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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 07-7493
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
MICHAEL RODNEY MCMILLAN,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh. W. Earl Britt, Senior
District Judge. (7:02-cr-00004-BR; 7:03-cv-00065-BR)
Submitted: February 21, 2008 Decided: February 26, 2008
Before MOTZ and GREGORY, Circuit Judges, and WILKINS, Senior
Circuit Judge.
Dismissed by unpublished per curiam opinion.
Michael Rodney McMillan, Appellant Pro Se. Rudolf A. Renfer, Jr.,
Assistant United States Attorney, Raleigh, North Carolina, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Michael Rodney McMillan seeks to appeal the district
court’s order treating his Fed. R. Civ. P. 60(b) motion, seeking to
reopen his 28 U.S.C. § 2255 (2000) proceeding, as a successive
§ 2255 motion, and dismissing it on that basis. The order is not
appealable unless a circuit justice or judge issues a certificate
of appealability. 28 U.S.C. § 2253(c)(1) (2000); Reid v. Angelone,
369 F.3d 363, 369 (4th Cir. 2004). A certificate of appealability
will not issue absent “a substantial showing of the denial of a
constitutional right.” 28 U.S.C. § 2253(c)(2) (2000). A prisoner
satisfies this standard by demonstrating that reasonable jurists
would find that any assessment of the constitutional claims by the
district court is debatable or wrong and that any dispositive
procedural ruling by the district court is likewise debatable.
Miller-El v. Cockrell, 537 U.S. 322, 336-38 (2003); Slack v.
McDaniel, 529 U.S. 473, 484 (2000); Rose v. Lee, 252 F.3d 676, 683-
84 (4th Cir. 2001). We have independently reviewed the record and
conclude that McMillan has not made the requisite showing.
Accordingly, we deny a certificate of appealability and dismiss the
appeal.
Additionally, we construe McMillan’s notice of appeal and
informal brief as an application to file a second or successive
motion under 28 U.S.C. § 2255. United States v. Winestock, 340
F.3d 200, 208 (4th Cir. 2003). In order to obtain authorization to
- 2 -
file a successive § 2255 motion, a prisoner must assert claims
based on either: (1) a new rule of constitutional law, previously
unavailable, made retroactive by the Supreme Court to cases on
collateral review; or (2) newly discovered evidence, not previously
discoverable by due diligence, that would be sufficient to
establish by clear and convincing evidence that, but for
constitutional error, no reasonable factfinder would have found the
movant guilty of the offense. 28 U.S.C. §§ 2244(b)(2), 2255
(2000). McMillan’s claims do not satisfy either of these criteria.
Therefore, we deny authorization to file a successive § 2255
motion.
We dispense with oral argument because the facts and
legal contentions are adequately presented in the materials before
the court and argument would not aid the decisional process.
DISMISSED
- 3 -
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396 F.3d 1369
PALM BAY IMPORTS, INC., Appellant,v.VEUVE CLICQUOT PONSARDIN MAISON FONDEE EN 1772, Appellee.
No. 04-1042.
United States Court of Appeals, Federal Circuit.
February 9, 2005.
Edmund J. Ferdinand, III, Grimes & Battersby, LLP, of Norwalk, Connecticut, argued for appellant. With him on the brief was Gregory J. Battersby.
Marie V. Driscoll, Fross Zelnick Lehrman & Zissu, P.C., of New York, New York, argued for appellee. With him on the brief was John Margiotta.
Before MICHEL, Chief Judge,1 RADER, and PROST, Circuit Judges.
RADER, Circuit Judge.
1
Palm Bay Imports, Inc. (Palm Bay) appeals from the decision of the United States Patent and Trademark Office Trademark Trial and Appeal Board (Board) refusing registration of the mark VEUVE ROYALE for sparkling wine on the ground of likelihood of confusion with three of opposer Veuve Clicquot Ponsardin's (VCP's) marks. Veuve Clicquot Ponsardin v. Palm Bay Imports, Inc., Opp'n No. 115,438, 2003 WL 21953664 (T.T.A.B. Aug. 4, 2003). This court concludes that the Board did not err in finding a likelihood of confusion, but substantial evidence does not support such a finding for one of the marks. Even though this court reverses the Board's conclusion as to one of the marks, the Board's refusal to register Palm Bay's VEUVE ROYALE mark is affirmed.
I.
2
In April 1998, Palm Bay filed an intent-to-use trademark application under Section 1(b) of the Lanham Act, 15 U.S.C. § 1051(b), for the mark VEUVE ROYALE for "alcoholic beverages, namely, sparkling wine." Veuve Clicquot Ponsardin, slip op. at 1. The examining attorney found no evidence of a similar mark that would bar registration on the ground of likelihood of confusion under Section 2(d) of the Trademark Act, 15 U.S.C. § 1052(d). In response to the June 22, 1999 Official Gazette publication of Palm Bay's application, VCP filed an opposition with the Board, alleging a likelihood of confusion between VEUVE ROYALE and five of its own marks. Specifically, VCP asserted a likelihood of confusion based on the following marks: (1) VEUVE CLICQUOT PONSARDIN; (2) VEUVE CLICQUOT; (3) VEUVE CLICQUOT PONSARDIN Design; (4) THE WIDOW; and (5) LA VIUDA.
3
On August 4, 2003, the Board refused registration of VEUVE ROYALE, finding a likelihood of confusion with (1) VEUVE CLICQUOT PONSARDIN, (2) VEUVE CLICQUOT, and (3) THE WIDOW. The Board dismissed VCP's Section 2(d) claim for LA VIUDA finding the doctrine of foreign equivalents inapplicable to marks in two different foreign languages, i.e., Spanish and French. Palm Bay appeals.
II.
4
Likelihood of confusion under the Lanham Act, 15 U.S.C. § 1052(d), is a legal determination based upon factual underpinnings. On-Line Careline, Inc. v. Am. Online, Inc., 229 F.3d 1080, 1084 (Fed.Cir.2000). This court determines the question on a case-specific basis, applying the thirteen factors set forth in In re E.I. DuPont DeNemours & Co., 476 F.2d 1357, 1361 (C.C.P.A.1973), without deference. In re Int'l Flavors & Fragrances, Inc., 183 F.3d 1361, 1365 (Fed.Cir.1999). At the same time, this court reviews factual underpinnings for that legal conclusion, namely the DuPont factors, for substantial evidence. Dickinson v. Zurko, 527 U.S. 150, 156, 119 S.Ct. 1816, 144 L.Ed.2d 143 (1999); Bose Corp. v. QSC Audio Prods., 293 F.3d 1367, 1370 (Fed.Cir.2002). Evidence is substantial if "a reasonable person might find that the evidentiary record supports the agency's conclusion." On-Line Careline, 229 F.3d at 1085.
III. The VEUVE Marks
5
Palm Bay asserts that the Board erred in its findings on four DuPont factors during analysis of VEUVE CLICQUOT and VEUVE CLICQUOT PONSARDIN: (1) the similarity of the marks; (2) third-party use of the term VEUVE; and (3) the fame of VCP's marks; and (4) purchaser sophistication (corresponding to the first, sixth, fifth and fourth DuPont factors, respectively).
A.
6
The first DuPont factor requires examination of "the similarity or dissimilarity of the marks in their entireties as to appearance, sound, connotation and commercial impression." DuPont, 476 F.2d at 1361. Palm Bay contends that the Board made two errors in finding that VEUVE ROYALE was confusingly similar to VCP's marks. First, it claims that the Board misstated the legal test of similarity by treating "commercial impression" as the ultimate conclusion rather than as a separate factor. Second, Palm Bay claims the Board erred in finding that VEUVE was the "prominent feature" of VCP's marks. Instead, argues Palm Bay, CLICQUOT is the dominant feature.
1. Test for Similarity
7
The Board phrased the legal test for similarity as whether the marks "when compared in their entireties in terms of appearance, sound and connotation, are similar or dissimilar in their overall commercial impressions." Veuve Clicquot Ponsardin, slip op. at 26-27. After conducting a thorough analysis of the appearance, sound, meaning, and commercial impression of the marks, the Board concluded that they were "more similar than dissimilar in their overall commercial impression for purposes of the first DuPont factor." Id. at 29. In both instances, the Board treated "commercial impression" as the ultimate conclusion under this prong rather than as a separate factor along with appearance, sound, and meaning. Palm Bay contends that the Board's inaccurate paraphrase of the legal standard infected its analysis and constitutes reversible error.
8
This court declines to find reversible error merely because the Board, in two instances, made a minor misstatement of the similarity test in an otherwise proper analysis. Moreover, this court's precedent counsels that the phrase "commercial impression" is occasionally used as a proxy for the ultimate conclusion of similarity or dissimilarity of marks resulting from a comparison of their appearance, sound, and meaning. Hewlett-Packard Co. v. Packard Press, Inc., 281 F.3d 1261, 1266-67 (Fed.Cir.2002) (holding that PACKARD TECHNOLOGIES and HEWLETT PACKARD differ in appearance and sound, but the marks convey a similar commercial impression because consumers would be aware of Hewlett-Packard's heavy involvement in technology-based goods, and therefore the marks are similar in their entireties); Kenner Parker Toys, Inc. v. Rose Art Indus., Inc., 963 F.2d 350, 355 (Fed.Cir.1992) (holding that in light of the appearance, sound and meaning of the marks PLAY-DOH and FUNDOUGH, consumers may receive the "same commercial impression" from the marks); Morton-Norwich Prods., Inc. v. S.C. Johnson & Son, Inc., 531 F.2d 561, 562 (C.C.P.A.1976) (holding that RAINFRESH is confusingly similar to RAIN BARREL given the close relationship of the goods and "similarity of commercial impressions").
2. Significance of CLICQUOT
9
Palm Bay next asserts that the Board gave insufficient weight to the relative dominance of CLICQUOT, while placing too much emphasis on the weaker VEUVE portion of VCP's marks. Palm Bay notes that VCP admitted that CLICQUOT was the most distinctive portion of its marks in a World Intellectual Property Organization (WIPO) Internet domain name proceeding, and that VCP has used CLICQUOT in its marketing materials, including radio spots, promotional products, and as the URL of its website (www.clicquot.com). Moreover, Palm Bay argues, VCP has no enforceable trademark rights in the term VEUVE, and has never used the term, standing alone, on its champagne bottles or in its marketing efforts.
10
The Board correctly weighed the relative importance of VEUVE and CLICQUOT. VEUVE is an arbitrary term as applied to champagne and sparkling wine, and thus conceptually strong as a trademark. See, e.g., Nautilus Group, Inc. v. Icon Health & Fitness, Inc., 372 F.3d 1330, 1340 (Fed.Cir.2004) (defining an arbitrary mark as "a known word used in an unexpected or uncommon way" and observing that such marks are typically strong). Indeed, VCP has made VEUVE a theme of its marketing efforts because of the history, and the widow Clicquot herself, connected with the origins of the company. To be sure, CLICQUOT is an important term in the mark, but VEUVE nevertheless remains a "prominent feature" as the first word in the mark and the first word to appear on the label. Not only is VEUVE prominent in the commercial impression created by VCP's marks, it also constitutes "the dominant feature" in the commercial impression created by Palm Bay's mark. Veuve Clicquot Ponsardin, slip op. at 31-32 (VEUVE is first word in mark; significance of ROYALE is more laudatory and less source-indicating than VEUVE or "widow"; arbitrary term VEUVE contributes more to commercial impression of product than ROYALE). The presence of this strong distinctive term as the first word in both parties' marks renders the marks similar, especially in light of the largely laudatory (and hence non-source identifying) significance of the word ROYALE.
11
This case is distinguishable from cases upon which Palm Bay relies where this court found no likely confusion between marks involving a common term. See, e.g., Kellogg Co. v. Pack `em Enters., Inc., 951 F.2d 330 (Fed.Cir.1991) (FROOTEE ICE for flavored ice bars not likely to cause confusion with FROOT LOOPS for breakfast cereal and related products); Keebler Co. v. Murray Bakery Prods. Inc., 866 F.2d 1386 (Fed.Cir.1989) (PECAN SHORTIES not likely to cause confusion with PECAN SANDIES for cookies). In these cases, the common term is a generic or non-distinctive term. Here, the common term — VEUVE — is distinctive, and as such its presence in both parties' marks enhances the likelihood of confusion. Substantial evidence therefore supports the Board's finding that the marks are similar under the first DuPont factor.
B.
12
Palm Bay next contends that the Board erred in rejecting evidence of third-party use of at least five different alcoholic beverages that use the term VEUVE (or a foreign equivalent). This assertion requires analysis of the sixth DuPont factor, which considers "the number and nature of similar marks in use on similar goods." DuPont, 476 F.2d at 1361. Evidence of third-party use of similar marks on similar goods is relevant to show that a mark is relatively weak and entitled to only a narrow scope of protection. General Mills, Inc. v. Kellogg Co., 824 F.2d 622, 626-27 (8th Cir.1987); J. Thomas McCarthy, 2 McCarthy on Trademarks and Unfair Competition § 11:88 (4th ed.2001) (hereinafter McCarthy on Trademarks). In particular, Palm Bay argues that third-party evidence consists of at least five different alcoholic beverages that use the term VEUVE: (1) VIUDA DE ROMERO (tequila); (2) VEUVE CASTARDE BAS ARMAGNAC (brandy); (3) VEUVE ROTH BRANDY (brandy); (4) VEUVE DE LALANDE (sparkling wine); and (5) VEUVE DU VERNAY (sparkling wine). Each of these brands has at various points of time appeared in an industry trade publication, the Beverage Media Guide, which lists all beverage products in the wine and spirits categories sold by wholesalers to restaurants and retail stores in New York State. The Board rejected this evidence on the ground that the Beverage Media Guide is only distributed to the trade, and thus does not show the extent to which consumers actually encounter these brands in the marketplace.
13
The probative value of third-party trademarks depends entirely upon their usage. E.g., Scarves by Vera, Inc. v. Todo Imports, Ltd., 544 F.2d 1167, 1173 (2d Cir.1976) ("The significance of third-party trademarks depends wholly upon their usage. Defendant introduced no evidence that these trademarks were actually used by third parties, that they were well promoted or that they were recognized by consumers."). While the Beverage Media Guide is compelling evidence that distributors were aware that the term VEUVE was used for other alcoholic products, it is not evidence that the consuming public was likewise aware. At best, the Beverage Media Guide is evidence that the consuming public could potentially be cognizant of third-party use of the term VEUVE. Absent evidence of the consuming public's awareness, however, the Beverage Media Guide standing alone does not suffice. As this court has previously recognized where the "record includes no evidence about the extent of [third-party] uses ... [t]he probative value of this evidence is thus minimal." Han Beauty, Inc. v. Alberto-Culver Co., 236 F.3d 1333, 1338 (Fed.Cir.2001) (emphasis added).
14
Lloyd's Food Products, Inc. v. Eli's, Inc., 987 F.2d 766 (Fed.Cir.1993), does not alter that reasoning. In Lloyd's, this court held that the Board erred in failing to consider evidence of third-party use of service marks in phone directories. Id. at 768. Unlike the Lloyd's phone directories that were distributed to the public, the Beverage Media Guide is only sent to distributors, not to the consuming public. Additionally, the issue in Lloyd's involved service marks, for which advertising in phone directories is evidence of use. Here, by contrast, the marks are trademarks applied to goods for which a mere listing in a directory is not evidence of such use. Thus, the Lloyd's holding is inapposite to the facts of this case.
15
Palm Bay further argues that the Board erred in minimizing the import of retail marketing evidence it presented for the third-party mark VEUVE DE VERNAY. Specifically, Palm Bay notes that its private investigator discovered that six New York stores displayed for sale the VEUVE DE VERNAY sparkling wine as well as internet web sites and restaurant lists. Though the Board determined that such evidence exhibited more than de minimis use, it did not credit the single mark use with much weight. As the Board observed, "[t]he purpose of a defendant introducing third party uses is to show that customers have become so conditioned by a plethora of such similar marks that customers `have been educated to distinguish between different [such] marks on the bases of minute distinctions.'" Veuve Clicquot Ponsardin, slip op. at 25 (citing McCarthy on Trademarks, at § 11:88). Palm Bay's evidence does not rise to the level of demonstrating that the single third-party use was so widespread as to "condition" the consuming public.
16
Accordingly, substantial evidence supports the Board's finding that the strength of VCP's mark was not undermined by third-party use in either the Beverage Media Guide or the retail market.
C.
17
Palm Bay argues that the Board erred in concluding that VCP's marks are famous, per the fifth DuPont factor, and therefore entitled to a wide scope of protection. In its view, the Board applied an incorrect legal standard for measuring fame by focusing on a narrow class of consumers limited to purchasers of champagne and sparkling wine. The proper standard for fame, Palm Bay asserts, is whether a mark has achieved "extensive public recognition and renown" among the general public. Kenner Parker Toys, Inc., 963 F.2d at 353. Palm Bay further contends there was insufficient evidence to support a finding of fame.
18
Fame of an opposer's mark, if it exists, plays a "dominant role in the process of balancing the DuPont factors." Recot, Inc. v. M.C. Becton, 214 F.3d 1322, 1327 (Fed.Cir.2000). Famous marks enjoy wide latitude of legal protection since they are more likely to be remembered and associated in the public mind than weaker marks, and are thus more attractive as targets for would-be copyists. Id. Indeed, "[a] strong mark ... casts a long shadow which competitors must avoid." Kenner Parker Toys, 963 F.2d at 353. Fame for likelihood of confusion purposes and fame for dilution purposes, however, are distinct concepts. The Toro Co. v. ToroHead, Inc., 61 U.S.P.Q.2d 1164, 1170 (T.T.A.B.2001).2 While dilution fame is an either/or proposition — fame either does or does not exist — likelihood of confusion fame "varies along a spectrum from very strong to very weak." In re Coors Brewing Co., 343 F.3d 1340, 1344 (Fed.Cir.2003).
19
This court's statement in Kenner Parker Toys that fame for likelihood of confusion purposes is to be measured by whether a mark has achieved "extensive public recognition and renown" was not intended to require public awareness among every segment of the U.S. population. Indeed, the court in Kenner Parker Toys did not consider the issue of the extent of public renown necessary to qualify for treatment as a famous mark. Palm Bay's argument for a general public standard would be contrary to the trend of our case law and improperly elevate likelihood of confusion fame to the higher and more rigorous standard for dilution fame required under the FTDA. In this case, some classes of consumers would not have occasion to be exposed to VCP's champagne products, such as children or adolescents below the drinking age, or adults who for religious or other reasons choose not to consume alcoholic beverages. Thus, a general public awareness standard does not adequately reflect the mark's fame amongst the purchasing public. Fame for confusion purposes arises as long as a significant portion of the relevant consuming public, namely, purchasers of champagne and sparkling wine, recognizes the mark as a source indicator. Although this court has not directly addressed the question of what segment of the consuming public must be aware of a mark in order for it to be considered famous in a likelihood of confusion analysis, it has indirectly suggested that a mark's renown within a specific product market is the proper standard. See Bose Corp., 293 F.3d at 1376 (2002) ("Large market shares of product sales or large percentages of advertising expenditures in a product line would buttress claims to fame."). Similarly, this court's precedent has defined the relevant product market for purposes of determining likelihood of confusion as customers and potential customers. Elec. Design & Sales, Inc. v. Elec. Data Sys. Corp., 954 F.2d 713, 716 (Fed.Cir.1992) (holding that purchaser confusion is the "primary focus" and, in case of goods and services that are sold, "the inquiry generally will turn on whether actual or potential `purchasers' are confused"). Accordingly, this court holds that the proper legal standard for evaluating the fame of a mark under the fifth DuPont factor is the class of customers and potential customers of a product or service, and not the general public. The Board did not err in so holding.
20
Given this clarification of the proper relevant market for evaluating the fame of a mark, this court finds that there was sufficient factual evidence of fame within the market of purchasers of champagne and sparkling wine to support the Board's conclusion. The record indicates that VCP's sales volume and advertising expenditures since 1990 have been substantial. VEUVE CLICQUOT champagne is the second leading brand sold in the U.S. The brand is sold in 8,000 restaurants nationwide, and in liquor stores, wine shops, and other retail establishments. VCP advertises in general interest magazines such as Vanity Fair and in wine specialty magazines, radio ads, point-of-sale displays, through in-store and in-restaurant wine tastings and events, through sponsorship of events, and on its Internet site. VCP's products have been featured in articles and reviews in both specialized and general interest magazines. According to an April 2001 issue of Wine and Spirits, VEUVE CLICQUOT was the most-ordered wine in the "sparkling wine" category of the 363 survey respondents. VCP's products have also been featured in Business Week, American Way (in-flight magazine of American Airlines), The New York Times, the Boston Globe, Money magazine, and the Detroit News. Moreover, Palm Bay's President, David Taub, admitted that the VEUVE CLICQUOT mark is famous. His later qualification that such fame was limited to the "top-end" segment of the market does not diminish the significance of his admission in view of the Board's finding that high-end champagne and less-expensive sparkling wines are marketed in the same channels of trade to the same consumers. Finally, the Board noted that several WIPO domain name arbitration decisions had found VCP's marks to be famous. While acknowledging Palm Bay's argument that a mark must be famous among purchasers in the United States, whereas WIPO examined VCP's marks worldwide, the Board properly noted that such evidence nonetheless provided a "confirmatory context" for VCP's other evidence of fame. Considering this evidence in its totality and in context, this court finds that substantial evidence supports the Board's finding of fame.
D.
21
The fourth DuPont factor examines the conditions under which, and to whom, sales are made. DuPont, 476 F.2d at 1361. Purchaser sophistication may tend to minimize likelihood of confusion. Conversely, impulse purchases of inexpensive items may tend to have the opposite effect. Recot, Inc., 214 F.3d at 1329.
22
In concluding that this factor was "neutral, at best," Veuve Clicquot Ponsardin, slip op. at 15, the Board found that champagne and sparkling wines are not necessarily expensive goods which are always purchased by sophisticated purchasers who exercise a great deal of care in making their purchases. This court agreed with the Board's finding. Although some champagne can be expensive, many brands sell for around $25 a bottle, and sparkling wines for less than $10 a bottle. Moreover, general consumers, not just connoisseurs, occasionally purchase champagne or sparkling wines on celebratory occasions, with little care or prior knowledge. And even more sophisticated purchasers might be aware that champagne houses offer both types of products under similar marks, and could easily conclude that VEUVE ROYALE was Veuve Clicquot's sparkling wine. This market expansion rationale undercuts Palm Bay's argument that because VCP has never sold a sparkling wine product or low-priced champagne, and that it has always used its CLICQUOT house mark in connection with its sales, consumers would be unlikely to confuse Palm Bay's inexpensive sparkling wine and VCP's slightly more expensive champagne products. Considering this evidence in its entirety, this court concludes that substantial evidence supports the Board's finding under this DuPont factor.
IV.
23
The Board held that Palm Bay's VEUVE ROYALE was confusingly similar to VCP's mark THE WIDOW, in part because under the doctrine of foreign equivalents, an appreciable number of purchasers in the U.S. speak and/or understand French, and they "will translate" applicant's mark into English as "Royal Widow." Veuve Clicquot Ponsardin, slip op. at 36. The Board erred in so finding.
