at 1157. Not only did we find counsel's performance deficient, but we held that the deficiency was so substandard as to be presumptively prejudicial under Cronic. Counsel's performance here was limited to a strategic choice to gain favor with the jury by asking that Hoffner receive eligibility for parole after thirty years instead of after twenty. Counsel did not depict Hoffner as frightening or create an image of him more damaging than what the prosecution presented. Rickman is thus inapposite.
Hoffner also cites our decision in Spisak v. Hudson, 512 F.3d 852 (6th Cir.2008), which, since oral argument in this case, has been reversed by the Supreme Court, Smith v. Spisak, ___ U.S. ___, 130 S.Ct. 676, 175 L.Ed.2d 595 (2010). In Spisak, counsel "described his client's acts in vivid detail," "argued that his client deserved no sympathy for his actions," and "[a]t no point ... endeavor[ed] to direct his negative statements about his client toward an express appeal for leniency." Id. at 692 (Stevens, J., concurring in part and concurring in the judgment). However, the Court unanimously held that counsel's actions were not prejudicial in light of the context in which the argument was made. Id. at 687 (majority opinion). The Court reasoned that, because evidence from the guilt phase was still fresh in the jurors' minds, because counsel made repeated appeals to the jurors' sense of humanity, and because the testimony of the defense's mental health experts had presented many of the arguments for mitigation, it could not find a reasonable probability that the result of the case would have been different had closing argument been more persuasive. Id.; see also id. at 693 (Stevens, J., concurring in part and concurring in the judgment) ("In my judgment even the most skillful of closing argumentseven one befitting Clarence Darrowwould not have created a reasonable probability of a different outcome in this case.").
Even if we were to find counsel's performance deficient in this case, under Spisak we could not find it to have prejudiced Hoffner's defense. Hoffner's counsel only referred to the heinous nature of his client's acts; he did not go into "vivid detail" or argue that Hoffner deserved "no sympathy." Further, counsel spent substantial time presenting a case for leniency. When viewed in light of the extensive evidence of the crime produced at the guilt phase of trial and the substantial mitigating evidence produced at the penalty phase, we can hardly find counsel's comments here to be prejudicial. Our decision is only bolstered by the deference due under AEDPA to the Ohio Supreme Court's determination of this issue. We therefore affirm the district court's denial of habeas on this sub-claim.
C.
Finally, Hoffner argues that trial counsel was ineffective at the penalty phase for failing to object to the trial judge's definition of a "preponderance," which was given in response to a question from the jury during deliberations. Hoffner claims that counsel should have requested "an additional instruction to make clear that the jury knew the prosecution carried the ultimate burden of proving that the aggravating factors outweighed the mitigating factors `beyond a reasonable doubt.'" According to Hoffner, counsel's failure to do so was constitutionally deficient because "the Sixth Amendment requires a criminal defense attorney to remain an `active advocate' *504 on behalf of his or her client." Appellant Br. at 46 (citing Evitts v. Lucey, 469 U.S. 387, 394, 105 S.Ct. 830, 83 L.Ed.2d 821 (1985)).
Hoffner raised this claim for the first time in his state post-conviction petition. The Ohio Court of Appeals held that, because this claim could have been brought solely on the basis of the trial record, it was barred by res judicata. Hoffner III, 2002 WL 31162813, at *5. Therefore, this claim is procedurally defaulted. Hoffner claims in a footnote in his reply brief that ineffective assistance of appellate counsel excuses his default but, on appeal, he has not developed any argument for why counsel's error here was prejudicial, and, thus, his claim fails.[3]
We affirm the district court's denial of habeas relief for ineffective assistance of trial counsel at the penalty phase.
VI.
In his fourth claim for relief, Hoffner contends that appellate counsel's failure to raise various meritorious issues on appeal amounted to constitutionally deficient performance. On appeal, Hoffner points to four issues in particular that appellate counsel should have raised: (1) that the trial court failed to define the term "aggravating circumstances" in the jury instructions; (2) that the prosecution committed misconduct by arguing that the nature and circumstances of the case were to be considered as aggravation; (3) that the trial court's jury instruction as to the process of weighing mitigating and aggravating factors was faulty; and (4) that trial counsel was ineffective for failing to object to the above errors.
Under Ohio law, a claim of ineffective assistance of appellate counsel must be raised as part of an Ohio Appellate Rule 26(B) motion to reopen an appeal before the Ohio Court of Appeals. State v. Murnahan, 63 Ohio St.3d 60, 584 N.E.2d 1204, 1209 (1992); Ohio R.App. 26(B). Rule 26(B)(1) requires that the "application for reopening shall be filed ... within ninety days from journalization of the appellate judgment unless the applicant shows good cause for filing at a later time." The Ohio Court of Appeals' decision on Hoffner's direct appeal was journalized on March 23, 2001, but Hoffner did not file his Rule 26(B) application until June 6, 2006. The Ohio Court of Appeals thus found Hoffner's application to be "untimely on its face" and dismissed it. Hoffner IV, slip op. at 2. The court further rejected his attempts to establish cause for the late filing and his challenge to the constitutionality of the rule. Id. at 2-3. Despite this ruling, however, the court of appeals proceeded to address each of Hoffner's ineffective-assistance-of-appellate-counsel claims and rejected them all on their merits. Id. at 4-15. On appeal, the Ohio Supreme Court affirmed the dismissal of the 26(B) application on untimeliness grounds only. Hoffner V, 860 N.E.2d at 1022-23.
This court's precedents guide our application of the Maupin test for procedural default when a Rule 26(B) motion has been denied for untimeliness. By the time Hoffner filed his Rule 26(B) motion in June 2006, "it was well established that claims of ineffective assistance of appellate counsel must be raised in a motion for reconsideration before the Ohio Court of Appeals." Monzo v. Edwards, 281 F.3d 568, 577 (6th Cir.2002) (considering whether Rule 26(B) was an independent and adequate state procedural rule as of May 1998). Since at least 1996, Ohio law has *505 provided sufficient guidance on what constitutes a "good cause" for a late filing under Rule 26(B). Id. at 578. Furthermore, as of January 1996, "the time constraints of Rule 26(B) were firmly established and regularly followed." Parker v. Bagley, 543 F.3d 859, 861 (6th Cir.2008) (discussing Fautenberry v. Mitchell, 515 F.3d 614, 641 (6th Cir.2008)) (emphasis omitted). Although we have, in prior cases, found Rule 26(B) not to be an adequate and independent ground on which to find procedural default, those precedents are not applicable here because Rule 26(B) was firmly established and regularly followed by June 2006.[4]See id. at 862 (applying the "firmly established and regularly followed" requirement "as of the time Rule 26(B) was to be applied"). Thus, we conclude that Hoffner has procedurally defaulted his claims of ineffective assistance of appellate counsel. Nevertheless, even if Hoffner's claims were not defaulted, each fails on the merits. See Fautenberry, 515 F.3d at 642 (analyzing the merits of a procedurally defaulted claim in the alternative).
The usual two-pronged analysis of ineffective-assistance claims under Strickland also governs claims of ineffective assistance of appellate counsel. Robbins, 528 U.S. at 285, 120 S.Ct. 746. Thus Hoffner must demonstrate that appellate counsel's decision not to raise the issues raised here was "below an objective standard of reasonableness" and that the deficiency caused a "reasonable probability" that "the result of the proceedings would have been different." Strickland, 466 U.S. at 688, 694, 104 S.Ct. 2052. "It is not required that an attorney argue every conceivable issue on appeal." Jones v. Barnes, 463 U.S. 745, 749, 103 S.Ct. 3308, 77 L.Ed.2d 987 (1983) (citation and quotation marks omitted). Rather, appellate counsel must "examine the record with a view to selecting the most promising issues for review." Id. at 752, 103 S.Ct. 3308. "Generally, only when ignored issues are clearly stronger than those presented, will the presumption of effective assistance of counsel be overcome." Robbins, 528 U.S. at 259, 120 S.Ct. 746 (citation and quotation marks omitted).
Because we are reviewing these claims under AEDPA, we must give the appropriate deference to "the last state court to issue a reasoned opinion on the issue." Payne v. Bell, 418 F.3d 644, 660 (6th Cir.2005); see also Joseph v. Coyle, 469 F.3d 441, 450 (6th Cir.2006) (citing Barrientes v. Johnson, 221 F.3d 741, 779 (5th Cir.2000) ("When the last state adjudication of the claim is silent or ambiguous, the federal court should look through to the last clear state decision on the matter.")). Further, we give AEDPA deference to a ruling on the merits despite the fact that the reasoning was given as an alternative to a primary ground for decisionin this case, the court of appeals's dismissal of the Rule 26(B) application as untimely. See Brooks v. Bagley, 513 F.3d 618, 625 (6th Cir.2008). Therefore, we will review the Ohio Court of Appeals's determination of the merits of the claims Hoffner raises here and accord that decision the appropriate deference under AEDPA.
A.
Hoffner first argues that appellate counsel were deficient for failing to argue that *506 the trial court erred by failing to instruct the jury on the meaning of "aggravating circumstances." Without a proper definition, Hoffner claims, the jury was left "with untrammeled discretion to impose or withhold the death penalty." Appellant Br. at 49-50 (citing Gregg v. Georgia, 428 U.S. 153, 196 n. 47, 96 S.Ct. 2909, 49 L.Ed.2d 859 (1976)). The Ohio Court of Appeals rejected the claim, relying on a prior case in which the exact same argument was raised and rejected. Hoffner IV, slip op. at 5-6. In State v. Hutton, the Ohio Supreme Court held that appellate counsel's decision not to argue that the trial court erred by not including a definition of "aggravating circumstances" was reasonable, especially considering the fact that, because trial counsel had not objected to the instructions, plain error review would have applied on appeal. 100 Ohio St.3d 176, 797 N.E.2d 948, 958-59 (2003). The court cited Robbins and Barnes and held that appellate counsel's decision not to raise the issue was not unreasonable. Id. at 959. Applying Hutton to Hoffner's claim, the Ohio Court of Appeals concluded that counsel's decision not to argue for the need for a definition of "aggravating circumstances" did not constitute deficient performance, as the issue was not "clearly stronger" than the numerous other issues counsel did raise, including other alleged defects in the jury instructions. See Hoffner IV, slip op. at 5-6.
Relying primarily on the same cases, the district court held that the Ohio Court of Appeals's decision was not an unreasonable application of federal law. Hoffner VI, slip op. at 36. We agree. Trial counsel's failure to object to the jury instructions meant that plain error review would have applied; appellate counsel's decision not to raise a waived issue was reasonable. Furthermore, as the district court explained, the Ohio Supreme Court's reweighing of the mitigating and aggravating factors would effectively cure any error caused by an improper definition of "aggravating circumstances." See id. at 36-37 (citing Slagle v. Bagley, 457 F.3d 501, 521 (6th Cir.2006)). Moreover, Hoffner cannot show that, even if appellate counsel was deficient for not having raised the claim, the result of the proceeding would have been different. Hoffner argues that the failure to provide this instruction was a "structural" defect in the trial under Arizona v. Fulminante, 499 U.S. 279, 309-310, 111 S.Ct. 1246, 113 L.Ed.2d 302 (1991). This is a mischaracterization of the trial court's omission. Structural defects affect "the framework within which the trial proceeds" and are not simply errors in the trial process itself, see id., such as a faulty jury instruction is. The Ohio court's resolution was not unreasonable. We affirm the district court's rejection of this sub-claim.
B.
Next, Hoffner claims that the prosecutor made several comments during closing argument at the penalty phase that improperly represented that the nature and circumstances of the offense could be considered an aggravating factor. At closing argument, the prosecutor stated:
Archie Dixon went through Chris' wallet and later both Mr. Hoffner and Mr. Dixon took and sold Chris' car. I don't think there's any question there's an aggravating circumstance, maybe more than one here.
Is there anything mitigating about the nature of circumstance of this crime? Is there anything mitigating, ladies and gentlemen, about trying to snap someone's neck, trying to snap his neck, leaving, digging a hole, coming back, walking him to the car, driving him there with other people, walking him down a path and taking him to his grave, is *507 there anything mitigating about that?...
Who benefited in this murder? I think the evidence is clear that Mr. Hoffner and Mr. Dixon sold Chris Hammer's car. He bought at least one car, and there are a couple of exhibits, State's Exhibit's, after the taking and selling of Chris Hammer's car, and then he initially lied to the police and blamed everything on Archie Dixon. Is there anything mitigating about the nature and circumstances of this crime, a planned, premeditated, calculated killing?
(emphasis added by Hoffner). Hoffner claims that these statements "allowed the jury unbridled discretion to consider any number of non-statutory aggravating factors." Appellant Br. at 51 (citing Zant v. Stephens, 462 U.S. 862, 878, 103 S.Ct. 2733, 77 L.Ed.2d 235 (1983)).
The Ohio Court of Appeals once again conducted plain-error review, as Hoffner's counsel had not objected at trial. Hoffner IV, slip op. at 8. As to the prosecutor's first comment, the state court reasoned that although "the prosecutor's reference to `more than one' aggravating circumstance technically may have been improper[,]... `[i]solated comments by a prosecutor are not to be taken out of context and given their most damaging meaning.'" Id. at 9 (quoting State v. Ahmed, 103 Ohio St.3d 27, 813 N.E.2d 637, 662 (2004)). As to the remainder of the statements, the court held that the remarks properly stated the law. Under Ohio law, the facts and circumstances of the offense must be examined to determine whether they are mitigating. Ohio Rev.Code Ann. § 2929.04(B). "Thus, a prosecutor may legitimately refer to the nature and circumstances of the offense, both to refute any suggestion that they are mitigating and to explain why the specified aggravating circumstance[s] outweigh mitigating factors." State v. Sheppard, 84 Ohio St.3d 230, 703 N.E.2d 286, 294 (1998). Therefore, the court of appeals reasoned, the prosecutor was justified in arguing to the jury that the nature and circumstances of Hoffner's crime should not be considered mitigating, and appellate counsel was not deficient for failing to raise the claim. Hoffner IV, slip op. at 10-11.
We agree with the district court that this conclusion was not an unreasonable application of federal law. The prosecutor's statements could hardly qualify as prosecutorial misconduct under Ohio law as they accurately reflected Ohio's rules on the use of aggravating and mitigating evidence. Therefore, appellate counsel's failure to raise the claim on appeal could not have been deficient, especially considering the plain-error review to which the claim would have been subject. We affirm the district court's decision on this sub-claim.
C.
Hoffner also argues that the trial court's instructions to the jury were erroneous in their explanation of the process by which the jury should weigh aggravating and mitigating evidence. First, he claims that the court omitted an instruction that the jury need not reach a unanimous decision as to the existence of any mitigating factor. The instructions read: "If the weight of the evidence is equally balanced, or if you are unable to determine which side of an issue has the preponderance as to any one or more of the mitigating factors, then the defendant has not established that mitigating factor or factors as the case may be." Hoffner argues that this instruction could have led the jurors to believe that they could not consider a mitigating factor unless all the jurors believed it had been proven, in violation of Mills v. Maryland, 486 U.S. 367, 384, 108 S.Ct. 1860, 100 L.Ed.2d 384 (1988).
*508 The Ohio Court of Appeals rejected this claim, concluding that the trial court in fact was properly instructing the court as to the defendant's burden to prove a mitigating circumstance by a preponderance, which is constitutionally valid. Hoffner IV, slip op. at 12 (citing State v. Tenace, 109 Ohio St.3d 255, 847 N.E.2d 386, 397 (2006)). In a prior case, we held that "requiring unanimity as to the presence of a mitigating factor"a process prohibited by Millsis a "far different matter" than requiring unanimity as to the results of the weighing. Coe v. Bell, 161 F.3d 320, 338 (6th Cir.1998) (emphasis omitted). Similarly, it is a far different matter than emphasizing that the defendant carries the burden of proving mitigating factors by a preponderance. "[F]ailing to expressly state that mitigating factors need not be unanimously found does not improperly imply that mitigating factors must be unanimously found." Williams v. Anderson, 460 F.3d 789, 808 n. 5 (6th Cir.2006). We affirm the district court's finding that the court of appeals's resolution of this sub-claim was not unreasonable.
Second, Hoffner contends that the district court erred by instructing the jury that it could consider penalties other than death only after finding that the prosecution failed to prove that the aggravating factors did not outweigh the mitigating factors. Hoffner does not cite a particular portion of the jury instructions where the trial court made such an error, but we will assume that he is referring to the same passage that he cited in his Rule 26(B) application. The instructions read:
If after a full and impartial consideration of all the evidence in this case you are firmly convinced that the aggravating circumstances outweigh the mitigating factors, then the State has established this beyond a reasonable doubt and your sentence recommendation should be death.
If you are not firmly convinced that the aggravating circumstances outweigh the mitigating factors, then your sentence recommendation must be life imprisonment with parole eligibility only after either 20 full years of imprisonment or 30 full years of imprisonment.
....
Now, in conclusion, as you shall recommend the sentence of death only if you unanimously, all 12 jurors, find by proof beyond a reasonable doubt that the aggravating circumstances outweigh the mitigating factors. If you do not so find, you should unanimously recommend either a life sentence with parole eligibility after serving 20 full years of imprisonment or a life sentence with parole eligibility only after serving 30 full years of imprisonment.
Hoffner claims that this instruction was faulty in requiring the jury to reject the death penalty before considering another option and that counsel was ineffective for failing to raise the claim. Appellant Br. at 56 (citing Mapes v. Coyle, 171 F.3d 408, 416-17 (6th Cir.1999)).
The Ohio Court of Appeals distinguished the instructions given here from an Ohio Supreme Court case prohibiting "acquittal-first" instructions. Hoffner IV, slip op. at 13-14. In State v. Brooks, 75 Ohio St.3d 148, 661 N.E.2d 1030, 1042 (1996), the Ohio Supreme Court "h[eld] that the jury need not unanimously reject the death penalty in order to recommend a life sentence." State v. Murphy, 91 Ohio St.3d 516, 747 N.E.2d 765, 793 (2001). But the instruction given in Brooks"You are now required to determine unanimously that the death penalty is inappropriate before you can consider a life sentence," Brooks, 661 N.E.2d at 1040is clearly distinguishable from the instructions in this case, which "state nothing about unanimously rejecting the death penalty nor do they state anything *509 about the order in which the jury should proceed," Hoffner IV, slip op. at 14.
We agree with the Ohio Court of Appeals that counsel was not deficient for failing to raise this state claim as the claim itself was meritless under Ohio precedent. The claim would have also failed under federal law. As it recently noted, the Supreme Court "ha[s] not ... previously held jury instructions unconstitutional" for requiring rejection of the death penalty first. Spisak, 130 S.Ct. at 684. The jury instructions here are substantively congruent to those in Spisak, in which the Court held the instructions not to be contrary to clearly established Supreme Court precedent. Id. The Ohio court's conclusion was not an unreasonable application of federal law, and we affirm the district court on this sub-claim.
D.
Finally, Hoffner claims that appellate counsel was ineffective for failing to raise a claim that trial counsel was ineffective for failing to object to the errors discussed here. Because we find none of the alleged underlying errors to be meritorious, trial counsel was not ineffective for failing to object. Therefore, appellate counsel's failure to raise the ineffective assistance issue was not constitutionally deficient. The Ohio Court of Appeals reached the same conclusion.
We therefore affirm the district court's denial of habeas on Hoffner's claim of ineffective assistance of appellate counsel.
VII.
In his fifth claim for relief, Hoffner contends that the police questioning that led to his arrest was conducted in violation of his Fifth Amendment rights under Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966), and that the trial court erred by failing to suppress the statements. Hoffner argues that the atmosphere at the house where he was initially questioned by the police was such that it constituted custodial interrogation necessitating a Miranda warning. According to Hoffner, because the police failed to give the warning at that time, later statements given in the police car and at the police station were so tainted that a mid-interrogation Miranda warning could not cure the violation. Appellant Br. at 60-61 (citing Missouri v. Seibert, 542 U.S. 600, 124 S.Ct. 2601, 159 L.Ed.2d 643 (2004)).
Hoffner properly preserved this issue for our review by raising it on direct appeal. See Hoffner II, 811 N.E.2d at 52. Under AEDPA, factual findings made by the state courts based on the trial record are entitled to a presumption of correctness that may be rebutted by clear and convincing evidence. 28 U.S.C. § 2254(e)(1); Warren, 161 F.3d at 360-61. The Ohio Supreme Court made extensive factual findings on this issue:
{¶ 17} On November 9, 1993, Hoffner and Dixon were living at Wilkerson's house. At approximately 11:00 a.m. on that date, Toledo police officers executed a search warrant at the Wilkerson residence and arrested Dixon for forgery.
{¶ 18} During the search, Lieutenant Charles Hunt discovered Hoffner covered with a blanket lying on a couch in the family room. Hunt, with his weapon drawn but pointed in the air, ordered Hoffner off the couch. Hunt then pulled the blanket away from Hoffner, holstered his weapon, and searched Hoffner for weapons. To prevent Hoffner from interfering while police searched the premises, Hunt asked Hoffner to sit in a nearby chair.
{¶ 19} Hunt and Detective Robert Leiter then searched the family room. During their search, the detectives asked Hoffner whether he knew anything *510 about Hammer's disappearance. Hoffner denied all knowledge of Hammer's whereabouts.
{¶ 20} After Hunt and Leiter completed their search of the family room, Hoffner asked to speak with them. Hoffner told police that Dixon and Hammer had gotten into an argument and that Dixon had "[taken] care of him," had buried Hammer's body in the woods, and had sold Hammer's car. At no point did Hoffner implicate himself.
{¶ 21} Once Hoffner had implicated Dixon, Hunt and Leiter asked whether Hoffner would go downtown to make a statement. Hoffner agreed. On the drive to the police station, Leiter told Hoffner that officers would begin searching the wooded area where Hoffner had said Hammer's body was buried and that any other information Hoffner had would be helpful. Leiter again asked whether Hoffner had had anything to do with Hammer's disappearance, and Hoffner said he had not. Hoffner subsequently asked the detectives to stop the car and indicated that he had additional information but said he did not want to get into trouble. Leiter told Hoffner that he could be charged with obstruction if he withheld information, but if he told the truth and was not involved in any crimes, he had nothing to worry about. At that point, Hoffner told the detectives where they could find Hammer's body.
{¶ 22} After leading the detectives to Hammer's grave, Hoffner again agreed to go to the police station to give a statement. On the way to the station, the detectives stopped at a fast-food restaurant, and Hoffner was given food and a drink. At the station, Leiter advised Hoffner of his Miranda rights but did not arrest him. Hoffner confirmed that he understood his rights and signed a waiver-of-rights form. At approximately 3:30 p.m., Hoffner gave a taped statement describing Dixon's murder of Hammer. After the interview, Leiter and Detective Phil Kulakoski drove Hoffner back to Wilkerson's house. Hoffner then packed his belongings and drove himself to his mother's house in Perrysburg.
{¶ 23} At approximately 7:30 p.m. on November 9, Dixon confessed to Hammer's murder and, in the process, implicated Hoffner. Shortly thereafter, police obtained an arrest warrant for Hoffner. After midnight on November 10, Kulakoski and Leiter arrested Hoffner at his mother's house.
{¶ 24} Detectives drove Hoffner to the police station, where they again read him Miranda warnings. Hoffner signed a waiver-of-rights form and gave a taped statement confessing to Hammer's murder.
Hoffner II, 811 N.E.2d at 52-53.
Addressing Hoffner's claim, the Ohio Supreme Court began by explaining that "Miranda warnings are not required simply because the questioning takes place in a coercive atmosphere." Id. at 54 (citing Oregon v. Mathiason, 429 U.S. 492, 495, 97 S.Ct. 711, 50 L.Ed.2d 714 (1977)). Rather, the court undertook analysis under Thompson v. Keohane, 516 U.S. 99, 112, 116 S.Ct. 457, 133 L.Ed.2d 383 (1995), and California v. Beheler, 463 U.S. 1121, 1125, 103 S.Ct. 3517, 77 L.Ed.2d 1275 (1983), to determine whether Hoffner would have felt that he was not at liberty to terminate the interview and leave. The court found that the police's initial questioning regarding Hammer's whereabouts consisted of "[g]eneral on-the-scene questioning" not subject to the Miranda warning requirement. Hoffner II, 811 N.E.2d at 54 (quoting Miranda, 384 U.S. at 477, 86 S.Ct. 1602). Further, the court found "no evidence that police officers coerced Hoffner into making any statements"; rather, *511 Hoffner "voluntarily offered information that Dixon had killed Hammer." Id. (citing Miranda, 384 U.S. at 478, 86 S.Ct. 1602). The court held that the police's initial instructions to Hoffner to stay in a specific location were reasonably necessary to secure the scene and did not place Hoffner in custody. Id.
The court also found that events after Hoffner left the Wilkerson house in the police vehicle did not constitute custodial interrogation. According to the Ohio Supreme Court, "Hoffner voluntarily agreed to go to police headquarters to give a taped statement. On the way to the station, Hoffner offered to direct police to the location of Hammer's body." Id. at 55. The court reasoned that "[b]ecause Hoffner was not under arrest or in custody..., police were not required to issue Miranda warnings." Id. As to the interrogations at the police station occurring both before and after his arrest, the court found that, in both instances, Hoffner voluntarily waived his Miranda rights in writing. Id. Therefore, the court concluded that "[a]ll of Hoffner's statements regarding Hammer's disappearance and murder were voluntarily made and properly admitted at trial." Id.
The district court found that "the Ohio Supreme Court correctly identified and reasonably applied federal precedent to this case's facts" and therefore denied habeas relief on this claim. Hoffner VII, slip op. at 53-54.
Hoffner argues that this was an unreasonable application of Supreme Court precedent. He claims that the initial questioning at the Wilkerson house was custodial because he was not free to leave after ten officers entered Wilkerson's house, and at least one officer pointed a gun at him and ordered him to stay in one place. He maintains that the questions he was asked at that point regarding Hammer's disappearance constituted interrogation. Hoffner argues that, because he gave incriminating statements to the police shortly thereafter and because his custody with the police was continuous until the time he gave his first statement, he could not have reasonably perceived the later questioning to be "new and distinct," which would have dissolved the taint of the earlier Miranda violation. Finally, he claims that the officers failed to ensure that, at the time he gave his confession, his earlier pre-Miranda statements could not be used against him, thus violating United States v. Pacheco-Lopez, 531 F.3d 420 (6th Cir. 2008).
The procedural safeguards outlined in Miranda apply only to suspects subject to "custodial interrogation." Miranda, 384 U.S. at 444, 86 S.Ct. 1602. This term was defined as "questioning initiated by law enforcement officers after a person has been taken into custody or otherwise deprived of his freedom of action in any significant way." Id. "[T]he only relevant inquiry" for determining whether an individual is in custody "is how a reasonable man in the suspect's position would have understood his situation." Berkemer v. McCarty, 468 U.S. 420, 442, 104 S.Ct. 3138, 82 L.Ed.2d 317 (1984). This requires that we resolve two questions: "[F]irst, what were the circumstances surrounding the interrogation; and second, given those circumstances, would a reasonable person have felt he or she was not at liberty to terminate the interrogation and leave." Keohane, 516 U.S. at 112, 116 S.Ct. 457 (footnote omitted). "Volunteered statements of any kind are not barred by the Fifth Amendment and their admissibility is not affected by [Miranda]." Miranda, 384 U.S. at 478, 86 S.Ct. 1602.
We find that the Ohio Supreme Court's ruling was neither contrary to nor an unreasonable application of clearly established *512 Supreme Court precedent. The circumstances surrounding the beginning of Hoffner's interaction with the police do not reflect any form of coercion or custody. Hoffner was present at Wilkerson's house when the police burst into the house to execute a search warrant. However, as the Ohio Supreme Court recognized, "[g]eneral on-the-scene questioning as to facts surrounding a crime or other general questioning of citizens in the fact-finding process is not affected by [the] holding [in Miranda]." Id. at 477, 86 S.Ct. 1602. Thus, the police did not need to give Hoffner Miranda warnings upon entering the house in order to ask basic investigatory questions. Hoffner's claim that the fact that one officer pointed a gun at him is unavailing as Hoffner made each of his statements incriminating Dixon entirely voluntarily and not in response to police questioning. At Wilkerson's house, Hoffner approached the officers to inform them that he had information as to Hammer's whereabouts. Hoffner then volunteered to go to the police station to give a statement. In the police vehicle on the way to the station, Hoffner volunteered that he knew the location of Hammer's body. Hoffner walked to Hammer's gravesite voluntarily, without coercion by the police officers. As noted above, volunteered statements do not implicate Miranda's protections. Further, Hoffner was properly Mirandized and waived his rights in writing before he gave his official statement at the police station. The same proper procedures preceded his eventual confession. Therefore, the Ohio Supreme Court correctly concluded that each of Hoffner's statements complied with the requirements of Miranda and its progeny.
As to Hoffner's argument that his earlier statements tainted his later taped confession, because none of the statements violated Miranda on its own, none of them can taint any later statements. Cf. Seibert, 542 U.S. at 606, 124 S.Ct. 2601. In any event, the facts of Seibert are easily distinguishable from this case. In Seibert, police had developed a protocol whereby they would interrogate a suspect, gain incriminating information, then give the proper Miranda warnings and re-question the suspect covering the same ground. Id. at 604, 124 S.Ct. 2601. The Supreme Court held that this technique rendered the Miranda warnings "ineffective," id. at 611, 124 S.Ct. 2601, and "likely to mislead and `depriv[e] a defendant of knowledge essential to his ability to understand the nature of his rights and the consequences of abandoning them,'" id. at 613-14, 124 S.Ct. 2601 (quoting Moran v. Burbine, 475 U.S. 412, 424, 106 S.Ct. 1135, 89 L.Ed.2d 410 (1986)) (alteration in original). Nothing in the facts of this case remotely resemble the police protocol invalidated in Seibert. In fact, Hoffner's case is much more similar to Oregon v. Elstad, 470 U.S. 298, 300-01, 105 S.Ct. 1285, 84 L.Ed.2d 222 (1985), in which a suspect was questioned without proper warnings at his home, made an incriminating statement, then was taken to the police station, properly warned, waived his rights, and made a full confession. The Supreme Court held that the confession was admissible because no taint attached to an incriminatory statement given without "any actual coercion or other circumstances calculated to undermine the suspect's ability to exercise his free will." Id. at 309, 105 S.Ct. 1285. The initial unwarned statement was suppressed, but all later statements were subject to the standard voluntariness inquiry. Id.
The Ohio Supreme Court's application of federal law in affirming the admission of Hoffner's statements was thus reasonable. We therefore affirm the district court's denial of the writ on this ground.
VIII.
In his last assignment of error, Hoffner claims that the prejudicial effect *513 of the various errors that we have individually rejected become, in the aggregate, a constitutional violation. First, Hoffner has defaulted this issue by not raising it on direct appeal. Although he did argue cumulative error in his post-conviction petition, see Hoffner III, 2002 WL 31162813, at *6, that claim involved a substantially different set of underlying claims and thus does not preserve the issue for our review. Even so, as Hoffner recognizes in his brief, we have previously held that "post-AEDPA, not even constitutional errors that would not individually support habeas relief can be cumulated to support habeas relief." Moore v. Parker, 425 F.3d 250, 256 (6th Cir.2005); see also Appellant Br. at 74 n.3. We therefore affirm the district court's denial of habeas relief on this claim.
IX.
For the reasons discussed above, we affirm the judgment of the district court and deny Hoffner's petition for a writ of habeas corpus.
NOTES
[1] On direct appeal, Hoffner raised a claim that counsel failed to file a post-hearing brief in support of his motion to suppress statements made to the police. See Hoffner II, 811 N.E.2d at 56. That claim is distinct from the suppression claim raised here.
[2] Although Hoffner did not raise this defense in his principal brief, he did raise it in his reply brief in response to the government's assertion of procedural default in its brief.
[3] Before the district court, Hoffner pointed to the affidavit of juror Eve Gimple, but he has not done so here.
[4] For this reason, Hoffner's reliance on Franklin v. Anderson, 434 F.3d 412 (6th Cir. 2006), is misplaced. In Franklin, the Rule 26(B) motion was filed on June 30, 1993, one day before Rule 26(B) went into effect. Id. at 418. We determined that applying Rule 26(B)'s timeliness requirement to cases filed before the effective date of the rule would give the rule impermissible retroactive effect, a holding with no application to Hoffner's case. Id. at 420.
| {
"pile_set_name": "FreeLaw"
} |
10-4734-cr
United States v. Hiralall
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held
at the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of
New York, on the 30th day of December, two thousand eleven.
PRESENT: REENA RAGGI,
SUSAN L. CARNEY,
Circuit Judges,
MARK R. KRAVITZ,
District Judge.*
-------------------------------------------------------------------------------------
UNITED STATES,
Appellee,
v. No. 10-4734-cr
MEERADAI HIRALALL,
Defendant-Appellant,
v.
AMAR KUMAR BALKARAN,
Defendant.**
-------------------------------------------------------------------------------------
*
Judge Mark R. Kravitz of the United States District Court for the District of
Connecticut, sitting by designation.
**
The Clerk of the Court is directed to amend the official caption to read as shown
above.
FOR APPELLANT: Frederick H. Cohn, Esq., New York, New York.
FOR APPELLEE: Winston M. Paes, Susan Corkery, Assistant United States
Attorneys, Of Counsel, for Loretta E. Lynch, United States
Attorney for the Eastern District of New York, Brooklyn, New
York.
Appeal from a judgment of the United States District Court for the Eastern District
of New York (Sandra L. Townes, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment entered on November 15, 2010, is AFFIRMED.
Defendant Meeradai Hiralall, who was sentenced to 24 months’ imprisonment, three
years’ supervised release, and $1,435,307.11 in restitution for her commission of food stamp
fraud, see 7 U.S.C. § 2024(c), challenges the restitution component of her judgment on the
grounds that (1) her fraudulent conduct did not cause the United States any loss, and (2) the
district court failed to consider her ability to pay. “We review an order of restitution
deferentially, and we will reverse only for abuse of discretion. To identify such abuse, we
must conclude that a challenged ruling rests on an error of law, a clearly erroneous finding
of fact, or otherwise cannot be located within the range of permissible decisions.” United
States v. Aumais, 656 F.3d 147, 151 (2d Cir. 2011) (internal quotation marks omitted). We
assume familiarity with the underlying facts and record of prior proceedings, which we
reference only as necessary to explain our decision to affirm.
2
1. Loss to the United States
Hiralall pleaded guilty to orchestrating a scheme whereby, as the proprietor of a
grocery store approved to participate in the federal food stamp program, she bought food
stamps with cash, usually paying only a fraction of the full value that she received from the
United States upon redemption. Although Hiralall admits that the United States was the
victim of her fraud and that she diverted $1,435,307.11 in food stamps from their intended
use, she maintains that she should not have been ordered to pay restitution under 18 U.S.C.
§ 3663 because the United States did not sustain a loss. As Hiralall reasons, regardless of
whether food stamp recipients use their benefits legitimately or illegitimately, the United
States receives nothing in return; therefore, “the government, in terms of pecuniary loss, was
in exactly the same position after the fraud, that it would have been had there been no fraud.”
Def.’s Br. 6.
This court has previously rejected this argument, holding that when food stamps are
converted into cash, the United States suffers a loss because federal program benefits are
diverted from their intended use. See United States v. Uddin, 551 F.3d 176, 179–81 (2d Cir.
2009) (affirming district court’s restitution order calculating total loss caused by food stamp
fraud in terms of the estimated amount of food stamps converted into cash); United States
v. Cheng, 96 F.3d 654, 657–58 (2d Cir. 1996) (affirming district court’s order of restitution
based on “actual loss” to United States, i.e., amount of government benefits diverted from
intended use). Thus, the district court appropriately determined that the government
sustained a loss and that Hiralall should pay restitution under 18 U.S.C. § 3663.
3
2. Ability to Pay
Hiralall contends that the district court erred by failing to consider her ability to pay.
See 18 U.S.C. § 3663(a)(1)(B)(i) (“The court, in determining whether to order restitution
under this section, shall consider . . . the financial resources of the defendant [and] the
financial needs and earning ability of the defendant and the defendant’s dependents . . . .”).
Hiralall did not raise this objection at sentencing, and we therefore review for plain error.
See United States v. Marino, 654 F.3d 310, 316 (2d Cir. 2011). We identify no such error
here because the district court considered Hiralall’s ability to pay restitution.
Specifically, the district court adopted the Presentence Investigation Report’s (“PSR”)
findings, with one amendment in defendant’s favor, regarding Hiralall’s net worth and
monthly cash flow. See United States v. Thompson, 113 F.3d 13, 15 (2d Cir. 1997) (stating
that district court’s adoption of PSR that adequately sets forth defendant’s financial resources
and earning ability “tends to support a finding that the court in fact considered the [statutory]
factors” (internal quotation marks omitted)). The PSR’s amended findings establish that
Hiralall had a net worth of $275,761.20, and Hiralall did not submit opposing evidence of
restricted future earning capacity. See United States v. Ben Zvi, 242 F.3d 89, 100 (2d Cir.
2001) (“[I]n the absence of a defendant showing a restricted future earnings potential by a
preponderance of the evidence, it is entirely reasonable for a district judge to presume future
earnings in ordering restitution.”). Finally, the district court imposed a payment
schedule—$25 per quarter while in custody, and 10% of her monthly gross income upon
release—that accommodated Hiralall’s inability to pay the restitution immediately. In sum,
4
the district court satisfied its § 3663(a)(1)(B)(i) obligation to consider Hiralall’s ability to pay
in ordering restitution.
3. Conclusion
For the foregoing reasons, the judgment of conviction is AFFIRMED.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, Clerk of Court
5
| {
"pile_set_name": "FreeLaw"
} |
123 U.S. 67 (1887)
ORIENT INSURANCE COMPANY
v.
ADAMS.
Supreme Court of United States.
Argued April 13, 1887.
Decided October 24, 1887.
ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR THE WESTERN DISTRICT OF PENNSYLVANIA.
*68 Mr. James Lowndes for plaintiff in error.
Mr. D.T. Watson for defendant in error. Mr. Isaac Vanvoorhis was with him on the brief.
MR. JUSTICE HARLAN delivered the opinion of the court.
This writ of error brings up for review a judgment against the Orient Mutual Insurance Company of New York upon a policy whereby that company insured the defendants in error in the sum of five thousand dollars, on the steamer Alice, of the agreed valuation of $27,000, against perils "of the seas, lakes, rivers, canals, fires, and jettisons that should come to the damage of said vessel or any part thereof."
The policy provided, among other things, that the company should be free from all claim for loss or damage "arising from or caused by ... barratry, ... or occasioned by the bursting of boilers, the collapsing of flues, explosion of gunpowder, the derangement or breaking the engine or machinery, *69 or any consequence resulting therefrom, unless the same be caused by unavoidable external violence;" that there should be "no abandonment as for a total loss on account of said vessel grounding or being otherwise detained, or in consequence of any loss or damage, unless the injury sustained be equivalent to fifty per centum of the agreed value in this policy; that the aforesaid vessel is, and shall be at all times during the continuance of this policy, tight and sound, sufficiently found in tackle and appurtenance thereto, competently provided with masters, officers, and crew, and in all things and means for the safe employment thereof;" and that "in no case whatever shall the assured have the right to abandon until it shall be ascertained that the recovery and repairs of said vessel are impracticable, nor sell the wreck, or any portion thereof, without the consent of the company."
The insured sued as for a total loss arising from one of the perils specified in the policy.
The company pleaded non assumpsit and payment, with leave to give in evidence the matters set forth in its affidavit of defence, which was adopted as a special plea. Those matters will sufficiently appear from the facts which will now be stated.
According to the bill of exceptions, there was evidence in behalf of the plaintiffs tending to show that, without wilfulness or design on the part of her captain, the vessel was carried, April 28, 1880 before the expiration of the policy over the falls of the Ohio River, at Louisville, Kentucky, and sunk, receiving damage in a sum equal to fifty per centum of her agreed value; and that on the 18th of May, 1880, it being apparently impracticable to float her off and repair her, the vessel was abandoned to the insurers as a total loss, and the sum due under the policy demanded.
The evidence introduced by the company tended to establish these facts: The master of the Alice was C.F. Adams, one of the assured, and a son of the other plaintiff. Before the sailing of the vessel he had the reputation of being a "drinking" man, and of that fact his father was informed. On her arrival at Louisville, on the morning of April 28, 1880, *70 the master gave the usual signal (which was transmitted to the engineer) that he had no present need of the engines. The joint of the mud valve was out of order, threatening damage to the freight, and making repairs necessary. The steam was thereupon blown off in order to make repairs. The captain, coming on board, saw that repairs were going on, and knew that the mud valve connected with the boiler needed repairs. The work of repairing made it necessary to blow off steam. The captain subsequently went on deck, and, without making inquiry of the engineer as to the condition of the steam or receiving any notice from him that steam was ready, tapped his bell at about 8.30 A.M. as a signal to let go the boat. At that time there was not sufficient steam to propel the vessel. It is the custom of the river for the master, before giving the order to let go, to inquire of the engineer as to the condition of the steam, and await his reply that the steam is ready before giving the order to let go. At the time of the accident the vessel was in a position to be carried over the falls, if she was let go without steam on. Upon being let go she was carried by the current down the river and over the falls, and, striking a pier, was badly damaged; in consequence of which she sunk soon thereafter below the bridge in about eighteen feet of water.
There was, also, evidence in behalf of the company, tending to show that the vessel was but slightly injured, and, in the spring of 1881, was floated and removed from the place at which she sunk, and put in the condition in which she was before sinking, for a sum little less than $6000; that when she was raised, the plaintiffs refused to pay the expense thereof; that after May 18, 1880, the plaintiffs sold her furniture and apparel without the company's consent, and that on or about the 28th of April, 1880, they put her into the possession of the Cincinnati Underwriters' Wrecking Company, which thereafter had the right of possession until the vessel was seized by the United States marshal under process, in December, 1880, upon maritime liens.
To further maintain the issues on its behalf the defendant the bill of exceptions states produced in evidence an exemplification *71 of the record of a certain cause, entitled "Cincinnati Underwriters' Company against The Steamer Alice," &c., in the United States District Court for the District of Kentucky, as tending to show that after the 18th May, 1880, the claimants, by the answers and petitions in that suit, claimed to be the owners of the vessel, her furniture, and apparel; that the Alice was subject to maritime liens, in a considerable sum, existing on the 18th of May, 1880; that she was sold under a decree to satisfy the same, the plaintiffs receiving a part of the proceeds of sale; that the plaintiffs admitted that she was slightly damaged, and they had refused, after she was raised, to pay the expense of raising her.
Thereupon the plaintiffs offered evidence tending to show that "it was the custom of the river that the engineer should give notice to the captain before exhausting steam, and that it was not the custom for the captain to have notice from the engineer that steam was ready before giving the order to let go."
The plaintiffs, in further reply, offered to prove by the plaintiff, C.F. Adams, "that the steamer, at the time of loss, was insured in seven companies for a total insurance of eighteen thousand dollars, and, after the notice of abandonment, six of them, representing an insurance of $13,000.00, settled with the insured, and, as part of the settlement, released to the latter all interest in the steamer as she lay; that, after the marshal's sale of the boat, the plaintiffs claimed to own the 13/18 of the proceeds of sale, and that when the claim for the entire proceeds was made it was as to form, under the advice of counsel; but the plaintiffs did not intend thereby to waive the abandonment theretofore made, or to keep, as against the Orient Insurance Company, the 5/18 of the proceeds of sale." This was offered as bearing upon the question of waiver of abandonment of the Alice; to which offer the defendant objected; but the objection was overruled and the testimony of the witness admitted. The defendant excepted to the overruling of the objection and to the admission of the testimony.
The first assignment of error relates to the instructions upon the general question whether the insured, by anything done or *72 omitted to be done, had defeated their right to recover on the policy. The court, at the request of the plaintiffs, and against the objections of the company, instructed the jury that "where a loss under a policy of insurance, such as the one in suit, happens from the perils of the river, it is not a defence to the insurance company that the remote cause of loss was the negligence of the insured or his agents;" and that "the mere fault or negligence of the captain of the vessel by which the Alice was drifted into the current and drawn over the falls, will not constitute a defence for the company, unless the jury should be satisfied that the captain acted fraudulently or wilfully, with design in so doing." The theory of the defence was disclosed by the request to instruct the jury that if they "are satisfied from the evidence that the accident and loss was caused by the misconduct of Captain Charles F. Adams, that then the plaintiff cannot recover." This request was denied, but the court said to the jury: "This is true if the jury is satisfied that the conduct of the captain is properly characterized. If he designedly or recklessly exposed the vessel to the dangers of navigation at the falls, knowing that she was not in a condition to encounter them, he was guilty of misconduct such as would relieve the defendant from liability; but if the proximate cause of the loss was the stranding of the vessel, this was covered by the policy, and the defendant is not relieved from liability by showing that the loss was remotely ascribable to the negligence of the captain or the other officers or employes."
We do not perceive anything in these instructions of which the insurance company can rightfully complain. The court proceeded upon the ground that, if the efficient and, therefore, proximate cause of the loss was a peril of the river, the company could not escape liability by showing that the loss was remotely caused by mere negligence in not ascertaining, before giving the signal to let the vessel go, that she had steam enough for her proper management. The court committed no error in so ruling. In Columbia Ins. Co. v. Lawrence, 10 Pet. 507, 518, which was a case of insurance against fire on land, the court said that "a loss by fire, occasioned by the mere fault *73 or negligence of the assured, or his servants or agents, and without fraud or design, is a loss within the policy, upon the general ground that the fire is the proximate cause of the loss, and also upon the ground that the express exceptions in policies against fire leave this within the scope of the general terms of such policies." In the subsequent case of Waters v. Merchants Louisville Ins. Co., 11 Pet. 213, 224, it was said in reference to the case of Columbia Ins. Co. v. Lawrence, that "the court then thought that in marine policies, whether containing the risk of barratry or not, a loss whose proximate cause was a peril insured against, is within the protection of the policy; notwithstanding it might have been occasioned remotely by the negligence of the master and mariners." To the same effect are Patapsco Ins. Co. v. Coulter, 3 Pet. 222, 237; General Mut. Ins. Co. v. Sherwood, 14 How. 352; and Phnix Ins. Co. v. Erie Transportation Co., 117 U.S. 312, 325.
But it is insisted that the court should have granted the request of the company to the effect that it was not liable if the accident and loss were caused by the "misconduct" of the master. Had that request been granted, in the form asked, the jury might have supposed that the company was relieved from liability if the master was chargeable with what is sometimes described as gross negligence as distinguished from simple negligence. Hence the court properly said, in effect, that the misconduct of the master, unless affected by fraud or design, would not defeat a recovery on the policy. The principle upon which the court below acted was that expressed by Chief Justice Gibson in American Ins. Co. v. Insly, 7 Penn. St. 223, 230, when he said that "public policy requires no more than that a man be not suffered to insure against his own knavery, which is not to be protected or encouraged by any means; for though the maximum respondeat superior is applicable to the responsibility of a master for the acts of his servants, yet the insured, so long as he acts with fidelity, is answerable neither for his servants nor for himself." Williams v. Suffolk Ins. Co., 3 Sumner, 270, 276.
The next assignment of error is that the court erred in ruling that the loss was not within the express exceptions of the *74 policy. The specification, under this assignment, is that the loss was the consequence of the derangement of the mud valve, and, therefore, within the exception that the company should be free of all claim for loss or damage occasioned by "the derangement or breaking of the engine or machinery, or any consequence resulting therefrom." The "consequence" here referred to is an immediate or proximate, not a remote consequence. Even if the mud valve is a part of the machinery of the vessel, within the meaning of the policy, its derangement cannot be said to have been the proximate cause of the loss. So far as the bills of exception show, the repairs of the mud valve had been completed before the order was given to let the vessel go.
It is also contended that the court erred in its instructions as to the abandonment of the vessel by the plaintiffs. The court told the jury, in substance, that the assured were entitled to abandon the vessel, if, on May 18, 1880, it was impracticable to recover and repair it, and if the damage from the perils of the river amounted to fifty per cent of the agreed value; that the right to abandon was to be determined from the facts as they existed on that day; that if the right then existed, and the plaintiffs availed themselves of it, the subsequent floating off of the vessel in the winter or spring of 1881 would not change the result; and that, in determining whether the injuries to the vessel from the perils of the river were to the extent of fifty per cent of her agreed value, the jury should take into consideration the "place where the Alice lay, and the uncertainty as to when (if at all) a rise would come to float her off, and all other circumstances in the case."
The argument in behalf of the company is that these instructions disregarded the express terms of the contract between the parties; that while the rule laid down by the court made the probability of the stipulated loss, at the time of abandonment, the test of the right to abandon, the policy made the actual existence of the stipulated proportion of loss the ground of the exercise of that right. We do not think the court mistook the meaning of the contract or erroneously instructed the jury. The jury were distinctly told that the right to *75 abandon depended upon the fact that it was impracticable to recover and repair the vessel. But how were the jury to determine the existence of that fact? The contract provided as a condition precedent to the right to abandon that it be "ascertained that the recovery and repairs of said vessel are impracticable." But in what mode ascertained? How was the insured to determine whether the recovery and repair of the vessel were impracticable at the time of abandonment? Why, manifestly, as the jury were told, by taking into consideration where the vessel lay, the uncertainty as to when (if at all) a rise would come to float her off, and all the other attendant circumstances. While the damage must at the time have been equivalent to fifty per cent of the agreed value, and while the fact that the repairs subsequently made amounted to only $6000 tended to show that the actual damage was not so great as claimed, that fact is not decisive of he right to abandon. For, as said in Bradlie v. Maryland Ins. Co., 12 Pet. 378, 397, "If the abandonment when made is good, the rights of the parties are definitively fixed; and do not become changed by any subsequent events. If, on the other hand, the abandonment when made is not good, subsequent circumstances will not affect it, so as, retroactively, to impart to it a validity which it had not at its origin." Rhinelander v. Ins. Co., 4 Cranch, 29; Marshall v. Delaware Ins. Co., 4 Cranch, 202.
Again: "In many cases of stranding, the state of the vessel at the time may be such, from the imminency of the peril, and the apparent extent of expenditures required to deliver her from it, as to justify an abandonment; although, by some fortunate occurrence, she may be delivered from her peril, without an actual expenditure of one-half of her value after she is in safety. Under such circumstances, if, in all human probability, the expenditures which must be incurred to deliver her from her peril, are, at the time, so far as any reasonable calculations can be made, in the highest degree of probability, beyond half value; and if her distress and peril be such as would induce a considerate owner, uninsured, and upon the spot, to withhold any attempt to get the vessel off, because of *76 such apparently great expenditures, the abandonment would doubtless be good." 12 Pet. 398.
In the same case the court quote with approval the following language of Kent:
"The right of abandonment does not depend upon the certainty, but on the high probability of a total loss, either of the property or of the voyage, or both. The insured is to act, not upon certainties, but upon probabilities, and if the facts present a case of extreme hazard and of probable expense, exceeding half the value of the ship, the insured may abandon; though it should happen that she was afterwards recovered at a less expense." 3 Kent Ccm. 321.
In this connection it is assigned for error that the court erred in ruling that the fact of the actual repair of the vessel for less than fifty per centum of her agreed value was not evidence relevant to the issue as to the amount of damage done to the Alice. This statement as to the ruling of the court is scarcely accurate. The court refused, and properly, to tell the jury that the fact that the vessel was recovered and repaired was "the best evidence" that it was practicable to recover and repair it. That fact, however, went to the jury as evidence, and they were at liberty, under the instructions, to give it due weight in connection with all the other circumstances, in determining whether the recovery and repair of the vessel were, within the principles announced in other instructions, impracticable at the time of the abandonment.
Upon the whole case we are of opinion that no error of law was committed to the prejudice of the company, and the judgment is
Affirmed.
| {
"pile_set_name": "FreeLaw"
} |
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 95-40858
HUBERT D. GALLIEN,
Plaintiff-Appellant,
versus
CORRECTION CORPORATION OF AMERICA;
JOE HINOJOSA
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of Texas
L-95-CV-4
June 18, 1996
Before GARWOOD, HIGGINBOTHAM, and BENAVIDES, Circuit Judges.
PER CURIAM*:
Texas prisoner Hubert Gallien, proceeding pro se, sued the
Correction Corporation of America and CCA Warden Joe Hinojosa under
42 U.S.C. § 1983, alleging that they had denied him his right of
access to the courts. The district court granted summary judgment
for the defendants. We affirm.
Texas prisoner Hubert Gallien was incarcerated from September
1993 until August 1994 by the Correction Corporation of America in
*
Pursuant to Local Rule 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 Local Rule 47.5.4.
Cuero, Texas.1 Gallien arrived at CCA in September 1993 following
his conviction in Texas state court. After the Fourteenth Court of
Appeals affirmed his conviction in November 1993, Gallien sought
legal assistance at CCA because he wanted to file a Petition for
Discretionary Review with the Texas Court of Criminal Appeals to
challenge the admission of his post-arrest, voluntary statement,
which was used to impeach his trial testimony. The filing deadline
for Gallien's PDR was December 30, 1993. According to Gallien, he
was unable to file his PDR in time because neither a law library
nor legal assistance was available.
Gallien contacted Diaz, a man he believed was a CCA attorney,
but Diaz could not give him any information. Gallien also sent CCA
Warden Joe Hinojosa several requests for a transfer to the Texas
Department of Criminal Justice, but received no response. Gallien
then gave a letter for Warden Hinojosa to a kitchen worker who saw
Warden Hinojosa daily. The kitchen worker later relayed a verbal
message from the warden that Gallien would be in the next transfer
to TDCJ. Gallien followed up by filing a formal grievance seeking
a transfer to TDCJ or another facility with a law library. A month
later, Gallien was transferred to TDCJ. He then filed a motion for
an extension of time to file his PDR, but his motion was denied.
1
Though CCA is a private corporation, state action exists
because CCA has contracted with the State of Texas to operate and
manage state prison facilities. See West v. Atkins, 487 U.S. 42,
55-56 (1988) (holding that private doctor who contracted with state
prison to provide medical care to prisoners was state actor because
his actions were fairly attributable to state).
2
Gallien, pro se, sued CCA and Warden Hinojosa under 42 U.S.C.
§ 1983, alleging that they denied him his constitutional right of
access to the courts by failing to provide him with adequate legal
assistance or a law library. Gallien seeks money damages, an order
that CCA install a law library or some other adequate system, and
an order that CCA relieve Warden Hinojosa of his position.
The district court referred Gallien's action to a magistrate
judge, who conducted a Spears hearing. The defendants moved for
summary judgment, arguing that Gallien received written notice that
a CCA attorney, Oliver Canales, was available to help him, and that
Gallien did not contact Mr. Canales. The defendants also asserted
that another inmate informed Gallien of the PDR procedure, and that
Gallien declined to pursue it. Gallien responded by urging, inter
alia, that he could not ask for specific legal materials because he
did not know what to request without consulting a law library.
The magistrate judge ruled that Gallien could not prove that
he was legally prejudiced because there was no merit to the claim
he sought to raise in the PDR. The magistrate judge recommended
that the district court grant summary judgment for the defendants.
Gallien filed objections to the magistrate judge's report and
recommendation. He argued that CCA had no law library, and that
there was a genuine fact issue as to whether there was a meaningful
alternative to a law library. Gallien asserted that there was no
attorney at CCA, and that it was impossible to research his case by
requesting law books because each request took six or seven days to
3
fill. Gallien argued that he was legally prejudiced because he was
unable to file a timely PDR; he insists that the magistrate judge
could not forecast what the Texas Court of Criminal Appeals would
do about his claim.
The district court overruled Gallien's objections and granted
summary judgment for the defendants, dismissing Gallien's claims
with prejudice. It issued a memorandum stating that the summary
judgment evidence showed that CCA provided legal assistance upon
request, and that Gallien knew how to request such assistance. The
court stated further that Gallien was not prevented from preparing
his PDR without a law library, noting Gallien's ability to prepare
this § 1983 action.
Though we agree with Gallien that the magistrate judge erred
in analyzing his claim of legal prejudice in terms of the weakness
of the merits of his proposed PDR claim, we nevertheless conclude
that the summary judgment evidence is insufficient as a matter of
law to establish that Gallien was legally prejudiced. "While the
precise contours of a prisoner's right of access to the courts
remain somewhat obscure, the Supreme Court has not extended this
right to encompass more than the ability of an inmate to prepare
and transmit a necessary legal document to the court." Brewer v.
Wilkinson, 3 F.3d 816, 821 (5th Cir. 1993), (footnote omitted),
cert. denied 114 S. Ct. 1081 (1993).2 Further, the prisoner "must
2
The Supreme Court recently heard argument in a case involving
the scope of a prisoner's right of access to the courts. Casey v.
4
have demonstrated that his position as a litigant was prejudiced by
his denial of access to the courts." Eason v. Thaler, 73 F.3d
1322, 1328 (5th Cir. 1996); see also Henthorn v. Swenson, 955 F.2d
351, 354 (5th Cir.), cert. denied, 504 U.S. 988 (1992) ("A denial-
of-access-to-the-courts claim is not valid if a litigant's position
is not prejudiced by the alleged violation.").
Here, Gallien claims that he was legally prejudiced because
the denial of access to the courts left him unable to file a timely
PDR, or to seek an extension to do so. There is no evidence,
however, that CCA's action or inaction precluded Gallien from
ascertaining the limitations period for filing his PDR or from
timely contacting the Fourteenth Court of Appeals to explain his
position or to seek an extension. Hence, even assuming that CCA
did not provide Gallien with adequate legal services or a law
library, there is insufficient summary judgment evidence to raise
a fact issue as to whether Gallien was legally prejudiced by CCA's
shortcomings. The evidence establishes as a matter of law that
Gallien's legal position was prejudiced by his own failure to take
the necessary action to file a timely appeal, not by CCA's denial
of legal assistance.
Lewis, 43 F.32 1261 (9th Cir. 1994), cert. granted, Lewis v. Casey,
115 S. Ct. 1997 (1995) (argued November 1995). The issue in Lewis
was whether access to an adequate law library but without trained
legal counsel satisfies a prisoner's right of access to the courts.
Since we conclude that Gallien suffered no legal prejudice, his
claim fails even if the defendants otherwise denied him adequate
access to the courts.
5
| {
"pile_set_name": "FreeLaw"
} |
55 F.Supp.2d 1314 (1999)
BELLSOUTH TELECOMMUNICATIONS, INC., d/b/a Southern Bell Telephone and Telephone Company/South Central Bell, Plaintiff,
v.
Robert KERRIGAN, George W. Estess, and 811, Inc., Defendants.
No. 3:97CV554.
United States District Court, N.D. Florida, Pensacola Division.
May 28, 1999.
*1315 Scott A Markowitz, Heinrich Gordon Hargove Etc., FT Lauderdale, Cathy J Goodwin, Heinrich Gordon Hargrove Etc, Orlando, for plaintiff.
Dennis K. Larry, Clark Partington Hart Etc., Pensacola, David Lafuria, Lukas Nace Gutierrez Etc., Washington, DC, Damian Christopher Taylor, Clark Partington Etc., Pensacola, for defendants.
*1316 ORDER
VINSON, Chief Judge.
Pending is the plaintiff's motion for summary judgment. (doc. 48) Also pending is the defendants' motion for partial summary judgment. (doc. 79)
I. BACKGROUND
In 1992, plaintiff BellSouth Telecommunications, Inc. ("BellSouth") introduced a new "N11" service in the state of Florida. The N11 service is a three-digit local dialing arrangement available in specified areas for the delivery of general information over the telephone. BellSouth made available for assignment in specified areas the N11 telephone numbers 211, 311, 511, 711, and 811. N11 Subscribers who contracted with BellSouth and were assigned an N11 number could provide information services and charge end users for calls, while BellSouth would record and rate the calls on behalf of the subscribers. Only one N11 number could be assigned to an N11 subscriber per local calling area. The intended target market for the service consisted of subscribers making available on a pay-per-call basis such information as sports scores, weather, time, stock quotes, and classified services. Service in Florida was to be offered in specified local calling areas, with area designations ranging from Tier 1 (highly-populated areas) to Tier 4 (the least-populated areas).
The various telephone services provided by BellSouth in Florida are governed by the Florida General Subscriber Service Tariff ("Tariff"), as approved by the Florida Public Service Commission ("PSC"). BellSouth filed a modification to the Tariff consisting of Section A.39, a section that set forth the service requirements and conditions of N11 abbreviated dialing. (doc. 48, ex. D) The Florida Public Service Commission approved the A.39 tariff on November 4, 1992. (doc. 48, ex. E)
In 1994, defendant Robert Kerrigan and his partner, defendant George Estess, decided to apply to BellSouth for the ability to provide N11 service in multiple regions in the state of Florida. The defendants requested "811" as their three digit dialing code. The defendants signed letters of agreement with BellSouth for seven N11 lines in Florida, and received copies of the BellSouth General Service Subscriber Tariff, which was incorporated into the agreements by reference. The defendants incorporated 811, Inc. for the purpose of operating the N11 business. To provide information to callers, the defendants ordered a satellite-based information system, and hardware was installed in several locations in Florida.
Under the Tariff, a "minimum usage charge" is incurred by an N11 provider if six months after the N11 line is installed, the line usage has not risen to a specified level. The parties dispute whether the charge is a one-time charge or a monthly charge. In 1995, the plaintiff billed the defendants monthly for minimum usage charges on all the N11 sites operated by the defendants. The defendants paid the charge for one month for each site. (Miller dep., at 40-41) The plaintiff billed the defendants for minimum usage charges for subsequent months on the sites, and the defendants refused to pay the charges on the basis that the minium usage charge was a one-time charge, rather than a monthly charge.
BellSouth continued to apply minimum usage charges to 811, Inc., and after five months of non-payment BellSouth informed 811, Inc. that service would be disconnected if the balance owed was not immediately paid. On May 30, 1996, an attorney for BellSouth sent 811, Inc. a letter stating that according to BellSouth's interpretation of the tariff, 811, Inc. was required to pay minimum usage charges for every period in which 811, Inc. fell below the minimum usage charges, and that 811, Inc. had an outstanding balance of $85,474. (doc. 48, ex. K) The telephone lines were eventually disconnected on the basis that 811, Inc. had made no arrangements to pay the outstanding balance.
*1317 The plaintiff filed the present action on December 29, 1997, and filed an amended complaint on May 21, 1998. (doc. 27) Count I alleges breach of contract. Count II, entitled "Statement of Account," alleges that the defendants owe the plaintiff $107,730.28 and $14,608.39 on two accounts. In their counterclaim, the defendants alleged that plaintiff breached the N11 agreements by improperly cutting off the defendant's N11 service without prior notice.
II. ANALYSIS
A. Summary Judgment Standard
A motion for summary judgment should be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Rule 56(c), Fed.R.Civ.P. "[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265, 273 (1986); see also Everett v. Napper, 833 F.2d 1507, 1510 (11th Cir.1987).
However, summary judgment is improper "[i]f a reasonable fact finder could draw more than one inference from the facts, and that inference creates a genuine issue of material fact." Cornelius v. Highland Lake, 880 F.2d 348, 351 (11th Cir.1989), cert. denied, 494 U.S. 1066, 110 S.Ct. 1784, 108 L.Ed.2d 785 (1990). An issue of fact is "material" if it might affect the outcome of the case under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202, 211 (1986). It is "genuine" if the record taken as a whole could lead a rational trier of fact to find for the nonmoving party. Id.: see also Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538, 552 (1986).
Conclusory allegations based on speculation, subjective beliefs, or bald assertions based upon unsubstantiated hearsay are insufficient to create a "genuine issue of material fact." Carter v. Miami, 870 F.2d 578, 585 (11th Cir.1989); Ramsey v. Leath, 706 F.2d 1166, 1170 (11th Cir.1983). On a summary judgment motion, the record and all reasonable inferences that can be drawn from it must be viewed in the light most favorable to the non-moving party. McCabe v. Sharrett, 12 F.3d 1558, 1560 (11th Cir.1994). If the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, then summary judgment is appropriate. Matsushita Elec. Industrial Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538, 552 (1986).
B. Discussion
(1) Plaintiff's Motion for Summary Judgment on Defendant's Counterclaim
In their counterclaim, the defendants allege that the plaintiff breached the Florida General Subscriber Service Tariff and the agreements with the defendants when the plaintiff improperly cut off the defendants' N11 service access without right or justification and without proper notice. The Tariff provides that:
Unless otherwise specifically provided in this Tariff, the Company shall be authorized to disconnect any tariffed service provided to the N11 subscriber utilized, directly or indirectly, with the N11 Service which fails to comply with regulation and conditions set forth herein, upon five (5) days notice to the subscriber. Disconnection may be suspended at the discretion of the Company if it receives written certification that the N11 subscriber is in compliance with regulations and conditions of the tariffs. Continual noncompliance shall be cause for *1318 disconnection without notice at the discretion of the Company.
According to the plaintiff, it is entitled to summary judgment on the defendants' counterclaim because the counterclaim is barred by the limitation of liability clause in the Tariff.
The plaintiff entered into seven separate agreements for N11 service with the defendants, with each agreement addressing a separate service location. Each agreement contains a paragraph which states that 811, Inc.:
[A]grees to the rules and regulations for the provision of N11 service as set out in Section A.39 of the Florida General Subscriber Service Tariff.
(doc. 48, ex. F) The agreements also provide that:
811, Inc. further agrees to abide by any subsequent rules adopted by the FCC regarding the use and return of N11 service codes.
(doc. 48, ex. F) The General Subscriber Service Tariff in effect at the time the agreements were signed provides:
In no event shall the Company be liable for any losses or damages of any kind resulting from the unavailability of its equipment or facilities or for any act, omission or failure of performance by the company, or its employees, or agents, in connection with this tariff. The Company shall not be responsible for calls that cannot be completed as a result of repair or maintenance difficulties on company facilities and equipment. Nor on equipment owned or leased by the subscriber.
Section A.39.1.2(J). According to the plaintiff, under the filed rate doctrine, the limitation of liability clause must be interpreted as barring the defendants' claim for damages resulting from termination of service.
The filed rate doctrine "recognizes that where a legislature has established a scheme for utility rate-making, the rights of the rate-payer in regard to the rate he pays are defined by that scheme." Taffet v. Southern Co., 967 F.2d 1483, 1490 (11th Cir.1992). The filed rate doctrine applies whether the rate in question is approved by a federal or state agency. Id. at 1494; Wegoland v. NYNEX Corp., 27 F.3d 17 (2d Cir.1994); H.J., Inc. v. Northwestern Bell Tel. Co., 954 F.2d 485, 494 (8th Cir.1992). Application of the filed rate doctrine can at times be harsh, but the doctrine's justification lies in the principle that the tariff must be uniformly applied in a non-discriminatory manner so that similarly situated customers pay the same rates for the same service. See American Tele. & Telegraph Co. v. Central Office Tele., Inc., 524 U.S. 214, ___, 118 S.Ct. 1956, 1963, 141 L.Ed.2d 222 (1998). The filed rate is a matter of public knowledge and the customer is assumed to know the filed rate. A tariff filed with a regulatory agency has the force and effect of law as to services arising under it, and supersedes all other agreements between the parties. See Vendola v. Southern Bell Telephone & Telegraph Co., 474 So.2d 275, 278 (Fla. 4th DCA 1985); MCI Telecomm. Corp. v. Best Tel. Co., 898 F.Supp. 868, 872 (S.D.Fla.1994). The utility that files the rate cannot be held liable for any representations contrary to the tariff. Taffet, 967 F.2d at 1487; Marco Supply Co. v. AT & T Communications, Inc., 875 F.2d 434, 435-36 (4th Cir.1989). Once the tariff is approved, "the rate must be charged and paid regardless of mistake, inadvertence or contrary intention of the parties." American Transp. Lines, Inc. v. Wrves, 985 F.2d 1065, 1067 (11th Cir.1993) (citation omitted).
The defendants contend that the clause is an unenforceable exculpatory clause under Florida law. Under Florida law, "[c]ontractual provisions by which a party seeks exculpation for his own negligence, although not favored in the law, have been upheld as not violative of public policy where the contract is between persons of equal bargaining power and the provisions are clear and unambiguous." *1319 Hardage Enterprises, Inc. v. Fidesys Corp. ., 570 So.2d 436, 439 (Fla. 5th DCA 1990) (citations omitted); Mankap Enterprises, Inc. v. Wells Fargo Alarm Services, Inc., 427 So.2d 332 (Fla. 3d DCA 1983). The Florida courts have upheld exculpatory clauses against claims for consequential losses based on negligence and breach of contract claims. Greater Orlando Aviation Authority v. Bulldog Airlines, Inc., 705 So.2d 120 (Fla. 5th DCA 1998); Continental Video Corp. v. Honeywell, Inc., 422 So.2d 35 (Fla. 3d DCA 1982); L. Luria & Son v. Honeywell, Inc., 460 So.2d 521 (Fla. 4th DCA 1984). An exculpatory clause also does not protect against claims of willful, malicious, or grossly negligent conduct. See, e.g., Southworth & McGill, P.A. v. Southern Bell Tel. & Tel. Co., 580 So.2d 628, 631 (Fla. 1st DCA 1991); Willhite v. South Central Bell Tel. Co., 693 F.2d 340, 343 (5th Cir.1982) (applying Louisiana law).
The defendants rely upon Sniffen v. Century Nat'l Bank of Broward, 375 So.2d 892 (Fla. 4th DCA 1979), and Ivey Plants, Inc. v. FMC Corp., 282 So.2d 205 (Fla. 4th DCA 1973). In Sniffen, the plaintiff filed a complaint against the defendant bank alleging that the bank negligently permitted an unauthorized person to have access to his safety deposit box. The trial judge dismissed the complaint on the ground that an exculpatory provision in the safety deposit box agreement barred the action. On appeal, the Florida Fourth District Court of Appeal reversed, on the basis that application of the exculpatory clause would render the agreement "entirely nugatory," because if a customer could not enforce the bank's undertaking to preclude unauthorized access to the box, the customer would "have received nothing whatsoever in return for his rental fee." Id. at 894. The court relied on its prior decision in Ivey Plants, Inc. v. FMC Corp., supra, in which the court held that the requirements of mutuality of obligation and mutuality of remedy rendered an exculpatory clause unenforceable where the clause would prevent all recovery of damages for the breach of a contractual undertaking in a lease. Ivey Plants, Inc., 282 So.2d at 208.
In contrast to the exculpatory clauses at issue in Sniffen and Ivey Plants, the limitation of liability clause at issue here is contained in a tariff. A limitation of liability clause in a tariff is an essential and valid part of the rate, and serves the public interest by allowing lower utility rates. See Landrum v. Florida Power & Light Co., 505 So.2d 552, 553 (Fla. 3d DCA 1987); Computer Tool & Engineering, Inc. v. Northern States Power Co., 453 N.W.2d 569 (Minn.App.1990). The courts have held that limitation of liability provisions in tariffs bar claims for simple negligence and breach of contract. Landrum v. Florida Power & Light Co., 505 So.2d at 554 (negligence); Bulbman, Inc. v. Nevada Bell, 108 Nev. 105, 825 P.2d 588, 590 (1992) (breach of contract); Simpson v. Phone Directories Co., 82 Or.App. 582, 729 P.2d 578, 580 (1986); Willhite v. South Central Bell Telephone, Inc., 693 F.2d 340 (5th Cir.1982); Greyhound Lines, Inc. v. Mah, 216 Va. 401, 219 S.E.2d 842, 844 (1975). The limitation of liability clause in the plaintiff's tariff is enforceable, and is not an invalid exculpatory clause. This is not the end of the inquiry, however.
The defendants contend that even if the limitation of liability clause in Section A.39.1.2(J) of the tariff is enforceable, it does not apply to the plaintiff's conduct. The defendants contend that while Section A.39.1.2(J) limits liability for unavailability of equipment, acts or omissions or failure of performance in connection with the tariff, and for calls that cannot be completed due to maintenance, it does not limit liability for the plaintiff's intentional discontinuance of its services to the defendants without five days notice.
The essence of the defendants' counterclaim is that the plaintiff cut off the defendants' N11 service without giving the notice required by the tariff. The tariff specifically provides that the plaintiff must give five days notice to the subscriber *1320 before disconnecting N11 service, unless "continual noncompliance" gives the plaintiff cause to disconnect service without notice. Under the filed rate doctrine, the plaintiff was required to comply with this tariff provision when disconnecting the defendants' service. Although the limitation of liability clause is valid and enforceable, it has no application to the obligation of the plaintiff to comply with the notice provision of its own tariff, and does not prevent the defendants from bringing a counterclaim based on the alleged failure to give the notice required by the tariff.
The plaintiff contends that it was it was permitted to disconnect the defendants' service without notice because of the defendants' continued non-compliance with the terms of the tariff; specifically, the defendants' obligation to pay the minimum usage charges. In its statement of facts, the plaintiff states that the plaintiff contacted the defendants after five months of non-payment of the charges and informed the defendants that service would be interrupted if payment was not made. As support for this statement, the plaintiff has submitted the printout of a screen from the plaintiff's computerized billing system, which is largely in code, but which indicates that the defendants were contacted by telephone regarding the outstanding fees. (doc. 48, ex. 1)
The plaintiff and defendants have also submitted correspondence between the parties. A letter dated April 4, 1996, from defendant Kerrigan to Ruth Margolis, a senior account executive for the plaintiff, disputes the plaintiffs' interpretation of the minimum usage charge as a monthly charge. (doc. 62, ex. 3) On May 15, 1996, Kerrigan sent a letter to Margolis noting that Margolis had failed to reply to his previous letter, stating that service in Jacksonville had been disconnected, and enclosing two bills that had been sent to the defendants by the plaintiff. (doc. 62, ex. 3) Kerrigan wrote a letter to Dave Sczuka, an employee of the plaintiff, on May 20, 1996, stating that service in Jacksonville had been disconnected, and that the defendants were "now receiving notice by Bell South that each of our seven market accounts are being targeted for service interruption" on the basis of non-payment of the minimum usage charges. (doc. 62, ex. 3) In the letter, Kerrigan also referred to the continual threat of disconnection as jeopardizing the parties' relationship.
In another letter from Kerrigan to Margolis dated May 31, 1996, Kerrigan stated that the defendants could not operate under a threat of discontinued service, and also stated that the defendants could not and would not pay the monthly minimum charges disputed by the defendants. (doc. 62, ex. 3) Hugh Dye, an attorney for the plaintiff, wrote a letter to the defendants on May 30, 1996, in which Dye stated that the defendants were required by the tariff to pay the minimum usage charges on a monthly basis, and that the defendants needed to contact the plaintiff by June 7, 1996, to make arrangements to pay the outstanding balance of $85,474. (doc.48, ex. K)
In a letter sent from Kerrigan to Dye dated June 10, 1996, Kerrigan stated that the defendants had remitted one monthly minimum payment for each of the defendants' N11 markets, and that interruption of service was an act in bad faith. (doc. 62, ex. 3) Defendant Kerrigan wrote another letter to Dye on June 13, 1996, in which he stated that the plaintiff's interpretation of the tariff was illogical, and noted that if the plaintiff refused to reconsider its position the defendants would be forced to discontinue service to their customers. (doc. 62, ex. 3) Dye wrote a short letter to the defendants on June 20, 1996, stating that the plaintiff would stand by its interpretation of the tariff. (doc. 62, ex. 3) Hugh Dye wrote another letter to the defendants on June 27, 1996, in which he stated that while the account had been terminated, the defendants could reestablish service by satisfying the account in full and paying new installation charges by *1321 July 26, 1996, with failure to do so resulting in the transfer of the N11 numbers to a new entity. (doc. 59, ex. 1)
Renee Miller, who worked as the business administrator for the defendants, testified that she could not recall the defendants receiving a written notice from the plaintiff stating that disconnection would occur by a certain date if the charges were not paid. (Miller dep., at 66) Miller testified that she first became aware of the monthly minimum charges in November 1995, when Kerrigan instructed her not to pay the monthly minimum charges. (Miller dep., at 32-34) When Miller informed Kerrigan that the charges were being billed to the defendants, Kerrigan stated that he did not believe the minimum charges were owed. (Miller dep., at.34) At some point, the plaintiff told Miller that service would be cut off if the bills were not paid. (Miller dep., at 39)
There is no evidence in the record showing that the plaintiff gave the defendants the five days notice required by the tariff before disconnecting the defendants' N11 service. The issue becomes whether "continual noncompliance" gave the plaintiff cause to disconnect service without notice. The evidence in the record shows that the defendants were aware that they were expected to pay the monthly minimum charges on a monthly basis, and that the plaintiff billed the defendants for the charges on several occasions before the defendants' N11 services were disconnected. Without any question, non-payment is noncompliance. However, it is not clear from the record whether the plaintiff exercised its discretion to disconnect service without notice, or whether the plaintiff simply failed to give the five days notice required by the tariff. It is also not clear exactly when service was disconnected in Jacksonville and in the defendants' other locations. Because genuine issues of material fact remain concerning the issue of notice, the plaintiff's motion for summary judgment must be DENIED.
(2) Defendants' Motion for Partial Summary Judgment
The plaintiff alleges in its amended complaint that the defendants breached their agreements with the plaintiff by failing to pay the minimum usage charges under the Tariff. The defendants contend that they are entitled to judgment as a matter of law on the plaintiff's claims for recovery of minimum usage charges relating to service before April 16, 1996.
Section A.39.1.6.A.5 of the Tariff provides:
A Minimum Usage Charge will be billed to the N11 subscriber in each billing period, following the 6-month period after the service has been provisioned, in which the N11 subscriber's usage charges fall below the amount of the Minimum Usage Charge in B.5. following.
Section A.39.1.6.B.5 bears the heading "Minimum Usage Charge, per N11 Service Number, per Local Calling Area," and under a column labeled "Nonrecurring Charge," lists the charges applicable to each service area tier. The charges listed were: (1) $10,000 for Tier 1; (2) $5,000 for Tier 2; (3) $3,000 for Tier 2; and (4) $2,000 for Tier 4. Effective April 16, 1996, Section A.39.1.6 was revised to provide new lower rates. Revised Section A.39.1.6.B.5 no longer listed minimum usage charges under "Nonrecurring Charges," but listed the charges in a column labeled "Monthly Minimum Charge."
According to the defendants, before the revision, Section A.39.1.6 was ambiguous as to whether the minimum usage charge was a one-time charge or a continuing charge. The defendants contend that the ambiguity must be construed against the plaintiff, the entity that drafted the tariff.
The construction of a tariff ordinarily presents a question of law. Bella Boutique Corp. v. Venezolana International de Aviacion, S.A., 459 So.2d 440, 442 (Fla. 3d DCA 1984).
*1322 Although any ambiguity in a tariff should be construed against the carrier, such ambiguity or doubt must be a reasonable one. There must be a substantial and not mere arguable basis in order to justify resolving the doubt against the carrier .... The terms of a tariff should be given their ordinary meaning, and strained or unnatural constructions are not permitted.
Bella Boutique, 459 So.2d at 442.
Section A.39.1.6.A.5 of the Tariff states that following the six month period after service has been provisioned, a minimum usage charge will be billed to the subscriber "in each billing period" in which the usage charges fall below the amount of the minimum usage charge. The parties do not dispute that under this language, the minimum usage charge would be a continuing charge. The defendants' argument of ambiguity is based on the fact that in the list of charges that follows Section A.39.1.6.A.5, the minimum usage charges are listed under the subheading "Nonrecurring Charge." According to the defendant, the plain meaning of the term "nonrecurring charge" is that the minimum usage charge would only be charged one time as to each of a provider's individual calling areas. The plaintiff contends that in the telecommunications industry, the term "nonrecurring charge" can include charges that are not necessarily assessed in every billing cycle, but that can be assessed more than one time.
An initial issue is whether the doctrine of primary jurisdiction applies in this case.
Primary jurisdiction "applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body."
MCI Telecommunications Corp. v. Teleconcepts, Inc., 71 F.3d 1086, 1103 (3d Cir. 1995). See Humana of Florida, Inc. v. McKaughan, 652 So.2d 852, 860 (Fla. 2d DCA 1995); Access Telecommunications v. Southwestern Bell Tel. Co., 137 F.3d 605 (8th Cir.1998); Rebel Motor Freight, Inc. v. Interstate Commerce Comm'n, 971 F.2d 1288 (6th Cir.1992). Thus, under the doctrine of primary jurisdiction a court may leave an issue for agency determination when it involves the special expertise of the agency and would impact the uniformity of the regulated field. See Hill Top Developers, v. Holiday Pines Service Corp., 478 So.2d 368, 370 (Fla. 2d DCA 1985); DeBruce Grain, Inc. v. Union Pacific R. Co., 149 F.3d 787 (8th Cir.1998). The doctrine does not apply if the tariff's language is used in its ordinary sense, or if the question is not intertwined with technical facts. Humana of Florida, Inc. v. McKaughan, 652 So.2d at 860; Milne Truck Lines, Inc. v. Makita USA, Inc., 970 F.2d 564, 567 (9th Cir.1992).
In this case, the term "nonrecurring charge" must be interpreted. Although the plaintiff has presented evidence that the term has a special meaning in the telecommunications industry, the issues of interpretation are not overly technical or complex. Primary jurisdiction does not extend to a legal question that "is within the conventional competence of the courts, and the judgment of a technically expert body is not likely to be helpful in the application of these standards to the facts of the particular case." National Communications Ass'n, Inc. v. American Tel. & Tel. Co., 46 F.3d 220, 223 (2d Cir.1995). The doctrine of primary jurisdiction does not require referral of this case to the Florida Public Service Commission. I note, however, that the Commission's approval of the tariff and its various provisions, as well as its subsequent approval of the amended tariff without any revenue adjustments, is indicative that it construed the term as applying to each billing cycle.
According to the plaintiff, within the telecommunications industry, the term "nonrecurring charge" is sometimes used *1323 to refer to charges or fees that do not necessarily occur in every billing cycle, in contrast to "recurring charges," such as monthly residential phone service fees, that are charged in every billing cycle. Martha Johnson, the employee of the plaintiff who drafted the tariff, testified at her deposition that the minimum usage charge was a nonrecurring charge, in that while the charge might be applied one month because of failure to meet the monthly minimum, it would not be applied the next month if the N11 provider met the minimum requirement. (doc. 86, ex. 1) Other employees of the plaintiff gave similar definitions of "nonrecurring charge." (See doc. 86, ex. 3, ex. 8) The plaintiff also relies on the affidavit of Robin Norton, a communications consultant for Technologies Management, Inc., and a former employee of the Florida Public Service Commission. Norton states that the minimum usage charge "is properly classified as a non-recurring charge because it is a contingency charge that is assessed only when a certain condition is met, in this case, when the monthly usage falls below the minimum amount." (doc. 86, ex. 23)
In response to the evidence presented by the plaintiff, the defendants point to the deposition testimony of Martha Johnson that "[n]onrecurring does mean a one-time fee but I think it's also appropriate for the minimum usage charge." (doc. 81, Johnson dep., at 34) She further explained that:
A. A nonrecurring charge is one that applies on a one-time basis as it's defined. And the minimum usage charge was defined as a charge that would be calculated on a monthly basis but not charged on a monthly basis. A monthly charge implies that it is charged month after month after month. The nonrecurring charge is a one-time charge. If a customer didn't meet their monthly minimum one month we would charge the nonrecurring charge. If they met it the next month it would not apply.
Q. And if the subscriber month after month after month failed to meet the minimum they would be charged a nonrecurring charge month after month after month, in effect, becoming a recurring charge?
A. Calculated on a month-to-month basis, yes.
(doc. 81, Johnson dep., at 35) Johnson testified that in other parts of the tariff at issue, the term "nonrecurring" meant a charge that is truly a one-time charge, such as a charge for installation of new service. (doc. 81, Johnson dep., at 34) Thomas Williams, the plaintiff's product manager for N11 service, testified that nonrecurring "means a charge that doesn't appear repeatedly on a continuous basis, usually monthly." (doc. 81, Williams dep., at 26)
The defendants rely on the plaintiff's use of the term "nonrecurring charge" in other contexts, such as a tariff unrelated to this case which defines "nonrecurring charges" as one-time charges that apply for a specific work activity, such as the installation of a new service or a change to a new service. (doc. 79, ex. 6) The defendants also note that after Kerrigan questioned the plaintiff as to why the minimum usage charge was termed a "nonrecurring charge" in the tariff, the plaintiff made an amendment to the tariff in Florida and in other states and changed the term "nonrecurring charge" to "monthly minimum charge." Sandy Sanders, the BellSouth employee responsible for ensuring that the change was made, testified that the issue arose when a customer questioned BellSouth about the use of the term in connection with the usage charge. (Sanders dep., at 5) Sanders' team concluded that the term could be confusing to customers. Sanders testified that "[t]he tariff was correct. But to further clarify the true meaning of the tariff we decided to make the change at the next appropriate tariff revision." (Sanders dep., at 10)
The common meaning of a tariff term is a question of law. Bella Boutique Corp. v. Venezolana Internacional de Aviacion, S.A., 459 So.2d 440, 442 (Fla. *1324 3d DCA 1984); United States v. Godinez, 922 F.2d 752, 753 (11th Cir.1991). The terms of a tariff should be given their ordinary meaning, and strained or unnatural constructions are not permitted. Bella Boutique Corp. 459 So.2d at 442. See Godinez, 922 F.2d at 753 (in absence of evidence to the contrary, meaning of tariff term is presumed to be its common or dictionary meaning). In interpreting a term in a tariff, a court may rely on its own understanding of the term or assist its understanding with "works of standard lexicographers, scientific authorities, the testimony of witnesses, or by such other means as may be available." Godinez, 922 F.2d at 754 (citation omitted). See West Bend Co. v. United States, 892 F.2d 69, 72 (Fed.Cir.1989); United States v. Patel, 762 F.2d 784, 791 (9th Cir.1985).
The term "nonrecurring" is commonly understood to mean an event that occurs only one time. This common meaning applies to certain charges listed as "nonrecurring" by telephone companies such as the defendant, including installation charges for telephone service, which are typically only charged one time. See, e.g., U.S. West Communications, Inc. v. TCG Oregon, 35 F.Supp.2d 1237 (D.Or.1998) ("Nonrecurring charges are one-time fees imposed for establishing particular services, such as the charge a customer pays to have telephone service established."). The term "nonrecurring charge" clearly has this meaning when used at various points in the tariff at issue, such as the provision stating that the N11 provider will be billed a nonrecurring charge for setup of the N11 service. (doc. 48, att., at p. 2.1) The evidence in the record shows that the term "nonrecurring charge" can also refer to charges that do not necessarily recur every month, but that are assessed when a certain contingency occurs. (See doc. 86, ex. 1, ex. 3, ex. 8) Depending on whether and with what frequency the contingency occurs, the charge could be assessed periodically, at sporadic intervals, or on a one-time basis. (doc. 81, Johnson dep., at p. 35)
In the Tariff, the charges for Tier 1, 2, 3, and 4 are under the main heading "Minimum Usage Charge, per N11 Service Number, per Local Calling Area," and the subheading "Nonrecurring Charge" is located directly over the column of money amounts. If considered by itself, the subheading "Nonrecurring Charge" is ambiguous, in that it has two distinct meanings. However, when considered in context, the subheading is not ambiguous. The main heading bearing the words "Minimum Usage Charge" is referred to at the top of the same page, where Section A31.1.6.A.5 explains that "[a] Minimum Usage Charge will be billed to the N11 subscriber in each billing period, following the 6-month period after the service has been provisioned, in which the N11 subscriber's usage charges fall below the amount of the Minimum Usage Charge in B.5. following." (emphasis added). That section clarifies that the frequency of the charge depends on whether and when the contingency (insufficient amount of usage) occurs. Therefore, the term "nonrecurring charge," as used in this particular subheading, is not ambiguous when read in context with all the associated language of the tariff. Because the tariff before its revision on April 16, 1996, unambiguously provided that the minimum usage charge was applicable each billing period and was not just a one-time charge, the defendants are not entitled to summary judgment.
III. CONCLUSION
The plaintiff's motion for summary judgment is DENIED. (doc. 48) The defendants' motion for partial summary judgment is also DENIED. (doc. 79)
| {
"pile_set_name": "FreeLaw"
} |
838 F.2d 118
L.J., An Infant, By and Through His Next Friend, Lydia KayeDARR and; O.S., An Infant, By and Through Her Next Friend,Jackie Garner and; M.S., An Infant, By and Through Her NextFriend, Susan Leviton and; C.S., An Infant, By and ThroughHer Next Friend, Susan Leviton and; P.G., An Infant, By andThrough Her Next Friend, Margaret Evans on Their Behalf andOn Behalf of All Others Similarly Situated; R.K.; S.J.,Plaintiffs-Appellees,v.Ruth W. MASSINGA, Individually and as Secretary of theMaryland Department of Human Resources; and; Frank Farrow,Individually and as Executive Director of the MarylandSocial Services Administration; and; Joy Duva,Individually and as Director of the Office of Child WelfareServices, Maryland Social Services Administration; and;Bud Nocar, Individually and as Acting Program Manager FosterCare Services of the Maryland Social ServicesAdministration; and; Alma Randall, Individually and asProgram Manager for 24-Hour Group Care and Licensing of theMaryland Social Services Administration; and; BaltimoreCity Department of Social Services; and; George Musgrove,Individually and as Director of the Baltimore CityDepartment of Social Services; and; Michael Warner-Burke,Individually and as Chief of Protective Services for theBaltimore City Department of Social Services; and; CherylGibson, Individually and as Caseworker for the BaltimoreCity Department of Social Services; and; Bridgette Thomas,Individually and as Caseworker for the Baltimore CityDepartment of Social Services; and; Marylyn Holcombe,Individually and as Caseworker for the Baltimore CityDepartment of Social Services; and; Delores Cooper,Individually and as Caseworker Supervisor of the BaltimoreCity Department of Social Services; and; Gail Fulton,Individually and a Caseworker for the Baltimore CityDepartment of Social Services; and; Elvia Dewatkins,Individually and as Caseworker for the Baltimore CityDepartment of Social Services; and; Dawn Zinkand,Individually and as Caseworker of the Baltimore CityDepartment of Social Services; and; Jerilyn Simmons,Individually and as Caseworker for the Baltimore CityDepartment of Social Services; and; Anthony Baird,Individually and as Caseworker for the Baltimore CityDepartment of Social Services; and Susan Lieman,Individually and as Caseworker Supervisor for the BaltimoreCity Department of Social Services; and; Allen Collins,Individually and as Caseworker for the Baltimore CityDepartment of Social Services; and; Susan Zuravin,Individually and as Caseworker for the Baltimore CityDepartment of Social Services; and; Emma Graves,Individually and as Caseworker for the Baltimore CityDepartment of Social Services; and; John Roes 1 Through12, Individually and as Caseworkers for the Baltimore CityDepartment of Social Services, Defendants-Appellants.
No. 87-2156.
United States Court of Appeals,Fourth Circuit.
Argued Dec. 4, 1987.Decided Feb. 1, 1988.
Judson Paul Garrett, Jr., Deputy Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen., Ralph S. Tyler, Asst. Atty. Gen., on brief), for defendants-appellants.
William Lee Grimm (Ethel Zelenske, Legal Aid Bureau, Inc., on brief), Ward Baldwin Coe, III (Nevett Steele, Jr., Whiteford, Taylor & Preston, Carol R. Golubock, Children's Defense Fund, on brief), for plaintiffs-appellees.
Before WINTER, Chief Judge, RUSSELL and MURNAGHAN, Circuit Judges.
HARRISON L. WINTER, Chief Judge:
1
Plaintiffs, present or former foster children in the custody of the Baltimore City Department of Social Services, sued twenty-one state and city officials, caseworkers and supervisors who played a role in administering Maryland's federally-funded foster care program in Baltimore City. They alleged that, as a result of defendants' maladministration of the program, they were victims of physical and sexual abuse as well as medical neglect. They sought broad interim and permanent injunctive relief to redress the deficiencies in the administration of the program and money damages.
2
Defendants traversed the claims for injunctive and monetary relief and also specially pled their good faith immunity to damages for plaintiffs' claims prior to 1980 and our holding in Jensen v. Conrad, 747 F.2d 185 (4 Cir.1984), cert. denied, 470 U.S. 1052, 105 S.Ct. 1754, 84 L.Ed.2d 818 (1985).
3
The district court heard and decided defendants' claim for qualified immunity and plaintiffs' claim for interim injunctive relief. It granted a preliminary injunction requiring defendants to submit a plan for review of foster homes about which a report of maltreatment has been made, to monitor child placements in foster homes at least monthly and in some instances weekly, to expand its medical services to foster children including the keeping of medical records, and to provide prompt written reports of maltreatment of foster children to their attorneys and the juvenile court including the action taken thereon. It denied defendants' claim of immunity, and it imposed attorneys' fees and expenses as sanctions on defendants, in an amount yet to be determined, for their failure to comply with two court orders.
4
Defendants appeal, and we affirm.
I.
5
As a preliminary matter, we state our jurisdiction to entertain all aspects of this appeal. We, of course, have jurisdiction to review the grant of a preliminary injunction by the express language of 28 U.S.C. Sec. 1292(a)(1). We also have jurisdiction to review the district court's denial of defendants' claim of qualified immunity under the holding in Mitchell v. Forsyth, 472 U.S. 511, 105 S.Ct. 2806, 86 L.Ed.2d 411 (1985). We proceed therefore to review the correctness of both rulings.
II.
6
In concluding to grant a preliminary injunction, the district court correctly considered each of the factors set forth in the leading case in this circuit, Blackwelder Furniture Co. v. Seilig Mfg. Co., 550 F.2d 189 (4 Cir.1977). There we held that four factors are to be considered: (1) the likelihood of irreparable harm to the plaintiff if the preliminary injunction is denied, (2) the likelihood of harm to the defendant if the requested relief is granted, (3) the likelihood that the plaintiff will succeed on the merits, and (4) the public interest. See Federal Leasing, Inc. v. Underwriters at Lloyd's, 650 F.2d 495, 499 (4 Cir.1981). As Blackwelder set forth, the two most important factors are the likelihood of irreparable harm to the plaintiff if interim relief is not granted and the likelihood of irreparable harm to the defendant if interim relief is granted. The two factors should be weighed against one another, and if the balance is in favor of the plaintiff, it is proper to grant interim injunctive relief if grave or serious questions are presented for ultimate decision. Blackwelder, 550 F.2d at 196. See also Jones v. Bd. of Governors of Univ. of North Carolina, 704 F.2d 713, 715 (4 Cir.1983); Fort Sumter Tours, Inc. v. Andrus, 564 F.2d 1119, 1124-25 (4 Cir.1977).
7
The district court found that there was the likelihood of irreparable harm to the plaintiffs if interim relief were not granted on a dual basis. It found this likelihood as a matter of fact after conducting an evidentiary hearing at which it heard testimony and received other evidence, and it found this likelihood as a matter of law as a sanction for certain defaults and omissions on the part of defendants' lawyers. Because we think that the factual finding of the likelihood of irreparable harm to plaintiffs is not clearly erroneous, we conclude that it is unnecessary for us to consider the appropriateness of the sanction that it be considered as established "that defendants fail to protect effectively children in foster homes where there is reason to know that such children are at risk of harm to their physical and emotional well-being."1 We express no view of the appropriateness of the additional sanction of attorney's fees and expenses in an amount yet to be determined. While the record reflects some defaults on the part of defendants' counsel, we do not think that this aspect of the case is properly before us until the amount and form of the sanction are fixed.
8
As a factual matter, plaintiffs presented a statistical study of the case records maintained by the officials on children in foster care prepared by an expert in research methodology and child welfare services. The study documented systemic problems in the Baltimore foster care program with grave consequences to children in the program and great likelihood of irreparable harm. In addition there was testimony by relatives and expert witnesses regarding the cases of sixteen children who had recently been severely abused or neglected, or both, while in foster care. Finally there was testimony from several experts on foster care to the effect that there were systemic deficiencies in the foster care program which placed the children at substantial risk of severe harm, including the testimony of two physicians experienced in the medical care provided to children in foster care, who concluded that defendants were failing to take responsible measures to ensure foster children essential and basic medical care, placing them at risk of severe diseases and other illnesses.
9
Defendants sought to counter this proof by attacking the methodology of the statistical sample and evidence of the so-called Report of the Harris Task Force, an internal study, which detailed deficiencies in the foster care program and made recommendations for their alleviation, together with proof of the corrective actions they had taken. As to the latter, the district court made full and persuasive findings as to why defendants' responses to the problems identified by the Harris Task Force were ineffective and incomplete. We cannot say that these findings lack full evidentiary support. Nor do we think that plaintiffs' statistical study was flawed or that its findings must be disregarded. In our view the statistical sample was significant. It was based on a random selection of 897 of the roughly 4,000 children in the foster program, which was further refined by the use of sampling criteria to a pool of 224 children. The district court found 15 well-founded cases of abuse or neglect in the sample and further indicated that the pool may contain up to 24 additional such cases. We see no abuse of discretion on the part of the district court in affording the study substantial probative value.
10
Defendants' proof of irreparable injury to it should interim relief be granted was evidence of the obvious--the monetary cost and administrative inconvenience to the city and state of a more encompassing administration of the foster child care program. In addition they argued to the district court and contend before us that principles of federalism protect them against federal judicial interference in the administration of a state program, absent convincing proof of deliberate indifference on their part to the plight of the victims of maladministration, if any.
11
We recognize that the considerations pressed on us by defendants are weighty. We note of course that if carried to their logical extreme, federal courts would be powerless to enforce federal rights in any case where enforcement would conflict with the rights of a state. Such is not the law and we think that, properly applied, the Blackwelder test recognizes that the interests of the state are to be fully respected and overridden only in those instances in which the apparent denial of a federal right is so egregious that the individual right to interim relief outweighs the governmental interest to be free from federal judicial interference. The element of deliberate indifference may be a substantial factor in the aspect of this case which seeks monetary recovery, but it is of little moment with regard to injunctive relief in futuro if plaintiffs can prove that defendants are not acting lawfully. In this case we cannot say that if, as will be later shown, plaintiffs have made a showing of probable success in their claim for permanent relief, the district court improperly balanced the respective rights of plaintiffs and defendants with regard to prospective injunctive relief. Defendants' real harm is the expenditure of money. Admittedly the supply of money is finite, but balanced against that is the emotional, psychological and physical damage to children, much of which will continue throughout their lives. In short, we see no basis on which to fault the district court on how it balanced the equities and why it concluded that irreparable damage to plaintiffs if relief were not granted outweighed the injury to defendants if relief was granted.
12
Finally, consistent with Blackwelder, we have no doubt that plaintiffs' case presents a grave and substantial question. Defendants do not seriously contend with respect to prospective relief that if plaintiffs prove their allegations, which they have already demonstrated have an arguably solid foundation, plaintiffs will have proven a violation of their due process rights under the Fourteenth Amendment. See Fox v. Custis, 712 F.2d 84, 88 (4 Cir.1983) (rights may arise out of special custodial or other relationships created or assumed by the State in respect of particular persons). For the reasons that we will shortly discuss with respect to defendants' claim of qualified immunity, we think that plaintiffs will have also proven a violation of 42 U.S.C. Sec. 608(f) (1961) and its subsequent amendments. Thus we affirm the district court's judgment granting a preliminary injunction.
III.
13
In the district court defendants moved for partial summary judgment on the ground that they were immune to damage claims for action or non-action attributable to them prior to 1980. Later in argument before the district court and before us, they assert immunity even after 1980. Invoking the principle that immunity in the performance of discretionary duties exists where the law governing official conduct is unsettled, their claim for pre-1980 immunity was grounded on the argument that not until the decision in Martinez v. California, 444 U.S. 277, 285, 100 S.Ct. 553, 559, 62 L.Ed.2d 481 (1980), was there recognized a constitutional right to protection on the part of persons in the custody of the state, except in the prison context, and that we recognized this uncertain state of the law in Jensen v. Conrad, 747 F.2d 185 (4 Cir.1984), cert. denied, 470 U.S. 1052, 105 S.Ct. 1754, 84 L.Ed.2d 818 (1985). Their claim for post-1980 immunity is grounded on the argument that even now the law is uncertain as to whether they could reasonably be expected to know that placing children in their custody in an unsuitable foster home could constitute a violation of the constitutional rights of those children.2
14
The district court placed its denial of the immunity defense on the dual grounds that (a) during the period in litigation, there existed a constitutional right to protection on the part of those in the custody of the state or having a special relationship with the state, even out of the prison context, so that defendants could have reasonably expected to know that a failure on their part to protect foster children placed by them in foster homes selected by them could constitute a violation of plaintiffs' Fourteenth Amendment rights, and (b) since 1961 plaintiffs had a statutory right, enforceable under 42 U.S.C. Sec. 1983, to the care and protection that they allege were denied, so that defendants could not be said to exercise discretion in an area in which the law respecting their duties and obligations was uncertain. We agree with the district court that defendants' statutory duty was clear and certain and therefore they are not entitled to invoke the immunity defense. Our conclusion makes it unnecessary to decide whether plaintiffs' constitutional rights were also violated prior to 1980 if they can prove what they have alleged.
15
The foster care program in Baltimore City is federally funded. In 1961 the funding statute created both the obligations of those administering the program and the rights of beneficiaries thereunder. That statute was part of the Aid to Families with Dependent Children program in Title IV-A of the Social Security Act, 42 U.S.C. Sec. 608 (repealed by the Adoption Assistance and Child Welfare Act of 1980, Pub.L. 96-272). The original statute required states participating in the foster care program to develop "a plan for each such child [in foster care] (including periodic review of the necessity for the child's being in a foster family home or child-care institution) to assure that he receives proper care...." 42 U.S.C. Sec. 608(f) (repealed in 1980). In 1980 and thereafter, the foster care program was made a separate title of the Social Security Act. 42 U.S.C. Secs. 671, 675. Significantly, however, the duty to assure that a child in foster care receives "proper care" was continued and amplified. Titles IV-E and IV-B of the Social Security Act as it now exists contains the following relevant requirements. A State participating in the program is required to have a plan which provides for an agency "responsible for establishing and maintaining standards for foster family homes and child care institutions which are reasonably in accord with recommended standards of national organizations concerned with standards for such institutions or homes, including standards related to admission policies, safety, sanitation, and protection of civil rights...." 42 U.S.C. Sec. 671(a)(10).
16
In addition the eligibility of a State to receive an appropriation is conditioned upon its implementation and operation of "a case review system ... for each child receiving foster care under the supervision of the State...." 42 U.S.C. Sec. 627(a)(2)(B). This requirement is repeated and amplified in 42 U.S.C. Sec. 671(a)(16), which requires a State's plan to provide for "a case plan ... for each child receiving foster care maintenance payments ... [and] a case review system ... with respect to each such child."3 Finally, 42 U.S.C. Sec. 671(a)(9) requires a State's plan to provide that "where any agency of the State has reason to believe that the home or institution in which a child resides ... is unsuitable for the child because of the neglect, abuse, or exploitation of such child, it shall bring such condition to the attention of the appropriate court or law enforcement agency."
17
Taken together we think that these statutory provisions spell out a standard of conduct, and as a corollary rights in plaintiffs, which plaintiffs have alleged have been denied. It is true that the statutes are largely statutes relating to appropriations, but, defendants' argument to the contrary notwithstanding, they are privately enforceable under 42 U.S.C. Sec. 1983. See Miller v. Youakim, 440 U.S. 125, 99 S.Ct. 957, 59 L.Ed.2d 194 (1979); Rosado v. Wyman, 397 U.S. 397, 90 S.Ct. 1207, 25 L.Ed.2d 442 (1970); King v. Smith, 392 U.S. 309, 88 S.Ct. 2128, 20 L.Ed.2d 1118 (1968). Moreover the Supreme Court did not distinguish between prospective equitable relief and an action for money damages in regard to the right to enforce privately in Wright v. Roanoke Redevelopment and Hous. Auth., --- U.S. ----, 107 S.Ct. 766, 770 n. 5, 773, 93 L.Ed.2d 781 (1987).
18
We therefore conclude that the district court correctly denied defendants' motion for summary judgment on the ground of immunity and we affirm its ruling. We should not be understood, however, to mean that defendants or any of them are necessarily liable for money damages. Their right to claim immunity must be determined by an objective test rather than their subjective good faith belief, see Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S.Ct. 2727, 2738, 73 L.Ed.2d 396 (1982), and we decide only that objectively, to the extent that they had discretion in the exercise of their duties, they would not be justified in doing or in failing to do what is alleged, if that be proven.4 The proof, however, of the alleged actionable nonfeasance and malfeasance must await further proceedings in the district court.
19
AFFIRMED.
1
Order of the district court entered July 27, 1987. J.A. 506
2
Defendants' argument deals only with the constitutional rights of foster children, because defendants argue that the foster children have no statutory rights which are enforceable under 42 U.S.C. Sec. 1983. We touch on this argument in the text infra
3
"Case plan" and "case review system" are both elaborately defined in 42 U.S.C. Sec. 675, the relevant text of which follows:
The term "case plan" means a written document which includes at least the following: A description of the type of home or institution in which a child is to be placed, including a discussion of the appropriateness of the placement and how the agency which is responsible for the child plans to carry out the voluntary placement agreement entered into or judicial determination made with respect to the child in accordance with section 672(a)(1) of this title; and a plan for assuring that the child receives proper care and that services are provided to the parents, child, and foster parents in order to improve the conditions in the parents' home, facilitate return of the child to his own home or the permanent placement of the child, and address the needs of the child while in foster care, including a discussion of the appropriateness of the services that have been provided to the child under the plan. Where appropriate, for a child age 16 or over, the case plan must also include a written description of the programs and services which will help such child prepare for the transition from foster care to independent living.
* * *
The term "case review system" means a procedure for assuring that--
(A) each child has a case plan designed to achieve placement in the least restrictive (most family like) setting available and in close proximity to the parents' home, consistent with the best interest and special needs of the child,
(B) the status of each child is reviewed periodically but no less frequently than once every six months by either a court or by administrative review (as defined in paragraph (6)) in order to determine the continuing necessity for and appropriateness of the placement, the extent of compliance with the case plan, and the extent of progress which has been made toward alleviating or mitigating the causes necessitating placement in foster care, and to project a likely date by which the child may be returned to the home or placed for adoption or legal guardianship....
4
In view of this conclusion we do not consider what discretion, if any, is vested in any particular defendant in the performance of his duties under the program
| {
"pile_set_name": "FreeLaw"
} |
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 91-6027
_____________________
EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,
Plaintiff-Appellant,
Cross-Appellee,
versus
OLSON'S DAIRY QUEENS, INC.,
Defendant-Appellee,
Cross-Appellant,
DAVID T. LOPEZ,
Appellee-Cross-Appellant.
_______________________________________________________
Appeal from the United States District Court for
the Southern District of Texas
(CA H 86 3777)
_______________________________________________________
(March 9, 1993)
Before REAVLEY, KING and WIENER, Circuit Judges.
PER CURIAM:1
The Equal Employment Opportunity Commission (EEOC) appeals
the district court's judgment that Olson's Dairy Queens, Inc.
(Olson's) had not committed unlawful employment discrimination
1
Local Rule 47.5 provides: "The publication of opinions
that have no precedential value and merely decide particular
cases on the basis of well-settled principles of law imposes
needless expense on the public and burdens on the legal
profession." Pursuant to that Rule, the court has determined
that this opinion should not be published.
and awarding Olson's attorney's fees. We reverse and render as
to Olson's liability and remand for determination of damages.
I. BACKGROUND
The relevant facts underlying EEOC's complaint are outlined
in the district court's opinion. 803 F. Supp. 1215, 1217-18.
Our departure from the district court's recitation, and
ultimately its opinion, is based largely upon the testimony of
the EEOC's expert witness, Dr. Mahlon Straszheim, and Olson's
expert witness, Dr. Ira Chorush.
A. DR. STRASZHEIM'S STUDY.
Dr. Straszheim analyzed the extent to which Olson's actual
hiring patterns produced a different black-nonblack employee mix
than would be expected if Olson's hiring policies were entirely
race-neutral. He did so by two distinct means.
1. External Availability Analysis.
The first approach, which was the focus of the district
court's opinion, was to compare Olson's hiring history with the
percentage of black food preparation and service workers in the
relevant labor market from which Olson's draws its work force.
Dr. Straszheim, relying on years of experience in labor,
transportation, and urban economic analysis, determined that the
relevant labor market was the metropolitan Houston area -- more
specifically, the Houston Standard Metropolitan Statistical Area,
or "SMSA," as defined by the United State Bureau of the Census.
Using detailed census data for the Houston SMSA, Dr.
Straszheim determined that blacks comprise roughly 25.2% of the
2
food preparation and service workers in the Houston SMSA. By
comparison, only 8.1% of employees of known race hired by Olson's
between 1978 and 1987 were black.
Dr. Straszheim refined the Houston SMSA figures to
account for travel time to and from Olson's locations and the
average travel times for black food preparation and service
workers reported in the census data. He also distinguished
between the Spring Branch (6 locations), Bellaire (2 locations),
and Katy (1 location) labor markets. Based upon the demographics
of each of these distinct markets and the relevant travel times,
Dr. Straszheim concluded that blacks comprised 19.8% of the
relevant labor pool for Olson's Spring Branch and Bellaire
locations, and 8.1% for the Katy store. By comparison, blacks
comprised 6.5% of hires of known race at Olson's six Spring
Branch stores, 12.3% of hires of known race at Olson's two
Bellaire-area stores, and 9.4% of hires of known race at Olson's
Katy location.
Employing standard statistical techniques, Dr.
Straszheim concluded that there was less than one chance in
100,000 (.00001) that Olson's observed hiring patterns in the
Spring Branch stores could have resulted from truly race-neutral
hiring practices, and less than three chances in one thousand
(.0026) that Olson's observed hiring patterns in the Bellaire
stores could have resulted from truly race-neutral hiring
practices. Dr. Straszheim found no statistically significant
difference between the number of blacks hired in the Katy store
3
and the number which would be expected based upon black
representation in the relevant labor market.
2. Applicant Flow Analysis.
As a separate and distinct means of assessing the race-
neutrality of Olson's hiring practices, Dr. Straszheim compared
the percentage of blacks among Olson's applicants of known race
to the percentage of blacks among Olson's hired employees of
known race. The results of this analysis were completely
disregarded by the district court's opinion and largely ignored
by Olson's own expert, as well as by Olson's counsel in his
argument to this court.
Between 1984 and 1987, the period for which rejected
applications were available, blacks constituted 29.6% of the
roughly 1,800 applicants of known race. In the Spring Branch
market, 30.1% of the applicants of known race for the relevant
period were black; 39.5% in the Bellaire market; and 27.6% in the
Katy market. By comparison, roughly 13.2% of the persons of
known race hired by Olson's Spring Branch stores during the same
time period were black, while blacks constituted 27.3% and 11.1%
of the hires of known race for Olson's Bellaire and Katy
locations, respectively, for the same period.
In light of the racial mix of actual applications made
to each of the stores, Dr. Straszheim concluded that the
likelihood that Olson's observed hiring patterns resulted from
truly race-neutral hiring practices was less than one chance in
ten thousand (.0001) for the Spring Branch stores, less than
4
seven chances in one thousand (.0070) for the Bellaire stores,
and less than two chances in one thousand (.0020) in the Katy
store.
B. DR. CHORUSH'S STUDY.
Dr. Chorush testified that he had requested data from
Olson's Spring Branch stores for April 1990. He found that, of
the 60 employees working at the six Spring Branch locations in
April 1990, more than one-half lived within one mile of the store
at which they worked, and more than 80 percent lived within three
miles. He testified that many of Olson's Spring Branch area
employees were high school students and that many were employed
part time. Dr. Chorush did not quarrel with Dr. Straszheim's
depiction of Olson's Spring Branch area employees as
predominantly nonblack. Based upon his observations, Dr. Chorush
concluded that "most persons willing to accept positions at
Olson's are young, seeking part-time employment and residing
within a very short distance of the restaurant." Id.
II. DISCUSSION
A. EEOC'S COMPLAINT.
To prevail on its claim of disparate treatment, the EEOC
must establish by a preponderance of the evidence that a pattern
of intentional discrimination existed in Olson's hiring of black
applicants. That is, the EEOC must show that racially
discriminatory hiring was Olson's regular, rather than unusual,
practice. International Brotherhood of Teamsters v. United
States, 431 U.S. 324, 360, 97 S. Ct. 1843, 1867 (1977)
5
("Teamsters"). If the EEOC establishes a prima facie violation,
it is incumbent upon Olson's to articulate a legitimate,
nondiscriminatory reason for its hiring patterns. Id.; McDonnell
Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S. Ct. 1817, 1824
(1973). If Olson's articulates an acceptable rationale, the EEOC
bears the burden of showing that Olson's explanation is a pretext
for unlawful discrimination. Teamsters, 431 U.S. at 362 n.50, 97
S. Ct. 1868 n.50; McDonnell Douglas, 411 U.S. at 804, 93 S. Ct.
at 1825.
1. Prima Facie Violation.
The EEOC may establish a prima facie violation of Title
VII through statistical evidence, evidence of Olson's treatment
of individual job applicants and employees, or both. See
Hazelwood Sch. Dist. v. United States, 433 U.S. 299, 97 S. Ct.
2736 (1977); see also Pouncy v. Prudential Ins. Co., 668 F.2d
795, 802 (5th Cir. 1982) ("When the statistical showing is
sufficiently strong in a disparate treatment action, the
plaintiffs' prima facie case can be made without additional
evidence establishing that the defendant purposefully treated
minorities protected under Title VII less favorably than other
persons."). EEOC presented both statistical and anecdotal
evidence. While we do not dispute the district court's
assessment of the anecdotal testimony of rejected applicants
Kathy Richie, Angela Burks, Ruby Cantu, Lillie Lewis, and Jessica
J. Jones, we hold that the district court erred both in its
assessment of the statistical evidence offered by the EEOC and in
6
its conclusion that the EEOC failed to establish a prima facie
violation of Title VII.
The district court correctly observes that "[t]he
usefulness of statistical data in assessing discriminatory
practices depends . . . on the validity of the basic reference
population as the pole star being compared to the work force of
the employer," 803 F. Supp. at 1220-21, and that, "[i]n a
disparate treatment case, the statistical evidence must be
`finely tuned' to compare the employer's relevant workforce with
the qualified populations in the relevant labor market." Id. at
1221 (quoting Krodel v. Young, 748 F.2d 701, 709 (D.C. Cir.
1984)). However, we disagree with the district court's
conclusion that the EEOC's statistical evidence fails to raise a
claim of intentional discrimination. First, Dr. Straszheim's
"external availability" methodology is sufficiently similar to
that approved by the court in United States v. Pasadena Indep.
Sch. Dist., 43 Fair Emp. Prac. Cas. (BNA) 1319, 1987 WL 9919
(S.D. Tex. Apr. 18, 1987) (DeAnda, C.J.) ("Pasadena I.S.D."), to
beg the question why the court found it so lacking here.
Second, the travel times which the district court found
"simply untenable," 803 F. Supp. at 1219, were confirmed by the
census data, which was, in turn, legitimized by the actual
applications received by Olson's. We do not understand how the
district court can completely discount the possibility that
prospective employees will travel further than a few blocks to
work at Olson's when it was presented with evidence of hundreds
7
of applications from job seekers not residing in the immediate
vicinity of an Olson's location.
Third, Dr. Chorush's analysis, which the district court
found "persuasive," id., is fundamentally unsound. Dr. Chorush's
analysis considers only a portion of Olson's work force at only
one point in time, presuming that what was true for the Spring
Branch stores in April 1990 must be true for all Olson's
locations over the entire period under dispute. Dr. Chorush
begins with the presumption that one can describe Olson's labor
market by describing Olson's work force; thus, he concludes,
since most of Olson's Spring Branch employees are white teenagers
living a short distance from the store, then white teenagers
living a short distance from the store constitute Olson's
available labor force. This is wholly at odds with the
fundamental premise of employment discrimination law. In order
to test for discriminatory hiring, we evaluate an employer's work
force in terms of the available labor pool, not the other way
around. The fact that Olson's April 1990 Spring Branch work
force was predominantly white teenagers living close to the store
does not mean that there were not qualified applicants who were
not white teenagers living close to the store.
Finally, the district court's assessment of the EEOC's
statistical evidence completely disregards the "applicant flow"
analysis conducted by Dr. Straszheim. Dr. Chorush "opin[ed]"
that Olson's could "expect" to draw its work force from a given
area. Id. By contrast, Dr. Straszheim analyzed the actual
8
applications. The district court found, based upon Dr. Chorush's
testimony, that "[a]pplicants for employment [at Olson's] are
therefore likely to be substantially different from those
actually holding employment in the food preparation and service
classification [of the Census]." Id. However, Olson's own
applications indicate that blacks not living within the immediate
vicinity of Olson's locations comprise a higher percentage of
applicants than was suggested by Dr. Straszheim's census-based
analysis.
Guided by this circuit's previous admonition that the
"most direct route to proof of racial discrimination in hiring is
proof of disparity between the percentage of blacks among those
applying for a particular position and the percentage of blacks
among those hired," Hester v. Southern Ry., 497 F.2d 1374, 1379
(5th Cir. 1974), we conclude that the district court clearly
erred when it held, without fully considering the "applicant
flow" analysis offered by the EEOC's expert, that the EEOC had
failed to provide ample statistical evidence to establish a prima
facie violation of Title VII.2 To the contrary, we find the
record replete with evidence to establish such a violation.
2. Olson's Rationale.
The district court summarily accepted, without
description or explanation, Olson's articulated nondiscriminatory
2
We also express concern for the short shrift which the
district court gave the EEOC's "external availability" analysis,
especially when we consider the dearth of countervailing evidence
offered by Olson's expert.
9
reasons for its hiring and found that the EEOC failed to show
that those articulated reasons were a pretext disguising
discrimination. 803 F. Supp. at 1223. We disagree with the
district court's assessment of Olson's proffered explanation.
The record clearly demonstrates that any explanation which the
district court may have perceived to be facially
nondiscriminatory is, in fact, mere pretext.
Discarding Mr. Watson's statement that Olson's
customers prefer to be served by persons of their own "culture,"
the only other "reasons" which may be gleaned from Olson's case
are (1) the proximity of an applicant's residence to the
restaurant, and (2) the racial make-up of the Spring Branch
school district. While the former might conceivably satisfy the
McDonnell Douglas-Teamsters test if there was a showing that
proximity to the restaurant was either a critical factor or even
a stated criteria in Olson's hiring guidelines, that showing was
not made or even attempted. This leaves only the intimation that
people from nearby were hired because only people from nearby
would apply. However, we know that is not true, based upon Dr.
Straszheim's review of Olson's applications. As for the second
explanation, the racial make-up of the Spring Branch school
district explaining the racial make-up of the employees, aside
from ignoring conditions at the Bellaire and Katy stores and in
their surrounding neighborhoods, presumes that Olson's potential
work force is composed of area high school students. However,
while it may be true that Olson's employees are predominantly
10
area high school students, the applications make it clear that
Olson's available labor force includes many persons who are not
area high school students.
B. OLSON'S ATTORNEY'S FEES.
42 U.S.C. § 2000e-5(k) allows the district court to grant
the prevailing party in a Title VII action to recover reasonable
attorney's fees. Because we render judgment for the EEOC on
liability, it is the EEOC who prevails and not Olson's.
Notwithstanding that, we are compelled to express our puzzlement
at how the district court could look at this record and find that
the EEOC's complaint was "frivolous, unreasonable, or without
foundation," Christiansburg Garment Co. v. EEOC, 434 U.S. 412,
421, 98 S. Ct. 694, 700 (1978), particularly in light of the
district court's denial of Olson's two pre-trial motions for
summary judgment and of Olson's Rule 41(b) motion for dismissal,
which was offered at the close of the EEOC's case-in-chief.
III. CONCLUSION
We REVERSE and RENDER judgment in favor of the EEOC on the
question of Olson's liability. We return this matter to the
district court in order to proceed to the damages stage of this
employment discrimination class action, see Teamsters, 431 U.S.
at 361-62, 97 S. Ct. at 1867-68; Richardson v. Byrd, 709 F.2d
1016, 1021 (5th Cir. 1983).
REVERSED AND RENDERED IN PART; CAUSE REMANDED.
11
| {
"pile_set_name": "FreeLaw"
} |
MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2019 ME 11
Docket: And-18-74
Submitted
On Briefs: September 26, 2018
Decided: January 24, 2019
Panel: SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, HJELM and HUMPHREY, JJ.
Majority: SAUFLEY, C.J., and MEAD, GORMAN, JABAR, HJELM and HUMPHREY, JJ.
Concurrence/
Dissent: ALEXANDER, J.
TANYA J. MCMAHON
v.
CHRISTOPHER P. MCMAHON
JABAR, J.
[¶1] Christopher P. McMahon appeals from a judgment of the District
Court (Lewiston, Ende, J.) denying his motion for contempt and granting Tanya
J. McMahon’s motion to modify a 2010 divorce judgment and the court’s order
(Sparaco, D.C.J.)1 denying his motion to alter or amend the judgment and
1 A judge may not “entertain a motion to alter or amend the judgment, decree or order of another
judge of the same court except in extraordinary circumstances such as in the case of the decreeing
judge’s death, resignation, sickness or other disability.” In re C.P., 2016 ME 18, ¶¶ 24-25,
132 A.3d 174 (alterations omitted) (quotation marks omitted); see also Burrow v. Burrow,
2014 ME 111, ¶ 26, 100 A.3d 1104. Here, the judge who issued the judgment on the motion for
contempt and motion for modification retired shortly afterward and was not available to act on the
post-judgment motions. The successor judge reviewed the entirety of the record and determined
that the record was sufficient for the court to address Christopher’s post-judgment motions. See
In re C.P, 2016 ME 18, ¶ 28, 132 A.3d 174.
2
granting in part his motion for additional findings of fact and conclusions of law.
See M.R. Civ. P. 52(b), 59(e).
[¶2] Christopher argues that the court committed error and abused its
discretion by (1) denying his motion for contempt, (2) failing to implement a
partial mediation agreement, (3) ordering him to pay attorney and guardian
ad litem fees, (4) denying a deviation from the child support guidelines, and
(5) imposing conditions on his visitation rights. Discerning no error or abuse
of discretion in the court’s actions, we affirm the judgment.
I. BACKGROUND
[¶3] The following facts, all of which are supported by competent
evidence, were found by the court. Because Christopher moved for additional
findings of fact pursuant to M.R. Civ. P. 52(b), we do not infer any findings, and
consider only the findings and conclusions explicitly rendered by the court. See
Ehret v. Ehret, 2016 ME 43, ¶ 9, 135 A.3d 101
[¶4] Christopher and Tanya McMahon, parents of three children now
ranging from eleven to eighteen years of age, were divorced through a 2010
judgment entered by the District Court (Ende, J.). The judgment conferred both
shared parental rights and shared primary residence for all three children.
3
Christopher moved to Connecticut in early 2012, but neither party sought to
amend the divorce judgment.
[¶5] Over the next few years, Christopher’s relationship with his two
eldest children began to deteriorate, in part because of conflicts between the
children and his new wife. In 2016, the youngest child expressed a wish to try
school in Connecticut, and Tanya and Christopher began to discuss the
possibility of making the move happen. To this end, Christopher sent a written
agreement to Tanya stating that the child would remain with him in
Connecticut for the entire school year. Tanya added additional language stating
that the child could move back to Maine without hesitation if the child so
desired, and sent a signed copy back to Christopher. Christopher neither read
nor replied to Tanya’s version of the agreement, and no further discussions
took place. The child moved to Connecticut later that year.
[¶6] While the youngest child was in Maine for the holidays in late 2016,
Tanya sent a letter to Christopher stating that their “temporary arrangement”
had been rescinded, and that the child would remain in Maine. Concurrently,
Tanya filed a motion to modify the 2010 divorce judgment, seeking to provide
the sole primary residence for the three children and a recalculation of child
support. In response, Christopher filed a motion for contempt, alleging that
4
Tanya breached the 2010 divorce judgment by relocating the residence of the
youngest child without thirty days’ notice. Both parties attended mediation in
May 2017, which culminated in a partial agreement.
[¶7] The court held a hearing on the parties’ motions a half day at a time
on three days in late August and early September. Following the hearings, the
court granted Tanya’s motion to modify the divorce judgment, giving her the
right to provide the sole primary residence for all three children. The court
denied Christopher’s motion for contempt. The court (Sparaco, D.C.J.) denied
Christopher’s subsequent motion to alter or amend and granted in part his
motion for additional findings of fact and conclusions of law. Christopher
timely appealed. See 14 M.R.S. § 1901 (2017); 19-A M.R.S. § 104 (2017);
M.R. App. P. 2B(c).
II. DISCUSSION
A. Motion for Contempt
[¶8] Christopher first argues that the court erred and abused its
discretion by denying his motion for contempt. We review the findings of fact
“that form a basis for [the] court’s decision regarding civil contempt for clear
error.” Lewin v. Skehan, 2012 ME 31, ¶ 18, 39 A.3d 58. The court’s finding is
“clearly erroneous when there is no competent evidence in the record to
5
support it.” Id. If review of the factual findings reveals no clear error, the court’s
decision is reviewed for an abuse of discretion. Id.
[¶9] “For a court to find a party in contempt, the complaining party must
establish by clear and convincing evidence that the alleged contemnor failed or
refused to comply with a court order and presently has the ability to comply
with that order.” Efstathiou v. Efstathiou, 2009 ME 107, ¶ 11, 982 A.2d 339.
Further, the “court order must inform the person in definite terms what duties
the order imposes upon him.” Lewin, 2012 ME 31, ¶ 19, 39 A.3d 58.
[¶10] Here, Christopher moved to Connecticut following the issuance of
the original divorce judgment, making compliance with its shared residence
provision all but impossible. Neither party sought to alter that judgment, and
the parties’ informal agreement about the youngest child’s move to Connecticut
in 2016 was not an enforceable order. See Fisco v. Dep’t of Human Servs.,
659 A.2d 274, 275 (Me. 1995) (holding that reliance on an informal agreement
between parties as to child support “is unreasonable and unjustifiable” because
it frustrates the power of the court); Ashley v. State, 642 A.2d 176, 176
(Me. 1994) (same). Accordingly, the court found that both parties shared the
responsibility for the sequence of events that transpired; that there was no
court order that specified the youngest child’s primary residence in light of the
6
changed circumstances; and therefore, that there was no court order that could
have been violated. Because competent evidence in the record supports that
determination, it was not an abuse of discretion for the court to deny
Christopher’s motion for contempt.
B. Mediated Agreement
[¶11] Christopher next argues that the court erred when it failed to
implement provisions of a mediated partial agreement between him and Tanya
regarding his summer contact with their youngest child. Contrary to
Christopher’s assertion, “[a] family matter agreement does not become an
order of the court until it is presented to and approved by the court.” Cloutier
v. Cloutier, 2003 ME 4, ¶ 8, 814 A.2d 979. Although “in the normal course, the
court should honor an agreement reached by the parties,” it may, “acting within
its discretion, conclude[] that there is a basis for setting aside an agreement that
has not been incorporated in a court order.” Id. ¶¶ 9-10. Among other bases,
the court may consider “what [effect] the enforcement or setting aside of the
agreement would have on the best interests of the children.” Id. ¶ 11.
[¶12] The mediated agreement was created three months prior to the
final hearing, and during that time, the guardian ad litem expressed her opinion
that she did not believe the agreement was in the best interest of the youngest
7
child. It was well within the court’s discretion to examine the mediated
agreement in order to determine if it was in the child’s best interest and to
ultimately find that it was not. See id.
C. Attorney and Guardian ad Litem Fees
[¶13] Finally, Christopher contends that it was error for the court to
order him to pay a portion of Tanya’s attorney fees and to apportion more than
half of the guardian ad litem fees to him. Christopher argues that the court
erred by finding that he was able to afford such payments. We review the
award and apportionment of attorney and guardian ad litem fees for an abuse
of discretion. See McBride v. Worth, 2018 ME 54, ¶ 20, 184 A.3d 14; Akers v.
Akers, 2012 ME 75, ¶ 10, 44 A.3d 311.
[¶14] In making its determination, the court found that Christopher
made almost twice as much as Tanya and thus was better able to absorb the
cost of litigation. See 19-A M.R.S. § 1507(7)(A), (E) (2017). The court’s finding
is based firmly on the financial affidavits that both parties provided to the court.
Although Christopher has attempted to introduce new evidence on appeal of an
allegedly lower income, we do not “consider new facts, new exhibits or other
material relating to the merits of the appeal that was not presented to the trial
court and included in the trial court record.” Beane v. Me. Ins. Guar. Ass’n,
8
2005 ME 104, ¶ 9, 880 A.2d 284. In relying on the financial information
available to it, the court did not abuse its discretion.
[¶15] Although concurring in all other respects, the dissent would
conclude that the court erred by straying from the maximum fee and equal
sharing arrangement contemplated in the orders appointing the guardian
ad litem. Dissenting Opinion ¶ 21. It is important to note, however, that other
than Christopher’s argument on appeal that he could not afford the payments,
he did not raise any issues surrounding the guardian ad litem fees.
[¶16] In Teel v. Colson, we said
The general rule governing proper appellate procedure is that a
party who seeks to raise an issue for the first time at the appellate
level is held, in legal effect, to have “waived” the issue insofar as he
utilizes it to attack a judgment already entered and from which an
appeal is taken; therefore, appellate review will be denied to such
question.
396 A.2d 529, 533 (Me. 1979) (quoting Reville v. Reville, 289 A.2d 695, 697
(Me. 1972)). To that point, we further stated that
Specifically, proper appellate practice will not allow a party to shift
his ground on appeal and come up with new theories after being
unsuccessful on the theory presented in the trial court. It is a well
settled universal rule of appellate procedure that a case will not be
reviewed by an appellate court on a theory different from that on
which it was tried in the court below.
Id. at 534.
9
[¶17] In this case, the appellant did not challenge the total amount of the
guardian ad litem’s fees at trial and is not raising any issue regarding the final
amount of the guardian ad litem’s fees in this appeal. Nonetheless, the dissent
sua sponte raises the issue. Dissenting Opinion ¶¶ 24-43. Moreover, at the
conclusion of the hearing, Christopher’s attorney noted that he had reviewed
the bill and there was “really no objection [he could] make to it.” Although it is
not clear which guardian ad litem bill was being discussed, the record
establishes that the guardian submitted an affidavit regarding her fees on
September 11, 2017, and the court acted well within its discretion in
considering Christopher’s litigation strategy and choices as increasing the time
required of the guardian ad litem.
[¶18] In his motion for additional findings and conclusions, Christopher
did not question the guardian’s total fees as being over the initial cap, nor did
he question the uneven allocation. Finally, on this appeal, other than claiming
that he could not afford the attorney and guardian ad litem fees, Christopher
has not raised the issue of the guardian’s fees being over the initially authorized
amount allowed or the uneven allocation of the payment of the guardian’s bill.
Although we do not disagree with the principle addressed by the dissent
regarding the need for clarity of orders setting the amounts and expectations
10
of guardian ad litem fees, that issue has not been raised in this appeal.
Accordingly, we deem the issue waived. See id. at 533-34.
D. Christopher’s Remaining Arguments
[¶19] Christopher’s remaining arguments are also unpersuasive. It was
well within the court’s discretion to determine that the several weeks the
youngest child spends in his father’s care during the summer was an
insufficient basis to deviate from the child support guidelines.2 See Wong v.
Hawk, 2012 ME 125, ¶ 17, 55 A.3d 425 (stating that we review the “decision not
to deviate from the child support guidelines for an abuse of discretion”).
[¶20] Similarly, it was not an abuse of discretion for the court to
determine, based on previous interactions between the two eldest children and
Christopher’s new wife, that it was in the best interests of the children to
impose a condition on Christopher’s visitation with them that the stepmother
not be present. See Jackson v. MacLeod, 2014 ME 110, ¶ 23, 100 A.3d 484
2 Christopher also argues that he is entitled to a deviation from the child support guidelines
because of the increased cost of transportation related to his contact with the children because of his
newly reduced income. See 19-M.R.S. § 2007(3)(P) (2017). Neither this argument nor evidence of
increased costs of transportation and reduced income were presented to the trial court, and they are
not part of the record on appeal. See Beane v. Me. Ins. Guar. Ass’n, 2005 ME 104, ¶ 9, 880 A.2d 284.
As a result, we do not address this issue. See Foster v. Oral Surgery Assocs., P.A., 2008 ME 21, ¶ 22,
940 A.2d 1102 (“An issue raised for the first time on appeal is not properly preserved for appellate
review.”).
11
(“We review a trial court’s decision on a motion to modify a divorce judgment
for an abuse of discretion or errors of law.”).
The entry is:
Judgment affirmed.
ALEXANDER, J., concurring in part and dissenting in part.
[¶21] I concur in those portions of the Court’s opinion affirming the trial
court’s determinations regarding parent/child contact, child support, and the
allocation of attorney fees. I respectfully dissent from that portion of the
Court’s opinion affirming the trial court’s disregard of the payment caps and
equal allocation of payment responsibility for guardian ad litem fees, which
were specified in previously agreed-to orders and acknowledged at the hearing.
[¶22] The development of practice in the Family Division over the past
two decades has seen increasing numbers of guardian ad litem appointments,
usually by magistrates, sometimes by judges, to evaluate families and provide
advice to the parties and the court as to resolutions that might serve the best
interests of the children involved. In early practice, most guardian ad litem
appointment orders included only vague and general guidance as to the tasks
12
the guardians ad litem were to perform and set no caps on the fees guardians
ad litem might charge for their services.
[¶23] These open-ended orders led to significant abuses, with some
guardians ad litem performing tasks unanticipated by the parties and/or
seeking payment for fees that sometimes were well beyond parties’ ability to
pay. These abuses, particularly to middle-income litigants, were documented
in our opinions in Douglas v. Douglas, 2012 ME 67, ¶¶ 10-12, 19-28,
43 A.3d 965, and Desmond v. Desmond, 2011 ME 57, ¶ 7, 17 A.3d 1234.
Following those opinions, the courts adopted form guardian ad litem
appointment orders, such as were approved in this case, that (1) required
consideration of parties’ ability to pay, (2) specified the rates to be charged,
(3) set strict caps on payment and hours to be worked, and (4) allocated
payment responsibility between the parties. These orders were supported by
rules, adopted in 2015, that confirmed the importance of the fee limitations and
payment responsibility allocations set in the form guardian ad litem
appointment orders. Maine Rules for Guardians Ad Litem (Tower, 2018).
[¶24] Here, the guardian ad litem claimed to have worked hours and
sought payment for fees far in excess of the caps set in the appointment orders.
13
The history of the guardian ad litem’s appointment, the payment cap, and the
fee sharing arrangement is addressed below.
[¶25] After the competing post-judgment motions at issue in this appeal
had been filed, the court entered several orders reflected in the docket entries.
One of those orders, entered February 2, 2017 (Ham-Thompson, M.), was an
expanded appointment order for a guardian ad litem. See M.R.G.A.L. 4(a)(3)
and 4(b)(4)(D)(iii)(a). Maine Rule for Guardians Ad Litem 4(b)(4)(A) requires
that such an appointment order “specify the guardian ad litem’s length of
appointment; duties, including the filing of a written report . . . ; and fee
arrangements, including hourly rates, timing of payments to be made by the
parties, and the maximum amount of fees that may be charged for the case
without further order of the court.”
[¶26] The February 2 order, entered on the standard court guardian
ad litem appointment form, complied with M.R.G.A.L. 4(b)(4)(A). The order
specified a $120 hourly rate for the guardian ad litem, a 20-hour cap on the
guardian ad litem’s work, and a maximum amount of fees to be charged of
$2,400. The order required that each party pay half of the fees—$1,200. The
order also specified that the guardian ad litem would not be expected to travel
to Connecticut, where Christopher McMahon resided.
14
[¶27] Three months later, on May 1, 2017, the court (Mulhern, J.), again
utilizing the standard court form, amended the original guardian ad litem
appointment order particularly to authorize the guardian ad litem to travel to
Connecticut. The order recognized that the guardian ad litem’s travel time to
and from Connecticut would be compensated at a rate of $50 per hour;
extended the cap on the guardian ad litem’s hours by ten hours; and expanded
the payment obligation for the guardian ad litem’s fees by $1,000 for each party.
As a result of these amendments, each party’s specified total payment
obligation became $2,200, with the total fees to be paid to the guardian ad litem
to be “no more than” $4,400.
[¶28] The case file includes a brief order of the court (Ende, J.) purporting
to amend the May 1 guardian ad litem appointment order to remove the
Connecticut travel authorization and to direct the guardian ad litem to call one
of the children in Connecticut twice before August 1, 2017. That order, dated
August 31, 2017, also included a notation by the court (Ende, J.) dated
September 1, 2017, stating, “vacated as moot when signed.” Neither the
August 31 amendment order nor the September 1 order vacating the August 31
order as moot is reflected anywhere in the docket entries.
15
[¶29] September 1, 2017, was the last day of the court’s hearing on the
various motions. At that hearing, the court, the guardian ad litem, and the
parties discussed payments due the guardian ad litem. The guardian ad litem
noted that she had not traveled to Connecticut as anticipated by the May 1
amended appointment order. The guardian ad litem then said that “the day one
bill goes through last Friday.” Whatever document was referenced was not
marked as an exhibit. The guardian ad litem then referenced the appointment
orders: “I think that they were of $2,400 total with the parties each paying half.
No, 4,800 total, right, because they were each 24, is that right?”
[¶30] After the guardian ad litem expressed confusion as to the amounts
authorized in the appointment orders, Christopher McMahon’s counsel offered,
“I can make this probably simple. . . . I’ve reviewed the bill. And there’s really
no objection I can make to it.” The payment cap in the final appointment order
was $4,400, not $4,800 as referenced by the guardian ad litem.
[¶31] The transcript includes no suggestion by the guardian ad litem that
she was seeking payments in excess of the payment cap set in the May 1 order,
no justification offered for payments in excess of the cap, and an express
acknowledgement by the guardian ad litem that the parties are “each paying
half.” The September 1 on-the-record discussion certainly could not have
16
referenced the guardian ad litem’s bill submitted to the court around
September 11, 2017, as the Court’s opinion suggests. Court’s Opinion ¶ 17.
[¶32] Following discussion of the amount due, the court, apparently not
having referenced the appointment orders or heard the guardian ad litem’s
“each paying half” testimony, asked, “is there an agreement as to how to split
it?” Counsel for Tanya McMahon then observed, “It is—I think—is subject to
reallocation, isn’t it?” After the court asked, “Do the parties intend to be subject
to reallocation?” counsel for Christopher McMahon observed, “I don’t
remember. I’ll just let the order speak for itself.” Counsel’s statement indicated
his view that the agreed-to order providing for the equal sharing of costs
remained in effect. The guardian ad litem then observed that “mom has paid
more” and that “I’d like to get paid . . . I’m willing to talk to the parties about
this, what’s owed.” Counsel for Christopher McMahon then responded, “So we
understand. An additional submission may be made.”
[¶33] No additional filings or submissions are referenced in the docket
entries, and no other actions or amendments to the guardian ad litem
appointment orders appear in the file prior to the court’s November 13, 2017,
order that is the subject of this appeal. Thus, as of the time the court rendered
its decision, the outstanding and effective guardian ad litem appointment
17
orders, pursuant to M.R.G.A.L. 4(b)(4)(A), specified a maximum fee that may be
charged without further order of the court of $4,400 and specified that each
party pay a total of $2,200 toward the guardian ad litem fees.
[¶34] Disregarding the governing guardian ad litem appointment orders,
the court’s final order authorized total payments to the guardian ad litem of
$7,974.71, nearly $3,600 in excess of the final spending cap set in accordance
with the Rule 4(b)(4)(A) and more than triple the $2,400 spending cap agreed
to before the amendment that contemplated the travel to Connecticut that
ultimately did not occur. The final order directed Christopher McMahon to pay
the guardian ad litem over $3,400 in addition to the $1,700 that the court
recognized that Christopher McMahon had already paid to the guardian
ad litem. That final order effectively set aside the agreement for equal sharing
of costs in the original guardian ad litem appointment orders and required that
Christopher McMahon pay approximately $2,900 more than the cap of $2,200
on his payments set in the May 1, 2017, amended order.
[¶35] Neither the court’s findings nor the record contains any
justification for the guardian ad litem to perform work in excess of the thirty
hours specified in the guardian ad litem appointment orders or to charge fees
in excess of the total of $4,400 authorized in the amended guardian ad litem
18
appointment order. In fact, because the guardian ad litem did not travel to
Connecticut, as contemplated by the May 1, 2017, amended order, there is a
serious question as to whether there was authority to exceed the $2,400 cap set
in the original guardian ad litem appointment order before the change
authorizing travel to Connecticut. However, for purposes of this opinion, we
can assume that the hours cap of thirty hours and the fees cap of $4,400 govern
the work authorized and payments that can be approved for the guardian ad
litem. At the hearing, Christopher McMahon’s counsel acknowledged and
agreed to the $4,400 or $4,800 payment obligation with “each paying half.”
[¶36] Without providing the parties with notice or an opportunity to be
heard, or any findings justifying its actions, the final court order disregarded
the earlier orders setting limits on the work authorized and payments to the
guardian ad litem. The final order, in effect, signified a return to the abusive,
open-ended guardian ad litem fee-setting practices that prevailed prior to the
Douglas and Desmond opinions and the reforms that followed those opinions.
[¶37] The Court’s opinion, addressing the issues on appeal, states that
“Christopher contends that it was error for the court to order him to pay a
portion of Tanya’s attorney fees and to apportion more than half of the guardian
ad litem fees to him. Christopher argues that the court erred by finding that he
19
was able to afford such payments.” Court’s Opinion ¶ 13. Despite recognizing
that the guardian ad litem’s excessive fee request was not submitted until ten
days after trial, the Court supports its decision by asserting that “the appellant
did not challenge the total amount of the guardian ad litem’s fees at trial and is
not raising any issue regarding the final amount of the guardian ad litem’s fees
in this appeal. Nonetheless, the dissent sua sponte raises the issue.” Court’s
Opinion ¶ 17.
[¶38] Christopher McMahon is unrepresented in this appeal. During the
hearing, McMahon’s then-counsel and the guardian ad litem recognized the
continuing existence of the $4,400 or $4,800 payment cap and the continuing
validity of the agreed equal fee-sharing arrangement. The concern in this
opinion is the trial court’s sua sponte act, without any on-the-record request
from the guardian ad litem and without specific findings supporting its
unilateral action, altering the fee cap and fee sharing arrangement
acknowledged by the guardian ad litem at hearing.
[¶39] Christopher McMahon sufficiently preserved for appeal his
objections to the payment mandate in his appeal documents by generally
objecting to the guardian ad litem’s payment mandate, when the general
20
objection is combined with his then-counsel’s and the guardian’s statements on
the last day of the hearing.
[¶40] Even if the appeal filing and the on-the-record statements are
viewed as insufficient to preserve objections to the disregard of the negotiated
cap and equal sharing agreement, the trial court’s disregard of the orders
setting payment caps and specifying the fee sharing arrangement, without
providing the parties with notice and an opportunity to be heard, constitutes
obvious error.
[¶41] We have held that for us to vacate a judgment based on the obvious
error standard of review, “there must be (1) an error, (2) that is plain, and
(3) that affects substantial rights”; if those conditions are met, we have
indicated that we will exercise our discretion to notice an unpreserved error if
we also conclude that (4) the error seriously affects the fairness and integrity
or public reputation of the judicial proceedings. State v. Fahnley, 2015 ME 82,
¶ 15, 119 A.3d 727; accord Truman v. Browne, 2001 ME 182, ¶ 12, 788 A.2d 168;
Morey v. Stratton, 2000 ME 147, ¶¶ 10 & n.3, 11, 756 A.2d 496; Scott v. Lipman
& Katz, P.A., 648 A.2d 969, 974-75 (Me. 1994) (applying obvious error review
in civil cases).
21
[¶42] The trial court’s disregard of the previously agreed to and court
approved payment caps and fee sharing arrangement, requiring Christopher
McMahon to pay more than double his agreed-to commitment without advance
notice and opportunity to be heard and without findings justifying rejection of
the prior agreed to orders, meets our criteria to vacate due to obvious error.
With the past problems that had afflicted guardian ad litem fee-setting and
collection practices, problems that the Court had adopted orders and rules to
correct, the trial court should not have allowed the guardian ad litem to invite
it to return to the past, discredited fee assessment and collection practices.
[¶43] I would vacate the portion of the trial court’s judgment regarding
approval of guardian ad litem fees and imposition of payment obligations on
Christopher McMahon and remand with direction that the guardian ad litem
appointment order’s limitation on payments of $4,400 with equal sharing of
payment obligation by the parties be enforced. With this change, Christopher
McMahon would be obligated to pay $500 in addition to the $1,700 that the final
order recognized he had already paid toward the guardian ad litem fees.
22
Christopher P. McMahon, appellant pro se
Sarah C. Mitchell, Esq., and Amy Dieterich, Esq., Skelton Taintor & Abbott,
Auburn, for appellee Tanya J. McMahon
Lewiston District Court docket number FM-2009-782
FOR CLERK REFERENCE ONLY
| {
"pile_set_name": "FreeLaw"
} |
43 A.3d 527 (2012)
IN RE ADOPTION OF J.H;
APPEAL OF T.H.
No. 1564 MDA 2011.
Superior Court of Pennsylvania.
January 25, 2012.
Affirmed.
| {
"pile_set_name": "FreeLaw"
} |
987 F.2d 775
Lightfootv.White*
NO. 92-6583
United States Court of Appeals,Eleventh Circuit.
Feb 25, 1993
1
Appeal From: N.D.Ala.
2
AFFIRMED.
*
Fed.R.App.P. 34(a); 11th Cir.R. 34-3
| {
"pile_set_name": "FreeLaw"
} |
484 F.2d 1295
DART INDUSTRIES, INC., a Delaware corporation formerly knownas Rexall Drug and Chemical Company, Plaintiff-Appellee,v.LIBERTY MUTUAL INSURANCE COMPANY, a Massachusettscorporation, Defendant-Appellant.
No. 71-1986.
United States Court of Appeals,Ninth Circuit.
Sept. 25, 1973.
Jean Wunderlich (argued), William D. Jennett, of Gilbert, Thompson, Kelly, Crowley & Jennett, Los Angeles, Cal., for defendant-appellant.
Bruce A. Beckman (argued), James S. Cline, of Adams, Duque & Hazeltine, Los Angeles, Cal., for plaintiff-appellee.
Before CARTER and TRASK, Circuit Judges, and BURNS,* District Judge.
TRASK, Circuit Judge:
1
Liberty Mutual Insurance Company, a Massachusetts corporation (Liberty), appeals from a final judgment entered in favor of Dart Industries, Inc., a Delaware corporation (Dart), following the granting of a motion for summary judgment in this diversity case. We affirm.
2
On June 23, 1961, Liberty had issued its Comprehensive General Liability Policy of Insurance, naming The Owl Drug Company (Owl) and Rexall Drug and Chemical Company (Rexall) as named insureds. On April 3, 1962, Owl was merged into Rexall under the "short merger" procedure of Nevada Revised Statutes Sec. 78.486. Such a merger results from the exercise of a statutory right without agreement or action required on the part of the merged corporation and no agreement or action by Owl took place here. Effective April 22, 1969, the name of Rexall was changed to Dart Industries, Inc., a publicly held stock corporation.
3
Prior to June 23, 1961, one Calabrese had become indebted to Owl for large sums of money, principally in connection with sales of drug stores. Upon receipt of a credit information report concerning Calabrese and this indebtedness from a Credit Managers Association of which Owl was a member, W. H. Fisher, Jr., then president of Owl, sent a letter to the Association dated June 23, 1961, on a letterhead of Rexall controverting some of the statements in the report. Calabrese made no complaint about the letter to Owl prior to the filing of a libel action on March 22, 1963, against Rexall (now merged with Owl) in state court. Despite Rexall's defense that the letter was privileged, requiring a finding by the jury of malice in the writing of the letter by Owl, a verdict of $880,000 plus costs was recovered by Calabrese. Subsequently this amount was reduced to $550,000 plus costs.
4
No question of policy coverage has been raised by Liberty. Its principal defense is that under California Insurance Code, Section 533, the insurer is not liable where the loss was caused by the willful act of the insured.1 Liberty contends this was such a case.
5
When Liberty refused to pay the judgment, Dart, on April 17, 1969, paid it, plus interest, in the total amount of $615,062.54. Dart then filed this action for recovery of that sum under the provisions of the policy. The summary judgment below permits Dart to recover that amount, plus interest, now grown to $697,564.56.
6
The thesis of Liberty is that a corporation can act only through its agents; that it is well established that a corporation may be held liable for the wanton, malicious, willful acts of its agents or employees done within the scope of their employment whereby injuries are inflicted on a third person, although such acts have not been expressly authorized or subsequently ratified. It refers generally to 19 C.J.S. Corporations Sec. 1263 and to 19 Am.Jur.2d, Corporations Sec. 1428. No quarrel may be had with such an argument in general and the California authorities support it. California Grape Control Board v. Boothe Fruit Co., 220 Cal. 279, 29 P.2d 857 (1934); Johnson v. Monson, 183 Cal. 149, 190 P. 635 (1920). Therefore, appellant concludes, since the letter which Mr. Fisher wrote was within the general scope of his corporate responsibilities as established by the libel judgment in state court, it also became an act of the corporation within the ambit of section 533.
7
Dart contends that the position of Liberty oversimplifies the problem by confusing in one proposition what in reality involves two considerations. The first is the issue of under what circumstances a principal or an employer can be liable in damages to third persons for acts of its agents or employees. The second and critical issue here, is whether a principal or employer may insure against the potential liability for such acts of its agents or employees, in the light of section 533.
8
Dart's argument is that there is a policy of the law to impose vicarious liability upon the principal or employer for damages caused by agents or employees to third persons; that there is also a public policy and established business practice to permit persons including corporations to purchase insurance to indemnify them against damages which might be imposed for not only tortious acts of agents or employees but also willful acts of agents or employees, for which such vicarious liability may be imposed.
9
The trial court took the view as shown by its comments during argument that where policy coverage was otherwise admitted, as it was here, and there had been no showing that the letter had by formal action of the Board of Directors been previously authorized or subsequently ratified; and no showing that the corporation by some form of informal action had indicated prior approval or later acquiescence, section 533 did not constitute a legal defense.
10
There is a surprising dearth of direct authority upon the narrow issue involved or collateral authority which might point the way. A group of arson cases decided by the courts of California give support to appellee, Dart. In Arenson v. National Automobile & Casualty Insurance Co., 45 Cal.2d 81; 286 P.2d 816 (1955), an insured under a general liability policy had a judgment obtained against him for damages caused when his minor son started a fire which injured school property. A statute made a parent liable for all damage which was "wilfully" caused by a child. The company refused to indemnify because the damage was caused "intentionally by an insured" within the terms of a policy exclusion. The California Supreme Court in reversing a judgment for the insurer, also interpreted section 533 and held that it did not apply where the insured was not at fault. The court said:
11
"Section 533 of the Insurance Code, which codifies the general rule that an insurance policy indemnifying the insured against liability due to his own wilful wrong is void as against public policy, has no application to a situation where the plaintiff is not personally at fault." 45 Cal.2d at 84, 286 P. 2d at 818.
12
Here, then, vicarious liability is imposed upon an insured in a damage action for a willful act which the insured did not directly commit, yet the right to insure against the consequences of the willful act was upheld against the claimed exclusion of section 533. Although not a case of corporate liability, it clearly indicates the policy of the statutory exclusion as being limited to a situation where the insured is personally at fault. See also, Erlin-Lawler Enterprises, Inc. v. Fire Insurance Exchange, 267 Cal.App. 2d 381, 73 Cal.Rptr. 182 (1968); Nuffer v. Insurance Co. of North America, 236 Cal.App.2d 349, 45 Cal.Rptr. 918 (1965).
13
The court in Nuffer, supra, recognized the distinction between vicarious liability of respondeat superior and the rights flowing from a policy of indemnity insurance, saying:
14
". . . [T]he rules governing a determination of the scope of an agent's authority for the purpose of ascertaining the responsibility of his principal on account of wrongs committed by the agent in the transaction of the business of the agency do not control a determination of the scope of the agent's authority for other purposes. The case at bench does not concern the responsibility of a principal to a third person for a loss occasioned by wrongs committed by an agent. Instead, the case here concerns the responsibility of a third person under a contract of indemnity for a loss sustained by the principal as a result of an act of the agent. Stated otherwise, the case here concerns the coverage provided by the insurance policies." 236 Cal.App.2d at 356, 45 Cal.Rptr. at 923.
15
In Hendrix v. Employers Mutual Liability Insurance Co., 98 F.Supp. 84, 87 (E.D.S.C.1951), reversed on other grounds, 199 F.2d 53 (4th Cir. 1952), the court in an assault and battery case by an employee said:
16
"It is true, as a general proposition of law, that public policy will not permit an insured to be indemnified for liability incurred by his own unlawful act. Farm Bureau Mut. Automobile Ins. Co. v. Hammer, 4 Cir., 1949, 177 F.2d 793. It is, therefore, necessary to determine whether the counterclaims sought to recover from the plaintiff on account of his personal wrong-doing, or whether they sought to hold him for damages because of the wrong-doing of his agent, under the doctrine of respondeat superior. Indemnity for the latter is not contrary to public policy because the insured in such a case is guilty of no wrong-doing, but simply has the misfortune to be legally responsible for the wrong-doing of another."
17
The cases relied upon by appellant are cases where an individual insured was the one who personally committed the act for which he was held responsible in damages. Maxon v. Security Insurance Co., 214 Cal.App.2d 603, 29 Cal.Rptr. 586 (1963); Capachi v. Glens Falls Insurance Co., 215 Cal.App.2d 843, 30 Cal. Rptr. 323 (1963). We do not find them helpful to the solution of the case now under consideration.
18
An examination of the cases indicates that the rationale of section 533 is that the wrongdoer as a matter of public policy should not profit from his own wrong, or, in other cases, a somewhat similar reasoning that the wrongdoer should not be indemnified against the effects of his wrongdoing. Hendrix v. Employers Mutual Liability Insurance Co., supra; Erlin-Lawler Enterprises, Inc. v. Fire Insurance Exchange, supra.
19
Here, Fisher certainly will not gain anything from the insurance protection afforded Dart. He has left the employment of the corporation. Neither, does it appear, will those who remain. Whether they were individually sued in the libel action or not, does not appear from the record before us. It would certainly appear that they were subject to suit. Should a recovery be obtained (a possibility upon which we express no opinion) and an action begun for indemnification under a policy like that before us, section 533 would appear to be more germane. Liberty, viewing with alarm, contends that the trial court's interpretation of section 533 makes the section meaningless. We do not see it so. On the contrary it could be argued that if appellant's view were adopted a defense could arguably be interposed that almost every tortious act of a corporate agent or employee was "wilful" under the statute. This would make the comprehensive liability policy illusory for corporate purposes. The view of the trial court upon the facts of this case appears to us to be correct in principle and consistent with the construction which would have been accorded by the California courts. Norm Thompson Outfitters, Inc. v. General Motors Corp., 448 F.2d 1293, 1299 (9th Cir. 1971).
20
Appellant calls our attention to the fact that this case has been decided on cross motions for summary judgment and urges that genuine issues of material fact remain which make it inappropriate to determine now that appellee is entitled to judgment as a matter of law. Rule 56(c) Fed.R.Civ.P. states that a motion for summary judgment may be granted whenever "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." See 6 Moore's Federal Practice (2d ed.) p 56.15. We have given careful consideration to this argument. Both sides agreed that Fisher was an agent of the corporation as its president; that he was acting in the course of his employment in sending the letter; that other corporate officials were consulted or were aware of its preparation; that it was not the type of matter that would be discussed with the Board of Directors or senior management of Rexall-Dart; and that it was not discussed at that level either before being sent or ratified after being sent. It appears clearly to be the type of activity that would not ordinarily, and did not here, cause a ripple in the management of the affairs of the corporation at the directors' level. In order to afford counsel every opportunity to fully explore the facts, the court after having twice heard arguments on summary judgment and having indicated its inclinations as to the proper disposition of the case, withheld its ruling in order to give appellant additional opportunity to develop further facts2 or issues on material facts. It was after this that appellant deposed Mr. Fisher and house counsel Thedens. A careful reading of those depositions discloses no additional facts or genuine issues of fact which would preclude an order for summary judgment.3 Credibility is not an issue since there is no disagreement concerning the basic facts. Nor are we persuaded that "varying factual conclusions" may be drawn by reasonable persons from the basic facts not in dispute. Whatever "varying conclusions" may be drawn, there remains a complete absence of proof that the policymaking management of the corporation approved, ratified or had any knowledge of the letter or its libel. No additional relevant facts which could be adduced on trial have been suggested4 and we therefore affirm the decision of the trial court on summary judgment.
21
Judgment affirmed.
*
Honorable James M. Burns, United States District Judge, District of Oregon, sitting by designation
1
Section 533 provides:
"An insurer is not liable for a loss caused by the wilful act of the insured; but he is not exonerated by the negligence of the insured, or of the insured's agents or others."
2
At the second hearing on motions for summary judgment, counsel for Liberty told the court: "I think eventually, if this case is to be tried, we can stipulate to most of the facts." R.T. 28
3
At page 11 of its opening brief, Liberty states "that while the evidentiary facts stated in the depositions . . . and the affidavits are not in dispute, they are subject to varying inferences as to ultimate facts to be drawn therefrom, as well as to the judgment of the trier of facts as to credibility."
4
In Byrnes v. Mutual Life Ins. Co. of New York, 217 F.2d 497, 501 (9th Cir. 1954), we said,
"'When a party presents evidence on which, taken by itself, it would be entitled to a directed verdict if believed, and which the opposite party does not discredit as dishonest, it rests upon that party at least to specify some opposing evidence which it can adduce and which will change the result. . . .' Radio City Music Hall Corporation v. United States, 2 Cir., 1943, 135 F.2d 715, 718."
| {
"pile_set_name": "FreeLaw"
} |
925 F.2d 1479
Unpublished DispositionNOTICE: Federal Circuit Local Rule 47.8(b) states that opinions and orders which are designated as not citable as precedent shall not be employed or cited as precedent. This does not preclude assertion of issues of claim preclusion, issue preclusion, judicial estoppel, law of the case or the like based on a decision of the Court rendered in a nonprecedential opinion or order.Robert William KIMBLE, Sr., Plaintiff-Appellant,v.The UNITED STATES, Defendant-Appellee.
No. 90-5154.
United States Court of Appeals, Federal Circuit.
Jan. 14, 1991.Rehearing Denied Feb. 14, 1991.
Before CLEVENGER, Circuit Judge, COWEN, Senior Circuit Judge, and RADER, Circuit Judge.
DECISION
PER CURIAM.
1
Robert William Kimble, Sr. appeals the final order of the Claims Court dismissing his complaint for want of subject matter jurisdiction. Kimble v. United States, No. 90-768 C (Aug. 14, 1990). We affirm.
OPINION
2
Kimble styled his complaint as an "Extraiordinary [sic] Writ for malicious deprivation [ ] of my legal and U.S. Constitutional right to the access to the courts...." At bottom, his complaint alleges that various officials of the judiciary have conspired to preclude timely assessment of his numerous habeas corpus petitions. For relief, Kimble seeks a substantial monetary award.
3
The Claims Court dismissed Kimble's complaint because it did not state a cause of action over which the court could entertain jurisdiction. For the reasons and upon the authority cited by the Claims Court, we affirm.
| {
"pile_set_name": "FreeLaw"
} |
661 S.E.2d 304 (2008)
STATE of North Carolina
v.
Shelton Lamar SAPP.
No. COA07-1135.
Court of Appeals of North Carolina.
June 3, 2008.
Attorney General Roy Cooper, by Special Deputy Attorney General Norma S. Harrell, for the State.
Russell J. Hollers, III, Carrboro, for the defendant-appellant.
*306 STEELMAN, Judge.
Defendant's acts of withdrawal and moving a female victim from the couch to the floor established that there was a separate penetration supporting a second rape charge. When defendant raped one of the victims twice during the course of a home invasion and robbery, a third rape by his co-defendant was a natural or probable consequence of the robbery and the trial court properly submitted the third rape to the jury under an acting in concert theory. Evidence that young children were confined to a bedroom while defendants terrorized the family during the course of a robbery was sufficient to withstand defendant's motion to dismiss second-degree kidnapping charges on the elements of confinement and restraint and to warrant a jury instruction on both theories. The trial court properly found that defendant's conviction in Virginia was for a crime substantially similar to a North Carolina Class A1 misdemeanor.
I. Factual and Procedural Background
In the early morning hours of 18 August 2002, two men entered a residence in Charlotte in search of money and drugs belonging to Damien Bell (hereinafter "Bell"). The apartment belonged to Bell's girlfriend, L.B., whose 48-year-old mother and 12-year-old brother were staying with the couple and L.B.'s three young children (ages 6, 3, and 5 months). The intruders, Shelton L. Sapp (defendant) and Tracy Hicks (hereinafter "Hicks"), armed with a shotgun and a knife respectively, entered through a bedroom window, where they found L.B.'s mother and 12-year-old brother asleep. They forced these two persons through the hall into the second bedroom, where Bell, L.B., and the younger children slept.
The intruders used duct tape to bind Bell and demanded cash and illegal drugs that they suspected were located in the residence. As the intruders searched for the cash and drugs, they forcibly separated Bell and L.B. from the rest of the family. L.B.'s mother, her 12-year-old brother, and the three young children remained in the bedroom throughout the incidents hereinafter described, while the intruders verbally and physically terrorized Bell and L.B.
Both intruders forced L.B. to engage in sexual intercourse: first, defendant in the living room, and later, Hicks in the apartment's lone bathroom. Defendant testified that he had sex with L.B. in order to induce Bell to reveal the location of the money and drugs. Hicks did not testify. Defendant took L.B. into the living room, where he twice penetrated her vaginally: first on the couch then again on the floor, while Bell and Hicks watched. Defendant then sent L.B. to the bathroom with instructions to "wash really good." After she bathed, and was in the process of drying herself, Hicks came into the bathroom and had intercourse with her.
Eventually, Bell told the men where to find the money and drugs. Defendant retrieved the money and drugs from their hiding place in a bedroom closet, then made a phone call. Before leaving, defendant killed Bell with a single shot to the head.
On 13 January 2003, defendant was indicted for murder, first degree burglary, first degree rape (3 counts), first degree kidnapping (2 counts), and second degree kidnapping (5 counts). Defendant was tried capitally on the murder charge. The offenses were consolidated for trial before a jury at the 26 June 2006 criminal term of Mecklenburg County Superior Court. Defendant's motion to dismiss the charges at the close of the State's evidence was denied. Defendant then testified and admitted to raping L.B. and shooting Bell. Defendant testified that he only raped L.B. once and did not plan any crime other than the robbery. On cross-examination, the State questioned defendant concerning his statement to police investigators that "My only plan was to go in, boom, boom." Defendant's motion to dismiss all charges at the close of all evidence was denied.
On 21 July 2006, the jury returned a verdict of guilty on all charges. On 28 July 2006, the jury recommended life imprisonment rather than death on the murder charge. The trial court accordingly sentenced defendant to life imprisonment for the murder charge, and consecutive active sentences totaling a minimum of 1,369 months *307 and a maximum of 1,764 months imprisonment for the other offenses. Defendant appeals.
II. Denial of Defendant's Motions to Dismiss
In his first three arguments, defendant contends that the trial court erred in denying his motions to dismiss two of the rape charges and three of the second degree kidnapping charges.
A. Standard of Review
When considering a criminal defendant's motion to dismiss, the trial court must view all of the evidence presented in the light most favorable to the State, and the State is entitled to all reasonable inferences which may be drawn from the evidence. The trial court correctly denies a motion to dismiss if there is substantial evidence of every element of the offense charged, or any lesser offense, and of defendant being the perpetrator of the crime.
State v. Murray, 154 N.C.App. 631, 634, 572 S.E.2d 845, 847 (2002) (internal quotations and citations omitted).
"Whether the evidence presented is substantial is a question of law for the court." Id. at 734, 572 S.E.2d at 847 (citation omitted). "Evidence is substantial if it is relevant and adequate to convince a reasonable mind to accept a conclusion." Id. (quoting State v. Robinson, 355 N.C. 320, 336, 561 S.E.2d 245, 255 (2002), cert. denied, 537 U.S. 1006, 123 S.Ct. 488, 154 L.Ed.2d 404 (2002)). This Court reviews such questions of law de novo.
B. The Rape Charges
1. The Living Room Rapes
In his first argument, defendant contends that he committed only one rape on L.B. because he did not "finish" having sex with her on the couch, but merely switched positions by moving to the floor. We disagree.
Defendant relies on State v. Small, 31 N.C.App. 556, 559, 230 S.E.2d 425, 427 (1976), for the premise that an act "of rape is terminated by a single act or fact." This reliance is misplaced. In State v. Key, this Court upheld separate convictions for rape where defendant did not move the victim from one location to another but forced her to change positions before re-entering her. State v. Key, 180 N.C.App. 286, 289, 636 S.E.2d 816, 820 (2006) (affirming two rape convictions where defendant penetrated victim vaginally from the front, withdrew, turned her on her side, and re-penetrated the victim vaginally from the rear), disc. review denied, 361 N.C. 433, 649 S.E.2d 399 (2007). "Each act of forcible vaginal intercourse constitutes a separate rape. Generally rape is not a continuous offense, but each act of intercourse constitutes a distinct and separate offense." Key, 180 N.C.App. at 288, 636 S.E.2d at 819 (2006) (quoting State v. Owen, 133 N.C.App. 543, 551-52, 516 S.E.2d 159, 165 (1999)).
Viewed in the light most favorable to the State, the evidence showed that the defendant and Hicks broke into the victim's home in the middle of the night and terrorized her and her family. After beating her boyfriend in an attempt to find money and drugs, defendant, armed with a shotgun, took L.B. to the living room with the stated purpose of having sex. L.B. testified that defendant penetrated her twice, first on the couch in the living room, then on the floor after Hicks dragged Bell, with his mouth taped and hands bound, into the room to watch.
The victim's testimony included the following:
Q. What happened to you on that couch, [Ms. B.]?
A. Well, I had sex with the tall guythe tall guy with the shotgun.
Q. When you say sex, what do you mean?
A. Intercourse.
Q. Okay. And, you mean he put his penis in your vagina?
A. Yes, sir.
Q. [Ms. B.], did you give that man permission or did you want to have sexual intercourse with him there on your couch?
A. No, sir.
Q. Why did you do it?
A. I was afraid.
*308 ...
Q. And, did the man, the tall man with the shotgun, did he finish having sexual intercourse with you, there on the couch?
A. No, sir.
. . .
Q. . . . What happened . . . once the shorter man brought [Bell] into the living room where you and the tall man with the shotgun were?
A. Well, we got on the floor; me and the tall guy got on the floor. He got on top of me and we had sex, again.
. . .
Q. . . . did you give that man permission fordid you want to have sexual intercourse with him at that time?
A. No, sir.
Although L.B. did not specifically articulate that the defendant withdrew, her testimony that he did not "finish" on the couch but that the two "had sex, again" on the floor was substantial evidence from which the jury could infer that the defendant withdrew before re-penetrating the victim on the floor. Robinson, 355 N.C. at 336, 561 S.E.2d at 255-56.
Defendant acknowledged that he was not sure how many times he raped the victim. On direct examination, defendant testified:
Q. Did you have sex with her, in the living room?
A. Yeah. I did.
Q. Why did you do it?
A. I don't know how many times. I done thought about this right here, man.
(emphasis added). Defendant testified that his motive in "having sex" with the victim was to apply pressure to Bell to reveal where the money and drugs were hidden.
When viewed in the light most favorable to the State, defendant's testimony and the testimony of the victim constitute substantial evidence of two rapes: one on the couch and one on the floor. The act of withdrawal and moving with the victim to the floor was sufficient to sustain the second charge. Key, 180 N.C.App. at 289, 636 S.E.2d at 820. Thus, the trial court did not err in denying defendant's motion to dismiss at the close of all the evidence or in submitting both rape charges to the jury.
This argument is without merit.
B. Rape in the Bathroom
In his second argument, defendant contends that the court erred in denying his motion to dismiss the rape charge resulting from the acts of Hicks in the bathroom because the evidence did not support a rape conviction on an acting in concert theory. We disagree.
[I]f two persons join in a purpose to commit a crime, each of them, if actually or constructively present, is not only guilty as a principal if the other commits that particular crime, but he is also guilty of any other crime committed by the other in pursuance of the common purpose; that is, the common plan to rob, or as a natural or probable consequence thereof.
State v. Westbrook, 279 N.C. 18, 41-42, 181 S.E.2d 572, 586 (1971)(quoted with approval in State v. Barnes, 345 N.C. 184, 233, 481 S.E.2d 44, 71 (1997); State v. Erlewine, 328 N.C. 626, 637, 403 S.E.2d 280, 286 (1991)), sentence vacated on other grounds, 408 U.S. 939, 92 S.Ct. 2873, 33 L.Ed.2d 761 (1972). "A natural consequence is thus one which is within the normal range of outcomes that may be expected to occur if nothing unusual has intervened." State v. Bellamy, 172 N.C.App. 649, 669, 617 S.E.2d 81, 95 (2005)(quoting Roy v. United States, 652 A.2d 1098, 1105 (D.C.1995)), disc. review denied, appeal dismissed, 360 N.C. 290, 628 S.E.2d 384 (2006).
Defendant argues that, under Bellamy, the bathroom rape was not a natural or probable consequence of the robbery. He contends that, as the man with the gun, he was "in charge of the situation" and it was unforeseeable that Hicks "would defy him by raping [L.B.]." He further contends that once that he told L.B. to go wash herself that the actions of Hicks were no longer a natural or probable consequence of the robbery and that he cannot be convicted under an acting in concert theory.
In Bellamy, two men planned a robbery of a restaurant where one of the men was employed. *309 Bellamy entered the office area of the restaurant shortly after closing. He confronted the night manager with a gun as she prepared the night deposit. After securing the money, Bellamy instructed the manager to disrobe. He demanded that she spread her labia, then used the barrel of the gun to further separate her labia. The assault followed the robbery. There was no evidence of any plan for a sexual assault, nor was there evidence that the sexual assault was related in any way to the robbery. The State argued that, as a party to the robbery, Bellamy's co-defendant was "liable as a principal under the theory of acting in concert for Bellamy's sexual assault on C.B." The issue before this Court was whether "a sexual assault is a natural or probable consequence of a robbery with a dangerous weapon of a fast food restaurant[.]" Bellamy, 172 N.C.App. at 668, 617 S.E.2d at 94.
In reaching its conclusion that this unusual sexual assault was not a natural or probable consequence of the completed robbery, this Court stated:
Our Supreme Court has expressly rejected the concept that for a defendant to be convicted of a crime under an acting in concert theory, he must possess the mens rea to commit that particular crime. Barnes, 345 N.C. 184, 481 S.E.2d 44 (overruling State v. Blankenship, 337 N.C. 543, 447 S.E.2d 727 (1994) and State v. Straing, 342 N.C. 623, 466 S.E.2d 278 (1996)). Based upon the holding in Barnes, it would not be appropriate to adopt a standard based upon the defendant's subjective state of mind or intent. Rather, the appropriate standard for evaluating whether a crime was a reasonable or probable consequence of a defendant's joint purpose should be an objective one.
We decline to adopt a per se rule that any sexual assault committed during the course of a robbery is a natural or probable consequence of a planned crime. Rather, this determination must be made on a case by case basis, upon the specific facts and circumstances presented. See State v. Trackwell, 235 Neb. 845, 458 N.W.2d 181, 183-84 (1990).
Bellamy, 172 N.C.App. at 668-69, 617 S.E.2d at 95. The Court held that this "bizarre sexual offense" was not a natural and probable consequence of the robbery. Id. at 670-71, 617 S.E.2d at 96.
Citing to the case of People v. Nguyen, 21 Cal.App.4th 518, 532-33, 26 Cal.Rptr.2d 323, 332 (Cal.App. 3 Dist.1993), this Court analyzed the foreseeability of a sexual assault occurring in the context of a commercial setting, as opposed to a residential setting. Bellamy, 172 N.C.App. at 669-70, 617 S.E.2d at 95-96. We held that it was less likely that a sexual assault in the course of a robbery of a business would be a natural and probable consequence than in the context of a residential robbery. Id. at 670, 617 S.E.2d at 96.
Viewed in the light most favorable to the State, the evidence at trial showed that Hicks and defendant invaded the victims' residence with the intent to commit robbery with a dangerous weapon. Defendant's rapes of L.B. in front of Bell were for the admitted purpose of coercing Bell to give up his money and drugs, and, as such, they were part of the robbery. Once defendant had engaged in this conduct in front of Hicks it was clearly foreseeable that Hicks would become aroused and want to have sex with L.B. Having set in motion the rape of L.B. as an integral part of the robbery, defendant cannot now complain that Hicks' rape of L.B. was not a natural and probable consequence of the home invasion and robbery.
Unlike in Bellamy, where the sexual assault took place after the robbery was completed, the rape by Hicks was conducted during the course of the robbery. As noted in Nguyen, "[d]uring hostage-type robberies in isolated locations, sexual abuse of victims is all too common. . . . rapes in the course of a residential robbery occur with depressing frequency." Nguyen, 21 Cal.App.4th at 532-33, 26 Cal.Rptr.2d at 332 (internal quotations and citations omitted).
Taken in the light most favorable to the State, the evidence in this case supports the trial court's submission of the bathroom rape by Hicks to the jury under an acting in concert theory. We hold that, on these facts, Hicks' rape of L.B. was a natural and probable consequence of the intended robbery of *310 Bell and the court did not err in submitting this rape charge to the jury.
This argument is without merit.
C. Second Degree Kidnapping: The Children
In his third argument, defendant contends that the court erred in denying his motion to dismiss the three second degree kidnapping charges involving L.B.'s young children, stating that, because the children were "neither restrained nor confined," the evidence was insufficient to submit these charges to the jury. We disagree.
Since 1975, the crime of kidnapping has been governed by statute. N.C.G.S. § 14-39 (2007) (defining kidnapping of a juvenile as the confinement, restraint or removal of the child, without the consent of the parent, for the purpose of, among other things, facilitating the commission of a felony).
In State v. Shue, this Court observed that:
"If the victim is shown to be under sixteen, the state has the burden of showing that he or she was unlawfully confined, restrained, or removed from one place to another without the consent of a parent or legal guardian." State v. Hunter, 299 N.C. 29, 40, 261 S.E.2d 189, 196 (1980).
"Confinement" in the context of the offense "connotes some form of imprisonment within a given area, such as a room, a house or a vehicle." State v. Fulcher, 294 N.C. 503, 523, 243 S.E.2d 338, 351 (1978). Whereas "`restrain,' while broad enough to include a restriction upon freedom of movement by confinement, connotes also such a restriction, by force, threat or fraud, without confinement." Id.
State v. Shue, 163 N.C.App. 58, 63, 592 S.E.2d 233, 237 (2004). Moreover, we believe that "The terms `restrain,' `confine' or `remove' are related in that they all encompass an act which asserts control over the victim." State v. Dominie, 134 N.C.App. 445, 451, 518 S.E.2d 32, 35 (1999) (J. Walker, concurring).
Viewed in the light most favorable to the State, the evidence at trial showed that defendant, wielding a shotgun, acted in concert with Hicks to isolate L.B.'s mother, L.B.'s 12-year-old brother, and L.B.'s three young children in a single bedroom while terrorizing the remaining occupants of the apartment in the course of a robbery. There was evidence that defendant controlled the behavior of the persons in the bedroom by forcing both women to remove their clothes and refusing to allow L.B.'s mother to use the bathroom when she asked to do so, telling her to "pee on the floor." There was also evidence that the intruders terrorized those in the bedroom, responding to L.B.'s 12-year-old brother by hurling racial slurs and telling him to "shut up." We thus hold that there was substantial evidence from which the factfinder could infer that the defendant exercised impermissible restraint over the young children and confined them within the meaning of the statute. Fulcher, 294 N.C. at 523, 243 S.E.2d at 351; Shue, 163 N.C.App. at 63, 592 S.E.2d at 237.
This argument is without merit.
II. Jury Instructions on Second Degree Kidnapping Charges
In his fourth argument, defendant alleges prejudicial error in that the jury was instructed on a theory of restraint without sufficient evidence to support that theory. We disagree.
The judge instructed the jury as to each child:
First, that the defendant, either acting alone or together with another, unlawfully confined [the child] within a given area or restrained him, that is restricted his freedom of movement.
Second, that [the child] had not reached his 16th birthday and his parent or guardian did not consent to this confinement or restraint. Consent obtained or induced by fraud or fear is not consent.
Third, that the defendant, either acting alone or together with another, confined or restrained [the child] for the purpose of committing the offenses of robbery with a dangerous weapon [sic].
And fourth, that this confinement or restraint was a separate, complete act, independent of and apart from the commission of the offense of robbery with a dangerous weapon.
*311 Defendant challenges only the element of restraint in each paragraph, contending that: (1) Fulcher defined restraint as a constriction on one's freedom of movement by force, threat or fraud without confinement; (2) there was no evidence that defendant kept the children in the bedroom by force, threat or fraud; (3) the trial court should have refrained from charging the jury on the restraint theory; and (4) its failure to do so was prejudicial error because it prevented the jury from considering "whether staying with your grandmother in your bedroom, standing alone, constitutes kidnapping."
The language in Fulcher includes confinement within the meaning of restraint. Fulcher, 294 N.C. at 523, 243 S.E.2d at 351 ("The term `restrain,' while broad enough to include a restriction upon freedom of movement by confinement, connotes also such a restriction, by force, threat or fraud, without a confinement."). We have already determined that there was substantial evidence from which the jury could infer that the defendant exercised impermissible control over the inhabitants of the bedroom, sufficient to withstand a motion to dismiss the second-degree kidnapping charges related to L.B.'s young children. We hold that the instruction on restraint was supported by substantial evidence that defendant, wielding a shotgun, terrorized the occupants of the apartment and exercised control over the persons in the bedroom by use of threats.
This argument is without merit.
III. Felony Sentencing Level
In his fifth argument, defendant contends that the State failed to meet its burden of proving that defendant's prior conviction in Virginia was substantially similar to a Class A1 or Class 1 misdemeanor in North Carolina. We disagree.
At trial, the State introduced the petition, indictment, and judgment from the Commonwealth of Virginia against defendant for inflicting bodily injury on an employee of a juvenile detention center. After discussing with counsel for the State and defendant whether the offense was similar to the North Carolina crimes of assault inflicting serious injury or assault on a government official, the court concluded that the offense was "at least a Class 1 misdemeanor[,]" revised the Sentencing Worksheet to reflect one point instead of two, and found the defendant to be a Prior Record Level II offender. Defendant contends that, because the Virginia indictment did not allege that the victim was discharging or attempting to discharge any official duty, the State failed to prove that the assault was anything more than a simple assault, a Class 2 misdemeanor, and consequently he should have been found to be a Level I offender with no prior sentencing points.
N.C. Gen.Stat. § 15A-1340.14(e) governs the classification of prior convictions from other jurisdictions. The relevant portion of the statute reads:
If the State proves by the preponderance of the evidence that an offense classified as a misdemeanor in the other jurisdiction is substantially similar to an offense classified as a Class A1 or Class 1 misdemeanor in North Carolina, the conviction is treated as a Class A1 or Class 1 misdemeanor for assigning prior record level points.