24
Under the doctrine of foreign equivalents, foreign words from common languages are translated into English to determine genericness, descriptiveness, as well as similarity of connotation in order to ascertain confusing similarity with English word marks. See In re Sarkli, Ltd., 721 F.2d 353 (Fed.Cir.1983); In re Am. Safety Razor Co., 2 U.S.P.Q.2d 1459, 1460 (T.T.A.B.1987) (finding BUENOS DIAS for soap confusingly similar to GOOD MORNING for shaving cream). When it is unlikely that an American buyer will translate the foreign mark and will take it as it is, then the doctrine of foreign equivalents will not be applied. In re Tia Maria, Inc., 188 U.S.P.Q. 524 (T.T.A.B.1975) (no likelihood of confusion between TIA MARIA for a Mexican restaurant and AUNT MARY's for canned vegetables).
25
In comparing VEUVE ROYALE with VEUVE CLICQUOT PONSARDIN and VEUVE CLICQUOT, the Board found that "an appreciable number of purchasers are unlikely to be aware that VEUVE means `widow' and are unlikely to translate the marks into English." Veuve Clicquot Ponsardin, slip op. at 11 (emphasis added). In comparing VEUVE ROYALE with THE WIDOW, however, the Board found that "[A]n appreciable number of purchasers in the United States speak and/or understand French, and they will translate applicant's mark into English as ROYAL WIDOW." Id., slip op. at 14 (emphasis added). An appreciable number of U.S. consumers either will or will not translate VEUVE into "widow," and the Board was inconsistent in its application of the doctrine of foreign equivalents.
26
Although words from modern languages are generally translated into English, the doctrine of foreign equivalents is not an absolute rule and should be viewed merely as a guideline. In re N. Paper Mills, 20 C.C.P.A. 1109, 64 F.2d 998, 999 (1933); McCarthy on Trademarks, at § 11:34. The doctrine should be applied only when it is likely that the ordinary American purchaser would "stop and translate [the word] into its English equivalent." In re Pan Tex Hotel Corp., 190 U.S.P.Q. 109, 110 (T.T.A.B.1976). This court agrees with the T.T.A.B. that it is improbable that the average American purchaser would stop and translate "VEUVE" into "widow." Substantial evidence does not support the Board's finding regarding the doctrine of foreign equivalents. This court, therefore, reverses the Board's finding of likelihood of confusion for THE WIDOW.
CONCLUSION
27
This court affirms the Board's decision that a likelihood of confusion exists between applicant's VEUVE ROYALE mark and opposer's marks VEUVE CLICQUOT PONSARDIN and VEUVE CLICQUOT. We reverse the Board's conclusion of the likelihood of confusion as to the THE WIDOW mark and we affirm the Board's refusal to register Palm Bay's VEUVE ROYALE mark.
COSTS
28
Each party shall bear its own costs.
AFFIRMED
Notes:
1
Paul R. Michel assumed the position of Chief Judge on December 25, 2004
2
Under the 1996 Federal Trademark Dilution Act (FTDA), 15 U.S.C. § 1125(c), only "famous" marks are protected. The FTDA lists eight nonexclusive factors courts are to consider in determining whether a mark is "distinctive and famous."See 15 U.S.C. § 1125(c)(1)(A) — (H) (2004).
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46 F.3d 1117
Pens. Plan Guide P 23904KInternational Union of Electronic, Electric, Salaried,Machine and Furniture Workers, AFL-CIO, Baldwin(James R.), Layne (Harry J.), Pettinato(Rodney J.), Rothermel(Pauline), Thompson (Marlyn)v.Murata Erie North America, Inc., a Georgia Corporation
NO. 94-3267
United States Court of Appeals,Third Circuit.
Dec 16, 1994
Appeal From: W.D.Pa., No. 89-00255E,
Mencer, J.
1
AFFIRMED.
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540 U.S. 898
ALEXANDERv.COOK, ASSISTANT WARDEN, ET AL.
No. 03-5268.
Supreme Court of United States.
October 6, 2003.
1
Appeal from the C. A. 5th Cir.
2
Certiorari denied. Reported below: 67 Fed. Appx. 247.
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485 S.E.2d 867 (1997)
Effie PARSONS, Plaintiff-employee,
v.
The PANTRY, INC., Defendant-employer, Self-Insured (Alexsis, Inc., Servicing Agent), Defendant-carrier.
No. COA96-853.
Court of Appeals of North Carolina.
June 17, 1997.
*868 Law Offices of Kathleen G. Sumner by Kathleen G. Sumner, Greensboro, for plaintiff-appellant.
Ward and Smith, P.A. by Catherine Ricks Piwowarski and S. McKinley Gray, III, New Bern, for defendant-appellee.
LEWIS, Judge.
Plaintiff appeals from opinion and award by the full Commission denying her further medical expenses as a result of her compensable injury. We reverse and remand.
On 30 April 1991, plaintiff was an assistant manager at one of defendant-employer's stores. Late that night, two men entered the store. One of them struck plaintiff in the forehead and shot her four times with a stun gun. By opinion and award filed 9 December 1993, the Industrial Commission concluded that plaintiff suffered compensable injuries as a result of the 30 April 1991 occurrence. The Commission ordered defendants to pay plaintiff's medical expenses but ruled that plaintiff was not entitled to any temporary total disability compensation. The Industrial Commission further ordered defendants to pay for "such future medical treatment which tends to effect a cure, give relief, or lessen the plaintiff's period of disability." Neither side appealed from this order.
On 11 August 1994, plaintiff requested a hearing, citing defendants' failure to pay medical expenses. The deputy commissioner concluded that plaintiff was not entitled to further medical treatment as a result of her compensable injury absent a change of condition, but ordered defendants to pay her medical bills to the date of the filing of that opinion and award. The decision denying further treatment was based on the conclusion that "there is no competent medical evidence relating her current complaints to her compensable injury or suggesting that there is any need for further medical treatment." The full Commission affirmed the deputy's decision.
Our review of Industrial Commission decisions is limited to consideration of whether competent evidence supports the findings of fact and whether the findings support the Commission's legal conclusions. Simon v. Triangle Materials, Inc., 106 N.C.App. 39, 41, 415 S.E.2d 105, 106, disc. review denied, 332 N.C. 347, 421 S.E.2d 154 (1992). "However, if the findings are predicated on an erroneous view of the law or a misapplication of the law, they are not conclusive on appeal." Id.
On appeal, plaintiff argues that the full Commission erred in concluding that she was not entitled to further medical treatment. The parties disagree over one crucial factor: who has the burden to prove whether plaintiff's current medical problems and the compensable injury are causally related for purposes of awarding additional medical compensation. The Industrial Commission *869 placed the burden on plaintiff, finding that "Plaintiff has not introduced any evidence of causation between her injury and her headache complaints at the time of the hearing" and "Plaintiff has failed to meet her burden of proof for showing the necessity of continued or additional medical treatment." Plaintiff maintains that this was error because it is defendants' duty to prove that her current pain is not the result of her compensable accident. Defendants argue that the Commission properly imposed the burden upon plaintiff to prove a causal link between her current problems and the compensable injury. Neither side provides precedent in this case of first impression in North Carolina.
N.C. Gen.Stat. section 97-25 requires employers to pay future medical compensation when the treatment lessens the period of disability, effects a cure or gives relief. Little v. Penn Ventilator Co., 317 N.C. 206, 210, 345 S.E.2d 204, 207 (1986). "Logically implicit" in this statute is the requirement that the future medical treatment be "directly related to the original compensable injury." Pittman v. Thomas & Howard, 122 N.C.App. 124, 130, 468 S.E.2d 283, 286, disc. review denied, 343 N.C. 513, 472 S.E.2d 18 (1996). In determining which side should bear the burden of proof on this issue, we are mindful that "the Workers' Compensation Act was never intended to be a general accident and health insurance policy." Weaver v. Swedish Imports Maintenance, Inc., 319 N.C. 243, 253, 354 S.E.2d 477, 483 (1987). However, we also note that the Act is to be construed liberally and in favor of the injured employee, Dayal v. Provident Life and Accident Ins. Co., 71 N.C.App. 131, 132, 321 S.E.2d 452, 453 (1984), and that the General Assembly's intent behind the Act was to "`compel industry to take care of its own wreckage.'" Hyler v. GTE Products Co., 333 N.C. 258, 268, 425 S.E.2d 698, 704 (1993)(quoting Barber v. Minges, 223 N.C. 213, 25 S.E.2d 837 (1943)).
Guided by these considerations, we hold that the Commission committed legal error by placing the burden on plaintiff to prove causation. At the initial hearing, plaintiff's main injury complaint was headaches. At that time, it was her burden to prove the causal relationship between her 30 April 1991 accident and her headaches. See Snead v. Sandhurst Mills, Inc., 8 N.C.App. 447, 451, 174 S.E.2d 699, 702 (1970)("A person claiming the benefit of compensation has the burden of showing that the injury complained of resulted from the accident."). Plaintiff met this burden, as evidenced by the Commission's initial opinion and award, from which there was no appeal, granting her medical expenses and future medical treatment. In effect, requiring that plaintiff once again prove a causal relationship between the accident and her headaches in order to get further medical treatment ignores this prior award. Plaintiff met her causation burden; the Industrial Commission ruled that her headaches were causally related to the compensable accident. Logically, defendants now have the responsibility to prove the original finding of compensable injury is unrelated to her present discomfort. To require plaintiff to re-prove causation each time she seeks treatment for the very injury that the Commission has previously determined to be the result of a compensable accident is unjust and violates our duty to interpret the Act in favor of injured employees.
We hold that the Industrial Commission erred in this matter by placing the burden of causation on plaintiff instead of defendants. We remand for findings and conclusions using the proper standard. In doing so, to prevent future error, we also point out the Commission's additional error in requiring a change of condition before an award of future medical expenses under N.C. Gen.Stat. section 97-25. See Pittman, 122 N.C.App. at 130, 468 S.E.2d at 287 ("Unlike a claim for further compensation under G.S. § 97-47, however, G.S. § 97-25 imposes no `change in condition' requirement.").
We need not address plaintiff's remaining assignments of error.
Reversed and remanded.
ARNOLD, C.J., and JOHN, J., concur.
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Cite as 2016 Ark. App. 599
ARKANSAS COURT OF APPEALS
DIVISION IV
No. CR-16-331
Opinion Delivered: December 14, 2016
CHACHAWAL CHAWANGKUL
APPELLANT APPEAL FROM THE ARKANSAS
COUNTY CIRCUIT COURT,
V. NORTHERN DISTRICT
[NO. 01CR-15-34]
STATE OF ARKANSAS
APPELLEE
HONORABLE DAVID G. HENRY,
JUDGE
AFFIRMED
BART F. VIRDEN, Judge
An Arkansas County jury convicted appellant Chachawal Chawangkul 1 of second-
degree sexual assault involving then eight-year-old N.L., his girlfriend’s granddaughter, and
he was sentenced to serve five years in prison. On appeal, appellant argues that the trial court
erred in denying his directed-verdict motions because the State failed to prove that he
touched the child for the purpose of sexual gratification. We affirm.
I. Standard of Review
A motion for directed verdict is a challenge to the sufficiency of the evidence. Davis
v. State, 2009 Ark. App. 753. On appeal, in reviewing a challenge to the sufficiency of the
evidence, we view the evidence in the light most favorable to the verdict to determine
1
Appellant’s names are often inverted, but the record confirms that Chawangkul is
his surname.
Cite as 2016 Ark. App. 599
whether the verdict is supported by substantial evidence, direct or circumstantial. Id.
Substantial evidence is that which is of sufficient force and character that it will, with
reasonable certainty, compel a conclusion one way or the other, without resorting to
speculation or conjecture. Id. Decisions regarding the credibility of witnesses are for the trier
of fact. Id.
II. Sexual Assault
A person commits sexual assault in the second degree if the person, being eighteen
years of age or older, engages in sexual contact with another person who is less than fourteen
years old and not the person’s spouse. Ark. Code Ann. § 5-14-125(a)(3) (Supp. 2015).
“Sexual contact” means any act of sexual gratification involving the touching, directly or
through clothing, of the sex organs, buttocks, or anus of a person or the breast of a female.
Ark. Code Ann. § 5-14-101(10). “Sexual gratification” is not defined in the statute, but our
supreme court has construed the words in accordance with their reasonable and commonly
accepted meanings. Elliott v. State, 2010 Ark. App. 185.
III. Trial Testimony 2
N.L. lived in a home belonging to her great-grandmother, D.B., along with her
younger brother, mother, and grandmother. N.L.’s grandmother, Karen Jones, worked with
and had dated appellant, who was known as “Joshua.” Karen and appellant were at D.B.’s
home on the night of February 8, 2015. D.B. routinely slept with N.L. and her brother.
The State charged appellant with two counts of second-degree sexual assault
2
involving N.L. and her great-grandmother. Even though the trial court ultimately granted
appellant’s directed-verdict motion as to the great-grandmother, because the allegations
were of a sexual nature, we will refer to her as D.B.
2
Cite as 2016 Ark. App. 599
When they went to bed, Karen took appellant to her bedroom down the hall. D.B. testified
that, around 1:00 a.m., she had awakened to see appellant in her bedroom. She noted that
his hand had been near her pelvis. Even though she was already covered, appellant had said
to her, “I cover you up.” D.B. stated that she had thought nothing of it until N.L. woke
her a few hours later.
N.L. testified that, around 3:50 a.m., she had awakened to find appellant on his knees
on her side of the bed with his hand between her legs. N.L. said that appellant’s hand had
been underneath the covers and on top of her underwear. N.L. testified that appellant had
said, “Shhh. Don’t tell nobody,” and left the bedroom. N.L. woke D.B. and said that
appellant had touched her “frog,” which was what she called her vagina. D.B. testified that,
shortly after N.L.’s disclosure, she saw appellant as he came from Karen’s bedroom; he put
on his coat and left.
Detective Sergeant Eric Brown with the Stuttgart Police Department interviewed
appellant on February 12, 2015. Brown testified that, prior to the interview, he had read
appellant his Miranda rights and had given him the rights form to read and sign. Brown
testified that he had been satisfied that appellant “completely understood English.”
Appellant’s videotaped interview was played for the jury.
During the interview, appellant initially insisted that he had only covered D.B. and
N.L. with a blanket. Later, appellant conceded that he had “probably brush[ed]” against
D.B.’s vaginal area and that he had touched N.L.’s vagina for a few seconds outside of her
orange panties. He used the word “groin” three times to describe where he had touched
N.L. He agreed with Brown’s observation that he had been “just sexually stimulating
3
Cite as 2016 Ark. App. 599
[himself] by touching her.” Appellant later said, “I was having a sensual arouse,” to which
Brown said, “Okay, it aroused you . . .,” and appellant said, “Uh-huh.”
Pamela Meeks, an employee with the Arkansas State Police Crimes Against Children
Division, testified that the child-abuse hotline had received a report of abuse involving N.L.
on February 10, 2015. Meeks went to N.L.’s school to speak with her on February 11, and
N.L. had denied having been touched by any adult. Meeks then interviewed D.B. and
Karen, who had provided the name “Joshua.” Meeks then returned to N.L.’s school hours
after the first interview, and N.L. revealed that “Joshua” had touched her “frog” on top of
her panties. Meeks testified that it was not unusual for a child victim to be less than
completely forthcoming at the start of an interview. She said, “You’ve got to realize that I
am a complete stranger coming in asking about something really personal and embarrassing.”
According to Meeks, what N.L. had said in the second interview was consistent with earlier
reports.
Appellant testified that he had come to the United States from Thailand in 1979 and
had first come to Arkansas in 1986. He described various jobs he had held across the country
and stated that he had been in the U.S. Army for three years, had received a college degree,
and had gone to Pulaski Technical College majoring in computer science. Currently, he
was working as a chef at The Lotus Blossom restaurant, where he had met Karen.
Appellant testified that he had gone to D.B.’s house around 10:00 p.m. on February
8 and that he and Karen had begun drinking. He said that, after Karen’s family members
had retired for the night, he had sex with Karen around 12:00 a.m. and left shortly afterward.
Appellant admitted having gone into D.B.’s bedroom on that cold night, but he claimed to
4
Cite as 2016 Ark. App. 599
have done so only to cover D.B. and the children with a blanket. He denied having touched
D.B. at all and testified that he did not recall reaching under the covers and touching N.L.
Appellant testified that, during the interview with police, Brown had “tricked” him;
that Brown had “put words in his mouth”; and that he had said that he touched N.L. only
to satisfy Brown. He denied having said that he put his hand on N.L.’s “groin” and claimed
that he did not know the meaning of that word. He stated that he had not read the forms
given to him by Brown and had signed them all prior to the interview. Appellant said that
lies had been told about him because Karen was mad at him for trying to break up with her.
IV. Argument
In arguing that the trial court erred in denying his directed-verdict motions, appellant
contends that the State failed to prove that he had come into contact with N.L.’s
undergarments for the purpose of sexual gratification. He asserts that not every touch of
genitalia is an act involving sexual gratification because, otherwise, the words “sexual
gratification” would be superfluous in the definition of “sexual contact.” According to
appellant, Brown had lied to him and had suggested words like “caressing” and “massaging.”
Appellant argues that, while “there may have been some sort of sensation when he pulled
the covers up and came into contact with the garment[,] . . . it’s not a crime if the contact
isn’t intentional.”
Appellant contends that he did not admit the sexual-gratification element and that
this is not a case where that element may be assumed. Appellant contends that a jury may
assume sexual gratification only when the acts are “indisputably intentional and the purpose
is obvious.” He cites Williams v. State, 298 Ark. 317, 766 S.W.2d 931 (1989), where the
5
Cite as 2016 Ark. App. 599
defendant had shocked his victim with a stun gun, had threatened to stab her with an ice
pick, and had inserted his fingers into her vagina. Appellant asserts that the assumption has
been allowed where there were “other equally brazen acts” and cites Farmer v. State, 341
Ark. 220, 15 S.W.3d 674 (2000) (defendant had beaten the victim and, while wielding a
knife, had threatened to “fix it” so she could not be with another man, and then he shoved
his fist inside her vagina); Holloway v. State, 312 Ark. 306, 849 S.W.2d 473 (1993)
(defendant, who had touched one victim’s private spot in front and back and had touched
the breasts of another victim, was convicted of various sex offenses, along with terroristic
threatening, against nine children at his day-care center); and McGalliard v. State, 306 Ark.
181, 813 S.W.2d 768 (1991) (defendant had touched victim between her legs for about an
hour while threatening to beat her until she was black and blue if she told).
V. Discussion
N.L. testified that appellant had touched her private parts on top of her panties while
she was sleeping. A sexual-assault victim’s testimony may constitute substantial evidence to
sustain a conviction for sexual assault. Castrellon v. State, 2013 Ark. App. 408, 428 S.W.3d
607. The victim’s testimony need not be corroborated, and the victim’s testimony alone,
describing the sexual contact, is enough for a conviction. Id. Aside from the victim’s
testimony, there was appellant’s interview during which he said that he had touched N.L.’s
vagina; that he was embarrassed and sorry for his actions; and that he worried that “[N.L.]
would memorize [the event] for the rest [of] her life.” The jury was not required to believe
appellant’s testimony at trial that he did not recall touching N.L. Davis, supra.
6
Cite as 2016 Ark. App. 599
The supreme court has consistently held that it is not necessary for the State to
provide direct proof that an act is done for sexual gratification if it can be assumed that the
desire for sexual gratification is a plausible reason for the act. Farmer, supra. The State cites
Davis, supra, where Davis had touched an eleven-year-old girl while she was sleeping. The
victim said that she had awakened to find Davis’s hand inside her panties touching her
private part. On appeal, Davis had argued that there was no evidence that he had been
sexually aroused or gratified by the contact. He said that, because he had not inserted his
finger into the victim’s vagina, no assumption was available. This court disagreed and
affirmed Davis’s conviction.
Appellant appears to believe that the assumption is permissible only under the most
egregious circumstances and where an act is “indisputably intentional and the purpose is
obvious.” The desire for sexual gratification need only be “a plausible reason” for the act.
See Elliott, supra; see, e.g., Holbert v. State, 308 Ark. 672, 826 S.W.2d 284 (1992) (Holbert
had admitted touching a three-year-old victim “on top of her panties” and “on her
vagina.”); Castrellon, supra (A twelve-year-old victim had awakened to find Castrellon
rubbing her vaginal region over her clothes.); Elliott, supra (Elliott had touched an eleven-
year-old victim’s “private spot” with his foot for about ten minutes.).
Although appellant insisted that he had gone into the bedroom to cover D.B. and
the children with a blanket, the testimony established that they were already covered.
Moreover, the evidence showed that appellant had crept into a bedroom at night, had put
his hand underneath the covers, had touched a sleeping child’s vagina, and, upon waking
her, had told her not to tell anyone. The jury could reasonably infer from these acts that it
7
Cite as 2016 Ark. App. 599
was at least plausible that the purpose was sexual gratification. The State was not required to
put on additional evidence that appellant was motivated by such desire. Even if no
assumption were available, appellant said in his own words that he had had “a sensual arouse”
while touching eight-year-old N.L.’s vagina. We hold that there was substantial evidence
to support appellant’s conviction for second-degree sexual assault and thus affirm his
conviction.
Affirmed.
HIXSON, J., agrees.
GRUBER, J., concurs.
RITA W. GRUBER, Judge, concurring. I agree in all aspects with the majority’s
rejection of appellant’s argument that the State failed to prove sexual gratification and with
the holding that substantial evidence supports the appellant’s conviction for second-degree
sexual assault. I write separately to express my dismay that the name of this young victim
appears throughout appellant’s brief. The State’s brief refers to the victim by initials rather
than name, yet the State has filed no motion to redact the juvenile’s name from the
appellant’s brief.
Rule 6-3 of the Rules of the Supreme Court and Court of Appeals requires counsel
and the court to “preserve the juvenile’s anonymity” by using initials in all adoption appeals
and appeals originating in the juvenile division of circuit court. Ark. Sup. Ct. R. 6–3(a)
(2016). Surely, absolute anonymity should also be afforded a juvenile who is the victim of
a sexual crime.
Brett D. Watson, Attorney at Law, PLLC, by: Brett D. Watson, for appellant.
Leslie Rutledge, Att’y Gen., by: Brad Newman, Ass’t Att’y Gen., for appellee.
8
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495 F.2d 26
Joseph LePAGE et al., Plaintiffs, Appellants,v.Philip J. PICARD, Respondent, Appellee.
No. 73-1359.
United States Court of Appeals, First Circuit.
Argued March 6, 1974.Decided April 18, 1974.
Evan T. Lawson, Boston, Mass., by appointment of the court, for plaintiffs, appellants.
Barbara A. H. Smith, Asst. Atty. Gen., with whom Robert H. Quinn, Atty. Gen., John J. Irwin, Jr., Asst. Atty. Gen., Chief, Crim. Div., and David A. Mills, Asst. Atty. Gen., Chief, Crim. Appellate Section, were on brief, for respondent, appellee.
Before COFFIN, Chief Judge, ALDRICH and CAMPBELL, Circuit Judges.