N.C. Gen.Stat. § 15A-1340.14(e) (2007).
The Virginia juvenile court petition charged that defendant:
did on or about 11/29/99, unlawfully and feloniously, while confined in a secure facility as defined in VA.Code Section 16.1-228, knowingly and willfully inflict bodily injury on [D.R.], an employee thereof, in violation of Section 18.2-55 of the 1950 Code of Virginia as amended.
Section 18.2-55 of the Code of Virginia, "Bodily injuries caused by prisoners, state juvenile probationers and state and local adult probationers or adult parolees[,]" states that:
A. It shall be unlawful for a person confined in a state, local or regional correctional facility as defined in § 53.1-1; in a secure facility or detention home as defined in § 16.1-228 or in any facility designed for the secure detention of juveniles; or while in the custody of an employee thereof to knowingly and willfully inflict bodily injury on:
*312 1. An employee thereof, . . .
Va.Code Ann. § 18.2-55 (2008).
Pursuant to defendant's guilty plea in Virginia, the court sentenced him to ten years imprisonment, with eight years and three months suspended.
During trial of the instant case, defendant testified that:
A. . . . I was in a juvenile correctional center . . . for like a couple of weeks and I caught an assault on an officer; in an assault on that officer.
[DEFENSE COUNSEL]. How did that happen?
A. One night, another inmate was in a block that we was in [sic] and it was only one officer working the unit [sic]. He came in to break the fight up and he tried to prevent both of us from fighting. In the process, he got assaulted. He got hit in the face. He pressed charges on me.
. . .
Q. . . . what happened as a result of that?
A. I got tried as an adult.
. . .
[DISTRICT ATTORNEY]. . . . [T]he guard was a Mr. [D.R.]; wasn't it?
A. Yeah.
. . .
Q. . . . And the charge you were convicted of was called inflicting bodily injury; wasn't it?
A. I can't remember the exact charge; but some where around that [sic].
. . .
Q. . . . Inflict bodily injury, do you know if that's a felony?
A. I think so.
N.C. Gen.Stat. § 14-33(c) classifies the following conduct by a defendant as a Class A1 misdemeanor:
. . . if, in the course of the assault, assault and battery, or affray, he or she:
. . .
(4) Assaults an officer or employee of the State or any political subdivision of the State, when the officer or employee is discharging or attempting to discharge his official duties[.]
N.C. Gen.Stat. § 14-33(c) (2007). The Virginia statute does not contain the precise wording found in N.C. Gen.Stat. § 14-33(c). However, the requirement set forth in N.C. Gen.Stat. § 15A-1340.14(e) is not that the statutory wording precisely match, but rather that the offense be "substantially similar." The Virginia statute makes it a crime for persons confined in a correctional facility to knowingly and willfully inflict bodily injury upon an employee of that facility. Due to the nature of a correctional facility, an assault on one of its employees would necessarily be in the discharge of the employee's duties. Any questions as to whether this was the case were resolved by the defendant's own testimony that the assault occurred as the employee attempted to break up a fight between prisoners and prevent them from further fighting. The trial court properly found defendant to be a Level II offender for felony structured sentencing purposes.
This argument is without merit.
IV. Short Form Indictment
In his final argument, defendant challenges the constitutionality of the short form murder indictment, contending that the trial court lacked subject matter jurisdiction to enter a judgment on first-degree murder because the short form indictment alleged only second degree murder. We disagree.
Defendant acknowledges that our Supreme Court has on numerous occasions upheld the constitutionality of the use of the short-form murder indictment, e.g. State v. Hunt, 357 N.C. 257, 582 S.E.2d 593, cert. denied, 539 U.S. 985, 124 S.Ct. 44, 156 L.Ed.2d 702 (2003) (rejecting the argument that the United States Supreme Court's decision in Ring v. Arizona, 536 U.S. 584, 122 S.Ct. 2428, 153 L.Ed.2d 556 (2002) rendered North Carolina's short-form murder indictment unconstitutional), and seeks only to preserve this issue in the event of further review. Engle v. Isaac, 456 U.S. 107, 102 S.Ct. 1558, 71 L.Ed.2d 783 (1982).
This argument is without merit.
*313 V. Conclusion
Defendant's brief addresses only six of nine original assignments of error. Pursuant to N.C. R.App. P. 28(b)(6) (2007), the remaining assignments of error are deemed to be abandoned.
For the reasons stated above, we find no error in the trial or sentencing of defendant.
NO ERROR.
Judges McCULLOUGH and ARROWOOD concur.
| {
"pile_set_name": "FreeLaw"
} |
622 F.Supp. 1 (1984)
William DOUGHERTY
v.
NAVIGAZIONE SAN PAOLO, S.P.A. MEDAFRICA LINE
and
Alcoa Maritime Co., Ltd.
Civ. A. No. 82-5518.
United States District Court, E.D. Pennsylvania.
May 4, 1984.
Charles Sovel, Freedman Borowsky & Lorry, Philadelphia, Pa., for plaintiff.
Raymond T. Letulle, Krusen, Evans & Byrne, Philadelphia, Pa., for Alcoa.
Robert B. White, Jr., Douglas Riblet, Rawle & Henderson, Philadelphia, for Navigazione San Paolo et al.
MEMORANDUM OPINION AND ORDER
VanARTSDALEN, District Judge.
Plaintiff, a longshoreman, has brought this action seeking to recover damages for alleged personal injuries suffered while working aboard the ship M/V Hektor. Named as defendants are the vessel's owner, Alcoa Maritime Co., Ltd. (Alcoa) and the time charterer, Navigazione San Paolo, S.P.A. Medafrica Line (Medafrica Line). Alcoa has filed a cross claim against Medafrica Line which has been stayed pending arbitration. Dougherty v. Navigazione San Paolo, S.P.A., No. 82-5518 (Jan. 9, 1984). Medafrica Line has now moved for summary judgment against plaintiff.
Medafrica Line, in support of its motion, asserts that the Time Charter Party (Charter Party) provides that the owner and not the charterer is to remain responsible for the vessel. Therefore, Medafrica Line contends it owed no duty to plaintiff and cannot be held liable for negligence. The *2 clause that Medafrica Line relies upon, clause 26, provides:
Nothing herein stated is to be construed as a demise of the vessel to the Time Charterers. The owner is to remain responsible for the navigation of the vessel, insurance, acts of pilots and tugs [sic] boats and cargo claims, crew and all other matters, same as when trading for their own account.
Plaintiff and defendant Alcoa oppose the motion for summary judgment. Both contend there is an issue of material fact whether Medafrica Line, the time charterer, breached a duty owed to plaintiff; such duty arising from the terms of clause 8 of the Charter Party. Clause 8 provides:
That the Captain shall prosecute his voyages with the utmost despatch, and shall render all customary assistance with ship's crew and boats. The Captain (although appointed by the Owners), shall be under the orders and directions of the Charters as regards employment and agency; and Charters are to load, stow and discharge and trim the cargo at their expense under the supervision of the Captain.
Plaintiff and Alcoa contend that the alleged breach of duty by Medafrica Line to plaintiff arises out of this agreement. Plaintiff, in his memorandum, asserts that "to the extent ... that a charter party grants certain authority to the charterer with respect to cargo operations, and the charterer, in fact, exercises this authority, the charterer is under a duty to exercise reasonable care to third parties, including longshoremen, with respect to the manner in which it exercises this authority." Plaintiff's Answer to Motion For Summary Judgment at 4 (emphasis in original).
Discussion
It is fundamental that in deciding a motion for summary judgment all reasonable inferences must be accorded the party against whom the motion is made. Bryson v. Brand Insulation, Inc., 621 F.2d 556, 559 (3d Cir.1980). The summary judgment standard is well knownrelief is appropriate if "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).
The problem presented by this case is whether a longshoreman may maintain an action under the Longshoremen's and Harbor Workers' Compensation Act (LHWCA), 33 U.S.C. §§ 901-950, against the time charterer. What appears to be a relatively straightforward problem becomes complex because of an ambiguity in the statute that several authorities have concluded was a mistake in the wording.
Jurisdiction is alleged under 28 U.S.C. § 1331 (Federal Question) and 28 U.S.C. § 1332 (Diversity of Citizenship). Although not expressly alleged in the complaint, federal question jurisdiction can be founded only on the LHWCA, which grants a remedy against the "vessel" to a longshoreman who is injured at work. The remedy provided to the longshoreman under LHWCA against the vessel, as defined in the statute, is the longshoreman's exclusive remedy against the vessel. Griffith v. Wheeling Pittsburgh Steel Corp., 521 F.2d 31, 40 (3d Cir.1975). Section 905(b) of Title 33, United States Code, provides in relevant part as follows:
In the event of injury to a person covered under this chapter caused by the negligence of a vessel, then such person ... may bring an action against such vessel as a third party in accordance with the provisions of section 933 of this title.... The remedy provided in this subsection shall be exclusive of all other remedies against the vessel except remedies available under this chapter.
A vessel is defined in LHWCA as follows:
The term "vessel" means any vessel upon which or in connection with which any person entitled to benefits under this chapter suffers injury or death arising out of or in the course of his employment, and said vessel's owner, owner pro hac vice, agent, operator, charter or bareboat charterer, master, officer, or crew member.
33 U.S.C. § 902(21) (emphasis added).
Clearly, under the statute, plaintiff longshoreman may maintain an action against *3 the defendant Alcoa, as owner of the vessel. The issue is whether plaintiff may maintain an action against the defendant, Medafrica Line, who was a time charterer and not a demise or bareboat charterer. As set forth above, the statutory definition of a "vessel" does not expressly include the term "time charterer," although it does include the phrase "charter or bareboat charterer." Do these words include or exclude a time charterer?
It does not appear that the Third Circuit Court of Appeals has addressed this specific question. At least three other circuit courts of appeals have directly held that section 905(b) of the LHWCA applies to time charterers. Turner v. Japan Lines, Ltd., 651 F.2d 1300, 1304 (9th Cir.1981); Mallard v. Aluminum Co. of Canada, Ltd., 634 F.2d 236, 242 n. 5 (5th Cir.1981); Migut v. Hyman-Michaels Co., 571 F.2d 352, 356 (6th Cir.1978). While I have decided to follow these cases, I feel compelled to point out a potentially troublesome problem which heretofore has not been fully explored.
The crux of the problem lies in the phrase "charter or bareboat charterer" in the definition of the term "vessel" in section 902(21). The initial difficulty with the phrase is the use of the term "charter." All of the other relevant terms in section 902(21) refer to individuals ("... and said vessel's owner, owner pro hac vice, agent operator ... master, officer, or crew"). The term "charter" is ordinarily meant to be the charter party; that is the contract between the owner and the charterer. Thus, as written in the statute, the word "charter" appears to be a mistake. This conclusion is confirmed by at least one circuit court and one influential admiralty treatise. The ninth circuit in Turner and Professors Gilmore and Black in their treatise both include the notation "[sic]" after the term "charter" when citing the LHWCA. Turner, 651 F.2d at 1303; G. Gilmore and C. Black, The Law of Admiralty 450 (2d ed. 1975). The court in Turner evidently believed the term "charter" should have been "charterer." This is probably the interpretation given the term "charter" by both the Mallard and Migut courts as well.
Although courts that have faced the ambiguity have apparently construed the word "charter" as set forth in the statute to mean "charterer," this construction creates its own ambiguity. The term "charterer" includes the various types recognized in the law such as a "time charterer," a "voyage charterer" and a "bareboat or demise charterer." If Congress, in adopting the wording "charter or bareboat charterer" meant "charterer or bareboat charterer," the ambiguity is apparent. If "charterer" was intended to include all types of charterers including a time charterer and a bareboat charterer, why add the unnecessary words "or bareboat charterer"? If Congress intended to limit its application to bareboat charterers, the word "charter" or "charterer" adds only uncertainty as to the meaning. It is possible, of course, to conclude that the word "or" was intended to make the word "charter" synonymous with the words "bareboat charterer."
Under general maritime principles, there are three types of charter parties: the voyage charter, the time charter, and the demise or bareboat charter. In a voyage charter the ship is engaged to carry a full cargo on a single voyage. The owner retains all control over the vessel. In a time charter the ship's carrying capacity is taken by the charterer for a fixed time for the carriage of goods on as many voyages as can fit into the charter period. Again, the owner retains all control for management and navigation. In a demise or bareboat charter, the charterer takes over full control of the ship and becomes the owner pro hac vice. The charterer thus assumes control of management and navigation. See generally, G. Gilmore and C. Black, The Law of Admiralty 193-94 (2d ed. 1975).
It is well settled under admiralty law that absent an agreement to the contrary the time charterer has no control over the vessel and assumes no liability for negligence *4 of the crew or unseaworthiness of the vessel. Mallard, 634 F.2d at 242 n. 5; Habrat v. United States, 310 F.Supp. 618 (W.D.Pa.1970). Control over the vessel distinguishes the demise or bareboat charter from the others:
The first problem is of course distinguishing the demise from the regular time and voyage charters. The test is one of "control"; if the owner retains control over the vessel, merely carrying the goods furnished or designated by the charter, the charter is not a demise; if control of the vessel itself is surrendered to the charterer, so that the master is his man and the ship's people are his people, then we have to do with a demise.
G. Gilmore and C. Black, The Law of Admiralty 240 (2d ed. 1975).
Because the phrase "charter or bareboat charterer" in the statute is ambiguous, reference to the other terms included in the definition and the legislative history are appropriate. The other terms included in the statutory definition of "vessel" involve parties who have some measure of control over the vessel ("... and said vessel's owner, owner pro hac vice, agent, operator ... master, officer or crew"). The legislative history states, in part:
Vessel would be classified as any vessel upon which or in connection with which any person entitled to benefits suffers injury and including the vessel owner and others responsible for the operation of the vessel.
H.Rep. No. 1441, 92d Cong., 2d Sess., reprinted in 1972 U.S.CODE CONG. & AD. NEWS 4698, 4719 (emphasis added). Time charterers ordinarily are not responsible for the control or operation of the vessel under general maritime law. Consequently, based on the legislative history noted above, it may be that the phrase "charter or bareboat charterer" was not intended to include or apply to time charterers. This construction would explain the specific reference to "bareboat charterers" because under general maritime principles, they were responsible for control and operation of the vessel. Thus, the construction given to the phrase "charter or bareboat charterer" could be "demise or bareboat charterer."
The reason I have decided to follow those courts that have determined the LHWCA includes suits against the vessel's time charterer despite the logical difficulties, is Congress' expressed intention of providing relief to injured harbor workers. "Permitting actions against the vessel based on negligence will meet the objective of encouraging safety because the vessel will still be required to exercise the same care as a land-based person in providing a safe place to work." H.Rep. No. 1441, 92d Cong., 2d Sess., reprinted in 1972 U.S. CODE CONG. & AD.NEWS 4698, 4704. Even though the time charterer does not normally assume control over the operation of the vessel the time charterer is involved in the loading and unloading of cargo. Thus, it is entirely consistent with the purpose of the LHWCA to allow third party actions against the time charterer because the time charterer could possibly make those areas used in the storing of cargo safer.
This determination is separate from any agreement between the owner and the time charterer in the Charter Party that may assign the ultimate risk of loss between them. That the time charterer is involved in the storing of the cargo is, in my view, enough to hold the charterer answerable under the LHWCA to workers for any negligence of the time charterer.
Another reason for holding that time charterers may be sued under the LHWCA is to prevent circuity of actions and possibly inconsistent jury verdicts. If time charterers could not be sued under the LHWCA, the plaintiff could nevertheless probably maintain a nonstatutory, common-law negligence action against the time charterer in state court or, if diversity jurisdiction existed, in federal court. In such an action the alleged duty on the part of the time charterer would arise from the Charter Party, not from the LHWCA. By holding that only the vessel's owner may be found liable under the LHWCA, this *5 court would, in effect force the plaintiff to bring a separate action against the time charterer. This creates a situation where the owner could defend his suit by arguing that under the Charter Party, the time charterer was responsible, which the jury might accept. However, not being in the case, the time charterer could not be held liable. In a separate action against the time charterer, the time charterer could argue that the owner was responsible to the plaintiff under the Charter Party. If the jury agreed, the plaintiff would again have no remedy because the owner would not be in the case. Given the purpose of the LHWCA, Congress could not have intended that the terms of a Charter Party could potentially leave harbor workers remediless. I have, therefore, concluded that the LHWCA applies to time charterers.
The LHWCA, as set out above in section 905(b), provides a cause of action against the vessel (as defined by section 902(21)) if the injury is a result of the negligence of the vessel. Although not articulated, it appears that placed in the context of the LHWCA, Medafrica Line's contention is that it cannot possibly have been negligent to plaintiff because it owed no duty to plaintiff. This assertion is based upon Medafrica Line's claim that clause 26 of the Charter Party provides that the owner and not the time charterer is to remain responsible for the vessel. Medafrica Line's argument misperceives the very purpose of the LHWCA. What Medafrica Line is seeking by this summary judgment motion is a determination that as between it and Alcoa, because of the contract between them, Alcoa is liable. Such a claim is a contractual indemnity claim. Because of the January 9, 1984 Order staying the parties' cross claims pending arbitration, Medafrica Line's claim for indemnity is not properly before this court. Rather, it should be presented through the arbitration mechanism called for by the Charter Party.
The LHWCA is intended to provide longshoremen and harbor workers with workmen's compensation benefits without depriving them of the right to sue negligent third parties for injuries, or eliminating the incentive for third parties to provide longshoremen a safe place to work. To prevent indirect recovery from the employer, the 1972 amendments to the LHWCA prohibit the employer from having to indemnify third parties for damages recovered by employees. The Turner court has explained that imposing a duty on the owner or time charterer or both should further the congressional goal of safety. I have already set out my agreement with this position. Thus, the duty that Medafrica Line owed to plaintiff did not arise from clause 8 of the Charter Party, as plaintiff and Alcoa contend. The duty arose by operation of the LHWCA. The LHWCA itself provides a cause of action against negligent third parties.
The clause in the Charter Party that plaintiff and Alcoa cite would only serve to transfer ultimate liability from one defendant to the other in accordance with their contract. It cannot affect in any way plaintiff's rights under the LHWCA, one of those being the right to bring a third party cause of action for negligence against the vessel, as that term is defined in the statute. I have determined that "vessel" includes the time charterer. Whether plaintiff can ultimately prove that the owner or time charterer or both was or were negligent is another matter. Whether the owner or time charterer will ultimately bear the risk of loss due to a contractual agreement between them is also another matter; one proper for arbitration by the very terms of the agreement between them.
The motion for summary judgment will be denied.
| {
"pile_set_name": "FreeLaw"
} |
541 U.S. 1092
GRIFFINv.UNITED STATES.
No. 03-10210.
Supreme Court of United States.
June 7, 2004.
1
C. A. 2d Cir. Certiorari denied. Reported below: 326 F. 3d 45.
| {
"pile_set_name": "FreeLaw"
} |
49 B.R. 876 (1985)
In re TECH HIFI, INC., Debtor.
Bankruptcy No. 84-504-JG.
United States Bankruptcy Court, D. Massachusetts.
May 30, 1985.
*877 Judy Mencher, Goodwin, Procter & Hoar, Boston, Mass., for petitioner.
Remy J. Ferrario, Shea & Gould, New York City, for respondent.
MEMORANDUM
THOMAS W. LAWLESS, Chief Judge.
This contested matter came before the Court for hearing on the Debtor's Notice of Intent to Sell Real Estate Lease (Valley Stream, New York), filed on January 9, 1985. By the notice of sale, the debtor notified interested parties of its intention to assume and assign the lease and provided a deadline for filing objections and counter-offers. Four counter-offers were filed. The landlord, Toys "R" Us, Inc., filed an objection. At the hearing on both matters held on February 11, 1985, an auction of the debtor's interest in the lease was held. The successful bidder was Leather Warehouse of New Jersey, Inc. for a price of $54,000. After indicating that the sale would proceed only if the objection were overruled, the Court then heard testimony of several witnesses and received into evidence the following documents: the lease, financial statements of The Leather Warehouse Group, and photographs of the premises and shopping center.
In support of its objection the landlord argues: that the debtor did not file a proper motion for assumption of the lease; that the debtor did not present evidence to demonstrate that assumption and assignment of the lease is in the best interests of the estate; that the proposed assignee cannot provide adequate assurance of future performance under the lease, and that the proposed assignee's use of the shopping center premises for sale of adult leather clothing violates the lease's restrictive use clause and negative covenant.
*878 Clause 3A of the lease provides:
"[t]enant shall use demised premises solely for the sale, storage, and repair of consumer electronics products, including video disks and video games and related assessories".
Clause II K provides:
"[t]enant . . . shall not, at any time without first obtaining the landlords consent in writing. . . . use the premises for the retail sale of toys, juvenile furniture, pools, outdoor play equipment, wheel goods, layettes, and health and beauty aids, furnishings, clothing, books, records, family and adult games, recreational equipment and, candy and sporting goods or any other items customarily carried in a modern toy store or landlord's store chain. Notwithstanding the foregoing tenant may sell items customarily carried in tenant's store chain".
The procedural objection is that the debtor did not file a Motion to Assume and Assign the Lease prior to sending notice of the sale. This is incorrect. The debtor did file a Motion to Assume and Assign the Lease on December 27, 1984 but did not request a hearing on the Motion for the same date and time as for objections to the notice of sale. When this procedural problem was presented at the hearing, I indicated that the Motion to Assume and Assign would be considered in conjunction with the notice of sale and objections thereto because the identical dispute and issues were raised by both pleadings. Indeed, the landlord's objection to the sale is entitled "Objection to Debtor's Proposed Assignment of Lease (Valley Stream, New York)". Therefore, the landlord was aware that assumption and assignment were the subject of the February 11 hearing despite the absence of the Motion from the schedule.
Next, the landlord argues that court approval of the assignment should be withheld because the debtor has not shown that assumption and assignment are in the best interests of the estate. This objection is without merit.
"Court approval of a debtor-in-possession's judgment that assumption of a lease is in the best interest of the debtor's business should not be withheld on the basis of a second-guessing of the debtor's judgment . . . As long as assumption of a lease appears to enhance a debtor's estate, Court approval of a debtor-in-possession's decision to assume the lease should only be withheld if the debtor's judgment is clearly erroneous, too speculative, or contrary to the provisions of The Bankruptcy Code, and particularly of 11 U.S.C. § 365. See Allied Technology, Inc., v. R.B. Brunemann & Sons, Inc., 25 B.R. 484 (Bankr.S.D.Ohio, 1982).
In this case, the assumption and assignment of the lease clearly benefits the estate because the debtor's estate is enhanced by the approximate $25,000 net sales price (after curing defaults) and is released from liability for rent for this store, which is no longer in operation. The debtor's business judgment that the lease should be assumed and assigned is reasonable.
The landlord next argues that the debtor may not assume and assign the lease because it is unable to provide "adequate assurance of future performance under the lease" by the assignee. The term adequate assurance of future performance of a shopping center lease is defined in § 365(b)(3):[1]
"For the purposes of paragraph (1) of this section, adequate assurance of future performance of a lease of real property in a shopping center includes adequate assurance
(A) of the source of rent and other consideration due under the lease;
(B) that any percentage rent due under the lease will not decline substantially
(C) that assumption or assignment of such lease will not breach substantially any provision such as radius, location, *879 use, or exclusivity provision, in any other lease, financing agreement, or master agreement relating to such shopping center; and
(D) that assumption of assignment of such lease will not disrupt substantially any tenant mix or balance in such shopping center.
11 U.S.C. § 365(b)(3)(A), (B), (C), and (D) (1979).
The landlord first argues that the proposed assignee cannot provide the landlord with adequate assurance that the $2750 rent will be paid. The court does not agree. Adequate assurance of future performance with respect to the source of rent to be paid means that the proposed assignee has the ability to satisfy the financial obligations imposed by the lease. In re Evelyn Byrnes, Inc., 32 B.R. 825, 829 (Bankr.S.D.N.Y.1983). An absolute guarantee, such as a letter of credit, is not required to meet this standard. In re Alipat, Inc., 36 B.R. 274 (Bankr.D.Mo.1984). Here, the lease is to be assigned to a newly formed corporation which is a subsidiary of The Leather Warehouse, Inc. The financial statement of The Leather Warehouse, Inc., and subsidiaries, which have operated twelve stores for thirteen years in New York and New Jersey, show total assets of $2,849,579 and retained earnings of $1,127,384 as of the end of April 1984. The company's president testified that its financial position has only improved since April 1984. Each store has sales of approximately $800,000 per year. Leather Warehouse, the parent, is willing to guarantee the lease obligations. The principals of the group are also willing to personally guarantee the lease. Leather Warehouse is willing to post a security deposit of up to six months rent in the form of a letter of credit. These assurances are more than adequate to ensure that the Leather Warehouse is able to perform the lease's rent obligations. Therefore, the debtor has complied with subsection (A) of § 365(b)(3).
The landlord contends that the assignee cannot provide adequate assurance of future performance with respect to this shopping center lease because the proposed use as a retail store for sale of leather goods violates this particular leases's restrictive covenant and use clauses. This argument misreads the statute. The landlord, in its brief, conveniently omits the complete version of this subsection which is worth repeating:
". . . adequate assurance of future performance if a lease of real property in a shopping center lease indicates assurance
(c) that assumption or assignment of such lease will not breach substantially any provision, such as radius, location, use, or exclusivity provision in any other lease, financing agreement or master agreement or master agreement relating to such shopping center;" (Emphasis added).
"The language of Clause (c) refers to nonsubstantial breaches in other leases or agreements relating to the shopping center as distinguished from provisions contained in the lease which is itself to be assigned." D. Simpson, Leases and the Bankruptcy Code, 56 Am.Bankr.L.J. 233, 243 (1982). By omitting the lease in question and referring only to other leases, the subsection does not require a showing that assignment will not breach the lease to be assigned, thus tacitly acknowledging that a measure of change in the contractual obligations is permissible. Id. at 243. Although this subsection does not require strict performance of the debtor's lease obligations by the assignee,[2] the Court cannot rewrite the lease. The variance in the nature of the business must not jeopardize the landlord's relationship with his other tenants, lending institutions, and agents. Therefore under this former subsection, it is not appropriate for the Court to question whether the proposed use violates the use *880 provisions of the lease to be assigned, but rather question whether the change substantially breaches other agreements relating to the shopping center. In this case the debtor is not prohibited from assigning despite the deviation in use because it was not shown that the assignment will substantially breach a provision in any other agreement concerning the shopping center.
Even if former sub-section (C) could be construed to mean the assignment must be denied in the absence of compliance with all restrictive provisions of the particular lease to be assigned, the proposed use by Leather Warehouse will not substantially breach the two use provisions of this lease. The landlord argues that the proposed assignee must not sell clothing, which is prohibited under paragraph K. However, a review of the entire clause indicates that the prohibition is intended to prevent sale of children's clothes normally sold by the landlord which are not sold by Leather Warehouse. Secondly, the restrictive use clause which requires the tenant to sell only electronics is unenforceable as it is purely an attempt to preclude assignment by the original tenant. See In re Vista, Vi, Inc., 35 B.R. 564, 568 (Bankr.N.D.Ohio 1983). Rather, the issue of whether the two use clauses should prevent assignment to this proposed assignee is relevant to the question of whether the assignment will disrupt substantially any tenant mix or balance in the shopping center. 11 U.S.C. 365(B)(3)(D).
The prohibition against substantial disruption of tenant mix ". . . certainly inplies that there is inherent authority in the Bankruptcy Court to authorize deviation in the use of shopping center premises from that permitted by the express terms of the lease itself. If the debtor assuming a lease were restricted merely to continuing its business as therefore conducted, the issue of disruption in the tenant mix or balance would not arise and the necessity for the statutory condition would be superfluous." Leases Under The Bankruptcy Code, supra at 243.
Where the proposed use varies the nature of the business in technical violation of a restrictive use clause, but does not harm the overall image of the shopping center and does not jeopardize the landlord's bargain, a deviation in the tenant mix is permissible. Vista Vi, Inc., 35 B.R. 564 (Bankr.N.D.Ohio, 1983) (debtor permitted to change name of store even though shopping center lease required it to operate under particular name); Matter of Libson Shops, Inc., 24 B.R. 693 (Bankr.E.D.Mo. 1982) (debtor permitted to conduct going out of business sale despite prohibition of same in shopping center lease). This interpretation is supported by the legislative history to former 365: "use clauses are not intended to prevent assignment of leases". S.Report No. 70, 98th Cong. 1st Sess. 1 (119) quoted in In re Vista Vi, Inc., 35 B.R. 564, at 56 (Bankr.N.D.Ohio 1983).
In the present case, the proposed use for retail of leather goods does not substantially disrupt the balance of the shopping center. The photographs introduced into evidence show that the center is a small five store shopping center, comprised of the landlord's toy store, a ladies' dress store, a bank, a shoe store, and the closed stereo electronics store of the debtor. Replacement of the debtor's operation with The Leather Warehouse does not force any of the tenants to compete with each other. Thus, the present case is distinguishable from In re TSW Stores of Nanuet, Inc., 34 B.R. 299 (Bankr.S.D.N.Y. 1983) where assignment was denied because the proposed assignee sold the same goods as another tenant. Here, no other store in the shopping center sells inventory similar to that of Leather Warehouse. There was no evidence presented that the change in use will prejudice other tenants by causing losses in sales.
For these reasons, I find that the assignee has provided adequate assurance of future performance within the meaning of § 365(b)(3)(A), (B), (C), and (D). The debtor concedes that it is required to cure all defaults in the lease before assumption and assignment, see 11 U.C.C. § 365(b)(1)(A) (1979), and has expressed its willingness to so do.
The landlord claims $91 per day in accrued rent. The debtor does not dispute *881 this figure. The debtor has not paid rent since April 1, 1984, and therefore the landlord is entitled to payment through the date of this memorandum (May 29, 1985) in the amount of $30,100. In addition to base rent, the landlord claims interest on late rent, pursuant to section 4(C) as the term is defined in § 37 of the lease. The debtor does not express an opinion on the issue of interest. Since interest is a component of the rent reserved in the lease, it is allowable unless the debtor produces evidence that it is unreasonable. See In re GHR Energy Corp., 41 B.R. 668 (Bankr.D.Mass. 1984). The landlord's claim for interest is allowed in the amount of $1899.
Finally, the landlord claims it is entitled to reimbursement of attorneys fees and expenses, for which § 25(B)(ii) permits recovery. Where a contract between a debtor and a third party provides for award of attorneys' fees, the Court is obligated to determine the reasonable value of the services by examining the nature and extent of services rendered. See In re Edsel Scarboro, 8 B.C.D. 72 (Bankr.D.Md.1981). After reviewing the statement of work performed, it is my conclusion that the amount sought by the landlord is unreasonable. First, the time spent on formulating, drafting, and the one hour trial of its objection to assignment of the leaseforty-three hoursis excessive. Second, the attachments disclose that much time was spent on routine matters such as "telephone calls" and "document review". The hourly rate charged by the attorneys is not stated in the request. My calculation results in a requested hourly rate of approximately $175. Neither attorney attached a resume of his experience and qualifications. The requested hourly rate is, in my view, is unreasonable. I have determined that a reasonable fee for the services rendered is $3500.
The landlord requests reimbursement of $405 in expenses incurred in conjunction with legal services. The request for $100 fee for word processing is denied as this constitutes overhead of the attorneys office. The request for reimbursement for "xerox, telephone, misc." is denied as it is merely an estimated charge, and no detail is provided. Expenses are allowed in the amount of $205. It is ordered that the debtor cure all of the above-discussed defaults in the amount of $35,704 prior to the assignment of the lease.
NOTES
[1] The amendments to this section by The Bankruptcy Amendments and Federal Judgeship Act of 1984, 11 U.S.C. § 365(b)(3) (July 10, 1984) apply prospectively to cases filed after October 9, 1984, and therefore are not operative in this case.
[2] The recent amendment to § 365(b)(3)(C) by The Bankruptcy Amendments and Federal Judgeship Act of 1984 require strict adherence to use clauses. Assignment is subject to all use and exclusivity provisions in the particular lease to be assigned. 11 U.S.C. § 365(b)(3)(C) (1984). The addition lends further support to the interpretation that the previous version did not require strict adherence to use provisions.
| {
"pile_set_name": "FreeLaw"
} |
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
__________________________________________
)
ROBERT ANDREW REED, )
)
Petitioner, )
)
v. ) Civil Action No. 14-0530 (BAH)
)
UNITED STATES OF AMERICA et al., )
)
)
Respondents. )
__________________________________________ )
MEMORANDUM OPINION
Petitioner Robert Andrew Reed has filed a “Petition Under 28 U.S.C. § 2254 for Writ
of Habeas Corpus by a Person in State Custody,” ECF No. 1. He challenges his conviction
entered by the Superior Court of the District of Columbia in March 2010 on the ground that
the prosecuting attorney withheld exculpatory evidence during his jury trial. See Pet.,
ECF pp. 1, 5, 9. For the following reasons, the Court finds that it lacks jurisdiction to hear
the petition and, thus, will dismiss the case.
Unlike prisoners convicted in state courts or those convicted in a United States
District Court, "a District of Columbia prisoner has no recourse to a federal judicial forum
unless [he shows that] the local remedy is inadequate or ineffective to test the legality of
his detention.@ Garris v. Lindsay, 794 F.2d 722, 726 (D.C. Cir.), cert. denied, 479 U.S. 993
(1986) (internal footnote and quotation marks omitted); see Byrd v. Henderson, 119 F.3d
34, 37 (D.C. Cir. 1997) ("In order to collaterally attack his sentence in an Article III court a
District of Columbia prisoner faces a hurdle that a federal prisoner does not."). It is
1
established that challenges to a Superior Court judgment of conviction must be pursued in
that court under D.C. Code ' 23-110. See Blair-Bey v. Quick, 151 F.3d 1036, 1042-43 (D.C.
Cir. 1998). Under the local statute, a District of Columbia prisoner may move to vacate,
set aside, or correct his sentence on grounds, among others, that A(1) the sentence was
imposed in violation of the Constitution . . . .@ D.C. Code ' 23-110(a). The statute further
provides that
[an] application for a writ of habeas corpus in behalf of a prisoner who is
authorized to apply for relief by motion pursuant to this section shall not be
entertained by . . . any Federal . . . court if it appears . . . that the Superior Court
has denied him relief, unless it also appears that the remedy by motion is
inadequate or ineffective to test the legality of his detention.
D.C. Code ' 23-110(g). ASection 23-110(g)'s plain language makes clear that it only
divests federal courts of jurisdiction to hear habeas petitions by prisoners who could have
raised viable claims pursuant to section 23-110(a).@ Williams v. Martinez, 586 F.3d 995,
998 (D.C. Cir. 2009); see id. at 999 (concluding that this Court could review a Afederal
habeas petition asserting ineffective assistance of appellate counsel after [the petitioner
has] moved to recall the mandate in the D.C. Court of Appeals@ because such a claim is not
available via a ' 23-110 motion); see accord Sanders v. Caraway, 859 F. Supp. 2d 78, 80-81
(D.D.C. 2012).
The government’s failure to disclose exculpatory evidence at trial is a viable due
process claim under D.C. Code § 23-110(a). See Coleman v. Ives, 841 F. Supp. 2d 333, 335
(D.D.C. 2012) (finding “claims arising from errors that occurred during [] trial . . . foreclosed
from federal court review by § 23-110”); Wright v. Stansberry, 677 F. Supp. 2d 286, 288
(D.D.C. 2010), citing Wright v. U.S., 979 A.2d 26 (D.C. 2009)(discussing D.C. Court of
Appeals’ treatment of § 23-110 motion raising violations of Brady v. Maryland, 373 U.S. 83
2
(1963)). Petitioner has not shown that his local remedy is ineffective or inadequate, and
an unsuccessful appeal or collateral proceeding does not otherwise suffice to overcome the
jurisdictional hurdle. See Garris, 794 F.2d at 727 (A[M]ere lack of success on [direct]
appeal does not pave the way for collateral attack.@) (footnote and citations omitted);
accord Bruton v. Ashcroft, 48 Fed. Appx. 336 (D.C. Cir. 2002) (AThe [28 U.S.C.] ' 2255
remedy is not inadequate or ineffective simply because ' 2255 relief has already been
denied.@) (citing Charles v. Chandler, 180 F.3d 753, 756 (6th Cir. 1999) (collecting cases));
Wilson v. Off. of the Chairperson, 892 F. Supp. 277, 280 (D.D.C. 1995) (AA petitioner may not
complain that the remedies provided him by D.C. Code ' 23-110 are inadequate merely
because he was unsuccessful when he invoked them.@).
For the foregoing reasons, this action is dismissed for want of jurisdiction. A
separate Order accompanies this Memorandum Opinion.
/s/ Beryl A. Howell
UNITED STATES DISTRICT JUDGE
DATE: April 7, 2014
3
| {
"pile_set_name": "FreeLaw"
} |
101 B.R. 107 (1989)
In re HYDRAULIC INDUSTRIAL PRODUCTS, CO., Debtor.
A. Thomas DEWOSKIN, Trustee, Plaintiff,
v.
James R. BRADY and Mira Brady, Defendants.
Adv. No. 89-0043-BKC-JJB, Bankruptcy No. 86-02142-BKC-JJB.
United States Bankruptcy Court, E.D. Missouri, E.D.
June 9, 1989.
Stephen J. Horace, St. Louis, Mo., for trustee/plaintiff.
J. Leonard Schermer, Clayton, Mo., for defendants.
FINDINGS AND CONCLUSIONS
JAMES J. BARTA, Chief Judge.
The matter being considered here is the Defendants' Motion for Summary Judgment. These Findings and Conclusions are based upon a consideration of the record as a whole including the Parties' Written Memoranda.
*108 Summary judgment may be rendered if the pleadings, depositions, answers to interrogatories, and admissions on file, 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. See, Fed.R.Civ.P. 56 as made applicable by Rule 7056, Bankruptcy Rules. Recent Supreme Court and Circuit Court decisions have stated that trial courts should be somewhat more hospitable to summary judgments than in the past.
The motion for summary judgment can be a tool of great utility in removing factually insubstantial cases from crowded dockets, freeing courts' trial time for those cases that really do raise genuine issues of material fact. City of Mount Pleasant v. Associated Elec. Corp., 838 F.2d 268, 273 (8th Cir.1988), citing, Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548 [91 L.Ed.2d 265] (1986), Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348 [89 L.Ed.2d 538] (1986) and Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505 [91 L.Ed.2d 202] (1986).
In the matter being considered here, the Plaintiff/Trustee is attempting to avoid a pre-petition transfer and recover a money judgment, alleging that the Defendants are Insiders and Relatives of an Officer of the Debtor pursuant to 11 U.S.C. § 547 and § 550, and 11 U.S.C. § 101(30) and § 101(39).[1]
The Defendants have argued that as first cousins of an officer of the Debtor, they are not "relatives" within the meaning of Section 101(39), because they are not related by affinity or consanguinity within the third degree as determined by the common law. There being no federal common law, the law to be applied is the law of the state. Erie v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188.
Under Missouri canon law, the degree of relationship is determined by counting generations down from the common ancestor. State v. Thomas, 351 Mo. 804, 174 S.W.2d 337, 340 (1943). This canon law method of computation has been referred to as the common law method. See, 23 Am.Jur.2d, Descent and Distribution § 55 (1983); Annot., 54 ALR2d 1009, 1013 (1957).
There is little legislative history as to the Federal Congressional interest with respect to the term "common law" at Section 101(39). It is not inconsistent with the scheme of the Bankruptcy Code to determine that "common law" refers to the body of applicable state law in effect at the time of the action which is the subject of proceeding.
Generally, in Missouri, the common law is the law of the land unless it is abrogated by the Constitution or by statute. L.E. Lines Music Co. v. Holt, 332 Mo. 749, 60 S.W.2d 32 (1933); Pugh v. St. Louis Police Relief Ass'n., 237 Mo.App. 922, 179 S.W.2d 927 (1944); See Mo.Rev.Stat. § 1.010 (1939).
*109 Section 474.010 Mo.Rev.Stat. (1980) states that descent and distribution is determined by counting upward from the decedent to the nearest common ancestor, and then downward to the relative. The degree of kinship is the sum of these counts. The Plaintiff has not provided any authority to support the position that the canon law method should be used notwithstanding the otherwise clear language of the statute.
Therefore, the Court concludes that for purposes of Section 101(39) of Title 11, common law refers to the computational method set out at Section 474.010, Mo.Rev. Stat. (1980). First cousins are not within the third degree and are not within the definition of "relative" in the Bankruptcy law.
However, the definition of "insider" at Section 101(30) is not limited to the examples listed therein. In re Schuman, 81 B.R. 583, 586, 17 B.C.D. 57, 59 (9th Cir. BAP, 1987). When used in Title 11, the words, "includes" and "including" are not limiting. 11 U.S.C. § 102(3).
The legislative history of Section 101 indicates that an insider is one who has a sufficiently close relationship with a debtor that his conduct is made subject to closer scrutiny. S.Rep. No. 95-989, 95th Cong., 2nd Sess. 25 (1978) and H.R.Rep. No. 95-595, 95th Cong. 1st Sess. 312 (1977), U.S. Code Cong. & Admin. News, pp. 5787, 5810-5811, 6269; Schuman at 57.
It is a question of fact in each situation as to who will be determined to be an insider. See, In re Taylor, 29 B.R. 5, 7 (Bankr.W.D.Ky.1983).
In this case, there exist genuine issues at to material facts with respect to the Defendants' classification as an "insider". The Motion for Summary Judgment is denied.
NOTES
[1] 11 U.S.C. § 101(30) reads as follows:
"insider" includes
(A) if the debtor is an individual
(i) relative of the debtor or of a general partner of the debtor;
(ii) partnership in which the debtor is a general partner;
(iii) general partner of the debtor; or
(iv) corporation of which the debtor is a director, officer, or person in control;
(B) if the debtor is a corporation
(i) director of the debtor;
(ii) officer of the debtor;
(iii) person in control of the debtor;
(iv) partnership in which the debtor is a general partner;
(v) general partner of the debtor; or
(vi) relative of a general partner, director, officer, or person in control of the debtor;
(C) if the debtor is a partnership
(i) general partner in the debtor;
(ii) relative of a general partner in, general partner of, or person in control of the debtor;
(iii) partnership in which the debtor is a general partner;
(iv) general partner of the debtor; or
(v) person in control of the debtor;
(D) if the debtor is a municipality, elected official of the debtor or relative of an elected official of the debtor;
(E) affiliate, or insider of an affiliate as if such affiliate were the debtor; and
(F) managing agent of the debtor;
11 U.S.C. § 101(39) reads as follows:
"relative" means individual related by affinity or consanguinity within the third degree as determined by the common law, or individual in a step or adoptive relationship within such third degree.
| {
"pile_set_name": "FreeLaw"
} |
380 U.S. 553 (1965)
GENERAL MOTORS CORP.
v.
DISTRICT OF COLUMBIA.
No. 352.
Supreme Court of United States.
Argued March 10, 1965.
Decided April 27, 1965.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT.
*554 Donald K. Barnes argued the cause for petitioner. With him on the briefs were Aloysius F. Power, Thomas J. Hughes, Seymour S. Mintz, William T. Plumb, Jr., and E. Barrett Prettyman, Jr.
Henry E. Wixon argued the cause for respondent. With him on the brief were Chester H. Gray and Milton D. Korman.
MR. JUSTICE STEWART delivered the opinion of the Court.
The District of Columbia Income and Franchise Tax Act of 1947 imposes a tax of 5% on the taxable income of every corporation, foreign or domestic, for the privilege of engaging in any trade or business within the District.[1] The Act further provides that "[t]he measure of the franchise tax shall be that portion of the net income of the corporation . . . as is fairly attributable to any trade or business carried on or engaged in within the District and such other net income as is derived from sources within the District."[2] The Act does not attempt to define a specific method whereby the portion of income "fairly attributable" to the District is to be determined, but authorizes the District Commissioners to prescribe regulations for such determination.[3] However, the Commissioners' discretion in devising such regulations is not unfettered, as the Act further commands: "If the trade or business of any corporation . . . is carried on or engaged *555 in both within and without the District, the net income derived therefrom shall . . . be deemed to be income from sources within and without the District."[4]
Acting pursuant to the authority delegated to formulate regulations governing the allocation of income, the District Commissioners promulgated regulations which provide: "Where income for any taxable year is derived from the manufacture and sale or purchase and sale of tangible personal property, the portion thereof to be apportioned to the District shall be such percentage of the total of such income as the District sales made during such taxable year bear to the total sales made everywhere during such taxable year."[5]
The petitioner, General Motors Corporation (G. M.), seeks review of an en banc decision of the Court of Appeals for the District of Columbia Circuit which approved the application of these regulations in determining the proportion of its total net income allocable to the District for the purpose of computing the franchise tax due.[6] General Motors attacks this method of computation on the grounds that it attributes to the District an unreasonably high proportion of its total income and that it is therefore both unauthorized by the relevant sections of the statute, and violative of the Interstate Commerce and Due Process Clauses of the Constitution. We agree that this method of allocation is not authorized by the D. C. Code and therefore reverse the judgment of the Court of Appeals without reaching the constitutional questions raised.
*556 General Motors is engaged in the manufacture and sale of motor vehicles, parts, and accessories. A Delaware corporation, the petitioner maintains its principal offices in New York and Detroit. It carries on no manufacturing operations within the District of Columbia, but it makes substantial sales to customers located within the District, chiefly retail automobile dealers. During the years in question, 1957 and 1958, its volume of sales to such customers aggregated $37,185,704 and $32,542,519, respectively.[7] Orders for these sales were received and filled outside the District, and the products were shipped to customers from G. M. manufacturing plants in Maryland. Delaware, and Michigan.
It is the claim of G. M. that the use of the "sales-factor formula" in the regulations is beyond the authority of the statute, because that formula taxes more of its net income than is "fairly attributable" to its District of Columbia business, particularly in light of the statutory provision which provides that the net income of a business carried on both within and without the District shall be deemed to be from sources within and without the District. We agree that the Commissioners exceeded their statutory authority by allocating income to the District in disregard of the express restrictions of the law.
We are normally content to leave undisturbed decisions by the Court of Appeals for the District of Columbia Circuit concerning the import of legislation governing the affairs of the District. However, at times application of the District Code has an impact not confined to the Potomac's shores, but reaching far beyond. This is such a case, for approval of the District Commissioners' regulations lends sanction to an apportionment formula seriously at variance with those prevailing in the vast majority of States and creates substantial dangers of *557 multiple taxation. Where a decision is of such significance to interstate commerce, and where the result reached involves statutorily unsupportable exertions of administrative power, the traditional reasons underlying our customary refusal to review interpretations of District law do not apply.
It is of course clear that the District Code does not expressly prescribe the use of any particular formula for the apportionment of income to sources within and without the District. On the contrary, the Code expressly authorizes the District Commissioners to promulgate regulations for the detailed apportionment of the income of multistate enterprises. But neither does the Code leave the Commissioners wholly unguided in their exercise of this authority. The Commissioners' authority is clearly limited by the provision (§ 47-1580a) which requires that the net income of a corporation doing business inside and outside the District be deemed to arise from sources situated in like fashion. To understand the meaning of this limitation, we need but take the simple example of a corporation which has its manufacturing facilities located wholly in Maryland and sells all of its products in the District of Columbia. Application of the Commissioners' formula would result in the allocation of 100% of the corporation's income to the District. Yet there can be no doubt that the business of the corporation is carried on both within and without the District, viz., manufacture in Maryland and sales in the District. The statute does not say that net income shall be deemed to be derived from sources within and without the District only where the sales of any corporation are made both within and without the District, which is the effect of the Commissioners' regulation. The statute is phrased more broadly and commands apportionment of income to sources within and without the District whenever "the trade or business of any corporation . . . is carried on or *558 engaged in both within and without the District." As it is clear that some part of the trade or business of this hypothetical corporation is carried on without the District, the conclusion follows that the Commissioners must "deem" some part of the income of this corporation to be derived from sources outside the District.
It is said that the Commissioners' regulations are within the statutory grant of authority because the language "the net income derived therefrom" in § 47-1580a must be read to mean the total income of the corporation and not the "net income arising from activities in the District." The section must be so read, it is argued, because this reading least restricts the discretion of the Commissioners in devising apportionment formulae, and the traditional canon of broad construction of revenue measures demands that restrictions on the Commissioners' discretion be minimized. Applying this approach to the case at hand, it is argued that the Commissioners fulfilled their statutory obligation in apportioning the total income of G. M. to sources inside and outside the District in accordance with the geographical distribution of the company's sales.
Where, as in this case, some portion of a corporation's income is derived from manufacture and sale outside the District, there is no question that the statute requires the Commissioners to allocate that portion to sources outside the District.[8] However, it does not follow that the making of that kind of allocation alone relieves the Commissioners of their statutory responsibility to apportion that part of a corporation's income arising from manufacture outside and sale inside the District limits. As to *559 this segment of its income, G. M. is in precisely the same situation as the hypothetical corporation manufacturing wholly in Maryland and selling solely in the District; that is, it is carrying on a business partly within and partly without the District limits. It is not enough under the statute to require apportionment of income derived from District sales only in the case where the taxed corporation has no sales outside the District. The inescapable and determinative fact in both the hypothetical case and the case before us is that the company carries on business both inside and outside the District with respect to the income which it derives from the sales made within the District. Consequently, § 47-1580a requires that some portion of this income be deemed to arise from sources outside the District.
The conclusion which we reach by analysis of the plain language of the statute also finds support in the consequences which a contrary view would have for the overall pattern of taxation of income derived from interstate commerce. The great majority of States imposing corporate income taxes apportion the total income of a corporation by application of a three-factor formula which gives equal weight to the geographical distribution of plant, payroll, and sales.[9] The use of an apportionment formula based wholly on the sales factor, in the context of general use of the three-factor approach, will ordinarily result in multiple taxation of corporate net income; for *560 the States in which the property and payroll of the corporation are located will allocate to themselves 67% of the corporation's income, whereas the jurisdictions in which the sales are made will allocate 100% of the income to themselves. Conversely, in some cases enterprises will have their payroll and plant located in the sales-factor jurisdictions and make their sales in the three-factor jurisdictions so that only 33% of their incomes will be subject to state taxation. In any case, the sheer inconsistency of the District formula with that generally prevailing may tend to result in the unhealthy fragmentation of enterprise and an uneconomic pattern of plant location, and so presents an added reason why this Court must give proper meaning to the relevant provisions of the District Code.
Moreover, the result reached in this case is consistent with the concern which the Court has shown that state taxes imposed on income from interstate commerce be fairly apportioned. In upholding taxes imposed on corporate income by Connecticut and New York and apportioned in accordance with the geographical distribution of a corporation's property, this Court carefully inquired into the reasonableness of the apportionment formulae used.
"The profits of the corporation were largely earned by a series of transactions beginning with manufacture in Connecticut and ending with sale in other States. In this it was typical of a large part of the manufacturing business conducted in the State. The legislature in attempting to put upon this business its fair share of the burden of taxation was faced with the impossibility of allocating specifically the profits earned by the processes conducted within its borders. . . . There is . . . nothing in this record to show that the method of apportionment adopted by the State was inherently arbitrary, or that its *561 application to this corporation produced an unreasonable result." Underwood Typewriter Co. v. Chamberlain, 254 U. S. 113, 120-121.
See also Bass, Ratcliff & Gretton, Ltd. v. State Tax Comm'n, 266 U. S. 271. While the Court has refrained from attempting to define any single appropriate method of apportionment, it has sought to ensure that the methods used display a modicum of reasonable relation to corporate activities within the State. The Court has approved formulae based on the geographical distribution of corporate property and those based on the standard three-factor formula. See, e. g., Underwood Typewriter Co. v. Chamberlain, supra; Butler Bros. v. McColgan, 315 U. S. 501. The standard three-factor formula can be justified as a rough, practical approximation of the distribution of either a corporation's sources of income or the social costs which it generates. By contrast, the geographic distribution of a corporation's sales is, by itself, of dubious significance in indicating the locus of either factor. We of course do not mean to take any position on the constitutionality of a state income tax based on the sales factor alone. For the present purpose, it is sufficient to note that the factors alluded to by this Court in justifying apportionment measures constitutionally challenged in the past lend little support to the use of an exclusively sales-oriented approach. In construing the District Code to prohibit the use of a sales-factor formula, we sacrifice none of the values which our scrutiny of state apportionment measures has sought to protect.
In sum, we find that the language of the authorizing statute does not permit the application of an apportionment formula which makes use of the sales factor alone. The conclusion which we draw from examination of the statutory language finds support in the conflict with other taxing jurisdictions which would result from a contrary view. It finds further support in the continuing concern *562 for fair apportionment which this Court has displayed over the years in scrutinizing state taxing statutes. As the District Code confides in the Commissioners the authority to prescribe detailed regulations, it is not for us to make specific prescription, and we limit ourselves to holding that the present regulation is unauthorized by the statute. Accordingly, the judgment of the Court of Appeals for the District of Columbia Circuit is reversed and the case remanded for proceedings consistent with this opinion.
Reversed and remanded.
MR. JUSTICE BLACK and MR. JUSTICE DOUGLAS, agreeing with the Court of Appeals that the tax here is authorized by the controlling statute, would affirm the judgment.
NOTES
[1] D. C. Code 1961, § 47-1571a.
[2] D. C. Code 1961, § 47-1580.
[3] D. C. Code 1961, § 47-1580a.
[4] Ibid.
[5] Section 10.2 (c) of the District of Columbia Income and Franchise Tax Regulations, relettered by amendment of July 24, 1956.
[6] 118 U. S. App. D. C. 381, 336 F. 2d 885, certiorari granted, 379 U. S. 887. An earlier decision (91 Wash. Law Rep. 650) of a panel of the Circuit Court, reversed by the decision here reviewed, had reached a contrary conclusion in affirming the decision of the District of Columbia Tax Court (CCH D. C. Tax Rep. ¶ 200-006).
[7] Out of total sales of $9,461,855,874 in 1957 and $7,853,393,381 in 1958.
[8] This is not to say that the Commissioners need engage in detailed segmentation of corporate income to source and specific allocation thereof. All that is required is that the formula adopted for general application take account of the geographical spread of the major dimensions of a business.
[9] Of the 38 States requiring payment of such taxes, 26 employ varieties of a three-factor formula which takes into account the geographical distribution of a corporation's payroll, property and sales, generally giving equal weight to each factor. Another three use substantially the same formula, replacing the payroll factor with the broader category of manufacturing costs. Yet another three make use of a formula which incorporates the sales and property factors. Only four taxing jurisdictions use formulae based solely on the geographic distribution of corporate sales. See H. R. Rep. No. 1480, 88th Cong., 2d Sess., at 119.
| {
"pile_set_name": "FreeLaw"
} |
427 F.Supp. 389 (1977)
Marshall ROBERTS et al.
v.
EXXON CORPORATION.
Civ. A. No. 18872.
United States District Court, W. D. Louisiana, Lafayette Division.
March 16, 1977.
*390 William E. Logan, Jr., Lafayette, La., and Walter G. Murphy and Harold Brown, Boston, Mass., David Berger, Warren D. Mulloy, Bruce K. Cohen and Warren Rubin, Philadelphia, Pa., for plaintiffs.
Bernard J. Caillouet, New Orleans, La., Keith E. Pugh, Jr., Howrey, Simon, Baker & Murchikon, Washington, D. C., Robert T. Jorden, Liskow & Lewis, Lafayette, La., for defendant.
PUTNAM, Senior District Judge.
The plaintiffs in this case, Marshall Roberts and Guy Benitez, allege violations of the antitrust laws by defendant, Exxon Corporation. Benitez operated two automatic service stations for Exxon from June 2, 1969 to September 6, 1971 under the terms of a "Commission Manager" contract under which he is considered by defendant as an employee of the company. Roberts, on the other hand, has operated as an independent dealer for Exxon in this area and continues to so act. The gravamen of the complaint is the fact that Exxon fixes the retail prices for the sale of its gasoline products at the stations operated by the "Commission Manager", Benitez. The threshold question is whether or not this plaintiff is in fact an employee of Exxon or, for purposes of the antitrust laws, an independent business man.
The parties have stipulated the facts on this issue and both have moved for summary judgment based upon this stipulation. The record is most voluminous. The authorities cited by able counsel are legion. After reviewing the facts agreed to, the affidavits filed in support of the motions and the briefs, we reach the conclusion that the motion of plaintiffs should be granted and hold that for all intents and purposes this "Commission Manager" agreement confected by defendant is nothing more than a consignment of goods to Benitez enabling Exxon to fix retail prices at the pump.
A detailed review of the uncontested issues established by the record is not necessary for purposes of this decision. Suffice it to say that Benitez was clothed under the "Commission Manager" agreement with many of the attributes of an independent business man and also with many attributes of an employee. He operated his own independent garage and repair business on the premises occupied by him with defendant's permission, he sold tires, batteries, and accessories (TBA) furnished to him by defendant on consignment and for which he was paid a commission based upon a fixed percentage. All gasoline and petroleum products used in the service station business was sent to him by Exxon ostensibly as Exxon's own goods, but which he kept and stored at his own risk except for losses resulting from acts of God or other forces beyond his control. On gasoline he was paid a commission varying from three and half to four and a half cents per gallon, depending upon *391 the price and quality of the gasoline sold. Exxon fixed all prices. The agreement was terminable at will by either party. If the prices were not competitive and plaintiff Benitez lost money, it was his loss; there was no minimum income guaranteed to him. Regardless of the appellation given to his relationship with the defendant, the status of the goods in commerce was no different than the status of the goods in the lease consignment agreement before the Court in Simpson v. Union Oil Co., 1964, 377 U.S. 13, 84 S.Ct. 1051, 12 L.Ed.2d 98. We view it as a retail price fixing arrangement and a per se violation of Section 1 of the Sherman Act, 15 U.S.C.A. § 1.
Since the decision in Simpson, it is clear that the relationship of the commission manager vis-a-vis the defendant distributor or manufacturer under general principles of master and servant is not the main issue in such litigation. Cf. Lehrman v. Gulf Oil Corp., 5 Cir. 1972, 464 F.2d 26; Greene v. General Foods Corp., 5 Cir. 1975, 517 F.2d 635, Part III, at page 647 et seq., and Goldinger v. Boron Oil Co., W.D.Pa.1974, 375 F.Supp. 400.
In Greene, supra, Judge Wisdom as the organ of the court gives an excellent discussion of the development of the law before and after Simpson v. Union Oil Co., supra. Given a device such as the commission manager agreement in this case as it is interpreted by defendant in addition to its already overwhelmingly powerful economic arsenal, would enable Exxon to underprice and drive from the market place all independent distributors or dealers in its petroleum products, thereby depriving the public of the benefit of competitive prices in a substantial area of the business.
For the foregoing reasons, the motion for summary judgment on the issue of whether or not plaintiff Guy Benitez was an employee of the defendant Exxon is decided in favor of plaintiffs. The motion for summary judgment filed by Exxon is denied.
In view of the stipulation filed in the record on May 6, 1975, paragraph 5, to the effect that in the event plaintiffs prevail in their motion there may be further proceedings before this court to determine causation, impact, damages, and the defendant's counterclaim, which will involve a lengthy trial of these issues, the question of law presented by this motion is controlling. Since there is clearly substantial ground for difference of opinion, and an immediate appeal may materially advance the ultimate termination of the litigation, we will certify it for an immediate appeal under 28 U.S. C.A. § 1292(b).
The attorneys for plaintiffs will forthwith prepare a formal order in keeping with the forging, for signature by the Court. Judgment shall not be entered by the Clerk until such order has been signed and filed.
Rendered at Lafayette, Louisiana, April 29, 1976.[1]
ADDENDUM I
XXX-XXXX-X S-1440-1 /S #2163
LAFAYETTE, LOUISIANA
SERVICE STATION MANAGER AGREEMENT
THIS AGREEMENT made this 9th day of MARCH, 1970, between HUMBLE OIL
& REFINING COMPANY, a Delaware corporation, having an office at 1211 Union Avenue
(Address)
__________________________, Memphis , Tennessee ,
(City) (State)
hereinafter called "Humble", and GUY E. BENITEZ ,
whose address is 2307 W. ST. MARY BLVD. , LAFAYETTE , LOUISIANA ,
(Address) (City) (State)
hereinafter called "Manager".
*392
WITNESSETH:
1. EMPLOYMENT
Humble hereby employs Manager, commencing on the 9th day of March, 1970,
subject to all the terms and conditions hereof, to superintend, manage and operate its service station
located at U. S. 167 & Chalmette Drive , Lafayette , Louisiana .
(Address) (City) (State)
2. HUMBLE'S PRODUCTS
Humble shall make, or cause to be made, deliveries of motor fuels and such other products as
Humble shall select to the service station from time to time, in such quantities as Humble shall
determine. Title to such products shall remain in Humble until sold for Humble's account when title
shall pass directly from Humble to the service station customer. All sales of Humble-owned products
shall be at retail prices fixed by Humble from time to time.
The entire proceeds of all sales of Humble-owned products, both cash and service station delivery
tickets pursuant to approved credit card sales, are the property of Humble. Manager shall segregate such
proceeds and hold the same in trust for Humble until delivery to Humble as hereinafter provided.
Manager shall account to Humble for sales of its products by remitting to Humble daily, or at
such other time as Humble may specify, all delivery tickets on credit sales plus Manager's own check,
bank cashier's draft or money order, as Humble may require, for all cash sales made since Manager's
last previous accounting, or shall otherwise account and make remittances as required by Humble.
3. OTHER PRODUCTS
Manager may with Humble's consent purchase from Humble and others and resell other products
and accessories usually sold at service stations.
4. SERVICES
Manager shall perform service work usually rendered at service stations, and shall comply with
the instructions of Humble with respect to the performance of such service work and the prices to be
charged therefor. Manager shall account to Humble for proceeds received for service work as required
by Humble.
5. COMMISSIONS
Manager shall receive commissions on sales of Humble-owned products and on service work in
accordance with Schedule "A" attached hereto and made a part hereof. Humble shall have the
right to revise said Schedule "A" from time to time.
6. DUTIES OF MANAGER
Manager agrees to conduct a first-class service station business upon the premises; to render to
the public courteous, efficient and prompt service; to keep the service station premises in a clean,
healthful and attractive condition; and to comply with all instructions of Humble as to standards of
service and hours of operation. Manager and personnel operating the service station shall wear
uniforms acceptable to Humble.
Manager shall keep such records and make such reports and accountings as Humble may require
for all business done at the service station, and Humble may at any time examine such records,
reports and accountings and make such inventories and inspections as it deems necessary. Manager
agrees to retain or to turn over to Humble as Humble may require such records of business done at
the station as in Humble's opinion may be necessary or required for federal, state or local tax audits.
Manager shall take proper care of all real and personal property of Humble that is placed in his
charge, and will make all minor repairs and adjustments and will promptly notify Humble of all necessary
major repairs. A complete list of all equipment owned by Humble and located upon the premises is
attached hereto as Schedule "B", and Manager hereby acknowledges receipt of such equipment in
good condition.
*393
Manager assumes responsibility for Humble-owned products delivered to the station and for
proceeds received from the sale thereof, and for proceeds from service work, and for equipment
shown on Schedule "B", but Manager shall not be liable for loss of or damage to the same or to the
service station building where Manager can show that such loss or damage was caused by fire,
explosion, storm or other acts of God, or by causes beyond Manager's reasonable control.
Manager shall hire adequate personnel satisfactory to Humble to properly operate the service
station, and shall be responsible for supervising such personnel in the performance of their duties in
accordance with all instructions of Humble as to standards of service and employment. The wages
paid such personnel by Manager and their hours of work shall comply with the requirements of State
or Federal Law where applicable.
Manager has no authority and agrees not to obligate Humble on any contract, warranty or
guarantee, or to bind Humble's credit in any respect whatsoever, unless expressly authorized by
Humble in writing.
7. MISCELLANEOUS COSTS OF OPERATION
Miscellaneous costs of operation including, but not limited to, supplies, licenses, claims, insurance,
heating, cooling, electricity, water, telephone and other utilities, shall be borne as provided in
Schedule "C" attached hereto.
8. TAXES
Manager shall collect, account for and deliver to Humble all excise and sales taxes applicable to
sales of Humble-owned products, products and accessories purchased from Humble and others for
resale and service work performed hereunder. Humble will file the necessary excise and sales tax
returns and remit amounts due thereon to the proper taxing authorities. Manager agrees to bear any
additional tax, interest and penalties which result from Manager's failure to collect, account for and
deliver to Humble such excise and sales taxes, or which result from Manager's failure to keep proper
records with respect to such taxes.
Manager shall withhold and pay over to Humble all amounts that are required by any law to be
withheld with respect to the salaries, commissions or wages of Manager and other station personnel
(including, but not limited to, federal, state and local income taxes, social security taxes, and state
unemployment taxes or disability fund payments, if any). Humble will file the necessary returns and
remit amounts collected from Manager to the proper taxing authorities and will also pay to such
authorities the additional taxes, contributions and moneys due by Humble with respect to Manager and
other station personnel in Humble's capacity as an employer.
Humble agrees to file necessary returns and make payment to the proper authorities for all taxes
levied or assessed against all of Humble's real and personal property situated in and upon the premises
and all other business taxes which may be levied or assessed against the premises or the business or
operations conducted thereon, except that Manager shall be responsible for and agrees to file
necessary returns and make payment to the proper authorities for federal, state and local income
taxes due and payable from Manager and for taxes levied or assessed against all of Manager's
property situated in or upon the premises.
9. TERMINATION
Humble or Manager may terminate this Agreement at any time by written notice to the other
delivered in person or mailed to the address set forth above.
Upon termination of this Agreement, Manager shall vacate the service station premises and
surrender custody of all of Humble's property and equipment, including products not theretofore sold,
and deliver to Humble the proceeds of all its products which have been sold since the last previous
accounting and any other sums due Humble. Humble shall repurchase from Manager, at Manager's
cost of acquisition, such products or accessories as Manager has in stock which Manager purchased
from Humble and which are in good condition.
Any property owned by Manager, which is not removed from the premises by Manager within 24
hours after the termination of this Agreement, may be stored by Humble for Manager at Manager's
sole risk and expense or may be rented by Humble for $1.00 per month until it is removed or
otherwise disposed of by Manager.
*394
IN WITNESS WHEREOF, the parties hereto have caused these presents to be duly executed the
day and year first above written.
HUMBLE OIL & REFINING COMPANY
(s) John L Ovento By(s) D H Luncford
Witness
(s) E C King (s) Guy E. Benitez
Witness Manager
Alternate
(Rev. 3/18/69) S/S2
SCHEDULE "A"
TO
SERVICE STATION MANAGER AGREEMENT
In full payment for all sales made and all services performed by Manager and Service Station
Attendants hereunder, HUMBLE shall pay Manager Commissions as set forth below in this
Schedule "A" subject to HUMBLE's right to revise or change such schedule from time to time.
Unless otherwise expressly authorized by HUMBLE, the Manager shall remit all sales, less
commissions, each day following the sale.
Manager's commissions on sales of HUMBLE-owned products shall be as follows:
A. MOTOR GASOLINE AND DIESEL FUEL:
1. HUMBLE'S Branded Motor Fuel:
ESSO
Retail Price (¢/Gal.) Commission (¢/Gal.) Retail Price (¢/Gal.) Commission (¢/Gal.)
34.0 - 34.9 (and Above) 3.9 30.0 - 30.9 3.0
33.0 - 33.9 3.6 29.0 - 29.9 3.0
32.0 - 32.9 3.3 28.0 - 28.9 3.0
31.0 - 31.9 3.0 27.0 - 27.9 (& Below) 3.0
ESSO PLUS
36.0 - 36.9 (and Above) 4.1 32.0 - 32.9 3.2
35.0 - 35.9 3.8 31.0 - 31.9 3.2
34.0 - 34.9 3.5 30.0 - 30.9 3.2
33.0 - 33.9 3.2 29.0 - 29.9(& BELOW) 3.2
ESSO EXTRA
38.0 - 38.9 (and Above) 4.4 34.0 - 34.9 3.5
37.0 - 37.9 4.1 33.0 - 33.9 3.5
36.0 - 36.9 3.8 32.0 - 32.9 3.5
35.0 - 35.9 3.5 31.0 - 31.9 (& Below) 3.5
(NOTE: Retail prices include Federal and State Gasoline Taxes and State Sales Taxes where
applicable.)
2. Diesel Fuel ________________ ¢/Gal.)
B. LUBRICATING OILS AND OTHER NON-VOLATILE PETROLEUM PRODUCTS (EXCLUDING
ANTI-FREEZE): Forty per cent (40%) of HUMBLE's established retail
service station sales price, excluding tax, applicable at the time and for the place
of sale.
*395
C. ANTI-FREEZE: Forty-five per cent (45%) of HUMBLE's established sales price applicable
to the time and for the place of sale.
D. TIRES, TUBES AND BATTERIES: A percentage of the Suggested Retail Price for Adjustment
Purpose Only (Including Federal Excise Tax) as quoted in the current TBA
Buying and Selling Guide (Dealer).
Atlas Tires Commission
"HP," Plycron and Weathergard 31% per unit
Grip Safe 27% per unit
Mile Pak 18% per unit
Atlas Tubes 50% per unit
Atlas Batteries
HD & PHD 31% per unit
A 25% per unit
K 18% per unit
Manager shall retain all proceeds received by Manager for service work.
Effective 3/9/70 , this schedule supersedes any previous Commission Schedules signed by
me and is hereby accepted as part of Service Station Manager Agreement signed by me and dated
3/9/70 .
Guy E. Benitez 2163 Lafayette, Louisiana
Manager S/S No. City and State
3/9/70
Date
SCHEDULE "B" TO
SERVICE STATION MANAGER AGREEMENT
DATED 3/9/70
Equipment Owned by Humble
6Model Trimline G&B Dispensers
3Submerged Turbine Pumps
36000 Gal. U. G. Tanks
1 550 Gal. U. G. Tank
1G&B Frame Contact Grease Lift
13 HP G&B Air Compressor
1Major Sign & Pole (Plastic Oval)
1Coats Iron Tireman
2Sel Oil Cabinets
12-Reel Overhead Greasing Unit
1 400 Lb. Gear Oil Pump
1 400 Lb. Chassis Grease Pump
Receipt of the above equipment in good condition is
hereby acknowledged.
(s) E. C. King Guy E. Benitez
Witness Manager
*396
SCHEDULE "C" OF
SERVICE STATION MANAGER AGREEMENT
Miscellaneous Costs of Operation
Dated: 3/9/70
1. HUMBLE assumes responsibility for and will bear the cost of the following:
A. Licenses
HUMBLE agrees to make application and payment to the proper authorities for all business
licenses and permits which may be required with respect to the business or operations conducted upon
the premises, except as provided in Section II-A hereof.
B. Utilities
HUMBLE will pay the cost of public utilities furnished by HUMBLE to the premises,
including electricity, water, and heating and cooling fuel.
C. Workmen's Compensation
HUMBLE will cover the Workmen's Compensation liability arising out of the operation of the
service station at no cost to the Manager, and will furnish to the Manager the required notice which
Manager shall keep posted at the premises at all times.
D. Public LiabilityOperation of the Service Station and Non-owned Vehicles
HUMBLE will provide, at no cost to the Manager, except as set forth below in this Section
1-D and in Section II-D hereof, public liability insurance protecting the Manager and other station
personnel against claims of customers and the public arising out of the operation of the station. A
certificate of insurance will be issued to the Manager for the following limits:
Bodily Injury $200,000 one person
$200,000 two or more persons each accident
Property Damage $200,000 each accident
This insurance covers:
(1) accidents occurring on or about the service station premises;
(2) accidents occurring away from the service station which are allegedly due to faulty service
work, or to faulty or contaminated products;
(3) accidents occurring away from the service station which are due to the operation of non-owned
vehicles by the Manager or other station personnel in the business of the
service station. "Non-owned vehicles" include customers' cars but exclude vehicles owned
or hired by the Manager or by any member of his household.
NOTE: This insurance does not cover claims arising from the use of motor vehicles owned or hired by
the Manager or by any member of his household. Such vehicles shall be insured by the
Manager pursuant to Section II-E hereof.
II. Manager assumes responsibility for and will bear the cost of the following:
A. Licenses
Manager agrees to make application and payment to the proper authorities for all business
licenses and permits which may be required with respect to his resale of products and accessories
purchased by him from HUMBLE and others, in addition to those business licenses and permits to be
obtained by HUMBLE pursuant to Section I-A hereof.
*397
B. Supplies
Manager shall provide all supplies satisfactory to HUMBLE to properly operate the service
station, including cleaning and rest room supplies and items for service work.
C. Telephone
Manager shall pay all telephone charges for any telephone(s) installed upon the premises,
and all charges for telephone directory advertising taken at his request. Each telephone installed
upon the premises shall be listed in the telephone directory in accordance with HUMBLE'S
instructions. Telephone numbers assigned to the station may not be transferred by the Manager to
any other premises, nor may any listing be cancelled by the Manager notwithstanding any termination
of this Agreement; provided, that the Manager's responsibility hereunder for telephone charges cease
upon his payment of all telephone charges and directory advertising charges for which he is
responsible under the terms of this Agreement.
D. First $50.00 of Payments for Loss of or Damage to Customers' Cars and Other Property
of Customers
With respect to claims for loss of or damage to customers' cars or other property while in
the cars, custody or control of the Manager or station personnel (either on or away from the station
premises), or allegedly due to faulty service work, or to faulty or contaminated products, the
following provisions shall apply: Upon Manager's receipt of notice that HUMBLE or its insurance
carrier under Section I-D hereof has paid any such claim, Manager shall promptly reimburse
HUMBLE, for its own account or that of its insurance carrier, as the case may be, up to but not
exceeding the first $50.00 of each such payment.
E. Automobile Liability Manager's Vehicles
Manager shall provide automobile liability insurance to cover all vehicles owned or hired by
him or by any member of his household, which are used in the operation of the service station. Such
insurance shall include HUMBLE as a Named Insured and shall be written for limits of not less than:
Bodily Injury $ 50,000 one person
$100,000 two or more persons
each accident
Property Damage $ 5,000 each accident
Manager shall furnish HUMBLE, at its address stated in the Agreement, with a certificate
as evidence that the insurance is in effect and that HUMBLE has been included as a Named Insured.
Manager shall not authorize or permit the use in the station's business of vehicles owned
by other station personnel or members of their respective households, unless and until such vehicles
are insured in accordance with the above stated requirements.
NOTE: The Manager is not required to provide automobile non-ownership liability coverage
on customers' cars or other vehicles not owned or hired by the Manager or any member
of his household, as such coverage is provided by HUMBLE pursuant to Section I-D
hereof.
F. Other Responsibilities
Manager shall determine his need for commercial insurance protection for damage to or loss
of any personal property, including tools, equipment or merchandise owned by Manager.
G. Other Business Activities of Manager
The Agreement to which this Schedule "C" is attached does not contemplate that the
Manager shall engage in any business at HUMBLE'S service station premises other than a retail
service station business. For purposes of clarification, and not by way of limitation, it is agreed that
the operation of an automobile or truck parking lot or garage is not to be considered a part of the
service station business. In the event that, with HUMBLE'S prior written consent, the Manager does
engage in such other business, a separate agreement shall be executed by the parties, under which the
Manager shall assume full responsibility for all claims for injury to or death of persons, and for
*398
damage to or loss of property, which may arise out of the operation of such other business, and the
Manager alone shall determine his need for commercial insurance protection with respect thereto.
H. Reports of Accidents, Claims and Unusual Occurrences
Manager shall report promptly to HUMBLE, in accordance with HUMBLE'S instructions,
every accident, or other occurrence, and each claim, demand or legal process arising out of the
operation of the service station that is covered by Workmen's Compensation and by Public Liability
insurance as provided in Section I-C and D hereof.
Manager shall also make (or cause to be made) a prompt report, in writing, to his insurance
carrier (or to the insurance carrier of other station personnel) pursuant to Section II-E hereof, with
respect to every accident, or other occurrence, and each claim, demand or legal process arising out of
the operation of vehicles owned or hired by him or other station personnel, or by any member(s) of
their respective households, which are used in the operation of the service station, such report to be
made whether or not the accident out of which the claim arose occurred in the course of the station's
business. Manager shall promptly furnish HUMBLE with a copy of said report, as HUMBLE is to
be included as a Named Insured thereunder.
(s) E. C. King (s) Guy E. Benitez
Witness Manager
NOTES
[1] See Addendum I for the full text of the "Service Station Manager Agreement" executed by Benitez with Humble (now Exxon), on March 9, 1970, for the operation of the station located at Highway 167 and Chalmette Drive in the city of Lafayette, which is identical to the contract for the other location operated by this plaintiff.
| {
"pile_set_name": "FreeLaw"
} |
327 F.2d 337
Joseph John MATULA, Appellant,v.UNITED STATES of America, Appellee.Jamie MATHIS, Appellant,v.UNITED STATES of America, Appellee.
Nos. 7508, 7509.
United States Court of Appeals Tenth Circuit.
Feb. 4, 1964.
Jerry Co. Connell, Lakewood, Colo., for appellants.
John H. Quinn, U.S. Atty. (John A. Babington, Asst. U.S. Atty., was with him on the brief), for appellee.
Before PICKETT, LEWIS and SETH, Circuit Judges.
LEWIS, Circuit Judge.
1
Appellants were each convicted of unlawfully transporting firearms across state lines in violation of 15 U.S.C.A. 902(e). Each appeals, contending that the evidence was insufficient as a matter of law to establish a prior conviction of a 'crime punishable by imprisonment for a term exceeding one year * * *.'1 The evidence is admittedly sufficient to show that both Matula and Mathis did transport firearms from Texas to New Mexico.
2
The evidence relating to prior conviction is similar in substance as to each appellant. Government witnesses testified to an extra-judicial statement made by Matula to the effect that he had been convicted of assault with intent to commit murder in Bexar County, Texas, in 1958, and had received a seven-year sentence; that Mathis had stated that he had been convicted of forging and uttering in Coleman County, Texas, in 1956, and had received a two-year sentence. Authenticated copies of Texas state court records were also placed in evidence showing convictions identical in name, place, nature of offense, times and terms of sentence.
3
An essential element of an offense may not be proved by an uncorroborated extra-judicial statement of the defendant, Kelly v. United States, 10 Cir., 246 F.2d 864; nor, in a Federal Firearms Act prosecution, does the government discharge its total burden of proving a prior conviction by the introduction of court records pertaining to a person of same or similar name, Gravatt v. United States, 10 Cir., 260 F.2d 498. However, each such channel of proof is a proper approach and becomes sufficient in law when supported by independent evidence tending to support its trustworthiness. The independent proof need not be sufficient, alone, to establish the element of the offense. Opper v. United States, 348 U.S. 84, 75 S.Ct. 158, 99 L.Ed. 101; Smith v. United States, 348 U.S. 147, 75 S.Ct. 194, 99 L.Ed. 192.
4
In the case at bar neither the appellants' extra-judicial statements nor the Texas state court records, when considered separately, are sufficient to prove the existence of a prior conviction. But each is strong corroboration of the other and when considered together meets that standard of proof required in federal prosecutions. Gonns v. United States, 10 Cir., 231 F.2d 907. And see Arriaga-Ramirez v. United States, 10 Cir., 325 F.2d 857 (1963).
5
Affirmed.
1
15 U.S.C.A. 902(e). 'It shall be unlawful for any person who is under indictment or who has been convicted of a crime punishable by imprisonment for a term exceeding one year or who is a fugitive from justice to ship, transport, or cause to be shipped or transported in interstate or foreign commerce any firearm or ammunition.'
| {
"pile_set_name": "FreeLaw"
} |
573 F.2d 1296
U. S.v.Alter
No. 77-1403
United States Court of Appeals, Second Circuit
11/15/77
1
S.D.N.Y.
2
AFFIRMED*
*
Oral opinion delivered in open court in the belief that no jurisprudential purpose would be served by a written opinion. An oral opinion or a summary order is not citable as precedent. Local Rule Sec. 0.23
| {
"pile_set_name": "FreeLaw"
} |
735 F.2d 1377
*Foyv.Veterans Admin.
83-5664
United States Court of Appeals,Eleventh Circuit.
6/7/84
1
S.D.Fla.
AFFIRMED
2
---------------
* Fed.R.App.P. 34(a); 11th Cir.R. 23.
| {
"pile_set_name": "FreeLaw"
} |
365 F.Supp.2d 76 (2005)
Paul MARAGLIA, Plaintiff,
v.
Michael MALONEY, etc., Luis Spencer, etc., Edward Ficco, etc., Janice Pina, etc., Sgt. Peckham, etc., C.O. Slyman, etc., C.O. Andrea, etc., C.O. Hennessy, etc., Lt. Hammond, etc., Defendants.
No. CIV.A. 01-12144-RBC.[1]
United States District Court, D. Massachusetts.
March 28, 2005.
*77 Stephen G. Dietrick, MA Department of Correction, Legal Division, Boston, MA, for CO Hennesy, CO Slyman, Co. Andrea, Lt. Hammond, Sgt. Peckham, Edward Ficco, Sgt. Janice Pina, Luis Spencer, Michael Maloney, Defendants.
MEMORANDUM AND SECOND ORDER ON MOTION TO DISMISS (# 33)
COLLINGS, United States Magistrate Judge.
I. Introduction
The plaintiff filed his initial complaint (# 6) on December 5, 2001, first amended it on October 10, 2003(# 20) and then again on December 3, 2003 (# 24) to alter the claims of the suit. As the amended complaint now stands, plaintiff Paul Maraglia ("Maraglia") alleges eight claims against nine individual defendants, namely Michael Maloney ("Maloney"), Luis Spencer ("Spencer"), Edward Ficco ("Ficco"), Janice Pina ("Pina"), Sgt. Peckham ("Peckham"), CO Slyman ("Slyman"), CO Andrea ("Andrea"), CO Hennessy ("Hennessy"), and Lt. Hammond ("Hammond").
All of the defendants have filed a motion to dismiss (# 33) the amended complaint for various reasons. The plaintiff has countered with letters (36, 37, 38) in opposition to the dispositive motion. On March 24, 2005, the Court allowed the motion as to defendants Maloney, Spencer, Ficco and Pina. At this juncture, the motion to dismiss is poised for resolution as to the defendants Peckham, Slyman, Andrea, Hennessey and Hammond.[2]
II. The Applicable Standards
Among other reasons, the defendants seek to dismiss the plaintiff's claims pursuant *78 to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim consequent to Maraglia's failure to exhaust his administrative remedies under the Prison Litigation Reform Act ("PLRA") and under Massachusetts General Laws Chapter 127 § 38F. As the Supreme Court declared in Conley v. Gibson, "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the non-moving party can prove no set of facts in support of his claims that would entitle him to relief." Conley, 355 U.S. 41, 45-6, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) (footnote omitted). Furthermore, "in reviewing the legal sufficiency of petitioner's cause of action, `[the Court] must assume the truth of the material facts as alleged in the complaint.'" Davis v. Monroe County Bd. of Educ., 526 U.S. 629, 631, 119 S.Ct. 1661, 143 L.Ed.2d 839 (1999) (citation omitted).
A leading treatise states that when ruling on a motion to dismiss in light of the PLRA guidelines, a "district judge on his or her own initiative may note the inadequacy of the complaint and dismiss it for failure to state a claim as long as the procedure employed is fair to the parties." 5B Wright & Miller, Federal Practice and Procedure: Civil 3d § 1357, 409; Chute v. Walker, 281 F.3d 314, 315 (1 Cir., 2002); First Capital Asset Management, Inc. v. Brickellbush, Inc., 219 F.Supp.2d 576, 580 (S.D.N.Y., 2002). Discussing the PLRA requirements, the Sixth Circuit has held that "the complaint of a plaintiff that fails to allege exhaustion of administrative remedies through particularized averments does not state a claim on which relief may be granted, and must be dismissed sua sponte." Baxter v. Rose, 305 F.3d 486, 489 (6 Cir., 2002).
"The court has considerable leeway under the liberal pleading standards of the federal rules in deciding when a complaint is formally insufficient." Wright & Miller, Federal Practice and Procedure: Civil 3d § 1357, 416. "In this process, the fact that the plaintiff filed the complaint pro se militates in favor of a liberal reading. See Boivin v. Black, 225 F.3d 36, 43 (1st Cir.2000) (explaining that "courts hold pro se pleadings to less demanding standards than those drafted by lawyers")." Rodi v. Southern New England School Of Law, 389 F.3d 5, 2004 WL 2537204, *4 (1st Cir.2004)
III. The Facts
The facts as recited have been culled from the amended complaint in a light most favorable to the plaintiff. Beginning with an introduction of the parties, Maraglia is an inmate in custody of the Massachusetts Department of Corrections who is presently incarcerated at Massachusetts Correctional Institute ("MCI") in Bridgewater, Massachusetts and was incarcerated at Souza-Baranowski Correctional Center ("SBCC") in Shirley, Massachusetts at the time of the alleged incidents. (# 24 ¶ 1) The five remaining individual defendants are all citizens of Massachusetts and are past and present employees of the Department of Corrections. (# 24 ¶¶ 2-10) Defendant Peckham is a security guard at MCI Bridgewater. (# 24 ¶¶ 5-6) Defendants Slyman, Andrea, Hennessy, and Hammond are all prison security guards at SBCC. (# 24 ¶¶ 7-10)
In 2000 and 2001, the plaintiff alleges frequent abuse, both physical and emotional, at the hands of various defendants named in the amended complaint. Specifically, Maraglia asserts that Peckham caused him both emotional and physical harm, including making threats on his life and kicking him in his lame right leg.[3] (# 24 ¶ 15) Maraglia specifically claims *79 that in May of 2000, Peckham threatened him as he was leaving the chow hall and ordered him not to say anything about the incident to prison staff. (# 24 ¶ 5) From April to September of 2000, the plaintiff claims to have brought these acts to the attention of Spencer, but Spencer refused to act or intercede on Maraglia's behalf. (# 24 ¶ 12) The plaintiff alleges that Slyman caused him continuous harm as well, closing the cell door on his lame right leg and threatening him with further harm. (# 24 ¶ 16)
According to the amended complaint, from March to August of 2001, Andrea also closed the cell door on Maraglia's leg. (# 24 ¶ 17) It is further contended that Andrea ridiculed the plaintiff in front of other inmates and staff, making "groan sounds" when he walked by. (# 24 ¶ 17) Maraglia also claims that Andrea threatened him with harm and death, particularly if he filed additional grievances implicating Andrea. (# 24 ¶ 17)
It is alleged that on June 25, 2001, Hennessy grabbed the plaintiff by the neck and punched him in the face, resulting in a split lip that called for stitches. (# 24 ¶ 18) According to Maraglia, Hennessy also twisted his arm, handcuffed him in an abusive manner, and moved him out of range of the video camera surveillance to assault him further. (# 24 ¶ 18) The plaintiff alleges that Hennessy told him that he should not have written any grievances on his "friends, guards in that unit J2," used excessive force to move him to a "lockup" cell, and ordered the nurse on duty to withhold his medication from him. (# 24 ¶ 18)
From March to August of 2001, the plaintiff claims that Hammond attempted to persuade other inmates to abuse him and made offensive comments about both Maraglia and his family. (# 24 ¶ 19) On August 8, 2001, Hammond purportedly threw the plaintiff against the wall, grabbing his lame right arm and twisting it deliberately to cause him pain. (# 24 ¶ 19) According to Maraglia, Hammond also deprived him of his visit with family members. (# 24 ¶ 19) During this same period, Maraglia claims to have brought the abuse to the attention of Ficco but that again no action was taken. (# 24 ¶ 19)
The plaintiff has not attached any grievances to his amended complaint.[4] As stated in the facts above, he alludes to interactions with the defendants about which grievances may have been filed, but specific details and documents are absent.
IV. The Claims
Maraglia's primary claim is brought under 42 U.S.C. § 1983 alleging excessive force by prison guards in violation of the Eighth Amendment. The plaintiff also claims violations of Article XXVI of the Declaration of Rights of the Massachusetts Constitution and of Massachusetts General Laws chapter 12 § 11I as well as state claims of assault and battery and intentional infliction of emotional distress. One hundred thousand dollars in damages is sought as a result of the allegedly clear violations of his civil and constitutional rights.
V. Discussion
In deciding the motion to dismiss a plaintiff inmate's complaint, a court must consider whether the administrative remedies available to the plaintiff have been exhausted under the PLRA before the plaintiff brought his or her claim in federal court. Civil Rights of Institutionalized *80 Persons Act, § 7, 42 U.S.C. § 1997e. The PLRA provides that
No action shall be brought with respect to prison conditions under section 1983 of this title, or any other Federal law, by a prisoner confined in any jail, prison, or other correctional facility until such administrative remedies as are available are exhausted.
Title 42 U.S.C. § 1997e(a).
The PLRA's exhaustion requirement "simply `governs the timing of the action' and does not contain the type of `sweeping and direct language that would indicate a jurisdictional bar rather than a mere codification [] of administrative exhaustion requirements'." Ali v. District of Columbia, 278 F.3d 1, 6 (D.C.Cir., 2002) citing Chelette v. Harris, 229 F.3d 684, 688 (8 Cir., 2000) (quoting Weinberger v. Salfi, 422 U.S. 749, 95 S.Ct. 2457, 45 L.Ed.2d 522 (1975)).
While exhaustion under the PLRA is not jurisdictional, it is mandatory for inmates to satisfy this requirement before bringing an action in a court of law. Porter v. Nussle, 534 U.S. 516, 520, 122 S.Ct. 983, 152 L.Ed.2d 12 (2002). The PLRA was amended to include such a mandate in order to deter frivolous lawsuits brought by prisoners and to conserve judicial resources. Porter, 534 U.S. at 527, 122 S.Ct. 983.
In Brown v. Toombs, the Sixth Circuit had occasion to comment on a plaintiff's burden to attach such evidence of grievances:
Prisoners filing § 1983 cases involving prison conditions must allege and show that they have exhausted all available state administrative remedies. A prisoner should attach to his § 1983 complaint the administrative decision, if it is available, showing the administrative disposition of his complaint.
Brown v. Toombs, 139 F.3d 1102, 1104 (6 Cir.), cert. denied, 525 U.S. 833, 119 S.Ct. 88, 142 L.Ed.2d 69 (1998).
The Massachusetts Department of Corrections provides a grievance system for prisoners under 103 C.M.R. 491.00 which details the procedure an inmate must follow to file a formal complaint and seek redress within the prison. Among other rules, the regulation regarding appeals states that "an inmate whose grievance has been denied may appeal to the Superintendent." 103 C.M.R. 491.12(1). The plaintiff does not allege that he has filed grievances or appeals in his original or amended complaints. In the absence of any such allegations, or allegations regarding foul play by prison administration to deter efforts to file grievances, the Court must conclude that the exhaustion requirement was not met.
In light of the plaintiff's pro se status and specific circumstances, the Court must determine whether the exhaustion requirement is reasonable in this case and whether Maraglia fails completely to satisfy the requirement. In Wyatt v. Leonard, 193 F.3d 876 (6 Cir., 1999), the Court adopted a liberal reading of the PLRA in ruling that an inmate who was raped by another prisoner and then filed a § 1983 claim against prison employees satisfied the exhaustion requirement through good faith attempts. Wyatt, 193 F.3d at 878. In Wyatt, the plaintiff submitted various correspondence to prison officials regarding the charges he intended to bring against them. Wyatt, 193 F.3d at 878. While the Court determined that the prisoner "did not follow precisely the requisite procedures for bringing his complaint to the attention of the appropriate person, he [had] substantially complied with the exhaustion requirement by giving written notice on several occasions to prison officials." Wyatt, 193 F.3d at 880.
*81 While Maraglia does not allege that he has filed grievances, he does claim to have complained to prison guards and supervisors and refers to discussions concerning past grievances filed. Under Wyatt the Court might have been persuaded that these good faith attempts also satisfy the exhaustion requirement if not for a pertinent distinguishing feature between Wyatt and this case, to wit, § 1997(e)a of the PLRA was not yet law when the facts of Wyatt occurred, but it had been in effect for several years at the time the events at hand occurred. Wyatt, 193 F.3d at 879. The Court in Wyatt limited its holding to the few cases in which acts occurred and complaints were filed before the PLRA was amended, but did not seem willing to extend its generous reading of the PLRA exhaustion requirement to complaints filed after 1997(e)a took effect. Wyatt, 193 F.3d at 879. Consequently Maraglia must be held to the higher standard of the PLRA, and so is found to have failed to exhaust his available remedies.
Even if the monetary damages that plaintiff seeks are not available through the prison grievance process, the Supreme Court has determined that the PLRA exhaustion requirement still applies in order to allow prison officials an opportunity to address inmates' concerns before legal action is taken. Booth v. Churner, 532 U.S. 731, 740, 121 S.Ct. 1819, 149 L.Ed.2d 958 (2001). Adhering to the regular PLRA procedures ensures that inmates are not simply able to claim money damages in order to bypass the exhaustion requirement. The Court commented on the current mandate of exhaustion:
Before § 1997e(a) was amended by the Act of 1995, a court had discretion (though no obligation) to require a state inmate to exhaust "such ... remedies as are available," but only if those remedies were "plain, speedy, and effective." 42 U.S.C. § 1997e(a). That scheme, however, is now a thing of the past, for the amendments eliminated both the discretion to dispense with administrative exhaustion and the condition that the remedy be "plain, speedy, and effective" before exhaustion could be required.
Booth, 532 U.S. at 739, 121 S.Ct. 1819.
Therefore, Maraglia must met the PLRA standards despite the fact that he is seeking money damages.
Finally, it was somewhat unclear whether inmates' claims of excessive force involved "prison conditions" under the PLRA because a definition of the phrase "prison conditions" was not included in § 1997e. The Supreme Court has clarified this point, ruling in Porter that "the PLRA's exhaustion requirement applies to all inmate suits about prison life, whether they involve general circumstances or particular episodes, and whether they allege excessive force or some other wrong." Porter, 534 U.S. at 532, 122 S.Ct. 983. Clearly, then, the PLRA is applicable to the case at bar even though the claims involve excessive force.
In light of the PLRA's strict requirements for exhaustion of administrative remedies, Maraglia must allege that he has satisfied those requirements. However, on a motion to dismiss, the Court cannot consider the extrinsic evidence of grievances filed which has been submitted by both the plaintiff and the defendants. Accordingly, the Court shall deny the motion to dismiss to the extent that dismissal is sought and convert the motion to a motion for summary judgment on the issue of whether the plaintiff has exhausted his administrative remedies as to the claims *82 (both federal and state[5]) against the five defendants who remain in the case. Massey v. Wheeler, 221 F.3d 1030, 1034 (7 Cir., 2000); Arnold v. Goetz, 245 F.Supp.2d 527, 540 (S.D.N.Y., 2003) citing Hayden v. County of Nassau, 180 F.3d 42, 54 (2 Cir., 1999); Torrence v. Pesanti, 239 F.Supp.2d 230, 233-4 (D.Conn.2003).
VI. Conclusion and Second Order
For the reasons stated, it is ORDERED that the Motion to Dismiss (# 33) as to claims against defendants Peckham, Slyman, Andrea, Hennessy and Hammond be, and the same hereby is, DENIED as drafted. It is FURTHER ORDERED that pursuant to Rule 12(b), Fed.R.Civ.P., said motion by defendants Peckham, Slyman, Andrea, Hennessy and Hammond be, and the same hereby is, CONVERTED to a motion for summary judgment on the question of whether the plaintiff has exhausted his administrative remedies with respect to the claims brought against these defendants. The Court shall consider the materials submitted by the defendants, i.e., the Affidavit of Ruth Anthony (# 34) and the Affidavit of Maria Sazonick (# 35). If the defendants wish to provide any other materials on the issue of exhaustion, they shall file and serve the materials on or before the close of business on Friday, April 8, 2005. The materials must comply with the provisions of Rule 56(e), Fed.R.Civ.P.
The plaintiff may submit any materials he wishes to support his contention that he has exhausted his administrative remedies as to each of the claims he brings against each of the five remaining defendants. However, the materials must be authenticated under oath and all factual averments must be made under oath in affidavit form. See Rule 56(e), Fed.R.Civ.P. If the plaintiff claims he did not exhaust any of his available remedies because of deliberate wrongful actions of the defendants to deter him from exhausting his remedies (i.e., filing grievances and appeals), he shall submit an affidavit providing the factual details of such deliberate wrongful actions. Plaintiff's authenticated materials and/or affidavit must be filed on or before the close of business on Friday, April 29, 2005.
NOTES
[1] This case has been referred and reassigned to the undersigned for all purposes including trial and the entry of judgment pursuant to 28 U.S.C. § 636(c).
[2] These five defendants have been served. See ## 8-12.
[3] Maraglia is disabled with a lame right arm, shoulder, and leg.
[4] The defendants have filed affidavits with grievances attached and Maraglia has filed various informal letters. The Court shall discuss how it proposes to deal with these filings, infra.
[5] However, bearing in mind the plaintiff's pro se status, a brief review may prove helpful. The state claims under the Massachusetts Declaration of Rights and the State Civil Rights Act as well as the claims of assault and battery and intentional infliction of emotional distress are subject to dismissal under state law. Massachusetts General Laws Chapter 127 § 38F provides that "an inmate shall not file any claim that may be the subject of a grievance under Section 38E unless the inmate has exhausted the administrative remedy established pursuant to said Section 38E..." Thus, all administrative remedies must be exhausted before the plaintiff may pursue these claims in the federal court.
| {
"pile_set_name": "FreeLaw"
} |
Matter of Herbin v Stolz (2017 NY Slip Op 08099)
Matter of Herbin v Stolz
2017 NY Slip Op 08099
Decided on November 16, 2017
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 November 16, 2017
Renwick, J.P., Manzanet-Daniels, Andrias, Kern, Oing, JJ.
4986 2754/16 -4953] 121/17
[*1]In re Reginald Herbin, Petitioner,
vHon. Robert Stolz, et al., Respondents.
Reginald Herbin, petitioner pro se.
Eric T. Schneiderman, Attorney General, New York (Angel Guardiola II of counsel), for Hon. Robert Stolz and Hon. Jill Konviser, respondents.
Cyrus R. Vance, Jr., District Attorney, New York (Ross D. Mazer of counsel), for Cyrus R. Vance, Jr. and Michael Mulanphy, respondents.
The above-named petitioner having presented an application to this Court praying for an order, pursuant to article 78 of the Civil Practice Law and Rules,
Now, upon reading and filing the papers in said proceeding, and due deliberation having been had thereon,
It is unanimously ordered that the application be and the same hereby is denied and the petition dismissed, without costs or disbursements.
ENTERED: NOVEMBER 16, 2017
CLERK
| {
"pile_set_name": "FreeLaw"
} |
In the United States Court of Federal Claims
OFFICE OF SPECIAL MASTERS
No. 14-321V
Filed: April 27, 2020
* * * * * * * * * * * * * *
ASHLEY RICE and CRAIG RICE *
parents of R.R., a minor, * UNPUBLISHED
*
Petitioner, *
*
v. * Attorneys’ Fees and Costs
*
SECRETARY OF HEALTH *
AND HUMAN SERVICES, *
*
Respondent. *
* * * * * * * * * * * * * *
Edward M. Kraus, Esq., Law Offices of Chicago Kent, Chicago, IL, for petitioner.
Traci R. Patton, Esq., U.S. Department of Justice, Washington, DC, for respondent.
DECISION ON ATTORNEYS’ FEES AND COSTS1
Roth, Special Master:
On April 21, 2014, Ashley and Craig Rice (“petitioners”) filed a petition pursuant to the
National Vaccine Injury Compensation Program on behalf of their minor child, R.R.2 Petitioners
alleged that R.R. suffered from acute hemorrhagic leukoencephalitis (“AHLE”), a severe form of
acute disseminated encephalomyelitis (“ADEM”) after receiving measles-mumps-rubella
(“MMR”), hepatitis A, and influenza vaccinations on March 26, 2012. See Petition, ECF No. 1.
On October 18, 2019, the parties filed a stipulation, which the undersigned adopted as her
Decision awarding compensation on October 21, 2019. ECF No. 94.
1
The undersigned intends to post this Decision on the United States Court of Federal Claims' website. This
means the decision will be available to anyone with access to the Internet. In accordance with Vaccine
Rule 18(b), petitioner has 14 days to identify and move to redact medical or other information, the
disclosure of which would constitute an unwarranted invasion of privacy. If, upon review, the undersigned
agrees that the identified material fits within this definition, the undersigned will redact such material from
public access. Because this unpublished ruling contains a reasoned explanation for the action in this case,
the undersigned is required to post it on the United States Court of Federal Claims' website in accordance
with the E-Government Act of 2002. 44 U.S.C. § 3501 note (2012) (Federal Management and Promotion
of Electronic Government Services).
2
National Childhood Vaccine Injury Act of 1986, Pub L. No. 99-660, 100 Stat. 3755.
On January 10, 2020, petitioner filed an application for attorneys’ fees and costs. ECF
No. 99 (“Fees App.”). Petitioners request total attorneys’ fees and costs in the amount of
$246,072.63 (representing $152,800.00 in attorneys’ fees, $77,750.63 in attorneys’ costs, and
$15,522.00 in costs borne by petitioners). Fees App. at 1. Respondent responded to the motion
on January 27, 2020, stating “Respondent is satisfied the statutory requirements for an award of
attorneys’ fees and costs are met in this case” and requesting that the undersigned “exercise her
discretion and determine a reasonable award for attorneys’ fees and costs.” Response at 2-3, ECF
No. 100. Petitioners did not file a reply thereafter.
This matter is now ripe for consideration.
I. Legal Framework
The Vaccine Act permits an award of “reasonable attorneys' fees” and “other costs.” §
15(e)(1). If a petitioner succeeds on the merits of his or her claim, the award of attorneys' fees is
automatic. Id.; see Sebelius v. Cloer, 133 S. Ct. 1886, 1891 (2013). However, a petitioner need not
prevail on entitlement to receive a fee award as long as the petition was brought in “good faith”
and there was a “reasonable basis” for the claim to proceed. § 15(e)(1). Here, because petitioners
were awarded compensation, they are entitled to a reasonable award of attorneys’ fees and costs.
The Federal Circuit has endorsed the use of the lodestar approach to determine what
constitutes “reasonable attorneys' fees” and “other costs” under the Vaccine Act. Avera v. Sec'y of
Health & Human Servs., 515 F.3d 1343, 1349 (Fed. Cir. 2008). Under this approach, “an initial
estimate of a reasonable attorneys' fees” is calculated by “multiplying the number of hours
reasonably expended on the litigation times a reasonable hourly rate.” Id. at 1347–48 (quoting
Blum v. Stenson, 465 U.S. 886, 888 (1984)). That product is then adjusted upward or downward
based on other specific findings. Id.
Special masters have substantial discretion in awarding fees and may adjust a fee request
sua sponte, apart from objections raised by respondent and without providing petitioners with
notice and opportunity to respond. See Sabella v. Sec'y of Health & Human Servs., 86 Fed. Cl.
201, 209 (2009). Special masters need not engage in a line-by-line analysis of petitioner's fee
application when reducing fees. See Broekelschen v. Sec'y of Health & Human Servs., 102 Fed.
Cl. 719, 729 (2011).
II. Discussion
A. Reasonable Hourly Rate
A “reasonable hourly rate” is defined as the rate “prevailing in the community for similar
services by lawyers of reasonably comparable skill, experience and reputation.” Avera, 515 F.3d
at 1348 (quoting Blum, 465 U.S. at 896 n.11). In general, this rate is based on “the forum rate for
the District of Columbia” rather than “the rate in the geographic area of the practice of petitioner's
attorney.” Rodriguez v. Sec'y of Health & Human Servs., 632 F.3d 1381, 1384 (Fed. Cir. 2011)
(citing Avera, 515 F. 3d at 1349). There is a “limited exception” that provides for attorney's fees
to be awarded at local hourly rates when “the bulk of the attorney's work is done outside the forum
2
jurisdiction” and “there is a very significant difference” between the local hourly rate and forum
hourly rate. Id. This is known as the Davis County exception. See Hall v. Sec'y of Health & Human
Servs., 640 F.3d 1351, 1353 (2011) (citing Davis Cty. Solid Waste Mgmt. & Energy Recovery
Special Serv. Dist. v. U.S. EPA, 169 F.3d 755, 758 (D.C. Cir. 1999)).
For cases in which forum rates apply, McCulloch provides the framework for determining
the appropriate hourly rate range for attorneys' fees based upon the attorneys' experience. See
McCulloch v. Sec'y of Health & Human Servs., No. 09–293V, 2015 WL 5634323 (Fed. Cl. Spec.
Mstr. Sept. 1, 2015). The Office of Special Masters has accepted the decision in McCulloch and
has issued a Fee Schedule for subsequent years.3
Petitioners request the following hourly rates for the work of their attorneys: for Mr.
Edward Kraus, $361.00 per hour for work performed in 2014, $375.00 per hour for work
performed in 2015, $389.00 per hour for work performed in 2016, $398.00 per hour for work
performed in 2017, $409.00 per hour for work performed in 2018, and $418.00 per hour for work
performed in 2019; for Ms. Amy Kraus, $318.00 per hour for work performed in 2017, $327.00
per hour for work performed in 2018, and $334.00 per hour for work performed in 2019; and for
Ms. Tara O’Mahoney, $210.00 per hour for work performed in 2013, $225.00 per hour for work
performed in 2014, $265.00 per hour for work performed in 2015, $275.00 per hour for work
performed in 2016, and $281.00 per hour for work performed in 2017. Fees App. at 2. These rates
are consistent with what these attorneys previously have been awarded for their Vaccine Program
work and the undersigned finds them to be reasonable herein.
B. Hours Reasonably Expended
Attorneys' fees are awarded for the “number of hours reasonably expended on the
litigation.” Avera, 515 F.3d at 1348. Counsel should not include in their fee requests hours that are
“excessive, redundant, or otherwise unnecessary.” Saxton ex rel. Saxton v. Sec'y of Health &
Human Servs., 3 F.3d 1517, 1521 (Fed. Cir. 1993) (quoting Hensley v. Eckerhart, 461 U.S. 424,
434 (1983)). “Unreasonably duplicative or excessive billing” includes “an attorney billing for a
single task on multiple occasions, multiple attorneys billing for a single task, attorneys billing
excessively for intra office communications, attorneys billing excessive hours, [and] attorneys
entering erroneous billing entries.” Raymo v. Sec'y of Health & Human Servs., 129 Fed. Cl. 691,
703 (2016). While attorneys may be compensated for non-attorney-level work, the rate must be
3
The 2015-2016 Fee Schedule can be accessed at:
http://www.cofc.uscourts.gov/sites/default/files/Attorneys-Forum-Rate-Fee-Schedule2015-2016.pdf. The
2017 Fee Schedule can be accessed at: http://www.cofc.uscourts.gov/sites/default/files/Attorneys-Forum-
Rate-Fee-Schedule-2017.pdf. The 2018 Fee Schedule can be accessed at:
http://www.cofc.uscourts.gov/sites/default/files/Attorneys%27%20Forum%20Rate%20Fee%20Schedule
%202018.pdf.
The 2019 Fee Schedule can be accessed at:
http://www.cofc.uscourts.gov/sites/default/files/Attorneys%27%20Forum%20Rate%20Fee%20Schedule
%202019.pdf. The hourly rates contained within the schedules are updated from the decision in
McCulloch v. Sec’y of Health & Human Servs., No. 09-293V, 2015 WL 5634323 (Fed. Cl. Spec. Mstr.
Sept. 1, 2015).
3
comparable to what would be paid for a paralegal or secretary. See O'Neill v. Sec'y of Health &
Human Servs., No. 08–243V, 2015 WL 2399211, at *9 (Fed. Cl. Spec. Mstr. Apr. 28, 2015).
Clerical and secretarial tasks should not be billed at all, regardless of who performs them. See, e.g.,
McCulloch, 2015 WL 5634323, at *26. Hours spent traveling are ordinarily compensated at one-
half of the normal hourly attorney rate. See Scott v. Sec'y of Health & Human Servs., No. 08–756V,
2014 WL 2885684, at *3 (Fed. Cl. Spec. Mstr. June 5, 2014) (collecting cases). And “it is
inappropriate for counsel to bill time for educating themselves about basic aspects of the Vaccine
Program.” Matthews v. Sec'y of Health & Human Servs., No 14–1111V, 2016 WL 2853910, at *2
(Fed. Cl. Spec. Mstr. Apr. 18, 2016). Ultimately, it is “well within the Special Master's discretion
to reduce the hours to a number that, in [her] experience and judgment, [is] reasonable for the work
done.” Saxton, 3 F.3d at 1522. In exercising that discretion, special masters may reduce the number
of hours submitted by a percentage of the amount charged. See Broekelschen, 102 Fed. Cl. at 728–
29 (affirming the Special Master's reduction of attorney and paralegal hours); Guy v. Sec'y of
Health & Human Servs., 38 Fed. Cl. 403, 406 (1997) (same).
The overall hours spent on this matter appear to be reasonable. The undersigned has
reviewed the billing entries and finds that the billing entries adequately describe the work done on
the case and the amount of time spent on that work. None of the entries appear objectionable, nor
has respondent identified any entries as objectionable. Accordingly, petitioner is entitled to a final
award of attorneys’ fees in the amount of $152,800.00.
C. Reasonable Costs
Like attorneys’ fees, a request for reimbursement of attorneys’ costs must be reasonable.
Perreira v. Sec’y of Health & Human Servs., 27 Fed. Cl. 29, 34 (Fed. Cl. 1992). Petitioners request
a total of $77,750.63 in costs, comprised of obtaining medical records, postage, the Court’s filing
fee, work performed by petitioners’ two experts, Dr. Dwight Lindholm and Dr. M. Eric Gershwin,
mediation costs, and costs for retaining a life care planner. Fees App. at 35-37. These are typical
costs in Vaccine Program cases and appear reasonable in the undersigned’s experience.
Concerning the work performed by the experts, the undersigned finds the billed time and hourly
rates to be reasonable for the work performed in the instant case. Petitioners have also provided
adequate documentation supporting all their requested costs.
The only reduction necessary is for travel time billed by petitioners’ life care planner. The records
indicate that the life care planner billed a full hourly rate for time spent traveling. See, e.g., Fees
App. at 141. Travel time for attorneys and experts and other professionals is typically reimbursed
at one-half of the individual’s typical hourly rate absent some evidence that work was being
performed during this travel time. Thus, the undersigned will reduce the final costs awarded by
$1,268.75. Petitioners are therefore awarded final attorneys’ costs of $76,481.88.
D. Petitioners’ Costs
Pursuant to General Order No. 9, petitioners warrant that they have personally incurred
costs of $15,522.00 related to the case. These costs are for the work of petitioners’ probate counsel
and for accounting and probate fees. Fees App. at 160-162. As this work was necessary and appears
reasonable, the undersigned shall award the requested petitioners’ costs in full.
4
III. Conclusion
In accordance with the foregoing, petitioners’ motion for attorneys’ fees and costs is
GRANTED. The undersigned hereby awards the following:
1) a lump sum in the amount of $229,281.88, representing reimbursement for
petitioners’ attorneys’ fees and costs, in the form of a check payable to petitioners and
their counsel, Mr. Ed Kraus; and
2) a lump sum in the amount of $15,522.00, representing reimbursement for petitioners’
costs, in the form of a check payable to petitioners.
In the absence of a motion for review filed pursuant to RCFC Appendix B, the clerk of the
court shall enter judgment in accordance herewith.4
IT IS SO ORDERED.
s/Mindy Michaels Roth
Mindy Michaels Roth
Special Master
4
Entry of judgment can be expedited by each party’s filing of a notice renouncing the right to seek review.
Vaccine Rule 11(a).
5
| {
"pile_set_name": "FreeLaw"
} |
938 F.2d 183
Mitchell (Albert Junior)v.Armontrout (Bill)
NO. 89-2809
United States Court of Appeals,Eighth Circuit.
FEB 27, 1991
1
Appeal From: E.D.Mo.
2
AFFIRMED.
| {
"pile_set_name": "FreeLaw"
} |
5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
3XUVXDQW WR 6L[WK &LUFXLW 5XOH
(/(&7521,& &,7$7,21 )(' $SS 3 WK &LU
)LOH 1DPH DS
81,7('67$7(6&28572)$33($/6
)257+(6,;7+&,5&8,7
BBBBBBBBBBBBBBBBB
,QUH $87267</( 3/$67,&6 ;
,1&
'HEWRU
1R
!
%$<(5 &25325$7,21
3ODLQWLII$SSHOODQW
Y
0$6&27(&+ ,1& &,7,&253
9(1785( &$3,7$/ /7' DQG
7+( 75($685(5 2) 7+(
67$7( 2) 0,&+,*$1DV
FXVWRGLDQRIVHYHUDOVWDWH
UHWLUHPHQWV\VWHPV
'HIHQGDQWV$SSHOOHHV
1
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH:HVWHUQ'LVWULFWRI0LFKLJDQDW*UDQG5DSLGV
1R n*RUGRQs4XLVW'LVWULFWsXGJH
$UJXHG 0DUFK
'HFLGHGDQG)LOHG 2FWREHU
,QUH$XWRVW\OH3ODVWLFV,QF 1R
%HIRUH .583$16.<DQG%2**6&LUFXLWsXGJHV DQG
7$512:'LVWULFWsXGJH
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(' :LOOLDP(.HOOHKHUsU&2+(1 *5,*6%<
3LWWVEXUJK3HQQV\OYDQLDIRU$SSHOODQWsRHO'$SSOHEDXP
3(33(5+$0,/721 6&+((7='HWURLW0LFKLJDQIRU
$SSHOOHHV21%5,() :LOOLDP(.HOOHKHUsU&2+(1
*5,*6%<3LWWVEXUJK3HQQV\OYDQLD7KRPDV'0D[VRQ
(&.(57 6($0$16 &+(5,1 0(//27 3LWWVEXUJK
3HQQV\OYDQLDIRU$SSHOODQWsRHO'$SSOHEDXP3(33(5
+$0,/721 6&+((7='HWURLW0LFKLJDQIRU$SSHOOHHV
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
%2**6 &LUFXLW sXGJH 7KLV FRPSOH[ FDVH FRQFHUQV D
UHDVRQDEO\VLPSOHLVVXH WKHUHODWLYHSULRULW\RIFODLPVWRWKH
SURFHHGVRIDEDQNUXSWF\HVWDWH3ODLQWLII%D\HU&RUSRUDWLRQ
m%D\HUl DSSHDOVWKHEDQNUXSWF\FRXUWjVMXGJPHQWDIILUPHG
E\ WKH GLVWULFW FRXUW JUDQWLQJ VXPPDU\ MXGJPHQW WR
GHIHQGDQWV 0DVFR7HFK ,QF m0DVFR7HFKl &LWLFRUS
9HQWXUH&DSLWDO/WG &9&RU&LWLFRUS DQGWKH7UHDVXUHURI
WKH6WDWHRI0LFKLJDQDVFXVWRGLDQRIVHYHUDOVWDWHUHWLUHPHQW
V\VWHPV 6056 FROOHFWLYHO\ mWKH GHIHQGDQWVl LQ WKLV
DGYHUVDU\ DFWLRQ UHODWLQJ WR WKH EDQNUXSWF\ RI $XWR6W\OH
3ODVWLFV,QF m$XWR6W\OHl %RWKWKHGLVWULFWFRXUWDQGWKH
EDQNUXSWF\FRXUWFRQFOXGHGWKDWWKHGHIHQGDQWVjFODLPVKDYH
SULRULW\RYHU%D\HUjVFODLP)RUWKHIROORZLQJUHDVRQVZH
DIILUP
7KH +RQRUDEOH $UWKXU s 7DUQRZ 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU
WKH (DVWHUQ 'LVWULFW RI 0LFKLJDQ VLWWLQJ E\ GHVLJQDWLRQ
1R ,QUH$XWRVW\OH3ODVWLFV,QF
,3URFHGXUDO+LVWRU\
%HIRUH UHYLHZLQJ WKH IDFWV ZH ZLOO EULHIO\ UHYLHZ WKH
SURFHGXUDOKLVWRU\RIWKLVFDVHZKLFKH[SODLQVKRZWKLVLQWHU
FUHGLWRUGLVSXWHEHWZHHQ%D\HUDQGWKHGHIHQGDQWVGHYHORSHG
ZLWKLQWKHFRQWH[WRI$XWR6W\OHjVEDQNUXSWF\SURFHHGLQJ2Q
sXQH $XWR6W\OHILOHGD&KDSWHUSHWLWLRQZLWKWKH
EDQNUXSWF\ FRXUW 2Q sXQH WKH EDQNUXSWF\ FRXUW
HQWHUHGDQRUGHUDXWKRUL]LQJWKHOHDVHDQGVDOHRIDOOSHUVRQDO
SURSHUW\RI$XWR6W\OHLQFOXGLQJPDFKLQHU\DQGHTXLSPHQW
WKDW VHUYHG DV FROODWHUDO IRU %D\HUjV VHFXULW\ LQWHUHVW WR
9HQWXUH ,QGXVWULHV &RUSRUDWLRQ m9HQWXUHl 2Q sXO\
$XWR6W\OHjV &KDSWHU FDVH ZDV FRQYHUWHG WR
&KDSWHU
2Q 6HSWHPEHU WKH EDQNUXSWF\ FRXUW HQWHUHG D
&RQVHQW 2UGHU 3URYLGLQJ $GHTXDWH 3URWHFWLRQ DQG 2WKHU
5HOLHIWKDWGLUHFWHG9HQWXUHWRSD\LWVPRQWKO\OHDVHSD\PHQW
RIGLUHFWO\WR&,7*URXS&UHGLW)LQDQFH,QF &,7
UDWKHU WKDQ WR %D\HU &,7 KDG D SHUIHFWHG ILUVWSULRULW\
VHFXULW\LQWHUHVWLQDOORI$XWR6W\OHjVDVVHWV7KHORDQVWKDW
&,7PDGHWR$XWR6W\OHWKURXJKLWVFUHGLWIDFLOLW\KDGEHHQ
UHSDLG E\ WKLV WLPH KRZHYHU FHUWDLQ ORDQV PDGH E\ WKH
GHIHQGDQWVSXUVXDQWWRSDUWLFLSDWLRQDJUHHPHQWVLQWKHFUHGLW
IDFLOLW\ KDG QRW EHHQ UHSDLG ,W LV EHFDXVH RI WKHVH
SDUWLFLSDWLRQ LQWHUHVWV WKDW WKH EDQNUXSWF\ FRXUW RUGHUHG
SD\PHQW E\ 9HQWXUH WR &,7 UDWKHU WKDQ WR %D\HU %D\HU
DFNQRZOHGJHV&,7jVILUVWSULRULW\VWDWXVEXWFRQWHQGVWKDWWKH
GHIHQGDQWVj SDUWLFLSDWLRQ DJUHHPHQWV DUH VXERUGLQDWH WR
%D\HUjVOLHQSRVLWLRQ
2Q)HEUXDU\ %D\HUILOHGD0RWLRQIRU$GHTXDWH
3URWHFWLRQ 'LUHFWLQJ 7UXVWHH WR 0DNH 5HQWDO 3D\PHQWV WR
%D\HU&RUSRUDWLRQ m0RWLRQIRU$GHTXDWH3URWHFWLRQl LQWKH
8QLWHG6WDWHV%DQNUXSWF\&RXUWIRUWKH:HVWHUQ'LVWULFWRI
0LFKLJDQ %D\HU DVVHUWHG WKDW LW KDV D VHFXULW\ LQWHUHVW LQ
FHUWDLQPDFKLQHU\DQGHTXLSPHQWRI$XWR6W\OHWKDWLVVHFRQG
LQ SULRULW\ WR &,7jV VHFXULW\ LQWHUHVW DQG DKHDG RI WKH
GHIHQGDQWVjSDUWLFLSDWLRQLQWHUHVWV%D\HUDUJXHGWKDW&,7jV
VHFXUHG LQWHUHVW ZDV SDLG LQ IXOO DQG WKDW UHQWDO SD\PHQWV
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
VKRXOGEHGLUHFWHGWR%D\HUDVWKHKROGHURIWKHQH[WVHFXUHG QR HYLGHQFH KRZHYHU LQGLFDWLQJ WKDW WKH IXQGV IURP WKH
LQWHUHVWIROORZLQJ&,77KHEDQNUXSWF\FRXUWDJUHHGWRWUHDW SDUWLFLSDWLRQDJUHHPHQWVZHUHDFWXDOO\XVHGIRUWKLVSXUSRVH
%D\HUjVPRWLRQDVDQDGYHUVDU\SURFHHGLQJ RUIRUDQ\RWKHUFDSLWDODVVHWVUDWKHUWKDQDVZRUNLQJFDSLWDO
7KHUHIRUHWKLVIDFWRUZHLJKVWRZDUGGHEW
$IWHUVHYHUDOWHOHSKRQLFVWDWXVFRQIHUHQFHVDQGVFKHGXOLQJ
RUGHUVDQGH[WHQVLYHGLVFRYHU\WKHSDUWLHVILOHGFURVVPRWLRQV 7KH3UHVHQFHRU$EVHQFHRID6LQNLQJ)XQGWR3URYLGH
IRU VXPPDU\ MXGJPHQW 2Q 'HFHPEHU WKH 5HSD\PHQWV
EDQNUXSWF\FRXUWLVVXHGLWVILUVWRSLQLRQJUDQWLQJLQSDUWWKH
GHIHQGDQWVj PRWLRQ IRU VXPPDU\ MXGJPHQW DQG GHQ\LQJ 7KH IDLOXUH WR HVWDEOLVK D VLQNLQJ IXQG IRU UHSD\PHQW LV
%D\HUjVPRWLRQIRUVXPPDU\MXGJPHQW7KHFRXUWJUDQWHGWKH HYLGHQFHWKDWWKHDGYDQFHVZHUHFDSLWDOFRQWULEXWLRQVUDWKHU
GHIHQGDQWVVXPPDU\MXGJPHQWDVWR%D\HUjVFRQWHQWLRQWKDW WKDQORDQV,ELG7KHEDQNUXSWF\FRXUWQRWHGWKHDEVHQFHRI
WKHGHIHQGDQWVjFODLPVEHHTXLWDEO\VXERUGLQDWHGWR%D\HUjV DVLQNLQJIXQGDQGFRQFOXGHGWKDWWKLVIDFWRUZHLJKHGWRZDUG
FODLP 7KH FRXUW UXOHG WKDW LW GLG QRW KDYH MXULVGLFWLRQ WR HTXLW\:HDJUHHZLWKWKHGLVWULFWFRXUWKRZHYHUWKDWmWKH
DGGUHVV%D\HUjVDUJXPHQWWKDWWKHGHIHQGDQWVjSDUWLFLSDWLRQ ORDQVZHUHVHFXUHGZLWKOLHQVZKLFKREYLDWHGDQ\QHHGIRUD
DJUHHPHQWVEHUHFKDUDFWHUL]HGIURPGHEWWRHTXLW\)LQDOO\ VLQNLQJIXQGl7KHUHIRUHZHFRQFOXGHWKDWWKLVIDFWRURQO\
WKH FRXUW GLG QRW UHDFK D GHFLVLRQ DV WR ZKHWKHU WKH VOLJKWO\ZHLJKVWRZDUGHTXLW\LIDWDOO
GHIHQGDQWVj SDUWLFLSDWLRQ DJUHHPHQWV ZLWK &,7 ZHUH YDOLG
,QVWHDGWKHFRXUWUHTXLUHGWKHGHIHQGDQWVWRVKRZHYLGHQFH
WKDW WKH\ SURYLGHG SD\PHQW WR &,7 IRU WKHLU SDUWLFLSDWLRQ
LQWHUHVWV 7KH GHIHQGDQWV FRPSOLHG ZLWK WKH EDQNUXSWF\ %D\HULVXQDEOHWRGHPRQVWUDWHDVLQJOHIDFWRUWKDWZHLJKV
FRXUWjVUHTXLUHPHQW VWURQJO\ WRZDUG UHFKDUDFWHUL]LQJ WKH SDUWLFLSDWLRQ ORDQV DV
HTXLW\7KHFORVHVWLWFDQFRPHDUHVHYHUDOIDFWRUVWKDWOHDQ
2Q sXO\ WKH EDQNUXSWF\ FRXUW LVVXHG D RQO\VOLJKWO\WRZDUGHTXLW\QDPHO\WKHVRXUFHRIUHSD\PHQWV
VXSSOHPHQWDO RSLQLRQ ILQGLQJ WKDW WKH SDUWLFLSDWLRQ DQGWKHDEVHQFHRIDVLQNLQJIXQGDQGRQHIDFWRUDERXWZKLFK
DJUHHPHQWVZHUHYDOLGDQGUHDIILUPLQJLWV'HFHPEHU WKHUH LV GLVSXWHG HYLGHQFH WKH DGHTXDF\ RI FDSLWDOL]DWLRQ
RSLQLRQ%D\HUDSSHDOHG2Q0D\ WKHGLVWULFWFRXUW *LYHQWKDWWKHRWKHUHLJKWIDFWRUVDOOZHLJKWRZDUGGHEWWRD
DIILUPHGWKHEDQNUXSWF\FRXUWjVRSLQLRQZLWKUHVSHFWWRDOO JUHDWHURUOHVVHUH[WHQW%D\HUSUHVHQWVLQVXIILFLHQWHYLGHQFH
LVVXHVH[FHSW%D\HUjVFODLPWKDWWKHGHIHQGDQWVjDOOHJHGGHEW WRZLWKVWDQGVXPPDU\MXGJPHQWDVWRWKLVLVVXH
VKRXOGEHUHFKDUDFWHUL]HGDVHTXLW\7KHGLVWULFWFRXUWUXOHG
WKDWWKHEDQNUXSWF\FRXUWKDGMXULVGLFWLRQWRDGGUHVVWKLVLVVXH 9&RQFOXVLRQ
DQGUHPDQGHGLWWRWKHEDQNUXSWF\FRXUW
)RUWKHIRUHJRLQJUHDVRQVWKHMXGJPHQWRIWKHGLVWULFWFRXUW
2Q UHPDQG DFWLQJ DW WKH GHIHQGDQWVj VXJJHVWLRQ WKH LV$)),50('
EDQNUXSWF\ FRXUW DJUHHG WR UHYLHZ WKH UHFRUG DQG WKH
SUHYLRXVO\ ILOHG EULHIV WR GHWHUPLQH ZKHWKHU WKH
UHFKDUDFWHUL]DWLRQ LVVXH FRXOG EH GHFLGHG ZLWKRXW IXUWKHU
KHDULQJ2Q$XJXVW ZLWKRXWIXUWKHUKHDULQJWKH
EDQNUXSWF\ FRXUW LVVXHG DQ RSLQLRQ UHMHFWLQJ %D\HUjV
UHFKDUDFWHUL]DWLRQFODLP2Q'HFHPEHU WKHGLVWULFW
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
7KH([WHQWWR:KLFK$GYDQFHV:HUH6XERUGLQDWHGWR FRXUW DIILUPHG WKH EDQNUXSWF\ FRXUWjV GHFLVLRQ %D\HU
&ODLPVRI2XWVLGH&UHGLWRUV VXEVHTXHQWO\ILOHGDWLPHO\DSSHDO
6XERUGLQDWLRQRIDGYDQFHVWRFODLPVRIDOORWKHUFUHGLWRUV ,,)DFWV
LQGLFDWHVWKDWWKHDGYDQFHVZHUHFDSLWDOFRQWULEXWLRQVDQGQRW
ORDQV ,G DW :H EHOLHYH WKDW WKLV IDFWRU ZHLJKV $XWR6W\OHZDVRULJLQDOO\LQFRUSRUDWHGDV& )6WDPSLQJ
VOLJKWO\WRZDUGWKHDGYDQFHVEHLQJDORDQ7KHGHIHQGDQWVj ,QFLQWKHPLG V6WDUWLQJLQWKHPLG V$XWR6W\OH
FODLPVZHUHVXERUGLQDWHGZLWKLQWKHFUHGLWIDFLOLW\WR&,7DQG EHJDQPDQXIDFWXULQJSODVWLFSDUWVIRUWKHDXWRPRWLYHLQGXVWU\
WRWKHRWKHUSDUWLFLSDQWVLQWKHORDQZKLFKLQFOXGHGVHYHUDO $XWR6W\OHHYHQWXDOO\PRYHGLQWRDSURFHVVNQRZQDVUHDFWLRQ
RWKHUOHQGHUVH[FOXVLYHRIWKHGHIHQGDQWV,QRWKHUZRUGVDV LQMHFWLRQPROGLQJZKHUHWZRRUPRUHFKHPLFDOVDUHPL[HG
$XWR6W\OH UHSDLG &,7 IRU PRQH\ LW OHQW WKURXJK WKH FUHGLW DQGUHDFWHGWRIRUPIOH[LEOHSODVWLF%D\HUZDV$XWR6W\OHjV
IDFLOLW\&,7DQGWKHRWKHUORDQ SDUWLFLSDQWVZRXOGEHSDLG H[FOXVLYHVXSSOLHURIWKHVHFKHPLFDOV%D\HUDOVRSURYLGHG
ILUVWDQGDIWHUWKH\ZHUHIXOO\UHSDLGWKHGHIHQGDQWVZRXOGEH FUHGLWDQGRWKHUILQDQFLDODFFRPPRGDWLRQVWR$XWR6W\OH
UHSDLGIRUWKHLUSDUWLFLSDWLRQV7KHGHIHQGDQWVjDJUHHPHQWWR
VXERUGLQDWHWKHLUFODLPVZLWKLQWKHFUHGLWIDFLOLW\ZDVRQO\DV 2Q 0DUFK $XWR6W\OH HQWHUHG LQWR D ORQJWHUP
DFRQGLWLRQRIWKHLUSDUWLFLSDWLRQDJUHHPHQWVZLWK&,77KH FUHGLWIDFLOLW\ DOVRUHIHUUHGWRDVDUHYROYLQJORDQDJUHHPHQW
DGYDQFHV ZHUH QRW VXERUGLQDWHG WR WKH FODLPV RI DOO RI ZLWK&,77KHFUHGLWIDFLOLW\ZDVVHFXUHGE\DSURSHUO\DQG
$XWR6W\OHjVFUHGLWRUVQRUZHUHWKH\VXERUGLQDWHGSXUVXDQWWR FRQWLQXRXVO\ SHUIHFWHG EODQNHW OLHQ RQ VXEVWDQWLDOO\ DOO RI
DQ\DJUHHPHQWEHWZHHQWKHGHIHQGDQWVDQG$XWR6W\OH7KLV $XWR6W\OHjVDVVHWV7KHFUHGLWIDFLOLW\ZDVH[SDQGDEOHLQWKDW
LVVWURQJO\LQGLFDWLYHRIGHEW+RZHYHUZHDOVREHOLHYHWKDW LW FRQWHPSODWHG WKH SRVVLELOLW\ RI IXWXUH DGYDQFHV
WKH IDFW WKDW WKH GHIHQGDQWV DJUHHG WR VXERUGLQDWH WKHLU 6SHFLILFDOO\LWVWDWHGWKDW&,7DJUHHGm>W@KDWLWZLOOIURPWLPH
SDUWLFLSDWLRQVWR&,7DQGWKHRWKHUORDQSDUWLFLSDQWVoDPDMRU WRWLPHPDNHDGYDQFHVWR>$XWR6W\OH@l
FRQFHVVLRQ RQ WKH SDUW RI WKH GHIHQGDQWV o LV DOVR D VOLJKW
LQGLFDWLRQRIHTXLW\7KHUHIRUHZHFDQQRWJLYHIXOOZHLJKWWR 2Q0DUFK $XWR6W\OH,QFZDVIRUPHG7KHVDPH
WKLVIDFWRUDVEHLQJLQGLFDWLYHRIDORDQ GD\$XWR6W\OH,QFDFTXLUHGWKHPDMRULW\RIWKHRXWVWDQGLQJ
VWRFN RI $XWR6W\OH &9& DQG 6056 ZHUH VKDUHKROGHUV RI
7KH([WHQWWR:KLFK$GYDQFHV:HUH8VHGWR$FTXLUH $XWR6W\OH ,QF &9& RZQHG DSSUR[LPDWHO\ RI
&DSLWDO$VVHWV $XWR6W\OH,QFVWRFNDQG6056RZQHGDSSUR[LPDWHO\
RI$XWR6W\OH,QFVWRFN7KHUHPDLQLQJ RIVWRFNZDV
8VHRIDGYDQFHVWRPHHWWKHGDLO\RSHUDWLQJQHHGVRIWKH GLYLGHGEHWZHHQWKHSULRURZQHUVRI$XWR6W\OH FHUWDLQVHQLRU
FRUSRUDWLRQ UDWKHU WKDQ WR SXUFKDVH FDSLWDO DVVHWV LV PDQDJHPHQW DQG 3DWULFN %DLOH\ IRU SUHDFTXLVLWLRQ VDOHV
LQGLFDWLYH RI ERQD ILGH LQGHEWHGQHVV ,G DW 7KH FRPPLVVLRQV$IWHUWKHWUDQVDFWLRQ$XWR6W\OHDQG$XWR6W\OH
GHIHQGDQWVKDYHSUHVHQWHGXQGLVSXWHGHYLGHQFHWKDWWKHIXQGV ,QFUHWDLQHGVHSDUDWH%RDUGVRI'LUHFWRUV
WKDW ZHUH DFWXDOO\ SURYLGHG SXUVXDQW WR WKH SDUWLFLSDWLRQ
DJUHHPHQWV ZHUH XVHG IRU ZRUNLQJ FDSLWDO WKDW HQDEOHG 2Q1RYHPEHU $XWR6W\OHDQG$XWR6W\OH,QFKHOG
$XWR6W\OHWRPHHWGDLO\RSHUDWLQJQHHGV%D\HUUHOLHVRQO\RQ PHHWLQJVRIWKHLU%RDUGVRI'LUHFWRUVWRGLVFXVV$XWR6W\OHjV
PLQXWHVRIDQ$XWR6W\OH%RDUGRI'LUHFWRUVPHHWLQJWKDWZDV FDVK IORZ SUREOHPV $W WKHVH PHHWLQJV $XWR6W\OH ,QFjV
KHOGSULRUWRWKHWLPHWKDWDQ\RIWKHSDUWLFLSDWLRQDJUHHPHQWV %RDUG RI 'LUHFWRUV DSSURYHG WKH ERUURZLQJ RI XS WR
ZHUHVLJQHGLQZKLFKWKHUHZDVGLVFXVVLRQRIDQHHGIRUFDVK IURP&9&DQG6056$XWR6W\OHjV%RDUGDOVR
WRILQDQFHmEDVLFLQYHVWPHQWLQWKHSDLQWOLQHl%D\HUSUHVHQWV UHFRJQL]HGWKDW$XWR6W\OHmLVLQGHVSHUDWHQHHGRIPLOOLRQ
GROODUVVKRUWWHUPFDVKl5LFKDUG0&DVKLQsUDGLUHFWRURI
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
$XWR6W\OHDQG$XWR6W\OH,QFDQGDVHQLRURIILFHU DQGODWHU IDFLOLW\7KHUHIRUHWKHGHIHQGDQWVjSDUWLFLSDWLRQLQWHUHVWVGLG
SUHVLGHQW RI&9&VWDWHGWKDW&9&PLJKWEHLQWHUHVWHGLQ QRWH[DFWO\FRUUHODWHWRWKHLURZQHUVKLSLQWHUHVWVLQ$XWR6W\OH
ORDQLQJ$XWR6W\OHPLOOLRQLILWUHFHLYHG$XWR6W\OHZDUUDQWV 7KHGHIHQGDQWVLQDVHQVHZHUHPDNLQJDORDQWRWKHRWKHU
LQ FRQQHFWLRQ ZLWK WKH RIIHULQJ 2Q 1RYHPEHU $XWR6W\OH VKDUHKROGHUV ZKR GLG QRW KDYH SDUWLFLSDWLRQ
$XWR6W\OHjVDWWRUQH\ZURWHDOHWWHUWR&DVKLQFRQILUPLQJWKH LQWHUHVWV LQ &,7jV FUHGLW IDFLOLW\ $V D UHVXOW WKLV IDFWRU
SODQQHGORDQWR$XWR6W\OHDQGHQFORVLQJDOHWWHUDJUHHPHQW ZHLJKVVOLJKWO\WRZDUGGHEW
UHJDUGLQJ WKH VWRFN ZDUUDQWV DQG D SURSRVHG QRWH IURP
$XWR6W\OH IRU PLOOLRQ 7KH OHWWHU FRQILUPHG &9&jV 7KH6HFXULW\IRUWKH$GYDQFHV
LQWHQWLRQWRZLUHWUDQVIHUWKHIXQGVWKHQH[WGD\7KHUHZDV
QR LQGLFDWLRQ RI SDUWLFLSDWLRQ LQ &,7jV FUHGLW IDFLOLW\ RU D 7KH DEVHQFH RI D VHFXULW\ IRU DQ DGYDQFH LV D VWURQJ
VHFXULW\LQWHUHVWLQIDYRURI&9&LQHLWKHUWKH%RDUGPLQXWHV LQGLFDWLRQWKDWWKHDGYDQFHVZHUHFDSLWDOFRQWULEXWLRQVUDWKHU
FRXQVHOjVOHWWHURUSURSRVHGQRWHIURP$XWR6W\OHWR&9& WKDQORDQV5RWK6WHHO)GDW$VKDVDOUHDG\EHHQ
GLVFXVVHG DW OHQJWK WKH GHIHQGDQWV KDG YDOLG OHJDO
7KLVSODQQHGGLUHFWORDQQHYHURFFXUUHG%D\HUDGPLWVWKDW HQIRUFHDEOH SDUWLFLSDWLRQ DJUHHPHQWV LQ &,7jV SURSHUO\
WKHm>W@KHUHFRUGFRQWDLQVQRH[SODQDWLRQIRUZK\WKHGLUHFW VHFXUHG FUHGLW IDFLOLW\ ZKLFK ZDV VHFXUHG E\ D OLHQ RQ
ORDQZDVQRWXOWLPDWHO\GRFXPHQWHGDVVXFKl,QVWHDGWKH $XWR6W\OHjVDVVHWV7KHUHIRUHWKLVIDFWRUFXWVLQIDYRURID
SDUWLHV HQWHUHG LQWR D GLIIHUHQW IRUP RI WUDQVDFWLRQ 7KH ORDQ
UHFRUG FRQWDLQV D GRFXPHQW HQWLWOHG m6XERUGLQDWHG
3DUWLFLSDWLRQ $JUHHPHQWl EHWZHHQ &,7 DQG &9& m)LUVW 7KH&RUSRUDWLRQjV$ELOLW\WR2EWDLQ2XWVLGH)LQDQFLQJ
3DUWLFLSDWLRQ$JUHHPHQWl ZKHUHE\&9&SDLGPLOOLRQWR
&,7 ZKLFK DOORZHG &,7 WR IXQG DGGLWLRQDO ERUURZLQJV E\ :KHQWKHUHLVQRHYLGHQFHRIRWKHURXWVLGHILQDQFLQJWKH
$XWR6W\OH7KH)LUVW3DUWLFLSDWLRQ$JUHHPHQWJUDQWHG&9& IDFWWKDWQRUHDVRQDEOHFUHGLWRUZRXOGKDYHDFWHGLQWKHVDPH
DmVXERUGLQDWHGSDUWLFLSDWLRQlLQ&,7jVFUHGLWIDFLOLW\ PDQQHU LV VWURQJ HYLGHQFH WKDW WKH DGYDQFHV ZHUH FDSLWDO
LQH[FKDQJHIRUWKHPLOOLRQ&9&SDLGWR&,7&9&ZRXOG FRQWULEXWLRQVUDWKHUWKDQORDQV,ELG%D\HUFRQWHQGVWKDWWKH
UHFHLYHUHSD\PHQWRQO\LI$XWR6W\OHSDLG&,7DQGRQO\DIWHU EDQNUXSWF\FRXUWLPSURSHUO\FRQFOXGHGWKDWPLOOLRQLQ
&,7DQGRWKHUORDQSDUWLFLSDQWVUHFHLYHGUHSD\PHQWIRUWKHLU ORDQV IURP 31& %DQN DQG 0HOORQ %DQN ZHUH IURP
VKDUHVRIWKHORDQ,QDGGLWLRQ$XWR6W\OHVLJQHGDVHSDUDWH GLVLQWHUHVWHGOHQGHUVEHFDXVHWKHORDQVZHUHJXDUDQWHHGE\
GHPDQGQRWHDQG&9&UHFHLYHGVWRFNZDUUDQWVGLUHFWO\IURP WZRRI$XWR6W\OHjVSULPDU\VXSSOLHUV 33*,QGXVWULHVLQWKH
$XWR6W\OH ,QF 7KH GHIHQGDQWV VWDWH WKDW WKH DGGLWLRQDO FDVHRIWKH31&ORDQDQG%D\HULQ WKH FDVHRIWKH0HOORQ
IXQGLQJZDVXVHGE\$XWR6W\OHSULPDULO\IRUZRUNLQJFDSLWDO %DQNORDQ,WLVWUXHWKDWWKHJXDUDQWHHVFDPHIURPLPSRUWDQW
7KLV WUDQVDFWLRQ ZDV WKH ILUVW RI ILYH VXERUGLQDWHG VXSSOLHUVEXWWKHIDFWUHPDLQVWKDWWKHILQDQFLQJFDPHIURP
SDUWLFLSDWLRQDJUHHPHQWVWKDW&,7HQWHUHGZLWKWKHGHIHQGDQWV RXWVLGH OHQGLQJ LQVWLWXWLRQV 7KDW WKH JXDUDQWHHV ZHUH
ZLWK HDFK RQH H[SDQGLQJ WKH WRWDO DPRXQW RI &,7jV FUHGLW UHTXLUHGIRUWKHILQDQFLQJGRHVQRWFKDQJHWKLVIDFW7KHUHLV
IDFLOLW\ QR UHTXLUHPHQW WKDW RXWVLGH ILQDQFLQJ FRPH ZLWKRXW DQ\
LQYROYHPHQWRImLQWHUHVWHGlSDUWLHV7KHUHIRUHWKLVIDFWRU
2Q sDQXDU\ 6056 HQWHUHG LQWR D VHSDUDWH ZHLJKVLQIDYRURIDORDQ
m6XERUGLQDWHG 3DUWLFLSDWLRQ $JUHHPHQWl ZLWK &,7
VXEVWDQWLDOO\VLPLODUWRWKHSDUWLFLSDWLRQDJUHHPHQWEHWZHHQ
&9&DQG&,7 m6HFRQG3DUWLFLSDWLRQ$JUHHPHQWl 3XUVXDQW
WR WKH DJUHHPHQW LQ H[FKDQJH IRU 6056 ZDV
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
$XWR6W\OHjV EXVLQHVV KRZHYHU WKLV LV EDODQFHG WR VRPH JUDQWHGDSRUWLRQRI&,7jVFUHGLWIDFLOLW\6056ZRXOGEH
H[WHQWE\WKHVHFXULW\RIWKHOLHQRQDOORI$XWR6W\OHjVDVVHWV UHSDLGXQGHUWKHVDPHWHUPVDV&9& RQO\LI$XWR6W\OHUHSDLG
WKHORDQDQGRQO\DIWHU&,7DQGRWKHUORDQSDUWLFLSDQWVZHUH
7KH$GHTXDF\RU,QDGHTXDF\RI&DSLWDOL]DWLRQ UHSDLG$XWR6W\OHVLJQHGDVHSDUDWHGHPDQGQRWHDQG6056
UHFHLYHGVWRFNZDUUDQWV7KHGHIHQGDQWVQRWHWKDWWKHIXQGLQJ
7KLQRULQDGHTXDWHFDSLWDOL]DWLRQLVVWURQJHYLGHQFHWKDWWKH ZDVDOVRXVHGE\$XWR6W\OHSULPDULO\IRUZRUNLQJFDSLWDO
DGYDQFHVDUHFDSLWDOFRQWULEXWLRQVUDWKHUWKDQORDQV,GDW
7KH GLVWULFW FRXUW UHOLHG RQ ODQJXDJH LQ ,Q UH &ROG 2Q 0DUFK $XWR6W\OH PDGH D SUHVHQWDWLRQ WR
+DUERU LQGLFDWLQJ WKDW WKH XQGHUFDSLWDOL]DWLRQ DQDO\VLV LV %D\HU IRUPDOO\ DVNLQJ %D\HU WR JXDUDQWHH D SURSRVHG
SDUWLFXODUO\ UHOHYDQW ZKHQ mD FRUSRUDWLRQ LV VWDUWHG E\ WKH PLOOLRQ ORDQ IURP 0HOORQ %DQN $W WKH SUHVHQWDWLRQ
VKDUHKROGHUV ZLWK D PLQLPDO DPRXQW RI FDSLWDO ZKR WKHQ $XWR6W\OHSURYLGHG%D\HUDmGHEWVFKHGXOHDVRIsDQXDU\
PDNHDODUJHORDQRIPRQH\WRWKHQHZO\IRUPHGFRUSRUDWLRQl >VLF @lLWHPL]LQJ$XWR6W\OHjVQRWHVSD\DEOH7KH
%5 DW 7KH GLVWULFW FRXUW FRQFOXGHG WKDW GHEW VFKHGXOH GHVFULEHG D m&LWLFRUS EULGJH ORDQ ZLWK
FDSLWDOL]DWLRQZDVDGHTXDWHEHFDXVH$XWR6W\OHKDGRSHUDWHG ZDUUDQWVlRIPLOOLRQDQGDm6WDWHRI0LFKLJDQEULGJHORDQ
IRUPRUHWKDQWZHQW\\HDUVEHIRUHWKHGHIHQGDQWVjORDQVZHUH ZLWKZDUUDQWVlRI HPSKDVLVDGGHG %D\HUVWDWHV
PDGH:HDJUHHZLWK%D\HUKRZHYHUWKDWFDSLWDOL]DWLRQLV WKDWLWZDVQHYHUVSHFLILFDOO\LQIRUPHGE\$XWR6W\OH&9&RU
QRWWREHDVVHVVHGRQO\DWLQLWLDOFDSLWDOL]DWLRQ,QGHHGWKH 6056WKDWWKHPLOOLRQDQG ORDQVZHUHVHFXUHG
FRXUWLQ5RWK6WHHO H[DPLQHGFDSLWDOL]DWLRQDWWKHWLPHWKH E\WKHVHQLRUVHFXULW\LQWHUHVWVLQIDYRURI&,7
WUDQVIHU ZDV PDGH )G DW 7KHUH LV GLVSXWHG
HYLGHQFHWKDWFXWVERWKZD\VDVWRWKLVIDFWRU%D\HUSUHVHQWV 2Q $XJXVW &9& DQG &,7 DPHQGHG WKH )LUVW
HYLGHQFHWKDW$XWR6W\OHZDVLQVHULRXVILQDQFLDOVWUDLWVDWWKH 3DUWLFLSDWLRQ$JUHHPHQWWRLQFUHDVH&9&jVSDUWLFLSDWLRQIURP
WLPHWKHGHIHQGDQWVHQWHUHGLQWRWKHSDUWLFLSDWLRQDJUHHPHQWV PLOOLRQWRPLOOLRQ m7KLUG3DUWLFLSDWLRQ$JUHHPHQWl
DQG WKDW LW KDG QHJDWLYH ZRUNLQJ FDSLWDO IRU QLQH VWUDLJKW 7KHGHIHQGDQWVVWDWHWKDWWKLVPRQH\ZDVZLUHWUDQVIHUUHGWR
\HDUV EXW WKHUH LV DOVR HYLGHQFH IURP WKH GHIHQGDQWV WKDW &,7 DQG SHUPLWWHG &,7 WR SURYLGH DGGLWLRQDO IXQGLQJ WR
$XWR6W\OH ZDV REWDLQLQJ PRQH\ IURP GLVLQWHUHVWHG WKLUG $XWR6W\OH ZKLFK XVHG LW SULPDULO\ IRU ZRUNLQJ FDSLWDO
SDUWLHVLQFOXGLQJ%D\HULWVHOIDWWKHWLPHWKHWUDQVIHUVZHUH $XWR6W\OH H[HFXWHG GHPDQG QRWHV GLUHFWO\ WR &,7 LQ
PDGH FRQQHFWLRQZLWKWKLVDGGLWLRQDOIXQGLQJ
7KH,GHQWLW\RI,QWHUHVW%HWZHHQWKH&UHGLWRUDQG 2Q 6HSWHPEHU %D\HU H[HFXWHG D JXDUDQWHH WR
6WRFNKROGHU 0HOORQ %DQN IRU D PLOOLRQ ORDQ WR $XWR6W\OH IRU LW WR
SXUFKDVH FHUWDLQ HTXLSPHQW $XWR6W\OH HQWHUHG LQWR D
,I VWRFNKROGHUV PDNH DGYDQFHV LQ SURSRUWLRQ WR WKHLU 6HFXULW\ $JUHHPHQW JUDQWLQJ %D\HU D VHFXULW\ LQWHUHVW LQ
UHVSHFWLYH VWRFN RZQHUVKLS DQ HTXLW\ FRQWULEXWLRQ LV PDFKLQHU\DQGHTXLSPHQWVHFRQGLQSULRULW\RQO\WRWKHOLHQ
LQGLFDWHG,ELG2QWKHRWKHUKDQGDVKDUSO\GLVSURSRUWLRQDWH LQIDYRURI&,77KHSDUWLHVVLJQHGILQDQFLQJVWDWHPHQWVWKDW
UDWLREHWZHHQDVWRFNKROGHUjVSHUFHQWDJHLQWHUHVWLQVWRFNDQG ZHUHILOHGRQEHKDOIRI%D\HULQDOOUHTXLUHGILOLQJORFDWLRQV
GHEWLVLQGLFDWLYHRIERQDILGHGHEW,ELGm:KHUHWKHUHLVDQ %D\HUjV 6HSWHPEHU VHFXULW\ LQWHUHVW UHPDLQV
H[DFW FRUUHODWLRQ EHWZHHQ WKH RZQHUVKLS LQWHUHVWV RI WKH SHUIHFWHGWRGD\
HTXLW\ KROGHUV DQG WKHLU SURSRUWLRQDWH VKDUH RI WKH DOOHJHG
ORDQ WKLV HYLGHQFH VWDQGLQJ DORQH LV DOPRVW 7KH SDUWLFLSDWLRQ LQWHUHVWV RI &9& DQG 6056 LQ &,7jV
RYHUZKHOPLQJl,QUH&ROG+DUERU%5DW 1RWDOO FUHGLWIDFLOLW\ZHUHGLVFORVHGLQJHQHUDOWHUPVLQ$XWR6W\OHjV
RI$XWR6W\OHjVVKDUHKROGHUVZHUHSDUWLFLSDQWVLQ&,7jVFUHGLW DXGLWHG ILQDQFLDOVWDWHPHQWVGDWHG0D\
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
DQG LQ DOO VXEVHTXHQW DQQXDO DXGLWHG ILQDQFLDO VWDWHPHQWV GHPDQGQRWHVDORQJZLWKDIL[HGUDWHRILQWHUHVWDQGLQWHUHVW
FRSLHVRIZKLFKZHUHSURYLGHGWR%D\HU7KHVHVWDWHPHQWVGR SD\PHQWVLVPRUHLQGLFDWLYHRIGHEWWKDQHTXLW\
QRWUHIHUVSHFLILFDOO\WRWKHSDUWLFLSDWLRQLQWHUHVWVRI&9&DQG
6056,QVWHDGWKH\UHIHUWRWKHH[LVWHQFHRIWKH&,7FUHGLW 7KH3UHVHQFHRU$EVHQFHRID)L[HG5DWHRI,QWHUHVWDQG
IDFLOLW\ DQG WKH IDFW WKDW &,7 DQG FHUWDLQ $XWR6W\OH ,QWHUHVW3D\PHQWV
mVKDUHKROGHUVl KDG PDGH DUUDQJHPHQWV IRU $XWR6W\OH WR
ERUURZ DGGLWLRQDO PRQH\ WKURXJK WKH FUHGLW IDFLOLW\ ,Q 7KHDEVHQFHRIDIL[HGUDWHRILQWHUHVWDQGLQWHUHVWSD\PHQWV
DGGLWLRQWKHVWDWHGDPRXQWRIWKHFUHGLWIDFLOLW\ZDVKLJKHULQ LV D VWURQJ LQGLFDWLRQ WKDW WKH DGYDQFHV ZHUH FDSLWDO
HDFKILQDQFLDOVWDWHPHQW$WWKHWLPHRIWKH6HSWHPEHU FRQWULEXWLRQV UDWKHU WKDQ ORDQV ,ELG 7KH DJUHHPHQWV
DJUHHPHQW6056KDGVHFXULW\LQWHUHVWVRWKHUWKDQWKH LQFOXGHGERWKDIL[HGLQWHUHVWUDWHDQGIL[HGSD\PHQWV7KH
SDUWLFLSDWLRQDJUHHPHQWVLQLWVQDPH7KLQNLQJWKDWLWKDG GHIHQGDQWV ZHUH WR EH SDLG DW RYHU WKH SULPH UDWH mDV
NQRZOHGJH RI DOO RI 6056jV VHFXULW\ LQWHUHVWV %D\HU >&,7@LVSDLGE\>$XWR6W\OH@l7KHGHIHQGDQWVVXEVHTXHQWO\
UHTXHVWHGWKDW6056VXERUGLQDWHWKRVHOLHQVDQGILQDQFLQJ DJUHHGWRGHIHULQWHUHVWSD\PHQWV$WEHVW%D\HUFDQDUJXH
VWDWHPHQWVWRWKRVHRI%D\HUDQG6056DJUHHG WKDWWKLVIDFWRUFXWVERWKZD\VVLQFHWKHGHIHUUDORILQWHUHVW
SD\PHQWVLQGLFDWHVWKHSRVVLELOLW\WKDWGXULQJWKHFRXUVHRI
$URXQGWKHWLPHRI%D\HUjV6HSWHPEHU DJUHHPHQW WKHWUDQVDFWLRQWKHGHIHQGDQWVHYHQWXDOO\QHYHUH[SHFWHGWR
3LWWVEXUJK1DWLRQDO%DQNORDQHG$XWR6W\OHPLOOLRQWR JHWUHSDLGDQGFRQYHUWHGWKHLUGHEWWRHTXLW\6WLOOLWGRHVQRW
SXUFKDVHDQGLQVWDOODSDLQWOLQHLQ$XWR6W\OHjVIDFLOLWLHV7KH FKDQJHWKHIDFWWKDWLQLWLDOO\DWOHDVWWKHUHZDVDIL[HGUDWHRI
ORDQ ZDV JXDUDQWHHG E\ 33* ,QGXVWULHV ,QF D SULQFLSDO LQWHUHVWDQGLQWHUHVWSD\PHQWVLQGLFDWLQJWKDWWKHWUDQVDFWLRQ
VXSSOLHURISDLQWSURGXFWVWR$XWR6W\OH$WDERXWWKHVDPH ZDVRULJLQDOO\LQWHQGHGWREHGHEWQRWHTXLW\6HH,QUH&ROG
WLPH %D\HU GLUHFWO\ ORDQHG $XWR6W\OH DSSUR[LPDWHO\ +DUERU%5DW LQGLFDWLQJWKDWUHFKDUDFWHUL]DWLRQ
PLOOLRQ ZKLFK$XWR6W\OHODWHUUHSDLG WRSXUFKDVHDQGLQVWDOO DSSOLHV WR WUDQVDFWLRQV WKDW ZHUH HTXLW\ FRQWULEXWLRQV mDE
DWDQNIDUPWRKRXVH%D\HUSURGXFWV LQLWLRl 0RUHYHUWKHGHIHUUDORILQWHUHVWSD\PHQWVGRHVQRW
E\LWVHOIPHDQWKDWWKHSDUWLHVFRQYHUWHGDGHEWWUDQVDFWLRQWR
2Q1RYHPEHU $XWR6W\OHREWDLQHGDmVROYHQF\ HTXLW\VLQFHWKHGHIHQGDQWVVWLOOH[SHFWHGWREHUHSDLG
RSLQLRQlIURP0DUVKDOODQG6WHYHQV7KHRSLQLRQFRQFOXGHG
WKDW$XWR6W\OHjVDVVHWVH[FHHGHGLWVOLDELOLWLHVWKDW$XWR6W\OH 7KH6RXUFHRI5HSD\PHQWV
FRXOGSD\LWVOLDELOLWLHVDVWKH\FDPHGXHDQGWKDW$XWR6W\OH
ZDVDGHTXDWHO\FDSLWDOL]HG6KRUWO\DIWHUWKHUHOHDVHRIWKH ,I WKH H[SHFWDWLRQ RI UHSD\PHQW GHSHQGV VROHO\ RQ WKH
RSLQLRQ0DVFR7HFKSXUFKDVHGRQHKDOIRIWKHFRPPRQVWRFN VXFFHVV RI WKH ERUURZHUjV EXVLQHVV WKH WUDQVDFWLRQ KDV WKH
RI$XWR6W\OHjVSDUHQW$XWR6W\OH,QFIRUPLOOLRQDQG DSSHDUDQFHRIDFDSLWDOFRQWULEXWLRQ5RWK6WHHO)GDW
ORDQHG$XWR6W\OHDQRWKHUPLOOLRQ 7KHEDQNUXSWF\FRXUWQRWHGWKDWWKHVRXUFHRIUHSD\PHQW
RI WKH GHIHQGDQWVj SDUWLFLSDWLRQ LQWHUHVWV LQ WKH &,7 FUHGLW
2Q 0DUFK &,7 DQG 0DVFR7HFK HQWHUHG LQWR D IDFLOLW\ LV LGHQWLFDO WR WKH VRXUFH ORRNHG WR E\ &,7 IRU
m6XERUGLQDWHG3DUWLFLSDWLRQ$JUHHPHQWlVLPLODUWRWKH&9& UHSD\PHQWRILWVSRUWLRQRIWKHFUHGLWIDFLOLW\ $XWR6W\OHjV
DQG6056DJUHHPHQWV7KHUHZDVDVOLJKWGLIIHUHQFHLQWKDW HDUQLQJVVHFXUHGE\DOLHQRQDOORI$XWR6W\OHjVDVVHWV:H
0DVFR7HFKDJUHHGWRSXUFKDVHRQGHPDQGIURP&,7DIWHU DJUHH ZLWK WKH GLVWULFW FRXUW WKDW WKHVH IDFWV ZHLJK RQO\
$XWR6W\OHjV GHIDXOW RU DW DQ\ WLPH VRRQHU DW 0DVFR7HFKjV VOLJKWO\ LQ IDYRU RI HTXLW\ 7KH IDFW WKDW &,7 DQG WKH
RSWLRQDPLOOLRQSDUWLFLSDWLRQLQWHUHVWLQWKH&,7IDFLOLW\ GHIHQGDQWV ZHUH WR EH SDLG RXW RI $XWR6W\OHjV HDUQLQJV
m)RXUWK 3DUWLFLSDWLRQ $JUHHPHQWl &,7 GLG QRW PDNH D LQGLFDWHV WKDW WKH\ ZHUH GHSHQGHQW RQ WKH VXFFHVV RI
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
DQG WKHSUHVHQFHRUDEVHQFHRIDVLQNLQJIXQGWRSURYLGH GHPDQGIRUWKHVHIXQGVXQWLO2FWREHU DIWHU$XWR6W\OH
UHSD\PHQWV5RWK6WHHO)GDW1RRQHIDFWRULV ILOHGIRUEDQNUXSWF\DWZKLFKWLPH0DVFR7HFKSDLGWKH
FRQWUROOLQJRUGHFLVLYH,ELG7KHIDFWRUVPXVWEHFRQVLGHUHG PLOOLRQXQGHULWVDJUHHPHQWZLWK&,7
ZLWKLQWKHSDUWLFXODUFLUFXPVWDQFHVRIHDFKFDVH,ELG:H
QRWH WKDW m>W@KH PRUH >D WUDQVDFWLRQ@ DSSHDUV WR UHIOHFW WKH $OVRRQ0DUFK &9&DPHQGHGWKH)LUVWDQG7KLUG
FKDUDFWHULVWLFVRIDQDUPjVOHQJWKQHJRWLDWLRQWKHPRUH 3DUWLFLSDWLRQ $JUHHPHQWV E\ OHWWHU DJUHHPHQW ZLWK &,7
OLNHO\VXFKDWUDQVDFWLRQLVWREHWUHDWHGDVGHEWl,QUH&ROG LQFUHDVLQJ&9&jVSDUWLFLSDWLRQLQ&,7jVFUHGLWIDFLOLW\E\
+DUERU%5DW :HZLOODGGUHVVHDFKRIWKHHOHYHQ PLOOLRQ m)LIWK3DUWLFLSDWLRQ$JUHHPHQWl 7KHWHUPVRIWKLV
IDFWRUVLQWXUQ DPHQGPHQW ZHUH VLPLODU WR WKRVH RI 0DVFR7HFKjV
SDUWLFLSDWLRQDJUHHPHQW &9&DJUHHGWRSXUFKDVHRQGHPDQG
7KH1DPHV*LYHQWRWKH,QVWUXPHQWV IURP &,7 DIWHU $XWR6W\OHjV GHIDXOW RU DQ\ WLPH VRRQHU DW
&9&jVRSWLRQDPLOOLRQSDUWLFLSDWLRQLQWHUHVWLQWKH&,7
7KHDEVHQFHRIQRWHVRURWKHULQVWUXPHQWVRILQGHEWHGQHVV IDFLOLW\7KLVDPRXQWDOVRZDVQRWIXQGHGXQWLO2FWREHU
LV D VWURQJ LQGLFDWLRQ WKDW WKH DGYDQFHV ZHUH FDSLWDO DIWHU$XWR6W\OHILOHGIRUEDQNUXSWF\
FRQWULEXWLRQVDQGQRWORDQV5RWK6WHHO)GDW,Q
WKLV FDVH WKHUH DUH LQVWUXPHQWV RI LQGHEWHGQHVV WKH ILYH 7KHVH ILQDO WZR SDUWLFLSDWLRQ LQWHUHVWV ZHUH GLVFORVHG LQ
SDUWLFLSDWLRQDJUHHPHQWVWKDWWKHGHIHQGDQWVHQWHUHGLQWRZLWK $XWR6W\OHjV DXGLWHG ILQDQFLDO VWDWHPHQWV 0DVFR7HFK DQG
&,7%D\HUDUJXHVWKDWLQUHO\LQJRQWKHVHDJUHHPHQWVWKH &9&SDLG&,7PLOOLRQXQGHUWKHLUUHVSHFWLYHDJUHHPHQWV
EDQNUXSWF\FRXUWH[DOWHGIRUPRYHUVXEVWDQFH:HGLVDJUHH LQ2FWREHU DIWHU$XWR6W\OHILOHGIRUEDQNUXSWF\
)RUWKHUHDVRQVZHKDYHDOUHDG\VWDWHGWKHVHDJUHHPHQWVZHUH
YDOLG DQG HQIRUFHDEOH LQVWUXPHQWV WKDW ZHUH HYLGHQFH RI %D\HUSRVVHVVHVDWRWDOVHFXUHGFODLPDJDLQVW$XWR6W\OHLQ
LQGHEWHGQHVV DSULQFLSDODPRXQWRI SOXVRWKHUFKDUJHV,Q
DJJUHJDWH WKH GHIHQGDQWV DUH RZHG DSSUR[LPDWHO\
7KH3UHVHQFHRU$EVHQFHRID)L[HG0DWXULW\'DWHDQG FRQVLVWLQJ RI DPRXQWV IXQGHG SXUVXDQW WR WKH
6FKHGXOHRI3D\PHQWV SDUWLFLSDWLRQDJUHHPHQWV
7KHDEVHQFHRIDIL[HGPDWXULW\GDWHDQGDIL[HGREOLJDWLRQ ,,,6WDQGDUGRI5HYLHZ
WR UHSD\ LV DQ LQGLFDWLRQ WKDW WKH DGYDQFHV ZHUH FDSLWDO
FRQWULEXWLRQV DQG QRW ORDQV ,ELG 7KH EDQNUXSWF\ FRXUW 7KLVFRXUWUHYLHZVDEDQNUXSWF\FRXUWjVJUDQWRIVXPPDU\
QRWHG WKDW WKH DEVHQFH RI D VHW VFKHGXOH RI UHSD\PHQW RI MXGJPHQWGHQRYR6HH&LW\RI0W&OHPHQVY8QLWHG6WDWHV
SULQFLSDOZHLJKVLQIDYRURIHTXLW\EXWLVQRWGLVSRVLWLYH7KH (QYWO3URW$JHQF\ )G WK&LU $
GLVWULFW FRXUW KRZHYHU QRWHG WKDW WKH SDUWLFLSDWLRQ EDQNUXSWF\FRXUWjVJUDQWRIVXPPDU\MXGJPHQWLVUHYLHZHG
DJUHHPHQWV XVHG GHPDQG QRWHV DV ZHOO DV D IL[HG UDWH RI ZLWK DOO IDFWV DQG LQIHUHQFHV FRQVLGHUHG LQ WKH OLJKW PRVW
LQWHUHVWDQGUHJXODULQWHUHVWSD\PHQWVZKLFKLWEHOLHYHGZDV IDYRUDEOHWRWKHQRQPRYLQJSDUW\6HH,QUHsXOLHQ&R
LQGLFDWLYHRIDORDQ0RUHRYHUWKHGLVWULFWFRXUWVWDWHGWKDW )G WK &LU 6XPPDU\ MXGJPHQW LV
ULJLGDSSOLFDWLRQRIDUXOHWKDWWKHODFNRIDIL[HGPDWXULW\GDWH DSSURSULDWH ZKHUH mWKH SOHDGLQJV GHSRVLWLRQV DQVZHUV WR
DQGIL[HGUHSD\PHQWVFKHGXOHZDVLQGLFDWLYHRIHTXLW\mZRXOG LQWHUURJDWRULHV DQG DGPLVVLRQV RQ ILOH WRJHWKHU ZLWK WKH
FUHDWHDSHUVHUXOHWKDWXVHRIDGHPDQGQRWHE\DQLQVLGHU DIILGDYLWVLIDQ\VKRZWKDWWKHUHLVQRJHQXLQHLVVXHDVWRDQ\
ZRXOGDOZD\VEHLQGLFDWLYHRIDQHTXLW\FRQWULEXWLRQUDWKHU PDWHULDO IDFW DQG WKDW WKH PRYLQJ SDUW\ LV HQWLWOHG WR D
WKDQDORDQl:HDJUHHDQGWKHUHIRUHFRQFOXGHWKDWWKHXVHRI MXGJPHQW DV D PDWWHU RI ODZl )(' 5 &,9 3 F ,Q
GHFLGLQJDPRWLRQIRUVXPPDU\MXGJPHQWWKLVFRXUWYLHZVWKH
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
IDFWXDOHYLGHQFHDQGGUDZVDOOUHDVRQDEOHLQIHUHQFHVLQIDYRU %5 DW ,Q UH &ROG +DUERU %5 DW ,Q UH
RIWKHQRQPRYLQJSDUW\6HH1DWLRQDO(QWHUV,QFY6PLWK +\SHULRQ%5DW ,QUH)HWW5RRILQJ, 438 F. Supp.
)G WK &LU 7R SUHYDLO WKH QRQ at 729s30.