COFFIN, Chief Judge.
1
This is a consolidated appeal from dismissal of petitioners for writs of habeas corpus. Petitioners are serving life sentences pursuant to convictions, for first degree murder and armed assault with intent to rob, reached after a trial which began on February 4, 1965, in Massachusetts Superior Court.1 The hearing below was limited, by agreement of counsel, to the claim that the Superior Court denial of petitioners' motion to suppress certain incriminating statements and their subsequent admission into evidence were violative of the Supreme Court's holding in Escobedo v. Illinois, 378 U.S. 478, 84 S.Ct. 1758, 12 L.Ed.2d 977 (1964). The district judge ruled that the petitioners had failed to show by convincing evidence that the state court rulings were in error. 28 U.S.C. 2254.
2
The statements in question took place while the petitioners were in police custody on the night of March 13 or in the early morning of March 14, 1964, before the decision in Escobedo had been reached. However, because the trial took place after the Supreme Court's decision in June, 1964, Escobedo is applicable. Johnson v. New Jersey, 384 U.S. 719, 86 S.Ct. 1772, 16 L.Ed.2d 882 (1966). Counsel in support of the motion to suppress argued specifically that Escobedo had been violated, and that the confessions were involuntary. The Superior Court rejected the challenge:
3
'On the evidence adduced at the voir dire . . . the constitutional rights of the defendants were not violated, and . . . the defendants were not prejudiced with respect to any such rights.
4
I find that so much of the oral admissions and statements made by either of the defendants of an incriminating nature to police officers and police officials at the police interrogation of them at the Cambridge Police Station the night of March 13 to 14, 1964 as constituted a confession by either of the defendants were given voluntarily and were neither coerced by the police nor induced by any promises made by the police and therefore that the same are to be received in evidence before the jury under appropriate instructions.'
5
In concentrating on the voluntariness issue, the Superior Court did not articulate the legal standards applied or facts found in determining whether other 'constitutional rights' including the right to counsel had been violated. It is petitioners' central contention that because the district court had reason to suspect the application of an incorrect constitutional standard, the requisite facts cannot be presumed to have been properly found and therefore that a mandatory habeas corpus hearing was required of the district court under Townsend v. Sain, 372 U.S. 293, 312-318, 83 S.Ct. 745, 9 L.Ed.2d 770 (1966). If we accept the premise that a hearing was mandated it would follow that the district court incorrectly required the petitioners to prove by convincing evidence that the Massachusetts court was in error; preponderance of the evidence would be the appropriate measure. But we are not so persuaded and find that the district court held a discretionary habeas corpus hearing, properly requiring a showing by convincing evidence under 28 U.S.C. 2254.
6
Petitioners ask us to infer from the state appellate court's articulation of the Escobedo standard the application of an inappropriate rule by the trial court. It is the petitioners' position that the Supreme Judicial Court held that 'Escobedo did not apply' and that therefore the district court, hearing the petitions for habeas, had reason to believe the Superior Court failed to apply Escobedo. This argument is premised on the following statement by the Supreme Judicial Court:
7
'The interrogation of the defendants occurred before the decision in Escobedo v. Illinois, 378 U.S. 478, 84 S.Ct. 1758, 12 L.Ed.2d 977 (June 22, 1964). The trial (February 4 to 19, 1965) took place before the decision in Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (June 13, 1966). The Miranda decision, of course, need not be retroactively applied to this case. Johnson v. New Jersey, 384 U.S. 719, 726-735, 86 S.Ct. 1772, 16 L.Ed.2d 882 . . .. The Supreme Court in the Johnson case, 384 U.S. 719, 731-735, 86 S.Ct. 1772, recognized that police authorities, like the Cambridge police in the present case, 'attempting to protect the privilege' against self-incrimination, prior to the Escobedo and Miranda decisions, had 'not been apprised . . . of the specific safeguards' which emerged in those cases. That court also recognized that naturally enough, such police authorities may have 'adopted devices which, although' not complying fully with those safeguards, 'were not intentional evasions of the requirements of the privilege.' We think that the Johnson decision permits the State courts a reasonable range of discretion in sensible appraisal of police action taken prior to and in ignorance of the Escobedo decision . . .. That these defendants were repeatedly warned of their rights, that they were told that they could get in touch with counsel, that Eskedahl talked with counsel who gave advice at the police station, and that they never asked for counsel distinguishes this case from the Escobedo case . . ..
8
There is no evidence (that their attorneys) . . . requested or demanded of the police that they cease their interrogation of the defendants.' 352 Mass. 403 at 416-417, 226 N.E.2d at 208.
9
We are asked to examine the discussion of Escobedo in vacuo, eliminating the factual discussion because the Supreme Judicial Court spoke without the benefit of specific findings by the Superior Court. We cannot fairly do so. In context, with the factual discussion and assumptions made and especially in light of the citations to Johnson v. New Jersey, supra, it is clear that the Supreme Judicial Court was aware of the applicability of Escobedo to this case. It cannot be inferred from this brief discussion on appeal that the trier did not apply the requisite standard.
10
Townsend v. Sain, 372 U.S. 293 at 314-315, 83 S.Ct. 745 at 758 indicates that in ordinary circumstances, unless 'there is reason to suspect that an incorrect standard was in fact applied', even where there has been no articulation by the state trier of fact, it may be properly assumed that the correct standards of federal law were applied. The facts of this case create a design which does not fit neatly into predetermined patterns. However, the petitioners' rights in Escobedo were vigorously argued in a special hearing on the evidence in question.2 There is no 'reason to suspect that an incorrect standard' was applied. Under these circumstances, entertaining the presumption that the Superior Court resolved petitioners' factual contentions against them would have been proper. See Lavalee v. Delle Rose, 410 U.S. 690, 93 S.Ct. 1203, 35 L.Ed.2d 637 (1973). Therefore, the district court was not obligated to hold an evidentiary hearing. A four day hearing was held at its discretion, Frank v. Mangum, 237 U.S. 309, 311, 35 S.Ct. 582, 59 L.Ed. 969 (1915), because the complex question before it warranted a deliberate reconstruction of the facts and because of an allegation that one of the attorneys had demanded to see his clients, which if proved would have entitled petitioners to relief. Townsend, supra 372 U.S. at 312,83 S.Ct. 745; Fay v. Noia, 372 U.S. 391, 416 n. 27, 83 S.Ct. 822, 9 L.Ed.2d 837 (1962).
11
We turn now to the question of the appropriate burden of proof. The categories established in Townsend for mandatory hearing are codified in 28 U.S.C. 2254(d). See, e.g., Maxwell v. Turner, 411 F.2d 805 (10th Cir. 1969); United States ex rel. Hughes v. McMann, 405 F.2d 773, 776 (2d Cir. 1968). The statute employs the Townsend categories not to indicate when hearing is required but rather to establish the standard of proof which is to be applied to all hearings. See Developments in the Law, Federal Habeas Corpus, 83 Harv.L.Rev. 1038, 1122, n. 46, 1141 (1970).
12
Where the petitioner establishes any of the eight enumerated circumstances, a preponderance of evidence will suffice to show trial error. As we have indicated, the petitioners failed to establish one of these circumstances. The district court followed the letter of the statute in requiring 'the applicant(s) to establish by convincing evidence that the factual determination by the State court was erroneous.' 28 U.S.C. 2254(d).
13
The court, applying the appropriate standard, held: 'The evidence is not convincing that the police refused to permit them to consult counsel.' The court supported this conclusion by assuming a version of events, favorable to petitioners, evidenced by police records (recorded after the events) and petitioners' statements paralleling the records.3 Even with these facts assumed the court found that petitioners were effectively warned of their right to be silent; that they were permitted to phone an attorney, friends, or family;4 that there was only a passing request for counsel, not renewed; and that no attempt was made to terminate the questioning. The court further held that Mr. Travers, the attorney for petitioners, who said he 'demanded' to see his clients was at times confused and was not a wholly reliable witness. Even by his own testimony, his actions were inconsistent with his desire to see his clients. The district court ruled that the state court would have been justified in disbelieving his testimony and could have supportably found 'that Travers failed to make a clear demand or that the demand was made after the confessions were given.'5
14
Given the district court's factual findings, we concur in its legal evaluation. No constitutional violation was made out. Frazier v. Cupp, 394 U.S. 731, 89 S.Ct. 1420, 22 L.Ed.2d 684 (1968) dealt with a similar situation and Escobedo was the applicable case. In the midst of questioning Frazier said 'I think I had better get a lawyer before I talk any more.' Id. at 738, 89 S.Ct. at 1424. The Court held that in contrast to the clear request for counsel and counsel's repeated requests to see his client in Escobedo, 'here . . . it is possible that the questioning officer took petitioner's remark not as a request that the interrogation cease but merely as a passing comment. Petitioner did not pursue the matter, but continued answering questions. In this context, we cannot find the denial of the right to counsel which was found so crucial in Escobedo.' Id. at 739, 89 S.Ct. at 1424. We so hold in this case.
15
Affirmed.
1
The facts of the case can be found in Commonwealth v. LePage, 352 Mass. 403, 226 N.E.2d 200 (1967). The incriminating statements relevant to this appeal are set forth at 408, 226 N.E.2d 200
2
'If the prior state hearing occurred in the course of the original trial-- for example, on a motion to suppress allegedly unlawful evidence, as in the instant case-- it will usually be proper to assume that the claim was rejected on the merits. Townsend, supra at 314, 83 S.Ct. at 758
3
The petitioners did not testify at the suppression hearing or the trial before the Superior Court. It is clear from the district court opinion that the district judge did not consider the testimony of the petitioners convincing. After examining the history of the circumstances and the petitioners' natural interest in obtaining relief, the court indicated that their testimony was questionable but that even if it were relied upon, they did not establish that they were unwilling to proceed with the interrogation without legal advice
4
LePage did phone his wife several times and she came to the police station and was permitted to speak to him privately. Eskedahl spoke with Attorney Andrews early in the evening before the charge had been determined
5
Petitioners' challenge to these findings is unavailing. We say this after a thorough review of the district court transcript, the notes of the police officers, the deposition of Attorney Travers and the state court transcript of Attorney Andrews' testimony. The habeas hearing having taken place nine years after the trial, minor inconsistencies in testimony are inevitable. The only recording soon after the events was done by the police
Petitioners made a special point to challenge the court's finding that Eskedahl requested his attorney before talking to LePage and not before making the confession. We have reviewed the testimony petitioner pointed out but have also reviewed the oral testimony of Norton and Davenport which supported the findings. The district judge would have been supported in crediting any of this testimony. His holding was not that in fact a request was made before the consultation between the two petitioners but that at most the request was then made.
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243 P.3d 568 (2010)
2010 WY 149
Wendy WILLIS, f/k/a Wendy Davis, Appellant (Defendant),
v.
Chad DAVIS, Appellee (Plaintiff).
No. S-10-0066.
Supreme Court of Wyoming.
November 18, 2010.
*569 Representing Appellant: Alex H. Sitz III of Meinecke & Sitz, LLC, Cody, Wyoming.
Representing Appellee: Matthew D. Winslow of Keegan & Winslow, P.C., Cody, Wyoming.
Before KITE, C.J., and GOLDEN, HILL, VOIGT, and BURKE, JJ.
KITE, Chief Justice.
[¶ 1] Chad Davis (Father) and Wendy Willis f/k/a Wendy Davis (Mother) were divorced by decree awarding Father primary physical custody of the children and giving Mother liberal visitation. A year later, Father filed a motion for an order requiring Mother to show cause why she should not be held in contempt for violating provisions of the decree. Mother responded with her own motion for an order requiring Father to show cause why he should not be held in contempt for decree violations. In her motion, Mother also requested custody modification.
[¶ 2] After a hearing, the district court entered an order declining to hold either party in contempt and denying Mother's request for custody modification. Mother did not appeal from that order. Nine days later, Mother filed a motion to modify custody. Father moved to dismiss arguing that the motion was barred by the doctrine of res judicata because the district court had just heard and ruled on a request by Mother for custody modification. The district court granted the motion to dismiss. Mother appeals to this Court claiming res judicata did not apply and the dismissal of her custody modification motion violated her right to due process. We affirm.
ISSUE
[¶ 3] Mother presents a single issue on appeal:
Whether the district court erred when it applied the doctrine of res judicata to [her] Motion to Modify Custody.
FACTS
[¶ 4] The parties were married on August 12, 2000. They had two children, the first in 2003 and the second in 2005. Father filed for divorce in 2007. The district court granted the divorce and awarded the parties joint legal custody of the children, Father primary physical custody and Mother liberal visitation. The district court's decision letter, which the decree incorporated, contained several provisions requiring Mother and Father to cooperate, keep each other informed about matters involving the children and refrain from acting in ways detrimental to the children's relationship with the other parent.
[¶ 5] In October of 2008, six weeks shy of a year from entry of the decree, Father filed a motion for an order requiring Mother to show cause why she should not be held in contempt of court for violating certain provisions of the decree. He alleged that in contravention of the decree Mother had been taking the children to a counselor without informing him and refused to disclose the nature of the counseling or authorize the counselor to discuss it with him. He also alleged Mother had made derogatory comments about him in the children's presence and made exchanges of the children difficult.
[¶ 6] In response, Mother denied Father's allegations and filed her own petition for an order requiring him to show cause why he should not be held in contempt for his alleged acts in contravention of the decree, including moving the children to a different daycare and refusing to disclose the name or location, changing the youngest child's preschool without consulting her in order to prevent her and her family from spending time there with the child, and interfering with communication between Mother and the children by taping their telephone conversations. Father denied Mother's allegations and, several months later, filed a supplement to his motion to show cause in which he alleged additional violations of the decree by Mother. Mother filed a response in which she denied the new allegations and asked for modification of custody.
[¶ 7] Five months later and almost a year after Father filed the original contempt motion, the district court held a hearing during which both parties presented evidence. Following the hearing, the district court issued a decision letter declining to find either party *570 in contempt but requiring the parties to attend a parenting workshop and begin counseling. The district court further found "that the facts before it do not support a material change of circumstances" warranting a change in custody. On October 14, 2009, the district court entered an order consistent with its decision letter. Mother did not appeal the district court's order.
[¶ 8] Nine days later, on October 23, 2009, Mother filed a motion to modify custody in which she alleged there had been a material change of circumstances "including but not limited to [Father] not properly communicating with [Mother] regarding the children, manipulation of the children by [Father], the actions of [Father's] live-in girlfriend unreasonably seeking a protection order against [Mother] to prevent her from going to the children's school and daycare facilities, the immoral behavior and lifestyle of [Father] continuing to reside unwed with another woman, and various other general health and welfare concerns of the children being in [Father's] custody." Father filed a motion to dismiss Mother's motion pursuant to W.R.C.P. 12(b)(1), asserting that the district court had just decided modification was not warranted in its October 14, 2009, order, Mother's motion did not allege any new facts warranting modification and the doctrine of res judicata barred her motion.
[¶ 9] Mother responded, asserting the parties were not on notice that the issue of custody modification would be fully adjudicated during the earlier contempt hearing, no evidence was presented concerning modification at the earlier hearing and her right to due process would be violated if the court dismissed her most recent motion for custody modification. She further contended the requirements for application of res judicata were not satisfied. After hearing arguments, the district court entered an order granting the motion to dismiss. Mother timely appealed the order of dismissal to this Court.
STANDARD OF REVIEW
[¶ 10] Mother asserts the district court erred in dismissing her custody modification motion on the basis of res judicata. She further claims the dismissal violated her right to due process. The question of whether res judicata bars a claim is one of law. Wyoming Med. Ctr., Inc. v. Wyoming Ins. Guar. Ass'n, 2010 WY 21, ¶ 11, 225 P.3d 1061, 1064 (Wyo.2010). This Court reviews questions of law de novo. Id. The question of whether the constitutional right to due process has been violated is also one of law reviewed de novo. Welch v. Welch, 2003 WY 168, ¶ 5, 81 P.3d 937, 938 (Wyo.2003).
DISCUSSION
[¶ 11] Mother contends the district court erred in dismissing her motion on the basis of res judicata when the four factors necessary for application of the doctrine were not satisfied. The doctrine of res judicata bars re-litigation of previously litigated causes of action or claims. Wyoming Med. Ctr., ¶ 15, 225 P.3d at 1065 (citation omitted). Four factors must exist for res judicata to apply: 1) the parties must be identical; 2) the subject matter must be identical; 3) the issues must be identical and relate to the same subject matter; and 4) the capacities of the persons must be identical in reference to both the subject matter and the issues between them. Id. Mother asserts the last three factors were not satisfied because the only matter at issue at the contempt hearing was whether either party had violated the divorce decree. She contends the existence of a material change of circumstances warranting modification of custody was not at issue and was not addressed in the contempt hearing. She further argues the capacities of the parties were different at the contempt hearing than they would be at a custody modification hearing in that, in the first instance, they were each trying to show the other had violated the decree while, in the second instance, they would have been advocating for the children's best interests.
[¶ 12] As a general rule the doctrine of res judicata applies to divorce decrees. Mentock v. Mentock, 638 P.2d 156, 158 (Wyo. 1981). However, Wyoming law recognizes that custody modification is sometimes necessary. Id. Thus, a district court in this state that enters a custody order in a divorce proceeding has continuing subject matter jurisdiction *571 to enforce or modify custody upon petition by either parent. Wyo. Stat. Ann. § 20-2-203(a) (LexisNexis 2009); Wyo. Stat. Ann. § 20-2-204(b) (LexisNexis 2009). The party seeking to modify custody bears the burden of establishing that a material change in circumstances has occurred since the entry of the previous custody determination and that the modification would be in the best interests of the children. Section 20-2-204(c).
[¶ 13] In Aragon v. Aragon, 2005 WY 5, 104 P.3d 756 (Wyo.2005), we considered a mother's claim that the father's petition for custody modification was barred by the doctrines of res judicata and collateral estoppel. There, the parties were divorced by decree entered in 2000. Id., ¶ 3, 104 P.3d at 758. They returned to court six months later on Mother's motions to modify Father's child support and visitation and for an order holding Father in contempt. Father responded with a motion for an order holding Mother in contempt. The district court entered an order modifying child support and visitation. Id. Several months later, Father filed a motion for correction of the child support computation. Mother responded with another motion to have Father held in contempt. The district court entered an order granting Father's motion. Id. A month later, Father filed a motion for change of custody and support which the district court granted, finding that Father had shown a material change in circumstances and the change in custody was in the best interests of the children.
[¶ 14] Addressing Mother's contention that Father's change of custody motion was barred by res judicata and collateral estoppel, we stated:
This court's established policy manifests a balance between the doctrine of finality of judgments and judicial economy supported by the doctrines of res judicata and collateral estoppel, on the one hand, and the applicable statutes providing for modification of the provisions of a divorce decree concerning child custody.... A court is charged with resolving that tension by determining if there has been a material change in circumstances warranting modification and that modification would be in the best interests of the children.
Id., ¶ 9, 104 P.3d at 759. We held that the doctrine of res judicata did not bar Father's custody modification motion under the circumstances existing in that case. While concluding that the identity of the parties, the subject matter and the parties' capacities were identical throughout the proceedings, we concluded the issues addressed were not. The earlier proceedings addressed child support and visitation. The issue of custody was not expressly addressed until the last proceeding. Id., ¶ 17, 104 P.3d at 761. We said: "Critically, the issue of custody modification was not formally raised for the district court's consideration from the time of entry of the initial decree of divorce until Father filed his [most recent] motion." Id. Because modification of custody had not been raised or addressed before then, we agreed that res judicata did not apply.
[¶ 15] The present case is distinguishable. In Mother's response to Father's supplement to motion for order to show cause, filed five months before the hearing, Mother prayed for an order requiring Father to show why he should not be held in contempt and "for a modification of custody." The record, therefore, is clear that Mother requested custody modification, thereby placing the matter at issue. The record is also clear that the district court considered Mother's custody modification request to be at issue during the contempt proceedings. In its decision letter after the hearing, under the subheading "Modification", the district court stated:
During the hearing, [Mother] argued a material change in circumstance has occurred thus allowing for a modification of the visitation and custody established in this matter in the ... Decree of Divorce. The party seeking to modify child custody bears the burden of establishing that a material change in circumstances has occurred since the entry of the previous custody determination. If that showing is made, then the party must also show that modification of custody would be in the best interests of the children. Wyo. Stat. Ann. § 20-2-204(c) (LexisNexis 2009); *572 Hayzlett v. Hayzlett, 2007 WY 147, ¶ 9, 167 P.3d 639, 642 (Wyo.2007); CLH v. MMJ, 2006 WY 28, ¶ 8, 129 P.3d 874, 876 (Wyo. 2006) (modification is a two step process). In determining whether a material change [of circumstance] has occurred, the Court must evaluate the current circumstances of the parties in relation to their circumstances at the time the prior custody order was entered. In re TLJ, 2006 WY 28, ¶ 10, 129 P.3d 874, 877 (Wyo.2006). The Court does not find the facts before it to support a material change of circumstance.
Given Mother's request for custody modification and the district court's ruling on her request, there is no question the matter was raised and decided. To warrant another hearing on the issue, Mother had to allege that a material change in circumstances occurred after the entry of the October 14, 2009, order.
[¶ 16] Mother's October 23, 2009, motion does not specifically make that allegation. Rather, it appears to allege a material change of circumstances since the entry of the divorce decree. Although the allegations Mother made against Father in the more recent motion (his girlfriend sought a protective order to keep Mother from visiting the children's daycare and preschool and his lifestyle was immoral) were different from those she presented in her earlier motions (Father changed daycares and preschools without consulting her and recorded her phone conversations with the children), there is nothing in the record indicating these were new allegations that arose after the district court's October 14, 2009, ruling.
[¶ 17] Because the record submitted to this Court does not include a hearing transcript or another statement of the evidence presented at the hearing, we have no way of knowing what allegations and evidence Mother presented against Father in support of her initial custody modification request. W.R.A.P. 2.05 provides in pertinent part:
Concurrently with filing the notice of appeal, appellant must order and ... make arrangements ... for the payment for a transcript of the portions of the evidence deemed necessary for the appeal.... A certificate of compliance with this rule shall be endorsed upon or filed with the notice of appeal. If appellant does not intend to order a transcript, the certificate of compliance shall include a statement indicating whether appellant intends to procure a statement of evidence pursuant to Rule 3.03 or an agreed statement pursuant to Rule 3.08.
W.R.A.P. 3.03 provides:
If no report of the evidence or proceedings at a hearing or trial was made, or if a transcript is unavailable, appellant may prepare a statement of the evidence or proceedings from the best available means including appellant's recollection. The statement shall be filed and served on appellee within 35 days of the filing of the notice of appeal. Appellee may file and serve objections or propose amendments within 15 days after service. The trial court shall, within 10 days, enter its order settling and approving the statement of evidence, which shall be included by the clerk of the trial court in the record on appeal.
W.R.A.P. 3.08 provides:
(a) In lieu of designations of the record, the parties may prepare and sign a statement of the case showing how the questions arose and were decided in the trial court, and may set forth those facts averred and proved, or sought to be proved, which are essential for review.