PRYDQW PXVW VKRZ VXIILFLHQW HYLGHQFH WR FUHDWH D JHQXLQH
LVVXHRIPDWHULDOIDFW6HH.OHSSHUY)LUVW$P%DQN :HWXUQWKHQWRWKHHOHYHQ5RWK6WHHOIDFWRUV7KHIDFWRUV
)G WK &LU FLWLQJ &HORWH[ &RUS Y DUH WKHQDPHVJLYHQWRWKHLQVWUXPHQWVLIDQ\HYLGHQFLQJ
&DWUHWW 86 $ PHUH VFLQWLOOD RI WKH LQGHEWHGQHVV WKH SUHVHQFH RU DEVHQFH RI D IL[HG
HYLGHQFHLVLQVXIILFLHQW mWKHUHPXVWEHHYLGHQFHRQZKLFKWKH PDWXULW\GDWHDQGVFKHGXOHRISD\PHQWV WKHSUHVHQFHRU
MXU\FRXOGUHDVRQDEO\ILQGIRUWKH>QRQPRYDQW@l,GDW DEVHQFHRIDIL[HGUDWHRILQWHUHVWDQGLQWHUHVWSD\PHQWV
TXRWLQJ$QGHUVRQY/LEHUW\/REE\,QF86 WKHVRXUFHRIUHSD\PHQWV WKHDGHTXDF\RULQDGHTXDF\RI
FDSLWDOL]DWLRQ WKHLGHQWLW\RILQWHUHVWEHWZHHQWKHFUHGLWRU
DQGWKHVWRFNKROGHU WKHVHFXULW\LIDQ\IRUWKHDGYDQFHV
2QDSSHDO%D\HUDUJXHVWKDWWKHEDQNUXSWF\FRXUWHUUHGLQ WKHFRUSRUDWLRQ
VDELOLW\WRREWDLQILQDQFLQJIURPRXWVLGH
JUDQWLQJ WKH GHIHQGDQWVj PRWLRQ IRU VXPPDU\ MXGJPHQW OHQGLQJLQVWLWXWLRQV WKHH[WHQWWRZKLFKWKHDGYDQFHVZHUH
%D\HU DVVHUWV WKDW LWV FURVVPRWLRQ IRU VXPPDU\ MXGJPHQW VXERUGLQDWHGWRWKHFODLPVRIRXWVLGHFUHGLWRUV WKHH[WHQW
VKRXOGKDYHEHHQJUDQWHGRULQWKHDOWHUQDWLYHLWUHTXHVWVWKDW WR ZKLFK WKH DGYDQFHV ZHUH XVHG WR DFTXLUH FDSLWDO DVVHWV
ZHUHYHUVHWKHGHFLVLRQJUDQWLQJWKHGHIHQGDQWVjPRWLRQIRU
VXPPDU\MXGJPHQWDQGUHPDQGWKLVFDVHIRUWULDO%D\HUjV
UHTXHVWFRPSOLHVZLWKGHFLVLRQVRIWKLVFRXUWWKDWKDYHKHOG
WKDWm>W@KHIDFWWKDWERWKSDUWLHVPDNHPRWLRQVIRUVXPPDU\
UH +HUE\jV )RRGV )G DW
UHFKDUDFWHUL]H D ORDQ DV DQ HTXLW\ FRQWULEXWLRQ HYHQ ZKHQ FLUFXPVWDQFHV
MXGJPHQWGRHVQRWUHTXLUHWKH&RXUWWRUXOHWKDWQRIDFW ,Q
GR QRW ZDUUDQW HTXLWDEOH VXERUGLQDWLRQl
LVVXHH[LVWVl%HJQDXGY:KLWH)G WK&LU
FLWHG ZLWK DSSURYDO LQ &KHURNHH ,QV &R Y ( :
%ODQFK&R)GQ WK&LU VHHDOVR 7KH GLVWULFW FRXUW VSHFXODWHG DV WR ZKHWKHU D UHFKDUDFWHUL]DWLRQ
%)*RRGULFK&RY86)LOWHU&RUS)G DQDO\VLV ZDV DSSURSULDWH LQ WKLV FDVH JLYHQ WKH IDFW WKDW WKH GHIHQGDQWV
SXUFKDVHG SDUWLFLSDWLRQ LQWHUHVWV DQG GLG QRW ORDQ IXQGV GLUHFWO\ WR
WK&LU 7DIW%URDG&RY8QLWHG6WDWHV )G $XWR6W\OH DQG WKHUHIRUH GLG QRW KDYHDOHJDOUHODWLRQVKLSZLWK$XWR6W\OH
WK&LU :H EHOLHYH KRZHYHU WKDW HYHQ WKRXJK WKH GHIHQGDQWV DUH QRW DVVHUWLQJ
WKHLU RZQ FODLP DJDLQVW $XWR6W\OHjV EDQNUXSWF\ HVWDWH D
,9$QDO\VLV UHFKDUDFWHUL]DWLRQ DQDO\VLV LV DSSURSULDWH 7KH GHIHQGDQWV ZRXOG
HIIHFWLYHO\ UHFHLYH IXQGV DKHDG RI %D\HU WKURXJK &,7jV FODLP 7KHUHIRUH
7KH GLVSXWH LQ WKLV FDVH WXUQV RQ ZKHWKHU %D\HU RU WKH ZH PXVW FRQVLGHU ZKHWKHU WKH GHIHQGDQWVj SDUWLFLSDWLRQV LQ &,7jV ORDQ WR
$XWR6W\OH ZHUH LQ UHDOLW\ ORDQV RU UDWKHU D PHWKRG XVHG WR IXQQHO DQ
GHIHQGDQWVKDYHDKLJKHUSULRULW\LQWHUHVWLQSURFHHGVIURP HTXLW\ FRQWULEXWLRQ WR $XWR6W\OH ,I WKH\ ZHUH WKH ODWWHU ZH EHOLHYH WKDW
$XWR6W\OHjVEDQNUXSWF\HVWDWH7KHSDUWLHVGRQRWGLVSXWHWKDW LW ZRXOG EH ZLWKLQ WKH EDQNUXSWF\ FRXUWjV HTXLWDEOH SRZHU WR
&,7 LV ILUVW LQ SULRULW\ EDVHG RQ LWV VHFXULW\ LQWHUHVW LQ UHFKDUDFWHUL]H DV DQ HTXLW\ FRQWULEXWLRQ WKDW SRUWLRQ RI &,7jV FODLP EDVHG
$XWR6W\OHjV DVVHWV WKDW ZDV ILOHG DIWHU &,7 DQG $XWR6W\OH RQ WKH GHIHQGDQWVj SDUWLFLSDWLRQ DJUHHPHQWV
HQWHUHGWKH FUHGLWIDFLOLW\%D\HUDUJXHVWKDWLWLVLQOLQH
EHKLQG&,7oEXWDKHDGRIWKHGHIHQGDQWVoEDVHGXSRQLWV 7KH 5RWK 6WHHO IDFWRUV ZHUH IRUPXODWHG LQ WKH FRQWH[W RI D WD[ FRXUW
VHFXULW\LQWHUHVWLQ$XWR6W\OHjVDVVHWVWKDWZDVILOHGDIWHUWKH FDVH :H EHOLHYH WKDW WKH 5RWK 6WHHO IDFWRUV SURYLGH D JHQHUDO IUDPHZRUN
ORDQJXDUDQWHHWKDW%D\HUPDGHWR0HOORQ%DQN7KH IRU DVVHVVLQJ UHFKDUDFWHUL]DWLRQ FODLPV WKDW LV DOVR DSSURSULDWH LQ WKH
EDQNUXSWF\ FRQWH[W :H QRWH KRZHYHU WKDW WKHUH LV VRPH GLVDJUHHPHQW
GHIHQGDQWVDUJXHWKDWWKURXJKWKHLUSDUWLFLSDWLRQDJUHHPHQWV DV WR ZKHWKHU WD[ FRXUW UHFKDUDFWHUL]DWLRQ IDFWRUV DUH DSSURSULDWH IRU XVH
LQ EDQNUXSWF\ FDVHV 6HH 1R]HPDFN VXSUD SDJH DW QQ
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
DQDO\VLVLIWKHFRXUWGHWHUPLQHVWKDWWKHDGYDQFHRIPRQH\LV WKH\DUHHIIHFWLYHO\LQOLQHZLWK&,7DQGWKHUHIRUHDKHDGRI
HTXLW\DQGQRWGHEWWKHFODLPLVUHFKDUDFWHUL]HGDQGWKHHIIHFW %D\HU%D\HUUHOLHVXSRQIRXUOHJDOWKHRULHVWR VXSSRUWLWV
LVVXERUGLQDWLRQRIWKHFODLPmDVDSURSULHWDU\LQWHUHVWEHFDXVH DVVHUWLRQVWKDWWKHGHIHQGDQWVjFODLPVVKRXOGEHVXERUGLQDWHG
WKH FRUSRUDWLRQ UHSD\V FDSLWDO FRQWULEXWLRQV RQO\ DIWHU WR%D\HUjVFODLP:HZLOODGGUHVVHDFKRIWKHVHDUJXPHQWVLQ
VDWLVI\LQJDOORWKHUREOLJDWLRQVRIWKHFRUSRUDWLRQl,GDW WXUQ
,QDQHTXLWDEOHVXERUGLQDWLRQDQDO\VLVWKHFRXUWLVUHYLHZLQJ
ZKHWKHUDOHJLWLPDWHFUHGLWRUHQJDJHGLQLQHTXLWDEOHFRQGXFW $$OOHJHG,QYDOLGLW\RIWKH3DUWLFLSDWLRQ$JUHHPHQWV
LQZKLFKFDVHWKHUHPHG\LVVXERUGLQDWLRQRIWKHFUHGLWRUjV
FODLPmWRWKDWRIDQRWKHUFUHGLWRURQO\WRWKHH[WHQWQHFHVVDU\ %D\HU FRQWHQGV WKDW WKH GHIHQGDQWV GLG QRW KDYH mWUXHl
WRRIIVHWLQMXU\RUGDPDJHVXIIHUHGE\WKHFUHGLWRULQZKRVH SDUWLFLSDWLRQVLQ&,7jVFUHGLWIDFLOLW\7KHGHIHQGDQWVRQWKH
IDYRUWKHHTXLWDEOHGRFWULQHPD\EHHIIHFWLYHl,QUH:7 RWKHUKDQGDUJXHWKDWWKHLUSDUWLFLSDWLRQDJUHHPHQWVDUHYDOLG
*UDQW&R%5 %DQNU6'1< HPSKDVLV DQGHQIRUFHDEOH$VDUHVXOWWKHGHIHQGDQWVFODLPWKDWWKH\
DGGHG KDYHWKHVDPHSULRULW\SRVLWLRQDV&,7SODFLQJWKHPDKHDGRI
%D\HULQWKHUHFHLSWRISURFHHGVIURP$XWR6W\OHjVEDQNUXSWF\
,IDFODLPLVUHFKDUDFWHUL]HGDQGWKHUHIRUHmWKHDGYDQFHLV HVWDWH
QRWDFODLPWREHJLQZLWKlDQGWKHFUHGLWRULVQRWDOHJLWLPDWH
RQHmWKHQHTXLWDEOHVXERUGLQDWLRQQHYHUFRPHVLQWRSOD\l,Q %HIRUHDQDO\]LQJWKHDUJXPHQWVRIWKHSDUWLHVLWLVXVHIXOWR
UH *HRUJHWRZQ %OGJ $VVRFV %5 %DQNU EHJLQZLWKDEULHIRYHUYLHZRIWKHFRQFHSWRISDUWLFLSDWLRQ
''& ,QGHHGmZKHUHVKDUHKROGHUVKDYHVXEVWLWXWHGGHEW DJUHHPHQWV
IRUDGHTXDWHULVNFDSLWDOWKHLUFODLPVDUHDSSURSULDWHO\UHFDVW
DVHTXLW\UHJDUGOHVVRIVDWLVIDFWLRQRIWKHRWKHUUHTXLUHPHQWV m$ SDUWLFLSDWLRQ LV QRW D ORDQ 7R WKH FRQWUDU\ D
RIHTXLWDEOHVXERUGLQDWLRQl,QUH+\SHULRQ%5DW SDUWLFLSDWLRQLVDFRQWUDFWXDODUUDQJHPHQWEHWZHHQDOHQGHU
6RPHRIWKHFRQIXVLRQEHWZHHQWKHGRFWULQHVLVFDXVHGE\WKH DQGDWKLUGSDUW\ZKHUHE\WKHWKLUGSDUW\ODEHOHGDSDUWLFLSDQW
IDFW WKDW XQGHUFDSLWDOL]DWLRQ LV D IDFWRU LQ WKH HTXLWDEOH SURYLGHVIXQGVWRWKHOHQGHUl1DWZHVW86$&UHGLW&RUS
VXERUGLQDWLRQ DQDO\VLV DQG RIWHQ LV D IDFWRU LQ D Y$OFR6WDQGDUG&RUS)6XSS 6'1<
UHFKDUDFWHUL]DWLRQDQDO\VLVOHDGLQJmVRPHFRXUWVWRHTXLWDEO\ 7KHOHQGHULQWXUQXVHVWKHIXQGVIURPWKHSDUWLFLSDQW
VXERUGLQDWHFODLPVWKDWRWKHUFRXUWVZRXOGUHFKDUDFWHUL]HDV WR PDNH ORDQV WR WKH ERUURZHU 6HH LG DW m7KH
HTXLW\FRQWULEXWLRQVl1R]HPDFNVXSUDSDJHDW SDUWLFLSDQW LV QRW D OHQGHU WR WKH ERUURZHU DQG KDV QR
FRQWUDFWXDO UHODWLRQVKLS ZLWK WKH ERUURZHUl ,ELG 7KH
%HFDXVH ERWK UHFKDUDFWHUL]DWLRQ DQG HTXLWDEOH SDUWLFLSDQWjVRQO\FRQWUDFWXDOUHODWLRQVKLSLVZLWKWKHOHQGHU
VXERUGLQDWLRQ DUH VXSSRUWHG E\ WKH %DQNUXSWF\ &RGH DQG WKHSDUWLFLSDQWKDVQRDELOLW\WRVHHNOHJDOUHFRXUVHDJDLQVWWKH
VHUYH GLIIHUHQW SXUSRVHV ZH MRLQ WKRVH FRXUWV WKDW KDYH ERUURZHU 6HH : &UHZV /RWW HW DO 6WUXFWXULQJ 0XOWLSOH
FRQFOXGHG WKDW D EDQNUXSWF\ FRXUW KDV WKH SRZHU WR /HQGHU 7UDQVDFWLRQV %$1.,1* /s
UHFKDUDFWHUL]HDFODLPIURPGHEWWRHTXLW\6HHHJ,QUH 3DWULFNs/HGZLGJH/RDQ3DUWLFLSDWLRQV$PRQJ&RPPHUFLDO
+HUE\jV)RRGV)GDW
,QUH*HRUJHWRZQ%OGJ %DQNV7(11 / 5(9
6LQFH D SDUWLFLSDWLRQ LV E\ LWV QDWXUH FRQWUDFWXDO WKH
SDUWLHV WR D SDUWLFLSDWLRQ DJUHHPHQW PD\ FKRRVH ZKDWHYHU
7KH FRXUW LQ ,Q UH +\SHULRQ %5 DW QRWHG WKDW WKH )LIWK WHUPVWKH\ZLVKDQGWKHDJUHHPHQWZLOOJHQHUDOO\EHHQIRUFHG
&LUFXLW KDG WUHDWHG UHFKDUDFWHUL]DWLRQ RI ORDQV DV D VXEVHW RI D EDQNUXSWF\ DVWRLWVWHUPV6HH)LUVW%DQNRI:D.HHQH\Y3HRSOHV6WDWH
FRXUWjV HTXLWDEOH VXERUGLQDWLRQ SRZHUV EXW RQH PRQWK DIWHU ,Q UH
+\SHULRQ WKH )LIWK &LUFXLW PDGH FOHDU WKDW mD FRXUW LV DXWKRUL]HG WR %DQN3G .DQ&W$SS 7KHSDUWLHV
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
WR D SDUWLFLSDWLRQ DJUHHPHQW DUH DWWUDFWHG E\ FHUWDLQ %DQNUXSWF\ &RGH DOORZV FRXUWV WR GHWHUPLQH ZKHWKHU WR
LQFHQWLYHV)RUWKHOHDGOHQGHUWKHDWWUDFWLRQVDUHPDQ\ GLVDOORZ FODLPV WKURXJK WKH SURFHVV RI HTXLWDEOH
VXERUGLQDWLRQ6HHLELG7KHFRXUWVWDWHGWKDWm>Z@KHUHWKHUH
7KH OHDG >OHQGHU@ UHFHLYHV LPPHGLDWH UHSD\PHQW RI D LVDVSHFLILFSURYLVLRQJRYHUQLQJWKHVHGHWHUPLQDWLRQVLWLV
SRUWLRQRIWKHORDQIURPWKHSDUWLFLSDQWVDQGLVWKHUHE\ LQFRQVLVWHQW ZLWK WKH %DQNUXSWF\ &RGH WR DOORZ VXFK
DEOHWRPDNHDGGLWLRQDOORDQVWRHLWKHUWKHVDPHRUWRQHZ GHWHUPLQDWLRQVWREHPDGHXQGHUGLIIHUHQWVWDQGDUGVWKURXJK
ERUURZHUV7KHOHDG>OHQGHU@DOVRHDUQVLQFRPHLQWKH WKHXVHRIDFRXUWjVHTXLWDEOHSRZHUVl,ELG
IRUPRIORDQRULJLQDWLRQIHHVDQGORDQVHUYLFLQJFKDUJHV
$W WLPHV WKH SDUWLFLSDWLRQ GHYLFH SHUPLWV WKH OHDG :HGLVDJUHHZLWKWKLVOLQHRIFDVHV,QVWHDGZHDJUHHZLWK
LQVWLWXWLRQ WR DFFRPPRGDWH FRQVXPHU FUHGLW GHPDQGV WKHGLVWULFWFRXUWjVGHFLVLRQDQGKROGWKDWDEDQNUXSWF\FRXUW
ZLWKRXW H[FHHGLQJ LWV OHJDO OHQGLQJ OLPLW 7KH ORDQ FDQ FRQVLGHU ZKHWKHU WR UHFKDUDFWHUL]H D FODLP RI GHEW DV
SDUWLFLSDWLRQ LV DSSHDOLQJ EHFDXVH LW DOORZV D OHQGLQJ HTXLW\ %DQNUXSWF\ FRXUWV WKDW KDYH DSSOLHG D
LQVWLWXWLRQWRVKDUHWKHOHQGLQJULVN UHFKDUDFWHUL]DWLRQDQDO\VLVKDYHVWDWHGWKDWWKHLUSRZHUWRGR
VRVWHPVIURPWKHDXWKRULW\YHVWHGLQWKHEDQNUXSWF\FRXUWVWR
:+.QLJKWsU/RDQ3DUWLFLSDWLRQ$JUHHPHQWV &DWFKLQJ XVHWKHLUHTXLWDEOHSRZHUVWRWHVWWKHYDOLGLW\RIGHEWV6HH,Q
8SZLWK&RQWUDFW/DZ &2/80 %86 / 5(9 UH&ROG+DUERU%5DW ,QUH)HWW5RRILQJ 6KHHW
%\HQWHULQJLQWRSDUWLFLSDWLRQDJUHHPHQWVWKHQWKH 0HWDO&R,QF)6XSS %DQNU('9D
OHQGHUREWDLQVWKHEHQHILWRIEHLQJDEOHmWRPDNHDORDQZKLFK 7KHVRXUFHRIWKHFRXUWjVJHQHUDOHTXLWDEOHSRZHUVLV
LV JUHDWHU WKDQ LWV OHQGLQJ DXWKRULW\l )LUVW %DQN RI RIWKH&RGHZKLFKVWDWHVWKDWEDQNUXSWF\MXGJHVKDYH
:D.HHQH\3GDW7KHSDUWLFLSDQWRQWKHRWKHU WKHDXWKRULW\WRmLVVXHDQ\RUGHUSURFHVVRUMXGJPHQWWKDWLV
KDQGmREWDLQVWKHEHQHILWVRIWKHOHQGHUjVVHFXULW\LQWHUHVW QHFHVVDU\RUDSSURSULDWHWRFDUU\RXWWKHSURYLVLRQVlRIWKH
DQGSULRULW\RISD\PHQWl1DWZHVW86$)6XSSDW &RGH86& D
HPSKDVLVDGGHG
7KHHIIHFWRIDEDQNUXSWF\jVFRXUWjVUHFKDUDFWHUL]DWLRQRID
,Q,QUH&RURQHW&DSLWDO&R%5 %DQNU6'1< FODLP IURP GHEW WR HTXLW\ PD\ EH VLPLODU WR WKH FRXUWjV
WKH FRXUW GHYLVHG D IRXUSDUW GHILQLWLRQ RI D mWUXHl VXERUGLQDWLRQRIDFODLPWKURXJKHTXLWDEOHVXERUGLQDWLRQLQ
SDUWLFLSDWLRQ DJUHHPHQW PRQH\ LV DGYDQFHG E\ D WKDWLQERWKFDVHVWKHFODLPLVVXERUGLQDWHGEHORZWKDWRI
RWKHU FUHGLWRUV +RZHYHU WKHUH DUH LPSRUWDQW GLIIHUHQFHV
EHWZHHQDFRXUWjVDQDO\VLVRIUHFKDUDFWHUL]DWLRQDQGHTXLWDEOH
VXERUGLQDWLRQ LVVXHV 1RW RQO\ GR UHFKDUDFWHUL]DWLRQ DQG
3DUWLFLSDQWV DOVR REWDLQ RWKHU EHQHILWV GHSHQGLQJ RQ WKHLU LQWHUHVW LQ HTXLWDEOH VXERUGLQDWLRQ VHUYH GLIIHUHQW IXQFWLRQV EXW WKH
WKH WUDQVDFWLRQ 6PDOO EDQNV IRU H[DPSOH mPD\ DGYHUWLVH DV KDYLQJ
H[WHQWWRZKLFKDFODLPLVVXERUGLQDWHGXQGHUHDFKSURFHVV
KHOSHG ILQDQFH WKH FUHGLW QHHGV RI ODUJH ZHOONQRZQ ERUURZHUV ZKLFK
ZRXOG QRW RUGLQDULO\ VHHNV ORDQV IURP VPDOOHU LQVWLWXWLRQVl .QLJKW
PD\ EH GLIIHUHQW 7KHVH DUH IDFWV WKDW WKH ,Q UH 3DFLILF
8:57D DW ,Q WKLV FDVH WKH GHIHQGDQWV DUH QRW VPDOO EDQNV EXW UDWKHU ([SUHVVFRXUWDSSHDUHGQRWWRUHFRJQL]H5HFKDUDFWHUL]DWLRQ
VKDUHKROGHUV RI WKH ERUURZHU 7KH\ FODLP WKDW SDUWLFLSDWLRQ DJUHHPHQWV FDVHVmWXUQRQZKHWKHUDGHEWDFWXDOO\H[LVWVQRWRQZKHWKHU
RIIHU WKH EHQHILW RI JLYLQJ VKDUHKROGHUV WKH RSSRUWXQLW\ WR DGYDQFH WKH FODLP VKRXOG EH HTXLWDEO\ VXERUGLQDWHGl 0DWWKHZ
PRQH\ WKURXJK WKH OHDG OHQGHU WR WKH VKDUHKROGHUjV FRPSDQ\ ZKHQ LW LV
1R]HPDFN1RWH0DNLQJ6HQVH2XWRI%DQNUXSWF\&RXUWVj
IDFLQJ ILQDQFLDO GLIILFXOW\ 1 ,Q UH +\SHULRQ (QWHUV
%5
'5, LQ FRQVLGHULQJ HTXLWDEOH VXERUGLQDWLRQ FODLP LQYROYLQJ
5HFKDUDFWHUL]DWLRQ RI &ODLPV :K\ 1RW 8VH F
LQVLGHUV FRXUW QRWHG WKDW mEHFDXVH LQVLGHUV DUH WKH SHUVRQV PRUH (TXLWDEOH6XERUGLQDWLRQ":$6+ /(( / 5(9
LQWHUHVWHG LQ UHVWRULQJ DQG UHYLYLQJ WKH GHEWRU VXFK ERQD ILGH HIIRUWV FULWLFL]LQJ3DFLILF([SUHVV ,QDUHFKDUDFWHUL]DWLRQ
VKRXOG EH YLHZHG ZLWK DSSURYDOl
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
SUHVHQWHYLGHQFHWKDWWKHGHIHQGDQWVHQJDJHGLQLQHTXLWDEOH SDUWLFLSDQW WR D OHDG OHQGHU WKH SDUWLFLSDQWjV ULJKW WR
FRQGXFW UHSD\PHQWRQO\DULVHVZKHQWKHOHDGOHQGHULVSDLG RQO\
WKHOHDGOHQGHUFDQVHHNOHJDOUHFRXUVHDJDLQVWWKHERUURZHU
'$OOHJHG'HEW6KRXOGEH5HFKDUDFWHUL]HGDV DQG WKH GRFXPHQW LV HYLGHQFH RI WKH SDUWLHVj WUXH
(TXLW\ LQWHQWLRQV,GDW VHHDOVR,QUH6DFNPDQ0RUWJDJH&RUS
%5 %DQNU6'1< DSSO\LQJ&RURQHW
%D\HUjVILQDODUJXPHQWLVWKDWWKHEDQNUXSWF\FRXUWHUUHGLQ IDFWRUV ,QUH<DOH([SUHVV6\V,QF)6XSS
UHIXVLQJWRUHFKDUDFWHUL]HWKHGHIHQGDQWVjmDOOHJHGlGHEWDV 6'1< ILUVWDUWLFXODWLQJIDFWRUVDGRSWHGDVIRXUSDUW
HTXLW\ 5HFKDUDFWHUL]DWLRQ LV DSSURSULDWH ZKHUH WKH GHILQLWLRQ LQ &RURQHW :H EHOLHYH WKDW WKLV GHILQLWLRQ
FLUFXPVWDQFHVVKRZWKDWDGHEWWUDQVDFWLRQZDVmDFWXDOO\>DQ@ DFFXUDWHO\ GHVFULEHV WKH IDFWRUV WKDW PXVW EH FRQVLGHUHG LQ
HTXLW\FRQWULEXWLRQ>@DELQLWLRl,QUH&ROG+DUERU$VVRFV RUGHUWRGHWHUPLQHLIWKHSDUWLHVKDYHLQIDFWHQWHUHGLQWRD
%5 %DQNU('9D %D\HUDUJXHVWKDW SDUWLFLSDWLRQDJUHHPHQWRUDQRWKHUW\SHRIWUDQVDFWLRQVLPSO\
WKH EDQNUXSWF\ FRXUW DQG WKH GLVWULFW FRXUW PLVDSSOLHG WKH ODEHOHGDSDUWLFLSDWLRQDJUHHPHQW
HOHYHQIDFWRU WHVW HQXQFLDWHG E\ WKLV FRXUW WR GHWHUPLQH
ZKHWKHU UHFKDUDFWHUL]DWLRQ LV DSSURSULDWH 6HH 5RWK 6WHHO 7KHGHIHQGDQWVDUJXHWKDWWKHFKDUDFWHULVWLFVRIWKHLUILYH
7XEH&RY&RPPjURI,QWHUQDO5HYHQXH)G SDUWLFLSDWLRQDJUHHPHQWVPHHWWKLVGHILQLWLRQ%D\HUGLVSXWHV
WK&LU %D\HUDVVHUWVWKDWLWKDVSUHVHQWHGVXIILFLHQW WKLV DVVHUWLQJ WKDW WKH EDQNUXSWF\ FRXUW HUUHG LQ JUDQWLQJ
HYLGHQFH DV WR WKH HOHYHQ IDFWRUV WR ZLWKVWDQG VXPPDU\ VXPPDU\ MXGJPHQW LQ IDYRU RI GHIHQGDQWV VLQFH JHQXLQH
MXGJPHQW LVVXHVRIPDWHULDOIDFWH[LVWDVWRHDFKIDFWRU
:H PXVW ILUVW GHWHUPLQH ZKHWKHU D UHFKDUDFWHUL]DWLRQ 'RWKH$JUHHPHQWV'RFXPHQWWKH3DUWLHVj,QWHQWLRQV"
DQDO\VLV LV DSSURSULDWH EHIRUH ZH FDQ FRQVLGHU %D\HUjV
DUJXPHQWV7KHEDQNUXSWF\FRXUWLQWKLVFDVHUXOHGWKDWLWGLG 7KH GHIHQGDQWV DUJXH WKDW WKH SDUWLFLSDWLRQ DJUHHPHQWV
QRWKDYHWKHDXWKRULW\WRUHYLHZ%D\HUjVUHFKDUDFWHUL]DWLRQ WKHPVHOYHV DQG WKH FRQGXFW RI &,7 DV OHDG OHQGHU DQG WKH
FODLP7KHGLVWULFWFRXUWUHYHUVHGWKDWGHFLVLRQDQGUHPDQGHG GHIHQGDQWV DV SDUWLFLSDQWV DOO GHPRQVWUDWH WKDW WKH SDUWLHV
WKH FDVH LQ RUGHU IRU WKH EDQNUXSWF\ FRXUW WR UHYLHZ WKH LQWHQGHG WKDW WKH WUDQVDFWLRQV EH mWUXHl SDUWLFLSDWLRQ
UHFKDUDFWHUL]DWLRQ FODLP &RXUWV DUH VSOLW DV WR ZKHWKHU DJUHHPHQWV 7KH GHIHQGDQWV QRWH WKDW $XWR6W\OHjV DQQXDO
EDQNUXSWF\FRXUWVKDYHWKHDXWKRULW\WRUHFKDUDFWHUL]HFODLPV ILQDQFLDOVWDWHPHQWVZKLFK%D\HUUHFHLYHGPDGHUHIHUHQFHWR
6RPH FRXUWV KDYH KHOG WKDW WKH\ GR QRW 6HH HJ ,Q UH WKHUH EHLQJ SDUWLFLSDWLRQV LQ &,7jV FUHGLW IDFLOLW\ 7KH
3DFLILF ([SUHVV ,QF %5 WK &LU %$3 ILQDQFLDO VWDWHPHQWV GLG QRW VSHFLILFDOO\ PHQWLRQ WKH
,QUH3LQHWUHH3DUWQHUV/WG%5 %DQNU GHIHQGDQWVQRUGLGWKH\VSHFLILFDOO\VWDWHWKDWWKHGHIHQGDQWV
1'2KLR IROORZLQJ,QUH3DFLILF([SUHVV 7KHVH HQWHUHGLQWRSDUWLFLSDWLRQDJUHHPHQWVZLWK&,7EXWWKH\GLG
GHFLVLRQVKDYHEHHQEDVHGSULQFLSDOO\RQWKHIDFWWKHUHLVQR VWDWH WKDW mVKDUHKROGHUVl RI $XWR6W\OH DGYDQFHG DGGLWLRQDO
VSHFLILFSURYLVLRQRIWKH%DQNUXSWF\&RGHWKDWDOORZVFRXUWV IXQGLQJWR$XWR6W\OHWKURXJK&,7jVFUHGLWIDFLOLW\
WRUHFKDUDFWHUL]HFODLPV6HH,QUH3DFLILF([SUHVV %5
DW 7KH FRXUW LQ ,Q UH 3DFLILF ([SUHVV QRWHG WKDW WKH %D\HUFRQWHQGVWKDWWKHGLVWULFWFRXUWLPSURSHUO\UHOLHGRQ
WKH WLWOH RI HDFK RI WKH SDUWLFLSDWLRQ DJUHHPHQWV DV DQ
6LQFH %D\HU LV XQDEOH WR HVWDEOLVK WKH ILUVW UHTXLUHG HOHPHQW RI DQ
HTXLWDEOH VXERUGLQDWLRQ FODLP LW LV XQQHFHVVDU\ IRU XV WR DGGUHVV WKH 7KH SDUWLHV DGGUHVV WKH &RURQHW IDFWRUV LQ UHYHUVH RUGHU :H ZLOO
UHPDLQLQJ WZR HOHPHQWV GR WKH VDPH
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
LQGLFDWLRQRIWKHSDUWLHVjLQWHQWLRQWRWUHDWWKHWUDQVDFWLRQVDV 8QGHUFDSLWDOL]DWLRQ DORQH LV LQVXIILFLHQW WR MXVWLI\ WKH
SDUWLFLSDWLRQVLQ&,7jVORDQV%D\HUDVVHUWVWKDWWKHSDUWLHVj VXERUGLQDWLRQ RI LQVLGHU FODLPV KRZHYHU m$ ILQGLQJ RI
LQWHQWLRQVDQGDFWLRQVFRQWUDGLFWWKHWHUPVRIWKHDJUHHPHQWV LQHTXLWDEOH FRQGXFW UHTXLUHV PRUH WKDQ D VKRZLQJ RI
%D\HUFLWHVHYLGHQFHIURPERDUGPHHWLQJVRI$XWR6W\OHDQG XQGHUFDSLWDOL]DWLRQ 7KHUH PXVW EH HYLGHQFH RI RWKHU
$XWR6W\OH,QFLQGLFDWLQJWKHFRPSDQLHVFRQWHPSODWHGWKDW LQHTXLWDEOHFRQGXFWl,QUH+\SHULRQ%5DW VHH
&9&DQG6056ZRXOGIXQGGLUHFWDQG XQVHFXUHGmEULGJH DOVR,QUH )DEULFDWRUV )GDW 7KLVLVEHFDXVH
ORDQVlZLWKZDUUDQWV%D\HUXVHVWKLVHYLGHQFHWRDOOHJHWKDW m>D@Q\RWKHUDQDO\VLVZRXOGGLVFRXUDJHORDQVIURPLQVLGHUVWR
WKH)LUVWDQG6HFRQG3DUWLFLSDWLRQ$JUHHPHQWVZHUHRULJLQDOO\ FRPSDQLHV IDFLQJ ILQDQFLDO GLIILFXOW\ DQG WKDW ZRXOG EH
LQWHQGHG WR EH EULGJH ORDQV ,Q DGGLWLRQ %D\HU SUHVHQWV XQIRUWXQDWHEHFDXVHLWLVWKHVKDUHKROGHUVZKRDUHPRVWOLNHO\
HYLGHQFH WKDW DIWHU WKH )LUVW DQG 6HFRQG 3DUWLFLSDWLRQ WRKDYHWKHPRWLYDWLRQWRVDOYDJHDIORXQGHULQJFRPSDQ\l,Q
$JUHHPHQWVZHUHGUDIWHGDQGVLJQHG$XWR6W\OHJDYH%D\HU UH2FWDJRQ%5DW,QGHHGWKHTXRWHWKDW%D\HU
GRFXPHQWVLQGLFDWLQJWKDWWKHSDUWLFLSDWLRQVZHUHXQVHFXUHG UHOLHVXSRQVWDWHVWKDWDEDQNUXSWF\FRXUWmPD\loQRWPXVWo
mVKDUHKROGHU EULGJH ORDQVl %D\HU DOVR UHOLHV RQ D &,7 HTXLWDEO\ VXERUGLQDWH D FODLP LI WKHUH LV HYLGHQFH RI
PHPRUDQGXPUHJDUGLQJ$XWR6W\OHWKDWOLVWHGWKHGHIHQGDQWV XQGHUFDSLWDOL]DWLRQ,QUH7HQQHVVHH9DOOH\%5DW
DV m3DUWLFLSDQWVl LQ m6SHFLDO /RDQVl VHSDUDWH DQG GLVWLQFW Q$FRXUWPD\HTXLWDEO\VXERUGLQDWHDFODLPLIWKHUHLV
IURP DQG VXERUGLQDWHG WR &,7jV ORDQV DQG WKRVH RI RWKHU mVRPH VKRZLQJ RI VXVSLFLRXV LQHTXLWDEOH FRQGXFW EH\RQG
SDUWLFLSDQWVLQ&,7jVFUHGLWIDFLOLW\)LQDOO\%D\HUUHOLHVXSRQ PHUH LQLWLDO XQGHUFDSLWDOL]DWLRQ RI WKH HQWHUSULVHl ,Q UH
DQDIILGDYLWIURPDUHWLUHG0HOORQ%DQNRIILFLDOVWDWLQJWKDW %UDQGLQJ ,URQ 6WHDN +RXVH )G WK &LU
mWKLVPHWKRGRISURYLGLQJIXQGVE\DQLQVLGHULVQRWKLQJPRUH 6XFK FRQGXFW PD\ LQFOXGH mIUDXG VSRLODWLRQ
WKDQ LQ UHDOLW\ D FDSLWDO LQIXVLRQ DQG VKRXOG EH WUHDWHG PLVPDQDJHPHQW RU IDLWKOHVV VWHZDUGVKLSl ,Q UH 2FWDJRQ
DFFRUGLQJO\l %5DW TXRWLQJ,QUH1 '3URSV,QF%5
%DQNU1'*D DIILUPHGLQSDUWUHYHUVHG
%D\HUjVDUJXPHQWVDUHXQDYDLOLQJ7KHIDFWVLQGLFDWHWKDW LQ SDUW RQ RWKHU JURXQGV )G WK &LU
WKHSDUWLHVLQWHQGHGWKHWUDQVDFWLRQVWREHWUXHSDUWLFLSDWLRQ %D\HUSUHVHQWVQRHYLGHQFHRIWKLVW\SHRIDGGLWLRQDOFRQGXFW
DJUHHPHQWV 7KH IDFW WKDW WKH ILUVW WZR SDUWLFLSDWLRQ 7KHUHIRUH %D\HUjV UHOLDQFH RQ $XWR6W\OHjV DOOHJHG
DJUHHPHQWVPD\RULJLQDOO\KDYHEHHQLQWHQGHGWREHDQRWKHU XQGHUFDSLWDOL]DWLRQ LV QRW HQRXJK WR VXSSRUW LWV HTXLWDEOH
IRUPRIDJUHHPHQWLVQRWE\LWVHOIVXIILFLHQWWRGHPRQVWUDWHD VXERUGLQDWLRQFODLP
JHQXLQHLVVXHRIPDWHULDOIDFW$OWKRXJKWKHSDUWLHVPD\KDYH
FRQWHPSODWHGDGLIIHUHQWW\SHRIDJUHHPHQWWKHWUDQVDFWLRQV %D\HULVXQDEOHWRHVWDEOLVKDJHQXLQHLVVXHRIPDWHULDOIDFW
WKDWWKHSDUWLHVDFWXDOO\FRPSOHWHGDUHZKDWZHPXVWDQDO\]H DVWRLWVHTXLWDEOHVXERUGLQDWLRQFODLPEHFDXVHLWLVXQDEOHWR
VLQFH LW LV WR WKHVH DJUHHPHQWV WKDW WKH SDUWLHV XOWLPDWHO\
DJUHHGWRELQGWKHPVHOYHV0RUHRYHUWKHIDFWWKDW$XWR6W\OH
PD\ KDYH UHSUHVHQWHG WKH WUDQVDFWLRQV DV EULGJH ORDQV LQ
GRFXPHQWVLWJDYHWR%D\HULVRIOLWWOHLPSRUWVLQFH$XWR6W\OH
ZDV QRW D SDUW\ WR WKH DJUHHPHQWV )LQDOO\ WKH &,7
PHPRUDQGXPWKDWGHVFULEHGWKHGHIHQGDQWVjSDUWLFLSDWLRQVDV
m6SHFLDO/RDQVlZDVQRWLQDFFXUDWH7KHPHPRUDQGXPPDGH
FOHDUWKDW WKHGHIHQGDQWVKDGSDUWLFLSDWLRQVLQ&,7jVFUHGLW
7KH GHIHQGDQWV GLVSXWH ZKHWKHU $XWR6W\OH ZDV XQGHUFDSLWDOL]HG
IDFLOLW\DQGLQGLFDWHGWKDWWKHGHIHQGDQWVjSDUWLFLSDWLRQVZHUH +RZHYHU ZH GR QRW QHHG WR UHVROYH WKLV IDFWXDO GLVSXWH EHFDXVH HYHQ LI
VXERUGLQDWHGWR&,7DQGRWKHUSDUWLFLSDQWVLQWKHORDQ $XWR6W\OH ZDV XQGHUFDSLWDOL]HG WKLV IDFW E\ LWVHOI ZRXOG QRW EH QRW
HQRXJK IRU %D\HU WR SUHYDLO RQ LWV FODLP RI HTXLWDEOH VXERUGLQDWLRQ
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
&ODLPRI8QGHUFDSLWDOL]DWLRQ 7KHODQJXDJHDQGIRUPRIWKHDJUHHPHQWVLQGLFDWHVWKDWWKH
SDUWLHV LQWHQGHG WKDW WKH GHIHQGDQWV KDYH D SDUWLFLSDWLRQ
)LQDOO\%D\HUDUJXHVWKDWWKHGHIHQGDQWVDFWHGLQHTXLWDEO\ LQWHUHVWLQ&,7jVFUHGLWIDFLOLW\7KHGHPDQGQRWHVH[HFXWHG
EHFDXVHWKH\JDYHORDQVWR$XWR6W\OHDQGDVVXPHGILGXFLDU\ E\$XWR6W\OHZHUHJLYHQWR&,7DVWKHOHQGHU,QDGGLWLRQWKH
REOLJDWLRQVWR$XWR6W\OH DQG LWVFUHGLWRUVZKHQ$XWR6W\OH VWRFN ZDUUDQWV JUDQWHG WR &9& DQG 6056 UHIHUUHG WR WKH
ZDVLQVROYHQWXQGHUFDSLWDOL]HGDQGXQDEOHWRREWDLQORDQV KROGHUjVSDUWLFLSDWLRQLQ$XWR6W\OHjVORDQVIURP&,7
IURPGLVLQWHUHVWHGWKLUGSDUWLHV
%D\HUDOVRFDQQRWUHO\RQWKHIDFWWKDWWKHFUHGLW IDFLOLW\
8QGHUFDSLWDOL]DWLRQXVXDOO\UHIHUVWRWKHLQVXIILFLHQF\RIWKH H[SDQGHGDVWKHGHIHQGDQWVPDGHWKHLUORDQV,QGHHGRQHRI
FDSLWDO FRQWULEXWLRQV PDGH WR D FRUSRUDWLRQ 6HH ,Q UH WKHSXUSRVHVRISDUWLFLSDWLRQDJUHHPHQWVLVWRJLYHWKHOHQGHU
)DEULFDWRUV )G DW :KHQ D FRUSRUDWLRQ LV WKHDELOLW\WRH[SDQGLWVORDQEH\RQGLWVRZQOLPLWV6HH%DQN
XQGHUFDSLWDOL]HGDFRXUWLVPRUHVNHSWLFDORISXUSRUWHGORDQV RI:D.HHQH\3GDW7KHIDFWWKDWWKHGHIHQGDQWVj
PDGHWRLWEHFDXVHWKH\PD\LQUHDOLW\EHLQIXVLRQVRIFDSLWDO ORDQV ZHUH VXERUGLQDWHG WR WKH ORDQV RI &,7 DQG WKH RWKHU
0RUHRYHUXQGHUFDSLWDOL]DWLRQPD\FUHDWHFLUFXPVWDQFHVLQ SDUWLFLSDQWVLQWKHFUHGLWIDFLOLW\LVDOVRRIOLWWOHKHOSWR%D\HU
ZKLFKLQHTXLWDEOHFRQGXFWLVPRUHOLNHO\WRRFFXU7KHUHIRUH 7KHSDUWLFLSDQWVKDGWKHDELOLW\WREDUJDLQIRUWKHLUUHODWLYH
DV %D\HU SRLQWV RXW mLI DQ LQVLGHU PDNHV D ORDQ WR DQ SRVLWLRQ RI UHSD\PHQW ZLWKLQ WKH FUHGLW IDFLOLW\ DQG WKH
XQGHUFDSLWDOL]HG FRUSRUDWLRQ WKH FRPELQDWLRQ RI GHIHQGDQWV WRRN WKH ULVN RI D VXERUGLQDWHG KLJKHUULVN
XQGHUFDSLWDOL]DWLRQ DQG WKH LQVLGHU ORDQ PD\ DOORZ WKH SRVLWLRQUHODWLYHWRWKHOHDGOHQGHUDQGRWKHUSDUWLFLSDQWV6HH
EDQNUXSWF\FRXUWWRHTXLWDEO\VXERUGLQDWHWKHORDQWRWKH ,QUH)HOLFLW\$VVRFV,QF %5 %DQNU'5,
FODLPV RI RWKHU FUHGLWRUVl ,Q UH 7HQQHVVHH 9DOOH\ 6WHHO XSKROGLQJ YDOLGLW\ RI VXERUGLQDWHG SDUWLFLSDWLRQ
&RUS %5 Q %DQNU (' 7HQQ DJUHHPHQWDQGVWDWLQJWKDWDmSDUWLFLSDWLRQDJUHHPHQWKDVµQR
TXRWLQJ ,Q UH +HUE\jV )RRGV )G DW 7KH VSHFLILHGRUVWDQGDUGIRUP>DQG@QRVWDWXWRU\FKDUDFWHULVWLFV
EDQNUXSWF\FRXUWjVDELOLW\WRWDNHVXFKDFWLRQmHPDQDWHVIURP DQG RIWHQ RSHUDWHV LQ FRQMXQFWLRQ ZLWK RWKHU GRFXPHQWV
WKHFRXUWjVSRZHUWRLJQRUHWKHIRUPRIDWUDQVDFWLRQDQG jl TXRWLQJ$ODQ:$UPVWURQJ7KH(YROYLQJ/DZRI
JLYHHIIHFWWRLWVVXEVWDQFHl,QUH)DEULFDWRUV )GDW 3DUWLFLSDWLRQV5$/,$%$ $SU
%D\HULVOHIWWRUHO\RQO\RQFLUFXPVWDQWLDOHYLGHQFHDQGWKH
%D\HUFODLPVWKDW$XWR6W\OHjVILQDQFLDOVWDWHPHQWVLQGLFDWH DIILGDYLWRIDQRIILFLDOIURPWKHEDQNWKDWORDQHG$XWR6W\OH
WKDW GXULQJ WKH UHOHYDQW WLPHV $XWR6W\OHjV OLDELOLWLHV WKHIXQGVWKDW%D\HUJXDUDQWHHG7KHRIILFLDOjVFRQFOXVRU\
H[FHHGHGLWVDVVHWVDQG$XWR6W\OHFRXOGQRWREWDLQORDQVIURP VWDWHPHQW WKDW WKH GHIHQGDQWVj SDUWLFLSDWLRQV DUH UHDOO\
GLVLQWHUHVWHGWKLUGSDUWLHV5HO\LQJRQ,QUH7HQQHVVHH9DOOH\ LQIXVLRQV RI FDSLWDO LV QRW VXIILFLHQW WR RYHUFRPH WKH
%D\HUDVVHUWVWKDWWKHGHIHQGDQWVjWUDQVDFWLRQVZHUHLQVLGHU RYHUZKHOPLQJHYLGHQFHWKDWWKHGHIHQGDQWVDQG&,7LQWHQGHG
ORDQV WR DQ XQGHUFDSLWDOL]HG FRUSRUDWLRQ WKDW VKRXOG EH WRHQWHUmWUXHlSDUWLFLSDWLRQDJUHHPHQWV
HTXLWDEO\VXERUGLQDWHGWR%D\HUjVORDQV
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
'LG&,7+DYHWKH6ROH5LJKWWR6HHN/HJDO5HFRXUVH LQDGHTXDWHWRSURYLGHQRWLFHEHFDXVHWKH\RQO\UHIHUUHGWRWKH
$JDLQVWWKH%RUURZHU" GHIHQGDQWVLQJHQHUDOWHUPVDVVKDUHKROGHUVDQGGLGQRWPDNH
UHIHUHQFHWRWKHSDUWLFLSDWLRQDJUHHPHQWV,QDGGLWLRQ%D\HU
7KHSDUWLFLSDWLRQDJUHHPHQWVH[SOLFLWO\JLYH&,7WKHVROH FRQWHQGVWKDWEHIRUHDJUHHLQJWRWKH0HOORQ%DQNJXDUDQWHH
ULJKWWRVHHNOHJDOUHFRXUVHDJDLQVWWKHERUURZHU0RUHRYHU LW LQTXLUHG LQWR WKH mVKDUHKROGHU ORDQVl UHIHUHQFHG LQ WKH
WKHEDQNUXSWF\FRXUWQRWHGWKDWWKHGHIHQGDQWVGLGQRWILOHD ILQDQFLDO VWDWHPHQW DQG $XWR6W\OH VWDWHG WKDW WKH\ ZHUH
SURRI RI FODLP DJDLQVW $XWR6W\OH 7KH EDQNUXSWF\ FRXUW mEULGJHORDQVlPDGHE\VKDUHKROGHUVQRW&,7%D\HUDOVR
GHWHUPLQHG WKDW WKLV ZDV FRQVLVWHQW ZLWK D OHJLWLPDWH VWDWHVWKDWLWUHYLHZHGWKHSXEOLFUHFRUGZKLFKGLVFORVHGQR
SDUWLFLSDWLRQVLQFHWKHOHDGOHQGHUKROGVWKHH[FOXVLYHSRZHU SHUWLQHQW VHQLRU VHFXULW\ LQWHUHVW KHOG E\ DQ\ RI WKH
WRILOHDSURRIRIFODLP6HH,QUH)HOLFLW\ %5DW VKDUHKROGHUV
1HYHUWKHOHVV%D\HUFODLPVWKDWWKHUHLVHYLGHQFHRXWVLGHRI 7KHVHDUJXPHQWVDUHLQVXIILFLHQW WRGHPRQVWUDWHWKDWWKH
WKH DJUHHPHQWV LQGLFDWLQJ WKDW WKH GHIHQGDQWV GLG QRW ORRN GHIHQGDQWV IDLOHG WR SXW %D\HU RQ QRWLFH RI WKHLU FODLPV WR
VROHO\WR&,7WRHQIRUFHWKHLUORDQV%D\HUSRLQWVWRWKDWIDFW &,7jV VHQLRU OLHQ SRVLWLRQ $OWKRXJK WKH UHIHUHQFHV LQ WKH
WKDWRQHRIWKHGHIHQGDQWV&9&ILOHGD0RWLRQWR&RPSHO ILQDQFLDO VWDWHPHQWV ZHUH QRW VSHFLILF DV WR HLWKHU WKH
3D\PHQWRI1HW5HQWDO3D\PHQWVZLWKWKHEDQNUXSWF\FRXUW GHIHQGDQWV RU WKH SDUWLFLSDWLRQ DJUHHPHQWV WKH UHIHUHQFHV
RQ 0D\ DQG WKH GHIHQGDQWV KDYH SURYLGHG WKH ZHUHLQFOXGHGLQDGLVFXVVLRQRI&,7jVFUHGLWIDFLOLW\,QVWHDG
SULQFLSDO RSSRVLWLRQ WR %D\HUjV 0RWLRQ IRU $GHTXDWH RILQYHVWLJDWLQJWKLVLQIRUPDWLRQIXUWKHUDQGFRQWDFWLQJ&,7
3URWHFWLRQ%D\HUFODLPVWKDWWKHOHDGOHQGHU&,7VKRXOG %D\HU UHOLHG XSRQ $XWR6W\OHjV GHVFULSWLRQV RI WKHVH
KDYHWDNHQDFWLRQWRHQIRUFHWKHSDUWLFLSDWLRQORDQVQRWWKH DJUHHPHQWVDVEULGJHORDQVHYHQWKRXJKWKH\ZHUHGLVFXVVHG
GHIHQGDQWV LQ $XWR6W\OHjV ILQDQFLDO VWDWHPHQWV ZLWKLQ WKH FRQWH[W RI
&,7jVFUHGLWIDFLOLW\%D\HUDOVRDUJXHVWKDWWKHSDUWLFLSDWLRQ
7KH GHIHQGDQWV SRLQW RXW WKDW XQGHU WKH SDUWLFLSDWLRQ DJUHHPHQWVZHUHQRWLQWKHSXEOLFUHFRUGEHFDXVH%D\HUIRXQG
DJUHHPHQWV&,7LVHQWLWOHGWRUHLPEXUVHPHQWRILWVDWWRUQH\Vj QRVSHFLILFUHIHUHQFHWRWKHGHIHQGDQWVjVHFXULW\LQWHUHVWVLQ
IHHV IRU DQ\ GHIHQVH FRVWV EHIRUH GLVWULEXWLRQ WR WKH WKH SXEOLF UHFRUG +RZHYHU %D\HU NQHZ WKDW &,7 KDG D
GHIHQGDQWV7KHGHIHQGDQWVVWDWHWKDWWKHUHIRUHWKH\FKRVH VHFXULW\LQWHUHVWWKDWLWZDVH[SDQGDEOHDQGWKDWLWZDVDKHDG
QRWWRXVH&,7jV&KLFDJRFRXQVHODQGLQFXUUHLPEXUVHPHQW RI%D\HUjVVHFXULW\LQWHUHVW$VZHKDYHSUHYLRXVO\GLVFXVVHG
FRVWVWR&,7EXWLQVWHDGUHWDLQHGWKHLURZQ0LFKLJDQFRXQVHO WKRURXJKH[DPLQDWLRQRI&,7jVFUHGLWIDFLOLW\DQGLWVVHFXULW\
WR SXUVXH WKLV OLWLJDWLRQ 7KH GHIHQGDQWV UHO\ RQ 1DWZHVW LQWHUHVWoZKLFK%D\HUGRHVQRWGLVSXWHZHUHLQWKHSXEOLF
86$)6XSSDW LQZKLFKDSDUWLFLSDQW UHFRUGoZRXOGKDYHUHYHDOHGWKHSDUWLFLSDWLRQDJUHHPHQWV
OLWLJDWHGDSULRULW\GLVSXWHZLWKDQRWKHUFUHGLWRUDIWHUWKHOHDG WKHIDFWWKDWWKHFUHGLWIDFLOLW\FRQWHPSODWHGIXWXUHDGYDQFHV
OHQGHU ZDV UHSDLG LQ IXOO +RZHYHU LQ WKDW FDVH WKH OHDG WKDWZRXOGDOORZLWWRH[SDQGDQGWKHIDFWWKDWWKHGHIHQGDQWV
ZHUHVKDULQJLQ&,7jVOLHQSRVLWLRQ%D\HUZDVRQQRWLFHRI
WKH GHIHQGDQWVj OLHQ SRVLWLRQ WKURXJK &,7jV VHFXUHG FUHGLW
6HFWLRQ RI WKH RI WKH )LUVW 6HFRQG DQG )RXUWK 3DUWLFLSDWLRQ IDFLOLW\7KHIDFWWKDW%D\HUZDVQRWDZDUHRIWKHGHIHQGDQWVj
$JUHHPHQWV SURYLGHV WKDW m>W@KH DFFRXQW VKDOO EH FRQGXFWHG VROHO\ LQ
OLHQ SRVLWLRQ EHFDXVH %D\HU GLG QRW FRQGXFW DGHTXDWH GXH
>&,7jV@ QDPH >&,7@ LV HQWLWOHG WR PDNH $GYDQFHV DV LW GHHPV ILW XQGHU
GLOLJHQFH GRHV QRW MXVWLI\ HTXLWDEO\ VXERUGLQDWLQJ WKH
GHIHQGDQWVjFODLPV
WKH $JUHHPHQWV >&,7@ VKDOO KDYH WKH ULJKW WR WDNH DOO DFWLRQV DQG
SURFHHGLQJV MXGLFLDO RU RWKHUZLVH WKDW >&,7@ PD\ UHDVRQDEO\ GHHP
QHFHVVDU\ RU SURSHU WR SURWHFW WKH MRLQW LQWHUHVWV SURYLGHG KHUHLQ l
7KH 7KLUG DQG )LIWK 3DUWLFLSDWLRQ $JUHHPHQWV DPHQGHG SUHYLRXV
DJUHHPHQWV DQG GLG QRW DIIHFW WKH ODQJXDJH LQ 6HFWLRQ
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
WKDW WKH GHIHQGDQWV REWDLQHG mVHFUHW OLHQVl WKURXJK WKHLU OHQGHUILOHGDQLQWHUSOHDGHUDFWLRQWRDOORZWKHSDUWLFLSDQWWR
SXUSRUWHGSDUWLFLSDWLRQVFRQFHDOHGWKRVHOLHQVIURP%D\HU OLWLJDWHWKHFDVHDQDFWLRQWKDWGLGQRWRFFXULQWKLVFDVH
DQGWRRNDGYDQWDJHRIWKHIDFWWKDW$XWR6W\OHWROG%D\HUWKDW
WKHDJUHHPHQWVZHUHEULGJHORDQV :HEHOLHYHWKDWWKHDFWLRQVRIWKHGHIHQGDQWVGRQRWFDVW
GRXEWRQWKHODQJXDJHLQWKHSDUWLFLSDWLRQDJUHHPHQWVVWDWLQJ
%D\HUjV DUJXPHQWV DUH EDVHOHVV 7KH IDFW WKDW %D\HU WKDWWKHOHDGOHQGHUKDVWKHVROHULJKWWRVHHNOHJDOUHFRXUVH
SHUFHLYHVWKHGHIHQGDQWVjOHJLWLPDWHDFWLRQVWREHLQHTXLWDEOH DJDLQVW WKH ERUURZHU $OWKRXJK &,7 GLG QRW ILOH DQ
DV WR %D\HU LV QRW VXIILFLHQW m,Q RUGHU WR HTXLWDEO\ LQWHUSOHDGHUDFWLRQLWZDVQRWLPSURSHUIRU&,7WRDOORZWKH
VXERUGLQDWH D FUHGLWRUjV FODLP WKH FUHGLWRULQVLGHU PXVW GHIHQGDQWVWRKLUHWKHLURZQFRXQVHODQGSURYLGHWKHSULQFLSDO
DFWXDOO\XVHLWVSRZHUWRFRQWUROWRLWVRZQDGYDQWDJHRUWRWKH RSSRVLWLRQ WR %D\HUjV PRWLRQ LQ OLJKW RI WKH IDFW WKDW WKH
RWKHUFUHGLWRUVjGHWULPHQWl,QUH0U5jV3UHSDUHG)RRGV GHIHQGDQWV ZRXOG KDYH WR UHLPEXUVH &,7 IRU WKH FRVWV RI
,QF%5 %DQNU'&RQQ TXRWLQJ,QUH OLWLJDWLQJ WKLV DFWLRQ )XUWKHUPRUH WKH GHIHQGDQWV DUH QRW
)DEULFDWRUV )GDW $OWKRXJKWKHGHIHQGDQWVj VHHNLQJUHFRXUVHIURP$XWR6W\OHLQWKLVDFWLRQ UDWKHUWKH\
DFWLRQVZHUHWR%D\HUjVGHWULPHQWWKHUHLVQRHYLGHQFHWKDW DUH RSSRVLQJ %D\HUjV FODLPWKDW WKH GHIHQGDQWV VKRXOG QRW
WKHGHIHQGDQWVXVHGWKHLUSRZHUWRFRQWUROLQVXFKDZD\WKDW UHFHLYHSURFHHGVIURP$XWR6W\OHjVEDQNUXSWF\HVWDWHDKHDGRI
WKH\HQJDJHGLQLQHTXLWDEOHFRQGXFW$VZHKDYHGLVFXVVHG %D\HU,QGHHG&9&jV0RWLRQWR&RPSHO3D\PHQWZDVILOHG
WKH SDUWLFLSDWLRQ DJUHHPHQWV DUH YDOLG DQG HQIRUFHDEOH LQ UHVSRQVH WR %D\HUjV 0RWLRQ IRU $GHTXDWH 3URWHFWLRQ
0RUHRYHU WKHUH ZDV QR QHHG IRU WKH GHIHQGDQWV WR ILOH %D\HULVXQDEOHWRSRLQWWRDQ\DFWLRQE\ZKLFKWKHGHIHQGDQWV
VHFXULW\VWDWHPHQWVUHJDUGLQJWKHDJUHHPHQWVVLQFHWKH\ZHUH VRXJKW OHJDO UHFRXUVH GLUHFWO\ IURP $XWR6W\OH SULRU WR WKH
VHFXUHGE\&,7jVSURSHUO\DQGFRQWLQXRXVO\SHUIHFWHGVHFXULW\ FRPPHQFHPHQWRIWKLVOLWLJDWLRQ
LQWHUHVW LQ LWV FUHGLW IDFLOLW\ 7KH IDFW WKDW WKH SDUWLHV
RULJLQDOO\FRQWHPSODWHGDGLIIHUHQWIRUPRIDJUHHPHQWKDVQR 'R3DUWLFLSDQWVj5LJKWVWR5HSD\PHQW$ULVH2QO\:KHQ
EHDULQJZLWKRXWHYLGHQFHRIPLVFRQGXFWZKLFK%D\HUIDLOVWR /HDG/HQGHULV3DLGE\%RUURZHU"
SURYLGH6LPLODUO\$XWR6W\OHjVLPSURSHUGHVFULSWLRQRIWKH
DJUHHPHQWV LV RI OLWWOH DVVLVWDQFH WR %D\HU JLYHQ WKDW ,QDWUXHSDUWLFLSDWLRQDJUHHPHQWmWKHSDUWLFLSDQWJHWVSDLG
$XWR6W\OHZDVQRWDSDUW\WRWKHDJUHHPHQWV IURPPRQH\WKHOHDGOHQGHUUHFHLYHVIURPWKHERUURZHUl,Q
UH&RURQHW%5DW$FFRUGLQJWRWKHDJUHHPHQWVWKH
/DFNRI1RWLFHWR%D\HU GHIHQGDQWVjULJKWVWRUHSD\PHQWVDURVHRQO\ZKHQ&,7ZDV
SDLG E\ $XWR6W\OH ,Q DGGLWLRQ RWKHU VHFWLRQV RI WKH
%D\HU DVVHUWV WKDW WKH GHIHQGDQWV HQJDJHG LQ LQHTXLWDEOH
FRQGXFWE\QRWSXWWLQJ%D\HURQQRWLFHRIWKHLUFODLPWRVKDUH
&,7jVVHQLRUOLHQSRVLWLRQ%D\HUVWDWHVWKDWWKHGLVWULFWFRXUW
HUUHGLQFRQFOXGLQJWKDW%D\HUZDVRQQRWLFH%D\HUUHOLHVRQ 6HFWLRQ RI WKH SDUWLFLSDWLRQ DJUHHPHQWV VWDWHV
WZR DIILGDYLWV IURP LWV 'LUHFWRU RI &UHGLW 6 'RQDOG ([FHSW IRU WKRVH SD\PHQWV SHUPLWWHG XQGHU 6HFWLRQ KHUHRI
&DPSEHOOVWDWLQJWKDW%D\HUZDVQRWDZDUHWKDWLQYHVWPHQWV DQG IRU WKH SD\PHQW RI LQWHUHVW ZKHQ SHUPLWWHG XQGHU 6HFWLRQ
E\WKHGHIHQGDQWVPLJKWEHLQFOXGHGLQ&,7jVILUVWOLHQRUEH KHUHRI LW LV XQGHUVWRRG DQG DJUHHG WKDW 3DUWLFLSDQWjV
FRYHUHG E\ &,7jV IXWXUH DGYDQFH FODXVH $ZDUHQHVV LV 6XERUGLQDWHG 3DUWLFLSDWLRQ VKDOO DW DOO WLPHV EH VXERUGLQDWH DQG
GLIIHUHQWIURPQRWLFHKRZHYHU1RWVXUSULVLQJO\WKHQ%D\HU SRVWSRQHG LQ SD\PHQW WR WKH UHSD\PHQW LQ IXOO RI >&,7jV@ DQG DOO
DOVRDUJXHVWKDWLWZDVQRWRQQRWLFH%D\HUDVVHUWVWKDWWKH RWKHU SDUWLFLSDQWVj SRUWLRQV RI WKH $GYDQFHV
GLVFORVXUHV LQ $XWR6W\OHjV ILQDQFLDO VWDWHPHQWV ZHUH 6HFWLRQ RI WKH DJUHHPHQWV VWDWHV
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
DJUHHPHQWV LQGLFDWH WKDW WKH GHIHQGDQWV UHOLHG XSRQ WKH HJUHJLRXVFRQGXFWVXFKDVIUDXGVSRLODWLRQRURYHUUHDFKLQJLV
FUHGLWZRUWKLQHVVRI$XWR6W\OHDQGWKHFROODWHUDOVHFXULQJWKH QHFHVVDU\l 6LQFHDOOWKUHHGHIHQGDQWVZHUHmLQVLGHUVlLQ
ORDQ,QRWKHUZRUGVWKHGHIHQGDQWVGLGQRWORRNWR&,7WR WKDWWKH\KHOGVWRFNLQ$XWR6W\OH,QFWKHSDUHQWFRPSDQ\RI
SURYLGH SD\PHQWV WR WKHP GLUHFWO\ WKH\ RQO\ ORRNHG WR $XWR6W\OH%D\HUDUJXHVWKDWWKHGHIHQGDQWVjFRQGXFWPXVWEH
$XWR6W\OH WR SURYLGH SD\PHQWV WR &,7 ZKLFK ZRXOG WKHQ H[DPLQHGVFUXSXORXVO\
SURYLGHSD\PHQWWRWKHGHIHQGDQWVDIWHU&,7DQG WKHRWKHU
ORDQSDUWLFLSDQWVZHUHSDLG :KLOH ZH DSSO\ FDUHIXO VFUXWLQ\ LQ RXU UHYLHZ RI DQ
HTXLWDEOHVXERUGLQDWLRQFODLPLQYROYLQJDQLQVLGHUZHXVH
%D\HUIDLOVWRSURYLGHDQDGHTXDWHDUJXPHQWFRQWUDGLFWLQJ JUHDW FDXWLRQ LQ DSSO\LQJ WKH UHPHG\ mHTXLWDEOH
WKH ODQJXDJH RI WKH DJUHHPHQWV %D\HU DUJXHV WKDW WKH VXERUGLQDWLRQLVDQXQXVXDOUHPHG\ZKLFKVKRXOGEHDSSOLHG
GHIHQGDQWV FRXOG QRW KDYH UHOLHG XSRQ $XWR6W\OH IRU LQ OLPLWHG FLUFXPVWDQFHVl ,G DW VHH DOVR ,Q UH
UHSD\PHQW EHFDXVH E\ $XWR6W\OH ZDV LQ VHULRXV 2FWDJRQ%5DW7KLVJHQHUDOODQJXDJHDSSOLHVWR
ILQDQFLDOGLIILFXOW\+RZHYHUWKHH[WHQWWRZKLFK$XWR6W\OH FODLPVLQYROYLQJERWKLQVLGHUVDQGQRQLQVLGHUV:HQRWHWKDW
ZDVLQSRRUILQDQFLDOVWUDLWVGRHVQRWFKDQJHWKHODQJXDJHRI mWKH PHUH IDFW RI DQ LQVLGHU UHODWLRQVKLS LV LQVXIILFLHQW WR
WKHDJUHHPHQWVZKLFKVWDWHVWKDWWKHGHIHQGDQWVZHUHWREH ZDUUDQW VXERUGLQDWLRQl ,Q UH +\SHULRQ %5 DW
SDLGRQO\ZKHQ&,7ZDVSDLGE\$XWR6W\OH0RUHRYHUWKH &ODLPV LQYROYLQJ LQVLGHUV mDUH QRW DXWRPDWLFDOO\
IDFW WKDW WKH GHIHQGDQWV KDG D VXERUGLQDWHG SDUWLFLSDWLRQ VXERUGLQDWHGlVLQFHmLQVLGHUVDUHWKHSHUVRQVPRVWLQWHUHVWHG
LQWHUHVWLQZKLFKWKH\ZRXOGQRWEHSDLGXQWLO&,7DQGRWKHU LQ UHVWRULQJ DQG UHYLYLQJ WKH GHEWRU DQG VXFK ERQD ILGH
SDUWLFLSDQWV ZHUH SDLG LQ IXOO GRHV QRW DIIHFW WKLV DQDO\VLV HIIRUWV VKRXOG EH YLHZHG ZLWK DSSURYDOl ,ELG ,QVLGHU
VLQFHWKHGHIHQGDQWVUHOLHGVROHO\RQWKHFUHGLWZRUWKLQHVVRI WUDQVDFWLRQV DUH PRUH FORVHO\ VFUXWLQL]HG QRW EHFDXVH WKH
$XWR6W\OHIRUUHSD\PHQW7KLVFDVHLVXQOLNH&RURQHWIRU LQVLGHU UHODWLRQVKLS PDNHV WKHP LQKHUHQWO\ ZURQJ EXW
H[DPSOH LQ ZKLFK WKH SDUWLFLSDQW KDG D mFRQWUDFWXDO EHFDXVHLQVLGHUVmXVXDOO\KDYHJUHDWHURSSRUWXQLWLHVIRU
JXDUDQWHHRIUHSD\PHQWl%5DW,Q&RURQHWWKH LQHTXLWDEOHFRQGXFWl,QUH)DEULFDWRUV )GDW
%D\HUSUHVHQWVWKUHHDUJXPHQWVWRVXSSRUWLWVFODLPWKDWWKH
>&,7@ GRHV QRW KDYH DQG GRHV QRW DVVXPH DQ\ OLDELOLW\ WR
GHIHQGDQWVHQJDJHGLQLQHTXLWDEOHFRQGXFW:HZLOODGGUHVV
3DUWLFLSDQW IRU WKH UHSD\PHQW RI WKH 6XERUGLQDWHG 3DUWLFLSDWLRQ HDFKRIWKHVHDUJXPHQWVLQWXUQ
RU LQWHUHVW WKHUHRQ WR WKH H[WHQW WKDW VXFK DUH QRW UHFHLYHG IURP
%RUURZHU RU DQ\ *XDUDQWRU RI %RUURZHUjV 2EOLJDWLRQV XQGHU WKH 3DUWLFLSDWLRQV$UH$FWXDOO\'LVJXLVHG%ULGJH/RDQV
$JUHHPHQWV H[FHSW IRU ORVVHV RFFDVLRQHG E\ LWV EDG IDLWK
%D\HU DUJXHV WKDW WKH GHIHQGDQWV HQJDJHG LQ ZURQJIXO
6HFWLRQ RI WKH SDUWLFLSDWLRQ DJUHHPHQWV VWDWHV FRQGXFW E\ GLVJXLVLQJ EULGJH ORDQV DV SDUWLFLSDWLRQV DQG
VHFXULQJ WKHP E\ ZKDW %D\HU DOOHJHV DUH mVHFUHW OLHQVl
3DUWLFLSDQW DFNQRZOHGJHV WKDW >&,7@ KDV QRW PDGH DQG GRHV QRW
PDNH DQ\ UHSUHVHQWDWLRQV RU ZDUUDQWLHV H[SUHVV RU LPSOLHG DV WR
WKURXJK&,7jVFUHGLWIDFLOLW\%D\HUUHOLHVRQPLQXWHVIURP
%RUURZHUjV ILQDQFLDO FRQGLWLRQ RU ZLWK UHVSHFW WR WKH YDOLGLW\
ERDUGPHHWLQJVRI$XWR6W\OHDQG$XWR6W\OH,QFLQZKLFKWKH
HQIRUFHDELOLW\ FROOHFWDELOLW\ SULRULW\ RU SHUIHFWLRQ RI WKH ERDUGVGLVFXVVHGWKHSRVVLELOLW\RIMXQLRUXQVHFXUHGGLUHFW
$JUHHPHQWV WKH 7UDQVDFWLRQV WKH 3ULPDU\ &ROODWHUDO RU WKH mEULGJHORDQVlIURP&9&DQG6056WR$XWR6W\OH%D\HU
6HFRQGDU\ &ROODWHUDO DQG WKDW 3DUWLFLSDQW LV IXOO\ IDPLOLDU ZLWK
DOOHJHV WKDW WKHVH EULGJH ORDQV ZHUH mVXGGHQO\ UHFDVW DV
KDV PDGH LWV RZQ LQGHSHQGHQW HYDOXDWLRQ DQG GHWHUPLQDWLRQ RI
SXUSRUWHG VXERUGLQDWHG SDUWLFLSDWLRQVl LQ WKH &,7 FUHGLW
IDFLOLW\ WKURXJK WKH )LUVW DQG 6HFRQG 3DUWLFLSDWLRQ
DQG DSSURYHV RI DOO GHWDLOV WKHUHRI
$JUHHPHQWV,QDGGLWLRQ%D\HURIIHUVFRQFOXVRU\DOOHJDWLRQV
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
&$OOHJHG,QHTXLWDEOH&RQGXFW5HTXLULQJ OHDG OHQGHU ZDV UHTXLUHG WR SD\ WKH SDUWLFLSDQW
(TXLWDEOH6XERUGLQDWLRQ QRWZLWKVWDQGLQJWKHSD\PHQWVLWUHFHLYHGIURPWKHERUURZHU
6HH LELG 7KHUH LV QR HYLGHQFH RI VXFK DQ DUUDQJHPHQW
%D\HU DVVHUWV WKDW WKH GHIHQGDQWVj FODLPV VKRXOG EH EHWZHHQ&,7DQGWKHGHIHQGDQWV
HTXLWDEO\VXERUGLQDWHGWR%D\HUjVFODLPVSXUVXDQWWR6HFWLRQ
F RIWKH%DQNUXSWF\&RGHZKLFKSURYLGHV 'LG3DUWLFLSDQWV$GYDQFH0RQH\'LUHFWO\WR/HDG
/HQGHU"
F 1RWZLWKVWDQGLQJ VXEVHFWLRQV D DQG E RI WKLV
VHFWLRQDIWHUQRWLFHDQGDKHDULQJWKHFRXUWPD\o 7KH GHIHQGDQWV UHO\ XSRQ HYLGHQFH WKDW WKH\ VXEPLWWHG
XQGHU SULQFLSOHV RI HTXLWDEOH VXERUGLQDWLRQ LQGLFDWLQJ WKDW WKH\ SDLG PRQH\ GLUHFWO\ WR &,7 QRW WR
VXERUGLQDWHIRUSXUSRVHVRIGLVWULEXWLRQDOORUSDUWRIDQ $XWR6W\OH2WKHUHYLGHQFHGHPRQVWUDWHVWKDWRQO\&,7ORDQHG
DOORZHGFODLPWRDOORUSDUWRIDQRWKHUDOORZHGFODLPRU IXQGV WR $XWR6W\OH DQG RQO\ &,7 KDG D GLUHFW FRQWUDFWXDO
DOORUSDUWRIDQDOORZHGLQWHUHVWWRDOORUSDUWRIDQRWKHU UHODWLRQVKLSZLWK$XWR6W\OH
DOORZHGLQWHUHVW
%D\HULVXQDEOHWRHVWDEOLVKDJHQXLQHLVVXHRIPDWHULDOIDFW
86& F DVWRWKLVHOHPHQW%D\HUUHOLHVRQO\RQPLQRULQFRQVLVWHQFLHV
LQ WKH UHFRUG QRQH RI ZKLFK GLUHFWO\ FRQWUDGLFW WKH IDFWV
7KLVFRXUWKDVDGRSWHGDWKUHHSDUWVWDQGDUGIRUHVWDEOLVKLQJ SUHVHQWHGE\WKHGHIHQGDQWVLQGLFDWLQJWKDWWKH\SDLGPRQH\
HTXLWDEOHVXERUGLQDWLRQ WKHFODLPDQWPXVWKDYHHQJDJHG GLUHFWO\WR&,7
LQVRPHW\SHRILQHTXLWDEOHFRQGXFW WKHPLVFRQGXFWPXVW
KDYH UHVXOWHG LQ LQMXU\ WR WKH FUHGLWRUV RI WKH EDQNUXSW RU
FRQIHUUHG DQ XQIDLU DGYDQWDJH RQ WKH FODLPDQW DQG
HTXLWDEOHVXERUGLQDWLRQRIWKHFODLPPXVWQRWEHLQFRQVLVWHQW $IWHUDVVHVVLQJHDFKRIWKHIRXUHOHPHQWVQHFHVVDU\IRUD
ZLWKWKHSURYLVLRQVRIWKH%DQNUXSWF\$FW6HH,QUH%DNHU mWUXHl SDUWLFLSDWLRQ DJUHHPHQW ZH FRQFOXGH WKDW WKH
*HWW\)LQ6HUYV,QF )G WK&LU GHIHQGDQWVKDYHFRQYLQFLQJO\GHPRQVWUDWHGWKDWHDFKRIWKH
FLWLQJ,QUH0RELOH6WHHO&R)G WK SDUWLFLSDWLRQ DJUHHPHQWV PHHWV WKLV GHILQLWLRQ 7KH IDFWV
&LU 6DWLVIDFWLRQRIWKLVWKUHHSDUWVWDQGDUGGRHVQRW UHOLHGXSRQE\%D\HUDUHLQVXIILFLHQWWRHVWDEOLVKDJHQXLQH
PHDQWKDWDFRXUWLVUHTXLUHGWRHTXLWDEO\VXERUGLQDWHDFODLP LVVXHRIPDWHULDOIDFWDVWRYDOLGLW\RIWKHDJUHHPHQWV
EXWUDWKHUWKDWWKHFRXUWLVSHUPLWWHGWRWDNHVXFKDFWLRQ6HH
,QUH2FWDJRQ5RRILQJ%5 1',OO 6LQFHZHKDYHGHWHUPLQHGWKDWWKHSDUWLFLSDWLRQDJUHHPHQWV
ZHUHYDOLGOHJDODQGHQIRUFHDEOHWKHZHLJKWRI%D\HUjVWKUHH
:KHQ UHYLHZLQJ HTXLWDEOH VXERUGLQDWLRQ FODLPV FRXUWV UHPDLQLQJDUJXPHQWVLVVLJQLILFDQWO\ZHDNHQHG
LPSRVHDKLJKHUVWDQGDUGRIFRQGXFWXSRQLQVLGHUV,QGHHG
m>D@FODLPDULVLQJIURPWKHGHDOLQJVEHWZHHQDGHEWRUDQGDQ %$OOHJHG)DLOXUHWR3HUIHFWD6HFXULW\,QWHUHVW
LQVLGHULVWREHULJRURXVO\VFUXWLQL]HGE\WKHFRXUWVl,QUH
)DEULFDWRUV )G WK&LU VHHDOVR,Q %D\HUDUJXHVWKDWWKHGHIHQGDQWVVKRXOGKDYHREWDLQHGD
UH+\SHULRQ%5DW7KHUHIRUHmLIWKHFODLPDQWLV VHFXULW\ DJUHHPHQW VLJQHG E\ $XWR6W\OH DV UHTXLUHG E\
DQ LQVLGHU OHVV HJUHJLRXV FRQGXFW PD\ VXSSRUW HTXLWDEOH 6HFWLRQ RIWKH8QLIRUP&RPPHUFLDO&RGH 8&& ,Q
VXERUGLQDWLRQl,QUH+HUE\jV)RRG,QF)G DGGLWLRQ %D\HU DUJXHV WKDW WKH GHIHQGDQWV GLG QRW ILOH
WK&LU FI,QUH)DEULFDWRUV )GDW m,I
WKH FODLPDQW LV QRW DQ LQVLGHU WKHQ HYLGHQFH RI PRUH
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
ILQDQFLQJ VWDWHPHQWV GLVFORVLQJ WKDW WKH\ ZHUH VHFXUHG PLVOHDGLQJlZKDWLVDOHJLWLPDWHEXVLQHVVSUDFWLFH0RUHRYHU
FUHGLWRUVDVUHTXLUHGE\6HFWLRQ RIWKH8&& RQFH FUHGLWRUV DUH DZDUH WKDW D VHFXUHG ORDQ LV PDGH WKH\
KDYHDGXW\RILQTXLU\WRGHWHUPLQHLISDUWLFLSDWLRQLQWHUHVWV
%D\HUDUJXHVWKDWE\IDLOLQJWRJLYHQRWLFHWKDWWKH\ZHUH KDYHEHHQVROGLIWKH\WKLQNWKDWVXFKNQRZOHGJHZRXOGEH
IXQGLQJ$XWR6W\OHWKHGHIHQGDQWVmGHFHSWLYHO\GHQLHG%D\HU LPSRUWDQW
WKH RSSRUWXQLW\ WR PDNH DQ LQIRUPHG GHFLVLRQl UHJDUGLQJ
ZKHWKHU %D\HUjV FUHGLW WHUPV VKRXOG EH GLIIHUHQW ZKHWKHU 6HFRQG %D\HU DUJXHV WKDW WKH GHIHQGDQWVj SDUWLFLSDWLRQ
VXERUGLQDWLRQDJUHHPHQWVVKRXOGEHGHPDQGHGDQGZKHWKHU LQWHUHVWVDUHQRWFRYHUHGE\WKHIXWXUHDGYDQFHFODXVHLQ&,7jV
WRH[WHQGDGGLWLRQDOFUHGLW FUHGLW IDFLOLW\ %D\HU FRQWHQGV WKDW ZKLOH WKH 8&&
FRQWHPSODWHV mIORDWLQJ FROODWHUDOl WKURXJK DIWHUDFTXLUHG
%D\HUjVFODLPLVZKROO\ZLWKRXWPHULW7KH8&&GRHV SURSHUW\ SURYLVLRQV DQG mIORDWLQJ GHEWl WKURXJK IXWXUH
QRWUHTXLUHSDUWLFLSDQWVWRREWDLQVHSDUDWHVHFXULW\DJUHHPHQWV DGYDQFH FODXVHV LW GRHV QRW FRQWHPSODWH mIORDWLQJ VHFXUHG
RUWRILOHVHSDUDWHILQDQFLQJVWDWHPHQWVQRUGRHVWKH8&& SDUWLHVl,QUH($)UHW]&R,QF)G
UHTXLUH D OHDG OHQGHUjV ILQDQFLQJ VWDWHPHQW WR LGHQWLI\ WK &LU %D\HU DVVHUWV WKDW WKH GHIHQGDQWV DUH
SDUWLFLSDQWVLQWKHXQGHUO\LQJORDQ$ORDQSDUWLFLSDQWGRHV mIORDWLQJVHFXUHGSDUWLHVlZKRKDGXQVHFXUHGLQWHUHVWVWKDW
QRWREWDLQDVHSDUDWHVHFXULW\LQWHUHVWIRUZKLFKLWLVUHTXLUHG ZHUHRQO\VHFXUHGE\&,7jVIXWXUHDGYDQFHFODXVH7KHFRXUW
WRILOHDVHSDUDWHILQDQFLQJVWDWHPHQW UDWKHULWmREWDLQVWKH LQ,QUH($)UHW]VWDWHGWKDW
EHQHILWV RI WKH OHQGHUjV VHFXULW\ LQWHUHVW DQG SULRULW\ RI
SD\PHQWl 1DWZHVW 86$ ) 6XSS DW HPSKDVLV WKH 8&& FOHDUO\ FRQWHPSODWHV DQG VDQFWLRQV IORDWLQJ
DGGHG :KHQSDUWLFLSDWLRQDJUHHPHQWVmFOHDUO\FRQWHPSODWH FROODWHUDO DIWHUDFTXLUHG SURSHUW\ RI WKH GHEWRU DQG
DVDOHDQGFRPSOHWHWUDQVIHURIDQRZQHUVKLSLQWHUHVWWRWKH IORDWLQJGHEW IXWXUHDGYDQFHV +RZHYHUWKH8&&GRHV
SDUWLFLSDQWlDVLQWKLVFDVHm>W@KHSDUWLFLSDQWWKHQRZQVDQ QRWFRQWHPSODWHmIORDWLQJVHFXUHGSDUWLHVlWKDWLVDQ
XQGLYLGHGSRUWLRQRIWKH>OHDGOHQGHUjV@ORDQDQGDQ\VHFXULW\ RSHQHQGHG FODVV RI FUHGLWRUV ZLWK XQVHFXUHG DQG
LQWHUHVWWKHUHXQGHUl%UDGIRUG$QGHUVRQ/RDQ3DUWLFLSDWLRQV XQSHUIHFWHGLQWHUHVWVZKRDIWHUWKHGHEWRUjVEDQNUXSWF\
FDQ DVVLJQ WKHLU FODLPV WR D PRUH VHQLRU OLHQRU DQG
PDJLFDOO\ VHFXUH DQG SHUIHFW WKHLU LQWHUHVWV XQGHU DQ
RPQLEXVVHFXULW\DJUHHPHQWDQGILQDQFLQJVWDWHPHQW
(ODLQH $ :HOOH
:H QRWH WKDW $UWLFOH RI WKH 8&& KDV EHHQ UHYLVHG HIIHFWLYH
,GDW HPSKDVLVDGGHG 1RWKLQJRIWKHVRUWKDSSHQHGLQ
:<2 / 5(9
sXO\ 6HH HJ $Q ,QWURGXFWLRQ WR 5HYLVHG
WKLVFDVH7KHGHIHQGDQWVOHJLWLPDWHO\WRRNDGYDQWDJHRIWKH
+DUU\ & 6LJPDQ (GZLQ ( 6PLWK
$UWLFOH RI WKH 8QLIRUP &RPPHUFLDO &RGH
5HYLVHG
%86 /$:
8&& $UWLFOH
V
IXWXUHDGYDQFHFODXVHLQ&,7jVFUHGLWIDFLOLW\7KHGHIHQGDQWV
+DUU\ & 6LJPDQ (GZLQ ( 6PLWK QHYHU ZHUH mIORDWLQJ VHFXUHG SDUWLHVl 7KH\ ZHUH QRW DQ
7UDQVLWLRQ 5XOHV ,QVXULQJ D 6RIW /DQGLQJ3DUW ,,
%86 /$:
5HYLVHG 8&& $UWLFOH
V
RSHQHQGHGFODVVRIFUHGLWRUV0RUHRYHUWKH\GLGQRWKDYH
6LQFH WKH WUDQVDFWLRQV LQ WKLV FDVH ZHUH FRPSOHWHG EHIRUH WKH UHYLVHG
7UDQVLWLRQ 5XOHV ,QVXULQJ D 6RIW /DQGLQJ
mXQVHFXUHGDQGXQSHUIHFWHGLQWHUHVWVlWKDWWKH\DVVLJQHGWRD
$UWLFOH EHFDPH HIIHFWLYH ZH ZLOO DSSO\ $UWLFOH DV LW H[LVWHG EHIRUH WKH PRUHVHQLRUOLHQRU5DWKHUWKHGHIHQGDQWVKDGVHFXUHGDQG
UHYLVLRQV DQG ZLOO QRW VSHFXODWH RQ WKH HIIHFW RI WKH UHYLVHG $UWLFOH SHUIHFWHGLQWHUHVWVDVVRRQDVWKHLUSDUWLFLSDWLRQLQWHUHVWVFDPH
LQWRH[LVWHQFH
%D\HU QRWHV WKDW LW GHPDQGHG DQG UHFHLYHG D VXERUGLQDWLRQ
DJUHHPHQW IURP 6056 LQ WKH LQVWDQW WUDQVDFWLRQ DOWKRXJK WKH DJUHHPHQW %D\HUjVDUJXPHQWVDUHLQVXIILFLHQWWRGHPRQVWUDWHWKDWWKH
GLG QRW LQYROYH 6056jV SDUWLFLSDWLRQ LQWHUHVW VLQFH %D\HU FODLPV LW ZDV
QRW DZDUH RI WKH LQWHUHVW DQG IURP &,7 0DVFR7HFK DQG 6056 LQ RWKHU GHIHQGDQWVZHUHUHTXLUHGWRSHUIHFWVHSDUDWHO\WKHLUVHFXULW\
WUDQVDFWLRQV LQWHUHVWVLQ&,7jVFUHGLWIDFLOLW\
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
7KHILQDQFLQJVWDWHPHQWILOHGE\&,7ZDVVXIILFLHQWWRSXW DQGWKH%RUURZHUjV%DQNUXSWF\ $0 %$1.5 /s
%D\HURQQRWLFHRIWKHIDFWWKDW&,7PD\KDYHKDGDVHFXULW\ $VRQHREVHUYHUKDVVWDWHG
LQWHUHVWUHODWLQJWR$XWR6W\OH,WZDV%D\HUjVREOLJDWLRQWR
LQTXLUHDVWRH[WHQWRI&,7jVVHFXULW\,QVWHDGRIFRQWDFWLQJ 7KHFXVWRPDPRQJEDQNVKDVEHHQWKDWWKH>SDUWLFLSDQW@
&,7WRGHWHUPLQHWKHH[WHQWRI&,7jVFUHGLWIDFLOLW\ZKLFK PDNHV QR HIIRUW WR SHUIHFW DQ\ VHFXULW\ LQWHUHVW LW PD\
%D\HUGRHVQRWDOOHJHLWHYHUGLG%D\HUUHOLHGRQ$XWR6W\OHjV KDYH HLWKHU E\ ILOLQJ XQGHU WKH 8QLIRUP &RPPHUFLDO
LQDFFXUDWH UHSUHVHQWDWLRQV RI WKH GHIHQGDQWVj SDUWLFLSDWLRQ &RGHRUXQGHUUHFRUGLQJODZVUHODWLQJWRUHDOSURSHUW\
LQWHUHVWVDVEULGJHORDQV,QGHHGmILQDQFLQJVWDWHPHQWV 5DWKHUWKH>SDUWLFLSDQW@UHOLHVXSRQWKH>OHDGOHQGHU@DQG
GLVFORVH>@ VXIILFLHQW LQIRUPDWLRQ WR HQDEOH DQ\ FRQFHUQHG WKHILOLQJVDQGUHFRUGLQJVPDGHE\WKH>OHDGOHQGHU@IRU
FUHGLWRUWRFRQWDFW>WKHQHFHVVDU\SDUWLHVIRUIXUWKHUGHWDLOV@ WKH SHUIHFWLRQ RI LWV ULJKWV DJDLQVW WKH ERUURZHUjV
7KH&RGHKHOSVRQO\WKRVHZKRKHOSWKHPVHOYHVl,QUH.LQJ SURSHUW\6HFWLRQ RIWKH8QLIRUP&RPPHUFLDO
3RUWHU &R )G WK &LU HPSKDVLV &RGHSURYLGHVWKDWLIDVHFXUHGSDUW\DVVLJQVDSHUIHFWHG
DGGHG %D\HUVLPSO\FDQQRWEHUHZDUGHGIRULWVODFNRIGXH VHFXULW\LQWHUHVWQRILOLQJXQGHU$UWLFOH LVUHTXLUHGLQ
GLOLJHQFHLQIDLOLQJWRFRQWDFW&,7 RUGHU WR FRQWLQXH WKH SHUIHFWHG VWDWXV RI WKH VHFXULW\
LQWHUHVW,QGHILQLQJDµVHFXUHGSDUW\jVHFWLRQ RI
%D\HU RIIHUV WZR UHDVRQV WR GLYHVW WKH GHIHQGDQWV RI WKH WKH&RGHSURYLGHVWKDWZKHQWKHKROGHUVRIREOLJDWLRQV
VHFXULW\ WKH\ REWDLQHG WKURXJK &,7jV FUHGLW IDFLOLW\ )LUVW LVVXHG XQGHU DQ LQGHQWXUH RI WUXVW HTXLSPHQW WUXVW
%D\HUVWDWHVWKDWWKHIDLOXUHRIWKHGHIHQGDQWVWRILOHILQDQFLQJ DJUHHPHQWµRUWKHOLNHjDUHµUHSUHVHQWHGjE\DWUXVWHHRU
VWDWHPHQWVRUWREHGLVFORVHGRQ&,7jVILQDQFLQJVWDWHPHQWV RWKHUSHUVRQWKHUHSUHVHQWDWLYHLVWKHVHFXUHGSDUW\
LVmVHULRXVO\PLVOHDGLQJl8&& D ,QUH&RSSHU
.LQJ,QQ,QF )G WK&LU ,Q /HGZLGJH VXSUD SDJH DW :H EHOLHYH WKDW WKLV
&RSSHU .LQJ WKH FRXUW UXOHG LW ZDV LPSURSHU IRU LQVLGHU mFXVWRPl LV VXSSRUWHG E\ FDVHV ZKLFK LQ DQDORJRXV
DIILOLDWHV WR FODLP VHFXUHG VWDWXV IRU ORDQV H[WHQGHG WR D FLUFXPVWDQFHV KDYH FRQVLGHUHG WKH LVVXH RI ZKHWKHU D
UHODWHG GHEWRU EDVHG RQ D 8&& ILQDQFLQJ VWDWHPHQW WKDW SDUWLFLSDQW LQ D ORDQ LV UHTXLUHG WR ILOH VHSDUDWH ILQDQFLQJ
LQFOXGHGWKHDIILOLDWHVjQDPHVEXWQRWWKHWUXHVRXUFHRIWKH VWDWHPHQWV
IXQGVIRUWKHORDQV,GDW7KHFRXUWVWDWHGWKDWmWKH
RPLVVLRQRIDFUHGLWRUjVQDPHFRXOGEHVHULRXVO\PLVOHDGLQJ ,Q)LUVW6WDWH%DQNY7RZERDW&KLSSHZD)6XSS
HVSHFLDOO\ LQ VLWXDWLRQV OLNH WKH RQH SUHVHQWHG KHUH ZKHUH 1',OO DFUHGLWRUFKDOOHQJHGDSURSHUO\SHUIHFWHG
RIILFHUVDQGVKDUHKROGHUVLQWKHGHEWRUFRPSDQ\DUHDOVRLWV VKLSPRUWJDJHRQWKHJURXQGWKDWDORDQSDUWLFLSDQWZDVQRW
FUHGLWRUVl,ELG&RSSHU.LQJGLGQRWLQYROYHDSDUWLFLSDWLRQ VSHFLILFDOO\ QDPHG WKHUHLQ 7KH FRXUW KHOG WKDW LW ZDV QRW
DJUHHPHQW KRZHYHU EXW D GLUHFW VHFXUHG ORDQ 7KH FRXUW QHFHVVDU\WKDWWKHXQLGHQWLILHGSDUWLFLSDQWVLQWKHPRUWJDJH
SURSHUO\ GHWHUPLQHG WKDW WKH IDLOXUH mWR LGHQWLI\ WKH WUXH FRPSO\ZLWKWKHUHTXLUHPHQWVRIWKH6KLS0RUWJDJH$FWWR
VRXUFHRIWKHFUHGLWlZDVmVHULRXVO\PLVOHDGLQJl,ELG,QWKLV SUHVHUYHWKHPRUWJDJH,GDW%D\HUSURSHUO\SRLQWV
FDVHWKHILQDQFLQJVWDWHPHQWGLGLGHQWLI\WKHWUXHVRXUFHRI RXWWKDWWKLVLVQRWD8&&FDVHDQGWKDWWKHORDQSDUWLFLSDQW
WKH FUHGLW o &,7 7R LPSRVH D UXOH WKDW LW LV VHULRXVO\ ZDVQRWDVKDUHKROGHU:HEHOLHYHKRZHYHUWKDWWKHVDPH
PLVOHDGLQJIRUDOHDGOHQGHUWRILOHDILQDQFLQJVWDWHPHQWDQG SULQFLSOHoWKDWDORDQSDUWLFLSDQWGRHVQRWKDYHDVHSDUDWH
QRW LQGLFDWH SDUWLFLSDQWV LQ LWV ORDQV HLWKHU DW WKH WLPH RI REOLJDWLRQWRFRPSO\ZLWKVWDWXWRU\UHTXLUHPHQWVoDSSOLHVLQ
ILOLQJ RU ODWHU E\ DPHQGPHQW ZRXOG KDYH QHJDWLYH WKLVFDVH
FRQVHTXHQFHV,WZRXOGLPSRVHDQXQQHFHVVDU\EXUGHQRQ
OHDGOHQGHUVDQGSDUWLFLSDQWVDQGZRXOGODEHODVmVHULRXVO\ 6LPLODUO\ LQ ,Q UH )ULHG )XUQLWXUH &RUSRUDWLRQ )
6XSS ('1< WKH FRXUW XSKHOG WKH 6PDOO
,QUH$XWRVW\OH3ODVWLFV,QF 1R 1R ,QUH$XWRVW\OH3ODVWLFV,QF
%XVLQHVV $GPLQLVWUDWLRQjV OLHQ RQ WKH GHEWRUjV SURSHUW\ &,7jV ORDQ DQG PRVW LPSRUWDQWO\ WKH SURWHFWLRQ RI LWV
GHVSLWHWKHIDFWVWKDWWKH6%$DVDORDQSDUWLFLSDQWKDGQRW VHFXULW\7KHIDFWWKDWWKHGHIHQGDQWVjSDUWLFLSDWLRQLQWHUHVWV
PDGH D VHSDUDWH 8&& ILOLQJ DQG WKDW WKH OHDG OHQGHUjV ZHUHVXERUGLQDWHGZLWKLQWKHFUHGLWIDFLOLW\E\WKHGHIHQGDQWVj
ILQDQFLQJVWDWHPHQWLQGLFDWHGWKDWLWKDGPDGHWKHHQWLUHORDQ FRQWUDFWXDODUUDQJHPHQWZLWK&,7GRHVQRWFKDQJHWKHIDFW
7KHFRXUWVWDWHGWKDWm>Z@KHUHDQXPEHURISHUVRQVIXUQLVK WKDW WKH GHIHQGDQWV ZHUH DEOH WR WDNH DGYDQWDJH RI &,7jV
IXQGVWRSDUWLFLSDWHLQDORDQPDGHE\RQHRIWKHPoDQRW VHFXUHGSRVLWLRQDQGWKDWRXWVLGHUVZHUHDEOHWRLQTXLUHDVWR
XQFRPPRQVLWXDWLRQoWKHUHLVQRSRLQWLQUHTXLULQJHDFKWR WKHVL]HDQGQDWXUHRIWKHGHIHQGDQWVjVXERUGLQDWHGLQWHUHVWV
ILOHDVHSDUDWHSLHFHRISDSHUWRFOXWWHUXSUHFRUGLQJILOHVl
,ELG:HEHOLHYHWKHVDPHDQDO\VLVDSSOLHVLQWKLVFDVH 7KLV UHVXOW LV VXSSRUWHG E\ 8&& ZKLFK
FRQWHPSODWHVWKDWZKHQDFUHGLWRUILOHVDILQDQFLQJVWDWHPHQW
$QRWKHUVLPLODUFDVHLQYROYHGDFUHGLWRUZKRHQWHUHGLQWR WKLUGSDUWLHVKDYHDGXW\WRFRQGXFWIXUWKHULQTXLU\LQWRWKH
D FRQWUDFW ZLWK WKH 8QLWHG 6WDWHV DQG WKHQ DVVLJQHG DOO FUHGLWRUjVVHFXULW\LQWHUHVW6HFWLRQ
SD\PHQWV IURP WKDW FRQWUDFW WR D WKLUG SDUW\ 6HH ,QGXV
3DFNDJLQJ3URGV&RY)RUW3LWW3DFNDJLQJ,QWjO,QF DGRSWV WKH V\VWHP RI µQRWLFH ILOLQJj :KDW LV
$G 3D 7KHDVVLJQPHQWZDVFKDOOHQJHGRQ UHTXLUHG WR EH ILOHG LV QRW WKH VHFXULW\ DJUHHPHQW
WKH EDVLV WKDW WKH FUHGLWRUjV ILQDQFLQJ VWDWHPHQW ZDV LWVHOIEXWRQO\DVLPSOHQRWLFHZKLFKPD\EHILOHGEHIRUH
LQVXIILFLHQWEHFDXVHLWGLGQRWPHQWLRQWKHDVVLJQPHQW7KH WKH VHFXULW\ LQWHUHVW DWWDFKHV RU WKHUHDIWHU 7KH QRWLFH
3HQQV\OYDQLD6XSUHPH&RXUWKHOGWKDWWKHILQDQFLQJVWDWHPHQW LWVHOI LQGLFDWHV PHUHO\ WKDW WKH VHFXUHG SDUW\ ZKR KDV
ZDV VXIILFLHQW 7KH FRXUW VWDWHG WKDW m>W@KH 8QLIRUP ILOHG PD\ KDYH D VHFXULW\ LQWHUHVW LQ WKH FROODWHUDO
&RPPHUFLDO&RGHGRHVQRWUHTXLUHWKDWWKHVHFXUHGSDUW\DV GHVFULEHG)XUWKHULQTXLU\IURPWKHSDUWLHVFRQFHUQHG
OLVWHG LQ VXFK VWDWHPHQW EH D SULQFLSDO FUHGLWRU DQG QRW DQ ZLOOEHQHFHVVDU\WRGLVFORVHWKHFRPSOHWHVWDWHRIDIIDLUV
DJHQWl,GDW7KHFRXUWDOVRVWDWHGWKDWWKHILOLQJZKLFK
PDGHUHIHUHQFHWRIXWXUHDGYDQFHVUHDVRQDEO\LGHQWLILHGWKH 8&& QRWH HPSKDVLVDGGHG 7KHGXW\RI
FROODWHUDOVHFXULW\,ELG7KHFRXUWQRWHGODQJXDJHLQ8&& LQTXLU\FUHDWHGXQGHU8&& LVZHOOUHFRJQL]HGE\
WKDW mD VHFXULW\ DJUHHPHQW PD\ SURYLGH WKDW FRXUWV6HHHJ,QUH'DYLGVRQ/XPEHU6DOHV,QF)G
FROODWHUDOZKHQHYHUDFTXLUHGVKDOOVHFXUHDQ\DGYDQFHVPDGH WK&LU TXRWLQJ$VVRFVY)LUVW
RU RWKHU YDOXH JLYHQ DW DQ\ WLPH SXUVXDQW WR WKH VHFXULW\ 6HF)LQ 3GQ 8WDK&W$SS m$
DJUHHPHQWl,ELG HPSKDVLVDGGHG ILQDQFLQJVWDWHPHQWRQO\RIIHUVQRWLFHWKDWDVHFXULW\LQWHUHVW
PD\ H[LVW DQG UHTXLUHV SRWHQWLDO FUHGLWRUV WR PDNH IXUWKHU
7KHILOLQJPDGHE\&,7ZDVSURSHUHYHQWKRXJKLWGLGQRW LQTXLU\ WR FRQILUP WKH H[LVWHQFH RI VSHFLILF GHWDLOV RI WKH
VSHFLILFDOO\ PHQWLRQ WKH GHIHQGDQWV DQG WKHLU SDUWLFLSDWLRQ WUDQVDFWLRQl ,QUH1RUWKHDVW&KLFN6HUYV,QF%5
LQWHUHVWV 7KH ILOLQJ PDGH UHIHUHQFH WR WKH FUHGLW IDFLOLW\ %DQNU ' 0DVV m7KH SXUSRVH RI D ILQDQFLQJ
ZKLFKLQFOXGHGDIXWXUHDGYDQFHFODXVHWKDWVWDWHGWKDW&,7 VWDWHPHQW LV PHUHO\ WR JLYH QRWLFH RI WKH H[LVWHQFH RI D
mZLOOIURPWLPHWRWLPHPDNHDGYDQFHVWR>$XWR6W\OH@XSRQ VHFXUHG WUDQVDFWLRQ DQG WKDW IXUWKHU LQTXLU\ DV WR WKH
WKH VHFXULW\l RI WKH FROODWHUDO ZKLFK ZDV D OLHQ RQ DOO RI SDUWLFXODUVLVSUXGHQWl 6LJQDO&DSLWDO&RUSY/DNH6KRUH
$XWR6W\OHjVDVVHWV%\ILOLQJWKLVILQDQFLQJVWDWHPHQW&,7 1DWjO%DQN1(G ,OO$SS&W m7KH
SXWSRWHQWLDOFUHGLWRUVRQQRWLFHRILWVFUHGLWIDFLOLW\DQGWKH SXUSRVHRIWKHILQDQFLQJVWDWHPHQWLVWRSXWWKLUGSDUWLHVRQ
SRVVLELOLW\WKDWLWFRXOGH[SDQGDQGFRXOGLQFOXGHSDUWLFLSDQWV QRWLFHWKDWWKHVHFXUHGSDUW\ZKRILOHGLWPD\KDYHDSHUIHFWHG
VXFK DV WKH GHIHQGDQWV %\ HQWHULQJ LQWR SDUWLFLSDWLRQ VHFXULW\LQWHUHVWLQWKHFROODWHUDOGHVFULEHGDQGWKDWIXUWKHU
DJUHHPHQWVZLWK&,7WKHGHIHQGDQWVREWDLQHGDSRUWLRQRI LQTXLU\LQWRWKHH[WHQWRIWKHVHFXULW\LQWHUHVWLVSUXGHQWl
| {
"pile_set_name": "FreeLaw"
} |
722 N.W.2d 401 (2006)
2006 WI App 194
STATE v. LOVE[1].
No. 2005AP3152-CR.
Wisconsin Court of Appeals.
August 3, 2006.
Unpublished opinion. Affirmed.
NOTES
[1] Petition for Review Filed
| {
"pile_set_name": "FreeLaw"
} |
456 B.R. 84 (2011)
In re EXPERT SOUTH TULSA, LLC, Debtor.
LTF Real Estate Company, Inc., Plaintiff,
v.
Expert South Tulsa, LLC, Defendant.
Bankruptcy No. 10-20982. Adversary No. 11-06011.
United States Bankruptcy Court, D. Kansas.
August 29, 2011.
*85 Bruce E. Strauss, Merrick, Baker & Strauss, P.C., Kansas City, MO, for Plaintiff.
Jonathan A. Margolies, McDowell Rice Smith & Buchanan, Kansas City, MO, for Defendant.
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT, IN PART
ROBERT D. BERGER, Bankruptcy Judge.
Plaintiff LTF Real Estate Company, Inc., moves for summary judgment on its declaratory judgment action against Debtor Defendant Expert South Tulsa, LLC, and First American Title Insurance Company in its capacity as escrow agent.[1] The Court has jurisdiction under 28 U.S.C. §§ 157 and 1334. The motion for summary judgment is granted, in part. The escrow funds are not property of the estate, and LTF is entitled to pursue its rights under the escrow agreement. This opinion constitutes the findings of fact and conclusions of law pursuant to Fed. R. Bankr.P. 7052 and 7056.
I. Findings of Fact
A. Standards for a Properly Opposed Motion for Summary Judgment
Summary judgment is appropriate if the movant shows there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.[2] The movant bears the burden of proving the absence of controverted facts. Once this initial burden is met, the opposing party must not only set forth specific facts showing there is a genuine issue for trial, but also that the disputed fact is material. The opposing party may not rely on its pleadings, but must produce evidence to support its position. If a nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition, it may request additional time to conduct discovery.[3]
LTF sets forth a statement of material facts to which it contends no genuine issues exist.[4] Defendant Debtor does not specifically controvert most of these facts. Of Plaintiffs 27 numbered paragraphs, Debtor controverts only two with a cite to *86 an affidavit. Instead, Debtor requests more time for discovery, but Debtor fails to explain what facts it needs to discover to present its opposition. A review of Debtor's answer to the complaint shows the material facts in this case are not controverted. The parties' disagreement centers on the rights and remedies as set forth in the written agreements between them. The Court, upon its own review of the record and in light of the foregoing, finds the following facts are material and uncontroverted.
B. Uncontroverted Facts
On March 30, 2010, another of Debtor's creditors, Team Viva, filed an involuntary Chapter 7 petition, which Debtor later voluntarily converted to Chapter 11. Debtor's business was to own, develop, and sell commercial property located in Tulsa, Oklahoma. Debtor's financial difficulties stem primarily from a failed real estate development known as Memorial Commons. The project was to include retail shopping, restaurants, and office space.
LTF purchased from Debtor an undeveloped site at Memorial Commons for the purpose of building and operating a health club. The Purchase Agreement required Debtor to construct certain improvements within Memorial Commons, including: (i) the detention facility or drainage channel; (ii) the storm water connection lines; (iii) an internal roadway; (iv) an entryway into the project; (v) site grading and compaction; (vi) utilities service; and (vii) a traffic signal. Pursuant to the Purchase Agreement, Debtor agreed to escrow 120 percent of the amount estimated to complete the improvements as a guarantee fund. LTF and Debtor entered into an Escrow and Post-Closing Construction Agreement. Debtor placed $1,226,400 in escrow with First American Title. Under the terms of the escrow agreement, Debtor was entitled to return of the escrow funds upon completion of the improvements. In the event Debtor failed to complete the improvements, LTF was entitled to complete the improvements and obtain reimbursement from the escrow funds. Debtor was to remain liable for improvement costs exceeding the escrow funds.
Debtor began work on the improvements, but the improvements were not completed. Contractors who performed work or supplied materials for the improvements filed and prosecuted mechanic's liens in Oklahoma state court. LTF presents uncontroverted testimony the mechanic's lien claimants settled and dismissed their claims against Debtor. However, LTF also presents uncontroverted testimony mechanic's liens are still pending against LTF's property in the aggregate amount of approximately $551,411. No money has been disbursed from the escrow. Until this action, LTF has not elected to complete the improvements itself and seek reimbursement according to the procedure provided by the escrow agreement.
II. Conclusions of Law
A. Whether Escrow Funds Are Property of the Estate
The Bankruptcy Code defines property of the estate and includes the debtor's legal and equitable interests in property as of the petition date.[5] State law defines the debtor's rights in the property.[6] A bankruptcy estate cannot succeed to a greater interest in property than the debtor held prior to bankruptcy.[7]
*87 Legal title to property placed in an escrow account remains with the grantor until the occurrence of the condition specified in the escrow agreement. Nonetheless, funds deposited into an escrow account by a debtor, for the benefit of others, cannot be characterized as property of the estate.[8] Escrow agreements are not executory contracts. Escrow agreements are a type of express trust and are a method of conveying property.[9] The nature and circumstances of the escrow agreement control. When property is delivered in escrow, the depositor loses control over it and an interest in the property passes to the ultimate grantee under the escrow agreement.[10] Where the escrow agreement acts as an assurance or guarantee fund, the escrow funds are not property of the estate.[11] The debtor's bankruptcy does not allow escrow funds to be released to the debtor contrary to the agreement between the debtor and other parties to the escrow agreement. Such a result would convert a debtor's contingent right to the funds to a non-contingent right.[12]
Factors relevant in determining whether an escrow fund is estate property include, but are not limited to, whether the debtor initiated or agreed to the creation of the escrow, what if any control the debtor exercises over it, the incipient source of it, the nature of the funds put into it, the recipient of its remainder (if any), the target of all its benefit, and the purpose of its creation.[13]
In this case, Debtor deposited $1,226,400 in escrow to guarantee completion of site improvements for the benefit of LTF. As between LTF and Debtor, Debtor is solely responsible for the site improvement costs. Debtor is entitled to return of the escrow funds only upon completion of the site improvements. Debtor has no right to unilaterally terminate the escrow agreement and withdraw the funds prior to the site improvements' completion. In the event Debtor fails to complete the site improvements, LTF is entitled to complete them and seek reimbursement from the escrow funds. The condition precedent for the disbursement of the escrow funds is completion of site improvements. Upon occurrence of the escrow agreement's *88 condition precedent, LTF's interest in the escrow funds would terminate, and title to the account would vest with Debtor.[14] The condition precedent has not occurred. Thus, Debtor holds a contingent remainder interest with respect to any escrow funds remaining after the terms of the escrow agreement are satisfied. Debtor may not succeed to a greater interest in the funds than it possessed pre-petition. While the estate received Debtor's contingent remainder interest under the escrow agreement, such interest cannot vest until the site improvements are completed and surplus funds remain in the escrow account to which the Debtor's interest can attach. As of the petition date, Debtor had no vested interest in the escrow funds, and the funds are not property of the estate.
Debtor raises only two possible issues. First, Debtor notes it was the grantor of the funds. However, being the grantor does not establish the money is estate property. The issue is, what right to the funds does Debtor possess as of the petition date. In this case, Debtor is a contingent grantee and has an interest in the funds only after site improvements are completed.[15]
Second, Debtor notes LTF did not exercise its self-help remedy to the escrow funds prior to the petition date. LTF's failure does not cut off its rights with respect to the escrow agreement.[16] LTF's interest in the escrow agreement vested upon its creation.[17]
The escrow agreement required Debtor to deposit 120 percent of the estimated costs of the site improvements into a guarantee fund to ensure to LTF their completion. Debtor cannot claim the escrow funds before the contingency is completed or it will receive a windfall in bankruptcy it would not otherwise receive under nonbankruptcy law.
The estate holds Debtor's contingent interest in the escrow agreement and therefore has an interest in seeing LTF likewise comply with the escrow agreement's terms. However, Debtor has no present interest in the escrow funds. The escrow funds guarantee to LTF the site improvements will be completed. LTF is entitled to exercise self-help, proceed with the site improvements, and seek reimbursement from the escrow funds as provided by the escrow agreement. When the site improvements are complete, Debtor will have an interest in any surplus funds remaining in the account. Until such time, Debtor has no immediate possessory interest in the funds within the meaning of § 541 so as to bar LTF from the declarations it seeks.
Accordingly, based upon the foregoing findings of fact and conclusions of law, the Court enters summary judgment on subparagraph (a) and finds Debtor has a contingent interest in the escrow agreement.
The Court further enters summary judgment on subparagraph (b) and finds the escrow funds are not property of the estate.
The Court further enters summary judgment on subparagraph (c) and finds neither Debtor nor LTF are entitled to a disbursement of the escrow funds at this time.
*89 The Court further enters summary judgment on subparagraph (d) and finds LTF may exercise the remedy of self-help under the terms of the escrow agreement.
III. Conclusion
For the reasons set forth above, the Court GRANTS the motion for summary judgment, in part, and grants LTF the relief as provided with respect to subparagraphs (b) and (d).
IT IS SO ORDERED.
NOTES
[1] Doc. No. 21.
[2] Fed. R. Bankr.P. 7056.
[3] Fed. R. Bankr.P. 7056(d).
[4] Doc. No. 22.
[5] 11 U.S.C. § 541.
[6] Butner v. United States, 440 U.S. 48, 54-55, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979).
[7] In re ANR Advance Transp. Co., Inc., 247 B.R. 771, 774 (Bankr.E.D.Wis.2000) (escrow funds not property of estate); Cedar Rapids Meats, Inc. v. Hager (In re Cedar Rapids Meats, Inc.), 121 B.R. 562 (Bankr.N.D.Iowa 1990) (escrow fund established to guarantee worker's compensation claims was not estate property); N.S. Garrott & Sons, et al. v. Union Planters Nat'l Bank, et al. (In re N.S. Garrott & Sons), 772 F.2d 462, 466 (8th Cir.1985).
[8] Dzikowski v. NASD Regulation, Inc. (In re Scanlon), 239 F.3d 1195, 1197-98 (11th Cir. 2001).
[9] Old Republic Nat'l Title Ins. Co. v. Tyler (In re Dameron), 155 F.3d 718, 723 (4th Cir. 1998); Matter of Newcomb, 744 F.2d 621, 624 (8th Cir. 1984) (an escrow agreement is more than an executory contract and cannot be rejected because it is also a method of conveying property).
[10] Creeden v. North, 160 Okla. 90, 15 P.2d 991, 993 (1932).
[11] In re Cedar Rapids Meats, 121 B.R. at 566; In re Dolphin Titan Int'l, Inc., 93 B.R. 508, 511-12 (Bankr.S.D.Tex.1988) (funds placed in escrow to assure payment of worker's compensation claims was not estate property); In re Palm Beach Heights Dev. & Sales Corp., 52 B.R. 181, 183 (Bankr.S.D.Fla.1985) (monies placed by debtor in an escrow fund to guarantee the debtor would complete certain drainage and road improvement work was not property of the bankruptcy estate); In re Atlantic Gulf Communities Corp., 369 B.R. 156, 164 (Bankr.D.Del.2007) (funds placed in escrow to guarantee water and sewer facilities were completed were not property of the estate).
[12] In re Dolphin Titan Int'l, 93 B.R. at 512 (citing In re Creative Data Forms, Inc., 41 B.R. 334 (Bankr.E.D.Pa.1984)).
[13] In re Cedar Rapids Meats, 121 B.R. at 567.
[14] See Matter of Missionary Baptist Found, of America, 792 F.2d 502, 506 (5th Cir. 1986).
[15] See, e.g., In re Atlantic Gulf Communities Corp., 369 B.R. at 163.
[16] See, e.g., TTS, Inc. v. Citibank, N.A. (Matter of TTS, Inc.), 158 B.R. 583 (D.Del.1993).
[17] Id. at 587.
| {
"pile_set_name": "FreeLaw"
} |
385 F.2d 350
Ida NINIO, Appellant,v.Donald W. HIGHT, Appellee.
No. 9360.
United States Court of Appeals Tenth Circuit.
November 7, 1967.
Rehearing Denied December 27, 1967.
Robert A. Dufty of Kripke, Hoffman & Friedman, Denver, Colo., for appellant.
Eugene S. Hames, of Wood, Ris & Hames, Denver, Colo., for appellee.
Before MURRAH, Chief Judge, PHILLIPS and LEWIS, Circuit Judges.
MURRAH, Chief Judge.
1
Plaintiff-appellant Ninio appeals from a judgment on a jury verdict in her negligence action against defendant-appellee Hight for damages arising out of a skiing accident. The contention is, and must be, that only an inference of negligence can be drawn from the facts of the case and that the trial court erroneously refused to direct a verdict accordingly. And see Gushurst v. Benham, Colo., 417 P.2d 777; Christopherson v. Humphrey, 10 Cir., 366 F.2d 323. Alternatively, she insists that if the facts make out a case for the jury, the court erroneously refused to instruct concerning the applicable rule by which the jury should consider the negligence issue.
2
The uncontroverted facts are that on the day of the accident Mrs. Ninio was a participant in a beginner's skiing class in Aspen, Colorado. The class of ten or eleven skiers, under the direction of an instructor, were slowly descending the ski slope one after another and diagonally from one side of the ski trail to the other. Several of the skiers had crossed to the left side of the trail and were standing with the instructor looking back at those still descending. Just as Mrs. Ninio turned to begin her "traverse" to the left, Hight came skiing from "behind * * * above and to the right of the group" and collided with those of the class who were waiting to traverse to the left, including Mrs. Ninio.
3
Mrs. Ninio invokes the unwritten "rule of the road" applicable to skiing activities under which an overtaking skier is required to yield to skiers below him that are being overtaken. She points to the admitted fact that as an experienced skier, Hight was fully cognizant of this well-known rule and was the overtaking skier when he collided with the members of the ski class. She says that the day was clear and the downhill view unobstructed; that Hight was concededly "in control" and admitted seeing people on the left side of the trail but no one on the right side; that the collision occurred on the right side where at least three people were knocked to the ground, including Mrs. Ninio. We understand the theory of her case to be that if Hight was in control and had looked to the right, he could have seen and avoided the group, and that failure to see and heed their presence was negligence as a matter of law.
4
Examination of the record, however, reveals conflicting testimony as to whether Hight was in control and whether the immediate circumstances and exigencies of the situation prevented him from looking to his right. Hight testified that he was skiing "in control". But an expert witness testified that immediately after the collision Hight stated that he "caught an edge and lost control"; that "catching an edge is simply that your ski turns and you catch the edge in the snow in such a way * * * [that] it causes loss of control"; that no matter "what your proficiency is, it's still possible * * * to catch an edge while * * * skiing". Hight also testified that he had been skiing down the right-hand side of the trail to avoid people standing on the left; that "I remember either a bare spot or a spot I wanted to avoid, and I rose over a mogul [a mound of snow] and just as I had finished making my turn to the left I saw, sort of out of my field, ski pants and boots, and I didn't have time to really look up. Then we just made contact." We agree with Judge Doyle that this evidence presents questions of fact for the jury as to whether Hight was in control and whether in the circumstances he was prevented from looking to see what he should have seen.
5
Submitting the case to the jury, the trial court abstractly instructed on the issue of negligence in conventional terms of ordinary care. At the conclusion, appellant objected to the refusal of the court to instruct in accordance with the "rule of the road" in Colorado to the effect that "* * * in law if a party looks in such a manner as to fail to see what must have been plainly visible, he or she looked without a reasonable degree of care, and such a look is of no more effect than if he or she had not looked at all."
6
This instruction appears to read on the settled law of Colorado to the effect that when, in the exercise of ordinary care, one has a duty to look for dangerous conditions, he will be presumed, in case of accident, to have looked where he was supposed to look and to have seen what he could reasonably be expected to see. And, failure to look and to see what reasonably could and should have been seen is negligence. See Behr v. McCoy, 138 Colo. 137, 330 P.2d 535; Clibon v. Wayman, 137 Colo. 495, 327 P.2d 283, and cases cited.
7
Hight argues, however, that the Colorado Court has applied this rule only to cases involving automobile accidents and that it is unsound to equate drivers of motor vehicles with skiers. But, we can see no logic in refusing to apply this well-reasoned rule to all activities involving a duty to keep a proper lookout for perilous conditions or situations.
8
As we have seen, there was record evidence to support Mrs. Ninio's theory that Hight was in control, that he could and should have looked to his right and, had he done so, he could have seen and avoided the group into which he collided. Upon proper request, Mrs. Ninio would undoubtedly have been entitled to an instruction applying the abstract statement of the rule of the road to the factual theory of her case. See Dallison v. Sears, Roebuck & Co., 10 Cir., 313 F.2d 343. She requested no such instruction — unfortunately, all requested instructions were in the abstract. Be that as it may, we think the trial judge was obliged to give her requested abstract instruction on the rule of the road even as he gave other necessarily abstract instructions on ordinary care.
9
The case is accordingly reversed and remanded for a new trial.
10
LEWIS, Circuit Judge (dissenting in part).
11
I agree with my Brothers that this case presented a jury question as to whether the accident was caused by the appellee's negligence and also agree that an overtaking skier has a duty to keep such lookout as may be reasonable under all the circumstances that may be present under the varying conditions of skiing. But I do not agree that the trial court's refusal to give the abstract Colorado "rule of the road" instruction denied to appellant her right to have her theory of the case presented to the jury.
12
In her complaint, appellant alleges that appellee "negligently collided with her." No specifics of negligence are alleged. Although the record indicates that pretrial proceedings were held it contains nothing to indicate appellant's participation in the proceedings. From the brief abstract of the evidence that is before us it seems apparent that appellant presented evidence of appellee's overall skiing conduct and the physical conditions present at the site. Emphasis was upon speed, control and the claimed proficiency of appellee as a skier. At the close of the case appellant submitted fourteen proposed instructions, not one of which indicated any theory for recovery except that the "plaintiff claims that the defendant Hight was negligent in his skiing." In fact, of the proposed instructions twelve were but variations of stock instructions, one is not now in issue, and the remaining one was the subject requested instruction which is set forth in the main opinion. In regard to this instruction appellant's objection was simply to the court's failure to give it, without elaboration. The appellant presented her case in generalities and the court instructed accordingly. To have given the requested instruction as requested would have been meaningless. And the trial court had no duty to initiate appellant's theory and refine the instruction to fit the case simply from submission of an abstract statement of the law taken from cases involving the duty of motorists. Nor does this court have such a duty. The duty rests upon counsel to advise the trial court of his theory of the case and submit proposed instructions in accord so as to allow the trial court an opportunity to rule advisedly. This was never done. And even at the appellate level, appellant concedes that the requested instruction touches upon his theory of the case only "in part."
13
I would affirm.
| {
"pile_set_name": "FreeLaw"
} |
400 Mass. 254 (1987)
508 N.E.2d 842
MOLLIE H. BROMFIELD & another, executors, & others[1]
vs.
COMMONWEALTH.
Supreme Judicial Court of Massachusetts, Plymouth.
April 8, 1987.
June 11, 1987.
Present: HENNESSEY, C.J., WILKINS, LIACOS, LYNCH, & O'CONNOR, JJ.
J. Owen Todd (Richard Hoffman with him) for the plaintiffs.
Elizabeth Bowen Donovan, Assistant Attorney General, for the Commonwealth.
*255 WILKINS, J.
The plaintiffs seek to reopen a judgment entered on June 23, 1982, awarding them damages and interest in connection with a 1970 taking of land by the Commonwealth. The judgment reflected interest at 6% from the date of the taking to the date (August 17, 1982) of the certificate of judgment. Collection of the judgment was delayed because of the unavailability of appropriated funds to satisfy the judgment. In February, 1983, the plaintiffs brought an action to collect the judgment, and in December, 1983, this court issued an opinion. Bromfield v. Treasurer & Receiver Gen., 390 Mass. 665 (1983). In that opinion we indicated that, in the circumstances, we would not then order payment of the judgment in the absence of an appropriation, but that, if no seasonable appropriation were made, relief in some other form could be ordered, including perhaps even permitting levy of execution on the Commonwealth's property. Id. at 670. In February, 1984, with appropriated funds available, the Commonwealth paid the judgment in its principal amount with interest at the rate of 10% per annum from the date of the issuance of the certificate of judgment. The docket sheet shows for March 7, 1984: "Agreement for judgt. satisfied."
On April 24, 1985, this court decided Verrochi v. Commonwealth, 394 Mass. 633 (1985), holding that under G.L.c. 79, § 37 (St. 1981, c. 800, § 3), prejudgment interest at the rate of 10% (not 6%) should be paid on all land damage verdicts entered after April 13, 1982, the effective date of the 1981 act. See also Hargrove v. Minuteman Regional Vocational Technical School Dist., 394 Mass. 1010 (1985); Holyhood Cemetery Ass'n v. Boston, 394 Mass. 1011 (1985); Salem Country Club, Inc. v. Peabody Redevelopment Auth., 21 Mass. App. Ct. 433 (1986).
The question in this case is whether the judge erred in denying the plaintiffs' amended motion "for entry of second partial and final judgment and issuance of final certificate of judgment," filed on February 6, 1986. There is no question that the plaintiffs would have been entitled to the benefit of the interpretation of the interest statute made in the Verrochi case had their case not gone to judgment. In their appeal, which we transferred here on our own, the plaintiffs argue that the judge committed *256 an error of law or an abuse of discretion, or both, in denying their motion. They rely on Mass. R. Civ. P. 60 (b), 365 Mass. 828 (1974), which in relevant part is set forth in the margin,[2] to argue that there was a vehicle pursuant to which the judge could and should have given them relief from judgment. There was no error.
Relief from judgment may not be granted under rule 60 (b) (6) unless the reason relied on is not a possible ground for relief under rule 60 (b) (1)-(5). Bird v. Ross, 393 Mass. 789, 791 (1985). Chavoor v. Lewis, 383 Mass. 801, 805-806 (1981). If the reason for relief asserted in this case is a "mistake" within the meaning of rule 60 (b) (1), relief could not properly be given under subsection (6), and the plaintiffs' motion was filed too late to obtain subsection (1) relief. Relief under subsection (1) must be sought within a reasonable time, and, in any event, within one year of the judgment. There is some disagreement in opinions dealing with the parallel Federal rule as to whether an error of law by the judge can properly be a subsection (1) "mistake." See 11 C.A. Wright & A.R. Miller, Federal Practice and Procedure § 2858, at 176-178 (1973). See also United States v. 329.73 Acres of Land, 695 F.2d 922, 925-926 (5th Cir.1983) (subsection [1] not available to challenge amount of judgment calculated using allegedly unconstitutionally inadequate rates of interest). An appeal or a motion under Mass. R. Civ. P. 59 (e), 365 Mass. 827 (1974), may provide the only appropriate avenues for relief from judicial error, although certain errors by the office of clerk of court (Chavoor v. Lewis, supra at 805 n. 3) and changes in the applicable law occurring between the time of the judge's order for judgment and its entry (Hingham v. Director of the Div. of Marine Fisheries, 7 Mass. App. Ct. 908, 909 [1979]) may warrant use of subsection (1) to obtain relief.
*257 Our most recently expressed view is that rule 60 (b) does not provide an avenue for challenging supposed legal errors and that subsection (6) relief is to be granted only in extraordinary circumstances. Pentucket Manor Chronic Hosp. v. Rate Setting Comm'n, 394 Mass. 233, 236-237 (1985). See Bowers v. Board of Appeals of Marshfield, 16 Mass. App. Ct. 29, 33 (1983). Cf. Galvin v. Welsh Mfg. Co., 382 Mass. 340, 344 (1981) ("changes in the law alone would not justify reopening [a final] judgment"). In Parrell v. Keenan, 389 Mass. 809, 816 (1983), we upheld the discretionary granting of subsection (6) relief from a purported consent judgment, entered without the moving party's agreement, because of the extraordinary circumstances.
The parallel Federal rule has been narrowly construed to deny subsection (6) relief based on an error of law. In Ackermann v. United States, 340 U.S. 193, 198 (1950), the Supreme Court noted that rule 60 (b) (6) is not a substitute for appeal and that there "must be an end to litigation someday, and free, calculated, deliberate choices are not to be relieved from." It is, therefore, generally held "improper to grant relief under Rule 60 (b) (6) if the aggrieved party could have reasonably sought the same relief by means of appeal." Martinez-McBean v. Government of V.I., 562 F.2d 908, 911 (3d Cir.1977). See McKnight v. United States Steel Corp., 726 F.2d 333, 338 (7th Cir.1984); Council for Employment & Economic Energy Use v. WHDH, 580 F.2d 9, 13 (1st Cir.1978), cert. denied, 440 U.S. 945 (1979); 11 C.A. Wright & A.R. Miller, Federal Practice and Procedure § 2864, at 214-215 (1973).
Even if the plaintiffs could persuade us that an error in the computation of prejudgment interest could be a proper reason for granting relief from judgment under rule 60 (b) (6), in this case they make no persuasive argument that the judge abused his discretion in denying their motion seeking a recomputation of interest and a "second partial and final judgment." The plaintiffs did not appeal from the judgment of June 23, 1982, nor did they seek to alter or amend it. The increase in interest rates from 6% to 10% provided by the 1981 amendment of G.L.c. 79, § 37 (St. 1981, c. 800, § 3) became effective *258 prior to the trial of the case. The issue was not raised in the plaintiffs' mandamus action commenced in February, 1983. See Bromfield v. Treasurer & Receiver Gen., 390 Mass. 665 (1983). The judgment and postjudgment interest at 10% were paid in early 1984, and an agreement for judgment satisfied was filed on March 7, 1984. The motion for relief which is the subject of this appeal was not filed until August, 1985, more than three years after entry of judgment. The judge acted well within his range of discretion in denying relief. The claim was made too late.
Order denying relief from judgment affirmed.
NOTES
[1] See Bromfield v. Treasurer & Receiver Gen., 390 Mass. 665 n. 1 (1983).
[2] "On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; ... or (6) any other reason justifying relief from the operation of the judgment. The motion shall be made within a reasonable time, and for reasons (1), (2), and (3) not more than one year after the judgment, order or proceeding was entered or taken."
| {
"pile_set_name": "FreeLaw"
} |
NOT RECOMMENDED FOR PUBLICATION
File Name: 17a0350n.06
No. 16-6263 FILED
Jun 20, 2017
UNITED STATES COURT OF APPEALS DEBORAH S. HUNT, Clerk
FOR THE SIXTH CIRCUIT
UNITED STATES OF AMERICA, )
)
Plaintiff-Appellee, )
) ON APPEAL FROM THE
v. ) UNITED STATES DISTRICT
) COURT FOR THE EASTERN
RONNIE FRISKEY, ) DISTRICT OF KENTUCKY
)
Defendant-Appellant. )
)
BEFORE: BOGGS, GRIFFIN, and WHITE, Circuit Judges.
HELENE N. WHITE, Circuit Judge. A jury convicted defendant-appellant Ronnie
Friskey of one count of manufacturing 100 or more plants of marijuana, 21 U.S.C. § 841(a)(1),
and acquitted him of one count of possessing a firearm during and in relation to a drug-
trafficking crime, 18 U.S.C. § 924(c)(1). Friskey appeals, arguing that: (1) the district court
erred in denying Friskey’s motion to suppress all evidence seized from his basement; (2) the
district court erred in applying two two-level sentencing enhancements, for possession of a
firearm and for obstruction of justice; and (3) Friskey’s above-Guidelines sentence is
procedurally and substantively unreasonable. We affirm.
I. Background
On November 13, 2012, police officers were dispatched to Mills Road in Kenton County,
Kentucky, following a 911 call reporting that a suspicious person was prowling outside of a
residence there; the caller did not report a specific address. There had previously been a number
of burglaries in the area. The officers initially went to the wrong house, where they checked the
No. 16-6263, United States v. Friskey
perimeter of the residence, discovered that a door was unlocked, and entered to look for burglars.
After the officers exited this house, the 911 caller approached the officers and informed them
that they had entered the wrong house. The caller directed the officers to 3277 Mills Road,
Friskey’s address, and told them that there had been a male prowling outside the house and a
suspicious vehicle parked across the street.
At Friskey’s house, the officers discovered that both the front and back doors were
unlocked. The officers also noticed low-to-the-ground windows and believed it likely that the
house had a basement. The officers entered the house through the front door to search for the
suspected burglar. They immediately noticed a strong marijuana odor in the house. The officers
were unable to locate anyone in their sweep of the first floor of the house. Eventually, they
discovered a trap door hidden underneath a carpet in a first-floor alcove that the officers
described as seeming “like a hallway that led to nowhere[.]” R. 85, PID 408. The officers
opened the trap door and were met by an even stronger marijuana odor. The officers then
searched the basement for the suspected burglar. Although they did not locate anyone in the
basement, they discovered a wall of plastic sheeting and a large number of marijuana plants in
plain view. The officers searched the first floor again and still did not locate a burglar. The
officers then exited the house, secured the perimeter, and sought a search warrant based on the
marijuana plants observed.
About two hours later, after obtaining a search warrant, officers reentered the house.1
While executing the search warrant, the officers found the suspected burglar hiding behind a
1
In the time between the initial search and the issuance of the warrant, an additional
police officer arrived at the house to investigate a device with hoses sticking out of it that the
officers discovered in their search of the first floor of the house. The officers suspected the
device may have been used for the production of methamphetamine. The additional officer
-2-
No. 16-6263, United States v. Friskey
dresser on the first floor; the suspect told the officers that he had previously been hiding under a
pile of clothes in a closet, and relocated to the dresser after realizing the officers had not yet left
the premises. The officers seized 571 marijuana plants in various stages of growth, grow lights,
a filter system and other materials used to grow marijuana, an AK-47 assault rifle, a .22-caliber
rifle, several magazines and ammunition, and $8,015 in cash.
Friskey moved to suppress the evidence seized from his home as the fruit of an
unconstitutional search; the district court denied the motion and admitted the evidence. Prior to
trial, Friskey stipulated that he knowingly and intentionally grew marijuana in the basement of
his residence, and that he knowingly possessed the two firearms. Thus, the only issues for trial
were (1) the number of marijuana plants in the basement and (2) whether the firearms were
possessed in furtherance of the marijuana manufacturing. Regarding the first question, Friskey
testified that there were only 75 marijuana plants. The jury convicted Friskey of manufacturing
100 or more marijuana plants, and acquitted him of the firearms charge.
Friskey’s presentence report (“PSR”) calculated Friskey’s offense level as 24 and his
criminal history category as III, yielding a Sentencing Guidelines’ range of 63 to 78 months.
Friskey’s offense level included a two-level enhancement for possessing a firearm, and another
two-level enhancement for obstruction of justice due to Friskey’s false testimony during his trial.
Friskey objected to both enhancements. The district court adopted the PSR, including the
enhancements, and then varied Friskey’s sentence upward to 90-months’ imprisonment.2 The
district court justified its variance on the grounds that 571 plants were discovered in Friskey’s
entered the house, quickly investigated the device, and determined that it was unrelated to
methamphetamine production. The officer then exited the house. This search is unrelated to the
issues on appeal.
2
The Government had requested a 121-month sentence, and Friskey requested a
sentence in the “lower half of” his sentencing range.
-3-
No. 16-6263, United States v. Friskey
basement and “[t]he fact that a hundred plants gets you [a statutory minimum of] 60 months,[3]
571, by statute, gets you 60 months, [any number between 100 and 1,000 plants] gets you 60
months . . . leads the Court to conclude that somewhat of a variance is necessary in this case
upward.” R. 190, PID 1867–68. The court also emphasized that Friskey admitted that he had
used marijuana manufacture as his livelihood for approximately eighteen months; he fled the
area after learning of the search of his residence; and he was apprehended months later because
he attempted to sell marijuana to a police informant and is therefore more appropriately
considered as a two-time offender.
On appeal, Friskey argues that the district court erred in admitting the evidence seized
during the search, that the sentencing enhancements for possession of a firearm and obstruction
of justice were improper, and that his sentence is procedurally and substantively unreasonable.
II. Analysis
A. Suppression of the Seized Evidence
When analyzing a district court’s denial of a motion to suppress, we review the district
court’s factual findings for clear error and its legal conclusions de novo. United States v.
Quinney, 583 F.3d 891, 893 (6th Cir. 2009). Friskey makes multiple arguments regarding the
constitutionality of the officers’ warrantless search, including that (1) there were no exigent
circumstances justifying the officers’ entry into Friskey’s house; (2) the officers were not
permitted to engage in a protective sweep of the house; (3) even if the officers were permitted to
sweep the house, they exceeded the permissible scope of the sweep by entering the basement;
and (4) the officers’ initial smell of marijuana was insufficient on its own to establish probable
cause supporting the search.
3
The statutory minimum sentence for the marijuana conviction is 60 months. 21 U.S.C.
§ 841(b)(1)(B).
-4-
No. 16-6263, United States v. Friskey
First, we conclude that Friskey at least forfeited the argument that the officers’ initial
entry into his house was unconstitutional, and we therefore review for plain error.4 See United
States v. Mack, 729 F.3d 594, 607 (6th Cir. 2013). Given the 911 call and the officers’
interaction with the 911 caller, we cannot say that the district court plainly erred in concluding
that the officers had probable cause to believe there was a burglary in progress inside Friskey’s
house. When officers possess probable cause to suspect that there is a burglary in progress, they
“are also confronted with the necessary exigency” to enter a home without a warrant. United
States v. McClain, 444 F.3d 556, 562 (6th Cir. 2005). Since the officers’ initial entry into the
4
When the district court attempted to narrow the issue during the suppression hearing,
Friskey’s counsel failed to assert that there were no exigent circumstances to justify the officers’
warrantless entry into his home:
[The Court:] You’re not contesting the initial entry into the residence, are
you, based on exigent circumstances, or are you?
[Friskey’s Counsel:] Your Honor, unless I learn something today, no. I
mean, it appears to me, and I’ve talked to Mr. Friskey about this in general, that
the officers were legitimately called to the scene. It’s what happened after they
got there that we have issue with.
The Court: That’s fine. As far as the initial entry into the residence,
because what I try to do is see what actually is in dispute and then focus on those
issues.
[Friskey’s Counsel:] Your Honor, I don’t have a dispute with that. Had I
had a dispute with that, it would have been incumbent on me to subpoena the
reporting person and put them on the witness stand and have them say something
other than what the police reported. We have no reason to believe that the phone
call didn’t happen or that the police got there incorrectly.
The Court: So we’re focused on just kind of factually what occurred after
they went in the house, when the burglar was found, when the plants were
observed.
R. 85, PID 378. The colloquy between the district court and Friskey’s counsel is somewhat
ambiguous. On the one hand, the district court could have understood Friskey’s counsel as
agreeing that exigent circumstances justified the initial entry. On the other hand, counsel’s
extended answers explicitly concede only that the officers were at Friskey’s house for the reason
they said—that they received a 911 call, and that the caller identified Friskey’s house as the site
of a potential burglary-in-progress. Because Friskey is entitled to no more than plain-error
review, and he has not shown that the district court plainly erred, we need not decide whether the
argument was forfeited or waived.
-5-
No. 16-6263, United States v. Friskey
home was permissible, Friskey’s argument that the officers were not permitted to conduct a
protective search of the home fails. See United States v. Johnson, 9 F.3d 506, 510 (6th Cir.
1993) (police officers’ search of a residence was justified because “it would defy reason to
suppose that [the officers] had to secure a warrant before investigating, leaving the putative
burglars free to complete their crime unmolested”) (citation omitted).
We further conclude that the officers’ entry into the basement to check for the suspected
burglar was permissible. This court has held that “a cursory check of the premises, analogous to
a protective sweep incident to arrest, is valid if it is narrowly confined to a cursory visual
inspection of those places in which a person might be hiding.” United States v. Brown, 449 F.3d
741, 750 (6th Cir. 2006) (quoting Johnson, 9 F.3d at 510). Here, the officers had observed close-
to-ground windows, indicating that there was a basement, and were concerned that they had not
immediately located a basement door. They encountered an alcove that looked noticeably
altered and had a double-layered carpet on the floor, which, when pulled back, revealed a trap
door. The officers did not search spaces in which a person would clearly not be hiding, such as
drawers or cabinets; they simply looked in a place—the basement—where a burglar could have
been hiding. See id. (distinguishing the search of an interior basement room from “moving
stereo equipment to find the concealed serial numbers”). Once the officers discovered the trap
door, they acted reasonably in quickly checking the basement for the suspected burglar, and,
after failing to locate him, but having seen evidence of a significant marijuana-growing
operation, exiting the house to await the issuance of a search warrant.
-6-
No. 16-6263, United States v. Friskey
Because we find that the scope of the officers’ search was reasonable, we need not
consider whether smelling marijuana, standing alone, would supply probable cause to justify the
search warrant.5
B. Firearms Enhancement
Friskey next argues that the district court erred in applying a two-level sentencing
enhancement pursuant to Guidelines § 2D1.1(b)(1) for his possession of the .22-caliber rifle. A
district court’s determination that a defendant possessed a firearm during a drug crime is
reviewed for clear error. United States v. Darwich, 337 F.3d 645, 664 (6th Cir. 2003).
In order to obtain a sentencing enhancement under Guidelines § 2D1.1(b)(1), the
Government must establish that Friskey possessed a firearm in connection with his manufacture
of marijuana. United States v. Faison, 339 F.3d 518, 519 (6th Cir. 2003). “If the government
establishes that the defendant possessed a weapon, a presumption arises that the weapon was
connected to the offense.” United States v. Wheaton, 517 F.3d 350, 367 (6th Cir. 2008) (internal
quotation marks omitted). To rebut the presumption, Friskey must present evidence, and not
“mere argument,” that it was “clearly improbable” that the firearm was connected to the crime.
United States v. Greeno, 679 F.3d 510, 514 (6th Cir. 2012). The following factors guide our
review of the enhancement: “(1) the type of firearm involved; (2) the accessibility of the weapon
to the defendant; (3) the presence of ammunition; (4) the proximity of the weapon to illicit drugs,
proceeds, or paraphernalia; (5) the defendant’s evidence concerning the use of the weapon; and
5
The Government asserts that even if the officers’ search of Friskey’s basement was
unreasonable, the officers’ smelling marijuana upon entering the house provided an independent
basis for the issuance of the search warrant. Since we find the officers’ search of the basement to
have been reasonable, we need not consider whether the marijuana smell would have been
sufficient to obtain the search warrant.
-7-
No. 16-6263, United States v. Friskey
(6) whether the defendant was actually engaged in drug-trafficking rather than mere
manufacturing or possession.” Id. at 515.
The district court did not err in finding that the Government proved by a preponderance
of the evidence that Friskey possessed a firearm. It is undisputed that Friskey knowingly
possessed the rifle, and Friskey concedes that the “loaded .22 rifle was found in the bedroom
with the bulk of the currency[.]”6 Appellant Br. at 45.
Friskey has not shown that it was clearly improbable that the rifle was connected to the
crime. Friskey’s contention that the firearm was not “readily accessible” to him lacks merit; the
firearm was owned by Friskey and found loaded in a room off his bedroom, in close proximity to
most of the proceeds from Friskey’s marijuana manufacturing. The rifle was clearly available to
Friskey whenever he wanted it. Friskey further argues that “the Government itself recognized
the lack of evidence to prove that [he] possessed the .22-caliber firearm in furtherance of drug
trafficking” because it struck the .22 rifle from the indictment and only sought a conviction under
18 U.S.C. § 924(c)(1) for Friskey’s possession of the AK-47. Appellant Br. at 45–46. First, this
is “mere argument,” and not actual evidence that the possession of the rifle was unrelated to
marijuana manufacturing. Greeno, 679 F.3d at 514. Second, the Government has a far lighter
burden of proof during sentencing than it does at trial, and its decision to remove the .22-caliber
rifle from the indictment is therefore irrelevant in evaluating the district court’s application of a
§ 2D1.1(b)(1) enhancement. See United States v. Miggins, 302 F.3d 384, 391 (6th Cir. 2002)
(“[T]he jury’s verdict of acquittal on the 18 U.S.C. § 924(c)(1) firearm possession charge does
not prevent the sentencing court from considering conduct underlying the charge of which
6
From the evidence, it appears that the .22-caliber rifle was found leaning against
Friskey’s dryer in a small office attached to the bedroom rather than “in the bedroom.” The
distinction is immaterial.
-8-
No. 16-6263, United States v. Friskey
Miggins was acquitted, so long as that conduct has been proved by a preponderance of the
evidence.”).
Because Friskey has failed to show it was clearly improbable that the .22-caliber rifle was
connected to his manufacture of marijuana, the district court did not clearly err in applying the §
2D1.1(b)(1) enhancement. See Greeno, 679 F.3d at 515 (affirming a § 2D1.1(b)(1) enhancement
where firearms “were found throughout [Defendant’s] property in relatively close proximity to
drugs and drug paraphernalia” and “regardless of where [Defendant] was on the property, he had
ready access to the firearms”); see also Wheaton, 517 F.3d at 367 (affirming a § 2D1.1(b)(1)
enhancement when defendant had “dominion over the house where the gun was found”).
C. Obstruction-of-Justice Enhancement
When reviewing a district court’s application of an obstruction-of-justice enhancement
pursuant to § 3C1.1 of the Guidelines, we review the district court’s factual findings for clear
error and its determination that its factual findings constitute an obstruction of justice de novo.
United States v. Bazazpour, 690 F.3d 796, 805 (6th Cir. 2012). Here, the district court applied
the enhancement after concluding that Friskey perjured himself by testifying during trial that
there were only 75 marijuana plants in his basement.
This court has recognized the importance of a criminal defendant’s constitutional right to
testify, and observed that “the application notes to the Guidelines themselves provide that
§ 3C1.1 is ‘not intended to punish a defendant for the exercise of a constitutional right’ and that
courts ‘should be cognizant that inaccurate testimony or statements sometimes may result from
confusion, mistake, or faulty memory and, thus, not all inaccurate testimony or statements
necessarily reflect a willful attempt to obstruct justice.’” Id. at 806 (quoting USSG § 3C1.1,
-9-
No. 16-6263, United States v. Friskey
comment. (n.2)). However, perjury is a proper grounds for applying the obstruction-of-justice
enhancement. United States v. Watkins, 691 F.3d 841, 851 (6th Cir. 2012).
The elements of perjury are: “(1) a false statement under oath (2) concerning a material
matter (3) with the willful intent to provide false testimony.” Id. A district court’s determination
that a defendant testified falsely and intentionally about material matters is reviewed for clear
error. United States v. Camejo, 333 F.3d 669, 675 (6th Cir. 2003). The first element is easily
satisfied here—Friskey testified on direct examination that there were only 75 plants; but the
Government’s evidence showed there were 571 plants, and the jury convicted Friskey of
manufacturing at least 100 plants. The number of plants was also material. As the district court
correctly noted, if the jury believed Friskey’s testimony, it would have found that he
manufactured fewer than 100 plants, and Friskey would thus not have been subjected to the
mandatory minimum sentence of 60 months. Finally, the district court did not clearly err in
finding that Friskey’s testimony was willful and intentional, rather than a lapse of memory. The
district court found that Friskey was adamant and specific in his testimony, and that Friskey had
demonstrated throughout the trial that he was “very smart, very articulate, [and] knew exactly
how many plants he had.” R. 190, PID 1855–56.
Friskey’s only argument on appeal is that “his testimony regarding the amount of
marijuana plants was consistent and truthful, and keeping with his position that was conveyed to
the government and the Court throughout the proceedings below.” Appellant Br. at 48.
However, Friskey offers no evidence to refute the district court’s finding that Friskey’s testimony
was false, material, and intentional. That Friskey consistently asserted that there were only 75
plants is simply not relevant. We are therefore satisfied that the district court did not err in
applying the obstruction-of-justice enhancement.
-10-
No. 16-6263, United States v. Friskey
D. Procedural and Substantive Reasonableness
We review whether a sentence is unreasonable “under a deferential abuse-of-discretion
standard.” Gall v. United States, 552 U.S. 38, 41 (2007). A sentence is procedurally
unreasonable if the district court “failed to calculate the Guidelines range properly; treated the
Guidelines as mandatory; failed to consider the factors prescribed at 18 U.S.C. § 3553(a); based
the sentence on clearly erroneous facts; or failed to adequately explain the sentence.” United
States v. Coppenger, 775 F.3d 799, 803 (6th Cir. 2015). To determine whether a sentence is
substantively unreasonable, we consider whether the sentencing court “imposed a sentence
arbitrarily, based on impermissible factors, or unreasonably weighed a pertinent factor.” Id.
Friskey argues that his sentence is procedurally unreasonable because the district court
incorrectly calculated his Guidelines range by applying the § 2D1.1(b)(1) and § 3C1.1
enhancements. Because we have determined that the district court did not err in imposing these
enhancements, Friskey’s procedural reasonableness argument fails.
Friskey also argues that the district court’s 12-month upward variance is substantively
unreasonable. Specifically, Friskey asserts that the district court weighed the number of
marijuana plants and Friskey’s untruthful testimony too heavily in fashioning his sentence, and
that these factors were already reflected in his Guidelines calculations. However, the fact that
certain conduct was addressed in the Guidelines does not preclude a district court from
considering it as a basis for varying, provided that the court explains why it thinks the conduct
should be given additional weight. United States v. Nixon, 664 F.3d 624, 626 (6th Cir. 2011).
Here, the district court explained that the Guidelines range did not adequately consider the
number of marijuana plants recovered. The mandatory-minimum sentence of 60 months was
triggered by Friskey’s manufacture of 100 or more plants. The district court reasonably found
-11-
No. 16-6263, United States v. Friskey
that an upward variance was necessary to reflect the view that the 571 plants recovered
constituted a more serious offense than if Friskey had manufactured only 100 plants.
Additionally, Friskey does not address the district court’s other justifications for the
above-Guidelines sentence. The district court found that Friskey had been growing marijuana
for at least 18 months, and “was, in essence, engaged in a criminal livelihood.” R. 190, PID
1866. The district court also expressed concern that Friskey fled the area after the police raided
his home and was arrested and convicted of marijuana trafficking after fleeing. The court further
justified the upward variance by noting that although Friskey was not subject to the ten-year
mandatory-minimum sentence for repeat drug offenders because he manufactured marijuana
prior to his marijuana-trafficking conviction, 21 U.S.C. § 841(b)(1)(B),7 factually Friskey was a
“two-time trafficker.”
Because its consideration of these factors was reasonable, the district court did not abuse
its discretion in imposing Friskey’s above-Guidelines sentence.
IV. Conclusion
For these reasons, we AFFIRM Friskey’s conviction and sentence.
7
The statute provides: “If any person commits such a violation after a prior conviction
for a felony drug offense has become final, such person shall be sentenced to a term of
imprisonment which may not be less than 10 years . . . .” 21 U.S.C. § 841(b)(1)(B).
-12-
| {
"pile_set_name": "FreeLaw"
} |
495 F.3d 1157 (2007)
Steven MacARTHUR; Michelle Lyman; Helen Valdez, Plaintiffs-Appellants, and
Nathaniel Penn; Candace Laws; Paul Keith; Dorothy Keith; Linda Cacapardo; Sue Burton; Amy Terlaak; Alison Dickson; Candace Holiday; Nicole Roberts; Donna Singer; Fred Riggs, Plaintiffs,
v.
SAN JUAN COUNTY; San Juan Health Services District; J. Tyron Lewis, Commissioner; Bill Redd, Commissioner; Craig Halls; Reid M. Wood; Cleal Bradford; Roger Atcitty; John Lewis; John Housekeeper; Karen Adams; Patsy Shumway; James D. Redd; L. Val Jones; Manfred R. Nelson; Richard Bailey; Marilee Bailey; Ora Lee Black; Gary Holladay; Lori Wallace, also known as Laurie Walker; Carla Grimshaw; Gloria Yanito; Julie Bronson; Laurie Schafer; Lyn Stevens, San Juan County Commissioner, Defendants-Appellees.
No. 05-4317.
United States Court of Appeals, Tenth Circuit.
July 18, 2007.
*1158 Susan Rose, Sandy, UT, for Plaintiffs-Appellants.
Carolyn Cox (and Blaine J. Benard, on the brief), Holme, Roberts & Owen, L.L.P., Salt Lake City, UT, for Defendant-Appellee San Juan Health Services District.
Robert R. Harrison, Snow, Christensen & Martineau, Salt Lake City, UT, for Defendants-Appellees.
Jesse Trentadue, (Michael W. Homer and Thomas B. Price), Salt Lake City, UT, for Defendant-Appellee San Juan County.
Before KELLY, EBEL, and McCONNELL, Circuit Judges.
PAUL KELLY, Jr., Circuit Judge.
Plaintiffs-Appellants Michelle Lyman and Helen Valdez ("Plaintiffs") appeal the dismissal of eighteen claims brought against Defendants-Appellees San Juan County, San Juan Health Services District ("SJHSD"), and numerous employees of those entities. The district court held a pretrial conference, pursuant to Fed. R.Civ.P. 16, and dismissed the majority of these claims with prejudice; it declined to exercise jurisdiction over the remaining state-law claims, dismissing them without prejudice. Our jurisdiction arises under 28 U.S.C. § 1291, and we dismiss the appeal as frivolous.
Background
Mrs. Lyman is a licensed physician's assistant who worked under the supervision of various SJHSD physicians beginning in 1995.[1] After leaving Dr. James *1159 Redd's supervision in October 1998, Mrs. Lyman claims she began to experience difficulty exercising her staff privileges at SJHSD facilities.[2] In December 1999, she requested a renewal of her privileges, but her request was delayed, ostensibly due to missing CPR certification cards in her file. She provided copies of the cards, but she asserts that the dates on the cards had been altered. Mrs. Lyman alleges a multitude of claims relating to her request to renew her privileges as well as the harassment and discrimination she allegedly suffered at the hands of Dr. Redd and SJHSD staff.
Mrs. Valdez asserts claims of discriminatory treatment arising from her visit to the San Juan Hospital emergency room on April 14, 1999. Shortly after her arrival, Mrs. Valdez overheard Defendant Lori Wallace, an emergency room nurse, tell the clerk that she would arrange for Mrs. Valdez to be seen by a physician. Mrs. Valdez then went to the restroom, and when she returned, her sister-in-law reported having overheard Ms. Wallace tell the clerk that Mrs. Valdez should go to her doctor's office, which would be opening soon. Although no SJHSD employee said this directly to Mrs. Valdez or her sister-in-law, Mrs. Valdez decided to leave the emergency room without having been seen by a doctor. She brought claims seeking $350,000 to compensate for "the badge of inferiority she was made to wear as she left the facility she had sought help from, not being able to see the provider of her choice, [and] not being able to feel as though she could return to a facility in Monticello for fear of L[ori] Wallace." R. Doc. 742, at 17 (quoting Am. Compl. at 92-93).
At a pretrial conference held on November 14-15, 2002, the district court dismissed sixteen of the Plaintiffs' claims due to pleading deficiencies and an utter lack of factual support in the record.[3] The Plaintiffs subsequently filed several motions for reconsideration, which the district court denied. In June 2005, the court filed a 192-page order memorializing its rationale and granting the Plaintiffs' motion to file an amended complaint nunc pro tunc.
Discussion
Mrs. Lyman and Mrs. Valdez argue on appeal that (1) the district court's judgment was procured by fraud entitling them to an entry of judgment by this court, (2) the district court abused its discretion in dismissing their claims relying on law arising after its oral ruling, and (3) the defendants waived qualified immunity by failing *1160 to raise it early in this litigation. The Defendants, understandably upset about the quality of the arguments to which they must respond, ask us to dismiss this appeal because the issues have not been adequately presented. See United States v. Dunkel, 927 F.2d 955, 956 (7th Cir.1991) (per curiam) ("A skeletal `argument', really nothing more than an assertion, does not preserve a claim."). We choose instead to dismiss because the Plaintiffs' contentions are frivolous.
I.
The rules of appellate procedure are designed to facilitate efficient appellate review by allowing one's adversary to respond to focused argument supported by authority. The adversarial process cannot properly function when one party ignores its obligations under the rules. Here, the Defendants have expended significant amounts of time and money responding to prolix pleadings and frivolous contentions. The district court and two panels of this court have been forced to wade through a swamp of incoherent arguments in hope of accomplishing a merits review. All of this wasted effort could have been avoided if Plaintiffs' counsel had followed the relevant rules of procedure.
Sadly, vague and conclusory court filings are nothing new for these litigants. The district court criticized Plaintiffs' counsel for "shuffling each plaintiff's factual allegations and legal assertions together as one would a deck of playing cards, sacrificing narrative sequence in favor of argumentative characterizations and conclusory assertions." R. Doc. 742, at 179. It also noted that some of the allegations raised "serious concerns under Fed.R.Civ.P. 11." Id. at 46 n. 40. In a prior related appeal before this court, we noted the "profound lack of clarity" in the brief and catalogued its other deficiencies. See MacArthur v. San Juan County, 309 F.3d 1216, 1218 (10th Cir.2002). The clerk has also "caution[ed] [Plaintiffs' counsel] to take better care in drafting her pleadings" in response to deficient filings in this appeal.
Despite these warnings, counsel has persisted in ignoring the rules of appellate procedure. For example, Fed. R.App. P. 28(a)(6) requires the brief to include "a statement of the case briefly indicating the nature of the case, the course of proceedings, and the disposition below." The statement here fails in all respects. See Aplt. Br. at 3-5. It does not mention a single one of the Plaintiffs' eighteen causes of action, instead reciting a rambling list of factual assertions. It does not discuss the proceedings below, nor does it describe the district court's resolution of the case.
Pursuant to Fed. R.App. P. 28(a)(7), the brief must include "a statement of facts relevant to the issues submitted for review with appropriate references to the record. . . ." (emphasis added). Rather than concentrating on the issues noted above, the Plaintiffs offer a flood of factual allegations relevant only to the merits of the underlying case. Indeed, they have included no facts whatsoever relating to the second and third issues presented. This is simply not adequate.
Similarly, the Plaintiffs have failed to heed Fed. R.App. P. 28(a)(9)(A), which requires the argument section to contain "appellant's contentions and the reasons for them, with citations to the authorities and parts of the record on which the appellant relies." The opening brief cites only three cases. The abuse of discretion section does not contain a single case citation, and the qualified immunity section does not cite a single case relevant to the underlying argument. "[M]ere conclusory allegations with no citations to the record or any legal authority for support" *1161 does not constitute adequate briefing. Garrett v. Selby Connor Maddux & Janer, 425 F.3d 836, 841 (10th Cir.2005).
Finally, Fed. R.App. P. 28(a)(9)(B) requires an appellant's brief to include "for each issue, a concise statement of the applicable standard of review. . . ." The words "standard of review" do not appear anywhere in the Plaintiffs' briefs. The omission of such a basic component of an appellate brief is inexcusable.
It is indisputably within our power as a court to dismiss an appeal when the appellant has failed to abide by the rules of appellate procedure, and any one of the inadequacies we have catalogued is sufficiently egregious to justify doing so.[4]See, e.g., Fryar v. Curtis, 485 F.3d 179, 182 n. 1 (1st Cir.2007); Amnesty Am. v. Town of W. Hartford, 361 F.3d 113, 133 (2d Cir. 2004); Anderson v. Hardman, 241 F.3d 544, 545-46 (7th Cir.2001). However, "[w]here an appellant has provided defective briefs, the court in its discretion may scrutinize the merits of the case insofar as the record permits. . . ." Fryar, 485 F.3d at 182 n. 1 (internal quotation marks and alterations omitted). Here, in spite of numerous violations of the appellate rules, we understand enough about the Plaintiffs' arguments to conclude that they are meritless. Accordingly, we decline to dismiss for failure to abide by the rules of appellate procedure.
II.
There is a difference, however, between understanding the Plaintiffs' arguments and judging them worthy of a full merits review. We have long recognized our "inherent authority" to dismiss an appeal presenting "no arguably meritorious issue for our consideration." United States v. Hahn, 359 F.3d 1315, 1329 n. 15 (10th Cir.2004) (en banc) (per curiam). Here, all three of the Plaintiffs' arguments are frivolous; accordingly, we dismiss their appeal.
The Plaintiffs first argue that the district court's written order is void due to fraud on the court. A litigant seeking to establish fraud on the court must prove that the district court relied on fraudulent statements in rendering its decision. See Herring v. United States, 424 F.3d 384, 390 (3d Cir.2005). Here, the district court dismissed the Plaintiffs' claims due to pleading deficiencies, and this decision was wholly independent of any allegedly fraudulent merits arguments made by defense counsel. Furthermore, a litigant may not raise a fraud on the court argument for the first time on appeal; rather, the issue must first be presented to the court in which the alleged fraud was perpetrated. Taft v. Donellan Jerome, Inc., 407 F.2d 807, 809 (7th Cir.1969); see also Indian Head Nat. Bank of Nashua v. Brunelle, 689 F.2d 245, 249-52 (1st Cir.1982) (discussing two narrow exceptions to this general rule). We find no indication in the record that the Plaintiffs raised a fraud on the court claim in the district court, dooming their argument to failure.
The Plaintiffs next argue that the district court abused its discretion in dismissing their claims. Rule 16(c) clearly *1162 permits the district court to dismiss claims that do not present a genuine issue for trial at the pretrial conference. See Chavez v. Ill. State Police, 251 F.3d 612, 654 (7th Cir.2001); see also 6A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure § 1529, at 301 (2d ed.1990). Moreover, the two sentences (with no legal citations) devoted to this issue are utterly insufficient to trigger a merits review. See Craven v. Univ. of Colo. Hosp. Auth., 260 F.3d 1218, 1226 (10th Cir.2001) ("We will not manufacture arguments for an appellant, and a bare assertion does not preserve a claim. . . ."). In other words, this argument is also frivolous.
Finally, the Plaintiffs argue that the Defendants have waived qualified immunity by failing to plead or otherwise assert it early in the litigation. We have consistently held, however, that "qualified immunity can be raised at any time and a district court may enter . . . judgment on that ground at any point before trial at which it is appropriate." Langley v. Adams County, 987 F.2d 1473, 1481 n. 3 (10th Cir.1993) (internal quotation marks omitted). The Plaintiffs' argument to the contrarypresented in four sentences without the support of any relevant authority and without any reasoned argument for a departure from our long-standing precedentis frivolous.
DISMISSED.
NOTES
[1] Pursuant to Utah law, a physician's assistant may only practice medicine under the supervision of a licensed physician. See Utah Code Ann. § 58-70a-501.
[2] Dr. Redd became SJHSD medical staff director in early 1999.
[3] The district court dismissed the following claims for pleading deficiencies: (1) civil Racketeer Influenced Corrupt Organizations (RICO) Act claims; (2) Freedom of Access to Clinic Entrances (FACE) Act claims; (3) Health Care Quality Improvement Act (HCQIA) claims; (4) Medicare Patient Bill of Rights claims; (5) 42 U.S.C. § 1981 claims; (6) 42 U.S.C. § 1985 claims; (7) Utah constitutional claims; (8) Utah Unfair Practices Act claims; (9) Utah Civil Rights Act claims; (10) Utah contract law claims; (11) Health Insurance Portability and Accountability Act (HIPAA) claims; (12) claims under Utah law for negligent infliction of emotional distress; and (13) fraud claims under Utah law. It further held that the Plaintiffs' federal antitrust claims were barred by statutory immunity and that the facts in the record could not support their 42 U.S.C. § 1983 claims as a matter of law. Finally, the court recognized that the Plaintiffs had moved to dismiss the Emergency Medical Treatment and Active Labor Act (EMTALA) claims; in any case, the court held that these claims could not succeed on the merits given the facts in the record. Accordingly, the court dismissed these claims with prejudice. The court also held that several state-law claims had been sufficiently pled, but it declined to exercise supplemental jurisdiction over these claims and dismissed them without prejudice.
[4] We also note that the Plaintiffs' briefs are replete with errors of spelling and grammar, and the prose is often incomprehensible. See, e.g., Aplt. Br. at 7 ("The biggest piece of evidence that the Plaintiffs are correct in that State and Federal government has not legislatively granted authority to the District to limit license authorities, beyond determining if the person is licensed and in good standing with a reputable background, is the simple fact that the District could not just say no, you can't have them."); id. at 19 ("The Deposition of Mrs. Lyman, reflecting patients reports to her of being afraid of being in a life threatening way, and Dr. Redd telling them they can't use District facilities.").
| {
"pile_set_name": "FreeLaw"
} |
71 F.2d 332 (1933)
KLEBERG & CO., Inc.,
v.
UNITED STATES.
No. 3582.
Court of Customs and Patent Appeals.
May 22, 1933.
Wm. L. Wemple, of New York City, for appellant.
Charles D. Lawrence, Asst. Atty. Gen. (John F. Kavanagh, Sp. Atty., of New York City, of counsel), for the United States.
Before GRAHAM, Presiding Judge, and BLAND, HATFIELD, GARRETT, and LENROOT, Associate Judges.
GRAHAM, Presiding Judge.
The appellant imported certain safety matches of the "strike-on-the-box" variety and entered the same at the port of New York on May 8, 1929. The shipment originated in Austria but was reshipped from Sweden. On March 23, 1931, the Secretary of the Treasury issued an order, T. D. 44718, 59 Treas. Dec. 642, as follows:
"To Collectors of Customs and Others Concerned:
"After due investigation in accordance with the provisions of section 201, antidumping act, 1921, I find that the industry of manufacturing safety matches of the strike-on-box type in the United States is being and is likely to be injured by reason of the importation into the United States of safety matches of the strike-on-box type from Austria, and that such safety matches of the strike-on-box type have been sold and are likely to be sold in the United States at less than their fair value."
*333 After this importation was received, the local appraiser, under the provisions of section 201 (b) of the Anti-Dumping Act of 1921, 42 Stat. 11 (19 USCA § 160 (b), notified the Secretary of the Treasury, under date of February 19, 1930, that he suspected dumping as to this importation. It was as a result of this notice that the order of the Secretary was issued which is above quoted. Said section 201 (19 USCA § 160) appears in a marginal note.[1]
After the issuance and promulgation of the said order of the Secretary, the local collector fixed an anti-dumping duty upon said merchandise under the provisions of section 202 of said Anti-Dumping Act (19 USCA § 161).
Thereupon the importer appealed to reappraisement, and the matter came on to be heard before Judge McClelland of the United States Customs Court. In the initiation of the proceedings before the single judge, the attorney for the importer simplified the issue by making the following statement:
"* * * In this case, if the court please, I will concede that if there were any warrant in law for the making thereof, the action of the appraiser in finding foreignmarket value of the merchandise in this case is correct. I would further concede, subject to the same conditions, that if there were any warrant in law for the making thereof, the appraiser's calculation of the importer's sales price or exporter's sales price, whatever he did compute, is also correct, and I will further concede, subject to the same conditions, that the appraiser has correctly performed the arithmetical computation in subtracting one figure from the other. This concession is confined to this case only. It does not extend to any other case or any other issue.
"I propose to try only one point in view of the concession I have just put on the record, and that is that the Secretary of the Treasury in making the alleged dumping finding in this case acted illegally and outside the powers conferred upon him by the statute."
The case was tried upon that issue before the single judge, who, after hearing the parties, sustained the contention of the importer and found a dutiable value equal to the entered values. The Government petitioned for a review, which was duly heard by the Second Division of the United States Customs Court. The Appellate Division reversed the judgment of the single judge and sustained the imposition of the dumping duty. From that judgment the importer has appealed.
In this court the appellant assigns several grounds of error, but its particular contentions are these: First, that the Secretary of the Treasury had no facts before him upon which he was justified in issuing the antidumping order in question; second, that the court below erred in not finding that it could judicially investigate the facts which were the basis of the Secretary's order; third, that the Secretary had no legal right to define the phrase "fair value" by means of a Treasury regulation, and that where such a regulation is made, it is not binding upon a court which reviews it; fourth, that the court below and this court should give a judicial construction to the phrase "fair value" as applied to the facts in this case; fifth, that the order of the Secretary was void as ultra vires, and that if it was within his statutory powers, the act authorizing it is unconstitutional and of no effect.
Various other suggestions are made, but these are the essential points involved.
*334 On the hearing before Judge McClelland, the importer called three witnesses: Edward J. Dougherty, customs agent of the Treasury Department; Edwin Kleberg, treasurer and president of the importer; and Andrew W. Mellon, Secretary of the Treasury. In substance, Dougherty testified that in 1929 he received certain instructions from the Treasury Department, as a result of which he investigated the subject of dumping matches in the United States and injury to American industry thereby. He interviewed certain persons in the custom house in New York, and certain persons representing domestic match interests. When this agent's investigation was completed, his report was duly forwarded to the Secretary, through the Commissioner of Customs, in November or December, 1929. The contents of this report were considered confidential by the witness and were so held to be by the trial judge; however, the witness did testify at some length as to a comparison between prices of these and competitive American products in the markets of this country.
The witness Kleberg testified, in a general way, as to the selling prices of these and similar domestic matches in the markets of the United States. The attempt here, by the importer, was to establish what he designated as a "just price" for the imported product, in the markets of the United States, at that time.
The witness Mellon testified that he remembered the issuance of said order of March 23, 1931, T. D. 44718; that he caused an investigation to be made relative to the prices at which matches imported from Austria were sold in the United States in 1929, 1930, and 1931, by the witness Dougherty and the antidumping unit of the Customs Department. He further stated that he consulted with the assistant secretary in charge of the case, had the files, and familiarized himself with the facts and some of the arguments of counsel. In addition to acquainting himself with the files, he stated that he went further and discussed the matter with his assistant and with the undersecretary, and thereafter signed the order personally.
The Secretary stated that in ascertaining what the "fair value" of the imported matches was, he considered Treasury Regulations, article 712, 1923 Cust. Reg. 370, and applied the meaning of said article to said words. Said article appears in a marginal note.[2]
On March 27, 1931, counsel for the importer addressed a letter to the Treasury Department asking for permission to inspect the evidence "and other representations" upon which the Secretary acted. So far as the record shows, no such permission was granted. It fairly appears from the record that such failure to grant such permission was due to the fact that the Secretary considered such matters confidential.
It appears, therefore, that the Secretary of the Treasury did make such investigation as he thought necessary; that he did find that an industry in the United States, namely, the business of manufacturing safety matches of the strike-on-box type in the United States, is being, or is likely to be, injured by reason of the importation into the United States of matches of that type from Austria; that such goods "have been sold," or are likely to be sold, in the United States at less than their fair value.
It further appears that he made such finding public to the extent he deemed necessary, together with a description of the merchandise to which it applied, in such detail as was necessary for the guidance of the appraising officers.
Thus every statutory step required by the law was taken by the Secretary and customs officials in imposing the anti-dumping duty here involved.
In view of the recent decisions of the United States Customs Court, this court, and of the Supreme Court of the United States in similar cases, it cannot now be doubted that the Congress was within its constitutional powers in enacting this statute, section 201, Anti-Dumping Act of 1921 (19 USCA § 160). The Congress has laid down "by legislative act an intelligible principle" to which the Secretary of the Treasury is directed to conform, and, therefore, such legislative action is not a forbidden delegation of legislative power. Hampton & Co. v. United States, 276 U. S. 394, 48 S. Ct. 348, 72 L. Ed. 624, affirming 14 Cust. App. 350; United States v. Blandamer, 20 C. C. P. A. (Customs) 45, T. D. 45676, certiorari denied, 287 U. S. 628, 53 S. Ct. 81, 77 L. Ed. 545; United States v. Leon & Co., 20 C. C. P. A. (Customs) 49, T. D. 45677, certiorari denied, 287 U. S. 628, 53 S. Ct. 83, 77 L. Ed. 545; Foster & Co. v. United States, 20 C. C. P. A. (Customs) 15, *335 T. D. 45673; United States v. Fox River Butter Co., 20 C. C. P. A. (Customs) 38, T. D. 45675, certiorari denied, 287 U. S. 628, 53 S. Ct. 83, 77 L. Ed. 545; United States v. Sears, Roebuck & Co., 20 C. C. P. A. (Customs) 295, T. D. 46086.
It is equally well established by the authorities that if the Secretary of the Treasury has proceeded in the method prescribed by the Congress, we may not judicially inquire into the correctness of his conclusions. The constitutionality of the law under which he proceeds having been once determined, then the judicial power extends only to a correction of his failure to proceed according to and within the law. United States v. Sears, Roebuck & Co., supra; Clarke v. United States, 17 C. C. P. A. (Customs) 420, T. D. 43866; United States v. Tower & Sons, 14 Cust. App. 421, T. D. 42058; United States v. Central Vermont Railway Co., 17 C. C. P. A. (Customs) 166, T. D. 43474.
This being the state of the law, we are not at liberty here to go into an investigation as to whether the facts shown on the trial below justified the issuance of the order complained of. Under the statute, the Secretary was not confined to any particular source of information or means of investigation. Furthermore, such information as he might obtain was not open to public inspection, unless he felt that the public interest so required. Norwegian Nitrogen Products Co. v. United States, 20 C. C. P. A. (Customs) 27, T. D. 45674, affirmed in 288 U. S. 294, 53 S. Ct. 350, 77 L. Ed. 796.
There is but one remaining question: Did the Secretary proceed upon a wrong theory of law when he established "fair value," under said section 201, on the basis of article 712 of the Treasury Regulations? That article provides that merchandise is sold at less than its fair value, within the meaning of said section 201 (a), if the purchase price or exporter's sales price of such merchandise is less than its foreign-market value (or cost of production).
This does not present a question of the validity of the regulation. The inquiry is, rather, did the Secretary exceed his authority when he construed the meaning of the words "fair value" to be as defined in said regulation. We are unable to so conclude. The apparent intent of the statute and the common meaning of the words used, both sustain the view of the reasonableness of such definition.
This statute was evidently intended to prevent the sale of foreign goods upon the markets of the United States at less than their foreign-market value in the country of exportation, or at less than their cost of production there, all as defined by said anti-dumping act. The fair value must, obviously, be intended to refer to their value in the country where they are produced. There does not seem to be anything unreasonable about the construction which the Secretary has placed upon the language "fair value." Discussing the Secretary's powers in United States v. Central Vermont Railway Co., supra, we said: "He has a broad and liberal discretion in the methods he shall adopt in finding his facts; he has no discretion after the facts are found. In finding the fair value of imported goods, he does no more than appraisers and collectors at the ports have been doing for many years."
It is argued that the secretary's order could not be retroactive and be made to apply to goods entered several months before the order was issued. However, the papers disclose that the appraisement was held in abeyance by the local appraiser upon this entry until after the Secretary's order was promulgated, in accordance with the provisions of said section 201 (b), 19 USCA § 160 (b). The goods were imported subject to the provisions of said act, and the importer's rights must be measured thereby.
The judgment of the United States Customs Court. Second Division, is affirmed.
NOTES
[1] "Sec. 201. (a) Whenever the Secretary of the Treasury (hereinafter called the `Secretary'), after such investigation as he deems necessary, finds that an industry in the United States is being or is likely to be injured, or is prevented from being established, by reason of the importation into the United States of a class or kind of foreign merchandise, and that merchandise of such class or kind is being sold or is likely to be sold in the United States or elsewhere at less than its fair value, then he shall make such finding public to the extent he deems necessary, together with a description of the class or kind of merchandise to which it applies in such detail as may be necessary for the guidance of the appraising officers.
"(b) Whenever, in the case of any imported merchandise of a class or kind as to which the Secretary has not so made public a finding, the appraiser or person acting as appraiser has reason to believe or suspect, from the invoice or other papers or from information presented to him, that the purchase price is less, or that the exporter's sales price is less or likely to be less, than the foreign market value (or, in the absence of such value, than the cost of production) he shall forthwith, under regulations prescribed by the Secretary, notify the Secretary of such fact and withhold his appraisement report to the collector as to such merchandise until the further order of the Secretary, or until the Secretary has made public a finding as provided in subdivision (a) in regard to such merchandise."
[2] "Art. 712. Unfair value. Merchandise is sold at less than its fair value within the meaning of section 201 (a) of the act if the purchase price or exporter's sales price of such merchandise is less than its foreign-market value (or cost of production)."
| {
"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 March 7, 2007
Charles R. Fulbruge III
Clerk
No. 06-20195
Conference Calendar
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
CHARLTON ORIASO ESEKHIGBE,
Defendant-Appellant.
--------------------
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:05-CR-354-ALL
--------------------
Before KING, WIENER, and OWEN, Circuit Judges.
PER CURIAM:*
Appealing the Judgment in a Criminal Case, Charlton Oriaso
Esekhigbe raises arguments that are foreclosed by United States
v. Slaughter, 238 F.3d 580, 582-84 (5th Cir. 2000), which held
that Apprendi v. New Jersey, 530 U.S. 466 (2000), did not render
21 U.S.C. § 841 unconstitutional on its face, and by United
States v. Daugherty, 264 F.3d 513, 518 (5th Cir. 2001), which
rejected a Commerce Clause challenge to the felon-in-possession-
of-a-firearm statute, 18 U.S.C. § 922(g). The Government’s
*
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. 06-20195
-2-
motion for summary affirmance is GRANTED, and the judgment of the
district court is AFFIRMED.
| {
"pile_set_name": "FreeLaw"
} |
Matter of Kyle D. ( (Dwayne D.) (2016 NY Slip Op 02810)
Matter of Kyle D. ( (Dwayne D.)
2016 NY Slip Op 02810
Decided on April 13, 2016
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 13, 2016
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
RUTH C. BALKIN, J.P.
SHERI S. ROMAN
JOSEPH J. MALTESE
FRANCESCA E. CONNOLLY, JJ.
2015-02384
(Docket Nos. N-5562-13, N-5563-13)
[*1]In the Matter of Kyle D. (Anonymous), appellant. Administration for Children's Services, petitioner- appellant;
andDwayne D. (Anonymous), respondent. (Proceeding No. 1)In the Matter of Maya D. (Anonymous), appellant. Administration for Children's Services, petitioner- appellant; Dwayne D. (Anonymous), respondent. (Proceeding No. 2)
Seymour W. James, Jr., New York, NY (Tamara A. Steckler, Claire V. Merkine, and Judith Stern of counsel), attorney for the children, the appellants Kyle D. and Maya D.
Zachary W. Carter, Corporation Counsel, New York, NY (Pamela Seider Dolgow and Diana Lawless of counsel), for petitioner-appellant.
Susan Jacobs, New York, NY (Neha Choudary and Maura Keating of counsel), for respondent.
DECISION & ORDER
Appeal from an order of the Family Court, Queens County (Barbara Salinitro, J.), dated March 6, 2015. The order, after a fact-finding hearing and upon a finding that the petitioner failed to establish that the father abused or neglected Maya D. or derivatively neglected Kyle D., dismissed the petitions.
ORDERED that the order is reversed, on the law and the facts, without costs or disbursements, the petition is reinstated, it is found that the father abused and neglected Maya D. and derivatively neglected Kyle D., and the matter is remitted to the Family Court, Queens County, for a dispositional hearing and dispositions thereafter before a different Judge.
While the credibility findings of a hearing court are accorded deference (see Matter of Irene O., 38 NY2d 776, 777; Matter of Chanyae S. [Rena W.], 82 AD3d 1247), we are free to make our own credibility assessments and, where proper, make a finding of abuse or neglect based upon the record before us (see Matter of Nyasia C. [Christine J.-L.], __ AD3d __, 2016 NY Slip Op 01486 [2d Dept 2016]; Matter of Chanyae S. [Rena W.], 82 AD3d 1247; Matter of Samuel D.-C., 40 AD3d 853; Matter of Peter R., 8 AD3d 576, 579). Contrary to the determination of the Family Court, the testimony of the petitioner's expert witness, who was an expert in the field of child sexual abuse, provided sufficient corroboration to support the reliability of Maya D.'s out-of-court statements regarding her father's sexual abuse of her and, together with the testimony of the [*2]petitioner's caseworker and the mother, established the allegations in the petition by a preponderance of the evidence (see Family Ct Act § 1046[a][vi]; Matter of Elizabeth G., 255 AD2d 1010). The allegations of sexual abuse were further corroborated by the consistency of Maya D.'s out-of-court statements and by the fact that Maya D. had age-inappropriate knowledge of sexual matters (see Matter of Kimberly CC. v Gerry CC., 86 AD3d 728, 730; Matter of Briana A., 50 AD3d 1560; Matter of Yorimar K.-M., 309 AD2d 1148, 1148-1149). Therefore, upon our review of this record, we conclude that the petitioner satisfactorily demonstrated by a preponderance of the evidence that the father abused and neglected Maya D. and derivatively neglected her brother, Kyle D.
In view of our findings of abuse, neglect, and derivative neglect, we remit the matter to the Family Court, Queens County, for a dispositional hearing and dispositions thereafter. Under the particular circumstances of this case, we deem it appropriate to remit the matter to a different Judge for purposes of disposition.
BALKIN, J.P., ROMAN, MALTESE and CONNOLLY, JJ., concur.
ENTER:
Aprilanne Agostino
Clerk of the Court
| {
"pile_set_name": "FreeLaw"
} |
986 F.2d 499
Landgray Assocv.450 Lexington
NO. 92-6150
United States Court of Appeals,Second Circuit.
Dec 01, 1992
1
Appeal From: S.D.N.Y.
2
AFFIRMED.
| {
"pile_set_name": "FreeLaw"
} |
63 F.3d 1111
U.S.v.Puccini-Miranda*
NO. 93-4594
United States Court of Appeals,Eleventh Circuit.
Aug 02, 1995
Appeal From: S.D.Fla., No. 92-00694-CR-SM
1
AFFIRMED.
*
Fed.R.App.P. 34(a); 11th Cir.R. 34-3
| {
"pile_set_name": "FreeLaw"
} |
NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
PALISADES ACQUISITION XVI, LLC, Assignee of Centurian Capital
Corporation, Assignee of Orchard Bank, Plaintiff/Appellee,
v.
PAULA A. ROBERTO aka PAULA TAYLOR, Defendant/Appellant,
and
KINETIC CONTROL CORPORATION, Garnishee/Appellant
No. 1 CA-CV 14-0497
FILED 5-26-2015
Appeal from the Superior Court in Maricopa County
No. TJ2008-000548
The Honorable James R. Morrow, Judge
AFFIRMED
COUNSEL
Johnson Mark LLC, Phoenix
By Rhett Flaming-Buschman
Counsel for Plaintiff/Appellee
Robert D. Barlow, Attorney at Law, Phoenix
By Robert D. Barlow, Jr.
Counsel for Defendants/Appellants
PALISADES v. ROBERTO, et al.
Decision of the Court
MEMORANDUM DECISION
Judge Andrew W. Gould delivered the decision of the Court, in which
Presiding Judge Randall M. Howe and Judge Peter B. Swann joined.
G O U L D, Judge:
¶1 Paula A. Roberto a.k.a. Paula Taylor (“Appellant”) and
Garnishee Kinetic Control Corporation (“Kinetic”) appeal from the
superior court’s order denying Appellant’s motion to dismiss garnishment
proceedings. For the following reasons, we affirm.
FACTS AND PROCEDURAL HISTORY
¶2 On October 23, 2007, Palisades Acquisition XVI, LLC,
(“Palisades”) obtained a default judgment against Appellant and John
Taylor in the Estrella Mountain Justice Court. Palisades filed a certified
transcript of the judgment with the Clerk of the Maricopa County Superior
Court on January 15, 2008. On September 4, 2012, Palisades filed an
affidavit of renewal of judgment with the Clerk.
¶3 Palisades filed an application for writ of garnishment on
February 28, 2014, to garnish Appellant’s earnings from Kinetic. Appellant
objected and requested a hearing, asserting that Palisades did not have a
valid judgment. The parties stipulated to continue the garnishment
proceedings in superior court, and Appellant filed a motion to set aside the
original default judgment entered in justice court. However, when
Appellant filed her motion, the justice court informed her that its records
concerning the judgment had been destroyed.
¶4 Appellant filed a motion to dismiss the garnishment
proceedings in the superior court on April 9, 2014. The superior court
denied Appellant’s motion and entered an order for a continuing lien on
Appellant’s non-exempt earnings. Appellant timely appealed.
DISCUSSION
¶5 Appellant contends the garnishment proceedings should
have been dismissed because Palisades did not renew its judgment in
justice court, thereby rendering the judgment void and unenforceable.
2
PALISADES v. ROBERTO, et al.
Decision of the Court
¶6 We review issues concerning the construction of a statute de
novo. J.C. Penney v. Lane, 197 Ariz. 113, 115, ¶ 9 (App. 1999). We review a
trial court’s denial of a motion to set aside a judgment as well as a denial of
relief under Arizona Rule of Civil Procedure 60(c) for an abuse of discretion.
Blair v. Burgener, 226 Ariz. 213, 216, ¶ 7 (App. 2010); City of Phx. v. Geyler,
144 Ariz. 323, 328 (1985).
¶7 A judgment must be renewed within five years from the date
of entry to remain valid and enforceable. A.R.S. § 12-1612(B); J.C. Penney,
197 Ariz. at 118, ¶ 25. When a party files a certified transcript of a justice
court judgment in superior court, that judgment is deemed a judgment of
the superior court. A.R.S. § 33-962(A). Once a transcript judgment has been
entered and docketed in superior court, it may be renewed by filing an
affidavit for renewal with the clerk of the superior court. A.R.S. § 12-
1612(A); J.C. Penney, 197 Ariz. at 118, ¶ 27 (stating the proper court for
renewing a judgment is “the superior court in the same county in which the
[transcript] judgment was docketed”).
¶8 Following the entry of judgment in justice court, Palisades
filed a certified transcript of the judgment with the Clerk of the Maricopa
County Superior Court. Palisades renewed the judgment with the Clerk
within five years. Accordingly, Palisades properly renewed its judgment.
¶9 Next, Appellant claims the justice court determined that the
original judgment was void.
¶10 The justice court never made a determination the judgment
was void. Rather, when Appellant filed her motion to set aside the
judgment, the justice court sent her a notice stating that (1) more than five
years had passed since the date of judgment was entered, and (2) no
renewal of judgment had been filed. As a result, the justice court destroyed
its records concerning the judgment. However, the justice court also
advised Appellant about the very circumstances that exist in this case; that
it was possible the judgment had been filed and renewed with another
court. 1
¶11 Finally, Appellant asserts the judgment is void because she
was never served with the summons and complaint. See Ariz. R. Civ. P.
60(c)(4) (party may be relieved from void final judgment); Master Fin. Inc.
1 The justice court’s policy regarding destruction of its records is
concerning and may, in the appropriate case, raise serious due process
concerns. However, under the facts of this case, the issue is not dispositive.
3
PALISADES v. ROBERTO, et al.
Decision of the Court
v. Woodburn, 208 Ariz. 70, 74, ¶ 19 (App. 2004) (lack of personal jurisdiction
over defendants renders judgment void). However, she contends she is
unable to challenge the judgment because the justice court records that
would allegedly show lack of service have been destroyed. Appellant
argues, therefore, that due process requires Palisades bear the burden of
demonstrating that she was properly served. We disagree.
¶12 Appellant was required to file her motion to set aside the
judgment in the justice court. Marquez v. Perez, 14 Ariz. App. 451, 452 (1971).
As the movant, Appellant bore the burden of establishing that the default
judgment should be set aside. Miller v. Nat’l Franchise Servs., Inc., 167 Ariz.
403, 406 (App. 1991). Additionally, it is the Appellant's burden to ensure
that “the record on appeal contains all transcripts or other documents
necessary for us to consider the issues raised.” Baker v. Baker, 183 Ariz. 70,
73 (App. 1995); see also ARCAP 13(a).
¶13 Here, Appellant does not dispute that the judgment is valid
on its face. Moreover, apart from Appellant’s unsupported assertions, there
is nothing in the record to prove her claim of lack of service. Accordingly,
based on the record before us we are unable to conclude the superior court
erred.
ATTORNEYS’ FEES
¶14 We decline to award Palisades attorneys’ fees on appeal.
Palisades’ reliance on ARCAP 13(a) and (b) is not a proper basis for an
award of fees. Cf. Fereman v. Sorchych, 226 Ariz. 242, 252, ¶ 31 (2011).
CONCLUSION
¶15 For the foregoing reasons, we affirm.
:ama
4
| {
"pile_set_name": "FreeLaw"
} |
Hollingsworth v Mercy Med. Ctr. (2018 NY Slip Op 03340)
Hollingsworth v Mercy Med. Ctr.
2018 NY Slip Op 03340
Decided on May 9, 2018
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 May 9, 2018
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
WILLIAM F. MASTRO, J.P.
JEFFREY A. COHEN
HECTOR D. LASALLE
VALERIE BRATHWAITE NELSON, JJ.
2015-06301
(Index No. 2481/12)
[*1]Nylah Hollingsworth, etc., appellant-respondent,
vMercy Medical Center, respondent-appellant.
The Fitzgerald Law Firm, P.C., Yonkers, NY (James P. Fitzgerald, John M. Daly, and Mitchell L. Gittin of counsel), for appellant-respondent.
Peter C. Kopff, LLC (Mauro Lilling Naparty LLP, Woodbury, NY [Caryn L. Lilling and Katherine Herr Solomon], of counsel), for respondent-appellant.
DECISION & ORDER
In an action to recover damages for medical malpractice, the plaintiff appeals, and the defendant cross-appeals, from an order of the Supreme Court, Queens County (Kevin J. Kerrigan, J.), entered April 16, 2015. The order, insofar as appealed from, granted that branch of the defendant's motion which was pursuant to CPLR 4404(a) to set aside the jury verdict on the issue of damages as excessive to the extent of directing a new trial on the issue of damages unless the plaintiff stipulated to a reduction of the damages awards. The order, insofar as cross-appealed from, denied that branch of the defendant's motion which was pursuant to CPLR 4404(a) to set aside the jury verdict on the issue of liability and for judgment as matter of law or, in the alterative, to set aside the verdict on the issue of liability as contrary to the weight of the evidence and for a new trial.
ORDERED that the order is affirmed, without costs or disbursements.
On February 23, 2009, the plaintiff was born prematurely at 27 weeks of gestation at the defendant hospital. On March 9, 2009, while still in the care of the defendant, the plaintiff was diagnosed with necrotizing enterocolitis (hereinafter NEC), an acute infection of the intestine sometimes seen in premature infants. She was transferred to another hospital on March 14, 2009, and ultimately underwent surgery on May 5, 2009, for resection of portions of her intestine. The plaintiff has since been diagnosed with short bowel syndrome secondary to NEC, which, it is anticipated, will cause her to suffer certain intestinal problems for life.
The plaintiff commenced this medical malpractice action alleging that the defendant negligently caused NEC by feeding her increased calories and concentrated breast milk, and that the defendant was negligent in failing to order a surgical consultation upon diagnosing her with NEC and failing to timely transfer her to another hospital capable of surgically treating her. After a trial, the jury found that the defendant did not depart from acceptable medical practice in its feeding of the plaintiff, but that it did depart from such practice by failing to obtain a surgical consultation upon diagnosing her with NEC and failing to timely transfer her to another hospital. The jury also found that these departures were substantial factors in causing injury to the plaintiff. The jury awarded the plaintiff the sum of $1,000,000 for past pain and suffering, and the sum of $4,000,000 for future pain and suffering.