(b) .... The statement shall be filed with the trial court within 45 days of filing the notice of appeal. The trial court shall, within 15 days, enter its order adopting the statement, or promptly set it for hearing to resolve any disputes. The order and statement shall be included by the clerk of the trial court in the record on appeal.
[¶ 18] Mother's notice of appeal included the following:
CERTIFICATION OF ORDERING TRANSCRIPTS
No report of the evidence was made for the underlying Order to Show Cause hearing held on September 8, 2009. Appellant will attempt to procure an agreed upon statement pursuant to Rule 3.08, however *573 if one cannot be agreed upon then counsel [will] submit a Statement of the Evidence pursuant to W.R.A.P 3.03. Furthermore, the proceedings related to the Motion to Dismiss held on December 1, 2009, were reported and concurrently with the filing of this notice arrangements will be made to procure the transcript of that proceeding.
[¶ 19] Despite the certification indicating that either a Rule 3.08 agreed statement or Rule 3.03 statement of evidence would be submitted to this Court, no such statement appears in the record. Mother, as the appellant, had the burden to submit a sufficient record from which this Court could decide the issues presented. Erhart v. Evans, 2001 WY 79, ¶ 18, 30 P.3d 542, 547 (Wyo.2001). Without a transcript of the hearing or other statement of evidence, this Court will accept the district court's finding and conclusion that the issues Mother presented in her October 23, 2009, motion were identical to those heard at the earlier hearing and decided by the October 14, 2009, order.
[¶ 20] Mother maintains the dismissal of her October 23, 2009, custody modification motion denied her due process because she did not have an adequate opportunity in the earlier hearing to present evidence and argument supporting her request for modification of custody. Any contention that Mother was denied due process in the earlier hearing properly should have been presented to this Court by way of appeal from the October 14, 2009, order. Mother did not appeal from that order.
[¶ 21] Affirmed.
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116 F.2d 748 (1940)
McQUAY-NORRIS MFG. CO.
v.
NATIONAL LABOR RELATIONS BOARD.
No. 7269.
Circuit Court of Appeals, Seventh Circuit.
December 23, 1940.
*749 Barnes, Hickam, Pantzer & Boyd and Paul Y. Davis, all of Indianapolis, Ind. (Kurt F. Pantzer, of Indianapolis, Ind., of counsel), for petitioner.
Gerhard P. Van Arkel, of Washington, D. C., for respondent.
Before EVANS and MAJOR, Circuit Judges, and LINDLEY, District Judge.
MAJOR, Circuit Judge.
This case is before us on petition to review and set aside an order issued by the National Labor Relations Board (hereinafter called the "Board"), under Section 10(c) of the National Labor Relations Act (hereinafter called the "Act") (29 U.S.C.A. § 151, et seq.). In its answer to the petition, the Board has requested enforcement of its order. The charge was filed April 21, 1938, by Local 226 of the United Automobile Workers of America (hereinafter called "Local 226") upon which complaint issued February 11, 1939. Petitioner, by answer, denied the charge and a hearing was held from March 9 to 12, 1939. Jurisdiction is not in dispute, and so far as here material, the complaint, in conformity with the charge, alleged in substance that petitioner, on March 21, August 18 and 19, 1938, and at all times thereafter, refused to bargain collectively with Local 226 as the exclusive representative of petitioner's employees in an appropriate unit, and that by reason of such refusal, petitioner had engaged, and was engaging in unfair labor practices within the meaning of Section 8(1) and (5), and Section 2(6) and (7) of the Act.
Petitioner excepted to the report made by the Trial Examiner and participated in oral argument before the Board. On March 18, 1940, the Board rendered its decision, setting forth its findings of fact, conclusions of law, and order. We see no occasion to set forth in detail the Board's decision. It is sufficient, for the purpose of the case, to state that it found petitioner guilty of the unfair labor practices as charged. In accordance with its decision, the Board ordered petitioner, (a) upon request, to bargain with Local 226 as the exclusive representative in the appropriate unit; to embody any understanding reached in a signed agreement, and, if requested, to incorporate an exclusive recognition clause in said signed agreement; and (b) to post appropriate notices.
In the beginning, it is important to note that on March 25, 1938, and at all subsequent times, Local 226 was the duly designated representative of a majority of the employees in the appropriate unit for the purpose of collective bargaining. This was found by the Board, and at all times material to this inquiry, has been recognized by petitioner.
The ultimate question for decision is whether petitioner is guilty of an unfair labor practice in refusing to recognize Local 226 as the exclusive representative for the purpose of collective bargaining *750 in respect to rates of pay, wages, hours and other conditions of employment.
While the issue in dispute appears to be legal rather than factual, it seems pertinent to give a brief resume of the facts prior to and during the time it is charged petitioner refused to grant exclusive recognition. Petitioner has its principal office and place of business in St. Louis, Missouri, and operates three plants: One in St. Louis, Missouri, one in Connersville, Indiana, and one in Indianapolis, Indiana. Each of these plants has a local union, all affiliated with the United Automobile Workers of America. Local 226 is the union representative of petitioner's plant at Indianapolis, and the controversy in dispute is between petitioner and this Union. All of petitioner's plants are engaged in the manufacture and sale of automotive products. Petitioner, both before and subsequent to the enactment of the Act, jointly bargained with the designated representatives of the employees at its three plants. As early as March 25, 1937, petitioner was requested to recognize the locals representing the employees at the different plants, as the sole collective bargaining agencies of petitioner's employees at such plants. At that time, Arden J. Mummert (director and vice-president of petitioner, who was in charge of all bargaining negotiations) by letter, suggested: "the Company recognize the Union as the sole collective bargaining agency for those employees of the Company who are members of the Union."
On April 12, 1937, an agreement was reached between petitioner and the St. Louis Local which, under the heading "Recognition and Representation" stated: "The Company recognizes the Union as the sole collective bargaining agency for those employees of the Company who are members of the Union. Any employee who is not a member of the Union and wishes to bargain or state a grievance to the Management may continue to do so. Any benefits in wages or working conditions resulting from bargaining by any individual or group will automatically be extended to all employees on similar operations under like conditions, whether they belong to the Union or not."
The Connersville Local also requested an exclusive recognition clause, but after negotiation, on June 4, 1937, approved a written agreement containing the same recognition clause as that incorporated in the agreement with the St. Louis Local.
Local 226, early in 1937, also proposed that the agreement with it contain an exclusive recognition clause. The agreement consummated, however, contained the same clause in this respect as had been included in the agreement with the other locals. Upon the request of Local 226 that petitioner explain the recognition clause, a letter was written by Mummert to the effect that no other labor organization would be recognized or dealt with, and that no outside labor organization would be encouraged. The agreements with all three locals, by their terms, were effective until April 12, 1938. In March, 1938, a joint conference was had between Mummert and representatives of the three locals, with a view of renewing the 1937 agreements with such modifications as might be agreed upon. Again, each of the Locals proposed that petitioner recognize such Locals as the sole bargaining agencies for employees in the appropriate unit in the three plants respectively. Later, many conferences were had concerning the recognition clause, as well as other requests made by the three Locals, but at all times petitioner refused to incorporate into the proposed agreements the requested recognition. Mummert testified at the hearing that at a meeting held on April 12, 1938, "the big issue was still the actual wording of a recognition clause in the 1938 agreement."
Shortly thereafter, charges were filed with the Board against petitioner by Local 226 as related heretofore. Charges were also preferred about the same time by the St. Louis and Connersville Locals. On August 18, 1938, negotiations were renewed, which continued for several days. The main controversy was still the form of the recognition clause. Numerous proposals were made in this connection, both by the Union representatives and petitioner, all of which were rejected.
On August 18, Belflower, a representative of the St. Louis Local, proposed a clause (hereinafter called the "Belflower clause") which, with some modifications, was accepted by the petitioner. This clause is the one around which this controversy largely revolves, and is: "The Company recognizes the Union as the sole collective bargaining agency for those employees who are affiliated with the Union; for the purpose of collective bargaining in respect to rates of pay, wages, hours of employment; and during the term of this contract the Company will *751 deal with them and no others; provided that any individual employee or group of employees shall have the right at any time to present grievances to the Company." The agreement, containing this clause, was submitted to the respective Locals and approved by the St. Louis and Connersville Locals. Thereupon, the charges theretofore filed with the Board by these Locals, were withdrawn. There is some dispute as to whether the agreement was approved by Local 226. We think it is rather clear, however, that such approval as was given by this Local, insofar as it concerned recognition, was conditioned upon the decision of the Board upon the charge then pending. On October 14, 1938, and January 12, 1939, Local 226, in conference between its representatives and petitioner, again insisted that it was entitled to an exclusive recognition clause, which it was unable to obtain.
Petitioner argues, (1) that the Belflower clause is not susceptible of the conclusion that recognition required by 9 (a) was denied, and (2) that irrespective of the construction given this clause that there was, as a matter of fact, exclusive recognition. We are of the opinion that petitioner's position is clearly inconsistent with the statutory command that "* * * a unit appropriate for such purposes, shall be the exclusive representatives of all the employees in such unit for the purposes of collective bargaining * * *." This is so whether the Belflower clause be considered independently or in connection with other facts and circumstances. There is no escape from the conclusion that the words "for those employees who are affiliated with the Union" place a limitation upon the recognition granted, which can not be reconciled with the plain language of the Statute.
If there be any doubt in this respect, however, it is dispelled by the controversy concerning recognition which was paramount at the numerous conferences had between petitioner and the Locals, including Local 226. In the first place, the recognition required by 9(a) is not a bargaining matter as petitioner sought to make it. When it was disclosed to petitioner that Local 226 represented a majority of the employees in the appropriate unit, (this was at no time questioned by petitioner) the obligation was then fixed upon it to recognize the Local as the sole and exclusive bargaining agent, not only for the members of the Union, but for all employees. In place of complying with this statutory requirement, petitioner made it the subject of a long and extended bargaining process. Subsequent to the time when demand for recognition was made, petitioner, at all times, has been in default of its statutory obligation. Neither can the consequences of its refusal to grant complete recognition be dissipated by the fact if it be a fact that it bargained with the Union on all other matters in dispute. In our view of the situation, there could be no genuine bargaining as contemplated by the Statute until complete recognition had been granted as the Act requires. Notwithstanding the fact that it agreed not to bargain with any other group or individual, its bargaining with Local 226, while limiting its recognition solely to members of the Union, made such bargaining abortive and of little, if any, effect.
One member of the Board dissented, holding to the view that the complaint should be dismissed. We think a fair interpretation of his dissent is that notwithstanding petitioner's limited recognition, it did, as a matter of fact, bargain with the Union; that the agreement reached as a result of such bargaining was approved by its members, and that, therefore, the question of recognition had become moot. Such a construction of the Act would result in serious impairment of the right granted employees to organize and bargain through the agency designated by a majority of the members of the appropriate unit. It would confer upon the employer the option of bargaining concerning a matter guaranteed the employee as of right, and which, as we have said, is not a bargaining matter. Nor do we think it is material, under the circumstances of this case, whether the limited recognition granted by petitioner was, or was not, approved by members of Local 226. If so, it could mean nothing more than that the Union, after engaging in a controversy for more than a year regarding its right to complete recognition, consented to accept the most it could obtain of a right to which it was entitled for the asking. A consent given under such circumstances can not be utilized by petitioner to relieve it of its statutory duty to grant complete recognition. In this connection, it seems pertinent to point out that when the Union was denied recognition in defiance of the Statutory mandate, it placed its reliance upon the Board to require petitioner *752 to concede that about which there was no room for controversy. That the Union pursued this lawful and peaceful method is to its credit.
Neither is there any merit in petitioner's argument that it refused exclusive recognition for fear that such a clause would bring about reprisals by rival unions. It is pointed out that many of its customers, as well as a few of its employees, were members of a rival union, and that complete recognition of Local 226 would incur their disfavor and thus adversely affect petitioner's business. We are convinced from a reading of the testimony that Mummert's reasoning in this respect was in good faith, but even so, such a position can not afford petitioner any justification for its position. The Statutory requirement under discussion permits no immunity because of undue hardship or economic pressure imposed upon the employer. It leaves no room for the appeasement of hostile interests by conceding to a Union, properly designated as the bargaining agent, less than the Act requires.
The argument advanced that petitioner was not required to grant complete recognition because the Belflower clause failed to follow the precise language of the Statute, or set out the exact unit found appropriate by the Board, must also fall by the wayside. In the first place, petitioner at no time raised any question but that the Union was the properly designated bargaining agent, and in the second place, when thus apprised and requested, had no alternative but to grant complete recognition, and this, irrespective of the language contained in the clause finally presented by the Union in an effort to compromise a situation for which petitioner alone was responsible.
We therefore conclude that petitioner refused to grant recognition as the Act commands, and that its refusal constitutes an unfair labor practice as charged in the complaint and as found by the Board.
We are still confronted with the affirmative portion of the Board's order which requires petitioner "to embody any understanding reached in a signed agreement, and, if requested, to incorporate an exclusive recognition clause in said signed agreement." Petitioner contends that the Act does not require that recognition be reduced to writing, and further, that there is no obligation on the part of an employer to reduce to writing agreements reached as a result of collective bargaining. A number of decisions[1] of this court are cited in support of this position. We are of the opinion that these decisions are not controlling for the reason that the issue here is different from that decided in those cases. Here, the undisputed fact is that petitioner never, at any time, refused a written recognition clause. In fact, it proposed such a clause in writing, consented to the Belflower clause, and incorporated it in a written agreement. What might have been the obligation of petitioner with reference to a written recognition clause, had the question been raised at an opportune time, need not be decided. It is sufficient to decide that, having proposed and agreed to a written recognition clause which failed to comply with the Act, it can not now be heard to complain when required to grant written recognition in conformity with the Act.
We are also of the opinion that the same reasoning applies to petitioner's objection to a signed contract incorporating any further agreement reached by the bargaining process. There exists a written contract entered into by petitioner and Local 226, the provisions of which are not here material. It is sufficient to state that, in addition to the limited recognition clause, the contract is a lengthy one and purports to constitute a working agreement between petitioner and its employees. When this contract was signed by petitioner, no question was raised as to its right to refuse to sign. Thus, no question is raised as to the requirement of the Act in this respect. Petitioner has conceded a written contract and now is in no position to contend to the contrary. Such a situation is clearly distinguishable from those cases in which we have held that a written agreement is not required by the terms of the Act.
We therefore are of the opinion that the Board's order is proper and its request for enforcement is allowed.
NOTES
[1] Inland Steel Co. v. National Labor Relations Board, 7 Cir., 109 F.2d 9, 22; Fort Wayne Corrugated P. Co. v. National Labor Relations Board, 7 Cir., 111 F.2d 869; Stewart Die Casting Corp. v. National Labor Relations Board, 7 Cir., 114 F.2d 849.
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IN THE SUPREME COURT OF IOWA
No. 13–0346
Filed June 10, 2016
Amended September 1, 2016
STATE OF IOWA,
Appellee,
vs.
ZYRIAH HENRY FLOYD SCHLITTER,
Appellant.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Linn County, Marsha M.
Beckelman, Judge.
Defendant seeks further review of a court of appeals decision
affirming convictions for child endangerment resulting in death and
involuntary manslaughter by commission of public offense. DECISION
OF COURT OF APPEALS AFFIRMED IN PART AND VACATED IN
PART; DISTRICT COURT JUDGMENT AFFIRMED IN PART,
REVERSED IN PART, AND REMANDED.
Mark C. Smith, State Appellate Defender, Shellie L. Knipfer,
Assistant Appellate Defender, and Zyriah Schlitter, pro se, for appellant.
2
Thomas J. Miller, Attorney General, Jean C. Pettinger, Assistant
Attorney General, Jerry Vander Sanden, County Attorney, and Nicholas
Maybanks and Lisa Epp, Assistant County Attorneys, for appellee.
CADY, Chief Justice.
In this appeal from convictions of involuntary manslaughter by
commission of public offense and child endangerment resulting in death,
we primarily consider a claim of ineffective assistance of trial counsel
based on the failure to challenge the sufficiency of evidence to support
the submission of all four alternative means of committing the crime of
child endangerment. On our review, we conclude trial counsel was
ineffective, and a new trial must be granted. We affirm the decision of
the court of appeals in part and vacate in part, reverse the judgment and
sentence of the district court, and remand the case for a new trial.
I. Background Facts and Proceedings.
Zyriah Schlitter met Nicole King in 2006 and they entered into a
relationship. They began sharing a residence and eventually had a
daughter, K.S., on September 23, 2008. The relationship ended in late
2009. In February 2010, Schlitter and King agreed that Schlitter would
be the temporary primary custodian of K.S. Schlitter was living with his
grandparents at the time. He was also dating a woman named Amy
Parmer. Schlitter would often stay overnight at Parmer’s apartment.
Parmer had two children.
On March 1, 2010, Schlitter took K.S. to a medical clinic for a
health checkup required for admission to a day-care center. A clinic
nurse updated K.S.’s vaccines and found her to be in good health.
K.S. was accepted by the day-care facility on March 2 and attended
day care for the remainder of the workweek. Schlitter and K.S. then
stayed with Parmer and her children at her apartment over the weekend.
3
Parmer cared for K.S. on Sunday evening while Schlitter attended a
financial management class at church for a couple of hours.
On Monday morning, March 8, Schlitter dropped K.S. off at the
day-care center. Later that morning, a day-care worker observed a
bruise on K.S.’s forehead and around one eye. She also saw marks on
the side of K.S.’s chin and discovered makeup had been applied to cover
up the bruises. Parmer stopped by the day-care center during the
afternoon to check on K.S. and was asked about the injuries. Parmer
said K.S. bruised her eye from a fall and was accidentally struck on the
forehead by a Pack’n Play® falling out of a closet.
Schlitter did not take K.S. to the day-care center on March 9. K.S.
had a fever, and Schlitter took her to the medical clinic. He told a nurse
that K.S. had not been sleeping well and had little appetite. The nurse
inquired about the bruise on her forehead. Schlitter responded that K.S.
fell into a coffee table. K.S. was diagnosed with conjunctivitis and
prescribed Motrin® and eyedrops.
Over the next few days, Schlitter’s father and grandparents
provided day care for K.S. K.S. would cling to Schlitter when he was
present. On March 10, K.S. had a fever of 104°. Schlitter called the
clinic to report the fever. He was told to continue the Motrin® and
eyedrops and to call the next day if there was no improvement. On
March 11, Schlitter called the clinic to report that K.S. vomited. He also
reported the Motrin® would only briefly keep her fever under control, and
an appointment was scheduled for the next day. Schlitter took K.S. to
the clinic on March 12. Medical providers diagnosed K.S. with an ear
infection and prescribed an antibiotic. No new bruising was observed.
On March 13, her temperature returned to normal.
4
Schlitter and K.S. again stayed at Parmer’s apartment on the
weekend. King exercised visitation with K.S. for a period of time. She
did not notice any bruises on her face or body.
Schlitter dropped K.S. off at the day-care center on Monday,
March 15. Workers at the center again observed bruising on her
forehead and face. K.S. acted listless and sad. She slept more than
normal, did not play, and did not want to interact. When Schlitter was
asked about the new facial bruises, he responded that K.S. liked to beat
on herself. Workers at the day-care center reported their observations to
the Iowa Department of Human Services (DHS). An investigator for the
DHS met with Schlitter on March 16. Schlitter admitted to spanking
K.S. and told the investigator that K.S. listened better to Parmer. K.S.
was not removed from Schlitter’s care.
On March 17, K.S. spent the day with King. K.S. was detached
and often cried. Schlitter called the medical clinic on March 18 to report
that K.S. was very sleepy. The next day, her condition seemed to
improve.
Schlitter and K.S. again spent the weekend with Parmer. On
Sunday, March 21, K.S. was sleepy, and she often cried. She also clung
to Schlitter. At 5:15 p.m., Schlitter left K.S. in the care of Parmer so he
could attend the Sunday evening financial management class.
At 7:45 p.m., Parmer called 911 and reported that K.S. was barely
breathing. An ambulance arrived at the apartment and transported K.S.
to a hospital in Cedar Rapids. Medical personnel at the hospital found
her in a decorticate posture. Her pupils were fixed and dilated. The
doctor observed hemorrhages in her eyes. She exhibited limited reaction
to pain stimuli. After the doctors told Schlitter that her injuries were
5
likely the result of child abuse, he entered the room where K.S. was
being treated and told her “I’m sorry.”
K.S. was promptly airlifted to the University of Iowa Hospitals &
Clinics. Family members gathered to be with her and tension surfaced
between King and Schlitter. King blamed Parmer for the injuries, and
Schlitter blamed the day care.
Medical tests and scans of K.S.’s brain showed significant swelling.
Despite extensive medical efforts, K.S.’s condition continued to
deteriorate. She remained in a coma, which doctors believed would likely
never change. K.S. was kept alive by a ventilator and a feeding tube. On
Sunday, March 28, King and Schlitter agreed to the removal of life
support systems. K.S. died.
On July 11, 2011, the State charged Schlitter and Parmer with
murder in the first degree and child endangerment resulting in death.
The trials were severed, and Schlitter went to trial on December 3, 2012.
The medical testimony at trial described the injuries to K.S. as
nonaccidental or abusive trauma. The medical professionals generally
agreed that K.S. had suffered multiple head trauma events. The
testimony came from the emergency room doctors and nurses at both
hospitals, as well as neurologists, pathologists, an ophthalmologist,
radiologist, doctors in the pediatric intensive care unit, and the head of
the child protection team.
The external injuries included bruises on K.S.’s cheeks and under
her chin; scrapes or red marks on her left shoulder, the nape of her
neck, her left ear and cheek, upper right portion of her chest, and her
right underarm area; contusions on her right upper arm and left and
right inner thighs; and an infected lesion on her left labia. K.S.’s internal
injuries included subdural hematomas in the brain and around the
6
spinal cord, as well as other brain injuries. An MRI revealed that K.S.
suffered a massive stroke on the left side of her brain, but revealed no
evidence that K.S.’s injuries were caused by strangulation.
Multiple doctors testified that the bruises on K.S.’s face and body
were different colors, indicating they had occurred at different times.
The retinal hemorrhages, brain blood clots, and subdural membranes
indicated injuries that could be up to a few weeks old. The blood found
in her brain showed signs of fresh bleeding, older bleeding that had
happened over two days before the recent injury, and a recent bleeding
within hours of K.S. becoming symptomatic. Moreover, with repeated
injuries to the same part of the brain, some of the new injury clouded
evidence of the older injury.
The time frames suggested by the different doctors’ testimonies
sometimes conflicted. The estimates ranged from minutes to hours,
within a day, a twelve- to twenty-four-hour period estimate, and an
“hours to days” time frame. One doctor stated she could not accurately
estimate the timing, but that she had not seen any child awake with the
kinds of injuries found in K.S. Almost all the medical professionals were
clear that a specific time of the injuring event could not be pinpointed
due to individual-specific rates of healing, the age of the patient, an
unknown rate of bleeding, and uncertainty concerning the number and
frequency of injuries.
Dr. Resmiye Oral, the head of the child protection team, specializes
in treating and consulting in cases of child abuse. She met with a
statewide multidisciplinary team made up of the physicians, law
enforcement, DHS employees, and medical examiners involved in K.S.’s
case. Dr. Oral collected all of the reports of the physicians and
examiners to make a final medical determination regarding K.S.’s
7
injuries. Dr. Oral concluded that K.S. suffered at least two separate
episodes of injury. She pinpointed the first injury as likely occurring one
or two weeks before K.S. entered the hospital, and the second injury as
inflicted from minutes up to six hours before K.S. was brought to the
hospital, noting the shorter time frame was more likely than the longer.
The doctor stated it must have been an acute and forceful trauma to
explain the injuries found.
The paramedic who responded to the 911 call on March 21
testified to statements made by Parmer in response to questioning about
the condition of K.S. Parmer said she found K.S. unresponsive and
struggling to breathe. She told a paramedic K.S. had a fever earlier in
the week, but was unaware of any falls or injuries.
Law enforcement investigators conducted several interviews with
Schlitter and Parmer. Schlitter gave one interview at an Iowa State
Patrol Office on March 30, 2010. During the interview, Schlitter
acknowledged he was rough on K.S. at times in his discipline of her and
was probably incriminating himself by maintaining that Parmer was a
good caretaker and would not have harmed K.S. On another occasion,
Schlitter told one investigator that while at the hospital, he had
researched head trauma symptoms and that K.S. had exhibited some of
the symptoms during the period of time prior to her hospitalization.
Prior to trial, Schlitter had moved to suppress his statements made to
law enforcement investigators during the March 30 interview at the state
patrol office. The district court denied the motion, and the interview was
entered into evidence.
Investigators also discovered Parmer had made inculpatory
statements to two people. On one occasion, Parmer made a spontaneous
statement to a coworker that she “might have killed a kid.” Another
8
time, Parmer was in her apartment with the coworker and a man she
was dating. Parmer suddenly started crying and told the man, “You
don’t want to get involved with me.” She then explained that she had
taken an eighteen-month-old’s life. She further explained that the child
was K.S., and it involved a head injury.
At the close of all the evidence at trial, trial counsel for Schlitter
moved for a judgment of acquittal. The motion, however, was limited to
the sufficiency of the evidence to support the crime of first-degree
murder. The trial court overruled the motion.
The jury found Schlitter guilty of involuntary manslaughter by
commission of public offense (child endangerment) and child
endangerment resulting in death. A general verdict was returned, and
the jury did not identify the alternative theories relied upon to support
the guilty verdict for child endangerment. Schlitter moved for a new trial
and arrest of judgment. After a hearing on February 20, 2013, the trial
court denied Schlitter’s motions and sentenced Schlitter. The court
merged the sentences for the two charges under the one-homicide rule.
It imposed a mandatory indeterminate fifty-year sentence for child
endangerment resulting in death and ordered $150,000 restitution to be
paid to Nicole King. Although the State requested a thirty-year minimum
sentence before parole eligibility, the court declined to require a
minimum sentence before parole eligibility, leaving that question to the
board of parole.
Schlitter appealed and raised four claims of error. First, he
claimed the district court erred in failing to suppress his statements
made during the interrogation on March 30. Second, he claimed his trial
counsel was ineffective for failing to challenge the sufficiency of evidence
to support the lesser included offense of involuntary manslaughter to the
9
charge of first-degree murder and the alternative theories to the crime of
child endangerment. Third, he claimed his trial counsel was ineffective
for failing to timely object to improper comments by the prosecuting
attorney during closing argument. Finally, he claimed his trial counsel
was ineffective for failing to investigate properly.
We transferred the case to the court of appeals. It affirmed the
judgment and sentence of the district court. It found Schlitter was not in
custody during the interrogation on March 30, and the law enforcement
officers were not required to give Schlitter his Miranda warnings. It also
found Schlitter failed to preserve error on his secondary claim that the
statements were involuntary. The court of appeals further found that
trial counsel was not ineffective because sufficient evidence was
presented to support all the charges. It also found trial counsel was not
ineffective because, even if the prosecutor’s statements amounted to
misconduct, no prejudice resulted. Finally, it found trial counsel was not
ineffective for failing to conduct a proper investigation.
Schlitter sought, and we granted, further review. The only issue
Schlitter raised was that his trial counsel was ineffective for failing to
move for a judgment of acquittal for the crimes for which he was
convicted.
II. Scope of Review.
Ineffective-assistance-of-counsel claims are reviewed de novo.
State v. Tompkins, 859 N.W.2d 631, 636 (Iowa 2015). Ineffective-
assistance-of-counsel claims require a showing by a preponderance of
the evidence both that counsel failed an essential duty and that the
failure resulted in prejudice. Anfinson v. State, 758 N.W.2d 496, 499
(Iowa 2008). We review sufficiency-of-the-evidence challenges for
10
correction of errors at law. State v. Neiderbach, 837 N.W.2d 180, 190
(Iowa 2013).
We review constitutional issues, including Miranda violations,
de novo. See State v. Kooima, 833 N.W.2d 202, 205 (Iowa 2013). We
examine the totality of the circumstances in the entire record in our
evaluation. State v. Baldon, 829 N.W.2d 785, 789 (Iowa 2013).
III. Analysis.
The right to effective assistance of counsel stems from the general
right to counsel under the Sixth Amendment to the United States
Constitution and article I, section 10 of the Iowa Constitution. State v.
Ambrose, 861 N.W.2d 550, 556 (Iowa 2015). “To succeed on a claim of
ineffective assistance of counsel, a claimant must establish by a
preponderance of the evidence: ‘(1) his trial counsel failed to perform an
essential duty, and (2) this failure resulted in prejudice.’ ” State v.
Thorndike, 860 N.W.2d 316, 320 (Iowa 2015) (quoting State v. Adams,
810 N.W.2d 365, 372 (Iowa 2012)). The claimant must establish both
elements of the claim. Dempsey v. State, 860 N.W.2d 860, 868 (Iowa
2015).
For the first element, we presume the attorney performed
competently, requiring the claimant to rebut the presumption with
evidence the attorney performed outside the standard of a reasonably
competent practitioner. Id. To prove prejudice for the second element,
the claimant needs to show the attorney’s errors functionally deprived
the defendant of a fair trial and further show by a reasonable probability
that the result of the proceeding would have been different without the
errors by the attorney. State v. Ross, 845 N.W.2d 692, 698 (Iowa 2014).
A. Failure to Move for Judgment of Acquittal on Child-
Endangerment Alternatives. “To preserve error on a claim of
11
insufficient evidence[, a] defendant must make a motion for judgment of
acquittal at trial . . . .” State v. Truesdell, 679 N.W.2d 611, 615 (Iowa
2004). The motion must be made after the evidence on either side of the
case has been presented. Iowa R. Crim. P. 2.19(8)(a).
When presented with a motion for acquittal, courts must view “the
evidence in the light most favorable to the State and draw[] all fair and
reasonable inferences from it, taking all the evidence into consideration,
both direct and circumstantial.” State v. Duncan, 312 N.W.2d 519, 522
(Iowa 1981) (citations omitted). This standard requires courts to assume
the truth of the evidence offered by the prosecution. Nguyen v. State,
707 N.W.2d 317, 327 (Iowa 2005). The evidence must be sufficient to
convince a rational fact finder that the defendant is guilty beyond a
reasonable doubt. State v. Shanahan, 712 N.W.2d 121, 134 (Iowa 2006).
A fair inference of guilt is necessary, not merely suspicion, speculation,
or conjecture. State v. Geier, 484 N.W.2d 167, 171 (Iowa 1992).
Counsel for Schlitter did not challenge the sufficiency of the
evidence to support any of the alternative theories of guilt for a finding of
child endangerment. We must consider if he failed to perform within “the
range of normal competency” by determining if a competent attorney
would have challenged the sufficiency of the evidence. State v. Graves,
668 N.W.2d 860, 881 (Iowa 2003). If counsel failed to raise a meritorious
issue a normally competent attorney would have raised, and such failure
cannot “be attributed to reasonable trial strategy, then we can conclude
the defendant has established that counsel failed to perform an essential
duty.” Id. at 870.
In its case against Schlitter, the State presented four alternatives
of guilt to the jury on the charge of child endangerment. The trial court
instructed on each alternative. The jury was told they could find
12
Schlitter committed child endangerment if they found he had done any of
the following alternatives:
a. Knowingly acted in a manner that created a
substantial risk to [K.S.]’s physical health or safety; or
b. By an intentional act or series of intentional acts used
unreasonable force that resulted in bodily injury or
was intended to cause serious injury; or
c. Willfully deprived [K.S.] of necessary supervision or
medical care appropriate to her age, being reasonably
able to make such necessary provisions, which
deprivation substantially harmed [K.S.]’s physical
health; or
d. Knowingly permitted the continuing physical abuse of
[K.S.].
Counsel did not move for judgment of acquittal on any of the alternatives
presented based on insufficient evidence but, rather, conceded to a jury
question on the child endangerment charge. Thus, if the evidence
presented by the State at trial was insufficient to support any alternative,
Schlitter’s trial counsel would have provided ineffective assistance by
failing to raise the issue and permit the trial court to enter a judgment of
acquittal on any alternative not supported by sufficient evidence.
We often do not address ineffective-assistance-of-counsel claims on
direct appeal because a record is needed to fully develop the claim and
identify the existence of any trial strategies that may have influenced the
actions or inactions of trial counsel. See State v. Ondayog, 722 N.W.2d
778, 786 (Iowa 2006) (“[P]ostconviction proceedings are often necessary
to discern the difference between improvident trial strategy and
ineffective assistance.”). However, no reasonable trial strategy could
permit a jury to consider a crime not supported by substantial evidence.
See State v. Brubaker, 805 N.W.2d 164, 174 (Iowa 2011) (holding counsel
ineffective for failing to move for judgment of acquittal based on
insufficient evidence to support a necessary element of the charged crime
13
and noting such a failure “is not a trial strategy”). Therefore, we must
review each alternative theory of the crime of child endangerment to
determine if a reasonable trial counsel would have moved for judgment of
acquittal on any of the four alternatives.
1. Knowingly acted in a manner that created substantial risk to
physical health or safety. We first consider the sufficiency of evidence to
support a finding that Schlitter knowingly acted in a manner that created
a substantial risk to the physical health or safety of K.S. The term
“knowingly” not only refers to the act, but also the creation of a
substantial risk to physical health or safety. State v. James, 693 N.W.2d
353, 355–57 (Iowa 2005). Additionally, “the definition of ‘substantial
risk’ in the context of child endangerment” means “[t]he very real
possibility of danger to a child’s physical health or safety.” State v.
Anspach, 627 N.W.2d 227, 233 (Iowa 2001). The risk does not have to be
likely, just real or identifiable. Id. at 232–33. The evidence offered by the
State at trial targeted Schlitter either as the abuser or complicit in abuse
inflicted by Parmer by failing to intervene to stop or prevent it.
The State presented an abundance of evidence that K.S. sustained
bruises to her head on separate occasions in the weeks leading up to her
death. A number of people noticed bruises the week of March 8—
including family members, day-care workers who saw her every day, and
a nurse practitioner. Evidence was presented that either Schlitter or
Parmer used makeup to cover bruising around K.S.’s eye and forehead.
One week later, a new bruise appeared on K.S.’s forehead in the same
location as the previous bruise.
Construing the evidence in favor of the State, a reasonable jury
could find beyond a reasonable doubt that, even if Parmer was the
abuser instead of Schlitter, he knew that K.S. was at risk of physical
14
injury while in the sole care of Parmer. The jury could have also found
Schlitter knowingly acted in a manner that created a substantial risk to
the physical health or safety of K.S. by leaving her in the care of Parmer.
2. By an intentional act or series of intentional acts used
unreasonable force that resulted in bodily injury or was intended to cause
serious injury. To prove the second alternative, the State must present
sufficient evidence that Schlitter either committed an act resulting in the
injury or had sole care of K.S. during the time in which the injury
occurred. See Neiderbach, 837 N.W.2d at 219. The evidence presented
at trial clearly supported a finding that a series of intentional acts of
unreasonable force were inflicted on K.S. and that these acts resulted in
the bodily injury she suffered. However, the evidence does not
reasonably support a finding either that Schlitter committed the violent
acts or that he had sole care of her when the injuries were sustained.
During the period of time prior to discovery of the first bruises on K.S.,
numerous people other than Schlitter had cared for her. These
caretakers included Parmer, day-care providers, King, and several
members of Schlitter’s family. Likewise, K.S. had been in the care of
several people prior to the time the second set of bruises was discovered.
Additionally, K.S. had been in the care of both Schlitter and Parmer prior
to the injuries that led to K.S.’s hospitalization and death. Finally,
Schlitter was not with K.S. during the two hours prior to the 911 call.
There was no testimony that Schlitter had ever inflicted unreasonable
force on K.S. in the past or that he had ever shaken her. To the
contrary, the evidence was consistent that Schlitter may have yelled at
her when frustrated, but he typically would leave the room to cope with
his frustration.
15
In our careful consideration of all the evidence in the light most
favorable to the State, we cannot conclude that a reasonable jury could
find Schlitter inflicted the force on K.S. that resulted in her injuries.
Such a finding could only be based on speculation. Speculation and
conjecture cannot be used to support a verdict. See State v. Webb, 648
N.W.2d 72, 76 (Iowa 2002) (“The evidence must raise a fair inference of
guilt and do more than create speculation, suspicion, or conjecture.”).
Thus, the second alternative could not support a guilty verdict for child
endangerment, and Schlitter’s counsel was ineffective for failing to move
for a judgment of acquittal on this alternative. The jury should not have
been instructed to consider this alternative in considering Schlitter’s
guilt, and Schlitter’s trial counsel failed to perform an essential duty by
failing to object to the submission of the alternative to the jury.
Furthermore, we also find from this record that prejudice resulted to
Schlitter when his trial counsel failed to move for a judgment of acquittal
on this alternative. It is not possible to know whether or not the jury
relied on this alternative in reaching its verdict. See State v. Tyler, 873
N.W.2d 741, 753–54 (Iowa 2016) (holding we reverse a general verdict
when not all theories are supported by sufficient evidence).
Consequently, there is no way to know if the jury refrained from relying
on this alternative in reaching their verdict.
Accordingly, Schlitter must be given a new trial based on
ineffective assistance of counsel. A new trial cannot include the second
alternative theory for the crime of child endangerment.
3. Willfully deprived K.S. of necessary supervision or medical care.
We now proceed to consider the sufficiency of the evidence to support the
remaining two alternatives of child endangerment. If insufficient
16
evidence was not presented, the alternative cannot be submitted at the
new trial.
The third alternative required proof that Schlitter willfully deprived
K.S. of necessary supervision or medical care he was reasonably able to
provide and the deprivation substantially harmed her physical health.
“Willfully” is defined either as “said or done deliberately or intentionally”
or “established by proof of intentional and deliberate conduct undertaken
with a bad purpose, in disregard for the rights of another, or contrary to
a known duty.” State v. Leckington, 713 N.W.2d 208, 214 (Iowa 2006)
(quoting State v. Tippett, 624 N.W.2d 176, 178 (Iowa 2001) (first quote))
(finding either definition appropriate for this subsection of the child
endangerment statute in that particular case). In Leckington, the
defendant saw an intoxicated minor suffer an injury, left him alone in an
unsupervised location without healthcare, and then tried to remove him
from her house while he was unconscious and foaming from the mouth
rather than call for help in an effort to avoid a criminal investigation. Id.
at 214–15. We found the delay and the seriousness of the minor’s
condition satisfied the requirement of willful deprivation of medical care.
Id. at 215.
In this case, there was evidence that K.S. exhibited numerous
signs of abuse and head trauma. On the other hand, she also exhibited
signs of more normal childhood illness or infection. Schlitter took K.S. to
the doctor on numerous occasions and called the medical clinic several
times. He also administered medication prescribed by the doctor.
Schlitter, however, did not seek medical care for K.S.’s most serious
symptoms. The doctors testified at trial that the symptoms of head
trauma would have been obvious to anyone. In particular, Dr. Oral
testified that the symptoms exhibited by K.S., such as lethargy,
17
decreased appetite, pulling hair, nightmares, multiple bruises from
distinct time periods, and lack of playfulness even after she had healed
from the conjunctivitis and ear infection, combined with the repeated
injuries to her forehead were far enough outside normal child behavior
that a reasonable caretaker would have sought medical care.
We conclude a reasonable jury could have found that Schlitter
knew of the abuse occurring to K.S. and chose not to seek medical
attention for the resulting injuries, such as facial bruising and other
abnormal symptoms. A reasonable jury could have found Schlitter
willfully deprived K.S. of medical care despite the ongoing symptoms of
excessive sleep and failure to eat. It could have further found that
Schlitter purposely did not take K.S. in for treatment to avoid the risk of
exposure and an investigation, a risk he knew was possible after the
March 16 visit with DHS regarding the bruise on K.S.’s forehead.
4. Knowingly permitted the continuing physical abuse of K.S.
Finally, we consider the alternative that Schlitter committed child
endangerment by knowingly permitting the continuing physical abuse of
K.S. In State v. Watkins, we held that continuous proximity to a child
abused by a person was sufficient to find a defendant knowingly
permitted the continuing physical abuse of the child. 659 N.W.2d 526,
536–37 (Iowa 2003). To make its case, the State had to show Schlitter
actually knew Parmer was abusing K.S., not just that K.S. always ended
up with odd, significant bruises after her care, even if plausible
explanations for the bruises existed.
Construing the evidence in a light most favorable to the State, this
alternative was supported by sufficient evidence. Schlitter’s explanations
for the origin of the forehead bruises were not consistent, and he
provided no reason for his inconsistencies. Further, a reasonable jury
18
could find he knew the bruising on March 8 was covered with makeup in
an attempt to hide the injury. A jury could also reasonably believe a
parent would not seek to hide bruises on a toddler with makeup.
Construing the evidence in the light most favorable to the State, the jury
could have inferred that K.S. was being abused and that Schlitter
knowingly permitted the abuse to continue by failing to take action to
remove her from the care of the abuser.
B. Failure to Move for Judgment of Acquittal on the Lesser
Included Offenses of Murder. Schlitter also claims his trial counsel
should have sought an acquittal on the lesser offense to murder of
involuntary manslaughter by public offense because the State failed to
establish sufficient evidence to prove the public offense of child
endangerment. Even if we recognized a duty to move for judgment of
acquittal on lesser included offenses after denial of a motion to acquit on
the greater offense, because we find sufficient evidence to support three
of the alternatives of child endangerment, this claim must fail.
C. Claim of Error by Prosecutor. We proceed to consider other
issues raised by Schlitter on appeal to determine if they will impact the
retrial. Because a new trial will be necessary, we will exercise our
authority to promote efficiency and judicial economy by addressing those
issues raised on appeal that will likely reoccur at the retrial.
During closing argument, the prosecutor made an emotional
appeal to the jurors by telling them that the jury system gives control to
“citizens to hold each other accountable for criminal behavior.” He also
told the jurors that they had the “sacred duty of protecting the safety of
the public and of the innocent by judging those that commit brutal acts
of abuse and neglect against fellow humans to be guilty when it’s been
shown beyond a doubt that’s reasonable.” Additionally, the prosecutor
19
informed the jurors that they had an “important honor” to “protect the
rights of citizens and acknowledge those rights and find [offenders]
accountable through the rest of us.”
Counsel for Schlitter objected to these statements after
deliberations had begun. The district court ultimately found the
statements did not amount to prosecutorial misconduct. Based on this
ruling, Schlitter raised a claim of prosecutorial misconduct on appeal.
At the outset, we observe that the term “prosecutorial misconduct”
has gained a specialized meaning within the law:
to describe conduct by the government that violates a
defendant’s rights whether or not that conduct was or
should have been known by the prosecutor to be improper
and whether or not the prosecutor intended to violate the
Constitution or any other legal or ethical requirement.
ABA House of Delegates, Recommendation 100B, at 1 (2010),
http://www.americanbar.org/content/dam/aba/directories/policy/2010
_am_100b.pdf [hereinafter ABA Recommendation]. We have followed this
approach by broadly describing trial conduct of a prosecutor in a
criminal case that is claimed to deprive the defendant of a fair trial to be
prosecutorial misconduct. See Graves, 668 N.W.2d at 870. The range of
trial conduct by prosecutors falling into the category of claims referred to
as “prosecutorial misconduct” includes questioning witnesses about
others’ deceit, distorting testimony, making unsupported statements
during closing argument, stating the defendant lied during testimony,
diverting the jury from deciding the case based on the evidence, making
other inflammatory or prejudicial statements about the defendant, and
more. State v. Musser, 721 N.W.2d 734, 754–55 (Iowa 2006) (referring to
improper closing argument that urges the jury to decide the case on
something other than the evidence as prosecutorial misconduct); State v.
20
Carey, 709 N.W.2d 547, 552 (Iowa 2006) (referring broadly to claims of
improper closing argument by the prosecutor as claims of misconduct);
Graves, 668 N.W.2d at 870–71 (collecting cases). While some of the
conduct in these cases may have been intentional, other conduct can be
the result of mistake or error during the heat of trial.
The problem with describing all claims as prosecutorial
misconduct is that the term tends to conflate prosecutorial misconduct
with professional misconduct as controlled by our Iowa Rules of
Professional Conduct. ABA Recommendation, at 1; Shawn E. Minihan,
Measuring Prosecutorial Actions: An Analysis of Misconduct versus Error,
Prosecutor, Dec. 2014, at 22, 23 [hereinafter Minihan]; see also Iowa R.
Prof’l Conduct 32:8.4 (defining professional misconduct). The two
phrases are not only similar in their language, but tend to connote
similar meanings. Yet, professional misconduct generally applies to
intentional misbehavior on the part of the attorney, while prosecutorial
misconduct is not always intentional. Iowa R. Prof’l Conduct 32:8.4;
ABA Recommendation, at 2. In 2010, the American Bar Association
(ABA) adopted a recommendation urging courts to be careful in
distinguishing between prosecutorial misconduct and prosecutorial error
and to attach different levels of culpability for each. ABA
Recommendation, at 2–3.
One author has offered helpful guidance on how to distinguish
between prosecutorial misconduct and prosecutorial error. 1 Minihan, at
24–25. Prosecutorial misconduct includes those statements “where a
1Minihan based distinction between prosecutorial misconduct and error on an
analytical framework developed by the Office of Professional Responsibility for the
United States Department of Justice. Minihan, at 24–25; Office of Prof’l Responsibility,
U.S. Dep’t of Justice, Analytical Framework (2005), https://www.justice.gov/sites/
default/files/opr/legacy/2006/03/15/framework.pdf.
21
prosecutor intentionally violates a clear and unambiguous obligation or
standard imposed by law, applicable rule or professional conduct,” as
well as “those situations where a prosecutor recklessly disregards a duty
to comply with an obligation or standard.” Id. Prosecutorial error occurs
“where the prosecutor exercises poor judgment” and “where the attorney
has made a mistake” based on “excusable human error, despite the
attorney’s use of reasonable care.” Id. at 25. This distinction also
conforms to the general definitions for misconduct and a trial error.