The defendant moved pursuant to CPLR 4404(a) to set aside the jury verdict on the issue of liability and for judgment as matter of law or, in the alternative, to set aside the verdict on the issue of liability as contrary to the weight of the evidence and for a new trial. In the alternative, the defendant moved pursuant to CPLR 4404(a) to set aside the verdict on the issue of damages as excessive and for a new trial on that issue unless the plaintiff stipulated to a reduction of the damages awards. In the order appealed from, the Supreme Court denied that branch of the motion which was to set aside the verdict on the issue of liability, but granted that branch of the motion which was to set aside the verdict on the issue of damages to the extent of directing a new trial on damages unless the plaintiff stipulated to a reduction of the damages awards for past pain and suffering to $75,000 and for future pain and suffering to $500,000. The plaintiff appeals, and the defendant cross-appeals.
A motion to set aside a jury verdict and for judgment as a matter of law will be granted only if there is no valid line of reasoning and permissible inferences which could possibly lead a rational jury to the conclusion reached on the basis of the evidence presented at trial (see Killon v Parrotta, 28 NY3d 101, 108; Campbell v City of Elmira, 84 NY2d 505, 509-510; Cohen v Hallmark Cards, 45 NY2d 493, 499). In a medical malpractice action, the plaintiff must show that the defendant deviated from acceptable medical practice, and that such deviation was a proximate cause of the plaintiff's injury (see Mazella v Beals, 27 NY3d 694, 705; James v Wormuth, 21 NY3d 540, 545). Here, the jury rationally could have concluded that the defendant was negligent in failing to order a surgical consultation when it diagnosed the plaintiff with NEC and in failing to timely transfer her to a hospital capable of treating her surgically, and that these departures were a proximate cause of the plaintiff's injuries.
A jury verdict should not be set aside as contrary to the weight of the evidence unless the jury could not have reached the verdict by any fair interpretation of the evidence (see Killon v Parrotta, 28 NY3d at 107-108; Lolik v Big V Supermarkets, 86 NY2d 744, 746). Where, as here, conflicting expert testimony is presented, the jury is entitled to accept one expert's opinion and reject that of another expert (see Russo v Levat, 143 AD3d 966, 968; Hatzis v Buchbinder, 112 AD3d 890, 891; Ferreira v Wyckoff Hgts. Med. Ctr., 81 AD3d 587, 588). The jury's verdict in favor of the plaintiff on the issue of liability in this case was supported by a fair interpretation of the evidence.
However, we agree with the Supreme Court's conclusion that the jury verdict indicates that the jury found that the defendant did not cause the plaintiff's NEC inasmuch as it determined that the defendant was not negligent in its feeding of the plaintiff. Upon rejecting this claim, the jury found only that the defendant was responsible for the delay in obtaining a surgical consult and transferring the plaintiff to another hospital. The plaintiff's expert testified that this delay allowed the plaintiff's NEC to become more severe and complex, and resulted in the loss of more bowel. Under these circumstances, we agree with the court that the damages awarded were excessive to the extent indicated, as they deviate materially from what would be reasonable compensation (see CPLR 5501[c]; LaTorre v Knorr, 35 AD3d 671; Roseingrave v Massapequa Gen. Hosp., 298 AD2d 377, 380; DeRosa v Kaali, 240 AD2d 534, 535).
MASTRO, J.P., COHEN, LASALLE and BRATHWAITE NELSON, JJ., concur.
ENTER:
Aprilanne Agostino
Clerk of the Court
| {
"pile_set_name": "FreeLaw"
} |
202 F.Supp. 520 (1962)
Leona HOMLITAS, Plaintiff,
v.
UNITED STATES of America, Defendant.
Civ. No. 61-128.
United States District Court D. Oregon.
February 15, 1962.
*521 Pozzi, Levin & Wilson, Philip A. Levin, Portland, Or., Collins & Redden, Hugh B. Collins, Medford, Or., for plaintiff.
Sidney I. Lezak, Acting U. S. Atty., Victor E. Harr, Asst. U. S. Atty., Portland, Or., for defendant.
KILKENNY, District Judge.
This cause is before the Court on the segregated issue of the applicability of the Federal Tort Claims Act (28 U.S.C. § 1346(b), § 2671 et seq.) to the state of facts as disclosed by the record.
Plaintiff's intestate, Walt J. Young, enlisted in the Regular Army of the United States for three years' active duty on June 15, 1959. On September 11, 1960, Young was stationed at Fort Bragg, North Carolina. Young was granted 20 days' ordinary leave commencing September 6, 1960, and at that time signed-out as required by regulations. His leave status was to terminate on September 27th. While so carried on the records of his organization and while on leave status, he requested and received passage on a U. S. Air Force plane on September 11, 1960, for transportation from Lowry Air Force Base to Hamilton Air Force Base. The Air Force plane in which he was a passenger carried him to his death in an accident which occurred on September 11, 1960.
The case was tried and presented on the theory that Young obtained passage on the plane pursuant to the provisions of AFR 76-6[1] which provides, among other things, for gratuitous flight for military personnel and others on a space available basis.
Plaintiff contends that the Federal Tort Claims Act affords relief to the representative of decedent, who was on leave status, under the doctrine as announced in Brooks v. United States, 337 U.S. 49, 69 S.Ct. 918, 93 L.Ed. 1200. Defendant asserts that Young, being a member of the armed services of the United States, having claimed his privilege to utilize the transportation available by reason of his particular status, is precluded from prosecuting such an action under the doctrine as taught in Feres v. United States, *522 340 U.S. 135, 71 S.Ct. 153, 95 L.Ed. 152.
Decedent, though on leave status, was subject to the Uniform Code of Military Justice. 10 U.S.C. § 802, Art. 2.[2] Judicial notice is taken of the fact that all pilots of aircraft in the United States Air Force are commissioned officers. Regulation 60-16[3] of the Department of the Air Force dated September 16, 1958, gives to the pilot in command of the aircraft the command of all persons on board. Although decedent was on leave status, he was still in the active service of the United States Army and as such subject to military discipline. If, during the flight, decedent had violated 10 U.S.C. § 889[4] or 10 U.S.C. § 890[5] or 10 U.S.C. § 892[6], there is no question but that he would have been subject to military discipline and trial before a military court.
In Brooks v. United States, supra, the members of the armed forces involved in the accident were on leave status. However, these servicemen were riding in their own automobile on a public highway at the time the accident occurred. The vehicle which caused the injuries and death was owned and operated by the United States Army. In his opinion, Mr. Justice Murphy placed emphasis on the fact that the servicemen were engaged in a venture which was "not incident" to their service at the time the injuries were received. Furthermore, emphasis is placed on the fact that the court was dealing with an accident which had nothing whatsoever to do with the Army careers of the men involved. The Court recognized that an entirely different case would be presented if the accident was in any way incident to the military careers of the servicemen in question. Although the opinion contains rather broad language which might encompass the factual situation involved in the present case, we must keep in mind the rule that all opinions *523 must be read and the language used construed in the light of their particular facts. I do not believe that the decision in Brooks is controlling on the factual background with which I am confronted. As said by Justice Holmes in Lochner v. People of State of New York, 198 U.S. 45, 74, 25 S.Ct. 539, 547, 49 L.Ed. 937, "general propositions do not decide concrete cases."
Feres v. United States, supra, involved three separate cases, each of which presented the same issue. In Feres, the United States was charged with negligence in connection with a fire which destroyed the barracks in which Feres, the serviceman, was housed. He was on active duty at the time. In Jefferson (Jefferson v. United States, D.C., 74 F. Supp. 209), the United States was charged with negligence when one of its doctors left a towel in plaintiff's abdomen during the course of surgery. He was on active duty at the time of the operation. The Griggs case (Griggs v. United States, 2 Cir., 178 F.2d 1) also involved a charge of negligence against Army surgeons while the serviceman was on active duty. These cases are distinguishable from the present case. None of the servicemen were on leave status at the time of the occurrence in which they were injured or killed. However, the language of the opinion in Feres, in my judgment, forecasts the probable decision of the Supreme Court on the admitted facts in this case. Although in Feres, as in Brooks, the language used must be read and construed in the light of the facts involved, we cannot overlook the positive language in both cases which would indicate non-liability of the Government under the Federal Tort Claims Act for injuries to servicemen where the injuries arise out of or are in the course of activity incident to military service. The doctrine taught in those cases requires an inspection of the serviceman's activity at the time of the occurrence. At the time of the accident in Brooks, the serviceman was engaged in no activity which was in any way connected with the military service. He was in exactly the same position as any other civilian might have been at the time and place in question. While decedent Young, in the present case, could have used his own automobile or any other method of transportation he desired, he elected to use a method of transportation which was directly connected with and was incident to his military service. Initially, at the inception of his leave, Young had the same status as Brooks. However, he voluntarily changed this status when he sought and secured passage on the military aircraft, a privilege to which he was entitled only by reason of his service connection. Plaintiff argues that certain named civilians are entitled to transportation on Air Force planes under the same rules and regulations which permitted decedent's transportation, and that most certainly a civilian would not be precluded from prosecuting an action under the Federal Tort Claims Act. Civilians entitled to such transportation may or may not be engaged in an activity which is incident to military service. In any event, this problem is not before me and an expression of an opinion on the subject would be nothing more than pure dictum.
The recent case of Fass v. United States, D.C.E.D.N.Y.1961, 191 F.Supp. 367, is directly in point and, in my opinion, the District Judge in that case arrived at the correct conclusion. In United States v. Brown, 348 U.S. 110, 75 S.Ct. 141, 99 L.Ed. 139, the negligence occurred after the serviceman was discharged from the armed services and is patently not in point. The decision in Healy v. United States, D.C.S.D.N.Y. 1961, 192 F.Supp. 325, and Hungerford v. United States, D.C.N.D.Cal.1961, 192 F.Supp. 581, although factually different from the present case, support the views herein expressed.
Although certain testimony was admitted at a supplemental hearing, I do not feel that this testimony in any manner altered the agreed statement of facts and, since the facts are agreed, I see no reason for making detailed findings. My *524 general findings are in favor of the defendant's contentions and against those of the plaintiff. The Federal Tort Claims Act does not apply. Judgment must be entered for the defendant.
NOTES
[1] AFR 76-6
* * * * *
"a. Military personnel of the United States (including midshipmen or cadets of the Army, Navy, Air Force, and Coast Guard) in active Federal Service, while in a duty status on a requirement basis, or while in a leave status on a space available basis. Orders directing permanent change of station or temporary duty travel, or authorizing leave, will constitute authority."
* * * * * * *
[2] 10 U.S.C. § 802. Art. 2
"The following persons are subject to this chapter:
"(1) Members of a regular component of the armed forces, including those awaiting discharge after expiration of their terms of enlistment; volunteers from the time of their muster or acceptance into the armed forces; inductees from the time of their actual induction into the armed forces; and other persons lawfully called or ordered into, or to duty in or for training in, the armed forces, from the dates when they are required by the terms of the call or order to obey it. * * *"
[3] AFR 60-16
* * * * * * *
"6. Who Has Command of an Aircraft. The organization commander responsible for the flight will designate the pilot in command of the aircraft. This pilot, regardless of his grade or pilot rating, commands all persons on board and is responsible for the safe operation of the aircraft. He may, at any time he considers it necessary in the interest of safety and to protect lives, deviate from this or other regulations and from any other instructions or orders he has received."
* * * * * * *
[4] 10 U.S.C. § 889
"Any person subject to this chapter who behaves with disrespect toward his superior commissioned officer shall be punished as a court-martial may direct."
[5] 10 U.S.C. § 890
"Any person subject to this chapter who
"(1) strikes his superior commissioned officer or draws or lifts up any weapon or offers any violence against him while he is in the execution of his office; or
"(2) willfully disobeys a lawful command of his superior commissioned officer; shall be punished, if the offense is committed in time of war, by death or such other punishment as a court-martial may direct, and if the offense is committed at any other time, by such punishment, other than death, as a court-martial may direct."
[6] 10 U.S.C. § 892
"Any person subject to this chapter who
"(1) violates or fails to obey any lawful general order or regulation;
"(2) having knowledge of any other lawful order issued by a member of the armed forces, which it is his duty to obey, fails to obey the order; or
"(3) is derelict in the performance of his duties; shall be punished as a court-martial may direct."
| {
"pile_set_name": "FreeLaw"
} |
[Cite as Nelson v. Cleveland, 2013-Ohio-493.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 98548
TAMICKA NELSON
PLAINTIFF-APPELLANT
vs.
CITY OF CLEVELAND, ET AL.
DEFENDANTS-APPELLEES
JUDGMENT:
REVERSED AND REMANDED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-729088
BEFORE: McCormack, J., Keough, P.J., and E.A. Gallagher, J.
RELEASED AND JOURNALIZED: February 14, 2013
ATTORNEY FOR APPELLANT
Earl F. Ghaster
Kubyn & Ghaster
8373 Mentor Avenue
Mentor, OH 44060
ATTORNEYS FOR APPELLEES
Barbara Langhenry
Director of Law
City of Cleveland
Jerome A. Payne, Jr.
Assistant Director of Law
Room 106 – City Hall
601 Lakeside Avenue
Cleveland, OH 44114
TIM McCORMACK, J.:
{¶1} Plaintiff-appellant, Tamicka Nelson (“Nelson”), appeals the trial court’s
decision granting summary judgment in favor of the defendant-appellee, city of Cleveland
(“the City”). The trial court determined that the City is entitled to sovereign immunity
under R.C. Chapter 2744 for any personal injury or property damage Nelson incurred.
For the reasons that follow, we reverse the grant of summary judgment.
Substantive Facts and Procedural History
{¶2} The basic facts of this case are not in dispute. On June 29, 2008, Nelson
was traveling eastbound on State Route 2 in the City, near the Edgewater Park exit. As
she approached the exit sign, Nelson noticed a large puddle of standing water that
extended across all three lanes of traffic. There were no cars ahead of her. She entered
the puddle while traveling approximately 40 miles per hour. Upon entering the puddle,
Nelson lost control of her car and struck a median. Nelson testified that cars continued
on through the water, passing her vehicle after the collision. As a result of this accident,
Nelson suffered personal injury and property damage.
{¶3} On June 11, 2010, Nelson filed a complaint against the City and John Does
#1-3 in the Cuyahoga County Court of Common Pleas.1 In her complaint, Nelson
alleged that the City was negligent in failing to keep public roads open and free from
Nelson obtained leave to file an amended complaint on May 27, 2011. The amended
1
complaint named Northeast Ohio Regional Sewer District “NORSD” as a defendant. On January 31,
2012, Nelson voluntarily dismissed defendant NORSD without prejudice.
obstructions. Nelson also alleged that the City negligently failed to maintain and/or
repair the sewer catch basins and water runoff systems. Nelson claimed that she
sustained injuries and property damage due to the City’s negligence.
{¶4} On February 8, 2012, the City filed a motion for summary judgment
pursuant to Civ.R. 56, contending that it is immune from liability in this action pursuant
to R.C. 2744.02. Nelson, in her brief in opposition to defendant’s motion for summary
judgment filed on March 30, 2012, argued that due to the exceptions outlined in R.C.
2744.02(B)(2) or R.C. 2744.02(B)(3), which preclude immunity for loss caused by
negligence, the City is not entitled to the protection afforded by sovereign immunity.
The trial court granted summary judgment in favor of the City, stating that the City is
immune from liability for Nelson’s claims because neither exception to R.C. 2744.02
applies in the instant case. Specifically, the trial court held that “R.C. 2744.02(B)(3)
does not apply because standing water is not an obstruction * * * [and] R.C.
2744.02(B)(2) also fails because there was no evidence of negligence.”
Assignments of Error
{¶5} Nelson now appeals the trial court’s order, raising the following
assignments of error:
I. The trial court erred to the prejudice of Appellant-Plaintiff by granting
Appellee-Defendant City of Cleveland’s Motion for Summary Judgment
based upon an erroneous finding that the sovereign immunity exception set
forth in Section 2744.02(B)(2) does not apply based upon the
unsubstantiated fact that “there was no evidence of negligence.”
II. The trial court erred to the prejudice of Appellant-Plaintiff by granting
Appellee-Defendant City of Cleveland’s Motion for Summary Judgment
based upon an erroneous finding that the sovereign immunity exception set
forth in Section 2744.02(B)(3) does not apply as “water is not an
obstruction.”
Standard of Review
{¶6} Summary judgment is appropriate where it appears that: (1) there is no
genuine issue as to any material fact; (2) the moving party is entitled to judgment as a
matter of law; and (3) reasonable minds can come to but one conclusion, and that
conclusion is adverse to the party against whom the motion for summary judgment is
made, who is entitled to have the evidence construed most strongly in his favor. Harless
v. Willis Day Warehousing Co., Inc., 54 Ohio St.2d 64, 66, 375 N.E.2d 46 (1978); Civ.R.
56(C).
{¶7} The burden is on the movant to show that no genuine issue of material fact
exists. Id. Conclusory assertions that the nonmovant has no evidence to prove its case
are insufficient; the movant must specifically point to evidence contained within the
pleadings, depositions, answers to interrogatories, written admissions, affidavits, etc.,
which affirmatively demonstrate that the nonmovant has no evidence to support his
claims. Dresher v. Burt, 75 Ohio St.3d 280, 293, 1996-Ohio-107, 662 N.E.2d 264;
Civ.R. 56(C). Unless the nonmovant then sets forth specific facts showing there is a
genuine issue of material fact for trial, summary judgment will be granted to the movant.
{¶8} An appellate court reviews a trial court’s grant of summary judgment de
novo. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 1996-Ohio-336, 671 N.E.2d
241. Accordingly, appellate courts must independently review the record to determine if
summary judgment was appropriate. In other words, appellate courts need not defer to
trial court decisions on summary judgment. See Brown v. Scioto Cty. Bd. Commrs., 87
Ohio App.3d 704, 711, 622 N.E.2d 1153 (4th Dist.1993).
Political Subdivision Immunity
{¶9} Chapter 2744 of the Ohio Revised Code, the Political Subdivision Tort
Liability Act, contains a comprehensive statutory scheme for the tort liability of political
subdivisions and its employees. The statutory framework begins with R.C.
2744.02(A)(1), a general grant of immunity to a political subdivision from civil liability.
It provides as follows:
For the purposes of this chapter, the functions of political subdivisions are
hereby classified as governmental functions and proprietary functions.
Except as provided in division (B) of this section, a political subdivision is
not liable in damages in a civil action for injury, death, or loss to person or
property allegedly caused by any act or omission of the political subdivision
or an employee of the political subdivision in connection with a
governmental or proprietary function. R.C. 2744.02(A)(1).
{¶10} The statute enumerates five exceptions to the general grant of immunity.
The five exceptions are provided in R.C. 2744.02(B). Two of these enumerated
exceptions are relevant to this case. Nelson claims that the City is liable under R.C.
2744.02(B)(2), which states: “Except as otherwise provided in sections 3314.07 and
3746.24 of the Revised Code, political subdivisions are liable for injury, death, or loss to
person or property caused by the negligent performance of acts by their employees with
respect to proprietary functions of the political subdivisions.”
{¶11} Nelson further asserts that the City is liable under R.C. 2744.02(B)(3).
This exception to political subdivision immunity exists when a political subdivision
negligently fails to remove obstructions from public roadways:
Except as otherwise provided in section 3746.24 of the Revised Code,
political subdivisions are liable for injury, death, or loss to person or
property caused by their negligent failure to keep public roads in repair and
other negligent failure to remove obstructions from public roads, except that
it is a full defense to that liability, when a bridge within a municipal
corporation is involved, that the municipal corporation does not have the
responsibility for maintaining or inspecting the bridge.
R.C. 2744.02(B)(3).
{¶12} The statute also provides several defenses for political subdivisions and their
employees. Relevant to this case is R.C. 2744.03(A)(5), which extends immunity arising
out of the exercise of discretion by a political subdivision:
In a civil action brought against a political subdivision or an employee of a
political subdivision to recover damages for injury, death, or loss to person
or property allegedly caused by any act or omission in connection with a
governmental or proprietary function,* * *[t]he political subdivision is
immune from liability if the injury, death, or loss to person or property
resulted from the exercise of judgment or discretion in determining whether
to acquire, or how to use, equipment, supplies, materials, personnel,
facilities, and other resources unless the judgment or discretion was
exercised with malicious purpose, in bad faith, or in a wanton or reckless
manner.
{¶13} In order to correctly determine whether immunity applies with respect to a
political subdivision, a detailed analysis is required. The Ohio Supreme Court
determined that the applicability of the immunity statute requires a three-tier analysis:
Determining whether a political subdivision is immune from tort liability
pursuant to R.C. Chapter 2744 involves a three-tiered analysis. Greene
Cty. Agricultural Soc. v. Liming (2000), 89 Ohio St.3d 551, 556-557,
2000-Ohio-486, 733 N.E.2d 1141. The first tier is the general rule that a
political subdivision is immune from liability incurred in performing either
a governmental function or proprietary function. Id. at 556-557, 733
N.E.2d 1141; R.C. 2744.02(A)(1). However, that immunity is not
absolute. R.C. 2744.02(B); Cater v. Cleveland (1998), 83 Ohio St.3d 24, 28,
1998-Ohio-421, 697 N.E.2d 610.
The second tier of the analysis requires a court to determine whether any of
the five exceptions to immunity listed in R.C. 2744.02(B) apply to expose
the political subdivision to liability. Id. at 28, 697 N.E.2d 610. At this tier,
the court may also need to determine whether specific defenses to liability
for negligent operation of a motor vehicle listed in R.C. 2744.02(B)(1)(a)
through (c) apply.
If any of the exceptions to immunity in R.C. 2744.02(B) do apply and no
defense in that section protects the political subdivision from liability, then
the third tier of the analysis requires a court to determine whether any of the
defenses in R.C. 2744.03 apply, thereby providing the political subdivision
a defense against liability.
Colbert v. Cleveland, 99 Ohio St.3d 215, 2003-Ohio-3319, 790 N.E.2d 781, ¶ 7-9.
{¶14} Under this three-tier analysis, the court reaches the end of its inquiry when
the acts or omissions of a political subdivision do not fit under any of the five exceptions
enumerated in R.C. 2744.02(B). In other words, the courts do not engage in the third
tier of the analysis regarding available defenses provided in R.C. 2744.03 if no exception
under R.C. 2744.02(B) can be found to remove the general grant of immunity. O’Toole
v. Denihan, 118 Ohio St.3d 374, 2008-Ohio-2574, 889 N.E.2d 505.
Analysis
I. Applicability of R.C. 2744.02(B)(2)
{¶15} Nelson’s first assignment of error states that the trial court erred in finding
that the sovereign immunity exception outlined in R.C. 2744.02(B)(2) does not apply.
Nelson alleges that she has provided competent evidence of the City’s negligence in its
maintenance and repair of Route 2 (“Shoreway”) eastbound, near the Edgewater Park exit
ramp.
{¶16} Political subdivisions are generally immune from liability incurred in
performing either a governmental function or a proprietary function. R.C.
2744.02(A)(1). However, in applying the three-tier analysis outlined above, we must
now determine whether any exception under R.C. Chapter 2744 applies. Nelson asserts
that the exception outlined in R.C. 2744.02(B)(2) should apply. As previously stated,
R.C. 2744.02(B)(2) provides that political subdivisions are liable for “injury, death, or
loss to person or property caused by the negligent performance of acts by their employees
with respect to proprietary functions of the political subdivisions.” The City asserts that
Nelson has failed to provide facts that would create a genuine issue of fact demonstrating
that it performed a proprietary act negligently.
{¶17} Before R.C. 2744.02(B)(2) will remove a political subdivision’s immunity,
Nelson must establish the following: (1) the elements required to sustain a negligence
action; and (2) that the negligence arose out of a “proprietary function.” Williams v.
Glouster, 4th Dist. No. 10CA58, 2012-Ohio-1283, 864 N.E.2d 102, ¶ 17, citing Gabel v.
Miami E. School Bd., 169 Ohio App.3d 609, 2006-Ohio-5963, ¶ 39-40 (2d Dist.).
{¶18} R.C. 2744.01(G)(2) lists specific functions expressly designated as
proprietary functions. This list includes “[t]he maintenance, destruction, operation, and
upkeep of a sewer system.” R.C. 2744.01(G)(2)(d). Moreover, Ohio courts have long
recognized that a city can be liable for the negligent maintenance of its sewers. See
Portsmouth v. Mitchell Mfg. Co., 113 Ohio St. 250, 148 N.E. 846 (1925). In Mitchell
Mfg., the Supreme Court held that, while there is no liability for mere failure to construct
sewers, “the operation and upkeep of sewers is not a governmental function, but is a
ministerial or proprietary function of the city.” Id. at 255. Similarly, the court later
held that when a municipality does construct or maintain sewers, “it becomes its duty to
keep them in repair and free from conditions which will cause damage to private
property.” Doud v. Cincinnati, 152 Ohio St. 132, 137, 87 N.E.2d 243 (1949). Thus,
the municipality becomes liable “in the same manner and to the same extent as a private
person under the same circumstances.” Id.
{¶19} “Determining whether an allegation of negligence relates to the
maintenance, operation, or upkeep of a sewer system or, instead, the design, construction,
or reconstruction of a sewer system is not always a simple inquiry.” Essman v.
Portsmouth, 4th Dist. No. 09CA3325, 2010-Ohio-4837, ¶ 2. A complaint is properly
characterized as a “maintenance, operation, or upkeep issue” when “remedying the sewer
problem would involve little discretion but, instead, would be a matter of routine
maintenance, inspection, repair, removal of obstructions, or general repair of
deterioration.” Id., citing Martin v. Gahanna, 10th Dist. No. 06AP-1175,
2007-Ohio-2651, ¶ 17. On the other hand, a complaint presents a design or construction
issue if “remedying a problem would require a city to, in essence, redesign or reconstruct
the sewer system.” Id., citing Zimmerman v. Summit Cty., 9th Dist. No. 17610, 1997
Ohio App. LEXIS 52 (Jan. 15, 1997).
{¶20} In this case, Nelson’s allegation that the City’s actions pertaining to the
sewers along the Shoreway amount to a proprietary function is well taken. R.C.
2744.01(G)(2) expressly designates “the maintenance, destruction, operation, and upkeep
of a sewer system” as a proprietary function. Nelson claims that the City failed to
properly maintain its sewers and catch basins along the Shoreway. She maintains that
the City could have prevented the large puddle of standing water on the Shoreway had it
properly maintained, inspected, and repaired the catch basins. Nelson is not alleging
that in order to remedy the existing problem on the Shoreway, the City would, essentially,
need to redesign or reconstruct the sewer system. Rather, she alleges that remedying the
sewer problem would involve little discretion and would be a matter of timely inspections
and maintenance. Essman at ¶ 2. We find, therefore, that the City’s maintenance of its
sewer system along the Shoreway at issue is a proprietary function, allowing for the
consideration of the immunity exception provided in R.C. 2744.02(B)(2).
{¶21} Because we find that the City’s maintenance of its sewer system in this case
is a proprietary function, we must next address whether Nelson has set forth facts that
create a genuine issue as to the City’s negligence in that regard. Nelson alleges there
was sufficient evidence of negligence to avoid summary judgment because she
established that a large unnatural accumulation of a pool of water formed on the regularly
traveled portion of the roadway, which the City knew or should have known, instituted a
dangerous condition and that condition caused her accident. For the reasons that follow,
we agree.
{¶22} In order to establish negligence, one must show the existence of a duty, a
breach of that duty, and the breach was the proximate cause of an injury. Menifee v.
Ohio Welding Prods., Inc., 15 Ohio St.3d 75, 84, 472 N.E.2d 707 (1984). Negligence
may not be presumed from mere proof of an injury caused by some act of the defendant.
The burden is on the plaintiff to prove by a preponderance of the evidence that the
defendant failed to exercise the care that a reasonably prudent person is accustomed to
exercise under the same or similar circumstances. Republic Light & Furniture Co. v.
Cincinnati, 97 Ohio App. 532, 536-537, 127 N.E.2d 767 (1st Dist.1954). The trier of
fact may not speculate as to what the standard of care should be. Rather, where the
standard of care is not a matter of common knowledge to a jury, the burden rests on the
plaintiff to introduce substantial evidence from which a jury may reasonably infer the
standard of care that is appropriate to the situation established by the evidence. Id.,
citing Englehardt, a Minor v. Philipps, 136 Ohio St. 73, 23 N.E.2d 829 (1939).
{¶23} In this case, Nelson alleges that the City negligently maintained and/or
repaired the catch basins along the Shoreway near the Edgewater exit. In support of her
claim, Nelson submitted an affidavit of an expert, James D. Madden, P.E. Nelson’s
expert opined that the City has not taken the necessary measures to properly maintain the
drainage system for the Shoreway located near the Edgewater exit. Affidavit ¶ 28.
Specifically, Nelson’s expert states that the condition of the drainage system “that caused
the development of the standing water” at the site of the accident had been deteriorating
“for a considerable time.” Affidavit ¶ 32. He further states that as the drainage
condition deteriorated, larger areas of standing water would accumulate due to the debris
that would progressively slow the drainage rate, and this standing water was a “hazard”
and its presence was the notice of a problem with the drainage. Id. Nelson’s expert
maintains that this dangerous condition on the Shoreway could be completely eliminated
by cleaning the drainage system “at an interval that would keep the drainage system
functioning properly, rather than waiting for the inevitable development of * * * standing
water.” Id. at ¶ 33. Finally, Nelson’s expert stated that, despite a history of drainage
system clogging, the City’s records confirm that there had been no maintenance of the
drainage system in the area of the accident. Affidavit ¶ 32.
{¶24} The City, on the other hand, presented evidence that it regularly cleans the
catch basins on the Shoreway. The Commissioner of the City’s Water Pollution Control
department, Rachid Zoghaib, testified that preventative maintenance — a blanket
cleaning — is performed once every year, typically in October or November, to coincide
with a time when the leaves have fallen off the trees. He further testified that the catch
basins were fully cleaned in November 2007 (seven months before Nelson’s accident)
and, again, in October 2008.
{¶25} Construing the evidence in a light most strongly in favor of Nelson, we
believe that genuine issues of material fact exist concerning Nelson’s allegation that the
City was negligent in its maintenance of the Shoreway. Nelson presented evidence, by
way of her expert witness, that the hazardous condition that existed on the Shoreway at
the time of the accident was the result of the City’s failure to maintain the drainage
system, including the catch basins, sewer pipes, and traps.
{¶26} Because we find that R.C. 2744.02(B)(2) applies in this case, and we find
that there are genuine issues of fact regarding the City’s negligent maintenance of the
Shoreway’s sewer system, we must now look at possible defenses presented by the City.
Under the third tier of a sovereign immunity analysis, the court must determine whether
any of the defenses outlined in R.C. 2744.03 apply, thereby providing the political
subdivision with a defense against liability. Colbert, 99 Ohio St.3d 215,
2003-Ohio-3319, 790 N.E.2d 781, ¶ 9. R.C. 2744.03(A)(5) extends immunity to a
political subdivision if the injury or damage “resulted from the exercise of judgment or
discretion in determining whether to acquire, or how to use, equipment, supplies,
materials, personnel, facilities, and other resources” unless this judgment or discretion
“was exercised with malicious purpose, in bad faith, or in a wanton or reckless manner.”
{¶27} Under this tier, the City argues that its summary judgment motion should be
granted because the alleged negligent behavior on the part of the employees of the City
falls within its own judgment or discretion. In support of its position, the City provides
that it has adopted a plan to clean the Shoreway catch basins in the fall, to coincide with
the leaves falling. The City further states that this adopted course of action to maintain
the catch basins is not routine; rather, the City’s use of its personnel is a discretionary
function that falls within the duties of the City’s employees.
{¶28} Courts have consistently held that sovereign immunity operates to protect
political subdivisions from liability based on discretionary judgments concerning the
allocation of limited resources. Frenz v. Springvale Golf Course & Ballroom, 8th Dist.
No. 97593, 2012-Ohio-3568, citing Hall v. Ft. Frye Local School Dist. Bd. of Edn., 111
Ohio App.3d 690, 699, 676 N.E.2d 1241 (4th Dist.1996). This immunity, however, “is
not intended to protect conduct which requires very little discretion or independent
judgment.” (Citations omitted.) Id. Courts have held that property maintenance, in
general, does not involve “‘the type of judgment or discretion contemplated by R.C.
2744.03(A)(3).’” Frenz at ¶ 22, quoting Hall at 702. More on point, the Fourth
District Court of Appeals has held that a city’s decision “‘regarding whether, when, and
how to comply with its duty to maintain the sewer does not fall within the R.C.
2744.03(A)(5) exception.’” Williams v. Glouster, 4th Dist. No. 10CA58,
2012-Ohio-1283, quoting Malone v. Chillicothe, 4th Dist. No. 05CA2869,
2006-Ohio-3268, ¶ 20.
{¶29} Immunity pursuant to R.C. 2744.03(A)(5) relates to activities that require
the balancing of alternatives or making decisions involving an increased amount of
official judgment or discretion. Inland Prods., Inc. v. Columbus, 193 Ohio App.3d 740,
2011-Ohio-2046, 954 N.E.2d 141, ¶ 62 (10th Dist.). Discretion, in reference to R.C.
2744.03(A)(5), involves the exercise of independent judgment and policymaking.
Hacker v. Cincinnati, 130 Ohio App.3d 764, 770, 721 N.E.2d 416 (1st Dist.1998).
“Some positive exercise of judgment that portrays a considered adoption of a particular
course of conduct in relation to an object to be achieved is required in order to
demonstrate an exercise of discretion for which R.C. 2744.03(A)(5) confers immunity
from liability on a political subdivision.” Addis v. Howell, 137 Ohio App.3d 54, 60, 738
N.E.2d 37 (2d Dist.2000). A political subdivision, however, may not simply assert that
all of its decisions are discretionary under R.C. 2744.03(A)(5). Hacker. “[R]outine
decisions requiring little judgment or discretion and that, instead, portray inadvertence,
inattention, or unobservance, are not covered by the defense provided by R.C.
2744.03(A)(5).” Hubbell v. Xenia, 175 Ohio App.3d 99, 2008-Ohio-490, 885 N.E.2d 290,
¶ 22 (2d Dist.).
{¶30} The City contends that the decision to inspect and maintain the sewer catch
basins along the Shoreway involved the exercise of discretion, in particular with respect
to the use of its resources and personnel. It further argued that R.C. 2744.03(A)(5)
absolved it from liability with respect to its decisions regarding the repair and
maintenance of the sewer system. Based on the foregoing decisions, we find the City’s
argument not well taken. Decisions involving the proper maintenance of the sewer or
drainage system is a proprietary act, which is mandatory and not discretionary. These
decisions do not involve a high degree of discretion. Rather, they involve routine
inspection and maintenance. Therefore, the defense outlined in R.C. 2744.03(A)(5) is
not available to the City.
{¶31} Consequently, Nelson’s first assignment of error is sustained.
II. Applicability of R.C. 2744.02(B)(3)
{¶32} In granting summary judgment in favor of the City, the trial court also
determined that R.C. 2744.02(B)(3) does not apply and, thus, the City retains its
immunity. Nelson’s second assignment of error states that the trial court erred in finding
that the sovereign immunity exception outlined in R.C. 2744.02(B)(3) does not apply.
Specifically, appellant asserts that this exception does, in fact, apply, because the standing
water on the Shoreway was an “obstruction,” thus, precluding the City’s immunity.
{¶33} As previously stated, R.C. 2744.02(B)(3) provides that political subdivisions
“are liable for injury, death, or loss to person or property caused by their negligent failure
to keep public roads in repair and other negligent failure to remove obstructions from
public roads.” The statute, however, does not define “obstruction.” We must look,
therefore, to the interpretation of this statute by the courts.
{¶34} The Ohio Supreme Court analyzed the immunity statute in order to
determine whether there was sovereign immunity for ice on public roads. Howard v.
Miami Twp. Fire Div., 119 Ohio St.3d 1, 2008-Ohio-2792, 891 N.E.2d 311 (“Howard I”).
More on point, the Supreme Court considered the issue of whether an accumulation of
ice on the roadway was an “obstruction” within the meaning of R.C. 2744.02(B)(3). Id.
In reviewing the statutory history of political subdivision immunity, the Supreme Court
determined that, for purposes of R.C. 2744.02(B)(3), “an ‘obstruction’ must be an
obstacle that blocks or clogs the roadway and not merely a thing or condition that hinders
or impedes the use of the roadway or that may have the potential to do so.” Id. at ¶ 30.
Applying this definition of “obstruction,” the Supreme Court found in Howard I that an
accumulation of ice on a roadway is not an obstruction within the meaning of R.C.
2744.02(B)(3). Id.
{¶35} In Howard, a 16 year-old boy died when he lost control of his vehicle upon
hitting black ice that had formed on the roadway following fire department training
exercises. Id. The court of appeals in that case “held that [an] ‘obstruction’ as it is used
in R.C. 2744.02(B)(3), should be interpreted to mean any object placed or erected in a
public roadway that has the potential of interfering with the public’s use of that roadway.
An interference occurs when the public’s safe use of the roadway is jeopardized.’” Id. at
¶ 22, quoting Howard v. Miami Twp. Fire Div., 171 Ohio App.3d 184, 2007-Ohio-1508,
870 N.E.2d 197, ¶ 23-24 (2d Dist.) (“Howard II”). The appellate court went on to find
as follows:
“[A]n icy mixture on a public roadway has the potential of interfering with
the public’s safe use of the roadway by creating an opportunity for loss of
traction and/or loss of control of a vehicle and * * *the township was not
entitled to judgment as a matter of law under R.C. 2744.02(B)(3), because
the political subdivision had a duty of care to remove this obstruction from
the road.”
Id. at ¶ 22, quoting Howard II, 171 Ohio App.3d 184, 2007-Ohio-1508, 870 N.E.2d 197,
¶ 26 (2d Dist.). The Supreme Court, however, rejected this broad interpretation of the
meaning of the word “obstruction,” reversed the appellate court, and found that the
appellate court’s decision ignored the statutory history of R.C. 2744.02(B)(3):
[W]e believe that the General Assembly purposely replaced the phrase “free
from nuisance” with “other negligent failure to remove obstructions.” To
find otherwise is to conclude that the legislature’s action in amending the
statute was a superfluous act.
We are persuaded that the legislature’s action in amending R.C.
2744.02(B)(3) was not whimsy but a deliberate effort to limit political
subdivisions’ liability for injuries and deaths on their roadways.
Howard I at ¶ 25-26. The Supreme Court further stated that the word “obstruction”
requires something greater than a nuisance:
[W]e discern a legislative intent to limit political-subdivision liability for
roadway injuries and deaths. The General Assembly, in furtherance of its
goal, used the word “obstructions” in a deliberate effort to impose a
condition more demanding than a showing of a “nuisance” in order for a
plaintiff to establish an exception to immunity.
Id. at ¶ 29.
{¶36} Following the Supreme Court’s decision in Howard I, the Sixth District
Court of Appeals in Engle v. Williams Cty., 6th Dist. No. F-07-027, 2008-Ohio-3852,
applied the Supreme Court’s definition of “obstruction” within the meaning of R.C.
2744.02(B)(3) to an accumulation of water on the roadway. In doing so, the court
determined that water accumulated on a county road was not an “obstruction” pursuant to
the statutory exception to sovereign immunity for failure to remove obstructions in the
roadway, thus finding the county immune from civil liability for its alleged failure to
remove standing water. Id.
{¶37} In Engle, the driver of a vehicle lost control while driving through standing
water on a roadway. The standing water was in a protected wetlands area that had been
saturated by heavy rain. The court of appeals determined that the Supreme Court’s
decision in Howard I was not limited to circumstances involving only ice, finding that the
water in that case “was not blocking or clogging the roadway and was therefore not an
obstruction as contemplated by R.C. 2744.02(B)(3).” Id. at ¶ 5.
{¶38} The instant case involves standing water in the form of a large puddle that
stretched across three lanes of traffic on the Shoreway. There is no evidence that this
puddle either blocked or clogged traffic. Nelson testified that she saw no other vehicles
ahead of her and, following her accident, other vehicles continued on through the puddle
beyond her vehicle. While the standing water may have impeded traffic on the
Shoreway, an impediment such as this does not rise to the level of an obstruction as
defined by the Ohio Supreme Court in Howard I. Therefore, the exception to political
subdivision immunity outlined in R.C. 2744.02(B)(3) does not apply, and Nelson’s
second assignment of error is without merit.
{¶39} This cause is reversed and remanded to the lower court for further
proceedings consistent with this opinion.
It is ordered that appellant recover of said appellees costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the common
pleas court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
______________________________________________
TIM McCORMACK, JUDGE
KATHLEEN ANN KEOUGH, P.J., and
EILEEN A. GALLAGHER, J., CONCUR
| {
"pile_set_name": "FreeLaw"
} |
223 P.3d 513 (2009)
153 Wash.App. 44
16th STREET INVESTORS, LLC, a Washington limited liability company; George Killian, Elaine Killian; Lance Killian; and Bernhardt Associates, Inc., d/b/a Coldwell Banker Commercial Jenkins-Bernhardt Associates, a Washington corporation, Respondents,
v.
Joseph W. MORRISON, Appellant.
No. 37451-0-II.
Court of Appeals of Washington, Division 2.
September 15, 2009.
Publication Ordered November 17, 2009.
*514 James I. Holland, Attorney at Law, James J. Holland, Hall & Holland, Vancouver, WA, Michael Barr King, Carney Badley Spellman PS, Seattle, WA, for Appellant.
Stephen Garrett Leatham, Heurlin Potter Jahn Leatham & Holtmann, Vancouver, WA, James T. McDermott, Aaron D. Goldstein, Ball Janik LLP, Portland, OR, for Respondents.
BRIDGEWATER, J.
¶ 1 Joseph W. Morrison appeals from a judgment that ordered specific performance of a purchase and sales agreement (PSA), requiring him to sell property he owned in downtown Vancouver, Washington, to an undisclosed buyer (George and Lance Killian through 16th Street Investors, LLC). Before sending the PSA to the Killians' representative, Morrison attached a memorandum setting forth an option to purchase a condominium, should the buyer develop the property into residential condominiums. Even though the Killians received the PSA, including the memorandum, and accepted it without modification, Morrison initiated further negotiations concerning the option. He attempted to delineate the option terms. The Killians engaged in the negotiations. We hold that the option contained in the PSA was merely an agreement to agree and the PSA was not subject to specific performance. Consequently, we reverse trial court's judgment regarding specific performance and the other damages the court granted, i.e., an increased tax liability due to the failed transaction and damages to the brokerage house that lost commission on the transaction. As well, the Killians' award of attorney fees is stricken and the matter is remanded for the trial court to award attorney fees to Morrison for the trial and the appeal under the terms of the PSA. We reverse and remand for entry of orders consistent with this opinion.
FACTS
¶ 2 Between 1971 and 1987, Morrison acquired seven parcels of property near downtown Vancouver, Washington. Because he supported a revival of downtown Vancouver, he hoped that someday someone would seek to develop his property. He also hoped that he would have an opportunity to live in a residential unit built on the property after someone developed it.
¶ 3 In the late summer of 2005, Jim Justin informed Morrison that an undisclosed buyer was interested in purchasing his downtown Vancouver property. Justin was a real estate broker at Coldwell Banker Commercial Jenkins Bernhardt Associates (Bernhardt Associates). One of Justin's colleagues at Bernhardt Associates, Wallace Hornberger, told Justin that he was working with some *515 clients who expressed an interest in Morrison's property. Hornberger was working on behalf of local commercial real estate developers George Killian and his son, Lance Killian.
¶ 4 The Killians wished to remain anonymous throughout the transaction as a precaution against the seller, Morrison, artificially inflating the property price. According to the Killians', this type of anonymous transaction is typical in the real estate community, particularly one like Vancouver, Washington, where the Killians' real estate projects are sometimes reported in the news. Due to the Killians' desire to remain undisclosed, several real estate agents represented the parties throughout the transaction. Justin represented Morrison. He agreed to protect the Killian's identity and thus did not disclose it to Morrison. Wallace Hornberger acted as a "conduit" between Justin (on behalf of Morrison) and represented the Killians. Bob Berhnardt served as the named buyer in the transaction.
¶ 5 Morrison did not want to sell the property without retaining an option to purchase a condominium, should the buyer develop the property into residential condominiums. He was also concerned that the initial buyer would "flip" the property to another party to develop the property; therefore, he sought to include an option in a recordable agreement. II RP at 215, 216. Morrison initially had Justin draft an option agreement, but he felt that the language he drafted fell short. As a result, Morrison asked his attorney, Greg Call, to prepare a memorandum more formally outlining the option agreement he sought. Call drafted what came to be known as the "Call memorandum," which included the following terms:
(1) The purchase price of $580,000 based on $20 per square foot;
(2) A refundable earnest money deposit of $50,000, to be paid into escrow within three days of acceptance by both parties;
(3) Instruction that the balance of the purchase price be paid in cash, pursuant to a Section 1031 exchange;[1] and
(4) Detailed some provisions pertaining to Morrison's option to purchase, including the size and location of the residential unit Morrison would have the option to purchase and a formula for calculating the price of the residential unit Morrison would have the right to a purchase.
See Ex. 3 (Ex. B); Ex.4.
¶ 6 Call gave his memorandum to Justin, who in turn presented it to the Killians for review. The Killians approved the Call memorandum. Thereafter, Morrison wanted to attach the Call memorandum to the PSA; thus, Justin attached the Call memorandum to the PSA document and presented it to Morrison for his signature. Morrison, as seller, initialed and signed the PSA, including the attached Call memorandum, on October 22, 2005.
¶ 7 On the Killians' direction, Bernhardt, as buyer, signed the PSA, including the attached Call memorandum, on November 9. The Killians accepted Morrison's offer without modifications. Also on November 9, Bernhardt executed a document entitled "ASSIGNMENT AND ASSUMPTION OF AGREEMENT." Ex. 5. The document recited that Bernhardt Associates had entered into the PSA "as an agent for Killian as an undisclosed principal." Ex. 5. It further recited that Bernhardt Associates was now assigning "all liability pursuant to" the PSA to Killian Pacific, LLC and or its assigns. Ex. 5.
¶ 8 Following execution of the PSA, the parties proceeded toward closing. On November 29, 2005, Bernhardt Associates gave Morrison notice that the buyer had satisfied the PSA's "Inspection Contingency," and on December 9, 2005, Bernhardt Associates notified Morrison that the buyer had determined that no "Permitted Exception(s)" would be required regarding title. Ex. 6, 7. In addition, the Killians tendered a $50,000 earnest money promissory note shortly thereafter.
¶ 9 Then, in April 2006, Bernhardt Associates gave notice of an intention to close on *516 May 30, 2006.[2] At some point in May, the Killians formed 16th Street Investors, LLC.[3] The sole purpose of 16th Street Investors was to hold the property that the Killians were acquiring from Morrison.
¶ 10 On May 24, 2006, six days before closing, Chicago Title provided Morrison with copies of the closing documents, including documents making it clear that the buyer was going to participate in a Section 1031 exchange as a part of the transaction. On May 25, 2006, at the parties' request, the Killians' attorney provided Morrison, through Chicago Title, a written document acknowledging Morrison's option to acquire a residential unit pursuant to the Call memorandum. The acknowledgement stated in pertinent part:
16 STREET INVESTORS, LLC, having acquired the West 42 feet of Lot 2 in Blocks 3, 4, 5, 6 and 7, BLOCK 71, CITY OF VANCOUVER (commonly known as EAST VANCOUVER) according to the Plat thereof recorded in Volume "C" of Plats, that certain Memorandum attached hereto and by this reference incorporated herein. 16 Street Investors, LLC agrees that if it includes residential units in the construction and development of the aforementioned property, Joseph W. Morrison will be provided the option to acquire a unit as described in the attached Memorandum.[4]
Ex.20.
¶ 11 Morrison was not satisfied by the acknowledgement because he felt it did not adequately address his concerns over the option. He refused to close on May 30, as required under the PSA.
¶ 12 On June 5, Morrison had Call send Justin a proposed form of a revised option agreement along with a cover memorandum setting forth Morrison's concerns and inviting the Killians' attorney to contact Call directly to discuss those concerns. The Killians initially tried to salvage the transaction by discussing Morrison's option to purchase, but the parties were unable to reach an agreement. On June 16, the Killians' attorney informed Call that the transaction had to close by June 20, as that was the deadline for the buyer's 1031 exchange. On June 20, Morrison terminated all negotiations. Because the 1031 exchanged failed to timely close, the Killians suffered a tax liability totaling $100,689.
¶ 13 On August 8, the Killians, through 16th Street Investors, LLC, and Bernhardt Associates filed a complaint in Clark County Superior Court seeking specific performance, money damages equal to its tax liability, and Bernhardt Associates' commission from Morrison. Following a bench trial, the trial court granted specific performance of the PSA, $100,689 plus interest for the 1031 tax liability, and $17,400 plus interest for Bernhardt Associates' lost commission.
ANALYSIS
I. Standard of Review
¶ 14 Morrison challenges several findings of fact and conclusions of law. In reviewing the trial court's findings and conclusions, we determine whether substantial evidence supports its findings of fact and, in turn, whether the findings support the conclusions of law. Pilcher v. Dep't of Revenue, 112 Wash. App. 428, 435, 49 P.3d 947 (2002), review denied, 149 Wash.2d 1004, 67 P.3d 1096 (2003). Substantial evidence is evidence sufficient to convince a fair-minded, rational person of the truth of the finding. Pilcher, 112 Wash.App. at 435, 49 P.3d 947.
I. PSA Interpretation
¶ 15 The crux of Morrison's appeal is that the PSA, including the Call memorandum, did not create a legal obligation in him to sell the property. Rather, he asserts that it was an agreement to agree. We agree and we hold that the trial court erred by ordering specific performance of the PSA.
*517 A. PSA Language as a Whole
¶ 16 Morrison places great emphasis on the language in the Call memorandum, contending that it converted the PSA offer into a mere agreement to agree. On October 22, 2005, Morrison signed the PSA, attached the Call memorandum, and transmitted this offer to Bernhardt for his acceptance. The Killians, through Bernhardt, accepted Morrison's offer without any modifications.
¶ 17 As the trial court noted, the issue is not whether the Call memorandum alone constituted a specifically enforceable contract. Rather, the issue is whether the package as a whole constituted a specifically enforceable contract. We hold that it did not.
¶ 18 It has long been held that the essential terms of a real estate contract generally include the "subject matter of the agreement, the consideration and terms of payment." Hubbell v. Ward, 40 Wash.2d 779, 787, 246 P.2d 468 (1952). When a contract contains all of the material[5] and essential terms of a future contract such that a court can ascertain what the parties must do to constitute performance, then the court may order specific performance. Hubbell, 40 Wash.2d at 787, 246 P.2d 468.
¶ 19 Here, the PSA, but for the Call memorandum, included all of the material and essential terms required for a specifically enforceable real estate contract. Hubbell, 40 Wash.2d at 787, 246 P.2d 468. Morrison objectively represented to the buyers that he would convey his property for consideration of $580,000 plus "additional consideration" of an option to purchase a condominium, or "residential unit" if such were constructed by the buyer. Ex. 3 (Ex. B); Ex. 4. Moreover, the PSA included the following language:
22. MISCELLANEOUS PROVISIONS.
a. Complete Agreement. The Agreement and addenda and any exhibits to it state the entire understanding of Buyer and Seller regarding the sale of the Property. There are no verbal or written agreements which modify or affect the Agreement....
b. No Merger. The terms of the Agreement shall not merge in the deed or other conveyance instrument transferring the Property to Buyer at closing.
Ex. 3 at 7.
¶ 20 The attached Call memorandum contained the following paragraph:
As additional consideration, Mr. Morrison would like an option to purchase a condominium if Buyer, at Buyer's election, decides to include residential units in the construction and development of the property. The option would provide for the purchase of one (1) residential unit to be located on an upper level floor and on the south side or on the southwest corner of the building with the square footage of the unit to be the greater of the size of the largest residential unit included in the design or twice the size of the smallest unit planned for the design, but under no circumstances less than 1,600 square feet. The purchase price under the option would be based on Seller's cost per square foot for construction of the selected unit including inside walls, ceilings, windows, plumbing, wiring, ventilation and flooring but not fixtures, appliances, molding, paint, wall paper, cabinets and floor coverings. Buyer and Seller shall agree on a location of electrical outlets, ventilation and plumbing.
Ex. 3 (Ex. B); Ex.4.
¶ 21 But despite the above specifics, the issue remains as to the nature of the Call memorandum. See Hubbell, 40 Wash.2d at 787, 246 P.2d 468.
B. Call Memorandum
¶ 22 Morrison maintains that the "would like" language in the Call memorandum *518 converted the PSA into an agreement to agree. Ex. 4. An agreement to agree is "`an agreement to do something which requires a further meeting of the minds of the parties and without which it would not be complete.'" Keystone Land & Dev. Co. v. Xerox Corp., 152 Wash.2d 171, 175, 94 P.3d 945 (2004) (quoting Sandeman v. Sayres, 50 Wash.2d 539, 541-42, 314 P.2d 428 (1957)). Agreements to agree are unenforceable in Washington. Keystone, 152 Wash.2d at 175, 94 P.3d 945.
¶ 23 The Keystone court found that the parties had formed only an agreement to agree and not a binding contract. There, Keystone submitted a letter of intent to purchase a facility Xerox owned. Keystone, 152 Wash.2d at 174, 94 P.3d 945. As in the instant case, the letter contained a net purchase price and several other key deal points. Keystone, 152 Wash.2d at 174, 94 P.3d 945. Xerox then requested a "final and best offer" and Keystone responded by letter, amending the purchase price. Keystone, 152 Wash.2d at 175, 94 P.3d 945. Xerox replied stating, "Xerox is prepared to negotiate a Purchase and Sale Agreement with Keystone Development subject to two modifications to your Proposal." Keystone, 152 Wash.2d at 175, 94 P.3d 945. Keystone accepted the modifications and on appeal contended that all of the key terms necessary to form a contract were present in its agreements with Xerox. Keystone, 152 Wash.2d at 175, 94 P.3d 945. The Keystone court rejected this contention, finding that Xerox merely manifested an intention to negotiate with Keystone and "an intention to do something `is evidence of a future contractual intent, not the present contractual intent essential to an operative offer.'" Keystone, 152 Wash.2d at 179, 94 P.3d 945 (quoting Pac. Cascade Corp. v. Nimmer, 25 Wash.App. 552, 556, 608 P.2d 266, review denied, 93 Wash.2d 1030 (1980)).
¶ 24 Keystone is instructive here. When Morrison attached the Call memorandum to the PSA, he manifested an intention to negotiate his option further with the Killians. See Keystone, 152 Wash.2d at 179, 94 P.3d 945. Morrison's use of the words "would like" in the Call memorandum created an ambiguity in the contract as a whole and left undefined the nature of the option. Specifically, the Call memorandum stated:
Mr. Morrison would like an option to purchase a condominium if Buyer, at Buyer's election, decides to include residential units in the construction and development of the property.
Ex. 3 (Ex. B); Ex. 4 (emphasis added).
¶ 25 We hold that Morrison's use of the term "would like" created an undefined material term. Morrison indicated a desire to define an option in the future. Ex. 3 (Ex. B); Ex. 4; see Keystone, 152 Wash.2d at 175, 94 P.3d 945. It is clear from both Call and Morrison's testimony what they desired, at some point, and attempted to clarify the term "residential unit." II RP at 219. It is also clear that Call and Morrison desired that the option would survive a transfer of "flip" by the original buyer. II RP at 215, 216. This was a material term of the option that they attempted to negotiate.
¶ 26 Indeed, the parties' actions support this conclusion. That the Killians, through their attorney, continued to negotiate with Morrison demonstrates that the option terms captured in the Call memorandum were undefined. The Killians were not unwilling to delineate the full import of the option. Their actions reflect the future nature of the agreement to agree concerning the option.
¶ 27 Finally, basic contract interpretation compels our holding. The terms of a contract must be sufficiently definite. Keystone, 152 Wash.2d at 178, 94 P.3d 945. If an offer is so indefinite that a court cannot decide just what it means and fix exactly the legal liability of the parties, its acceptance cannot result in an enforceable agreement. Sandeman, 50 Wash.2d at 541, 314 P.2d 428. When parties seek specific performance of a contract, rather than damages, a higher standard of proof must be met: "clear and unequivocal evidence that leaves no doubt as to the terms, character, and existence of the contract." Kruse v. Hemp, 121 Wash.2d 715, 722, 853 P.2d 1373 (1993) (internal quotations and citations omitted).
¶ 28 Here, the Killians have not offered clear and unequivocal evidence that leaves no doubt as to the terms, character, and existence of the contract. See Kruse, 121 *519 Wash.2d at 722, 853 P.2d 1373. They have not convinced us that the contract and its terms are so definite that we can determine exactly what it means or fix the parties' exact legal liability. See Sandeman, 50 Wash.2d at 541, 314 P.2d 428. Here, the parties had agreed that they needed to reach a further agreement on the terms of the option. See Kruse, 121 Wash.2d at 722, 853 P.2d 1373. Accordingly, specific performance is not appropriate. See Kruse, 121 Wash.2d at 722, 853 P.2d 1373. And the trial court erred when it found that Morrison breached the PSA when he failed to close by May 30, 2006. We need not address Morrison's argument as to the undisclosed principal's intent, in light of our holding that the plain language establishes an agreement to agree.
¶ 29 We hold that trial court's judgment must be reversed regarding specific performance and the other damages the trial court granted, i.e., an increased tax liability due to the failed transaction and damages to the brokerage house that lost commission on the transaction. As well, the Killians' award of attorney fees is stricken and the matter is remanded for the trial court to award attorney fees to Morrison for the trial and the appeal under the terms of the PSA. We reverse and remand for entry of orders consistent with this opinion.
We concur: VAN DEREN, C.J., and PENOYAR, J.
NOTES
[1] A 1031 exchange is a property exchange device, authorized by the federal Internal Revenue Code and which can result in substantial tax savings.
[2] The closing date was subsequently moved to May 30 because May 29 was a holiday.
[3] Fisher's Terrace, LLC is the sole of 16th Street Investors, LLC. Lance Killian, George Killian, and George's wife and Lance's mother, Elaine Killian, are members of Fisher's Terrace, LLC.
[4] The "attached memorandum" was the Call memorandum. Ex. 3 (Ex. B); Ex. 4.
[5] The Hubbell court separately enumerated 13 specific material factors in a real estate contract (involving structures, not just land):
(a) time and manner for transferring title; (b) procedure for declaring forfeiture; (c) allocation of risk with respect to damage or destruction; (d) insurance provisions; (e) responsibility for: (i) taxes, (ii) repairs, and (iii) water and utilities; (f) restrictions, if any, on: (i) capital improvements, (ii) liens, (iii) removal or replacement of personal property, and (iv) types of use; (g) time and place for monthly payments; and (h) indemnification provisions. Hubbell, 40 Wash.2d at 782-83, 246 P.2d 468; Kruse v. Hemp, 121 Wash.2d 715, 722, 853 P.2d 1373 (1993).
| {
"pile_set_name": "FreeLaw"
} |
592 F.Supp. 948 (1984)
UNIVERSAL MARINE INSURANCE COMPANY, LTD., Plaintiff,
v.
BEACON INSURANCE COMPANY, Neill Portermain, New Orleans Reinsurers, Inc., Robert C. Schirmer, B.F.G. Toomey & Associates, Inc., B.F.G. Toomey Associates, Ltd., Barry Toomey and Cherokee Insurance Company, Ltd., Defendants.
No. ST-C-83-328-P.
United States District Court, W.D. North Carolina, Statesville Division.
August 28, 1984.
*949 *950 Bruce Friedman, Kroll, Pomerantz & Cameron, New York City, Hugh Campbell, Weinstein, Sturges, Odom, Groves, Bigger, Jonas & Campbell, E. Fitzgerald Parnell, III, Charlotte, N.C., for plaintiff.
Gaston H. Gage, Parker, Poe, Thompson, Bernstein, Gage & Preston, Charlotte, N.C., for additional parties defendant, Frederick B. Ingram and Ingram Corp.
Katherine D. Woodruff, Condos, Shafer, Paynor, Ramsey, Beggs & Woodruff, Dallas, Tex., Ronald A. Jacks, Paul W. Schroeder, David M. Spector, Edward R. Gower, Isham, Lincoln & Beale, Chicago, Ill., James E. Walker, Walker, Palmer & Miller, Charlotte, N.C., for Beacon Ins. Co. and Neil Portermain.
Raymond E. Owens, Jr., Charlotte, N.C., for New Orleans Reinsurers and Robert Schirmer.
John DeQ Briggs, W. Donald Dresser, Howrey & Simon, Washington, D.C., Charles H. Warfield, Thomas P. Kanady, Jr., Rachel L. Steele, Farris, Warfield & Kanaday, Nashville, Tenn., Robert B. Cordle, E. Osborne Ayscue, Helms, Mulliss & Johnston, Charlotte, N.C., Harold M. Tract, Rein, Mound & Cotton, New York City, for Cherokee Ins. Co., Ltd.
ORDER
ROBERT D. POTTER, Chief Judge.
THIS MATTER was heard before the undersigned on August 15, 1984 in Charlotte, North Carolina. The Plaintiff ("UMIC") was represented by E. Fitzgerald Parnell, III and Bruce M. Friedman. Beacon Insurance Company ("Beacon") was represented by Lane Wharton, Ronald A. Jacks and David M. Spector. Cherokee Insurance Company ("Cherokee") was represented by Robert B. Cordle, Robert Pryor, Rachel L. Steele and Thomas P. Kanaday. Dana Corporation ("Dana") was represented by W. Donald Dresser and John DeQ Briggs, III. Bercanus Insurance Company ("Bercanus") was represented by James E. Walker. New Orleans Reinsurers, Inc. ("Nola Re") was represented by Raymond E. Owens. The hearing was held on motions of Beacon for a preliminary injunction and for a constructive trust, on motion of Cherokee to stay all claims against Cherokee and on motions of the Plaintiff for a stay and for reconsideration. During the hearing Beacon moved to strike the affidavit of W. Donald Dresser, Cherokee moved to stay this Order and to certify this Order for interlocutory appeal pursuant to 28 U.S.C. § 1292(b) and Bercanus requested a stay of its obligation to file an Answer. Each motion will be discussed seriatum.
I. MOTION TO STRIKE THE AFFIDAVIT OF W. DONALD DRESSER
Beacon moves the Court to strike Mr. Dresser's affidavit on the grounds that the affidavit is rank with hearsay and violates EC 7-24 of the North Carolina Code of Professional Responsibility by expressing an attorney's personal opinion. The Court, however, after considering the matter is of the opinion that Beacon's motion to strike should be denied in that the information is not offered to prove the truth of the matter asserted. Fed.R.Evid. 801.
Beacon and UMIC have suggested by inuendo that Cherokee masked its knowledge of its pending insolvency or delayed arbitration proceedings because it knew rehabilitation *951 was imminent. Mr. Dresser's affidavit is offered only to refute the above suggestions by explaining how and when Cherokee decided to file for rehabilitation. Since the affidavit is therefore not offered to prove the truth of the matter asserted, i.e., it is not offered to prove the truth of the facts reported by Ormond Re to Cherokee, the Court is of the opinion that Beacon's motion to strike the affidavit should be denied.
II. BEACON'S MOTION FOR A PRELIMINARY INJUNCTION
Beacon moves the Court to enjoin Cherokee from allowing to be maintained an order or from seeking an order in any other forum that would in any way interfere with the Order of May 4, 1984, 588 F.Supp. 735, compelling arbitration and the Order of March 2, 1984, 581 F.Supp. 1131, directing that the disputed funds be held in the registry of the Court. Beacon is entitled to a preliminary injunction against Cherokee if Beacon establishes that it is likely to prevail on the merits, that it will be irreparably harmed if the interim relief is denied, that the harm to Beacon outweighs the injury to Cherokee if the injunction is granted and granting the injunction must not disserve the public interests. Wetzel v. Edwards, 635 F.2d 283, 287 (4th Cir.1980).
As the temporary restraining Order of August 6, 1984, 592 F.Supp. 945, discloses the facts leading to Beacon's requested motion, sufficiently discusses Beacon's likelihood of success in attacking the validity of the Tennessee orders and sets forth the irreparable harm to Beacon if an injunction is not issued, the Court will not belabor the issues and instead simply reaffirms the matters set forth in the temporary restraining Order.
The only issues remaining to be determined are whether a preliminary injunction would disserve the public interest and whether the balance of the equities lies in Cherokee's favor. The Court finds that both issues must be answered negatively. The interest of the public in preventing Cherokee from collaterally attacking an order of this Court is de minimus. Similarly, the harm to Cherokee in being enjoined from seeking collateral orders which impermissibly attempt to interfere with matters before this Court is negligible compared to the harm to Beacon in being subject to contempt for proceeding with orders of this Court. Since Beacon has satisfied its burden with respect to the four prerequisites for issuing a preliminary injunction the Court is of the opinion that Beacon's motion should be granted.
III. CHEROKEE'S MOTION FOR A STAY OF ALL CLAIMS AGAINST CHEROKEE IN THIS LITIGATION
On July 17, 1984 Cherokee was placed into receivership pursuant to the insurance rehabilitation laws of Tennessee. At the time Cherokee filed for rehabilitation, UMIC was already under the supervision of the Bermuda insurance authorities and Beacon was already placed in rehabilitation pursuant to the insurance rehabilitation laws of North Carolina. Although Beacon and UMIC had been in rehabilitation during a substantial portion of this litigation and subject to various orders of this Court, none of the litigants, including Cherokee, had suggested that the Court was required to stay all claims against Beacon and UMIC pending conclusion of the North Carolina or Bermuda rehabilitation proceeding. After Cherokee suffered a similar fate, however, Cherokee asserted that as a matter of law the Court was required to stay all proceedings against Cherokee pending resolution of the Tennessee rehabilitation proceeding.[1] Accordingly, Cherokee filed the instant motion to stay contending that pursuant to the McCarran-Ferguson Act, 15 U.S.C. § 1011 et seq., the Uniform Insurers Liquidation Act, N.C.G.S. § 58-155.10 et seq., and the doctrine of abstention, the mere presence of state court receivership proceedings mandates a federal court to abstain in the exercise of its jurisdiction.
*952 Only exceptional circumstances justify abstention from the exercise of federal jurisdiction in deference to state litigation. As the Supreme Court has repeatedly stated
"Abstention from the exercise of federal jurisdiction is the exception, not the rule. `The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it. Abdication of the obligation to decide cases can be justified under this doctrine only in the exceptional circumstances where the order to the parties to repair to the State court would clearly serve an important countervailing interest.'" Moses H. Cone Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 956, 74 L.Ed.2d 765 (1983), quoting Colorado River Water Conservation District v. United States, 424 U.S. 800, 813, 96 S.Ct. 1236, 1244, 47 L.Ed.2d 483 (1976).
Accordingly, the task before the Court is not to find a substantial reason for the exercise of jurisdiction, rather the Court must ascertain whether this litigation is the exception justifying surrender of jurisdiction. 103 S.Ct. at 942.
Cherokee argues that the presence of Tennessee rehabilitation proceeding, the McCarran-Ferguson Act and the Uniform Insurers Liquidation Act require the Court to recognize this case as the exception justifying abstention. In support of this proposition, Cherokee relies heavily on Levy v. Lewis, 635 F.2d 960 (2d Cir. 1980). Although the Court found the erudite opinion of Judge Lumbard in Levy extremely informative it must be remembered that there is not any mechanical checklist to employ in deciding whether a case is the exception. The appropriateness of abstention in Levy does not necessarily mandate the appropriateness of abstention in the instant case. Rather the determination rests "on a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction." 103 S.Ct. at 937 (emphasis supplied).
In Levy the state insurance rehabilitator terminated the benefits of a retired employee in a state liquidation proceeding. The retired employee then filed suit in federal court alleging that the termination of the employee welfare benefits violated ERISA. Holding that the case falls squarely within the exceptional circumstances test of abstention in Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976) the federal court refrained from exercising concurrent jurisdiction over the ERISA claim. 635 F.2d at 965. The Court, however, refused to abstain on the claim of breach of fiduciary duty under ERISA because that was a claim which carries with it exclusive and not concurrent federal jurisdiction. 635 F.2d at 967.
In applying the exceptional circumstances test of Colorado River to the facts the Court found abstention would prevent duplicative litigation, would enable consolidation of all claims, would avoid delay and piecemeal adjudication of the claims, and would promote the federal policy of allowing states to regulate insurance matters. The facts in this case, however, are significantly distinct, resulting in the opposite conclusion. Here the Court is confronted with not one, but instead three defunct insurers and thus three separate concurrent rehabilitation proceedings. Furthermore, the federal litigation had substantially progressed prior to the institution of the Tennessee rehabilitation proceeding and Cherokee has asserted substantial claims in this litigation against the other litigants. This is not simply a case of a disgruntled claimant attacking the manner in which the insurance rehabilitator administered the rehabilitation of an impaired insurance company. No challenge is made in this case which implicates the regulatory responsibilities of Tennessee or North Carolina. This action is to establish the validity, if any, of the multiple litigants' claims with respect to the various reinsurance treaties. The litigation does not interfere with a state's *953 custody or control of the assets of an insolvent insurer. If a party is eventually successful in this litigation and establishes the validity of its claim against Cherokee, it may take the judgment to the Tennessee rehabilitator who will determine the priority of the claim under the state rehabilitation laws as against other claimants. This case is also factually distinct from Levy in that Cherokee and Beacon contracted to arbitrate and are therefore subject to the United States Arbitration Act ("the Arbitration Act") and the strong federal policy favoring arbitration. 103 S.Ct. at 941.
Whether a court should abstain in deference to a concurrent state court proceeding if a litigant seeks arbitration pursuant to the Arbitration Act is an issue recently adjudicated by the Supreme Court. In Moses H. Cone, supra, a hospital sued in state court for a declaratory judgment that a contractor had waived its right under the contract for arbitration and the hospital had satisfied its obligations to the contractor. Nineteen days later the contractor brought a diversity action in federal court to compel the hospital to arbitrate under the Arbitration Act. The District Court ordered the federal action stayed pending resolution of the state litigation since the federal and the state court had concurrent jurisdiction to enforce the Arbitration Act. On appeal, the Supreme Court applied the exceptional circumstances test and held that the District Court's stay was impermissible under Colorado River.
In interpreting the exceptional circumstances test the Supreme Court noted that the most important factor in Colorado River justifying dismissal was the avoidance or danger of piecemeal litigation. 103 S.Ct. at 937, 939. In addition, other factors in the case tending to support dismissal were the absence of any substantial progress in the federal court litigation, the presence in the suit of extensive rights governed by state law and the geographical inconvenience of the federal forum. 103 S.Ct. at 937.
After discussing the relevancy of the Colorado River factors, the Court examined two other factors not raised in Colorado River which cautioned against the stay. One, it was thought significant that federal law, in the form of the Arbitration Act, would provide the rule of decision on the merits. 103 S.Ct. at 941. Two, the probable inadequacy of the state court to protect a litigant's right to arbitration under the Arbitration Act was an important reason against allowing a stay. 103 S.Ct. at 942.
The presence of a claim under the Arbitration Act was immediately recognized as a significant federal law claim even though jurisdiction is premised on diversity of citizenship. The Supreme Court noted that the Arbitration Act is an "... anomaly in the field of federal-court jurisdiction. It creates a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate, yet it does not create any independent federal question jurisdiction under 28 U.S.C. § 1331" (emphasis supplied) 103 S.Ct. at 942 n. 32. Section two is a congressional declaration of a liberal federal policy favoring arbitration agreements and it creates a "body of federal substantive law of arbitrability." 103 S.Ct. at 941. Further, the presence of a claim under the Arbitration Act was a significant factor even though state and federal courts have concurrent jurisdiction to enforce the statute,[2] in that only the `clearest of justifications' can suffice to justify the surrender of jurisdiction. 103 S.Ct. at 942. Accordingly, the Court thought the existence of the Arbitration Act, a federal-law issue, "must always be a major consideration weighing against surrender." 103 S.Ct. at 942.
*954 The second important factor raised in Moses H. Cone which counseled against the stay was the dubious adequacy of the state court to protect the contractor's right to arbitration under the Arbitration Act. Section three of the Arbitration Act requires state courts as much as federal courts to grant a stay of the litigation. 103 S.Ct. at 942. It is questionable, however, if the same is true of an order to compel arbitration under section four of the Arbitration Act. Although the Supreme Court declined to resolve that query it did express substantial doubt that a litigant could obtain from a state court an order compelling arbitration. 103 S.Ct. at 942. The presence of this substantial doubt cautioned against the granting of the stay.
Applying the Moses H. Cone method of analysis to the instant litigation the Court is of the opinion that this is not the rare case in which exceptional circumstances exist justifying a stay. The federal court litigation had substantially progressed prior to initiation of the Tennessee rehabilitation proceeding and the parties do not contend that the federal forum is inconvenient. Further, there is not present in this litigation extensive rights governed by state law. As previously discussed although there are various state interests in regulating the defunct insurance companies, the parties are not challenging in this litigation the regulatory responsibilities of Tennessee or North Carolina. Further, although this is a diversity action which normally is resolved under state law, the Arbitration Act, an anolomy in the federal court system, creates a body of federal substantive law governing arbitrability. The remaining factors, avoidance of piecemeal litigation, the presence of federal law and the probable inadequacy of the state court proceeding, which factors are probably the more important factors, counsel against the stay.
Federal law, in the form of the Arbitration Act, has a substantial impact on this litigation. Cherokee, Beacon, and Nola Re clearly contracted for arbitration and the arbitration agreements are subject to the Arbitration Act. As in Moses H. Cone, the presence of the federal law issue, even though the federal and state courts have concurrent jurisdiction to enforce the statute, is a major argument against granting a stay. Beacon, in addition claims that Cherokee and Beacon must arbitrate their differences. If Beacon, however, raises that claim in the Tennessee proceeding there is substantial doubt whether any state court, including the Tennessee Court, could compel arbitration. See, 103 S.Ct. at 942. Thus, as in Moses H. Cone the presence of this doubt weighs heavily against granting the stay.
The danger of piecemeal litigation, the factor of primary importance in Colorado River, cuts strongly against granting the stay. 103 S.Ct. at 937. Pretermitting the obvious issue of whether the Tennessee Court could obtain in personam jurisdiction over all the litigants and their claims in this action, the fact remains that Cherokee is not the only insurance company in this litigation subject to state rehabilitation proceedings. If the claims against Cherokee are stayed then the Court should seriously consider staying the claims against Beacon and/or UMIC. Further, the Uniform Insurers Liquidation Act (the "Act") does not require an exclusive single state proceeding. Rather the Act allows the initiation of separate claims in any state that has adopted the Act. N.C.G.S. §§ 58-155.5 to 155.14; Central States v. Old Security Life Insurance Co., 600 F.2d 671, 677 (7th Cir.1979). Accordingly, if this litigation is stayed there will be numerous fragmented proceedings in various states, and no one proceeding could provide a full and complete adjudication of all the parties' rights. In addition, there is a substantial doubt whether a state court could compel arbitration, so not only will there be fragmentation among the state tribunals, but also there will be fragmentation between the federal and state proceedings. Accordingly, the most expeditious and cohesive resolution of the claims in this litigation is not to stay the proceeding, but is instead to proceed with arbitration, try the remaining issues in this central forum and then allow the parties to obtain satisfaction of their *955 judgments, if any, in the respective insurance rehabilitation proceedings.
In light of the above, the Court is of the opinion that Cherokee's motion to stay all claims against Cherokee should be denied.
IV. CHEROKEE'S MOTION TO STAY THIS ORDER PENDING APPEAL AND TO CERTIFY THIS ORDER FOR INTERLOCUTORY APPEAL
During the hearing Cherokee moved the Court to stay the Order denying Cherokee's motion to stay the litigation and to certify the Order for interlocutory appeal. Cherokee primarily argued that a stay pending appeal should be granted to protect Cherokee from the costs of arbitration if the Order is reversed. As the Court has required Beacon to post a substantial bond, as it is Cherokee's motion which seeks to alter the status quo of this litigation pending appeal, as the stay would in effect give Cherokee the relief sought in their motion and as the stay would only serve to delay this litigation and the rights of the other litigants not subject to arbitration, the Court in its discretion is of the opinion that the motion should be denied.
Since Cherokee first raised a request for certification under 28 U.S.C. § 1292 during the hearing the Court will defer ruling on the request until Cherokee files its motion and memorandum and Beacon files its response within five days from service.
V. THE PLAINTIFF'S MOTION TO STAY THE ORDER OF MAY 4, 1984 PENDING APPEAL
The Order of May 4, 1984 compelled Cherokee to submit to arbitration with Beacon and Nola Re and stayed the litigation pending arbitration. UMIC requests the Court to stay the Order, staying the litigation, pending appeal.
The Court, after carefully considering the matter, is of the opinion that UMIC's motion should be denied in that the May 4, 1984 Order only temporarily delays, in the interest of all the parties and the efficient management of this litigation, UMIC's right to proceed. The Arbitration Plan provides for a hearing no later than December 3, 1984 and an award no later than January 15, 1985. This mere delay will not subject UMIC to irreparable harm and thus the motion should be denied.
VI. THE PLAINTIFF'S MOTION FOR RECONSIDERATION OF THE ORDER OF JUNE 1, 1984, 588 F.SUPP. 740, DENYING THE PLAINTIFF'S MOTION FOR RECONSIDERATION
As the Court has previously discussed in its prior Orders the issue of whether the Plaintiff is entitled to a constructive trust the Court will not rehash that issue except to add that Cherokee's rehabilitation weighs against the imposition of a constructive trust as opposed to the creation of a constructive trust. The standard for imposing a constructive trust is not whether a party is solvent or insolvent. Similarly, it is not a device to obtain a prejudgment attachment or lien over other creditors. The Plaintiff has basically failed to show that in equity and good conscience it is entitled to a constructive trust, which would in effect give the Plaintiff priority over the numerous other creditors, policyholders, and insurance agents who must now assert the priority of their claims in the Tennessee proceeding. In addition, on July 17, 1984 the funds of Cherokee became subject to the exclusive jurisdiction of the Tennessee Court. Accordingly, the Tennessee Court, being the first court to acquire jurisdiction over the res, leaves this Court without authority to issue an order affecting the rights in that res. The Court is, therefore, of the opinion that the Plaintiff's motion should be denied.
VII. BEACON'S MOTION FOR A CONSTRUCTIVE TRUST
The Court is of the opinion that Beacon's motion should be denied for the reasons stated with respect to the Plaintiff's motion for a constructive trust and for the further reason that Beacon has completely failed to show an equitable entitlement to the funds.
*956 VIII. MOTION OF BERCANUS TO STAY ITS OBLIGATION TO FILE ITS ANSWER
The Court is of the opinion that Bercanus' motion to stay its obligation to file an Answer should be denied for the same reasons that the other litigants were required to file their Answer.
IT IS, THEREFORE, ORDERED that:
(1) Beacon's motion to strike the affidavit of W. Donald Dresser is DENIED;
(2) Cherokee's motion for a stay of all claims against Cherokee is DENIED;
(3) Cherokee's motion to stay this Order pending appeal is DENIED;
(4) The Court will defer ruling on Cherokee's request to certify this Order for interlocutory appeal until Cherokee files its motion and memorandum and Beacon responds within five (5) days of service;
(5) The Plaintiff's motion to stay the Order of May 4, 1984 is DENIED;
(6) The Plaintiff's motion for reconsideration of the Order of June 1, 1984 is DENIED;
(7) Beacon's motion for a constructive trust is DENIED;
(8) The motion of Bercanus to stay its obligation to file its Answer is DENIED, and Bercanus is directed to file its Answer on or before September 15, 1984;
(9) Cherokee and Commissioner Neff, in his capacity as statutory receiver for Cherokee, and their attorneys, agents and representatives, are preliminarily enjoined during the pendency of this litigation from seeking an order in any other forum that would in any way interfere with this Court's Order of May 4, 1984 compelling Cherokee to arbitrate or with this Court's Order of March 2, 1984 directing that certain funds be held in the registry of this Court or with other proceedings before this Court;
(10) Cherokee and Commissioner Neff, in his capacity as statutory receiver for Cherokee, and their attorneys, agents, and representatives, are preliminarily enjoined during the pendency of this litigation from seeking the issuance of a contempt order against Beacon for proceeding with the arbitration and the other matters before this Court; and
(11) Beacon is required to post a $50,000.00 bond as security pursuant to Fed.R.Civ.P. 65(c).
NOTES
[1] Beacon suggested that the rehabilitation proceeding could easily last five to ten years.
[2] In Levy, supra, the Court granted a stay with respect to the claim in which the federal and state courts had concurrent jurisdiction and denied the stay with respect to the claim in which the federal court had exclusive jurisdiction. Levy, however, was considered prior to the Supreme Court's recognition in Moses H. Cone, supra, of the importance of a federal law issue even if the state and federal courts have concurrent jurisdiction. If Levy is read as distinguishing abstention on the basis of concurrent versus exclusive jurisdiction, it is probable that Moses H. Cone partially undermines Levy.
| {
"pile_set_name": "FreeLaw"
} |
Michigan Supreme Court
Lansing, Michigan
Syllabus
Chief Justice: Justices:
Bridget M. McCormack Stephen J. Markman
Brian K. Zahra
Chief Justice Pro Tem:
Richard H. Bernstein
David F. Viviano Elizabeth T. Clement
Megan K. Cavanagh
This syllabus constitutes no part of the opinion of the Court but has been Reporter of Decisions:
prepared by the Reporter of Decisions for the convenience of the reader. Kathryn L. Loomis
RAFAELI, LLC v OAKLAND COUNTY
Docket No. 156849. Argued November 7, 2019 (Calendar No. 1). Decided July 17, 2020.
Rafaeli, LLC, and Andre Ohanessian brought an action in the Oakland Circuit Court
against Oakland County and its treasurer, Andrew Meisner, alleging due-process and equal-
protection violations as well as an unconstitutional taking of their properties. Rafaeli owed $8.41
in unpaid property taxes from 2011, which grew to $285.81 after interest, penalties, and fees.
Defendants foreclosed on Rafaeli’s property for the delinquency, sold the property at public
auction for $24,500, and retained all the sale proceeds in excess of the taxes, interest, penalties,
and fees. Ohanessian owed approximately $6,000 in unpaid taxes, interest, penalties, and fees
from 2011. Like Rafaeli’s property, defendants foreclosed on Ohanessian’s property for the
delinquency, sold his property at auction for $82,000, and retained all the proceeds in excess of
Ohanessian’s tax debt. Plaintiffs specifically alleged that defendants, by selling plaintiffs’ real
properties in satisfaction of their tax debts and retaining the surplus proceeds from the tax-
foreclosure sale of their properties, had taken their properties without just compensation in
violation of the Takings Clauses of the United States and Michigan Constitutions. The circuit
court, Denise K. Langford-Morris, J., granted summary disposition to defendants, finding that
defendants did not “take” plaintiffs’ properties because plaintiffs forfeited all interests they held
in their properties when they failed to pay the taxes due on the properties. The court determined
that property properly forfeited under the General Property Tax Act (GPTA), MCL 211.1 et seq.,
and in accordance with due process is not a “taking” barred by either the United States or Michigan
Constitution. Because the GPTA properly divested plaintiffs of all interests they had in their
properties, the court concluded that plaintiffs did not have a property interest in the surplus
proceeds generated from the tax-foreclosure sale of their properties. Plaintiffs appealed in the
Court of Appeals. In an unpublished per curiam opinion issued on October 24, 2017 (Docket No.
330696), the Court of Appeals, MARKEY, P.J., and METER and SHAPIRO, JJ., affirmed the circuit
court’s decision and rejected plaintiffs’ argument that the GPTA’s “scheme” allows for
unconstitutional takings. Drawing on Bennis v Michigan, 516 US 442 (1996), a United States
Supreme Court case regarding civil-asset forfeiture resulting from criminal activity, the Court of
Appeals held that defendants acquired their interest in plaintiffs’ properties by way of a statutory
scheme that did not violate due process and thus that defendants were not required to compensate
plaintiffs for property that was lawfully obtained. Plaintiffs sought leave to appeal in the Supreme
Court, raising the takings issue as the sole issue on appeal. The Supreme Court granted the
application. 503 Mich 909 (2018).
In an opinion by Justice ZAHRA, joined by Chief Justice MCCORMACK and Justices
MARKMAN, BERNSTEIN, CLEMENT, and CAVANAGH, the Supreme Court held:
Michigan’s common law recognizes a former property owner’s property right to collect the
surplus proceeds that are realized from the tax-foreclosure sale of property, and this right is vested
such that it is to remain free from unlawful governmental interference. Accordingly, when the
government takes property to satisfy an unpaid tax debt, Michigan’s Takings Clause requires the
foreclosing governmental unit to return any proceeds from the tax-foreclosure sale in excess of the
delinquent taxes, interest, penalties, and fees reasonably related to the foreclosure and sale of the
property as just compensation. To the extent the GPTA permits the government to retain these
surplus proceeds and transfer them into the county general fund, the GPTA is unconstitutional as
applied to former property owners whose properties were sold at a tax-foreclosure sale for more
than the amount owed in unpaid taxes, interest, penalties, and fees related to the forfeiture,
foreclosure, and sale of their properties. The trial court’s reliance on the term “forfeiture” in the
GPTA was incorrect, and the Court of Appeals erred by relying on Bennis to conclude that no
taking occurred in this case.
1. The trial court’s reliance on the term “forfeiture” in the GPTA was incorrect. Under
MCL 211.78(8)(b), “forfeiture” simply permits defendants to seek a judgment of foreclosure.
Forfeiture does not affect title, nor does it give the county treasurer (or the state if the state is the
foreclosing governmental unit) any rights, titles, or interests to the forfeited property. Therefore,
plaintiffs did not “forfeit” all rights, titles, and interests they had in their properties by failing to
pay their real-property taxes.
2. The Court of Appeals erred by relying on Bennis to conclude that no taking occurred in
this case. Bennis is distinguishable because the purpose of civil-asset forfeiture is different than
the purpose of the GPTA provisions at issue in this case. Bennis recognized that civil-asset
forfeiture serves, at least in part, to punish the owner of property, but the GPTA is not punitive in
nature; its aim is to encourage the timely payment of property taxes and to return tax-delinquent
properties to their tax-generating status, not necessarily to punish property owners for failing to
pay their property taxes. The Court’s holding in Bennis focused narrowly on forfeited property
that was used as an instrumentality for criminal activity and the government’s interest in deterring
illegal activity. In this case, plaintiffs did not use their properties for illicit purposes. They simply
failed to pay their property taxes, which is not a criminal offense. Accordingly, the Court of
Appeals improperly conflated the meaning of “forfeiture” in an unrelated area of law with the
meaning of “forfeiture” as expressly described under the GPTA.
3. A claim of an unconstitutional taking is distinct from a claim of property deprivation
without due process of law. The remedy for a taking of private property is just compensation,
whereas the remedy for being deprived of property without due process of law is the return of the
property. In this case, plaintiffs did not dispute the legitimacy of defendants’ authority to foreclose
on their properties, nor did plaintiffs contest the adequacy of defendants’ efforts to notify plaintiffs
of the tax delinquency, forfeiture, and foreclosure; instead, plaintiffs challenged defendants’
retention of the surplus proceeds as an unconstitutional taking. Plaintiffs’ request for a
determination of just compensation demonstrated that the nature of their claim was a taking
without just compensation, not a deprivation of property without due process of law. Therefore,
there was no legal basis to conclude that defendants’ compliance with the GPTA’s notice
provisions justified defendants’ retention of the surplus proceeds.
4. Under US Const, Am V and Const 1963, art 10, § 2, private property shall not be taken
for public use without just compensation. Michigan’s Takings Clause has been interpreted to
afford property owners greater protection than its federal counterpart when it comes to the state’s
ability to take private property for a public use under the power of eminent domain. A “taking”
for purposes of inverse condemnation means that the government has permanently deprived the
property owner of any possession or use of the property without the commencement of formalized
condemnation proceedings. When such a taking occurs, the property owner is entitled to just
compensation for the value of the property taken. In order to assert a takings claim of this nature,
a claimant must first establish a vested property right under state law. In this case, plaintiffs alleged
that they have a cognizable, vested property right to the surplus proceeds that resulted from the
tax-foreclosure sale of their properties under Michigan law that is protected by Michigan’s Takings
Clause. The primary objective in interpreting a constitutional provision is to determine the text’s
original meaning to the ratifiers, the people, at the time of ratification. The whole of Article 10,
§ 2 has a technical meaning that must be discerned by examining the purpose and history of the
power of eminent domain. People ex rel Seaman v Hammond, 1 Doug 276 (Mich, 1844), United
States v Lawton, 110 US 146 (1884), and Nelson v City of New York, 352 US 103 (1956), all
address a former property owner’s statutory right to recover the surplus proceeds. Seaman
recognized that the owner or claimant of the land at the time of the tax-foreclosure sale had a
statutory right to recover the surplus. Consistent with Seaman, Lawton not only recognized this
statutory right but also made it clear that a Takings Clause violation will arise when a tax-sale
statute grants a former owner an independent property interest in the surplus proceeds and the
government fails to return that surplus. Nelson, on the other hand, held that no federal Takings
Clause claim will exist when there is a statutory path to recover the surplus proceeds but the
property owners fail to avail themselves of that procedure. Read together, Lawton and Nelson
establish that the Takings Clause under the United States Constitution may afford former property
owners a remedy when a tax-sale statute provides the divested property owner an interest in the
surplus proceeds and the government does not honor that statutory interest. However, Seaman,
Lawton, and Nelson do not provide direction on what occurs when the statutes governing
foreclosure make no mention of, or expressly preclude, a divested property owner’s right to the
surplus proceeds but the divested property owner establishes a property right to the surplus
proceeds through some other legal source, such as the common law. In that instance, the failure
to provide the divested property owner an avenue for recovering the surplus proceeds would
produce an identical result to Lawton: property to which an individual is legally entitled has been
taken without recourse. Michigan’s statutory scheme under the GPTA does not recognize a former
property owner’s statutory right to collect these surplus proceeds; therefore, it had to be determined
whether plaintiffs have a vested property right to these surplus proceeds through some other legal
source, such as the common law.
5. Michigan’s common law is adopted from England; therefore, English cases and
authorities may be considered when identifying common law. A review of English common law
supported the notion that an owner of real or personal property has a right to any surplus proceeds
that remain after the property is sold to satisfy a tax debt. The Magna Carta protected property
owners from uncompensated takings and recognized that tax collectors could only seize property
to satisfy the value of the debt payable to the Crown, leaving the property owner with the excess.
Sir William Blackstone similarly explained in the context of bailments that whenever the
government seized property for delinquent taxes, it did so subject to an implied contract in law to
either return the property if the tax debt was paid or to render back the surplus if the property was
sold to satisfy the delinquent taxes. The right to collect the surplus proceeds was also firmly
established in the early years of Michigan’s statehood, and throughout Michigan’s history the
Michigan Supreme Court has held that the government’s takings power is limited to only that
property which is necessary to serve the public. These fundamental principles—that the
government shall not collect more taxes than are owed, nor shall it take more property than is
necessary to serve the public—protect taxpayers and property owners alike from government
overreach and have remained a staple in Michigan’s jurisprudence. A property owner’s right to
collect the surplus proceeds from the tax-foreclosure sale of his or her property has also withstood
the most recent ratification of the Michigan Constitution, as exemplified by Dean v Dep’t of
Natural Resources, 399 Mich 84 (1976), which recognized a right to collect those proceeds under
the common-law claim of unjust enrichment. Dean stands for more than just a recognition of the
plaintiff’s right to bring a claim under unjust enrichment for the surplus proceeds; inherent in
Dean’s holding is Michigan’s protection under the common law of a property owner’s right to
collect the surplus proceeds that result from a tax-foreclosure sale. Accordingly, Michigan’s
common law recognizes a former property owner’s property right to collect the surplus proceeds
that are realized from the tax-foreclosure sale of property, and this right is vested such that it is to
remain free from unlawful governmental interference.
6. The amendments of the GPTA did not abrogate the common-law right to collect the
surplus proceeds. The 1963 Constitution protects a former owner’s property right to collect the
surplus proceeds following a tax-foreclosure sale under Article 10, § 2. While the Legislature is
typically free to abrogate the common law, it is powerless to override a right protected by
Michigan’s Takings Clause.
7. As the foreclosing governmental unit under the GPTA, defendants were entitled to seize
plaintiffs’ properties to satisfy the unpaid delinquent real-property taxes as well as any interest,
penalties, and fees associated with the foreclosure and sale of plaintiffs’ properties. But defendants
could only collect the amount plaintiffs owed and nothing more. Once defendants foreclosed on
plaintiffs’ properties, obtained title to those properties, and sold them to satisfy plaintiffs’ unpaid
taxes, interest, penalties, and fees related to the foreclosures, any surplus resulting from those sales
belonged to plaintiffs. Defendants’ retention of those surplus proceeds under the GPTA amounted
to a taking of a vested property right requiring just compensation. To the extent the GPTA permits
defendants to retain these surplus proceeds and transfer them into the county general fund, the
GPTA is unconstitutional as applied to former property owners whose properties were sold at a
tax-foreclosure sale for more than the amount owed in unpaid taxes, interest, penalties, and fees
related to the forfeiture, foreclosure, and sale of their properties. Defendants were required to
return the surplus proceeds to plaintiffs, and defendants’ failure to do so constituted a government
taking under the Michigan Constitution entitling plaintiffs to just compensation.
8. The remedy for a government taking is just compensation for the value of the property
taken. The property “taken” is the surplus proceeds from the tax-foreclosure sale of plaintiffs’
properties to satisfy their tax debts. Therefore, plaintiffs are entitled to the value of those surplus
proceeds as just compensation.
Reversed and remanded to the Oakland Circuit Court for further proceedings.
Justice VIVIANO, concurring, agreed with the majority’s result but disagreed with much of
its reasoning. Justice VIVIANO would interpret the Constitution by discerning the ordinary
meaning of the term “property” and applying it to the facts of this case, concluding that the property
right taken from plaintiffs was their equity in their respective properties and not any independent
interest in the surplus proceeds from the tax-foreclosure sale. The majority did not explain which
words in the Takings Clause were in need of interpretation, and the majority’s investigation of
what the ratifiers understood property to mean ultimately rested on a flawed understanding of its
original meaning. By reasoning that “property” must be defined as the particular types the ratifiers
had in mind, the majority interpreted the Takings Clause as exalting those interests above the
Legislature’s authority to modify them, raising serious concerns regarding the separation of
powers. Under the majority’s position, any property rights extant when the Constitution was
ratified would be insulated from legislative change, whereas later-developed property rights would
presumably be subject to change. The majority’s broad position would not allow the Legislature
to repeal rights that were recognized property rights at the time of ratification and thereby
preserved in the Takings Clause, and this prohibition would extend even to legislation that
prospectively modified or abrogated nonvested property rights—i.e., rights to property that
individuals might acquire in the future. Furthermore, the majority characterized the property at
issue as merely the surplus proceeds from the foreclosure sale but did not consider the property
interests that existed before the sale or how those interests affected the taxpayer’s entitlement to
anything resulting from the sale. And it was far from clear what implications the former existence
of a statutory right to surplus proceeds had in determining the application of the constitutional right
in this case. In sum, Justice VIVIANO would have characterized the property right at issue in this
case as the taxpayer’s equity in the property, which best fits the development of ownership rights
in property laden with debts and liens. The Legislature did not purport to abrogate the taxpayer’s
equity; therefore, a taking occurred when title to plaintiffs’ property was vested in the government
without any possibility of redemption, and plaintiffs were owed the surplus proceeds from the tax-
foreclosure sales.
©2020 State of Michigan
Michigan Supreme Court
Lansing, Michigan
OPINION
Chief Justice: Justices:
Bridget M. McCormack Stephen J. Markman
Brian K. Zahra
Chief Justice Pro Tem: Richard H. Bernstein
David F. Viviano Elizabeth T. Clement
Megan K. Cavanagh
FILED July 17, 2020
STATE OF MICHIGAN
SUPREME COURT
RAFAELI, LLC, and ANDRE
OHANESSIAN,
Plaintiffs-Appellants,
v No. 156849
OAKLAND COUNTY and ANDREW
MEISNER,
Defendants-Appellees.
BEFORE THE ENTIRE BENCH
ZAHRA, J.
Plaintiff Rafaeli, LLC, owed $8.41 in unpaid property taxes from 2011, which grew
to $285.81 after interest, penalties, and fees. Oakland County and its treasurer, Andrew
Meisner (collectively, defendants), foreclosed on Rafaeli’s property for the delinquency,
sold the property at public auction for $24,500, and retained all the sale proceeds in excess
of the taxes, interest, penalties, and fees. Plaintiff Andre Ohanessian owed approximately
$6,000 in unpaid taxes, interest, penalties, and fees from 2011. Like Rafaeli’s property,
defendants foreclosed on Ohanessian’s property for the delinquency, sold his property at
auction for $82,000, and retained all the proceeds in excess of Ohanessian’s tax debt. The
issue in this case is whether defendants have committed an unconstitutional taking by
retaining the surplus proceeds from the tax-foreclosure sale of Rafaeli’s and Ohanessian’s
(collectively, plaintiffs) properties that exceed the amount plaintiffs owed in unpaid
delinquent taxes, interest, penalties, and fees under the General Property Tax Act (GPTA).1
We hold that defendants’ retention of those surplus proceeds is an unconstitutional taking
without just compensation under Article 10, § 2 of our 1963 Constitution. Accordingly,
we reverse the judgment of the Court of Appeals and remand this case to the Oakland
Circuit Court for proceedings consistent with this opinion.
I. FACTS AND PROCEDURAL HISTORY
Rafaeli purchased a rental property in Southfield for $60,000 on August 15, 2011,
but failed to pay the 2011 taxes due on the property in the amount of $536.24.2 Defendants
mailed to Rafaeli notice of the delinquency on June 11, 2012. Rafaeli sent payment to
defendants on August 30, 2012, yet this payment was insufficient to cover the full amount
of the tax delinquency. Defendants mailed a second notice of the delinquency to Rafaeli
on September 3, 2012, and Rafaeli sent another payment to defendants on January 14,
2013; however, even after Rafaeli’s second payment, a deficiency of $8.41, plus $2.26 in
1
MCL 211.1 et seq.
2
In plaintiffs’ complaint, Rafaeli alleges that a tax deficiency remained on the property
despite certification from Meisner that all taxes were paid on the property from the previous
five years. This led to a tax delinquency of $496.52 plus $39.72 in penalties, fees, and
interest.
2
interest, penalties, and fees remained on Rafaeli’s property. On February 1, 2013,
defendants sent Rafaeli a third notice of delinquency. This delinquency was never paid,
and as a result, on March 1, 2013, Rafaeli’s property was forfeited in the amount of the
unpaid taxes, interest, penalties, and fees.
On May 16, 2013, defendants filed a petition seeking to foreclose all tax-delinquent
properties that were forfeited for unpaid 2011 real-property taxes, including Rafaeli’s
property. On February 26, 2014, a foreclosure hearing was held in the Oakland Circuit
Court. Rafaeli did not appear. After the hearing, the court entered a judgment of
foreclosure that included Rafaeli’s property. At the time of the foreclosure, the
delinquency had grown to $285.81 because of penalties, interest, and fees. Rafaeli failed
to timely redeem the property by March 31, 2014, resulting in the transfer to defendants of
fee simple title to Rafaeli’s property. On August 19, 2014, defendants sold Rafaeli’s
property at auction to a third party for $24,500. Defendants retained all the surplus
proceeds that exceeded the $285.81 debt Rafaeli owed to defendants.
Ohanessian purchased a 2.7-acre property located in the city of Orchard Lake
Village in 2004. Ohanessian paid $2,510.05 to defendants to satisfy his 2010 delinquent
property taxes but failed to pay his 2011 property taxes.3 After Ohanessian’s property was
forfeited for the amount of the unpaid taxes, interest, penalties, and fees, defendants added
3
According to Ohanessian, he moved to California sometime in 2011. He alleges that he
filled out an electronic change-of-address form on defendants’ website but that he stopped
receiving his tax bills when he moved. He states that he used a mailbox at a UPS store in
Eastpointe to receive his property-tax bills. Defendants claim that they used this address,
as well as Ohanessian’s former residence in Livonia, to send Ohanessian notice of the tax
delinquency in June 2013, December 2013, and February 2014. Defendants claim that they
received no response to these notices.
3
his property to the petition for foreclosure for unpaid 2011 real-property taxes. The same
judgment of foreclosure entered on February 26, 2014, that included Rafaeli’s property
also included Ohanessian’s property. At the time of the foreclosure, Ohanessian owed
approximately $6,000 in unpaid taxes, interest, penalties, and fees. Ohanessian failed to
redeem his property by March 31, 2014, and defendants obtained fee simple title to his
property. On September 26, 2014, defendants sold Ohanessian’s property at auction to a
third party for $82,000. Defendants retained all the surplus proceeds exceeding
Ohanessian’s tax debts.
Plaintiffs filed this action against defendants in the Oakland Circuit Court, alleging
due-process and equal-protection violations as well as an unconstitutional taking.4 As
relevant to this case, plaintiffs specifically alleged that defendants, by selling plaintiffs’
real properties in satisfaction of their tax debts and retaining the surplus proceeds from the
tax-foreclosure sale of their properties, had taken their properties without just
compensation in violation of the Takings Clauses of the United States and Michigan
Constitutions.
The circuit court granted summary disposition to defendants, finding that defendants
did not “take” plaintiffs’ properties because plaintiffs forfeited all interests they held in
4
Prior to filing this action, Rafaeli and a nonparty to this case filed a putative class action
against the counties of Wayne and Oakland in federal court, asserting, among other things,
an unconstitutional-takings claim. The case was dismissed for lack of subject-matter
jurisdiction. Rafaeli, LLC v Wayne Co, unpublished opinion of the United States District
Court for the Eastern District of Michigan, issued June 4, 2015 (Case No. 14-13958).
4
their properties when they failed to pay the taxes due on the properties.5 The court
determined that property properly forfeited under the GPTA and in accordance with due
process is not a “taking” barred by either the United States or Michigan Constitution.
Because the GPTA properly divested plaintiffs of all interests they had in their properties,
the court concluded that plaintiffs did not have a property interest in the surplus proceeds
generated from the tax-foreclosure sale of their properties.6 Plaintiffs appealed in the Court
of Appeals. The Court of Appeals affirmed the circuit court and rejected plaintiffs’
argument that the GPTA’s “scheme” allows for unconstitutional takings.7 Drawing on
precedent from the United States Supreme Court regarding civil-asset forfeiture resulting
from criminal activity, the Court of Appeals held that defendants acquired their interest in
plaintiffs’ properties “by way of a statutory scheme that did not violate due process” and
thus defendants were not required to compensate plaintiffs for property that was lawfully
obtained.8
5
Rafaeli, LLC v Oakland Co, unpublished opinion and order of the Oakland Circuit Court,
issued October 8, 2015 (Docket No. 15-147429-CZ), p 3.
6
Plaintiffs moved for reconsideration and also moved to amend their complaint to add
claims of substantive due-process violations, violations of the Eighth Amendment’s
prohibition against excessive fines, and unjust enrichment. The circuit court denied
reconsideration and denied plaintiffs’ proposed amendment as futile.
7
Rafaeli, LLC v Oakland Co, unpublished per curiam opinion of the Court of Appeals,
issued October 24, 2017 (Docket No. 330696), p 5.
8
Id., citing Bennis v Michigan, 516 US 442, 452; 116 S Ct 994; 134 L Ed 2d 68 (1996).
Judge SHAPIRO concurred with the majority’s conclusion that plaintiffs failed to state a
compensable takings claim but disagreed with the majority’s reliance on principles of civil-
asset forfeiture. Instead, Judge SHAPIRO relied on different authority from the United
States Supreme Court, which he concluded had rejected a similar claim to recover the
surplus proceeds from a tax-foreclosure sale. Rafaeli (SHAPIRO, J., concurring), unpub op
5
Plaintiffs sought leave to appeal in this Court, raising the takings issue as the sole
issue on appeal. We granted plaintiffs’ application, ordering the parties to address whether
defendants violated the Takings Clause of the United States Constitution, the Michigan
Constitution, or both by retaining the proceeds from the sale of tax-foreclosed property that
exceeded the amount of the taxes, penalties, interest, and fees owed on the property.9
II. OVERVIEW OF THE GPTA
The GPTA permits the recovery of unpaid real-property taxes, penalties, interest,
and fees through the foreclosure and sale of the property on which there is a tax
delinquency. Under the current process, tax-delinquent properties are forfeited to the
county treasurers; foreclosed on after a judicial foreclosure hearing; and, if not timely
at 1-2, citing Nelson v City of New York, 352 US 103, 111; 77 S Ct 195; 1 L Ed 2d 171
(1956).
9
Rafaeli, LLC v Oakland Co, 503 Mich 909 (2018).
6
redeemed, sold at a public auction.10 Counties may elect to serve as the “foreclosing
governmental unit”; otherwise, the state will do so.11
Real-property taxes are assessed and collected first by the city, township, or village
treasurer where the property is located.12 When property taxes are not satisfied and become
10
Before 1999, delinquent-tax liens were offered at annual tax-lien sales in which anyone
could purchase the tax liens. See Smith, Foreclosure of Real Property Tax Liens Under
Michigan’s New Foreclosure Process, 29 Mich Real Prop Rev 51, 51 (2002); see also
Alexander, Tax Liens, Tax Sales, and Due Process, 75 Ind L J 747, 760 (2000) (“This
transfer of the lien is distinct from the sale of the underlying property which occurs at a tax
foreclosure sale. Instead, what is transferred is the lien itself, vesting in the purchaser the
right to enforce the lien in accordance with statutory procedures.”). The tax-lien sale was
followed by a one-year redemption period. If the property was not timely redeemed, the
tax-lien purchaser, or the state if there was no tax-lien purchaser, would be deeded the
property and was responsible for the final foreclosure of the property. The former
foreclosure process could extend many years, causing properties to deteriorate and become
clouded with poor title, which often led to title-insurance companies refusing to insure
these properties. As a result, the Legislature overhauled the GPTA in 1999. See 1999 PA
123. The current scheme expedites the foreclosure process, thereby reducing the amount
of abandoned, tax-delinquent properties within the state. Given that the sole issue in this
appeal is whether a “taking” occurred, many of the GPTA’s procedures regarding the
notice and hearing requirements, which are relevant to due-process jurisprudence, are
either described briefly or omitted entirely from this general overview. For a complete
discussion of the current foreclosure process, see Michigan’s New Foreclosure Process,
29 Mich Real Prop Rev at 51. And for a comprehensive overview of the prior foreclosure
process, see Smith, Foreclosure of Real Property Tax Liens, 75 Mich B J 953 (1996).
11
MCL 211.78(8)(a). Seventy-five of Michigan’s 83 counties elect to act as the foreclosing
governmental unit. See Michigan Department of Treasury, New Law Tax Foreclosure
Archive <https://www.michigan.gov/taxes/0,4676,7-238-43535_55601_55605-235134--,00.html>
(accessed May 12, 2020) [https://perma.cc/L9V2-BC35].
12
MCL 211.44; MCL 211.45; see also OAG, 2014, No. 7,279 (June 11, 2014) (“[Real
property taxes] are assessed and, in the first instance, collected by the city, township, or
village treasurer.”).
7
delinquent, collection is turned over to the foreclosing governmental unit.13 If the county
elects to serve as the foreclosing governmental unit, it may create a “delinquent tax
revolving fund” that funds local municipalities for the unpaid delinquent taxes.14 The
county treasurer then attempts to collect the delinquent taxes.15
On March 1 of each tax year, taxes due in the immediately preceding year that
remain unpaid are returned to the county treasurer as “delinquent.”16 Notice of the
delinquency, which must explain the effect of failing to pay the tax delinquency and the
possibility of foreclosure, must be afforded to property owners throughout the next 12
months.17 On March 1 of the year following delinquency, properties with delinquent taxes
are “forfeited” to the county treasurer for the amount of the tax delinquency, as well as any
13
MCL 211.55.
14
MCL 211.87b. Local municipalities rely heavily on real-property taxes for revenue
streams. Thus, counties use the delinquent tax revolving fund to advance municipalities’
funds that would otherwise come from the unpaid real-property taxes. This advance allows
local municipalities to continue with their day-to-day operations without having to wait for
payment of the delinquent property taxes.
15
Any taxes, interest, penalties, and fees subsequently collected by the county treasurer are
deposited into the delinquent tax revolving fund. If delinquent property taxes are not
collected, properties are foreclosed and typically sold at a public auction known as a tax-
foreclosure sale. In disbursing the proceeds from the tax-foreclosure sale, the first priority
is to reimburse the delinquent tax revolving fund for “all taxes, interest, and fees on all of
the property . . . .” MCL 211.78m(8)(a). If the county is ultimately unable to collect the
entire amount it advanced to the municipalities, either by tax collection or foreclosure sales,
then the county can charge the municipalities back the uncollected amount. MCL
211.87b(1). When a surplus exists, the county board of commissioners may transfer the
surplus into the county’s general fund. MCL 211.78m(8)(h).
16
MCL 211.78a(2).
17
See MCL 211.78a through MCL 211.78c; MCL 211.78f.
8
interest, penalties, and fees associated with the delinquency.18 Notably, the term
“forfeiture,” as used in the GPTA, means only that a foreclosing governmental unit may
seek a judgment of foreclosure if the property is not redeemed; it does not affect title.19
Once forfeiture occurs, the county treasurer must record a certificate of forfeiture
with the county register of deeds, placing all parties with an interest in the property on
notice that the property has been forfeited to the county treasurer, that the property has not
been redeemed, and “that absolute title to the property will vest in the county treasurer on
the March 31 immediately succeeding the entry of a judgment foreclosing the
property . . . .”20 Forfeited property may be redeemed at any time on or before that March
31 date if the total amount of unpaid delinquent taxes, interest, penalties, and fees are paid
to the county treasurer.21 Meanwhile, foreclosing governmental units must file a petition
for foreclosure with the circuit court that presides over where the forfeited property is
located no later than the 15th day of June following the forfeiture.22 The petition must
“seek a judgment in favor of the foreclosing governmental unit for the forfeited unpaid
18
MCL 211.78g(1).
19
MCL 211.78(8)(b) (“ ‘Forfeited’ or ‘forfeiture’ means a foreclosing governmental unit
may seek a judgment of foreclosure under [MCL 211.78k] if the property is not redeemed
as provided under [the GPTA], but does not acquire a right to possession or any other
interest in the property.”).
20
MCL 211.78g(2).
21
MCL 211.78g(3)(a). This subsection details additional taxes, interest, and fees that must
be paid to the county treasurer in order to successfully redeem the property. MCL
211.78g(3)(b) through (d).
22
MCL 211.78h(1).
9
delinquent taxes, interest, penalties, and fees listed against each parcel of property . . . [and]
shall request that a judgment be entered vesting absolute title to each parcel of property in
the foreclosing governmental unit, without right of redemption.”23
A judicial foreclosure hearing must be held in the circuit court within 30 days of
March 1 of the year after the petition for foreclosure is filed.24 After the judicial foreclosure
hearing, the judgment of foreclosure must be entered by March 30, with an effective date
of March 31.25 Unless the delinquent taxes, interest, penalties, and fees are paid on or
before March 31, fee simple title to the property vests absolutely in the foreclosing
governmental unit without any further redemption rights available to the delinquent
taxpayer.26 Thereafter, the foreclosing governmental unit’s title to the property is not
subject to any recorded or unrecorded lien.27
After foreclosure, and assuming the state, city, village, township, or county where
the property is located does not purchase the property, the GPTA provides for one or more
auction sales beginning on the third Tuesday in July immediately succeeding the entry of
23
Id. Forfeited properties listed in the petition may be redeemed after the petition for
foreclosure is filed, in which case the properties are removed from the petition for
foreclosure. MCL 211.78h(2).
24
MCL 211.78h(5). In the meantime, the GPTA provides for various notices and hearings
that must be given before foreclosure is finalized. These include various notices by mail,
publication, recordation, and even a personal visit to the property, see MCL 211.78h
through MCL 211.78i, as well as a show cause hearing within seven days of the judicial
foreclosure hearing, see MCL 211.78j.
25
MCL 211.78k(5). The final redemption date is March 31. Id.
26
MCL 211.78k(5) and (6).
27
MCL 211.78k(6).
10
the judgment of foreclosure.28 Once sold, the foreclosing governmental unit deposits the
sale proceeds into an account designated as the “delinquent tax property sales proceeds for
the year [the taxes became delinquent]” (hereinafter, the account).29
Importantly, the account is comprised of the proceeds of all sales for that year, such
that the proceeds of a single sale are commingled with the proceeds of all the other sales.30
The foreclosing governmental unit then distributes the proceeds in the account in a specific
order of priority. The first priority is to reimburse the delinquent tax revolving fund for
the full amount of unpaid taxes, interest, and fees owed on the property.31 This is followed
by the annual costs incurred as a result of conducting foreclosure sales and general
28
MCL 211.78m(2). All property not sold on or before December 30 immediately
succeeding entry of the judgment of foreclosure is transferred to the city, village, or
township where the property is located unless the city, village, or township objects to the
transfer. MCL 211.78m(6). If the property remains unsold and is not transferred to the
city, village, or township, the foreclosing governmental unit retains the property. Id.
29
MCL 211.78m(8). Notably, this account is a subsidiary account within the delinquent
tax revolving fund. The delinquent tax revolving fund is segregated into separate accounts
for each year’s delinquent taxes. Those accounts continue to exist until all the delinquent
taxes for that tax year have been collected. See generally Michigan Department of
Treasury, 2001-5 Delinquent Tax Revolving Funds Revisions To Accounting After Public Act
123 of 1999 (February 8, 2001), available at <https://www.michigan.gov/treasury/0,4679,7-
121-1751_2194-6024--,00.html> (accessed May 13, 2020) [https://perma.cc/395W-
FWHC].
30
Money and property within the delinquent tax revolving fund, however, remain separate
from any other money, property, or assets in the custody of the county treasurer. MCL
211.87b(1).
31
MCL 211.78m(8)(a). In fact, the GPTA requires the delinquent tax revolving fund to be
reimbursed regardless of “whether or not all of the property was sold.” Id.
11
overhead in conducting the foreclosure proceedings for the year.32 The statutory scheme
for reimbursement is quite exhaustive and even includes costs for maintaining property
foreclosed under the GPTA, defending title actions, and administering the foreclosure and
the disposition of forfeited property for delinquent taxes.33
The parties acknowledge that sale proceeds are often insufficient to cover the full
amount of the delinquent taxes, interest, penalties, and fees related to the foreclosure and
sale of the property. But when there are excess proceeds from individual sales, such as the
sale of plaintiffs’ properties in this case, those proceeds are used to subsidize the costs for
all foreclosure proceedings and sales for the year of the tax delinquency, as well as any
years prior or subsequent to the delinquency.34 Then, after the required statutory
disbursements are made, surplus proceeds may be transferred to the county general fund in
cases in which the county is the foreclosing governmental unit.35 Of particular importance
here, the GPTA does not provide for any disbursement of the surplus proceeds to the former
property owner, nor does it provide former owners a right to make a claim for these surplus
proceeds. Michigan is one of nine states with a statutory scheme that requires the
32
MCL 211.78m(8)(b) and (c).
33
MCL 211.78m(8)(e), (f)(ii), and (f)(iii).
34
MCL 211.78m(8)(b) through (d); MCL 211.78m(8)(f)(i).
35
MCL 211.78m(8)(h). In cases in which the state is the foreclosing governmental unit,
“any remaining balance shall be transferred to the land reutilization fund created under
[MCL 211.78n].” MCL 211.78m(8)(g).
12
foreclosing governmental unit to disperse the surplus proceeds to someone other than the
former owner.36 It is under this framework that we review plaintiffs’ takings claim.
III. STANDARD OF REVIEW
This Court reviews a circuit court’s decision regarding a motion for summary
disposition, as well as any constitutional issues, de novo.37
IV. ANALYSIS
A. “FORFEITURE” UNDER THE GPTA AND CIVIL-ASSET FORFEITURE
Before turning to plaintiffs’ takings claim, we first address why the trial court’s
reliance on the term “forfeiture” in the GPTA was incorrect and why the panel majority
erred by relying on Bennis v Michigan, a case involving civil-asset forfeiture, to conclude
that no taking occurred in this case.
First, the GPTA makes clear that “forfeiture” simply permits defendants to seek a
judgment of foreclosure.38 Forfeiture does not affect title, nor does it give the county
36
Comment, State Theft In Real Property Tax Foreclosure Procedures, 54 Real Prop Tr &
Est L J 93, 101-102 & n 56 (2019) (explaining that Alabama, Arizona, Illinois, Indiana,
Michigan, Minnesota, Mississippi, Montana, and Oregon all require the foreclosing
governmental unit “to do something with the foreclosure sale surplus other than return it
to the original owner”).
Recent legislation has been proposed requiring the foreclosing governmental unit,
in instances in which sale of the property exceeds the minimum bid at auction, to “remit an
amount equal to that excess” to the former property owner if the property was owned and
occupied as a principal residence before the judgment of foreclosure was entered. See
2019 HB 4219.
37
Sidun v Wayne Co Treasurer, 481 Mich 503, 508; 751 NW2d 453 (2008).
38
MCL 211.78(8)(b).
13
treasurer (or the state if the state is the foreclosing governmental unit) any rights, titles, or
interests to the forfeited property. Therefore, we reject the premise that plaintiffs
“forfeited” all rights, titles, and interests they had in their properties by failing to pay their
real-property taxes.
Second, Bennis is distinguishable because the purpose of civil-asset forfeiture is
different than the purpose of the GPTA provisions at issue here. Bennis recognized that
civil-asset forfeiture “serves, at least in part, to punish the owner” of property.39 But the
GPTA is not punitive in nature. Its aim is to encourage the timely payment of property
taxes and to return tax-delinquent properties to their tax-generating status, not necessarily
to punish property owners for failing to pay their property taxes.40 Bennis also recognized
that civil-asset forfeiture works as a deterrent, preventing property tainted with criminality
from being further used for illicit purposes.41 To this end, the Supreme Court in Bennis
stated that “[t]he government may not be required to compensate an owner for property
which it has already lawfully acquired under the exercise of governmental authority other
39
Bennis, 516 US at 451-453 (quotation marks and citation omitted).
40
MCL 211.78(1) (“The legislature finds that there exists in this state a continuing need to
strengthen and revitalize the economy of this state and its municipalities by encouraging
the efficient and expeditious return to productive use of property returned for delinquent
taxes. Therefore, the powers granted in this act relating to the return of property for
delinquent taxes constitute the performance by this state or a political subdivision of this
state of essential public purposes and functions.”).
41
Bennis, 516 US at 452 (“[F]orfeiture . . . serves a deterrent purpose distinct from any
punitive purpose. Forfeiture of property prevents illegal uses both by preventing further
illicit use of the property and by imposing an economic penalty, thereby rendering illegal
behavior unprofitable.”) (quotation marks, brackets, and citation omitted).
14
than the power of eminent domain.”42 We conclude that Bennis is distinguishable and
provides us little guidance as it relates to plaintiffs’ takings claim. The Court’s holding in
Bennis focused narrowly on forfeited property that was used as an instrumentality for
criminal activity and the government’s interest in deterring illegal activity.43 In this case,
plaintiffs did not use their properties for illicit purposes. They simply failed to pay their
property taxes, which is not a criminal offense.44 Accordingly, we conclude that the Court
of Appeals improperly conflated the meaning of “forfeiture” in an unrelated area of law
with the meaning of “forfeiture” as expressly described under the GPTA.
42
Id.
43
Id. at 453 (explaining that the forfeiture of the petitioner’s car used in her husband’s
criminal activity was consistent with longstanding punitive, deterrent, and remedial goals
underlying civil-asset forfeiture); id. at 455 (Thomas, J., concurring) (holding that the
forfeiture was permissible because the car was used as an instrumentality of crime and the
petitioner did not argue otherwise); id. at 458 (Ginsburg, J., concurring) (“Michigan has
decided to deter johns from using cars they own (or co-own) to contribute to neighborhood
blight, and that abatement endeavor hardly warrants this Court’s disapprobation.”).
44
As the Supreme Court of Appeals of Virginia in Martin v Snowden, 59 Va 100, 142-143
(1868), aff’d sub nom Bennett v Hunter, 76 US 326 (1869), stated:
This forfeiture cannot be sustained as a forfeiture for crime . . . . In
such cases, the thing forfeited is the instrument by which the offence was
committed, or was the fruit of the offence, and is treated as being itself, in
some sort, the offender. But the land of a delinquent tax-payer cannot be
brought within the principle of this class of cases; it is neither the instrument
nor the fruit of any offence. Nor can we suppose that Congress intended to
make it a criminal, or even a quasi criminal offence, for a man not to pay his
taxes . . . .
15
B. DUE PROCESS
We also reject defendants’ argument that no taking occurred in this case because
plaintiffs were afforded the minimal protections of due process. The United States and
Michigan Constitutions dictate that before the government may take property for unpaid
taxes, it must provide the property owner sufficient notice of the delinquency and
foreclosure proceedings as well as an opportunity to contest those proceedings.45 To this
end, the GPTA explicitly states its intent to comply with minimum requirements of due
process and not create new rights beyond those prescribed in the Constitutions of our nation
or this state.46 As long as defendants comply with these due-process considerations,
plaintiffs may not contest the legitimacy of defendants’ authority to foreclose on their
properties for unpaid tax debts, nor may plaintiffs contest the sale of their properties to
third-party purchasers.47
45
US Const, Am V (“[N]or shall private property be taken for public use, without just
compensation.”); Const 1963, art 1, § 17 (“No person shall . . . be deprived of life, liberty
or property, without due process of law.”).
46
MCL 211.78(2).
47
See Jones v Flowers, 547 US 220, 234; 126 S Ct 1708; 164 L Ed 2d 415 (2006) (“People
must pay their taxes, and the government may hold citizens accountable for tax
delinquency by taking their property. But before forcing a citizen to satisfy his debt by
forfeiting his property, due process requires the government to provide adequate notice of
the impending taking.”); Sidun, 481 Mich at 509 (“Proceedings that seek to take property
from its owner must comport with due process.”).
16
A claim of an unconstitutional taking, however, is distinct from a claim of property
deprivation without due process of law.48 In Lingle v Chevron USA Inc, the United States
Supreme Court discussed the difference between these two constitutional clauses:
The [Takings] Clause expressly requires compensation where government
takes private property for public use. It does not bar government from
interfering with property rights, but rather requires compensation in the event
of otherwise proper interference amounting to a taking. Conversely, if a
government action is found to be impermissible—for instance because
it . . . is so arbitrary as to violate due process—that is the end of the inquiry.
No amount of compensation can authorize such action.[49]
As Lingle suggests, each constitutional provision protects property owners against
specific government action, offering different remedies for distinct constitutional
violations. The remedy for a taking of private property is just compensation, while the
remedy for being deprived of property without due process of law is the return of the
property.50 Notably, plaintiffs do not dispute the legitimacy of defendants’ authority to
48
Compare Const 1963, art 10, § 2 (Michigan’s Takings Clause) with Const 1963, art 1,
§ 17 (Michigan’s Due Process Clause); see also Peñalver & Strahilevitz, Judicial Takings
or Due Process?, 97 Cornell L Rev 305, 317-318 (2012) (stating that the Takings Clause
and the Due Process Clause of the Fifth Amendment “have frequently been muddled
together by courts and commentators alike,” but “grammatically they operate
independently of one another and the Supreme Court understands them to protect owners
against different kinds of government harms”) (citation omitted).
49
Lingle v Chevron USA Inc, 544 US 528, 543; 125 S Ct 2074; 161 L Ed 2d 876 (2005)
(quotation marks, citation, and emphasis omitted).
50
Id.; see also Judicial Takings, 97 Cornell L Rev at 320 (“Distinguishing between the
Takings and Due Process Clauses is consistent with the text of the Constitution, but it also
provides a richer conceptual vocabulary for evaluating constitutional property
claims . . . .”). The GPTA, at one point, limited property owners to a damages action under
MCL 211.78l whenever “he or she did not receive any notice required under [the
GPTA] . . . .” Once the judgment of foreclosure was entered and the former property
owner’s interest in the property was extinguished, the former owner could not bring an
17
foreclose on their properties, nor do plaintiffs contest the adequacy of defendants’ efforts
to notify plaintiffs of the tax delinquency, forfeiture, and foreclosure. Instead, plaintiffs
challenge defendants’ retention of the surplus proceeds as an unconstitutional taking.
Plaintiffs ask this Court to reverse the decision of the Court of Appeals and remand to the
circuit court for a determination of just compensation. Plaintiffs’ request for a
determination of just compensation demonstrates that the nature of their claim is a taking
without just compensation, not a deprivation of property without due process of law.
Therefore, there is no legal basis to conclude that defendants’ compliance with the GPTA’s
notice provisions justifies defendants’ retention of the surplus proceeds.
C. OVERVIEW OF TAKINGS JURISPRUDENCE AND PLAINTIFFS’ TAKINGS
CLAIM
The Fifth Amendment of the United States Constitution, as applied to the states
through the Fourteenth Amendment, provides, in relevant part: “[N]or shall private
property be taken for public use, without just compensation.”51
Comparatively, Michigan’s Takings Clause provides, in relevant part:
Private property shall not be taken for public use without just
compensation therefore being first made or secured in a manner prescribed
action for possession. But, in In re Petition By Treasurer of Wayne Co for Foreclosure,
478 Mich 1; 732 NW2d 458 (2007), this Court held that limitation unconstitutional. Thus,
property owners can now file a motion to set aside their judgment of foreclosure if the
foreclosing governmental unit failed to comply with due process when providing notice to
owners.
51
US Const, Am V; US Const, Am XIV; see AFT Mich v Michigan, 497 Mich 197, 217;
866 NW2d 782 (2015) (“The Fifth Amendment is applied to the states through the
Fourteenth Amendment.”), citing Chicago, B & Q R Co v Chicago, 166 US 226, 241; 17
S Ct 581; 41 L Ed 979 (1897).
18
by law. If private property consisting of an individual’s principal residence
is taken for public use, the amount of compensation made and determined
for that taking shall be not less than 125% of that property’s fair market
value, in addition to any other reimbursement allowed by law. . . .
“Public use” does not include the taking of private property for
transfer to a private entity for the purpose of economic development or
enhancement of tax revenues. Private property otherwise may be taken for
reasons of public use as that term is understood on the effective date of the
amendment to this constitution that added this paragraph.[52]
While we draw on authority discussing and interpreting both clauses, we must keep
in mind that Michigan’s Takings Clause has been interpreted to afford property owners
greater protection than its federal counterpart when it comes to the state’s ability to take
private property for a public use under the power of eminent domain.53
Plaintiffs, as the aggrieved property owners, have filed this inverse-condemnation
action alleging that defendants have taken plaintiffs’ properties without just compensation.
A “taking” for purposes of inverse condemnation means that the government has
permanently deprived the property owner of any possession or use of the property without
the commencement of formalized condemnation proceedings.54 When such a taking
52
Const 1963, art 10, § 2.
53
Compare Kelo v New London, Conn, 545 US 469; 125 S Ct 2655; 162 L Ed 2d 439
(2005) (holding that the government’s condemnation and transfer of private property to a
private entity to facilitate economic development was a permissible “public use” under the
Fifth Amendment’s Takings Clause), with Wayne Co v Hathcock, 471 Mich 445; 684
NW2d 765 (2004) (holding that a similar condemnation and transfer was not a permissible
“public use” under Michigan’s Takings Clause).
54
United States v Clarke, 445 US 253, 257; 100 S Ct 1127; 63 L Ed 2d 373 (1980)
(explaining that the property owner’s right to bring an inverse-condemnation action is
derived from “the self-executing character of the constitutional provision with respect to
compensation”) (quotation marks and citation omitted).
19
occurs, the property owner is entitled to just compensation for the value of the property
taken.55 The government’s seizure of real property is the clearest form of a taking requiring
just compensation.56 But a taking can, and often does, encompass more than just the
physical deprivation of real, tangible property; it also includes the government’s
interference with one’s personal, intangible property.57
In order to assert a takings claim of this nature, a claimant must first establish a
vested property right under state law.58 “Because the Constitution protects rather than
creates property interests, the existence of a property interest is determined by reference to
existing rules or understandings that stem from an independent source such as state law.”59
Plaintiffs allege that they have a cognizable, vested property right to the surplus proceeds
55
Hart v Detroit, 416 Mich 488, 494; 331 NW2d 438 (1982) (discussing inverse-
condemnation actions under Michigan law).
56
Horne v Dep’t of Agriculture, 576 US 350; 135 S Ct 2419, 2425-2426; 192 L Ed 2d 388
(2015) (explaining that a “classic” or per se taking occurs when the government directly
appropriates private property for its own use).
57
AFT Mich, 497 Mich at 218 (“The term ‘taking’ can encompass governmental
interference with rights to both tangible and intangible property.”), citing Ruckelshaus v
Monsanto Co, 467 US 986, 1003; 104 S Ct 2862; 81 L Ed 2d 815 (1984) (“[I]ntangible
property rights protected by state law are deserving of the protection of the Taking
Clause . . . .”); see also 1 Cooley, General Principles of Constitutional Law in the United
States (1880), p 336 (explaining that the federal Takings Clause protects “anything of value
which the law recognizes as such, and in respect to which the owner is entitled to a remedy
against any one who may disturb him in its enjoyment,” regardless of “whether the property
be tangible or intangible”).
58
In re Certified Question, 447 Mich 765, 788; 527 NW2d 468 (1994) (Fun ’N Sun RV,
Inc v Michigan).
59
Phillips v Washington Legal Foundation, 524 US 156, 164; 118 S Ct 1925; 141 L Ed 2d
174 (1998) (quotation marks and citation omitted).
20
that result from the tax-foreclosure sale of their properties under Michigan law that is
protected by Michigan’s Takings Clause.
Our “primary objective” in interpreting a constitutional provision such as our state’s
Takings Clause is “to determine the text’s original meaning to the ratifiers, the people, at
the time of ratification.”60 This Court has held that “the whole of art 10, § 2 has a technical
meaning that must be discerned by examining the ‘purpose and history’ of the power of
eminent domain.”61 Accordingly, we must canvass the body of law so that we may
ascertain the “common understanding” of Article 10, § 2 and the property rights protected
thereunder.62
1. A HISTORICAL REVIEW OF CLAIMS FOR SURPLUS PROCEEDS FOLLOWING
A TAX-FORECLOSURE SALE
This is not the first time a former property owner has made a claim for the surplus
proceeds that result from the tax-foreclosure sale of the owner’s property. In People ex rel
Seaman v Hammond, the plaintiff, referred to as the “relator,” purchased land in October
1840 that was sold to satisfy the 1837 taxes.63 The relator received the county treasurer’s
certificate of sale, which, according to statute, entitled the “purchaser” to the deed to the
land within two years of the sale (October 1842) unless the land was redeemed. Before the
relator became entitled to the deed, however, the land was sold again in August 1842 to
satisfy the 1838 taxes, this time producing a surplus. According to the statute, the surplus
60
Hathcock, 471 Mich at 468.
61
Id. at 471.
62
Id.
63
People ex rel Seaman v Hammond, 1 Doug 276 (Mich, 1844).
21
was to be deposited in the state treasury to the credit of the “owner or claimant” of the land.
After the redemption period expired for the first sale, the relator presented his deed for the
land and demanded the surplus proceeds from the second sale, but he was refused. This
Court held that the relator, as the purchaser of the land, was not entitled to receive the
surplus proceeds because, under the statute, he was not the owner or claimant of the land
at the time of the sale, explaining, in relevant part:
In that statute, whenever mention is made of the person who buys land
at a tax sale, he is denominated the purchaser, and no title whatever to the
land sold, vests in him, until, at the expiration of two years, he receives the
treasurer’s deed, “which conveyance,” says the statute, “shall vest in the
person who receives it, an absolute estate in fee simple.” Prior to that
conveyance, he has only a lien upon the land for the repayment of the amount
of the tax paid, with twenty per cent interest; he has no right to interfere with
the possession of the owner; he cannot enter upon the land for any purpose
whatever, nor can he control the rents and profits.
* * *
It is perfectly clear that the individual who has the legal title to the
land at the time of the tax sale, is the owner, entitled, under the statute, to the
surplus money, if any there be.[64]
Thirty-seven years later, the United States Supreme Court, in United States v Taylor,
addressed whether a federal statute, which permitted the federal government to conduct tax
sales to recover delinquent federal tax debts, gave property owners a right to claim the
surplus proceeds that resulted from the tax sales.65 The Court in Taylor concluded that the
64
Id. at 279-280.
65
United States v Taylor, 104 US 216, 217-218; 26 L Ed 721 (1881). Although we decide
this case based on our state Constitution, we can look for guidance in the decisions of the
United States Supreme Court regarding surplus proceeds and the federal Takings Clause.
22
statute allowed for the recovery of the surplus proceeds. Three years later, the Court
followed Taylor in United States v Lawton.66 In Lawton, the appellee’s property was seized
for a tax delinquency of $88, which grew to $170.50 after interest, penalties, and costs.
The board of tax commissioners bought the land on behalf of the United States in
satisfaction of the appellee’s tax debt. The property was “struck off” for $1,100, leaving a
total of $929.50 in excess of the tax debt. The tax debtor sought the surplus but was
refused. The Court held that the tax debtor was entitled to the surplus proceeds, stating:
The land in the present case having been “struck off for” and “bid in” for the
United States at the sum of $1,100, we are of [the] opinion that the surplus
of that sum, beyond the $170.50 tax, penalty, interest, and costs, must be
regarded as being in the treasury of the United States, under the provisions
of section 36 of the act of 1861, for the use of the owner, in like manner as if
it were the surplus of purchase money received by the United States from a
third person on a sale of the land to such person for the non-payment of the
tax. It was unnecessary to go through any form of paying money out of the
treasury to any officer and then paying it in again to be held for the owner of
the land. But, so far as such owner is concerned, the surplus money is set
aside as his as fully as if it had come from a third person. If a third person
had bid $1,099 in this case, there would have been a surplus of $928.50 paid
into the treasury and held for the owner. It can make no difference that the
United States acquired the property by bidding one dollar more. To withhold
the surplus from the owner would be to violate the fifth amendment to the
constitution, and deprive him of his property without due process of law or
take his property for public use without just compensation. If he affirms the
propriety of selling or taking more than enough of his land to pay the tax and
penalty and interest and costs, and applies for the surplus money, he must
receive at least that.[67]
66
United States v Lawton, 110 US 146; 3 S Ct 545; 28 L Ed 100 (1884).
67
Id. at 149-150 (emphasis added).
23
The Supreme Court later clarified the holding of Lawton in Nelson v City of New
York.68 In Nelson, the city of New York foreclosed on properties for water charges that
went unpaid for four years. As in Lawton, the delinquencies were far lower than the value
of the properties, yet the city kept the surplus proceeds after the properties were sold.69
The property owners challenged the city’s retention of these surplus proceeds under the
city’s tax-lien foreclosure statute. The Court concluded that it was undisputed that the
statutory notice provisions were complied with and that the application of the statute did
not deprive the plaintiffs of procedural due process.70 The Court then turned to and rejected
the plaintiffs’ takings claim. The Court explained that the plaintiffs’ reliance on Lawton
was inappropriate because the takings claim asserted in Lawton was premised on a statutory
right to the proceeds. The statute in Lawton required that the surplus proceeds be paid to
the former property owner, thus rendering the government’s failure to return those surplus
proceeds an unconstitutional taking. The statute in Nelson, in contrast, did not require the
surplus proceeds to be paid back to the property owner. Still, the city’s statute provided a
property owner a path to obtain the surplus proceeds from the sale. Specifically, the statute
68
Nelson v City of New York, 352 US 103; 77 S Ct 195; 1 L Ed 2d 171 (1956).
69
The water charges for the first parcel amounted to $65. The first parcel’s property value
was assessed at $6,000, and it ultimately sold for $7,000. The water charges for the second
parcel amounted to $814.50. The second parcel’s property value was assessed at $46,000,
but the city acquired title to that parcel and retained it. Id. at 105-106.
70
Id. at 108-109 (“We conclude . . . that the City having taken steps to notify appellants of
the arrearages and the foreclosure proceedings and their agent having received such
notices, its application of the statute did not deprive appellants of procedural due
process.”). The Court also rejected the plaintiffs’ equal-protection challenge. Id. at 109.
24
permitted a property owner to file a timely answer in the foreclosure proceeding asserting
an interest in the property that exceeded the tax debt. Upon proof of the owner’s allegation,
a separate sale would be directed so that the owner could receive the surplus.71 Because
the plaintiffs failed to avail themselves of this opportunity, the Court concluded that they
were not entitled to relief. The Court explained:
What the City of New York has done is to foreclose real property for charges
four years delinquent and, in the absence of timely action to redeem or to
recovery any surplus, retain the property or the entire proceeds of its sale.
We hold that nothing in the Federal Constitution prevents this where the
record shows adequate steps were taken to notify the owners of the charges
due and the foreclosure proceedings.[72]
Significantly, Seaman, Lawton, and Nelson all address a former property owner’s
statutory right to recover the surplus proceeds. Seaman recognized that the owner or
claimant of the land at the time of the tax-foreclosure sale had a statutory right to recover
the surplus. Consistent with Seaman, Lawton not only recognized this statutory right but
also made it clear that a Takings Clause violation will arise when a tax-sale statute grants
a former owner an independent property interest in the surplus proceeds and the
government fails to return that surplus. Nelson, on the other hand, informs us that no
federal Takings Clause claim will exist when there is a statutory path to recover the surplus
proceeds but the property owners fail to avail themselves of that procedure. Read together,
Lawton and Nelson establish that the Takings Clause under the United States Constitution
may afford former property owners a remedy when a tax-sale statute provides the divested
71
Id. at 110 & n 10.
72
Id. at 110 (emphasis added).
25
property owner an interest in the surplus proceeds and the government does not honor that
statutory interest. What Seaman, Lawton, and Nelson do not tell us, however, is what
occurs when the statutes governing foreclosure make no mention of, or expressly preclude,
a divested property owner’s right to the surplus proceeds, but the divested property owner
establishes a property right to the surplus proceeds through some other legal source, such
as the common law.73 In that instance, the failure to provide the divested property owner
an avenue for recovering the surplus proceeds would produce an identical result to Lawton:
“Property to which an individual is legally entitled has been taken without recourse.”74
Michigan’s statutory scheme under the GPTA does not recognize a former property
owner’s statutory right to collect these surplus proceeds.75 Therefore, we must determine
whether plaintiffs have a vested property right to these surplus proceeds through some other
legal source, such as the common law.
2. VESTED PROPERTY RIGHTS UNDER THE COMMON LAW
Like the founders of our nation, Michigan has historically held property rights in
the highest regard. Former Michigan Supreme Court Justice Thomas M. Cooley, one of
73
And even if those cases had directly addressed the issue presented here, they would
provide only helpful guidance; our decision interpreting Michigan’s Constitution would
not be bound by them.
74
Coleman v Dist of Columbia, 70 F Supp 3d 58, 80 (D DC, 2014), citing Lawton, 110 US
at 149; see also Clifford, Massachusetts Has A Problem: The Unconstitutionality of the
Tax Deed, 13 U Mass L Rev 274, 287 (2018) (“In summary, the Coleman court recognized
that once a state recognizes a property interest in the taxpayer, it cannot summarily remove
that interest.”).
75
See MCL 211.78m(8)(h) (directing that any surplus proceeds from the tax-foreclosure
sale be transferred into the county’s general fund).
26
our nation’s preeminent jurists and learned scholars, wrote that the “right to private
property is a sacred right; . . . it was the old fundamental law, springing from the original
frame and constitution of the realm.”76
[P]roperty . . . is recognized as such by the law, and nothing else is or can be.
Property and law are born and must die together. Before the laws, there was
no property; take away the laws, all property ceases.[77]
Drawing on Sir William Blackstone, Justice Cooley further recognized that the
Magna Carta “guaranteed” the protection of private property against government
overreach.78 Just as the Magna Carta guaranteed property owners due process of law, so
too did the sacred text limit the King’s ability to take his subject’s property, real or personal,
under principles of eminent domain.79 Thus, it is without surprise that private-property
76
2 Cooley, Constitutional Limitations (8th ed), p 745 (quotation marks and citation
omitted).
77
Cooley, General Principles, p 315 (quotation marks and citation omitted).
78
Cooley, Constitutional Limitations, pp 733-734, citing 4 Blackstone, Commentaries on
the Laws of England, p *424.
79
See Magna Carta, Grant 39 (1215) (“No freeman shall be . . . disseised . . . unless by the
lawful judgment of his peers, or by the law of the land.”); see also Horne, 135 S Ct at 2426
(discussing the history of the federal Takings Clause going as far back as the Magna Carta
and making no distinction between real or personal private property); Silver Creek Drain
Dist v Extrusions Div, Inc, 468 Mich 367, 373, 374 & n 6; 663 NW2d 436 (2003)
(explaining that the sovereign’s power of eminent domain and its “ancient provenance”
dates back to the Magna Carta); Peterman v Dep’t of Natural Resources, 446 Mich 177,
186-187 & 187 n 14; 521 NW2d 499 (1994) (discussing the history of eminent domain in
America).
27
rights have been protected from unlawful government takings in every version of this
state’s Constitution.80
“This state’s common law is adopted from England, and to identify such law this
Court may consider original English cases and authorities.”81 Our review of English
common law supports the notion that an owner of real or personal property has a right to
any surplus proceeds that remain after property is sold to satisfy a tax debt. Just as the
Magna Carta protected property owners from uncompensated takings, it also recognized
that tax collectors could only seize property to satisfy the value of the debt payable to the
Crown, leaving the property owner with the excess.82 In fact, although the “mode of
collecting the land tax in England was by distress,” it was a well-recognized principle that
80
See Const 1835, art 1, § 19; Const 1850, art 18, § 14; Const 1908, art 13, § 1; Const
1963, art 10, § 2.
81
People v Woolfolk, 497 Mich 23, 25; 857 NW2d 524 (2014) (citations omitted).
82
See Johnson, The Ancient Magna Carta and the Modern Rule of Law: 1215 to 2015, 47
St Mary’s L J 1, 47 (2015), citing McKechnie, Magna Carta: A Commentary on the Great
Charter of King John (Glasgow: James Maclehose & Sons, 2d ed, 1914), p 322. Johnson
explains that when a man died, officers would seek collection of the deceased’s debts.
Ancient Magna Carta, 47 St Mary’s L J at 47. However, these officials would often seize
everything, sell the decedent’s property for an amount far in excess of the debt, and refuse
to disgorge the surplus to the decedent’s heirs. Id. As a protection against such abuse
practices, Clause 26 of the Magna Carta required that “the value of the goods seized had to
approximate the value of the debt[,] and the process had to be superintended by worthy
men whose function it was to form a check on the actions of the sheriff’s officers.” Id.
(quotation marks and citation omitted); see also Martin, 59 Va at 136 (“The summary
methods employed in England in early times for the collection of debts to the Crown seem
to have been turned to purposes of oppression, and . . . [the] Magna Charta provided for
their restraint.”).
28
any excess property sold to satisfy a tax debt would be paid back to the owner.83 Further,
Blackstone explained that in the context of bailments, whenever the government seized
property for delinquent taxes, it did so subject to “an implied contract in law” to either
return the property if the tax debt was paid or “to render back the overplus” if the property
was sold to satisfy the delinquent taxes.84
The right to collect the surplus proceeds was also firmly established in the early
years of Michigan’s statehood. In his treatise on the Law of Taxation, Justice Cooley
discusses the various methods that states used to save the surplus proceeds for the former
owner when that owner’s land was sold for unpaid taxes.85 The first of these methods was
to sell the distressed land for payment of delinquent taxes, and if the accepted bid exceeded
the delinquency, the surplus would be deposited with the local treasury “for the benefit of
the party, who shall show his right.”86 This is precisely what occurred in Seaman. While
Seaman was resolved on then-existing statutory authority, this Court’s discussion
regarding a property owner’s right to collect surplus proceeds is valuable in defining the
nature and scope of that right:
83
Martin, 59 Va at 136-137 (explaining that while land was typically only taken to satisfy
tax debts when personal property was insufficient to satisfy the debt, any surplus resulting
from the sale of the property taken, real or personal, would be paid back to the owner).
84
2 Blackstone, Commentaries on the Laws of England, p *452.
85
Cooley, Law of Taxation (3d ed), p 952.
86
Id. As support for this first method, Justice Cooley cites the Supreme Court’s decision
in Lawton for the notion that if land was sold to the United States for unpaid federal taxes,
the United States remained liable to the former owner for any surplus. Id. at 952 & n 1,
citing Lawton, 110 US 146.
29
The surplus money produced by the tax sale, is the property of the
person who has the legal title to the land at the time of the sale, and the
moment the amount is ascertained and passed to his credit in the books of the
treasurer, it is as absolutely his as though it were in his own keeping; and the
right is personal—as unqualifiedly so as the ownership of any chattel; and
although the surplus spoken of is produced by the sale of land, yet the right
to receive and control it, no more follows the title to the land, than does the
ownership of the cattle and farming utensils that a man may happen to have
on his farm when it is sold for taxes, and the purchaser may, with as much
propriety, claim a right to the latter as the former.[87]
Notably, at the time Seaman was decided, a property owner’s right to redeem his
property continued after the foreclosure sale. That is, it was commonly understood that the
delinquent taxpayer would continue to be the legal owner of the property at the time of the
foreclosure sale and thus would be entitled to any surplus proceeds produced from the sale
as the “owner or claimant” of the land. This is vastly different from the current version of
the GPTA, in which a property owner’s interest in the property is extinguished well before
the tax-foreclosure sale. Thus, a fair reading of Seaman demonstrates that in the early years
of this state, it was commonly understood that the delinquent taxpayer, not the foreclosing
entity, continued to own the land at the time of the tax-foreclosure sale and would have
been entitled to any surplus, which no more followed title to the land than the former
owner’s other personal property.
At the same time that it was common for any surplus proceeds to be returned to the
former property owner, it was also generally understood that the government could only
collect those taxes actually owed and nothing more. Justice Cooley explained that
excessive tax levies were “beyond the jurisdiction of the officers” charged with collecting
87
Seaman, 1 Doug at 281.
30
taxes and that even de minimis amounts in excess of the taxes owed were impermissible.88
This Court recognized a similar principle in 1867, stating that “[n]o law of the land
authorizes the sale of property for any amount in excess of the tax it is legally called upon
to bear.”89 Indeed, any sale of property for unpaid taxes that was in excess of the taxes
owed was often rendered voidable at the option of the landowner.90 Rather than selling all
of a person’s land and risk the sale being voided, officers charged with selling land for
unpaid taxes often only sold that portion of the land that was needed to satisfy the tax
debt.91 That is, early in Michigan’s statehood, it was commonly understood that the
government could not collect more in taxes than what was owed, nor could it sell more
land than necessary to collect unpaid taxes.
Further, in the context of eminent domain, it was axiomatic that the government
shall take no more property than necessary for the particular public use for which the taking
was done. As Justice Cooley stated:
88
Cooley, Law of Taxation, pp 590-591 (“If the line which the legislature has established
be once passed, we know of no boundary to the discretion of the assessors.”) (quotation
marks and citation omitted).
89
Case v Dean, 16 Mich 12, 19 (1867).
90
Cooley, Law of Taxation, p 953 (“A sale of the whole when less would pay the tax would
be such a fraud on the law as to render the sale voidable at the option of the land-
owner . . . .”).
91
Id. at 952-958. Indeed, this was another method discussed by Justice Cooley to ensure
that any “surplus moneys” remained with the landowner after the property was sold. Id. at
952-953. The other method was to require that a lien be placed on the land holding the
purchaser accountable to pay the excess back to the original owner. Id. at 952.
31
The taking of property must always be limited to the necessity of the
case, and consequently no more can be appropriated in any instance than the
proper tribunal shall adjudge to be needed for the particular use for which the
appropriation is made. When a part only of a man’s premises is needed by
the public, the necessity for the appropriation of that part will not justify the
taking of the whole, even though compensation be made therefor. The
moment the appropriation goes beyond the necessity of the case, it ceases to
be justified on the principles which underlie the right of eminent domain.[92]
This Court has consistently recognized this constitutional precept. Throughout this
state’s history, this Court has held that the government’s takings power is limited to only
that property which is necessary to serve the public.93
Accordingly, these fundamental principles—that the government shall not collect
more taxes than are owed, nor shall it take more property than is necessary to serve the
public—protect taxpayers and property owners alike from government overreach. These
92
Cooley, Constitutional Limitations, p 1147.
93
See Peterman, 446 Mich at 201, 202 n 36 (“As an unnecessary taking of property,
defendant’s actions violated the strict dictates of the constitutional guarantee that private
property may be taken only when necessary for public purposes.”); Livonia Twp Sch Dist
v Wilson, 339 Mich 454, 460; 64 NW2d 563 (1954) (“It is a general principle that the
legislature cannot authorize the taking of property in excess of that required for public
use.”); Cleveland v Detroit, 322 Mich 172, 179; 33 NW2d 747 (1948) (“In acquiring
property for public use it is not permissible for the city to take additional property not
necessary for that public use for private purposes.”); Berrien Springs Water Power Co v
Berrien Circuit Judge, 133 Mich 48, 53; 94 NW 379 (1903) (“[O]nly so much [land] can
be taken as is necessary to the public use.”); Bd of Health of Portage Twp v Van Hoesen,
87 Mich 533, 537; 49 NW 894 (1891) (“It can never be just to take property, under pretence
of public benefit, which is not needed by the public . . . .”), citing Paul v Detroit, 32 Mich
108, 114 (1875) (explaining that the 1850 Michigan Constitution added a provision
requiring juries to determine the necessity of a taking of private property for public use, as
well as the compensation owed for that taking, because there was “a well founded belief,
founded on experience, that private property was often taken improperly and without any
necessity”).
32
principles have remained a staple in this state’s jurisprudence well after the most recent
ratification of our Constitution in 1963.94
A property owner’s right to collect the surplus proceeds from the tax-foreclosure
sale of his or her property has also withstood the most recent ratification of our
Constitution, as exemplified by our decision in Dean v Dep’t of Natural Resources, which
recognized a right to collect those proceeds under the common-law claim of unjust
enrichment.95 In Dean, the plaintiff-property owner failed to pay her property taxes for
both the city of Flint and Genesee County in the amount of $230.68 and $146.90,
respectively. After the plaintiff failed to appear at the foreclosure hearing, the court issued
a judgment authorizing the sale of the plaintiff’s property at a tax sale and stating that if
the property was sold to the state, the state’s title would become absolute unless the plaintiff
timely redeemed the property.96 The state successfully bid on the plaintiff’s property,
starting the one-year redemption period for the plaintiff. During the redemption period,
94
Detroit v Walker, 445 Mich 682, 701-704; 520 NW2d 135 (1994) (explaining that
citizens have a duty to pay their taxes and that the Legislature may enact procedural
schemes “to secure taxes owed”); Peterman, 446 Mich at 184 (“ ‘[I]t can never be lawful
to compel any man to give up his property, when it is not needed, or to lose it, whether
needed or not, without being made whole.’ ”), quoting Paul, 32 Mich at 119; see also Fidlin
v Collison, 9 Mich App 157, 167; 156 NW2d 53 (1967) (holding that under the GPTA’s
provision allowing seizure of personal property to satisfy unpaid taxes, the city treasurer’s
seizure of the plaintiffs’ personal property valued at $629.32 to satisfy a $10,500 tax debt
was “an excessive distraint” on their property, given that “ ‘[t]he amount of property
distrained must not be excessive and, if it is, the seizure is illegal’ ”), quoting 84 CJS,
Taxation, § 694, p 1371.
95
Dean v Dep’t of Natural Resources, 399 Mich 84; 247 NW2d 876 (1976).
96
Notice of the hearing was published in the newspaper as required under the former
version of the GPTA. Id. at 88, citing MCL 211.66, repealed by 1999 PA 123.
33
the plaintiff paid her delinquent city-property taxes in full but mistakenly failed to pay her
delinquent county-property taxes. After she failed to timely redeem her property during
the redemption period, the State Treasurer deeded the plaintiff’s property to the state, which
received absolute title to the property and then sold it to a private investor for $10,000. The
plaintiff filed an action against the state, alleging, in relevant part, that the state had been
unjustly enriched by retaining the $10,000 following the sale of her property. The circuit
court granted summary disposition to the defendant, but this Court reversed, holding that
the plaintiff could bring her suit for unjust enrichment:
In fact, the events out of which plaintiff’s claim of unjust enrichment
arises occurred subsequent to the default judgment entered by the Genesee
County Circuit Court: the alleged good-faith attempt at redemption, the
running of the redemption period after this attempt with plaintiff under the
impression that she had in fact redeemed her home, the loss of her home, and
the sale of the property by the state for a profit of close to $10,000.[97]
Dean stands for more than just a recognition of the plaintiff’s right to bring a claim
under unjust enrichment for the surplus proceeds. Inherent in Dean’s holding is
Michigan’s protection under our common law of a property owner’s right to collect the
surplus proceeds that result from a tax-foreclosure sale. A viable claim for unjust
enrichment requires the complaining party to show that the other party retained a benefit
from the complaining party.98 In concluding that the plaintiff in Dean stated an actionable
claim for unjust enrichment, this Court did not rely on any statutory right that the plaintiff
97
Dean, 399 Mich at 94-95.
98
Tkachik v Mandeville, 487 Mich 38, 47-48; 790 NW2d 260 (2010) (“Unjust enrichment
is defined as the unjust retention of money or benefits which in justice and equity belong
to another. No person is unjustly enriched unless the retention of the benefit would be
unjust.”) (quotation marks and citations omitted).
34
had to collect the surplus proceeds. As is the case here, title to the plaintiff’s property in
Dean had already vested with the state. Without a statutory right, the plaintiff must have
had a common-law right to these surplus proceeds. Otherwise, her claim of unjust
enrichment would not be actionable because it could not have been said that the state
retained a benefit at her expense. In sum, Dean supports the proposition that a property
owner has a recognized common-law property right to the surplus proceeds from a tax-
foreclosure sale.99
We conclude that our state’s common law recognizes a former property owner’s
property right to collect the surplus proceeds that are realized from the tax-foreclosure sale
of property. Having originated as far back as the Magna Carta, having ingratiated itself
into English common law, and having been recognized both early in our state’s
jurisprudence and as late as our decision in Dean in 1976, a property owner’s right to
collect the surplus proceeds from the tax-foreclosure sale of his or her property has deep
roots in Michigan common law. We also recognize this right to be “vested” such that the
right is to remain free from unlawful governmental interference. “To constitute a vested
right, the interest must be something more than such a mere expectation as may be based
upon an anticipated continuance of the present general laws; it must have become a title,
99
While Dean stands for the proposition that a claim for the surplus proceeds may be
asserted through unjust enrichment, the Court of Appeals concluded that plaintiffs
abandoned their claim of unjust enrichment by failing to develop it in their briefing below.
See Mitcham v Detroit, 355 Mich 182, 203; 94 NW2d 388 (1959) (explaining that a party’s
failure to adequately brief an issue on appeal constitutes abandonment).
35
legal or equitable, to the present or future enjoyment of property . . . .”100 As demonstrated
by the discussion earlier, the right to collect these proceeds was beyond a mere expectancy
or claim of entitlement. It is as much an interest in property as our kitchen tables; television
sets; and, as this Court observed in Seaman, our cattle and farming utensils.101 Further, the
prohibitions against collecting excess taxes, selling more land than needed to collect such
taxes, and taking more property than necessary to serve the public all underlie a property
owner’s right to collect the surplus proceeds and were well-established legal principles
before 1963. Therefore, we hold that the ratifiers would have commonly understood this
common-law property right to be protected under Michigan’s Takings Clause at the time
of the ratification of the Michigan Constitution in 1963.102
100
Fun ’N Sun, 447 Mich at 788 (quotation marks and citation omitted); Cooley, General
Principles, p 320 (“The test of unlawful interference with property is that vested rights are
abridged or taken away.”) (emphasis added).
101
An often-used metaphor in property law further illustrates this point. Property rights
are commonly referred to as a “bundle of sticks,” with each stick representing a distinct
right defined by state law. United States v Craft, 535 US 274, 278; 122 S Ct 1414; 152 L
Ed 2d 437 (2002) (“A common idiom describes property as a ‘bundle of sticks’—a
collection of individual rights which, in certain combinations, constitute property. State
law determines only which sticks are in a person’s bundle.”) (citation omitted). These
sticks range from a property owner’s right to use or enjoy the property, the right to eject
others from the property, and the right to dispose of the property altogether. See Adams v
Cleveland-Cliffs Iron Co, 237 Mich App 51, 57; 602 NW2d 215 (1999) (“The general
concept of ‘property’ comprises various rights—a ‘bundle of sticks,’ as it is often called—
which is usually understood to include ‘[t]he exclusive right of possessing, enjoying, and
disposing of a thing.’ ”), quoting Black’s Law Dictionary (6th ed), p 1216. Unlawful
governmental interference with even one stick in that bundle constitutes a taking requiring
just compensation. Our holding today recognizes that the right to collect any surplus
proceeds that result from the sale of a person’s property for unpaid taxes is one stick in the
owner’s bundle of rights, entitled to as much protection as any other stick in that bundle.
102
Hathcock, 471 Mich at 471.
36
Having recognized both the existence of this vested property right at common law
and that the ratifiers of the 1963 Michigan Constitution would have commonly understood
this right to be protected under Michigan’s Takings Clause at that time, the question now
becomes whether the amendments of the GPTA abrogated this common-law right.103 If it
did, there is no taking here.
The common law “is but the accumulated expressions of the various judicial
tribunals in their efforts to ascertain what is right and just . . . .”104 It is dynamic and
flexible, not static or fixed like statutory law.105 The common law is, however, incremental
in adapting to society’s changing circumstances, developing gradually to reflect our
policies, customs, norms, and values.106 Nonetheless, the Legislature may enact legislation
that abrogates or alters the common law. Of course, both legislation and the common law
are secondary to our Constitution. Article 3, § 7 of Michigan’s Constitution provides:
103
While the bulk of the revisions to the GPTA took place in 1999, the provision allowing
counties to transfer any surplus proceeds to their general funds, MCL 211.78m(8)(h), was
not added until 2006. See 2006 PA 498.
104
Price v High Pointe Oil Co, Inc, 493 Mich 238, 242; 828 NW2d 660 (2013) (quotation
marks and citation omitted).
105
Beech Grove Investment Co v Civil Rights Comm, 380 Mich 405, 430; 157 NW2d 213
(1968) (“The common law does not consist of definite rules which are absolute, fixed, and
immutable like the statute law . . . .”) (quotation marks and citation omitted).
106
Price, 493 Mich at 243 (“The common law is always a work in progress and typically
develops incrementally, i.e., gradually evolving as individual disputes are decided and
existing common-law rules are considered and sometimes adapted to current needs in light
of changing times and circumstances.”).
37
The common law and the statute laws now in force, not repugnant to
this constitution, shall remain in force until they expire by their own
limitations, or are changed, amended or repealed.[107]
It is clear that our 1963 Constitution protects a former owner’s property right to
collect the surplus proceeds following a tax-foreclosure sale under Article 10, § 2. This
right existed at common law; was commonly understood to exist in the common law before
the 1963 ratification of our Constitution; and continues to exist after 1963, as our decision
in Dean demonstrates. Because this common-law property right is constitutionally
protected by our state’s Takings Clause, the Legislature’s amendments of the GPTA could
not abrogate it. While the Legislature is typically free to abrogate the common law, it is
powerless to override a right protected by Michigan’s Takings Clause.108
107
Const 1963, art 3, § 7 (emphasis added).
108
Nothing in our holding today prevents the Legislature from enacting legislation that
would require former property owners to avail themselves of certain procedural avenues to
recover the surplus proceeds. See, e.g., Nelson, 352 US at 110 & n 10. We only hold that
the Legislature may not write this constitutionally protected vested property right out of
existence. See Munn v Illinois, 94 US 113, 134; 24 L Ed 77 (1876) (“A person has no
property, no vested interest, in any rule of the common law. . . . Rights of property which
have been created by the common law cannot be taken away without due process; but the
law itself, as a rule of conduct, may be changed at the will, or even at the whim, of the
legislature, unless prevented by constitutional limitations.”) (emphasis added); see also
Mackin v Detroit-Timkin Axle Co, 187 Mich 8, 13; 153 NW 49 (1915) (“Except as to vested
rights, the legislative power exists to change or abolish existing statutory and common-law
remedies.”) (emphasis added). Further, because this common-law property right existed
well before 1963, it cannot be said that our Constitution created this property right; rather,
this right was, and still is, commonly understood to be protected by Michigan’s Takings
Clause. See Phillips, 524 US at 164 (“[T]he Constitution protects rather than creates
property interests . . . .”).
38
V. APPLICATION
A. DEFENDANTS’ RETENTION OF THE SURPLUS PROCEEDS WAS AN
UNCONSTITUTIONAL TAKING
As the foreclosing governmental unit under the GPTA, defendants were entitled to
seize plaintiffs’ properties to satisfy the unpaid delinquent real-property taxes as well as
any interest, penalties, and fees associated with the foreclosure and sale of plaintiffs’
properties. But defendants could only collect the amount plaintiffs owed and nothing more.
Once defendants foreclosed on plaintiffs’ properties, obtained title to those properties, and
sold them to satisfy plaintiffs’ unpaid taxes, interest, penalties, and fees related to the
foreclosures, any surplus resulting from those sales belonged to plaintiffs. That is, after
the sale proceeds are distributed in accordance with the GPTA’s order of priority, any
surplus that remains is the property of plaintiffs, and defendants were required to return
that property to plaintiffs. Defendants’ retention of those surplus proceeds under the GPTA
amounts to a taking of a vested property right requiring just compensation. To the extent
the GPTA permits defendants to retain these surplus proceeds and transfer them into the
county general fund, the GPTA is unconstitutional as applied to former property owners
whose properties were sold at a tax-foreclosure sale for more than the amount owed in
unpaid taxes, interest, penalties, and fees related to the forfeiture, foreclosure, and sale of
their properties.
Defendants rely on a line of Michigan cases to argue that plaintiffs held no rights,
titles, or interests in their properties once foreclosure occurs and fee simple title vests with
39
the state.109 None of these decisions, however, involved a claim for the surplus proceeds
after a foreclosure sale. Rather, these cases all addressed the former property owners’
ability to retain or convey an interest in the land that had been foreclosed. Indeed, one of
these cases even noted that the “primary and inducing purpose of the legislation was to
secure a portion of the unpaid taxes, rather than nothing, and to restore lands to a taxpaying
basis, instead of supinely allowing them to accumulate tax delinquencies with no hope of
ever recovering them.”110 In this case, defendants recovered the entire amount of plaintiffs’
tax debts and more by way of a surplus. Plaintiffs had a cognizable, vested property right
to collect those surplus proceeds. This vested right did not simply “vanish[] into thin
air.”111 In the same way that the foreclosure process does not eliminate the former property
owner’s interest in the personal property that sits on the foreclosed land, the vesting of fee
simple title to the real property does not extinguish the property owner’s right to collect
the surplus proceeds of the sale. This is a separate property right that survives the
109
Krench v Michigan, 277 Mich 168, 179; 269 NW 131 (1936) (holding that a tax-
foreclosure sale divests the former owner of title and vests title with the state in fee simple
with a new chain of title being formed); James A. Welch Co, Inc v State Land Office Bd,
295 Mich 85, 93-95; 294 NW 377 (1940) (holding that after the state received absolute title
to land that was sold for delinquent property taxes, the former owner held no greater interest
in title to the land than any other stranger); Meltzer v State Land Office Bd, 301 Mich 541,
545; 3 NW2d 875 (1942) (affirming Krench and Welch and concluding that once absolute
title to a tax-foreclosed property vests with the state, the former owners hold “no interest
in the land at the time of the tax sale”).
110
Welch, 295 Mich at 92 (quotation marks and citation omitted; emphasis added).
111
Armstrong v United States, 364 US 40, 48; 80 S Ct 1563; 4 L Ed 2d 1554 (1960) (holding
that the government’s “total destruction” of the value of a lienholder’s lien against
government-held property was an unconstitutional taking).
40
foreclosure process. Accordingly, like any other creditor, defendants were required to
return the surplus.112
We see no reason to recharacterize these surplus proceeds as public money to be
transferred into the county general fund and used for public purposes wholly independent
of the GPTA without paying just compensation.113 While plaintiffs’ takings claim was not
compensable until their properties sold for an amount in excess of their tax debts, that lack
of an immediate right to collect the surplus proceeds does not mean that plaintiffs had no
right to collect the surplus proceeds at all.114 Indeed, a former property owner only has a
right to collect the surplus proceeds from the tax-foreclosure sale; that is, a former property
owner has a compensable takings claim if and only if the tax-foreclosure sale produces a
surplus. Once the sale produces a surplus, the former owner may make a claim for the
112
See Lawton, 110 US at 150 (“[S]o far as such owner is concerned, the surplus money is
set aside as his as fully as if it had come from a third person. . . . It can make no difference
that the United States acquired the property by bidding one dollar more.”); Armstrong, 364
US at 48 (“[T]he Government for its own advantage destroyed the value of the liens,
something that the Government could do because its property was not subject to suit, but
which no private purchaser could have done.”); see also Bank of America, NA v First
American Title Ins Co, 499 Mich 74, 91; 878 NW2d 816 (2016) (“No one disputes that the
mortgagee is entitled to recover only his debt. Any surplus value belongs to others, namely,
the mortgagor or subsequent lienors.”) (quotation marks and citation omitted).
113
See Webb’s Fabulous Pharmacies, Inc v Beckwith, 449 US 155, 164; 101 S Ct 446; 66
L Ed 2 358 (1980) (“[A] State, by ipse dixit, may not transform private property into public
property without compensation . . . .”).
114
Id. at 162 (explaining that creditors of a deposit account, whose statutory right to collect
a portion of the account’s interest did not accrue until distribution of the account was
ordered, had a cognizable property right despite that right not being immediately
compensable).
41
surplus proceeds. Again, this holds true even though the former owner no longer holds
title to the property.
Moreover, we are unmoved by caselaw from other states that have addressed the
disposition of surplus proceeds. Some courts that have confronted the issue whether a
cognizable takings claim can be made for the surplus proceeds have only addressed the
issue in the context of the federal Takings Clause.115 Unlike those courts, however, our
holding speaks to Michigan’s Takings Clause, which this Court has, on occasion,
interpreted as offering broader protection to property owners.116 Other courts have limited
the inquiry to whether there is statutory authority for a property owner to collect the surplus
proceeds, not whether a right existed within their states’ common law.117 Moreover, a few
115
See, e.g., Ritter v Ross, 207 Wis 2d 476, 484-485; 558 NW2d 909 (1996) (analyzing the
former property owners’ claim for the surplus proceeds under the federal Takings Clause
and holding that no taking under that clause occurred), cert den 522 US 995 (1997); Auburn
v Mandarelli, 320 A2d 22, 25 (Me, 1974) (same).
116
See AFT Mich, 497 Mich at 217 & n 9 (“Although the courts of this state have applied
the state and federal Takings Clauses coextensively in many situations, this Court has
found that [Michigan’s Takings Clause] offers broader protection than [the federal Takings
Clause].”) (citation omitted), comparing Kelo, 545 US 469, with Hathcock, 471 Mich 445.
117
See, e.g., Kelly v Boston, 348 Mass 385, 388; 204 NE2d 123 (1965) (“We think it is
clear from the above history of the tax statutes that the Legislature intended the surplus
from a sale of land taken for nonpayment of taxes, on which the right of redemption has
been foreclosed in the Land Court, to belong to the municipality.”); Automatic Art, LLC v
Maricopa Co, unpublished opinion of the United States District Court for the District of
Arizona, issued March 18, 2010 (Case No. CV 08-1484-PHX-SRB), pp 5-7 (holding that,
under Arizona’s statutory scheme governing tax foreclosures, the government’s retention
of the surplus proceeds is not an unconstitutional taking because “Arizona law does not
provide for the recovery of any funds by a previous owner after a tax sale”); Reinmiller v
Marion Co, unpublished opinion of the United States District Court for the District of
Oregon, issued October 16, 2006 (Case No. CV 05-1926-PK), pp 2-4 (holding the same
under Oregon law).
42
courts have addressed the takings issue in the context of other areas of jurisprudence,
including tax collection, forfeiture, and due process.118 That said, we note that two states,
Vermont and New Hampshire, have recognized the government’s obligation to return any
surplus proceeds to the former owner after a tax-foreclosure sale and that the failure to
return those proceeds is a taking under their state constitutions.119 Similarly, we hold that
defendants were required to return the surplus proceeds to plaintiffs and that defendants’
failure to do so constitutes a government taking under the Michigan Constitution entitling
plaintiffs to just compensation.
B. DEFENDANTS CANNOT RELY ON THE TAXING POWER TO JUSTIFY THEIR
RETENTION OF THE SURPLUS PROCEEDS
Defendants also contend that their actions are simply a matter of tax collection and
that “there can be no taking when a Michigan county foreclosures on a property for the
118
See, e.g., Balthazar v Mari Ltd, 301 F Supp 103, 105 n 6 (ND Ill, 1969) (“Rather than
taking private property for a public purpose, Illinois is here collecting taxes which are
admittedly overdue.”), aff’d 396 US 114 (1969); Sheehan v Suffolk Co, 67 NY2d 52, 60;
490 NE2d 523 (1986) (“There is no constitutional prohibition against such a full
forfeiture.”); Miner v Clinton Co, 541 F3d 464, 475 (CA 2, 2008) (“The retention of any
surplus from a tax auction is constitutional because there was no violation of plaintiffs’
right to due process related to the notices of foreclosure.”).
119
See Bogie v Barnet, 129 Vt 46, 55; 270 A2d 898 (1970) (“No justification for the
withholding of this excess from the plaintiff, derived as it was from the compelled sale of
his land, has been demonstrated. Its retention by the town amounts to an unlawful taking
for public use without compensation, contrary to . . . the Vermont Constitution.”);
Polonsky v Bedford, ___ NH ___; ___ A3d ___ (2020) (Case No. 2019-0339); slip op at
12 (holding that, under New Hampshire’s Takings Clause, “the taking of property without
just compensation is unconstitutional, even when the municipality has taken the property
by tax deed due to the former owner’s failure to pay taxes,” and that the municipality’s
failure to return any excess proceeds to the former owner is an unconstitutional taking),
citing Thomas Tool Servs, Inc v Croydon, 145 NH 218, 220; 761 A2d 439 (2000).
43
nonpayment of taxes.”120 The Legislature undoubtedly has the inherent power to levy
taxes, and cities and villages also have the authority to impose taxes for public purposes.121
We recognize that municipalities rely heavily on their citizens to timely pay real-property
taxes so that local governments have a source of revenue for their operating costs.122
Nothing in this opinion impedes defendants’ right to hold citizens accountable for failing
to pay property taxes by taking citizens’ properties in satisfaction of their tax debts. What
defendants may not do under the guise of tax collection is seize property valued far in
excess of the amount owed in unpaid taxes, penalties, interest, and fees and convert that
surplus into a public benefit. The purpose of taxation is to assess and collect taxes owed,
not appropriate property in excess of what is owed. Defendants’ ability to take plaintiffs’
properties was limited by what plaintiffs actually owed as a result of failing to pay their
taxes. Thus, defendants’ retention of the surplus proceeds amounts to a taking of plaintiffs’
properties far in excess of plaintiffs’ tax debts that cannot be justified as a valid form of
tax collection.
120
Defendants’ Brief on Appeal (April 3, 2019) at 14.
121
Const 1963, art 9, § 1 (“The legislature shall impose taxes sufficient with other resources
to pay the expenses of state government.”); Const 1963, art 7, § 21 (“Each city and village
is granted power to levy other taxes for public purposes, subject to limitations and
prohibitions provided by this constitution or by law.”).
122
Walker, 445 Mich at 702 (“Traditionally, the property tax—and in particular, the tax on
real property—has been the mainstay of municipal revenue-gathering—the largest single
source of municipal revenue.”) (quotation marks and citation omitted); see also Tax Liens,
75 Ind L J at 756 (explaining that property taxes are the primary source of revenue for local
governments and that “[t]he failure to collect even a small portion of property taxes can
have a dramatic impact on local governments”).
44
Moreover, “the power of taxation should not be confused with the power of eminent
domain . . . .”123 As Justice Cooley has explained, whereas taxation requires citizens to
bear the burden of public expenses equally and proportionally, “something exceptional” is
taken under the government’s exercise of eminent domain such that apportionment cannot
be achieved, thus requiring compensation “of a pecuniary nature” to the property owner.124
By retaining the surplus proceeds and transferring them into the county general fund to be
used for public purposes, defendants are forcing delinquent taxpayers to contribute to the
general government revenues beyond their fair share. This is not simply an adjustment of
“the benefits and burdens of economic life to promote the common good.”125 Rather, this
confiscation of the sale proceeds in excess of what is actually owed requires delinquent
taxpayers “ ‘alone to bear public burdens which, in all fairness and justice, should be borne
by the public as a whole.’ ”126 Michigan’s Takings Clause was “ ‘adopted for the
protection of and security to the rights of the individual as against the government . . . .’ ”127
123
Koontz v St. Johns River Water Mgt Dist, 570 US 595, 617; 133 S Ct 2586; 186 L Ed
2d 697 (2013) (quotation marks and citation omitted).
124
Cooley, General Principles, pp 333-334.
125
See Penn Central Transp Co v City of New York, 438 US 104, 124; 98 S Ct 2646; 57 L
Ed 2d 631 (1978); see also AFT Mich, 497 Mich at 218 (“[G]overnmental action creating
general burdens or liabilities, i.e., merely requiring citizens to expend monies for valid
public purposes and expenditures, typically will not form the basis for a cognizable taking
claim.”).
126
Webb’s Fabulous Pharmacies, 449 US at 163, quoting Armstrong, 364 US at 49.
127
Bott v Natural Resources Comm, 415 Mich 45, 81 n 43; 327 NW2d 838 (1982), quoting
Pearsall v Eaton Co Bd of Supervisors, 74 Mich 558, 561; 42 NW 77 (1889).
45
To permit such forced contributions to stand would undermine the very rights our Takings
Clause seeks to protect.
Put simply, defendants’ argument that the taxing power justifies their retention of
the surplus proceeds from tax-foreclosure sales over and above property owners’ tax
liabilities is an exceedingly poor attempt at disguising a physical taking of property
requiring just compensation as an arbitrary and disproportionate tax.128
C. JUST COMPENSATION IS EQUAL TO THE AMOUNT OF SURPLUS
PROCEEDS GENERATED FROM THE TAX-FORECLOSURE SALE
Having found an unconstitutional taking, we must next decide the method by which
just compensation may be determined. This Court has stated that the remedy for a
government taking is “just compensation for the value of the property taken.”129 As our
holding today makes clear, the property “taken” is the surplus proceeds from the tax-
foreclosure sale of plaintiffs’ properties to satisfy their tax debts. While it could be said
that plaintiffs have received at least some compensation, given that they are no longer liable
for their delinquent taxes,130 satisfaction of plaintiffs’ tax debts cannot constitute just
128
See Acker v Comm’r of Internal Revenue, 258 F2d 568, 574 (CA 6, 1958) (“[D]espite
the breadth of the taxing power conferred by the Constitution, there might arise ‘a case
where, although there was a seeming exercise of the taxing power, the act complained of
was so arbitrary as to constrain to the conclusion that it was not the exertion of taxation but
a confiscation of property; that is, a taking of the same in violation of the 5th
Amendment[.]’ ”), quoting Brushaber v Union Pacific R Co, 240 US 1, 24-25; 36 S Ct
236; 60 L Ed 493 (1916).
129
Hart, 416 Mich at 494.
130
See State Theft, 54 Real Prop Tr & Est L J at 124 & nn 219-220 (“In the case of property
tax foreclosure, there is some compensation provided to the owner because the proceeds
from the property sale are used to satisfy the amount that the property owner owes the
government in taxes, interest, and fees. This is a form of compensation because after the
46
compensation for the value of the property taken, i.e., the surplus proceeds. Therefore,
plaintiffs are entitled to the value of those surplus proceeds.
Defendants submit that if plaintiffs have, in fact, pleaded a viable takings claim,
then the amount of compensation due could be more than the surplus proceeds from the
tax-foreclosure sale. Plaintiffs make this point in their postargument briefing, arguing that
a full remedy for an unconstitutional taking requires property owners to be put in as good
of position had their properties not been taken at all. That is, while the surplus proceeds
from a tax-foreclosure sale are some evidence of the value of the property and
compensation due, plaintiffs contend that it may be less than just compensation and may
instead constitute the fair market value of their properties.131
We reject the premise that just compensation requires that plaintiffs be awarded the
fair market value of their properties so as to be put in as good of position had their
properties not been taken at all. First, this would run contrary to the general principle that
just compensation is measured by the value of the property taken. In this case, the property
property is sold the former owner’s debt is canceled.”), citing Comment, Tax Foreclosure:
A Drag On Community Vitality Or A Tool For Economic Growth?, 81 U Cin L Rev 1615,
1617 (2013) (explaining that the collection of unpaid real-property taxes involves, among
other things, “liquidation of the property by public sale in order to satisfy the debt owed”).
131
Plaintiffs’ Supplemental Brief on Appeal (December 13, 2019) at 4 n 1, citing United
States v Miller, 317 US 369, 373; 63 S Ct 276; 87 L Ed 336 (1943) (stating that just
compensation for a takings claim requires that the property owner “be put in as good
position pecuniarily as he would have occupied if his property had not been taken”).
47
improperly taken was the surplus proceeds, not plaintiffs’ real properties.132 Second,
plaintiffs are largely responsible for the loss of their properties’ value by failing to pay their
taxes on time and in full. If plaintiffs were entitled to collect more than the amount of the
surplus proceeds, not only would they be taking money away from the public as a whole,
but they would themselves benefit from their tax delinquency.133
Accordingly, when property is taken to satisfy an unpaid tax debt, just compensation
requires the foreclosing governmental unit to return any proceeds from the tax-foreclosure
sale in excess of the delinquent taxes, interest, penalties, and fees reasonably related to the
foreclosure and sale of the property—no more, no less.134
132
This distinction also explains why the Michigan Takings Clause’s 125% requirement
does not apply. That provision is triggered only when the property taken consists of an
individual’s principal residence. That is not the case here.
133
In re State Hwy Comm’r, 249 Mich 530, 535; 229 NW 500 (1930) (“Just compensation
should neither enrich the individual at the expense of the public nor the public at the
expense of the individual.”).
134
Plaintiffs suggest that they are entitled to the equity they held in their properties before
foreclosure, but throughout their briefing they conflate equity with surplus proceeds,
suggesting that they are one in the same. See Plaintiffs’ Brief on Appeal (February 13,
2019) at 12 (“Equity is realized when property is sold. Thus, logically, common law and
statutory law have traditionally treated the surplus proceeds from the sale of foreclosed
property as representing the former owner’s equity.”). Similarly, the concurring opinion
asserts that the property right taken is the equity a former property owner held in his or her
property prior to foreclosure. The concurring opinion supports this assertion with scant
caselaw, relying primarily on the “equity of redemption” as representing an owner’s equity
interest in property. Yet the concurring opinion acknowledges that equity of redemption
and equity are distinct concepts, with the former serving to protect the latter. Further, we
are unaware of any authority affirming a vested property right to equity held in property
generally. Nor is it necessary for us to do so here. The question presented is whether a
former property owner retains the ability to collect any surplus proceeds that might result
after the government seizes title to real property for failure to pay taxes and then sells that
property for more than the tax delinquency. The earlier discussion reaffirms a former
48
VI. CONCLUSION
We hold that plaintiffs, former property owners whose properties were foreclosed
and sold to satisfy delinquent real-property taxes, have a cognizable, vested property right
to the surplus proceeds resulting from the tax-foreclosure sale of their properties. This
right continued to exist even after fee simple title to plaintiffs’ properties vested with
defendants, and therefore, defendants’ retention and subsequent transfer of those proceeds
into the county general fund amounted to a taking of plaintiffs’ properties under Article 10,
§ 2 of our 1963 Constitution. Therefore, plaintiffs are entitled to just compensation, which
in the context of a tax-foreclosure sale is commonly understood as the surplus proceeds.
Accordingly, we reverse the judgment of the Court of Appeals and remand this case to the
Oakland Circuit Court for proceedings consistent with this opinion.
Brian K. Zahra
Bridget M. McCormack
Stephen J. Markman
Richard H. Bernstein
Elizabeth T. Clement
Megan K. Cavanagh
property owner’s vested common-law property right to the surplus proceeds resulting from
a tax-foreclosure sale that is protected by our state’s Takings Clause. Thus, plaintiffs have
a compensable takings claim for the surplus proceeds, i.e., the value of the property taken.
49
STATE OF MICHIGAN
SUPREME COURT
RAFAELI, LLC, and ANDRE
OHANESSIAN,
Plaintiffs-Appellants,
v No. 156849
OAKLAND COUNTY and ANDREW
MEISNER,
Defendants-Appellees.
VIVIANO, J. (concurring).
At issue is whether defendant Oakland County’s retention of the surplus proceeds
from tax-foreclosure sales constitutes a taking under Article 10, § 2 of the 1963 Michigan
Constitution. I concur with the majority’s result but disagree with much of its reasoning.1
In its zeal to adopt a pragmatic rule in order to provide limited relief to these plaintiffs and
others similarly situated, the majority has made a number of doctrinal missteps. In
particular, the majority has applied a flawed interpretive methodology and, even more
fundamentally, has failed to identify the correct property right. These mistakes are not
without consequences. The first trenches upon the Legislature’s power to abrogate
nonvested property rights. And the second—by defining plaintiffs’ property right as the
right to surplus proceeds, instead of the right to equity more generally—would seemingly
1
I concur in all parts except Parts IV(C), V(A), V(C), and VI.
encourage and endorse many takings of a person’s equity without just compensation
whenever a foreclosure sale does not yield surplus proceeds.
I would instead interpret the Constitution in the usual manner, discerning the
ordinary meaning of “property” and applying it to the facts here. Doing so, I conclude that
the property right that has been taken from the plaintiffs is their equity in their respective
properties and not any independent interest in the surplus proceeds from the tax-foreclosure
sale.
I. INTERPRETIVE ISSUES
The majority correctly notes that “a claimant must first establish a vested property
right under state law” in order to have a takings claim and that “ ‘the existence of a property
interest is determined by reference to existing rules or understandings that stem from an
independent source such as state law.’ ”2 Then the majority recounts the familiar rule that
“[o]ur ‘primary objective’ in interpreting a constitutional provision such as our state’s
Takings Clause is ‘to determine the text’s original meaning to the ratifiers, the people, at
the time of ratification.’ ”3
However, the majority does not explain which words in the Takings Clause are in
need of interpretation.4 In fact, rather than go on to explain what the ratifiers would have
2
Phillips v Washington Legal Foundation, 524 US 156, 164; 118 S Ct 1925; 141 L Ed 2d
174 (1998) (quotation marks and citation omitted).
3
Wayne Co v Hathcock, 471 Mich 445, 468; 684 NW2d 765 (2004).
4
The Takings Clause reads, in pertinent part: “Private property shall not be taken for public
use without just compensation therefore being first made or secured in a manner prescribed
by law.” Const 1963, art 10, § 2.
2
understood any particular words in the Takings Clause to mean, the majority proceeds to
recount historical claims for surplus and a menagerie of other past cases involving vested
property rights more generally. Later, when considering whether the Legislature might
have abrogated a common-law right to the surplus, the majority explains:
It is clear that our 1963 Constitution protects a former owner’s
property right to collect the surplus proceeds following a tax-foreclosure sale
under Article 10, § 2. This right existed at common law; was commonly
understood to exist in the common law before the 1963 ratification of our
Constitution; and continues to exist after 1963, as our decision in Dean
demonstrates. Because this common-law property right is constitutionally
protected by our state’s Takings Clause, the Legislature’s amendments of the
[General Property Tax Act (GPTA), MCL 211.1 et seq.] could not abrogate
it. While the Legislature is typically free to abrogate the common law, it is
powerless to override a right protected by Michigan’s Takings Clause.[5]
Though the majority does not make it explicit, I understand its opinion as reasoning
that because various past cases and other materials appear to recognize some interest on
the part of the previous landowner in the surplus proceeds after a tax foreclosure, the
ratifiers would have understood the term “property” in the Constitution to encompass such
a property right to surplus proceeds. Consequently, that property right must be considered
frozen and inviolable under our Takings Clause. And because it is enshrined in the
Constitution, the Legislature may not abrogate that common-law right; to do so would run
afoul of the Takings Clause.
I, of course, take no issue with the general rule that when interpreting a
constitutional provision, we aim to “determine the text’s original meaning to the
5
Ante at 38.
3
ratifiers . . . .”6 Consequently, under our rules of constitutional interpretation, the
definition of “property” is determined by what the ratifiers understood “property” to mean.
But the majority’s investigation of this concept ultimately rests on a flawed understanding
of original meaning. Obviously, the majority cannot say that the constitutional term
“property” means “surplus proceeds.”7 Rather, what the majority says, at least implicitly,
is that the phrase “surplus proceeds” falls within the meaning of “property” because the
ratifiers would have considered surplus proceeds to be property at the time of ratification.
But the majority never defines the term “property.” Yet, this question—the semantic
content of “property”—should be at the center of any interpretation of a legal term or
phrase, and its absence here is telling.8 Compare this with how the United States Supreme
Court has defined “property” in the Takings Clause: “The constitutional provision is
addressed to every sort of interest the citizen may possess.”9 Whether right or wrong, this
definition at least gives the term a meaning that can be applied.
6
Hathcock, 471 Mich at 468.
7
Cf. McGinnis & Rappaport, Original Interpretive Principles as the Core of Originalism,
24 Const Comment 371, 378 (2008) (“The original meaning of the words would not
normally be defined by the expected applications, but instead by the meaning that people
at the time would understand the words to have.”).
8
Cooley, Constitutional Limitations (5th ed), p 49 (explaining that the purpose of
interpretation is to “find[] out the true sense of any form of words”).
9
United States v Gen Motors Corp, 323 US 373, 378; 65 S Ct 357; 89 L Ed 311 (1945).
4
By contrast, the majority here focuses on what res the ratifiers would have believed
were encompassed by the term “property.”10 This treats the ratifiers’ expectations about
the application of the constitutional text as binding. Such an approach has been rejected
by those who, like myself, consider courts to be bound by the Constitution’s original textual
meaning—it is the publicly accessible meaning of the text, rather than its intended or
expected applications, that binds the courts.11
10
“Res” is Latin for “thing; event, business; fact; cause; property[.]” University of Notre
Dame, William Whitaker’s Words <http://archives.nd.edu/cgi-bin/wordz.pl?keyword=res>
(accessed June 26, 2020) [https://perma.cc/5HEJ-RHSD]. Black’s Law Dictionary (11th
ed) now defines it as “n. [Latin ‘thing’] (17c) 1. An object, interest, or status, as opposed
to a person . . . .”
11
See McConnell, The Importance of Humility in Judicial Review: A Comment on Ronald
Dworkin’s “Moral Reading” of the Constitution, 65 Fordham L Rev 1269, 1284 (1997)
(“Mainstream originalists recognize that the Framers’ analysis of particular applications
could be wrong, or that circumstances could have changed and made them wrong. . . .
[T]hey believe that ‘[w]e are governed by what our lawmakers said—by the principles they
laid down—not by any information we might have about how they themselves would have
interpreted those principles or applied them in concrete cases.’ ”) (citation omitted);
Balkin, Living Originalism (Cambridge: The Belknap Press of Harvard University Press,
2011), p 13 (“Fidelity to original meaning as original semantic content does not require
that we must apply [for example] the equal protection clause the same way that people at
the time of enactment would have expected it would be applied.”); Whittington,
Constitutional Interpretation: Textual Meaning, Original Intent, and Judicial Review
(Lawrence: University Press of Kansas, 1999), p 178 (“An expectation, in and of itself, is
derived from the text and as a prediction about its effects in the future is only contingently
related to the text. . . . [T]he author has no special authority relative to expectations about
effects.”); Scalia, A Matter of Interpretation: Federal Courts and the Law (Princeton:
Princeton University Press, 1997), p 144 (“I agree with the
distinction . . . between . . . ‘semantic intention’ and the concrete expectations of
lawgivers. It is indeed the former rather than the latter that I follow.”); Rosenthal,
Originalism in Practice, 87 Ind L J 1183, 1209 (2012) (“Most originalists draw a
distinction between the original meaning of constitutional text and its originally intended
applications, arguing that only the former is interpretively binding.”) (collecting sources);
Barnett, An Originalism for Nonoriginalists, 45 Loy L Rev 611, 622 (1999) (“While some
5
The ratifiers’ understanding thus establishes the general meaning of “property” but
not necessarily which things fall within that concept. In other words, the meaning of
“property,” as defined at the time of ratification, establishes the parameters by which we
originalists still search for how the relevant generation of ratifiers expected or intended
their textual handiwork would be applied to specific cases, original meaning originalists
need not concern themselves with this, except as circumstantial evidence of what the more
technical words and phrases in the text might have meant to a reasonable listener.”).
The majority’s emphasis on expected applications rather than the semantic content
of the text itself fundamentally misperceives the object of interpretation as the ratifiers’
intentions rather than the original public meaning of the text. As Robert Bork described
the larger interpretive principle, the search for the “understanding of the ratifiers . . . is
actually a shorthand formulation” for what courts must interpret “because what the ratifiers
understood themselves to be enacting must be taken to be what the public of that time
would have understood the words to mean. It is important to be clear about this. The
search is not for a subjective intention.” Bork, The Tempting of America: The Political
Seduction of the Law (New York: Simon & Schuster Inc, 1990), p 144. See also Calabresi
& Fine, Two Cheers for Professor Balkin’s Originalism, 103 Nw U L Rev 663, 669 (2009)
(“What judges must be faithful to is the enacted law, not the expectations of the parties
who wrote the law. . . . The enactment into law of these texts was an open democratic
process, and every citizen was entitled to think that the words in the texts that were enacted
meant what a good dictionary in use at the time said they meant.”).
Contemporaneous expectations about how the constitutional text applied in a case
are useful only to the extent they shed light on the original public meaning. Whittington,
Originalism: A Critical Introduction, 82 Fordham L Rev 375, 385 (2013) (“[E]xpected
applications might be helpful to later interpreters in clarifying the substantive content of
the embodied constitutional rule. The Founders could be mistaken or disingenuous about
the implications of adopting a proposed rule, but the rule itself must be publicly
understandable. If examples of likely applications of the rule are regularly offered and
there is widespread agreement on such applications, then they may be reflective of the
content of the rule in question.”); Original Interpretive Principles, 24 Const Comment at
378 (noting that expected applications are not tantamount to original meaning but can
provide evidence of that meaning).
6
determine the things denoted by “property.”12 It does not necessarily establish, for all time,
what those things were.13 This is particularly the case with a broad concept like property,
which covers various classes of things that can be redefined by the Legislature.14
For these reasons, the ratifiers’ understanding of which particular res were included
in the definition of property at a particular moment in time does not dictate which res we
must recognize as “property” under the Takings Clause today. Instead, I would define the
term “property” according to its ordinary meaning at the time the Constitution was ratified.
Because this case does not turn on fine distinctions in the definitions—but it does turn on
12
See Slocum, Ordinary Meaning: A Theory of the Most Fundamental Principle of Legal
Interpretation (Chicago: University of Chicago Press, 2015), p 222.
13
Justice Thomas Cooley recognized, for example, that the same text bearing the same
meaning could, over time, come to take on a different significance because changing
circumstances (e.g., technology) could change the objects that fell within the unchanged
textual meaning: “The bounds of [constitutional] power remain the same, but the new
creations that come within its compass give it an importance which those who devised it
never dreamed of.” Cooley, The Comparative Merits of Written and Prescriptive
Constitutions, 2 Harv L Rev 341, 355 (1889); see also Dist of Columbia v Heller, 554 US
570, 582; 128 S Ct 2738; 171 L Ed 2d 637 (2008) (“Some have made the argument,
bordering on the frivolous, that only those arms in existence in the 18th century are
protected by the Second Amendment. We do not interpret constitutional rights that way.
Just as the First Amendment protects modern forms of communications, . . . and the Fourth
Amendment applies to modern forms of search, . . . the Second Amendment extends, prima
facie, to all instruments that constitute bearable arms, even those that were not in existence
at the time of the founding.”); Scalia & Garner, Reading Law: The Interpretation of Legal
Texts (St. Paul: Thomson/West, 2012), p 86 (“The meaning of rules is constant. Only their
application to new situations presents a novelty. . . . Broad language can encompass the
onward march of science and technology[.]”).
14
See Black’s Law Dictionary (11th ed) (defining “property” as, “[c]ollectively, the rights
in a valued resource such as land, chattel, or an intangible” or “[a]ny external thing over
which the rights of possession, use, and enjoyment are exercised”).
7
having some definition rather than a mere example—it is sufficient for present purposes to
employ a common definition of “property” from the relevant period: “something owned or
possessed; specif : a piece of real estate”; “the exclusive right to possess, enjoy, and dispose
of a thing : OWNERSHIP”; “something to which a person has a legal title.”15
Defining property using this traditional approach to constitutional interpretation
avoids other problems raised by the majority’s reading. One such problem is that any
property rights extant when the Constitution was ratified would be insulated from
legislative change, whereas later-developed property rights would presumably be subject
to change. Though the majority might conclude that the Legislature could expand the res
in which citizens may have property interests, the majority’s broad position would not
allow the Legislature to repeal rights in the res that were recognized property rights at the
time of ratification and thereby preserved in the protective amber of the Takings Clause.16
That is not problematic if the rights the Legislature sought to abrogate were vested. The
troubling sweep of the majority’s opinion, however, would extend its prohibition even to
15
Webster’s Seventh New Collegiate Dictionary (1963); see also The American Heritage
Dictionary of the English Language (1969) (“1. Ownership. 2. A possession, or
possessions collectively. 3. Something tangible or intangible to which its owner has legal
title.”); 8 Oxford English Dictionary (1933) (“That which one owns; a thing or things
belonging to or owned by some person or persons; . . . [a] piece of land owned[.]”).
16
Cf. PruneYard Shopping Ctr v Robins, 447 US 74, 93; 100 S Ct 2035; 64 L Ed 2d 741
(1980) (Marshall, J., concurring) (“Such an approach would freeze the common law as it
has been constructed by the courts, perhaps at its 19th-century state of development. It
would allow no room for change in response to changes in circumstance.”).
8
legislation that prospectively modified or abrogated nonvested property rights—i.e., rights
to property that individuals might acquire in the future.17
17
The breadth of the opinion stems, in part, from the majority’s misunderstanding about
what it means for a right to be “vested.” The majority suggests that the right to surplus
proceeds is “vested” because “the right to collect these proceeds was beyond a mere
expectancy or claim of entitlement,” apparently because the proceeds can be owned. Ante
at 35-36. In other words, the right is somehow vested irrespective of any individual
circumstances—it is vested in the ether. But that is not how it works. “To constitute a
vested right, the interest must be something more than such a mere expectation as may be
based upon an anticipated continuance of the present general laws; it must have become a
title, legal or equitable, to the present or future enjoyment of property . . . .” In re Certified
Question, 447 Mich 765, 788; 527 NW2d 468 (1994) (quotation marks and citation
omitted). “Vested” means “[h]aving become a completed, consummated right for present
or future enjoyment; not contingent; unconditional; absolute . . . .” Black’s Law Dictionary
(11th ed). This requires a real person or entity and a real property right, not simply a
property right in the abstract. See Wylie v City Comm of Grand Rapids, 293 Mich 571,
586; 292 NW 668 (1940) (noting, in the related context of due process, that “ ‘[r]ights are
“vested” when the right of enjoyment, present or prospective, has become the property of
some particular person or persons as a present interest’ ”) (citation omitted); Cooley,
Constitutional Limitations, p 438 (describing vested rights in the context of an individual’s
rights and interests); 5 Smith & Philbin, Michigan Civil Jurisprudence, Constitutional Law
(May 2020 update), § 300 (noting this definition).
For instance, I do not have a vested property right in a wild fox simply because, if I
captured one, the law would recognize my ownership of it. Cf. Pierson v Post, 3 Cai R
175; 2 Am Dec 264 (1805). If, before I even don my hunting cap, the Legislature proscribes
or limits ownership of foxes, no one would say I have been deprived of a vested property
right in the fox I never owned or caught. At best, I had an expectation or hope. In the same
way, someone who does not now own a home but would like to own one in the future does
not have any vested property right in a home. As Justice Cooley stated, “[A] mere
expectation of property in the future is not considered a vested right . . . .” Cooley,
Constitutional Limitations, p 440. And as discussed below, there is no vested right in a
mere common-law rule. See post at nn 20-21 and accompanying text. Thus, although the
majority purports to cabin its opinion to vested rights, its misconception of those rights
leads to a wider application that encompasses nonvested rights as well.
9
This would be a novel approach to legislative power over property. We have stated,
for example, that the right of redemption—which we have recognized is a property right in
the context of tax-foreclosure sales18—“is not a constitutional right but exists only as
permitted by statute, that such rights . . . are subject to abridgement by the legislature for
the reason they are remedial in nature, and that no vested rights arise . . . .”19 Other courts,
too, have recognized that the Legislature’s role in defining property rights extends to
removing items from the category of property, if done prospectively, i.e., without affecting
18
See Cobleigh v State Land Office Bd, 305 Mich 434, 436-437; 9 NW2d 665 (1943).
19
Buckeye Union Fire Ins Co v Michigan, 383 Mich 630, 639; 178 NW2d 476 (1970)
(discussing Baker v State Land Office Bd, 294 Mich 587; 293 NW 763 (1940)); see also
Dumphey v Hilton, 121 Mich 315, 317; 80 NW 1 (1899) (“It was held by the United States
Supreme Court that the right of redemption from tax sales, although it is to be regarded
favorably, does not exist, except as permitted by statute. . . . ‘While it may well be doubted
whether the legislature could enact an immediate bar to any existing right, yet it is clearly
settled that to prescribe the period within which any right may be enforced is within their
power.’ ”) (citations omitted). We had earlier said that “the equity of redemption”—which
was the redemption right at common law—“appertains to and goes with the title to the real
estate, and is in law the property of the owner of the fee. It is an interest in land . . . .”
Case v Ranney, 174 Mich 673, 681; 140 NW 943 (1913).
10
vested rights.20 And, of course, even the majority recognizes that the Legislature may, at
times, abrogate the common law.21 As the United States Supreme Court has explained:
A person has no property, no vested interest, in any rule of the common law.
That is only one of the forms of municipal law, and is no more sacred than
any other. Rights of property which have been created by the common law
cannot be taken away without due process; but the law itself, as a rule of
conduct, may be changed at the will, or even at the whim, of the legislature,
unless prevented by constitutional limitations. Indeed, the great office of
statutes is to remedy defects in the common law as they are developed, and
to adapt it to the changes of time and circumstances.[22]
A vested right, therefore, cannot be divested without just compensation.23 But the
Legislature has greater scope to prospectively reshape laws establishing property rights as
20
The New York Court of Appeals held, for example, that the legislature could “extinguish
[a] property right by the simple expedient of repealing the provision which gives rise to it,”
but only prospectively and not as to property already vested. Alliance of American Insurers
v Chu, 77 NY2d 573, 585-586; 571 NE2d 672 (1991); id. at 589 (“Nothing in our decision
prevents the State from changing the law as it affects future contributions.”); 29A CJS,
Eminent Domain (June 2020 update), § 72 (“It has also been held that, just as a state
legislature has the power to statutorily create property interests, so too may it legislatively
alter or take away those same property interests, though its power to alter the rights and
obligations that attach to completed transactions is not as broad as its power to regulate
future transactions.”). It is true that these sources refer to statutorily created property rights
rather than those that arose from the common law. But this distinction is immaterial
because, as explained below, the Legislature can abrogate the common law.
21
Const 1963, art 3, § 7 (“The common law and the statute laws now in force, not repugnant
to this constitution, shall remain in force until they expire by their own limitations, or are
changed, amended or repealed.”).
22
Munn v Illinois, 94 US 113, 134; 24 L Ed 77 (1876) (discussing due process).
23
Cf. Bank Markazi v Peterson, 578 US ___, ___; 136 S Ct 1310, 1324; 194 L Ed 2d 463
(2016) (“The Fifth Amendment’s Takings Clause prevents the Legislature (and other
government actors) from depriving private persons of vested property rights except for a
‘public use’ and upon payment of ‘just compensation.’ ”) (quotation marks and citation
omitted); In re Certified Question, 447 Mich at 787-788 (“One who asserts an
11
long as those laws function in a way that leaves vested rights untouched.24 Such actions
are not prohibited by the Takings Clause.25 Thus, for example, the United States Supreme
Court has held that the expectation of future child-support benefits is not protected because
it is a “prospective right . . . clearly subject to modification by law, be it through judicial
decree, state legislation, or congressional enactment.”26
Moreover, as the United States Supreme Court and numerous state supreme courts
have established, “the existence of a property interest is determined by reference to existing
rules or understandings that stem from an independent source such as state law.”27 In other
uncompensated taking claim must first establish that a vested property right is affected.”)
(emphasis added).
24
See Cooley, Constitutional Limitations, p 440 (“Acts of the legislature . . . cannot be
regarded as opposed to fundamental axioms of legislation, ‘unless they impair rights which
are vested; because most civil rights are derived from public laws; and if, before the rights
become vested in particular individuals, the convenience of the State procures amendments
or repeals of those laws, those individuals have no cause of complaint.’ ”) (citation
omitted).
25
There is no need to decide in this case whether other constitutional provisions may limit
the Legislature’s ability to define property. My point is only that no such limitation may
be found in the Takings Clause.
26
Bowen v Gilliard, 483 US 587, 607; 107 S Ct 3008; 97 L Ed 2d 485 (1987); see also
Peterson, The Taking Clause: In Search of Underlying Principles Part I—A Critique of
Current Takings Clause Doctrine, 77 Calif L Rev 1299, 1313 (1989) (“In a number of other
takings cases, the Court has said that unless a right created by positive law is a ‘vested
right,’ it is not property within the meaning of the takings clause. The Court’s reasoning
is that when the government grants A a legal right, it normally retains the power to change
the law to promote the general welfare, and thus no taking occurs when the government
exercises its retained power, even though the change in the law eliminates A’s rights under
the prior law. As the Court expresses it, A has not lost any ‘vested rights.’ ”).
27
Phillips, 524 US at 164 (quotation marks and citation omitted; emphasis added).
12
words, “the Constitution protects rather than creates property interests . . . .”28 Citing this
rule, one federal court has reasoned that the nature of the “property” at issue in the tax-
foreclosure context would be found in local law, not the Constitution itself.29 Yet by
reasoning that “property” must be defined at least as the particular types the ratifiers had
in mind, the majority interprets the Takings Clause as exalting those interests above the
Legislature’s authority to modify them.30
28
Id. See also Kafka v Montana Dep’t of Fish, Wildlife & Parks, 348 Mont 80, 93; 2008
MT 460; 201 P3d 8 (2008) (“Property interests themselves are not defined by the [federal]
Takings Clause, or for that matter by [the state’s taking clause]” but by “ ‘ “background
principles” and “rules and understandings” [that] focus on the nature of the citizen’s
relationship to the alleged property, such as whether the citizen had the rights to exclude,
use, transfer, or dispose of the property.’ ”) (citations omitted); Cheatham v Pohle, 789
NE2d 467, 473 (Ind, 2003) (“The plaintiff has no property to be taken except to the extent
state law creates a property right.”); Mayor & City Council of Baltimore v Bregenzer, 125
Md 78; 93 A 425, 426 (1915) (“The section of the Constitution quoted does not define
property, nor does it declare what shall be a taking. It leaves those questions to the
determination of the courts upon the facts of each particular case.”).
29
Coleman v Dist of Columbia, 70 F Supp 3d 58, 80 (D DC, 2014).
30
This result goes well beyond what the United States Supreme Court has done. Even with
regard to vested property rights, the United States Supreme Court has recognized that “the
property owner necessarily expects the uses of his property to be restricted, from time to
time, by various measures newly enacted by the State in legitimate exercise of its police
powers; ‘[a]s long recognized, some values are enjoyed under an implied limitation and
must yield to the police power.’ ” Lucas v South Carolina Coastal Council, 505 US 1003,
1027; 112 S Ct 2886; 120 L Ed 2d 798 (1992), quoting Pennsylvania Coal Co v Mahon,
260 US 393, 413; 43 S Ct 158; 67 L Ed 322 (1922). “And in the case of personal property,
by reason of the State’s traditionally high degree of control over commercial dealings, [the
property owner] ought to be aware of the possibility that new regulation might even render
his property economically worthless (at least if the property’s only economically
productive use is sale or manufacture for sale).” Lucas, 505 US at 1027-1028. Elaborating
on these points in his Lucas dissent, Justice Stevens observed that “[a]rresting the
development of the common law” would be “a departure from our prior decisions[.]” Id.
at 1069 (Stevens, J., dissenting). Legislatures, he explained, “often revise the definition of
13
I believe that such a reading raises serious concerns regarding the separation of
powers. The Constitution provides that “the legislative power of the State of Michigan is
vested in a senate and a house of representatives.”31 This Court has recognized that the
legislative power includes the power to abrogate the common law.32 In fact, the
Constitution specifically allows the common law to be changed: Const 1963, art 3, § 7
states, “The common law and the statute laws now in force, not repugnant to this
constitution, shall remain in force until they expire by their own limitations, or are
changed, amended or repealed.”33 It is true that this Court has applied the principle that
statutes in derogation of the common law must be strictly construed.34 But the majority
now significantly limits that power by reasoning that any attempt to prospectively abrogate
property and the rights of property owners. Thus, when the Nation came to understand that
slavery was morally wrong and mandated the emancipation of all slaves, it, in effect,
redefined ‘property.’ ” Id. All of this—in both the majority and dissent—referred to the
legislature’s expansive power over property a person already owned. In this case, the
majority goes in the opposite direction and ties the Legislature’s hands in regulating
property that does not yet exist and that no one yet owns.
31
Const 1963, art 4, § 1.
32
E.g., Hoerstman Gen Contracting, Inc v Hahn, 474 Mich 66, 74; 711 NW2d 340 (2006)
(“The Legislature has the authority to abrogate the common law.”).
33
Emphasis added.
34
E.g., Rusinek v Schultz, Snyder & Steele Lumber Co, 411 Mich 502, 508; 309 NW2d 163
(1981) (“[S]tatutes in derogation of the common law must be strictly construed . . . .”).
14
a common-law property right in a particular object that existed in 1963, without providing
just compensation, is unconstitutional.35
II. THE PROPERTY RIGHT AT ISSUE
The majority’s flawed interpretive methodology has led it to characterize the
“property” at issue as merely the surplus proceeds from the foreclosure sale. But the
existence and scope of these proceeds are contingent upon the foreclosure sale—the
proceeds spring to life only at the end of that process. The majority does not consider the
property interests that exist before the sale or how these interests affect the taxpayer’s
entitlement to anything resulting from the sale. In starting its analysis at the end of the
process, the majority ignores the laws and history of real-property ownership and creates
problematic gaps in the process that fail to respect takings law. My analysis, by contrast,
starts at the beginning: the property owners’ preexisting interest in the real estate, or their
equity.
35
Additionally, I believe that the majority’s approach has broad implications in the realm
of regulatory takings. If the ratifiers’ understanding of which particular objects an
individual may have property rights in is now set in stone in the Constitution, I see no
reason why the ratifiers’ understanding of the scope of their property rights is also not set
in stone. In other words, under the majority’s approach, if the ratifiers believed that their
property interest entitled them to use a res in a variety of ways, each of those ways must be
read into the definition of “property” under the Takings Clause. Consequently, it would
be unconstitutional for a regulation to take away any use of a res that the ratifiers would
have understood their property rights to include.
15
A. THE MAJORITY’S MISTAKEN APPROACH
It is important, at the outset, to note the questionable basis for the majority’s
conclusion that “our state’s common law recognizes a former property owner’s property
right to collect the surplus proceeds . . . .” The majority relies, first, on the Magna Carta,
saying, “Just as the Magna Carta protected property owners from uncompensated takings,
it also recognized that tax collectors could only seize property to satisfy the value of the
debt payable to the Crown, leaving the property owner with the excess.”36 But the
provision of the Magna Carta to which the majority refers concerns collecting debts by
seizing only movable property.37 It is much more understandable to have a rule
discouraging the government from needlessly taking property in excess of the tax debt
when the government is seizing various movable goods rather than real estate—it is easier
to take the chair and leave the table than it is to take the kitchen and leave the living room.
Thus, although many of our rights can be traced to the Magna Carta, I question whether
36
Ante at 35.
37
Ante at 28. Clause 26 of the Magna Carta reads:
If at the death of a man who holds a lay ‘fee’ of the Crown, a sheriff
or royal official produces royal letters patent of summons for a debt due to
the Crown, it shall be lawful for them to seize and list movable goods found
in the lay ‘fee’ of the dead man to the value of the debt, as assessed by worthy
men. Nothing shall be removed until the whole debt is paid, when the residue
shall be given over to the executors to carry out the dead man’s will. If no
debt is due to the Crown, all the movable goods shall be regarded as the
property of the dead man, except the reasonable shares of his wife and
children. [Johnson, The Ancient Magna Carta and the Modern Rule of Law:
1215 to 2015, 47 St Mary’s L J 1, 47 (2015) (emphasis added).]
16
Clause 26 has much bearing on the seizure of real property.38 Additionally, it is not quite
true that tax collectors could only seize property to satisfy the debt—as “the value of the
goods seized had to approximate the value of the debt[.]”39 Such a rule falls short of one
that demands any surplus be returned to the previous owner.
Next, the majority turns to People ex rel Seaman v Hammond, 1 Doug 276 (Mich,
1844), noting that though Seaman held that the previous landowner was entitled to the
surplus, the statutory scheme at the time was different than the GPTA. Specifically, the
statute specified that the excess proceeds must be returned to the owner.40 The majority
appears to recognize that Seaman, and other cases involving statutes, are not particularly
instructive.41 Nevertheless, the majority concludes that “a fair reading of Seaman
38
See Baker, An Introduction to English Legal History (Dayton: LexisNexis, 2002), p 223
(“The most fundamental distinction in the English law of property was between real
property (realty) and personal property (personalty).”). Indeed, the conception of
ownership of land—real property—was only just emerging in the thirteenth century from
innovations within the feudal system. Id. at 223-237; see also Turner, The Equity of
Redemption: Its Nature, History and Connection with Equitable Estates Generally
(Cambridge: Cambridge University Press, 1931), pp 1-3. The majority’s resort to
Blackstone is similarly unavailing because Blackstone’s discussion of bailments deals with
goods rather than real property. See ante at 28-29, citing 2 Blackstone, Commentaries on
the Laws of England, p *452.
39
Ancient Magna Carta, 47 St Mary’s L J at 47.
40
Seaman, 1 Doug at 278.
41
The majority also cites United States v Lawton, 110 US 146; 3 S Ct 545; 28 L Ed 100
(1884), and Nelson v City of New York, 352 US 103; 77 S Ct 195; 1 L Ed 2d 171 (1956).
See ante at 25 (“Significantly, Seaman, Lawton, and Nelson all address a former property
owner’s statutory right to recover the surplus proceeds.”). See also ante at 25-26 (“Lawton
and Nelson establish that the Takings Clause under the United States Constitution may
afford former property owners a remedy when a tax-sale statute provides the divested
17
demonstrates that in the early years of this state, it was commonly understood that the
delinquent taxpayer, not the foreclosing entity, continued to own the land at the time of the
tax-foreclosure sale and would have been entitled to any surplus, which no more followed
title to the land than the former owner’s other personal property.”42 But this is a misreading
of Seaman. To the extent that the owner’s entitlement to the surplus was “commonly
understood,” it no doubt resulted from the statute that expressly provided such a right. If
the majority means this common understanding somehow reflected a common-law right to
the surplus, I do not see how. It is just as possible that the statutory scheme provided for a
right in the surplus because the Legislature did not believe the common law recognized
such a right. Speculations on what the Legislature thought it was doing are thus unfruitful
and far afield from establishing a common-law right to the proceeds. In sum, it is far from
clear what implications the former existence of a statutory right to surplus proceeds has in
determining the application of the constitutional right in this case.
And Dean v Dep’t of Natural Resources, 399 Mich 84; 247 NW2d 876 (1976), can
hardly be read as recognizing a longstanding vested property right in the surplus. That case
considered an unjust-enrichment claim. The key determination in that cause of action is
whether retention of the benefit is inequitable, not which party has the property right.43 In
property owner an interest in the surplus proceeds and the government does not honor that
statutory interest.”).
42
Ante at 30.
43
See also Tkachik v Mandeville, 487 Mich 38, 47-48; 790 NW2d 260 (2010) (“Unjust
enrichment is defined as the unjust retention of ‘ “money or benefits which in justice and
18
other words, Dean involved an equitable decision based on the specific facts of the case.
Those facts, which involved “the alleged good-faith attempt at redemption, the running of
the redemption period after this attempt with plaintiff under the impression that she had in
fact redeemed her home, the loss of her home, and the sale of the property by the State for
a profit of close to $10,000,” are very different than those here.44 Dean does not indicate
that all former property owners have a property right to the surplus as a matter of course.45
B. EQUITY
In contrast to the majority’s approach, I would turn to the law of property and the
development of property interests in real estate to determine the rights at issue. The history
of equity in real estate is particularly illuminating because this property right formed in
response to foreclosure practices that raised concerns like those in the present case. Until
mortgages came into widespread use, creditors generally obtained a “gage of land” as
security in the debtor’s land, but the creditor could not recover possession of the land from
equity belong to another.” ’ ”), quoting McCreary v Shields, 333 Mich 290, 294; 52 NW2d
853 (1952) (citation omitted).
44
Dean v Dep’t of Natural Resources, 399 Mich 84, 94-95; 247 NW2d 876 (1976).
45
The majority also cites the brief discussion on surplus proceeds in Cooley, Law of
Taxation (3d ed), p 952. See ante at 29. But Cooley never stated the right to surplus was
of common-law origin. Instead, the treatise explained that “[v]arious methods are adopted
in different states to save, if possible, something to the owner when his land is sold.”
Cooley, Law of Taxation, p 952 (emphasis added). As the majority notes, Cooley found
support in Lawton, 110 US 146, but that is another case dealing with a statutory scheme
rather than the common law. See ante at 29 n 86.
19
the debtor.46 That defect, from the creditor’s perspective, likely led to the creation of the
predominant form of common-law mortgage, in which the mortgagor conveyed the land,
usually in fee simple, to the mortgagee on the condition subsequent that it would be
reconveyed to the mortgagor when the debt was repaid at the appointed time.47
The harshness of this procedure was evident to many at the time and is similar to
harshness involved in the present case, namely that it automatically led to the full loss of
46
Sutherland, The Assize of Novel Disseisin (Oxford: Clarendon Press, 1973), pp 12, 138;
see also Hazeltine, General Preface, in Turner, The Equity of Redemption, pp xxiv-xxx
(describing the gage as a conveyance on condition precedent); 3 Holdsworth, A History of
English Law (3d ed), pp 128-129 (calling the interest a mortgage but differentiating it from
later practices and explaining that the creditor could not dispossess the debtor if the latter
had possession).
47
See An Introduction to English Legal History, pp 311-312 (“[T]he mortgagor conveyed
the fee to the mortgagee forthwith, on condition that he might re-enter (and regain the fee)
if he paid by a certain date. . . . [This] gave the mortgagee a fee simple defeasible by
condition subsequent (that is, payment).”); Simpson, An Introduction to the History of the
Land Law (London: Oxford University Press, 1961), p 225 (“[T]he mortgagor conveyed
his lands outright in fee simple to the mortgagee, with a covenant for re-conveyance if the
debt was repaid on time; this is the classical common law mortgage . . . .”); 3 Holdsworth,
p 129 (“It was probably due chiefly to the latter cause [i.e., the creditor’s inability to recover
the land from a debtor in possession] that the peculiar interest of the
mortgagee . . . disappeared. He ceased to take a peculiar interest as mortgagee, and took
instead some one of the recognized estates or interests in the land—a fee simple, a life
estate, or a term. . . . The debtor might convey the land to the creditor in fee, with a proviso
that if the debt was paid by a fixed date the land should be reconveyed[.]”); Turner, The
English Mortgage of Land as a Security, 20 Va L Rev 729, 729 (1934) (“The English
mortgage has developed from a form of conveyance in use in the 16th century comprising
an absolute conveyance to the lender with a proviso that, on the borrower repaying the
principal with interest and costs by a fixed day, the lender would reconvey the property to
him.”); Lloyd, Mortgages—The Genesis of the Lien Theory, 32 Yale L J 233, 234 (1923)
(“If the debt was not paid on the day named, the estate of the creditor became absolute.
After default no right of redemption was admitted.”).
20
the mortgagor’s interest in the property no matter how much debt was owed—no surplus
was owed or paid to the mortgagor.48 Equity courts addressed these concerns—in part
48
See Restatement Property, 3d, Mortgages, § 3.1, comment a (“The consequences of
payment default were especially harsh on the mortgagor. If for any reason the payment
was not made on law day, the borrower forfeited all interest in [the property].”); 5 Tiffany,
Real Property (3d ed, November 2019 update), § 1518 (noting that equity intervened out
of justice because “no foreclosure was necessary [under the common-law mortgage], since
the mere breach of the condition vested an absolute estate in the mortgagee”); An
Introduction to English Legal History, p 313 (explaining that equity courts began granting
relief in this situation because “[t]he moneylender was morally entitled only to the debt,
and perhaps some reasonable profit, but ought not to profit unconscionably from a penal
arrangement”); An Introduction to the History of the Land Law, pp 226-227 (“The common
law courts construed mortgage transactions strictly and unsympathetically. If the mortgage
provided that the mortgagor was to lose his land through defaulting in payment upon a
fixed day then that was that; it mattered nothing that he defaulted by a single day, or that
the property was worth infinitely more than the debt.”); 5 Holdsworth, A History of English
Law (1924), pp 330-331 (noting that equity granted relief because of the penal character of
the forfeiture); Sugarman & Warrington, Land Law, Citizenship, and the Invention of
“Englishness”: The Strange World of the Equity of Redemption, in Early Modern
Conceptions of Property (Brewer & Staves eds, 1995), p 113 (“A single day’s delay in
tendering repayment could result in the borrower losing the entire property to the lender,
even though the amount of the loan might be far less than the value of the land.”); Burkhart,
Fixing Foreclosure, 36 Yale L & Pol’y Rev 315, 320 (2018) (noting that this “process,” as
incorporated in the American colonies, “often gave lenders an especially large windfall
because land values were increasing at a greater rate than had previously occurred
anywhere”); Weinberger, Tools of Ignorance: An Appraisal of Deficiency Judgments, 72
Wash & Lee L Rev 829, 849-850 (2015) (noting that the borrower was not entitled to any
surplus and lost title and all interest in the property); Mattingly, The Shift From Power to
Process: A Functional Approach to Foreclosure Law, 80 Marq L Rev 77, 90 (1996) (“The
pendulum of power swung towards the borrower with the intervention of the Equity Courts,
which viewed the borrower’s forfeiture of any interest in the property as unduly harsh.”);
Wechsler, Through the Looking Glass: Foreclosure by Sale as De Facto Strict
Foreclosure—An Empirical Study of Mortgage Foreclosure and Subsequent Resale, 70
Cornell L Rev 850, 856 (1985) (“Equity soon recognized the injustice of the forfeiture
inherent in this situation.”).
The same points are true regarding strict foreclosures, which developed along with
the changes in mortgage law described above and, as in the present case, transfers title by
21
because the transaction functioned as an extension of a security interest in the property
rather than a true transfer of the fee—by creating the “equity of redemption,” under which
the mortgagee could redeem the property by paying off the debt after defaulting.49 The
court decree rather than automatically by extinguishment of the condition subsequent or by
foreclosure sale. In strict foreclosure, as under the common-law mortgage or the statutes
at issue here, the homeowner loses his or her equity in the property. Ghent, How Do Case
Law and Statute Differ? Lessons from the Evolution of Mortgage Law, 57 J L & Econ
1085, 1094 (2014) (“Strict foreclosure involved the lender going to an equity court and
asking it to terminate the borrower’s equity of redemption; foreclosure by sale of the
property was not permitted, and any equity the borrower had in the property would be lost
in the foreclosure.”); Tracht, Renegotiation and Secured Credit: Explaining the Equity of
Redemption, 52 Vand L Rev 599, 607 (1999) (“Under strict foreclosure (where foreclosure
vests title in the lender), there will be a forfeiture by the borrower and a windfall to the
lender if the property is worth more than the debt.”); Brabner-Smith, Economic Aspects of
the Deficiency Judgment, 20 Va L Rev 719, 720-721 n 2 (1934) (Strict foreclosure “is a
proceeding in which the decree finds that the mortgagee debt is due and has not been paid,
that title to the property therefore is absolute in the mortgagee, and that the mortgagor is
entirely divested of whatever interest he had in the premises at the time of the execution of
the mortgage. There is no sale and no resulting deficiency or surplus.”).
49
See 1 Coote, A Treatise on the Law of Mortgages (2d ed), pp 19-20 (“[Equity courts]
declared it unreasonable that [the mortgagee] should retain for his own benefit, what was
intended as a mere pledge; and they adjudged that the breach of the condition was in the
nature of a penalty, which ought to be relieved against, and that the mortgagor had an equity
to redeem on payment of principal, interest, and costs . . . .”); Sugarman & Warrington,
Equity of Redemption, p 113 (“Dating from at least the turn of the seventeenth century, the
courts of equity determined that the strict date for repayment was somewhat irrelevant.
Accordingly, the lender’s claim to the property became subject ‘to a right called the equity
of redemption, which arose from the court’s consideration that the real object of the
transaction was the creation of a security for the debt. This entitled the [borrower] to
redeem (or recover the property), even though he had failed to repay by the appointed
time.’ ”) (citation omitted; brackets in original); Waddilove, The “Mendacious” Common-
Law Mortgage, 107 Ky L J 425, 457 (2019) (“The equity of redemption . . . looked to what
it deemed to be underlying substance of the mortgage agreement and gave effect to that
over legal interpretation.”).
The mortgagor’s specific right to redeem property after foreclosure has been
codified in Michigan, and the foreclosure sale purchaser’s deed does not vest until the
22
“equity of redemption” was considered—including by this Court—a property right and
came to represent the homeowner’s interest in the property, known as “equity.”50
redemption period ends. See MCL 600.3240(1) and (2); MCL 600.3236. See also People
v March, 499 Mich 389, 416-421; 886 NW2d 396 (2016).
50
As described in the Restatement Property, 3d, Mortgages, § 3.1, comment a, the “concept
[of equitable redemption] evolved from simply a late payment rule to connote, in addition,
the mortgagor’s ownership interest in the land prior to the satisfaction of the mortgage.
The term ‘equity’ became and is today the pervasively used term to describe this interest.”
See also Case, 174 Mich at 681 (“As a general proposition, the equity of redemption
appertains to and goes with the title to the real estate, and is in law the property of the
owner of the fee. It is an interest in land . . . .”); An Introduction to English Legal History,
p 314 (“The equity of redemption had thus become a right inherent in the land . . . . [T]he
great landowner of the seventeenth, eighteenth and nineteenth centuries was commonly in
possession of his land (or some of it) only as the owner of an equity of redemption. The
equity could be bought and sold, settled in tail, and even mortgaged. . . . [I]t had become
an equitable estate[.]”); An Introduction to the History of the Land Law, pp 227-228 (“[T]he
equity of redemption [was] a peculiar form of property which could be dealt with by the
debtor like other forms of equitable property. . . . In the eighteenth century the final
touches were put upon the conception; the equity of redemption is spoken of as an estate
in the land, and the mortgagor is regarded as the owner in equity of the land.”); Turner, The
Equity of Redemption, pp 66-67 (“ ‘An equity of redemption is considered as an estate in
land[.] . . . The person having the equity of redemption is considered as the owner of the
land . . . . An equity of redemption, . . . unforeclosed, is the ownership of the land, or the
real estate in equity[.]’ ”) (citation omitted); 6 Holdsworth, A History of English Law
(1924), p 663 (“The result had been to make the mortgagor’s equity to redeem a right of
property. He had an equitable estate in the land; and, subject to the legal rights of the
mortgagee, was, in equity, regarded as its owner.”); 5 Holdsworth, p 332 (“[I]t became
clear that this equitable right to redeem was in substance an equitable estate in the land
which could be conveyed or settled like any other estate.”); Waddilove, Why the Equity of
Redemption?, in Land and Credit: Mortgages in the Medieval and Early Modern European
Countryside (Briggs & Zuiderduijn eds, 2018), § 5.1, pp 1-2 (“According to the equity of
redemption, a mortgagor remained the true owner of mortgaged property throughout a
mortgage despite lacking legal title; a mortgagee’s interest was mere security for a debt;
and a mortgagor was thus entitled to redeem the property at any time . . . until his or her
equity of redemption was declared foreclosed by a court.”); Sugarman & Warrington,
Equity of Redemption, pp 115-116 (noting the “shift of the equity of redemption from a
‘thing’ to an ‘estate’ in equity, that is, in conceptualizing the equity of redemption as a kind
23
Thereafter, the equity courts “developed the decree of foreclosure,” which a
mortgagee could seek in order to end the mortgagor’s period of equitable redemption; when
foreclosure by sale was permitted, “the mortgagee [took] the money owed to her/him, the
remainder going to the mortgagor.”51 Thus the creation of “equity” led to the homeowner’s
of real property rather than as a kind of chattel property,” and noting further that it was
“characterized . . . as a title in equity” and “was proprietorial”); Mortgages, 32 Yale L J at
236 (noting that chancery “treats the equity of redemption not as a mere right but as an
estate which the mortgagor may deal with in any way consistent with the rights of the
mortgagee in his security”).
Although the terms “equity” and “equity of redemption” now are “interchangeable,”
they were “not equivalent” at common law because the equity of redemption originally
could not be sold. Sabella, When Enough is Too Much: Overcollateralization as a
Fraudulent Conveyance, 9 Cardozo L Rev 773, 780 n 32 (1987). Once it could be
alienated, “the concept changed in meaning to one much closer to today’s notion of
‘equity.’ ” Id. Still, a distinction exists. In discussing the mortgagor’s interest in the
property, one treatise states, “[T]he term ‘equity of redemption’ which had previously and
appropriately been applied to the mortgagor’s right to get back his property after default
was applied somewhat inappropriately to this entirely distinct equitable ownership before
default.” 1 Nelson, Real Estate Finance Law (6th ed), § 1:3. Compare Black’s Law
Dictionary (11th ed) (defining “equity” as “[a]n ownership interest in property”), with id.
(defining “equity of redemption” as “[t]he right of a mortgagor in default to recover
property before a foreclosure sale by paying the principal, interest, and other costs that are
due”). Thus, perhaps it is more accurate to say a redemption right functions to protect a
homeowner’s equity interest. See, e.g., Note, The Big Chill: Applicability of Section
548(a)(2) of the Bankruptcy Code to Noncollusive Foreclosure Sales, 53 Fordham L Rev
813, 817 n 22, 834 (1985) (observing that the equity interest was originally called the
equity of redemption but noting that the “debtor can protect his equity interest in the
property by paying the sale price plus costs,” i.e., exercise the redemption right, and that
the equity of redemption “ordinarily would serve to preserve his equity interest”).
51
Sugarman & Warrington, Equity of Redemption, pp 113-114; see also 2 Dunaway, Law
of Distressed Real Estate (December 2019 update), § 26:29 (noting that any surplus over
the foreclosing mortgagee’s debt is paid to other liens and “[a]ny balance is distributed to
the holder of the equity of redemption”); 5 Holdsworth, p 331 (“About the same period
therefore we get the foreclosure decree . . . .”); Fixing Foreclosure, 36 Yale L & Pol’y Rev
at 319-320 (discussing the transition from strict foreclosure to foreclosure by public
24
right to surplus proceeds from foreclosure sales. Indeed, as stated in Restatement Property,
3d, Mortgages, § 7.4 , comment a, “[W]hen a surplus occurs, it represents what remains of
the equity of redemption and is, as such, a substitute res. The surplus stands in the place
of the foreclosed real estate . . . .”52
auction); How Do Case Law and Statute Differ, 57 J L & Econ at 1094-1095 (discussing
the transition from strict foreclosure to foreclosure by sale, which protected the debtor’s
equity); Through the Looking Glass, 70 Cornell L Rev at 859 (“Foreclosure by sale was
viewed as a logical way of protecting the debtor’s equity in the property . . . .”); The
English Mortgage, p 730 (“Almost as soon as the equity of redemption became established
the mortgagee was given an equitable right of foreclosure[.]”).
52
As the Missouri Court of Appeals stated:
[A] foreclosure sale surplus “retains the character of real estate for the
purpose of determining who is entitled to receive it, and goes to the person
to whom the real estate would have gone but for the conversion.” Roy v. Roy,
233 Ala. 440, 172 So. 253, 254 (1937). Such surplus represents the owner’s
equity in the real estate. Dodson v. Farm & Home Sav. Ass’n, 208 Ga.App.
568, 430 S.E.2d 880, 881 (1993). It stands in place of the foreclosed
property, subject to the same liens and interests that were attached to the land.
Timm v. Dewsnup, 86 P.3d 699, 703 (Utah 2003). Surplus “usually arises
because more land is sold . . . than is necessary to satisfy the mortgage
debt. . . . [T]he money stands for the land and the rights therein are
determined as though the court were dealing with the land itself.” Morris v.
Glaser, 106 N.J. Eq. 585, 151 A. 766, 771 (N.J.Ch.1930) aff’d mem., 110
N.J. Eq. 661, 160 A. 578 (N.J.Err. & App.1932). See also First Fed. Sav. &
Loan Ass’n v. Brown, 78 A.D.2d 119, 434 N.Y.S.2d 306, 310 (1980)
(foreclosure surplus “stands in place of the land for all purposes of
distribution among persons having vested interests or liens upon the land”);
East Atlanta Bank v. Limbert, 191 Ga. 486, 12 S.E.2d 865, 867 (1941)
(quoting Morris)[.] [Grand Teton Mountain Investments, LLC v Beach
Props, LLC, 385 SW3d 499, 502-503 (Mo App, 2012).]
See also Nelson, § 7:32 (“The major underlying principle is that the surplus represents the
remnant of the equity of redemption and the security that the foreclosure eliminated.
Consequently, the surplus stands in the place of the foreclosed real estate . . . .”); Tiffany,
§ 1529 (“Any surplus proceeds of sale remaining after the payment of the debt secured by
25
Given this history and caselaw, I would characterize the property right at issue here
as the taxpayer’s equity in the property. This conclusion best fits the development of
ownership rights in property laden with debts or liens. The majority’s belief that a property
right in the surplus proceeds exists apart from the interest in the equity finds no support in
the historical record. Indeed, equity formed in response to practices like those at issue here,
albeit in the private realm, and gives rise to any right in surplus proceeds. It thus constitutes
a disposable property right to the value of land above any liens or other interests in the
property.53 And it is a vested right—at least with regard to an individual who owns
the mortgage are paid to the mortgagor or, if there are subsequent purchasers or
incumbrancers, such surplus proceeds belong to them, in the order of priority in which their
rights against the land could have been asserted. In other words, the proceeds of sale are
substituted for the land itself, and become subject to outstanding liens and claims to the
same extent and in the same order as the land itself was subject thereto.”) (citations
omitted); Nelson & Whitman, Reforming Foreclosure: The Uniform Nonjudicial
Foreclosure Act, 53 Duke L J 1399, 1483 (2004) (“Sometimes a foreclosure sale yields a
surplus amount in excess of what is needed to satisfy the mortgage obligation and the
expenses of sale. In essence, when a surplus results, it represents what remains of the
debtor’s ownership or ‘equity of redemption’ and is conceptually a substitute res.”).
It is true that some courts have found that the surplus proceeds are the property
owner’s general funds rather than the real estate. See In re Schiphof, 192 NC App 696,
702; 666 SE2d 497 (2008) (“This Court stated that, ‘the surplus funds . . . did not constitute
real estate. The surplus funds represented the general funds of the plaintiffs, the owners of
the premises and the grantors in the deed of trust which was foreclosed.’ ”), quoting Smith
v Clerk of Superior Court, 5 NC App 67, 73-74; 168 SE2d 1 (1969). This does not,
however, have any bearing on a homeowner’s entitlement to the proceeds by virtue of his
or her equity in the home. As stated, “ ‘[E]quity’ is defined as ‘the value of a
property * * * above the total of the liens.’ ” Crane, 331 US at 7. Whether that value,
realized in the surplus proceeds after a tax foreclosure, is thought of as representing the
real estate or general funds, it is still a result of the right to equity.
53
Black’s Law Dictionary (11th ed) defines “equity” as “[a]n ownership interest in
property, esp. in a business.” See also Crane, 331 US at 7 (“ ‘[E]quity’ is defined as ‘the
26
property with equity value—because it represents an estate in the land providing immediate
and future benefit.54 It thus fits the general definition of “property” at the time our
Constitution was ratified.55 If more proof were needed that “equity” is routinely considered
the relevant property right in the nondebt value of a house, one need look no further than
divorce proceedings, in which home equity is part of the property split between the
parties.56
Perhaps for these reasons, numerous courts, parties, and commentators who have
addressed similar cases in the tax-foreclosure context discuss the right to a surplus as
related to the homeowner’s equity—and none that I have found (nor any the majority cites)
holds that the right to surplus proceeds is a freestanding property interest independent of
the underlying equity interest.57 The right to equity is, in fact, the very right that plaintiffs
value of a property * * * above the total of the liens.’ ”). Of course, there might be other
liens on the property such that a landowner’s equity is less than the property value minus
what was owed in taxes. It is also true that equity may fluctuate as market values change.
But I see no reason why a fluctuation in equity would affect whether the right is vested.
Though a property owner is not guaranteed that real property will sell for a particular
amount, the owner’s interest still comes from his title and is more than a “mere
expectation.” In re Certified Question, 447 Mich at 788.
54
See In re Certified Question, 447 Mich at 788 (“To constitute a vested right, the interest
must be something more than such a mere expectation as may be based upon an anticipated
continuance of the present general laws; it must have become a title, legal or equitable, to
the present or future enjoyment of property . . . .”) (quotation marks and citation omitted).
55
See note 15 of this opinion.
56
See, e.g., Rogner v Rogner, 179 Mich App 326; 445 NW2d 232 (1989) (reviewing an
award of equity in the marital home).
57
See Dorce v City of New York, ___ F Supp 3d ___ (SD NY, 2020) (Docket No. 19-cv-
2216) (discussing the plaintiffs’ loss of “equity” in their properties in the context of a
27
takings challenge); Polonsky v Bedford, ___ NH ___; ___ A3d ___ (2020) (Docket No.
2019-0339); slip op at 2, 5 (referring to the excess “equity” owed to the taxpayer and
holding that when a tax deed is issued, a taking occurs “requiring that [the government]
provide just compensation to the former owner when, as here, the equity in the property
exceeds the amount owed”); Automatic Art, LLC v Maricopa Co, unpublished opinion of
the United States District Court for the District of Arizona, issued March 18, 2010 (Case
No. CV 08-1484-PHX-SRB), pp 2, 3, 6 (discussing the statutes and constitutional
challenges to them as affecting the property owner’s equity in the real property); Thomas
Tool Servs, Inc v Croydon, 145 NH 218, 220; 761 A2d 439 (2000) (“Assuming that the
property is worth substantially more than the $370.26 that the defendant paid for it, the
defendant has realized an enormous surplus.”); Syntax, Inc v Hall, 899 SW2d 189, 190 n 1
(Tex, 1995) (“The claim for excess proceeds concedes the loss of ownership and simply
seeks a return of the excess value that was received at the sale.”); First NH Bank v
Windham, 138 NH 319, 327; 639 A2d 1089 (1994) (holding that the state constitution
required notice of the tax deeding because, in part, the “tax deeding irreversibly deprives
the owner of any equity in the property,” given that no surplus proceeds were then
available); Anchorage v Thomas, 624 P2d 271, 273 (Alas, 1981) (finding a statutory right
to surplus proceeds and noting “the basic injustice inherent in requiring delinquent
taxpayers to forfeit the total value of their property far in excess of taxes due”); Auburn v
Mandarelli, 320 A2d 22, 32 (Me, 1974) (“In the absence of contrary provision by statute
or constitution, a municipality’s title to property acquired under the tax-lien-mortgage-
foreclosure statute is absolute, and the city or town has no power to part with, nor duty to
account for, any surplus value on any” equitable theory.); Bogie v Barnet, 129 Vt 46, 48,
54; 270 A2d 898 (1970) (finding a taking of the property to the extent of the difference
between the tax sale bid “and the demonstrated far greater value of the property” evidenced
by a later sale); Balthazar v Mari Ltd, 301 F Supp 103, 106 (ND Ill, 1969) (“[T]he Illinois
tax delinquency statutes allow all real estate owners to recover the surplus value of their
land.”), aff’d 396 US 114 (1969); Note, Someone to Lien On: Privatization of Delinquent
Property Tax Liens and Tax Sale Surplus in Massachusetts, 61 BC L Rev 667, 670, 691-
694 (2020) (noting that “[e]normously inequitable outcomes occur as a result [of
Massachusetts’s similar tax-foreclosure law] because property owners can lose all equity
in their home” and describing caselaw as addressing whether the government must return
“surplus equity” left after the foreclosure sale); Note, State Theft in Real Property Tax
Foreclosure Procedures, 54 Real Prop Tr & Est L J 93, 105 (2019) (noting that a surplus-
retention system like ours “destroys property owners’ home equity and leaves them with
nothing”); Bartell, Tax Foreclosures as Fraudulent Transfers—Are Auctions Really
Necessary?, 93 Am Bankr L J 681, 706 (2019) (arguing that owners concerned about the
price obtainable at a tax sale should preemptively “conduct a private sale that may generate
enough proceeds to pay the taxes in full and provide the owner any extant equity”);
Clifford, Massachusetts Has a Problem: The Unconstitutionality of the Tax Deed, 13 U
28
Mass L Rev 274, 286-287 (2018) (discussing caselaw that addresses the proceeds as
“surplus equity”) (citation and quotation marks omitted); Kelly, Jr, Bringing Clarity to Title
Clearing: Tax Foreclosure and Due Process in the Internet Age, 77 U Cin L Rev 63, 72
(2008) (“The vast majority of jurisdictions rely on a combined sale and foreclosure process
to make sure both that the taxes due are paid in full and that any surplus value in the
property is made available to the stakeholders whose interests have been liquidated.”)
(emphasis added).
Courts and parties in Takings Clause challenges to Michigan’s foreclosure system
have focused on the homeowner’s deprivation of equity. See Rafaeli, LLC v Wayne Co,
unpublished opinion of the United States District Court for the Eastern District of
Michigan, issued June 4, 2015 (Case No. 14-13958), p 8 (“Plaintiffs also claim that the
excess equity in their property was taken without just compensation, in violation of the
Takings Clause of the Fifth Amendment to the United States Constitution.”); Petition for
Writ of Certiorari at 14, Wayside Church v Van Buren Co, 138 S Ct 380 (2017) (No. 17-
88) (“The property interest at issue here is privately generated and owned equity.”); cf.
Freed v Thomas, unpublished opinion of the United States District Court for the Eastern
District of Michigan, issued November 7, 2018 (Case No. 17-CV-13519), p 2 (“The heart
of plaintiff’s complaint is that this statutory scheme is unconstitutional because it provides
no mechanism for the return to the delinquent taxpayer of the ‘surplus equity’ (i.e., the
difference between the equity and the tax bill) or, in the event that the property is sold for
less than fair market value, for the return to the delinquent taxpayer of the difference
between the sale proceeds and the tax bill.”).
A few cases addressing whether a statute provides for surplus to the homeowner do
not mention “equity,” but these cases are not deciding whether a nonstatutory basis exists
for the property right in surplus proceeds; thus, they do not contradict the regnant
interpretation of “surplus” as stemming from equity. See, e.g., Lake Co Auditor v Burks,
802 NE2d 896 (Ind, 2004) (finding statutory avenues for recovering surplus); Kelly v
Boston, 348 Mass 385; 204 NE2d 123 (1965) (finding no statutory right to surplus). In
addition, a handful of opinions rejecting constitutional challenges to tax-foreclosure
statutes like the one here have not mentioned “equity,” but they did not examine in any
detail the potential sources of the property right at issue. See Miner v Clinton Co, 541 F3d
464, 474-475 (CA 2, 2008) (rejecting a due-process claim because the notices were
adequate and an equal-protection claim because no discrimination occurred); Reinmiller v
Marion Co, unpublished opinion of the United States District Court for the District of
Oregon, issued October 16, 2006 (Case No. CV 05-1926-PK) (rejecting a takings claim
and stating that Oregon law did not provide any property right entitling the homeowner to
the proceeds, but only discussing the relevant tax-foreclosure statutes rather than common
law). In a few cases with more detailed constitutional analyses, surplus or excess proceeds
29
rely on here to support their claim under the Takings Clause.58 One federal district court
provided an insightful discussion on the topic, first summing up the United States Supreme
Court’s caselaw—the same cases the majority here discusses—as “mak[ing] clear that a
Takings Clause violation regarding the retention of equity will not arise when a tax-sale
statute provides an avenue for recovery of the surplus equity.”59 The question in that case
was, as here, “[w]hat if the tax-sale statute does not provide a right to the surplus” or an
are mentioned without regard to the homeowner’s equity; nonetheless, the cases do not
hold that these proceeds are property without regard to equity. See Sheehan v Suffolk Co,
67 NY2d 52, 59, 60; 490 NE2d 523 (1986) (“There is no constitutional prohibition against
such a full forfeiture” of the “surplus.”); Ritter v Ross, 207 Wis 2d 476, 484; 558 NW2d
909 (App, 1996) (“We thus consider whether the Ritters had a property interest in the
excess proceeds of the foreclosure sale . . . .”); Oosterwyk v Milwaukee Co, 31 Wis 2d 513,
517; 143 NW2d 497 (1966) (rejecting an unjust-enrichment claim for surplus proceeds).
58
Plaintiffs’ brief states, “The private property interest at issue in this case is privately
generated and owned equity.” Plaintiffs’ Brief on Appeal (February 13, 2019) at 11. The
majority dismisses this argument, saying that plaintiffs “conflate equity with surplus
proceeds, suggesting that they are one in the same.” Further, the majority criticizes my
analysis as stating both that the equity of redemption represents an owner’s equity and also
acknowledging that the two are distinct. I see nothing inconsistent with noting the fact
that, on one hand, the “equity of redemption” came to represent the homeowner’s interest
in the property, i.e., the equity, but, on the other hand, that there were and are certain
distinctions between the two concepts, such as alienability, see note 50 of this opinion.
The majority goes on to say that it is unnecessary to discuss whether a property right
to equity exists here because the question is whether the former property owner may collect
surplus proceeds. However, it is necessary to begin the analysis with a vested right in the
equity because, as explained above, there is no such thing as a vested right in surplus
proceeds independent of the right to equity. Additionally, for the reasons we discuss below,
even taken on its own terms, the right to surplus proceeds set forth in the majority’s opinion
is evanescent given that it can be so easily taken away.
59
Coleman, 70 F Supp 3d at 80 (emphasis added).
30
“avenue for recover[ing]” it?60 The court continued, “A property interest in equity could
conceivably be created by some other legal source,” including caselaw—although not the
Takings Clause itself.61 Throughout the opinion, the property right was characterized as
“surplus equity.”62
In short, the relevant property right in this case is the taxpayers’ equity interest, not
some contingent right to proceeds if there is a foreclosure sale. Equity has better historical
grounding than any novel and freestanding right to proceeds—indeed, it is the reason
entitlement to proceeds may exist—and is a common enough concept that I cannot
comprehend the majority’s efforts to avoid it.
C. CONSEQUENCES
My difference of opinion with the majority on this point is no small matter.
Characterizing the property right at issue as equity has very real consequences here. For
one thing, the GPTA does not clearly abrogate any of a person’s property rights in their
real estate or in their equity generally. Instead, the GPTA simply allocates the surplus
proceeds after the tax-foreclosure sale. Accordingly, it cannot be said to have abrogated
the common-law right to equity.63
60
Id.
61
Id. at 80-81.
62
See, e.g., id.
63
Defendants have not raised the argument that the Legislature abrogated the common-law
right to equity. See Mich Gun Owners, Inc v Ann Arbor Pub Sch, 502 Mich 695, 709-710;
918 NW2d 756 (2018) (noting that parties raise the arguments in our adversary system).
Under the regnant interpretive principle noted above, “ ‘legislative amendment of the
31
In addition, the statute contemplates—and indeed, expressly provides for—a
number of scenarios in which there will be no surplus proceeds. For our purposes, the first
key point in the process occurs when the court enters the foreclosure judgment. This must
occur before March 30, and the judgment must become effective on March 31.64 When it
becomes effective, the taxpayer loses his or her redemption rights and absolute title vests
in the government.65 The following day, April 1, the foreclosing governmental unit obtains
the right to possession.66
Afterward, the state has until the first Tuesday in July to buy the property from the
foreclosing governmental unit for the greater of either the minimum bid—which equals the
common law is not lightly presumed,’ ” and the “Legislature ‘should speak in no uncertain
terms’ when it exercises its authority to modify the common law.” Dawe v Dr Reuven Bar-
Levav & Assoc, PC, 485 Mich 20, 28; 780 NW2d 272 (2010) (citation omitted). Like the
majority’s view that the Legislature cannot abrogate common-law property rights extant
before 1963, this principle raises separation-of-powers concerns as well. See A Matter of
Interpretation, pp 27-28. But it is longstanding, and no party has challenged it here. Under
this canon, it is reasonably apparent that the Legislature left untouched the taxpayer’s
common-law right to equity. Nothing in the statute clearly displaces that right. The same
could not be said, however, for the majority’s separate right to surplus proceeds, which the
Legislature very clearly attempted to extinguish in the GPTA. In any event, the parties’
failure to address this argument means that it should not be resolved in this case.
64
MCL 211.78k(5). These dates are for uncontested cases. The judgment in contested
cases becomes effective 10 days after the hearing, and 21 days after entry of the judgment
the taxpayer loses his or her redemption rights and absolute title vests in the government.
MCL 211.78k(5) and(6). In contested cases, the government obtains the right to possession
22 days after judgment enters. MCL 211.78g(1).
65
MCL 211.78k(5) and(6).
66
MCL 211.78g(1).
32
debt and various additional costs67—or the “fair market value.”68 This protects the
foreclosing unit, which would be certain to recoup the debt and costs if the state exercises
its right to purchase. And under this option the property might sell for a price reflecting
the debt and the equity. But if the state declines, the next series of options ensures that no
surplus will occur. Next, the “city, village, or township” where the property is located can
purchase the property “for a public purpose” at the minimum bid, meaning that no surplus
would result.69 If they pass on the purchase, then the county has the chance to buy it
(without being required to have a “public purpose” for doing so), again for the minimum
bid.70 If any of these last few governmental units—city, village, township, or county—
buys the property and subsequently sells it, any excess proceeds (less additional costs) are
distributed in various funds.71
If the property goes unpurchased after all this, the foreclosing unit holds one or more
auctions from July to November.72 Although the statute prescribes notice requirements, it
allows the foreclosing unit to “adopt procedures governing the conduct of the sale . . . .”73
67
MCL 211.78m(16)(a).
68
MCL 211.78m(1).
69
Id.
70
Id.
71
Id.
72
MCL 211.78m(2).
73
Id.
33
To sell the property, the foreclosing unit must receive at least the “minimum bid.”74 If the
property goes unpurchased after an auction, the city, village, township, or county can buy
it for the minimum bid without needing a public purpose to do so.75 At the final auction,
there is no minimum bid.76 Property that is not purchased is transferred to the city, village,
or township where it is located unless the unit objects, in which case the property goes to
the foreclosing unit.77
In light of this statutory framework, the majority’s focus on the surplus proceeds as
the relevant property, and thus the postsale retention as the taking, produces puzzling
results. Because “a property owner has a claim for a violation of the Takings Clause as
soon as a government takes his property for public use without paying for it,”78 under the
majority’s theory, no constitutional issues occur until the surplus proceeds are retained. It
does not matter that once title has vested in the government without chance of redemption,
the taxpayer’s property—his or her equity—has been taken. Consequently, the majority’s
view of the case would seemingly be that if the property does not sell at auction and is
simply transferred to a governmental unit, the taxpayer is out of luck: no proceeds, let alone
74
Id.
75
MCL 211.78m(3).
76
MCL 211.78m(5).
77
MCL 211.78m(6) and(7).
78
Knick v Scott Twp, 588 US ___, ___; 139 S Ct 2162, 2170; 204 L Ed 2d 558 (2019).
34
a surplus, have been produced or retained by the government.79 Perhaps worse still,
governmental units have numerous opportunities to purchase the property for the minimum
bid, i.e., for the debt (and costs), and thus obtain it for an amount that will usually be much
less than fair market value. Yet in those cases, too, because no surplus would result, the
majority leaves the taxpayer without a remedy.
The better view, under the law described above, is that the property taken is the
taxpayer’s equity and that this occurs when title vests in the government with no
opportunity for redemption. In that circumstance, if the government retains the property,
the taxpayer would be able to seek compensation for the deprivation of his or her equity.80
If the property is sold, any surplus represents the remaining equity in the property and is
owed as the just compensation due the taxpayer.81 Returning the surplus would usually
satisfy the Takings Clause by “leav[ing the property owner] ‘in as good as position as if
his lands had not been taken,’ ”82 i.e., by leaving the property owner with the representation
of what was taken.
79
Of course, the majority might counter that this is a question for another day because the
properties here were sold. But it is hard to imagine what the majority would do in such a
case besides either denying the takings claim under the theory it adopts here or
reconsidering whether it is based on the taxpayer’s right to the equity in his or her property.
80
See Polonsky, slip op at 5 (noting that the statutory scheme did not require the
government to sell the foreclosed property but that, in those cases, the government has
conflicts with the Takings Clause by failing to pay over the equity).
81
See note 52 of this opinion and accompanying text.
82
Dep’t of Transp v Tomkins, 481 Mich 184, 198; 749 NW2d 716 (2008) (citation omitted).
35
To elaborate on this last point, awarding the surplus as “just compensation” only
makes sense in light of the underlying principle that the surplus represents the owner’s
equity.83 It is, of course, possible that the surplus might not capture the value of a
taxpayer’s property.84 But the “just compensation” requirement does not require local
governments to impoverish themselves.85 Thus, taxpayers seeking some speculative value
beyond the surplus realized in the tax sale might often lack meritorious claims. It is also
worth noting, in this regard, that the taxpayers would be free to conduct a private sale of
the property during the redemption period prior to title vesting in the government and, by
failing to do so, might be considered to have agreed to the value produced by the tax-
foreclosure sale.86
83
See note 52 of this opinion.
84
See State Theft, 54 Real Prop Tr & Est L J at 126 (noting that limiting the taxpayer to
the surplus might cause him or her to lose some equity but arguing that this result might be
consistent with the “just compensation” requirement).
85
See United States v Commodities Trading Corp, 339 US 121, 123; 70 S Ct 547; 94 L Ed
707 (1950) (“Fair market value has normally been accepted as a just standard. But when
market value has been too difficult to find, or when its application would result in manifest
injustice to owner or public, courts have fashioned and applied other standards. . . . [T]he
dominant consideration always remains the same: What compensation is ‘just’ both to an
owner whose property is taken and to the public that must pay the bill?”) (citation omitted);
In re State Hwy Comm’r, 249 Mich 530, 535; 229 NW 500 (1930) (“Just compensation
should neither enrich the individual at the expense of the public nor the public at the
expense of the individual.”).
86
See Tax Foreclosures, 93 Am Bankr L J at 706-707 (arguing that courts reviewing
whether foreclosure laws protect the debtor’s “equity” should consider that the debtor’s
“right of redemption provides to the owner of the property the opportunity to realize the
full fair market value of the property” less the taxes owed, and the debtor’s failure to avail
36
On the other hand, by limiting the compensation to the surplus (when one exists),
the majority risks depriving taxpayers of “just compensation.” As demonstrated above, the
statute gives governmental units the option to ensure that there will be no surplus. Under
the majority’s regime, a rational governmental actor is incentivized to buy properties that
have a market value above the minimum bid amount that must be paid or to take other steps
to limit or eliminate surpluses. For example, both the Legislature in constructing the
statutory framework and the foreclosing unit in prescribing sale procedures could design
rules that diminish the probability of obtaining fair market value in the tax-foreclosure sale.
Indeed, while it might be true that most sale prices now do not even cover the taxes owed,
the foreclosing unit would have little incentive to conduct a sale that earns anything more
than the delinquent tax sum.87 Consequently, I would not now rule out the possibility that
“just compensation” might require something greater than the surplus in a particular case,
especially in cases in which the government purchased the property for the minimum bid.
But we have no reason to decide that issue in this case because, although plaintiffs
nominally distinguish equity and surplus, they have offered no argument suggesting that
the tax foreclosures here failed to obtain a fair price for their properties.
themselves of this relief constitutes agreement to the “price obtained by the state
foreclosure process”).
87
The majority seems untroubled by the possibility that what it might have taken away
with one hand—i.e., the Legislature’s authority to prospectively abrogate the supposed
common-law right to surplus proceeds—it has given with the other by defining the right so
that the Legislature can shrink or erase those surplus proceeds.
37
III. CONCLUSION
Although I agree with the majority as to the ultimate disposition of this case, I
disagree with its reasoning. I would not define the constitutional term “property” by merely
citing an example of what the ratifiers might have thought would fall within the meaning
of that term. Instead, I would give the word its ordinary meaning at the time the
Constitution was ratified and then apply that meaning to the case at hand. In addition, I
would examine the relevant property right: the taxpayers’ equity in the real property.
Equity falls within the semantic scope of “property” under our Constitution. And the
Legislature did not purport to abrogate the taxpayer’s equity. Therefore, a taking occurred
when title to plaintiffs’ property was vested in the government without any possibility of
redemption. In this case, I agree with the majority that plaintiffs are owed the surplus
proceeds from the tax-foreclosure sales.
David F. Viviano
38
| {
"pile_set_name": "FreeLaw"
} |
108 So.2d 16 (1958)
Tony MONTALBANO et ux., Plaintiffs-Appellants,
v.
Wayne E. HALL et al., Defendants-Appellees.
No. 8948.
Court of Appeal of Louisiana, Second Circuit.
December 19, 1958.
*18 T. C. McLure, Jr., Alexandria, for appellants.
Stafford & Pitts, Alexandria, for appellees.
AYRES, Judge.
This is an action in tort. Plaintiffs, husband and wife, seek to recover damages for personal injuries sustained by the wife, as well as hospital and medical expenses incurred, and for property damages to the family automobile as the result of a motor vehicle collision at the intersection of Chester and Albert Streets in the City of Alexandria. The defendants are Wayne E. Hall, the driver of the alleged offending automobile, his employer and the employer's public liability insurer.
Negligence charged to defendant Hall consists, inter alia, of his failure to maintain a proper lookout to keep his vehicle under control, and to yield or accord the right of way to plaintiff, who had allegedly entered and pre-empted the intersection. Counter charges of negligence against plaintiff, Mrs. Montalbano, allegedly constituting to the sole cause of the accident, or, in the alternative, a contributing cause thereof, are that she was traveling at an excessive rate of speed in violation of ordinances of the City of Alexandria and failed to make proper observation before entering the intersection or to slow down or stop in order to avoid the collision.
The trial court reached the conclusion that Mrs. Montalbano was at fault in not maintaining a proper lookout and, accordingly, rejected plaintiffs' demands. From the judgment thus rendered and signed, plaintiffs now prosecute an appeal to this court.
Presented for determination are questions of fact, concerning which there is little, if any, dispute. These questions pertain to the right of way, the pre-emption of the intersection, and proper observation on the part of the driver of plaintiffs' car. The principal facts existent at the scene of the accident, which occurred about 11:15 o'clock A.M. July 17, 1956, at the intersection of Chester and Albert Streets, may be briefly stated. Both streets are main city thoroughfares and are surfaced with either brick or concrete paving. At the time of the accident the weather was clear and the streets dry. Traffic was normally controlled by electric signal lights, which, however, at the *19 time, were not in operation. No stop signs were erected indicating either street had a superior right of way over the other; nor were any City ordinances introduced making such a designation. The course of Chester Street is generally northwest and southeast. The intersection with Albert Street is at right angles, near the northeast corner of which is a large hedge obscuring the view of motorists on both streets as they approach this intersection from the directions in which Mrs. Montalbano and Hall came.
Mrs. Montalbano testified that as she approached the aforesaid intersection she was traveling at a speed of 25 to 30 miles an hour; that as she neared the intersection she discovered the traffic light was not in operation, whereupon she reduced her speed to approximately 20 miles per hour, looked in both directions on Albert Street and, seeing no approaching traffic, proceeded into the intersection. Upon the rear of her automobile reaching the center of the intersection, her vehicle was struck near the right front door by the automobile driven by defendant Hall, who approached the intersection from plaintiff's right on Albert Street. Mrs. Montalbano also testified that she never saw the other car until the collision occurred. She did not even know, at the time, where the car came from.
The testimony of Hall is that he was traveling at 20 to 25 miles an hour as he approached the intersection, and, because of the existence of the aforesaid hedge, he was only 15 to 20 feet from the intersection when he saw the other vehicle proceeding at approximately the same rate, whereupon he immediately applied his brakes and almost brought his vehicle to a stop before the collision. His vehicle stopped immediately, but plaintiffs' automobile proceeded across the intersection and came to rest on the left side of Chester Street. Hall further testified that, on seeing the traffic light was not in operation, he assumed he had the right of way.
Under the aforesaid state of facts, it could not be said that Mrs. Montalbano had the right of way at the intersection. The Highway Regulatory Act, LSA-R.S. 32:237, subd. A, provides that when two vehicles approach or enter an intersection at approximately the same time, the driver approaching from the right shall have the right of way. In the absence of a city ordinance providing for the priority of right of ways on intersecting streets, the aforesaid statute is held to apply to city streets. Brazzel v. Farrar, La.App., 61 So. 2d 517. Application of the statute would also appear appropriate where traffic was not controlled by automatic signal devices, whether such signals were non-existent or temporarily out of operation. Therefore, the Hall vehicle was, by law, given the right of way over a vehicle approaching the intersection from his left at approximately the same time.
As a consequence of this, it was incumbent upon Mrs. Montalbano to accord to Hall the right of way, unless it can be said that she had pre-empted the intersection. Under the right of pre-emption, a motorist approaching an intersection has the right of way over oncoming traffic only if the motorist exercises the necessary precautions in determining that he can enter with a reasonable certainty of crossing the intersection safely. Oswalt v. Transcontinental Insurance Co. of New York, La. App., 96 So.2d 233; Harris v. Travelers Indemnity Co. of Hartford, Conn., La.App., 70 So.2d 235; Gerrets v. Reed, La.App., 99 So.2d 408.
In the Harris case, this court observed [70 So.2d 237]:
"Under the well-established interpretation with reference to the conflict of rights of automobile vehicle drivers, it is essential to again determine and apply the legal definition of preemption. Notwithstanding the fact that there are some pronouncements in some cases in the jurisprudence of our state *20 which would appear to define preemption as dependent upon a mere showing of first entrance into an intersection, We think by far the better rule, and one which is now completely accepted, clearly requires the interpretation of preemption to be the entrance of an intersection with the normal and reasonable opportunity and expectation of clearing such intersection without obstruction to the crossing thereof by other vehicles; Butler v. O'Neal, La. App., 26 So.2d 753; Aucoin v. Houston Fire & Casualty Co., La.App., 44 So.2d 127; Hooper v. Toye Bros. Yellow Cab Co., La.App., 50 So.2d 829." (Emphasis supplied.)
According to plaintiff's own testimony, although she said she looked in both directions for approaching traffic on Albert Street, she did not see the Hall automobile approaching to her right until almost precisely at the time of the impact. The decisions of the courts of this State are replete with pronouncements as to the duty and obligations of motorists to be observant at all times and constantly on the alert. Even where a motorist has a superior right of way, he is not relieved from the duty of looking in the direction from which others may be expected to come, and where the accident could have been prevented by the mere observation of traffic conditions, he who fails to look cannot recover, though the other party was grossly at fault. Johnson v. Item Co., 10 La. App. 671, 121 So. 369. Nor is a motorist proceeding on a favored street, much less on an unfavored street, warranted in proceeding into and across intersections without maintaining a proper lookout and in disregard of the rights of those who are or may not be observing the traffic laws, as every motorist is presumed to see, and is charged with the duty of seeing, that which he could have and ought to have seen. Prudhomme v. Continental Casualty Co., La.App., 169 So. 147; Commercial Credit Corp. v. Morris, La.App., 107 So.2d 563. Neither is a motorist relieved of the duty of maintaining an adequate lookout at intersections by virtue of a superior right of way. Holderith v. Zibermann, La.App., 151 So. 670; Pugh v. Henritzy, La.App., 151 So. 668; Murphy v. Star Checker Cab, La.App., 150 So. 79; Hamilton v. Lee, La.App., 144 So. 249; Johnson v. Item Co., supra.
It is obvious, therefore, a greater duty devolves upon a motorist in maintaining an adequate lookout at intersections wherein he is proceeding upon a street of an inferior right of way.
While proceeding at approximately 20 to 25 miles per hour, as she approached the intersection, Mrs. Montalbano was culpably negligent in failing to observe the approach of the defendant's vehicle. Whatever observation she made of traffic approaching from her right was ineffective, as she so admits in her testimony, wherein she says she never saw that vehicle until almost at the time of the very impact of the collision. A driver who enters and continues to traverse an intersection without making an effort to observe what he could have and should have seen is guilty of negligence, at least, contributing to the occurrence of the accident. There is a continuing duty to exercise care and caution. Particularly is this true where the motorist is crossing a favored or right of way thoroughfare. Huerstel v. L. Mangano & Co., La.App., 39 So.2d 460; Broughton v. Touchstone, La.App., 72 So. 2d 552; Sonnier v. U. S. Fidelity & Guaranty Co., La.App., 79 So.2d 635; Gerrets v. Reed, supra.
It appears pertinent to observe, from the facts established in this case, that a motorist is not entitled to the benefit of an assumption of safe negotiation of an intersection when he fails to see and observe that which could have and should have been seen. As stated in Gerrets v. Reed, supra, to hold otherwise would have the effect of sanctioning a blind and *21 unreasonable reliance upon a mere assumption, which could easily have been dispelled by even the slightest degree of continued care.
In Currie v. Government Employees Insurance Co., La.App., 90 So.2d 482, it was held that where both motorists approached an intersection controlled by automatic signals at a speed of less than 25 miles per hour, each was culpable in failing to observe the other, notwithstanding that one had the traffic light in his favor. Brockman v. Calvin, La.App., 90 So.2d 525; Starnes v. Mury, La.App., 90 So.2d 901.
From the above recited facts and the aforesaid principles of law governing the issues presented for determination, it could only be concluded that Mrs. Montalbano did not have a superior right of way over the approaching Hall vehicle, nor did she have a right of way by a pre-emption of the intersection, as clearly she did not enter the intersection sufficiently in advance of defendant Hall to justify a reasonable belief or anticipation that she could negotiate the intersection in safety or without endangering or obstructing approaching traffic. The conclusion is likewise inescapable that she did not make proper observation as, otherwise, she would have seen the approaching vehicle on a favored street only a short distance away.
Moreover, the rule is well established in the jurisprudence that the findings of the trial court upon questions of fact are entitled to great weight and that when only issues of fact are involved, it is incumbent upon the appellant to show manifest error in the judgment in order to secure a reversal of the decision from which he appeals. Currie v. Government Employees Insurance Co., supra; Commercial Credit Corp. v. Morris, supra. And, it can only be concluded in the instant case they have failed in that respect.
Accordingly, the judgment appealed is affirmed at appellants' cost.
Affirmed.
| {
"pile_set_name": "FreeLaw"
} |
238 U.S. 507 (1915)
CENTRAL VERMONT RAILWAY COMPANY
v.
WHITE, ADMINISTRATRIX OF WHITE.
No. 407.
Supreme Court of United States.
Argued April 23, 1915.
Decided June 21, 1915.
ERROR TO THE SUPREME COURT OF THE STATE OF VERMONT.
*508 Mr. J.W. Redmond for plaintiff in error.
Mr. Warren R. Austin for defendant in error.
MR. JUSTICE LAMAR delivered the opinion of the court.
1. On January 12, 1912, Enoch L. White was killed in a rear end collision while employed as brakeman on the Vermont Central, an interstate Railway. His Administratrix sued the Company, in a Vermont court, for "the benefit of the widow and next of kin, minor children." The jury returned a verdict of $7,168. The judgment thereon was affirmed by the Supreme Court of the State (87 Vermont, 330) and the case was brought here on a record containing so many assignments, covering 18 *509 printed pages, as to make it proper to repeat the ruling in Phillips v. Seymour, 91 U.S. 648 that the "practice of filing a large number of assignments cannot be approved. It perverts the purpose sought to be subserved by the rule requiring any assignments." "It points to nothing and thwarts the purpose of the rule" (Chicago Great Western Ry. Co. v. McDonough, 161 Fed. Rep. 659) which was intended to present to the court a clear and concise statement of material points on which the plaintiff in error intends to rely. Some of the assignments in the present case relate to matters of pleading; others to the admissibility of evidence, to the sufficiency of exceptions, and to various rulings of the trial court which involve no construction of the Employers' Liability Act and which, therefore, cannot be considered on writ of error from a state court. Seaboard Air Line v. Duvall, 225 U.S. 477, 486.
2. We shall, therefore, only consider those assignments, discussed in the brief, which raise a Federal question. Among them is the contention that the court failed to direct a verdict for the defendant because the proof failed to show negligence of the company or to prove the facts necessary to establish liability under the Federal law. Southern Pac. Co. v. Schuyler, 227 U.S. 601; North Carolina R.R. v. Zachary, 232 U.S. 248.
The evidence showed that on the night of Jan. 1st, 1912, Enoch L. White was employed by the Central Vermont Railway Company as brakeman on extra freight train No. 401. It had passed several miles north of Bethel, Vermont, and was proceeding up grade at a low rate of speed. White and the other employes thereon had no notice that it was followed by a faster freight train (No. 708), which, at Bethel, had received a "Clearance Card" indicating that the track ahead was clear and that it might proceed. The engine, pulling train No. 708, had a leaking cylinder, from which steam escaped in such *510 quantities as to make it impossible for the engineer to see the tail lights of the train on which White was employed. The result was that the faster train (708) ran into the slower train (401) and in the collision White was killed. The evidence was amply sufficient to sustain a finding that the death of White was due to the fault of the agents of the Railway Company.
3. Complaint is made because the court failed to instruct the jury as to the law respecting the assumption of risks. But there was not only no request to charge on that subject, but there is no evidence that White knew of the negligence of the agent in giving a "Clearance Card" or of the leaking cylinder which obscured the vision of the engineer. He did not assume the risk arising from unknown defects in engines, machinery or appliances, while the statute abolishes the fellow servant rule. 35 Stat. 65, § 2. Under the facts there was, therefore, no error in failing to charge the jury on the subject of assumption of risks. Southern Ry. v. Gadd, 233 U.S. 572; Gila Valley Ry. v. Hall, 232 U.S. 102; Seaboard Air Line v. Horton, 233 U.S. 492, 504.
4. The defendant, however, insisted that White knew his train was behind time and running at a low rate of speed. The Company contended that, in view of these circumstances, it was his duty, under the rules, to put out lighted fusees and torpedoes in order to give warning of the presence of train No. 401 on the track. On that theory the Company asked the court to charge that the burden was on the Administratrix to show that White was not guilty of contributory negligence. In considering that exception the Supreme Court of Vermont held that the defendant's contention was based on a correct statement of the state rule, but said "This case, however, is brought upon an act of Congress which supersedes the laws of the State in so far as the latter cover the same field. Consequently the question of the burden of proof respecting *511 contributory negligence on the part of the injured employe is to be determined according to the provisions of that act, . . .," Citing Seaboard Air Line v. Moore, 193 Fed. Rep. 1022; S.C., 228 U.S. 434.
In this court the argument was devoted principally to a discussion of this ruling counsel for the Railroad Company earnestly insisting that "the lex fori must determine all questions of evidence, including that of the burden of proof. Wharton on Conflict of Laws (3d ed.), § 478b." It was argued that there is nothing in the Federal statute indicating an intent to change the state rule as to the burden of proof, and it is claimed that because of the court's mistaken construction of the Federal Act the Railway Company has been deprived of a right to which it was entitled under the laws of Vermont.
There can, of course, be no doubt of the general principle that matters respecting the remedy-such as the form of the action, sufficiency of the pleadings, rules of evidence, and the statute of limitations depend upon the law of the place where the suit is brought. McNiel v. Holbrook, 12 Pet 89. But matters of substance and procedure must not be confounded because they happen to have the same name. For example, the time within which a suit is to be brought is treated as pertaining to the remedy. But this is not so if, by the statute giving the cause of action, the lapse of time not only bars the remedy but destroys the liability. Phillips v. Grand Trunk Ry., 236 U.S. 662; Boyd v. Clark, 8 Fed. Rep. 849; Hollowell v. Horwick, 14 Massachusetts, 188; Cooper v. Lyons, 77 Tennessee, 597 (2); Newcombe v. Steamboat Co., 3 Iowa (G. Greene), 295. In that class of cases the law of the jurisdiction, creating the cause of action and fixing the time within which it must be asserted, would control even where the suit was brought in the courts of a state which gave a longer period within which to sue. So, too, as to the burden of proof. As long as the question involves a mere *512 matter of procedure as to the time when and the order in which evidence should be submitted the state court can, in those and similar instances, follow their own practice even in the trial of suits arising under the Federal law.
But it is a misnomer to say that the question as to the burden of proof as to contributory negligence is a mere matter of state procedure. For, in Vermont, and in a few other States, proof of plaintiff's freedom from fault is a part of the very substance of his case. He must not only satisfy the jury (1) that he was injured by the negligence of the defendant, but he must go further and, as a condition of his right to recover, must also show (2) that he was not guilty of contributory negligence. In those States the plaintiff is as much under the necessity of proving one of these facts as the other; and as to neither can it be said that the burden is imposed by a rule of procedure, since it arises out of the general obligation imposed upon every plaintiff, to establish all of the facts necessary to make out his cause of action. But the United States courts have uniformly held that as a matter of general law the burden of proving contributory negligence is on the defendant. The Federal courts have enforced that principle even in trials in States which hold that the burden is on the plaintiff. Railroad v. Gladmon, 15 Wall. 401 (1), 407-408; Hough v. Railway Co., 100 U.S. 225; Inland &c. Co. v. Tolson, 139 U.S. 551 (4), 557; Washington &c. R.R. v. Harmon, 147 U.S. 581; Hemingway v. Ill. Cent. R.R., 114 Fed. Rep. 843. Congress in passing the Federal Employers' Liability Act evidently intended that the Federal statute should be construed in the light of these and other decisions of the Federal courts. Such construction of the statute was, in effect, approved in Sea Board Air Line v. Moore, 228 U.S. 434. There was, therefore, no error in failing to enforce what the defendant calls the Vermont rule of procedure as to the burden of proof.
*513 5. There are, however, a series of assignments in this record which must be disposed of in conformity with the general principle that matters affecting the remedy are to be governed by the law of the forum. They are all based on the fact that, while the Railway Company had lines running through Massachusetts and Vermont into Canada, the declaration contained no allegation that White was engaged in interstate commerce at the time of the collision. The Company made this the ground of a plea in bar. The Administratrix thereupon filed a Replication admitting that the deceased was engaged in such commerce at the time of his death. The Company demurred to the Replication on the ground that it was a departure from the cause of action under the state law and the assertion of a new cause of action under the Federal Employers' Liability Law. This demurrer was overruled and after verdict the defendant made the same facts the basis of a motion in arrest of judgment.
The evidence showed a liability under the Employers' Liability Act, and without stopping to discuss whether, on general principles, the motion should not have been overruled because the declaration was amendable to conform to the proof (Grand Trunk Railway v. Lindsay, 233 U.S. 48; Toledo, St. L. & Western R.R. v. Slavin, 236 U.S. 454) it is sufficient to say that the Supreme Court of the State held that the defect in the original declaration had been cured by the charge in the plea and the admission in the Replication that White was employed in interstate commerce. That decision on a matter of state pleading and practice is binding on this court.
6. Another assignment relates to the form of the verdict: The administratrix brought suit "for the benefit of the widow and next of kin, minor children." The defendant did not ask the court to instruct the jury to apportion the damages and there was a verdict for the plaintiff for $7,168. The defendant then moved in arrest "because *514 the verdict of the jury in this case was a general verdict." In this court there was a departure from the language of the exception and error is assigned "because the judgment being in solido is void under the Federal Employers' Liability Law for the reason that damages must be apportioned by the jury in accordance with the dependency of the relatives entitled to recover for his death." In support of that contention, the defendant relies on the statement in Gulf &c. Ry. v. McGinnis, 228 U.S. 176, that "though the judgment may be for a gross amount, the interest of each beneficiary must be measured by his or her individual pecuniary loss. That apportionment is for the jury to return. This will, of course, exclude any recovery in behalf of such as show no pecuniary loss." That statement must be read in the light of the record then before the court. It showed that one of those named as a beneficiary was a married daughter of the deceased living with her husband and supported by him. The jury actually apportioned the damages, so the question as to the validity of a verdict in solido was not raised by the record. The quoted language is part of its holding, that it was error to refuse to charge that the married daughter was not a dependent of her deceased father. But there was nothing in that record which would support a ruling that a general verdict was invalid or that the verdict could be set aside because it failed to fix the amount each beneficiary was to receive.
Under Lord Campbell's Act (9 & 10 Vict., ch. 93, § 2) and in a few of the American States the jury is required to apportion the damages in this class of cases. But even in those States the distribution is held to be of no concern to the defendant and the failure to apportion the damages is held not to be reversible error (Norfolk &c. Ry. v. Stevens, 97 Virginia, 631 (1), 634; International Ry. v. Lehman, 72 S.W. Rep. 619) certainly not unless the defendant can show that it has been injured by such *515 failure. The Employers' Liability Act is substantially like Lord Campbell's Act, except that it omits the requirement that the jury should apportion the damages. That omission clearly indicates an intention on the part of Congress to change what was the English practice so as to make the Federal statute conform to what was the rule in most of the States in which it was to operate. Those statutes, when silent on the subject, have generally been construed not to require juries to make an apportionment. Indeed, to make them do so would, in many cases, double the issues; for, in connection with the determination of negligence and damage, it would be necessary also to enter upon an investigation of the domestic affairs of the deceased a matter for Probate Courts and not for jurors. If, as in the McGinnis Case, the plaintiff sues for the benefit of one who is not entitled to share in the recovery (Taylor v. Taylor, 232 U.S. 363; North Carolina R.R. v. Zachary, 232 U.S. 248), and if her inclusion in the suit might increase the amount of the recovery, the defendant may raise the question, in such mode as may be appropriate under the practice of the court in which the trial is had, so as to secure a ruling which will prevent a recovery for one not entitled to share in the benefits of the Federal act. But no such question was or could have been raised in the present case, since, as matter of law, the wife and minor children were all to be treated as entitled to share in the amount recovered for the death of the husband and father. 35 Stat. 65.
7. Assignments 25 and 27 relate to the refusal of the court to permit testimony as to the delivery and contents of the "clearance card" and the refusal to permit the Railway Company to show that under the Federal law all engines, including 708, had been inspected and found to be in good condition. They both raise questions of general law. They involve no construction of the Federal statute and neither directly nor indirectly affect any *516 Federal right. Those assignments, therefore, under Jud. Code, § 237; Rev. Stat., § 709, will not be reviewed on a writ of error to a state court. Seaboard Air Line v. Duvall. See also Chicago Junction Ry. v. King, 222 U.S. 222 and Yazoo & Miss. R.R. v. Wright, 235 U.S. 376, which state the rule where similar cases are brought here by writ of error to a Federal court.
Judgment affirmed.
| {
"pile_set_name": "FreeLaw"
} |
IN THE DISTRICT COURT OF APPEAL
FIRST DISTRICT, STATE OF FLORIDA
EDWIN VAZQUEZ, CASE NO. 1D15-0623
Petitioner,
v.
CARLOS ROMERO, L & R
STRUCTURAL CORPORATION,
ACOSTA
CONSTRUCTION/CO/ASSOCIAT
ED INDUSTRIES INSURANCE
COMPANY, GUARANTEE
INSURANCE COMPANY, and
STAR INSURANCE.,
Respondents.
___________________________/
Opinion filed November 9, 2015.
Petition for Writ of Prohibition.
Matias R. Dorta, Gonzalo Ramon Dorta, and Craig A. Applebaum of Dorta Law,
Coral Gables, for Petitioner.
Rayford H. Taylor of Casey Gilson, P.C., Atlanta, GA., and William T. Goran,
Miami, for Respondents Romero and Associated Industries Insurance; and
Stephanie R. Hayes, Staff Counsel, Office of the Judges of Compensation Claims,
Tallahassee.
ON MOTIONS FOR REHEARING, REHEARING EN BANC,
CERTIFICATION, OR CLARIFICATION
KELSEY, J.
Following publication of our opinion, Respondent Romero filed a motion for
rehearing, rehearing en banc, and certification; and the Office of the Judge of
Compensation Claims (OJCC) filed a motion for rehearing, rehearing en banc, or
clarification. We grant the OJCC’s motion for clarification in part, to emphasize that
our disposition is limited to the facts of this case. We decline to address hypothetical
facts not before us, and deny all other post-decision motions. We withdraw our
opinion issued August 19, 2015, and substitute the following.
Petitioner seeks a writ of prohibition to prevent the Judge of Compensation
Claims (JCC) from exercising jurisdiction over discovery requests that Respondent
Romero filed after Petitioner had voluntarily dismissed petitions for benefits (PFBs)
against Romero and two other alleged Employers, and their Carriers. After
considering all of the parties’ arguments and those of the OJCC, we grant the
petition.
Petitioner filed three PFBs, thereby asserting that his injury is compensable
under the Workers’ Compensation Act. All three alleged employers denied having
an employer/employee relationship with Petitioner, thereby denying compensability.
Petitioner voluntarily dismissed his PFBs without prejudice, instead filing a tort
claim in circuit court. Nevertheless, Romero filed new papers before the JCC
attempting to rescind his prior denial of compensability, tried to provide benefits to
2
Petitioner (which Petitioner rejected), and filed a contribution action against
Respondent Acosta (again disavowing any employment relationship with
Petitioner). Romero and his carrier also sought discovery related to the contribution
claim, including discovery of Petitioner’s medical records from a non-party hospital.
Petitioner objected. The JCC held a hearing on Petitioner’s objection, and entered
an order holding that the JCC has jurisdiction over Romero’s discovery efforts
within the workers’ compensation arena. Further proceedings before the JCC were
stayed upon this Court’s issuance of a show cause order on the Petition. See Fla. R.
App. P. 9.100(h).
Romero and the OJCC argue that the JCC retains jurisdiction over Romero’s
discovery requests, either because Petitioner’s voluntary dismissal was without
prejudice and a PFB could be refiled, or pursuant to section 440.42(4), Florida
Statutes (2013) (conferring on the JCC jurisdiction over a controversy “as to which
of two or more carriers is liable for the discharge of the obligations and duties of one
or more employers with respect to a claim for compensation, remedial treatment, or
other benefits under this chapter”) (emphasis added). We reject all of the
Respondents’ arguments. We emphasize that Petitioner makes no claim,
compensability remains disputed, and no liability has been established.
Compensability has not been established by agreement, because Petitioner expressly
disavows it and has not accepted benefits. We have not been informed of any ruling
by the trial court on whether Petitioner’s claims are subject to the Workers’
3
Compensation Act. There is therefore no justiciable controversy before the JCC
regarding the parties’ rights or obligations under the Workers’ Compensation Act.
On these facts, Petitioner’s dismissal of his PFBs divested the JCC of jurisdiction.
“When all claims asserted through a petition for benefits are dismissed, the JCC loses
jurisdiction to address those claims. ‘Such dismissal divests a JCC of jurisdiction to
take any further action in the case.’” Cova v. Ostfeld, 994 So. 2d 1162, 1162 (Fla.
1st DCA 2008) (quoting Perez v. Winn-Dixie, 639 So. 2d 109, 111 (Fla. 1st DCA
1994)).
The particular facts of this case distinguish it from the cases the Respondents
cite, in which a JCC’s jurisdiction exists or continues in the absence of a pending
PFB. See, e.g., Southeastern Utils. Serv. Co. v. Redding, 131 So. 2d 1 (Fla. 1961)
(permitting deposition of injured worker when carrier was voluntarily providing
benefits, worker was accepting them, and worker subsequently filed formal claim
for benefits); Covell v. Cracker Barrel Old Country Store, Inc., 118 So. 3d 991 (Fla.
1st DCA 2013) (holding JCC has subject matter jurisdiction over discovery requests
filed by injured worker who is pursuing benefits, even before PFB is filed); Shannon
v. Cheney Bros. Inc., 98 So. 3d 1228 (Fla. 1st DCA 2012) (permitting JCC to award
attorney’s fee to counsel for claimant who was pursuing benefits, when claimant’s
deposition was taken prior to filing of formal claim); Canovas v. Sugar Supply, Inc.,
921 So. 2d 26 (Fla. 1st DCA 2006) (permitting JCC to compel claimant who was
receiving workers’ compensation benefits to release Social Security Administration
4
records to employer/carrier while no PFB was pending); Southeastern Recycling
Corp. v. McClure, 658 So. 2d 670 (Fla. 1st DCA 1995) (permitting JCC to compel
production of machine that injured claimant from employer even in absence of
pending claim where E/C had accepted compensability and was providing
benefits); Orange State Marine v. Snack, 382 So. 2d 1367 (Fla. 1st DCA 1980)
(permitting JCC to award attorney’s fees for appearance at two depositions after
worker filed claim; subsequent dismissal of claim did not divest JCC of jurisdiction
to award fee already earned by attendance at depositions).
Section 440.42(4) does not confer jurisdiction on the JCC, because that statute
applies only to disputes over carriers’ relative coverage responsibilities after
underlying liability has been conceded or otherwise established. See,
e.g., Medpartners/Diagnostic Clinic Med. Group, P.A. v. Zenith Ins. Co., 23 So. 3d
202, 204 (Fla. 1st DCA 2009) (“[A] carrier can obtain contribution pursuant to
section 440.42(4) only if the carrier from which contribution is sought is liable to
the claimant for payment of benefits.”); Jeffrey’s Steel v. Conibear Equip., Inc., 854
So. 2d 268, 271 (Fla. 1st DCA 2003) (“[S]ection 440.42(3) [now renumbered as (4)]
can be applied only when each of the contending employer/carriers is liable to the
claimant for a portion of the benefits which have been determined under other
provisions of chapter 440.”).
The defendants may conduct discovery in circuit court and may, if appropriate
(a question upon which we do not pass), assert workers’ compensation immunity as
5
an affirmative defense. See, e.g., Mandico v. Taos Constr., Inc., 605 So. 2d 850, 854
(Fla. 1992) (“A person has a right to file a personal injury action in circuit court, and
the court has jurisdiction to entertain the suit. The assertion that the plaintiff's
exclusive remedy is under the workers' compensation law is an affirmative defense,
and its validity can only be determined in the course of litigation.”).
On the specific facts presented and in the present posture of the underlying
dispute, the JCC lacks jurisdiction.
PETITION GRANTED.
THOMAS and MARSTILLER, JJ., concur.
6
| {
"pile_set_name": "FreeLaw"
} |
470 S.E.2d 296 (1996)
220 Ga. App. 772
SCHERNEKAU et al.
v.
McNABB.
No. A95A2753.
Court of Appeals of Georgia.
March 15, 1996.
Certiorari Denied May 17, 1996.
*297 Williams & Henry, Benjamin S. Williams, Joseph A. Fried, Atlanta, W. Anthony Moss, Marietta, for appellants.
Downey & Cleveland, Joseph C. Parker, W. Curtis Anderson, Marietta, for appellee.
RUFFIN, Judge.
This underlying personal injury action arose when Christopher Schernekau was shot in the head with an air rifle while on a camping trip. His parents brought suit on his and their behalf against Judy DiBauda, the adult who supervised the trip, Jon McKeachie, the 15-year-old who fired the weapon, and Mary Alice McNabb, mother of the 11-year-old who brought the air rifle on the trip. The trial court granted summary judgment in favor of McNabb. Concluding that the trial court erred, we reverse.
On August 3, 1993, DiBauda, an unlicensed day care provider, organized a campout on Lake Allatoona for 12 children of varying ages, including five children ages six and under, and six children between nine and eleven. McNabb knew about and specifically consented to her 11-year-old son's bringing *298 his air rifle on the campout. McNabb and DiBauda disagree as to whether McNabb obtained DiBauda's permission to take the air rifle on the trip. McNabb testified that she sought and obtained DiBauda's permission for her son to take the rifle, while DiBauda testified McNabb never even mentioned the gun. DiBauda testified that she would not have consented because of the danger the gun posed and because its presence would have violated campground rules.
The evidence shows the air rifle gun was not an ordinary BB gun but a high-powered, pneumatic pump air rifle that, fully pumped, has the same velocity as a .22 caliber bullet and is capable of firing BB's or .177 caliber lead pellets.
DiBauda testified that en route to the camp, she informed McNabb's son that if she discovered that he had a BB gun she would be obligated to take it away because the park prohibited guns. When they arrived at the campsite, DiBauda confiscated the rifle from McNabb's son and placed it in her van. However, without DiBauda's knowledge, McNabb's son retrieved his gun from the van. DiBauda subsequently left the campsite with some of the younger children, leaving the older children under the care of 15-year-old Jon McKeachie. During DiBauda's absence, McKeachie took the rifle and began shooting it around the campsite. He testified that he fired it over the lake, in the trees, and into the tent belonging to Christopher and Jonathan Schernekau. The testimony conflicted as to whether Christopher Schernekau and McKeachie wrestled over the gun after McKeachie shot the tent or whether McKeachie, with no apparent reason, shot Christopher Schernekau in the head at point blank range.
The trial court granted McNabb's motion for summary judgment finding that there were "genuine issues of fact as to [McNabb's] negligence vel non" but that "any negligence on her part was not the proximate cause of [Schernekau's] injuries." The court determined that "McKeachie's act of shooting Schernekau was an independent intervening criminal act." The court held that McKeachie's act of shooting Schernekau was unforeseeable as a matter of law because there was "no evidence that McKeachie had a propensity to commit violent or criminal acts or that McNabb had any reason to believe that McKeachie would intentionally shoot at someone with the BB gun."
The Schernekaus contend that the trial court erred by finding as a matter of law that McNabb's negligence was not the proximate cause of Christopher Schernekau's injuries, and by concluding that McKeachie's actions were an unforeseeable intervening criminal act.
Proximate cause is properly reserved for the jury and can only be appropriately addressed on summary judgment in "plain and indisputable cases." Atlanta Ob. & Gyn. Group v. Coleman, 260 Ga. 569, 570, 398 S.E.2d 16 (1990). "The decision may be made by the trial judge or appellate court only if reasonable persons could not differ as to both the relevant facts and the evaluative application of legal standards (such as the legal concept of `foreseeability') to the facts." Id. "With reference to foreseeability of injury, the correct rule is that in order for a party to be held liable for negligence, it is not necessary that he should have been able to anticipate the particular consequences which ensued. It is sufficient if, in ordinary prudence, he might have foreseen that some injury would result from his act or omission, and that consequences of a generally injurious nature might result." (Citations and punctuation omitted.) Wallace v. Sears, Roebuck & Co., 196 Ga.App. 221, 222, 396 S.E.2d 41 (1990).
The Schernekaus contend that McNabb should have appreciated the inherent danger of introducing the rifle in such a setting. They argue that she knew or should have known that children are drawn to objects like air rifles, that they, particularly in group settings, are prone to horseplay and consequential injury, and that they lack the proper judgment to handle guns. We agree.
The evidence shows that McNabb was aware of the dangerous capabilities of the air rifle, knew that her son planned to take the rifle on a campout in the presence of many other children who were to be supervised by only one adult, and helped her son roll up the *299 rifle in his bedroll. Therefore, based on the evidence in the record, a jury could conclude that McNabb, in the exercise of ordinary prudence, might have foreseen that some injurious consequences could ensue from permitting her son to bring a dangerous weapon on a campout with many young children and limited adult supervision.
McNabb contends that regardless of any negligence on her part, the actions of McKeachie constituted unforeseeable, intervening, independent criminal acts which broke the chain of causation. McNabb claims that in order for her "to have any foreseeability, she must have had some prior knowledge that John McKeachie was likely to harm someone." Relying on Doe v. Howell, 212 Ga.App. 305, 441 S.E.2d 767 (1994) and Skelton v. Gambrell, 80 Ga.App. 880, 57 S.E.2d 694 (1950), McNabb claims that the injury was unforeseeable as a matter of law.
However, both of these cases are distinguishable and fail to sustain McNabb's argument. In Doe, this court affirmed summary judgment in favor of a second grade teacher on a negligent supervision claim which was based on a sexual assault by one student on another student in the classroom coat closet. We found no evidence that the teacher knew or should have known that one student's presence created an unreasonable risk of a sexual attack to her other students.
Here, it is not McKeachie's presence that is at issue, but rather, the air rifle's presence on the campground, with young children and very limited adult supervision. McNabb admitted she knew that the air rifle was dangerous and yet she gave her young son permission to take it on the campout. A jury issue is created as to whether McNabb knew or should have known that by her action she was creating an unreasonable risk of injury.
In Skelton, the defendants were grocery store owners who provided a pistol to their 14-year-old son who thereafter discharged the pistol and killed a customer. This Court determined that the pleadings were deficient because they did not set forth a sufficient showing that the parents had reason to know of the dangerousness of their actions. Skelton, supra at 884, 57 S.E.2d 694. However, the case was decided under a different standard of review not applicable in this case, and the merits of the underlying claim were never addressed.
McNabb's reliance on Dent v. Smith, 172 Ga.App. 90, 322 S.E.2d 100 (1984), is also misplaced because there was no evidence of possible parental negligence in furnishing or permitting a child access to an instrumentality with which the child could injure a third party.
Moreover, it appears that the trial court applied an incorrect definition of foreseeability. "`It is not necessary that an original wrongdoer shall anticipate or foresee the details of a possible injury that may result from his negligence. It is sufficient if he should anticipate from the nature and character of the negligent act committed by him that injury might result as a natural and reasonable consequence of his negligence.'" Coleman v. Atlanta Ob. & Gyn. Group, 194 Ga.App. 508, 510(1), 390 S.E.2d 856 (1990). Therefore, the trial court's application of the foreseeability doctrine was more stringent than the law requiresall that was necessary was that it was reasonably foreseeable that someone might get hurt as a consequence of McNabb's sending the air rifle on the campout. See Wallace, supra at 222, 396 S.E.2d 41. Moreover, even if McKeachie's actions were criminal in nature, McNabb could not avoid liability if the acts were reasonably foreseeable. See Confetti Atlanta v. Gray, 202 Ga.App. 241, 414 S.E.2d 265 (1991).
Accordingly, we find that the trial court erred in concluding that McKeachie's actions necessarily broke the causal chain thus eliminating any act or omission by her as the proximate cause of Schernekau's injuries. Therefore, the grant of summary judgment was erroneous.
Judgment reversed.
BEASLEY, C.J., and POPE, P.J., concur.
| {
"pile_set_name": "FreeLaw"
} |
Case: 14-20237 Document: 00513079483 Page: 1 Date Filed: 06/16/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 14-20237
Conference Calendar
United States Court of Appeals
Fifth Circuit
FILED
June 16, 2015
UNITED STATES OF AMERICA,
Lyle W. Cayce
Clerk
Plaintiff-Appellee
v.
ELENILSON FLORES-RODRIGUEZ, also known as Elenilson Rodriguez
Flores, also known as Francisco Aquino, also known as Francisco L. Aquino,
also known as Elenilson R. Rodriguez, also known as Elenilson Flores, also
known as Elenilson Flores Rodriguez,
Defendant-Appellant
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:08-CR-255-1
Before DAVIS, JONES, and HIGGINSON, Circuit Judges.
PER CURIAM: *
The Federal Public Defender appointed to represent Elenilson Flores-
Rodriguez has moved for leave to withdraw and has filed a brief in accordance
with Anders v. California, 386 U.S. 738 (1967), and United States v. Flores, 632
F.3d 229 (5th Cir. 2011). Flores-Rodriguez has filed a response. We have
* 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: 14-20237 Document: 00513079483 Page: 2 Date Filed: 06/16/2015
No. 14-20237
reviewed counsel’s brief and the relevant portions of the record reflected
therein, as well as Flores-Rodriguez’s response. We concur with counsel’s
assessment that the appeal presents no nonfrivolous issue for appellate review.
Accordingly, counsel’s motion for leave to withdraw is GRANTED, counsel is
excused from further responsibilities herein, and the APPEAL IS DISMISSED.
See 5TH CIR. R. 42.2.
2
| {
"pile_set_name": "FreeLaw"
} |
907 F.2d 1140Unpublished Disposition
NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit.UNITED STATES of America, Plaintiff-Appellant,v.Ronald C. HOLLINGER, Defendant-Appellee.UNITED STATES of America, Plaintiff-Appellant,v.Michael TAPP, Defendant-Appellee.
Nos. 88-5208, 88-5209.
United States Court of Appeals, Fourth Circuit.
Argued Nov. 3, 1989.Decided June 12, 1990.
Appeals from the United States District Court for the District of Maryland, at Baltimore. J. Frederick Motz, District Judge. (CR-88-110-JFM)
Lisa M. Griffin, Assistant United States Attorney, Baltimore, Md. (Argued), for appellant; Breckinridge L. Willcox, United States Attorney, on brief.
Clarence William Sharp, Randallstown, Md; Richard P. Bricken, Frederick, Md., for appellees.
D.Md.
VACATED AND REMANDED.
Before K.K. HALL and WILKINS, Circuit Judges, and HARRISON L. WINTER,* Senior Circuit Judge.
PER CURIAM:
1
The United States appeals the sentences imposed on codefendants Michael Tapp and Ronald C. Hollinger, contending that (a) Tapp's sentence, six months of confinement in a halfway house and five years probation, was imposed outside of the sentencing guidelines and is therefore an illegal sentence, and (b) Hollinger's sentence, thirty-six months imprisonment plus a three-year supervised release, is an unwarranted downward departure from the guidelines.
2
We agree with the government in both cases, and we vacate and remand for resentencing.
I.
3
The facts of this case were admitted by the defendants in their guilty pleas. During a review and analysis of Express Mail receipts, postal authorities identified a pattern of suspicious mailings between the Orlando, Florida, area and Frederick, Maryland. Twenty-five Express Mail packages were addressed to defendant Hollinger in Frederick, seventeen were addressed to codefendant Steven Schlossberg in Daytona Beach, Florida, and three were sent from Hollinger to defendant Tapp at North Beach, Florida. After these suspicious mailings were discovered in January 1988, two narcotics detection dogs alerted on a package sent from Florida to defendant Hollinger. On February 4, 1988, a package from Hollinger to Tapp was opened pursuant to a search warrant; $3,600 in U.S. currency was discovered. The package was resealed and delivered to Florida, where Tapp picked it up. On March 22, 1988, after postal authorities discovered five ounces of cocaine in another package from Florida addressed to Hollinger in Frederick, Hollinger was arrested upon accepting delivery. The next day, Tapp was arrested. After his arrest, Tapp informed the authorities that Schlossberg was a cocaine dealer, and had persuaded Tapp to store cocaine in Tapp's apartment in Florida and to pick up packages for Schlossberg at a Daytona Beach post office.
4
Subsequently, Tapp, Hollinger, and Schlossberg were indicted for conspiracy to distribute cocaine (21 U.S.C. Sec. 841(a)(1)), and Hollinger and Schlossberg were indicted for possession with intent to distribute cocaine and unlawful use of a communication facility (21 U.S.C. Sec. 843(b), 18 U.S.C. Sec. 2). Defendants Tapp and Hollinger then pled guilty to the conspiracy count.
5
As part of the plea agreements, both defendants stipulated that three kilograms of cocaine were involved in the case and that the base offense level under the sentencing guidelines was 28. See United States Sentencing Commission, Guidelines Manual Sec. 2D1.1 (Oct.1988) [hereinafter "U.S.S.G." ]. The defendants and the government agreed that each had accepted responsibility for his offense and deserved a two-level reduction to level 26. See U.S.S.G. Sec. 3E1.1. The government also agreed that Tapp was a minor participant in the offense and so deserved a two-level reduction to level 24 pursuant to U.S.S.G. Sec. 3B1.2. The government agreed further to recommend reductions of one offense level to level 23 for Tapp and two offense levels to level 24 for Hollinger for their substantial assistance to authorities pursuant to U.S.S.G. Sec. 5K1.1.
6
In the presentence report prepared in Tapp's case, the Probation Office recommended a base offense level of 28 adjusted downward two levels to 26 for minor role and two levels to 24 for acceptance of responsibility. The report also recommended a departure of one level for substantial assistance and six additional levels to level 17 because of the defendant's emotional instability and "vulnerability to manipulation by more aggressive charismatic figures." The report stated that because Tapp had no prior convictions, he was in criminal history category I, with a sentence range of 51-63 months for offense level 24, and 24-30 months for offense level 17. U.S.S.G. Sec. 5A (sentencing table).
7
In Hollinger's presentence report, the Probation Office recommended a base offense level of 28, with a two-level downward adjustment to 26 for acceptance of responsibility. Because of Hollinger's one prior conviction, the report calculated his criminal history category at II, and set a sentence range of 70-87 months. The report, however, recommended a downward departure of two levels for substantial assistance and a departure to criminal history category level I because level II overstated the seriousness of Hollinger's record.
8
At Tapp's sentencing hearing, the government recommended a sentence within the guidelines range plus a one-level departure to level 23 for cooperation, which amounted to a sentence range of 46-57 months. Tapp's counsel recommended probation. After hearing argument, the district court sentenced Tapp to six months confinement in a halfway house and five years probation, stating:
9
I have no doubt that in this case the guidelines are ridiculous, and I cannot in good conscience impose a sentence under those guidelines, having found the law to be unconstitutional....
10
* * *
11
* * *
12
I have absolutely no doubt that for you to spend a substantial period of time incarcerated would serve no useful purpose whatsoever, to the extent that you've got to come to grips with things ..., and I think that this sentence is far more appropriate than that called for by the guidelines.
13
At Hollinger's sentencing hearing, the government recommended a two-level reduction to level 24 for substantial assistance, which amounted to a sentence range of 57-71 months (in criminal history category II). Hollinger's counsel asked the district court to sentence outside of the guidelines, and "as lenient as possible." The district court, although sentencing under the guidelines, awarded Hollinger the two-level reduction for substantial assistance, the departure to criminal history category I (which lowered the applicable sentence range to 51-63 months), and a further four-level departure, for a resulting sentence range of 33-41 months. The district court then imposed a sentence of thirty-six months imprisonment, three years supervised release, and a fine of $5,000. The district court explained that it awarded the four-level departure in order to bring Hollinger's sentence in line with that given to his codefendant Tapp. The government appeals both these sentences.
II.
A. Defendant Tapp
14
The reasons given for not applying the guidelines in Tapp's case, that they are unconstitutional and "ridiculous" in this particular instance, are of course not valid. Although the district court's action occurred after the United States District Court for the District of Maryland, sitting en banc, had struck down the sentencing guidelines as unconstitutional, see United States v. Bolding, 683 F.Supp. 1003 (D.Md.1988) (en banc), rev'd, 876 F.2d 21 (4th Cir.1989), both the Supreme Court and this court have found that the guidelines do not violate the constitution. Mistretta v. United States, --- U.S. ----, 109 S.Ct. 647 (1989); United States v. Bolding, 876 F.2d 21 (4th Cir.1989). Therefore, for all offenses which occur after November 1, 1987, district courts must impose a sentence within the applicable guideline range unless the court finds that a permissible reason for departure exists. 18 U.S.C.A. Sec. 3553(b) (West Supp.1989). Consequently, we vacate the sentence imposed and remand for resentencing under the range prescribed by the guidelines.1
B. Defendant Hollinger
15
In Hollinger's case, the district court departed four additional levels beyond the two-level departure urged by the government for substantial assistance and the departure to criminal history category I recommended by the Probation Office.2 The four-level departure was awarded so as to reduce the disparity between defendant Hollinger's sentence and that given to defendant Tapp. The government contends that this is not a valid reason for departure. We do not agree with this contention as a general matter, but we do agree that such a departure was not warranted in Hollinger's case.
16
By statute, the district court must sentence a convicted defendant to a term within the guideline range unless it finds "an aggravating or mitigating circumstance of a kind, or to a degree, not adequately taken into consideration by the Sentencing Commission in formulating the guidelines...." 18 U.S.C.A. Sec. 3553(b) (West Supp.1989). Cf. United States v. Bolden, 889 F.2d 1336, 1340 (4th Cir.1989) ("guidelines mandate that downward adjustments are appropriate only in the unusual case") (emphasis in original). Recently, we developed a two-prong test for reviewing decisions to depart from the guidelines. The first prong of the test requires the reviewing court to undertake a legal determination as to whether a particular aggravating or mitigating circumstance was "not adequately taken into consideration by the Sentencing Commission." The second prong permits the appellate court to affirm a departure only if the circumstance identified is found to exist in the particular case and "is of sufficient importance and magnitude to justify a departure." United States v. Summers, 893 F.2d 63, 66 (4th Cir.1990).
17
Applying the first prong of this test, we conclude, as did the panel in United States v. Daly, 883 F.2d 313, 319 (4th Cir.1989), that a district court may depart to remedy "unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct." 18 U.S.C.A. Sec. 3553(a)(6) (West Supp.1989); see also United States v. Bethancurt, 692 F.Supp. 1427, 1433-34 (D.D.C.1988) (sentencing courts may avoid "total lack of proportionality" in sentences of similarly situated defendants). However, we conclude that the desire to remedy disparities in the defendants' sentences was not proper "within the context of [this] particular case." Summers, 893 F.2d at 66. When the sentence of one defendant is imposed as a result of an incorrect application of the guidelines, or as a result of the non-application of the guidelines, then the sentence of the second defendant cannot be reduced so as to conform with the illegal first sentence. Consequently, the four-level reduction granted by the district court constituted an unreasonable departure from the guidelines.
III.
18
Accordingly, we vacate the sentences imposed on defendants Michael Tapp and Ronald C. Hollinger and remand these cases to the district court for resentencing in accordance with the views expressed herein.
19
VACATED AND REMANDED.
*
Judge Winter participated in the hearing of this case at oral argument but died prior to the time the decision was filed. The decision is filed by a quorum of the panel. 28 U.S.C. Sec. 46(d)
1
We thus reject Tapp's argument that a remand for resentencing violates the Fifth Amendment's Due Process Clause and the Eighth Amendment's prohibition against cruel and unusual punishment. Tapp maintains that a remand would offend these constitutional provisions because he has completed his six-month term in the halfway house. Although we note that the district court may credit Tapp with time served upon resentencing, see generally 18 U.S.C.A. Sec. 3585(b) (West Supp.1989), the remand does not offend the constitution. See United States v. Whitehead, 849 F.2d 849 (4th Cir.), cert. denied, --- U.S. ----, 109 S.Ct. 534 (1988)
2
The government does not challenge the district court's decision to depart from criminal history category II to category I, and we thus leave that determination undisturbed. Cf. U.S.S.G. Sec. 4A1.3, p.s. ("If reliable information indicates that the criminal history category does not adequately reflect the seriousness of the defendant's past criminal conduct ..., the court may consider imposing a sentence departing from the otherwise, applicable guideline range.")
| {
"pile_set_name": "FreeLaw"
} |
41 B.R. 882 (1984)
INDUSTRIAL INDEMNITY, Plaintiff,
v.
Robert SNYDER, et al., Defendants.
No. C-82-975-JLQ.
United States District Court, E.D. Washington.
May 4, 1984.
As Modified May 10, 1984.
Michael Kovach, Dept. of Justice, Washington, D.C., for plaintiff.
Paul Allison, Peter Grabicki, Spokane, Wash., for defendants.
ORDER GRANTING SUMMARY JUDGMENT
JUSTIN L. QUACKENBUSH, District Judge.
Defendant Internal Revenue Service's (IRS) Motion for Summary Judgment came on as scheduled without oral argument on April 23, 1984. The IRS was represented by Michael Kovach. The only response to this motion was filed by Paul Allison and Peter Grabicki on behalf of defendant Robert Snyder.
BACKGROUND
The IRS seeks judgment as a lien creditor of A.G. Murphy's in the amount of $89,218.66. This sum represents delinquent tax liabilities assessed against A.G. Murphy's during the years 1980, 1981 and 1982 plus penalties imposed as of October 24, 1983, the date an involuntary bankruptcy petition was filed against the corporation.[1] This court has previously granted summary judgment in the government's favor (but has disbursed no funds) to the extent of all unpaid taxes and penalties accrued through November 4, 1982, the filing date of this interpleader. (Ct.Rec. 397). The IRS now seeks an additional *883 $3,553.13 which represents the computed penalty from November 4, 1982 until October 24, 1983. Defendant Snyder opposes the IRS's demand for this additional sum.
This dispute arises out of the language of 26 U.S.C. § 6651(a)(2) which states in pertinent part:
§ 6651. Failure . . . to pay tax.
(a) Addition to the tax. In case of failure
(2) to pay the amount shown as tax on any return . . . on or before the date prescribed for payment of such tax, . . . unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount shown as tax on such return 0.5 percent of the amount of such tax if the failure is for not more than 1 month, with an additional 0.5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate; . . .
(Emphasis added).
The IRS construes the underlined portion of Section 6651(a)(2) to mean that a penalty shall be imposed for each month the taxes remain unpaid after the due date unless, on that date, the taxpayer's non-payment was due to "reasonable cause". In other words, the IRS looks to the date the tax was due, determines whether reasonable cause existed for non-payment, and, if not, the penalty is computed on a monthly basis until paymentregardless of any subsequent changes in the taxpayer's circumstances.
Defendant Snyder, on the other hand, argues that the "reasonable cause" standard is to be applied not only at the due date but at each subsequent month until payment. Thus, under Snyder's interpretation the imposition of the monthly penalty must cease at any time the taxpayer is able to satisfy the "reasonable cause" standard even if "reasonable cause" did not exist on the date the taxes were due.
It is undisputed that A.G. Murphy's failure to pay the taxes when due was not based on a "reasonable cause". In fact, defendant Snyder concedes that no "reasonable cause" existed and the penalty was properly assessed until November 4, 1982, the date this interpleader action was commenced. After that date, however, Snyder argues that any penalty was improper since the corporate assets were tied up in the interpleader leaving the corporation unable to pay the delinquent taxes, i.e., a "reasonable cause" for non-payment.
DISCUSSION
The resolution to this motion requires a sequential analysis. At the first step, the court must determine whether the "reasonable cause" standard is, as the IRS contends, a one-time test to be passed or failed at the tax due date; or, whether the taxpayer has as many chances at penalty immunity as there are months in the delinquency period. If the former, then the inquiry ends and the government's motion must be granted. But, if defendant Snyder is correct and the "reasonable cause" standard is to be applied on a month-to-month basis, the second step must focus on whether this interpleader constitutes "reasonable cause". There is a body of case-law of tangential assistance as to the second step; the issue posed at the first step, however, appears to be one of first impression.
Of course, the IRS interpretation of § 6651(a)(2) must be accorded substantial deference. This is so because "Congress has delegated to the Commissioner, not to the courts, the task of prescribing `all needful rules and regulations for the enforcement' of the Internal Revenue Code." United States v. Correll, 389 U.S. 299, 307, 88 S.Ct. 445, 449, 19 L.Ed.2d 537 (1967). The Commissioner's regulations must be sustained unless unreasonable and plainly inconsistent with the revenue statute. National Muffler Dealers Ass'n. v. United States, 440 U.S. 472, 477, 99 S.Ct. 1304, 1307, 59 L.Ed.2d 519 (1979). Here, however, neither the statute, its legislative history, S.Rep. No. 91-552, 91st Cong., 1st Sess. (1969) 1645 at 2027, 2037, 2336-37, 2455, U.S.Code Cong. & Admin.News 1969, nor the applicable regulation, 26 C.F.R. *884 § 301.6651-1, squarely addresses the question of when the "reasonable cause" standard is applied. The regulation does, however, contain language which lends inferential support to the government's argument. For example, at subsection (a)(1), (3) the regulation reads:
In case of failure to pay any amount in respect of any tax required to be shown on a return specified in subparagraph (1) of this paragraph (a), which is not so shown . . . within 10 days from the date of the notice and demand therefor . . . there shall be added to the amount stated in the notice and demand the amount specified below unless the failure to pay the tax within the prescribed time is shown to the satisfaction of the district director or the director of the service center to be due to reasonable cause and not to willful neglect.
(Emphasis added). And, at subsection (c)(1) the Commissioner states:
A taxpayer will be considered to have exercised ordinary business care and prudence if he made reasonable efforts to conserve sufficient assets in marketable form to satisfy his tax liability and nevertheless was unable to pay all or a portion of the tax when it became due.
(Emphasis added).
When read against the backdrop of the Congressional purpose behind the penalty provision, i.e., to encourage the payment of taxes when due, see U.S.Code & Admin. News, supra at 2336-2337, this court concludes that the regulation and the statute must be construed in favor of the IRS's position here. Consequently, since the parties agree that "reasonable cause" did not exist on the dates "prescribed for payment" of A.G. Murphy's taxes, the subsequent penalties were properly assessed through October 24, 1983. Accordingly, the IRS's Motion for Summary Judgment is GRANTED.
The custodian of the interpled fund is DIRECTED to issue a check payable to the Internal Revenue Service in the amount of $92,771.79.
IT IS SO ORDERED. The Clerk is directed to enter this Order and forward copies to counsel.
NOTES
[1] On February 28, 1984 the bankruptcy court apparently lifted the automatic stay, allowing the IRS to pursue its present Summary Judgment Motion.
| {
"pile_set_name": "FreeLaw"
} |
63 S.E.2d 731 (1951)
RICHARDSON
v.
COMMONWEALTH.
Supreme Court of Appeals of Virginia.
March 12, 1951.
M. Wallace Moncure, Jr., Richmond, Irby Turnbull, Boydton, for plaintiff in error.
J. Lindsay Almond, Jr., Atty. Gen, Thomas M. Miller, Asst. Atty. Gen, for the Commonwealth.
Before HUDGINS, C. J, and EGGLESTON, SPRATLEY, BUCHANAN and MILLER, JJ.
HUDGINS, Chief Justice.
W. W. Richardson, by this writ of error, seeks to reverse a judgment entered on the verdict of a jury finding him guilty of involuntary manslaughter and imposing a fine of $500.
*732 At approximately 12:00 noon, on January 16, 1950, J. E. Seay was walking east on the north shoulder of Highway No. 360, in Charlotte county, Virginia. W. W. Richardson, defendant, was driving his tractor trailer truck behind a similar tractor trailer, traveling east on the highway and approaching Seay from the west. Defendant, in an attempt to pass the truck in front of him, drove over on the north shoulder, struck and killed Seay.
Defendant's only contention is that the evidence was insufficient to establish that degree of recklessness, or wanton negligence necessary to constitute the crime of manslaughter.
The violation of one or more of the statutes (secs. XX-XXX-XXX), defining reckless driving, and the statutes (secs. XX-XXX-XXX), prescribing "The Rules of the Road" is negligence sufficient to support a civil action if such negligence was the proximate cause of the injury or damage sustained. But mere violation of one of these statutes is insufficient to bring the negligent act within the common law definition of involuntary manslaughter, unless the proof discloses that the act, or acts, of negligence charged are so flagrant, so culpable and wanton as to indicate a reckless disregard of human life. Where the negligent act amounts to recklessness, it becomes a crime, and "where there is no recklessness, there is no crime." Davis v. Com., 150 Va. 611, 143 S.E. 641; Goodman v. Com, 153 Va. 943, 151 S.E. 168, 171; Bell v. Com, 170 Va. 597, 195 S.E. 675; Albert v. Com, 181 Va. 894, 27 S.E.2d 177; 2 Michie's Jur, Automobiles, sec. 122, p. 609.
It is difficult to define, with accuracy, the line of demarcation between criminal negligence and negligence sufficient to support a civil action. The Commonwealth, in order to support a conviction of criminal negligence, must prove beyond a reasonable doubt that the act, or series of acts, charged are of such reckless, wanton or flagrant nature as to show utter disregard of the safety of others under circumstances likely to cause injury. Blash-field's Cyclopedia of Law and Practice, Perm. Ed. sec. 5388, p. 109.
The number of deaths resulting from the operation of motor vehicles on the highways has increased to such an alarming extent that the legislatures in a number of States have made a simple act of negligence which results in serious bodily injury, or death, a crime. Such statutes have been adopted in California, People v. Warner, 27 Cal.App.2d 190, 80 P.2d 737, Kansas, sec. 8-529, G.S. 1947 Sup., and Michigan (Comp.Laws of Michigan (1929) secs. 16743-16745; People v. Campbell, 237 Mich. 424, 212 N.W. 97.
The highway was straight, approximately level for a distance of 3/10 of a mile west of the point of impact. The paved surface of the highway was 20 feet, 10 inches wide, with a gravel shoulder on the north 4 feet wide. The roadbed was dry, shoulders damp from recent rains, and visibility good. Each of the two trucks with the trailers, was approximately 8 feet wide, and nearly 30 feet long.
Defendant had been driving at a rate of speed from 35 to 40 miles per hour behind the truck for several miles and "wanted to pass it." Defendant saw Seay walking on the left shoulder close to, and within 3 feet of, the edge of the hard-surface. As he turned his truck into the left traffic lane he increased his speed for the purpose of passing the truck. This maneuver made it obvious that the two trucks would be abreast of each other as they overtook Seay. This would force defendant to drive his truck close to, or on the north shoulder, as the trucks occupied at least 16 feet of the hard-surface. Allowing 2 feet for clearance, the left side of defendant's truck, even if he had driven his truck straight, would have passed dangerously close to the pedestrian on the shoulder. As defendant's truck was driven abreast of the other truck it skidded 41 ½ feet. Marks and scratches on the left side of the trailer, beginning 6 feet from the rear, indicated that that part of the body of the truck collided with Seay. The force of the impact knocked Seay forward. His body stopped rolling in the ditch 4 to 6 feet from the *733 north edge of the hard-surface. Marks on the shoulder extended approximately 50 feet from where the body was lying to the edge of the hard-surface. At this point the skid marks made by the dual wheels of the truck indicated that the left side of the trailer was more than 11 inches over on the north shoulder.
There were numerous abrasions on Seay's body, the most severe on the right side of the head near the base of the brain. His right hip was broken. One shoe was knocked completely off and the heel of the other was knocked loose.
Seay was walking on the left shoulder of the highway, with his back to east-bound traffic, as prescribed by statute (sec. 46-247). He had a right to believe that he was in a position of safety. Defendant, in utter disregard of the rights of the pedestrian, drove his truck to the wrong side of the road, off the hard-surface, and struck him from behind.
The only logical inference from this evidence is that defendant drove his truck in such a reckless manner that the rear end of the trailer veered or swung over on the shoulder where defendant knew Seay was walking, apparently unconscious of danger.
Defendant contends that as he approached Seay from the rear he blew his horn, but the testimony on this point is contradicted. Weatherford, who was riding with defendant, stated that he "was trying to go to sleep" and he heard a horn blow a couple of times, felt the truck sway, straightened up in the cab and saw Seay's body lying on the side of the road. On cross-examination he stated he could not say who blew the horn.
Mr. Carson Toombs testified that the impact occurred in front of his residence which was 50 feet from the north side of the highway. He was sitting in his home reading and in a position to hear defendant's horn if it had blown. He testified that he did not hear a horn blow, but did hear the air brakes when they were applied. He looked out of his window and saw the two trucks coming side by side, with the front of Richardson's truck not quite even with the front of the other truck, and at the same moment he saw Seay's body as it fell, or was knocked, away from the Richardson truck.
Defendant testified that Seay did not look back and did not indicate that he knew that a truck was approaching him from behind.
It is a matter of common knowledge that these long, high, wide and heavy trailers attached to motor vehicles, equipped with extra power, traversing the highways, create extra danger to other users thereof. "Their length and weight, accompanied by extra power, vests them with extra force, but should not vest them with extra privilege. It is particularly true, when changing the course of the tractor to right or left, that it is most difficult to calculate with exactitude the effect upon the trailer, and this very fact * * * requires greater precaution" for the safety of others. Horton Motor Lines v. Currie, 4 Cir., 92 F.2d 164, 167.
On a narrow road, traveling at a high speed, defendant attempted to drive the vehicle described in such manner as would necessarily require him to pass within 2 feet of a pedestrian who was apparently oblivious of the approaching danger and walking on the shoulder where he had a right to be. Defendant knew, or should have known (1) that when he changed the course of his tractor he could not "calculate with exactitude" how far the trailer would swing or swerve over and upon the north shoulder, and (2) that injury to Seay was not improbable.
The evidence fully justified the jury in finding defendant guilty of such reckless, wanton and flagrant negligence as to evince an utter disregard for the safety of others under circumstances likely to cause injury.
The judgment of the trial court is affirmed.
Affirmed.
| {
"pile_set_name": "FreeLaw"
} |
204 So.2d 278 (1967)
MISSISSIPPI INSURANCE COMMISSION
v.
James M. SAVERY.
No. 44540.
Supreme Court of Mississippi.
October 30, 1967.
Suggestion of Error Overruled December 11, 1967.
*279 Maurice R. Black, Jackson, for appellant.
Watkins & Eager, Jackson, Lumpkin, Holland & Ray, Tupelo, for appellee.
RODGERS, Justice:
A charge was filed against James M. Savery, appellee, an insurance agent, with the Insurance Commissioner of this state, alleging that appellee violated sections 5830 and 5834-11, Mississippi Code 1942 Annotated (1956). Notice was given to the appellee, and a hearing was had before the Commission. At the conclusion of the proceedings, the Commission entered an order holding:
"(T)hat said J.M. Savery wilfully and knowingly charged and received premiums for insuring property against loss or damage by fire or lightning which deviated from and did not conform to the rates approved and promulgated by the Mississippi State Rating Bureau, in violation of Section 5830 of the Mississippi Code of 1942, Recompiled and Amended.
"Wherefore, premises considered, it is ordered and adjudged that the agent's license of said J.M. Savery be, and same is nearby revoked, as of this date."
J.M. Savery appealed to the Circuit Court of the First Judicial District of Hinds County, Mississippi. The court reversed the order of the Commission, upon the ground that there was no substantial evidence in the record to sustain the order of the Commission. The Commission has appealed to this Court, and now contends that the circuit court erred in its holding.
The charge against the appellee, James M. Savery, arose under the following circumstances. *280 Mr. Savery (hereinafter called "Agent") is the owner of an insurance agency located at Tupelo, Mississippi. The agency was established by appellee's grandfather in 1869, and appellee succeeded his father as agent in 1920. Mr. Savery was a member of the board of directors of Tombigbee Electric Power Association for many years, and his agency handled the fire and casualty insurance for the Tombigbee Electric Power Association (hereinafter called "Power Association"). The Power Association had buildings and equipment located in Tupelo and in Fulton, Mississippi, and the Agent wrote several insurance policies covering fire and casualty risks on the property of the Power Association.
In the early part of 1963, the exact time is not clear, the Power Association moved to a new office building. This building was attached to another building. A third building was moved to this property later. All of this was enclosed with a cyclone fence. The three buildings, the office building, the warehouse building and the small tin building, contained equipment and fixtures belonging to the Power Association. One of the major contentions in this case is that a policy written in 1963 for $350,000 was erroneous. This policy attempted to cover the three buildings, the stock of wire, transformers, poles and other property in addition to the buildings. The location of this property had not been established for rating purposes. In fact, no water pipe or fire protection was near the property at the time the policy was written.
The Agent contends that he attempted to give the new property a "tentative" rate because it had not been rated by the rating bureau. When this information reached the Insurance Commissioner's office, the Insurance Commissioner held this matter in abeyance. A letter from the Commissioner to the Agent said, "not rating, listing for inspection." Later the Commissioner wrote, "Please endorse showing occupancy of the buildings to enable us to check." The Commissioner then rated the property as one building situated at 2880 Highway 45 South, Tupelo, Mississippi. At this point the witness for the insurance company was asked the following question:
"Q. Mr. Rankin, you've already told me, I think, that when the original policy came in the agent had showed plural `Buildings' and it was intended to cover not only the contents of those buildings, but the contents of the grounds in and around those buildings, which you recognized as an effort to write blanket coverage, didn't you?
"A. I do. But our auditors, I'm afraid, wouldn't be that sharp on it."
The insurance policies written to cover the property belonging to the Power Association at Fulton were erroneous as to the rate charge, but the Agent explained this discrepancy by saying:
"Yes, sir. On the Fulton property, we didn't have it located properly, and I doubt if they have yet because we don't have a Fulton map and we don't have a Fulton rate book. But we took the rates that we thought would be okay on it. It was high, and they criticized it, and we endorsed it to answer the criticism to satisfy the criticism and gave them credit for return premiums on, oh, four or five policies, maybe more, on that particular piece of property."
The testimony, however, shows that the Agent immediately endorsed all of the policies showing the new rates as required by the Insurance Commissioner, and mailed copies to the Insurance Commissioner and the insuror. The Power Association contended, however, and it is admitted by the Agent, that he did not, at first, mail endorsements on three of the policies to the Power Association. When being questioned with reference to these policies, he said:
"It was the three of these policies on buildings, $350,000 blanket and $50,000 on contents or stock blanket, and $20,000 on fixtures blanket."
*281 He then testified as follows:
"Q. But you did not send it to the insured, the party concerned?
"A. Not that day. I told you we delayed that until, oh, some time in December.
"* * *
"Q. '63. You sent those policies in December, according to the letter which
"* * *
"A. Yes, sir, we sent endorsements to the Tombigbee in I think December of 1963."
The Agent also mailed a letter to Mr. Louis Cook, superintendent of the Power Association, informing him of the reduced premiums, amounting to several thousand dollars, and stated that credit was given the Power Association on the books of the agency against the amount due to the agency by the Power Association.
Mr. A.N. Lann, the office manager and assistant secretary of the Power Association, denied that he received the endorsements. He appeared before a meeting of the board of directors of the Power Association and demanded that it be paid the refund premiums in cash rather than by credit memorandum against the amount due the Agent. A committee was appointed by the board to examine the claim. The committee recommended payment of $3,091.25. The Agent mailed a check for this sum to the Power Association. The Tennessee Valley Authority, the parent association, did not agree with this figure, and the Agent then paid an additional sum of $1400, making a grand total of approximately $4,500.
When all this testimony is carefully sifted, it is apparent that the only disagreement shown by the evidence is whether or not the Agent mailed the endorsement to the Power Association showing that the excess premium had been credited to the amount due by the Power Association to the Agent. In short, Mr. Lann, the office manager for the Power Association, said he did not receive the endorsement. Is this evidence, then, substantial enough to find the Agent guilty of "wilfully" violating the provisions of section 5830, Mississippi Code 1942 Annotated (1956)? After examining this Code section we are of the opinion that this evidence is not sufficient to support an order finding the agent guilty within the meaning of this section of the Code.
Mississippi Code 1942 Annotated section 5830 (1956) is in the following language:
"Any violation of the provisions of this section by any stock fire insurance company or by the rating bureau or by any officer or agent of either, shall be a misdemeanor, and, on conviction, be punished by a fine of not less than $25.00, nor more than $200.00 for each offense, and if such fine is not paid within thirty days after conviction, the license of such stock fire insurance company or its agents, so offending, may be suspended or revoked until the said fine shall be paid; provided, that any offense under this section shall not be cumulative both as to the company and its agents. If any such stock fire insurance company knowingly or wilfully charges or receives any premium or premiums for insuring property against loss or damage by fire or lightning, which deviates from or does not conform to the rates approved and promulgated by the rating bureau, or uniform deviation therefrom made under § 5313 (Code of 1930; § 5827, Code of 1942), or if such company wilfully violates any of the provisions of this section, the insurance commission, after notice to the party so offending, and after opportunity to be heard, shall suspend or revoke the license of such company or any offending agent so found guilty, and in addition any party aggrieved, or the state on relation of the attorney-general, may sue for and recover a penalty not in excess of $200.00."
*282 It is apparent that the first part of this section expressly states that the violation of this section "shall be a misdemeanor." After setting forth the fine upon conviction, it states that when the fine is not paid within thirty days, the license of the offending company or its agent may be suspended or revoked until the fine is paid. This part of section 5830 clearly requires the conviction in a criminal court before the Insurance Commission is authorized to act.
The second part of this section provides that an insurance company or its agent who does not conform to the rates promulgated by the Commission, or if the insurance company "wilfully" violates any provisions of section 5830, "the insurance commission, after notice * * * and after opportunity to be heard, shall suspend or revoke the license of such company or any offending agent so found guilty". Under the third part, the state may bring suit for a penalty of $200.
Although section 5830 is divided into three parts, it is in its entirety a penal statute and must be construed accordingly. In Mississippi State Board of Dental Examiners v. Mandell, 198 Miss. 49, 65, 21 So.2d 405, 409 (1945), it was held that section 8774 of Mississippi Code Annotated (1956), which authorizes the revocation of dentistry licenses, is penal in nature. There this Court said:
"Indeed, it is a serious matter to deprive anybody of a right to pursue the calling for which he is trained, whether a trade or a profession, because it involves denying to such person a property right by taking away the privilege of following his chosen occupation for a livelihood."
It was further held that a proceeding under that statute was in the nature of a criminal trial in which all intendments are in favor of the accused.
Statutes imposing penalties must be strictly construed. Kelley v. Welborn, 217 Miss. 16, 63 So.2d 413 (1953); Harris v. State, 179 Miss. 38, 175 So. 342 (1937). The textwriter in 44 C.J.S. Insurance § 86 (1945) has this to say on this subject:
"Statutes imposing penalties must be strictly construed, and every fact necessary to constitute the offense for which the recovery of the penalty is sought must be clearly proved; no intendments will be allowed in favor of the party for whose benefit the suit is brought."
Also see 16 Appleman, Insurance Law and Practice § 8636 (1944).
The meaning of section 5830 is apparent. Evidence which does not show an intent to violate the statute is not sufficient to sustain a charge under this Code section. "Wilful" is a word denoting an act done consciously and intentionally, or knowingly and purposely, without justification or excuse. The word as ordinarily used in courts of law denotes some element of design, intention or deliberation and intention to do or refrain from doing some act, and not mere inadvertence. Dorroh v. State, 229 Miss. 315, 90 So.2d 653 (1956), citing 94 C.J.S. Willful at 620, 624 (1956).
In Mississippi State Board of Dental Examiners v. Mandell, supra, it was said with respect to the "wilful" commission of certain acts as grounds for revocation of a license to practice dentistry:
"In penal statutes, the word `wilful' generally means with a bad purpose, an evil purpose, without ground for believing the act to be lawful; Roby et al. v. Newton, 121 Ga. 679, 49 S.E. 694, 68 L.R.A. 601; and indicates a bad or corrupt purpose; State ex rel. Hopkins v. Wilson, 108 Kan. 641, 196 P. 758, but if the act charged to be wilful merely reflects thoughtlessness and exhibits only an error of judgment, with no bad or evil purpose, it does not constitute wilfulness. Shields v. State, 184 Okl. 618, 89 P.2d 756." (198 Miss. at 65, 21 So.2d at 409)
*283 There is nothing unusual and certainly nothing criminal or fraudulent about overcharging premiums. This sort of mistake is made almost daily by every insurance agent in the state, particularly where no insurance rate has been promulgated by the Insurance Rating Bureau. It is always corrected by memorandum from the office of the Insurance Commissioner. These memoranda are called "criticism." The fault rises when the agent "knowingly or wilfully charges or receives any premium or * * * premiums which deviates from or does not conform to the rates approved and promulgated by the rating bureau * * *."
We agree with the argument of the Mississippi Insurance Commission that ordinarily this Court will not reverse a finding of an administrative agency where it has substantial evidence on which to base its finding; nevertheless, where the administrative agency is limited by the statute to determine an issue, penal in nature, requiring proof of "wilful" violation of that statute, the evidence of wilfulness must be clear and convincing. The Insurance Commission has power while acting quasi-judicially to suspend or revoke licenses, and this power carries with it a reasonable discretion, but this discretion must be exercised as outlined in and as authorized by the particular statute involved. It must not act unreasonably, capriciously nor arbitrarily. If the administrative agency fails to act within the clear intent of the statute, or acts arbitrarily or capriciously, this Court must reverse. Central Elec. Power Ass'n v. Hicks, 236 Miss. 378, 110 So.2d 351, 112 So.2d 230 (1959); 2 Am.Jur.2d Administrative Law § 620 (1962).
We are of the opinion that the testimony in this case does not clearly show that the Agent, James M. Savery, knowingly or wilfully violated the provisions of section 5830, Mississippi Code 1942 Annotated (1956), and for this reason the judgment of the circuit court should be affirmed.
The judgment of the circuit court reversing the order of the Insurance Commission will be affirmed, and the order of the Insurance Commission revoking the insurance agent's license of James M. Savery is hereby set aside.
Affirmed.
ETHRIDGE, C.J., and BRADY, PATTERSON and SMITH, JJ., concur.
| {
"pile_set_name": "FreeLaw"
} |
569 A.2d 1161 (1990)
Joseph M. WALLS, Plaintiff Below, Appellant,
v.
Scott REES, New Castle County Department of Police, and New Castle County Department of Public Safety, Defendants Below, Appellees.
Supreme Court of Delaware.
Submitted: July 6, 1989.
Decided: January 8, 1990.
Joseph M. Walls, pro se.
Donald E. Marston, First Asst. County Atty., Wilmington, for appellees.
Before CHRISTIE, Chief Justice, HORSEY, and HOLLAND, Justices.
*1162 CHRISTIE, Chief Justice.
This is an appeal from an order of Superior Court granting summary judgment in favor of defendants in a claim against New Castle County and its agents. Appellant, Joseph M. Walls, contends that the trial court erred by deciding as a matter of law that the appellees, Scott Rees (Rees) and the New Castle County Department of Public Safety (the county) were immune from suit in connection with his claim for the value of an automobile which was seized by the county as authorized by statute and later destroyed, even though the statute required that it be returned to the owner.
On March 28, 1984, Walls was arrested and incarcerated in connection with a criminal investigation. Because it was thought that his vehicle had been used in the commission of a felony and it was involved in the investigation, it was seized by the New Castle County Police pursuant to 11 Del.C. § 2322.[1] Upon completion of the criminal investigation on April 24, 1984, appellee Rees, a New Castle County Police Department employee, sent a letter to Walls by certified mail, return receipt requested, advising him that his vehicle could now be released. The letter also advised Walls that unless he made alternative arrangements with the county, the vehicle would be towed to a "commercial storage facility" after 30 days. The letter concluded: "[A]fter the vehicle leaves our facility, a daily storage fee set by the private vendor will be incurred by you." Walls was incarcerated at that time, but his wife, Donna M. Walls, who was joint owner of the automobile, contacted the New Castle County Police and tried to secure release of the vehicle. She was not successful for reasons which are not revealed in the record.
On November 2, 1984, Walls was acquitted of the criminal charges which involved the possible use of the vehicle. Thereafter, he and/or his representative again attempted to regain possession of the vehicle. At that time, he was advised by an unidentified county employee that the vehicle would be returned only upon a showing of *1163 proof of ownership, proof of insurance, and the payment of towing and storage fees. While he was able to prove ownership and the existence of insurance, Walls refused to pay the towing and storage fees.
Nearly two years later, on August 15, 1986, the county transferred possession of the vehicle to B & F Towing and Salvage Company, Inc. (B & F), a commercial storage facility often used by the county for this purpose. Walls was not notified of this transfer. In October, 1987, B & F contacted the Department of Motor Vehicles of the State of Delaware for authorization to dispose of the vehicle pursuant to 21 Del.C. Chapter 44, as a vehicle which had been abandoned. Thereafter and without notice to the appellees, the vehicle was sold for $25.00 to Breitenbach Auto Recyclers on October 20, 1987, and crushed for scrap metal.
Meanwhile, on November 24, 1986, Walls had filed a complaint in Superior Court seeking an order compelling the appellees to return the vehicle to him, or, in case the vehicle could not be returned, seeking $2,500.00 plus interest in compensatory damages and $5,000.00 in punitive damages. In the answer to the complaint, the appellees admitted that Walls was the record owner of the vehicle at the time of the seizure and that he had been acquitted of the charges which had precipitated the seizure. Appellees denied, however, that Walls was entitled to the relief requested and raised as an affirmative defense the contention that the appellees were immune from this suit according to the common law doctrine of sovereign immunity and pursuant to the terms of the Delaware Tort Claims Act (the Act). 10 Del.C. Ch. 40, Subch. II. Additionally, appellees argued that the seizure had been a proper seizure under the terms of the statute and that Walls had not complied with the procedures set out for release of the vehicle, which included paying the towing and storage fees. Further, appellees argued that they were no longer in possession of the vehicle, having had it moved to a lot owned by B & F.
On May 28, 1987, defendants moved for summary judgment. On July 6, 1987, the court granted summary judgment in favor of the defendants on the tort claims for damages on the ground that the county was immune from such a suit according to 10 Del.C. § 4011(a).[2] On the request for the return of the vehicle, the court delayed its ruling pending presentation of memoranda by both parties on the questions of whether the appellees had authority to require Walls to pay the towing and storage fees and whether the appellees were required to provide additional notice to the owner when the vehicle was moved to B & F. On February 18, 1988, after considering the memoranda, the court denied the defendants' motion for summary judgment on the remaining issues and ordered them to return the vehicle to Walls. As a result of that order, the question of notice was deemed irrelevant.
Shortly thereafter, defendants finally discovered that the vehicle had been destroyed while the case was pending and that they were therefore unable to comply with the court order. On April 18, 1988, and by amended order dated May 23, 1988, the Superior Court ordered the parties to negotiate a settlement of the matter and allowed the appellees to request a hearing on the fair market value of the vehicle. The court stated further that such a request would constitute an admission by appellees that the appellant was entitled to compensation for the vehicle. On the other hand, the court stated that if the appellees took the position that they did not owe the appellant any compensation, they were to submit argument on that issue. Appellees subsequently moved for summary judgment on the grounds that they were immune from a tort claim for damages pursuant to 10 Del.C. § 4011. On October 28, 1988, the court granted their motion and thus held them immune from liability. A motion for reargument was later denied. *1164 The appellant then filed a notice of appeal to this Court.
I.
First, the Court must determine whether the appellees' actions, quite apart from government immunity, constituted actionable wrongdoing. The parties agreed that the seizure of the vehicle was lawful pursuant to 11 Del.C. § 2322. Appellees also argue, however, that their continued possession was lawful. If the county were correct in requiring Walls to pay for the costs incurred as a result of the seizure, appellees might not be liable for what was done during the period of the detention. The claim for payment of expenses before the release of the vehicle, however, was not consistent with the written procedures of the New Castle County Department of Public Safety,[3] or with prior decisions of the Superior Court. Thompson v. Danvir Corp., Del.Super., 264 A.2d 361 (1970). See also, State v. Lloyd, Del.Super., 552 A.2d 498 (1988).
There is no indication in the order governing department procedures that a vehicle is to be released only after the owner pays the towing fees. To the contrary, the order indicates that careful records must be kept so that the towing charges may be accounted for within the department. Paragraph 5 of Section III specifically prohibits the officer from giving the "tow card" to the owner or operator of the vehicle. The order also instructs the seizing officers to retain only those vehicles which are ultimately likely to be forfeited, because "any time in storage only adds to the cost absorbed by the Department."
The Superior Court has held that "in the absence of a statute specifically creating a lien in favor of the garageman or requiring the owner to pay the costs of seizure, the plaintiff is not liable for costs of towing and storage." Thompson, 264 A.2d at 363. Accordingly we find no error in the order of Superior Court dated February 18, 1988, applying the Thompson holding to this case and ruling that the appellant was not required to pay towing and storage fees incurred by the county in order to secure release of his vehicle. Because the county no longer had any right to *1165 the vehicle once Walls was acquitted, the vehicle should have been released to him upon proof of ownership in November, 1984. 11 Del.C. § 2311(a)(2).[4]See also, Campbell v. Cochran, Del.Super., 416 A.2d 211, 220 (1980) (the court interpreted 11 Del.C. § 2311 to indicate that the failure of the State to prove the crime would terminate the State's right to retain the property). Thus, the county is liable for the loss of the vehicle unless it is immune from all such liability because it is a governmental entity.
II.
We must then consider whether the appellees are relieved of their liability to Walls by the fact that they are a governmental employee and entities. The doctrine of sovereign immunity in Delaware is now largely framed by statute. Fiat Motors of N.Am., Inc. v. Mayor and Council of the City of Wilmington, Del.Supr., 498 A.2d 1062 (1985). Whether the appellees were immune from liability depends in this case on whether the appellant's claim is not subject to the immunity provided to governmental entities and their employees in most circumstances by the Tort Claims Act. 10 Del.C. Ch. 40, Subch. II.
The Superior Court, by order dated July 6, 1987, granted summary judgment to appellees, thereby ruling that the statute conferred immunity from the tort claims for both compensatory and punitive damages. To the extent that Walls's claim is for mere negligence or the improper exercise of discretion by the county or its employees, the Act bars recovery. The specific provision which applies provides for immunity in connection with:
(3) The performance or failure to exercise or perform a discretionary function or duty [of an employee of the State or a subdivision thereof], whether or not the discretion be abused and whether or not the statute, charter, ordinance, order, resolution, regulation or resolve under which the discretionary function or duty is performed is valid or invalid.
10 Del.C. § 4011(b)(3). (This Court's explanatory language is noted in brackets.) This provision relates to both the procedures regarding seizure of the vehicle and to the erroneous decision made by Rees and the county to require payment of the fees before its return. Technically, the appellees were immune from liability for money damages incurred as a result of the decision to retain possession of the vehicle and to move it to B & F, and even for any negligence as a bailor in the ultimate destruction of the vehicle. Sadler v. New Castle County, Del.Supr., 565 A.2d 917, 921 (1989).
Additionally, appellee Rees was immune as an employee of the county. There is nothing in the record to indicate that by sending the letter to Walls informing him of the fee requirement, Rees was not acting "within the scope of employment" or that his actions displayed "wanton negligence or willful and malicious intent." 10 Del.C. § 4011(c).[5] The order of Superior Court of July 6, 1987 granting summary judgment to appellees on the issue of compensatory and punitive tort damages was correct as far as it went.
The Tort Claims Act, however, is not deemed to provide immunity for the appellees from Walls's alternative statutory claim for the return of the vehicle itself. His alternative claim was based on *1166 alleged conversion of his property, and he asked for the remedy of replevin. In Delaware, replevin is "primarily a form of action for the recovery of the possession of personal property which has been taken or withheld from the owner unlawfully." Harlan & Hollingsworth Corp. v. McBride, Del.Supr., 69 A.2d 9, 11 (1949). Although the plain language of the Act grants immunity from traditional tort claims "seeking recovery of damages," (10 Del.C. § 4011(a)), we rule that under the circumstances of this case, an action for replevin is not barred by the Act.
The order of the Superior Court of February 18, 1988 granted the appellant summary judgment for the return of his vehicle (without punitive or incidental damages). We hold that ruling to be correct, and we further hold that there is no applicable governmental immunity. We also note that the appellant's cause of action for replevin came into existence in November, 1984, on the date when he was acquitted of the criminal charges which precipitated the seizure of his vehicle. From that point on, appellees no longer had any right to hold Walls's vehicle and were obligated to return it to him. 11 Del.C. § 2311(a)(2).
III.
Shortly after the order dated February 18, 1988 was issued by the Superior Court, appellees discovered that the vehicle had been disposed of by B & F Towing Company in October, 1987, pursuant to permission from the Department of Motor Vehicles of the State of Delaware. Appellees immediately notified the Superior Court that they would be unable to comply with the order. After an office conference with the parties, the court by order dated April 18, 1988 (as amended May 23, 1988) ordered the appellees to settle with appellant on the basis of the market value of the destroyed vehicle. The appellees then renewed their defense of immunity, arguing that now the claim was for money damages resulting from negligence and that the county was immune from liability. This position was adopted by the Superior Court in an order dated October 28, 1988 and reaffirmed in the denial of the motion for reargument on December 1, 1988. We disagree and reverse those decisions.
The Superior Court appears to have shifted the focus from liability of the appellees for unlawful conversion of the vehicle to liability for negligence. The Superior Court stated the question as "do the present facts of record revealing that during October 1987 the defendants placed in motion a process which ultimately resulted in the vehicle being crushed into scrap metal form the basis of a valid claim for damages against the defendants?" Walls v. Rees, Del.Super., C.A. No. 86C-NO-117, Poppiti, J., 1988 WL 116416 (Oct. 28, 1988) (ORDER) (emphasis added). In answering the question, the Superior Court relied on a replevin case from the Maryland Court of Appeals. General Motors Acceptance Corp. v. Petrillo, Md.App., 253 A.2d 736 (1969). In that case, the court held that a debtor who had defaulted on a loan did not have sufficient rights to the title of a truck which had been repossessed to warrant replevin from the repossessor. The court also held, however, that there were separate damages to other property which occurred as a result of negligence on the part of the repossessor, and the appellee was awarded money to compensate for those losses. Thus, the replevin remedy and the other damages claimed were deemed to be separate issues.
In this case, the controversy stems from appellees' failure to return property as they were required to do. The value of the vehicle itself is directly involved because it is the only reasonable measure of the loss sustained on account of the county's destruction of the property. This Court has held that Delaware law will support a claim such as this in replevin. Harlan, 69 A.2d at 11. In the Harlan case, a purchaser sued for possession of machinery which he had purchased and to which he argued that he had established title under the terms of the sales contract. During the dispute, the seller disposed of the machinery at public auction. The court held that the buyer had established sufficient rights in the title to sustain replevin of the goods from the seller. Because the machinery had been sold, *1167 the court held that "[a] secondary object of the action may, therefore, be for the recovery of a sum of money equivalent to the value of the property claimed if the defendant cannot or will not surrender possession." Id. The value of the machinery was established as of the date of the conversion, which in that case was the date of the contract purchase price. Id. In accord with the Harlan decision, we rule that Walls's claim which established the liability of the appellees to return possession of appellant's vehicle was not converted into a tort claim for damages based on negligence because the appellees were unable to surrender the vehicle. Consequently, the Tort Claims Act does not apply to this case, and the county does not enjoy immunity as to this claim.
IV.
Appellant also argues that his claim falls within the exception provided in the Tort Claims Act itself as to motor vehicles. He contends that even if his claim were one for tort damages, the duty imposed upon the county by the statute authorizing the seizure of his vehicle operates as an express exception to governmental immunity.
Although we have decided that the claim is not one for the tort damages covered by the Act, we will address these additional contentions in the interest of lending additional clarity to the construction of the Tort Claims Act. 10 Del.C. Ch. 40, Subch. II. This Court has described the Act as reflecting the legislature's intention to broaden the doctrine of sovereign immunity. Fiat, 498 A.2d at 1066. Any statutory exception to immunity from claims for damages arising from negligent acts of a county government must now be found exclusively in the provisions of 10 Del.C. § 4012, or among those exceptions which are "otherwise expressly provided by statute" as noted in the language of 10 Del.C. § 4011(a). Id. at 1063.
Appellant contends that § 4012 should be deemed to provide an applicable exception to immunity on account of this language:
A governmental entity shall be exposed to liability for its negligent acts or omissions causing property damage, bodily injury or death in the following instances:
(1) In its ownership, maintenance or use of any motor vehicle, special mobile equipment, trailer, aircraft or other machinery or equipment, whether mobile or stationary.
10 Del.C. § 4012(1) (emphasis added). We held in the Fiat case that this section is to be viewed as an exclusive list of exceptions to immunity. Fiat, 498 A.2d at 1066. More recently, we have held that the wording of the § 4012 exceptions are "subject to strict construction" so as not to undermine the broad immunity granted by the Act. Sadler v. New Castle County, Del.Supr., 565 A.2d 917, 923 (1989). Appellant argues that seizure of his vehicle by the county constituted "use of any motor vehicle" within the meaning of that exception. The purported "use" was for evidence in his trial. He argues that the county's negligence in this "use" caused the vehicle's ultimate destruction. We cannot adopt this construction. We do not regard the seizure and storage of an automobile as the "ownership, maintenance or use" thereof within the meaning of the Act.
Alternatively, appellant has asserted that the statutory mandate of 11 Del.C. § 2311 requiring the county to release seized property once the accused is acquitted also operates as an express exception to the governmental immunity provided for in 10 Del.C. § 4011. Appellant argues that the mandatory language of this statute creates an express direction and a duty and that liability for such duty cannot be avoided under the terms of the Act. Because this duty is expressly stated in the statute, he contends that it fulfills the requirements of an express exception to the immunity granted in the Act. Appellees have argued that the requirement that there be an "express" exception to governmental immunity means that a statute must explicitly state that a governmental entity will not be immune from its provisions.
We find merit in appellant's contention on this point. The duty of the county to return the vehicle is a specific and express *1168 statutory duty to do a specific act. Such duty falls into a very different category than the general duty to avoid tortuous conduct. In this case, however, we have held that the mandate of 11 Del.C. § 2311 requiring the appellee county to return the vehicle to its owner creates a specific statutory duty of a type not even addressed in the provisions of the Tort Claims Act. Thus, Walls's claim survives a claim of immunity either as a claim not covered by the Act or as subject to a specific statutory exception to the immunity granted by the Act.
V.
Appellant has also challenged the constitutionality of the Tort Claims Act, to the extent that it is deemed to provide for governmental immunity in this case arguing that it violates the equal protection clause of the United States and Delaware Constitutions, and asserting that if the Act operates to deny his replevin action, it would allow a taking of his property by the government without compensation as prohibited by both constitutions. Although one or both of these contentions may have theoretical merit, we do not address them in this case because Walls's right to recover has been recognized.
* * *
We reverse the decision of the Superior Court and remand the case for a hearing to establish the fair market value of the vehicle as of the date of Walls's acquittal and to enter a money judgment in this replevin action based on such fair market value plus interest.
NOTES
[1] 11 Del.C. § 2322 states:
Grounds for Seizure.
Whenever any vehicle, as defined in this subchapter, has been used in, or in connection with, the commission of any felony or in connection with the flight or escape of any person who has committed any felony or in the transporting of cigarettes in violation of Chapter 53 of Title 30, it shall forthwith be seized and taken into custody by the peace officer or officers having knowledge of the facts of such use.
[2] 10 Del.C. § 4011(a) states in pertinent part:
Except as otherwise expressly provided by statute, all governmental entities and their employees shall be immune from suit on any and all tort claims seeking recovery of damages.
[3] New Castle County Department of Public Safety, General Order #25, dated August 1, 1983, states in part:
III. Towing Vehicles As Part of An Investigation
Impound to seize and hold under law, taken into custody by the Department. All vehicles impounded will be inventoried.
In those instances where the vehicle is to be seized as evidence, the following procedures will be followed:
A. Towed as Evidence:
. . . . .
1. Seek supervisory authority for the impoundment and complete all sections of Form #097 Tow Card with particular emphasis on:
a. Reason for impoundment
b. Supervisor's authority
2. Attempt to notify owner and complete Form #79 in its entirety
3. Notify Center to dispatch sector tow service and advise that the vehicle is impounded
a. All vehicles impounded will be stored in the fenced in area on the west side of the maintenance garage at the Churchman's Road facility....
b. ... Once processing of the vehicle is completed and/or the maintenance supervisor or night shift foreman is available to receive the impounded vehicle at Churchman's Road, the vehicle may be towed from headquarters to the impound yard at Churchman's Road.
4. The Vehicle Tow Card will be signed by the tow truck operator. The officer will furnish the pink copy to tow truck operator.
5. No copy of the Tow Card is to be given to the driver or operator. [emphasis in original]
. . . . .
8. The completed forms, (Tow Card #097, and Notification Form #79) will be given to the House Sergeant for transmittal to PIC.
9. The officer initiating the seizure shall forward a memorandum to the Investigative Section commander noting the date, time, officer's name, reason for towing, nature of the investigation and other necessary information concerning the case. The Investigative Section commander shall approve and coordinate all storage of confiscated and seized vehicles. The Investigative Section commander shall maintain a record of all vehicles stored for this purpose.
. . . . .
VIII. Towing of Vehicles for Seizure
. . . . .
6. Keep in mind there is usually an appreciable period of time between seizure and trial and any time in storage only adds to the cost absorbed by the Department.
[4] 11 Del.C. § 2311(a)(2) states:
(a) The following disposition shall be made of any papers, articles or things validly seized:
. . . . .
(2) If the papers, articles or things were allegedly used in the commission of a crime, they shall be returned to the person from whom seized if such person is not thereafter duly convicted of the alleged crime; but if such person is duly convicted of the alleged crime, the papers, articles and things shall he disposed of as the court directs.
[5] 10 Del.C. § 4011(c) states:
(c) An employee may be personally liable for acts or omissions causing property damage, bodily injury or death in instances in which his or her governmental entity is immune under this section, but only for those acts which were not within the scope of employment or which were performed with wanton negligence or willful and malicious intent.
| {
"pile_set_name": "FreeLaw"
} |
146 Cal.App.2d 702 (1956)
In re REFUGIO GONZALEZ LOZOYA, on Habeas Corpus.
Crim. No. 5826.
California Court of Appeals. Second Dist., Div. One.
Dec. 10, 1956.
David C. Marcus for Petitioner.
No appearance for Respondent.
THE COURT.
Petitioner has applied to this court for a writ of habeas corpus, alleging that he is unlawfully imprisoned by reason of the fact that the complaint issued against him and under which he is detained charges a crime as to which he has been heretofore tried and acquitted. *703
The relevant facts are: By a complaint filed in the municipal court of the Los Angeles judicial district, petitioner is charged with violation of section 11500 of the Health and Safety Code, in that he did, on the 17th of May, 1956, willfully and unlawfully have in his possession marijuana. Prior to the issuance of the complaint and petitioner's arrest thereunder, he was indicted by a federal grand jury. The indictment returned by the grand jury was in two counts. In the first count it was charged that on May 17 he unlawfully transferred nine and one-half pounds of marijuana without obtaining a written order on a form issued for that purpose by the Secretary of the Treasury of the United States. By Count II he was charged with being a transferee of marijuana within the meaning of section 4741(a) of title 26, United States Code, and having knowingly and unlawfully acquired and obtained approximately nine and one-half pounds of marijuana without having paid the transfer tax imposed by said section, and that said transaction took place on the 17th of May, 1956.
To this indictment petitioner pleaded not guilty, and upon trial was acquitted on both counts. He alleges in his petition here that the transactions alleged in the federal indictment are the same transactions with which he is charged by the complaint under which he is now charged by the People of this state, and that therefore he has been once in jeopardy and under the provisions of sections 656, 793, 794, and 1023 of the Penal Code of this state his acquittal in the federal court is a bar to the prosecution of this action, and that his prosecution is in violation of his constitutional rights under the Fifth and Fourteenth Amendments to the Constitution of the United States and article I, section 13, of the Constitution of this state.
We find it unnecessary to pass upon the question as to whether petitioner's trial and acquittal of the charges preferred against him by the federal indictment would sustain a defense upon the ground that he had been once in jeopardy upon the same charges as now made in the state court, or to pass upon the question as to whether the acquittal in the federal court is res judicata of the question of his possession of the marijuana in question. (As to res judicata, see People v. Beltran, 94 Cal.App.2d 197 [210 P.2d 238]; Sealfon v. United States, 332 U.S. 575 [68 S.Ct. 237, 92 L.Ed. 180]; and "Res Adjudicata in Criminal Cases" (Sept.-Oct. 1951) 26 State Bar J. 366 et seq.)
[1] The defense of once in jeopardy is a special defense *704 which must be specially pleaded in the manner provided by section 1017, Penal Code, and if not so pleaded it is waived. [2] Until the defense is pleaded, there is no such issue to be determined either here or in the court below; and the fact, if it be a fact, that the defense of once in jeopardy is available to petitioner, should he be held for trial in the superior court on an information issued by the district attorney, in no wise affords any ground for petitioner's release on habeas corpus (In re Collins, 151 Cal. 340, 350 [90 P. 827, 91 P. 397, 129 Am.St.Rep. 122].)
We cannot here, upon habeas corpus, try any of the defenses that may be available to petitioner should he be brought to trial upon the charges now made against him. All of his defenses must be presented in a proper manner to the trial court; and if it errs in the determination of those defenses, that is a matter for appeal.
For the reasons hereinbefore stated, the writ is denied.
| {
"pile_set_name": "FreeLaw"
} |
J-S48013-19
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
COMMONWEALTH OF PENNSYLVANIA : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
DAVID HUERTAS :
:
Appellant : No. 605 EDA 2019
Appeal from the PCRA Order Entered February 4, 2019
In the Court of Common Pleas of Lehigh County Criminal Division at
No(s): CP-39-CR-0001251-2015
BEFORE: BOWES, J., SHOGAN, J., and STRASSBURGER, J.*
MEMORANDUM BY BOWES, J.: FILED JANUARY 24, 2020
David Huertas appeals from the February 4, 2019 order denying his
petition for relief under the Pennsylvania Post-Conviction Relief Act, (the
“PCRA”). After careful review and consideration, we affirm.
A jury convicted Appellant of various offenses related to serial sexual
assaults he perpetrated against his minor stepdaughters, L.M. and N.D. The
underlying factual history of this case was well-summarized by a prior panel
of this Court that adjudicated Appellant’s direct appeal:
In the instant case, the testimony at trial revealed that L.M. is a
15 year old girl, with a date of birth [in] May 2000. Additionally,
N.D. is a 13 year old girl, with a date of birth [in] September 2002.
[Appellant] is L.M.’s and N.D.’s stepfather. Appellant was the only
father whom L.M. and N.D. knew, as he had been in their lives
since they were very young.
____________________________________________
* Retired Senior Judge assigned to the Superior Court.
J-S48013-19
Starting in the summer of 2011, when L.M. was approximately
eleven (11) years old, Appellant called her into his bedroom and
touched her “in ways that she did not like.” At that time, L.M. was
living at 714 Washington Street, Allentown, Lehigh County,
Pennsylvania. . . . [A]t one time, there were fourteen (14) people
living in the residence.
During the time that L.M. lived at the residence on Washington
Street, Appellant frequently would touch her breasts under and
over her clothes. He also would frequently touch her vagina, both
over and under her clothes. By "touch", L.M. explained that
Appellant would use his hand and his penis to glide over and
penetrate the inside of her vagina. This "touching" would occur
when Appellant was alone with L.M. in his bedroom, and happened
multiple times. Appellant instructed L.M. to do certain things,
such as touch his penis. L.M. testified that Appellant’s penis was
big and hard to the touch. In addition, L.M. explained that she
also "touched" Appellant’s penis with her mouth. This occurred
nearly every time. Even though L.M. did not want to do such
actions, she was afraid to say "no" to her stepfather. She feared
that Appellant would get mad and exhibit an attitude and take his
anger out on everyone around him. L.M. did not report this
"touching" to anyone, because she did not think that anyone
would believe her.
There were times when L.M.'s sister, N.D., was also present. L.M.
witnessed N.D. "touching" Appellant’s penis as to Appellant
instructed her to so do. On November 1, 2013, L.M., N.D. and
their family moved to a residence located at 1739 Hanover
Avenue, Allentown, Lehigh County, Pennsylvania. As on
Washington Street, L.M. and N.D. were living with Appellant, their
mother, their younger sister, and their brother. Appellant’s
mother lived with them on Hanover Avenue as well.
The "touching" continued to occur at the Hanover residence.
Appellant would frequently call L.M. and/or N.D. into his bedroom,
and make L.M. and/or N.D. touch his penis. He would make them
take off their clothes and he would touch L.M.'s breast and butt.
Appellant would glide over and penetrate L.M.'s vagina with his
penis. He would also rub his penis against the outside of N.D.'s
vagina. After he was "satisfied" and ejaculated, he would wipe off
the ejaculation.
-2-
J-S48013-19
At times, when L.M. was 13 or 14 years old, and N.D. was 11 or
12 years old, Appellant had N.D. hold his penis with her hand while
L.M. put her mouth on Appellant’s penis. Appellant also had N.D.
put her mouth on his penis while L.M. held his penis.
N.D. was also "touched" by Appellant when L.M. was not present.
N.D. specifically recounted that when she was 11 years old,
Appellant "touched" her and had her put his penis in her mouth.
Appellant had instructed her to take off her clothes and he had
pulled his pants down, but not all the way off. Appellant touched
her in her private parts using his hands and his penis. Although
he never penetrated her vagina, he would rub his penis against
her. N.D. testified that she did not want to do such acts, but that
Appellant offered her money to do them.
In November of 2014, N.D. confided in her best friend at school
about the "touching" that was going on with Appellant. She
mentioned it again to this friend in January of 2015. Thereafter,
on February 4, 2015, at approximately 7:39 A.M., L.M. sent her
aunt, Eraka Rivera Cruz, a text message, implying that someone
was "touching" her. When L.M. actually spoke with her aunt on
the telephone, she told her that Appellant had been touching her.