Compare Misconduct, Black’s Law Dictionary (10th ed. 2014) (defining
misconduct as “[a]n attorney’s dishonesty or attempt to persuade a court
or jury by using deceptive or reprehensible methods”), with Trial Error,
Black’s Law Dictionary (defining trial error as “[a] mistake in or deviation
from proper trial procedure during the presentation of a case to a jury”).
Going forward, we adopt the ABA’s recommendation on our review of
prosecutorial behavior and distinguish between incidences of
prosecutorial error and prosecutorial misconduct. A prosecutor who has
committed error should not be described as committing misconduct.
We discussed the role of the prosecutor in criminal cases in
Graves, 668 N.W.2d at 870. We also identified a multifactor test to
evaluate the statements made during closing arguments in determining if
there was misconduct and if that misconduct was prejudicial. Id. at
877–78. These same factors easily translate to an evaluation of
prosecutorial error.
In this case, the claim raised by Schlitter was actually describing
error by the prosecutor, not prosecutorial misconduct. It is unnecessary,
however, for us to apply the Graves factors to this claim or to address the
additional claim whether trial counsel was ineffective for failing to lodge a
timely objection to the closing argument of the prosecutor. The claim of
22
error by the prosecutor based on the statements made during closing
argument rests with the unique and particular choice of words, as well
as the particular surrounding circumstances. It is unlikely the
prosecutor will make the same choice of words or that the same
circumstances will be repeated during the retrial. Accordingly, we do not
resolve the issue, but remind counsel on retrial to be mindful of the
scope of closing arguments described in Graves.
D. Miranda Violation. Schlitter was interviewed by law
enforcement officers on several occasions, including an interview at a
state patrol office on March 30, 2010. He moved to suppress statements
made to officers during this interview because he was not given the
Miranda warnings and because his statements were involuntary based
on promises of leniency. In particular, at the suppression hearing,
Schlitter’s objections to the March 30 interview centered on two areas.
First, he objected to the nature of the interrogation. Second, he objected
because the officers continued to question him after he asked them to
stop once they began to graphically describe the possible ways K.S. could
have received her injuries. On appeal, however, Schlitter primarily
objected to the admission of his statements from the interview describing
his frustration with K.S., the possibility that he had picked up K.S.
roughly, and his implicit defense of Parmer.
The district court found the officers made no statements that
resembled any promise of leniency. It also found Schlitter was not in
custody during the interview, and the officers were not required to give
him the Miranda warnings. The court held Schlitter was not in custody
because he was allowed to and did leave the interview at his own will.
This issue will be raised again on retrial, and we proceed to resolve it on
this appeal. In doing so, we agree the record does not disclose any
23
promises of leniency. Thus, we proceed to decide if Schlitter was in
custody at any time during the interview.
We begin by recognizing that Schlitter raised the Miranda issue
under both the United States and Iowa Constitutions. He did not
propose, however, that we consider a different standard for determining
whether he was in custody under the Iowa Constitution than followed
under the federal caselaw. As a result, with respect to the Iowa
constitutional claim, we apply the prevailing federal standard, but
reserve the right to apply that standard in a different fashion from the
federal caselaw. See State v. Becker, 818 N.W.2d 135, 150 (Iowa 2012).
Law enforcement officers are required to give Miranda warnings
when a suspect is in custody and subjected to interrogation. State v.
Tyler, 867 N.W.2d 136, 171 (Iowa 2015) (discussing the warnings police
must give based on Miranda v. Arizona, 384 U.S. 436, 471, 478–79, 86
S. Ct. 1602, 1626, 1630, 16 L. Ed. 2d 694, 722, 726 (1966)). “[C]ustody
must be determined based on how a reasonable person in the suspect’s
situation would perceive [the] circumstances.” Yarborough v. Alvarado,
541 U.S. 652, 662, 124 S. Ct. 2140, 2148, 158 L. Ed. 2d 938, 950
(2004). Custody occurs “upon formal arrest or under any other
circumstances where the suspect is deprived of his or her freedom of
action in any significant way.” State v. Ortiz, 766 N.W.2d 244, 251 (Iowa
2009). This standard seeks to apply the Miranda requirements to
coercive atmospheres, not just coercive places. It uses a case-by-case
evaluation of all the circumstances existing at the time of the
interrogation. The factors used to determine custody include
(1) the language used to summon the individual; (2) the
purpose, place, and manner of interrogation; (3) the extent to
which the defendant is confronted with evidence of her guilt;
24
and (4) whether the defendant is free to leave the place of
questioning.
State v. Countryman, 572 N.W.2d 553, 558 (Iowa 1997).
In a Miranda claim, interrogation consists of the express
questioning and words and actions beyond those normally part of arrest
and custody “that the police should know are reasonably likely to elicit
an incriminating response from the suspect.” State v. Miranda, 672
N.W.2d 753, 761 (Iowa 2003) (quoting State v. Peterson, 663 N.W.2d 417,
424 (Iowa 2003)). The State has not separately addressed whether an
interrogation occurred and so has waived any argument to the contrary.
See id. Therefore, if we determine Schlitter was in custody then the
officers would have been required to inform him of his Miranda rights.
We first consider the circumstances concerning how the individual
was summoned to the interrogation. Countryman, 572 N.W.2d at 558.
An officer called Schlitter and asked if he would be willing to come to his
office at the state patrol office on a later date to answer some more
questions. The officer did not physically approach Schlitter, bring him to
the station in a police vehicle, or otherwise force Schlitter to the interview
but rather made a request and arrangements for Schlitter to come in
another day. Cf. State v. Bogan, 774 N.W.2d 676, 680–81 (Iowa 2009)
(finding custody when principal pulled student out of class and walked
him to the office followed by officers, and the student did not volunteer or
acquiesce to speaking with police). There is no indication Schlitter
attempted to decline the request or showed any reluctance to attend the
interview.
We next consider the purpose, place, and manner of interrogation.
Countryman, 572 N.W.2d at 558. With respect to the manner of
questioning, we consider how long it lasted, “the number of persons
25
conducting the questioning, the number of breaks taken during the
questioning, the availability of restroom breaks or other breaks, and the
type of questioning in which those conducting the interview engage.”
Tyler, 867 N.W.2d at 172–73. In Tyler, we noted that even a three-hour
interview was not necessarily custodial. Id. at 172. On the other hand,
even brief interviews that the individual knows will continue until the
desired answer is given can be custodial. Miranda, 672 N.W.2d at 760.
Interrogation at a police station is generally a more coercive environment
than questioning a suspect away from the station, but “merely because
questioning takes place at the police station” does not necessarily
implicate custody. State v. Smith, 546 N.W.2d 916, 922 (Iowa 1996).
The purpose of the encounter in this case was to get Schlitter to
confess to being the perpetrator of the physical injuries suffered by K.S.
or to get him to implicate Parmer. Schlitter was a focus of the
interrogation, but so was another person. Schlitter suspected he and
Parmer were targets of the investigation, as did others, including family
members. Schlitter had talked with law enforcement investigators on
several occasions prior to the March 30 encounter and had consistently
denied any responsibility for the injuries inflicted on K.S. The
questioning took place in an interview room and lasted about one hour
and twenty minutes. The officers did not call Schlitter to the patrol office
with the intent to detain or arrest him, nor did they indicate any such
intent to Schlitter.
During the interview, Schlitter sat in a chair against a wall
between a desk and a table. A camera was located directly in front of
him. Two officers were in the room during the interview, but only one
asked Schlitter questions. The officers wore plain clothes. One officer
was behind a desk, and the interviewing officer sat in a chair by the table
26
facing Schlitter. This arrangement placed the officer between Schlitter
and the door. He inched closer to Schlitter throughout the questioning,
moving from around two feet away to nearly knee-to-knee, then moving
back by the table.
It is clear the officers applied forceful verbal pressure on Schlitter
as the questioning progressed. The pressure included a strong and
graphic description of the injuries inflicted on K.S. The officer implied
Schlitter inflicted the injury and confronted Schlitter with the
inconsistency between his denial of any responsibility and his
declaration that Parmer was a good mother and never violent. The type
and amount of pressure used by the officers tended to make the
atmosphere coercive. The pressure was not just for Schlitter to implicate
Parmer but also for him to confess in the alternative. Schlitter thought
the aggressive pressure was unfair and asked the officer several times to
stop.
The officers also asked Schlitter if he would consent to a polygraph
examination. Schlitter said he would consent to a polygraph test but
wanted to take it the following day because it was getting close to
dinnertime. After the officers pressed for Schlitter to immediately take
the test, he requested to talk to his lawyer. When Schlitter was unable to
reach his lawyer by phone, the officers again pressed for him to take the
test, but then agreed it could be done the following day. Schlitter told
the officers that he would come back the next day, stating, “[I]f that’s
when you want me here.”
The third factor looks at “the extent to which the defendant is
confronted with evidence of [his] guilt.” Countryman, 572 N.W.2d at 558.
During this interview, the officer described the actions that could have
caused K.S.’s injuries, such as striking her head, shaking her violently,
27
or dropping her. The officer continued to describe each of those
scenarios in more detail. He told Schlitter that abused children cling to
their abuser and do not run away from the one abusing them. The
officer then continued asking if Schlitter somehow hit K.S.’s head on
anything while carrying her or lifting her. He implied that Schlitter
picked K.S. up too fast and squeezed her hard enough to cause the
bruising without realizing the hold was too rough or accidentally
squeezed her out of frustration. The officer asked to trace Schlitter’s
hand, suggesting it could help identify the source of bruising to K.S.’s
face. The officer told Schlitter his explanations were not credible and
pointed out the bruising on K.S. only began after he became the
custodial parent.
The amount of evidence of Schlitter’s guilt as the perpetrator
presented to him during the interview was not significant. Schlitter did
not make a confession, nor did the officer present any evidence to him
showing Schlitter was directly responsible for K.S.’s injuries. Although
the atmosphere became highly accusatory at a point, the evidence
presented to Schlitter was circumstantial and speculative in nature.
The final factor considered to establish custody is whether the
individual was free to leave the place of questioning. Id. One element of
this is the degree of physical restriction placed on the individual. Smith,
546 N.W.2d at 925. Schlitter’s path to the exit was partially blocked by
the interviewing officer. Additionally, the officers did not open the
interview by telling Schlitter he was free to leave when he wanted.
However, when the officers left the room, Schlitter had free access to the
door. He was not handcuffed at any point during the interview, and the
door to the room was not locked. He drove himself to the station and
was not dependent on the officers to drive him home. See Tyler, 867
28
N.W.2d at 174 (finding no custody even when the individual had been
brought by officers to the police station when the individual was told she
was free to leave and that she would be given a ride). Although Schlitter
became upset during the interview, at no time did his demeanor indicate
he felt he would not be allowed to leave. In fact, when Schlitter told the
officers towards the end of the interview that he could not remain long
enough to take a polygraph examination because he needed to leave for
dinner with his family, they attempted to talk him into staying for the
test, but allowed him to leave without doing so. See Countryman, 572
N.W.2d at 558 (finding no custody when individual was not restrained,
never asked to leave, and officer testified he would have tried to talk her
out of leaving but would have allowed it). Importantly, this exchange
indicated Schlitter did not consider himself to be in custody, but free to
leave to have dinner with his family.
Considering the totality of the circumstances, we conclude
Schlitter was not in custody at the time he entered the interrogation
room of the patrol office. He cooperatively talked to officers in the days
preceding the interview and, under the circumstances, would not have
been alarmed to learn they wanted to talk to him again. He voluntarily
went to the patrol office. The request to meet at the patrol office and to
go into the interview room could not be viewed reasonably as a
significant restraint on Schlitter’s freedom of movement. The difficult
question is whether the circumstances that followed deprived Schlitter at
any point of his freedom to a degree similar to a formal arrest. See
Miranda, 672 N.W.2d at 759 (noting Miranda safeguards apply as soon
as the person is deprived of freedom to the level of a formal arrest). A
coercive environment, whether by formal arrest or otherwise, gives rise to
custody, which requires the protections of Miranda. See id.
29
The strength of Schlitter’s claim of custody is found in the
aggressive and accusatory nature of the questioning. The approach
taken by the investigating officers was consistent with the type of
circumstances that can make suspects feel a coercive atmosphere of
custody. The more an interrogating officer discloses evidence of guilt to a
suspect and the more force the officer uses to express guilt to a suspect,
the greater likelihood the suspect will be in custody for purposes of
Miranda. Cf. Tyler, 867 N.W.2d at 173–74 (distinguishing between
accusatory and truth-seeking questioning); Smith, 546 N.W.2d at 925
(noting questions about conflicting stories was to find information rather
than to confront the defendant with evidence of guilt); see also United
States v. Griffin, 922 F.2d 1343, 1348 (8th Cir. 1990) (“[T]he fact that the
individual has become the focus of the investigation is relevant ‘to the
extent that the suspect is aware of the evidence against him’ and this
awareness contributes to the suspect’s sense of custody.” (quoting United
States v. Carter, 884 F.2d 368, 370 (8th Cir. 1989))). Yet, Schlitter
understood the officers were asking him either to acknowledge his guilt
or implicate Parmer. Even during the aggressive questioning, Schlitter
understood the officers were looking at one or the other as the guilty
party. Thus, if the officers wanted Schlitter to implicate Parmer, a
necessary inference would be the officers lacked evidence of his guilt.
Likewise, the request to trace his hand and to take a polygraph
examination did not support custody under the circumstances, but
confirmed the ongoing nature of the investigation and the ongoing search
for more evidence. Even though the officers wanted to press on with the
questioning and with the polygraph test when Schlitter wanted to end
the encounter, the questioning did promptly end, and Schlitter did agree
to return the next day. Schlitter indicated he did not believe the
30
interview had evolved into a custodial setting by telling the officers near
the end of the interview he would need to take the requested polygraph
examination another time because he needed to be leaving for dinner.
Under all the circumstances, and balancing all four factors, we conclude,
as did the district court, the interrogation did not restrict Schlitter’s
freedom to the point that it rendered him in custody for purposes of
Miranda.
IV. Conclusion.
We conclude the district court did not err in denying the motion to
suppress. However, we conclude insufficient evidence was presented at
trial to support a conviction for child endangerment under the theory
that Schlitter used unreasonable force that resulted in bodily injuries to
K.S. As a result, trial counsel for Schlitter was ineffective for failing to
preserve error. We therefore reverse and remand for a new trial. In light
of the need for a new trial, it is unnecessary to address further the other
issues raised by Schlitter on appeal. We allow the decision of the court
of appeals to stand as a final decision on the claim of ineffective
assistance of counsel relating to the failure to investigate.
DECISION OF COURT OF APPEALS AFFIRMED IN PART AND
VACATED IN PART; DISTRICT COURT JUDGMENT AFFIRMED IN
PART, REVERSED IN PART, AND REMANDED.
All justices concur except Wiggins, J., who concurs in part and
dissents in part, and Appel, J., who files a separate opinion concurring in
part and dissenting in part in which Wiggins and Hecht, JJ., join.
31
#13–0346, State v. Schlitter
WIGGINS, Justice (concurring in part and dissenting in part).
I join Justice Appel’s opinion that concurs in part and dissents in
part to the majority opinion. However, I am compelled to write further on
the use of special interrogatories in criminal cases. I see too many
judges not using them when appropriate.
As demonstrated by this case and State v. Tyler, 873 N.W.2d 741,
753–54 (Iowa 2016), a new trial is required when the evidence is
insufficient to support a guilty verdict on an alternative theory of
criminal liability submitted to a jury and the jury returned a general
guilty verdict. Appropriate use of special interrogatories can avoid new
trials.
Under limited circumstances, our present law allows jurors to
unanimously convict a defendant even when they do not agree on a
single theory of criminal liability. See State v. Bratthauer, 354 N.W.2d
774, 776–77 (Iowa 1984). So long as the alternative means of
committing an offense submitted to the jury are consistent with and not
repugnant to each other, the jury can convict a defendant without
agreeing to the precise means by which the defendant committed the
offense. Id. When the district court submits consistent alternate
theories of liability to the jury, it may submit special interrogatories that
will permit it to determine which jurors agree on each alternative theory,
but it is not required to do so.
In contrast, juror unanimity as to the means by which an offense
was committed is required to sustain a conviction when the alternative
means submitted to the jury are inconsistent, repugnant, or conceptually
distinguishable from each other. See Tim A. Thomas, Annotation,
Requirement of Jury Unanimity as to Mode of Committing Crime Under
32
Statute Setting Forth the Various Modes By Which Offense May Be
Committed, 75 A.L.R. 4th 91, 105 (1990). In such cases, jurors must
reach unanimity as to the means by which the defendant committed the
offense. Thus, the district court must submit special interrogatories to
the jury to convict the defendant when the alternative means submitted
to the jury are inconsistent, repugnant, or conceptually distinguishable
from each other.
Therefore, to determine whether special interrogatories are
necessary, a district court must make two distinct legal determinations.
Bratthauer, 354 N.W.2d at 776. First, the court must determine if the
legislature intended the relevant statute to define “a single offense that
may be committed in more than one way or instead defines multiple
offenses.” Id. Second, the court must apply a constitutional test and
determine if the alternative means for committing the offense are
inconsistent, repugnant, or are conceptually distinguishable. Id.
Only after a district court has completed this two-step analysis will
it be in the position to decide what type of special interrogatories, or
instructions, if any, it may need to give the jury in regards to its verdict. 2
2The model jury instructions published by the Iowa State Bar Association
include the following instruction:
Where two or more alternative theories are presented, or where two or
more facts would produce the same result, the law does not require
each juror to agree as to which theory or fact leads to his or her verdict.
It is the verdict itself which must be unanimous, not the theory or facts
upon which it is based.
Iowa State Bar Ass’n, Iowa Criminal Jury Instruction 100.16 (2015).
It appears the present practice among district courts is to give this instruction
when the alternative means submitted to the jury are not inconsistent, repugnant, or
conceptually distinguishable from each other. Again, the court may want to consider
submitting some form of interrogatories to avoid a retrial in case an appellate court
finds the evidence was insufficient to submit one of the alternative ways to commit an
offense.
33
#13–0346, State v. Schlitter
APPEL, Justice (concurring in part and dissenting in part).
I concur with the balance of the majority opinion but dissent on
the question of whether Schlitter was subjected to an unwarned
interrogation contrary to Miranda v. Arizona under the United States and
Iowa Constitutions. 384 U.S. 436, 444–45, 86 S. Ct. 1602, 1612, 16
L. Ed. 2d 694, 706–07 (1966).
I. Factual and Procedural Background.
The record reveals that law enforcement officers requested Schlitter
to come to the state patrol office for questioning in connection with the
death of his daughter. Schlitter drove himself to the station. He was
then escorted to an interrogation room. The interrogation room had two
steel desks. Schlitter sat in a chair with his back to the wall between the
two desks. Two officers were in the interrogation room seated between
Schlitter and the door. The door of the interrogation room was not
locked. Schlitter was not advised at any time during the interrogation
that the door was not locked, that he was not under arrest, or that he
was free to go.
The interrogation began with basic background information. After
a few minutes of questioning, however, the interrogation became
accusatory. The interrogating officer asked about bruises on Schlitter’s
daughter, stating that “none of the bruising shows up until she’s in your
custody” and that Schlitter’s answer of “I don’t know” to questions about
how the injuries occurred “doesn’t cut it.” The officer described the
injuries and asked, “[H]ow does that happen . . . did you do those
things?” The officer repeatedly stressed, “[W]e’re down to two people, you
and Amy (Schlitter’s girlfriend),” as responsible for the injuries to his
daughter. And the officer also stressed that Schlitter had told them that
34
“Amy’s a good mother [and he’d] never seen her be violent.” Schlitter
grasped the point stating, “So, I’m pretty much incriminating myself.”
For several minutes, the video recording of the interrogation
reveals that the interrogating officer repeatedly confronted Schlitter and
pressed him to admit responsibility for the injuries to his daughter.
Under persistent questioning focusing on his responsibility for the
injuries to his daughter, Schlitter finally declared, “Can you just stop?”
The officer did not stop. He pressed on. He responded by aggressively
stating, “But, but something happened. Okay? Something happened to
your daughter.” Schlitter responded, “You’re getting too graphic and
you’re getting . . . .” But he was not allowed to finish his sentence when
the officer interjected, “Something happened to your daughter and
whatever happened to her, killed her.” Schlitter declared, “I don’t
appreciate this!”
At this point, Schlitter asked, “Do I need my lawyer? Cause I don’t
appreciate this.” The officer ignored him and observed, “We’re just trying
to find out . . . what happened.” Schlitter again declared he did not
appreciate the questioning and for a second time announced, “We need
to stop!” To this the officer responded, “One of two people did [it].”
Schlitter for the third time stated, “I, we need to stop. Please.” The
officer again ignored him and pressed on noting, “One of two people
know what happened.”
At this point, Schlitter backed off his previous unqualified denials
of any involvement in his daughter’s injuries. When asked once again
whether he hurt his daughter, Schlitter now responded, “No. Not that I
know of.” When asked what he meant by that, Schlitter responded with
the phrase, “Not purposely trying to hurt my daughter.” When asked
whether Schlitter became frustrated with his daughter on the day she
35
went to the hospital with severe injuries, Schlitter now stated that his
daughter was not eating lunch and that he “picked her up to set her
down on her mat a few times, ‘cause she kept getting up.” Schlitter then
stated, “[I]t wasn’t hard or extremely forceful. I picked her up, sat her
down, and, uh, she did that enough times I had to take a break. Amy
watched her for a few minutes.”
The officers continued the interrogation. They ultimately asked to
trace Schlitter’s hand, suggesting that this technique would allow them
to determine who caused bruising to his daughter’s face. In apparent
reference to other bruises, Schlitter stated that he picked her up a lot
“like that” but never violently. When asked if his actions would cause
bruising, he stated, “Shouldn’t have been.”
The interrogation continued for several minutes. The interrogating
officer stated, “[I]t’s you and Amy,” “it’s down to you two,” and “it’s down
to you and Amy.”
At this point, the officers asked Schlitter if he would be willing to
take a polygraph test. Schlitter asked if he could do it tomorrow, and the
officers responded that they would prefer he do it that same day. When
Schlitter answered, “I’m supposed to be having dinner soon,” an officer
responded, “I think this is a bit more important than dinner right now.”
In response to the request for a polygraph test, Schlitter stated, “I
wanna talk to my lawyer, too.” The officers allowed Schlitter to call his
attorney. Schlitter could not reach her, however, and left a voice mail
message. After learning that Schlitter could not contact his attorney, the
officers continued questioning. An officer pressed the polygraph issue,
stating that “the choice is really yours.” Schlitter repeated, “I just wanna
talk to my lawyer first . . . about everything that is going on here.”
36
The officers continued to press for the polygraph. One officer
stated, “You can walk out of here knowing that, you know, we don’t think
that you’re, you’re our person anymore . . . .” Ultimately the officers and
Schlitter agreed that he would come back the next day for the polygraph.
An officer asked Schlitter, “Okay. I have your, your word?” and Schlitter
responded, “Yeah, if that’s when you want me here, I’ll come back.”