The aunt advised her to inform her mother of same. L.M. took her
aunt's advice and told her mother. That day, both Appellant and
the mother picked L.M. up from school. Appellant took L.M.'s cell
phone when she entered the vehicle. Her mother yelled at her
when they returned home. When N.D. supported her sister's
account of what had been transpiring, her mother yelled at her
and slapped her. The next day, L.M. borrowed a telephone from
her friend at school and called her aunt again. Her aunt notified
the police of what L.M. had confided in her, and subsequent
medical examinations were performed on L.M. and N.D.
Commonwealth v. Huertas, 178 A.3d 169 (Pa.Super. Sept. 19, 2017)
(unpublished memorandum)
The remaining procedural history of this case was aptly summarized by
the PCRA court as follows:
At the conclusion of a jury trial conducted from December 1,
2015[,] through December 3, 2015, [Appellant] was found guilty
of rape of a child, two (2) counts of involuntary deviate sexual
-3-
J-S48013-19
intercourse with a person less than 16 years of age, involuntary
deviate sexual intercourse with a child, aggravated indecent
assault with complainant less than 16 years of age, two (2) counts
of corruption of minors with defendant age 18 or above, and
indecent assault of a person less than 16 years of age. Thereafter,
on April 29, 2016, [the trial court] sentenced [Appellant] to an
aggregate term of state imprisonment of less than sixty (60) years
nor more than one hundred forty (140) years. Thereafter, on May
9, 2016, [Appellant] filed a timely motion for post[-]sentence
relief pursuant to Pennsylvania Rule of Criminal Procedure Rule
720. In his post[-]sentence motion, the Defendant filed a motion
in arrest of judgment challenging both the sufficiency and weight
of the evidence, a motion for new trial based on after-acquired
evidence, and a motion for new trial due to errors in the conduct
of trial.[1] [The trial court] denied Defendant’s motion for post[-
]sentence relief on June 1, 2016. Then, on June 23, 2016, the
Defendant filed a notice of appeal. Subsequently, on September
19, 2017, the Superior Court of Pennsylvania affirmed [the trial
court’s] judgment and sentence.
PCRA Court Opinion, 2/5/19, at 1-2 (unnecessary capitalization omitted).
____________________________________________
1 Appellant preserved an argument that the trial court “committed error by
allowing the Commonwealth’s expert witness to testify that she believed the
victims’ testimony of sexual assault thereby allowing the expert witness to
testify beyond her admissible scope and render an opinion as to the truth of
the victims’ testimony.” Appellant’s Motion for Post-Sentence Relief, 5/9/16,
at ¶ 8. This claim for relief was denied by the trial court. See Trial Court
Opinion, 6/2/16, at 13 (“It was not improper for [Dr. Jenssen] to answer
defense counsel’s direct question and opine that, based on studies and
statistics, she believed the statements made by L.M. and N.D. and took them
at face value.”). This claim was abandoned on direct appeal despite being
included in Appellant’s Rule 1925(b) statement. Compare Appellant’s Rule
1925(b) Statement, 7/19/16, at ¶ 5(c), with Commonwealth v. Huertas,
178 A.3d 169 (Pa.Super. Sept. 19, 2017) (unpublished memorandum). A
similar issue has been raised in this appeal under the auspices of
ineffectiveness. For the purposes of this appeal, Appellant’s claim is not
considered “previously litigated” under the PCRA. See Commonwealth v.
Smith, 995 A.2d 1143, 1150 (Pa. 2005) (“[I]neffectiveness claims are distinct
from claims raised on direct appeal, and must be treated as wholly
independent of underlying claim of error.”).
-4-
J-S48013-19
On September 10, 2018, Appellant filed a timely, pro se PCRA petition.
The PCRA court appointed counsel to represent Appellant, who prepared and
filed a timely amended PCRA petition. In relevant part, Appellant argued that
“trial counsel rendered ineffective assistance of counsel as a result of his
failure to object to certain portions of Dr. Debra Esernio-Jenssen’s testimony
during direct examination and his failure to properly cross-examined [Dr.
Jenssen].” Appellant’s Amended PCRA Petition, 12/18/18, at ¶ 15. On
January 28, 2019, a PCRA hearing was held at which trial counsel testified and
argument was presented. The PCRA court denied Appellant’s petition on
February 4, 2019, and Appellant filed a timely notice of appeal. Thereafter,
the PCRA court directed Appellant to file a concise statement of errors
complained of on appeal pursuant to Pa.R.A.P. 1925(b), Appellant timely
complied, and the PCRA court entered its Rule 1925(a) opinion. This case is
now ripe for our review.
Appellant has presented a well-reasoned summary of his claim for relief:
The [PCRA] court erred in failing to find trial counsel ineffective
when trial counsel repeatedly elicited testimony from an expert
witness as to the credibility of witnesses, which bolstered the
witnesses’ credibility and improperly invaded the province of the
jury, and is inadmissible pursuant to 42 Pa.C.S. § 5920(b)(3).
Trial counsel raised no objections to statements from the
[Commonwealth’s expert] testimony which improperly vouched
for and/or bolstered the testimony of witnesses. Trial counsel had
no reasonable strategic basis for his actions and but for counsel’s
actions, a reasonable probability exists that the outcome of the
proceedings would have been different.
-5-
J-S48013-19
Appellant’s brief at 12. Thus, Appellant is requesting a new trial due to his
trial counsel’s allegedly ineffective assistance.
Our standard and scope of review in the context of a petition for relief
pursuant to the PCRA is well-established under existing precedent. Our
standard of review is “limited to determining whether the PCRA court’s findings
are supported by the record and without legal error.” Commonwealth v.
Edmiston, 65 A.3d 339, 345 (Pa. 2013). Furthermore, “[o]ur scope of review
is limited to the findings of the PCRA court and the evidence of record, viewed
in the light most favorable to the prevailing party at the PCRA court level.”
Commonwealth v. Koehler, 36 A.3d 121, 131 (Pa. 2012). The PCRA court’s
credibility determinations are binding upon this Court to the extent that they
are supported by the record. See Commonwealth v. Spotz, 18 A.3d 244,
259 (Pa. 2011) (“Spotz I”). However, we will apply a de novo standard of
review with regard to the PCRA court’s legal conclusions. Id.
Section 5920 sets forth the scope of testimony of experts in criminal
proceedings that concern sexual offenses at 18 Pa.C.S. §§ 3101-44, and/or
offenses for which registration is required pursuant to 42 Pa.C.S. §§ 9799.10-
.42. See 42 Pa.C.S. §§ 5920(a)(1)-(2). This statute permits experts to offer
their “opinions regarding specific types of victim responses and victim
behaviors,” but specifically precludes opinions addressing “the credibility of
any other witness, including the victim.” Commonwealth v. Cramer, 195
A.3d 594, 608 (Pa.Super. 2018).
-6-
J-S48013-19
In pertinent part, § 5920 provides as follows:
(b) Qualifications and use of experts.—
(1) In a criminal proceeding subject to this section, a
witness may be qualified by the court as an expert if the
witness has specialized knowledge beyond that possessed
by the average layperson based on the witness’s experience
with, or specialized training or education in, criminal justice,
behavioral sciences or victim services issues, related to
sexual violence, that will assist the trier of fact in
understanding the dynamics of sexual violence, victim
responses to sexual violence and the impact of sexual
violence on victims during and after being assaulted.
(2) If qualified as an expert, the witness may testify to facts
and opinions regarding specific types of victim responses
and victim behaviors.
(3) The witness’s opinion regarding the credibility of any
other witness, including the victim, shall not be admissible.
42 Pa.C.S. 5920(b).
Instantly, Appellant’s claim relates to testimony adduced by both the
Commonwealth and Appellant’s own trial counsel from Dr. Jenssen, who was
qualified as an expert in the areas of pediatrics and child abuse pediatrics by
the trial court. See N.T. Trial II, 12/2/2015, at 74. In addition to being an
expert in the above-noted fields, Dr. Jenssen also examined L.M. and N.D. on
two separate occasions with the assistance of a nurse practitioner. The
examination commenced with a full history from both victims, followed by a
general physical examination and an ano-genital exam to ascertain whether
there was any physical evidence of sexual abuse. Id. at 75-78.
-7-
J-S48013-19
In relevant part, Dr. Jenssen’s direct testimony included the following
portions of relevant testimony that were flagged as problematic during oral
argument before the PCRA court, see N.T. PCRA Hearing II, 1/28/19, at 7-14,
and in Appellant’s briefing before this Court, see Appellant’s brief at 8-9. That
testimony began as follows:
Q: When L.M. was giving her history did you notice anything
about her demeanor?
A: Yes.
Q. What did you notice?
A: She was very – she had a very sad affect. She was often
very tearful when she was providing [her] history.
Q: Okay. And what was the history she provided to you?
A: She provided that she had – he knew why she was there,
that she had had [sic] – she was sexually abused by an individual
that she named as David Huertas. I don’t know if I’m saying it
correctly. I can spell it – H-U-E-R-T-A-S. She said he was about
45 years old and he was her stepfather.
Id. at 78-79.
Thereafter, Dr. Jenssen testified that L.M.’s physical exam was
inconclusive and did not disclose any direct physical evidence of sexual abuse.
Nonetheless, Dr. Jenssen opined that L.M.’s history and physical exam were
consistent with the allegations, particularly because such physical evidence
typically does not endure when reporting of abuse is delayed. Id. at 80-82.
Dr. Jenssen’s testimony then continued regarding N.D.’s examination:
Q: Okay. And you got a history from N.D.?
-8-
J-S48013-19
A: Yes.
Q: What history did N.D. provide you?
A: Well, initially N.D. didn’t even want to talk about it. And
then she kind of just blurted out that [Appellant], her stepfather,
had done inappropriate things to her.
Q: She talked about him touching her bottom with his hands
and that she had to see his penis. But she was very sad and really
did not want to talk about it.
Id. at 83.
Dr. Jenssen also testified that N.D., likewise, exhibited no physical signs
of abuse upon examination. Id. at 84-85. Thereafter, Dr. Jenssen explicitly
addressed N.D.’s seeming reluctance to discuss the allegations:
Q: I want to talk about one of the things you said in your report
specifically with N.D. You said in you report, “Disclosure of sexual
abuse is a process, especially when the abuser is a parent or
stepparent.” Do you remember saying that in your report?
A: Yes.
Q: What do you mean by that?
A: Intra-familial abuse is one of the most devastating things
for a child. We know that based on evidence-based studies,
advanced literature, that more than 50 percent of children that
are abused as children don’t disclose it until they’re adults.
Children are most often sexually abused by people they know,
they love, and they trust. That can be very confusing to a child
when the person who they care about, or other people like or love,
it can be devastating to them in terms of establishing a trusting
relationship with – in future relationships or even with adults.
Sometimes there is implicit or explicit, like with both of these girls,
pressure not to disclose. Sometimes there’s threats, like for L.M.,
that she – [Appellant] would beat them if she told. And sometimes
or older children they understand or they’re fearful of what the
consequences of their disclosure will bring. You know, in this case,
it’s their stepfather. Their mother was very much in love with this
-9-
J-S48013-19
man who was very kind to her. Or their relationship with him, it’s
still a parent figure.
Id. at 85-86. Dr. Jenssen then discussed the delayed reporting in this case,
and expressed concern regarding L.M. and N.D.’s mother, who did not believe
the allegations against Appellant:
Q: Also, going back to your statement that disclosure of sexual
abuse is a process, and maybe this is just my interpretation, but
tell me if I’m interpreting this correctly. Sometimes when they
disclose they don’t disclose everything right away.
A: Oh, that’s very typical. In fact, not only is that so typical
for adolescents, that’s even very typical for adults who disclose
sexual abuse that happened to them as a child. They test the
waters. They test, like, is this a trustworthy person that I’m
disclosing to? Are they going to believe me? They just give a
little bit, you know, to test the waters. It was very clear to me,
in my experience when I was talking with N.D., I felt that she was
not yet ready to give her full disclosure. It was too painful for her.
I felt that her sister was more forthright with what was going on.
....
In this particular case, what they disclosed about their mother was
very concerning to me, as I’m a provider and my responsibility is
to ensure the safety and well-being – not only the physical safety
and well-being but the emotional safety and well-being of the child
– and I felt their mother reacted by not believing them, hitting
them, and then just denying as if anything happened. And as a
result of that they were not brought to medical attention until, you
know, sometime after the disclosure.
Id. at 88-89 (emphasis added). Dr. Jenssen concluded her direct testimony
by stating that all of her opinions recited above were rendered “to a reasonable
degree of medical certainty.” Id. at 89.
- 10 -
J-S48013-19
Appellant’s trial counsel then engaged in the following line of questioning
while cross-examining Dr. Jenssen concerning the truthfulness of the
allegations made by L.M. and N.D. during their examinations:
Q: When you say her mother had concerns, did you speak with
her mother?
A: I don’t recall speaking with her mother. So I’m assuming it
was arranged through the social worker or somebody that works
in my office.
Q: Okay. So, then, you’re also assuming that the girls’ mother
hit them, or beat them, or did whatever it is that they told you
she did.
A: They told us she did.
Q: When they – they told you that.
A: That is correct.
Q: That there was – you didn’t inquire of the mother if this
happened.
A: I think that they are both bright, you know, 12 and 14
year olds. I think they could speak for themselves.
Q: You didn’t inquire of the mother if she did that, right?
A: Why would I?
Q: Well, you are coming in here today and you’re telling
these people that you’ve been told something. And you’re
telling these people that obviously these children are
telling you the truth. That’s what you’re telling them.
A: Yes.
....
Q: You just take what they tell you at face value.
- 11 -
J-S48013-19
A: When I am doing a medical evaluation and speaking to a
child we ask the questions in an open-ended way. I am not saying
to the child, “Did your mother hit you?” This was information that
they provided freely to me. So yes, in this particular case, I
believe what they were telling me.
Q: You just accepted what they told you.
A: Yes, other than what I said before about N.D. I felt that she
was holding back, which, it’s not me. It’s what scientific studies
have shown. Evidence based medicine have shown that disclosure
is so delayed and such a difficult process because society doesn’t
want to believe children. This is why children delay until adulthood
to disclose their childhood abuse. Sexual abuse is very common.
About ten percent of the population is sexually abused and yet the
majority wait until adulthood. It is because the people – the
reason why they don’t disclose is for just this, is because they
don’t feel that somebody is going to believe them.
....
Q: Okay. And is it your position to the jury that no child has
ever lied about being abused, sexually abused?
....
A: It is my position, and what is published in the
literature, that very few children lie about sexual abuse,
less than four percent.
Q: Okay.
A: And most of the circumstances are involved with children
who come from divorced or separation – ongoing divorce or
separation. That’s what’s in the medical literature.
Q: I asked – I simply asked you for your opinion, what you
were telling the jury.
A: Yes. And that’s where – my opinion is based on my
knowledge of, you know, and my ongoing knowledge of what’s in
the medical literature.
Q: Okay.
- 12 -
J-S48013-19
A: So it is extremely unusual for children to lie, less than
four percent in published studies.
Q: May I continue?
A: Yes, please.
* * *
Q: Okay. The second examination of L.M. says that her mother
is better now. Do you recall that?
A: Yes.
Q: She seems to care now?
A: That’s what the child said.
Q: Do you remember that?
A: Yes.
Q: And, so, do you believe, since everything else that the
children told you you believe, you believe that as well[?]
A: I believe what the child was telling me, yes.
Q: Okay. So after the second examination everything between
mother and daughter was better now, right? They were the
words.
A: Whatever words exactly I put in my note. I don’t remember
specifically other than that she did say that things were better
with her mother.
Q: And she – her mom seems to care now.
A: That’s what she said.
Id. at 96-102 (emphasis added).
- 13 -
J-S48013-19
Based on the foregoing testimony, Appellant avers that trial counsel’s
decision not to object under § 5920 to Dr. Jenssen’s testimony regarding the
credibility of L.M. and N.D. on both direct and cross examination, coupled with
trial counsel’s strange decision to adduce additional testimony along the same
lines, constitutes ineffective assistance of counsel under the PCRA.
To prevail in a PCRA proceeding upon a claim of ineffectiveness of
counsel, i.e., to establish that such assistance so undermined the truth-
determining process that no reliable adjudication of guilt or innocence could
have taken place, Appellant must establish: (1) that the claim is of arguable
merit; (2) that counsel had no reasonable strategic basis for his or her action
or inaction; and (3) that, but for the errors and omissions of counsel, there is
a reasonable probability that the outcome of the proceedings would have been
different. 2 See Commonwealth v. Kimball, 724 A.2d 326, 333 (Pa. 1999).3
As a general proposition, “[c]ounsel is presumed to be effective and [the
appellant] has the burden of proving otherwise.” Commonwealth v. Rivers,
786 A.2d 923, 927 (Pa. 2001). Finally, “[f]ailure to meet any prong of the
____________________________________________
2 See 42 Pa.C.S. § 9543(a)(2)(ii), regarding eligibility for relief from
ineffective assistance of counsel.
3 This standard derives from the holdings in Strickland v. Washington, 466
U.S. 668 (1984), and Commonwealth v. Pierce, 527 A.2d 973 (Pa. 1987).
- 14 -
J-S48013-19
test will defeat an ineffectiveness claim.” Commonwealth v. Wright, 961
A.2d 119, 149 (Pa. 2008).
The lynchpin of Appellant’s argument is Commonwealth v.
Maconeghy, 171 A.3d 707 (Pa. 2017), wherein our Supreme Court affirmed
our conclusion that expert testimony addressing the credibility of minor
victims in a similar context was improperly admitted under § 5920.4
Maconeghy, however, had not yet been decided when Appellant’s trial took
place, which significantly undercuts Appellant’s heavy reliance upon that
precedent. See Appellant’s brief at 16-24 (drawing numerous parallels
between the instant case and Maconeghy). Furthermore, Appellant’s claim
sounds in the context of ineffective assistance of counsel rather than trial court
error, and he “must demonstrate that counsel was incompetent under the law
____________________________________________
4 In Maconeghy, the defendant was convicted of sexually assaulting his
stepdaughter. Id. at 708. In addition to other testimony, the Commonwealth
presented expert testimony from a physician, who conducted a review of the
victim’s medical history and a physical examination. Id. The physician
discovered no physical evidence of abuse. During cross examination, defense
counsel “repeatedly attempted to secure a concession that the medical
evidence did not support a determination of abuse.” Id. In response, the
physician replied: “The history she provided to me pretty clearly indicated that
she was sexually abused.” Id. The physician also opined that his “medical
encounter” with the child “indicated the child had been victimized.” Id.
Finally, on redirect, the physician stated: “I really strongly believe that was
my medical conclusion that this child was victimized.” Id. Based upon this
testimony, our Supreme Court held that “an expert witness may not express
an opinion that a particular complainant was a victim of sexual assault based
upon witness accounts couched as a history, at least in the absence of physical
evidence of abuse. We find that such testimony intrudes into the province of
the jury . . . .” Id. at 779.
- 15 -
J-S48013-19
in existence at the time of trial.” Commonwealth v. Gribble, 863 A.2d 455,
464 (Pa. 2004). It is practically axiomatic under Pennsylvania law that
“[c]ounsel cannot be deemed ineffective for failing to predict developments or
changes in the law.” Id. The Supreme Court’s guidance in Maconeghy was
simply not available to Appellant’s counsel (or, indeed, to anyone) at the time
of trial, and we cannot evaluate counsel’s actions in the light of that precedent.
This is not altogether fatal to Appellant’s claims, as Appellant also relies
upon § 5920(b)(3)’s independent prohibition against the admission of
credibility opinions by experts in cases such as this one. Additionally, relevant
precedent from both this Court and the Pennsylvania Supreme Court that was
operative at the time of Appellant’s trial also suggests such a prohibition is
also recognized at Pennsylvania’s common law. See Commonwealth v.
Seese, 517 A.2d 920, 922 (Pa. 1986) (“[I]t was error to admit expert
testimony as to the credibility of . . . the crime victim. . . . That testimony
was necessar[ily] prejudicial to the appellant due to the fact that the
prosecution relied primarily upon the perceived veracity of the victim to
establish its case.”); see also Commonwealth v. Hernandez, 615 A.2d
1337, 1340 (Pa.Super. 1992) (“We are mindful that the admissibility of expert
testimony in child abuse cases must be evaluated cautiously in order to
prevent encroachment upon the jury’s function by the unfair enhancement of
a child victim’s credibility.”). Appellant’s claim for relief will have to find
- 16 -
J-S48013-19
purchase solely within the confines of § 5920 and the case law interpreting it
that existed at the time of his trial. See Gribble, supra at 464.
Evaluating the arguable merit of Appellant’s claims in the proper
temporal posture, it appears that much of the complained-of testimony was
specifically permitted pursuant to the “safe harbor” afforded by the statute,
which collectively provides that “the witness may testify to facts and opinions
regarding specific types of victim responses and victim behaviors” such as “the
dynamics of sexual violence, victim responses to sexual violence[,] and the
impact of sexual violence on victims during and after being assaulted.” 42
Pa.C.S. §§ 5920(b)(1)-(2). Upon close inspection, Dr. Jenssen’s testimony
during her direct examination by the Commonwealth appears to fall entirely
within this category of permissible testimony. In relevant part, Dr. Jenssen
shared her expert knowledge to explain the lack of physical evidence of sexual
assault in this case, and delineate typical behaviors exhibited by minor victims
of interfamilial abuse such as delayed reporting and reluctant disclosure. See
N.T. Trial II, 12/2/2015, at 78-89. Although Dr. Jenssen certainly discussed
her expert opinions and relevant professional sources in the context of her
experiences examining L.M. and N.D., such testimony appears5 to be
____________________________________________
5 This Court has concluded that § 5920’s remit distinguishes a number of
precedents concerning the admissibility of expert testimony, including
Commonwealth v. Dunkle, 602 A.2d 830, 837 (Pa. 1992) (“Not only is there
no need for testimony about the reasons children may not come forward, but
permitting it would infringe upon the jury’s right to determine credibility.”
- 17 -
J-S48013-19
admissible under § 5920(b)(2). See 42 Pa.C.S. § 5920(b)(2) (allowing
testimony regarding “specific types of victim responses and behaviors”).
Overall, Dr. Jenssen’s direct testimony never explicitly addressed whether or
not the complained-of sexual assaults in this case actually ever took place,
and expressed no opinion regarding the overall truthfulness of L.M. or N.D.
As such, Appellant’s claims regarding trial counsel’s failure to object to Dr.
Jenssen’s direct testimony are without arguable merit.6 See Commonwealth
v. Carter, 111 A.3d 1221, 1223 (Pa.Super. 2015) (concluding that expert
____________________________________________
(emphasis in original)) and Commonwealth v. Balodis, 747 A.2d 341, 345-
46 (Pa. 2000) (relying upon Dunkle to disapprove of expert testimony
regarding the “general characteristics of child victims of sexual abuse”). See
Commonwealth v. Carter, 111 A.3d 1221, 1224 (Pa.Super. 2015). Our
Supreme Court has agreed with this general conclusion, see Commonwealth
v. Olivo, 127 A.3d 769, 780-81 (Pa. 2015) (adjudicating the constitutionality
of § 5920 under Art. V, § 10(c) of the Pennsylvania Constitution), but has
declined to specifically delineate the extent to which such prior precedent
continues to constitute “good” law. See Commonwealth v. Maconeghy,
171 A.3d 707, 776 n.2 (Pa. 2017) (“The decisions in at least Dunkle and
Balodis are impacted by the enactment of Section 5920 of the Judicial Code
. . . . It is beyond the scope of this opinion to discuss the specific effect of the
statute on these cases.”).
6 This Court has recently suggested a more-stringent “best practice” under
§ 5920 that would potentially render Dr. Jenssen’s testimony in this case
objectionable due to her direct familiarity with the underlying allegations: “The
Commonwealth did not provide [the expert witness] with a factual account of
the allegations against Appellant, and she testified without knowing anything
about the allegations, the [v]ictim, or [the appellant] in order to comply with
Section 5920.” Commonwealth v. Cramer, 195 A.3d 594, 608 (Pa.Super.
2018). Instantly, Cramer is inapplicable in evaluating trial counsel’s
effectiveness, as it post-dates Appellant’s trial. See Commonwealth v.
Gribble, 863 A.2d 455, 464 (Pa. 2004) (“Counsel cannot be deemed
ineffective for failing to predict developments or changes in the law.”).
- 18 -
J-S48013-19
testimony regarding delayed reporting in child sexual assault victims was
admissible under § 5920 where the expert “did not testify regarding this victim
specifically or whether or not the alleged incidents actually occurred”); see
also Commonwealth v. Hernandez, 615 A.2d 1337, 1344 (Pa.Super. 1992)
(“[D]efense counsel cannot be deemed ineffective for not raising a meritless
objection.”).
We must conclude, however, that Appellant has established arguable
merit with respect to significant portions of trial counsel’s cross-examination
of Dr. Jenssen, which undeniably adduced testimony directly speaking to the
credibility of L.M. and N.D. Although Dr. Jenssen never explicitly stated
whether or not she personally believed that a sexual assault had taken place
in this case,7 she repeatedly stated that she “believed” what L.M. and N.D.
told her during their examinations and also vouched for them as “bright”
children that were capable of speaking for themselves. See N.T. Trial II,
12/2/15, at 96-102. Facially, this testimony falls within the ambit of the
statutory and common law prohibitions against experts offering credibility
opinions in their testimony and would likely be inadmissible given a timely
objection. See 42 Pa.C.S. § 5920(b)(3); see also Seese, supra at 922.
____________________________________________
7 Although Dr. Jenssen spoke, generally, to the credibility of L.M. and N.D.,
her statements of belief are explicitly limited to whether or not she had taken
their accounts of their mother striking them at “face value.” As such, she
never explicitly addressed whether or not she believed the allegations of
sexual abuse.
- 19 -
J-S48013-19
Consequently, we must assess whether Appellant’s claim satisfies the
remaining two prongs of the ineffectiveness standard.
Although we have serious concerns regarding the strategic basis of trial
counsel’s actions, we need not make a determination regarding that prong of
the Strickland test for ineffectiveness.8 Ultimately, Appellant’s claim fails
because he has not established prejudice as it is defined in the context of
____________________________________________
8 The learned Concurrence has suggested that Appellant’s trial counsel had a
reasonable strategic basis for his actions. The PCRA court reached the same
conclusion, construing trial counsel’s line of questioning as an attempt “to
prove that she believed the allegedly abused children regardless of the
inconsistencies in their testimony . . . .” PCRA Court Opinion, 2/5/19, at 11.
We respectfully disagree and take a much dimmer view of trial counsel’s
questionable decision to adduce testimony: (1) that he knew at the time of
trial would be inadmissible, see N.T. PCRA Hearing II, 1/28/19, at 15-16; (2)
that he knew at the time of trial would lead to Dr. Jenssen bolstering the
victim’s credibility to the detriment of his client, id. at 17-19; (3) without a
proper foundation to actually impeach Dr. Jenssen’s credibility, id. at 21-22;
and (4) without seeking any curative instruction from the trial court when this
attempt at impeachment predictably faltered. Id. at 20. Any utility or
advantage that might have been gained by impeaching Dr. Jenssen was
undercut by these significant deficiencies in trial counsel’s strategy. As such,
Appellant’s trial counsel should have either declined to pursue such a fraught
strategy altogether, sought curative instructions, or elicited bias testimony
from Dr. Jenssen with reference to the “thousands” of exams that she had
conducted over the course of her career. See N.T. Trial II, 12/2/15, at 73.
Even allowing that trial counsel possessed some strategic intent in this case,
his plan was not reasonably calculated or executed. See Commonwealth v.
Rounds, 542 A.2d 997, 999 (Pa. 1988) (opining in the context of expert
opinion offered regarding the veracity of minor sexual assault victims that
“[t]here is no reason that can be offered for permitting the damaging opinion
of [the expert] to be admitted”). As such, I cannot join in the Concurrence’s
suggestion that trial counsel had a reasonable strategic basis for his actions.
Such a conclusion is belied by trial counsel’s own testimony.
- 20 -
J-S48013-19
these ineffectiveness claims under the PCRA. The central thesis of Appellant’s
argument concerning prejudice is as follows:
Because the opinion, vouching for L.M.’s and N.D.’s credibility,
came from a highly qualified and experienced child abuse
pediatrician, and was buttressed with statements claiming
scientific and statistical studies supported the opinion, there was
substantial risk of prejudice for the Appellant. A jury could
easily be overly impressed or swayed by the opinions of
experts such as [Dr. Jenssen], particularly when surrounded with
the hallmarks of the scientific method.
Appellant’s brief at 23-24 (emphasis added).
Appellant’s argument regarding prejudice has misconstrued the
extraordinary burden of establishing prejudice under the PCRA. Although
Appellant has recited an arguably correct standard of review for this question,
Appellant’s application claims that the “risk of prejudice,” or the mere potential
that the jury could have been “impressed or swayed” by Dr. Jenssen’s
testimony, is sufficient to establish prejudice. This claim erroneously asserts
that trial counsel’s actions were prejudicial under the “harmless error”
standard. See Commonwealth v. Story, 383 A.2d 155, 164 (Pa. 1978)
(“[A]n error cannot be held harmless unless the appellate court determines
that the error could not have contributed to the verdict. Whenever there is a
reasonable possibility that an error might have contributed to the conviction,
the error is not harmless.”). By contrast, ineffectiveness claims under the
PCRA requires the affirmative demonstration of actual prejudice. See
Strickland v. Washington, 466 U.S. 668, 686 (1984) (“The benchmark for
judging any claim of ineffectiveness must be whether counsel’s conduct so
- 21 -
J-S48013-19
undermined the proper functioning of the adversarial process that the trial
court cannot be relied on as having produced a just result.”). In sum,
Appellant’s discussion inappropriately conflates “harmless error” with the
more-exacting “actual prejudice” standard that is applicable under the
PCRA.9/10
Our Supreme Court clearly delineated this distinction in
Commonwealth v. Spotz, 84 A.3d 294 (Pa. 2014) (“Spotz II”):
[T]he test for prejudice in the ineffectiveness context is more
exacting than the test for harmless error, and the burden of proof
is on the defendant, not the Commonwealth. As a general and
practical matter, it is more difficult for a defendant to prevail on a
claim litigated through the lens of counsel ineffectiveness, rather
than as a preserved claim of trial court error. . . .
A defendant raising a claim of ineffective assistance of counsel is
required to show actual prejudice; that is, that counsel’s
ineffectiveness was of such magnitude that it could have
reasonably had an adverse effect on the outcome of the
____________________________________________
9 This is a critical distinction because the precedent relied upon by Appellant
that resulted in the grant of a new trial uniformly arises in the context of
claims of trial court error on appeal, as opposed to collateral review. See
Commonwealth v. Maconeghy, 171 A.3d 707, 710 (Pa. 2017).
10 The learned Concurrence suggests that we have committed an error by
correctly reciting the standard for establishing prejudice under the PCRA for a
claim of ineffective assistance of counsel, and then applying that standard to
Appellant’s arguments of record. We respectfully disagree. Our conclusion
that Appellant has not sustained his burden of demonstrating “actual
prejudice” is not the product of some mistake in law, but the natural
consequence of Appellant presenting insufficient evidence to establish such.
While we commend the learned Concurrence for its solicitude concerning the
heavy burden posed by such a standard, we are bound by well-established
precedent in this area of law. See Commonwealth v. Williams, 9 A.3d 613,
619 n.7 (Pa. 2010) (“[I]t is more difficult to obtain relief on collateral review
because Strickland places a heavier burden on the defendant.”).
- 22 -
J-S48013-19
proceedings. This standard is different from the harmless error
analysis that is typically applied when determining whether the
trial court erred in taking or failing to take certain action. . . . [The
harmless error standard] places the burden on the Commonwealth
to show that the error did not contribute to the verdict beyond a
reasonable doubt, is a lesser standard than the Pierce prejudice
standard, which requires the defendant to show that counsel’s
conduct had an actual adverse effect on the outcome of the
proceedings. This distinction appropriately arises from the
difference between a direct attack on error occurring at trial and
a collateral attack on the stewardship of counsel. In a collateral
attack, we first presume that counsel is effective, and that not
every error by counsel can or will result in a constitutional violation
of a defendant’s Sixth Amendment right to counsel.
Id. at 315. Instantly, Appellant’s averments concerning prejudice are
unavailing as a result of this distinction, as Appellant’s claims regarding
prejudice are confined to unapplied speculation regarding how Dr. Jenssen’s
testimony might have impacted the proceedings below. This Court has
rejected such arguments, concluding that “[u]nsupported speculation does not
establish reasonable probability” that the outcome of the proceedings would
have been different. Commonwealth v. Charleston, 94 A.3d 1012, 1026
(Pa.Super. 2014).
“In making [a prejudice] determination, a court hearing an
ineffectiveness claim must consider the totality of the evidence before the
judge or jury . . . .” Commonwealth v. Lesko, 15 A.3d 345, 383 (Pa. 2011)
(emphasis in original).11 Instantly, the Commonwealth’s case rested largely
____________________________________________
11 The learned Concurrence has also averred that we have impermissibly
conflated sufficiency of the evidence with actual prejudice. However, our
- 23 -
J-S48013-19
upon testimonials from L.M. and N.D. that were uncorroborated by physical
evidence, but Appellant was unsuccessful in eliciting significant inconsistencies
or falsities in their respective testimonies. See N.T. Trial I, 12/1/15, at 64-
102 (cross-examination of L.M.); see also N.T. Trial II, 12/2/15, at 39-58
(cross-examination of N.D.). At best, Appellant raised a question regarding
whether Appellant’s bedroom door had a lock. Compare N.T. Trial I, 12/1/15,
at 69-70 (L.M. testifying that Appellant would lock the door to the bedroom
when the assaults took place) with N.T. Trial III, 12/3/15, at 28-29
(testimony that the bedroom could not be locked, but was held close by a
large container filled with coins). Although uncorroborated with physical
evidence, the victim testimonials in this case also remained uncontroverted at
the close of the proceedings. As such, it seems clear that the discrepancy that
resulted from trial counsel’s erroneous cross-examination of Dr. Jenssen was
not of a sufficient magnitude to undermine confidence in the jury’s verdict
based upon the arguments advanced by Appellant. Accord Spotz, supra at
315; cf. Commonwealth v. Sparks, 539 A.2d 887, 890 (Pa.Super. 1988)
____________________________________________
discussion of the totality of the evidence presented at trial is commanded by
the relevant precedent of our Supreme Court. See Commonwealth v.
Lesko, 15 A.3d 345, 383 (Pa. 2011). The point of this evidentiary review is
not to establish that the Commonwealth’s case was legally “sufficient,” but to
ascertain whether trial counsel’s error had a palpable effect upon the outcome
of the proceeding such that it constitutes “actual prejudice.” Based upon our
review of the totality of the evidence, we conclude that it did not. Tellingly,
the Concurrence does not explicitly opine regarding whether or not it would
conclude that “actual prejudice” resulted in this controversy.
- 24 -
J-S48013-19
(“The Commonwealth’s evidence was not overwhelming, and the
contradictions and inadequacies therein, if pointed out to the jury, may well
have created reasonable doubt as to whether appellant had committed the
crimes with which he was charged.”).
In totality, Appellant has failed to demonstrate actual prejudice with
respect to the arguable bolstering of L.M.’s and N.D.’s respective credibility by
Dr. Jenssen’s testimony during cross-examination by Appellant’s trial counsel.
As such, Appellant’s claim for relief must fail.12
Order affirmed.
Judge Shogan joins the memorandum.
Judge Strassburger files a concurring memorandum.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 1/24/20
____________________________________________
12 Although we affirm on a separate basis from that originally espoused by
the PCRA court, “[t]his Court may affirm a PCRA court’s decision on any
grounds if the record supports it.” Commonwealth v. Ford, 44 A.3d 1190,
1194 (Pa.Super. 2012).
- 25 -
| {
"pile_set_name": "FreeLaw"
} |
PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
PAT WEBSTER; JOEM WEBSTER;
ELIZABETH WEBSTER; CHARLES
FOLTZ; LINDA FOLTZ; GLORIA FOLTZ
WALKER; ELIZABETH WEBSTER, as
Executrix for the Estate of Allaina
Garrett Whetzel,
Plaintiffs-Appellants,
v.
UNITED STATES DEPARTMENT OF No. 11-1739
AGRICULTURE, by and through its
Agency, the Natural Resources
Conservation Service; POTOMAC
VALLEY CONSERVATION DISTRICT;
HARDY COUNTY COMMISSION; WEST
VIRGINIA STATE CONSERVATION
AGENCY,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of West Virginia, at Elkins.
John Preston Bailey, Chief District Judge.
(2:09-cv-00138-JPB)
Argued: May 16, 2012
Decided: July 13, 2012
Before WILKINSON, GREGORY, and FLOYD,
Circuit Judges.
2 WEBSTER v. USDA
Affirmed by published opinion. Judge Floyd wrote the opin-
ion, in which Judge Wilkinson and Judge Gregory joined.
COUNSEL
ARGUED: Christopher Patrick Stroech, Shepherdstown,
West Virginia, for Appellants. Mark R. Haag, UNITED
STATES DEPARTMENT OF JUSTICE, Washington, D.C.,
for Appellees. ON BRIEF: Silas B. Taylor, OFFICE OF THE
WEST VIRGINIA ATTORNEY GENERAL, Charleston,
West Virginia, for Appellee West Virginia State Conservation
Agency; Jessica M. Baker, WALTERS, KRAUSKOPF &
BAKER, Moorefield, West Virginia, for Appellees Potomac
Valley Conservation District and Hardy County Commission;
Ignacia S. Moreno, Assistant Attorney General, Elizabeth
Ann Peterson, Environment & Natural Resources Division,
UNITED STATES DEPARTMENT OF JUSTICE, Washing-
ton, D.C., for Appellee United States Department of Agricul-
ture.
OPINION
FLOYD, Circuit Judge:
Over thirty-five years ago, the Natural Resources Conser-
vation Service (NRCS),1 working with local sponsors, devised
a project to provide watershed protection, flood prevention,
and recreation along the Lost River Subwatershed. The pro-
posed project involved a combination of land-treatment mea-
sures and five dams and impoundments. In 1974, the NRCS
1
The NRCS is an agency of the United States Department of Agricul-
ture (USDA). Its predecessor agency until 1994 was the Soil Conservation
Service. Holly Hill Farm Corp. v. United States, 447 F.3d 258, 260 n.1
(4th Cir. 2006). For ease of reference, we consistently refer to the agency
as the "NRCS."
WEBSTER v. USDA 3
issued an environmental impact statement relating to the proj-
ect, and since that time, three dams and most of the land-
treatment measures have been completed. After preparing a
supplemental environmental impact statement in 2009, the
NRCS issued a record of decision that eliminated one of the
remaining dams from the project and authorized construction
of the final dam for the added purpose of providing water sup-
ply. Appellants, seven individuals who allege that their land
will be adversely affected by this final dam’s construction,
filed this action contending that the NRCS has failed to com-
ply with the National Environmental Policy Act (NEPA).
They now appeal the district court’s order granting Appellees’
motion for summary judgment. Because we determine that the
NRCS has complied with the procedures mandated by the
NEPA and taken a hard look at the project’s environmental
effects, we affirm.
I.
A.
The "NEPA is a procedural statute" that "sets forth a regu-
latory scheme for major federal actions that may significantly
affect the natural environment." Nat’l Audubon Soc’y v. Dep’t
of the Navy, 422 F.3d 174, 184 (4th Cir. 2005). Its procedural
mandates serve dual purposes. Id. They ensure that an agency
planning a major federal action obtains and considers the nec-
essary information concerning any significant environmental
impacts that the action may cause. Hodges v. Abraham, 300
F.3d 432, 438 (4th Cir. 2002). They also guarantee that the
public has access to the relevant information about the pro-
posed action so that it can participate in the decisionmaking
process. Id.
Under the NEPA, every "federal agency contemplating a
major action" must formulate an environmental impact state-
ment (EIS) if the action could significantly affect the environ-
ment. Robertson v. Methow Valley Citizens Council, 490 U.S.
4 WEBSTER v. USDA
332, 349 (1989); see also 42 U.S.C. § 4332(C). An EIS must
contain certain information specified by federal statute and
regulations promulgated by the Council of Environmental
Quality (CEQ), a governmental body created by the NEPA.
Nat’l Audubon Soc’y, 422 F.3d at 184-85; Hodges, 300 F.3d
at 438. This information includes "the environmental effects
and impacts of the proposed action, reasonable alternatives to
it, possible mitigation measures for any negative environmen-
tal impacts that will result from it, and the cumulative impacts
of it combined with other past, present, or foreseeable future
actions." Nat’l Audubon Soc’y, 422 F.3d at 185 (citations
omitted).
When preparing an EIS, an agency must follow procedures
established by the CEQ. Id. These procedures require that an
agency draft an EIS in stages. Id. The process begins with the
agency publishing in the Federal Register a notice of intent to
prepare and consider an EIS. 40 C.F.R. §§ 1501.7, 1508.22.
Then the agency must engage in a "scoping" process designed
to determine the scope of the issues to be addressed in the EIS
and to identify significant issues related to the proposed
action. Id. § 1501.7. During the scoping process, the agency
must, among other things, invite participation and input by
federal, state, and local agencies, as well as the public. Id.; see
also Citizens’ Comm. to Save Our Canyons v. U.S. Forest
Serv., 297 F.3d 1012, 1022 (10th Cir. 2002). Utilizing infor-
mation acquired during the scoping process, the agency is
then to prepare an initial draft EIS, which it must make pub-
licly available and circulate to other agencies for feedback. 40
C.F.R. §§ 1502.9(a), 1503.1. After doing so, the agency must
draft a final EIS that addresses any comments. Id.
§§ 1502.9(b), 1503.4.
Under certain circumstances, after the issuance of a final
EIS, the agency may draw up a supplemental EIS. It may pre-
pare a supplemental EIS if it determines that doing so would
further the purposes of the NEPA. Id. § 1502.9(c)(2). A sup-
plemental EIS becomes mandatory if the agency "makes sub-
WEBSTER v. USDA 5
stantial changes in the proposed action that are relevant to
environmental concerns" or if "significant new circumstances
or information relevant to environmental concerns and bear-
ing on the proposed action or its impacts" arise. Id.
§ 1502.9(c)(1). The agency must prepare, circulate, and file a
supplemental EIS in the same manner as draft and final EISs,
except, in general, it need not undertake a scoping process. Id.
§ 1502.9(c)(4). But if the agency makes substantial changes to
the proposed action or significant new circumstances or infor-
mation bearing on the proposal or its impacts arise, the
agency must revise the determinations reached in the initial
scoping process. Id. § 1501.7(c).
Finally, after the agency makes a decision regarding the
action, it must publish a record of decision, at which point it
may then finalize its action. Nat’l Audubon Soc’y, 422 F.3d
at 185. As a purely procedural statute, the NEPA "does not
mandate particular results, but simply prescribes the necessary
process." Robertson, 490 U.S. at 350. In that sense, "it does
not force an agency to reach substantive, environment-
friendly outcomes," meaning that as long as the agency ade-
quately considers a proposed project’s adverse environmental
effects, it may choose to pursue the project if it decides that
the benefits outweigh them. Nat’l Audubon Soc’y, 422 F.3d at
184. Simply put, the "NEPA merely prohibits unin-
formed—rather than unwise—agency action." Robertson, 490
U.S. at 351.
With this regulatory framework in mind, we now address
the underlying events giving rise to this appeal.
B.
In December 1944, Congress enacted the Flood Control
Act of 1944, ch. 665, 58 Stat. 887, authorizing "the construc-
tion and operation of certain dam and reservoir projects."
Cent. Elec. Power Coop., Inc. v. Se. Power Admin., 338 F.3d
333, 335 (4th Cir. 2003). Among the authorized projects were
6 WEBSTER v. USDA
"works of improvement for run-off and waterflow retardation,
and soil-erosion prevention" for various specified watersheds,
including the Potomac River Watershed. 58 Stat. at 905-06.
The dispute here involves a project on the Lost River Sub-
watershed, a part of the Potomac River Watershed situated in
Hardy County, West Virginia.
Pursuant to this grant of authority, the NRCS, upon appli-
cation by local sponsoring organizations,2 developed the "Lost
River Subwatershed Project" (Project). In October 1974, after
circulating a draft for comment, the NRCS issued a final EIS
(1974 EIS) related to the Project. In it, the NRCS observed
that the Lost River Subwatershed was incurring damage from
erosion, sedimentation, and frequent floods. It also recognized
the need for more recreational opportunities in the area. The
NRCS thus identified three overarching purposes underlying
the Project: watershed protection, flood prevention, and recre-
ation.
Additionally, in the 1974 EIS, the NRCS analyzed six alter-
natives, including the alternative of no action, before settling
on a plan that involved applying land-treatment measures to
94,750 acres and constructing five dams and impoundments
on designated sites. Four of the dams, located on Sites 4, 10,
23, and 27, were to be single-purpose flood-retarding struc-
tures. The fifth dam, located on Site 16, was to be a multiple-
purpose floodwater storage and recreation structure. The
NRCS described the Project’s anticipated environmental
impacts and recognized that it would require relocating eleven
residences. The NRCS also considered and responded to com-
ments received by various governmental agencies.
2
Originally, the local project sponsors consisted of the County Court of
Hardy County and the Potomac Valley Conservation District (PVCD). As
the Project progressed, the Hardy County Commission (HCC) replaced the
County Court as a sponsor. The West Virginia State Conservation Com-
mittee, which is the governing board of directors of the West Virginia
State Conservation Agency (WVSCA), also later joined.
WEBSTER v. USDA 7
Also in October 1974, the NRCS and the local project
sponsors released a work plan for implementing the Project.
They discovered, however, that local support for the Project
was lacking, prompting them to suspend its implementation.
In 1977, the NRCS noted in a letter that revival of the Project
would primarily depend on a decision by the local sponsors
to proceed. After serious flooding in 1985 caused damage
along the Lost River, the project sponsors requested that the
NRCS resume implementation of the Project, so it did.
In August 1989, the NRCS issued an environmental assess-
ment (1989 EA), which is a document that an agency prepares
to assist its planning and decisionmaking or to determine
whether an EIS is necessary, 40 C.F.R. §§ 1501.3, 1501.4(c).
In the 1989 EA, the NRCS reevaluated potential environmen-
tal impacts relating to Site 4, the first dam scheduled for con-
struction. A little over a year later, the NRCS drafted a
"Supplemental Information Report" analyzing whether there
had been any significant changes to the Project as a whole or
whether any significant environmental changes had occurred
since issuance of the 1974 EIS. It concluded that there had
been no such changes and determined that the 1974 EIS still
adequately described the Project and its impacts. Neverthe-
less, in this report, the NRCS addressed some insignificant
environmental changes and changes with respect to the costs,
benefits, and opportunities for incidental recreation.
The NRCS issued a record of decision in January 1991
approving implementation of the Project. A federal lawsuit
was then brought challenging the Project and the planned con-
struction of the dam at Site 4, but the parties ultimately agreed
to dismiss the claims involving Site 4 with prejudice and the
claims challenging the remainder of the sites without preju-
dice. In May 1994, as Site 4’s dam was under construction,
the NRCS issued an environmental information report relating
to the next dam scheduled for construction, the Site 27 dam.
By 2001, construction of the dams on Sites 4 and 27 was
8 WEBSTER v. USDA
complete, and land-treatment measures had been applied to
16,740 acres in accordance with the Project.
The NRCS then turned its attention to construction of the
dam at Site 10. In 2001, it issued an environmental assess-
ment report (2001 EA) primarily addressing this dam’s
planned construction. The NRCS discussed a recent drought
in the area that prompted the local sponsors to request that it
add water supply as a purpose for the Site 10 dam. It evalu-
ated the need for this additional purpose and the resultant
effects of such a change. The NRCS considered three alterna-
tives involving the use of surface water, groundwater, and
water purchase agreements before concluding that adding
water supply storage to the dam at Site 10 was the only practi-
cable alternative for providing both water supply and flood
prevention.
The Hardy County Public Service District (HCPSD),
though not a local sponsor of the Project, began planning the
construction of the "Baker/Mathias Water Distribution Sys-
tem" as early as October 2003, when it released a preliminary
engineering report. The purpose of the system, which the
USDA agreed to fund partially, was to supply water to the
central region of Hardy County. To do so, it would utilize the
water supply source from the dam at Site 10. Although con-
struction of Site 10’s dam was complete by 2005, as of 2009,
construction of the water distribution and treatment system
remained pending.
Meanwhile, the NRCS and the local project sponsors con-
tinued to evaluate Hardy County’s water resources. In April
2004, the NRCS and the WVSCA prepared a report entitled
"Hardy County Water Resources Assessment," which evalu-
ated the existing and projected water needs for Hardy County.
Also, in March 2007, the local project sponsors, with assis-
tance from the NRCS, issued a report entitled "Projected
Water Needs in Hardy County." This report concluded that
WEBSTER v. USDA 9
adding water supply storages to the dams at Sites 10 and 16
was necessary to meet the projected short-term water demand.
In 2005 the local project sponsors requested that the NRCS
add water supply and remove recreation as purposes for Site
16’s dam. That same year, the NRCS issued a report
reevaluating Site 23 and proposing its elimination. The
changes to the Site 16 dam’s purposes and the proposed elimi-
nation of Site 23 required the NRCS to prepare a supplemen-
tal EIS, so in 2006 the NRCS published a notice of intent to
prepare such a statement and engaged in a scoping process. In
April 2007, after circulating a draft for comment, the NRCS
published a final supplemental EIS (2007 SEIS). The 2007
SEIS reflected changes in the purposes of the Site 16 dam to
include flood control, water supply, and watershed protection,
but not recreation. Approximately two months later, the
NRCS issued a record of decision; however, the NRCS with-
drew it almost two years later after the filing of a federal law-
suit challenging it. According to the NRCS, additional
analyses and investigations involving Site 16 had become
available, and it wanted to incorporate them into its supple-
mental EIS. The district court thereafter dismissed the federal
lawsuit pursuant to the parties’ stipulation.
In March 2009, the NRCS published a notice of intent to
update and reissue a second draft supplemental EIS. It did not,
however, engage in another scoping process. After distribut-
ing a draft for comment, the NRCS issued a second final sup-
plemental EIS in August 2009 (2009 SEIS). In it, the NRCS
eliminated Site 23 from the Project and added water supply as
a purpose for the dam at Site 16. Although it removed recre-
ation as a purpose, it recognized that Site 16 would still offer
incidental recreational opportunities. As in the 2007 SEIS, the
purposes of Site 16’s dam were watershed protection, flood
prevention, and water supply. The NRCS considered seven-
teen alternatives for achieving these purposes, but analyzed
only two in detail, the no-action alternative and construction
of the dam at Site 16. After considering the relative impacts
10 WEBSTER v. USDA
of these two alternatives, including cumulative impacts, the
NRCS recommended constructing the dam at Site 16 and
described measures for mitigating its adverse impacts. In
October 2009, the NRCS issued a second record of decision
agreeing to implement the Project for Site 16.
C.
On November 23, 2009, Appellants filed a complaint in the
Northern District of West Virginia. Named as defendants
were the USDA, NRCS, PVCD, HCC, and WVSCA (collec-
tively, Appellees). Appellants challenged Appellees’ decision
to construct the dam at Site 16 and contended that they had
failed to comply with the NEPA. All Appellants asserted that
construction of the dam would not only affect their land, but
would cause them to lose at least some, if not all, of it. After
alleging numerous violations of the NEPA, primarily relating
to purported deficiencies in the 2009 SEIS, Appellants
requested declaratory and injunctive relief, costs, expenses,
and attorneys’ fees.
In early 2011, the parties filed cross-motions for summary
judgment. On June 13, 2011, the district court issued an order
granting Appellees’ motion for summary judgment and deny-
ing Appellants’. It addressed each alleged NEPA violation
before concluding that Appellees complied with the NEPA by
abiding by its procedural requirements, taking a hard look at
the environmental consequences that would result from con-
struction of the dam at Site 16, and allowing for public partic-
ipation in the decisionmaking process. Appellants brought this
timely appeal.
II.
We review de novo the district court’s order granting sum-
mary judgment. Henry v. Purnell, 652 F.3d 524, 531 (4th Cir.
2011) (en banc). "Summary judgment is appropriate only if
taking the evidence and all reasonable inferences drawn there-
WEBSTER v. USDA 11
from in the light most favorable to the nonmoving party, ‘no
material facts are disputed and the moving party is entitled to
judgment as a matter of law.’" Id. (quoting Ausherman v.
Bank of Am. Corp., 352 F.3d 896, 899 (4th Cir. 2003)).
In reviewing an agency’s efforts to comply with the NEPA,
our task is to ensure that it took a "hard look" at the environ-
mental consequences of the proposed action. Nat’l Audubon
Soc’y, 422 F.3d at 185. This review "requires a pragmatic
judgment whether the [EIS’s] form, content[,] and preparation
foster both informed decision-making and informed public
participation." Save the Peaks Coal. v. U.S. Forest Serv., 669
F.3d 1025, 1036 (9th Cir. 2012) (quoting Nat’l Parks & Con-
servation Ass’n v. Bureau of Land Mgmt., 606 F.3d 1058,
1072 (9th Cir. 2010)) (internal quotation marks omitted). A
hard look involves, at minimum, "a thorough investigation
into the environmental impacts of [the] action and a candid
acknowledgement of the risks that those impacts entail." Nat’l
Audubon Soc’y, 422 F.3d at 185. In conducting this review,
we "may not ‘flyspeck’ [the] agency’s environmental analy-
sis, looking for any deficiency, no matter how minor." Id. at
186. Instead, we "must take a holistic view of what the agency
has done to assess environmental impact" and "examine all of
the various components of [the] agency’s environmental anal-
ysis . . . to determine, on the whole, whether the agency has
conducted the required ‘hard look.’" Id.
Moreover, because the Administrative Procedure Act
(APA) governs our review of claims brought under the
NEPA, we may set aside the agency’s action only if it is "ar-
bitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law." N.C. Wildlife Fed’n v. N.C. Dep’t of
Transp., 677 F.3d 596, 601 (4th Cir. 2012) (quoting 5 U.S.C.
§ 706(2)(A)) (internal quotation marks omitted). This
involves a searching and careful, but ultimately narrow and
highly deferential, inquiry. Id.; Ohio Valley Envtl. Coal. v.
Aracoma Coal Co., 556 F.3d 177, 192 (4th Cir. 2009). In the
end, "[i]f the agency has followed the proper procedures, and
12 WEBSTER v. USDA
if there is a rational basis for its decision, we will not disturb
its judgment." Hodges, 300 F.3d at 445.
III.
On appeal, Appellants raise essentially eight issues, which
we address in turn.
A.
Appellants first contend that the NRCS failed to comply
with the NEPA in arriving at watershed protection, flood pre-
vention, and water supply as its stated purposes and needs for
constructing the dam at Site 16. They maintain that the NRCS
blindly accepted the purposes and needs provided by the local
project sponsors without conducting an independent, objec-
tive inquiry. Appellants also challenge as inadequate the evi-
dence relied upon by the NRCS in justifying these purposes
and needs. As a result, they insist that the NRCS’s stated pur-
poses and needs for the dam at Site 16 are unreasonable.
An EIS must "briefly specify the underlying purpose and
need to which the agency is responding in proposing the alter-
natives including the proposed action." 40 C.F.R. § 1502.13.
Only alternatives that accomplish the purposes of the pro-
posed action are considered reasonable, and only reasonable
alternatives require detailed study. Wyoming v. U.S. Dep’t of
Agric., 661 F.3d 1209, 1244 (10th Cir. 2011). So how the
agency defines the purpose of the proposed action sets the
contours for its exploration of available alternatives. See id.
Agencies enjoy considerable discretion in defining the pur-
poses and needs for their proposed actions, provided that they
are reasonable. See, e.g., id. at 1244-45; Nat’l Parks & Con-
servation Ass’n, 606 F.3d at 1070; Citizens Against Burling-
ton, Inc. v. Busey, 938 F.2d 190, 196 (D.C. Cir. 1991).
Typically, a purpose is unreasonable when the agency defines
it so narrowly as to allow "only one alternative from among
WEBSTER v. USDA 13
the environmentally benign ones in the agency’s power," such
that the EIS becomes essentially "a foreordained formality."
Citizens Against Burlington, 938 F.2d at 196. Conceivably, a
purpose can also be unreasonable if the agency draws it so
broadly that "an infinite number of alternatives would accom-
plish [it] and the project would collapse under the weight of
the possibilities." Id. But the potential for an agency to define
a purpose that broadly appears remote, for agencies have a
disincentive that assumedly would discourage them from
doing so: whereas drawing a purpose too narrowly is attrac-
tive because it eases the agency’s burden in drafting an EIS
by reducing the number of alternatives that it must explore in
detail, drawing a purpose too broadly complicates an agency’s
drafting of an EIS by expanding the number of alternatives it
must examine to a point that would make its task unmanage-
able.
In deciding on the purposes and needs for a project, it is
entirely appropriate for an agency to consider the applicant’s
needs and goals. See id. Appellants, in arguing that the NRCS
inappropriately relied upon the local project sponsors’ pur-
poses and needs, seek support from the Seventh Circuit’s
decision in Simmons v. United States Army Corps of Engi-
neers, 120 F.3d 664 (7th Cir. 1997), where it stated that agen-
cies have a "duty under [the] NEPA to exercise a degree of
skepticism in dealing with self-serving statements from a
prime beneficiary of the project." Id. at 669 (quoting Citizens
Against Burlington, 938 F.2d at 209 (Buckley, J., dissenting
in part)) (internal quotation marks omitted). This decision,
however, is of no assistance to Appellants. Contrary to their
assertions, the NRCS conducted a searching, independent
review of the stated purposes and needs for Site 16’s dam,
which demonstrates that it exercised a degree of skepticism in
establishing them.
In explaining why watershed protection and flood preven-
tion were necessary purposes and needs in the 2009 SEIS, the
NRCS incorporated by reference, among other things, the
14 WEBSTER v. USDA
1974 EIS and work plan, which explained in detail the flood-
water, sediment, and erosion problems justifying the Project.
Furthermore, the 2009 SEIS reaffirmed the continued need for
measures to curb problems relating to flooding, noted the
almost decennial occurrence of damaging floods in the area,
and provided various maps and other investigative analyses in
support. Even if the NRCS did not provide precisely the infor-
mation that Appellants desire, it set forth enough of a well-
documented discussion to demonstrate that it had a reasonable
basis for deciding that watershed protection and flood preven-
tion were appropriate purposes and needs for Site 16’s dam.
This discussion and its accompanying information reveal that
the NRCS carefully considered including watershed protec-
tion and flood prevention as purposes and needs for the dam
at Site 16.
Moreover, in the 2009 SEIS, the NRCS noted the local
project sponsors’ request to add water supply as a purpose and
need for the dam at Site 16, and the sponsors’ explanation of
why this addition was appropriate in light of population and
development trends and projections in the area. In recognizing
these trends and projections, the NRCS discussed the 2004
and 2007 reports on water resources in Hardy County, both of
which it assisted in preparing. Collectively, these reports sug-
gested that additional water supplies in the area were neces-
sary and that water storage in the dams at Sites 10 and 16 was
required to meet short-term demand. Although Appellants
charge that these reports have not been updated and are likely
overstated, they provide nothing beyond speculation that
would call into question their findings. Based on the NRCS’s
discussion concerning the need for water supply and the sup-
porting reports, we are confident that it adequately scrutinized
whether adding water supply as a purpose and need was
appropriate.
On the whole, it is evident that although the NRCS consid-
ered the local project sponsors’ goals and needs, as was
appropriate, it nevertheless conducted its own searching
WEBSTER v. USDA 15
inquiry into the purposes and needs for the Site 16 dam. It
then framed the purposes and needs in a manner that was nei-
ther so narrow as to yield only one suitable alternative nor so
broad as to produce an overwhelming and unmanageable
number of alternatives. And, importantly, the NRCS’s pur-
poses and needs for the dam at Site 16 are consistent with
Congress’s authorization in the Flood Control Act. See Citi-
zens Against Burlington, 938 F.2d at 196 (recognizing that
when arriving at the purposes and needs for a proposed action
agencies must consider their statutory authorization to act). In
the end, therefore, the NRCS’s decision to include watershed
protection, flood prevention, and water supply as the purposes
and needs underlying Site 16’s dam was an appropriate exer-
cise of its discretion.
B.
Appellants next insist that the NRCS violated the NEPA by
failing to engage in a scoping process before issuing the 2009
SEIS. As noted, the goal of the scoping process is to "identi-
fy[ ] specific issues to be addressed and studied" by "solicit[-
ing] comments and input from the public and other state and
federal agencies." Citizens’ Comm. to Save Our Canyons, 297
F.3d at 1022. Agencies, however, are not required to engage
in a scoping process when devising a supplemental EIS, see
40 C.F.R. § 1502.9(c)(4), but they may have to revise deter-
minations made in an initial scoping process if they subse-
quently make substantial changes to the proposed action or if
significant new circumstances or information bearing on the
proposed action or its impacts arise, see id. § 1501.7(c).
Appellants acknowledge this general rule. Their retort,
however, is that the 2009 SEIS did not supplement the 2007
SEIS but instead replaced it. Although they fail to elaborate
further, we presume their argument to be that even though the
NRCS undertook a scoping process prior to the 2007 SEIS, it
needed to undertake one leading up to the 2009 SEIS because
the 2009 SEIS replaced the 2007 SEIS. We disagree.
16 WEBSTER v. USDA
When it prepared the 2009 SEIS, the NRCS justifiably
relied on the scoping determinations made leading to the 2007
SEIS. That the NRCS decided to withdraw its record of deci-
sion related to the 2007 SEIS and issue the 2009 SEIS does
not operate to nullify the scoping process it had previously
undertaken. Like the 2007 SEIS before it, the 2009 SEIS sup-
plemented the 1974 EIS in light of the elimination of Site 23
and the addition of water supply as a purpose for the dam at
Site 16. As the NRCS acknowledged, the nature and extent of
the action did not change between the 2007 SEIS and the
2009 SEIS. Moreover, Appellants do not highlight any signif-
icant new circumstances or information that arose during that
time and would require revising the previous scoping determi-
nations. The specific issues that the NRCS needed to study
remained the same. Simply put, nothing occurred after the
scoping process leading to the 2007 SEIS that required the
NRCS to revisit the scoping determinations when it prepared
the 2009 SEIS.
In the absence of any such changes or new information or
circumstances, requiring the NRCS to undertake another
scoping process for the 2009 SEIS would exact needless costs
and delay. The NEPA imposes procedural mandates for the
purpose of ensuring informed decisionmaking and public par-
ticipation, not to impose red tape for its own sake. Requiring
the NRCS to engage in a new scoping process prior to prepar-
ing the 2009 SEIS would achieve the latter consequence but
not the former purpose. We are therefore of the opinion that
the NRCS was not required to engage in another scoping pro-
cess when preparing the 2009 SEIS.
C.
Appellants’ third contention is that the 2009 SEIS omits
information that is necessary for a complete analysis of the
Site 16 dam’s potential environmental impacts and stated ben-
efits. They specify a variety of missing information, mostly
pertaining to details about the construction or operation of the
WEBSTER v. USDA 17
dam at Site 16. They also maintain the NRCS failed to con-
sider connected actions in the 2009 SEIS—specifically, the
construction and operation of a water treatment facility and
water distribution system.3
1.
At the outset, we reiterate that we may not seize upon triv-
ial inadequacies to reject the agency’s decision, for that would
impermissibly intrude into its decisionmaking prerogative.
Nat’l Audubon Soc’y, 422 F.3d at 186. Put another way,
"[d]eficiencies in an EIS that are mere ‘flyspecks’ and do not
defeat [the] NEPA’s goals of informed decisionmaking and
informed public comment will not lead to reversal." N.M. ex
rel. Richardson v. Bureau of Land Mgmt., 565 F.3d 683, 704
(10th Cir. 2009).
Also, in assessing a claim that an agency has omitted infor-
mation in an EIS, we must further keep in mind that agencies
are charged with "concentrat[ing] on the issues that are truly
significant to the action in question, rather than amassing
needless detail." 40 C.F.R. § 1500.1(b); see also id. § 1502.2
("[EISs] shall be analytic rather than encyclopedic."). That is
in part because an EIS containing vast quantities of inconse-
quential information can actually defeat the NEPA’s goals of
informed decisionmaking and public participation by drown-
ing out truly significant information with that which is insig-
nificant. Agencies therefore face a delicate balancing act: they
must include enough details about a proposed action to allow
for the requisite hard look at its environmental effects without
providing so much information that the EIS becomes self-
3
We have framed this argument as we understand it. It is unclear to us
whether Appellants believe that details regarding the construction and
operation of Site 16’s dam—such as the number of workers necessary for
construction, the size and location of the site, and the type of construction
equipment that will be used—also constitute connected actions. If so, we
agree with the district court that these aspects concerning the construction
and operation of Site 16’s dam do not constitute connected actions.
18 WEBSTER v. USDA
defeating. Except when prescribed by statute or regulations,
deciding what details need to be included or omitted in an EIS
is generally a matter left to the agency’s discretion, which we
will not disturb unless we are convinced that its exercise pre-
vented the agency from taking a hard look at the action’s
environmental effects or the public from participating in the
decisionmaking process.
Turning to the information Appellants insist was missing,
we note initially that the 2009 SEIS included at least some of
it. For example, whereas Appellants contend that the 2009
SEIS omitted information regarding the excavation of borrow
material for use in constructing the dam, it in fact discussed
where the borrow areas would be and provided a map show-
ing their locations. And, similarly, notwithstanding Appel-
lants’ assertion that the 2009 SEIS did not provide the size
and location of the construction site, it actually did describe
the size of the site and its location and provided a project map
showing the same.
To the extent the 2009 SEIS did not include the other infor-
mation specified by Appellants, we find the omissions to be
inconsequential. The purportedly missing information
includes such items as the "[n]umber of workers needed for
construction," the "[l]ocation and distance of access roads,"
the "[l]ocation and distance of utility rights-of-ways," the
"[t]ype of construction equipment that would be used and for
how long," and the "[l]ocation and size of parking areas."
Appellants simply list the types of missing information with-
out any explanation as to their significance or how their omis-
sion impedes the NEPA’s goals of informed decisionmaking
and public participation. And the consequentiality of their
omission is not readily apparent to us. Instead, they strike us
as either needless detail that would clutter the 2009 SEIS or
trivial deficiencies that invite flyspecking. In the end, the
omission of this information does not disturb our belief that
the NRCS took a hard look at the Site 16 dam’s environmen-
tal effects and that the public had adequate information to par-
WEBSTER v. USDA 19
ticipate in the decisionmaking process. As a result, we will
not second-guess the agency’s decision to omit it.
2.
We also find unmeritorious Appellants’ assertion that the
NRCS violated the NEPA by failing to consider as connected
actions the construction and operation of a water treatment
facility and water distribution system.
Agencies must consider connected actions in the same EIS.
40 C.F.R. § 1508.25(a)(1). This requirement is intended to
prevent agencies from engaging in segmentation, which
involves "an attempt to circumvent [the] NEPA by breaking
up one project into smaller projects and not studying the over-
all impacts of the single overall project." Coal. on W. Valley
Nuclear Wastes v. Chu, 592 F.3d 306, 311 (2d Cir. 2009)
(quoting Stewart Park & Reserve Coal., Inc. v. Slater, 352
F.3d 545, 559 (2d Cir. 2003)) (internal quotation marks omit-
ted). Connected actions include those that (1) "[a]utomatically
trigger other actions which may require environmental impact
statements"; (2) "[c]annot or will not proceed unless other
actions are taken previously or simultaneously"; or (3) "[a]re
interdependent parts of a larger action and depend on the
larger action for their justification." § 1508.25(a)(1). Gener-
ally, in determining whether actions are connected so as to
require consideration in the same EIS, courts employ an "in-
dependent utility" test, which asks whether each project
would have taken place in the other’s absence. See, e.g., N.
Plains Res. Council, Inc. v. Surface Transp. Bd., 668 F.3d
1067, 1087 (9th Cir. 2011); Chu, 592 F.3d at 312; Wilderness
Workshop v. U.S. Bureau of Land Mgmt., 531 F.3d 1220,
1228-29 (10th Cir. 2008). If so, they have independent utility
and are not considered connected actions. N. Plains Res.
Council, 668 F.3d at 1087-88.
Appellants have failed to point to a water treatment facility
or water distribution system connected to the construction of
20 WEBSTER v. USDA
the dam at Site 16. Although Appellants do not specifically
argue that the HCPSD’s planned development of the
Baker/Mathias Water Distribution System is a connected
action, we nevertheless underscore that it is independent of
the NRCS’s proposed action here. The NRCS emphasized
when responding to comments in the 2009 SEIS that the
HCPSD would implement its system regardless of whether
the dam at Site 16 was constructed and, conversely, that the
NRCS would add water supply to the dam at Site 16 even if
the HCPSD abandoned its system. Given that the
Baker/Mathias Water Distribution System is independent of
the NRCS’s construction of Site 16’s dam, it is not a con-
nected action.
Furthermore, Appellants have failed to demonstrate that
any other water treatment facility or water distribution system
has been planned, much less in connection with the dam at
Site 16. Appellants apparently argue that because the Site 16
dam will include a water supply source, it will necessarily
require such a facility and system in the future to service the
source, so the NRCS should have considered them as con-
nected actions. Appellees, however, insist that there are no
plans for such a facility or system, and Appellants give us no
reason to question this representation. In the absence of any
impending plans to construct such a system or facility, seg-
mentation is not a concern. See Wilderness Workshop, 531
F.3d at 1229; O’Reilly v. U.S. Army Corps of Eng’rs, 477
F.3d 225, 236-37 (5th Cir. 2007). And, furthermore, we fail
to see how the agency could consider a water treatment facil-
ity and water distribution system, much less their impacts,
when there are no current plans to build them. Because such
a project is speculative at best and any discussion of its
impacts would be speculative, the agency was not required to
discuss it as a connected action. See Wyoming, 661 F.3d at
1253 ("In general, we have not required agencies to consider
‘speculative’ impacts or actions in an EIS . . . .").
WEBSTER v. USDA 21
D.
Appellants next maintain that the NRCS failed to consider
all reasonable alternatives in its 2009 SEIS.
At the heart of an EIS is the required analysis of "alterna-
tives to the proposed action." 42 U.S.C. § 4332(C)(iii); 40
C.F.R. § 1502.14. In this section, the agency must
"[r]igorously explore and objectively evaluate all reasonable
alternatives." 40 C.F.R. § 1502.14(a). For alternatives that are
unreasonable, the agency need only briefly discuss its reasons
for eliminating them from detailed study. See id. Hence,
because alternatives that do not accomplish the purpose or
objective of the action are unreasonable, they require only a
brief explanation for their rejection. Wyoming, 661 F.3d at
1244. Also, the agency is not required "to analyze the envi-
ronmental consequences of alternatives it has in good faith
rejected as too remote, speculative, or . . . impractical or inef-
fective." Id. (omission in original) (quoting Citizens’ Comm.
to Save Our Canyons, 297 F.3d at 1030) (internal quotation
marks omitted) The agency, however, must always consider
"the alternative of no action." 40 C.F.R. § 1502.14(d).
We are confident that the NRCS considered all reasonable
alternatives. Throughout the Project’s history, from the 1974
EIS and the various supplements and reports that followed it
to the 2009 SEIS, the NRCS studied numerous alternatives to
its proposed action. In the 2009 SEIS specifically, the NRCS
discussed seventeen alternatives. It offered appropriate rea-
sons for eliminating all but two from detailed study, includ-
ing, among other considerations, reasons related to technical
feasibility, pecuniary costs, and effectiveness in achieving the
purposes of the action. The NRCS then provided detailed
examination of the no-action alternative and the alternative
involving construction of the dam at Site 16. On its face, this
discussion of alternatives complies with the mandates of the
NEPA.
22 WEBSTER v. USDA
Appellants argue that the NRCS’s analysis is nevertheless
deficient because it failed to give detailed study to two gen-
eral types of alternatives. First, they maintain that the NRCS
should have afforded detailed consideration to alternatives
involving multiple actions that separately could achieve the
individual purposes underlying the dam at Site 16 . In fact, in
the 2009 SEIS, the NRCS considered alternatives that would
provide flood control and water supply separately, but elimi-
nated them from detailed consideration for various appropri-
ate reasons described above. Notably, Appellants fail to offer
a specific alternative involving multiple actions that the
NRCS should have considered in detail. Nor do they highlight
a specific alternative that the NRCS eliminated from further
consideration of which it should have provided detailed study.
So we are left only to speculate that one might exist, which
is an insufficient ground for disturbing the agency’s decision.
We therefore are unconvinced that the NRCS improperly
eliminated from detailed consideration alternatives involving
multiple actions that could achieve Site 16’s dam’s purposes
individually.
Second, Appellants contend that the NRCS failed to con-
sider alternatives involving other sites for the proposed dam
within the Lost River Subwatershed. Instead, according to
Appellants, the NRCS simply relied upon the 1974 EIS’s con-
sideration of thirty other locations, even though the purposes
for the dam have changed. But that is inaccurate. In the 2009
SEIS, after noting that it examined thirty other locations lead-
ing up to the 1974 EIS, the NRCS asserted that as part of its
supplemental evaluation it had reconsidered whether the Site
16 and Site 23 locations were still the most viable alterna-
tives. It observed that its reevaluation prompted it to eliminate
Site 23 as infeasible. With respect to the dam at Site 16, it
determined that there were no new locations for impound-
ments that were viable and that would achieve the identified
purposes and needs. Appellants do not offer a location that
would call into question this determination, so we defer to it.
WEBSTER v. USDA 23
The NRCS thus was not required to give this alternative
detailed consideration.
E.
Appellants assert that in the 2009 SEIS the NRCS failed to
address all of the environmental effects that would result from
construction of the dam at Site 16.4 In support, they list spe-
cific effects that they allege the NRCS neglected to consider.
Relatedly, according to Appellants, the NRCS also did not
conduct a sufficient cumulative-impacts analysis.
An EIS must include a discussion of "the environmental
impact of the proposed action" and "any adverse environmen-
tal effects which cannot be avoided should the proposal be
implemented." 42 U.S.C. § 4332(C)(i)-(ii). Because "[t]his
section forms the scientific and analytic basis for the compari-
son[ ]" of alternatives, it must "include the environmental
impacts of the alternatives[,] including the proposed action."
40 C.F.R. § 1502.16.
The CEQ has instructed agencies on the types of impacts
or "effects" (the regulations treat these terms as synonymous)
that they must consider: "ecological (such as the effects on
natural resources and on the components, structures, and func-
tioning of affected ecosystems), aesthetic, historic, cultural,
economic, social, or health." Id. § 1508.8. Agencies must
4
In addressing this issue, Appellants begin by insisting that the 2009
SEIS is deficient because it incorporated and relied on information set
forth in the 1974 EIS without indicating that the NRCS updated it or oth-
erwise ensured its continued accuracy. But given that the CEQ’s regula-
tions encourage agencies to tier their analyses and incorporate such prior
statements in subsequent statements by reference, see 40 C.F.R.
§ 1502.20, it was appropriate for the NRCS to rely on the 1974 EIS in its
2009 SEIS. Moreover, Appellants fail to highlight any inaccurate or out-
dated information upon which the NRCS relied. In the absence of evi-
dence that the NRCS relied on inaccurate or outdated information from the
1974 EIS, we will not assume that it did.
24 WEBSTER v. USDA
study these effects whether they are direct, meaning that they
"are caused by the action and occur at the same time and
place," or indirect, which means that they "are caused by the
action and are later in time or farther removed in distance, but
are still reasonably foreseeable." Id. Additionally, agencies
have to examine cumulative impacts resulting from "the
incremental impact of the [proposed] action when added to
other past, present, and reasonably foreseeable future
actions." Id. § 1508.7. Yet although agencies must take into
account effects that are reasonably foreseeable, they generally
need not do so with effects that are merely speculative. Wyo-
ming, 661 F.3d at 1253.
After reviewing the 2009 SEIS, we are convinced that the
NRCS took a hard look at the environmental effects that con-
struction of the dam at Site 16 would have. The 2009 SEIS
provided detailed analyses of the dam’s effects on the follow-
ing: flood damage; public health and safety; water supply,
including its economic implications; soil erosion and sedi-
mentation; agricultural productivity; prime and unique farm-
land; land use and upland habitats; aquatic resources;
recreation; riparian areas; wetlands; waters of the United
States; water quality; threatened and endangered species;
invasive species; historic, scientific, and cultural resources;
and environmental justice. The NRCS examined the effects of
each with relation to both the no-action alternative and the
construction of the dam.
The 2009 SEIS also contained a cumulative-impacts analy-
sis in which it discussed the environmental effects that con-
struction of the dam at Site 16 would have in conjunction with
the effects of five other projects in the area. Contrary to
Appellants’ assertion, the NRCS considered the overall cumu-
lative impact of these projects with respect to various environ-
mental effects, including, but not limited to, effects on
forestland, farmland, wetlands, and habitats. In the end, we
are satisfied that the NRCS performed a thorough investiga-
WEBSTER v. USDA 25
tion into the action’s effects and candidly acknowledged its
risks.
Our opinion that the NRCS took a hard look at the environ-
mental effects of constructing the dam at Site 16 is undis-
turbed by the specific effects that Appellants contend the
NRCS failed to discuss. It is again clear that the NRCS con-
sidered at least one of the sources of information that Appel-
lants insist is missing—specifically, the impact that the dam
would have on downstream fisheries. The NRCS, in its dis-
cussion of the Site 16 dam’s effects on aquatic resources, can-
didly acknowledged that the dam "would result in a barrier to
fish movement between the upper reaches of Lower Cove
Run and the lower sections of this stream and the main stem
[of the] Lost River."
Other effects that Appellants maintain are missing are
either speculative or relatively inconsequential flyspecks. For
instance, similar to their argument regarding connected
actions, Appellants assert that the NRCS should have consid-
ered the effects resulting from the construction of a new water
treatment facility and water distribution system to service the
water supply source at Site 16’s dam. But, as we explained,
such a system has not been planned and is speculative, mak-
ing any effects resulting from it speculative as well. After
reviewing the remainder of Appellants’ list of purportedly
unaddressed effects and considering the 2009 SEIS’s discus-
sion of environmental effects holistically, we remain con-
vinced that the NRCS took a hard look at the action’s
environmental effects.
F.
Appellants assert that the NRCS included a misleading and
inaccurate cost-benefit analysis. They highlight the following
as contributing to its misleading nature: 1) the NRCS admit-
ted that the usual design life for watershed-protection and
flood-prevention structures is fifty to one hundred years, but
26 WEBSTER v. USDA
in its cost-benefit analysis, it used a design life of one hundred
years, the far end of the spectrum; 2) the NRCS’s cost-benefit
ratio compared the costs and benefits of the Project as a
whole, not Site 16 specifically, which, according to Appel-
lants, may mask a less desirable cost-benefit ratio for Site 16
alone; and 3) the NRCS included as benefits over $900,000
that would result from incidental recreation, even though it
eliminated recreation as a purpose.
We have emphasized before that an agency must weigh a
proposed action’s benefits with its environmental costs. See
Ohio Valley Envtl. Coal., 556 F.3d at 191 ("[E]ven agency
action with adverse environmental effects can be NEPA-
compliant so long as the agency has considered those effects
and determined that competing policy values outweigh those
costs."); Hughes River Watershed Conservancy v. Johnson,
165 F.3d 283, 289 (4th Cir. 1999) ("NEPA requires agencies
to balance a project’s economic benefits against that project’s
environmental effects."). The CEQ’s regulations require that
an EIS "at least indicate those considerations, including fac-
tors not related to environmental quality, which are likely to
be relevant and important to a decision." 40 C.F.R. § 1502.23.
Along these lines, an EIS should provide enough detail con-
cerning the drawbacks and merits of the proposed action to
allow for reasoned evaluation and decisionmaking. See Subur-
ban O’Hare Comm’n v. Dole, 787 F.2d 186, 191 n.8 (7th Cir.
1986).
But an agency need not include a cost-benefit analysis in an
EIS when comparing the different alternatives. See § 1502.23.
That said, if an agency considers "a cost-benefit analysis rele-
vant to the choice among environmentally different alterna-
tives," it must either append it to the EIS or incorporate it by
reference. Id. The agency does not, however, need to display
the weighing of the merits and drawbacks of the alternatives
in a monetary cost-benefit analysis. Id. And indeed it would
be improper to do so "when there are important qualitative
considerations." Id.
WEBSTER v. USDA 27
In any event, an EIS may be deficient if its assessment of
the costs and benefits of a proposed action relies upon "mis-
leading economic assumptions." Hughes River Watershed
Conservancy v. Glickman, 81 F.3d 437, 446 (4th Cir. 1996).
Misleading economic assumptions can prevent the agency
from engaging in informed decisionmaking when balancing
the proposed action’s benefits with its environmental effects.
Id. They can also preclude meaningful public participation
"by skewing the public’s evaluation of" the action. Id. We
remain cognizant, however, that the weighing of a project’s
benefits with its costs lies at the core of an agency’s discre-
tion, so we perform "a ‘narrowly focused’ review of the eco-
nomic assumptions underlying a project to determine whether
[they] ‘were so distorted as to impair fair consideration’ of the
project’s adverse environmental effects." Id. (quoting S. La.
Envtl. Council, Inc. v. Sand, 629 F.2d 1005, 1011 (5th Cir.
1980)).
Here, the NRCS included a comparison of the monetary
and qualitative costs and benefits of the two alternatives it
analyzed in detail—the dam at Site 16 and the no-action alter-
native. Contrary to Appellants’ assertions, the analysis is not
misleading and does not thwart the NEPA’s goals of informed
decisionmaking and public participation. First, there is noth-
ing misleading or problematic about the fact that the NRCS
used a project life of one hundred years for Site 16’s dam,
particularly when that period is within the usual range for
such projects, even if it as at the high end of the normal range.
Using a project life of one hundred years was a reasonable
exercise of the agency’s discretion.
Second, there is no danger that the NRCS sought to mask
the relative costs and benefits of Site 16 alone by focusing on
the Project as a whole. Incorporated in the 2009 SEIS was a
chart comparing the costs and benefits of the Project if Site
16’s dam is constructed with the costs and benefits of the
Project if Site 16’s dam is not constructed. It includes a com-
parison of both monetary and nonmonetary benefits and costs.
28 WEBSTER v. USDA
This comparison brings into relief the relative costs and bene-
fits specific to Site 16. Regardless of whether the cost-benefit
ratio focused on the Project as a whole, it is evident that the
NRCS considered the costs and benefits of Site 16 specifi-
cally, and that the public had the information to do the same.
Finally, it was not misleading for the NRCS to include inci-
dental recreational benefits after removing recreation as a pur-
pose. The 2009 SEIS explained that, although recreation was
no longer a purpose for the dam at Site 16, incidental recre-
ation, such as fishing, bird watching, boating, and hiking,
would still occur. The estimated benefits reflected this inci-
dental recreation, and nothing suggests that this amount is
inflated or otherwise erroneous.
G.
Appellants contend that the 2009 SEIS failed to provide
sufficient detail about planned mitigation measures so that
they could be fairly evaluated. According to Appellants, the
2009 SEIS includes only unspecified measures. As proof, they
point to the NRCS’s response to a comment in the 2009 SEIS
in which it stated that in the future, to obtain the necessary
Clean Water Act Section 404 permit from the Army Corps of
Engineers and Section 401 state water quality certification, it
would develop a compensatory mitigation plan further
addressing wetlands impacts.
An "important ingredient of an EIS is the discussion of
steps that can be taken to mitigate adverse environmental con-
sequences." Robertson, 490 U.S. at 351. The statutory man-
date that agencies detail "any adverse environmental effects
which cannot be avoided should the proposal be imple-
mented," 42 U.S.C. § 4332(C)(ii), implicitly assumes "that the
EIS will discuss the extent to which adverse effects can be
avoided," Robertson, 490 U.S. at 352. The CEQ’s regulations
impose such a requirement more explicitly. In scattered provi-
sions, they instruct agencies to "discuss possible mitigation
WEBSTER v. USDA 29
measures in defining the scope of the EIS, in discussing alter-
natives to the proposed action and consequences of that
action, and in explaining its ultimate decision." Id. (citations
omitted) (citing 40 C.F.R. §§ 1502.14(f), 1502.16(h),
1505.2(c), 1508.25(b)).
To satisfy these procedural mandates, an EIS must contain
a "reasonably complete discussion of possible mitigation mea-
sures," which requires an examination of mitigation measures
"in sufficient detail to ensure that environmental conse-
quences have been fairly evaluated." Id. This ordinarily obli-
gates agencies to do more than simply list possible mitigation
measures. San Juan Citizens Alliance v. Stiles, 654 F.3d 1038,
1053-54 (10th Cir. 2011). But there is no "substantive require-
ment that a complete mitigation plan be actually formulated
and adopted." Robertson, 490 U.S. at 352. The inquiry into
the level of specificity required to provide a reasonably com-
plete mitigation discussion is necessarily contextual. See
Stiles, 654 F.3d at 1054. An EIS for a "large-scale, multi-step
project" will generally demand less detail than an EIS for a
"relatively contained, site-specific proposal." Id.
As a statement pertaining to a site-specific proposal, the
2009 SEIS contained a reasonably complete discussion of
possible mitigation measures. It did not simply list possible
measures. Instead, after describing the dam at Site 16 as the
recommended alternative for achieving its purposes, the
NRCS provided a "Mitigation Summary" in which it first
identified environmental effects that construction of the dam
at Site 16 would have and then explained measures it would
take to mitigate each effect. Notwithstanding Appellants
claim to the contrary, these measures, by and large, intro-
duced specific proposals to alleviate specific effects. An
example involves the NRCS’s discussion of measures it
would take to mitigate the action’s effects on wetlands. The
NRCS provided a map with wetland areas marked on it and,
using that map, described how it would attempt to avoid cer-
30 WEBSTER v. USDA
tain marked areas. It also described planned efforts to create
new wetlands in specified locations.
Moreover, the Mitigation Summary was not the only sec-
tion of the 2009 SEIS that discussed mitigation measures.
When explaining the environmental effects of the alternatives,
the 2009 SEIS described specific mitigation measures the
NRCS would take to alleviate the Site 16 dam’s effects. For
instance, after reporting how the permanent lake created by
the dam at Site 16 could cause increased water temperatures,
it stated that "[t]o avoid adverse temperature impacts to the
fishery downstream of Site 16, a cold water release in the
principal spillway structure will be included with the riser
configuration." Such discussions of specific, detailed mitiga-
tion measures that are responsive to specified effects reinforce
our belief that the NRCS fairly evaluated the action’s environ-
mental consequences.
The NRCS’s allusion to the fact that to obtain required per-
mits it would have to develop a compensatory mitigation plan
related to wetlands effects does not dissuade us of this belief.
Again, there is no requirement that the agency formulate and
adopt a complete mitigation plan at this stage. See Robertson,
490 U.S. at 352-53. That the NRCS may have to develop fur-
ther mitigation measures in the future to comply with permit
requirements does not render its current mitigation discussion
insufficient under the NEPA. In the 2009 SEIS, the NRCS
provided a detailed discussion of various mitigation measures
it would take to reduce wetlands effects. It is enough, for pur-
poses of the NEPA, to demonstrate that the NRCS took a hard
look at the effects its action would have on wetlands and that
it developed plans to mitigate those effects.
H.
Appellants lastly contend that the NRCS violated the
NEPA by failing to invite the Army Corps of Engineers to
participate in preparing the 2009 SEIS as a cooperating
WEBSTER v. USDA 31
agency despite learning that it needed to obtain a Clean Water
Act Section 404 permit from the Army Corps.
Lead agencies must request that agencies having "jurisdic-
tion by law" participate in the NEPA process as cooperating
agencies. 40 C.F.R. § 1501.6. Agencies have jurisdiction by
law if they possess "authority to approve, veto, or finance all
or part of the proposal." Id. § 1508.15. Once requested, coop-
erating agencies are required to participate in the NEPA pro-
cess. Id. § 1501.6(b)(1).
Even assuming that the NRCS did not ask the Army Corps
to participate as a cooperating agency and that it should have
done so, such error was harmless. See United States v. Coal.
for Buzzards Bay, 644 F.3d 26, 37 (1st Cir. 2011) (recogniz-
ing that harmless-error review applies to violations of the
NEPA). Despite bearing the burden to establish harm, see id.,
Appellants fail to show, or even suggest, any harm that
resulted from the failure to designate the Army Corps as a
cooperating agency. Nor do we identify any harm resulting
from this failure. In fact, the record reflects that the NRCS
provided the Army Corps opportunities to participate in pre-
paring both the 2007 SEIS and the 2009 SEIS, and that the
Army Corps took advantage of at least some of these opportu-
nities. It not only provided a letter in October 2006 comment-
ing on the draft leading to the 2007 SEIS, but it also
participated in a wetlands delineation and conference calls
and meetings regarding Site 16 prior to the issuance of the
2009 SEIS. It is evident that the Army Corps provided input
that assisted the NRCS’s preparation of the 2009 SEIS.
Alternatively, Appellants argue that the NRCS should not
have issued the 2009 SEIS prior to receiving the Clean Water
Act Section 404 permit from the Army Corps. But we are
aware of no requirement that the NRCS obtain necessary per-
mits before issuing an EIS. To the contrary, the CEQ’s regula-
tions mandate only that it list all necessary federal permits in
a draft EIS. See 40 C.F.R. § 1502.25(b). Thus, the NRCS’s
32 WEBSTER v. USDA
issuance of the 2009 SEIS before obtaining the requisite per-
mit from the Army Corps does not violate the NEPA.
IV.
For these reasons, we affirm the decision of the district
court.
AFFIRMED
| {
"pile_set_name": "FreeLaw"
} |
651 S.E.2d 156 (2007)
In the Interest of R.S. et al., children.
No. A07A1441.
Court of Appeals of Georgia.
August 10, 2007.
*157 Phyllis R. Williams, for appellant.
Thurbert E. Baker, Attorney General, Shalen S. Nelson, Senior Assistant Attorney General, Kathryn A. Fox, Assistant Attorney General, Cynthia Roberts-Emory, Atlanta, for appellee.
MILLER, Judge.
The biological mother of R.S. and I.R.S., minor children, appeals from an order of the juvenile court terminating her parental rights as to each child, citing insufficient evidence to support the order and claiming that she received ineffective assistance of counsel at the termination hearing. Discerning no error, we affirm.
In considering a challenge to the sufficiency of the evidence in a termination of parental rights case, the question is whether "any rational trier of fact could have found by clear and convincing evidence that the natural parent's rights to custody have been lost." In the Interest of C.M., 275 Ga.App. 719, 621 S.E.2d 815 (2005). In making that determination, this Court reviews the evidence in a light most favorable to the lower court's judgments and we "neither weigh[] evidence nor determine[ ] the credibility of witnesses; rather, we defer to the trial court's fact-finding and affirm unless the appellate standard is not met." (Citation omitted.) Id. at 719-720, 621 S.E.2d 815.
So viewed, the evidence shows that R.S. and I.R.S. have been in the protective custody of the DeKalb County Department of *158 Family and Children Services, acting on behalf of the Georgia Department of Human Resources (hereinafter "the Department") since April 9, 2002. The children were removed from their parents' home because of severe injuries to R.S., resulting from abuse by his father.[1] At the time of their removal, R.S. was approximately two months old and I.R.S. was approximately eighteen months old.
The Department's custody of the children was extended by four separate orders of the juvenile court, entered between June 19, 2002 and March 2, 2005. Each of these orders found R.S. and I.R.S. to be deprived, and none of the orders was appealed.
The Department's original case plan sought to reunify the children with their parents. That plan required both parents to complete psychological evaluations and obtain any counseling recommended as a result of the same; follow all recommendations made by a mental health professional treating them; attend and complete parenting classes; and use nonharmful and nonphysical discipline methods with their children.
On September 29, 2005, the Department filed a petition to terminate the parental rights of both the mother and the father, citing the parents' failure to maintain a meaningful and supportive bond with the children, their failure to provide for the children's care and support, and their failure to complete their case plan goals. The juvenile court granted that petition and on November 29, 2005 entered an order terminating the mother's parental rights.[2] This appeal followed.
1. The mother first argues that there was insufficient evidence to support the juvenile court's decision. We disagree.
The Georgia Code sets forth a two-step process to be used in termination of parental rights cases. First, the trial court determines "whether there is present clear and convincing evidence of parental misconduct or inability." OCGA § 15-11-94(a). Such evidence must show that: (1) the child is deprived; (2) the deprivation results from a lack of proper parental care or control; (3) the cause of the deprivation is likely to continue; and (4) continued deprivation is likely to cause serious physical, mental, emotional or moral harm to the child. See OCGA § 15-11-94(b)(4)(A)(i)-(iv).
The juvenile court entered at least four separate orders finding the children to be deprived, none of which was appealed. The mother is therefore bound by these findings of deprivation, and cannot now challenge the same. See In the Interest of C.R.G., 272 Ga.App. 161, 164, 611 S.E.2d 784 (2005).
When determining the second factor, whether a child's deprivation results from a lack of parental care and control, a court may consider, inter alia, a "medically verifiable deficiency of the parent's physical, mental, or emotional health of such duration or nature as to render the parent unable to provide adequately for the physical, mental, emotional or moral condition or needs of the child." OCGA § 15-11-94(b)(4)(B)(i). Additionally, in situations where a parent does not have custody of the children,
the court must consider, among other things, whether that parent without justifiable cause has failed significantly for a year or more prior to the filing of the termination petition: "(i) To develop and maintain a parental bond with the child in a meaningful, supportive manner; (ii) To provide for the care and support of the child as required by law or judicial decree; and (iii) To comply with a court ordered plan designed to reunite the child with the parent." OCGA § 15-11-94(b)(4)(C).
In the Interest of T.B., 267 Ga.App. 484, 488, 600 S.E.2d 432 (2004).
Here, the evidence demonstrates that the mother lacked the intellectual and emotional capacity to care for her children, particularly *159 R.S. As a result of the physical abuse by his father, R.S. suffered brain damage, which in turn led to seizures and a stroke. He was subsequently diagnosed with cerebral palsy and a seizure disorder and is severely developmentally delayed. He also suffers from upper respiratory problems for which he receives breathing treatments. These conditions are treated by a number of doctors, and, at the time of the hearing, R.S. generally had between seven and nine doctors' appointments per week.
The psychological assessment of the mother showed that she had limited intellect, which prevented her from recognizing and addressing the children's needs, particularly the special needs of R.S. The psychologist who performed a parenting assessment of the mother informed the Department that, if the children were returned to the mother, there would need to be another adult present who could provide such care. Similarly, the caseworker assigned to the mother, the Department caseworker in charge of adoptive placement, and the children's court appointed special advocate all opined that the mother could not provide the virtually full-time care that R.S. requires and could not keep up with his numerous doctors' appointments.
Additionally, this belief was supported by the mother's denial about R.S.'s injuries and his current physical condition. At various times, the mother told the Department caseworkers that there was nothing wrong with R.S., that he was "fine," and that "nothing had happened" to R.S. to cause him injury. Despite R.S.'s tender years, the mother stated that R.S. was "pretending," that his condition was not as severe as it appeared, and that R.S. was "just trying to get his dad into trouble." Moreover, despite the fact that a condition of the father's plea agreement was that he have no unsupervised contact with any child under the age of 18, the mother did not appear to accept that they could not live together once her husband was released from prison.
The evidence also showed that over the course of approximately three and a half years, the mother failed to comply with a crucial part of her case plan, which was to refrain from using physical discipline on her children. The mother's visits with the children had to be suspended after she slapped I.R.S. on the leg, grabbed her, and dragged the child by the arm. The caseworker expressed the opinion that the mother was incapable of meeting this goal, a conclusion supported by the mother's psychological assessment. That assessment noted that the mother had unrealistic expectations regarding her children's behavior, was likely to view her children as being responsible for meeting her needs, and had a "strong belief" in using physical methods of discipline.
Finally, the record showed that the mother had failed to create or maintain a meaningful parental bond with either of the children, and there was no evidence that the mother had paid any support for the children while they were in the Department's custody. Viewed in its entirety, therefore, the record supports the trial court's finding that the children's deprivation resulted from a lack of parental care and control. See, e.g., In the Interest of A.K., 272 Ga.App. 429, 432, 612 S.E.2d 581 (2005) (affirming finding of lack of parental care and control where mother had low IQ and mental health issues that prevented her from being able to adequately care for special needs child).
We analyze the trial court's findings as to the third and fourth factors together, as "[t]he same evidence supporting a finding that the deprivation is likely to continue also supports a finding that continued deprivation is likely to cause serious physical, mental, emotional, or moral harm to the child." (Citation omitted.) In the Interest of C.R.G., supra, 272 Ga.App. at 164, 611 S.E.2d 784. Here, the evidence of the mother's intellectual and mental limitations, which rendered her incapable of properly caring for her children, supported the trial court's findings as to both of these prerequisites. See id. (deprivation likely to continue, and children would suffer harm as a result, where mother "could not learn proper parenting skills"). Accord In the Interest of B.J.H., 194 Ga.App. 282, 283, 390 S.E.2d 427 (1990).
Having found clear and convincing evidence of parental misconduct or inability, we now turn to the second step of the termination analysis, which requires clear and convincing evidence that the termination of parental rights was in the best interests of the children, "considering [their] physical, mental, emotional, and moral condition and needs *160 . . ., including the need for a secure and stable home." OCGA § 15-11-94(a). Factors to be considered in this analysis include the facts demonstrating the existence of parental misconduct or inability and whether the children have improved while in the Department's custody, see In the Interest of C.R.G., supra, 272 Ga.App. at 164, 611 S.E.2d 784, as well as the children's "need for a stable home environment and the detrimental effects of prolonged foster care." (Footnote omitted.) In the Interest of M.C.L., 251 Ga. App. 132, 136(2), 553 S.E.2d 647 (2001).
The evidence showed that the children have done extremely well in foster care. In light of the children's need for a stable and permanent home, the fact that the children had thrived while in the Department's custody, and the mother's inability either to learn the necessary parenting skills or to give the care required by a special needs child such as R.S., the trial court's finding that the termination of parental rights was in the best interests of the children is supported by clear and convincing evidence.
2. The mother next asserts that she received ineffective assistance of counsel at the termination hearing, based on the fact that her lawyer failed to object to inadmissible testimony. The only specific testimony cited by the mother as objectionable was the caseworker's testimony regarding the mother's mental capacity, which she claims was inadmissible in the absence of supporting documentary evidence. The mother, however, cites to no case law that supports this assertion, nor does she offer any explanation as to why this testimony was objectionable. This enumeration of error, therefore, is deemed abandoned. See In the Interest of C.B., 258 Ga.App. 143, 147(1), 574 S.E.2d 339 (2002); Court of Appeals Rule 25(c).
In light of the foregoing, we affirm the juvenile court's order terminating the parental rights of the biological mother as to both R.S. and I.R.S.
Judgment affirmed.
BARNES, C.J., and SMITH, P.J., concur.
NOTES
[1] As a result of R.S.'s injuries, the father was charged with two counts of aggravated battery and two counts of cruelty to children. On June 2, 2004, the father pled guilty to these charges and was sentenced to ten years imprisonment, to serve five years.
[2] The father voluntarily relinquished his parental rights on November 16, 2006, and the juvenile court entered an order terminating the father's parental rights on December 7, 2006.
| {
"pile_set_name": "FreeLaw"
} |
261 Pa. Superior Ct. 39 (1978)
395 A.2d 931
COMMONWEALTH of Pennsylvania
v.
Stanley CIMASZEWSKI, Appellant.
Superior Court of Pennsylvania.
Submitted December 31, 1977.
Decided December 14, 1978.
*40 George B. Ditter, Assistant Public Defender, Norristown, for appellant.
William T. Nicholas, District Attorney, Norristown, for Commonwealth, appellee.
Before WATKINS, President Judge, and JACOBS, HOFFMAN, CERCONE, PRICE, VAN der VOORT and SPAETH, JJ.
*41 CERCONE, Judge:
On May 2, 1976, the residence of Albert Kramer of Lower Gwynedd Township was burglarized at around 6:30 P.M. A neighbor of Mr. Kramer's, Richard G. Sullivan, heard noises in the Kramer's next-door apartment and, knowing that the Kramers were away for the weekend, Sullivan decided to investigate. When Sullivan looked into the living room window of the Kramer's apartment he saw three white males, all approximately twenty years of age. The intruders spotted Sullivan and ran towards the back door of the apartment. Sullivan ran around the building and saw the men exiting the Kramer's apartment. In fact, Sullivan almost collided with two of the men, including one later identified as appellant. The men fled into a nearby wooded area. A short time later, another neighbor, Dr. George E. McLaughlin, who lives on the other side of the wooded area, saw two males carrying a sack and running from the woods, get into a dark green Chrysler car driven by a third person. Dr. McLaughlin was able to provide the Lower Gwynedd police with a description of the auto and its license number. Subsequently, Gary Glinka was arrested on May 3, 1976 in connection with the burglary. Glinka gave a statement to the police implicating William Doll and Stanley Cimaszewski, the appellant in the instant case. Doll was arrested on May 4, 1976 after his photograph was picked by Sullivan from a photographic display. Appellant was arrested on May 8, 1976, chiefly as a result of the statement given by Glinka. The three waived the right to a jury trial and on November 29, 1976 they were found guilty of criminal conspiracy, burglary, and theft, but not guilty of receiving stolen property. Appellant filed this appeal.
The record indicates that a complaint was filed on May 4, 1976 and that appellant was arrested on May 8, 1976. The matter was first listed for trial on August 24, 1976; however, on August 23, 1976 the Commonwealth requested a continuance because two of the Commonwealth eyewitnesses were on vacation. The trial court granted the Commonwealth a two-week continuance and the case was rescheduled *42 for September 9, 1976. On September 9, appellant's case was not reached due to the unavailability of courtrooms and court backlog. When it became apparent that appellant's case would not be heard by October 31, 1976, the one hundred and eightieth day in appellant's case, the Commonwealth filed a petition on October 28, 1976 for an extension of time for trial, citing the unavailability of courtrooms and court backlog as the reason for the request. On November 12, 1976, after a hearing, the Commonwealth's petition for an extension of time was granted.
Appellant argues[1] that the lower court erred in granting the Commonwealth an extension of time and in denying appellant's motion to dismiss pursuant to Rule 1100 of the Pennsylvania Rules of Criminal Procedure. Appellant claims that the Commonwealth's lack of diligence is evidenced by the fact that it waited until the last moment[2] to ask for this extension and then only filed a form petition. Appellant relies on this Court's decision in Commonwealth v. Ray, 240 Pa.Super. 33, 360 A.2d 925 (1976). In Ray, we expressed displeasure with the use of form petitions which merely allege judicial delay. However, in Ray, we did not hold that the mere use of a form petition for seeking an extension necessarily shows a lack of due diligence on the part of the Commonwealth. The legal holding in Ray was that the Commonwealth could not properly obtain an extension under Rule 1100 based upon judicial delay. However, the Supreme Court subsequently held that judicial delay could be a justifiable basis for an extension of time. Commonwealth v. Shelton, 469 Pa. 8, 364 A.2d 694 (1976); Commonwealth v. Mayfield, 469 Pa. 214, 364 A.2d 1345 (1976). In the instant case, unlike Ray, a hearing was held where *43 the Commonwealth was required to establish its due diligence in attempting to bring appellant to trial. At this hearing, the court assignment clerk testified that appellant's case, along with many others, remained on the assignment board because there were not enough courtrooms. It is undisputed that the Commonwealth was ready to proceed to trial on the scheduled date of September 9, 1976, almost two months before the 180-day expiration date. However, appellant's case was not reached on that date due to the unavailability of courtrooms and court backlog. Thereafter, the Commonwealth timely requested an extension and supported its request by showing that it was ready for trial but that it was prevented from bringing appellant to trial within the Rule 1100 deadline because of judicial delay. Appellant argues that the Commonwealth should not be permitted to use judicial delay to justify the extension, alleging that the district attorney's office could have scheduled appellant's trial for an earlier date if the case had been reassigned to a different assistant district attorney. This argument is specious. This allegation ignores the crucial fact that on September 9, 1976, well before the Rule 1100 expiration deadline, the Commonwealth was ready, willing, and able to proceed to trial. In this respect, appellant's case differs significantly from Commonwealth v. Smith, 477 Pa. 424, 383 A.2d 1280 (1978), wherein the Commonwealth was not ready to proceed when the accused's case was called because the prosecutor assigned to the case was involved in another trial. Our disposition of this issue is in keeping with our position in Commonwealth v. Zirkle, 251 Pa.Super. 214, 380 A.2d 454 (1977), where we reversed the trial court's decision, in arresting judgment, that Rule 1100 was violated. There the trial court ruled that the Commonwealth should not have been granted an extension based upon an overcrowded court schedule. On appeal, we held that the Commonwealth was properly granted an extension of time for trial because "the Commonwealth had listed the case and was ready to proceed to trial, but was prevented from so doing by the inability of the trial judge to hear the case." Commonwealth v. Zirkle, 251 Pa.Super. at 216, 380 A.2d at 454. In the instant case, *44 the Commonwealth was prepared to go to trial on September 9, 1976, fifty three days before the expiration of the one hundred and eighty day period.
Accordingly, judgment of sentence is affirmed.
JACOBS, President Judge, concurs in the result.
WATKINS, former President Judge, and HOFFMAN, J., did not participate in the consideration or decision of this case.
NOTES
[1] Appellant also attempts to raise several other issues including credibility of witnesses, propriety of in-court identification, and probable cause to arrest. However, review of the briefs and record clearly establishes that these issues are either waived or totally devoid of merit.
[2] Appellant claims that the Commonwealth filed its petition for extension on the 180th day. This is incorrect. The Commonwealth asked the court for an extension on the 178th day. Nevertheless, we can dispose of appellant's argument on the merits.
| {
"pile_set_name": "FreeLaw"
} |
532 F.3d 805 (2008)
Sandra L. O'BRIEN; Donna E. Peterson, Plaintiffs-Appellants,
v.
DEPARTMENT OF AGRICULTURE, Mike Johanns, Secretary, Defendant-Appellee.
No. 07-2274.
United States Court of Appeals, Eighth Circuit.
Submitted: February 15, 2008.
Filed: July 16, 2008.
*807 Charles M. Kester, argued, Fayetteville, AR, for appellant.
Clarence Daniel Stripling, AUSA, argued, Little Rock, AR, for appellee.
Before MELLOY, GRUENDER, and SHEPHERD, Circuit Judges.
SHEPHERD, Circuit Judge.
Appellants, Sandra L. O'Brien, a white employee of the United States Department of Agriculture (USDA), Natural Resources Conservation Service (NRCS), and Donna E. Peterson, a white former employee of NRCS, appeal the district court's[1] grant *808 of the USDA's motion for summary judgment on all their claims. We affirm.
I.
We recite the facts in the light most favorable to Appellants, as the nonmoving parties. Elnashar v. Speedway SuperAmerica, LLC, 484 F.3d 1046, 1055 (8th Cir.2007). Peterson served as NRCS Human Resources Officer in Little Rock, Arkansas. Her immediate supervisor was Joseph Manuel, a white employee. Peterson's second line supervisor was Kalven Trice, the State Conservationist for Arkansas and the chief NRCS official in the state. Trice is African-American. Peterson supervised O'Brien, a Human Resources Specialist. O'Brien's position entails rating and ranking job applicants, including utilizing the Delegated Examining Unit ("DEU") to rank applicants from outside the Agency.
In 2003, O'Brien was undergoing chemotherapy following several cancer surgeries. Trice did not respond to O'Brien's request to work from home in May 2003. Trice approved O'Brien's second request in September 2003. On October 9, 2003, Trice held a meeting in which he informed O'Brien of what Trice perceived to be deficiencies with the list O'Brien issued of the best qualified candidates for two secretarial positions. O'Brien testified that Trice was upset that a friend of his, an African-American, was not on the list of rated applicants. During the meeting, both Trice and O'Brien raised their voices, and O'Brien was reduced to tears. On October 15, 2003, O'Brien filed an informal complaint of discrimination with the Equal Employment Opportunity Commission ("EEOC"); Peterson provided a supportive statement. Trice was aware of this. O'Brien lodged a formal EEOC complaint on December 2, 2003.
Following Appellants' EEOC activity, Trice scrutinized Appellants' travel documents arising out of a training session they attended in San Diego, California and issued a memorandum stating that they had acted improperly in relation to their travel vouchers; did not allow Peterson to serve as acting state administrative officer though Manuel had designated her to do so; suspended O'Brien's DEU authority; sent partial files concerning the secretarial applicants to regional and national headquarters to be reviewed; did not allow O'Brien to attend a training session in Texas; failed to respond to Peterson's request to work from home in a sufficient manner; denied O'Brien a performance award; discussed suspending them; and attempted to institute disciplinary action against them. In addition to the discrete events described above, Appellants state, without specificity, that Trice: interfered with their work on a daily to weekly basis; embarrassed, isolated, and ostracized them; closely scrutinized and criticized their work; and increased their workload.
O'Brien filed a second EEOC complaint on May 29, 2004. Peterson filed an EEOC complaint on July 14, 2004. On April 30, 2005, Peterson retired; she was replaced by a white employee. On June 13, 2006, Appellants filed this action against the USDA under Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e to 2000e-17, claiming hostile work environment based on race discrimination and retaliation. Peterson also alleges constructive discharge.
The district court granted the USDA's motion for summary judgment on all claims. The court determined that Appellants failed to: (1) satisfy the affecting a term, condition, or privilege of employment element of a prima facie case of hostile work environment and (2) show a prima facie case of retaliation because they *809 had not proffered evidence that Trice's treatment of them was materially adverse. The court also concluded that Peterson's constructive discharge claim failed as a matter of law because the record did not contain evidence suggesting: (1) the requisite objectively intolerable working conditions or (2) that Trice intentionally created the conditions in an effort to cause Peterson to quit. Appellants bring this appeal.
II.
"Mindful that summary judgment should be granted in employment discrimination cases only if the evidence could not support any reasonable inference of discrimination, we review the district court's grant of summary judgment de novo, affirming if there is no genuine issue of material fact and [the USDA] is entitled to judgment as a matter of law." Elnashar, 484 F.3d at 1055. In conducting this review, "[w]e view all the evidence in the light most favorable to the non-moving part[ies], [Appellants], and draw all reasonable inferences in [their] favor." Id.
A. Hostile Work Environment
A racially hostile work environment violates Title VII. 42 U.S.C. § 2000e-2(a)(1); Harris v. Forklift Sys., Inc., 510 U.S. 17, 21, 114 S.Ct. 367, 126 L.Ed.2d 295 (1993). To make a prima facie showing of such a claim, Appellants must demonstrate, among other things, that "the harassment affected a term, condition, or privilege of [their] employment." Elnashar, 484 F.3d at 1058. This requires offering facts that show the harassment to have been "sufficiently severe or pervasive to alter the conditions of [Appellants'] employment and create an abusive working environment' as viewed objectively by a reasonable person." Carpenter v. Con-Way Cent. Express, Inc., 481 F.3d 611, 618 (8th Cir.2007) (quoting Tademe v. Saint Cloud State Univ., 328 F.3d 982, 991 (8th Cir.2003)).
Appellants contend that the district court failed to consider the totality of the circumstances, examining instead only a few instances of Trice's alleged harassment. Hostile work environment claims are assessed based on the totality of the circumstances, Vajdl v. Mesabi Acad. of KidsPeace, Inc., 484 F.3d 546, 551 (8th Cir.2007); however, Appellants seem to argue that the sheer number of alleged instances of harassment must equate to a racially hostile work environment. We disagree. The frequency of the alleged harassment is only one of the relevant factors in determining whether it was sufficiently severe or pervasive. Harris, 510 U.S. at 23, 114 S.Ct. 367. We also consider "its severity; whether it is physically threatening or humiliating, or a mere offensive utterance; and whether it unreasonably interferes with an employee's work performance." Id. Despite the hyperbolic and conclusory nature of Appellants' supporting affidavits, Trice's actions, as alleged, lack the requisite severity to be actionable. See Nitsche v. CEO of Osage Valley Elec. Coop., 446 F.3d 841, 846 (8th Cir.2006) ("To be actionable, the conduct complained of must be extreme in nature and not merely rude or unpleasant.") (emphasis added).
Basically, the allegations may be distilled to verbal harassment and increased scrutiny. Therefore, we find entirely unconvincing Appellants' attempt to analogize this case to Jackson v. Flint Ink N. Am. Corp., 382 F.3d 869 (8th Cir.2004) and Mems v. City of St. Paul, Dept. of Fire & Safety Servs., 224 F.3d 735 (8th Cir.2000), two cases in which this court reversed the district court's grant of summary judgment for the employer on hostile work environment claims. The plaintiff in Jackson was an African-American factory *810 worker who faced his name being written in a shower at his workplace with an arrow connecting his name with a burning cross and a KKK sign. 382 F.3d at 870. Mems involved African-American firefighters who: were required to leave the station promptly at the end of a shift and respond to all calls wearing full protective gear, while white firefighters were not; endured the display of racially offensive cartoons; and suffered the destruction of their property. 224 F.3d at 738-39.
Moreover, Appellants attempt to characterize this fact situation as at least the kind of borderline case presented by Rorie v. United Parcel Serv., Inc., 151 F.3d 757 (8th Cir.1998), similarly falls short. The Rorie Court stated,
While we concede that the facts of this case are on the borderline of those sufficient to support a claim of sexual harassment, we cannot say that a supervisor who pats a female employee on the back, brushes up against her, and tells her she smells good does not constitute sexual harassment as a matter of law.
Id. at 762. Rorie involved physical touching, which distinguishes it from this case.
Rather, the district court correctly analogized this case to Bradley v. Widnall, 232 F.3d 626 (8th Cir.2000), where we found an employer's conduct was not so severe or pervasive to have affected a term or condition of employment despite the employee's "frustrating work situation" characterized by her being: excluded from the decision-making process, treated with disrespect, subjected to false complaints, and curtailed in her supervisory duties. Id. at 631-32; see Devin v. Schwan's Home Serv., Inc., 491 F.3d 778, 788 (8th Cir.2007) (finding allegations "amount[ed] to a frustrating work environment rather than an objectively hostile work environment."); see also Breeding v. Arthur J. Gallagher & Co., 164 F.3d 1151, 1159 (8th Cir.1999) (concluding that unfair criticism and being yelled at did not amount to actionable harassment). Although increased scrutiny might, at some point, amount to a hostile work environment, nothing in this record warrants such a finding. See Harbuck v. Teets, 152 Fed.Appx. 846, 847-48 (11th Cir.2005) (unpublished per curiam) (holding that employer's conduct, including keeping workplace too cold, subjecting employee to heightened scrutiny, and revealing some information disclosed in prior lawsuit to her co-workers, did not constitute a hostile work environment); Martinelli v. Penn Miller Ins. Co., 269 Fed. Appx. 226, 228 (3d Cir.2008) (unpublished) (finding that employer's scrutiny of employee's work, "while unpleasant and annoying, did not create the sort of hostile work environment that would satisfy Title VII's anti-retaliation provision"). Because Appellants' working conditions were not so severe or pervasive that they rose to the level of a racially hostile work environment, the district court properly granted summary judgment to the USDA on this claim.
B. Constructive Discharge
Peterson asserts that the district court's grant of summary judgment to the USDA on her constructive discharge claim is improper because genuine issues of material fact exist. Even though Peterson resigned, she may still have a Title VII claim by demonstrating that she was constructively discharged. Carpenter, 481 F.3d at 616. To do so, she must first show that "a reasonable person in [her] situation would find the working conditions intolerable...." Anda v. Wickes Furniture Co., 517 F.3d 526, 534 (8th Cir.2008) (quoting Carpenter, 481 F.3d at 616). This burden is "substantial," Fischer v. Forestwood Co., 525 F.3d 972, 980 (10th Cir.2008), as "[t]he bar is quite high in [constructive discharge] *811 cases." Garrett v. Hewlett-Packard Co., 305 F.3d 1210, 1221 (10th Cir. 2002); see Poland v. Chertoff, 494 F.3d 1174, 1184 (9th Cir.2007) (stating that conditions must be "sufficiently extraordinary and egregious" in order to establish constructive discharge (quotation omitted)).
Peterson premises her constructive discharge claim on the same allegations we found insufficient to establish a hostile work environment. As such, her claim fails. See Penn. State Police v. Suders, 542 U.S. 129, 147, 124 S.Ct. 2342, 159 L.Ed.2d 204 (2004) ("A hostile-environment constructive discharge claim entails something more [than an actionable hostile work environment]."); Tran v. Trs. of State Colls. in Colo., 355 F.3d 1263, 1270-71 (10th Cir.2004) (recognizing that a plaintiff has a higher evidentiary burden when seeking to establish a constructive discharge than an adverse employment action). Accordingly, the district court properly granted summary judgment for the USDA.
C. Retaliation
Appellants also claim that the district court erred in granting summary judgment for the USDA on their retaliation claim because there is evidence, in the form of affidavits of NRCS employees, that Trice treated people who engaged in protected activity differently than those who had not. In order to establish a prima facie case of retaliation, Appellants must produce evidence that the alleged retaliation was such that "a reasonable employee would have found the challenged action materially adverse...." Smith v. Internat'l Paper Co., 523 F.3d 845, 848 (8th Cir.2008) (quoting Carrington v. City of Des Moines, 481 F.3d 1046, 1050 (8th Cir.2007)). We first note that Trice's conduct at the October 9, 2003 meeting preceded Appellants' EEOC complaints that led to this case,[2] and, therefore, cannot constitute retaliation for those complaints. See Stewart v. Indep. Sch. Dist. No. 196, 481 F.3d 1034, 1042 (8th Cir.2007). Furthermore, the remaining allegations, viewed as a whole, do not satisfy the "significant harm" standard imposed by the materially adverse element. See Clegg v. Ark. Dept. of Corr., 496 F.3d 922, 929 (8th Cir.2007). Accordingly, the district court properly granted summary judgment to the USDA on this claim.[3]
III.
For the reasons stated above, we affirm.
NOTES
[1] The Honorable Susan Webber Wright, United States District Judge for the Eastern District of Arkansas.
[2] We also note that the meeting occurred six years after Peterson's 1997 EEOC complaint and three years after O'Brien's 2003 testimony on Peterson's behalf such that no inference of retaliation can be made between Appellants' activities related to the 1997 case.
[3] Though Peterson said that Trice denied O'Brien a monetary award due to her EEO activity in September 2004, this bare assertion and speculation as to Trice's motive does not create a genuine issue of material fact. Anda v. Wickes Furniture Co., 517 F.3d 526, 531 (8th Cir.2008).
| {
"pile_set_name": "FreeLaw"
} |
379 S.C. 314 (2008)
665 S.E.2d 194
QUAIL HILL, LLC, Appellant,
v.
COUNTY OF RICHLAND, South Carolina, Respondent.
No. 4407.
Court of Appeals of South Carolina.
Heard April 9, 2008.
Decided June 6, 2008.
Rehearing Denied August 25, 2008.
*317 Clifford O. Koon, Jr., and Paul D. de Holczer, of Columbia, for Appellant.
William H. Davidson, II, and Michael Wren, of Columbia, for Respondent.
HEARN, C.J.
Quail Hill, LLC (Buyer) brought this action against Richland County as the result of its purchase of a 72.5 acre tract in reliance upon representations by County officers and staff regarding its zoning. The circuit court granted summary judgment to County on Buyer's claims for equitable estoppel, negligence, negligent misrepresentation, and inverse condemnation. We believe genuine issues of material fact exist as to some of Buyer's claims and therefore affirm in part, reverse in part, and remand.
FACTS
In 2002, Buyer contacted a licensed real estate broker and authorized him to act as its agent in locating and purchasing a parcel suitable for development of a manufactured-home subdivision. *318 Broker identified a 72.5-acre parcel as a potential site for Buyer's development.
At this time, the Richland County Planning Department, Development Services' website advised the public: "Since 1997 the department has performed the planning, zoning and land use management staff functions of county government. . . . The Development Services Counter is the key point of public contact for the planning and zoning functions of the County. It is the primary information resource of property owners and land use professionals who often need to know `What can and can not be done with a piece of property.'" (emphasis supplied).
Accordingly, in January 2003, Broker met with the Richland County Planning Department staff (Staff) to obtain the zoning classification and permitted uses for the parcel. County's subdivision coordinator, Carl Gosline, told Broker the parcel was zoned RU (rural), a classification that permits a manufactured-home subdivision. Additionally, County tax records listed the parcel's zoning as RU.
On March 13, 2003, Buyer purchased the parcel and then surveyed, platted, and prepared it for development. In September, Buyer filed an application with the County Planning Commission for site plan approval for his proposed subdivision. Buyer's site plan requested subdividing the parcel into twenty lots for manufactured homes. The Staff Report to the Planning Commission recommended approval of Buyer's subdivision plan and included the following findings: (1) the parcel was zoned RU, (2) the proposed project's impact on traffic was well within design capacity for the access road, (3) the proposed project was compatible with adjacent development, and (4) the project implemented objectives of the North Central Subarea Plan, including varied and low-density development initiatives. On October 6, 2003, the Planning Commission voted unanimously to approve Buyer's subdivision application and site plan. Thereafter, Buyer began marketing and selling lots for Brockington Acres.
Over a year later, after the first manufactured homes were already installed, community members contacted their county council representative and asked him to attend a neighborhood meeting at a church adjoining Brockington Acres. County's *319 current zoning administrator, Geonard Price, accompanied the council member to the meeting, where neighbors inquired about zoning restrictions and expressed opposition to the development of Brockington Acres. Shortly thereafter, on November 14, 2004, Staff notified Buyer that Price had interpreted the official zoning map and found the parcel was zoned RS-1, a classification that prohibits manufactured homes.[1] Three days later, Price issued an order requiring Buyer to cease development of the subdivision.
On November 17, 2004, County issued its order stopping further development; however, since receiving final site plan approval from the Planning Commission in October 2003, Buyer had already sold five of the subdivision's twenty lots. Two purchasers had obtained County permits authorizing them to install manufactured homes and, in fact, two homes were already installed on the lots. Another purchaser had permits to install manufactured homes on three lots, but had not yet installed them when the County issued its order to cease development.
When Buyer contacted Staff about County's order to cease development at Brockington Acres, Staff told him to apply to county council for a zoning map amendment and assured him it would recommend approval of his request. However, just two weeks later, the Staff Report recommended the Planning Commission deny Buyer's application for a zoning map amendment. At a meeting on December 2, 2004, the Planning Commission accepted the Staff Report and recommended county council deny Buyer's request for a zoning map amendment. Thereafter, county council voted unanimously to deny Buyer's application to amend the zoning map.
Buyer filed a complaint in circuit court requesting an injunction and alleging causes of action against County for equitable estoppel, negligence, negligent misrepresentation, and inverse condemnation. Buyer sought an order requiring County to change zoning of his parcel from RS-1 to RU. Alternatively, Buyer sought damages and attorney's fees. County moved for *320 summary judgment, which the circuit court granted. This appeal followed.
STANDARD OF REVIEW
When reviewing the grant of a summary judgment, this court applies the same standard that governed the trial court; summary judgment is proper when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fleming v. Rose, 350 S.C. 488, 493, 567 S.E.2d 857, 860 (2002); see also Rule 56(c), SCRCP. "On appeal from an order granting summary judgment, the appellate court will review all ambiguities, conclusions, and inferences arising in and from the evidence in a light most favorable to the appellant, the non-moving party below." Willis v. Wu, 362 S.C. 146, 151, 607 S.E.2d 63, 65 (2004).
LAW/ANALYSIS
I. Validity of Zoning Ordinances
Initially Buyer contends there is a material issue of fact as to whether County validly enacted its 1978 zoning ordinances. We agree with the circuit court that Buyer is statutorily barred from challenging the validity of the zoning ordinance at this juncture.
It took County thirteen months to provide the minutes from the county council meetings in 1978 wherein the zoning on the subject property was purportedly granted. While Buyer asserts certain irregularities in connection with the approval of the zoning ordinances, the circuit court correctly held that Buyer may not now be heard to challenge the validity of the enactment of the ordinances. Section 6-29-760(D) of the South Carolina Code (2004) provides:
No challenge to the adequacy of notice or challenge to the validity of a regulation or map, or amendment to it, whether enacted before or after the effective date of this section, may be made sixty days after the decision of the governing body if there has been substantial compliance with the notice requirement of this section or with established procedures *321 of the governing authority or the planning commission.
Accordingly, we find Buyer's argument is without merit.
II. Inverse Condemnation
Buyer next alleges the circuit court erred in granting summary judgment in favor of County on his claim for inverse condemnation. We disagree.
An inverse condemnation may result from the government's physical appropriation of private property, or it may result from government-imposed limitations on the use of private property. Byrd v. City of Hartsville, 365 S.C. 650, 656, 620 S.E.2d 76, 79 (2005). To prevail in an action for inverse condemnation, "a plaintiff must prove an affirmative, aggressive, and positive act by the government entity that caused the alleged damage to the plaintiff's property." WRB Ltd. P'ship v. County of Lexington, 369 S.C. 30, 32, 630 S.E.2d 479, 481 (2006).
The circuit court found there was "no evidence that the zoning designation [of Buyer's parcel] was changed, and at most, any representation of the zoning designation of the property by Mr. Gosline or contained in the Tax Assessor's records was a mistake." This finding is in line with Buyer's own complaint, which stated "the staff represented to [Buyer] that it had erroneously advised [Buyer] that the subject property was zoned `RU' and that records in the development staff offices and Tax Assessor's office differed from the official zoning map."
On appeal, Buyer puts forth two alternative arguments in support of its assertion that the circuit court erred in granting County's motion for summary judgment on the inverse condemnation claim. First, Buyer contends there has never been a valid, enforceable zoning map and that therefore, it was denied the ability to develop the property as it desired without being subject to zoning restrictions. As discussed above, because Section 6-29-760(D) bars Buyer's challenge, this contention is without merit. Next, Buyer contends that County's action in informing it the zoning of the property was RU constituted a sufficient showing of an affirmative, aggressive, and positive act to establish inverse condemnation.
*322 However, the only evidence in the record indicates that County's informing Buyer of the zoning designation for the property was merely a mistake, caused primarily by incorrect record keeping in the tax assessor's office. We have found no reported case, and Buyer has cited none, which holds that a mistake may rise to the level of an affirmative, aggressive, and positive act sufficient to constitute inverse condemnation. Accordingly, the court's grant of summary judgment to County on this cause of action is affirmed.
III. Negligence and Negligent Misrepresentation
Buyer also contends the circuit court erred in granting summary judgment in favor of County on its claims of negligence and negligent misrepresentation. We agree.
The circuit court judge, relying on the South Carolina Tort Claims Act, held that Buyer's tort claims against County were barred by sovereign immunity. S.C.Code Ann. § 15-78-40 (2005) states: "The State, an agency, a political subdivision, and a governmental entity are liable for their torts in the same manner and to the same extent as a private individual under like circumstances, subject to the limitations upon liability and damages, and exemptions from liability and damages, contained herein." Moreover, S.C.Code Ann. § 15-78-50(b) (2005) provides: "In no case is a governmental entity liable for a tort of an employee where that employee, if a private person, would not be liable under the laws of this State." Thus, the circuit court reasoned, County is liable for the negligent administration and enforcement of its zoning ordinances only if a private person could also be held liable for breach of that same duty under South Carolina law.
We recognize that there is Federal authority which supports the circuit court's resolution of this issue. See United States v. Olson, 546 U.S. 43, 126 S.Ct. 510, 163 L.Ed.2d 306 (2005) (holding that under a similar provision of the Federal Tort Claims Act, the United States only waives sovereign immunity under circumstances where local law would make a private person liable in tort). Moreover, the circuit court also relied upon a recent decision from this court in granting summary judgment to County on these causes of action; however, the case relied upon was recently reversed by our supreme court. *323 See Sloan Constr. Co., Inc. v. Southco Grassing, Inc., 368 S.C. 523, 629 S.E.2d 372 (Ct.App.2006), rev'd 377 S.C. 108, 659 S.E.2d 158 (2008) (holding that because a private person would never be liable for the failure to require bonds mandated under the "Little Miller Act," this court found Sloan had no right to sue under the South Carolina Tort Claims Act's limited waiver of sovereign immunity). Thus, no South Carolina precedent exists to support the circuit court's determination that it is necessary to have a private analogue in order for liability to exist against a governmental entity under the South Carolina Tort Claims Act. Therefore, at this premature stage of the litigation, we decline to hold that Buyer may not pursue its claims for negligence and negligent misrepresentation based on these provisions of the South Carolina Tort Claims Act.
The circuit court also based its decision to grant summary judgment on S.C.Code Ann. § 15-78-60(4) (2005), which states a governmental entity is not liable for a loss resulting from: "adoption, enforcement, or compliance with any law or failure to adopt or enforce any law, whether valid or invalid, including, but not limited to, any charter, provision, ordinance, resolution, rule, regulation, or written policies . . . ." We view Buyer's claims for negligence and negligent misrepresentation as arising from County's actions in mistakenly advising Buyer on the applicable zoning restrictions on the 72.5 acre parcel, not as emanating from the adoption or enforcement of County's zoning ordinances; therefore, we disagree with the circuit court that this provision of the tort claims act bars Buyer's claims. Accordingly, we reverse the circuit court's grant of summary judgment on Buyer's causes of action for negligence and negligent misrepresentation.
IV. Equitable Estoppel
Finally, Buyer contends the circuit court erred in granting summary judgment to County on its claim for equitable estoppel. Specifically, Buyer argues further inquiry is needed to determine whether County should be estopped from enforcing the RS-1 zoning determination almost two years after County determined the same parcel was zoned RU and a year after it approved Buyer's site plan. We agree.
*324 "[E]stoppel is an equitable doctrine, essentially flexible, and therefore to be applied or denied as equities between the parties may preponderate." Pitts v. N.Y. Life Ins. Co., 247 S.C. 545, 552, 148 S.E.2d 369, 372 (1966). To prevail on a claim of equitable estoppel, a party must show: "(1) a lack of knowledge[,] and the means of knowledge[,] of truth as to facts in question; (2) justifiable reliance upon the conduct of the party estopped; and (3) prejudicial change in the position of the party claiming estoppel." Evins v. Richland County Historic Pres. Comm'n, 341 S.C. 15, 20, 532 S.E.2d 876, 878 (2000).[2]
"The acts of a government agent that are within the proper scope of his authority may give rise to estoppel against a municipality." Charleston County v. Nat'l Adver. Co., 292 S.C. 416, 418, 357 S.E.2d 9, 10 (1987); see also Landing Dev. Corp. v. City of Myrtle Beach, 285 S.C. 216, 221, 329 S.E.2d 423, 426 (1985) ("To allow the city to repudiate its former interpretation of permissible rentals and the statements of its zoning director, based upon a re-assessment of the meaning of an undefined term in the ordinance[,] would be unconscionable.").
1. Lack of Knowledge
In granting summary judgment to County on Buyer's claim of equitable estoppel, the circuit court found the zoning administrator's interpretation of the official zoning map was conclusive because: "Richland County Zoning Ordinances provide that the official zoning map of Richland County constitutes the only official description of the location of zoning district boundaries, and that the zoning administrator is the only representative on behalf of Richland County that can interpret the official zoning map." However, this finding ignores the clear import of the County's website which directs the public to the Development Services Counter as "the primary information *325 resource of property owners and land use professionals who often need to know `What can and can not be done with a piece of property.'" Moreover, the Frequently Asked Questions portion of the website advises the public to check the zoning of a parcel prior to its development by consulting with the Department of Development Services, and suggests that it is advisable "to meet with the Planning Staff to discuss your upcoming project." Nowhere on the website is it stated that the official zoning map must be consulted to determine a property's correct zoning designation.
Accordingly, we believe a genuine issue of material fact exists as to whether Buyer possessed the knowledge or the means to acquire the knowledge concerning the true zoning of this property. See Abbeville Arms v. City of Abbeville, 273 S.C. 491, 257 S.E.2d 716 (1979); Landing Dev. Corp., 285 S.C. at 220, 329 S.E.2d at 425. At trial, both parties will have the opportunity to develop evidence on the issue of whether or not the official zoning map in Richland County is the exclusive means for acquiring zoning information.
2. Justifiable Reliance
Buyer contends there is a question of material fact whether its reliance on the representations of County officers and staff, acting within their proper scope of authority, was justified. We agree.
At the zoning hearing, Price was asked about Staff's determination that Buyer's parcel was zoned RU, and the Planning Commission's subsequent approval of Buyer's subdivision plan for manufactured housing which was predicated upon RU zoning. Price admitted: "It was thought to be approvable when we were asked." Price also conceded subdivision coordinator Gosline told him the parcel was zoned RU. Price then reviewed tax cards from the assessor's office showing the parcel's zoning as RU; however, Price could offer no reason for the contradictions of these statements and his later determination the development had a classification of RS-1.
Broker testified he met with subdivision coordinator Gosline about two months before Buyer purchased the parcel. Broker stated it was the common practice for brokers to consult Staff to determine a parcel's zoning classification. He also acknowledged *326 that, prior to November 17, 2004, he was unaware County kept an official zoning map and had never heard of developers demanding to see it. Additionally, Broker testified that Gosline determined the parcel was zoned RU by looking it up on his computer. Broker confirmed he later saw a tax bill that showed the property was zoned RU. Finally, Broker stated prior to November 17, 2004, all County documents referring to the parcel, including Buyer's recorded subdivision plat, showed the parcel was zoned RU.
Based on all of these assertions, Buyer purchased the parcel, then surveyed, platted and prepared it for development. We hold this evidence created a genuine issue of material fact as to whether Buyer's reliance on the representations of County officers and staff was justified.
3. Prejudicial Change in Position
Buyer contends there is a question of material fact whether harm was caused by his justifiable reliance on the County's representations. Specifically, he argues there was evidence that: (1) after County's Planning Staff determined the parcel was zoned RU, which permitted a manufactured home subdivision, Buyer purchased the parcel and prepared it for development; (2) after the Planning Commission unanimously approved the subdivision plan for Brockington Acres, Buyer recorded the plat, marketed the property, and sold lots for twelve months without objection; and (3) after County granted permits to purchasers for installation of their manufactured homes, it notified Buyer the parcel was zoned RS-1 and development must cease.[3]
Buyer contends that, as a result of his detrimental reliance, the value of his property was greatly diminished. Broker testified mobile homes predominate in the community encompassing Brockington Acres and lots for "stick-built homes" do not sell as quickly as lots for manufactured-homes. After County told Buyer he could not install manufactured-homes on his property, he sold six lots at a twenty-percent discount to the church members who had earlier opposed his development, losing a substantial amount of interest Buyer would *327 have received from self-financing those six lots to the original purchasers. We believe these facts clearly demonstrate a question of Buyer's prejudicial change in position.
Under the standard of review for summary judgment, we find questions of material fact exist on each of the elements of Buyer's cause of action for equitable estoppel. Accordingly, the court's order granting County summary judgment on this cause of action is reversed.
CONCLUSION
The circuit court's grant of summary judgment in favor of County on Buyer's claims of the existence of a valid zoning ordinance and inverse condemnation are affirmed. The grant of summary judgment in favor of County on Buyer's claims of negligence, negligent misrepresentation, and equitable estoppel are reversed.
AFFIRMED IN PART, REVERSED IN PART, and REMANDED.
CURETON, A.J., concurs. PIEPER, J., dissents in a separate opinion.
PIEPER, J., dissenting.
While I recognize the facts of the case are troubling, I respectfully dissent.
I do not believe that the Tort Claims Act provides a remedy for any negligence or mistake of a governmental employee not authorized by statute or ordinance to deviate from a zoning ordinance duly passed by the county. The negligence or mistake at issue did not involve the exercise of a discretionary act by even the duly authorized zoning administrator; instead, the negligent act or mistake at issue was the misinterpretation of the official zoning classification by an official other than the zoning administrator. Moreover, there simply is no indication that the zoning administrator or anyone else had the authority to deviate from the official zoning classification absent a duly authorized variance.
I am also concerned that the opinion may be interpreted as modifying the long-standing jurisprudence of this state regarding *328 the application of estoppel against a governmental entity by recharacterizing a possible estoppel claim, if any, into one for negligence or negligent misrepresentation. United States Supreme Court Justice Oliver Wendell Holmes once noted that "men must turn square corners when they deal with the Government." Rock Island, A. & L.R. Co. v. United States, 254 U.S. 141, 143, 41 S.Ct. 55, 65 L.Ed. 188 (1920). This case indeed presents such a situation and the majority opinion is very compelling as to the estoppel issue and the issue of summary judgment.
However, based upon my interpretation of the law on this issue, I would affirm the decision of the circuit court.
NOTES
[1] The Record indicates Price was not the County's zoning administrator in 2003 when the Planning Commission approved Buyer's subdivision plan.
[2] We note there appears to be a divergence in our state's case law as to the number of elements required to prove equitable estoppel; however, for the purposes of this appeal, we analyze this claim under the three element rubric. See e.g. McCrowey v. Zoning Bd. of Adjustment of City of Rock Hill, 360 S.C. 301, 305, 599 S.E.2d 617, 619 (Ct.App.2004) (quoting Oswald v. Aiken County, 281 S.C. 298, 305, 315 S.E.2d 146, 151 (Ct.App.1984)).
[3] Purchasers who had received permits and had placed mobile homes on their lots were required to remove them.
| {
"pile_set_name": "FreeLaw"
} |
Third District Court of Appeal
State of Florida
Opinion filed April 1, 2015.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D14-1774
Lower Tribunal No. 08-29374
________________
TRG Columbus Development Venture, Ltd.,
Appellant,
vs.
Luis Sifontes,
Appellee.
Appeal from the Circuit Court for Miami-Dade County, Ronald C. Dresnick,
Judge.
Greenberg Traurig, P.A., and Elliot H. Scherker, Brigid F. Cech Samole, and
Jay A. Yagoda, for appellant.
Vila, Padron & Diaz, P.A., and Kara D. Phinney, for appellee.
Before SUAREZ, EMAS and SCALES, JJ.
SCALES, J.
TRG Columbus Development Venture, Ltd., the defendant below (“TRG”),
appeals the trial court’s final order awarding Luis Sifontes (“Sifontes”) the sum of
$237,920 in attorney’s fees. Because the trial court did not abuse its discretion in
determining an hourly rate and in awarding Sifontes a contingency fee multiplier,
we affirm.
Facts
In August 2004, Sifontes entered into a pre-construction contract to purchase
a condominium unit from TRG. The purchase price for the unit was $304,900.
Pursuant to this contract, Sifontes made a $60,980 deposit, which represented
twenty percent of the purchase price. The parties’ contract required TRG to
substantially complete the condominium project within two years. Five months
later, however, the parties executed a subsequent agreement that extended the
completion date.
After his condominium unit was completed, Sifontes declined to close on
the unit and demanded the return of his deposit. Sifontes filed suit against TRG
alleging that the agreement extending the completion date was void and Sifontes
was entitled to the return of his deposit. The trial court ruled in favor of Sifontes on
this issue.
The trial court entered final judgment for Sifontes and granted Sifontes
entitlement to attorney’s fees in an amount to be determined at a later date. This
Court affirmed that final judgment in TRG Columbus Development Venture, Ltd.
v. Sifontes, 138 So. 3d 458 (Fla. 3d DCA 2014) (table).
2
The trial court then conducted an evidentiary hearing on the amount of the
attorney’s fee to which Sifontes was entitled. The trial court determined that
Sifontes’s counsel was entitled to be compensated for 297.40 hours of time for
trying the case, and determined a reasonable hourly rate to be $400 per hour.
This resulted in a lodestar fee of $118,960.1 Because Sifontes’s counsel had
been engaged on a contingeny fee basis, the trial court also heard evidence
regarding whether Sifontes’s counsel was entitled to a contingency fee multiplier.2
After the evidentiary hearing, the trial court entered a detailed, well-
reasoned final order finding that Sifontes was entitled to a contingency fee
multiplier of 2.0. The trial court awarded a total fee of $237,920.
TRG appeals both features of the fee award: the hourly rate and the
multiplier.
Analysis
1. The Hourly Rate
The relevant portion of the contingency fee agreement reads as follows:
1 A “lodestar” is determined by multiplying the number of hours reasonably
expended on the matter times the reasonable hourly rate. Fla. Patient’s Comp. Fund
v. Rowe, 472 So. 2d 1145, 1150-51 (Fla. 1985).
2If certain conditions are met (as discussed, infra) and counsel is hired pursuant to
a contingency fee contract, a trial court may enhance a lodestar by applying a
contingency fee multiplier of up to 2.5 times the lodestar fee. Standard Guar. Ins.
Co. v. Quanstrom, 555 So. 2d 828, 834 (Fla. 1990).
3
As compensation for their services, I agree to pay my said attorney
from the gross proceeds of recovery, the higher of such fee as is
determined to be a reasonable fee pursuant to any contract, statute or
decisional authority which does or may provide for recovery of a
“reasonable attorneys’ fee” or such fee as follows and agree that a
reasonable fee for such services is $350.00/hour for Kara D. Phinney,
Esq.:
i. 40% of any recovery
....
In the event a counter-claim is filed by a Defendant, the client hereby agrees
to pay the undersigned attorney the sum of $350.00 per hour in defense of
the claim.
(emphasis added)
While a trial court may not award an hourly rate higher than that which
Sifontes was contractually obligated to pay his counsel, TRG acknowledges the
exception to this rule when a contingency fee contract includes an alternate fee
recovery clause that enables a court to determine a reasonable fee. First Baptist
Church of Cape Coral, Fla, Inc. v. Compass Constr., Inc., 115 So. 3d 978 (Fla.
2013).
TRG maintains, however, that Sifontes’s contingency fee contract does not
contain an alternate fee recovery clause; hence, according to TRG, the First Baptist
exception would not apply to Sifontes’s fee claim. TRG argues that, based on the
contract’s reference to $350 per hour in the contract’s first paragraph, Sifontes was
entitled to recover the higher of either forty percent of the deposit recovered from
4
TRG, or $350 per hour. Therefore, the trial court was equally bound by the
contract and could not determine a $400 hourly rate.
To the contrary, Sifontes argues that the contract included an alternate fee
recovery provision (i.e., the underlined language cited above). Sifontes’s counsel
testified that the contingency fee contract’s first reference to “$350/ hour” –
located in the opening paragraph of the contract – does not establish a fixed rate of
compensation. Rather, it is merely a benchmark of reasonableness, not intended to
bind the parties to a $350 hourly rate for Sifontes’s counsel to litigate the recovery
of Sifontes’s deposit from TRG.
We are thus called upon to construe the subject fee contract to determine
whether it included an alternate fee recovery provision so as to allow the trial court
to award an hourly fee greater than $350.00. While the contingency fee contract is
poorly worded, we conclude that its intention, supported by testimony at the
hearing below, is evident.3
When a court construes a contract, it must look at the contract as a whole
and give meaning to the parties’ intentions as manifested in the contract’s
language. See Aristech Acrylics, LLC v. Lars, LLC, 116 So. 3d 542, 544 (Fla. 3d
DCA 2013).
3 Sifontes’s counsel testified that the $350 per hour rate identified in the fourth
paragraph of the contract applied only to a situation in which Sifontes was required
to defend against a counterclaim. As TRG asserted no counterclaim, this $350 per
hour rate had no application here.
5
Additionally, a court may not interpret a contract so as to render a portion of
its language meaningless or useless. See Moore v. State Farm Mut. Auto. Ins. Co.,
916 So. 2d 871, 877 (Fla. 2d DCA 2006).
In this case, TRG, a stranger to the contract between Sifontes and his
counsel, would have us simply ignore the underlined portion of the contingency fee
contract, which allows a “higher. . . fee” to be “determined. . . pursuant to any. . .
decisional authority.” While this language is not a model of clarity, we cannot
simply disregard it as superfluous; we must give it the meaning and effect intended
by the parties to the contract. See Aristech Acrylics, LLC, 116 So. 3d at 544.
Against this backdrop, we agree with the trial court that the first paragraph
of the contract contains a valid alternate fee recovery clause. Accordingly, the trial
court did not abuse its discretion in determining that a reasonable hourly rate for
Sifontes’s counsel was $400.
2. The Multiplier
We also review the trial court’s application of a contingency fee multiplier
using an abuse of discretion standard. Sunshine State Ins. Co. v. Davide, 117 So.
3d 1142, 1144 (Fla. 3d DCA 2013).
The question of whether the trial court may apply a multiplier is governed by
the standards set forth in Standard Guaranty Insurance Company. v. Quanstrom,
555 So. 2d 828 (Fla. 1990). Quanstrom provides:
6
[T]he trial court should consider the following factors in determining
whether a multiplier is necessary: (1) whether the relevant market
requires a contingency fee multiplier to obtain competent counsel; (2)
whether the attorney was able to mitigate the risk of nonpayment in
any way; and (3) whether any of the factors set forth in Rowe are
applicable, especially the amount involved, the results obtained, and
the type of fee arrangement between the attorney and his client.
Id. at 834.
Initially, we note that TRG reads the first Quanstrom prong in isolation, and
too narrowly. Quanstrom requires that a trial court consider evidence in support of
each of the three Quanstrom prongs in order to award a contingency fee multiplier.
The order on appeal indicates that the trial court undertook a complete
consideration of Quanstrom’s factors. We cannot say that the trial court abused its
discretion by weighing a full array of evidence.
In its exclusive focus on Quanstrom’s first prong, TRG argues that Sifontes
presented no evidence to demonstrate that the relevant market required a
contingency fee multiplier to obtain competent counsel. Appellate courts have
found that Quanstrom’s first prong is not satisfied where such evidence is absent.
See, e.g., Sun Bank of Ocala v. Ford, 564 So. 2d 1078 (Fla. 1990); USAA Cas. Ins.
Co. v. Prime Care Chiropractic, P.A., 93 So. 3d 345, 347 (Fla. 2d DCA 2012) (“If
there is no evidence that the relevant market required a contingency fee multiplier
to obtain competent counsel, then a multiplier should not be awarded.”).
7
In this case, however, evidence was adduced during an evidentiary hearing
that many South Florida lawyers were taking condominium deposit recovery cases
on a contingency fee basis, intending to settle those cases for a tiny percentage of
the full deposit without going to trial. The trial court heard direct evidence that
competent counsel willing both to take such cases on a contingency fee basis and
to try such cases to final judgment were few in number. Thus, with particular
regard to Quanstrom’s first prong, the trial court’s finding in favor of a
contingency fee multiplier is supported by competent substantial evidence.
Quanstrom, 555 So. 2d at 834.
Affirmed.
8
| {
"pile_set_name": "FreeLaw"
} |
897 F.2d 264w
65 A.F.T.R.2d 90-797, 90-1 USTC P 50,145
UNITED STATES of America and James A. Hill, Special Agent,Internal Revenue Service, Petitioners-Appellants,v.James E. MICHAUD and Mary L. Michaud, Respondents-Appellees.
Nos. 89-1684, 89-1986.
United States Court of Appeals,Seventh Circuit.
Argued Nov. 30, 1989.Decided March 8, 1990.
1
NOTE: THE COURT HAS WITHDRAWN THIS OPINION. SEE 907 F.2d 750.
| {
"pile_set_name": "FreeLaw"
} |
597 S.E.2d 104 (2004)
268 Va. 170
Amy Jean BARRETT, a/k/a Amy Jean Clark
v.
COMMONWEALTH of Virginia.
Record No. 032252.
Supreme Court of Virginia.
June 10, 2004.
*105 W. Todd Watson (David B. Hargett; Hargett & Watson, on brief), Richmond, for appellant.
Eugene Murphy, Asst. Atty. Gen. (Jerry W. Kilgore, Atty. Gen., on brief), for appellee.
Present: HASSELL, C.J., LACY, KEENAN, KOONTZ, KINSER, and LEMONS, JJ., and CARRICO, Senior Justice.
HARRY L. CARRICO, Senior Justice.
In a jury trial held in the Circuit Court of York County, Amy Jean Barrett (Barrett)[1] was convicted pursuant to Code § 18.2-371.1(A) of a Class 4 felony for the criminal neglect of her ten-month-old son, Joshua, resulting in his death. She was sentenced to serve two years in the penitentiary and ordered to pay a fine of $1,000.00. Barrett was also convicted pursuant to former Code § 18.2-371.1(B)[2] of a Class 6 felony for the criminal neglect of her daughter, Patricia, aged two years and ten months. Barrett was assessed a fine of $2,500.00 for this conviction.[3]
In a published opinion, the Court of Appeals affirmed both convictions. Barrett (Clark) v. Commonwealth, 41 Va.App. 377, 585 S.E.2d 355 (2003). We awarded Barrett this appeal to consider the two questions presented by her assignments of error, (1) whether the trial court erred in refusing to quash the indictment for Barrett's neglect of Patricia on the ground the indictment was the result of prosecutorial vindictiveness, and (2) whether the trial court erred in finding the evidence sufficient to support Barrett's convictions.
MOTION TO QUASH
Background
With respect to the death of Joshua, Barrett was indicted on September 15, 1998, for felony child neglect under Code § 18.2-371.1(A) and for felony murder under Code § 18.2-33. In a jury trial held in February 1999, Barrett was convicted of both offenses. However, on June 27, 2000, the Court of Appeals of Virginia reversed the convictions. Barrett v. Commonwealth, 32 Va.App. 693, 530 S.E.2d 437 (2000). The court held that, although the evidence was sufficient to support the conviction for felony child neglect under Code § 18.2-371.1(A), the trial court erred in refusing to instruct the jury on the meaning of the term "willful," as used in that Code section. 32 Va.App. at 699, 530 S.E.2d at 440. The court also held that the evidence was insufficient to sustain the felony murder conviction. The case was remanded for further proceedings, "if the Commonwealth be so advised." Id. at 701, 530 S.E.2d at 441.
When the case returned to the trial court, the Commonwealth moved to amend the charge for the felony murder of Joshua to a charge of involuntary manslaughter. On *106 April 3, 2001, without objection from Barrett, the trial court entered an order directing the amendment.
During plea negotiations that followed, the Commonwealth informed Barrett that it intended to proceed with a trial on both charges involving Joshua, i.e., manslaughter and felony child neglect under Code § 18.2-371.1(A). The Commonwealth also told Barrett that, if she refused to plead guilty to those charges, it would seek an indictment for felony child neglect of Patricia under Code § 18.2-371.1(B)(1). The plea negotiations failed, Barrett did not plead guilty, and, on May 22, 2001, the Commonwealth sought and received an indictment charging Barrett with felony child neglect of Patricia.
Barrett then filed a motion to quash the new indictment. In a hearing on the motion, Barrett asserted that the Commonwealth was pursuing the new charge as "punishment to [her] for having... successfully appealed her initial charges." She argued that the Commonwealth had the opportunity to bring the charge involving Patricia prior to trial on the initial charges yet waited for almost eleven months after the Court of Appeals had remanded the case, that the new indictment was based upon the same "facts and incidents" presented at the first trial, and that the new charge "carries a potential additional sentence to which [Barrett was] being subjected." All this, Barrett maintained, raised a presumption of prosecutorial vindictiveness or created "the appearance of vindictiveness," resulting in a violation of her Fifth Amendment right of due process. Thus, Barrett concluded, the trial court should quash the new indictment "based on prosecutorial vindictiveness or the appearance of vindictiveness." Finding "no presumption of vindictiveness, nor ... any actual vindictiveness," the trial court denied Barrett's motion to quash.
Discussion
On appeal, Barrett repeats her argument that her due process rights "were violated because the Commonwealth was permitted to bring a new indictment based on the same facts, transaction, or occurrence" and, hence, that she "is being punished for exercising her right to appeal the first set of convictions."[4] She states that the issue in this case "seems to be a matter of first impression for this Court as no appellate decision has opined whether the Commonwealth can indict a defendant on a wholly new charge following a successful appeal."
Barrett cites three decisions of the Supreme Court of the United States on the subject at hand: North Carolina v. Pearce, 395 U.S. 711, 89 S.Ct. 2072, 23 L.Ed.2d 656 (1969); Blackledge v. Perry, 417 U.S. 21, 94 S.Ct. 2098, 40 L.Ed.2d 628 (1974); and United States v. Goodwin, 457 U.S. 368, 102 S.Ct. 2485, 73 L.Ed.2d 74 (1982).
In Pearce, a defendant was originally convicted of assault with intent to commit rape and sentenced to serve eight to ten years. His conviction was reversed on appeal, and, upon retrial of the rape charge, the defendant was convicted and sentenced to a term of twelve to fifteen years, which, when added to the time he had already spent in prison, amounted to a longer sentence than originally imposed.
In a federal habeas corpus proceeding, the district court held that the longer sentence imposed upon retrial was unconstitutional and void. The United States Court of Appeals for the Fourth Circuit affirmed the district court's holding. The Supreme Court affirmed the Fourth Circuit, stating that the "imposition of a penalty upon the defendant for having successfully pursued a statutory right of appeal or collateral remedy would be... a violation of due process of law." 395 U.S. at 724, 89 S.Ct. 2072.
In Perry, the defendant was charged in a state district court with the misdemeanor of assault with a deadly weapon. Upon conviction, for which he received a six-month sentence, he appealed to the superior court, where he had the right to a trial de novo. While the appeal was pending, the prosecutor obtained an indictment charging a felony *107 for the same conduct, to which the defendant plead guilty and for which he was sentenced to a term of five to seven years.
In a federal habeas corpus proceeding, the district court granted the defendant a writ, and the United States Court of Appeals for the Fourth Circuit affirmed. In affirming the Fourth Circuit, the Supreme Court stated that "[a] person convicted of an offense is entitled to pursue his statutory right to a trial de novo, without apprehension that the State will retaliate by substituting a more serious charge for the original one, thus subjecting him to a significantly increased potential period of incarceration." 417 U.S. at 28, 94 S.Ct. 2098.
In Goodwin, the defendant was originally charged in federal district court with several misdemeanors, including assault of a police officer. He expressed an interest in plea bargaining but decided not to plead guilty and requested a trial by jury. Then, while those charges were still pending, he was indicted and thereafter convicted by the district court on a felony charge of forcibly assaulting a police officer arising out of the same incident. The court denied the defendant's motion to set the verdict aside on the ground of prosecutorial vindictiveness. The United States Court of Appeals for the Fourth Circuit reversed, finding a legal presumption of prosecutorial vindictiveness.
Although Barrett cites Goodwin as though it supports her argument, she does not tell us that the Supreme Court, while saluting the rule that "[t]o punish a person because he has done what the law plainly allows him to do is a due process violation," 457 U.S. at 372, 102 S.Ct. 2485, actually reversed the Fourth Circuit. The Supreme Court held that a presumption of prosecutorial vindictiveness was not warranted, id. at 382, 102 S.Ct. 2485, and that "[a]bsent a presumption of vindictiveness, no due process violation has been established," id. at 384, 102 S.Ct. 2485. The Supreme Court also stated that
the mere fact that a defendant refuses to plead guilty and forces the government to prove its case is insufficient to warrant a presumption that subsequent changes in the charging decision are unjustified.
457 U.S. at 382-83, 102 S.Ct. 2485. Goodwin, therefore, actually supports the Commonwealth's position; it certainly does not require the finding of a presumption of vindictiveness in Barrett's favor.
Barrett also cites three decisions by Circuit Courts of Appeals: United States v. Fiel, 35 F.3d 997 (4th Cir.1994) cert. denied, 513 U.S. 1177, 115 S.Ct. 1160, 130 L.Ed.2d 1116 (1995); United States v. Williams, 47 F.3d 658 (4th Cir.1995); and United States v. Whaley, 830 F.2d 1469 (7th Cir.1987), cert. denied, 486 U.S. 1009, 108 S.Ct. 1738, 100 L.Ed.2d 202 (1988). Again, Barrett cites these cases as though they support her argument and, again, she does not tell us the outcome of the cases. However, while all three of the cases involved prosecutions for offenses more serious than originally charged, in not one did the court apply a presumption of vindictiveness.[5] So the cases do not support the finding of a presumption of vindictiveness in Barrett's favor. To the contrary, the cases support the Commonwealth's position.
Hence, in only two of the cases cited above, Pearce and Perry, was a presumption of vindictiveness applied, and they are clearly distinguishable from the present case. In Pearce and Perry, the enhanced charge or punishment was directly related to the reversal on appeal of the initial charge. Here, there is no such relationship. The harsher punishment imposed in this case resulted not from the reversal on appeal of the offense involving Joshua, but from a trial for a separate offense, separate because it involved a different victim in the person of Patricia. It is merely coincidental, therefore, that the facts other than the identity of the victim might provide proof of Barrett's neglect of both Joshua and Patricia. And it is immaterial that the offense against Patricia could have been initiated at an earlier time. As the Court of Appeals stated in its written opinion in this case:
We note at the outset that "[i]t is well established that the choice of offenses for which a criminal defendant will be charged *108 is within the discretion of the Commonwealth's Attorney." Kauffmann v. Commonwealth, 8 Va.App. 400, 410, 382 S.E.2d 279, 284 (1989). Indeed, "the institution of criminal charges, as well as their order and timing, are matters of prosecutorial discretion." Bradshaw v. Commonwealth, 228 Va. 484, 492, 323 S.E.2d 567, 572 (1984).
41 Va.App. at 391, 585 S.E.2d at 362.
Here, Barrett, as did the defendant in Goodwin, declined to plead guilty to the original charges after plea negotiations failed and put the Commonwealth to proof of its case. What was said in Goodwin bears repeating here:
[T]he mere fact that a defendant refuses to plead guilty and forces the government to prove its case is insufficient to warrant a presumption that subsequent changes in the charging decision are unjustified.
457 U.S. at 382-83, 102 S.Ct. 2485.
Under the circumstances of this case, we are of opinion that a presumption of vindictiveness is not warranted. And, as in Goodwin,"[a]bsent a presumption of vindictiveness, no due process violation has been established." 457 U.S. at 384, 102 S.Ct. 2485.
In such absence, the burden was upon Barrett to establish actual vindictiveness, and we conclude that she failed to carry her burden. All Barrett offered in her attempt to show actual vindictiveness were allegedly contradictory statements made by the Commonwealth during argument on Barrett's motion to dismiss.
In responding to Barrett's argument that the charge involving the neglect of Patricia should have been pursued during the first trial, Leslie A. Siman-Tov, an Assistant Commonwealth's Attorney, said the prosecution was "focusing so much on the felony homicide and neglect of Joshua" that it failed to consider "there should have been another charge for neglect of Patricia." Ms. Siman-Tov also said it was not until the prosecution reviewed the Court of Appeals' opinion reversing Barrett's initial convictions that it was realized Barrett should also have been charged with the neglect of Patricia.
Then, when the Commonwealth's Attorney, Eileen M. Addison, joined the argument, she stated that two or three weeks prior to the initial trial "there was some discussion with defense counsel at that time about the possibility of this other charge of neglect of Patricia" but that Ms. Siman-Tov was not "involved in that conversation." Ms. Addison also said that the neglect of Patricia "was not charged at that time because there was no time to add an additional charge between the time that we thought of it and the time that [the initial charge] was set for trial."
Barrett says she "pointed out [in her argument below] that the prosecutors contradicted themselves by first claiming they did not think about the charge [involving Patricia] and then claiming that they ran out of time to get the indictment." However, if this indeed constitutes a contradiction, it is of such trifling importance that it does not deserve further comment beyond stating that it does not support a finding of actual vindictiveness or an abuse of discretion on the part of the prosecutor.
Accordingly, we conclude that the trial court did not err in denying Barrett's motion to quash the indictment charging the neglect of Patricia.
SUFFICIENCY OF THE EVIDENCE
Background
In accordance with familiar principles, we will state the evidence and all reasonable inferences fairly deducible therefrom in the light most favorable to the Commonwealth, the prevailing party at trial. Jackson v. Commonwealth, 267 Va. 178, 204, 590 S.E.2d 520, 535 (2004). And we will affirm the judgment of the trial court unless plainly wrong or without evidence to support it. Id.
The evidence shows that on April 17, 1998, Barrett and her two children were living with her boyfriend, Craig Griffith, in his apartment in York County. After Barrett put the children to bed that evening, she "went out," leaving the children in Griffith's care, which she did three or four times each month. She arrived at a local bar at 8:00 or 8:30 p.m. and had three beers during the course of the evening. She stayed at the bar until about *109 3:30 a.m. and then went to the home of the bartender, where she had one or two more beers.
The next morning, Griffith woke up about 5:00 a.m. and found that Barrett had not yet returned home. Griffith took a shower preparatory to going to work. He turned off the water when he finished his shower, but, because of an ongoing problem with the plumbing, approximately two to three inches of water remained in the tub. Usually, the water drained out in five to ten minutes but "[s]ometimes it could be worse than others."
Barrett returned home about 6:00 a.m. Griffith "wasn't happy" with her, and he left immediately for work. He returned home about noon and, upon entering the apartment, found "[i]t was a wreck ... [it] was just tore up." Patricia was "standing there with make-up on and no clothes." The TV was on but "playing static." Barrett was asleep on the couch and did not wake up when Griffith came in.
Griffith asked Patricia where Joshua was. She said "[h]e's in there," pointing to the entryway leading to the bedrooms and the bathroom. Joshua was not in either bedroom, so Griffith went into the bathroom and saw "a blanket over the top of the bathtub." When he removed the blanket, he saw in the tub a "lot of junk, toys, food, [and] a laundry basket upside down." He picked up the laundry basket and found Joshua underneath it. He picked Joshua up and saw that he was blue and cold. He found that cold water was running into the bathtub, and "potato chips were clogging the drain." Griffith tried to turn the water off but was unsuccessful, the faucet "just kept on spinning around."
Griffith picked Joshua up and "screamed for [Barrett]," saying "she had killed her kid." She awoke and called "911." An ambulance arrived and transported Joshua to a hospital, where he was pronounced dead. An autopsy disclosed that drowning was the cause of death. The autopsy also revealed there were thirteen fresh bruises on Joshua's forehead and the "top sides of his head."
The blanket Griffith found in the bathtub came from his bed and the laundry basket came from the bedroom occupied by Barrett and Griffith. The toys that were found in the bathtub were usually kept in Patricia's room.
Griffith testified that, approximately three months before the tragic events of April 17-18, 1998, Joshua's crib was moved into the bedroom occupied by Griffith and Barrett because Patricia had put "toys and stuff" on top of Joshua. Griffith testified further that Patricia was jealous of Joshua and that he, Griffith, had observed her covering Joshua with a blanket on one occasion and pushing him down in several other instances, that Barrett was present when this occurred, and that he had warned her more than once she "needed to keep her eye on them."
Jane M. Steele, an emergency room nurse who was present when a doctor told Barrett Joshua had died, testified that Barrett was "upset and crying [and] blamed a sibling, another child," meaning Patricia, for Joshua's death but then "turned and just blamed herself." Nurse Steele said that Patricia was present at the time, that Barrett was "very harsh toward the child," and that Barrett told Patricia, "you killed him."
Sergeant William Fordham of the Poquoson Police Department testified that he arrived at the hospital after Joshua was pronounced dead and asked Barrett for a statement. Barrett told him she was taking a nap on the couch about 11:00 or 11:30 on the morning in question and had placed Joshua on the floor next to the couch and given him a bottle. Patricia was asleep in her room. Barrett said there was something wrong with Patricia, that she constantly abused Joshua, tying scarves around his neck, pulling him around the apartment, and slamming her bedroom door in his face when he tried to crawl into the room. Barrett stated that Patricia had "tried in the past" to kill Joshua "but today she had been successful." Barrett told Fordham "she didn't want to even look at or be in the same room with Patricia."
Fordham was also present when Barrett was interviewed by two social service workers on the day Joshua died. Barrett said her son was "f____ dead and [Patricia] killed *110 him." Then Barrett said: "It's my fault. I shouldn't have taken a nap."
The Commonwealth also introduced into evidence a videotape that was made of an interview of Barrett by a social service worker about five days after Joshua's death. Barrett said Patricia was jealous of Joshua from the beginning; on the day she brought Joshua home from the hospital after his birth, Patricia, out of jealousy, threw toys on top of him in his crib. Barrett attributed much of the bruising found on Joshua's head in the autopsy to Patricia, including an occasion when she hit him in the head with a broom for no reason.
Barrett said the bathtub was Patricia's favorite place to play and she allowed her to sit in the tub with her toys as long as 45 minutes at a time; Patricia knew how to turn on the water and would turn it on to indicate she wanted to take a bath. Barrett agreed she could hear water running from the other parts of the apartment.
Barrett admitted that, shortly before Joshua's death, she had left Patricia unattended in the bathtub and that Patricia had pulled Joshua into the tub head first. This terrified Barrett. When asked whether Patricia could lift Joshua, Barrett said she definitely could, she had seen Patricia lift Joshua.
Barrett acknowledged to the social service worker that she had gone out the night before Joshua's death and had drunk about a six-pack of beer. She said she was not completely intoxicated but conceded that she could have been arrested for driving under the influence had she been stopped by the police on the way home. She said that she was extremely tired when she got home, that she still had alcohol in her system that morning, and that she had taken some sinus medication, although it was the non-drowsy kind.
After Barrett returned home, she gave Joshua a bottle and sat him on the floor next to the couch. She sent Patricia to her room, although it was well before Patricia's nap time. Barrett then went to sleep on the couch. She did not hear water running in the bathroom and did not wake up until she heard Griffith's screams. She conceded that she had failed to supervise the children that morning. She said that she had to be sleeping quite soundly and that, had she not fallen asleep, Joshua would still be alive.
At the conclusion of the Commonwealth's case in chief, Barrett made a motion to strike the evidence. In argument on the motion, Barrett stated that foreseeability was "really the crux of this case" and that the Commonwealth had "not put on evidence that is sufficient to indicate that Mrs. Barrett could have or should have anticipated the probable result of Joshua drowning in a tub." Barrett also argued that the level of negligence the Commonwealth must prove was "not simple negligence" or "even what's called gross negligence," but, rather, "a merciless or inhumane disregard or an arrogant recklessness toward the rights or feelings of others."
The trial court denied the motion to strike. Barrett then rested her case and renewed the motion. The trial court denied the renewed motion, stating that "[i]t's a question of fact for the jury."
Discussion
Code § 18.2-371.1(A),[6] under which Barrett was indicted for the neglect of Joshua, proscribes a "willful act or omission or refusal to provide any necessary care for [a] child's health." Code § 18.2-371.1(B)(1),[7] under which Barrett was prosecuted for the neglect of Patricia, proscribes a "willful act or omission in the care" of a child that is "so gross, wanton and culpable as to show a reckless disregard for human life."
*111 The word [willful] often denotes an act which is intentional, or knowing, or voluntary, as distinguished from accidental. But when used in a criminal statute it generally means an act done with a bad purpose; without justifiable excuse; stubbornly, obstinately, perversely[.] The word is also employed to characterize a thing done without ground for believing it is lawful.
United States v. Murdock, 290 U.S. 389, 394, 54 S.Ct. 223, 78 L.Ed. 381 (1933) (citations omitted). The term "willful act" imports knowledge and consciousness that injury will result from the act done. The act done must be intended or it must involve a reckless disregard for the rights of another and will probably result in an injury.
[T]he term "gross, wanton, and culpable" describes conduct. The word "gross" means "aggravated or increased negligence" while the word "culpable" means "deserving of blame or censure." Bell [v. Commonwealth, 170 Va. 597, 611, 195 S.E. 675, 681 (1938)]. "`Gross negligence' is culpable or criminal when accompanied by acts of commission or omission of a wanton or wilful nature, showing a reckless or indifferent disregard of the rights of others, under circumstances reasonably calculated to produce injury, or which make it not improbable that injury will be occasioned, and the offender knows, or is charged with the knowledge of, the probable result of his acts." Id. at 611-12, 195 S.E. at 681.
Cable v. Commonwealth, 243 Va. 236, 240, 415 S.E.2d 218, 220 (1992).
Barrett argues that the evidence, viewed in the light most favorable to the Commonwealth, "only shows ordinary negligence, at best, and does not show a reckless disregard for Patricia's life." Barrett says that when she fell asleep, "the atmosphere was peaceful and serene, Patricia was in her room playing, and Joshua was drinking a bottle while sitting on the floor next to [Barrett]." Under these circumstances, Barrett asserts, her "act of falling asleep cannot support, as a matter of law, a conviction for felony neglect because there was no evidence of intent with a bad purpose."
Barrett also argues that "[t]he evidence failed to prove, beyond a reasonable doubt, that [Barrett] could reasonably foresee that her daughter would somehow cause the death of her son in a tub which was holding about two inches of water." Barrett concludes that "[w]hile [her] falling asleep was not without remorse and blame, it does not rise to the level of a willful act or omission committed with a bad intent, a bad purpose, or a conscious disregard for human life."
We disagree with Barrett. She would have us focus on her "act of falling asleep" in a vacuum when it must be viewed in light of all the circumstances preceding and surrounding the tragic events of April 17-18, 1998. When so viewed, the circumstances show beyond all reasonable doubt that Barrett was guilty of more than the "ordinary negligence" she concedes she was guilty of. She was fully aware of Patricia's propensity for attempting to injure Joshua but recklessly disregarded those warning symptoms in neglect of her duty to protect both children. Coupling this with the evidence of her conduct on her "night out" and her resulting condition the next morning, she created a situation "reasonably calculated to produce injury, or which [made] it not improbable that injury [would] be occasioned, and [she knew], or [was] charged with the knowledge of, the probable results of [her] acts." Cable, 243 Va. at 240, 415 S.E.2d at 220.
Barrett knew from "the beginning" that Patricia was jealous of Joshua and that Patricia constantly abused him, covering him with a blanket, pushing him down, throwing toys on top of him in his crib, tying scarves around his neck, pulling him around the apartment, slamming Barrett's bedroom door in his face when he tried to crawl into the room, and hitting him in the head with a broom. Barrett said that Patricia had tried in the past to kill Joshua, and, upon learning Joshua was dead, Barrett immediately said Patricia intentionally killed him.
Barrett also knew that the bathtub was Patricia's favorite place to play, and she allowed Patricia to sit in the tub with her toys for extended periods of time. Barrett knew that Patricia could turn on the water, and Barrett acknowledged that she could hear *112 water running in the bathroom from other parts of the home.
Furthermore, and of the utmost significance, Barrett admitted that, shortly before Joshua's death, she had left Patricia unattended in the bathtub and Patricia had pulled Joshua into the tub head first. Barrett had seen Patricia lift Joshua before, and this should have forewarned Barrett that Patricia could get into the tub by herself and pull Joshua in after her.
Yet, Barrett "went out" drinking beer the evening before the tragic incident and spent the entire night away from home, even remaining away and drinking beer after the beer parlor had closed. She drank enough by her own admission to justify her arrest for driving under the influence had she been stopped by the police on her way home the next morning.
Barrett sent Patricia to her room even though it was well before nap time, gave Joshua a bottle and placed him on the floor beside the couch, and then, still intoxicated as well as tired, proceeded to go to sleep on the couch, knowing she was the only one left in the apartment to supervise the children. From this, the jury could have concluded that Barrett's conduct was willful and accompanied by acts of omission of a wanton nature showing a reckless or indifferent disregard of the life and health of both children.
Barrett argues, however, that "Patricia was never in danger; there was no foreseeable risk of harm to Patricia [and no] evidence demonstrated any known or suspected danger based on any previous events or any other evidence which would even suggest that injury to Patricia was a likely result of [Barrett's] action or inaction. In fact, Patricia was not injured, nor was she in jeopardy of being injured." Barrett also argues that "the evidence failed to prove, beyond a reasonable doubt, that [she] could reasonably foresee that her daughter would somehow cause the death of Joshua in a tub which was holding about two inches of water."
This represents a very narrow view of the evidence. What we have here is the story of a disaster just waiting to happen, a disaster any reasonable person would consider likely to result in injury to Patricia herself or to Joshua, or both. Barrett owed a duty to Joshua to protect him from injury by Patricia and a duty to Patricia to prevent her from injuring Joshua or being injured herself. Yet, Barrett failed miserably in her duty. Indeed, Barrett admitted "a lack of supervision" over the children on the occasion in question.
Barrett is correct in saying Patricia was not injured but incorrect in saying she was not in jeopardy of being injured. Code § 18.2-371.1(B)(1) does not require a showing of actual injury or death. "[S]ubsection (B)(1) does not limit the prohibited conduct to acts and omissions that subject a child to an actual risk of death, but proscribes conduct that is so `gross, wanton and culpable' as to demonstrate a `reckless disregard' for the child's life." Commonwealth v. Duncan, 267 Va. 377, 385, 593 S.E.2d 210, 215 (2004). And "such `reckless disregard' can be shown by conduct that subjects a child to a substantial risk of serious injury, as well as to a risk of death, because exposure to either type of risk can endanger the child's life." Id.
The evidence clearly showed conduct by Barrett that subjected Patricia to a substantial risk of serious injury or death. It might well have been Patricia's rather than Joshua's cold and blue body Griffith found under the laundry basket on that fateful morning.
Accordingly, we find the evidence sufficient to support Barrett's conviction for the criminal neglect of both Patricia and Joshua, and we will affirm the judgment of the Court of Appeals.[8]
Affirmed.
NOTES
[1] Apparently, Barrett married and became Amy Jean Clark at some time during these proceedings, but she was indicted under the name of Barrett and we will refer to her by that name.
[2] Code § 18.2-371.1(B) was amended in 2003. Paragraph B of the former statute, under which Barrett was indicted, is now set forth in identical language as paragraph (B)(1) in the amended statute. We will use the current numbering in this opinion.
[3] Barrett was also charged with involuntary manslaughter in the death of Joshua, but the jury found her not guilty of that charge.
[4] Barrett does not claim that her prosecution for the neglect of Patricia constituted double jeopardy but relies solely on her assertion that the prosecution was vindictive and thus violative of her right of due process.
[5] Nor did any of the courts make a finding of actual vindictiveness.
[6] Code § 18.2-371.1(A) provides in pertinent part as follows:
A. Any parent, guardian, or other person responsible for the care of a child under the age of 18 who by willful act or omission or refusal to provide any necessary care for the child's health causes or permits serious injury to the life or health of such child shall be guilty of a Class 4 felony.
[7] Code § 18.2-371.1(B)(1) provides as follows:
B. Any parent, guardian, or other person responsible for the care of a child under the age of 18 whose willful act or omission in the care of such child was so gross, wanton and culpable as to show a reckless disregard for human life shall be guilty of a Class 6 felony.
[8] Barrett maintains that the present case is "strikingly similar" to Ellis v. Commonwealth, 29 Va.App. 548, 513 S.E.2d 453 (1999), where the Court of Appeals reversed the conviction of a mother who failed to turn off the gas burner in her apartment and then left her two children alone to walk some 30 to 75 yards away to visit a friend. A fire ensued, and the two children were injured. However, Ellis is distinguishable. Ms. Ellis's neglect was inadvertent, id. at 557, 513 S.E.2d at 458, Barrett's was willful.
| {
"pile_set_name": "FreeLaw"
} |
72 So.2d 418 (1954)
MEADOR
v.
STATE.
1 Div. 683.
Court of Appeals of Alabama.
April 27, 1954.
Arthur Epperson, Foley, and Tolbert M. Brantley, Bay Minette, for appellant.
Si Garrett, Atty. Gen., and Paul T. Gish, Jr., Asst. Atty. Gen., for the State.
*419 HARWOOD, Judge.
This appellant stands convicted of burglary in the second degree, his punishment having been duly fixed at confinement in the penitentiary for one year.
Since a ruling by the court necessitates a reversal of this cause we will set out only so much of the evidence as may be necessary as a back drop for this ruling.
During the presentation of his evidence the defendant called as a witness Timothy Hunger. Actually the testimony of this witness on his direct examination produced evidence of slight, if any, probative value in so far as the issues of this case are concerned.
However, during the cross-examination by the Solicitor of this defense witness the record shows the following:
"Q. You are a friend of this boy's aren't you?A friend of George Meador? A. About the same as I am with anybody else I work with.
"Q. You run around with him quite a bit, don't you? A. No, I wouldn't say so.
"Q. Were you involved in the locker theft when there was a locker theft in the Navy barracks?
"Mr. Brantley: We object.
"Mr. Lauten: I have a right to show his bias.
"The Court: It is theft. I overruled the objection.
"Mr. Brantley: We except.
"Q. Were you involved when there was a theft of a locker at the barracks?Theft of a locker in Foley?Along with this boy?
"Mr. Epperson: We object.
"The Court: Overrule the objection.
"Mr. Epperson: Except.
"Q. Answer the questionyes or no?
A. Yes."
No proper predicate had been laid for the evidence on the Solicitor's erroneous theory that it should be admitted to show bias.
The proper way to show bias on the part of a witness is to ask him directly the state of his feelings, and if he denies bias, then resort may be had to facts tending to show it. Sullivan v. State, 25 Ala.App. 140, 142 So. 110; Pendley v. State, 34 Ala.App. 453, 41 So.2d 205.
While a witness' prior conviction for a crime involving moral turpitude may be shown as going to his credibility, a mere "involvement" in such a crime possesses no probative value and evidence to that effect is meaningless and obscure. This very obscurity does however furnish a nourishing medium for the production of ineradicable prejudice.
For this reason it is well settled that a mere accusation against a witness even for a crime involving moral turpitude is not admissible as affecting his credibility. Horsley v. State, 19 Ala.App. 263, 96 So. 937; Rogers v. State, 34 Ala.App. 617, 42 So.2d 642. See also 19 Alabama Digest, Witnesses, for other cases illustrative of this principle.
The question as to whether the witness, and apparently the appellant also, were "involved" in the theft of a locker sought evidence which was manifestly illegal and obnoxious to all rules of evidence. It could not be rendered legal by reframing the question, or by the introduction of other evidence. Under such circumstances the general objection interposed is sufficient. Rogers v. State, supra.
It is noted that on redirect examination this witness testified that neither he nor the defendant were convicted in connection with this locker theft. Such facts emphasize the illegality of the evidence pertaining to any "involvement" of the witness and the appellant in the theft of a locker. That such evidence of no convictions removed the possible, and highly probable prejudicial effect of the showing of "involvement" in the theft is, in our opinion, too speculative to permit the application of Supreme Court Rule 45, Code 1940, Tit. 7 Appendix.
Reversed and remanded.
| {
"pile_set_name": "FreeLaw"
} |
Becker v. State
COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
WILBERT LEE HAWKINS,
Appellant,
v.
THE STATE OF TEXAS,
Appellee.
§
§
§
§
§
§
No. 08-10-00031-CR
Appeal from
252nd District Court
of Jefferson County, Texas
(TC # 08-04887)
MEMORANDUM OPINION
Wilbert Lee Hawkins appeals his conviction of possession of cocaine. We affirm.
Appellant entered a negotiated plea of guilty and the trial court placed him on deferred
adjudication community supervision for five years. The State subsequently filed a motion to
adjudicate guilt based on allegations Appellant had violated the terms and conditions of community
supervision. Appellant entered a plea of true to the allegation that he committed aggravated robbery
since being placed on community supervision. The trial court revoked Appellant’s community
supervision, adjudicated him guilty of possession of cocaine, and assessed his punishment at
imprisonment for twenty years.
Appellant’s court-appointed counsel has filed a brief in which he has concluded that the
appeal is wholly frivolous and without merit. The brief meets the requirements of Anders v.
California, 386 U.S. 738, 87 S.Ct. 1396, 18 L.Ed.2d 493, reh. denied, 388 U.S. 924, 87 S.Ct. 2094,
18 L.Ed.2d 1377 (1967), by presenting a professional evaluation of the record demonstrating why,
in effect, there are no arguable grounds to be advanced. See High v. State, 573 S.W.2d 807
(Tex.Crim.App. 1978); Currie v. State, 516 S.W.2d 684 (Tex.Crim.App. 1974); Jackson v. State,
485 S.W.2d 553 (Tex.Crim.App. 1972); Gainous v. State, 436 S.W.2d 137 (Tex.Crim.App. 1969).
A copy of counsel’s brief has been delivered to Appellant, and Appellant has been advised of his
right to examine the appellate record and file a pro se brief. No pro se brief has been filed.
We have carefully reviewed the record and counsel’s brief, and agree that the appeal is
wholly frivolous and without merit. Further, we find nothing in the record that might arguably
support the appeal. The judgment is affirmed.
August 18, 2010
ANN CRAWFORD McCLURE, Justice
Before Chew, C.J., McClure, and Rivera, JJ.
(Do Not Publish)
| {
"pile_set_name": "FreeLaw"
} |
Case: 10-30582 Document: 00511341722 Page: 1 Date Filed: 01/06/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
January 6, 2011
No. 10-30582 Lyle W. Cayce
Summary Calendar Clerk
ASSOCIATED MARINE EQUIPMENT, LLC
Plaintiff-Appellant
v.
EDMOND JONES
Defendant-Appellee
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:05-CV-2837
Before WIENER, PRADO, and OWEN Circuit Judges.
PER CURIAM:*
Plaintiff-Appellant Associated Marine Equipment (“AME”) appeals the
district court’s grant of Defendant-Appellee Edmond Jones’s F ED. R. C IV. P. 60(b)
motion for relief from judgment. Jones, in response, filed a motion to dismiss
AME’s appeal for lack of appellate jurisdiction. We grant Jones’s motion and
dismiss this appeal.
*
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: 10-30582 Document: 00511341722 Page: 2 Date Filed: 01/06/2011
No. 10-30582
I. FACTS AND PROCEEDINGS
This case is before us for a second time.1 On appeal from the district
court’s original denial of Jones’s Rule 60(b) motion, we vacated the court’s order
and remanded on the ground that the record was not sufficiently developed,
making the denial order premature. The district court then developed the record
by taking the depositions of Jones, his wife, and his former lawyer, Clara
Toombs. After subsequent briefing and oral argument, the district court granted
Jones’s Rule 60(b) motion for relief from the judgment.
Rule 60(b) permits the district court to relieve a party from the effect of a
final judgment for several reasons, including mistake, surprise, excusable
neglect, newly discovered evidence, fraud, release, satisfaction, and any other
reason that justifies such disposition. The “main application [of a Rule 60
motion] is to those cases in which the true merits of a case might never be
considered because of technical error . . . .”2 We ordinarily do not have
jurisdiction to hear appeals of Rule 60(b) motions because they are purely
interlocutory.3 Among the limited exceptions, however, is when “the district
court acts without the power to do so.” 4
In the instant case, AME alleges that Jones did not file his motion within
a reasonable time, which is a requirement for the district court to have
jurisdiction to consider a Rule 60(b)(6) motion. The district court entered the
original judgment against Jones in August, 2006. Jones, however, did not find
out about the dismissal of his case until October or November of that year.
1
Assoc. Marine Equip. v. Jones, 301 F. App’x 346 (5th Cir. 2008).
2
Fackelman v. Bell, 564 F.2d 734, 735 (5th Cir. 1977).
3
Hand v. United States, 441 F.2d 529, 531 n.1 (5th Cir. 1971).
4
Shepherd v. Int’l Paper Co., 372 F.3d 326, 328 (5th Cir. 2004) (emphasis and citation
omitted).
2
Case: 10-30582 Document: 00511341722 Page: 3 Date Filed: 01/06/2011
No. 10-30582
Then, Jones did not file his Rule 60(b) motion until February, 2007, some three
to four months after learning that his claims had been dismissed and almost six
months after AME had moved to dismiss Jones’s opposition to its suit.
II. ANALYSIS
Although Rule 60(b)(1) motions must be filed within one year after entry
of the judgment or order, Rule 60(b)(6) motions, such as this one, are subject to
the more nebulous “reasonable time” requirement. A reasonable time for filing
such a motion is defined by the particular facts and circumstances of each case.5
In this case, AME contends that there was unreasonable delay because (1) Jones
waited several months after the final judgment before he even attempted to
determine the status of his case, and (2) Jones then waited three to four months
after learning that the judgment against him had been entered before he filed
his Rule 60(b) motion.
It is true that a party has a duty of diligence to inquire as to the status of
his case.6 This duty does not hold, however, for a client whose counsel
withdraws without informing him.7 In the instant case, Jones believed (and had
good reason to believe) that he was being adequately represented by his now-
former lawyer, Clara Toombs. In reality, as the further developed record shows,
Toombs relocated to Monroe, Louisiana after Hurricane Katrina and was
5
First RepublicBank Fort Worth v. Norglass, Inc., 958 F.2d 117, 119 (5th Cir. 1992).
See also Sudeikis v. Chicago Transit Auth., 774 F.2d 766, 769 (7th Cir. 1985) (“There is no
hard and fast rule as to how much time is reasonable for the filing of a Rule 60(b)(6) motion;
courts have found periods of as little as a few months unreasonable, and have found periods
of as long as three years reasonable.”).
6
See Pryor v. U.S. Postal Serv., 769 F.2d 281, 287 (5th Cir 1985); Wilson v. Altwood
Group, 725 F.2d 255, 257-58 (5th Cir. 1984) (en banc).
7
Seven Elves, Inc. v. Eskenazi, 635 F.2d 396, 403 (5th Cir. 1981).
3
Case: 10-30582 Document: 00511341722 Page: 4 Date Filed: 01/06/2011
No. 10-30582
generally non-responsive to Jones’s repeated attempts to contact her.8 The
district court credited and relied on Jones’s testimony that he believed that
Toombs was representing him through August, 2006. Furthermore, at that time,
Jones and his wife were trying to rebuild their lives following Katrina. Jones
had to rebuild his home, which suffered major damage during the hurricane. In
addition, just before Katrina, Jones had developed a hole in the pallet of his
mouth which left him unable to speak for several months and required three
surgeries to correct. In light of the confusion after Katrina, Jones’s ill health,
and his belief that Toombs was representing his interests adequately, it is
reasonable that it took Jones until the fall of 2006 to ascertain the status of his
claims.
Additionally, the three to four month delay between learning that his
claims had been dismissed and the filing of his Rule 60(b) motion was not
unreasonable. According to Jones’s testimony, he interviewed two lawyers as
potential replacements for Toombs and was declined both times before finding
new counsel to take over his case. Morever, Jones underwent his last surgery
in October 2006, which almost certainly contributed to his delay. Furthermore,
because the case was dismissed for Jones’s failure to tender discovery responses
or appear for his deposition — no doubt as a result of Toombs’s failure to
communicate with Jones — he never had the opportunity to litigate the merits
of his case. Although we consider “finality . . . an important goal, the justice-
function of the courts demands that it must yield, in appropriate circumstances,
8
The record further indicates that Toombs (1) never advised Jones of his scheduled
deposition, (2) never transmitted the responses to AME interrogatories that she had received
from Jones, (3) never accepted the medical records that Jones transmitted to her correct
address by certified mail, (4) never advised Jones of a pending trial date, and (5) never told
Jones that his case had been dismissed or that a judgment had been rendered against him for
attorney’s fees, expenses and costs.
4
Case: 10-30582 Document: 00511341722 Page: 5 Date Filed: 01/06/2011
No. 10-30582
to the equities of the particular case in order that judgment might reflect the
true merits of the case.” 9
III. CONCLUSION
We hold that Jones’s Rule 60(b) motion, which the district court granted,
was timely for the reasons set forth above. We therefore lack appellate
jurisdiction to hear this appeal. Accordingly, we GRANT Jones’s motion to
dismiss this appeal for lack of appellate jurisdiction and REMAND this case for
further proceedings, consistent herewith.
9
Seven Elves, 635 F.2d at 401.
5
| {
"pile_set_name": "FreeLaw"
} |
187 F.2d 577
88 U.S.P.Q. 393
WABASH CORP. et al.v.ROSS ELECTRIC CORP. et al.
No. 21, Docket 21714.
United States Court of Appeals Second Circuit.
Argued Oct. 10, 1950.Decided Feb. 21, 1951.
Kenyon & Kenyon, New York City, for plaintiff, Wabash Corporation.
Arthur G. Connolly, Wilmington, Del., (Theodore S. Kenyon, New York City, Arthur G. Connolly, Wilmington, Del. and Edward A. Ruestow, New York City, of counsel), for plaintiff, Hartford National Bank & Trust Co. (Trustee).
Alexander C. Neave, New York City, (Charles H. Walker, Harry R. Pugh, Jr., New York City, Vernet C. Kauffman and James J. Lazna, Cleveland, Ohio, of counsel), for defendants.
Before AUGUSTUS N. HAND, CHASE and FRANK, Circuit Judges.
AUGUSTUS N. HAND, Circuit Judge.
1
The facts in this case have been fully set forth in the opinion of Judge CHASE. I differ with him only in so far as he would hold the product patent valid. Judge Frank and I have been unable to discover any patentable invention in the plaintiffs' product. The Ostermeier, van Liempt and Crowley Patents taught the art enough to defeat the claims of the product patent relied on. In the first, a metallic foil was used; in the second, a metallic wire; and in the third, metallic wool. The only thing that remained was to fill the entire bulb with the wire for, given that, the filling would normally be undulating, serpentine, and elastic. If there was any invention in either of the patents in suit, it was in the mode of blowing the wire into the bulb with a stream of controlled air. The defendants failed to adopt the precise mode called for in the process patent and thus did not literally infringe. But the plaintiffs argue that they, as the first to use air for filling flash bulbs, should be entitled to a broad range of equivalents. Nevertheless, we all agree that these differences between the plaintiffs' process and the defendants' are sufficient to prevent a decree for infringement in what seems to be a narrow field of invention. Accordingly the process patent is held not infringed, and the decree of the District Court dismissing the action as to it is affirmed; the product patent is held void for lack of invention and the decree sustaining it, and holding it infringed, is reversed.
2
CHASE, Circuit Judge, dissenting in part.
3
This appeal is from a decree in a suit for the infringement of two patents, one, No. 2,115,423, issued to C. Korver on April 26, 1938, for a 'Method and Device for Transporting Wires,' and the other, No. 2,162,847, issued to the same patentee for a 'Flash Lamp.' The first patent is for a process used in the manufacture of the flash lamp which is the product covered by the second patent, and they will hereafter be called respectively the process patent and the product patent. Some of the claims of the process patent were held invalid. Those have all since been disclaimed and are not now involved. Others were held not infringed. All the claims of the product patent were held valid and infringed; an injunction was granted and an accounting ordered. The plaintiffs are the Wabash Corporation, exclusive licensee under both patents, and the Hartford National Bank and Trust Company, which holds the legal title to both patents in trust. They have appealed from so much of the decree as holds the process patent claims not infringed. The defendant Ross Electric Corporation which sells the accused lamps in the Eastern District and the defendant General Electric Company, which manufactures and distributes those lamps for sale, have appealed from that part of the decree which holds the product patent valid and infringed.
4
The flash lamps are the kind known as photo-flash lamps. The development of such lamps began with a type made by the General Electric Company under the Ostermeier patent, No. 1,776,637, about twenty years ago, and has marked a decided advance in the art of flash photography. Before then, the necessary intense light of short duration was provided by igniting fast-burning powers in open containers, creating smoke that was more or less disagreeable to the senses and somewhat of an interference with taking a succession of pictures. Ostermeier did away with all that by providing a glass bulb filled with oxygen and aluminum foil in such a way that an electric current, entering the bulb, would ignite the filling. An intense light of sufficiently controlled duration but with a sharp peak, i.e., a comparatively short period of highest intensity, could be obtained from his lamp. Yet his great advance over what had been done before left much to be desired. The shortness of the period of maximum light output made synchronization with the camera shutter difficult, his bulbs had to be so large that a photographer could readily carry but a few at once and they had to be handled with much care to prevent breaking. Their manufacture was made slow and costly by the necessity of filling the bulbs with the right amount of the right size of foil by hand, by pushing it in with a rubber-tipped rod such as a pencil with its eraser, to insure its uniform distribution in a crumpled condition throughout the bulb. Still this lamp was such an improvement over the old open flash method that it was in great demand and in 1938 nearly 4,000,000 were sold.
5
In 1936 the predecessor of Wabash Corporation, having obtained an exclusive license under the patents in suit, began making the patented lamps. They were so much cheaper to make, so much more efficient in operation, and in other respects so much better than the Ostermeier lamps that the latter were superseded in a few years. In 1942 over 17,000,000 of the patented lamps were sold and in 1948, over 60,000,000. In 1942 General Electric began to make and to market the accused lamps, and their sale has nearly equalled that of the patented ones. Though some of this marked commercial success may be justly attributable to factors independent of the disclosures of either of the patents in suit, it is apparent that those disclosures were in large measure responsible for it.
The Process Patent
6
While the process patent originally covered more, the elimination of the claims as above noted narrowed it to a method usable only in filling containers shaped in general like the bulbs of photo-flash lamps. Claims 2, 5 and 6 were held valid. Claim 2 is typical and reads as follows: 'A method of uniformly filling a hollow body closed except for a single aperture, with an internally-strained wire of small mechanical strength, comprising the steps of carrying the wire through the aperture and into the hollow by a stream of gas leaving through another portion of the aperture, and distributing the wire in a curled condition and as uniformly as possible within the hollow by the recurrent flow of the gas therein.'
7
I will confine my description of the process to one, as disclosed by the specifications, which is usable for filling photo-flash lamps, since the accused process is of that kind and the patentee called his 'particularly well adapted' for that.
8
Whenever a metal wire1 is bent the stretching which occurs on the outer side of the bend and the compression on the inner side so distort the metal that internal strains are set up. These strains have a tendency to make the wire curl when it is not under tension, the amount of curling varying directly with the intensity of such strains. Most metal wires of small absolute strength are inherently so strained that they have some tendency to wave or curl when loose, and winding on a spool serves to increase this tendency. Korver sought to fill a photo-flash bulb with such wire mechanically so that it would be evenly distributed throughout the bulb and would be so curled and waved that it would be held in place during handling and use by its resiliency against the walls of the bulb and between curls throughout its own mass. He did that by assembling a machine which first unwound from a spool the fragile wire when it was to be used for filling. If it was not already sufficiently internally strained to curl as desired in the bulb, the wire was pulled over a sharp edge to impart such strains. Then it was carried to, and through, a guide tube of small diameter which extended into the aperture of the bulb which was of much greater diameter; there the guide tube was greatly enlarged in diameter but still kept much smaller than the neck of the aperture. A supply of compressed air was fed into the guide tube near the end where the wire entered, this being done in such a way that the air would flow toward the bulb. This air stream carried the fragile wire along the small part of the guide tube under sufficient tension to keep it from curling or kinking during that transit but when this stream reached the enlarged or 'belled' portion of the guide tube, within the neck of the bulb, the air expanded and was thus slowed in speed enough to let the wire curl. From there the air stream, slowing even more after it entered the larger portion of the bulb to be filled, distributed curled wires throughout the receptacle by flowing to and against the closed end of the bulb and then reversing and passing out of the bulb through the aperture between its inner sides and the outside of the guide tube. This reversal of the direction of the air flow and its passage to, and out of, the aperture of the bulb is what is designated in Claim 2 as 'the recurrent flow of the gas' which distributes 'the wire in a curled condition and as uniformly as possible within the limited space.'
9
In the accused process the material from which the filler is made is not at the beginning a fragile wire wound on a spool. It is, instead, a roll of aluminum foil of the desired thickness and width. It usually is about eight inches wide and .001 of an inch thick. This sheet of foil is unwound from its roll by feed rolls between which it passes. These feed rolls first draw it through a lubricating tank, where it is treated to make it shear more readily, and then push it over a shear plate. There a rotary cutter, synchronized in speed with the rate of travel of the sheet of foil, slices off narrow strips of a pre-determined width.2 Suitably placed below these rotary shears is the flared-out end of a small hollow tube. This tube leads to a filling head with which it makes an air-tight connection. The filling head has an outside rim into which a photo-flash bulb may be placed so as to make an air-tight connection between the filling head rim and the outside of the bulb at some part of it between the neck and the point of the maximum diameter of the bulb. The inside of the filling head forms an extension of the carrier tube and has its outlet near the center of the bulb to be filled. Above the bottom of the carrier tube there is an opening in the side of the filling head which has an air-tight connection with a trap which is in turn connected to an exhaust pump. This pump tends to create a vacuum at the intake end of the carrier or feed tube into which there is a rush of the air which surrounds the shreds as they are cut off. As the trial judge justifiably found, 'The shreds are sucked into the feed tube at such high velocity that the naked eye cannot see their condition as they are drawn into and through the nozzle. However, they are probably drawn into the feed tube in 'hairpin' form, and are carried by the stream of gas through the filling tube and are kept fairly straight until they reach the bulb of the lamp. There the successive shreds strike the bulb wall and intertangle with one another to form a tangled, skeletonized mass of curled, crinkled or rumpled material within the bulb. The bulb is then removed from the filling tube and placed over an air jet which serves to fluff the material and to distribute it uniformly through the bulb.' The judge also found on adequately supporting evidence that, 'Unlike Korver, the General Electric filling method does not deal with or produce a wire which has been internally-strained so as to assume a curled or coiled condition when released.' And that, 'The General Electric filling method does not uniformly distribute the shreds as called for in the Korver patent. A separate fluffing operation with a jet of compressed air * * * is necessary to obtain uniformity in the General Electric operation.'
10
These differences between the two processes were considered by the trial judge sufficient to preclude infringement, and I agree. Though they may appear to be but narrow distinctions I think that in the light of the prior art they are crucial.
11
But before taking up that phase of the matter I wish to notice that the decision below apparently followed the 'better practice' as pointed out in Sinclair & Carroll Co. v. Interchemical Corp., 325 U.S. 327, 330, 65 S.Ct. 1143, 89 L.Ed. 1644, by dealing with the validity of the claims before deciding the question of infringement. The three claims remaining after those held invalid had been disclaimed were what I might call tentatively held to be valid and then held not infringed. That entirely disposed of the suit on that patent and the decree as to it provided for the dismissal of the complaint without adjudging the three remaining claims to be valid. Thus there was an investigation and determination as to validity to comply with the above mentioned better practice, which the record affirmatively disclosed, without the error of adjudging any claims valid which, even if valid, would not have been infringed. Electrical Fittings Corp. v. Thomas & Betts Co., 307 U.S. 241, 59 S.Ct. 860, 83 L.Ed. 1263. See Cover v. Schwartz, 2 Cir., 133 F.2d 541, 545; Western States Mach. Co. v. S. S. Hepworth Co., 2 Cir., 152 F.2d 79, 81. Without such a record on appeal, there is no way for an appellate court to know, in patent cases where the complaint has been dismissed solely for failure to prove infringement, what has been done, if anything, to determine whether the patent should be held invalid in whole or in part. Unless in such cases the record shows that, or can be required to show it, the approved practice, except in the comparatively rare instances where the patent in suit is obviously invalid, will be what the trial judges choose to make it and perhaps that is what the Supreme Court means to let it be. But if appellate courts are to have any effective supervision of the better practice, records on appeal must provide the basis for that. This record does so and accords with what seems to be needed for such supervision. Of course in those comparatively rare cases where the patent in suit is clearly invalid, and a trial court has failed so to hold, an appellate court may do so without any remand for findings for, by hypothesis, the record is already adequate to support such a decision.
12
But, where invalidity was a substantial issue, and the complaint was dismissed for non-infringement without findings on the question of validity in compliance with Rule 52(a), Fed. Rules Civ. Proc. 28 U.S.C.A., on appeal the judgment has been vacated and the cause remanded for such findings. Helbush v. Finkle, 9 Cir., 170 F.2d 41. I take that to mean that where the course followed below is not taken, in cases where validity presents a substantial question, it may be required in order that invalid claims be not left as a threat longer than necessary. But I do not understand that, on appeal by a plaintiff from a judgment dismissing a complaint solely on the ground of non-infringement, an appellate court need necessarily review the trial court's conclusion, not carried into the judgment, that the claims are valid, before it can, in the absence of error as to the infringement issue, affirm the judgment. It has long been the practice to treat non-infringement and invalidity as sufficient and alternative grounds for dismissing the complaint in a patent infringement suit. See Coulter v. Eagle & Phenix Mills, 5 Cir., 35 F.2d 268, certiorari denied, 281 U.S. 758, 50 S.Ct. 409, 74 L.Ed. 1167. Cf. Altvater v. Freeman, 319 U.S. 359, 63 S.Ct. 1115, 87 L.Ed. 1450. Lest a disagreement within the court as presently constituted create unnecessary confusion, two of its judges think that what was recently said by L. Hand, C.J., in Harries v. Air King Products Co., 2 Cir., 183 F.2d 158, 161, 162, 163 should be emphasized by repetition:
13
'Since, as will appear, the defendant has not infringed the claims, limited as they must be, the question arises whether we are compelled to review Judge Galston's conclusion in favor of their validity. In what cases a court may dispose of a patent infringement action upon the issue of non-infringement, recent decisions leave in some doubt, we must own. In Electrical Fittings Corp. v. Thomas & Betts Co., 2 Cir., 100 F.2d 403, we held that, after deciding that a defendant did not infringe a claim, we need not pass upon a finding of the district court that it was valid. This we held because the finding had not been necessary to the judgment and for that reason would not be an estoppel, and would not therefore prejudice the defendant. The Supreme Court did not differ with us in thinking that the finding was immaterial, but nevertheless it directed us to strike it from the decree.3 The rationale of that decision was that the defendant was entitled to have it out because, although it was not an estoppel, it might create some presumptive prejudice against him. It is to be noted that the court did not suggest that we were bound to review the finding, for that would have been inconsistent with its mere deletion. The case is therefore clearly a holding that it is not in all cases necessary to decide the issue of validity. In Cover v. Schwartz, 2 Cir., 133 F.2d 541, the district court had held that the claim was neither valid, nor infringed, and we dismissed the appeal because the patentee did not question the holding of non-infringement. We said that the unchallenged holding that the defendant had not infringed made the case moot and ended our jurisdiction. That decision the Supreme Court cited with approval in Altvater v. Freeman,4 saying that 'to hold a patent valid if it is not infringed is to decide a hypothetical case,' relying on Electrical Fittings Co. v. Thomas & Betts, supra.5 Unless there is some difference between a finding of invalidity and a finding of validity, Cover v. Schwartz should have ended with a direction to strike out the holding of invalidity, and perhaps the reason why we did not do so was that a counterclaim remained to be tried.
14
'So the law stood when Sinclair & Carroll Co. v. Interchemical Corp., 325 U.S. 327, 65 S.Ct. 1143, 89 L.Ed. 1644, was decided. There the district court had held that the patent was invalid and not infringed, and we had held it valid and infringed. This the Supreme Court reversed, holding the patent invalid, but not passing on the issue of infringement, which have of course become moot upon the finding of invalidity. However, it went out of its way to say, 325 U.S.at page 330, 65 S.Ct.at page 1145: 'There has been a tendency among the lower federal courts in infringement suits to dispose of them where possible on the ground of non-infringement without going into the question of validity of the patent'; then, after citing Cover v. Schwartz with apparent approval, it added: 'the District Court in this case followed what will usually be the better practice by inquiring fully into the validity of this patent.' One court has read this as a direction always to decide the issue of validity6 and perhaps it meant to go so far. However, if it did, it is hard to see how that was in accord with Electrical Fittings Co. v. Thomas & Betts, supra,7 with Altvater v. Freeman, supra,8 or with Cover v. Schwartz, supra,9 which proceed upon the implied premise that the issue of infringement may be disposed of before that of validity, since it is only in that event that the issue of the validity can become 'hypothetical,' or 'moot.' The passage we have just quoted from Sinclair & Carroll Co. v. Interchemical Corp., supra,10 was certainly not put in the form of a peremptory direction, but rather of a cautionary admonition, to be followed when that is the more convenient course; and it is thus that Woodbury, J., construed it in Grant Paper Box Co. v. Russell Box Co.11 We are disposed so to understand it in the case at bar.
15
'There are good reasons for allowing some latitude of choice. A decision resting upon non-infringement is generally must more secure than one on invalidity, at least when the question is whether there is a patentable invention. That issue is as fugitive, inpalpable, wayward, and vague a phantom as exists in the whole paraphernalia of legal concepts. It involves, or it should involve, as complete a reconstruction of the art that preceded it as is possible. The test of invention is the originality of the discovery, and discovery depends upon the mental act of conceiving the new combination for substantially every invention is only a combination. Nothing is more illusory, as nothing is more common, than to assume that this can be measured objectively by the magnitude of the physical readjustments required. Courts never tire, or at least in earlier times they never did, of expatiating upon the freshness of insight which observes a little, but fruitful, change which had theretofore escaped detection by those engaged in the field. When all is said, we are called upon imaginatively to project this act of discovery against a hypostatized average practitioner, acquainted with all that has been published and all that has been publicly sold. If there be an issue more troublesome, or more apt for litigation than this, we are not aware of it. The defence for always deciding it first, is that, if the claim be invalid, it should not be allowed to stand as a 'scarecrow'; and that is quite true, granted the premise. Indeed, the same notion lies back of the disclaimer statute. But it must not be forgotten that the decision of a single court, whether district, or court of appeals, does not settle the question. It is the usual, if not universal, custom of practitioners if the stake is enough, not to rest content with a single decision of invalidity, but to seek another forum, as indeed the disclaimer statute permits.12 A declaration of invalidity may therefore prove an ignis fatuus, as fictitious a security to those who wish to infringe the claim, as a declaration of validity may be a fictitious menace. We hold that it is open to a court to proceed as is most convenient, subject to the exception that, though the defendant has not infringed, claims may be so evidently invalid that the court should so declare.'
16
The differences to which I have already referred as crucial on the question of infringement are those operations which were claimed as a part of the patented method, viz., the steps of carrying 'an internally strained wire' into a 'hollow body' and there depositing it 'in a curled condition and as uniformly as possible within the hollow by the recurrent flow of the gas therein.' I have designated them as crucial because a brief reference to the prior art will show that those steps are what Korver disclosed which was new if anything was. That it was already old to use a contained stream of gas to fill a holder with light material in strands is shown by the Schur patent, No. 1,915,451, which used compressed air to fill a receptacle with weak fiber strands carried into it by the air flowing within a tube. But this is as much as Korver might have learned from Schur, since the latter wanted the filler to be arranged within his container for early withdrawal, and it had no internal strains, either inherent or imparted to it, to make it curl in the container and become a tangled mass held in place by its own elasticity against the walls. Nor was there what Korver calls his recurrent flow of gas. No other prior patent narrows the Korver claims more than Schur, and none, therefore, need be mentioned to demonstrate that unless the accused process does those things which distinguish the Korver process there is no infringement. That question depends, as always, upon whether, when the claims are interpreted so as to cover what is patentably new in the light of the specifications and of the prior art, the accused method does substantially the same thing in substantially the same way. Similarity, or even identity, of result will not alone suffice. Swan Carburetor Co. v. Chrysler Corporation, 6 Cir., 130 F.2d 393. Due regard must be had for what is known as the doctrine of equivalents to the end that minor omissions or minor changes will not serve to exonerate one who actually copies, and thus does appropriate, the gist of a patent. Cf. Graver Tank & Mfg. Co. v. Linde Air Products Co., 339 U.S. 605, 70 S.Ct. 854, 94 L.Ed. 1097; Royal Typewriter Co. v. Remington-Rand, Inc., 2 Cir., 168 F.2d 691. But when, as here, the accused process does not embrace those steps which distinguish the patented one from the prior art it does not infringe. Dixie-Vortex Co. v. Paper Container Mfg. Co., 7 Cir.,130 F.2d 569, 579, certiorari denied, 317 U.S. 686, 63 S.Ct. 260, 76 L.Ed. 550; Moto-Mower Co. v. E. C. Stearns & Co., 2 Cir., 126 F.2d 854.
The Product Patent
17
The patent, No. 2,162,847, for a 'Flash Lamp' was granted to C. Korver June 20, 1939. His original application was embraced in that of the process patent already considered and was filed April 26, 1935. This application was divided from that on July 16, 1936, and it is conceded that the date to be accorded his invention is May 18, 1934, when an application for the same invention was filed in Germany.13
18
What this flash lamp is, what it does, and how it does it has already been largely though not entirely, told in dealing with the process patent. The better a photo-flash lamp is, the more nearly will it supply the right amount of actinic light at the right time for the camera with which the picture is taken to operate at its maximum efficiency. If the actinic light is produced in synchronism with the shutter movement of the camera, allowing the peak light to affect the film, the best results will follow. But as is so often true, the problem is more easily stated than solved. I shall confine what I now say to the production of actinic light in a closed container like the patented and accused lamps in suit. They produce it by burning a metal- aluminum alone or alloyed with some other substance such as magnesium- in oxygen under greater than normal atmospheric pressure. When combustion starts, the intensity of the light increases rapidly to its peak and then decreases to extinction. The speed with which the peak is attained increases, within limits not here important, as the metal burned is made finer (just as a fire of small pieces of wood will flash into flame more quickly than like wood in larger pieces) and it is more nearly uniformly distributed throughout the container, so that all portions of the metal are surrounded by nearly equal amounts of oxygen. This construction results in a comparatively even rate of combustion, thereby giving a longer maximum output of actinic light. For photographing rapidly moving subjects, the camera shutter should, preferably, be open within this period of maximum output for the time required to sensitize the film and it is obvious that the longer the peak of the flash the easier it is to have the shutter opened within some part of that period. If the duration of the peak and the shutter time were equal the synchronization would have to be perfect for best results but if, for instance, the peak duration substantially exceeds the required shutter time there is a comparatively large tolerance for errors in synchronization, because during the peak any time the shutter opened and closed would do as well as any other. Furthermore, when flash lamps are, like these, ignited by electrically generated heat in contact with the metal, the contact time, i.e., the time in which a given amount of electricity will create heat sufficient for ignition, is shortened by using finer filling. Thus lamps constructed in accordance with the product patent have characteristics which give them decided advantages.
19
As the trial court found from ample evidence: 'The lamps manufactured by Wabash embodying the Korver patented product are cheaper, smaller, more uniform and more efficient than any photo-flash lamps previously made. They have a light curve which differs from that of the foil lamp in having a lower, broader peak, more like a plateau, so that the difficult problem of synchronization with the camera shutter is largely avoided.'
20
The only lamp which, before the patented lamp, was commercially successful was the foil filled one of Ostermeier, which the Korver lamp pushed off the market. That lamp has already been described, and with its crumpled thin foil, is no anticipation. The foil filler did not burn as readily as the wire one and this comparative inefficiency retarded its production of usable actinic light. Van Liempt's Patent No. 2,037,101 teaches some of the advantages of using wire in place of foil as a filler, but his wire was not uniformly distributed throughout the bulb nor held elastically in place within it. Instead it was wound into a clew and was supported by, or from, the stem which bore the igniter, rather than by the walls. He was primarily concerned with a wire made from aluminum and magnesium in the proportions disclosed. Crowley, in two British patents, Nos. 403,427 and 403,638, mentions metallic wool, among other filling materials, as suitable for a flash lamp, but he comes no closer to showing the Korver lamp. Leijdens filed an application on March 15, 1935, which was the same as his application filed in Germany on March 26, 1934, for a flash lamp and was granted a patent, No. 2,091,601, on August 31, 1937. While it is doubtful whether it is prior art, assuming, without deciding, that it is, the application discloses nothing which anticipates. Leijdens described and patented a device for igniting the filler by means of a 'spontaneous reaction' which dispensed with the use of electricity and the consequent need for an electrical supply source. His drawings, which are alone relied on, show bulbs filled with undulating wire in a random course and in a more or less tangled, perhaps curled, condition. Although the wire seems at spots to touch the walls, the contact is not enough to provide appreciable support. Moreover, any doubt as to what does support his filler there might otherwise remain is resolved by the description of a typical drawing, Fig. 1, in the specifications as follows: 'Within the bulb and supported by the stem 50 is a combustible material 4 shown as a clew of drawn magnesium or magnesium alloy wire.' Thus it appears that the support for the filler is the stem, not the walls, and that the filler is a clew of wire, quite unlike the Korver filler. Nothing else in the prior art has been called to our attention which is sufficiently near anticipation to require discussion.
21
Korver was the first to create a flash lamp with a filler uniformly distributed and held in place within the bulb so that the output of actinic light was more easily co-ordinated with the camera and more useful for photographic purposes. His lamp was cheaper to manufacture and less fragile than previous bulbs and it drove them off the market. It is true that the enormous commercial success of the lamp may justly be attributed in considerable part to other factors, like a safe increase in the oxygen pressure which allowed a decrease in the size of the bulbs without a lessening in the actinic light available for use. But I need make no attempt to apportion the cause of its success for that is the make-weight which may tip the scales when the fact of invention is otherwise in doubt. Cf. Jungerson v. Ostby & Barton Co., 335 U.S. 560, 567, 60 S.Ct. 269, 93 L.Ed. 235; Goodyear Tire & Rubber Co. v. Ray-O-Vac Co., 321 U.S. 275, 279, 64 S.Ct. 593, 88 L.Ed. 74. I think that it has here been otherwise proved.
22
Of the three claims of the patent, all of which were held valid, No. 2 is typical and reads: '2. A flash-lamp comprising a container of actinic light-transmitting material having an active portion, a mass of thin undulated wire disposed within said active portion so as to be elastically supported from the wall thereof, and a gas which upon ignition enters into an actinic reaction with said wire, said wire being arranged in a serpentine course so as to be in substantially uniform spacial distribution.'
23
It was shown that when the defendant's Ostermeier flash lamp was unable to meet successfully the competition of the patented lamp, the defendant cast about for something that would, and eventually turned up the accused lamps which, being able to do so, have been sold over the succeeding years in about the same quantity as the patented ones. These lamps have already been sufficiently described. It is argued that they do not infringe because the filler is shredded aluminum foil instead of 'wire'; because the filler is not 'undulated'; and because it is not kept in place in the bulb by its own pressure elastically on the walls.
24
There is evidence to the effect that the word 'wire' is often used to denote a drawn filament. That of course means a round wire, something which the accused filler is not. But there is other evidence which well shows that the term wire is understood to embrace much more than that and to include materials not the result of any drawing operation but of other operations, including shearing, and that 'square wire' and that of other shapes is known. That the claims used 'wire' in this broad sense to denote material usable as the filler rather than to denote any particular manner of making such filler seems plain enough when it is remembered that nothing was required of it after it was in place in the bulb but to remain there and to burn when ignited. The evidence shows that the accused filler is made of shreds which, though not continuous, are each longer than the diameter of the bulb in which used so that no piece can remain straight for its full length when in position. These pieces are there deformed, intertwined and enmeshed with each other as the result of the force exerted by the process which puts them there. And they so press upon each other and upon the wall of the bulb that they retain the nearly uniform distribution imparted by the fluffing operation having enough inherent elasticity to do so. Indeed there was substantial evidence to support the following finding of the trial court. 'The accused photoflash lamps are characterized by the undulating and serpentine course of the shredded material which forms a tangled mass of crumpled shreds bent in every conceivable direction at non-uniform intervals. The individual shreds are fine, fragile wires. The wire filling material of the accused lamps in substantially identical with that described in the Korver patents, even though it is in the form of 8Inch shreds rather than continuous. The mass of shreds is so light (generally less than a tenth of a gram) that the loops and tips in contact with the glass wall of the bulb are adequate to support the filling elastically and hold it in place, just as taught in the Korver patents. In every particular referred to in the claims, the structure of the accused lamps is the same as or the substantially equivalent of that described and claimed in the Korver product patent.'
25
What the defendant has done is but to substitute for the continuous wire of Korver a practically perfect equivalent- shreds sufficiently long to accomplish substantially what Korver's wire accomplishes and in substantially the same way. The interchangeability of these two substances or 'wires,' once Korver's disclosures were made available to those skilled in the art, was seemingly obvious. The doctrine of equivalents, long recognized in patent law and lately given effect in Graver Tank & Mfg. Co. v. Linde Air Products Co., supra, does not permit such close copying of the patented device as was here done.
26
I am unable to agree with my brothers that the product patent is invalid and would affirm the judgment in respect to both patents.
27
FRANK, Circuit Judge concurring in part and dissenting in part.
28
I agree with Judge A. N. HAND with respect to the product patent. I agree with Judge CHASE'S discussion of the process patent, except in one particular: I disagree with much (not all) that he says in a passage in his opinion which I quote in the footnote.1 My disagreement concerns the following:
29
The trial judge made formal findings2 that three claims of the process patent were valid but not infringed; his decree dismissed the complaint as to these claims. Judge CHASE says that it was proper for the trial judge thus to state his conclusion that the claims were valid, although he held them uninfringed. I agree that, because of the nature of these patent claims, in this case, on the evidence in this record, we may, without reviewing and reversing the finding of validity, exercise discretion to affirm on the ground of non-infringement alone. But I think that the ruling of the Supreme Court in Electrical Fittings Corp. v. Thomas & Betts Co., 307 U.S. 241, 59 S.Ct. 860, 83 L.Ed. 1263- which reversed this court- obliges us to order that the finding of validity be expunged.
30
As I understand Judge CHASE, he believes that the trial judge here properly coupled the findings of validity and non-infringement, and that Electrical Fittings is here inapplicable, for three reasons:
31
(a) In this case (says Judge CHASE), unlike Electrical Fittings, the finding of validity was not incorporated in the judgment or decree.
32
(b) In Sinclair & Carroll Co. v. Interchemical Corp., 325 U.S. 327, 330, 65 S.Ct. 1143, 89 L.Ed. 1644, decided after Electrical Fittings, the Supreme Court (says Judge CHASE) has laid it down as the 'better practice' that the trial judge should inquire fully into the validity of a patent before dismissing the suit for non-infringement only. Therefore, says Judge CHASE, the upper courts must see to it that the trial courts comply with this 'better practice'; in order that an upper court may do so, the trial judge should explore the patent's validity, and, if he considers the patent valid, should so find, even if he finds and decides that it has not been infringed (provided only he does not include his validity-finding in his decree). Thus, according to Judge CHASE, the Interchemical case virtually obliterates Electrical Fittings.
33
(c) Because of Rule 52(a), except in cases where invalidity is grossly obvious, an upper court, says Judge CHASE, must not pass on the issue of validity without first obtaining the trial judge's finding on that issue. Therefore, it was proper for the trial judge here to make a finding of validity (not incorporated in his judgment or decree) although he found the patent uninfringed, for otherwise on this appeal we could not have dealt with the patent's invalidity if, in our discretion, we had though it desirable to do so. Thus, according to Judge CHASE, Rule 52(a) leaves little if anything of Electrical Fittings.
34
I disagree with all three of these propositions. To make my position clear, I shall first sketch the background of the Supreme Court rulings in the Electrical Fittings and Interchemical cases.
35
It is, of course, elementary that, to win a patent infringement suit, the patent-owner must show both (1) that the patent is valid and (2) that the defendant has infringed. A decision against the owner can, then, rest on either or both of the alternative grounds, i.e., (1) invalidity and/or (2) no infringement. Until fairly recently the courts often preferred to decide against a patent for non-infringement alone. The following two common judicial practices allowed the patent-owner to turn an adverse decision to his own advantage: (a) A court would dismiss for non-infringement without discussing the issue of validity, and so avoid striking down what spurious patent. (b) A court, deciding that a patent was not infringed, would nevertheless gratuitously declare it valid. Each of those practices the Supreme Court has recently denounced.3
36
Judge CHASE, as I understand him, takes the position that it is often proper- indeed necessary- for the trial judge, in order to demonstrate that he has avoided the first prohibited practice, to engage in the second prohibited practice, i.e., often the trial judge may properly state judicially that a non-infringed patent is valid, if only he does not formally put that statement in his judgment or decree. To show why I believe that position mistaken, it will help to describe those two practices more in detail.
37
(a) The First Practice. Of this practice, it was said that it 'tends to postpone the determination of the validity of dubious patents where any issue of infringement is offered upon which the case can be decided in favor of the defendant.'4 As a result, many a patent was left intact when even a casual study of the prior art, as disclosed by the evidence,5 showed it to be spurious- a 'zombi'6 or a 'scarecrow.'7 Such a decision, although adverse to the patent owner, enabled him to say that the court had thought well of his patent. For he could tell infringing competitors: 'The judge decided only that the defendant hadn't infringed. He must have thought it valid, for if he had thought it invalid, surely he would have said so.' So a well-heeled patentee could use the decision, although it went against him, to threaten other less well-heeled competitors with the notorious expense of patent litigation, and thereby coerce them into onerous license agreements, the cost of which would be passed on to the consuming public.
38
For these reasons the Supreme Court, as I read its decision in Sinclair & Carroll Co. v. Interchemical Corp., 325 U.S. 327, 330, 65 S.Ct. 1143, 89 L.Ed. 1644, has recently held (per Mr. Justice Jackson) that, where the evidence shows a patent to be a 'scarecrow,' the court should declare it invalid, whether or not it also finds infringement.8 This ruling is in the public interest which, as the Supreme Court has also said (per Mr. Justice Jackson) is 'so frequently present but so seldom adequately represented in patent litigation.'9
39
(b) The Second Practice. This second practice- that of judicially declaring a non-infringed patent to be valid, and thus affirmatively endorsing its validity- gave the patent-owner a far more effective coercive weapon than mere judicial silence about his patent's validity. The evils of such judicial benedictions were by no means confined to cases where the evidence plainly revealed that the patents were 'scarecrows.'
40
For a finding that a patent is valid, when it is held uninfringed, involves three vices: (1) It is a decision of a hypothetical case, and, as such, is improper, and perhaps unconstitutional.10 (2) It may, in future litigation, unfairly prejudice the successful defendant.11 (3) It gives the patent-owner, gratuitously, a highly persuasive precedent for use in litigation, or threatened litigation, with other prospective defendants, thereby hurting the public interest.12 Consequently, in Electrical Fittings Corp. v. Thomas & Betts Co., 307 U.S. 241, 59 S.Ct. 860, 83 L.Ed. 1263, the Supreme Court decided that, when a trial court makes a finding that an uninfringed patent is valid, the upper court must order that finding expunged.
41
The evils of both the condemned practices stem from these facts: (a) The Patent Office, because of its setup, frequently overlooks important parts of the prior art in granting a patent. For as Kenyon, a leading patent lawyer, has recently said, the conditions in the Patent Office are such that 'it is hardly to be wondered at that a certain number of applications go to issue notiwthstanding the existence, undiscovered by the examiner, of some prior patent or publication which seriously impugns novelty.'13 (b) A trial court has no expert aids of its own choosing to examine into the full details of the prior art and bring them to the court's attention.14 (c) The trial court must therefore rely on the litigants to adduce such matter. If a patent-owner sues a defendant who can easily prove that he is not infringing, that defendant ordinarily will not be diligent in digging up, and presenting to the trial court, the adverse prior art data inimical to the patent's validity.15 Accordingly, the trial judge, receiving data relative to validity chiefly from the patent-owner,16 is likely to believe that the patent is valid. He may, therefore, when deciding that the patent is not infringed, either remain silent about validity or pronounce the patent valid.
42
He is particularly likely to declare a non-infringed patent valid when, from the evidence before him, the patent is not obviously invalid (i.e., a 'zombi' or 'scarecrow') but one whose invalidity would appear only from a comprehensive presentation in evidence of the prior art. Neatly illustrative of the way in which defective presentation of prior art data may induce a mistaken judicial belief concerning validity are Smith v. Snow, 1935, 294 U.S. 1, 55 S.Ct. 279, 79 L.Ed. 721 and Smith v. Hall, 1937, 301 U.S. 216, 57 S.Ct. 711, 81 L.Ed. 1049. In the Snow case, the Court sustained a patent's validity. Two years later, in the Hall case, where the defendant produced evidence not offered in the Snow case, the Court held the same patent invalid.
43
It follows that, as I have said, the evils of the second practice- interdicted by Electrical Fittings- are not confined to cases of patents whose invalidity, as shown by the evidence, is glaringly obvious. Indeed, the patent in Electrical Fittings was not such a 'scarecrow.' Nor, on the evidence in this record, is any of the three claims of the process patent in the present case.
44
If, then, the Interchemical case did not, sub silentio, over-rule or very substantially modify the Electrical Fittings case, the ruling in Electrical Fittings was violated in the present case, unless Judge CHASE is correct in asserting that Electrical Fittings applies only when the judgment or decree expressly mentions the finding of validity. I shall try to show, infra, that Interchemical did not over-rule or modify Electrical Fittings, and that it is entirely immaterial that the judgment here did not incorporate or mention the finding.
45
Before proceeding to a more detailed discussion of Judge CHASE'S position, if may be helpful to state the judicial practices which, as I understand them, the authorities require, where the court decides for the alleged infringer in a patent infringement suit:
46
(1) A court in its discretion (where the evidence warrants) may hold that a patent is invalid, or that the accused device does not infringe, or both.
47
(2) A court must always consider whether the evidence shows the patent to be a 'scarecrow.'
48
(3) If so, it must always so hold, whether or not infringement has been shown; as to this, the court has no discretion.
49
(4) To evidence its compliance with (2), a court may properly state (a) that it has examined the question sufficiently to conclude that, on the evidence, the patent is not glaringly invalid, but (b) that, by so saying, it is not finding the patent valid.
50
(5) If, however, the court finds no infringement, it should never state that the patent is valid- in its decree, or in its formal findings, or in its 'Conclusions of Law,' or in its opinion.
51
(6) Unless the evidence shows that the patent is a 'scarecrow,' an upper court, in its discretion, may review, and decide the case, on (a) the issue of validity or (b) the issue of infringement or (c) both.
52
(7) If the trial judge dismisses the suit for non-infringement but states of record that the patent is valid, the upper court, if on the evidence the patent is not a 'scarecrow,' and if the upper court affirms solely on the ground of non-infringement, must order that the trial judge's statement of validity be deleted- either on motion of the alleged infringer or sua sponte. As to such deletion, there is no discretion.
53
(8) When the trial judge decides that the patent is valid and infringed, the upper court, if it decides that there has been no infringement, and if on the evidence the patent is not a 'scarecrow,' must similarly order that the trial judge's finding of validity be stricken, although the upper court, in its discretion, chooses not to review the validity issue on the merits.
54
With this preface, I shall not consider and attempt to answer Judge CHASE'S three arguments.
55
1. Judge CHASE'S first argument: i.e., since the finding of validity here is not incorporated in the decree, the Electrical Fittings case does not apply.
56
In the Electrical Fittings case, the Supreme Court reversed this court for refusing to order the elimination of the very kind of trial court finding we have here: i.e., a finding of validity accompanying a finding of non-infringement. Judge CHASE, as I understand him, says or implies that, since the validity-finding in Electrical Fittings was formally incorporated in the decree, as it is not here, that decision is here inapposite.17 That this is a distinction minus a difference appears, I think, from a study of Electrical Fittings.
57
There the trial judge held a patent not infringed; he dismissed the complaint but stated in his decree that the patent was valid. Although the decree was in their favor, the defendants appealed, asking this court to order stricken the portion of the decree which found that patent valid. This court, 100 F.2d 403, 404 dismissed the appeal as 'moot,' on the ground that the statement as to validity in the decree would not be res judicata and so could not harm the defendants who had won the suit. The decree, we said, 'merely established that there was no equity in the bill which entitled the plaintiffs to any relief whatever regardless of whether claim I was valid or not. That left the losing plaintiffs in no better position in respect to the patent than they were at the time they brought the suit and the successful defendants in no worse.' The Supreme Court reversed this court, stating, 307 U.S.at 242, 59 S.Ct.at 860, 83 L.Ed. 1263, that the portion of the decree which held that patent valid should be deleted because, 'though the adjudication was immaterial to the disposition of the cause, it stands as an adjudication of one of the issues litigated. We think the petitioners were entitled to have this portion of the decree eliminated, and that the Circuit Court of Appeals had jurisdiction * * * to entertain the appeal, not for the purpose of passing on the merits, but to direct the reformation of the decree.'18
58
There is but this one difference between that case and this: here the finding of validity was not inserted or mentioned in the decree. I think it clear that such inclusion of the finding in the decree could not have been any part of the reason for the Electrical Fittings decision, because the harmful adjudicative effect of the finding (which caused the Supreme Court to reverse us) would have been no whit less if the decree had been silent about the finding.
59
For the cases are legion that, in determining the scope of a decree in later litigation, for purposes of res judicata or estoppel by judgment, a court will look to the entire record, including the opinion and findings which were not incorporated or mentioned in the judgment or decree.19 Under F.R.C.P. 52(a) and 54(a),20 findings are not a part of the decree. But the Note of the Advisory Committee on Rule 52(a) says: 'Findings of fact aid in the process of judgment and in defining for future cases the precise limitations of the issues and the determination thereon. Thus they * * * are an important factor in the proper application of res judicata and estoppel by judgment.' And the Supreme Court has said that Rule 52(a) merely embodies the former equity practice.21 It follows that the vice of the validity-finding in Electrical Fittings was not its inclusion or mention in the decree.
60
As I said previously, a finding of validity of an uninfringed patent is harmful, not merely because of its prejudicial effect in future litigation between the same parties,22 but also because, even when actually founded on an inadequate presentation of the prior art,23 it may be highly persuasive, if the patent owner sues, or threatens to sue, other alleged infringers,24 thus helping him to exact ultimate tribute from the public, via patent licenses, without ever facing a thoroughgoing scrutiny of his patent's validity. Under the authorities cited above, courts, in using a case as a precedent, look to the findings therein, regardless of whether or not those findings were separated from the judgment or decree.25
61
Moreover, in the light of those authorities, the validity finding here is just as much a forbidden decision of a hypothetical case as was the finding in Electrical Fittings. It is of marked interest in this connection that, in that case, the Supreme Court, in explaining why it entertained an appeal for the strictly limited purpose of ordering elimination of that finding, cited cases to the effect that such an appeal is legitimate when a lower court exceeds its jurisdiction.26 In Electrical Fittings, the trial court exceeded its jurisdiction in but a single respect- by deciding (in the finding of validity) a hypothetical case. See Altvater v. Freeman, 319 U.S. 359, 363, 63 S.Ct. 1115, 87 L.Ed. 1450; Cover v. Schwartz, 2 Cir., 133 F.2d 541.
62
In Electrical Fittings, the Supreme Court differentiated (a) an upper court review and reversal on the merits of a finding that an uninfringed patent is valid from (b) an upper court order directing the deletion of that finding. This court recognized that distinction in Harries v. Air King Products Co., 2 Cir., 183 F.2d 158, 161, saying of Electrical Fittings: 'It is to be noted that the court did not suggest that we were bound to review the finding, for that would have been inconsistent with its mere deletion.'
63
In the Harries case, the portion of the opinion (quoted by Judge CHASE) which discussed the trial judge's finding of the validity of a patent he found uninfringed, addressed itself at length to this question: Must an upper court, on affirming a trial court decision as to non-infringement, review the validity-finding when, on the evidence, the patent is not a 'scarecrow'? This court (I think correctly) answered No.
64
In that discussion, however, nothing was said of the obligation of an upper court to enter a deletion order, a la Electrical Fittings. Yet since this court did not there enter such an order, it might be argued that the Harries case is a precedent in this Circuit against the position I am here maintaining. I think not. I have carefully read the briefs filed in Harries and have discovered that the parties there did not suggest a deletion order; and, while the opinion differentiates between review and deletion, its whole thrust is directed at the lack of necessity for review of such a finding; nowhere does the opinion suggest that deletion is not required by Electrical Fittings. Very likely it was because appellee did not suggest deletion that this court overlooked the necessity for a deletion order. Such an inadvertent omission does not create a precedent. As Mr. Justice Sutherland said: 'Questions which merely lurk in the record, neither brought to the attention of the court nor ruled upon, are not to be considered as having been so decided as to constitute precedents.'27
65
True, the briefs in the instant case do not suggest an order eliminating the trial judge's finding of validity. But since here a member of the court has called attention to it, I think this court should, of its own motion, act in compliance with the Electrical Fittings ruling, because the public interest is concerned. For the Supreme Court has often warned that the courts should not be mere passive umpires in patent litigation but should act on their own initiative to protect the public interest in such litigation.28
66
Judge CHASE describes as 'tentative' the validity-finding here. I see nothing 'tentative' about it. The trial judge labelled it- as he also did his statement that the claims were not infringed- a 'Conclusion of Law.' But, whether it be a pure finding of fact or a mixed finding and legal conclusion,29 the failure to label it correctly is but an immaterial mistake in nomenclature.30
67
2. Judge CHASE'S second argument, i.e., that the Interchemical case compels a reversion to the practice forbidden in Electrical Fittings.
68
In the Interchemical case, the Supreme Court said, 325 U.S. 327 at 330, 65 S.Ct. 1143, at 1145, 89 L.Ed. 1644: 'There has been a tendency among the lower federal courts in infringement suits to dispose of them where possible on the ground of non-infringement without going into the question of validity of the patent. Irvin v. Buick Motor Co., 8 Cir., 88 F.2d 947, 951; Aero Spark Plug Co. v. B. G. Corp., 2 Cir., 130 F.2d 290; Franklin v. Masonite Corp., 2 Cir., 132 F.2d 800. It has come to be recognized, however, that of the two questions, validity has the greater public importance, Cover v. Shcwartz, 2 Cir., 133 F.2d 541, and the District Court in this case followed what will usually be the better practice by inquiring fully into the validity of this patent.'
69
Judge CHASE, as I understand him, argues thus: This Supreme Court ruling in Interchemical means that as to every sort of patent- 'scarecrow' or otherwise- the trial judge, even if he finds the patent uninfringed, must always inquire into validity. In order to supervise effectively the discharge of this duty by the trial judge, it is necessary that the upper court know whether the trial judge has conducted that inquiry. Therefore, even when the trial judge dismisses for non-infringement, still, if he considers the patent valid, he must so find.
70
I think this argument- which treats Interchemical as virtually gutting Electrical Fittings- misinterprets the Interchemical ruling. I believe that the Supreme Court in Interchemical meant simply this: If the evidence shows a patent to be glaringly invalid (i.e., a 'scarecrow'), the trial judge must hold it invalid, whether or not he finds it uninfringed. Nothing in Interchemical requires him to hold it invalid, when he finds it uninfringed, unless the evidence does disclose that it is a 'scarecrow.'31 And certainly nothing in Interchemical requires or permits him, in defiance of Electrical Fittings, to find that an uninfringed patent is valid.
71
Judge CHASE, however, impliedly poses this problem: A trial judge dismisses for non-infringement alone. How can the upper court ascertain that he has, purusant to Interchemical, considered whether, on the evidence, the patent is a 'zombi' or 'scarecrow'? The answer is that the trial judge need do no more, at most, than to state, in his opinion, something like this: 'I have found the patent claims uninfringed and shall dismiss the suit on that ground. I have sufficiently explored the issue of validity to be satisfied that, on the evidence in this record, the patent claims are not glaringly invalid. But this, of course, does not mean that I find them valid.' In that way, the judge will satisfy Interchemical without running foul of Electrical Fittings.
72
Since such a report by the trial judge suffices to meet what Judge CHASE regards as the requirement of Interchemical, theonly effect of Judge CHASE'S ruling is to have the trial judge, by violating Electrical Fittings, supply additional information which serves no useful purpose. Consider the instant case: What good is it to this court to know that the trial judge has concluded that the uninfringed claims are valid? Why uselessly extend the Interchemical ruling so that it does the harms which Electrical Fittings outlawed? One recalls the jocular saying: 'Papa bring the hammer, there's a fly on baby's head.'
73
As the Supreme Court in the Interchemical opinion does not mention Electrical Fittings, it could not have intended to overrule or eviscerate it. More important, the cases cited with approval and disapproval in Interchemical disclose that the 'better practice' there endorsed included a rejection of the practice forbidden in Electrical Fittings:
74
(a) In Interchemical, the one case cited with approval and as indicative of the 'better practice' is our decision in Cover v. Schwartz, 2 Cir., 133 F.2d 541. It is, then, important to note the distinction we there made between (a) finding a non-infringed patent invalid and (b) finding a non-infringed patent valid. We there said 133 F.2d at 545: 'The court, in deciding against a patentee-plaintiff, may, with propriety, hold (1) that his patent is invalid, or (2) that the defendant has not committed acts of infringement, or (3) that not only is the patent invalid but also that the defendant has not infringed; there is no requirement that the court must first pass on the issue of infringement and, if it decides that there is no infringement, must refuse to decide that the patent is invalid. Indeed, since the public is affected, there is much to be said for a decision in such a case as to the invalidity of the alleged patent monopoly (either alone or in conjunction with a decision of non-infringement) whenever the issue of invalidity is before the court and the evidence warrants such a decision. For a decision as to invalidity will tend to discourage suits against others based on that patent, and mere threats of patent suits, due to the expense of defending such litigation, may often prevent lawful competition which will be in the public interest; the desirability of a decision as to invalidity is especially important because it is the general rule that the government cannot bring suit to have a patent declared invalid, except for fraud inducing its issuance (and perhaps in other unusual circumstances which need no discussion here).
75
'Where, however, the court finds against the plaintiff as to infringement, it cannot go on to hold in his favor as to validity. For, once the issue of infringement is decided against the patentee, there exists no case or controversy justifying a decision in his favor that the patent is valid.'32
76
The basis of this distinction (as explained in Cover v. Schwartz) is this:33 (1) Non-infringment and invalidity are both grounds for a decision against a patent, and therefore either or both of those grounds may properly be used to justify such a decision; just as in many other contexts, a court may assign one or both of two alternative reasons for a decision. (Only if the evidence shows that the patent is glaringly invalid, must the decision be based on invalidity, whether or not it also rests on noninfringement.) (2) But if a decision against a patent is grounded on non-infringement, its validity, of course, furnishes no alternative grounds for the decision dismissing the action; a finding of validity in such a case is a determination of a superfluous and non-justiciable issue, as well as undesirable from the viewpoint of the public interest.
77
(b) I think that my interpretation of the Interchemical opinion is further borne out by a consideration of the cases cited with disapprobation in that opinion. The first of those cases is Irvin v. Buick Motor Co., 8 Cir., 88 F.2d 947, 951. There the Eighth Circuit said that the trial judge, who had held the patent not infringed, 'properly deemed that no necessity existed, for going further and passing on the validity of appellant's patent, and he therefore refrained from doing so, and thereby he followed the usual, better, and wiser practice, and thus left the legal status of the appellant's patent as he had found it, clothed with the presumption of validity arising from the fact of the grant.'34 This practice was again endorsed in S. S. Kresge Co. v. Davies, 8 Cir., 112 F.2d 708, 711 where, on the record, the patent was a 'scarecrow.' Another decision case cited with disapproval by the Supreme Court in Interchemical was that of this court in Aero Spark Plug Co. v. B.G. Corp., 2 Cir., 130 F.2d 290, 292. There, on appeal from a decree holding a 'scarecrow' patent both invalid and not infringed, this court affirmed solely on the non-infringement issue, citing the Eighth Circuit decision in Kresge Co. v. Davies, supra, which adopted the so-called 'better and wiser practice.' But the concurring opinion in the Aero Spark Plug case analyzed and criticized that practice as injurious to the public. It pointed out that the patent there in suit was a 'vicious zombi' whose continued existence would serve as a threat to the public interest. Thus that concurring opinion said that 'An invalid patent masquerading as a valid one is a public menace,' and went on as follows: 'To allow a patent to remain apparently valid when the issue of invalidity is raised and the court sees that the patent is invalid, is to ignore the paramount public interest. Because no representative of the public may institute a suit to have a patent held invalid,35 and because the courts have no staff of independent experts to aid them in patent suits, the courts, must, in most cases, rely on the litigants in ascertaining the prior art. But, when, in a patent suit, the court is aware of a prior art which shows no invention, and that issue is raised by one of the parties, the public interest would seem to require that the court should so decide.'36 As this point was subsequently reiterated by us in Cover v. Schwartz, cited approvingly in Interchemical, I think it fair to say that this part of the concurring opinion in Aero Spark Plug illuminates the meaning of Interchemical.
78
After the Electric Fittings decision, and before the Interchemical decision, the Supreme Court, in Altvater v. Freeman, 319 U.S. 359, 363, 63 S.Ct. 1115, 1117, 87 L.Ed. 1450, citing Cover v. Schwartz, said: 'To hold a patent valid if it is not infringed is to decide a hypothetical case.' In Interchemical, as previously noted, the Supreme Court again cited Cover v. Schwartz as illustrating the 'better practice.' Yet, curiously, Judge CHASE relies on the Supreme Court's statement in the Interchemical case about the 'better practice,' to support his view that, disregarding the Electrical Fittings case and Cover v. Schwartz, it is proper for a trial court to find a non-infringed patent valid.
79
My view of Interchemical- i.e., that it merely admonishes that patents shown by the evidence to be 'zombis' must be held invalid- was expressed by this court in Harries v. Air King Products Co., 2 Cir., 183 F.2d 158, 162. There, referring to the passage in the Interchemical case about the 'better practice,' this court said that it was 'certainly not put in the form of a peremptory direction, but rather of a cautionary admonition, to be followed when that is the more convenient course; * * * We hold that it is open to a court to proceed as is most convenient, subject to the exception that, though the defendant has not infringed, claims may be so evidently invalid that the court should so declare.'37 With that interpretation I wholly agree; for it regards as mandatory an exploration of the validity of a non-infringed patent where, but only where, the evidence shows that the patent is a 'scarecrow.'38
80
3. Judge CHASE'S third argument, i.e., that Rule 52(a) often authorizes a trial court to disregard Electrical Fittings and to revert to the practice there condemned.
81
Judge CHASE'S third argument, based on Rule 52(a), as I understand it runs as follows:
82
Where validity is contested, if the trial judge, upon finding the patent not infringed, dismisses for that reason, and makes no finding, one way or the other, about validity, then- unless the patent is 'clearly invalid' (i.e., a 'scarecrow')38a - the upper court, because of Rule 52(a), may never decide that the patent is invalid; in such circumstances, the upper court must always postpone any such decision of its own until, by remanding the case, it has first obtained the trial judge's finding that the patent is either valid or invalid. Wherefore (so I understand Judge Chase), the trial court here acted correctly in finding valid the uninfringed patent, since he thereby obviated the necessity of remanding, should the upper court (if it regarded the patent as not a 'scarecrow') wish to exercise its discretion to consider the patent's invalidity in addition to affirming for non-infringement.
I have several replies to this argument:
83
(1) It will be noted that it relies on Rule 52(a), not on Interchemical, to obliterate Electrical Fittings. If this argument is sound, Electrical Fittings was always wrong. For, although present Rule 52(a) was not in effect when the trial judge acted in Electrical Fittings, former Equity Rule 70 1/2 was; and present Rule 52(a) is the equivalent of Equity Rule 70 1/2.39 The present Rule is not, then, a new factor which justifies a departure from Electrical Fittings.
84
(2) Judge CHASE'S third argument, if sound, would render improper our own current practice. Thus, recently, in Bilofsky v. Westinghouse Elec. Sup. Co., 2 Cir., 1947, 160 F.2d 154,39a this court (per Judge CHASE with Judge A. N. HAND and me concurring), after saying: 'The trial court did not find any infringement and dismissed the complaint without passing upon the question of validity', went on to decide that the patent was invalid, without remanding for a trial court finding relative to validity- although, on the evidence, the patent was not a 'scarecrow.'40
85
I add that, in that case, on the evidence the patent was not a 'scarecrow' because Judge CHASE now- in his opinion in the instant case- apparently says that only when a patent is thus obviously invalid may an appellate court pass on its invalidity without a previous trial court finding on that issue.41 There I think Judge CHASE is in error. I think that the authority of an upper court to decide a patent's invalidity, without a trial court finding on that issue, has nothing whatever to do with whether or not the patent is or is not 'clearly invalid.' That authority depends not on the gross obviousness of the patent's invalidity but on the kind of evidence in the record before the upper court. Recent pertinent decisions of the Supreme Court emphasize the following distinction:
86
(a) If, on the issue of validity, there is substantial oral testimony of such a character that the credibility of orally testifying witnesses is crucial, then, under Rule 52(a), a trial court finding as to the facts bearing on that issue may be conclusive, because the trial judge saw and heard those witnesses and the upper court cannot.42 In that situation, such a finding is therefore a necessary vestibule to an upper court decision as to invalidity. But in that type of case it cannot be said sweepingly (as I understand Judge CHASE to say) that the upper court may dispense with a trial court finding when the patent is obviously invalid. For, in this type of case, the existence of a fact demonstrating the patent's obvious invalidity may depend on the trial judge's belief in a witness' oral testimony concerning the existence of that fact. Unfortunately, in some such cases the alleged infringer fails to produce such a witness. So it was in Smith v. Snow, 294 U.S. 1, 55 S.Ct. 179, 79 L.Ed. 721, where the court held the patent invalid. Not until, in the later case of Smith v. Hall, 301 U.S. 216, 57 S.Ct. 711, 81 L.Ed. 1049, where the defendant introduced further oral testimony, was the Court able to know that the patent was, so to speak, patently bad.
87
(b) But the Supreme Court has very recently said that a trial-court finding of validity may be disregarded by the upper courts where the 'facts are little in dispute',43 i.e., when the issue can be resolved solely by a consideration of undisputed documentary evidence and physical exhibits (or of such documentary evidence and exhibits which render the oral testimony insignificant or grossly incredible). For then, as in similar non-patent cases, the upper court is as well able as the trial court to decide that issue.44 In such a case, a trial court finding on the validity issue is not a necessary prelude to an upper-court decision thereon.45 In this second type of case, the upper court has authority to pass on validity, absent any trial-court finding thereon, even if the patent's invalidity is not strikingly apparent. To be sure, in this type of case, if the evidence shows the patent to be a 'scarecrow,' the upper court must hold it invalid, whether or not it also holds it uninfringed.45a But even if the evidence does not reveal the patent as a 'scarecrow,' the upper court, when the evidence warrants, has discretion to decide that the patent is invalid; that is, the court (if the evidence so justifies) may hold the patent merely invalid or merely uninfringed, or both valid and uninfringed.46
88
Rule 52(a) does not, then, in contradiction of Electrical Fittings, ever require or permit a trial judge to find that an uninfringed patent is valid.47
89
The instant case is of the second type- i.e., the oral testimony is not crucial- so that here we are not bound by the trial judge's findings. If, then, from the evidence, we had concluded that the three claims of the process patent were valid and infringed, we could properly have so decided without remanding, although the trial judge found those claims not infringed. Since the claims are not 'scarecrows,' and since we agree with the trial judge that they are uninfringed, we may in our discretion do as we have done here, i.e., affirm as to non-infringement without considering invalidity. But, because of Electrical Fittings, we may not properly allow the judge's finding of validity to stand but must direct its deletion.
90
(I should add that my discussion of trial-judge fact-finding in the two types of cases is oversimplified because it does not take into account the difference in the first type of case between (a) what may be called the trial judge's 'primary' inferences drawn from witnesses' statements of fact and (b) what may be called the trial judge's 'secondary' inferences drawn from his 'primary' inferences. For a discussion of that difference, see the Appendix to this opinion, points I and II.)
91
Conclusion.
92
I return to what I said at the outset. As I see it, the Supreme Court has developed these two distinct and entirely compatible policy considerations in patent litigation:
93
(a) To protect the public, patents that are obviously 'scarecrows' or 'zombis' should be held invalid, when possible.48
94
(b) In order to protect not only the defendants but also- in the public interest- others who may later be sued for infringement or threatened with infringement suits, a court should never find or state that a non-infringed patent is valid.
95
Judge CHASE has, I think, misinterpreted (a) and so broadened it as to render (b) impotent. If his view is adopted we will have a recurrence (as here) of the very practice disapproved in the Electrical Fittings case, i.e., that of making judicial statements, in the form of advisory opinions, that patents are valid though not infringed. This practice, I repeat, is undesirable (1) not merely because it may leave the defendant in such a case in a position where the defeated patent-owner may thereafter assert that he has an adjudication of validity as against that defendant, but (2) also because the defeated patent-owner will be able to misuse the judicial statement of validity in later litigation, or threatened litigation, against other alleged infringers, with resultant injury to the public interest.
96
In sum, I think we should (1) express disagreement with some of Judge CHASE'S dicta49 in the quoted passage of his opinion,50 and (2) direct the district court to strike out the finding that the three non-infringed claims of the process patent are valid.
97
Appendix.
98
I. Inferences in Trial-Judge Fact-Finding Generally
99
In determining the facts of a case, often many inferences are required. Some inferences made by the trial judge are impregnable; others are not:
100
(1) When a witness testifies to the existence or occurrence of a fact, if that testimony is accepted as true (i.e., credible, reliable), then it is inferred from his assertion of the existence or occurrence of that fact that such a fact existed or occurred. The inference is that the witness correctly stated that fact. Wigmore has termed this a 'testimonial inference'; it may also be called a 'primary inference.' (In passing, it may be noted that a witness usually arrived at the statements of fact in his testimony by his inferences from his observations; as Wigmore says, the 'element of inference from observed data is one which plays a greater or less part in every witness' testimony. * * *')
101
If the trial judge makes a 'testimonial' or 'primary' inference, but if he did not observe the witness while he testified, the upper court is not bound by that inference, but may make its own (i.e., it may infer that the witness' testimony is or is not reliable).
102
If, however, the witness testified orally (i.e., in the trial judge's presence) then the trial judge's 'testimonial' or 'primary' inference must usually be accepted by the upper court. That is the usual rule because of the importance attached to witnesses' demeanor in estimating credibility; the demeanor is regarded as a sort of 'real evidence.' Absent documentary evidence- or undisputed facts, or gross improbability, or 'laws of nature'- which render highly dubious the trial judge's choice of some parts of the testimony as credible, his discretion in making 'testimonial' or 'primary' inferences is virtually unreviewable.51 Accordingly, this discretion has been called his 'sovereignty.' See, e.g., Broadcast Music Co. v. Havana Madrid Restaurant Co., 2 Cir., 175 F.2d 77; Orvis v. Higgins, 2 Cir., 180 F.2d 537. In such a case, says Stephen, the trial judge's 'task is to infer, from what he * * * sees and hears, the existence of facts which he neither sees nor hears.'
103
Of course, documents do not prove themselves; oral testimony (absent a stipulation or waiver) is necessary to establish their authenticity (or the like). See e.g., Corbin, The Parol Evidence Rule, 53 Yale L.J. 603. The trial judge's 'testimonial inferences' affecting such an issue have the dignity accorded to other such inferences.
104
(2) From a fact or facts ascertained- by 'testimonial' or 'primary' inferences- from testimony, another fact or other facts, concerning which no one has testified, may be inferred. Any such inference may be labelled a 'secondary inference.' That is, some facts, as to which there is no testimony are inferred by reasoning from a fact or facts previously ascertained by 'testimonial' or 'primary' inferences from the testimony. The trial judge's task, says Stephen, 'is to infer (1) from what he himself hears and sees the existence of facts asserted (by witnesses) to exist; (2) from the facts which, on the strength of such assertion, he believes to exist, other facts which are not so asserted (by witnesses) to exist.'
105
For example, a witness testifies that, on December 1, 1950, someone, at the point of a gun, forcibly took a diamond ring from the witness; the trial judge infers that that is a fact. Another witness testifies that, on December 2, 1950, he saw that diamond ring on the defendant's finger; the trial judge infers that that is a fact. Reasoning from those two inferred facts (each of which was reached by a 'testimonial' inference), the trial judge infers that the defendant either stole the ring or received it from the thief. This latter is a 'secondary' inference of a fact which no witness has asserted.
106
Even if the trial judge's 'testimonial' inferences stem from oral testimony and therefore bind the upper court, still his 'secondary' inferences are not similarly binding, for those 'secondary' inferences involve no use of demeanor-observation. So, if he 'finds' a fact by means of a purported 'secondary' inference, an upper court may- and should- reject that finding if the trial judge's 'secondary' inference was not rational (i.e., if no reasonable man would thus infer). The upper court then accepts the trial judge's 'testimonial' inference (if grounded upon oral testimony not excessively incredible) but substitutes its own 'secondary' inference.
107
Sometimes any one of several alternative rational 'secondary' inferences is possible. If so, then, even if the trial judge's 'secondary' inference was rational, the upper court may- but need not- substitute its own rational 'secondary' inference. For then (regardless of whether the trial judge's 'testimonial' inferences are binding), the upper court is in as good a position as the trial judge to draw a 'secondary' inference from the trial judge's 'testimonial' inferences.
108
Thus Judge Learned Hand (referring to the demeanor of orally testifying witnesses as 'evanescent factors,' because they are not incorporated in the record which comes to the upper court) said of a question of 'intent,' in E. F. Drew & Co. v. Reinhard, 2 Cir., 170 F.2d 679, 684: 'When an appellate court is faced with that question, it is in substantially as good a position to answer it as the trial judge, provided it accepts as true all the oral testimony as we do here, so far as it was relevant. We yield to findings of fact, so far as those parts of the evidence which cannot come before us may have controlled their decision; we must assume that these evanescent factors may have been persuasive, unless what does come before us rationally forbids the conclusions, no matter what the unknown factors were. After giving them every possible probative force they might have, our problem therefore becomes the same as that before the trial court.' See also District of Columbia v. Pace, 320 U.S. 698, 701-702, 64 S.Ct. 406, 88 L.Ed. 408.
109
(3) Sometimes the so-called 'ultimate' facts may be directly inferred from the facts ascertained by 'secondary' inferences. Sometimes, however, there is need to ascertain intermediately- by further inferences from the facts reached by 'secondary' inferences- so-called 'constitutive' or 'pivotal' facts, from which, in turn, the 'ultimate' facts are inferred. With respect to any of these inferences- mentioned in this paragraph (3)- made by the trial judge, the upper court's power is the same as that described in (2) supra.
110
The foregoing comments are not, at least in the federal courts, fully applicable to jury verdicts or to the findings of most administrative agencies.52 See United States v. U.S. Gypsum Co., 333 U.S. 364, 394-396, 68 S.Ct. 525, 92 L.Ed. 746; Orvis v. Higgins, 2 Cir., 180 F.2d 537. It may be doubted, however, whether jury verdicts in patent cases possess any special dignity with reference to many basic issues.
111
As to all the foregoing, see, e.g.,- in addition to the cases cited above and in point 3 of the main body of this opinion- Daitz Flying Corp. v. U.S., 2 Cir., 167 F.2d 369, 371; U.S. v. Anderson Co., 7 Cir., 119 f.2d 343, 346; U.S. v. South Georgia Ry. Co., 5 Cir., 107 F.2d 3; J. S. Tyree Chemist v. Thymo Borine Laboratory, 7 Cir., 151 F.2d 621, 624; Mid-Continent Investment Co. v. Meroicd Corp., 7 Cir., 133 F.2d 803, 809, reversed on other grounds, 320 U.S. 661, 64 S.Ct. 268, 88 L.Ed. 376; Lewyt Corp. v. Health-Mor, Inc., 7 Cir., 181 F.2d 855, 857; Bach v. Friden Calculating Mach. Co., 6 Cir., 155 F.2d 361, 364; Barbarino v. Stanhope S. S. Co., 2 Cir., 151 F.2d 553, 555; Kreste v. United States, 2 Cir., 158 F.2d 575, 577; Consolidated Water P. & P. Co. v. Spartan A. Co., 3 Cir., 185 F.2d 947, 951; cf. Standard Oil Development Co. v. Marzall, 86 U.S.App.D.C. 210, 181 F.2d 280, 282-284; Evergreens v. Nunan, 2 Cir., 141 F.2d 927, 928, 152 A.L.R. 1187.
112
See also Stephen, The Principles of Judicial Evidence, published as an Introduction to the Indian Evidence Act (1872); Wigmore, The Principles of Judicial Proof (2d ed. 1931); Gulson, The Philosophy of Proof (2d ed. 1923).
113
II. Inferences in Trial-Judge Fact-Finding in Patent Litigation
114
Except as to subject matter, a trial judge's fact-finding in patent litigation has no unique characteristics. The learning as to such fact-finding in general therefore applies to patent suits in particular. This, then, would seem to follow:
115
(a) In many patent suits, the evidence consists of documentary evidence (i.e., the patent in suit and other documents disclosing the prior art), physical exhibits, and oral testimony of experts. Suppose that such an expert orally testifies that the patented device, or some device disclosed in the prior art, does or does not achieve a certain result. Suppose that the trial judge, believing that witness, makes a 'testimonial inference,' i.e., he infers that the fact asserted by that witness is a fact; that the trial judge then finds it to be a fact; and that that finding is not irrational or incredible in the face of the undisputed non-oral evidence. Such a finding binds the upper court, because it involves an estimate of the credibility of a witness whom the trial judge saw and heard but whom the upper court cannot see or hear. If the validity or invalidity of the patent is the sole rational inference from that finding, the upper court must decide the validity issue accordingly, if, in a proper case, it passes on that issue. If the findings (supported by the evidence) show that the patent is a 'scarecrow,' the upper court must always so hold. If they do not, the upper court may, in its discretion, disregard the validity issue,53 should it decide that the patent is not infringed; but, again, as to the infringement issue, the upper court is bound by the trial judge's findings of fact, if they are of the kind above described.
116
However, although the upper court must accept such a finding, it may nevertheless decide the issue of validity or infringement differently from the trial judge, provided the upper court's decision rests upon rational inferences ('secondary' inferences) derived from the trial judge's finding based on his 'testimonial' inferences. For the upper court is in as good a position to draw such 'secondary inferences' from the 'testimonial inferences' as was the trial judge, since those 'secondary' inferences do not require any evaluation of the credibility of a witness seen and heard by the trial judge.
117
Yet, because, in a patent case of that sort, the trial judge's 'testimonial' inferences derive in part from observation of a witness' demeanor, the trial judge's finding of fact is, to that extent, an indispensable condition precedent of the upper court's decision (one way or another) of the validity or infringement issue.
118
(b) In many patent suits, however, the oral testimony of the experts adds nothing of substance to the undisputed non-oral evidence, or is so much at variance with that evidence as to be unworthy of credit, or has an expository value not dependent on an estimate of credibility. In order to understand the case, it may be necessary (as in many suits not relating to patents) to study carefully an intricate art or science, and the exposition by some of the expert witnesses may be most helpful in that respect; yet a reading of the printed record of that testimony in such a suit will often be as helpful as- perhaps more helpful than- listening to an oral statement to the same effect (for most men are eye-minded rather than ear-minded). In any such suit, the upper court is as well able to ascertain the facts as the trial judge, since there are no essential 'testimonial' inferences to be drawn from oral testimony; consequently, any finding he makes does not bind the upper court; and therefore a finding by the trial judge does not constitute a necessary prelude to the upper court's decision of validity or invalidity (or infringement or non-infringement). In such a suit, when the trial court has merely held the patent not infringed, the upper court may properly hold it valid and infringed; or the upper court may hold it not infringed, or invalid, or both. Only if, on the evidence, the patent is a 'scarecrow,' is the upper court required to hold the patent invalid, whether or not the upper court also holds the patent to be not infringed. But the upper court's authority as to fact-finding in a case of this type does not turn on whether, on the evidence, the patent is or is not a 'scarecrow.'
119
III. The Difference Between (A) Coupling Findings of Invalidity and Non-Infringment and (B) Coupling Findings of Validity and Non-Infringement
120
Judge Learned Hand intimated, by way of dictum, in Harries v. Air King Products Co., 2 Cir., 183 F.2d 158, that, perhaps where a patent is held not infringed, as accompanying finding of its invalidity is as improper as an accompanying finding of its validity, and should be deleted. Such an intimation ignores the distinction we made in Cover v. Schwartz, 2 Cir., 133 F.2d 541, and contradicts what Judge Learned Hand, in Larson v. General Motors Corp., 2 Cir., 134 F.2d 450, 453, himself said in explaining what had been decided in Cover v. Schwartz: 'We agreed that the judge might have decided on both grounds * * * ' i.e., invalidity and non-infringement. It also ignores what this court said in Addressograph-Multigraph v. Cooper, 2 Cir., 156 F.2d 483, 485. There, after citing Cover v. Schwartz and quoting Altvater v. Freeman to the effect that, 'To hold a patent valid if it is not infringed is to decide a hypothetical case', this court said (per Judge Woodbury)54 that 'it does not follow that to hold a patent invalid if it is not infringed, is also to decide a hypothetical case. See Hale v. General Motors Corp., 1 Cir., 147 F.2d 383, 388; Grant Paper Box Co. v. Russell Box Co., 1 Cir., 151 F.2d 886, 890; Sinclair & Carroll Co., Inc. v. Interchemical Corp., 325 U.S. 327, 330, 65 S.Ct. 1143, 89 L.Ed. 1644. The reason for this is the importance to the public generally that an invalid patent 'should not remain in the art as a scarecrow."
121
The dictum in the Harries case also comments that, in Sinclair & Carroll Co., Inc. v. Interchemical Corp., 325 U.S. 327, 330, 65 S.Ct. 1143, 89 L.Ed. 1644, the infringement issue 'of course become moot upon the finding of invalidity.'55 The Supreme Court did not so hold or even intimate. On the contrary, the district court, having there found both invalidity and non-infringement, the Supreme Court said (citing Cover v. Schwartz) that the district court had followed the 'better practice.' True, the Supreme Court affirmed on the ground of invalidity alone; but there is not a line in the Supreme Court's opinion indicating that it refrained from deciding the infringement issue because it was moot. The Court so refrained, I think, in the exercise of its discretion.
122
It has been suggested (not by Judge Learned Hand or Judge CHASE) that Altvater v. Freeman, 319 U.S. 359, 63 S.Ct. 1115, 87 L.Ed. 1450, is basically inconsistent with the rationale of Cover v. Schwartz. The suggestion is that, in Altvater, the Court decided that a trial court, even if it holds a patent non-infringed, may yet hold it valid, if only the alleged infringer, by way of a counterclaim, has prayed a declaratory judgment of invalidity.56 That suggestion, I think, rests on a misreading of the Altvater case. There the trial court dismissed the patent-owner's complaint, on the ground of non-infringement; but it granted the prayer of defendant's declaratory-judgment counterclaim (which raised broader issues as to validity than did plaintiff's complaint) and held the patent claims invalid. The Court of Appeals affirmed as to non-infringement but (purporting to follow the Electrical Fittings case) directed the modification of the decree so far as it held the patent claims invalid.57 The Supreme Court reversed the Court of Appeals. Citing Cover v. Schwartz, supra, the Supreme Court said, 'To hold a patent valid if it is not infringed is to decide a hypothetical case.' But, said the Supreme Court, the issue raised by the counterclaim concerning validity went far beyond that raised by the complaint.58 Moreover, the trial court in Altvater did not decide that a non-infringed patent was valid; it decided that a non-infringed patent was invalid. Such a decision this court in Cover v. Schwartz, supra, had said was proper. The same has been said in subsequent cases, citing Altvater and Cover v. Schwartz, by this court and other courts.59 Neglect of this distinction (a neglect stemming from a misinterpretation of the Electrical Fittings case) led to the erroneous decision of the Court of Appeals in the Altvater case, supra, which the Supreme Court reversed.60
1
The wire filler of a photo-flash bulb must, of course, be made of metal which will burn as desired, like aluminum or an alloy of it and magnesium
2
Usually .001 of an inch, the same as the thickness of the foil, so that the strip is roughly square in cross section
3
307 U.S. 241, 59 S.Ct. 860, 83 L.Ed. 1263
4
319 U.S. 359, 363, 63 S.Ct. 1115, 1117, 87 L.Ed. 1450
5
307 U.S. 241, 59 S.Ct. 860, 83 L.Ed. 1263
6
Pennington Engineering Co. v. Spicer Mfg. Co., 6 Cir., 165 F.2d 59, 61
7
307 U.S. 241, 59 S.Ct. 860, 83 L.Ed. 1263
8
319 U.S. 359, 63 S.Ct. 1115, 87 L.Ed. 1450
9
2 Cir., 133 F.2d 541
10
325 U.S. 327, 65 S.Ct. 1143, 89 L.Ed. 1644
11
1 Cir., 151 F.2d 886, 890
12
Triplett v. Lowell, 297 U.S. 638, 56 S.Ct. 645, 89 L.Ed. 949
13
R.S. Sec. 4887, 35 U.S.C.A. § 32
1
'But before taking up that phase of the matter I wish to notice that the decision below apparently followed the 'better practice' as pointed out in Sinclair & Carroll Co. v. Interchemical Corp., 325 U.S. 327, 330, 65 S.Ct. 1143, 89 L.Ed. 1644, by dealing with the validity of the claims before deciding the question of infringement. The three claims remaining after those held invalid had been disclaimed were what I might call tentatively held to be valid and then held not infringed. That entirely disposed of the suit on that patent and the decree as to it provided for the dismissal of the complaint without adjudging the three remaining claims to be valid. Thus there was an investigation and determination as to validity to comply with the above mentioned better practice, which the record affirmatively disclosed, without the error of adjudging any claims valid which, even if valid, would not have been infringed. Electrical Fittings Corp. v. Thomas & Betts Co., 307 U.S. 241, 59 S.Ct. 860, 83 L.Ed. 1263. See Cover v. Schwartz, 2 Cir., 133 F.2d 541, 545; Western States Mach. Co. v. S. S. Hepworth Co., 2 Cir., 152 F.2d 79, 81. Without such a record on appeal, there is no way for an appellate court to know, in patent cases where the complaint has been dismissed solely for failure to prove infringement, what has been done, if anything, to determine whether the patent should be held invalid in whole or in part. Unless in such cases the record shows that, or can be required to show it, the approved practice, except in the comparatively rare instances where the patent in suit is obviously invalid, will be what the trial judges choose to make it and perhaps that is what the Supreme Court means to let it be. But if appellate courts are to have any effective supervision of the better practice, records on appeal must provide the basis for that. This record does so and accords with what seems to be needed for such supervision. Of course in those comparatively rare instances, where the patent in suit is clearly invalid, and a trial court has failed to so hold, an appellate court may do so without any remand for findings for, by hypothesis, the record is already adequate to support such a decision. But, where invalidity was a substantial issue, and the complaint was dismissed for non-infringement without findings on the question of validity in compliance with Rule 52(a), F.R.C.P., on appeal the judgment has been vacated and the cause remanded for such findings. Helbush v. Finkle, 9 Cir., 170 F.2d 41. I take that to mean that where the course followed below is not taken, in cases where validity presents a substantial question, it may be required in order that invalid claims be not left as a threat longer than necessary. But I do not understand that, on appeal by a plaintiff from a judgment dismissing a complaint solely on the ground of non-infringement, an appellate court need necessarily review the trial court's conclusion, not carried into the judgment, that the claims are valid, before it can, in the absence of error as to the infringement issue, affirm the judgment. It has long been the practice to treat non-infringement and invalidity as sufficient and alternative grounds for dismissing the complaint in a patent infringement suit. See Coulter v. Eagle & Phenix Mills, 5 Cir., 35 F.2d 268, certiorari denied, 281 U.S. 758, 50 S.Ct. 409, 74 L.Ed. 1167. Cf. Altvater v. Freeman, 319 U.S. 359, 63 S.Ct. 1115, 87 L.Ed. 1450.'
2
They read:
'1. Claims 1, 3, 4 and 10 of Korver patent No. 2,115,423, the filling device patent, are invalid over the prior art; claims 2, 5 and 6 are valid.
'2. None of claims 2, 5 and 6 of Korver patent No. 2,115,423 is infringed by the General Electric filling method and device.'
These findings are labelled 'Conclusions of Law,' but that label is immaterial. See point 2 of this opinion, infra.
3
Sinclair & Carroll Co. v. Interchemical Corp., 325 U.S. 327, 330, 65 S.Ct. 1143, 89 L.Ed. 1644; Electrical Fittings Corp. v. Thomas & Betts Co., 307 U.S. 241, 59 S.Ct. 860, 83 L.Ed. 1263; Altvater v. Freeman, 319 U.S. 359, 363, 63 S.Ct. 1115, 87 L.Ed. 1450. See also Cover v. Schwartz, 2 Cir., 133 F.2d 541; Aero Spark Plug Co. v. B. G. Corp., 2 Cir., 130 F.2d 290, 292 (concurring opinion)
4
Woodward. A Reconsideration of the Patent System, 55 Harv.Law Rev. 950, 957 (1942)
5
That the evidence may often not disclose the prior art which would so reveal, see infra
6
Aero Spark Plug Co. v. B. G. Corp., 2 Cir., 130 F.2d 290, 299, (concurring opinion); Cover v. Schwartz, 2 Cir., 133 F.2d 541
7
Bresnick v. U.S. Vitamin Corp., 2 Cir., 139 F.2d 239, 242
8
Cf. Harries v. Air King Products Co., 2 Cir., 183 F.2d 158 at 163: 'Though the defendant has not infringed, claims may be so evidently invalid that the court should so declare.'
9
Muncie Gear Co. v. Outboard Co., 315 U.S. 759, 768, 62 S.Ct. 865, 870, 86 L.Ed. 1171
This is not novel doctrine. See Pope Mfg. Co. v. Gormully, 1892, 144 U.S. 224, 234, 12 S.Ct. 632, 636, 36 L.Ed. 414: 'It is as important to the public that competition should not be repressed by worthless patents, as that the patentee of a really valuable invention should be protected in his monopoly. * * * ' See also Atlantic Works v. Brady, 107 U.S. 192, 2 S.Ct. 225, 27 L.Ed. 438; Slawson v. Grand Street R. Co., 107 U.S. 649, 652, 2 S.Ct. 663, 27 L.Ed. 576; Brown v. Piper, 91 U.S. 37, 44, 23 L.Ed. 200. See further notes 28 and 48 infra.
10
'To hold a patent valid if it is not infringed is to decide a hypothetical case.' Altvater v. Freeman, 319 U.S. 359, 363, 63 S.Ct. 1115, 89 L.Ed. 1450, citing Cover v. Schwartz, 2 Cir., 133 F.2d 541. Cf. Linde Air Products Co. v. Morse Dry Dock & Repair Co., 2 Cir., 246 F. 834, 837
11
Electrical Fittings Corp. v. Thomas & Betts Co., 307 U.S. 241, 59 S.Ct. 860, 83 L.Ed. 1263
12
For recent cases wherein trial judges have relied heavily on earlier decisions that a patent is valid, see, e.g., Steele v. Esquire Laundry & Dry Cleaners, Inc., D.C.W.D. Mo., 90 F.Supp. 61, 63; Hughes Tool Co. v. Chicago Pneumatic Tool Co., D.C.W.D. Okl., 90 F.Supp. 845, 847. See also discussion in Aero Spark Plug Co. v. B. G. Corp., 2 Cir., 130 F.2d 290, 292, (concurring opinion) and in Cover v. Schwartz, 2 Cir., 133 F.2d 541
13
Kenyon wrote: 'Patents are obtained ex parte. An examiner makes the best search he can in the time available to him for examining each of the many cases for which he is responsible. It is greatly to the credit of the Patent Office, and to the chiefs of its sixty-nine patent examining divisions, that in so large a proportion of the cases coming before them they do a surprisingly good job. But no action upon a patent application is any better than the search which lies behind it. As the arts today multiply and expand, searching becomes ever more difficult and slow. Searching, by and large, is the responsibility of the junior examiner, of whom hundreds have newly come to work in the Patent Office since the war. The junior is faced with a classification system in which existing United States patents are arranged by subject-matter in some 43,000 subclasses. As his experience grows he makes up his own further unofficial subclasses in the areas of his responsibility. But only United States patents are included in the general classification system- technical journals and foreign patents, though equally applicable on the issue of patentability, are not classified for him. He must in some way keep abreast of the expanding literature and the large numbers of incoming copies of foreign patents, often poorly indexed or not indexed at all, to keep his own private classes up-to-date. On top of this he is necessarily driven by the volume of work pressing upon him, and has a reputation to make with his superiors for efficiency and despatch of business. Under these circumstances it is hardly to be wondered at that a certain number of applications go to issue notwithstanding the existence, undiscovered by the examiner, of some prior patent or publication which seriously impugns novelty.' Kenyon, Patent Law, 35 Am.Bar Ass'n J. (1949) 480, 482
See also Aero Spark Plug Co. v. B. G. Corp., 2 Cir., 130 F.2d 290 at 294 note 5 (concurring opinion).
14
See Judge Learned Hand in Parke-Davis & Co. v. H. K. Mulford Co., C.C., 189 F. 95, 115. See also Picard v. United Aircraft Corp., 2 Cir., 128 F.2d 632, 639-640
15
See Cridlebaugh v. Rudolph, 3 Cir., 131 F.2d 795, 800, as to the reluctance of some alleged infringers to contest validity. See also Armstrong Cork Co. v. United Cork Companies, 3 Cir., 107 F.2d 36, referring to the 'esprit de patentability.' Cf. Aero Spark Plug Co. v. B. G. Corp., 2 Cir., 130 F.2d 290, 299 (concurring opinion), Smith v. Hall, 301 U.S. 216, 218, 57 S.Ct. 711, 81 L.Ed. 1049
Doubtless, most patent lawyers do not use such strategems. But that, with some patent-owners, no holds are barred, see Hazel-atlas Co. v. Hartford Co., 322 U.S. 238, 64 S.Ct. 1281, 88 L.Ed. 1596; Root Refining Co. v. Universal Oil Products Co., 3 Cir., 169 F.2d 514.
16
Of course, sometimes the patent is clearly invalid on its face. Sometimes, too, this appears from the data offered by the alleged infringer in his proof that he has not infringed
17
Judge Chase says that here the trial judge 'tentatively held' the claims 'to be valid'; that this conclusion was 'not carried into the judgment'; and that the trial judge dismissed the complaint 'without adjuding the three * * * claims to be valid.'
18
Cf. Minneapolis-Honeywell Co. v. Thermoco, Inc., 2 Cir., 116 F.2d 845, 847
19
See, e.g., State of Oklahoma v. State of Texas, 256 U.S. 70, 88, 41 S.Ct. 420, 65 L.Ed. 831; National Foundry etc. v. Oconto Water Supply Co., 183 U.S. 216, 234, 22 S.Ct. 111, 46 L.Ed. 157; Moore v. Harjo, 10 Cir., 144 F.2d 318, 321; Great Northern Ry. Co. v. General Railway Signal Co., 8 Cir., 57 F.2d 457, 461; Fagin v. Quinn, 5 Cir., 24 F.2d 42, 44; National Brake & Electric Co. v. Christensen, 7 Cir., 278 F. 490, 497; Imperial Machine & Foundry Corp. v. American Mach. Co., D.C.S.D.N.Y., 276 F. 436, 440; D'Arcy v. Staples & Hanford Co., 6 Cir., 161 F. 733, 737; Edelman v. Edelman, 65 Wyo. 271, 199 P.2d 840, 843, 203 P.2d 952; Dietz v. City of Neenah, 91 Wis. 422, 64 N.W. 299, 65 N.W. 500; Gilchrist v. Stevenson, 7 How.Prac.N.Y., 273, 274. See also Nordbye, 'Improvements in Statements of Fact and Conclusions of Law, 1 F.R.D. 25, 26-27
20
The Notes of the Advisory Committee on F.R.C.P. say that those Rules are the equivalent of former Equity Rules 70 1/2 and 71, 28 U.S.C.A. Appendix, which were applicable when the trial judge made his validity finding in Electrical Fittings
21 U.S. v. U.S. Gypsum Co., 333 U.S. 364, 394-395, 68 S.Ct. 525, 92 L.Ed. 746.
22
In Harries v. Air King Products Co., 2 Cir., 183 F.2d 158, 161, we said of Electrical Fittings: 'The rationale of that decision was that the defendant was entitled to have it (the validity finding) out because, although it was not an estoppel, it might create some presumptive prejudice against him.'
23
See discussion supra of Smith v. Snow, 294 U.S. 1, 55 S.Ct. 279, 79 L.Ed. 721, and Smith v. Hall, 301 U.S. 216, 57 S.Ct. 711, 81 L.Ed. 1049
24
See, e.g., Imperial Mach. & Foundry Corp. v. American Machine Co., D.C.S.D.N.Y., 276 F. 436 and cases cited in note 12, supra
25
For this practice in patent cases, see e.g., Steele v. Esquire Laundry & Dry Cleaners, D.C.W.D. Mo., 90 F.Supp. 61, 63; Hughes Tool Co. v. Chicago Pneumatic Tool Co., D.C.W.D. Okl., 90 F.Supp. 845, 847; Imperial Mach. & Foundry Corp. v. American Mach. Co., D.C.S.D.N.Y., 276 F. 436, 437-440
26
The Court cited Gully v. Interstate Natural Gas Co., 292 U.S. 16, 54 S.Ct. 565, 78 L.Ed. 1088; Oklahoma Gas & Electric Co. v. Oklahoma Packing Co., 292 U.S. 386, 54 S.Ct. 732, 78 L.Ed. 1318; William Jameson & Co. v. Morgenthau, 307 U.S. 171, 59 S.Ct. 804, 83 L.Ed. 1189
27
Webster v. Fall, 266 U.S. 507, 511, 45 S.Ct. 148, 149, 69 L.Ed. 411; KYOS, Inc. v. Associated Press, 299 U.S. 269, 279, 57 S.Ct. 197, 81 L.Ed. 183; U.S. v. Mitchell, 271 U.S. 9, 14, 46 S.Ct. 418, 70 L.Ed. 799. See also Tefft, Weller & Co. v. Munsuri, 222 U.S. 114, 119-120, 32 S.Ct. 67, 56 L.Ed. 118; St. Louis V. & T.H.R. v. Terre Haute R. Co., 145 U.S. 393, 403-404, 12 S.Ct. 953, 36 L.Ed. 748; U.S. v. More, 3 Cranch 159, 172, 2 L.Ed. 397; The Edward, 1 Wheat. 261, 275-276, 4 L.Ed. 86
28
See, e.g., Sinclair & Carroll Co. v. Interchemical Corp., 325 U.S. 327, 330, 65 S.Ct. 1143, 89 L.Ed. 1644; Muncie Gear Co. v. Outboard Co., 315 U.S. 759, 768, 62 S.Ct. 865, 86 L.Ed. 1171; Hazel-Atlas Co. v. Hartford Empire Co., 322 U.S. 238, 64 S.Ct. 997, 88 L.Ed. 1250; Mercoid Corp. v. Mid-Continent Investment Co., 320 U.S. 661, 670, 64 S.Ct. 268, 88 L.Ed. 376; Brown v. Piper, 91 U.S. 37, 44, 23 L.Ed. 200; Nachman Spring-Filled Corp. v. Kay Mfg. Co., 2 Cir., 139 F.2d 781, 783; Root Refining Co. v. Universal Oil Products Co., 3 Cir., 169 F.2d 515; Cridlebaugh v. Rudolph, 3 Cir., 131 F.2d 795, 800
29 U.S. v. Esnault-Palterie, 299 U.S. 201, 205, 57 S.Ct. 159, 81 L.Ed. 123; Graver Mfg. Co. v. Linde Co., 336 U.S. 271, 275, 69 S.Ct. 535, 93 L.Ed. 672; Graver Mfg. Co. v. Linde Co., 339 U.S. 605, 609, 611, 70 S.Ct. 854, 94 L.Ed. 1097; Great A. & P. Tea Co. v. Supermarket Co., 340 U.S. 147, 153-154, 71 S.Ct. 127; Minnesota Mining & Mfg. Co. v. Coe, 75 U.S.App.D.C 131, 125 F.2d 198, 199; Refrigeration Engineering Inc. v. York Corp., 9 Cir., 168 F.2d 896, 900.
30
Refrigeration Engineering, Inc. v. York Corp., 9 Cir., 168 F.2d 896, 900
31
That the Interchemical ruling was confined to patents shown by the evidence to be 'scarecrows,' see the decision of this court in Addressograph-Multigraph Corp. v. Cooper, 2 Cir., 156 F.2d 483, 485
It has been suggested, however, that an obviously invalid patent is no threat, and that therefore the Supreme Court, in the Interchemical case, could not have intended to limit its admonition to such patents. This suggestion ignores a well-known fact to which I have already adverted: A patent, no matter how obvious its invalidity (or 'scarecrow' character) may be to a court, is often used by the patent-owner to coerce an alleged infringer who has not the financial means to engage in the very considerable expense of defending an infringement suit.
32
On rehearing we said 133 F.2d at page 550, 551 that an upper court 'may affirm a judgment adverse to a patentee either by holding (a) that the patent is invalid, or (b) that there is no past or threatened infringement, or (c) that the patent is invalid and also that there is no infringement. The affirmance of a judgment against a patentee, or the reversal of a judgment in favor of a patentee, may properly be based upon a conclusion as to either one or both of the two major elements- validity and infringement- involved in a patent suit; although, as we have said, it may often be desirable to rest a decision adverse to a patentee on invalidity, when the evidence so warrants, a court is not obliged to do so. The exercise of such a 'discretion' as to the grounds of decision in patent suits- when a real controversy is before the court- gives rise to no novelties or complexities in procedure; similar discretion in the choice of the bases of decisions in exercised by all courts every day in other types of litigation.'
33
For a more extensive discussion of this point, see Aero Spark Plug Co. v. B.G. Corp., 2 Cir., 130 F.2d 290at 293, 294 (concurring opinion)
34
Emphasis added. See also Shakespeare Co. v. Perrine Manufacturing Co., 8 Cir., 91 F.2d 199
35
Except for fraud in procuring the patent. United States v. American Bell Telephone Co., 167 U.S. 224, 17 S.Ct. 809, 42 L.Ed. 144
36
Emphasis added
37
Emphasis added. See e.g., Airolite Co. v. Fiedler, 2 Cir., 147 F.2d 496, 499
38
See Hale v. General Motors Corp., 1 Cir., 147 F.2d 383, 388
38a As in Airolite Co. v. Fiedler, supra, note 37.
39
See Note of the Advisory Committee to F.R.C.P. 52(a); U.S. v. U.S. Gypsum Co., 333 U.S. 364, 394-395, 68 S.Ct. 525, 92 L.Ed. 746. Cf. District of Columbia v. Pace, 320 U.S. 698, 64 S.Ct. 406, 88 L.Ed. 408
39a See also Brunswick-Balke-Collender Co. v. American B. & B. Corp., 2 Cir., 150 F.2d 69, 70.
40
Judge CHASE seems to cite Helbush v. Finkle, 9 Cir., 170 F.2d 41, in support of his argument. Especially in the light of an earlier decision in the same Circuit- Marchus v. Druge, 9 Cir., 136 F.2d 602, 605- I doubt whether Helbush does lend such support. If it does, I think it wrong
41
I so interpret the following statement by Judge CHASE: 'Of course in those comparatively rare instances where the patent in suit is clearly invalid, and a trial court has failed to so hold, an appellate court may do so without any remand for findings for, by hypothesis, the record is already adequate to support such a decision. But, where invalidity was a substantial issue, and the complaint was dismissed for non-infringement without findings on the question of validity in compliance with Rule 52(a), F.R.C.P., on appeal the judgment has been vacated and the cause remanded for such findings. Helbush v. Finkle, 9 Cir., 170 F.2d 41. I take that to mean that where the course followed below is not taken, in cases where validity presents a substantial question, it may be required in order that invalid claims be not left as a threat longer than necessary.'
42
Graver Mfg. Co. v. Linde Mfg. Co., 336 U.S. 271, 275, 69 S.Ct. 535, 93 L.Ed. 672; Graver Mfg. Co. v. Linde Mfg. Co., 339 U.S. 605, 609-611, 70 S.Ct. 854, 94 L.Ed. 1097
43
Great Atlantic & Pacific Tea Co. v. Supermarket Equipment Co., 340 U.S. 147, 153-154, 71 S.Ct. 127, 131
44
See U.S. v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746; Orvis v. Higgins, 2 Cir., 180 F.2d 537, 539; Luckenbach S.S. Co. v. U.S., 2 Cir., 157 F.2d 250, 251; Kind v. Clark, 2 Cir., 161 F.2d 36, 46; The Coastwise, 2 Cir., 68 F.2d 720, 721; Stokes v. U.S., 2 Cir., 144 F.2d 82, 85; Norment v. Stillwell, 2 Cir., 135 F.2d 132; Pfeifer Oil Trans. Co. v. The Ira S. Bushey, 2 Cir., 129 F.2d 606, 607; Equitable Life Assurance Society of U.S. v. Irelan, 9 Cir., 123 F.2d 462, 464; Bowles v. Beatrice Creamery Co., 10 Cir., 146 F.2d 774, 780; Dollar v. Land, D.C. Cir., 184 F.2d 245, 249-249; Lauricella v. U.S. 2 Cir., 185 F.2d 327, 328; Sawyer v. McDonald, 5 Cir., 165 F.2d 426, 428; Letcher County v. DeFoe, 6 Cir., 151 F.2d 987, 990
The same may be the result when the oral testimony is virtually undisputed and abundantly corroborated by undisputed documentary evidence. Such, in effect, was the case in Smith v. Hall, 301 U.S. 216, 57 S.Ct. 711, 81 L.Ed. 1049- which therefore is really a case of the second type.
45
Sanitary Refrigerator Co. v. Winters, 280 U.S. 30, 36, 50 S.Ct. 9, 74 L.Ed. 147; United States v. Esnault-Pelterie, 303 U.S. 26, 30-31, 58 S.Ct. 412, 82 L.Ed. 625; cf. Singer Mfg. Co. v. Cramer, 192 U.S. 265, 275, 24 S.Ct. 291, 48 L.Ed. 437; Altoona Theatres v. Tri-ergon Corp., 294 U.S. 477, 55 S.Ct. 455, 79 L.Ed. 1005; Paramount Publix Corp. v. American Tri-ergon Corp., 294 U.S. 464, 55 S.Ct. 449, 79 L.Ed. 997. See also Lewyt Corp. v. Health-Mor, Inc., 7 Cir., 181 F.2d 855, 857; Charles Peckat Mfg. Co. v. Jacobs, 7 Cir., 178 F.2d 794, 802; Stuart Oxygen Co. v. Josephian, 9 Cir., 162 F.2d 857, 859; Fleming v. Palmer, 1 Cir., 123 F.2d 749, 751; Pennington Engineering Co. v. Spicer Mfg. Corp., 6 Cir., 165 F.2d 59; cf. Hazeltine Research v. General Motors Corp., 6 Cir., 170 F.2d 6, 10
45a As in Airolite Co. v. Fiedler, 2 Cir., 147 F.2d 496, 499, supra, notes 37 and 38a.
46
In a proper case of this second type, the court, without a trial court finding as to validity, may hold the patent valid and infringed
47
Nor does Rule 52(a) require a remand for a finding as to validity except in these two instances:
(a) Suppose that the trial judge, finding a patent uninfringed, dismisses the suit without a finding about validity. Suppose the upper court believes that the non-infringement finding is wrong. If the case is of the first type- i.e., where oral testimony on the validity issue is crucial- the upper court, before it decides the case, must remand for a trial-court finding on that issue. (I think the upper court should state its reason for remanding, i.e., that, if the patent is valid, the upper court is ready to hold it infringed.) If the trial judge, on the remand, finds the patent valid, and if the upper court accepts that finding, it will hold the patent valid and infringed.
I say 'if the upper court accepts that finding.' for this reason: Even where oral testimony is crucial, the trial judge's finding binds the upper court only in so far as it involves the trial judge's 'testimonial inference'- his inference that a fact exists because he believes a witness who testified to the existence of that fact. The trial judge's 'secondary inferences' do not similarly bind the upper court. See the Appendix to this opinion, points I and II.
(b) Again, suppose the trial judge dismissed for uninfringement solely, but the upper court wants to hold the patent invalid (or both invalid and uninfringed). If the case is of the first type, the upper court must remand for a finding on the issue of validity, admonishing the trial judge to make no finding unless he finds the patent invalid.
48
The third circuit has held it important to wipe out such a patent even where the defendant (the alleged infringer) has not contested its validity. Cridlebaugh v. Rudolph, 3 Cir., 131 F.2d 795, 800, citing Densmore v. Scofield, 102 U.S. 375, 378, 26 L.Ed. 214. See also Slawson v. Grand St. R. Co., 107 U.S. 649, 652, 2 S.Ct. 663, 27 L.Ed. 576; Brown v. Piper, 91 U.S. 37, 44, 23 L.Ed. 200
49
See point III of the Appendix to this opinion
50
See footnote 1
51
The same may be true of his 'primary' inferences from other sorts of 'real' evidence (including a 'view')
52
For instance, the actual or imputed 'secondary' inferences of a jury will not be disturbed if rational, although other rational 'secondary' inferences are possible. Much the same is true of the 'secondary' inferences of most federal administrative agencies. See Stern, Review of Findings, 58 Harvard Law Review, 1944, 70, 80-81, 84-86, 89
53
Unless the non-testimonial evidence demonstrates the patent's obvious invalidity
54
Note that in the Harries case, this court cited approvingly Judge Woodbury's previous remarks in Grant Paper Box Co. v. Russell Box Co., 1 Cir., 151 F.2d 886, 890. There he said, for the court, that '* * * sometimes, even when a patent is not infringed, it is proper to go further and in the public interest to declare a patent invalid if in discretion the circumstances presented make such a course seem appropriate.'
55
See a related comment in Richard Irvin & Co. v. Westinghouse Air Brake Co., 2 Cir., 121 F.2d 429, 430, decided before Cover v. Schwartz
56
See dissenting opinion in Addressograph-Multigraph Corp. v. Cooper, 2 Cir., 156 F.2d 483, 486, 487
57
See 8 Cir., 130 F.2d 763
58
Cf. Kalo Inoculant Co. v. Funk Bros. Co., 7 Cir., 161 F.2d 981, 990-991, reversed on other grounds, Funk Bros. Co. v. Kalo Inoculant Co., 333 U.S. 127, 68 S.Ct. 440, 92 L.Ed. 588
59
See, e.g., Addressograph-Multigraph Corp. v. Cooper, 2 Cir., 156 F.2d 483, 485; Grant Paper Box Co. v. Russell, 1 Cir., 151 F.2d 886, 890, modified, on rehearing, for other reasons, 1 Cir., 154 F.2d 729
60
See Altvater v. Freeman, 319 U.S.at 363, 63 S.Ct. 1115, 87 L.Ed. 1450
| {
"pile_set_name": "FreeLaw"
} |
IN THE SUPREME COURT OF IOWA
No. 14–0049
Filed May 30, 2014
IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD,
Complainant,
vs.
LORI JO KIEFFER-GARRISON,
Respondent.
On review of the report of the Grievance Commission of the
Supreme Court of Iowa.
Review of a report filed by the Grievance Commission
recommending suspension of an attorney’s license. LICENSE
SUSPENDED.
Charles L. Harrington and Wendell J. Harms, Des Moines, for
complainant.
Lori J. Kieffer-Garrison, Davenport, pro se.
2
HECHT, Justice.
The Iowa Supreme Court Disciplinary Board (Board) charged an
attorney with violations of the Iowa Rules of Professional Conduct after
she repeatedly missed appellate deadlines in several criminal cases,
received twenty default notices as a consequence of those missed
deadlines, failed to pay resulting penalties in a timely fashion over a
period of two years, and allegedly made a knowingly false statement to
the court. After a hearing, a division of the Grievance Commission of the
Supreme Court of Iowa found the attorney’s actions violated several
ethical rules and recommended a suspension of her license to practice
law. Upon our review, we find the Board proved the alleged violations,
and we conclude the appropriate sanction is a suspension of the
attorney’s license for a period of six months.
I. Background Facts and Prior Proceedings.
Lori Jo Kieffer-Garrison was first licensed to practice law in Iowa in
2002. 1 She was privately admonished in 2009 and 2010, each time for
failure to cure a notice of default from the clerk of this court. Both
private admonitions were based on violations of Iowa Rules of
Professional Conduct 32:1.3 and 32:8.4(d).
The Board’s complaint in this case alleged Kieffer-Garrison’s
pattern of neglecting her obligation to comply with the deadlines imposed
by our rules of appellate procedure continued in 2011 and 2012. In
particular, the amended complaint alleged and Kieffer-Garrison admitted
she received more than twenty notices of default after failing to meet
various deadlines and timely pay monetary penalties for such defaults in
1She was first licensed to practice law in Illinois in 2001.
3
nine separate criminal case appeals. The Board alleged—and Kieffer-
Garrison admitted—these failures and defaults constituted violations of
rules 32:1.3 (lawyer shall act with reasonable diligence and promptness
in representing a client); 32:3.2 (lawyer shall make reasonable efforts to
expedite litigation consistent with the interests of the client); 32:3.4(c)
(lawyer shall not knowingly disobey an obligation under the rules of a
tribunal); and 32:8.4(d) (professional misconduct for a lawyer to engage
in conduct that is prejudicial to the administration of justice).
In a separate count of the amended complaint, the Board alleged
Kieffer-Garrison falsely represented to both her client, Anthony McGee,
and the clerk of this court that she had timely filed by mail an
application for further review in a postconviction appeal. This conduct,
the Board alleged, violated rules 32:1.2(a) (lawyer shall abide by a client’s
decisions concerning the objectives of representation), 32:1.3, 32:3.2,
32:3.3(a)(1) (lawyer shall not knowingly make a false statement of fact to
a tribunal), 32:3.4(c), and 32:8.4(d). Kieffer-Garrison denied the Board’s
allegations in this count and testified before the commission that she
prepared the application for further review and followed her routine office
procedure for timely filing it through the mail.
The commission found the Board met its burden of proving Kieffer-
Garrison violated rules 32:1.3, 32:3.2, 32:3.4(c), and 32:8.4(d) as a
consequence of her serial failures to comply with deadlines imposed by
our rules of appellate procedure. The commission also found Kieffer-
Garrison violated rules 32:1.2(a), 32:1.3, 32:3.2, 32:3.3(a)(1), 32:3.4(c),
and 32:8.4(d) in failing to prepare and timely file the application for
further review, and in falsely representing to McGee and the court that
she had done so.
4
The commission recommended a one-year suspension of Kieffer-
Garrison’s license.
II. Scope of Review.
Our review of the commission’s report is de novo. Iowa Supreme
Ct. Att’y Disciplinary Bd. v. Howe, 706 N.W.2d 360, 366 (Iowa 2005).
“Under this standard of review, we give weight to the factual findings of
the Commission, especially with respect to witness credibility, but we
find the facts anew.” Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v.
Beckman, 674 N.W.2d 129, 131 (Iowa 2004). “Although we respectfully
consider the discipline recommended by the Commission, the final
decision on the appropriate sanction is for this court.” Howe, 706
N.W.2d at 366. The Board must prove its allegations of misconduct by a
convincing preponderance of the evidence. Id.
III. Ethical Violations.
We find the Board proved by a clear preponderance of the evidence
that Kieffer-Garrison violated rules 32:1.3, 32:3.2, 32:3.3(a)(1), 32:8.4(c),
32:1.2(a), and 32:8.4(d) in her repeated failures to comply with the
deadlines imposed by our rules of appellate procedure. Our analysis will
proceed with a discussion of the evidence pertaining to each of the
violations alleged by the Board.
A. Rule 32:1.3: Reasonable Diligence and Promptness. A
lawyer violates rule 32:1.3 in failing to act with reasonable diligence and
promptness in representing a client. Iowa R. Prof’l Conduct 32:1.3.
Kieffer-Garrison violated this rule in repeatedly failing to comply with
deadlines imposed by the rules of this court in nine separate criminal
cases and in failing to promptly pay penalties imposed by the court. The
documentary evidence of more than twenty default notices issued to her
in those cases overwhelmingly supports our finding of this violation.
5
B. Rule 32:3.2: Expediting Litigation. This rule is violated
when a lawyer fails to “make reasonable efforts to expedite litigation
consistent with the interests of the client.” Iowa R. Prof’l Conduct 32:3.2.
An attorney violates this rule by failing to appear for status conferences
and respond to court inquiries. Iowa Supreme Ct. Att’y Disciplinary Bd.
v. Johnson, 792 N.W.2d 674, 679–80 (Iowa 2010). Similarly, an attorney
violates this rule in failing to comply with orders compelling discovery
responses. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Cunningham, 812
N.W.2d 541, 548 (Iowa 2012). We conclude Kieffer-Garrison’s serial
failures to comply with the requirements of this court’s procedural rules
governing the timely presentation and progression of appeals constituted
a violation of her obligation to demonstrate reasonable efforts to expedite
numerous appeals consistent with her clients’ interests. 2
C. Rule 32:3.4(c): Knowing Disobedience of an Obligation
Under the Rules of a Tribunal. A lawyer’s obligation to act with
fairness to opposing parties and their counsel includes the obligation to
refrain from “knowingly disobey[ing] an obligation under the rules of a
tribunal except for an open refusal based on an assertion that no
obligation exists.” Iowa R. Prof’l Conduct 32:3.4. In this case, there can
be no doubt that Kieffer-Garrison knew the rules of this court imposing
time deadlines pertaining to appeals, and that she persistently violated
them in several criminal appeals. Her violations of the rules occurred
despite her acknowledged receipt of numerous notices of those deadlines
informing her of the specific rules requiring timely filings. Our decisions
2As the Board did not contend Kieffer-Garrison engaged in conduct for the
purpose of frustrating the judicial process, we need not address whether she acted with
such intent. See Iowa Supreme Ct. Att’y Disciplinary Bd. v. Knopf, 793 N.W.2d 525, 530
(Iowa 2011).
6
have explained, however, that the purpose of rule 32:3.4(c) is to ensure
“ ‘[f]air competition in the adversary system’ through proper adherence to
discovery and evidence rules.” Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Dunahoo, 799 N.W.2d at 524, 533 (Iowa 2011) (quoting Iowa R. Prof’l
Conduct 32:3.4(c) cmt. 1). We find the Board failed to meet its burden of
proving Kieffer-Garrison’s conduct undermined the competitive fairness
of the appeals or disadvantaged opposing counsel. Accordingly, we find
no violation of rule 32:3.4(c) by Kieffer-Garrison in this case.
D. Rules 32:8.4(c); 32:3.3(a)(1): Engaging in Dishonesty; Lack
of Candor Toward a Tribunal in the McGee Case. We now turn to the
Board’s claim that Kieffer-Garrison failed to prepare and timely file an
application for further review in the McGee case and falsely represented
to the clerk of this court she had done so. We find Kieffer-Garrison was
appointed on June 23, 2011, as McGee’s counsel in a postconviction
relief appeal. On October 7, the clerk of this court issued a notice of
default informing Kieffer-Garrison she had failed to timely serve McGee’s
proof brief and appendix designation. Kieffer-Garrison subsequently filed
both the proof brief and the appendix designation thirty-six and forty-
three days late, respectively. Another notice of default was issued by the
clerk on February 27, 2012, as a consequence of Kieffer-Garrison’s
failure to timely file the appendix, which was eventually filed twenty-
seven days late.
The court of appeals affirmed the dismissal of McGee’s petition for
postconviction relief on June 13. McGee learned of this development not
from Kieffer-Garrison, but via his receipt of a copy of the decision from
the court. McGee conferred with Kieffer-Garrison who agreed to prepare
and file an application for further review by this court.
7
No such application was received by the clerk of this court in due
course, however, and procedendo was therefore issued on July 11.
Thereafter, McGee called the clerk’s office to check on the status of his
appeal. He was informed that an application for further review had not
been filed in his case.
McGee went to Kieffer-Garrison’s office to inquire. After Kieffer-
Garrison assured McGee an application had been filed, McGee called the
clerk’s office. He handed his cell phone to Kieffer-Garrison who spoke
with a deputy clerk. Kieffer-Garrison told the deputy she had sent an
application to the clerk via the postal service but could not supply
tracking confirmation. When the deputy asked Kieffer-Garrison if she
possessed a copy of the application, Kieffer-Garrison said she was unable
to locate a copy that could be promptly transmitted to the clerk’s office
by email or fax. The deputy informed Kieffer-Garrison that her only
remaining option was to file a motion to reconsider and reinstate the
appeal.
Kieffer-Garrison’s opposing counsel, an assistant attorney general
representing the state in McGee’s appeal, never received a copy of the
application from Kieffer-Garrison. On August 13—four weeks after
procedendo issued—Kieffer-Garrison faxed to the clerk of this court a
motion to reconsider and reinstate McGee’s appeal and request further
review. The motion asserted she had “filed a request for further review,”
but no application for further review was attached.
This court’s clerk finally received an application for further review
from Kieffer-Garrison pertaining to McGee’s case on December 5. The
application included a certificate of mailing signed by Kieffer-Garrison
certifying the document had been filed on July 2 by mailing it to the clerk
and to opposing counsel at the attorney general’s office.
8
Upon our review of this evidence, we find Kieffer-Garrison violated
rules 32:3.3(a)(1) and 32:8.4(c) when, after failing to prepare and timely
file the application for further review, she falsely represented to McGee
and this court that she had done so.
In making these findings, we give weight to and agree with the
commission’s finding as to Kieffer-Garrison’s lack of credibility. Although
she persisted at the hearing before the commission in claiming she
prepared the McGee application and placed it in the mail for filing and
service, her testimony on this point is unsupported by the credible
evidence. Neither the clerk of this court nor Kieffer-Garrison’s opposing
counsel received the application through the mail before procedendo
issued in the appeal. Furthermore, after McGee confronted Kieffer-
Garrison with the fact that the clerk of this court had not received the
application, she was unable to produce a copy of the document from her
office computer system or paper files before she was notified of the
ethical complaint. 3 Even more salient, in our view, is the fact that her
billing records submitted in support of her request for compensation in
the McGee case did not include an entry for time spent in preparing the
application.
E. Rule 32:1.2(a): Failing to Abide by a Client’s Decisions
Concerning Objectives of Representation. This rule provides a lawyer
shall, subject to limitations not applicable here, “abide by a client’s
decisions concerning the objectives of representation.” Iowa R. Prof’l
Conduct 32:1.2(a). We find the board proved by a convincing
3Kieffer-Garrisondid later provide the Board with a copy of an application for
further review in McGee’s case, but the credible evidence supports our finding this
document was prepared and mailed after Kieffer-Garrison was notified of the default
and ethical complaint.
9
preponderance of the evidence that Kieffer-Garrison failed to abide by
McGee’s objective and her agreement to prepare and timely file the
application for further review.
F. Rule 32:8.4(d): Conduct Prejudicial to the Administration
of Justice. A lawyer’s conduct violates rule 32:8.4(d) if “it impedes ‘the
efficient and proper operation of the courts or of ancillary systems upon
which the courts rely.’ ” Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Taylor, 814 N.W.2d 259, 267 (Iowa 2012) (quoting Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Van Ginkel, 809 N.W.2d 96, 103 (Iowa 2012)).
Violations of this rule impede the efficient operation of the courts and
waste judicial resources. See Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Kallsen, 814 N.W.2d 233, 238–39 (Iowa 2012). We find Kieffer-Garrison’s
conduct was, by a convincing preponderance of the evidence, prejudicial
to the administration of justice because it caused the court to waste
judicial resources in addressing a motion falsely asserting she filed an
application for further review on behalf of McGee.
IV. Sanction.
“In considering an appropriate sanction, this court considers all
the facts and circumstances, including the nature of the violations, the
attorney’s fitness to practice law, deterrence, the protection of society,
the need to uphold public confidence in the justice system, and the need
to maintain the reputation of the bar.” Iowa Supreme Ct. Att’y
Disciplinary Bd. v. McGinness, 844 N.W.2d 456, 463 (Iowa 2014). We
consider mitigating and aggravating circumstances as we calibrate the
sanction. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Ireland, 748 N.W.2d
498, 502 (Iowa 2008) (per curiam). We give respectful consideration to
the commission’s findings and conclusions, but “may impose a greater or
lesser sanction than that recommended by the commission.” Iowa
10
Supreme Ct. Att’y Disciplinary Bd. v. Wheeler, 824 N.W.2d 505, 509–10
(Iowa 2012). We also seek to “achieve consistency with our prior cases
when determining the proper sanction.” Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Templeton, 784 N.W.2d 761, 769 (Iowa 2010).
“When neglect is the primary violation, the sanction generally
ranges from a public reprimand to a six-month suspension.” Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Earley, 729 N.W.2d 437, 443 (Iowa
2007). When neglect is accompanied by other misconduct, however, the
sanction imposed will likely be more severe than when neglect stands
alone. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Walker, 712 N.W.2d
683, 685 (Iowa 2006). A brief review of this court’s recent disciplinary
cases will illustrate factors influencing our determination of the
appropriate sanction in this case.
In Iowa Supreme Court Board of Professional Ethics & Conduct v.
Stein, 586 N.W.2d 523 (Iowa 1998), we concluded an attorney’s neglect of
two medical negligence cases and his numerous misrepresentations
made to cover up his neglect warranted a suspension of six months.
Stein, 586 N.W.2d at 526. In Walker, we imposed a suspension of six
months as the sanction for an attorney’s neglect of four clients’ cases
and misrepresentations calculated to conceal his neglect. Walker, 712
N.W.2d at 686. In Earley, we suspended for four months the license of
an attorney who neglected the interests of three clients, failed to deposit
retainers from two clients in a trust account, and failed to promptly
return a file to a client. Earley, 729 N.W.2d at 442–44. In Iowa Supreme
Court Attorney Disciplinary Bd. v. Conroy, 845 N.W.2d 59 (Iowa 2014), we
imposed a suspension of six months as a consequence of an attorney’s
neglect of appeals in six criminal cases and one postconviction relief
case. Conroy, 845 N.W.2d 59, 67–68. Although Conroy made no
11
misrepresentations to hide his neglect, we counted his history of two
prior admonitions, three temporary suspensions, and one suspension of
sixty days as aggravating factors affecting our determination of the
appropriate sanction. Id. at 67.
Sanctions for violations involving dishonesty have ranged from a
brief suspension of two months to revocation. Van Ginkel, 809 N.W.2d at
110–11 (imposing a suspension of two months for filing interlocutory
report with a false statement and other violations); Iowa Supreme Ct.
Att’y Disciplinary Bd. v. Rickabaugh, 728 N.W.2d 375, 382 (Iowa 2007)
(revoking the license of a lawyer for multiple instances of dishonest
conduct including forging an executor’s name on a probate report
submitted to the court after previous suspension for similar dishonest
conduct).
Kieffer-Garrison’s neglect of legal matters and her persistent
misrepresentations were serial acts of misconduct, rather than an
isolated misadventure. “Normally, a pattern of misconduct gives rise to
enhanced sanctions.” Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v.
Gallner, 621 N.W.2d 183, 187 (Iowa 2001). Kieffer-Garrison’s persistent
perpetuation of a falsehood is a “remarkable aggravating factor.”
McGinness, 844 N.W.2d at 466–67 (noting attorney’s persistence in
asserting misrepresentation was “a remarkable aggravating factor” and
suspending attorney’s license for six months).
In determining the appropriate sanction in this case, however, we
also consider Kieffer-Garrison’s depression during the relevant period
and her appropriate pursuit of medical treatment. Depression, while not
excusing the disciplinary violations, may have a bearing on our
determination of the appropriate severity of sanction. See Iowa Supreme
Ct. Bd. of Prof’l Ethics & Conduct v. Grotewold, 642 N.W.2d 288, 292–96
12
(Iowa 2002) (considering major depression as a factor influencing the
sanction). Having considered the relevant factors affecting our
determination of an appropriate sanction, we conclude Kieffer-Garrison’s
license should be suspended with no possibility of reinstatement for six
months.
V. Conclusion.
We suspend Kieffer-Garrison’s license to practice law in this state
with no possibility of reinstatement for a period of six months from the
date of the filing of this opinion. This suspension shall apply to all facets
of law. Iowa Ct. R. 35.13(3). She must establish prior to any
reinstatement that she has not practiced law during the suspension
period, that she has conformed with the rules and procedures governing
reinstatement found in Iowa Court Rule 35.14, and that she has satisfied
the notification requirements set forth in Iowa Court Rule 35.23. The
costs of this proceeding are taxed to Kieffer-Garrison. See Iowa Ct. R.
35.27.
LICENSE SUSPENDED.
| {
"pile_set_name": "FreeLaw"
} |
26 S.W.3d 436 (2000)
STATE of Missouri, Plaintiff-Respondent,
v.
Ronald L. WILES, Defendant-Appellant.
No. 23132.
Missouri Court of Appeals, Southern District, Division Two.
July 26, 2000.
Motion for Rehearing or Transfer Denied August 15, 2000.
Application for Transfer Denied October 3, 2000.
*438 Craig A. Johnston, Asst. Public Defender, Columbia, for appellant.
Jeremiah W. (Jay) Nixon, Atty. Gen., James R. Layton, Asst. Atty. Gen., Jefferson City, for respondent.
PHILLIP R. GARRISON, Judge.
Ronald L. Wiles ("Defendant") was charged with the Class D felony of driving while intoxicated in violation of Section 577.010.1, RSMo 1994. A jury found Defendant guilty, and he was sentenced to five years imprisonment. Defendant appeals his conviction, asserting that the trial court erred in 1) overruling his motion for judgment of acquittal and in sentencing him pursuant to Section 577.010.1, RSMo 1994, as the State failed to prove beyond a reasonable doubt that he had "operated" his vehicle while intoxicated and 2) overruling his motion to dismiss, submitting to the jury an instruction defining "operated" as "physically driving or operating," and refusing to give his definition of "operated."
As Defendant contests the sufficiency of the evidence supporting his conviction, appellate "review is limited to a determination of whether there is sufficient evidence from which a reasonable juror might have found the defendant guilty beyond a reasonable doubt." State v. Chaney, 967 S.W.2d 47, 52 (Mo. banc 1998), cert. denied 525 U.S. 1021, 119 S.Ct. 551, 142 L.Ed.2d 458 (1998). In applying this standard, the Court accepts as true all of the evidence favorable to the State, including all favorable inferences drawn from the evidence, and disregards all evidence and inferences to the contrary. State v. Grim, 854 S.W.2d 403, 405 (Mo. banc 1993), cert. denied 510 U.S. 997, 114 S.Ct. 562, 126 L.Ed.2d 462 (1993). Viewed in this light, the evidence most favorable to the verdict shows:
Shortly before 1 a.m. on February 14, 1999, Webb City Police Officer Travis Osterman ("Officer Osterman") received a report of a loud vehicle idling in a residential area. Upon arriving at the scene, Officer Osterman observed a blue 1970s model Ford truck parked at an angle, facing a garbage dumpster, with its engine running at a fast idle. As he approached the vehicle, Officer Osterman noticed that the truck's headlights, taillights, and brake lights were on. He found Defendant slumped over the steering wheel on the driver's side of the vehicle. Defendant's left hand was on the door rest and his right hand was down by his side. His left foot was on the brake pedal, his right foot was on the accelerator, and the vehicle was in park.
Officer Osterman knocked on the window to get Defendant's attention. Defendant failed to respond, so Officer Osterman opened the driver's side door. Defendant, after almost falling out of the truck, had to be assisted back into an upright position by Officer Osterman. Officer Osterman smelled a strong odor of intoxicants coming from Defendant and observed that his eyes were "glassy and watery and staring." Inside the truck's cab, Officer Osterman found an open container of whiskey, an open can of beer, and several unopened containers *439 of beer. After Defendant failed three field sobriety tests, Officer Osterman arrested Defendant for driving while intoxicated. After being taken to the Webb City jail, Defendant admitted that he had been drinking and that he was still under the influence of alcohol.
In a pre-trial motion, during the instruction conference, and in his motion for a judgment of acquittal or in the alternative for a new trial, Defendant asserted that the term "operate" as used in Section 577.010, RSMo 1994, was unconstitutionally vague and that the jury instruction incorporating the term was similarly vague.[1] The trial court overruled these objections. On June 23, 1999, a jury returned a verdict finding Defendant guilty of the charged offense. Defendant appeals his conviction.
In his first point on appeal, Defendant contends that the trial court erred in overruling his motion for judgment of acquittal and in sentencing him for operating a motor vehicle while intoxicated because the State failed to prove beyond a reasonable doubt that he had "operated" his vehicle while intoxicated. Defendant argues that although he was found intoxicated in a parked vehicle with its engine running, the evidence did not support that he was "physically driving or operating" a motor vehicle while intoxicated as required under Sections 577.001.1, RSMo Cum.Supp.1998, and 577.010, RSMo 1994, as he was asleep in the truck, the truck was in park, and there was no evidence that he had started, moved, or driven the truck while intoxicated.
Prior to August 28, 1996, the definition of "driving" or "operating" under Section 577.001.1, RSMo 1994, provided that "[a]s used in this chapter, the term `drive', `driving', `operates' or `operating' means physically driving or operating or being in actual physical control of a motor vehicle." That statute was amended in August 1996, and now states that "[a]s used in this chapter, the term `drive', `driving', `operates' or `operating' means physically driving or operating a motor vehicle." § 577.001.1, RSMo Cum.Supp.1998. Defendant concedes that under the prior definition, the evidence would have been sufficient to convict him of driving while intoxicated, as he was in "actual physical control of a motor vehicle." Defendant argues, however, that his actions, which would have fallen under the purview of former Section 577.001.1, RSMo 1994, no longer fall under the scope of the current version of the statute due to the removal of the words "actual physical control" from the statute.
Cases, prior to the statute's amendment, interpreting "actual physical control" had held that there was sufficient evidence to support a conviction for driving while intoxicated where a defendant was found asleep behind the steering wheel with the engine running and the lights burning, even though the vehicle was in park, under the theory that the defendant was in a position to regulate the vehicle's movement. See State v. O'Toole, 673 S.W.2d 25 (Mo. banc 1984) (evidence sufficient to support a conviction for driving while intoxicated when defendant was found in an intoxicated condition, asleep at the wheel with the engine running and the lights on); State v. Hollis, 800 S.W.2d 69 (Mo.App. S.D.1990) (defendant was found to be in actual physical control of vehicle when he was discovered, in an intoxicated condition, sitting behind the steering wheel with the engine running).
In cases finding sufficient evidence to support a conviction of driving while intoxicated based on "actual physical control," there is a lack of explanation as to what actions may fall within the definition of "operate" as used in the context of Section 577.001.1. This is because in each case, it was sufficient that the defendant had "actual physical control," regardless of whether *440 he or she succeeded in using that control to operate the vehicle. See O'Toole, 673 S.W.2d at 27; State v. Hoyt, 922 S.W.2d 443, 448 (Mo.App. W.D.1996); Hollis, 800 S.W.2d at 71. In addition, cases finding a lack of "actual physical control" do not explain the term "operate" because in each case the most obvious manifestation that a vehicle was "operating" was missing as the vehicle was not running. See State v. Hughes, 978 S.W.2d 24 (Mo. App. W.D.1998); State v. Swinson, 940 S.W.2d 552 (Mo.App. S.D.1997); State v. Block, 798 S.W.2d 213 (Mo.App. W.D. 1990); State v. Liebhart, 707 S.W.2d 427 (Mo.App. W.D.1986). Consequently, none of these cases address the issue presented by Defendant of whether an intoxicated, sleeping individual who has his feet on the brake and accelerator of an idling truck, which has its lights on and is in park, is "operating" a vehicle within the meaning of Sections 577.010.1, RSMo 1994, and 577.001.1, RSMo Cum.Supp.1998.
Baptist v. Lohman, 971 S.W.2d 366 (Mo. App. E.D.1998), is the sole case which has thus far interpreted and applied the amendment to Section 577.001.1, RSMo Cum.Supp.1998. In Baptist, the defendant was arrested for driving while intoxicated after he was found slumped over in the driver's seat of his vehicle with the engine running and the car in neutral. In challenging the Director of Revenue's decision to suspend his driver's license, the defendant argued that he was not "driving" the vehicle because the statute as amended required that someone actually observe an operator of a motor vehicle drive the vehicle. The court disagreed finding that "[w]hile a motorist may no longer be found to be driving while intoxicated merely because he is in `control' of a running automobile, Section 577.001 as amended still permits `operating a motor vehicle' to be established by circumstantial evidence." Id. at 368.
Although Baptist did not expressly consider the meaning of the terms "operating" and "physically driving," Defendant asserts that the amendment to Section 577.001.1, RSMo Cum.Supp.1998, when read in context with Baptist, stands for the proposition that the term "operating" should be narrowly construed. Moreover, he argues that the terms "driving" and "operating" should in fact be considered synonymous. In support of this proposition, Defendant refers to the interchangeable use of the terms "operating" and "driving" by the courts, and cites to such cases as State v. Johnston, 670 S.W.2d 552 (Mo. App. S.D.1984), and State v. Kennedy, 530 S.W.2d 479 (Mo.App.St.L.1975), in which the terms are used interchangeably.
While Missouri courts have admittedly used the terms "operating" and "driving" interchangeably, which has led to some confusion, this alone does not establish that the two terms have become synonymous. Under traditional rules of statutory construction, "each word, clause, sentence and section of a statute should be given meaning." Missouri Property & Cas. Ins. Guar. Ass'n v. Pott Indus., 971 S.W.2d 302, 305 (Mo. banc 1998). Defendant's interpretation of the term "operating," however, would effectively eliminate the word from the definition contained in Section 577.001.1, RSMo Cum.Supp.1998, as the term would be entirely consumed by the word "driving."
Further, although Missouri courts have not expressly considered the distinction between the terms "operating" and "driving," other courts have, with results contrary to what Defendant desires. For instance, in State v. Ducatt, 22 Conn.App. 88, 575 A.2d 708, 710 (1990), the court stated that an individual "operates a motor vehicle ... when ... in the vehicle and in a position to control its movements, he manipulates, for any purpose, the machinery of the motor or any other machinery manipulable from the driver's position that affects or could affect the vehicle's movement, whether [the individual] moves the vehicle or not."
Courts in Georgia have also reached the same conclusion through the use of common *441 dictionary definitions. For instance, in Flournoy v. State, 106 Ga.App. 756, 128 S.E.2d 528, 530 (Ga.App.1962), the court stated:
While the word "drive", as used in ["driving while intoxicated" statutes], usually denotes movement of the vehicle in some direction (see Webster's Unabridged Dictionary), the word "operate" has a broader meaning so as to include not only the motion of the vehicle but also acts which engage the machinery of the vehicle that, alone or in sequence, will set in motion the motive power of the vehicle.
In interpreting the term "operating," the Massachusetts Court of Appeals has also held that "[a] person operates a motor vehicle ... when, in the vehicle, he intentionally does any act or makes use of any mechanical or electrical agency which alone or in sequence will set in motion the motive power of that vehicle." Commonwealth v. Plowman, 28 Mass.App.Ct. 230, 548 N.E.2d 1278, 1280 (1990) (quoting Commonwealth v. Uski, 263 Mass. 22, 160 N.E. 305 (1928)).
A similar distinction between the two terms is also presented in 60 C.J.S. Motor Vehicles § 6(2) (1969), which states in pertinent part:
As used in connection with motor vehicles, the word "drives" usually denotes movement of the vehicle in some direction, and the word "operate" may also import motionmotion of the automobile; but the word "operate" may have a somewhat broader meaning, and may not necessarily be limited in meaning to the movement of the vehicle itself, that is, it may not be limited to a state of motion produced by the mechanism of the car. It may include not only the motion of the vehicle, but also acts which engage the machinery of the vehicle which, alone or in sequence, will set in motion the motive power of the vehicle. Thus, a person is considered to operate a vehicle when, in the vehicle, he intentionally does any act or makes use of any mechanical or electrical agency which alone or in sequence will set in motion the motive power of that vehicle. (Footnotes omitted.)
See also James O. Pearson, Jr., Annotation, What Constitutes Driving, Operating, or Being in Control of Motor Vehicle for Purposes of Driving While Intoxicated Statute or Ordinance, 93 A.L.R.3d 7, 16 (1979) ("It seems clearly established that the term `operating' ... is broader than the term `driving.' Accordingly, some courts have specifically recognized that a person may operate a vehicle without driving it.")
We agree that the terms "operate" and "drive" must have a distinct meaning. In this case, while Defendant's actions did not constitute "physically driving," in that the vehicle was not in motion, they did fall under the broader term of "operating" as defined in the aforementioned authorities. When Defendant was discovered in an intoxicated condition by Officer Osterman, he had his right foot pressed on the gas pedal, causing the engine to run at a fast idle. The vehicle's headlights and taillights were on, and Defendant's left foot was pressed on the brake pedal, resulting in the illumination of the brake lights. Defendant was engaging the machinery of his vehicle and was in a position to manipulate its movement. Under this set of facts, the trial court did not err in overruling Defendant's motion for judgment of acquittal and in sentencing him for "operating" a motor vehicle while intoxicated in violation of Section 577.010, RSMo 1994, because there was sufficient evidence from which a reasonable juror could have found Defendant guilty beyond a reasonable doubt. Defendant's first point is therefore denied.
In Defendant's second point, he argues that the trial court erred in overruling his motion to dismiss, in submitting to the jury an instruction defining "operated" *442 as "physically driving or operating,"[2] and in refusing to give Defendant's definition of "operated."[3] He contends that Sections 577.010.1, RSMo 1994, and 577.001.1, RSMo Cum.Supp.1998, when read in conjunction with each other are unconstitutionally vague, as a person of common intelligence would necessarily have to guess at their meaning and what conduct was prohibited.[4] Defendant supports his argument by noting that the jury during its deliberation asked for a clarification of the definition of "operating."[5]
A statute is presumed constitutional and will not be held otherwise unless it clearly and undoubtedly violates some constitutional provision. State v. Stokely, 842 S.W.2d 77, 79 (Mo. banc 1992); State v. Brown, 660 S.W.2d 694, 697 (Mo. banc 1983). Any doubt should be resolved in favor of the law's validity. State v. Young, 695 S.W.2d 882, 883 (Mo. banc 1985). Furthermore, impossible standards of specificity are not required. Brown, 660 S.W.2d at 697. "It is not the fact that the legislative branch of government which enacted the statute could have chosen more precise or clearer language which determines the issue of vagueness." State v. McMilian, 649 S.W.2d 467, 471 (Mo.App. W.D.1983).
In determining whether a statute is void for vagueness, the standard is whether the terms or words used in the statute are of common usage and are understandable by persons of ordinary intelligence. State v. Mahurin, 799 S.W.2d 840, 842 (Mo. banc 1990), cert denied 502 U.S. 825, 112 S.Ct. 90, 116 L.Ed.2d 62 (1991). A valid statute must give a person of ordinary intelligence a reasonable opportunity to learn what is prohibited. Id.
In State v. Johnson, 55 S.W.2d 967 (Mo. 1932), the Missouri Supreme Court considered the issue of whether the term "operate" as used in the "driving while intoxicated" statute required additional definition. The court held that "operate" had a well-understood meaning, and stated:
*443 Error is assigned [by the defendant] because the instructions of the trial court failed to define the word "operate" and the phrase "intoxicated condition." There is no merit in this contention. The words have a well-understood meaning. Any juror would readily understand what was meant by a charge of operating a motor vehicle while defendant was in an intoxicated condition. A court's failure, in its instructions, to define words of common, everyday usage, having well-defined meanings, is not error.
Id. at 968.
Similarly, the term "operate" as used in the current version of Sections 577.010.1, RSMo 1994, and 577.001.1, RSMo Cum.Supp.1998, has a plain and ordinary meaning cognizable by a person of ordinary intelligence. As such, the trial court had no obligation to the jury to further define the term "operate" beyond the definition given in Section 577.001.1, RSMo Cum.Supp.1998. See United States v. Shyres, 898 F.2d 647, 654 (8 th Cir.1990), cert. denied 498 U.S. 821, 111 S.Ct. 69, 112 L.Ed.2d 43 (1990) ("response to a jury request for supplemental instructions is a matter within the sound discretion of the [trial court]"); United States v. Smith, 635 F.2d 716, 720 (8 th Cir.1980) (trial court has "no obligation to define words within the ordinary understanding of the jury").
In this case, the submitted jury instruction was adequate, satisfying the constitutional requirements as to definiteness and certainty, and negated the possibility of arbitrary and discriminatory enforcement. See Mahurin, 799 S.W.2d at 842. Consequently, the trial court's denial of Defendant's motion to dismiss was proper. Further, the trial court did not err in refusing Defendant's proposed instruction because his instruction did not conform to the statute, as it would have expressly limited "operating" to "physically driving a motor vehicle," making the terms "physically driving" and "operating" synonymous. As previously discussed in Defendant's first point, this result is unacceptable. Defendant's second point is therefore denied.
The judgment of the trial court is affirmed.
PREWITT, J., and MONTGOMERY, J., concur.
NOTES
[1] Section 577.010.1, RSMo 1994, under which Defendant was charged, states that "[a] person commits the crime of `driving while intoxicated' if he operates a motor vehicle while in an intoxicated or drugged condition."
[2] The verdict director, Instruction No. 5, read:
If you find and believe from the evidence beyond a reasonable doubt:
First, that on or about February 14, 1999, at 1st and Hall Streets, Webb City, Missouri in the County of Jasper, State of Missouri, the defendant operated a motor vehicle, and
Second, that he did so while in an intoxicated condition, then you will find the defendant guilty of driving while intoxicated.
As used in this instruction, the term "intoxicated condition" means under the influence of alcohol.
As used in this instruction, the term "operated" means physically driving or operating a motor vehicle.
However, unless you find and believe from the evidence beyond a reasonable doubt each and all of these propositions, you must find the defendant not guilty of that offense.
[3] Defendant's Instruction No. 5A, which was refused by the trial court, read:
If you find and believe from the evidence beyond a reasonable doubt:
First, that on February 14, 1999, at First and Hall Streets in the City of Webb City, County of Jasper, State of Missouri, the defendant operated a motor vehicle, and
Second, that he did so while in an intoxicated condition, then you will find the defendant guilty of driving while intoxicated.
However, unless you find and believe from the evidence beyond a reasonable doubt each and all of these propositions, you must find the defendant not guilty of that offense.
As used in this instruction, the term "intoxicated condition" means under the influence of alcohol.
As used in this instruction, the term "operated" means physically driving a motor vehicle.
[4] The court of appeals does not have jurisdiction over the constitutional validity of a state statute. Mo. Const. art. V, § 3. The mere assertion that a statute is unconstitutional, however, does not deprive the court of appeals of jurisdiction unless the constitutional issue is real and substantial, and not merely colorable. See State v. Roedel, 884 S.W.2d 106, 108 (Mo.App. E.D.1994); State v. Charity, 637 S.W.2d 319, 321 (Mo.App. S.D.1982). Because we find Defendant's constitutional claim merely colorable and not substantial, this court has jurisdiction.
[5] The jury's request, "[p]lease clarify `operating' as refered [sic] to in instruction # 5" went unanswered.
| {
"pile_set_name": "FreeLaw"
} |
5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
3XUVXDQW WR 6L[WK &LUFXLW 5XOH 8QLWHG6WDWHVY*UDKDP 1R
(/(&7521,& &,7$7,21 )(' $SS 3 WK &LU
)LOH 1DPH DS
21%5,() sHIIUH\s2j+DUD*UDQG5DSLGV0LFKLJDQIRU
$SSHOODQWsRDQ(0H\HU$66,67$1781,7('67$7(6
$77251(<*UDQG5DSLGV0LFKLJDQIRU$SSHOOHH
81,7('67$7(6&28572)$33($/6
0225(sGHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQZKLFK
)257+(6,;7+&,5&8,7 %2**6sMRLQHG&2+1's S GHOLYHUHGDVHSDUDWH
BBBBBBBBBBBBBBBBB RSLQLRQFRQFXUULQJLQWKHUHVXOW
BBBBBBBBBBBBBBBBB
81,7(' 67$7(6 2) $0(5,&$ ;
3ODLQWLII$SSHOOHH 23,1,21
BBBBBBBBBBBBBBBBB
1R
Y .$5(1 1(/621 0225( &LUFXLW sXGJH 6HFWLRQ
! * G RI WKH 86 6HQWHQFLQJ *XLGHOLQHV UHTXLUHV WKDW
ZKHQ WKH VHQWHQFH LPSRVHG RQ WKH FRXQW ZLWK WKH JUHDWHVW
5$1'< *5$+$0
'HIHQGDQW$SSHOODQW VWDWXWRU\PD[LPXPLVOHVVWKDQWKHWRWDOSXQLVKPHQWSURYLGHG
XQGHU WKH JXLGHOLQHV VHQWHQFHV PXVW EH LPSRVHG
1 FRQVHFXWLYHO\ WR WKH H[WHQW QHFHVVDU\ WR UHDFK WKH WRWDO
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW SXQLVKPHQW866HQWHQFLQJ*XLGHOLQHV0DQXDO* G
IRUWKH:HVWHUQ'LVWULFWRI0LFKLJDQDW*UDQG5DSLGV 6HFWLRQ * D SURYLGHV WKDW ZKHQ D VWDWXWH VSHFLILHV D
1R n5LFKDUG$(QVOHQ'LVWULFWsXGJH PDQGDWRU\ VHQWHQFH IRU DQ RIIHQVH DQG VSHFLILHV WKDW WKH
VHQWHQFH LV WR UXQ FRQVHFXWLYHO\ WR DQ\ RWKHU VHQWHQFH WKH
$UJXHG 0DUFK VHQWHQFHRQWKDWFRXQWLVWREHmLPSRVHGLQGHSHQGHQWO\l,G
DW * D 7KH TXHVWLRQ SUHVHQWHG LQ WKLV DSSHDO LV
'HFLGHGDQG)LOHG $SULO ZKHWKHU D VHQWHQFH WKDW LV mLPSRVHG LQGHSHQGHQWO\l XQGHU
* D FRXQWVWRZDUGWKHWRWDOSXQLVKPHQWZKHQVWDFNLQJ
%HIRUH %2**6DQG0225(&LUFXLWsXGJHV &2+1 FRQVHFXWLYHVHQWHQFHVXQGHU* G %HFDXVHDVHQWHQFH
6HQLRU'LVWULFWsXGJH
WREHLPSRVHGLQGHSHQGHQWO\GRHVQRWFRXQWWRZDUGWKHWRWDO
SXQLVKPHQW IRU SXUSRVHV RI * G WKH GLVWULFW FRXUW
BBBBBBBBBBBBBBBBB FRUUHFWO\LPSRVHGDOOVHQWHQFHVFRQVHFXWLYHO\LQWKHSUHVHQW
FDVH
&2816(/
7KLVLVWKHVHFRQGWLPHZHKDYHVHHQWKLVFDVH6HH8QLWHG
$5*8(' sHIIUH\s2j+DUD*UDQG5DSLGV0LFKLJDQIRU 6WDWHVY*UDKDP)G WK&LU FHUWGHQLHG
$SSHOODQWsRDQ(0H\HU$66,67$1781,7('67$7(6 86 7KHILUVWWLPHZHVDZLWZHDIILUPHG
$77251(< *UDQG 5DSLGV 0LFKLJDQ IRU $SSHOOHH 5DQG\*UDKDPjVFRQYLFWLRQDQGUHPDQGHGIRUUHFRQVLGHUDWLRQ
RIKLVVHQWHQFHLQOLJKWRI$SSUHQGLY1HZsHUVH\86
*UDKDPQRZDSSHDOVKLVQHZVHQWHQFHZKLFK
7KH +RQRUDEOH $YHUQ &RKQ 6HQLRU 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU
ZH$)),50
WKH (DVWHUQ 'LVWULFW RI 0LFKLJDQ VLWWLQJ E\ GHVLJQDWLRQ
1R 8QLWHG6WDWHVY*UDKDP 8QLWHG6WDWHVY*UDKDP 1R
,%$&.*5281' UHIOHFW WKH FULPHjV VHULRXVQHVVl s$ DW 7KH FRXUW
FDOFXODWHG *UDKDPjV VHQWHQFH DV IROORZV LQFOXGLQJ D
5DQG\*UDKDPZDVDPDULMXDQDIDUPHUFXOWLYDWLQJFURSVRI WHUURULVPUHODWHGHQKDQFHPHQWSXUVXDQWWR$ D RIWKH
PDULMXDQDWKDWUDQJHGXSWRIRUW\SRXQGVSHU\HDU*UDKDP 86 6HQWHQFLQJ *XLGHOLQHV *UDKDP ZDV GHHPHG WR KDYH
)GDW *UDKDPDQGKLVSDUWQHUVROGWKHLUKDUYHVW FRPPLWWHG D /HYHO RIIHQVH ZLWK D /HYHO 9, &ULPLQDO
DQG*UDKDPZKRZDVNQRZQWRFDUU\DILUHDUPIURPWLPHWR +LVWRU\ XQGHU$WKHVHOHYHOVSURGXFHGDJXLGHOLQHUDQJH
WLPH ZKLOH WHQGLQJ KLV ILHOGV XVHG WKH SURFHHGV RI WKLV RIPRQWKVWROLIH
HQWHUSULVHWREX\ZHDSRQVIRUKLVRWKHUKREE\SORWWLQJWKH
RYHUWKURZRIWKH8QLWHG6WDWHV*RYHUQPHQW,G*UDKDPZDV 7KH GLVWULFW FRXUW WKHQ DSSOLHG * ZKLFK JRYHUQV
DQ DFWLYH PHPEHU RI WKH 1RUWK $PHULFDQ 0LOLWLD D VHQWHQFHV LQYROYLQJ FRQYLFWLRQV RQ PXOWLSOH FRXQWV 7ZR
SDUDPLOLWDU\RUJDQL]DWLRQWKDWSODQQHGDmILUVWVWULNHlLQZKLFK SURYLVLRQV ZHUH HVSHFLDOO\ UHOHYDQW )LUVW * D
WKH\ ZRXOG DWWDFN DQG GHVWUR\ YDULRXV WUDQVSRUWDWLRQ SURYLGHVWKDWH[FHSWIRUDQH[FHSWLRQQRWUHOHYDQWKHUHLIWKH
FRPPXQLFDWLRQ DQG HQHUJ\ VRXUFHV NLOO FHUWDLQ IHGHUDO VWDWXWH WKDW JRYHUQV VHQWHQFHV IRU D SDUWLFXODU FULPH RI
RIILFLDOV DQG mKROG RQl IRU D QXPEHU RI GD\V ZKLOH RWKHU FRQYLFWLRQLGHQWLILHVDVSHFLILFVHQWHQFHDQGUHTXLUHVWKDWWKH
PLOLWLDV WRRN WKH UHVW RI WKH FRXQWU\ ,G DW 7KH VHQWHQFH IRU WKDW RIIHQVH UXQ FRQVHFXWLYHO\ ZLWK DQ\ RWKHU
PLOLWLD KDG VWRFNSLOHG YDULRXV DVVDXOW ULIOHV H[SORVLYH VHQWHQFHWKHQWKHFRXUWVKRXOGLPSRVHWKHVHQWHQFHIRUWKDW
PDWHULDOVDQGERG\DUPRUIRUWKHLUDWWDFN,GDW VHQWHQFH DV WKH VWDWXWH UHTXLUHV 6HH 86 6HQWHQFLQJ
*XLGHOLQHV0DQXDO m866*l * D 7KLVDIIHFWHG
$ORQJZLWKRWKHUPHPEHUVRIWKH1RUWK$PHULFDQ0LOLWLD *UDKDPjVVHQWHQFHVRQ&RXQWVDQGEHFDXVH86&
*UDKDPZDVDUUHVWHGDQGKHZDVXOWLPDWHO\FRQYLFWHGRQVL[ F SURYLGHVWKDW*UDKDPjVFRQYLFWLRQVIRUFDUU\LQJ
FRXQWV7KHFRXQWVLQFOXGHGDFRQVSLUDF\WRFRPPLWRIIHQVHV DILUHDUPGXULQJDQGLQUHODWLRQWRKLVYLROHQWFULPHDQGKLV
DJDLQVW WKH 8QLWHG 6WDWHV LQ YLRODWLRQ RI 86& GUXJFULPHFDUU\PDQGDWRU\FRQVHFXWLYHVHQWHQFHVRIWZHQW\
&RXQW EHLQJDQXQODZIXOXVHURIPDULMXDQDLQSRVVHVVLRQ \HDUVDQGILYH\HDUVUHVSHFWLYHO\
RIILUHDUPVLQYLRODWLRQRI86& J &RXQW DQ
XQODZIXODWWHPSWWRPDQXIDFWXUHPDULMXDQDLQYLRODWLRQRI 6HFRQG* G SURYLGHVWKDWZKHQWKHVHQWHQFHIRUWKH
86& D &RXQW DFRQVSLUDF\WRPDQXIDFWXUH FRXQW ZLWK WKH KLJKHVW VWDWXWRU\ PD[LPXP LV OHVV WKDQ WKH
PDULMXDQDLQYLRODWLRQ RI86&DQG D WRWDOSXQLVKPHQWWKHQVHQWHQFHVVKDOOUXQFRQVHFXWLYHO\EXW
&RXQW FDUU\LQJDVHPLDXWRPDWLFDVVDXOWZHDSRQGXULQJ RQO\WRWKHH[WHQWQHFHVVDU\WRSURGXFHDFRPELQHGVHQWHQFH
DQGLQUHODWLRQWRDFULPHRIYLROHQFHLQYLRODWLRQRI86& WKDWHTXDOVWKHWRWDOSXQLVKPHQW866** G 2QFH
F &RXQW DQGFDUU\LQJDILUHDUPGXULQJDQGLQ WKHFRPELQHGVHQWHQFHVUHDFKWKHWRWDOSXQLVKPHQWKRZHYHU
UHODWLRQWRDGUXJWUDIILFNLQJFULPHLQYLRODWLRQRI86& WKHQVHQWHQFHVDUHWRUXQFRQFXUUHQWO\ ,G7KLVSULQFLSOH
F &RXQW $WVHQWHQFLQJWKHGLVWULFWFRXUWPDGH DIIHFWHG *UDKDPjV VHQWHQFHV RQ &RXQWV DQG
FOHDUWKDWLWFRQVLGHUHG*UDKDPmDGDQJHURXVPDQFDSDEOHRI &RXQWV DQG ZKLFK LQYROYHG *UDKDPjV XQODZIXO
NLOOLQJ SHRSOHl s$ DW m<RX DUH D VFDU\ JX\l WKH DWWHPSW WR PDQXIDFWXUH PDULMXDQD DQG KLV FRQVSLUDF\ WR
GLVWULFWFRXUWVWDWHGmDQGWKHJX\V\RXKDQJDURXQGZLWKDUH PDQXIDFWXUH PDULMXDQD UHVSHFWLYHO\ HDFK KDG D VWDWXWRU\
VFDU\ DQG \RXU LQWHUSUHWDWLRQ RI WKH &RQVWLWXWLRQ LV VFDULHU PD[LPXP RI ILYH WR IRUW\ \HDUV 6HH 86& E
\HWls$DW +DYLQJGHWHUPLQHGWKDW*UDKDPZDVUHVSRQVLEOHIRURYHURQH
KXQGUHG PDULMXDQD SODQWV WKH FRXUW VHQWHQFHG *UDKDP WR
7KH FRXUW VHQWHQFHG *UDKDP WR ILIW\ILYH \HDUV D WKLUW\\HDUVRQHDFKRIWKRVHFRXQWV7KHGLVWULFWFRXUWDOVR
SXQLVKPHQW LW FDOOHG mD ORQJ VHQWHQFHl EXW RQH WKDW mPD\ VHQWHQFHG*UDKDPWRWKHPD[LPXPILYH\HDUVRQ&RXQW
1R 8QLWHG6WDWHVY*UDKDP 8QLWHG6WDWHVY*UDKDP 1R
LQYROYLQJ WKH FRQVSLUDF\ WR FRPPLW RIIHQVHV DJDLQVW WKH 2QUHPDQGWKHGLVWULFWFRXUWVLPSO\IROORZHGWKHORJLFZH
8QLWHG6WDWHVDQGWKHPD[LPXPWHQ\HDUVRQ&RXQW IRU ODLGRXWLQWKHSDVVDJHTXRWHGDERYHDQGLPSRVHGDILIW\\HDU
EHLQJDQXQODZIXOXVHURIPDULMXDQDLQSRVVHVVLRQRIILUHDUPV VHQWHQFH,QUHVHQWHQFLQJ*UDKDPWKHGLVWULFWFRXUWVWDWHG
$SSO\LQJ* G WKHGLVWULFWFRXUWGHWHUPLQHGWKDWWKH m7KHJXLGHOLQHVFRULQJH[FHSWDVWR&RXQWVDQGVKRXOG
VHQWHQFH RQ WKH FKDUJH LQYROYLQJ WKH JUHDWHVW VWDWXWRU\ QRW DV , UHDG WKH RSLQLRQ EH FKDQJHGl s$ DW
PD[LPXPWKHWKLUW\\HDUVHQWHQFHLPSRVHGRQ&RXQWVDQG $FFRUGLQJO\WKHFRXUWLPSRVHGmLGHQWLFDOVHQWHQFHVZLWKWKH
HTXDOHGWKHWRWDOSXQLVKPHQWRIPRQWKVDQGWKHFRXUW H[FHSWLRQWKDWWKHWHUPVIRU&RXQWVDQGVKDOOHDFKEH
LPSRVHG WKH VHQWHQFHV RQ &RXQWV DQG WR UXQ UHGXFHGWRPRQWKVDQGWKHVHQWHQFHVRQDOOFRXQWVVKDOO
FRQFXUUHQWO\ZLWKHDFKRWKHUDQGZLWK&RXQWVDQG 7KH UXQFRQVHFXWLYHLQRUGHUWRFRQIRUPWRWKHJXLGHOLQHSXUSRVHV
GLVWULFWFRXUWDGGHGWKHPDQGDWRU\WZHQW\\HDUDQGILYH\HDU RI IXOO\ SXQLVKLQJ FULPLQDO FRQGXFW FDOFXODWHG XQGHU WKH
VHQWHQFHVRQ&RXQWVDQGIRUDWRWDORIILIW\ILYH\HDUV JXLGHOLQHV DQG FRQVLVWHQW ZLWK WKH &RXUW RI $SSHDOVj
DQG*UDKDPDSSHDOHG DQDO\VLVl s$ DW 7KH GLVWULFW FRXUW UHIHUUHG WR
*RIWKH*XLGHOLQHVDQGWKHODQJXDJHIURPWKLVFRXUWjV
,QDGHFLVLRQLVVXHGRQ'HFHPEHUZHDIILUPHGLQ GHFLVLRQWKDWLVFLWHGDERYH
DOO UHVSHFWV LQFOXGLQJ WKH DSSOLFDWLRQ RI WKH WHUURULVP
HQKDQFHPHQW RI $ D H[FHSW IRU WKH XOWLPDWH *UDKDPDSSHDOVDUJXLQJWKDWKHVKRXOGKDYHEHHQJLYHQD
FDOFXODWLRQ RI WKH VHQWHQFH %HFDXVH WKH TXDQWLW\ RI WKLUW\ILYH\HDUVHQWHQFH+HDUJXHVWKDWDIWHULPSRVLQJWKH
PDULMXDQD LQYROYHG LQ &RXQWV DQG LQFUHDVHG WKH PDQGDWRU\VHQWHQFHVRQ&RXQWVDQGZKLFKDGGHGWR
VHQWHQFH EH\RQG WKH VWDWXWRU\ PD[LPXP DQG KDG QRW EHHQ WZHQW\ILYH \HDUV * RI WKH *XLGHOLQHV UHTXLUHG WKH
IRXQGEH\RQGDUHDVRQDEOHGRXEWZHKHOGWKDW$SSUHQGLY GLVWULFW FRXUW WR LPSRVH DOO UHPDLQLQJ VHQWHQFHV WR UXQ
1HZsHUVH\86 ZKLFKZDVGHFLGHGDIWHUWKH FRQFXUUHQWO\ ZLWK HDFK RWKHU 2Q *UDKDPjV WKHRU\ WKRVH
VHQWHQFHKDGEHHQLVVXHGUHTXLUHGUHVHQWHQFLQJ7KHILQGLQJ VHQWHQFHV ZRXOG KDYH EHHQ VXEVXPHG XQGHU WKH WHQ\HDU
WKDW *UDKDP ZDV UHVSRQVLEOH IRU RQH KXQGUHG PDULMXDQD VHQWHQFH RQ &RXQW ZKLFK ZKHQ DGGHG WR WKH PDQGDWRU\
SODQWVKDGQHLWKHUEHHQDOOHJHGLQWKHLQGLFWPHQWQRUIRXQG VHQWHQFHV RQ &RXQWV DQG ZRXOG UHVXOW LQ D WRWDO
EH\RQG D UHDVRQDEOH GRXEW EXW EHFDXVH LW LQFUHDVHG KLV VHQWHQFH RI WKLUW\ILYH \HDUV :H UHYLHZ GH QRYR SXUH
PD[LPXPSHQDOW\IURPILYHWRIRUW\\HDUVFRPSDUH86& TXHVWLRQV RI ODZ UHJDUGLQJ VHQWHQFLQJ 8QLWHG 6WDWHV Y
E % YLL ZLWK LG E ' KLV VHQWHQFH &DQHVWUDUR )G WK &LU DQG WKH
YLRODWHG $SSUHQGL 6HH *UDKDP )G DW 7KLV GHWHUPLQDWLRQRIZKDW*UHTXLUHVLVDSXUHTXHVWLRQRI
FRQVWLWXWHGSODLQHUURUDIIHFWLQJ*UDKDPjVVXEVWDQWLDOULJKWV ODZ
E\ LQFUHDVLQJ KLV WRWDO VHQWHQFH EH\RQG WKH PD[LPXP
SHUPLWWHGXQGHUWKHVWDWXWH$GGLQJWKHVWDWXWRU\PD[LPXPV ,,$1$/<6,6
RIILYH\HDUVIRU&RXQWWHQ\HDUVIRU&RXQW ILYH\HDUVIRU
&RXQWILYH\HDUVIRU&RXQWWZHQW\\HDUVIRU&RXQW $/DZRIWKH&DVH
DQGILYH\HDUVIRU&RXQWZHQRWHGWKDWm>W@KHFRPELQHG
PD[LPXP SULVRQ VHQWHQFHV RI DOO FRXQWV RI FRQYLFWLRQ LI 7KH*RYHUQPHQWDUJXHVWKDW*UDKDPmFDQQRWQRZDUJXH
VHUYHGFRQVHFXWLYHO\ZRXOGEHILIW\\HDUV%HFDXVH*UDKDPjV WKDW>KLV@VHQWHQFHUDLVHV$SSUHQGLHUURUlEHFDXVHWKLVFRXUW
>ILIW\ILYH\HDU@VHQWHQFHH[FHHGHGWKLVOLPLWWKHSODLQHUURU SUHYLRXVO\ DGGUHVVHG WKH $SSUHQGL LVVXH IRXQG HUURU DQG
WHVWKD>G@EHHQVDWLVILHGlDQGZHUHPDQGHGIRUUHVHQWHQFLQJ mDXWKRUL]HGlWKHGLVWULFWFRXUWWRLPSRVHDILIW\\HDUVHQWHQFH
,GDW $SSHOOHH%UDW$FFRUGLQJO\WKH*RYHUQPHQWDUJXHVWKH
ODZRIWKHFDVHGRFWULQHSUHYHQWVXVIURPUHRSHQLQJWKLVLVVXH
%HFDXVH*UDKDPLVQRWQRZUDLVLQJDQ$SSUHQGLFKDOOHQJH
1R 8QLWHG6WDWHVY*UDKDP 8QLWHG6WDWHVY*UDKDP 1R
DQGEHFDXVHZHQHYHUDGGUHVVHGZKHWKHU*UHTXLUHVD WZHQW\\HDUVHQWHQFHRQ&RXQWDQGKLVILYH\HDUVHQWHQFH
ILIW\\HDUVHQWHQFHWKHODZRIWKHFDVHGRFWULQHLVLQDSSOLFDEOH RQ&RXQWDUHWRUXQFRQVHFXWLYHO\WRDQ\RWKHUVHQWHQFHV
KHUH *UDKDP DUJXHV WKDW XQGHU * G KLV VHQWHQFHV RQ
&RXQWV DQGVKRXOGKDYHUXQFRQFXUUHQWO\ZLWK
7KHODZRIWKHFDVHGRFWULQHJHQHUDOO\GLVFRXUDJHVFRXUWV HDFK RWKHU VR WKDW WKH WKUHH VKRUWHU VHQWHQFHV ZRXOG EH
IURPUHFRQVLGHULQJGHWHUPLQDWLRQVWKDWWKHFRXUWPDGHLQDQ VXEVXPHG XQGHU &RXQW jV WHQ\HDU VHQWHQFH IRU D WRWDO
HDUOLHUVWDJHRIWKHSURFHHGLQJV8QLWHG6WDWHVY7RFFR VHQWHQFHRIWKLUW\ILYH\HDUV6HFWLRQ* G SURYLGHVDV
)G WK &LU SHWLWLRQ IRU FHUW ILOHG IROORZV
86/: 86)HE 1R mµ/DZ
RIWKHFDVHUXOHVKDYHGHYHORSHGWRPDLQWDLQFRQVLVWHQF\DQG ,IWKHVHQWHQFHLPSRVHGRQWKHFRXQWFDUU\LQJWKHKLJKHVW
DYRLG UHFRQVLGHUDWLRQ RI PDWWHUV RQFH GHFLGHG GXULQJ WKH VWDWXWRU\ PD[LPXP LV OHVV WKDQ WKH WRWDO SXQLVKPHQW
FRXUVHRIDVLQJOHFRQWLQXLQJODZVXLWjl5RVDOHV*DUFLDY WKHQWKHVHQWHQFHLPSRVHGRQRQHRUPRUHRIWKHRWKHU
+ROODQG o )G o :/ DW
Q WK &LU FRXQWV VKDOO UXQ FRQVHFXWLYHO\ EXW RQO\ WR WKH H[WHQW
HQEDQF TXRWLQJ%&KDUOHV$ODQ:ULJKW$UWKXU5 QHFHVVDU\WRSURGXFHDFRPELQHGVHQWHQFHHTXDOWRWKH
0LOOHU (GZDUG+&RRSHU)HGHUDO3UDFWLFHDQG3URFHGXUH WRWDOSXQLVKPHQW,QDOORWKHUUHVSHFWVVHQWHQFHVRQDOO
GHG 2QFHDFRXUWKDVGHFLGHGDQLVVXHLWV FRXQWV VKDOO UXQ FRQFXUUHQWO\ H[FHSW WR WKH H[WHQW
GHFLVLRQ VKRXOG JHQHUDOO\ EH JLYHQ HIIHFW WKURXJKRXW WKH RWKHUZLVHUHTXLUHGE\ODZ
OLWLJDWLRQ6HH8QLWHG6WDWHVY7RGG )G WK
&LU 866** G *UDKDPDUJXHVWKDWWKHGLVWULFWFRXUW
VKRXOGKDYHLPSRVHGWKHVHQWHQFHVWRUXQFRQVHFXWLYHO\RQO\
+HUHKRZHYHUZHKDYHQRWGHFLGHGWKHLVVXHWKDW*UDKDP WR WKH H[WHQW QHFHVVDU\ WR UHDFK PRQWKV ZKLFK LV WKH
UDLVHV ,Q WKH LQLWLDO DSSHDO ZH GHWHUPLQHG WKDW *UDKDPjV ORZHUHQGRIWKHJXLGHOLQHUDQJHRIPRQWKVWROLIH7KXV
ILIW\ILYH\HDUVHQWHQFHYLRODWHGWKHSULQFLSOHVRI$SSUHQGLY RQFHWKHGLVWULFWFRXUWDGGHG&RXQW jVWHQ\HDUVHQWHQFHWR
1HZ sHUVH\ EHFDXVH HYHQ LI *UDKDP KDG EHHQ JLYHQ WKH WKHWZHQW\\HDUDQGILYH\HDUVHQWHQFHVRI&RXQWVDQG
VWDWXWRU\PD[LPXPSHQDOW\IRUHDFKRIIHQVHDQGDOOVHQWHQFHV ZKLFKDOOWRJHWKHUWRWDOHGPRQWKV*UDKDPFRQWHQGVWKDW
UDQ FRQVHFXWLYHO\ *UDKDP FRXOG RQO\ KDYH UHFHLYHG D * G UHTXLUHG WKH FRXUW WR LPSRVH WKH UHPDLQLQJ
VHQWHQFH RI ILIW\\HDUV*UDKDP)GDW,QWKLV VHQWHQFHVWRUXQFRQFXUUHQWO\
DSSHDO *UDKDP GRHV QRW DUJXH WKDW KLV ILIW\\HDU VHQWHQFH
FRQVWLWXWHVDQ$SSUHQGLYLRODWLRQ5DWKHUKHDUJXHVWKDWKLV 6HFWLRQ * LGHQWLILHV WKRVH VHQWHQFHV WKDW DUH WR EH
VHQWHQFHZDVLQDSSURSULDWHXQGHU*RIWKH6HQWHQFLQJ LPSRVHGFRQVHFXWLYHO\E\UHIHUHQFHWRWKHmWRWDOSXQLVKPHQWl
*XLGHOLQHV:HQHYHUVWDWHGLQWKHLQLWLDODSSHDOWKDWDILIW\ ZKLFK ZDV GHWHUPLQHG LQGHSHQGHQWO\ RI *UDKDPjV
\HDU VHQWHQFH ZDV DXWKRUL]HG XQGHU WKH JXLGHOLQHV RU FRQYLFWLRQVRQ&RXQWVDQG8QGHU* G LQFDVHV
DGGUHVVHG*LQDQ\ZD\ ZHUXOHGRQO\WKDWDILIW\\HDU LQZKLFKWKHVHQWHQFHZLWKWKHKLJKHVWVWDWXWRU\PD[LPXPLV
VHQWHQFH ZRXOG EH WKH PD[LPXP WKH GLVWULFW FRXUW FRXOG OHVVWKDQWKHWRWDOSXQLVKPHQWXQGHUWKH*XLGHOLQHVVHQWHQFHV
LPSRVHZLWKRXWYLRODWLQJ$SSUHQGL DUHWRUXQFRQVHFXWLYHO\WRWKHH[WHQWQHFHVVDU\WRUHDFKWKH
WRWDO SXQLVKPHQW 7KH mWRWDO SXQLVKPHQWl LQ WXUQ LV WKH
%&RQVHFXWLYH6HQWHQFHV mFRPELQHG OHQJWK RI WKH VHQWHQFHV GHWHUPLQHG E\ WKH
FRXUWDIWHUGHWHUPLQLQJWKHDGMXVWHGFRPELQHGRIIHQVHOHYHO
*UDKDPFODLPVWKDWWKHGLVWULFWFRXUWLPSURSHUO\LQWHUSUHWHG DQG WKH &ULPLQDO +LVWRU\ &DWHJRU\l 866* *
* WR UHTXLUH WKDW KLV VHQWHQFHV RQ DOO FRXQWV UXQ FPW+HUHWKHWRWDOSXQLVKPHQWZDVPRQWKVWROLIHD
FRQVHFXWLYHO\&RQFHGLQJWKDW* D UHTXLUHVWKDWKLV
1R 8QLWHG6WDWHVY*UDKDP 8QLWHG6WDWHVY*UDKDP 1R
ILJXUHEDVHGRQ*UDKDPjVFRPELQHGRIIHQVHOHYHORIDQG * D LW PHDQV SUHFLVHO\ WKDW &I 8QLWHG 6WDWHV Y
KLV &ULPLQDO +LVWRU\ &DWHJRU\ RI 9, %HFDXVH *XLGHOLQH 6FKDIIHU )G WK &LU QRWLQJ WKDW
' E H[FOXGHVRIIHQVHVWKDWFDUU\PDQGDWRU\VHQWHQFHV EHFDXVHVHQWHQFHVRQ F FRQYLFWLRQVDUHWREHFDOFXODWHG
WKDW WKH VWDWXWH UHTXLUHV UXQ FRQVHFXWLYHO\ WR DQ\ RWKHU LQGHSHQGHQWO\WKHDGMXVWPHQWVVHWIRUWKLQ&KDSWHU7KUHHRI
VHQWHQFHVZKHQGHWHUPLQLQJWKHFRPELQHGRIIHQVHOHYHOWKH WKH*XLGHOLQHV0DQXDOmDUHQRWWREHDSSOLHGWRPDQGDWRU\
WRWDOSXQLVKPHQWOHYHOZDVFDOFXODWHGEDVHGRQWKHRIIHQVHV VWDWXWRU\VHQWHQFHVl
LQ&RXQWV DQGDORQHDQGZLWKRXWUHIHUHQFHWRWKH
FRQYLFWLRQV WKDW FDUU\ PDQGDWRU\ VHQWHQFHV 866* +HUHWKHGLVWULFWFRXUWFRXOGQRWKDYHLPSRVHGDQ\RWKHU
' E VHQWHQFH :LWK D WRWDO SXQLVKPHQW RI PRQWKV WR OLIH
* G UHTXLUHG WKH FRXUW WR LPSRVH WKH VHQWHQFHV RQ
sXVWDVDGHIHQGDQWjVWRWDOSXQLVKPHQWLVFDOFXODWHGXQGHU &RXQWV DQG WR UXQ FRQVHFXWLYHO\ WR WKH H[WHQW
' E LQGHSHQGHQWO\ RI WKRVH RIIHQVHV WKDW FDUU\ QHFHVVDU\WRSURGXFHDVHQWHQFHHTXDOWRWKHWRWDOSXQLVKPHQW
PDQGDWRU\ FRQVHFXWLYH VHQWHQFHV D GHIHQGDQWjV VHQWHQFHV 7KRVHIRXUVHQWHQFHVDGGHGXSWRWZHQW\ILYH\HDUVZKLFK
PXVWUXQFRQVHFXWLYHO\XQGHU* G VRWKDWWKH\UHDFK GLG QRW UHDFK WKH WRWDO SXQLVKPHQW RI PRQWKV 7KH
WKH WRWDO SXQLVKPHQW LQGHSHQGHQWO\ RI DQ\ PDQGDWRU\ VHQWHQFHVRQ&RXQWVDQGFRXOGQRWFRXQWWRZDUGWKDW
FRQVHFXWLYHVHQWHQFHVLGHQWLILHGE\WKHVWDWXWH7KDWLVLQ WRWDO SXQLVKPHQW EHFDXVH * D UHTXLUHV WKDW WKRVH
FDVHV LQ ZKLFK WKH VHQWHQFH RQ WKH FRXQW ZLWK WKH KLJKHVW VHQWHQFHVEHLPSRVHGLQGHSHQGHQWO\DQGUXQFRQVHFXWLYHWR
VWDWXWRU\PD[LPXPLVOHVVWKDQWKHWRWDOSXQLVKPHQWFRXUWV DQ\RWKHUVHQWHQFH7KHWZHQW\\HDUVHQWHQFHRQ&RXQW
PXVW VWDFN WKH VHQWHQFHV WKDW GR QRW FDUU\ PDQGDWRU\ DQG WKH ILYH\HDU VHQWHQFH RQ &RXQW ZHUH WKHQ DGGHG
FRQVHFXWLYHVHQWHQFHVmWRWKHH[WHQWQHFHVVDU\WRSURGXFHD FRQVHFXWLYHO\ DV UHTXLUHG E\ 86& F ' LL
FRPELQHGVHQWHQFHHTXDOWRWKHWRWDOSXQLVKPHQWl866* UHVXOWLQJLQDWRWDOVHQWHQFHRIILIW\\HDUV
* G DQG WKHQ LPSRVH LQ DGGLWLRQ DQ\ PDQGDWRU\
FRQVHFXWLYHVHQWHQFHVWRUXQFRQVHFXWLYHO\ &$SSUHQGL
,I WKH VHQWHQFH RQ WKH FRXQW FDUU\LQJ D PDQGDWRU\ $WRUDODUJXPHQWWKH8QLWHG6WDWHVDUJXHGWKDWDGHFLVLRQ
FRQVHFXWLYHVHQWHQFHZHUHDFFXPXODWHGZLWKRWKHUVHQWHQFHV RIWKH8QLWHG6WDWHV6XSUHPH&RXUWUHTXLUHVWKDWZHUHYHUVH
IRU SXUSRVHV RI UHDFKLQJ WKH WRWDO SXQLVKPHQW XQGHU RXUHDUOLHU$SSUHQGLUXOLQJDQGUHPDQGWRWKHGLVWULFWFRXUWWR
* G &RQJUHVVjVVSHFLILFVWDWXWRU\UHTXLUHPHQWWKDWWKH UHLPSRVH *UDKDPjV ILIW\ILYH\HDU VHQWHQFH 7KH 8QLWHG
VHQWHQFHEHLPSRVHGLQGHSHQGHQWRIDQ\RWKHUVHQWHQFHDQG 6WDWHVSRLQWVWR8QLWHG6WDWHVY&RWWRQ866
UXQ FRQVHFXWLYH WR DQ\ RWKHU VHQWHQFH ZRXOG KDYH OLWWOH &W ZKLFKIRXQGDQ$SSUHQGLYLRODWLRQQRWWR
PHDQLQJ,QGHHGRQWKDWFRQWUDU\LQWHUSUHWDWLRQWKHUHZRXOG mVHULRXVO\DIIHFWWKHIDLUQHVVLQWHJULW\RUSXEOLFUHSXWDWLRQRI
EHSRVVLEOHFDVHVLQZKLFKDGHIHQGDQWFRQYLFWHGRID F MXGLFLDOSURFHHGLQJVlZKHQWKHGUXJTXDQWLW\DOWKRXJKQRW
RIIHQVHZRXOGUHFHLYHWKHVDPHWRWDOVHQWHQFHKHRUVKHZRXOG DOOHJHGLQWKHLQGLFWPHQWZDVHVWDEOLVKHGE\RYHUZKHOPLQJ
KDYHUHFHLYHGZLWKRXWWKH F FRQYLFWLRQDUHVXOWWKDW HYLGHQFH DW WULDO &RWWRQ 6 &W DW 7KH 8QLWHG
FDQQRW EH VTXDUHG ZLWK WKH VWDWXWHjV WH[W 6HH 86& 6WDWHVDUJXHVWKDWWKH$SSUHQGLYLRODWLRQLQ*UDKDPjVFDVH
F ' LL m>1@RWHUPRILPSULVRQPHQWLPSRVHGRQ VLPLODUO\IDLOVWRFRQVWLWXWHSODLQHUURU&RWWRQZDVGHFLGHG
DSHUVRQXQGHUWKLVVXEVHFWLRQVKDOOUXQFRQFXUUHQWO\ZLWKDQ\ RQ0D\PRUHWKDQILYHPRQWKVEHIRUHWKH8QLWHG
RWKHUWHUPRILPSULVRQPHQWLPSRVHGRQWKHSHUVRQl :KHQ 6WDWHVILOHGLWVEULHILQWKLVFDVH\HWWKH8QLWHG6WDWHVUHIHUUHG
* D VWDWHVWKDWVHQWHQFHVRQVXFKFULPHVDUHmWRUXQ WRQHLWKHUDQ\HUURULQWKHSUHYLRXVILQGLQJRIDQ$SSUHQGL
FRQVHFXWLYHO\WRDQ\RWKHUWHUPRILPSULVRQPHQWl866* YLRODWLRQ WKH ILYHPRQWKROG GHFLVLRQ LQ &RWWRQ QRU DQ\
1R 8QLWHG6WDWHVY*UDKDP 8QLWHG6WDWHVY*UDKDP 1R
RWKHUDUJXPHQWRQWKHPHULWVLQLWVEULHIIRFXVLQJRQO\RQLWV BBBBBBBBBBBBBBBBBBBB
ODZRIWKHFDVHDUJXPHQW7KH8QLWHG6WDWHVKDVLGHQWLILHGQR
mSODLQPLVFDUULDJHRIMXVWLFHlWKDWZRXOGUHVXOWLIZHGHFOLQHG &21&855(1&(
WRDGGUHVVWKLVLVVXH2YHUVWUHHWY/H[LQJWRQ)D\HWWH8UEDQ BBBBBBBBBBBBBBBBBBBB
&RXQW\*RYjW)G WK&LU TXRWDWLRQ
RPLWWHG DQGZHFRQVLGHULWZDLYHG $9(51&2+1'LVWULFWsXGJHFRQFXUULQJ,FRQFXULQWKH
UHVXOW
,,,&21&/86,21
$V * RI WKH 6HQWHQFLQJ *XLGHOLQHV UHTXLUHG WKH
GLVWULFW FRXUW WR LPSRVH DOO VHQWHQFHV FRQVHFXWLYHO\ ZH
$)),50WKHVHQWHQFH
| {
"pile_set_name": "FreeLaw"
} |
FILED
United States Court of Appeals
Tenth Circuit
August 6, 2012
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee, No. 12-3064
(D.C. Nos. 6:11-CV-01319-MLB and
v. 6:07-CR-10223-MLB-1)
(D. Kan.)