Schlitter stated that Amy was “too nice of a person to hurt any kid.” The
officer emphasized, “[U]ntil we can polygraph you and, and talk with Amy
. . . it won’t be over.” The interrogation then ended.
II. State and Federal Claims.
In this case, Schlitter raises his Miranda claim under both the
United States Constitution and the Iowa Constitution. Although the
Iowa Constitution does not contain an explicit right against compelled
self-incrimination, we have found such a right under the due process
clause of the Iowa Constitution. State v. Iowa Dist. Ct., 801 N.W.2d 513,
518 n.2 (Iowa 2011) (citing State v. Height, 117 Iowa 650, 659, 91 N.W.
935, 938 (1902)).
In the aftermath of Miranda, the United States Supreme Court has
embraced its core holding but generally limited the potentially protean
scope of the case. State supreme courts have not consistently followed
the Supreme Court’s later caselaw under Miranda in the interpretation of
their state constitutions. 3
3See, e.g., State v. Ketchum, 34 P.3d 1006, 1021–25 (Haw. 2001) (elaborating on
a more expansive definition of custody under article I, section 10 of the Hawaii
Constitution); People v. Griggs, 604 N.E.2d 257, 268 (Ill. 1992) (rejecting Moran v.
Burbine, 475 U.S. 412, 106 S. Ct. 1135, 89 L. Ed. 2d 410 (1986), under the Illinois
Constitution); Commonwealth v. Smith, 593 N.E.2d 1288, 1295 (Mass. 1992) (declining
to follow Oregon v. Elstad, 470 U.S. 298, 105 S. Ct. 1285, 84 L. Ed. 2d 222 (1985), on
state law grounds in Massachusetts); State v. Smith, 834 S.W.2d 915, 919 (Tenn. 1992)
(explaining that the Tennessee Constitution provides more protection than the Federal
Constitution under Miranda); see also State v. Tyler, 867 N.W.2d 136, 186–87 (Iowa
37
In this case, however, Schlitter does not suggest that we should
apply a different framework under the Iowa Constitution than is
generally applied by the United States Supreme Court. As a result, we
must apply the federal framework for the purpose of this case, but we
reserve the right to apply the federal framework in a more restrictive
manner. See State v. Short, 851 N.W.2d 474, 491 (Iowa 2014). Under
these circumstances, this case does not stand for the proposition that
departures from federal precedent will be rejected, but only that they
have not been presented and therefore have not been ruled upon in the
case presented.
Thus, the posture presented in this case is similar to State v. Pals,
805 N.W.2d 767 (Iowa 2011). In Pals, we considered the application of a
totality-of-the-circumstances test to determine whether an individual had
consented to a search. Id. at 777. Pals did not argue for a departure
from the federal totality-of-the-circumstances test under the Iowa
Constitution. Id. at 779–80. Consequently, we utilized the federal test,
but applied it in a fashion more stringent than federal law. Id. at 782.
Similarly, here we are faced with another totality-of-the-circumstances
test under federal law. We apply the test, but may do so in a fashion at
variance with federal law.
_________________________
2015) (Appel, J., concurring part and dissenting in part) (citing state constitutional
cases that decline to follow Elstad); Claudia R. Barbieri, Oregon v. Elstad Revisited:
Urging State Court Judges to Depart from the U.S. Supreme Court’s Narrowing of
Miranda, 4 U. Dist. Colum. L. Rev. 63, 69–74 (1998); Arthur Leavens, Prophylactic Rules
and State Constitutionalism, 44 Suffolk U. L. Rev. 415, 429–38 (2011); Katherine E.
McMahon, “Cat-Out-of-the-Bag” & “Break-in-the-Stream-of-Events”: Massachusetts’
Rejection of Oregon v. Elstad for Suppression of Warned Statements Made After a
Miranda Violation, 20 W. New Eng. L. Rev. 173, 201–08 (1998).
38
III. Legal Framework for Evaluation of Custody Under United
States Constitution.
As noted by the majority, the United States Supreme Court has
established a totality-of-the-circumstances test to determine if a person
is in custody or if freedom is deprived “in any significant way.” 4 Miranda,
384 U.S. at 444, 86 S. Ct. at 1612, 16 L. Ed. 2d at 706. Whether a
person is in custody or has been deprived of freedom in any significant
way is determined by examination of “all of the circumstances
surrounding the interrogation.” Stansbury v. California, 511 U.S. 318,
322, 114 S. Ct. 1526, 1528–29, 128 L. Ed. 2d 293, 298 (1994). The
Supreme Court has stated that relevant circumstances include, but are
not limited to: the language used in summoning the interrogatee,
Yarborough v. Alvarado, 541 U.S. 652, 664, 124 S. Ct. 2140, 2149, 158
L. Ed. 2d 938, 951 (2004); the location of the questioning, see Maryland
v. Shatzer, 559 U.S. 98, 114, 130 S. Ct. 1213, 1225, 175 L. Ed. 2d 1045,
1059 (2010); its duration, Berkemer v. McCarty, 468 U.S. 420, 437–38,
104 S. Ct. 3138, 3149, 82 L. Ed. 2d 317, 333 (1984); statements made
during the interrogation, Oregon v. Mathiason, 429 U.S. 492, 495, 97
S. Ct. 711, 714, 50 L. Ed. 2d 714, 719 (1977) (per curiam); the presence
or absence of physical restraints during the questioning, New York v.
Quarles, 467 U.S. 649, 655, 104 S. Ct. 2626, 2631, 81 L. Ed. 2d 550,
556 (1984); and whether the interrogatee is released at the end of the
questioning, California v. Beheler, 463 U.S. 1121, 1124, 103 S. Ct. 3517,
3519, 77 L. Ed. 2d 1275, 1278–79 (1983) (per curiam).
4The expansive language is broad enough to prevent law enforcement from
circumventing the Miranda requirements by conducting interrogations in places such
as hotel rooms or squad cars. See Orozco v. Texas, 394 U.S. 324, 326–27, 89 S. Ct.
1095, 1097, 22 L. Ed. 2d 311, 314–15 (1969).
39
Following the lead of the United States Supreme Court, several
circuit courts have developed nonexclusive criteria for consideration. See
United States v. Kim, 292 F.3d 969, 974 (9th Cir. 2002) (including “(1) the
language used to summon individual; (2) the extent to which the
defendant is confronted with evidence of guilt; (3) the physical
surroundings of the interrogation; (4) the duration of the detention; and
(5) the degree of pressure applied to detain the individual” (quoting
United States v. Hayden, 260 F.3d 1062, 1066 (9th Cir. 2001))); United
States v. Griffin, 922 F.2d 1343, 1349 (8th Cir. 1990) (including “whether
the suspect was informed at time of questioning that the questioning was
voluntary, that the suspect was free to leave or request officers to do so,
or that the suspect was not considered under arrest”; “whether the
suspect [had] unrestrained freedom of movement during questioning”;
“whether the suspect initiated the contact with authorities or voluntarily
acquiesced to official requests to respond to questions”; “whether strong
arm tactics or deceptive stratagems were employed during the
questioning”; “whether the atmosphere of the questioning was police
dominated”; or “whether the suspect was placed under arrest at the
termination of the questioning”). We have also utilized nonexclusive
criteria for determination of custody. State v. Miranda, 672 N.W.2d 753,
759 (Iowa 2003) (including “language used to summon the person”;
“purpose, place, and manner of interrogation”; “extent to which the
person is confronted with evidence of guilt”; and “whether the person is
free to leave the place of questioning”).
An individual is in custody when freedom of movement is
restrained to the degree comparable to formal arrest. Beheler, 463 U.S.
at 1125, 103 S. Ct. at 3520, 77 L. Ed. 2d at 1279. The question of
custody is sometimes phrased as whether there are circumstances that
40
objectively present “a serious danger of coercion”—coercion of a degree
associated with formal arrest. Howes v. Fields, 565 U.S. ___, ___, 132
S. Ct. 1181, 1189, 182 L. Ed. 2d 17, 27 (2012); Tammy R. Pettinato, The
Custody Catch-22: Post-Interrogation Release as a Factor in Determining
Miranda Custody, 65 Ark. L. Rev. 799, 818 n.115 (2012); Bryan Taylor,
You Have the Right to Be Confused! Understanding Miranda After 50
Years, 36 Pace L. Rev. 160, 180–81 (2015).
As noted by the United States Supreme Court, coercion inherent in
custodial interrogations “derives in large measure from an interrogator’s
insinuations that the interrogation will continue until a confession is
obtained.” Minnesota v. Murphy, 465 U.S. 420, 433, 104 S. Ct. 1136,
1145, 79 L. Ed. 2d 409, 423 (1984); see also State v. Muntean, 12 A.3d
518, 525 (Vt. 2010) (finding custody is present when individual is not “at
liberty to terminate the interview and leave”). As observed by one
authority, custody “implies a situation in which the suspect knows he is
speaking with a government agent and does not feel free to end the
conversation.” Stephen E. Arthur & Robert S. Hunter, The Miranda
Rights, in 1 Federal Trial Handbook: Criminal § 30:8 (4th ed.), Westlaw
(database updated Dec. 2015).
The United States Supreme Court has emphasized that in
determining the custody issue, the question must be approached from
the viewpoint of a reasonable person in the presence of the police officer,
not from the viewpoint of police officers themselves. Yarborough, 541
U.S. at 663, 124 S. Ct. at 2148–49, 158 L. Ed. 2d at 950–51; Thompson
v. Keohane, 516 U.S. 99, 112, 116 S. Ct. 457, 465, 133 L. Ed. 2d 383,
394 (1995); Stansbury, 511 U.S. at 323, 114 S. Ct. at 1529, 128
L. Ed. 2d at 298; Berkemer, 468 U.S. at 442, 104 S. Ct. at 3151, 82
L. Ed. 2d at 336. The subjective and undisclosed views of police officers
41
conducting the interrogation are irrelevant. Stansbury, 511 U.S. at 324,
114 S. Ct. at 1529–30, 128 L. Ed. 2d at 299–300. The views of officers
are relevant only to the extent conveyed, by word or deed, to the
individual being questioned. Id. at 325, 114 S. Ct. at 1530, 128
L. Ed. 2d at 300.
IV. Application of Totality-of-the-Circumstances Test of
Custody.
A. Language Used to Summon: The Question of Implied
Obligation. We begin by discussing the first nonexclusive factor often
cited in determining custody or restraint: the language used by the police
to summon an individual to interrogation. Yarborough, 541 U.S. at 664,
124 S. Ct. at 2149, 158 L. Ed. 2d at 951. As has been noted by a leading
authority, “ ‘invitations’ or ‘requests’ to come to the police station for
questioning may be ambiguous.” William E. Ringel et al., Searches and
Seizures, Arrests and Confessions, § 27.5 (2d ed.), Westlaw (database
updated Mar. 2016).
Here, however, the record does not provide the language used to
summon Schlitter. The officer testified at the suppression hearing only
that a request was made that Schlitter come to the patrol office and that
he voluntarily complied. There was no evidence the officer specifically
advised Schlitter that his decision was up to him, that he could leave at
any time during the interrogation if he chose, or that he was not under
arrest. Yet, it is clear under the caselaw that even when a person
appears to have voluntarily traveled to a police station to submit to
interrogation, this fact does not in and of itself establish lack of custody
or restraint for a number of reasons.
First, a request to appear at the police station “may easily carry an
implication of obligation, while the appearance itself, unless clearly
42
stated to be voluntary, may be an awesome experience for the ordinary
citizen.” Jefferson v. State, 459 S.E.2d 173, 177 (Ga. Ct. App. 1995)
(quoting Dunaway v. New York, 442 U.S. 200, 207 n.6, 99 S. Ct. 2248,
2253 n.6, 60 L. Ed. 2d 824, 832 n.6 (1979)) (noting an officer’s request
for a person to come to the station may easily be an offer that cannot be
refused, depending on the circumstances); State v. Menne, 380 So. 2d 14,
17 (La. 1980); State v. Bleyl, 435 A.2d 1349, 1357 (Me. 1981); People v.
Dross, 551 N.Y.S.2d 1016, 1020 (Supp. Ct. 1989). The United States
Supreme Court recognized the concern in Dunaway, where the Supreme
Court recognized that individuals may not view requests to come to the
station as something that they may easily refuse. 442 U.S. at 207 n.6,
99 S. Ct. at 2253 n.6, 60 L. Ed. 2d at 832 n.6. Thus, even an apparently
voluntary appearance may mask coercive features.
Second, many of the cases finding the manner of arrival at the
police station significant combine the voluntary nature of the summons
with other facts that reinforce a finding of lack of custody or restraint.
That was the case in Mathiason. In Mathiason, the defendant was told
upon his arrival at the police station that he was not under arrest. 429
U.S. at 493, 495, 97 S. Ct. at 713, 714, 50 L. Ed. 2d at 718, 719. This
key limiting feature of Mathiason—namely, that other facts supported a
finding of lack of custody beyond the apparently voluntary arrival of the
person at the place of interrogation—has not gone unnoticed. For
example, in Muntean, a defendant who voluntarily arrived at the place of
interrogation was nevertheless found to be in custody when he was not
told that he was free to leave at any time, he was confronted immediately
with evidence of guilt, the detective indicated that he was certain of his
guilt, and the interrogation took place in a small, windowless polygraph
room. 12 A.3d at 524.
43
Similarly, in Moore v. Ballone, the United States Court of Appeals
for the Fourth Circuit noted the fact that the police emphasized that the
individual was not under arrest at the station before the interrogation
commenced in Mathiason limited the scope of the case. 658 F.2d 218,
225 (4th Cir. 1981). Along the same line of reasoning, the court in
United States v. Harrold noted that although courts have held that an
individual who voluntarily arrived at the police station was not in
custody for purposes of Miranda, the defendants “in those cases were
also told that they were not under arrest or were not restrained at the
police station.” 679 F. Supp. 2d 1336, 1345 (N.D. Ga. 2009) (emphasis
added). Further, as has been observed by one federal court, the repeated
reminder that the suspect is free to leave is perhaps the most significant
fact for determining if the interrogation is noncustodial. United States v.
Crawford, 372 F.3d 1048, 1060 (9th Cir. 2004). Notably, here there was
no Mathiason reminder, let alone repeated Crawford reminders that
Schlitter was not under arrest or was free to leave the interrogation
location.
Finally, an interrogation that commences as a noncustodial
interrogation can morph into a situation that a reasonable person would
conclude involves custody or significant restraint. The usual fact pattern
involves an interrogation that begins in a low-key manner but then
escalates into a confrontation suggesting the defendant’s guilt. In these
situations, an interrogation may be voluntary at the beginning but may
develop into a confrontation that would give rise to a reasonable belief
that the defendant cannot leave until the interrogation is completed.
See, e.g., United States v. IMM, 747 F.3d 754, 766 (9th Cir. 2014) (noting
voluntary initial contact is significant but does not end custody inquiry);
People v. Algien, 501 P.2d 468, 470–71 (Colo. 1972); People v. Mrozek,
44
367 N.E.2d 783, 787 (Ill. App. Ct. 1977); Commonwealth v. Magee, 668
N.E.2d 339, 343 (Mass. 1996); State v. Payne, 149 S.W.3d 20, 33–34
(Tenn. 2004).
Under the thin record of this case, the conclusory testimony that
Schlitter voluntarily came to the station mildly supports a finding of lack
of custody. The lack of evidence of the specific language used, however,
and the failure of the record to show that Schlitter was told he could
voluntarily leave or end the interrogation substantially minimizes the
importance of this factor. Further, as will be seen below, developments
at the interrogation substantially overpower the voluntary nature of the
original summons.
B. Ensuring Voluntariness: Statement That the Individual Is
Free to Leave. A second factor often considered in determining whether
an interrogation is custodial is whether the interrogatee has been told
that he is not under arrest or that he is free to go at any time. The
authorities discussed above demonstrate the importance of these
admonitions. The Eighth Circuit has observed that
abundant advice of freedom to terminate the encounter
should not be treated merely as one equal factor in a multi-
factor balancing test designed to discern whether a
reasonable person would have understood himself to be in
custody. That a person is told repeatedly that he is free to
terminate an interview is powerful evidence that a
reasonable person would have understood that he was free
to terminate the interview.
United States v. Czichray, 378 F.3d 822, 826 (8th Cir. 2004).
Here, however, the transcript and the audio recording of Schlitter’s
interrogation reveal no such declarations. Although not necessarily
determinative, the lack of a statement that Schlitter was not under arrest
and was free to terminate the interrogation at any time is a factor cutting
45
in favor of custody. See United States v. Conder, 529 F. App’x 618, 623
(6th Cir. 2013).
Even in cases when a person is advised that he or she is free to
terminate the interrogation at any time, such declarations are not
determinative of the custody issue when the interrogation turns strongly
accusatorial. California v. Aguilera, 59 Cal. Rptr. 2d 587, 593–94 (Ct.
App. 1996) (holding that although the interrogatee was told he was not in
custody, repeated disbelief expressed by the interrogators indicated that
the individual would not be released so long as the individual continued
denials). While police in this case made no statement at the time of the
interrogation suggesting that Schlitter was not under arrest or was free
to leave, they did repeatedly question him in a way that demonstrated
disbelief, a factor cutting in favor of a finding of custody. See, e.g., Jones
v. People, 711 P.2d 1270, 1276 (Colo. 1986); State v. Rogers, 760 N.W.2d
35, 56–57 (Neb. 2009).
C. Place of Interrogation: Is It Police Dominated? A third
factor considered in determining whether an interrogation is custodial is
the place of interrogation. As noted in Miranda, “compulsion to speak in
the isolated setting of the police station may well be greater than in
courts or other official investigations, where there are often impartial
observers to guard against intimidation or trickery.” 384 U.S. at 461, 86
S. Ct. at 1621, 16 L. Ed. 2d at 716. According to Miranda, in the
investigator’s office, the investigator possesses all the advantages; “[t]he
atmosphere suggests the invincibility of the forces of the law.” Id. at 450,
86 S. Ct. at 1615, 16 L. Ed. 2d at 709. As a result, courts have noted
that stationhouse interrogations should be scrutinized with great care.
United States v. Jacobs, 431 F.3d 99, 105 (3rd Cir. 2005); Steigler v.
Anderson, 496 F.2d 793, 799 (3rd Cir. 1974).
46
Here, the interrogation not only occurred at the patrol office, but in
a room specially designed for that purpose. Schlitter was positioned with
his back to the wall, surrounded by two steel desks, with two officers in
front of him. A review of the videotaped interrogation shows that the
physical characteristics of the interrogation room and the placement of
the officers plainly tends to promote the type of police dominated
atmosphere that animated the concerns of Miranda.
The State notes that the door to the room was unlocked. Yet, there
is nothing in the record that suggests that Schlitter was told that fact.
See United States v. Rogers, 659 F.3d 74, 76 (lst Cir. 2011) (describing
how police told the suspect that the door was unlocked and he was free
to leave the interview room); People v. Vargas, 971 N.Y.S.2d 624, 625
(App. Div. 2013) (noting that the suspect was told that the doors were
unlocked and she could leave whenever she wanted). In any event, two
officers in a small room blocking access to the door minimizes the fact
that the door was unlocked. See Payne, 149 S.W.3d at 33 (noting that
police officers blocked access to the door of interrogation room); see also
People v. Elmarr, 181 P.3d 1157, 1163–64 (Colo. 2008) (stating the fact
that the suspect was “interrogated in a small, closed-door interview
room” by police officers contributed to a finding of custody); Ramirez v.
State, 739 So. 2d 568, 574 (Fla. 1999) (finding custody established when
accused was, among other things, questioned “in a small room in the
police station by two detectives”). In Harrold, the district court noted the
fact that the door to the interrogation room was unlocked, but did not
give this factor much weight under circumstances similar to those
presented in this case. 679 F. Supp. 2d at 1344.
The location and physical circumstances surrounding the
interrogation in this case point in a direction of finding custody or
47
restraint. Yet, though there is an element of compulsion in the setting,
the United States Supreme Court has made clear that the mere fact that
an interrogation occurs at the police station is not, in and of itself,
determinative of the question of custody or restraint. Mathiason, 429
U.S. at 495, 97 S. Ct. at 714, 50 L. Ed. 2d at 719. But nothing in
Mathiason indicates the station house location should not be considered
as a factor in the overall analysis of whether custody or restraint is
present.
D. Nature of Interrogation: Is It Accusatorial? Another
important factor to consider in determining the custody or restraint
question is the nature of the interrogation. In many cases, the evolution
of interrogation from ordinary fact-finding into a highly confrontational
and accusatorial proceeding converts a voluntary encounter into a
custodial interrogation. See Ross v. State, 45 So. 3d 403, 415–16 (Fla.
2010). When interrogation escalates, the key question is whether a
reasonable person would feel at the time of the accusatorial questioning
that they would be free to leave. People v. Payne, 838 N.Y.S.2d 123, 125
(App. Div. 2007).
Illustrative of accusatory questioning is State v. Lynn, 829 S.W.2d
553 (Mo. Ct. App. 1992). In this case, the investigation focused on
defendant and her boyfriend as perpetrators of the crime. Id. at 554.
When the police continued the questioning of the defendant despite her
denials until she confessed, the Missouri court held the defendant
reasonably believed she was not free to go. Id.; see also Mansfield v.
State, 758 So. 2d 636, 644 (Fla. 2000) (finding custody when accused
“was interrogated by three detectives at the police station, he was never
told he was free to leave, he was confronted with evidence strongly
suggesting his guilt, and he was asked questions that made it readily
48
apparent that the detectives considered him the prime, if not the only,
suspect”).
It is clear that an interrogation can be accusatorial even if there is
not probable cause to arrest the individual. In Moore, the Fourth Circuit
noted that even though law enforcement did not have probable cause to
arrest an individual and told him he was free to leave, a persistent
course of interrogation nonetheless produced a coercive environment
sufficient to satisfy the custody requirement of Miranda. Moore, 658 F.2d
at 221; see also State v. Mumbaugh, 491 P.2d 443, 449 (Ariz. 1971)
(stating that a finding of no probable cause does not necessarily mean
there was no “custody” for purposes of Miranda). Probable cause to
arrest and custody are different concepts. Lindsay v. State, 698 P.2d
659, 662–63 (Alaska Ct. App. 1985) (finding the defendant in custody
though no probable cause to arrest); People v. Biggs, 451 N.Y.S.2d 196,
199 (App. Div. 1982) (finding subject in custody in police car though no
probable cause to arrest him). The proper focus is not on the subjective
views of the police or the strength or weaknesses of their case, but is
instead on whether a reasonable person in the shoes of the person being
interrogated would believe he or she could terminate the interrogation
and leave.
Once again, the United States Supreme Court has cautioned that
mere investigatory questioning is not enough to dictate a finding of
custody or restraint. See Berkemer, 468 U.S. at 437–38, 104 S. Ct. at
3149, 82 L. Ed. 2d at 333 (noting that questioning incident to an
ordinary traffic stop is different than custodial questioning). Yet, the
nature of the questioning is an important factor in the analysis. United
States v. Bassignani, 575 F.3d 879, 885 (9th Cir. 2009) (discussing the
difference between confrontational and nonconfrontational interrogation).