TODD R. GEHRINGER,
Defendant-Appellant.
ORDER DENYING CERTIFICATE OF APPEALABILITY *
Before KELLY, TYMKOVICH, and GORSUCH, Circuit Judges.
After Todd Gehringer was convicted of several drug (21 U.S.C.
§§ 841(a)(1), 844) and gun (18 U.S.C. §§ 922(g)(3), 924(a)(2), and (c)) charges,
and after he lost his direct appeal, he brought a federal habeas petition under 28
U.S.C. § 2255. In his petition, Mr. Gehringer asserted twenty-six separate
failures by his lawyer. The district court dismissed the petition, however, finding
each claim without merit. The court also denied Mr. Gehringer a certificate of
appealability (COA). Now before us, Mr. Gehringer renews his request for a
COA.
*
This order is not binding precedent except under the doctrines of law of
the case, res judicata and collateral estoppel. It may be cited, however, for its
persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
We may grant his request, however, only if Mr. Gehringer first presents a
“substantial showing of the denial of a constitutional right.” 28 U.S.C.
§ 2253(c)(2). This requires him to demonstrate that “reasonable jurists could
debate whether (or, for that matter, agree that) the petition should have been
resolved in a different manner or that the issues presented were adequate to
deserve encouragement to proceed further.” Slack v. McDaniel, 529 U.S. 473,
484 (2000) (internal quotation omitted).
Mr. Gehringer has not met this standard. To prevail on any claim that his
counsel was constitutionally ineffective, Mr. Gehringer must show two things: (1)
counsel’s representation “fell below an objective standard of reasonableness” and
(2) “there is a reasonable probability that, but for counsel’s unprofessional errors,
the result of the proceeding would have been different.” Strickland v.
Washington, 466 U.S. 668, 688, 694 (1984).
None of the grounds Mr. Gehringer presents to this court (a subset of his
original 26 claims and some new ones) meets both prongs of the Strickland test.
Most of Mr. Gehringer’s claims are already addressed in the district court’s order,
or in the materials on which it relies and incorporates. The remainder fail
because Mr. Gehringer did not raise them before the district court in his original
§ 2255 motion. See Matthews v. Workman, 577 F.3d 1175, 1188 n.5 (10th Cir.
2009).
-2-
The only claim meriting further discussion is Mr. Gehringer’s second
enumerated claim in this court, a claim concerning incriminating evidence
discovered during the course of the December 3, 2007 search of his storage unit.
The district court upheld the search, finding Mr. Gehringer consented to it during
an interview with police. Before us, Mr. Gehringer argues his counsel was
ineffective for failing to introduce transcripts of the interview in support of his
motion to suppress. He faults counsel on this score because, he says, the
transcripts would show that he invoked Fifth and Sixth Amendment rights during
the interrogation and that his consent was coerced by the officers’ false promises.
As for his claim that the transcripts would document his invocation of his
Miranda rights, it is unpreserved for our review because he did not argue this to
the district court. And as for his claim that the transcripts would show his
consent was involuntary, Mr. Gehringer’s counsel filed a motion to suppress on
this precise ground and presented extensive evidence (including cross-examining
the officers and soliciting testimony from Mr. Gehringer) and argument in support
of it. Yet, Mr. Gehringer does not indicate how the transcripts would show
anything more or different than the evidence his counsel presented and argued.
Mr. Gehringer thus gives us no reason to doubt the district court’s conclusion that
he cannot meet the Strickland standard on this claim, at least because he cannot
show that omitting the transcripts was prejudicial. See Strickland, 466 U.S. at
694.
-3-
The application for a COA is denied and the appeal is dismissed.
ENTERED FOR THE COURT
Neil M. Gorsuch
Circuit Judge
-4-
| {
"pile_set_name": "FreeLaw"
} |
8 Wis.2d 46 (1959)
STATE DEPARTMENT OF PUBLIC WELFARE, Appellant,
v.
SEM, Respondent.
Supreme Court of Wisconsin.
September 9, 1959.
October 6, 1959.
*47 For the appellant there was a brief by Frank P. Fosgate, collection and deportation counsel, and Charles C. Lubcke and Clarence Simon, assistant counsel, and oral argument by Mr. Simon.
For the respondent the cause was submitted on the brief of Donald L. Farr of Eau Claire.
MARTIN, C. J.
In the lower court's opinion the divorce judgment established the extent of the obligation of the father to support the child and his liability is limited to the sum so fixed unless said judgment is modified by the divorce court.
We cannot agree with this view. Sec. 46.10, Stats., so far as material, provides:
"(1) Liability for the maintenance of patients in the institutions specified in this section and the collection and enforcement of such liability is governed exclusively by this section.
"(2) Any patient in any charitable or curative institution of the state ... or heretofore or hereafter committed or admitted to any such institution, and his property and estate, ... and in the case of a minor child the father or mother of the patient, and their property and estates, including their *48 homesteads, shall be liable for such patient's maintenance not exceeding the actual per capita cost thereof, ...
"(3) After investigation of the ability to pay of the patient or relative liable for such maintenance, the department shall make collection from the patient or the person who in the opinion of the department under all of the circumstances is best able to pay, giving due regard to relationship and the present needs of the person or of his lawful dependents. However, the liability of relatives for maintenance shall be in the following order: ... then, in the case of a minor, the father, and lastly the mother.
"(4) Upon the failure of any relative liable for maintenance to make payment or enter into or comply with an agreement for payment, the department may apply to the county court of the county ... in which such relative resides for an order to compel payment by such relative.
"(7) The department shall administer and enforce this section."
In Derouin v. State Department of Public Welfare (1952), 262 Wis. 559, 563, 55 N. W. (2d) 871, this court held:
"So that there will be no uncertainty in the future, we now state that parents become liable for the maintenance of a minor child in an institution for the mentally deficient as soon as the child enters the institution."
The liability of the parent is statutory and the divorce court has no jurisdiction to relieve the parent of that liability. The order for support money for the benefit of the child was based on the conditions existing at the time the divorce judgment was entered, that is, the child being in the care and custody of the mother. There was no indication then, so far as the record discloses, that the boy would require institutional care. When he was hospitalized, however, the only support rendered him was that provided by the state. The mother was no longer entitled to receive support-money payments and, while the record is silent as to whether or not payments directed by the divorce judgment were in fact *49 made, the respondent could have petitioned the divorce court for relief from the support order. The state was not a party to the divorce action; it could not apply to the divorce court for modification of the support order, and the divorce court would have no jurisdiction to order support for the child while in the institution. The liability for such support and the collections for the maintenance provided by the state are, by its terms, governed exclusively by sec. 46.10, Stats.
A divorce judgment terminates only the relationship between husband and wife; it does not terminate the parental relationship. Romanowski v. Romanowski (1944), 245 Wis. 199, 14 N. W. (2d) 23. It may fix the extent of liability of the father for support of a child, subject to modification upon proper application when changed circumstances warrant it, but we cannot see how such a judgment can affect the liability of the parent to the state which is imposed by sec. 46.10, Stats. This is a special statute designed by the legislature to cover a special situation. It is valid, unambiguous, and no confusion or inequity arises from its operation.
By the Court.Judgment reversed, and cause remanded for further proceedings not inconsistent with this opinion.
| {
"pile_set_name": "FreeLaw"
} |
Case: 13-60796 Document: 00512731293 Page: 1 Date Filed: 08/12/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
No. 13-60796
Fifth Circuit
FILED
Summary Calendar August 12, 2014
Lyle W. Cayce
EDUARDO ESPINOSA VELASCO, Clerk
Petitioner
v.
ERIC H. HOLDER, JR., U.S. ATTORNEY GENERAL,
Respondent
Petition for Review of an Order of the
Board of Immigration Appeals
BIA No. A087 897 443
Before JOLLY, GRAVES, and HIGGINSON, Circuit Judges.
PER CURIAM: *
Eduardo Espinosa Velasco, a native and citizen of Mexico, petitions for
review of the decision of the Board of Immigration Appeals (BIA) affirming the
immigration judge’s (IJ’s) order denying his application for withholding of
removal. To be eligible for withholding of removal, an applicant must prove a
“clear probability” of future persecution. See Majd v. Gonzales, 446 F.3d 590,
595 (5th Cir. 2006). “A clear probability means that it is more likely than not
* 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: 13-60796 Document: 00512731293 Page: 2 Date Filed: 08/12/2014
No. 13-60796
that the applicant’s life or freedom would be threatened by persecution on
account of either his race, religion, nationality, membership in a particular
social group, or political opinion.” Roy v. Ashcroft, 389 F.3d 132, 138 (5th Cir.
2004).
Before both the IJ and the BIA, Velasco identified the relevant group as:
“law abiding individuals in the state of Puebla, Mexico, where people such as
respondent are killed by the outlaws, including ‘Zetas,’ and where the
government cannot or will not protect respondent.” The IJ and the BIA
determined that the identified group was not a particular social group for
purposes of withholding of removal. Velasco does not challenge that
determination but instead argues that the IJ mistakenly identified the
relevant group as “wealthy people” when it should have identified the group as
consisting of business or land owners.
Judicial review of a final removal order is available only where the alien
has exhausted all administrative remedies of right. 8 U.S.C. § 1252(d)(1).
Because the exhaustion requirement is statutorily mandated, an alien’s failure
to exhaust an issue before the BIA is a jurisdictional bar to this court’s
consideration of the issue. Wang v. Ashcroft, 260 F.3d 448, 452 (5th Cir. 2001).
Velasco failed to exhaust his administrative remedies by failing to raise before
the BIA the argument he raises in his petition for review. Velasco did not
argue in the proceedings before the BIA that the particular social group to
which he belonged consisted of business or land owners or that the IJ
mistakenly identified the particular social group in which he claimed inclusion.
Furthermore, Velasco has not asserted that his administrative remedies were
inadequate. See Omari v. Holder, 562 F.3d 314, 323 (5th Cir. 2009).
Accordingly, the issues raised in Velasco’s petition for review are
unexhausted, and the petition is DISMISSED for lack of jurisdiction.
2
| {
"pile_set_name": "FreeLaw"
} |
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 00-20190
(Summary Calendar)
In the Matter Of: DON RICHARD DAVIS; LINDA LOUISE DAVIS
Debtors,
DON RICHARD DAVIS; LINDA LOUISE DAVIS,
Appellants,
versus
CYNTHIA M. HATCHETT, successor guardian of the person
and estate of Janet R. Davis,
Appellee.
Appeal from the United States District Court
for the Southern District of Texas
(H-99-CV- 4246)
December 4, 2000
Before EMILIO M. GARZA, STEWART and PARKER, Circuit Judges.
CARL E. STEWART, Circuit Judge:*
This is an appeal from a final judgment which held that the res of an express trust, a parcel
of real property, was not part of the bankruptcy estate of Appellants, Don R. and Linda Davis,
*
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.
because they did not hold equitable title to the property. Because we find that the express trust
failed and that a constructive trust was created, we affirm the district court’s ruling.
FACTUAL AND PROCEDURAL HISTORY
After filing for Chapter 7 bankruptcy in November 1998, Don and Linda Davis (“Don”),
requested that the bankruptcy court declare property located at 5907 Lake, Houston, TX, (the
“property”) as part of the bankruptcy estate. The property was formerly the homestead of Don’s
parents, S.J. and Janet Davis (“Janet”). Cynthia Hatchett (“Hatchett”), Janet’s former guardian, is
now the executor of her probate estate. Hatchett contends that the property is part of Janet’s probate
estate and not Don’s bankruptcy estate. The bankruptcy court agreed with Hatchett, noting that the
property was held in resulting trust and that Janet’s estate owned the equitable title to it. The district
court affirmed the judgment, and Don now appeals.
On September 29, 1993, Don’s parents, S.J. and Janet Davis, conveyed the property by
Special Warranty Deed to Don’s brother, Michael Davis (“Michael”). Don later filed suit against
Michael, claiming that Michael had forged their father’s signature on the deed. In settlement of the
suit, Michael and Don agreed o n July 27, 1994, that Don would hold the property, including any
income derived from its sale or use, as trustee for their parents. That day, Michael conveyed the
property to “Don R. Davis, Trustee,” in a Warranty Deed, and Davis signed a Declaration of Trust
agreement which stated that the property was to be held in trust for their parents. Michael, however,
did not sign this Declaration of Trust.
On September 1 and 5, 1994, soon after the trust was established, Don signed two documents
which revoked the trust, including a Revocation of Trust. However, in two subsequent documents,
dated September 22, 1994, and January 11, 1995, Don signed as “Don R. Davis, Trustee.”
2
S.J. Davis died in December 1994, and Janet inherited his estate. Janet died in March 1999,
and Hatchett testified at the bankruptcy trial that the only income available to pay for Janet’s nursing
home care was her monthly $862 Social Security check. Hatchett also testified that oftentimes there
was not enough money to pay for Janet’s care.
Don testified that he rented the property to third parties for approximately $800 - $900 per
month from late 1994 to 1997. In his deposition, Don testified that he refinanced it for $78,000 in
order to purchase personal items for his family, including a car for his son, clothes and a washer/dryer
for his wife, and to make improvements to the house. However, Don later testified at trial that he
spent some of the money for his parents. In mid-1997, Don and his wife moved onto the property.
Don now contends that an express trust was established, it was validly revoked by him, and that upon
the revocation, he became the sole owner of legal and equitable title to the property.
DISCUSSION
This Court reviews the bankruptcy court’s legal rulings de novo. See Matter of Haber Oil
Co., Inc., 12 F.3d 426, 434 (5th Cir. 1994). The bankruptcy court held that Michael and Don’s
attempt to establish an express trust failed because Michael, as settlor of the trust, did not sign the
Declaration of Trust. Don, however, asserts that the express trust did not fail, but was only revoked
by the Revocation of Trust documents. Moreover, while the bankruptcy court imposed a
constructive trust1, based on Michael and Don’s intent to establish an express trust, Don asserts that
1
The terms “constructive” and “resulting” trust are often used interchangeably. Both indicate the
imposition of an equitable trust upon the failure of an express trust. However, a resulting trust
involves “the operation of the equitable doctrine of consideration” and a constructive trust “involves
the presence of fraud.” Mills v. Gray, 210 S.W.2d 985, 987-88 (1948).
3
there is no basis for imposing this trust. He also asserts that he retains equitable and legal title to the
property because Michael deeded it to him.
I. Did the express trust fail?
Don argues that he validly revoked an express trust which vested legal and equitable title to
the property in him. However, following this line of logic, he did not acquire equitable title to the
property. Equitable and legal title are two separate concepts, with legal title to property vesting in
the trustee, upon creation of an express trust, and equitable title vesting to the beneficiary of a trust,
upon completion of the express trust’s objective or upon failure of the express trust. See Miller v.
Donald, 235 S.W.2d 201, 205 (Tex. App.- Fort Worth 1950, writ ref’d n.r.e.).
Applying Don’s analysis, equitable title does not vest in him because he signed the Warranty
Deed in which Michael granted the property to him as “Don R. Davis, Trustee.” He did not sign the
deed simply as “Don R. Davis.” Thus, if the express trust were revoked, the deed granting him the
property is similarly “revoked” because he signed the deed as trustee and there is no longer a trust.
Moreover, Don never had equitable title because he signed the deed as a trustee and Texas law states
that a trustee holds only legal title. Hence, legal and equitable title to the property logically reverts
to Michael, as it is Michael to whom it was originally deeded. Therefore, Don’s argument that
equitable and legal title vest in him simply because he revoked the trust is a huge leap in logic.
In addition, the express trust fails because it does not satisfy the Statute of Fraud provisions
for trust s of real property. Texas law unequivocally states that a trust for real property is only
enforceable when there is “written evidence of the trust’s terms bearing the signature of the settlor
or the settlor’s authorized agent.” Tex. Prop. Code Ann. § 112.004 (West 1995). Here, Michael,
as settlor of the trust, did not sign the Declaration of Trust. Because the trust involved real property,
4
the trust legally fails, despite Michael and Don’s intent to create a trust, the availability of a specific
trust res, and the designation of specific beneficiaries.
II. Is there a constructive trust?
Texas law implies a constructive trust upon an express trust’s failure in order to prevent unjust
enrichment. See Nolana Dev. Ass’n v. Corsi, 682 S.W.2d 246, 249 (1984); see also Brelsford v.
Scheltz, 564 S.W.2d 404, 406 (Tex. Civ. App. -Houston [1st Dist.]1978, writ ref’d n.r.e.) (stating
that when an express trust fails, a resulting trust will be implied in favor of the trustor or “in the case
of the trustor’s death, in her estate and devisees.”). Texas courts have also implied resulting trusts
in instances involving facts similar to the present case. For example, in Brelsford, the court implied
a resulting trust because the trustee had si gned the deed to the property as “trustee” although the
settlor had not signed a written instrument. See Brelsford, 564 S.W.2d at 406. Moreover, in Uriarte
v. Petro, the court imposed a constructive trust in favor of the decedent’s estate because it
determined that the real property had only been deeded to decedent’s sister for the purpose of taking
care of the decedent and her husband. 606 S.W.2d 22 (Tex. Civ. App.- Houston[1st Dist.] 1980, writ
ref’d n.r.e.). Thus, precedent indicates that the resulting trust should be upheld.
However, we have previously outlined three elements for the imposition of constructive trusts
under Texas law: “1) breach of a fiduciary relationship or, in the alternative, actual fraud; 2) unjust
enrichment of the wrongdoer; and 3) tracing of the property to an identifiable res.” Haber Oil Co.,
Inc., 12 F.3d at 437. Here, elements two and three of this test are satisfied since the property is the
trust res and Don was unjustly enriched by renting, occupying, and refinancing it.
5
The bankruptcy court noted that the first element of the test was satisfied on the basis of
actual fraud2 although it acknowledged that there was no evidence that Don created the trust knowing
that he would revo ke it and take complete title to the property. The district court affirmed the
bankruptcy court’s holding without analyzing the necessary proof for actual fraud.
The relevant inquiry for the first element of the test is whether Don, as grantee of the
property, breached a fiduciary relationship to Michael as grantor.3 Texas courts have determined
that grantor-grantee relationships are fiduciary or confidential. See Mills, 147 S.W.2d at 988-89.
The breach of such a duty is constructive fraud. See Estate of Herring, 970 S.W.2d 583, 586 n.1,
(Tex. Civ. App.-Corpus Christi 1998, no writ); see also Mills, 210 S.W.2d at 989 (noting that “the
breach of a confidential relationship existing between the grantor and the grantee frequently is
considered to be such constructive fraud as will give rise to a constructive trust.”). Evidence4 that
Don breached his duty to Michael to use the trust property for their parents’ needs is provided in
several ways: 1) Don used most of the property’s income and proceeds for his and his immediate
family’s personal use; 2) Hatchett, as Janet’s guardian, did not have enough money to care for her
personal and medical needs; 3) Don revoked the trust soon after attempting to establish it; 4) Don
and his family lived in the house; and 5) the trust, the result of the settlement of the lawsuit Don filed
2
A party claiming fraud in Texas must establish that: 1) the speaker knowingly or recklessly made
a material representation which was false; 2 ) t he speaker intended that the party rely on the
statement; 3) the party relied on the statement; and 4) the party was harmed by the statement. See
Haber Oil, 12 F.3d at 437.
3
Don did not breach a fiduciary relationship on the basis of a settlor-trustee relationship because
the express trust failed.
4
Parol evidence is admissible to show “the circumstances under which a resulting trust arose.”
Brelsford, 564 S.W.2d at 405; Miller, 235 S.W.2d at 205.
6
against Michael, was significantly more than what he would have acquired had he won the lawsuit.
Don acquired legal title to the property in the settlement whereas he would not have acquired
anything had he prevailed, since complete title would have reverted to his parents. Thus, because
Don breached a fiduciary duty to Michael, as grantor, the district court did not err when it upheld the
bankruptcy court’s imposition of the constructive trust.
III. Did Don acquire equitable title?
Imposition of a resulting trust results in the beneficiary of the trust acquiring equitable title
to the trust res and the trustee retaining legal title to it. See Uriarte, 606 S.W.2d at 24-25. Thus, in
the present case, although legal title is still vested in Don, Janet’s estate retains equitable title to the
propert y since a constructive trust was validly imposed. Consequently, the property belongs to
Janet’s probate estate and not to Don’s bankruptcy estate. See Haber Oil, 12 F.3d at 435-36 (stating
that when properly imposed, the doctrine of constructive trust gives a trust beneficiary the right to
recover the trust res from a debtor).
CONCLUSION
We AFFIRM the district court’s holding that the property is not part of Don’s bankruptcy
estate because the express trust failed, a resulting trust was correctly implied, and Don did not acquire
equitable title to the trust res.
AFFIRMED.
7
| {
"pile_set_name": "FreeLaw"
} |
Cite as 2015 Ark. App. 713
ARKANSAS COURT OF APPEALS
DIVISION IV
No. CV-15-404
ARKANSAS STATE HIGHWAY & Opinion Delivered December 16, 2015
TRANSPORTATION DEPARTMENT
APPELLANT APPEAL FROM THE SEBASTIAN
COUNTY CIRCUIT COURT,
V. FORT SMITH DISTRICT
[NO. CV-14-1007]
RAM OUTDOOR ADVERTISING HONORABLE J. MICHAEL
APPELLEE FITZHUGH, JUDGE
REVERSED
BART F. VIRDEN, Judge
Appellee RAM Outdoor Advertising (RAM) received a conditional-use permit from
the City of Fort Smith to convert an existing billboard along Interstate Highway 540 from
a static display to a digital display. RAM then applied for a permit from appellant, the
Arkansas State Highway & Transportation Department (the Department or AHTD), to
convert the sign to an electronic message device (EMD). The Department denied the
application, and RAM requested an administrative hearing before the Arkansas State
Highway Commission (the agency). The hearing officer upheld the Department’s decision,
and RAM appealed to the Sebastian County Circuit Court. The circuit court reversed the
agency’s decision, and the Department has appealed to this court. We reverse the circuit
court and affirm the agency’s decision.
Cite as 2015 Ark. App. 713
I. Overview
The 1965 Federal Highway Beautification Act (Federal Act) provides for the control
of billboards in an effort to maintain natural beauty along American interstate and primary
highway systems. 23 U.S.C. § 131 et seq. The federal law requires the states to provide
“effective control” along interstate and primary highway systems as a condition of receiving
all of each state’s federal highway funds, or else the United States Secretary of Transportation
will withhold ten percent of those funds. 23 U.S.C. § 131(b).
The Arkansas Highway Beautification Act, codified at Ark. Code Ann. § 27-74-101
et seq., was enacted by Act 640 of 1967 to further the goals of the Federal Act and ensure
continued funding for roads. Ark. State Highway & Transp. Dep’t v. Kidder, 326 Ark. 595, 933
S.W.2d 794 (1996). Arkansas Code Annotated sections 27-74-203(a) and -211(b) (Repl.
2010) impose a duty on the Arkansas State Highway Commission to regulate the erection
and maintenance of outdoor advertising devices and to adopt and promulgate regulations
governing the issuance of permits for erecting outdoor advertising devices. The agency has
promulgated and adopted Regulations for the Control of Outdoor Advertising on Arkansas
Highways. The General Assembly has declared that the erection and maintenance of outdoor
advertising devices shall be controlled in accordance with the terms of this chapter and
regulations promulgated pursuant thereto, in order to protect the public interest; promote
the public health, safety, and welfare; to preserve natural beauty; and to promote reasonable,
orderly, and effective display of outdoor advertising in Arkansas. Ark. Code Ann. § 27-74-
201(a) (Repl. 2010).
2
Cite as 2015 Ark. App. 713
Arkansas Code Annotated section 27-74-204(a) (Repl. 2010) provides that nothing
contained in this chapter shall prohibit the erection and maintenance of outdoor advertising
signs, displays, and devices consistent with customary use within 660 feet of the nearest edge
of the right-of-way of interstate, primary, and other state highways designated by the
commission (1) within those areas which are zoned industrial or commercial under authority
of the laws of this state, or (2) within those unzoned commercial or industrial areas which
may be determined by agreement between the commission and the United States Secretary
of Transportation. As set forth in Appendix 3 section (E) of the agency’s regulations, the
State of Arkansas and local political subdivisions shall have full authority under their own
zoning laws to zone areas for commercial or industrial purposes and that action in this regard
will be accepted for the purposes of this agreement. The regulations define “commercial or
industrial activities” as those activities generally recognized as commercial or industrial by
public zoning authorities in Arkansas, except that transient or temporary activities and
activities not visible from the main traveled way shall not be considered commercial or
industrial. 001-00-005-7 Ark. Code R. 3 § 1(F)(3) & (4) (Weil 2008).
Section 7(B)(8) of the revised regulations for EMDs provides that a sign owner may
modify existing, legal, conforming structures to an EMD only after filing an application and
receiving approval by the Department. RAM applied for such a permit, and the Department
denied the application because (1) the sign site is not located in a commercial/industrial area;
(2) the property was zoned industrial, and, although three billboards were built over thirty
years ago, there has been no industrial development of the property; (3) the property is a
3
Cite as 2015 Ark. App. 713
forested tract of land located in a floodplain, where there has been no development, and no
development is likely to occur; and (4) the Sebastian County Assessor’s Office lists the
landowner as “Fort Smith Riverfront/Jack White,” but the application does not have a
landowner’s permission statement.1
Following the Department’s denial of its application, RAM requested an
administrative hearing before the Arkansas State Highway Commission, which appointed a
hearing officer.
II. Administrative Hearing
Craig Roberts, RAM’s managing partner, testified that RAM’s proposed sign site is
in an area that the City of Fort Smith has zoned Industrial Light.2 Roberts stated that he had
observed ATV (all-terrain vehicle) activity on the land—primarily, on weekends—as recently
as a few months prior. He stated that there was also a front-end loader parked at the site and
that he had seen the excavator loading dirt for construction projects. Roberts said that the
front-end loader moved dirt eight or nine times out of ten when it was not raining.
Brandy Campbell, beautification coordinator with the Department, testified that he
recommended that RAM’s application be denied because the sign was non-conforming,
meaning that it would not qualify for a new permit in its present state. He testified that when
there is doubt about the legitimacy of zoning by the city, the Department uses an unzoned
1
Counsel for the AHTD conceded at the administrative hearing that title to the
property was not in dispute.
2
City of Fort Smith Ordinance No. 15-13 (Fort Smith, Ark., Code § 27-704-4
(1976)).
4
Cite as 2015 Ark. App. 713
test to determine whether the zoning is consistent with the activity occurring there.
Campbell, who described the proposed site as “a forested area,” testified that there was
absolutely no industrial activity that one could observe from Interstate 540 and that the
nearest commercial activity was 1.3 miles south of the site. Campbell also testified that he had
spoken with the operator of the front-end loader and was told that there was no on-site
office.
Jeff Ingram, an administrator at the Department and head of the beautification section,
testified that the purpose of the Beautification Act is to limit signs to commercial or industrial
areas. He said that, applying the unzoned test, there was no industrial development within
600 feet of the proposed site and no infrastructure. Ingram stated that there were no
recognizable structures that would lead one to conclude that there was a dirt pit or a mining
operation on the property as one is traveling on Interstate 540. He testified that the extent
of the dirt-pit operation was one man with a front-end loader who “occasionally” got phone
calls and loaded a dump truck. He described the site, which he clarified is in a floodway, as
“nothing but vacant land growing up in trees and weeds.” Ingram stated that there was a ten-
year history of no development and that no development was likely to occur over the next
ten years. Ingram further testified that the city had a right to zone the property as industrial
but, for purposes of the Beautification Act, it did not meet the expectations of the Federal
Highway Administration.
At the conclusion of the hearing, the hearing officer upheld the Department’s
decision. The hearing officer found
5
Cite as 2015 Ark. App. 713
(1) that RAM’s permit application did not comply with regulations for EMDs;
(2) that the Department was not bound by the zoning classifications or decisions of
municipalities;
(3) that the activity within the zoned area did not meet the definition of “industrial”
activity set forth in the regulations; and
(4) that the regulations have been deemed constitutional by the Arkansas Supreme
Court and do not impermissibly restrict certain speech.3
RAM then appealed to the circuit court, which reversed the agency’s decision. The
Department brings this appeal to our court.
III. Argument
RAM, as the challenging party, argues that the Department did not give due
deference to the City of Fort Smith’s zoning decision and that there was no substantial
evidence that the zoning was primarily to allow billboards, as was the case in Files v. Arkansas
State Highway & Transportation Department, 325 Ark. 291, 925 S.W.2d 404 (1996). According
to RAM, the Department ignored the General Assembly’s liberal grant of authority to
municipalities regarding construction of the Arkansas Highway Beautification Act.4 RAM
further contends that the Department was unable to point to any authority for its application
of an unzoned test for areas that are in fact zoned industrial or commercial, making its
decision both arbitrary and capricious.
3
See Yarbrough v. Ark. State Highway Comm’n, 260 Ark. 161, 539 S.W.2d 419 (1976).
4
Arkansas Code Annotated section 14-56-402 (Repl. 1998) provides that cities of the
first and second class and incorporated towns shall have the power to adopt and enforce plans
for the coordinated, adjusted, and harmonious development of the municipality and its
environs.
6
Cite as 2015 Ark. App. 713
IV. Standard of Review
Review of administrative agency decisions, by both the circuit court and the appellate
courts, is limited in scope. Ark. State Highway & Transp. Dep’t v. Lamar Advantage Holding
Co., 2011 Ark. 195, 381 S.W.3d 787. The standard of review to be used by both courts is
whether there is substantial evidence to support the agency’s findings. Id. The appellate
court’s review is directed, not toward the circuit court, but toward the decision of the
agency, because administrative agencies are better equipped by specialization, insight through
experience, and more flexible procedures than courts, to determine and analyze legal issues
affecting their agencies. Id. When reviewing such decisions, we uphold them if they are
supported by substantial evidence and are not arbitrary, capricious, or characterized by an
abuse of discretion. Id.
Substantial evidence has been defined as valid, legal, and persuasive evidence that a
reasonable mind might accept as adequate to support a conclusion and force the mind to pass
beyond conjecture. Ark. Contractors Licensing Bd. v. Pegasus Renovation Co., 347 Ark. 320, 64
S.W.3d 241 (2001). The challenging party has the burden of proving an absence of
substantial evidence. Id. To determine whether a decision is supported by substantial
evidence, the record is reviewed to ascertain if the decision is supported by relevant evidence
that a reasonable mind might accept as adequate to support a conclusion. Ark. State Racing
Comm’n v. Ward, Inc., 346 Ark. 371, 57 S.W.3d 198 (2001). When reviewing the evidence,
this court gives it its strongest probative force in favor of the agency. Id. The issue is not
whether the evidence supports a contrary finding, but whether it supports the finding that
7
Cite as 2015 Ark. App. 713
was made. Id. If there is substantial evidence to support even one basis for denial, this court
must affirm the agency’s decision. See, e.g., Lamar, supra. It is the prerogative of the agency
to believe or disbelieve any witness and to decide what weight to accord the evidence. Ward,
supra. We review issues of statutory interpretation de novo, however, the interpretation
placed on a statute or regulation by an agency or department charged with its administration
is entitled to great deference and should not be overturned unless clearly wrong. Lamar, supra.
V. Discussion
In Files, supra, the appellant petitioned for judicial review of the AHTD’s denial of his
application for a billboard permit. The circuit court affirmed the agency’s decision, and the
appellant appealed to the supreme court, which held (1) that the Department could look
behind a city’s zoning ordinance to examine the motivation behind the zoning decision and
(2) that the Department’s determination that land was annexed and zoned commercial for
the sole purpose of erecting billboards—contrary to the policies of the federal and state
laws—was supported by substantial evidence. While we agree that this case does not involve
“sham zoning” and that there was no evidence that the proposed site was zoned industrial
for the sole purpose of erecting billboards, Files stands for the proposition that the
Department has authority to question the validity of zoning decisions. Here, the Department
questioned the validity of Fort Smith’s zoning because it did not comport with the activities
occurring there.
The Arkansas Highway Beautification Act is remedial in nature and must be broadly
construed so as to effectuate the purpose sought to be accomplished by its enactment. Files,
8
Cite as 2015 Ark. App. 713
supra. The Files court cited with approval Alper v. Nevada, 96 Nev. 925, 621 P.2d 492 (1980),
which held that an inquiry into the status of billboard areas “should not be limited to a
review of the face of a zoning ordinance”; rather, the inquiry should include “reference to
actual[,] as well as contemplated[,] land uses.” Files, 325 Ark. at 298, 925 S.W.2d at 408. Our
supreme court agreed with the analysis of the Nevada Supreme Court and held that the
AHTD appropriately examined the propriety of Brinkley’s zoning ordinance. Our supreme
court concluded that
[s]ome deference must be given to the Department’s interpretation of state and federal
regulations in this area. The Department’s interpretation of its authority enables it to
review limited commercial zoning decisions relating to outdoor advertising to
determine validity. This fosters the purposes of the Highway Beautification Act and
assures compliance with federal law. The General Assembly certainly contemplated
that the Department would regulate outdoor advertising in accordance with state and
federal law.
Files, 325 Ark. at 298, 925 S.W.2d at 408–09.
Considering the deference this court gives agencies in the interpretation of their
regulations and, given our supreme court’s conclusion in Files, we hold that substantial
evidence from the administrative hearing supports the agency’s decision upholding the
Department’s denial of RAM’s application.
Moreover, we note that the agency agreed with the Department’s denial of RAM’s
application for a permit based, in part, on a determination that the activity in the zoned area
was not “industrial” according to the regulations. RAM does not challenge this finding on
appeal. While there is no bright-line standard for what constitutes industrial or commercial
activity, the regulations do provide what activity is not considered “industrial” or
9
Cite as 2015 Ark. App. 713
“commercial.” There was evidence from which the agency could determine that the activity
at RAM’s proposed sign site was transitory or temporary in nature and that the activity was
not visible from Interstate 540. Because we hold that there was substantial evidence to
support the agency’s decision, it automatically follows that it cannot be classified as
unreasonable or arbitrary. Capitol Zoning Dist. Comm’n v. Cowan, 2012 Ark. App. 619, 429
S.W.3d 267. We do not address RAM’s other arguments because substantial evidence
supporting only one basis for denial is sufficient to affirm. See Lamar, supra.
Accordingly, we reverse the circuit court and affirm the administrative agency’s
decision.
Reversed.
HARRISON and WHITEAKER , JJ., agree.
Rita S. Looney, Chief Counsel, by: William L. Wharton, Staff Attorney, for appellant.
Walters, Gaston, Allison & Parker, Attorney as Law, by: Troy Gaston, for appellee.
10
| {
"pile_set_name": "FreeLaw"
} |
J-S17037-15
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
COMMONWEALTH OF PENNSYLVANIA IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellee
v.
PAUL JAMES LETKY
Appellant No. 1559 WDA 2014
Appeal from the Judgment of Sentence April 14, 2014
In the Court of Common Pleas of Allegheny County
Criminal Division at No(s): CP-02-CR-0010950-2013
BEFORE: GANTMAN, P.J., SHOGAN, J., and FITZGERALD, J.*
MEMORANDUM BY GANTMAN, P.J.: FILED MARCH 17, 2015
Appellant, Paul James Letky, appeals nunc pro tunc from the judgment
of sentence entered in the Allegheny County Court of Common Pleas,
following his bench trial convictions for simple assault, harassment, and
criminal trespass.1 We affirm.
In its opinion, the trial court fully and correctly set forth the relevant
facts and procedural history of this case. Therefore, we have no reason to
restate them.
Appellant raises one issue for our review:
DID THE TRIAL COURT ERR IN DENYING APPELLANT’S
POST-SENTENCING MOTIONS SINCE APPELLANT’S
____________________________________________
1
18 Pa.C.S.A. §§ 2701, 2709, 3503, respectively.
___________________________
*Former Justice specially assigned to the Superior Court.
J-S17037-15
CONVICTIONS OF SIMPLE ASSAULT, DEFIANT TRESPASS,
AND SUMMARY HARASSMENT WERE AGAINST THE
WEIGHT OF THE EVIDENCE SINCE APPELLANT’S CREDIBLE
TESTIMONY AT TRIAL INDICATED THAT HE DID NOT
ASSAULT THE VICTIM, HE ONLY BRIEFLY AND
UNAVOIDABLY STEPPED ON HER LAWN SINCE THERE WAS
NO AVAILABLE SIDEWALK AND HE HAD TO PASS THAT
WAY TO ACCESS A BUS, AND HE DID NOT HARASS HER?
(Appellant’s Brief at 3).
On appeal, Appellant emphasizes his trial testimony that he walked
past the victim’s property to reach his bus stop, but he did not actually set
foot on the victim’s property. Appellant maintains he did not touch the
victim or attempt to harass her. Appellant further argues that the victim did
not provide warnings to stay off her property. Appellant insists he had no
motive to lie about his interaction with the victim. On this basis, Appellant
concludes his convictions were against the weight of the evidence. We
disagree.
The following principles apply to our review of a weight of the evidence
claim:
The weight of the evidence is exclusively for the
finder of fact who is free to believe all, part, or none
of the evidence and to determine the credibility of
the witnesses. An appellate court cannot substitute
its judgment for that of the finder of fact. Thus, we
may only reverse the…verdict if it is so contrary to
the evidence as to shock one’s sense of justice.
Commonwealth v. Small, 559 Pa. 423, [435,] 741 A.2d
666, 672-73 (1999). Moreover, where the trial court has
ruled on the weight claim below, an appellate court’s role
is not to consider the underlying question of whether the
verdict is against the weight of the evidence. Rather,
-2-
J-S17037-15
appellate review is limited to whether the trial court
palpably abused its discretion in ruling on the weight
claim.
Commonwealth v. Champney, 574 Pa. 435, 444, 832 A.2d 403, 408
(2003), cert. denied, 542 U.S. 939, 124 S.Ct. 2906, 159 L.Ed.2d 816 (2004)
(most internal citations omitted).
The Pennsylvania Crimes Code defines simple assault as follows:
§ 2701. Simple assault
(a) Offense defined.―Except as provided under
section 2702 (relating to aggravated assault), a person is
guilty of assault if he:
(1) attempts to cause or intentionally,
knowingly or recklessly causes bodily injury to another;
* * *
18 Pa.C.S.A. § 2701(a)(1). The Crimes Code defines harassment as follows:
§ 2709. Harassment
(a) Offense defined.―A person commits the crime
of harassment when, with intent to harass, annoy or alarm
another, the person:
(1) strikes, shoves, kicks or otherwise subjects
the other person to physical contact, or attempts or
threatens to do the same;
* * *
18 Pa.C.S.A. § 2709(a)(1). Additionally, the Crimes Code provides the
following definition for criminal trespass:
§ 3503. Criminal trespass
* * *
-3-
J-S17037-15
(b) Defiant trespasser.―
(1) A person commits an offense if, knowing
that he is not licensed or privileged to do so, he enters
or remains in any place as to which notice against
trespass is given by:
(i) actual communication to the actor;
* * *
18 Pa.C.S.A. § 3503(b)(1)(i).
After a thorough review of the record, the briefs of the parties, the
applicable law, and the well-reasoned opinion of the Honorable Anthony M.
Mariani, we conclude Appellant’s issue merits no relief. The trial court
opinion comprehensively discusses and properly disposes of the question
presented. (See Trial Court Opinion, filed September 30, 2014, at 2-5)
(finding: victim credibly testified that Appellant approached her after she
parked vehicle in her driveway; victim told Appellant to leave her property,
but Appellant refused and struck victim with walking stick, causing victim to
fall and suffer knee injury; court found Appellant incredible, as he provided
inconsistent testimony; Commonwealth presented competent evidence to
establish every element of charged offenses; verdict did not shock one’s
sense of justice, and verdict was not against weight of evidence).
Accordingly, we affirm on the basis of the trial court opinion.
Judgment of sentence affirmed.
-4-
J-S17037-15
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 3/17/2015
-5-
Circulated 03/04/2015 12:08 PM
IN THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, PENNSYLVANIA
CRIMINAL DNISION
COMMONWEALTH OF PENNSYLVANIA
vs.
PAULJ. LETKY,
-'"
."'='
.,..
er;,
Defendant. w
'ti
c;:,
''0
~
-r-
Il7
OPINION o
Mariani, J.
This is a direct appeal wherein the defendant appeals the Judgment of
Sentence of April 14, 2014 which became final when this Court denied defendant's post-
sentencing motions on May 28, 2014. After a non-jury trial, this Court found the
defendant gUilty of simple assault, criminal trespass and harassment. This Court
sentenced the defendant to a term of probation of 2 years relative to the conviction for
simple assault. No further penalty was imposed at the remaining counts. The defendant
filed a timely appeal after his appellate rights were reinstated nunc pro tunc. The
defendant also filed a timely Concise Statement of Errors Complained of on Appeal
alleging that the verdicts were against the weight of the evidence.
Relevant to this appeal, the credible facts of record adduced in this case are as
follows:
On July 30, 2013, Stacie Thomson was returning home from a fishing trip with
her mother, her son and her niece and nephew. She pulled her vehicle into the driveway
Circulated 03/04/2015 12:08 PM
of her residence and parked it. Just after she exited her vehicle, she observed the
d~fendant walking towards her.· She immediately admonished the defendant to leave her
property. Trial evidence demonstrated that, due to previous interactions involving the
defendant, the defendant had been previously instructed by local police and by Ms.
Thomson and her husband to stay off the Thomson's property. According to Ms.
Thomson, the defendant had been instructed approximately twelve times to stay off her
property over a fifteen month period.
Immediately upon being instructed to leave the Thomson's property, the defendant
began walking toward Ms. Thomson. The defendant was walking with the aid of a walking
stick which this Court observed to be approximately four feet in length. As he neared Ms.
Thomson, the defendant raised the walking stick, grabbed each end with his hands and
struck Ms. Thomson across her chest.! Just as the assault occurred, Ms. Thomson's
husband, who was in the residence, came running out of the residence toward the defendant.
The defendant hastily left the property. Ms. Thomson fell to the ground and ultimately
suffered a tom meniscus in her knee.
Ms. Thomson's testimony at trial was corroborated by the testimony of her mother
and her husband.
1 Ms. Thomson indicated at trial that the defendant struck her with the stick "like a cross-check". This
Court equates this description to mean that the defendant held his stick like hockey players do when they
are penalized for "cross-checking". Cross checking is accomplished when a hockey player uses both hands
to thrust a playing stick across the body of an opponent.
2
Circulated 03/04/2015 12:08 PM
The defendant testified in his own defense. The defendant testified that the
Thomson's were hostile toward him because of a mistaken belief that he had stolen a cell
phone from them. He denied ever being told that he was not permitted on the Thomson's
property. He testified that when Ms. Thomson pulled into her driveway during the incident
that she drove her vehicle very close to him near the roadway. He testified that she exited
her vehicle and confronted him. He testified that as she approached him, he gave her a
"head fake" and "slid" past her. According to the defendant, he was "pretty fit for an old
guy" and "good on his feet." He indicated that he raised his walking stick at this point to
maintain his balance but he testified that he did not strike her with it. He testified that Ms.
Thomson never fell but that she "staged" falling to her knees. He also testified that he never
had any physical contact with her and that he never travelled onto the Thomson's property.
The defendant's only claim on appeal is that the guilty verdicts were contrary to the
weight of the evidence. As forth in Criswell v. King, 834 A,2d 505, 512. (pa. 2003):
Given the primary role of the jury in determining questions of
credibility and evidentiary weight, the settled but
extraordinary power vested in trial judges to upset a jury
verdict on grounds of evidentiary weight is very narrowly
circumscribed. A new trial is warranted on weight of the
evidence grounds only in truly extraordinary circumstances,
i.e., when the jury's verdict is so contrary to the evidence that
it shocks one's sense of justice and the award of a new trial is
imperative so that right may be given another opportunity to
prevail. The only trial entity capable of vindicating a claim
that the jury's verdict was contrary to the weight of the
evidence claim is the trial judge -- decidedly not the jury.
3
Circulated 03/04/2015 12:08 PM
834 A.2d at 512. Annbruster v. Horowitz, 572 Pa. 1, 813 A.2d 698, 703 CPa. 2002);
Commonwealth v. Brown, 538 Pa. 410, 648 A.2d 1177, 1189 CPa. 1994». Although
Criswell spoke in terms of a jury verdict, there is no distinction relative to a non-jury verdict.
The initial determination regarding the weight of the evidence is for the fact-finder.
Commonwealth v. Jarowecki, 923 A.2d 425, 433 (pa.Super. 2007). The trier of fact is free
to believe all, some or none of the evidence. Id. A reviewing court is not permitted to
substitute its judgment for that of the fact-finder. Commonwealth v. Small, 741 A.2d 666,
672 CPa. 1999). A verdict should only be reversed based on a weight claim if that verdict
was so contrary to the evidence as to shock one's sense of justice. Id. See also
Commonwealth v. Habay, 934 A.2d 732, 736-737 CPa.Super. 2007). Importantly "[al
motion for a new trial on the grounds that the verdict is contrary to the weight of the
evidence concedes that there is sufficient evidence to sustain the verdict but claims that
'notwithstanding all the facts, certain facts are so clearly of greater weight that to ignore
them or to give them equal weight with all the facts is to deny justice." Commonwealth v.
Widmer, 744 A.2d 745 CPa. 2000». When the challenge to the weight of the evidence is
predicated on the credibility of trial testimony, appellate review of a trial court's decision
is extremely limited. Unless the evidence is so unreliable and/or contradictory as to make
any verdict based thereon pure conjecture, weight of evidence claims shall be rejected.
Commonwealth v. Rossetti, 2004 PA Super 465,863 A.2d 1185, 1191 CPa. Super. 2004).
The fact-finder's rejection of a defendant's version of events or the rejection of an
affirmative defense is within its discretion and not a valid basis for a weight of evidence
attack. Commonwealth v. Bowen, 55 A.3d 1254, 1262 CPa.Super. 2011)
4
Circulated 03/04/2015 12:08 PM
Essentially, the defendant claims that this Court should have credited his testimony
over the testimony of the Commonwealth's witnesses. This Court was well within its
province to determine that the defendant's version of the events was not credible? The trial
evidence presented by the Commonwealth has been recounted herein and was credible,
competent and reliable and established every element of the crimes charged. This Court has
reviewed the trial record and believes that the verdict does not shock any rational sense of
justice and, therefore, the verdict was not against the weight of the evidence.
For the foregoing reasons, the Judgment of Sentence should be affirmed.
By the Court:
J.
2 This Court did not find the defendant to be credible at all. His testimony was inherently inconsistent. The
defendant testified that he was physically fit, could still walk well and was able to use a "head fake" to
avoid Ms. Thomson but he also testified that he needed the walking stick to maintain his balance when he
walked and he had to focus on his steps while walking. This Court did not believe the defendant's
description of the events at issue.
5
| {
"pile_set_name": "FreeLaw"
} |
498 So.2d 43 (1986)
EAST BATON ROUGE PARISH
v.
Florence Hobgood HAYS, et al.
No. 85 CA 0692.
Court of Appeal of Louisiana, First Circuit.
October 15, 1986.
Rehearing Denied December 10, 1986.
Writ Denied February 6, 1987.
*44 William T. Lowrey, Jr. Asst. Parish Atty., Baton Rouge, for plaintiff-appellee East Baton Rouge Parish.
Ashton L. Stewart, Baton Rouge, for defendants-appellants Florence Hobgood Hays, et al.
Before SAVOIE, CRAIN and JOHN S. COVINGTON, JJ.
SAVOIE, Judge.
The sole issue of this appeal is the trial court's denial of severance damages in an expropriation action.
Appellants[1] are the owners of a 234 acre tract of undeveloped property (hereinafter referred to as the Hobgood property) in East Baton Rouge Parish. The property is located across from Baton Rouge's Ryan airport, fronting 1400 feet on the east side of Plank Road by a depth of approximately 5000 feet. The property is severed by a 50 foot drainage canal which runs parallel to and 1,000 feet east of Plank Road, 34 acres lying between the canal and Plank Road, and 200 acres lying east of the canal.
On June 5, 1984, the Parish of East Baton Rouge, under the provisions of LSA-R.S. 19:102, filed an expropriation petition. The purpose of the expropriation was to widen the existing natural drain of 50 feet located on the Hobgood property, to a width of 130 feet in order to improve drainage. Although the petition sought full ownership of the expropriated strip of land, the parties entered into a stipulation prior to trial whereby the Parish would obtain only a drainage servitude for the stipulated price of $30,000.00, and appellants would not contest the taking. The only issue that remained was whether appellants were entitled to any severance damages, and accordingly, the matter was tried on that issue alone.
Following trial on that issue, the trial judge ruled in favor of the Parish, dismissing appellant's claim for severance damages as a result of the acquisition of the drainage servitude, thereby prompting this appeal.
Appellants contend they are entitled to severance damages in the nature of "cost to cure" as enunciated in State, Through Department of Highways v. Champagne, 371 So.2d 626 (La.App. 1st Cir.1979). Therein, the court in an expropriation action, was faced with a similar situation when property, prior to the taking, was severed by a small ditch which could be bridged by a twelve to eighteen inch culvert. However, following the expropriation, the ditch was increased to a width of thirty to forty feet across the top, and eight to thirteen feet at the bottom. In addressing the issue of whether severance damages were due, the court noted the following well established rules relating to severance damages:
A landowner is entitled to recover for damages to the remainder of his property which are occasioned by the taking. These damages are determined as of the date of the trial. R.S. 48:453; State, Through Dep't of Highways v. Romano, 343 So.2d 222 (La.App. 1st Cir.1977). They are ordinarily calculated as the difference between the value of the remaining property before and after the taking. State, Dep't of Highways v. Denham Springs Development Co., Inc., 307 So.2d 304 (La.1975); State, Through Dep't of Highways v. Hoyt, 284 So.2d 763 (La.1973). The burden of proving such damages rests with the landowner who must satisfy the same with legal certainty and a preponderance of the evidence. State, Through Dep't of Highways v. Levy, 242 La. 259, 136 So.2d 35 (1961). The "cost to cure" appraisal method, except in a most unique situation, is not considered as a sound approach to the determination of severance damages as it may not truly reflect the before and after value of the remainder. State, Through Dep't of Highways v. *45 Mason, 254 La. 1035, 229 So.2d 89 (1969); State, Dep't of Highways v. Trippeer Realty Corp., 276 So.2d 315 (La.1973). There is authority, however, for the proposition that the "cost to cure" approach may be used where the damages to be derived are less than the decrease in the market value. State, Dep't of Highways v. Alexandria Volkswagen, Inc., 348 So.2d 176 (La.App.3d Cir.1977). 371 So.2d at 634
With these principles in mind, the question before the court was whether or not the facts of the case presented such a unique situation as to warrant application of the "cost to cure" appraisal method.
In holding that the "cost to cure" method was applicable, the court in Champagne gave the following reasons:
First, we are satisfied that the ditch presents a severe obstacle and virtually isolates these tracts from the highway, thereby rendering their division into one, two or three acre tracts for residential purposes impossible. Second, damages based on the "cost to cure" approach as utilized by Mr. Chauvin are less than damages based on the decrease in market value otherwise caused by the construction where, as here, the tracts involved are deeper than an acre.
In the case sub judice, both sides presented expert testimony at trial concerning the issues of highest and best use of the property, as well as existence of damages resulting from the taking. The experts were in agreement that the highest and best use of the 200 acre severed tract would be for the development of a residential subdivision. However, the dispute was over the question of whether the tract was damaged by the taking of an additional 80 feet for the drainage servitude.
On behalf of the Parish, Ross Shuffield, an expert in appraising property, testified that in his opinion there was no severance damage since the property was already severed at the time of the taking. He further testified that the existence of other available access routes aside from Plank Road, would allow the property to be developed as a residential subdivision. The opinion was concurred in by the remaining experts offered on behalf of the Parish.
Appellants in turn offered the testimony of Julius A. Bahlinger, III, who was accepted as an expert in the fields of appraisal, property management and development. Mr. Bahlinger testified that in order to develop a residential subdivision on this property, access to Plank Road was essential. He reasoned that while there did exist stub-out streets from other adjoining subdivisions, these streets would not be sufficient to handle the volume of traffic generated from a 600 lot subdivision as would be developed on a 200 acre tract. In his opinion, a subdivision that size would need an entrance or collector street to handle the flow of traffic and that any developer would connect this street to Plank Road.
Mr. Bahlinger further testified that in his opinion, absent access to Plank Road, the value of the property, developed as a subdivision, would be reduced at least $200.00 a lot or $120,000.00. This estimate was based upon the existence of the canal severing the property regardless of whether additional property was taken. In his opinion, the measure of damage to the property would be the "cost of curing" the problem, that is the cost of building a bridge to provide access to Plank Road.
Appellants also presented the testimony of Edward Evans who was accepted as an expert engineer in the design and construction of subdivisions. Mr. Evans agreed with the testimony of Mr. Bahlinger that access to Plank Road is necessary in order to develop this property into a subdivision. He testified that none of the existing stub-out streets would be sufficient to handle the traffic necessary to construct and handle a subdivision for a 200 acre tract nor would they provide sufficient access for residents, police, or fire officials. In his opinion the only way to properly subdivide the property would be to bridge the drainage *46 canal and provide access to Plank Road.
Mr. Evans calculated that prior to the taking, the cost to bridge the canal would be approximately $76,000.00. This was based upon the fact that the bridge in question would require four spans bank-to-bank. Following the taking, he testified the cost would be approximately $133,000.00 based upon the fact that seven spans would be required. Thus, the "cost to cure" the taking would be the difference between the cost of the bridges.
In holding that appellants were not entitled to severance damages, the trial court gave the following reasons:
The first determination I need to make is whether or not under the evidence presented in this case there was any market value diminution in the severed property as it should have been appraised under the law than it was before the servitude, before the taking. Mr. Bahlinger's testimony, I thought, was very much on point in many respects. Although he used the hypothetical subdivision approach, certainly his reasoning, his rationale would be the same whatever approach that he would use. And simply it was and he stated that it was a guesstimate of two hundred dollars per lot that he considered to be the diminution because of the existence of the drainage ditch; that in this hypothetical subdivision the value would be two hundred dollars a lot less than it would be if that ditch did not exist. But he further testified that the two hundred dollar a lot figure that he was guesstimating existed prior to the taking and subsequent to the taking; that is, it existed, as opposed to if there would be no drainage ditch there, if it had been filled in all of the way it would be worth what it was worth. But as it is now, it would be worth two hundred dollars less and the servitude the taking of the servitude didn't change that figure. His testimony, basically, is the primary testimony from that side upon which I have to rely but it's supported, certainly, by the defense or the plaintiff, as it were, testimony, Mr. Shuffield, who used different considerations and he valued the property apparently as a parcel, as one big piece of property as opposed to a hypothetical subdivision. In his opinion there was no change in the market price before and after the taking. He testified that in his mind the property was valued at the same both before and after the taking.
The testimony that Mr. Evans offered primarily, in my mind, was testimony that dealt with the cost of cure approach. And if I were to if I felt that I could get to that point, certainly his testimony would be given great weight in this case bcause I have a lot of respect for his opinion and he certainly has a great deal of experience.
But as a matter of law in this case I don't find any unique circumstances that would disallow the consideration of the market approach as favored by the courts consistently over the years. I don't find from the evidence that the defendants have carried the burden of proving that there is a diminution in the market value of the property taken after the taking, after the servitude. And finding that the evidence has not shown that, then there is no point in even going to the next step, finding out what the cost of cure is, because there are no damages; there are no severance damages.
We disagree. As this court stated in State of Louisiana, Department of Transportation and Development v. Chaisson, et ux, 477 So.2d 115 (La.App. 1st Cir.1985):
Property cannot be "taken or damaged" by the State or its political subdivision except for public purposes and with "just compensation" paid to the owner or into the court for his benefit. La. Const. 1974, Art. 1, § 4. In every expropriation, the owner must be compensated to the "full extent of his loss." La. Const.1974, *47 Art. 1, § 4; State, Department of Highways v. Bitterwolf, 415 So.2d 196 (La. 1982). Thus, our constitution does not simply require that the owner of condemned property be compensated with a market value of the property taken and severance damages to his remainder, but that he be "placed in as good a position pecuniarily as he enjoyed prior the taking." State, Department of Highways v. Constant, 369 So.2d 699 (La. 1979). (Emphasis ours).
While it is true that the property was severed and thereby damaged before the Parish expropriated additional property, we cannot ignore the fact that the action by the Parish substantially increased the severity of the severance and consequently the financial burden appellants faced in curing the problem. We feel that this is the very situation for which the "cost to cure" method was designed. Appellants are not requesting that the Parish pay the entire cost of bridging the canal, rather only that portion of the cost which is directly attributable to the additional taking by the Parish. After reviewing the record and exhibits in this matter, we feel that the facts of this case do indeed present a unique situation as referenced in Champagne, supra, and therefore, merit application of the "cost to cure" appraisal method.
In assessing the amount of damages due to appellants, we rely upon the figures presented by their own expert Edward Evans. Mr. Evans testified that prior to the taking the cost of the bridge would be $76,000.00 and that subsequently it would cost $133,000.00. Accordingly, we award severance damage in the amount of $57,000.00 together with judicial interest from date of demand.
For the above and foregoing reasons, the judgment of the trial court is reversed. Judgment is rendered in favor of defendants-appellants in the amount of $57,000.00 together with interest thereon from the date of demand until paid. Costs in the amount of $1,489.88 are to be born by plaintiff-appellee, East Baton Rouge Parish.
REVERSED AND RENDERED.
NOTES
[1] Appellants herein are Florence Hobgood Hays, John P. Hobgood, Edward C. Hobgood, Bill A. Hobgood, Jr., and Herbert W. Hobgood.
| {
"pile_set_name": "FreeLaw"
} |
780 F.2d 438
James N. FLEMING, Appellant,v.W. Bedford MOORE, III, Appellee,National Association for the Advancement of Colored People,Amicus Curiae.
No. 85-1361.
United States Court of Appeals,Fourth Circuit.
Argued Nov. 7, 1985.Decided Dec. 26, 1985.
S.W. Tucker (Hill, Tucker & Marsh, Richmond, Va., Gerald G. Poindexter; Poindexter & Poindexter, Surry, Va., on brief), for appellant.
Thomas E. Albro (Bradley B. Cavedo; Smith, Taggart, Gibson & Albro, Charlottesville, Va., on brief), for appellee.
Before WIDENER and SPROUSE, Circuit Judges, and HAYNSWORTH, Senior Circuit Judges.
SPROUSE, Circuit Judge:
1
James M. Fleming, a black real estate developer in Charlottesville, Virginia, appeals from the judgment of the district court dismissing his Section 19831 action against W. Bedford Moore, III, a white professor at the University of Virginia. In his federal complaint Fleming pursued several aspects of a libel action which he had previously lost as a defendant in a Virginia state court. We affirm the district court's ruling dismissing the action since Fleming's sole possible federal remedy is by appeal from the Supreme Court of Virginia to the United States Supreme Court.
2
The genesis of both the state libel suit, in which Fleming was a defendant, and this action, in which he is the plaintiff, was an advertisement Fleming wrote and published which Moore alleged labeled him a racist. Fleming's disagreement with Moore arose from the former's desire to develop a real estate subdivision adjacent to Moore's home, which was modeled after Thomas Jefferson's Monticello and was situated on approximately 100 acres of land. Beginning in late 1974, Fleming submitted proposals and sought zoning approval to build a planned unit development called Evergreen. Moore opposed the development of Evergreen and spoke out against it at meetings of the planning commission and board of supervisors. Moore spoke of incompatibility of land use, of conservation, and of concerns for the reservoir in the area. The planning commission initially rejected the Evergreen proposal, but later approved a modified plan which provided for a lower population density and a 100 foot buffer strip of trees surrounding the development.
3
During the zoning controversy, Fleming ran an "advertisement" in the Charlottesville-Albemarle Tribune and the Cavalier Daily (the University of Virginia student newspaper). It read, in part:
RACISM
4
I have endeavored to realize the opportunity to provide housing and pleasant surroundings for working people--the sort of people who made this the great country that it is.
5
I do not expect any Farmington members to buy my houses. The tenured position-holders who live off the public dole at the expense of the working people are already well-housed, and could not be expected to live in a racially-integrated neighborhood, anyhow.
6
There is a great deal of irony in the fact that here in Mr. Jefferson's country 200 years after his vision of situating his beloved Monticello upon the hilltop overlooking the developing community we have a replica of Monticello upon the hill overlooking my property which is occupied by a man who wants to deprive working people of the same opportunities that Mr. Jefferson sought for them. Mr. Jefferson even located his slaves' quarters down the hill from his house, but Bedford Moore, the occupant of little Monticello does not want any black people within his sight....
7
On January 3, 1977, Moore brought libel actions against Fleming in the circuit courts of Albemarle County and the City of Charlottesville. A jury verdict in the Albemarle County case awarded Moore $10,000 in compensatory damages and $100,000 in punitive damages. Fleming appealed to the Virginia supreme court, which reversed the case and remanded it for a new trial. Fleming v. Moore, 221 Va. 884, 275 S.E.2d 632 (1981) (Fleming I ). The Virginia court held that the trial court erred in ruling that Fleming's advertisement was defamatory per se and remanded it with instructions on how damages must be proven.
8
At the second trial, an all white jury found for Moore, awarding him $100,000 in compensatory damages and $250,000 in punitive damages as well as prejudgment interest of 12% on the punitive damages. The Supreme Court of Virginia granted an appeal on certain issues, and reversed and remanded on the amount of damages awarded. Moore was given the option of remitting "a substantial part" of the award or undertaking a new trial on the issue of damages only. Gazette, Inc. v. Harris, 325 S.E.2d 713 (Va.1983) (Fleming II ). Moore has since agreed to remit one-third of the awards. Execution of the altered judgment has been stayed pending yet another review by the Virginia supreme court.
9
Fleming sought review of Virginia supreme court rulings by petitioning the United States Supreme Court for a writ of certiorari on September 5, 1984. He asked for a review on the questions of whether the advertisement was a constitutionally protected opinion and whether Moore was a "limited-purpose" public figure. The petition was denied. Fleming filed a second petition for certiorari which was docketed May 2, 1985. In that petition, Fleming repeated his earlier questions and raised others regarding Fleming's state of mind when he published the advertisement and whether the composition of the jury in the second state court trial violated Fleming's due process rights. Once again the Supreme Court denied certiorari.
10
On August 9, 1984, Fleming filed an amended complaint in the United States District Court for the Western District of Virginia, seeking an injunction against enforcement of the state court award as well as other relief. The district court granted Moore's motion to dismiss the complaint on March 27, 1985. In his dismissal order, Judge Turk wrote that he was "of the opinion that plaintiff's sole remedy in the federal courts is by appeal to the United States Supreme Court." Fleming v. Moore, C/A No. 84-0042-C, slip op. at 1 (W.D.Va. March 29, 1985).
11
There is no question, of course, that in order to sustain an action under 42 U.S.C. Sec. 1983, a plaintiff must show both that he has been deprived of a right secured by the Constitution of the United States and that the defendant "deprived [him] of this right 'acting under color of any statute' " of a state. Flagg Brothers, Inc. v. Brooks, 436 U.S. 149, 155, 98 S.Ct. 1729, 1733, 56 L.Ed.2d 185 (1978). There is likewise no question that Moore, in bringing his state libel action against Fleming, did not act on behalf of the state or any of its political subdivisions. Fleming contends, however, that
12
[t]he circumstances alleged here indicate that consideration of race caused the unfairness and partiality which pervaded the entire process of decision. The 1871 Act to enforce the Provisions of the Fourteenth Amendment expressly authorized the lower federal courts to grant equitable relief from judgments of state courts when the decision process is shown to be flawed by racial considerations. The subsequent incorporation of the First Amendment into the Fourteenth emphasizes, in this case, the imperative of liberty and justice for all.
13
The state action apparently alleged by Fleming is that
14
the Supreme Court of Virginia failed, and later refused, to consider Fleming's claim of absolute privilege under the First Amendment to publish his opinion as to what his most vocal opponent in an on-going zoning controversy wants and does not want. By its failure 6 March 1981 to recognize that claim and, accordingly, to enter final judgment for the defendant ..., that court subjected Fleming to the expense, anguish and risk of further litigation and thereby denied to him the equal protection of the laws. And by its 7 June 1984 refusal to consider such claim, that court gave its approval to the deprivation of Fleming's property without due process of law.
15
We find no merit in Fleming's argument.
16
Fleming has, on two occasions, attacked the judgment of the Supreme Court of Virginia by petitioning the United States Supreme Court for certiorari. This, of course, was the appropriate procedure. We detect nothing in 42 U.S.C. Sec. 1983 that would permit a federal court to relitigate the libel issues under circumstances present here.
17
AFFIRMED.
1
42 U.S.C. Sec. 1983 (1982)
| {
"pile_set_name": "FreeLaw"
} |
STATE OF MICHIGAN
COURT OF APPEALS
FRANKENMUTH INSURANCE COMPANY, FOR PUBLICATION
July 21, 2015
Plaintiff-Appellant, 9:00 a.m.
v No. 320674
Kent Circuit Court
LC No. 12-006867-ND
LEONARD POLL and RUTH HEUBEL,
Defendants,
and
CITIZENS INSURANCE COMPANY OF
AMERICA and HANOVER INSURANCE
COMPANY,
Defendants-Appellees.
Before: RONAYNE KRAUSE, P.J., and MURPHY and SERVITTO, JJ.
PER CURIAM.
In this subrogation action under the No-Fault Act, MCL 500.3101 et seq., plaintiff
Frankenmuth Insurance Company (Frankenmuth) appeals by right the trial court’s orders
granting summary disposition in favor of defendants Citizens Insurance Company of America
and Hanover Insurance Company (Citizens/Hanover)1 and denying Frankenmuth’s motion for
reconsideration. We affirm.
The underlying facts are undisputed. Frankenmuth is the insurer of a home located in
Caledonia, Michigan, owned by non-party Bonnie Gabbert. Citizens/Hanover is the insurer of a
1999 Lincoln automobile owned by defendant Ruth Heubel. At the time of the accident that is
the subject of this appeal, Heubel’s insurance policy contained a named-driver exclusion, as
permitted by MCL 500.3009(2), which specifically named Heubel’s son, defendant Leonard
1
Although named separately, the record indicates that Citizens Insurance Company of America
and Hanover Insurance Company are the same entity.
-1-
Poll, as an excluded driver and warned that all liability coverage would be void if Poll operated
the Lincoln. The policy explicitly warned, inter alia, that “[w]hen a named excluded person
operates a vehicle, all liability coverage is void – no one is insured” and that one of the “legal
consequences” of allowing a named excluded driver to operate the vehicle would be that “the
vehicle is considered uninsured under the no-fault statute[.]”
In September of 2011, Poll was driving Heubel’s Lincoln when he lost control of the
vehicle and crashed into Gabbert’s home, causing extensive damages. Pursuant to its
homeowner’s insurance policy with Gabbert, Frankenmuth paid Gabbert $108,260.42, to cover
the damages. Frankenmuth then initiated this subrogation action to recover those costs from
Citizens/Hanover, as the primary insurer of the Lincoln, and from Heubel and Poll individually.2
Citizens/Hanover moved for summary disposition pursuant to MCR 2.116(C)(10), arguing that
the named-driver exclusion relieved it from any insurance liability for damages caused while
Poll was driving the Lincoln. The trial court agreed and granted the motion. It subsequently
denied Frankenmuth’s motion for reconsideration.
We review de novo a trial court’s ruling on a motion for summary disposition. BC Tile &
Marble Co, Inc v Multi Bldg Co, Inc, 288 Mich App 576, 583; 794 NW2d 76 (2010). We also
review de novo issues involving statutory construction and the construction of insurance
contracts. Bronson Methodist Hosp v Mich Assigned Claims Facility, 298 Mich App 192, 196;
826 NW2d 197 (2012). The trial court properly grants a motion for summary disposition under
MCR 2.116(C)(10) when there is no genuine issue of material fact and the moving party is
entitled to judgment as a matter of law. BC Tile & Marble Co, 288 Mich App at 583. We
review a trial court’s decision on a motion for reconsideration for an abuse of discretion.
Churchman v Rickerson, 240 Mich App 223, 233; 611 NW2d 333 (2000). An abuse of
discretion occurs when the trial court’s decision falls outside the range of reasonable and
principled outcomes. Woodington v Shokoohi, 288 Mich App 352, 355; 792 NW2d 63 (2010).
Frankenmuth argues that Citizens/Hanover, as the primary insurer of the involved
vehicle, is liable for the property damage irrespective of whether Heubel was personally involved
in the accident. Frankenmuth relies on the three-prong test articulated by our Supreme Court in
Turner v Auto Club Ins Ass’n, 448 Mich 22; 528 NW2d 681 (1995), under which an insurer is
liable for property protection insurance benefits if (1) there has been “accidental damage to
tangible property arising out of the ownership, operation, maintenance, or use of a motor vehicle
as a motor vehicle,” MCL 500.3121; (2) no exceptions to the insurer’s liability enumerated in
MCL 500.3123 apply; and (3) the insurer insures the owner of the vehicle “involved in the
accident.” Id. at 28-29. Frankenmuth argues that each prong is met in this case, so
Citizens/Hanover is therefore liable, despite the fact that Poll was an uninsured driver. However,
the named-driver exclusion, as it is written in the contract at issue, negates Frankenmuth’s
conclusion.
2
Heubel and Poll are not parties to this appeal pursuant to a consent judgment between them and
Frankenmuth.
-2-
“An insurer is free to define or limit the scope of coverage as long as the policy language
fairly leads to only one reasonable interpretation and is not in contravention of public policy.”
Farmers Ins Exch v Kurzmann, 257 Mich App 412, 418; 668 NW2d 199 (2003) (internal
quotation omitted). Under MCL 500.3009(2), “[t]he Legislature has made it possible for
insureds and insurers to exclude bad drivers from a policy.” Progressive Mich Ins Co v Smith,
490 Mich 977, 977 n 2; 806 NW2d 494 (2011) (YOUNG, C.J., concurring). Specifically:
If authorized by the insured, automobile liability or motor vehicle liability
coverage may be excluded when a vehicle is operated by a named person. Such
exclusion shall not be valid unless the following notice is on the face of the policy
or the declaration page or certificate of the policy and on the certificate of
insurance: Warning—when a named excluded person operates a vehicle all
liability or coverage is void—no one is insured. Owners of the vehicle and others
legally responsible for the acts of the named excluded person remain fully
personally liable. [500.3009(2)]
The operative effect of such a named-driver exclusion is that when a named excluded driver
operates the insured vehicle, “coverage is void—no one is insured.” MCL 500.3009(2);
Bronson, 298 Mich App at 198.
Here, the named-driver exclusion in Heubel’s car insurance policy contained verbatim the
warning set forth in MCL 500.3009(2). We must enforce as written both the plain and
unambiguous language of the statute, as well as the clear and unambiguous terms of the
insurance policy not in conflict with that statute. Bronson, 298 Mich App at 198. Applying the
plain language of both the insurance policy’s named-driver exclusion and the statute, while Poll
drove Heubel’s vehicle, the insurance policy was void, and therefore the security required by
MCL 500.3101 was not in effect at the time of the accident (i.e., no one was insured). Id.
Because Citizens/Hanover was not the insurer of the vehicle “involved in the accident,” Turner,
448 Mich at 29, at the time the accident occurred, it was not liable for the damages incurred.
Frankenmuth attempts to avoid the above conclusion by noting, accurately, that Bronson
dealt with the effect of MCL 500.3009(2) on an insurer’s obligation to provide personal injury
protection benefits, not property damage benefits. Frankenmuth further points out, also
accurately, that there are significant differences between personal injury protection benefits and
property damage benefits. However, neither Bronson nor MCL 500.3009(2) are applicable
solely to personal injury protection benefits. Indeed, subsection (1) of that statute specifically
refers to liability for both property damage and bodily injury. As Frankenmuth acknowledges,
the Legislature has seen fit in the past to make certain exceptions applicable to only personal
injury benefits and not property damage benefits. See MCL 500.3113(a). The Legislature did
not do the same here, indicating its intent to make MCL 500.3009(2) equally applicable to both
personal injury protection benefits and property damage benefits.
Frankenmuth finally argues that the named-driver exclusion is void as against public
policy. We disagree. An insurance policy provision is invalid as against public policy if it
conflicts with a statute. Auto-Owners Ins Co v Martin, 284 Mich App 427, 434; 773 NW2d 29
(2009). Here, however, as noted above, the named-driver exclusion is specifically permitted by
MCL 500.3009(2), and MCL 500.3009(2) is a valid exercise of legislative power. See, e.g.,
-3-
Verbison v Auto Club Ins Ass’n, 201 Mich App 635, 639-642; 506 NW2d 920 (1993); Muxlow v
Auto Club Ins Ass’n, 152 Mich App 817, 819-820; 394 NW2d 121 (1986). Therefore, the
named-driver exclusion is not void as against public policy.
The trial court properly granted summary disposition in favor of Citizens/Hanover, so
likewise it did not abuse its discretion in denying Frankenmuth’s motion for reconsideration.
Citizens/Hanover, being the prevailing party, may tax costs. MCR 7.219(A).
Affirmed.
/s/ Amy Ronayne Krause
/s/ William B. Murphy
/s/ Deborah A. Servitto
-4-
| {
"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 25, 2007
Charles R. Fulbruge III
Clerk
No. 05-41565
Summary Calendar
JOHN MICHAEL RIVERA,
Plaintiff-Appellant,
versus
GERALD DAWSON; UP BRYANT, Major; J. SMITH, Captain; CLARENCE
THOMAS, Doctor; FRED MOORE; ROBERT WILLIAMS, Laundry Captain;
JAMES DENBY, Laundry Lieutenant,
Defendants-Appellees.
--------------------
Appeal from the United States District Court
for the Eastern District of Texas
USDC No. 1:01-CV-673
--------------------
Before KING, HIGGINBOTHAM, and GARZA, Circuit Judges.
PER CURIAM:*
John Michael Rivera, Texas prisoner # 935107, appeals the
summary judgment granted in favor of the appellees in his
42 U.S.C. § 1983. He argues that the district court erred in
granting summary judgment on his claim that the appellees
assigned him to a job that caused his pain and aggravated his
back problems. Rivera has not demonstrated that Gerald Dawson or
Joe Smith were personally involved in assigning him to the
laundry folding position and, had they been involved, they would
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
No. 05-41565
-2-
have had any knowledge that this work assignment would aggravate
Rivera’s medical condition. See Jackson v. Cain, 864 F.2d 1235,
1246 (5th Cir. 1989). Because Rivera’s work assignment did not
violate his sedentary work restrictions, Robert Williams and
James Denby’s failure to change Rivera’s work assignment amounted
to no more than negligence. See Reeves v. Collins, 27 F.3d 174,
176-77 (5th Cir. 1994).
Rivera argues that the appellees retaliated against him for
filing grievances and for filing this civil action. Rivera has
not presented any evidence which demonstrates that the defendants
acted with a retaliatory motive or alleged a chronology of events
from which retaliation may plausibly be inferred. See Jones v.
Greninger, 188 F.3d 322, 325 (5th Cir. 1999).
Rivera argues that the appellees failed to bring the laundry
facility into compliance with the requirements of the Americans
with Disabilities Act (ADA). Rivera may not bring a 42 U.S.C.
§ 1983 action for damages against a state official in his
individual capacity to vindicate rights conferred by Title II of
the ADA. See McCarthy ex rel. Travis v. Hawkins, 381 F.3d 407,
412-14 (5th Cir. 2004). Further, because Rivera has been
transferred to another unit, any claim to injunctive relief that
he may have had is now moot. See Herman v. Holiday, 238 F.3d
660, 665 (5th Cir. 2001).1
1
Named appellee Bryant was never served and is not a party
to this appeal. The claims against named appellees Moore and
Thomas were severed by the district court, hence Moore and Thomas
No. 05-41565
-3-
AFFIRMED.
are not parties to this appeal. Rivera seemingly makes other
claims in his brief, but those claims are either inadequately
briefed or not properly on appeal for lack of his raising them
below.
| {
"pile_set_name": "FreeLaw"
} |
994 F.2d 1569
26 U.S.P.Q.2d 1912
EASTMAN KODAK COMPANY, Appellant,v.BELL & HOWELL DOCUMENT MANAGEMENT PRODUCTS COMPANY, Appellee.
No. 92-1482.
United States Court of Appeals,Federal Circuit.
June 2, 1993.
Richard D. Rochford, Jr., Nixon, Hargrave, Devans & Doyle, of Rochester, NY, argued for appellant. With him on the brief was James D. Kole. Also on the brief was Kathleen F. Tranelli, Eastman Kodak Co., Rochester, NY.
Howard B. Rockman Welsh & Katz, Ltd., Chicago, IL, argued for appellee. With him on the brief was Kathleen A. White.
David Goldberg, Cowan, Liebowitz & Latman, P.C., of New York City, was on the brief for the amicus curiae, Xerox Corp.
Before MICHEL, Circuit Judge, SMITH, Senior Circuit Judge, and SCHALL, Circuit Judge.
MICHEL, Circuit Judge.
1
Eastman Kodak Company (Kodak) appeals from the decision of the Trademark Trial and Appeal Board (Board) of the Patent and Trademark Office (PTO) in an intent-to-use application proceeding under the Lanham Act, as amended by the Trademark Law Revision Act of 1988, 15 U.S.C. §§ 1051-1127 (1992),1 Eastman Kodak Co. v. Bell & Howell Document Management Prods. Co., Nos. 86,083, 86,093, and 86,101 (TTAB June 8, 1992). In its decision, the Board denied Kodak's motion for summary judgment, granting summary judgment for Bell & Howell Document Management Products Company (B & H) on the issue of descriptiveness, and dismissing the oppositions "without prejudice to the filing of a petition to cancel the registration issued after a statement of use has been filed," id., slip op. at 6. Because we hold that, in the circumstances of an intent-to-use application proceeding, the Board's actions are permissible under the statute, we affirm.
BACKGROUND
2
On October 12, 1990, B & H filed intent-to-use applications, under 15 U.S.C. § 1051(b), to register the numbers "6200," "6800" and "8100" on the Principal Register as trademarks for microfilm reader/printers. After initial examination of the applications, the trademark examining attorney approved the applications for publication in the PTO's Official Gazette.
3
Section 1051(b) allows an applicant who alleges a bona fide intent to use a mark to file an application seeking registration on the Principal Register. If, upon examination, the mark appears registrable, the PTO publishes it for opposition. 15 U.S.C. § 1062(a). If no opposer is successful, the PTO issues a notice of allowance. Id. § 1063(b)(2). The applicant then has six months2 in which to file a statement that verifies that the mark is in use in commerce, the date of first use in commerce, the goods and services in connection with the mark are used in commerce, and the manner in which the mark is being used. Id. § 1051(d)(1). The statement of use is then subject to another examination, in which the PTO considers how the mark is used and, if it is still satisfied that, as used, the mark is registrable, issues a certificate of registration. Id.
4
Kodak, a competitor of B & H in the manufacture and marketing of business equipment products, including microfilm reader/printers, timely filed a notice of opposition to registration of each of the three marks. Kodak alleged that the marks would be used solely as model designators for the reader/printers and therefore would be merely descriptive. Kodak argued that B & H had not shown that the marks had acquired secondary meaning and that, therefore, registration of the marks would be improper. The three opposition proceedings were consolidated before the Board.
5
B & H moved for summary judgment on the grounds that there were no genuine issues of material fact regarding the alleged mere descriptiveness of its applied-for number marks and, alternatively, that Kodak had no standing to oppose B & H's applications. Kodak filed a cross-motion for summary judgment. The Board determined that Kodak did have standing to oppose and that conclusion is not contested in this appeal.
6
On the issue of mere descriptiveness, the Board stated that it "believe[s] that it is possible for a numerical designation, which functions only in part to designate a model or grade, to be inherently distinctive and registrable without a showing of secondary meaning." Eastman Kodak, slip op. at 5 (citing Neapco Inc. v. Dana Corp., 12 USPQ2d 1746, 1748 (TTAB 1989)). Due to the nature of intent-to-use applications, the number marks at issue had not been used at the time of the opposition proceeding. Accordingly, the Board held that it could not determine whether the numerical designations "are merely descriptive or if they are registrable without a showing of secondary meaning." Id. The Board concluded that in such situations, where the descriptiveness issue could not be resolved until use had begun, the opposition should be dismissed without prejudice to the initiation of a cancellation proceeding against the mark if the mark is registered after the statement of use is filed. Consequently, the Board denied Kodak's motion for summary judgment, granted B & H summary judgment on the descriptiveness issue, and dismissed the oppositions without prejudice. As a result, B & H received a notice of allowance.
DISCUSSION
7
The principal issue in this case is whether the Board's implied creation of a presumption in favor of the applicant for a numerical mark intended for use as more than a model designator is a reasonable interpretation of the Board's authority under the Lanham Act. We hold that it is.
8
Under the Chevron doctrine, established in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), "[w]hen a court reviews an [administrative] agency's construction of the statute which it administers, it is confronted with two questions." Id. at 842, 104 S.Ct. at 2781. The first is whether Congress has directly addressed the precise question at issue. If so, then the agency "must give effect to the unambiguously expressed intent of Congress," id. at 843, 104 S.Ct. at 2782, and the court must, of course, review the agency's interpretation accordingly. If, however, "the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute." Id. (emphasis added).3 In order to uphold the agency's interpretation, the court need not conclude that it was the only permissible construction or even the construction the court would have reached on its own reading of the statute. Id. n. 11. The agency's interpretation must merely be "reasonable." See id. at 866, 104 S.Ct. at 2793; see also Pauley v. BethEnergy Mines, Inc., --- U.S. ----, ----, 111 S.Ct. 2524, 2535, 115 L.Ed.2d 604 (1991) (applying "reasonableness" standard); IRS v. Fair Labor Relations Auth., 494 U.S. 922, 928, 110 S.Ct. 1623, 1627, 108 L.Ed.2d 914 (1990) (same); Zenith Elec. Corp. v. United States, 988 F.2d 1573, 1582-83 (Fed.Cir.1993) (same); DeCosta v. United States, 987 F.2d 1556, 1558 (Fed.Cir.1993) (same).
I.
9
In the instant case, the Board's decision to grant B & H summary judgment and dismiss Kodak's opposition without prejudice, necessarily involved the Board's concluding that numerical designators are presumptively not merely descriptive under Lanham Act section 2(e), 15 U.S.C. § 1052(e), when applied for in an intent-to-use application under section 1(b), 15 U.S.C. § 1051(b). Section 1(b) sets forth the requirements for filing an intent-to-use application. See 15 U.S.C. § 1051(b). Section 2(e) precludes registration of a trademark on the Principal Register that, inter alia, "[c]onsists of a mark which, ... when used on or in connection with the goods of the applicant is merely descriptive or deceptively misdescriptive of them." Id. § 1052(e). The statute on its face neither requires nor precludes the Board's interpretation.
10
Nor does the legislative history of the Trademark Law Revision Act of 1988 speak directly to this issue. The legislative history does demonstrate that Congress intended most marks applied for in an intent-to-use application (intent-to-use mark) to be reviewed for descriptiveness in the initial examination/pre-use stage of the intent-to-use application process. For example, Senate Report 515 states that "the absence of specimens at the time the application is filed will not affect examination on numerous fundamental issues of registrability (that is, descriptiveness, geographic or surname significance, or confusing similarity)." S.Rep. No. 515, 100th Cong., 2d Sess. 32 (1988), reprinted in 1988 U.S.C.C.A.N. 5577, 5595. With respect to the examination of the statement of use, which is filed after a notice of allowance has been issued, the Report states:
11
The Patent and Trademark Office's examination of the statement of use will be only for the purpose of determining issues that could not have been fully considered during the initial examination of the application, that is, whether the person filing the statement of use is the applicant, whether the mark as used corresponds to the drawing submitted with the application, whether the goods or services were identified in the application and not subsequently deleted, and whether the mark, as displayed in the specimens or facsimiles, functions as a mark.
12
Id. at 34, 1988 U.S.C.C.A.N. at 5596 (emphasis added). As the highlighted phrase shows, Congress did intend the PTO to confirm, after the filing of the statement of use, that the intent-to-use mark, as displayed and used, actually "functions as a mark." Indeed, the statute provides: "Subject to examination and acceptance of the statement of use, the mark shall be registered.... Such examination may include an examination of the factors set forth in subsections (a) through (e) of section 1052." 15 U.S.C. § 1051(d)(1) (emphasis added). And the legislative history itself emphasized that "[t]his provision [of the statute] permits the [PTO] to raise issues of registrability that might not be evident until the applicant makes available specimens showing the mark as used and/or clarifying the nature of the goods or services involved." H.R.Rep. No. 1028, 100th Cong., 2d Sess. 9 (1988). Thus, the statute and legislative history provide for the situation where, as here, the question of mere descriptiveness cannot be answered until after use has begun.
13
Furthermore, it is clear from the legislative history that Congress, for policy reasons, chose to sequence the opposition process before the use of an intent-to-use mark had commenced. See S.Rep. No. 515 at 32, 1988 U.S.C.C.A.N. at 5595 ("Subjecting an intent-to-use application to the opposition process before the applicant makes use of its mark is essential if the system is to achieve its goal of reducing uncertainty before the applicant invests in commercial use of the mark."). Accordingly, Congress knew that some issues of registrability could not be decided in opposition proceedings and would therefore have to be addressed in the post-use PTO examination or challenged in a cancellation proceeding after the mark was registered.
14
Thus, under step one of our inquiry under the Chevron doctrine, the Board's interpretation does not contravene any clear and unambiguous statutory meaning.
II.
15
We further conclude, under step two of the Chevron doctrine, that the Board's construction is a reasonable interpretation of the Lanham Act.
16
Kodak argues, however, that the Board's interpretation is unreasonable because it would preclude asserting mere descriptiveness as a basis for denying registration of both word and number marks in intent-to-use applications. This argument is unavailing for several reasons. First, there are words and phrases that, as applied to certain goods, the examining attorney in the initial examination could certainly find to be prima facie merely descriptive. For example, an examining attorney could easily find that the term "reader/printer" applied to the microfilm reader/printers at issue here would be merely descriptive or that the term "slow-cooker" was merely descriptive of a Dutch oven. Furthermore, the examining attorney may also find numbers that are intended for use solely as model designators to be prima facie merely descriptive. Cf. J.M. Huber Corp. v. Lowery Wellheads, Inc., 778 F.2d 1467, 1469, 228 USPQ 206, 207 (10th Cir.1985) (common law trademark infringement action in district court).
17
Second, Kodak's argument must assume that under circumstances such as these, after a notice of allowance is issued, intent-to-use marks will automatically be passed to registration. However, the statute provides for another examination of the mark after the statement of use is filed. 15 U.S.C. § 1051(d)(1) ("Subject to examination and acceptance of the statement of use, the mark shall be registered in the Patent and Trademark Office...."). Moreover, the statute contemplates the need, in certain circumstances, for a complete reexamination: "Such examination may include an examination of the factors set forth in subsections (a) through (e) of section 1052." Id. In addition, the trademark regulations, promulgated by the PTO pursuant to authority granted by statute, see id. § 1123, provide that "[a] timely filed statement of use which meets the minimum requirements specified in paragraph (e) of this section will be examined in accordance with §§ 2.61 through 2.69." 37 C.F.R. § 2.88(f) (emphasis added). Thus, once the examining attorney establishes that the statement of use has met the minimum requirements set forth in 37 C.F.R. § 2.88(e) (the prescribed fee, at least one specimen of use, and a declaration by the applicant that the mark is in use in commerce), the regulation requires that the examining attorney reexamine the mark under the standards of the initial examination (37 C.F.R. §§ 2.61-2.69).
18
Furthermore, the Trademark Examination Guide 3-89 (TEG) sets forth a standard for this examination of the statement of use: "The [PTO] will not issue any requirements or refusals concerning matters which could have or should have been raised during initial examination, unless the failure to do so in initial examination constitutes a clear error." TEG § A.9.b. The TEG defines "clear error" as "an error which, if not corrected, would result in issuance of a registration in violation of the Act." Id. Thus, the examining attorney's examination standard is for legal error and is not the deferential clearly erroneous standard due, for example, fact-findings of a district court. Accordingly, the examining attorney essentially must make a de novo determination on any issue that would affect the legal correctness of registration.4
19
The descriptiveness of the manner of use of numerical designators, such as the marks challenged in these oppositions, is such an issue. This is so even though the TEG singles out descriptiveness in its discussion of the extent of reexamination of the mark: "[T]he examining attorney may not issue a refusal under Trademark Act Section 2(e)(1), 15 U.S.C. Section 1052(e)(1), unless the refusal is dictated by changed circumstances from the time of initial examination or the failure to issue such a refusal would constitute clear error." Id. (emphasis added). In a case such as this, however, as the Board acknowledged, the issue of whether the numerical marks are merely descriptive cannot be resolved until they have been used, because it is the manner in which the numerical marks are used that renders them merely descriptive (solely model designators) or not. Thus, the situation delineated in the TEG of when "evidence that the mark is merely descriptive was available during initial examination," id., is not present here. The use of the mark may constitute "changed circumstances" from the information which the examining attorney could analyze in the initial examination. But even if the circumstances are not considered changed, unless the applicant originally claims use of the mark as purely a model designator, the examining attorney can make a determination of descriptiveness of numerical designators only after the statement of use has been filed. If, upon such further examination, the examining attorney determines that the mark is used in a merely descriptive manner, then the examining attorney must refuse registration because registration of a merely descriptive mark on the Principal Register would constitute "issuance of a registration in violation of the Act," id.--the TEG's definition of "clear error," id.
20
There is a serious question of whether the presumption created by the Board in favor of numerical designators would be lawful if the examining attorney, after the statement of use and specimens are filed, were to approve the mark for registration without serious inquiry as to whether, as used, the mark functions as a trademark under the provisions of section 2. Such a de novo determination under section 2 appears to be the only way the practical presumption created by the Board could be sustainable under Chevron. Therefore, any other interpretation of the applicable procedure would be of questionable validity as long as the Board maintains this presumption.
21
Furthermore, Kodak's contention that the Board's interpretation of the statute "in effect eliminates Lanham Act § 2(e) as a basis for rejecting an intent-to-use application," is unavailing because Kodak's analysis would eliminate the use of intent-to-use applications for any numerical mark that could possibly be used as a model designator, in whole or in part. However, the statute does not exclude from intent-to-use applications any type of mark. Because Kodak is incorrect that the Board's decision precludes the use of descriptiveness as a basis for rejecting intent-to-use applications and because Kodak's interpretation would preclude use of intent-to-use applications for such numerical marks in direct contravention of the statute, certainly the Board's failure to adopt such an interpretation is not unreasonable.
22
Kodak further asserts that the Board's interpretation is unreasonable because it allegedly creates a different standard for registrability for intent-to-use applications from use-based applications with regard to descriptiveness, contrary to statutory design. Kodak is correct that the statute provides for the same substantive requirements to be met for intent-to-use and use-based applications. Compare 15 U.S.C. § 1051(a) (requirements for use-based applications) with id. § 1051(b)-(d) (requirements for intent-to-use applications). However, Kodak's argument misunderstands the character of the Board's action. The Board merely adopted a presumption that a numerical mark, which may be used at least in part as a model designator, is not merely descriptive in the absence of evidence of how it is actually used. Once B & H files its statement of use with specimens of actual use, the PTO will refuse registration if the marks are, indeed, used in a merely descriptive fashion, just as the PTO would deny such a mark registration in a use-based application. See 37 C.F.R. § 2.88(f) ("A timely filed statement of use which meets the minimum requirements specified in paragraph (e) of this section will be examined in accordance with §§ 2.61 through 2.69."); TEG § A.9.e. ("The same standards applied in use applications in determining whether the specimens support use of the applied-for mark apply to specimens in intent-to-use applications."); id. § A.9.f. ("The examining attorney should issue requirements and refusals, as appropriate, based on the examination of the specimens, subject to the same standards which govern the examination of specimens in any other phase of examination."). Thus, the standard that the PTO applies in either case is the same--only the timing of such review is different. Accordingly, the Board's interpretation is not unreasonable under this analysis.5
23
Kodak contends that the difference in timing is sufficiently prejudicial to render the Board's interpretation unreasonable. Kodak argues particularly that the Board's decision relegates such questions of mere descriptiveness to a post-registration cancellation proceeding. Kodak maintains that the delay is prejudicial to it because in a cancellation proceeding, the registration at issue enjoys a presumption of validity. Kodak's argument is misplaced because, although the registration is considered prima facie valid, the challenger's burden of proof in both opposition and cancellation proceedings is a preponderance of the evidence. 2 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 20.16 (3d ed. 1992).
24
Furthermore, as shown above, the legislative history clearly shows that Congress considered the problem of placing the opposition proceeding of intent-to-use marks before actual use had occurred, but still chose to position the proceedings at that point in time for policy reasons. See discussion supra part I. And Congress codified this arrangement by (1) providing for the Commissioner, after initial examination, to publish the intent-to-use mark for opposition if it "would be entitled to registration upon the acceptance of the statement of use required by section 1051(d) of this title," 15 U.S.C. § 1062(a) (emphasis added), (2) providing for only thirty days from publication6 for a party to oppose registration of the mark, id. § 1063(a), and (3) providing that if the applicant prevails in the opposition proceeding, "a notice of allowance7 shall be issued to the applicant if the applicant applied for registration under section 1051(b)," id. § 1063(b)(2). Thus, the statute makes clear that the opposition proceedings occur before the statement of use is filed by the applicant, and any prejudice flowing to Kodak from this arrangement cannot render the Board's interpretation an unreasonable one in light of the statute.8
25
Because the Board's interpretation is consistent with the language and purposes of the statute, we hold that it is reasonable.
III.
26
Kodak argues that the Board erred in denying it summary judgment because Kodak believes that B & H's intent-to-use marks will be used as model designators, rendering them merely descriptive and therefore not registrable without a showing of secondary meaning. Kodak further asserts that it submitted evidence to the Board supporting this contention. Even if we assume that Kodak's evidence proves that B & H's numerical marks will be used as model designators, this conclusion is not dispositive of the descriptiveness issue as Kodak claims. In order for B & H's marks to be found merely descriptive, they must be used solely as model designators and not in any source-indicating function. As part of its intent-to-use application, B & H necessarily must have asserted a bona fide intent to use each number as a trademark, see 15 U.S.C. § 1051(b)(1), and not, therefore, solely as model designators. And prevailing Board authority establishes that "[d]epending upon the nature and manner of use, it is possible for an alphanumeric designation, which functions only in part to designate model or grade, to be inherently distinctive, and hence not require a showing of secondary meaning in order to be protected as a trademark." Neapco, 12 USPQ2d at 1748 (citing In re Clairol Inc., 457 F.2d 509, 510, 173 USPQ 355, 356 (CCPA 1972)) (emphasis added). Thus, even if Kodak is correct that the intent-to-use marks will be used as model designators, the law does not support Kodak's ultimate conclusion that therefore the marks will necessarily be merely descriptive. Indeed, the PTO has already granted B & H registration of one numerical (7500) and one alphanumeric mark (4000R), used in connection with microfilm reader/printers, without proof of secondary meaning. Eastman Kodak, slip op. at 4.
CONCLUSION
27
Based on the foregoing, the Board's decision is
28
AFFIRMED.
1
Like J. Thomas McCarthy, see, e.g., 2 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 19.07 (3d ed. 1992), we refer to the current trademark statutory provisions as the "Lanham Act," even though the 1946 statute has been extensively amended, including in 1988
2
The statute also provides for extensions of time for good cause. See 15 U.S.C. § 1051(d)(2)
3
Elsewhere, the court uses the word "reasonable," interchangeably with "permissible." See Chevron, 467 U.S. at 866, 104 S.Ct. at 2793
4
Indeed, another provision of the TEG provides that "Examination of the statement of use follows the same procedural course as the initial examination of the application under Trademark Rule 2.61 et seq., 37 C.F.R. Section 2.61 et seq." TEG § A.9.a
5
Kodak asserts that Neapco, Inc. v. Dana Corp., 12 USPQ2d 1746 (TTAB 1989), "must be limited to situations in which, as in Neapco, the Board is able to consider evidence that the model designator in actual use serves a trademark (source-indicating) function." Kodak argues that because B & H cannot prove use as a trademark in the initial examination, B & H should be denied registration at that point. However, the Board cannot consider "evidence that the model designator in actual use serves a trademark ... function" (emphasis added) until the mark is used. Under the TEG, the examining attorney examines the specimens of use "to confirm that the specimens show use of the subject matter as a trademark or service mark on or in connection with the goods or services identified in the statement of use." TEG § A.9.f. Thus, Neapco does apply in this case--just at the second stage in the two-stage examination process
6
The statute also provides for extensions of time for good cause. See 15 U.S.C. § 1063(a)
7
A notice of allowance, rather than a certificate of registration, is issued, after the initial examination and prior to the applicant's filing of a statement of use, unless the mark was successfully opposed. Id. § 1063(b)(2). If the examining attorney, after further examination, accepts the applicant's later-filed statement of use, then the certificate of registration "shall be issued." Id. § 1051(d)(1)
8
Kodak argues that the timing is also prejudicial because not enabling Kodak to challenge the marks until a post-registration cancellation proceeding allows an applicant to apply for several marks and tie them up for a period of months or years through the extension periods for filing a statement of use, see id. § 1051(d)(2), even though the marks may ultimately be found merely descriptive. This argument fails to acknowledge, however, certain important requirements the applicant must meet during the application process
For example, the applicant must specify, in the original application,
applicant's bona fide intention to use the mark in commerce, the goods on or in connection with which the applicant has a bona fide intention to use the mark and the mode or manner in which the mark is intended to be used on or in connection with such goods, including a statement to the effect that the person making the verification believes himself or herself, or the firm, corporation, or association in whose behalf he or she makes the verification, to be entitled to use the mark in commerce, and that no other person, firm, corporation, or association, to the best of his or her knowledge and belief, has the right to use such mark in commerce....
Id. § 1051(b)(1)(A). In addition, with each request for extension (after the first), the applicant must provide "a verified statement that the applicant has a continued bona fide intention to use the mark in commerce and specifying those goods or services identified in the notice of allowance on or in connection with which the applicant has a continued bona fide intention to use the mark in commerce." Id. § 1051(d)(2). Thus, the applicant, in effect, verifies at the time of application that he or she believes that the mark is registrable. Under Kodak's contention, the applicant would have to intentionally misrepresent his or her belief when applying for the mark. It is not unreasonable for the PTO to assume that each application is bona fide until proven otherwise.
Furthermore, extensions are only granted (after the first) "upon a showing of good cause by the applicant." Id. To show good cause, the applicant must provide:
(1) An allegation that the applicant has not yet made use of the mark in commerce on all the goods or services specified in the notice of allowance ..., and
(2) A statement of applicant's ongoing efforts to make use of the mark in commerce on or in connection with each of the goods or services specified in the verified statement of continued bona fide intention to use required under paragraph (b) of this section. Those efforts may include, without limitation, product or service research or development, market research, manufacturing activities, promotional activities, steps to acquire distributors, steps to obtain required governmental approval, or other similar activities. In the alternative, a satisfactory explanation for the failure to make such efforts must be submitted.
37
C.F.R. § 2.89(d). Accordingly, the applicant may not indefinitely extend the filing of a statement of use--the applicant must provide the PTO with substantive information to satisfy the PTO that the applicant has good cause to delay such a filing
Thus, in order for an applicant to tie up several merely descriptive marks for a period of months or years, the applicant would have to mislead the PTO through several stages of the process--an unlikely event and one with potentially severe consequences for the applicant. Furthermore, as mentioned above, such timing of Kodak's challenge to the mark was intended by Congress. Consequently, the Board's interpretation does not contravene the statute's meaning and purpose of the timing of the proceedings to challenge an intent-to-use mark.
| {
"pile_set_name": "FreeLaw"
} |
149 S.W.3d 628 (2004)
JJ & TK CORP., et al.
v.
BOARD OF COMMISSIONERS OF The CITY OF FAIRVIEW, Tennessee, et al.
Court of Appeals of Tennessee, Middle Section, at Nashville.
September 3, 2003 Session.
April 14, 2004.
Permission to Appeal Denied June 21, 2004.
A. Scott Derrick and Phillip P. Welty, Nashville, Tennessee, for the appellants, JJ & TK Corp., Joanne McCord, Jeff McCord, Kristin Mathes and Tim Mathes.
James D. Petersen, Franklin, Tennessee, for the appellees, Board Of Commissioners of the City of Fairview, Tennessee, Eddie Arney, Ken Brison, Wayne Hall, Mayor Darrell Mangrum, Vice-Mayor Stuart Johnson, and the City of Fairview Tennessee.
Permission to Appeal Denied by Supreme Court June 21, 2004.
OPINION
JAMES L. WEATHERFORD, SR., J., delivered the opinion of the court, in which WILLIAM B. CAIN, and PATRICIA J. COTTRELL, JJ. joined.
*629 In this case the defendant, the Board of Commissioners of the City of Fairview, declined to grant a certificate of compliance to the plaintiffs, who sought to operate a retail liquor store at the entrance of Bowie Nature Park in Fairview, Tennessee. The plaintiffs contend they met all the legal requirements in effect at the time of their application; and that the defendant based its decision on a pending ordinance which required a minimum distance of 1000 feet between liquor stores and public parks. The trial court granted summary judgment for the defendant. We reverse the decision of the trial court.
Plaintiffs, JJ & TK Corporation, a Tennessee corporation, its shareholders, officers and directors, are applicants for a retail liquor license to operate a retail liquor store within the city of Fairview. As part of their application submitted to the Tennessee Alcoholic Beverage Commission, the plaintiffs must obtain a certificate of compliance signed by the local governmental authorities stating that the applicant is in compliance with local ordinances. Tenn.Code Ann. § 57-3-208. The proposed location of the plaintiffs's liquor store was at the entrance to Bowie Nature Park in Fairview.
On November 15, 2001, the Fairview Beer Board appointed a committee to review the city's current ordinance prohibiting the issuance of beer licenses to establishments within 1,000 feet of the entrance to its public park, churches or other specified public facilities. The liquor ordinance then in effect provided:
No license shall be issued to any retailer where the place of business of the licensee is located within fifty yards of a private residence, or is within one hundred yards of any church or two hundred yards of a school ground....
No license shall be issued to any retail liquor dealer where the place of business of the licensee is located within three hundred yards of another retail liquor store.
Fairview Municipal Code § 8-103.
On January 17, 2002, the Beer Board discussed the inconsistency between the beer ordinance and the liquor ordinance and referred the question to the Board of Commissioners (hereinafter the defendant) to determine which ordinance should be amended.
On March 7, 2002, the plaintiffs appeared and requested the defendant to issue the certificate. They were advised to fill out an application and to bring it to the administrative committee meeting on March 14. The defendant adopted Bill 2002-4 on first reading, which reduced the distance requirement for beer licenses from 1,000 feet to more than 600 feet from the park entrance and required liquor stores to be more than 600 feet from the park entrance.
On March 9, 2002, the plaintiffs filed an application for the certificate with defendant. On March 14, 2002, the administrative committee voted to recommend to the defendant that the plaintiffs' application be denied because the proposed location was not in compliance with pending ordinance 2002-4. At its regular meeting on April 4, 2002, the defendant deferred action on both the plaintiffs' certificate and the pending ordinance until after receiving public input on the issue from a public workshop scheduled for April 11.
At the April 18, 2002 meeting, the defendant introduced and put up for 1st reading Bill 2002-6 which provided: "No retailer's license shall be issued to an applicant whose location is less than one thousand (1,000) feet from a church, school, licensed day care center or nursery, or public park." The ordinance passed on the first reading. The defendant again deferred *630 the plaintiffs' application until the May 2, 2002 meeting.
On May 2, 2002, Bill 2002-6 passed the 2nd and final reading. On that same night the defendant unanimously voted in favor of a motion "to deny the [plaintiffs'] liquor application on the basis that it was too close to a public park."[1]
The plaintiffs filed a petition for writ of certiorari and complaint for declaratory judgment in chancery court asking the court to find that defendant's action was arbitrary, capricious and unreasonable in denying the certificate based on a pending ordinance that was not legally effective on May 2, 2002. The plaintiffs contended that the ordinance did not take effect until May 3, 2002, or 15 days after its first reading pursuant to Tenn.Code Ann. § 6-20-215. The plaintiffs filed a motion for judgment on the pleadings and asked the court to find that they were entitled to issuance of the certificate. The defendant filed a response accompanied by the Mayor's affidavit. The defendant asked for judgment on the pleadings or in the alternative for summary judgment. After giving the plaintiffs an opportunity to file affidavits, the trial court decided the case on summary judgment.
The trial court found that the defendant had the authority to deny the plaintiffs' application for a certificate based upon a pending ordinance which took effect the following day and that the defendant did not act arbitrarily, capriciously, or unreasonably. The trial court dismissed the petition for declaratory judgment and granted the defendant's motion for summary judgment.
The plaintiffs raise the following issue:
Whether the trial court erred by holding that defendant had the authority to deny Plaintiffs' application for a certificate of compliance required by Tenn.Code Ann. § 57-3-208 (2002) based upon a pending ordinance which took effect the following day, and that in so denying Plaintiffs a certificate of compliance, whether Defendant acted arbitrarily, capriciously, and unreasonably under the law of the State of Tennessee.
In its memorandum opinion, the trial court stated: "Plaintiffs concede they would have no argument on this issue if the City had waited twenty-four hours before denying their application. As such, plaintiffs' argument amounts to elevating form over substance, which this Court cannot condone." The trial court also pointed out that the concerns about the location of beer and liquor stores near the entrance to the park were made public months before the plaintiffs filed their application; and the City conducted public hearings on the issue while the application was pending.
Construction of a statute is a question of law which the appellate courts review de novo without a presumption of correctness. Hill v. City of Germantown, 31 S.W.3d 234, 237 (Tenn.2000). In interpreting statutes, this court is to ascertain and give effect to the legislative intent without unduly restricting or expanding *631 the statute's coverage beyond its intended scope. Hathaway v. First Family Financial Services, Inc., 1 S.W.3d 634, 640 (Tenn.1999). The "[l]egislative intent must be ascertained from the natural and ordinary meaning of the statutory language, `read in context of the entire statute, without any forced or subtle construction which would extend or limit its meaning.'" State v. Butler, 980 S.W.2d 359, 362 (Tenn.1998); Chrisman v. Hill Home Development, Inc., 978 S.W.2d 535, 540 (Tenn.1998).
Tennessee Code Annotated § 57-3-208(b) provides in pertinent part:
The certificate must state:
(2) That the applicant or applicants have secured a location for the business which complies with all restrictions of any local law, ordinance, or resolution, duly adopted by the local jurisdiction, as to the location of the business;
(3) That the applicant or applicants have complied with any local law, ordinance or resolution duly adopted by the local authorities regulating the number of retail licenses to be issued within the jurisdiction.
Tenn.Code Ann. § 57-3-208(b)(2)-(3).
Tennessee Code Annotated § 6-20-215[2] provides in pertinent part:
(a) Every ordinance shall be read two (2) different days in open session before its adoption, and not less than one (1) week shall elapse between first and second readings, and any ordinance not so read shall be null and void....
(b) An ordinance shall not take effect until fifteen (15) days after the first passage thereof, except in case of an emergency ordinance. An emergency ordinance may become effective upon the day of its final passage; provided, that it shall contain the statement that an emergency exists and shall specify with distinctness the facts and reasons constituting such an emergency.
Tenn.Code Ann. § 6-20-215.
The statute provides that an ordinance shall not take effect until 15 days after its first passage. "[W]hen the word `shall' is used in statutes it is ordinarily construed as being mandatory and not discretionary." Gabel v. Lerma, 812 S.W.2d 580, 582 (Tenn.Ct.App.1990). The statute does allow for the adoption of an "emergency ordinance" which could take effect in a shorter period of time; but that provision is not applicable to this case. The defendant passed ordinance 2002-6 on the first reading on April 18, 2002. This ordinance did not take effect until May 3, 2002 or 15 days after the first passage pursuant to the statute. The defendant denied the plaintiffs' application based on ordinance 2002-6 on May 2, 2002.
The defendant cites two zoning ordinance cases as support for denying the plaintiffs' application based on a pending ordinance. State ex rel. SCA Chemical Waste Servs., Inc., v. Konigsberg, 636 S.W.2d 430 (Tenn.1982) and State ex rel. First American Bank v. City of Franklin Mun. Planning Comm., No. 0l-A-01-9408-CH-00394, 1996 WL 122182, 1996 Tenn.App. LEXIS 175 (Tenn.Ct.App. Mar. 21, 1996). Both of these cases involve the deferral of action or the refusal to grant permission by a governmental authority during the time period in which a new ordinance was pending.[3] In the SCA *632 Chemical case, the Tennessee Supreme Court stated: "We hold that the county acted properly and had authority to suspend the issuance of permits for such construction pending the effective date of its new joint ordinance resolution." SCA Chemical, 636 S.W.2d at 437. Here the Defendant denied the application based on the pending (but as yet ineffective) ordinance. See Claiborne Country Club v. City of Tazewell, 782 S.W.2d 476 (Tenn.1990) (denial of beer permit based on ordinance reducing number of beer permits from 5 to 4 held invalid because ordinance had not been published in accordance with statute and court also ordered issuance of permit as applicants met requirements of the effective ordinance)
"Generally speaking, proceedings under an ordinance between the date of its passage and the date it takes effect are void." 5 Eugene McQuillin, The Law of Municipal Corporations § 15.39 (3rd ed.1996). See Fee v. Bornhorn, 251 S.W.2d 230 (Ky.1952)(police chief appointment made by acting city manager several hours prior to effective date of resolution removing incumbent city manager from office held invalid).
After reviewing the record in this case, we find that the defendant's action denying plaintiffs' application based upon the pending ordinance to be void. The plaintiffs met all of the requirements of the ordinance in effect at the time of the denial of their application. Under these circumstances, the application should have been granted as plaintiffs met all other requirements for the certificate.
The judgment of the trial court is reversed and this case is remanded for the entry and enforcement of a decree ordering the City of Fairview to issue a certificate of compliance to the plaintiffs. Costs are taxed to the city.
NOTES
[1] The minutes of the meeting read as follows: "Arney then made a motion to deny the liquor application on the basis that it is too close to a public park. Hall seconded the motion. Brison asked if they should vote on the application using the old liquor ordinance or the new ordinance they just adopted. Petersen stated that it was at the discretion of the Board on which ordinance they used. Hall stated that when he was appointed in January, Arney mentioned at the Beer Board that they needed to make the beer and alcohol regulations the same. Vote on motion. All were in favor of denying the liquor store application."
[2] The Fairview City Manager Commission Charter adopts the language of this statute as its own § 6-2-215, and § 1-106 of the Fairview Municipal Code also mandates this procedure for passage and effectiveness of ordinances.
[3] Plaintiffs did not contest the defendant's authority to defer action upon the application within the 60 day limitation mandated by Tenn.Code Ann. 57-3-208(e); nor did they claim a "vested right" to issuance of the certificate under prior ordinance because they filed their application prior to the adoption of Ordinance 2002-6.
| {
"pile_set_name": "FreeLaw"
} |
In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 18-2513
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
MICHAEL L. CHAPARRO,
Defendant-Appellant.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Western Division.
No. 3:16-cr-50010-1 — Frederick J. Kapala, Judge.
____________________
ARGUED DECEMBER 11, 2019 — DECIDED APRIL 13, 2020
____________________
Before FLAUM, HAMILTON, and BARRETT, Circuit Judges.
HAMILTON, Circuit Judge. A jury found Michael Chaparro
guilty on three felony charges for viewing and transporting
child pornography. The charges arose from three crimes sep-
arated by significant gaps in time: viewing child pornography
on a hard drive in July 2013, transmitting child pornography
files over the Internet in August 2014, and viewing child por-
nography on a smartphone in November 2014. Chaparro was
sentenced to three concurrent prison terms of 210 months
2 No. 18-2513
each. On appeal he challenges his convictions on three distinct
grounds: the sufficiency of the evidence that he was the per-
son using the electronic devices; the admission at trial of a
statement that he made to Pretrial Services; and allegedly im-
proper remarks by the prosecutor during rebuttal.
The first and third challenges were not raised in the dis-
trict court and provide no basis to disturb the convictions.
Granted, the government’s case could have been stronger as
to the identity of the devices’ user. The computer forensics led
investigators to a home, not to an individual, and little evi-
dence showed that Chaparro resided at the relevant street ad-
dress before December 2014. Nevertheless, there was suffi-
cient evidence to sustain the convictions on plain-error re-
view. Any improper rebuttal comments did not affect Chap-
arro’s substantial rights.
The admission of Chaparro’s pretrial services statement
was an error, though. When Congress created Pretrial Ser-
vices, it made pretrial services information “confidential” and
specifically prohibited its admission “on the issue of guilt in a
criminal judicial proceeding.” 18 U.S.C. § 3153(c)(1) & (3).
This rule may protect some accused defendants, but its most
important benefits accrue to the judicial system as a whole.
Confidentiality helps pretrial services officers obtain the in-
formation needed to make quick and accurate recommenda-
tions about pretrial release and detention.
This case concerns a judge-made impeachment exception
to Congress’s mandate of confidentiality. In his pretrial inter-
view, Chaparro had said that he lived at the scene of the
crimes on all the relevant dates. The government left the rec-
ord blank on that key point during its case in chief. Chap-
arro’s lone witness, his uncle Eddie Ramos, then testified that
No. 18-2513 3
Chaparro did not live at the address until just before his ar-
rest. As rebuttal, the government sought to call the pretrial
services officer who interviewed Chaparro. The district court
allowed the testimony, over objection, relying on cases from
other circuits that have recognized an exception to pretrial
confidentiality for impeachment. See, e.g., United States v.
Griffith, 385 F.3d 124 (2d Cir. 2004).
Those precedents were inapposite, and it was a legal error
to admit Chaparro’s statement to Pretrial Services. Chaparro’s
words were not a prior inconsistent statement by Ramos, the
testifying witness. Instead, the government used them for
“impeachment by contradiction” against Ramos. Despite the
“impeachment” label, someone else’s contradictory statement
is relevant only if it is offered for the truth of the matter as-
serted. The statement by Chaparro was thus offered as evi-
dence of guilt, a purpose specifically prohibited by statute.
This error was not harmless for two of the three convictions.
Considered for its truth, Chaparro’s statement filled a key gap
in the government’s cases on the July 2013 and August 2014
charges. Those convictions must therefore be vacated. Chap-
arro is entitled to a new trial on those charges or, in the alter-
native, to resentencing on the remaining conviction.
I. Sufficiency of the Evidence
We first explain why the evidence was sufficient to sup-
port the jury’s guilty verdicts on all three charges. Our review
on this question is limited to “plain error.” Although Chap-
arro moved for a directed verdict under Rule 29 at the close of
the government’s case, he failed to renew that motion at the
close of all the evidence. He thus forfeited his sufficiency chal-
lenge, and we review for a “manifest miscarriage of justice.”
See United States v. Clark, 787 F.3d 451, 459 (7th Cir. 2015);
4 No. 18-2513
United States v. Natale, 719 F.3d 719, 743 (7th Cir. 2013); United
States v. Williams, 298 F.3d 688, 692 (7th Cir. 2002). Under this
standard, we will overturn the jury’s verdict “only if ‘the rec-
ord is devoid of evidence pointing to guilt, or if the evidence
on a key element of the offense was so tenuous that a convic-
tion would be shocking.’” Natale, 719 F.3d at 743, quoting
United States v. Turner, 551 F.3d 657, 662 (7th Cir. 2008).
We begin with some background common to all charges.
The investigation started in August 2014 when an undercover
detective in Pennsylvania, Robert Erdely, recorded the Inter-
net Protocol (IP) address of a computer transmitting child
pornography to him over the Internet. The IP address corre-
sponded to an AT&T account in the name of Eva Chaparro,
the defendant’s grandmother, with service at a home in
McHenry, Illinois.1 Based on Erdely’s tip, Detective Michelle
Asplund of the McHenry County Sheriff’s Office executed a
search warrant at the home on December 2, 2014. Accompa-
nying her was Zeus Flores, a forensic computer examiner with
the Illinois Attorney General’s Office. When law enforcement
arrived, only three people were in the house: Eva Chaparro,
her husband Hector Chaparro—that is, the defendant’s
grandfather—and Eddie Ramos, the defendant’s uncle.
Officers searched the home for computers and found two
Gateway-brand laptops and a Compaq-brand desktop. Flores
examined these computers on site and determined that the
1 “IP addresses identify computers on the Internet, enabling data
packets transmitted from other computers to reach them.” Nat’l Cable &
Telecommunications Ass’n v. Brand X Internet Servs., 545 U.S. 967, 987 n.1
(2005). Erdely testified that “as someone connects to me on the Internet …
I see his IP address,” allowing Erdely “to find out who the customer is, at
least the person paying the bill for that Internet service.”
No. 18-2513 5
desktop’s hard drive contained child pornography. During
the search, Michael Chaparro arrived at the home. The officers
seized an LG-brand smartphone from him. The smartphone
could not be examined on site, but Flores later determined
that it too had child pornography stored in its memory.
A grand jury indicted Michael Chaparro on three charges.
Count One charged him with transporting child pornography
over the Internet to Erdely in August 2014. Counts Two and
Three charged him with accessing child pornography with in-
tent to view it on the LG smartphone in November 2014 and
on the Compaq desktop in July 2013. For clarity, we address
the sufficiency of the evidence as to the charges in chronolog-
ical order rather than the order in the indictment.
A. Count Three – Accessing Material on the Hard Drive
Count Three charged Chaparro with accessing an image
of child pornography stored on the Compaq desktop’s hard
drive on July 30, 2013, in violation of 18 U.S.C.
§ 2252A(a)(5)(B). Chaparro concedes that the hard drive con-
tained child pornography. He argues that the government
failed to prove that he himself accessed any image on the hard
drive or that there was a connection to interstate commerce.
The forensic evidence showed that someone used the hard
drive to access child pornography on July 30, 2013. On the
date of the search, December 2, 2014, Flores, the computer ex-
aminer, removed the hard drive from the Compaq desktop
computer and analyzed it using special software. The desktop
had not been powered on in over fifteen months, since August
24, 2013. But Flores was able to recover records of Internet
searches for child pornography as well as images of child por-
6 No. 18-2513
nography from the drive. A user of the computer had down-
loaded a video on July 30, 2013 titled, in part, “11Yo Pe-
dofilia.” System logs indicated that folders containing child
pornography had been opened by a user. Chaparro does not
dispute these points.
The record also included circumstantial evidence that Mi-
chael Chaparro was the user of the hard drive on July 30, 2013.
Most directly, the Compaq desktop had a single user account
named “M1KEY.” In addition, the officers found the desktop
in an upstairs bedroom, and evidence suggested that this bed-
room belonged to Michael Chaparro—at least on the date of
the search. Detective Asplund testified without objection that
Eva Chaparro told her it was Michael’s bedroom. Photo-
graphs of the room showed video-gaming equipment and
sticks of men’s deodorant, items one might expect in the room
of a 26-year-old man rather than his grandmother. Another
photograph showed a partially obscured coffee mug with the
printed letters “ … hael” visible.
On the other hand, Ramos testified that the room with the
desktop computer was a “guest room/game room” and that
Michael slept in a basement bedroom. Ramos also testified
that the whole extended family, including his siblings, chil-
dren, and grandchildren, stayed overnight at the house from
time to time and used the computers. The jury was entitled to
discount Ramos’s testimony on these points. As the govern-
ment said in closing, the messy upstairs room—bed unmade,
half-empty water bottles on the dressers, video-gaming
equipment strewn about—did not resemble a guest bedroom.
Granted, there was little evidence of how long Michael
Chaparro had slept in the room with the desktop computer,
or even how long he had lived at his grandparents’ house. The
No. 18-2513 7
only direct evidence of Chaparro’s past residency was his
statement to Pretrial Services, admitted in the government’s
rebuttal case as purported “impeachment,” that he lived with
his grandparents from December 2011 to December 2014. As
explained below, the district court should not have admitted
that confidential statement because it provided substantive
evidence of guilt. But “a reviewing court must consider all of
the evidence admitted by the trial court when considering a
sufficiency of the evidence challenge, regardless of whether
that evidence was admitted erroneously.” United States v. Rah-
man, 805 F.3d 822, 839 (7th Cir. 2015), citing Lockhart v. Nelson,
488 U.S. 33, 39 (1988). Applying this principle, the record was
not “devoid of evidence pointing to guilt” as to the user of the
hard drive. Natale, 719 F.3d at 743.
Chaparro also argues that the government offered no evi-
dence that any image travelled through interstate commerce,
a distinct basis for legal insufficiency. The statute defines the
necessary connection to interstate commerce expansively: the
image must have been “mailed, or shipped or transported us-
ing any means or facility of interstate or foreign commerce or
in or affecting interstate or foreign commerce by any means,
including by computer” or “produced using materials that
have been mailed, or shipped or transported in or affecting
interstate or foreign commerce by any means, including by
computer.” 18 U.S.C. § 2252A(a)(5)(B). The government pre-
sented evidence that satisfied both paths to meet this test.
First, the images on the hard drive were downloaded from the
Internet, so the Internet transported them. The Internet is a
facility of interstate commerce. See United States v. Horne, 474
F.3d 1004, 1006 (7th Cir. 2007) (explaining in Hobbs Act case
that the Internet “crosses state and indeed international
8 No. 18-2513
boundaries”). Second, simply copying “computerized im-
ages” using “computer equipment” counts as “producing”
the images under this provision. See United States v. Anderson,
280 F.3d 1121, 1125 (7th Cir. 2002). The hard drive was manu-
factured in China, so the images were “produced” using ma-
terial transported in foreign commerce when they were cop-
ied onto the hard drive. The evidence was legally sufficient to
convict Chaparro on Count Three.
B. Count One – Transporting Material Through Interstate
Commerce
Count One charged Michael Chaparro with using the In-
ternet to transport images of child pornography on August 7,
2014, in violation of 18 U.S.C. § 2252A(a)(1). The forensics are
again undisputed. On that date, a device at the Chaparro
home in Illinois sent child pornography to Erdely, the under-
cover Pennsylvania detective, over the Internet. The device
specifically shared pieces of a “torrent” file named “817e.” As
explained at trial, the “BitTorrent” network allows anony-
mous users to combine multiple files and to share them with
one another as one electronic package called a “torrent file.”
Torrent 817e contained specific child pornography images
listed in the indictment.
Chaparro argues that there was insufficient evidence that
he was the user who shared pieces of torrent 817e with Erdely.
The device that transmitted to Erdely was never found, as the
government admitted at trial. (Recall that the Compaq desk-
top was not powered on after August 2013, so it was not the
device sharing child pornography on August 7, 2014.) Never-
theless, the record contained evidence that Michael Chaparro,
and not some other user of the home’s Internet connection,
No. 18-2513 9
shared torrent 817e in August 2014. First, the jury heard Chap-
arro’s inadmissible statement to Pretrial Services that he lived
at the home at that time. As noted, that statement must be con-
sidered in evaluating the sufficiency of the evidence.
In addition, two facts implied a single user of both the re-
covered hard drive and the unrecovered device that contacted
Erdely. Forensic investigation revealed that pieces of 817e had
also been downloaded to the recovered hard drive. And the
August 2014 device gained access to the BitTorrent network
using software called “Tixati,” a rare program that Erdely had
never encountered in hundreds of investigations. Tixati had
also been installed on the recovered hard drive. These simi-
larities were competent evidence, if not conclusive evidence,
that one person committed both crimes. See Fed. R. Evid.
404(b) (evidence of other acts admissible to prove identity
through modus operandi); United States v. Gomez, 763 F.3d 845,
854 (7th Cir. 2014) (en banc).
More generally, the evidence supporting the convictions
for accessing child pornography was admissible on this
charge to show that Chaparro had a propensity to transport
child pornography. See Fed. R. Evid. 414(a) (evidence of any
other child molestation crime “may be considered on any
matter to which it is relevant”), 414(d)(2)(B) (defining “child
molestation” to include all crimes under 18 U.S.C. § 2252A).
The government made this argument in closing: “the Defend-
ant is the one living in a room with a hard drive containing
child pornography and a phone containing child pornogra-
phy. The evidence shows that he was the one sharing child
pornography from that IP address … .” Because propensity
evidence was admissible, this argument was appropriate, and
10 No. 18-2513
the record was not “devoid of evidence” supporting a convic-
tion on Count One.
C. Count Two – Accessing Material on the Smartphone
Count Two charged Chaparro with accessing child por-
nography stored on an LG-brand cellular telephone on No-
vember 24, 2014, in violation of 18 U.S.C. § 2252A(a)(5)(B). As
with Count Three, Chaparro argues that the government
failed to prove that he was the person who accessed the im-
ages on the telephone or that a specific image travelled
through interstate commerce.
Again, the conduct and its connection to interstate com-
merce were amply supported. Forensic analysis of the
smartphone showed that a user performed searches for terms
related to child pornography on the morning of November 24,
2014. The smartphone had saved to its memory thumbnail
versions of child pornography images that a user viewed that
morning. The images arrived on the smartphone over the In-
ternet, and the smartphone was manufactured in South Ko-
rea. These facts satisfied the interstate or foreign commerce
element of the crime.
Sufficient evidence also showed that Chaparro was the
user of the smartphone on November 24, 2014. Officers seized
the device from him when he walked into the house during
the search on December 2, eight days after the charged con-
duct. The smartphone’s memory contained specific evidence
that Chaparro was also using it on the date of the crime. A text
message sent from the smartphone at 12:04 PM on November
24 read, “Hey alyssa its mike. Nick asked me to text ya.” Two
minutes earlier, a phone identified as “Nicksnew” had sent
Alyssa’s number to the smartphone. These messages imply
No. 18-2513 11
that Michael Chaparro was using the smartphone on Novem-
ber 24. The evidence was sufficient to sustain a guilty verdict
on Count Two.
II. Use of Statement to Pretrial Services to “Impeach by Contradic-
tion”
Chaparro next argues that the district court erred when it
allowed the government to impeach his only witness, Eddie
Ramos, using the statement that Chaparro himself had made
to Pretrial Services. The Pretrial Services Act provides that in-
formation from pretrial interviews is “not admissible on the
issue of guilt in a criminal proceeding” unless the charges
stem from conduct relating to Pretrial Services. 18 U.S.C.
§ 3153(c)(3). The question is whether this provision allows
one person’s account to Pretrial Services to be admitted to im-
peach a different person at trial by “specific contradiction.”
No court of appeals has decided this issue before, although
some have ruled that the government may impeach witnesses
using their own statements to Pretrial Services. We conclude
that the statute compels a different result here, especially
when interpreted in light of established evidence doctrine.
The admission of Chaparro’s statement was an error. Its ad-
mission was harmless as to Count Two (the smartphone
charge), but it was not harmless as to Counts One and Three.
A. Admission at Trial
We first summarize the proceedings in the district court
that gave rise to this question. Just before the close of evi-
dence, and without prior notice, the government called pre-
trial services officer James Wheatley as a rebuttal witness. Ed-
die Ramos had testified for the defense that Chaparro had
lived with a girlfriend from Easter 2013 to Thanksgiving 2014.
12 No. 18-2513
Since that time span covered all the charged conduct, Ramos’s
testimony would have severely damaged the government’s
case if the jury had credited it. The government called Officer
Wheatley, who would testify that Chaparro said in his pretrial
interview that he had been living at that home “for three years
prior to his arrest.” Attempting to distinguish the “issue of
guilt” statutory language, the government argued that it
wished to use Chaparro’s statement “for the purpose solely of
impeaching Mr. Ramos.” The prosecutor did not mention at
that time Ramos’s own statement to Pretrial Services.
Both the defense and Pretrial Services itself opposed hav-
ing Officer Wheatley testify about what Chaparro had told
him. The defense argued that Chaparro’s statement would in
fact go to “an issue of guilt” and more broadly that pretrial
communications “are supposed to be confidential.” Officer
Wheatley, who was already present in court, had spoken with
the chief of Pretrial Services and expressed “our position” that
“information obtained in the bond report should not be used
at trial.” Officer Wheatley also cited confidentiality regula-
tions promulgated by Pretrial Services that he believed barred
his testimony. See 8A Guide to Judiciary Policy § 240 (Sept.
23, 2019), formerly 8A Guide to Judiciary Policy app. 5A (Dec.
28, 2010). The current version of the regulations is attached as
an appendix to this opinion.2
The district court initially denied the government’s re-
quest, ruling that the statute “shields the Pretrial Services of-
ficer from having to give this testimony.” Minutes later, how-
ever, the court returned to the subject after discovering United
2
It is also publicly available online: https://www.uscourts.gov/sites/
default/files/guide-vol08a-ch02-sec240-confidentialityregs_0.pdf.
No. 18-2513 13
States v. Griffith, 385 F.3d 124 (2d Cir. 2004). That case held that
“a defendant’s statements to pretrial services are admissible
against the defendant when used to impeach the defendant’s
credibility.” Id. at 126. The district court acknowledged that
Chaparro’s case raised “the defendant’s witness’s credibility”
instead of “the defendant’s credibility,” but decided Griffith
was on point either way.
Officer Wheatley took the stand. Before his testimony be-
gan, the district court gave a limiting instruction to the jury:
“the testimony that Mr. Wheatley may give you regarding the
Defendant’s statements may be considered by you only insofar
as it may affect the credibility of Eddie Ramos and not for any
other purpose.” (Emphasis added.) Officer Wheatley then ex-
plained that he had interviewed Chaparro on March 3, 2016
to gather information for the bond report. Chaparro said that
he “had lived with his grandparents from approximately De-
cember of 2011 to December of 2014” and did not mention liv-
ing anywhere else. In a brief cross-examination, Officer
Wheatley acknowledged that he could not “say with 100 per-
cent certainty” that every defendant tells “the 100 percent cor-
rect truth” to Pretrial Services.
During redirect examination, the government without
warning asked Wheatley instead about statements Ramos had
made to Wheatley. The defense did not object to this expan-
sion during redirect. Officer Wheatley testified that he had
sought to verify Chaparro’s residence by interviewing Ramos,
whom Chaparro had named as a family member to contact.
Wheatley said that “Ramos confirmed what the defendant
had told me,” namely that Chaparro “lived with his grand-
parents” from “December 2011 to December 2014.”
14 No. 18-2513
After Officer Wheatley left the stand, the government
raised the issue of adding a jury instruction given the redirect
testimony: “the [original] instruction that we tendered to the
court is impeachment by contradiction. What the redirect
brought out from Mr. Wheatley was that Mr. Ramos made a
prior inconsistent statement.” (Emphasis added.) The govern-
ment gave the court a new jury instruction it had already pre-
pared, and the defense did not object. The new instruction as
given to the jury read: “You have heard evidence that before
the trial, Eddie Ramos made a statement that may be incon-
sistent with his testimony here in court. You may consider an
inconsistent statement made before the trial only to help you
decide how believable his testimony was here in court.” (Em-
phasis added.)
Thus, although the court had explicitly ruled on the ad-
mission of only Chaparro’s statement to Pretrial Services, the
jury also heard evidence of Ramos’s statement to Pretrial Ser-
vices. Confounding matters further, during the government’s
closing arguments, the prosecutor cited Chaparro’s statement
to Officer Wheatley—not Ramos’s—as proof that Ramos was
“a desperate liar.” On appeal, Chaparro challenges the admis-
sion only of his own statement; he emphasizes that he does
not appeal the admission of Ramos’s, which would fall within
the Griffith exception for impeachment. See Reply Br. at 4–6.
B. The Evidentiary Error
We review an evidentiary ruling for an abuse of discretion.
E.g., United States v. Driggers, 913 F.3d 655, 658 (7th Cir. 2019).
We review questions of statutory interpretation de novo,
however. E.g., Nielen-Thomas v. Concorde Inv. Servs., LLC, 914
F.3d 524, 527 (7th Cir. 2019). And a legal error is “an abuse of
discretion by definition.” Abu-Shawish v. United States, 898
No. 18-2513 15
F.3d 726, 736 (7th Cir. 2018). Using a defendant’s statements
to Pretrial Services to impeach a witness other than the de-
fendant by “specific contradiction” violates the confidential-
ity protections that Congress enacted. The district court made
a legal error and thus abused its discretion when it allowed
the government to use Chaparro’s confidential statement to
impeach Ramos.
1. The Statute and Implementing Regulations
We begin with the text of the Pretrial Services Act of 1982,
which established pretrial services agencies in each judicial
district and specified their functions and powers. See Pub. L.
No. 97-267, 96 Stat. 1136 (1982) (codified as amended at 18
U.S.C. §§ 3152–3155). Section 3153(c)(1) establishes a baseline
rule that pretrial services information should remain confi-
dential: “Except as provided in paragraph (2) of this subsec-
tion, information obtained in the course of performing pre-
trial services functions in relation to a particular accused shall
be used only for the purpose of a bail determination and shall
otherwise be confidential.” 18 U.S.C. § 3153(c)(1). Paragraph
(2) then directs Pretrial Services to issue regulations creating
five exceptions to the confidentiality bar, none of which ap-
plies to this case. See § 3153(c)(2); see also 8A Guide to Judici-
ary Policy § 240.20.30(b) (regulations promulgated under par-
agraph (2)).
This case instead concerns the third and final paragraph of
the subsection, which adds a further caveat:
Information made confidential under para-
graph (1) of this subsection is not admissible on
the issue of guilt in a criminal judicial proceeding
unless such proceeding is a prosecution for a
16 No. 18-2513
crime committed in the course of obtaining pre-
trial release or a prosecution for failure to ap-
pear for the criminal judicial proceeding with
respect to which pretrial services were pro-
vided.
18 U.S.C. § 3153(c)(3) (emphasis added). Under this provision,
Chaparro’s statement was not admissible “on the issue of
guilt” in his trial. The Eleventh Circuit, for example, has held
that allowing a pretrial services officer to identify the defend-
ant’s voice went to the issue of guilt and thus violated the Act.
See United States v. Perez, 473 F.3d 1147, 1151–52 (11th Cir.
2006) (nevertheless affirming on plain-error review).
The pretrial confidentiality mandated by Congress is de-
signed to help judges make prompt, accurate, and lawful pre-
trial release decisions. A core duty of Pretrial Services is to
“[c]ollect, verify, and report to the judicial officer, prior to the
pretrial release hearing, information pertaining to the pretrial
release of each individual charged with an offense.” 18 U.S.C.
§ 3154(1). Judges rely on these reports when deciding whether
to release defendants pending trial under the Bail Reform Act,
§ 3142. See, e.g., United States v. Mundy, No. 4:19-cr-00018-
TWP-VTW, 2019 WL 3729318, at *1, *3 (S.D. Ind. Aug. 8, 2019);
United States v. Gaunt, No. 1:18-cr-70-TLS, 2018 WL 5993885,
at *3 (N.D. Ind. Nov. 15, 2018); United States v. Khan, No. 1:15-
cr-00286, 2015 WL 4475537, at *4 (N.D. Ill. July 21, 2015).
Pretrial services officers often do not receive investigative
assignments until the defendant is arrested. They must pre-
pare their reports “in only a few hours,” according to a former
Chief Pretrial Services Officer for the District of Nevada. See
James R. Marsh, Performing Pretrial Services: A Challenge in the
Federal Criminal Justice System, Fed. Probation, Dec. 1994, at 3.
No. 18-2513 17
Chaparro’s case illustrates the required haste. He was in-
dicted on March 1, 2016; Officer Wheatley prepared an initial
report on March 2; Chaparro was arraigned on March 3; that
same day, Officer Wheatley interviewed Chaparro and Ra-
mos and prepared an addendum report. The magistrate judge
ordered Chaparro released on bond on March 7.
Pretrial confidentiality is essential to the reliability of this
rapid process. It would obviously discourage prompt and
candid interviews if defendants’ statements could later be
used to prove their guilt. Both the Senate and House Confer-
ence reports on the Act stressed this concern. The Senate Re-
port said that pretrial information “should be confidential
and only be used for a bail determination” in order “to pro-
mote candor and truthfulness by the defendant in bail inter-
views.” S. Rep. No. 97-77, at 12 (1981). The House Conference
Report explained that the goal of § 3153(c)(3) was to obtain
accurate information for the courts: “the limitation on admis-
sibility is necessary to further the objective of ensuring that
the court receives the most complete information possible.”
H.R. Rep. No. 97-792, at 9 (1982) (Conf. Rep.).
Practical experience has justified Congress’s concerns. In
the article cited above, Chief Officer Marsh noted that some
defense attorneys were “advising their clients not to answer
certain questions posed to them by pretrial services officers or
interview at all.” Marsh, supra, at 4. In 2005—the last year for
which such data are available—12.1 percent of defendants na-
tionwide refused to be interviewed. See Admin. Office of the
U.S. Courts, Judicial Business Table H-2: Interviews and
Types of Pretrial Services Reports (2005).3 This fact shows that
3 Available online at https://www.uscourts.gov/statistics-reports/judi-
cial-business-2005. “Judicial notice of historical documents, documents
18 No. 18-2513
a non-trivial minority of defendants already perceive danger
in cooperating with Pretrial Services. An overly permissive
reading of § 3153(c)(3) would likely corroborate these fears
and interfere with the proper operation of the courts in pre-
trial release and detention decisions. The regulations promul-
gated by Pretrial Services make this same point: “The disclo-
sure of pretrial services information for purposes other than
determining pretrial release, particularly for prosecution pur-
poses, would deter a person from cooperating with an officer
and deprive the court of necessary information.” 8A Guide to
Judiciary Policy § 240.10(b).4
Emphasizing the importance of this issue, the reliability of
pretrial release decisions has a constitutional dimension. To
comply with the Due Process Clause, pretrial detention au-
thorized by the Bail Reform Act must be “regulatory, not pe-
nal.” United States v. Salerno, 481 U.S. 739, 746 (1987). In up-
holding the Act, the Supreme Court underlined its reliability
safeguards: “the procedures by which a judicial officer evalu-
ates the likelihood of future dangerousness are specifically
contained in the public record, and reports of administrative bodies is
proper.” Menominee Indian Tribe of Wisconsin v. Thompson, 161 F.3d 449, 456
(7th Cir. 1998).
4Because Pretrial Services is an arm of the judiciary within the Ad-
ministrative Office of the U.S. Courts, see 18 U.S.C. § 3152(a), regulations
it promulgates do not receive Chevron deference in the traditional sense.
See Chevron, U.S.A., Inc. v. Nat. Resources Def. Council, Inc., 467 U.S. 837,
844 (1984) (“We have long recognized that considerable weight should be
accorded to an executive department’s construction of a statutory scheme it
is entrusted to administer … .” (emphasis added)). Nevertheless, Pretrial
Services had a congressional mandate to issue the confidentiality regula-
tions, and we give them due respect as the views of the office tasked with
a crucial function for the courts.
No. 18-2513 19
designed to further the accuracy of that determination.” Id. at
751. Pretrial confidentiality promotes this important aim.
In light of the strong policy favoring confidentiality of pre-
trial services information, we note the procedure district
courts should follow when asked to order its disclosure.
Judges may certainly order disclosure permitted by the Act in
appropriate circumstances. The pretrial services regulations
recognize this power, allowing officers to disclose pretrial in-
formation if “authorized by confidentiality regulations or di-
rected by a judge for good cause shown.” 8A Guide to Judiciary
Policy § 240.20.20(a) (emphasis added). In this case, none of
the authorized exceptions was relevant. See § 240.20.30 (list-
ing fourteen categories of authorized disclosures). Officer
Wheatley thus refused to testify at Chaparro’s trial until the
court ordered him to do so.
District courts should exercise this power in accordance
with the pretrial services regulations and any relevant local
rules. The regulations specify factors for a judge to consider
before finding good cause for disclosure: (1) any promise of
confidentiality made to the information’s source; (2) any harm
the disclosure might cause; (3) the overall policy in favor of
confidentiality; and (4) the purpose of the disclosure.
§ 240.20.30(i). The regulations also direct generally that any
disclosure “be limited to the minimum information necessary
to carry out the purpose of the disclosure.” § 240.20.30. The
local rules of the district court in this case similarly require
any disclosure to be supported by good cause and to be no
broader than necessary to accomplish its purpose. See N.D.
Ill. Local Crim. R. 46.4(b)(1) & (d). Even without a controlling
local rule, those are sensible standards.
20 No. 18-2513
Here, the district judge neither found that the government
had shown good cause to introduce the pretrial services state-
ments nor limited Officer Wheatley’s testimony to the mini-
mum information necessary for impeachment. Granted, not
every departure from the regulations and local rules neces-
sarily violates the Pretrial Services Act. But district courts can
minimize the risk of erroneously admitting evidence by re-
quiring litigants to show good cause for disclosure in the first
place. See, e.g., United States v. Mbirika, No. 1:12-cr-00602-
PKC, 2013 WL 5295195, at *2–3 (S.D.N.Y. Sept. 16, 2013) (find-
ing government failed to show good cause after considering
“(1) the kind and character of the information sought, (2) the
stated need for the information and (3) the availability of com-
parable information from other sources”). Such an inquiry
might have led the district court to limit Officer Wheatley’s
testimony and prevented this statutory dispute. At this stage,
however, our task is to evaluate whether the admission of
Chaparro’s statement violated the Act.
2. An Implied Impeachment Exception to Pretrial Confi-
dentiality
We thus return to the “issue of guilt” language in 18 U.S.C.
§ 3153(c)(3). Five circuits have held that, because the Act spe-
cifically bars pretrial services evidence “on the issue of guilt,”
it implicitly permits such evidence for impeachment pur-
poses. See United States v. Ackies, 918 F.3d 190, 206 (1st Cir.
2019); United States v. Griffith, 385 F.3d 124, 126 (2d Cir. 2004);
United States v. Stevens, 935 F.2d 1380, 1393–97 (3d Cir. 1991);
United States v. Wilson, 930 F.2d 616, 619 (8th Cir. 1991); United
No. 18-2513 21
States v. De La Torre, 599 F.3d 1198, 1205 (10th Cir. 2010).5
These decisions cite the traditional distinction between guilt
and impeachment evidence and then apply the canon that
“the expression of one thing suggests the exclusion of others.”
Exelon Generation Co., LLC v. Local 15, Int’l Bhd. of Elec. Workers,
676 F.3d 566, 571 (7th Cir. 2012) (in Latin, “expressio unius est
exclusio alterius”). Paragraph (1) of § 3153(c) makes strict con-
fidentiality the norm, but paragraph (3) adds a specific prohi-
bition against admitting pretrial information as guilt evi-
dence. The prior decisions concluded that Congress thus im-
plied an exception for impeachment evidence. See Griffith, 385
F.3d at 126; Stevens, 935 F.2d at 1395; Wilson, 930 F.2d at 619.
We have not interpreted § 3153(c) before, but we reached
an analogous result under a similar statute that barred evi-
dence from mental competency examinations “on the issue of
guilt in any criminal proceeding.” United States v. Castenada,
555 F.2d 605, 608 (7th Cir. 1977), quoting 18 U.S.C. § 4244
(1976). There, we allowed the impeachment of a testifying de-
fendant using statements he had made to a government psy-
chiatrist because they were “offered by the Government on
the limited issue of credibility rather than on the issue of
guilt.” Id. at 609. Our reasoning in Castenada comports with
other circuits’ analyses of the Pretrial Services Act.
As for the pretrial services regulations, no provision men-
tions the implied impeachment exception, either to endorse
or disparage it. The subsection on the use of pretrial services
information in prosecutions merely repeats the language of
the Act, including the “issue of guilt” proviso. 8A Guide to
5 See also United States v. Balogun, 463 Fed. Appx. 476, 483 (6th Cir.
2012) (same).
22 No. 18-2513
Judiciary Policy § 240.20.30(j). As noted above, a general
“good cause” exception recognizes that district judges may
order the disclosure of information after considering, among
other factors, “the purpose of the disclosure.” § 240.20.30(i).
The good cause provision could embrace an impeachment ex-
ception in some form.
That said, any negative inference carries risk. We cannot
be certain which concepts, if any, Congress was contrasting
with the language it included. See Antonin Scalia & Bryan A.
Garner, Reading Law: The Interpretation of Legal Texts 107
(2012) (negative-implication doctrine properly applies “only
when the unius (or technically, unum, the thing specified) can
reasonably be thought to be an expression of all that shares in
the grant or prohibition involved”); see also Alto Dairy v. Vene-
man, 336 F.3d 560, 566 (7th Cir. 2003) (“omissions are not en-
actments; and even deliberate omissions are often subject to
alternative interpretations”). Here, an alternative explanation
for the “issue of guilt” proviso in § 3153(c)(3) is that Congress
was exempting sentencing decisions. Indeed, the previous
paragraph expressly authorizes the release of pretrial services
information “for the purpose of compiling presentence re-
ports.” 18 U.S.C. § 3153(c)(2)(C); see United States v. Morrison,
778 F.3d 396, 400 (2d Cir. 2015) (holding that this provision
permits pretrial services information at sentencing). This
ready alternative, alongside the clear textual directive against
disclosure, casts some doubt on the inference that the statute
does not apply to impeachment.
But we need not resolve that issue here. For purposes of
this case, we assume without deciding that Congress in-
tended to create the impeachment exception found by other
circuits. Chaparro himself does not contest the existence of an
No. 18-2513 23
impeachment exception. He disputes only its scope. We must
classify use of his statement as either guilt or impeachment
evidence, so we turn to impeachment doctrine.
3. Specific Contradiction Distinguished from Other Meth-
ods of Impeachment
There are five general methods to impeach a witness:
(1) attacking character for truthfulness; (2) introducing a prior
inconsistent statement; (3) establishing bias; (4) showing im-
paired capacity to perceive, recall, or relate the events in ques-
tion; and (5) contradicting the substance of the testimony. See
United States v. Lindemann, 85 F.3d 1232, 1243 (7th Cir. 1996),
citing Charles Alan Wright & Victor James Gold, 27 Federal
Practice and Procedure: Evidence § 6094 (1990); see also 4
Mark S. Brodin et al., Weinstein’s Federal Evidence §§ 607.04–
.08 (2d ed. 2018) (listing same five methods). In this case, we
are concerned with methods (2) and (5): prior inconsistent
statements and specific contradiction. Only prior inconsistent
statements differ meaningfully from guilt evidence, and that
point of law shows the error here.
Nearly every case recognizing an impeachment exception
to pretrial services confidentiality approved impeaching a
witness by his or her own prior inconsistent statements to Pre-
trial Services—method (2). See Ackies, 918 F.3d at 206 (state-
ment of defense witness); Griffith, 385 F.3d at 125 (statement
of testifying defendant); Stevens, 935 F.3d at 1393 (statement
of defense witness); United States v. Hernandez-Espinoza, 890
F.3d 743, 746 (8th Cir. 2018) (statement of defendant at sen-
tencing); United States v. Issaghoolian, 42 F.3d 1175, 1177 (8th
Cir. 1994) (statement of testifying defendant); Wilson, 930 F.2d
at 619 (statement of testifying defendant); De La Torre, 599
24 No. 18-2513
F.3d at 1205 (statement of testifying defendant); see also Caste-
nada, 555 F.2d at 608–09 (statement of testifying defendant).6
In the only case that did not involve inconsistent statements,
the defendant had told a pretrial services officer that he was a
“hustler.” This was held admissible to show his lack of char-
acter for truthfulness—method (1). See United States v. Smith,
973 F.2d 1374, 1378–79 (8th Cir. 1992).
Impeachment by inconsistent statements attacks the gen-
eral credibility of a witness rather than the substantive truth
of specific testimony. “There is a crucial distinction between
the use of a prior inconsistent statement of a witness only to
impeach the credibility of the witness and its use to prove as
a fact what is contained in the statement.” United States v. Die-
trich, 854 F.2d 1056, 1062 n.5 (7th Cir. 1988), quoting United
States v. Ragghianti, 560 F.2d 1376, 1381 (9th Cir. 1977). The
critical point is this: a prior inconsistent statement casts doubt
on a witness’s reliability no matter which version, if either, is true.
“The attack by prior inconsistent statement is not based on the
theory that the present testimony is false and the former statement
true. Rather, the theory is that talking one way on the stand
and another way previously is blowing hot and cold, raising
a doubt as to the truthfulness of both statements.” 1 Kenneth S.
Brown et al., McCormick on Evidence § 34, at 209 (7th ed.
2013) (emphasis added). Federal Rule of Evidence 613(b) thus
allows admission of a prior inconsistent statement for im-
peachment even if the statement would be inadmissible for its
6
See also Balogun, 463 Fed. Appx. at 483 (statement of testifying de-
fendant).
No. 18-2513 25
truth. See United States v. Severson, 49 F.3d 268, 272 (7th Cir.
1995).7
The impeachment at issue in Chaparro’s case was differ-
ent. The district court allowed the admission of two pretrial
services statements, one by Chaparro and the other by Ramos.
Ramos’s was a prior inconsistent statement: whether or not
Ramos told the truth to Officer Wheatley, the fact that he said
different things at different times undermined his credibility.
As the government noted at trial, however, the admission of
Chaparro’s statement instead constituted “impeachment by
contradiction.” It undermined “the substance of [Ramos’s]
testimony”—method (5) in Lindemann, 85 F.3d at 1243—by
showing that someone else had said something different.
Chaparro rightly challenges this latter technique. To be
sure, introducing contradictory extrinsic evidence is a recog-
nized method of impeachment. See United States v. Kozinski,
16 F.3d 795, 805 (7th Cir. 1994) (“Impeachment by contradic-
tion is a valid method of impeachment and ‘simply involves
presenting evidence that part or all of a witness’ testimony is
incorrect.’”), quoting Simmons, Inc. v. Pinkerton’s, Inc., 762 F.2d
591, 604 (7th Cir. 1985). Although not expressly mentioned in
7 The same observation applies to most other instances of impeach-
ment. Evidence regarding a witness’s lack of character for truthfulness,
bias, or impaired capacity usually does not implicate substantive issues in
the case, so the line between guilt and impeachment is easy to draw. In
fact, the very concept of “impeachment” is commonly defined in terms of
the distinction between credibility and substantive truth. See Chiasson v.
Zapata Gulf Marine Corp., 988 F.2d 513, 517 (5th Cir. 1993) (“Substantive
evidence is that which is offered to establish the truth of a matter to be
determined by the trier of fact … . Impeachment evidence, on the other
hand, is that which is offered to discredit a witness … .” (quotation marks
omitted)).
26 No. 18-2513
the Federal Rules of Evidence, “impeachment by contradic-
tion” existed at common law and “can be inferred from the
relevance rules and Rule 607.” Charles Alan Wright & Victor
James Gold, 27 Federal Practice and Procedure: Evidence
§ 6096, at 655 (2d ed. 2007); cf. United States v. Abel, 469 U.S.
45, 51 (1984) (reaching analogous conclusion regarding the le-
gal foundation of bias impeachment).
Notwithstanding its name, impeachment by contradic-
tion—also called “specific contradiction,” 1 Broun, McCor-
mick on Evidence § 45—differs in a fundamental respect from
most other impeachment: it seeks to establish substantive
facts. See United States v. Boswell, 772 F.3d 469, 476 (7th Cir.
2014) (impeachment by contradiction “involves presenting
evidence that the substance of a witness’s testimony is not to
be believed” (emphasis added)). The problem is that contrary
substantive evidence can “impeach” only if the jury accepts it
as substantively true. That characteristic undermines the
guilt-impeachment distinction for our purposes.8
A story from American legal lore illustrates this point. In
1858, Abraham Lincoln defended William “Duff” Armstrong,
a man accused of murder in Beardstown, Illinois. See Irving
Younger et al., Principles of Evidence 12–14 (5th ed. 2007). The
prosecution’s key witness testified that he saw the killing by
8The guilt-impeachment line can blur in other situations as well. For
instance, the use of prior convictions to impeach a defendant’s character
for truthfulness under Rule 609 can verge on impermissible propensity
evidence. See generally United States v. Thomas, 933 F.3d 685, 690 (7th Cir.
2019) (Rules 404 and 609 are meant to “ensure that a defendant is con-
victed based on the evidence relevant to the charged offenses, not a sup-
posed propensity to commit crimes”). We do not speculate on other cases
that might raise similar issues under the Pretrial Services Act.
No. 18-2513 27
the light of a full moon high overhead. Id. at 13. Lincoln im-
peached the witness by contradiction. He famously used an
almanac that reported a quarter-moon below the horizon at
the alleged time of the murder. Id.; see also 2 John Henry Wig-
more, Evidence in Trials at Common Law § 1000, at 1156
(1904) (giving this story as example of impeachment by con-
tradiction). Armstrong was acquitted. Note, however, that if
the lunar tables in the almanac had been inaccurate, they
would not have cast any doubt on the witness’s testimony.
Their effect depended on their truth.9
The Lincoln example shows that specific contradiction, ra-
ther than targeting a witness’s credibility, merely adds con-
trary evidence to the record. So “impeachment by contradic-
tion” is a bit of a misnomer, at least using the normal defini-
tion of impeachment that contrasts it with substantive evi-
dence. This point has long been recognized. In the original
1904 edition of his now-canonical treatise, Dean Wigmore ex-
plained that specific contradiction presents substantive evi-
dence in another guise. His analysis merits quoting at length:
[C]ontradiction in itself does nothing proba-
tively, no[t] unless the contradicting witness or
witnesses are believed in preference to the first
one, i. e. unless his error is established. It is not
the contradiction, but the truth of the contradict-
ing assertion as opposed to the first one, that
constitutes the probative end. Nevertheless, the
9 In a different account, the witness reported a three-quarters moon,
not a full moon. See John Evangelist Walsh, Moonlight: Abraham Lincoln
and the Almanac Trial 52–55 (2000). In John Ford’s version, Henry Fonda
induces the witness not only to recant his testimony but also to confess on
the stand. See Young Mr. Lincoln (Cosmopolitan Productions 1939).
28 No. 18-2513
contradiction, being the usual and prominent
feature of the process by which that end is
aimed at, has served as the common name to
designate the probative end itself. This is not
wrong, provided it be clearly understood what
that end is.
2 Wigmore, Evidence § 1000, at 1157.10
Wigmore’s advice to keep clear “what the probative end
is” guides us here. The government introduced Chaparro’s
pretrial services statement that he had been living with his
grandparents precisely because it contradicted Ramos’s testi-
mony on a key fact. The power of Chaparro’s statement to
“impeach” Ramos depended on its truth—just as Wigmore ex-
plained. Yet the Pretrial Services Act barred admitting Wheat-
ley’s testimony for its truth. Chaparro’s residency at the rele-
vant times was central to the government’s case, so the testi-
mony went to an “issue of guilt” under the Act. 18 U.S.C.
§ 3153(c)(3); see United States v. Perez, 473 F.3d 1147, 1151 (11th
Cir. 2006) (evidence implicated “the issue of guilt” because it
tended “to prove that [the defendant] had been involved in
the drug transactions for which he was charged”). Admitting
the statement violated the Act. Assuming an exception exists
under § 3153(c)(3) for other forms of impeachment, applying
10 For a more recent articulation of the same point, see James L.
Kainen, The Impeachment Exception to the Exclusionary Rules: Policies, Prin-
ciples, and Politics, 44 Stan. L. Rev. 1301, 1331 (1992) (in the hearsay context,
“impeachment proof is distinguished from substantive proof by its ability
to reflect on the credibility of a witness’s testimony, regardless of the ‘truth
of the matter asserted’ by the evidence. In this context, therefore, impeach-
ment-by-contradiction proof would be excluded from the rubric of im-
peachment.”).
No. 18-2513 29
that exception to include specific contradiction by a statement
from someone other than the witness is contrary to the confi-
dentiality protections Congress enacted.11
4. Comparisons to Other Areas of Law that Distinguish
Guilt from Impeachment
The line we draw is consistent with the lines of precedent
from which other circuits have drawn to allow use of a wit-
ness’s statement to Pretrial Services to impeach his or her own
testimony: (1) evidence suppressed under the Fourth, Fifth,
and Sixth Amendments; and (2) grand jury testimony. Both
categories of normally inadmissible evidence are subject to
impeachment exceptions. But for both categories, only a wit-
ness’s own statements—not some other person’s contradic-
tory account—can be used to impeach him or her at trial.
To begin with exclusionary rules, evidence suppressed to
remedy a constitutional violation can still be introduced to
impeach a testifying defendant’s credibility. See, e.g., Michi-
gan v. Harvey, 494 U.S. 344, 349–51 (1990) (statement by de-
fendant procured through Sixth Amendment violation);
United States v. Havens, 446 U.S. 620, 626–28 (1980) (evidence
suppressed as the fruit of an illegal search); Oregon v. Hass,
420 U.S. 714, 721–22 (1975) (statement by defendant procured
through Fifth Amendment violation). But the Supreme Court
11 Our analysis is consistent with the collateral evidence rule on im-
peachment. “[I]f a matter is collateral (that is, if it could not be introduced
into evidence as substantive proof) then it cannot be proven simply to con-
tradict the witness’ testimony for impeachment purposes.” Simmons, 762
F.2d at 604–05. “To put it another way, ‘one may not contradict for the
sake of contradiction; the evidence must have an independent purpose
and an independent ground for admission.’” United States v. Payne, 102 F.3d
289, 294 (7th Cir. 1996) (emphasis added), quoting Kozinski, 16 F.3d at 806.
30 No. 18-2513
has limited the scope of this impeachment exception to testi-
fying defendants; other defense witnesses cannot be im-
peached with suppressed evidence. See James v. Illinois, 493
U.S. 307, 313 (1990). “Expanding the class of impeachable wit-
nesses from the defendant alone to all defense witnesses,” the
Court explained, “would not promote the truthseeking func-
tion to the same extent as did creation of the original excep-
tion, and yet it would significantly undermine the deterrent
effect of the general exclusionary rule.” Id. at 313–14.
The rules for grand jury testimony are similar. The general
rule is that grand jury testimony is secret and cannot be used
in a later trial. See Fed. R. Crim. P. 6(e)(2); United States v.
Procter & Gamble Co., 356 U.S. 677, 681 (1958) (noting “long-
established policy that maintains the secrecy of the grand jury
proceedings in the federal courts”). But if a witness at trial
gave inconsistent testimony to a grand jury, that testimony
may be admitted against the witness. See United States v. Han-
dlin, 366 F.3d 584, 592 (7th Cir. 2004) (testifying defendant);
United States v. Cooper, 767 F.3d 721, 728 (7th Cir. 2014) (de-
fense witness). In fact, due to the rule that sworn prior incon-
sistent statements are not hearsay, a witness’s conflicting
grand jury testimony can often be admitted not only for im-
peachment but also as substantive proof. See Fed. R. Evid.
801(d)(1)(A); Cooper, 767 F.3d at 728. That result depends,
however, on the same witness testifying both before the grand
jury and at trial. We are aware of no authority permitting “im-
peachment by contradiction” of a witness using someone
else’s grand jury testimony.
The comparisons to constitutional violations and grand
jury testimony thus reinforce our conclusion that Chaparro’s
No. 18-2513 31
confidential statement to Pretrial Services could not be intro-
duced to impeach Ramos.
C. Harmless Error?
Improper admission of evidence does not call for reversal
if the error was harmless. The general test for harmless error
at trial is whether it is “clear beyond a reasonable doubt that
a rational jury would have found the defendant guilty absent
the error.” United States v. Bonin, 932 F.3d 523, 538 (7th Cir.
2019), quoting Neder v. United States, 527 U.S. 1, 18 (1999). For
an incorrect evidentiary ruling, “we consider ‘whether the
prosecution’s case would have been significantly less persua-
sive in the mind of the average juror if the erroneously admit-
ted evidence had been excluded.’” United States v. Williams,
900 F.3d 486, 489 (7th Cir. 2018), quoting United States v. Saun-
ders, 826 F.3d 363, 370 (7th Cir. 2016). We will affirm if “the
error had no substantial influence on the verdict” because
“other untainted incriminating evidence is overwhelming.”
United States v. Zuniga, 767 F.3d 712, 717 (7th Cir. 2014), quot-
ing United States v. Dominguez, 992 F.2d 678, 681 (7th Cir.
1993).
Chaparro presents two distinct theories of the harm
caused by the admission of his statement to Officer Wheatley.
First, he argues, his statement undermined the credibility of
Ramos, his only witness, who had given testimony that
tended to exonerate Chaparro on several fronts. We reject this
theory. Chaparro challenges the admission only of his own
statement, but the jury heard an identical statement made by
Ramos. The final jury instructions mentioned only Ramos’s
prior inconsistent statement, not the “impeachment by con-
tradiction” via Chaparro. For impeaching Ramos, Chaparro’s
statement to Officer Wheatley was cumulative. “As a general
32 No. 18-2513
rule, errors in admitting evidence that is merely cumulative
of properly admitted evidence are harmless.” Jordan v. Binns,
712 F.3d 1123, 1138 (7th Cir. 2013). We are satisfied that ex-
cluding Chaparro’s statement would not have made Ramos
any more credible to the average juror.
Second, Chaparro argues that there is a risk that the jury
considered his statement as substantive evidence of guilt, not-
withstanding the limiting instruction, and that in this role his
admission bolstered the government’s case in chief. This the-
ory abandons Ramos’s testimony and refocuses on a weak-
ness in the government’s case noted above: the lack of any di-
rect evidence that Chaparro lived at his grandparents’ home
in the years before the search on December 2, 2014. To evalu-
ate whether Chaparro’s statement had a “substantial influ-
ence on the verdict” by this mechanism, Zuniga, 767 F.3d at
717, we must assess two nested risks: (1) whether the jury con-
sidered Officer Wheatley’s testimony on direct examination
for its truth; and (2) whether the testimony had a substantial
influence on the verdict.
The logic of impeachment by contradiction answers the
first question in Chaparro’s favor. Granted, we start from the
presumption that juries heed limiting instructions: though it
may be a “fiction,” the “usual view” is that “limiting instruc-
tions cure everything.” United States v. Myers, 892 F.2d 642,
645 (7th Cir. 1990). We have made clear, however, that this
presumption is rebuttable. See, e.g., Empress Casino Joliet Corp.
v. Balmoral Racing Club, Inc., 831 F.3d 815, 834 (7th Cir. 2016)
(“Absent indications to the contrary, we presume that juries
heed limiting instructions.” (emphasis added)), citing United
States v. Mallett, 496 F.3d 798, 802 (7th Cir. 2007).
No. 18-2513 33
The presumption is rebutted here because the limiting in-
struction did not even make sense as applied to Chaparro’s
own statement to Pretrial Services. The power of specific con-
tradiction evidence depends on the jury’s accepting its truth.
See above at 26–28; Kozinski, 16 F.3d at 805; 2 Wigmore, Evi-
dence § 1000, at 1157. That is why Chaparro’s statement went
to an “issue of guilt” under the Pretrial Services Act. Unless
the jury believed Chaparro’s statement that he lived with his
grandparents on the relevant dates, what doubt could it pos-
sibly have cast on Ramos’s contrary testimony?
We have great confidence in jurors, but we cannot fairly
expect them to obey contradictory or illogical instructions.
The jury was told to consider as “impeachment” evidence a
statement that was probative only if it was true, but also to
disregard the truth of the statement. That’s too much to ask.
No matter how diligent and attentive, the jury simply “could
not follow the court’s limiting instruction” and still treat
Chaparro’s statement as relevant. See Mallett, 496 F.3d at 802.
There is a substantial risk that the jury considered Officer
Wheatley’s testimony on direct examination as guilt evidence.
The second, more fact-specific question is whether the
government’s case would have been “significantly less per-
suasive in the mind of the average juror” without Chaparro’s
statement that he lived at the scene of the crime on all the rel-
evant dates. Williams, 900 F.3d at 489. The statement
amounted to an admission by the defendant—a defendant
who had exercised his constitutional right to remain silent—
to a crucial fact for the government on two of the three
charges.
In particular, Chaparro admitted that he lived at his
grandparents’ home on July 30, 2013, the date that someone
34 No. 18-2513
viewed child pornography on the hard drive, as charged in
Count Three of the indictment. The police did not search the
Chaparro home until over sixteen months later, in December
2014, at which point that desktop computer had not been
powered on for over fifteen months. As summarized above,
there was plenty of evidence that Michael Chaparro was liv-
ing in the bedroom with the desktop computer on the date of
the search. Eva Chaparro told Asplund the room was his, and
it contained a coffee mug labeled “ … hael.” Michael Chap-
arro showed up at the house while police were still there.
But the government needed to show that Chaparro was
the hard drive’s user on July 30, 2013. The record contained
no evidence, other than Chaparro’s inadmissible statement,
that he lived at his grandparents’ home in the summer of 2013.
Detective Asplund testified that she learned shortly before the
search that “an older couple” and “possibly two or three other
individuals” might live at the house. She also testified that
“you never really know who lives in a house until you get in
there and ask who lives there,” conceding that she could not
say whether Chaparro lived at the house before the search.
The government submitted no public records or anything else
to prove where Chaparro lived in the prior months and years.
The only admissible record evidence arguably probative of
Chaparro’s residency sixteen months prior appears to have
been the desktop’s user account name, “M1KEY.” That does
suggest that Chaparro at least configured the computer at
some point, but it does not place him in the home at any par-
ticular time. Given the government’s weak case on this point,
Chaparro’s admission of his residency, considered for its
truth, substantially strengthened the inference that he was the
user of the hard drive.
No. 18-2513 35
Chaparro also admitted to Officer Wheatley that he lived
at his grandparents’ home on August 7, 2014, the date that
someone at the house sent child pornography over the Inter-
net to Erdely, as charged in Count One. Although this crime
was closer in time to the search—four months prior—the gov-
ernment again presented no specific evidence that Chaparro
lived at his grandparents’ home at that time. As the defense
elicited on cross examination, Detective Erdely did not have
“any idea” who was present in the Chaparro home in early
August 2014. The computer that sent pornography to Erdely
was never recovered, so the government could present no di-
rect evidence of who used it. True, we concluded above that
the government presented sufficient evidence to sustain the
conviction on Count One on plain error review. But we relied
on the erroneously admitted pretrial services statement, spe-
cific similarities between the conduct charged in Counts One
and Three, and the propensity evidence allowed under Rule
414. See above at 8–10. The untainted evidence for Count One,
without a conviction on Count Three, was perhaps not even
sufficient, let alone “overwhelming.” Zuniga, 767 F.3d at 717.
Here, too, Chaparro’s admission of his residency helped the
government’s case significantly.
Even if considered for its truth, however, Chaparro’s state-
ment to Wheatley would not have had a substantial influence
on the verdict for viewing child pornography on the
smartphone. The smartphone conviction did not depend on
Chaparro’s living anywhere in particular. Officers seized the
smartphone from him when he walked into the house during
the search. The smartphone’s user had viewed child pornog-
raphy just eight days earlier and had identified himself in a
text message that day as “mike.” On Count Two, residence
was not particularly relevant. The exclusion of Chaparro’s
36 No. 18-2513
statement to Wheatley would not have made the govern-
ment’s case on County Two “significantly less persuasive” to
the average juror. Williams, 900 F.3d at 489. The error was
harmless as to that conviction.
Chaparro’s admission to Officer Wheatley provided by far
the best evidence of his presence at the scene of the crimes in
Counts One and Three. There is at least a reasonable doubt
whether, without the erroneous admission, the jury would
have found Chaparro guilty as to those charges. Those con-
victions must be reversed.
III. The Government’s Rebuttal Argument
Chaparro’s final argument is that improper comments by
the government during its closing rebuttal require a new trial.
Because the conviction as to Count Two remains intact, we
must address this argument as well. Chaparro did not object
to any of the statements he now challenges on appeal, so our
review is for plain error. In this context, plain error requires a
defendant to “demonstrate that the comments at issue were
‘obviously’ or ‘clearly’ improper … [such] that not only was
[he] deprived of a fair trial, but also that the outcome of the
trial probably would have been different absent the prosecu-
tion’s remarks.” United States v. Kelerchian, 937 F.3d 895, 917
(7th Cir. 2019) (alterations in original), quoting United States
v. Hills, 618 F.3d 619, 640 (7th Cir. 2010). “An error is not plain
unless it is of such an obvious nature that the trial judge and
prosecutor were ‘derelict in countenancing’ it, even absent the
defendant’s timely objection.” United States v. Turner, 651 F.3d
743, 751 (7th Cir. 2011), quoting United States v. Frady, 456 U.S.
152, 163 (1982).
No. 18-2513 37
Chaparro first argues that the government improperly
shifted the burden of proof by arguing that Chaparro could
have subpoenaed family members to corroborate Ramos and
brought forth exculpatory Internet activity records (“router
logs”) if they existed. These comments were permissible. Not
every criticism of a defendant’s case by the government raises
due process concerns: “If the evidence at issue does not impli-
cate a defendant’s right against self-incrimination, and the
jury has been properly instructed as to the burden of proof, a
prosecutor may comment on a defendant’s failure to present
evidence contradicting the government’s proof at trial.”
United States v. Glover, 479 F.3d 511, 520 (7th Cir. 2007); see
also United States v. Flournoy, 842 F.3d 524, 528 (7th Cir. 2016)
(“[A]s long as it is clear to jurors that the government carries
the burden of proof, the prosecutor may tell the jury that a
defendant has the power to subpoena witnesses.” (alteration
in original)), quoting United States v. Miller, 276 F.3d 370, 374–
75 (7th Cir. 2002). Neither of the prosecutor’s statements im-
plicated Chaparro’s right against self-incrimination, and the
district court properly instructed the jury on the burden of
proof. In addition, as in Flournoy, the prosecutor “explicitly
stated twice that the government bore the burden of proving
[Chaparro’s] guilt.” Id.
The other category of statements that Chaparro challenges
gives us more pause. Ostensibly upset that the defense had
cross-examined government witnesses, the prosecutor de-
manded: “why all the examination of Erdely and Rich? …
Why tear down Erdely and Rich? There is no reason. They
didn’t hurt him … . And same is really true with Zeus Flores.
What did he do to harm the Defendant?” Needless to say, the
accused has the right to cross-examine a government witness
38 No. 18-2513
whether or not that witness has “hurt” the accused. The pros-
ecutor then turned to testimony by Ramos that a police of-
ficer’s “machine gun” had frightened him during the search.
The prosecutor bristled at the suggestion that an officer had
acted inappropriately: “Did anybody tell you how the choices
and decisions are made by the planners before they do a
search warrant? Anybody? Anything? No, no questions
asked. Just criticism.” Most troubling, the prosecutor re-
framed this grievance in much broader terms: “So it seems
like we have to face it all the time, anybody that’s associated with
law enforcement in this country just seems to have to face it
every time they turn around. Somebody has got to say that law
enforcement behaved badly, they did bad things.” (Emphasis
added.)
“Taken as a whole, which is the right way to take a series
of questionable remarks by a prosecutor,” these comments
“exceeded the proper bounds of argument.” Hennon v. Cooper,
109 F.3d 330, 333 (7th Cir. 1997). The prosecutor’s appeal to
the hardships faced by “law enforcement in this country” in-
voked contemporary political controversies wholly unrelated
to the charges. He linked Chaparro with unnamed critics who
unfairly attack police officers generally and portrayed himself
as the defender of the police. But a prosecutor represents the
United States, not the government witnesses: “The United
States Attorney is the representative not of an ordinary party
to a controversy, but of a sovereignty whose obligation to
govern impartially is as compelling as its obligation to govern
at all.” Berger v. United States, 295 U.S. 78, 88 (1935). Accord-
ingly, prosecutors must not “appeal[] to jurors’ prejudices
and fears,” Hennon, 109 F.3d at 333, or make arguments that
are excessively “inflammatory or political.” United States v.
Boros, 668 F.3d 901, 911 n.9 (7th Cir. 2012).
No. 18-2513 39
Although the comments were improper, they do not re-
quire vacating the conviction on Count Two on plain-error re-
view. The government presented ample evidence to prove its
case on the smartphone charge. In any event, the comments
were irrelevant: the trial did not concern the propriety of the
search of the home. So we cannot say that “the outcome of the
trial probably would have been different absent the prosecu-
tion’s remarks.” Kelerchian, 937 F.3d at 917; see United States v.
Klemis, 859 F.3d 436, 442–43 (7th Cir. 2017) (upholding verdict
on plain error review despite the prosecutor’s “naked appeal
to passion rather than reason and evidence” because “the ev-
idence of [the defendant’s] guilt was plentiful and compel-
ling”).
IV. Remedy
The convictions as to Counts One and Three must be re-
versed because of the erroneous admission of Chaparro’s pre-
trial services statement. The Count Two conviction remains
intact. Chaparro was sentenced to three concurrent terms of
imprisonment of 210 months each, raising the question of
what remedy is required. Neither party objected to the district
court’s finding that each count carried an offense level of 37
under the Sentencing Guidelines. Indeed, all three counts nec-
essarily carried the same offense level because they were
grouped pursuant to Guideline 3D1.2. Because of our deci-
sion, however, it matters whether the guideline range for
Count Two would have been lower without the convictions
on Counts One and Three.
In addition, some of the specific characteristics that in-
creased Chaparro’s offense level likely would not apply to the
smartphone conviction on its own. A two-level increase for
40 No. 18-2513
distribution stemmed solely from the transportation convic-
tion. See U.S.S.G. § 2G2.2(b)(3)(F). A five-level increase ap-
plied because the offenses involved over 600 images in total,
but only two images were found on the smartphone. See
§ 2G2.2(b)(7)(D). It appears that, without Counts One and
Three, Count Two might have carried a substantially lower
offense level. Thus, if the government declines to retry Chap-
arro, he is still entitled to resentencing on Count Two with a
new guideline calculation.
The convictions as to Count One and Count Three of the
indictment are REVERSED, and the sentence on Count Two is
vacated. The case is remanded to the district court for a new
trial on Counts One and Three and/or resentencing on Count
Two in a manner consistent with this opinion.
No. 18-2513 41
APPENDIX
42 No. 18-2513
No. 18-2513 43
44 No. 18-2513
No. 18-2513 45
46 No. 18-2513
No. 18-2513 47
48 No. 18-2513
No. 18-2513 49
50 No. 18-2513
No. 18-2513 51
52 No. 18-2513
| {
"pile_set_name": "FreeLaw"
} |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.