49
Here, there is no question the interrogation began in a low-key,
matter-of-fact manner. It also escalated into confrontation. The tone of
the interrogation shifted, and law enforcement repeatedly sought a
confession from Schlitter. Further, when Schlitter unambiguously
demanded the officers to stop the interrogation, they did the opposite.
They persisted. He specifically asked the officers to stop three times and
declared the interrogation inappropriate four times. The officers ignored
his entreaties and plowed ahead. See State v. Roble-Baker, 136 P.3d 22,
29–30 (Or. 2006) (en banc) (noting refusal of police to stop questioning
when requested to do so created the kind of police-dominated
atmosphere that Miranda warnings were intended to counteract).
Ultimately, they pressured Schlitter to qualify his previous
unqualified strong denials by stating that he did not hurt his daughter
“as far as he knew” and declaring that he was frustrated with his
daughter’s behavior and picked her up and down repeatedly during the
time when the injuries might have been inflicted on her. The
accusatorial nature of the interrogation is a factor that cuts in favor of a
finding of custody.
The district court responded to these facts by crediting patrol
officers who testified that they were conducting an interrogation for the
purposes of background information. The district court found that the
officers had no plans to take Schlitter into custody because there was no
evidence with which to charge him with a crime.
The subjective views of the police officers have no direct bearing on
what a reasonable person would conclude from the circumstances.
Stansbury, 511 U.S. at 324, 114 S. Ct. at 1529–30, 128 L. Ed. 2d at 299–
300. Miranda rights are personal to the individual. That is why the test
is what a reasonable person in the shoes of the person being interrogated
50
would believe with respect to the custodial issue. The subjective belief
on custody of the police officer, unless communicated to the individual
being questioned, is of very little value in determining what a reasonable
interrogatee would believe. State v. Murray, 510 N.W.2d 107, 110 (N.D.
1994) (stating the fact that the officer planned to arrest the accused
irrelevant when not communicated to the accused). Here, there was no
such communication and indeed, just the opposite in light of the officer’s
declarations that the bruising occurred when his daughter was in his
care. Thus, the trial court’s focus on the subjective state of mind of
police officers does nothing to mitigate the accusatorial nature of the
interrogation.
E. Honoring Request to Call Attorney About Polygraph
Examination After Conclusion of Interrogation. Another factor in this
case is the significance of the officers honoring Schlitter’s request that he
be allowed to call his attorney when his interrogators wanted to conduct
a polygraph test. Yet, by the time the officers asked for a polygraph test,
the interrogation was essentially over. 5 The officers had achieved all they
could from the interrogation of Schlitter. The question here is whether
Schlitter felt free to leave at the time the questioning turned accusatorial
at the patrol office in the environment in which he found himself. The
fact that he repeatedly asked the interrogators to stop asking him
questions—and their determination to press on—suggests that at the key
point of the interrogation, a reasonable person in Schlitter’s shoes would
not have believed he was free to leave the interrogation room. He
5Schlitter also invoked his right to counsel generally. The law enforcement
officers refused to terminate the questioning, however, giving rise to a potential violation
of Edwards v. Arizona, 451 U.S. 477, 482, 101 S. Ct. 1880, 1883, 68 L. Ed. 2d 378, 384
(1981). This Edwards question was not raised in this case.
51
repeatedly asked the officers to stop, and his requests were repeatedly
not honored. The officers appeared determined to press the
interrogation, and at the accusatorial point of the questioning, a
reasonable person might not have believed they could just get up and
leave until the interrogation was concluded.
F. Departure at Conclusion of Interrogation. Another feature of
this case emphasized by the State is that Schlitter was not arrested at
the conclusion of the interrogation. In Mathiason, the individual who
confessed was not charged at the conclusion of the questioning, a fact
that the Supreme Court found significant. 429 U.S. at 495, 97 S. Ct. at
714, 50 L. Ed. 2d at 719. But in Mathiason, the suspect was told he was
not under arrest at the beginning of the interrogation, confessed within
about five minutes, and there was “no indication that the questioning
took place in a context where respondent’s freedom to depart was
restricted in any way.” Id. at 493, 495, 97 S. Ct. at 713, 714, 50
L. Ed. 2d at 718, 719. Here, a suspect is not told he is not under arrest
or that he can terminate the interrogation, is placed in a confined room
used for interrogations, has his exit blocked by patrol officers, is
confronted with accusatorial questioning, and is subject to repeated and
determined questioning in response to three unheeded demands that the
interrogation “stop!” The facts are obviously in strong contrast to those
in Mathiason.
Further, the fact that Schlitter was not charged for another fifteen
months is of little moment on the question of what Schlitter reasonably
thought at the time of the accusatorial interrogation. Again, the question
is not what the police may have thought after the interrogation was
concluded (or at any time, for that matter): the question is what would a
reasonable person in Schlitter’s position have concluded about his
52
custodial status at the time he faced accusatorial interrogation and made
repeated unheeded demands to stop the interrogation. See State v.
Aynes, 715 N.E.2d 945, 950 (Ind. Ct. App. 1999) (finding despite fact
that defendant drove himself to police station for interrogation and left at
end, interrogation was custodial in light of nature of interrogation and
fact that defendant was never told he was free to leave).
G. Conclusion. In light of the totality of the circumstances, I
conclude that the interrogation here became custodial when law
enforcement officers began focusing in on Schlitter as the possible
perpetrator of the crime in this case. I note in particular the failure of
law enforcement to advise Schlitter that he was not under arrest, the
physical circumstances of the interrogation, the confrontational nature of
the questioning by police, and importantly, the refusal of the officers to
discontinue the questioning when Schlitter repeatedly demanded that
they stop. After his repeated requests to stop were not honored, a
reasonable person would have believed he was not free to terminate the
interrogation. I would thus hold that the district court erred in failing to
suppress statements made beyond that point in the interrogation under
both the United States Constitution and under the due process clause of
article I, section 9 of the Iowa Constitution.
V. Harmless Error.
Constitutional error is harmless only if it may be shown to be
harmless beyond a reasonable doubt. State v. Turner, 630 N.W.2d 601,
609 (Iowa 2012). The record in this case shows, however, that the
prosecutor used Schlitter’s interrogation responses to persuade the jury
of his guilt. An incriminating response is any response, whether
inculpatory or exculpatory, that the prosecution may seek to introduce at
trial. Rhode Island v. Innis, 446 U.S. 291, 297, 100 S. Ct. 1682, 1688,
53
64 L. Ed. 2d 297, 305 (1980). At trial, the prosecutor emphasized
Schlitter’s lack of “outrage” in the interrogation. Further, the prosecutor
additionally emphasized in closing argument to the jury that in the
interrogation Schlitter admitted abusing his daughter when he stated
that he was frustrated with her on Sunday, March 21, because she was
not eating her lunch. The prosecutor also argued that in the
interrogation Schlitter admitted that he might have picked up his
daughter in a rough manner. In a close case like this one, we cannot say
that the admission of evidence from the interrogation was harmless given
the reliance placed on the evidence obtained after the March 30
interrogation turned adversarial by the prosecution. As a result,
Schlitter’s motion to suppress incriminating statements made after the
interrogation turned adversarial should have been granted. 6
Wiggins and Hecht, JJ., join this concurrence in part and dissent
in part.
6As a result of my disposition of the custody issue, it is not necessary to
consider Schlitter’s due process claim that the statements were involuntary.
| {
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FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
JACK C. LEESON,
Plaintiff-Appellant, No. 10-35380
v.
D.C. No.
2:04-cv-00471-RSM
TRANSAMERICA DISABILITY INCOME
PLAN, OPINION
Defendant-Appellee.
Appeal from the United States District Court
for the Western District of Washington
Ricardo S. Martinez, District Judge, Presiding
Submitted January 23, 2012*
Filed January 23, 2012
Before: Betty B. Fletcher, M. Margaret McKeown, and
Richard A. Paez, Circuit Judges.
Opinion by Judge Paez
*The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
633
636 LEESON v. TRANSAMERICA DISABILITY
COUNSEL
Steven Krafchick, Krafchick Law Firm, Seattle, Washington,
for the appellant.
David Levin, Drinker Biddle & Reath LLP, Washington, DC,
for the appellee.
OPINION
PAEZ, Circuit Judge:
Plaintiff Jack Leeson (“Leeson”), a former employee of
Defendant Transamerica Corporation (“Transamerica”), filed
this action under the Employee Retirement Income Security
Act (“ERISA”), 29 U.S.C. § 1101, et seq., to challenge the
termination of his long-term disability benefits. The district
court, applying an abuse of discretion standard of review,
upheld the Transamerica Corporation Disability Income
Plan’s decision to terminate his benefits. Leeson appealed. In
a prior disposition, we reversed the district court’s grant of
summary judgment to Transamerica and remanded with
instructions to the district court to apply a de novo standard
of review in determining whether Transamerica properly ter-
minated Leeson’s benefits. Leeson v. Transamerica Disability
Income Plan, 279 F. App’x 563 (9th Cir. 2008).
On remand, Transamerica filed a motion to dismiss Lee-
son’s action for lack of subject matter jurisdiction on the
ground that Leeson did not have statutory standing as a plan
participant to file suit under ERISA. Leeson, on the other
hand, argued that he was a plan participant because he was
employed at Transamerica at the time he applied for benefits.
Leeson also stressed that Transamerica approved his claim
and, in fact, paid him benefits for four years. The district
court, relying on Curtis v. Nevada Bonding Corp., 53 F.3d
LEESON v. TRANSAMERICA DISABILITY 637
1023 (9th Cir. 1995), concluded that Leeson was not a plan
participant and granted Transamerica’s motion to dismiss.
The district court concluded that because Leeson lacked
standing to pursue an ERISA claim, there was no federal sub-
ject matter jurisdiction. Leeson again timely appealed.
In this appeal, Leeson argues that the district court errone-
ously relied on our prior holding in Curtis to dismiss the case
for lack of subject matter jurisdiction. In Curtis, we held that
a district court lacked jurisdiction to consider an ERISA claim
where a former employee “had neither a reasonable expecta-
tion of returning to covered employment nor a colorable claim
to vested benefits.” Id. at 1027. Relying on a more recent
decision, Vaughn v. Bay Environmental Management, Inc.,
Leeson contends that, under ERISA, a “dismissal for lack of
statutory standing is properly viewed as a dismissal for failure
to state a claim rather than a dismissal for lack of subject mat-
ter jurisdiction.” 567 F.3d 1021, 1024 (9th Cir. 2009). Leeson
therefore argues that because he alleged a colorable claim for
benefits, the district court had subject matter jurisdiction to
address the merits of his case on remand.
For the reasons explained below, we agree with Leeson that
Vaughn controls. Whether Leeson is a participant for pur-
poses of ERISA is a substantive element of his claim, not a
prerequisite for subject matter jurisdiction. As the Supreme
Court has instructed, “when Congress does not rank a statu-
tory limitation on coverage as jurisdictional, courts should
treat the restriction as nonjurisdictional in character.”
Arbaugh v. Y & H Corp., 546 U.S. 500, 516 (2006). To the
extent our prior cases—including Curtis—hold otherwise,
they have “no precedential effect” because they are precisely
the type of “drive-by jurisdictional rulings” the Supreme
Court has since rejected. Id. at 511 (quoting Steel Co. v. Citi-
zens for a Better Env’t, 523 U.S. 83, 91 (1998)). We therefore
vacate the dismissal and remand for further proceedings.
638 LEESON v. TRANSAMERICA DISABILITY
I
Leeson is a former employee of Transamerica. While
employed there, he participated in Transamerica’s long-term
disability (“LTD”) income plans. The Basic Plan, known as
the Transamerica Corporation Disability Income Plan (“Basic
Plan”), provided benefits based on a participant’s pre-
disability annual earnings up to $150,000. A second plan,
known as the Transamerica Corporation Class 2 Long Term
Disability Coverage Supplemental Plan (“Supplemental
Plan”),1 provided benefits on eligible pre-disability annual
earnings over $150,000.
Leeson began working as a Regional Pension Manager for
Transamerica in 1983. In December 1993, Leeson was in an
automobile accident that resulted in injury to his neck and
caused him to suffer severe headaches. Leeson continued to
work until June 1996, at which time he took a leave of
absence due to his deteriorating physical condition. Shortly
thereafter, Leeson timely applied for LTD benefits under both
the Basic and Supplemental Plans.
On April 1, 1997, Prudential Insurance Company of Amer-
ica (“Prudential”), as Claims Administrator, determined that
Leeson was eligible for LTD benefits2 and approved his appli-
cation subject to “continuing evaluation of his claim.”3 Pru-
1
The Basic Plan provided LTD benefits of 70 percent of the first
$150,000 of eligible pre-disability annual earnings. The Supplemental
Plan provided benefits on eligible pre-disability annual earnings over
$150,000. Leeson’s last eligible salary was $221,648.40, an amount which
qualified him for benefits under the Supplemental Plan as well as the
Basic Plan.
2
After Leeson filed this case, Prudential, as Plan Administrator for the
Supplemental Plan, settled Leeson’s dispute over the allegedly improper
termination of his Supplemental Plan benefits. As a result of this settle-
ment, Leeson dismissed his claims against Prudential. Accordingly, unless
otherwise noted, all further references to “long-term disability benefits,”
“LTD plan,” or “LTD benefits” refer to the Basic Plan.
3
At the time Leeson applied for benefits, Transamerica was the Plan
Administrator for the Basic Plan. Prudential, however, was the Claims
LEESON v. TRANSAMERICA DISABILITY 639
dential paid Leeson LTD benefits until July 2, 2001, when it
determined that he was no longer disabled within the meaning
of the LTD plan.4 In terminating Leeson’s benefits, Prudential
determined that the medical evidence no longer supported
Leeson’s claim that he suffered from a physical impairment
that prevented him from returning to work. Prudential further
concluded that, although Leeson may have suffered from an
impairment that resulted from a psychological condition, the
maximum benefits available for a mental impairment limita-
tion had been exhausted.
Leeson appealed Prudential’s decision to terminate his
LTD benefits. Leeson disputed Prudential’s interpretation of
the medical evidence and requested that Prudential reinstate
his benefits. In a letter dated October 19, 2001, Prudential
affirmed its decision to terminate Leeson’s benefits. The letter
explained that Leeson’s benefits were terminated because of
the 24-month mental disorder limitation and because the med-
ical evidence did not show that Leeson suffered from a physi-
cal disability that prevented him from working.
In February 2002, Leeson filed a second administrative
appeal with the AEGON Committee, which had replaced
Transamerica as the Plan Administrator.5 Subsequently, on
Administrator. As Claims Administrator, Prudential made initial eligibility
determinations, including review of first level appeals from the denial of
benefits. If Prudential’s appeals unit upheld the denial of benefits, the
employee could appeal to the Transamerica Corporation Benefits Admin-
istration Committee.
4
As we noted in our prior disposition, although Prudential determined
that Leeson was no longer eligible for benefits under the Basic Plan, its
termination letter quoted the definition of disability from the Supplemental
Plan, not the Basic Plan. See Leeson, 279 F. App’x at 565.
5
In 1999, AEGON USA, Inc., acquired Transamerica. As a result of this
acquisition, the AEGON Committee replaced Transamerica as Plan
Administrator. The AEGON Committee also assumed responsibility for
second level appeals from the denial of benefits.
640 LEESON v. TRANSAMERICA DISABILITY
June 19, 2002, the AEGON Committee denied Leeson’s
appeal on the ground that he “d[id] not meet the definition of
disability under the Plan that is applicable after the first 24
months of disability.”
One year later, in August 2003, Leeson filed a second
appeal with the AEGON Committee. The Committee denied
this appeal, explaining that its June 19, 2002, decision was
final. Having pursued his administrative remedies, Leeson
filed this action pursuant to 29 U.S.C. § 1132(a)(1)(B) and
invoked federal court jurisdiction pursuant to 29 U.S.C.
§ 1132(e)(1).6
Ruling on cross-motions for summary judgment, the district
court granted Transamerica’s motion on the ground that the
termination of benefits did not constitute an abuse of discre-
tion. In its ruling, the district court concluded that Transamer-
ica did not breach its fiduciary duty under the then-existing
standard recognized in Atwood v. Newmont Gold Co., 45 F.3d
1317 (9th Cir. 1995), when it provided Leeson with a copy of
the 1997 Restatement Plan that was in effect at the time Lee-
son’s benefits were terminated, rather than the version of the
plan in effect at the time Leeson became disabled and applied
for benefits. The district court further concluded that Leeson
received a full and fair administrative review, and that there
was substantial evidence to support the determination that
“[Leeson’s] disability resulted from a mental condition.”
6
In his complaint, Leeson named Transamerica Corporation Disability
Income Plan, Prudential Insurance Company of America, and AEGON
Long Term Disability Plan as defendants. As a result of the settlement of
Leeson’s claim regarding benefits under the Supplemental Plan, Leeson
dismissed Prudential as a defendant. Because Leeson was never a partici-
pant in the AEGON Plan, Leeson dismissed the AEGON Plan as a defen-
dant. The only remaining defendant is the Transamerica Disability Income
Plan. Although the final administrative decision was made by the AEGON
Committee, the parties do not dispute that Transamerica Disability Income
Plan is the proper defendant.
LEESON v. TRANSAMERICA DISABILITY 641
As noted above, Leeson appealed. In Leeson’s first appeal,
we held that, under our then-recent decision in Abatie v. Alta
Health & Life Insurance Co., 458 F.3d 955 (9th Cir. 2006)
(en banc), the district court erred in reviewing for abuse of
discretion the decision to terminate Leeson’s benefits. We
remanded the case for further consideration under a de novo
standard of review to determine whether Leeson was disabled
under the terms of the 1997 Restatement Plan.7 Leeson, 279
F. App’x at 567.
Transamerica never asserted in the administrative process,
in the original district court proceeding, or in the prior appeal
that Leeson was not a plan participant within the meaning of
29 U.S.C. § 1002(7). After our remand, however, Transamer-
ica filed a Federal Rule of Civil Procedure 12(h)(3) motion to
dismiss for lack of subject matter jurisdiction on the ground
that Leeson did not qualify as a plan participant, and therefore
lacked statutory standing to sue under ERISA. In support of
its argument, Transamerica explained that after the remand,
its newly retained counsel located relevant plan documents8
that governed Leeson’s eligibility for benefits. Under these
LTD plan documents, Transamerica argued that Leeson was
not a plan participant because he was on an unpaid leave of
absence when he applied for benefits. Citing to the 1997
Restatement Plan, Transamerica argued that Section 3.3.4
expressly provided that “if an Eligible Employee is on an
unpaid leave of absence, his or her status as a Long-Term Par-
ticipant shall be suspended and he or she shall be ineligible
for Long-Term Disability Benefits.” Recognizing that it had
7
Because Leeson was entitled to de novo review of the decision to ter-
minate his benefits, we instructed the district court to reconsider Leeson’s
request to conduct discovery. Leeson, 279 F. App’x at 566-67. We also
directed that “[i]n the absence of record evidence that Leeson’s rights had
vested under a prior plan, the Plan in effect when his claim was denied—
the so-called 1997 Plan—governs his claim for benefits.” Id. at 565 (cita-
tions omitted).
8
Following our remand, Transamerica produced the 1988 and 1996
Summary Plan Descriptions, and the 1993 Restatement Plan.
642 LEESON v. TRANSAMERICA DISABILITY
not previously raised this standing issue, Transamerica argued
that because the issue ultimately related to the district court’s
subject matter jurisdiction it could, under Rule 12(h)(3), raise
the issue at any time. As noted above, Transamerica relied on
our decision in Curtis to support its argument.
In opposing Transamerica’s motion, Leeson submitted a
series of three declarations, the second and third of which cor-
rected typographical errors in the first declaration. In these
declarations, Leeson declared that at the time he applied for
LTD benefits, he was not on a leave of absence. In response
to Transamerica’s motion challenging the propriety of the
later filed declarations, the district court struck them. As for
the original declaration, the district court found that it was
“self-serving” because it was made on “information and belief
rather than personal knowledge,” and was not signed under
penalty of perjury. The district court ultimately concluded that
Leeson’s “self-serving declaration [did] not provide cogniza-
ble evidence that [he] was not on unpaid leave” when he
applied for benefits.9
With this ruling, the district court found that Leeson was
not a plan participant under 29 U.S.C. § 1132(a)(1)(B),10 and
therefore lacked statutory standing to pursue an ERISA claim.
Accordingly, the district court granted Transamerica’s motion
to dismiss. In so ruling, the district court relied on Curtis to
further conclude that because Leeson lacked statutory stand-
ing, federal court subject matter jurisdiction did not exist.
Leeson timely appealed.
9
In light of our disposition, we need not decide whether the district
court erred in striking any of Leeson’s declarations.
10
29 U.S.C. § 1132(a)(1)(B) provides:
(a) Persons empowered to bring a civil action. A civil action may
be brought —
(1) by a participant or beneficiary —
(B) to recover benefits due to him under the terms of his plan, to
enforce his rights under the terms of the plan, or to clarify his
rights to future benefits under the terms of the plan . . . .
LEESON v. TRANSAMERICA DISABILITY 643
II
We review de novo a dismissal for lack of subject matter
jurisdiction. United States ex rel. Newsham v. Lockheed Mis-
siles & Space Co., 190 F.3d 963, 968 (9th Cir. 1999). We also
review de novo the district court’s interpretation of ERISA.
See Spink v. Lockheed Corp., 125 F.3d 1257, 1260 (9th Cir.
1997).
III
[1] Leeson, who filed this action pursuant to 29 U.S.C.
§ 1132(a)(1)(B), alleges that he was a participant in the Trans-
america LTD plan and that federal jurisdiction existed under
29 U.S.C. § 1132(e)(1).11 Transamerica contends that the dis-
trict court lacked subject matter jurisdiction because Leeson
was not a plan participant as required by § 1132(a)(1)(B). As
Transamerica correctly notes, the Supreme Court has
explained that “[t]he express grant of federal jurisdiction in
ERISA is limited to suits brought by certain parties . . . .”
Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463
U.S. 1, 21 (1983) (concluding that the district court lacked
subject matter jurisdiction over a lawsuit brought by state tax
authorities for a declaratory judgment involving an ERISA-
covered employee benefit plan). Participants are among those
parties expressly entitled to bring suit under ERISA. 29
U.S.C. § 1132(a)(1)(B). Thus, the question presented in this
appeal is whether the challenge to Leeson’s status as a plan
participant implicates federal court subject matter jurisdiction,
11
29 U.S.C. § 1132(e)(1) provides:
(e) Jurisdiction
(1) Except for actions under subsection (a)(1)(B) of this section,
the district courts of the United States shall have exclusive juris-
diction of civil actions under this subchapter brought by the Sec-
retary or by a participant, beneficiary, [or] fiduciary. . . . State
courts of competent jurisdiction and district courts of the United
States shall have concurrent jurisdiction of actions under para-
graphs (1)(B) and (7) of subsection (a) of this section.
644 LEESON v. TRANSAMERICA DISABILITY
or the substantive adequacy of Leeson’s claim. Our prior case
law has undoubtedly contributed to the conflation of these
two distinct concepts. This appeal provides us with an oppor-
tunity, in light of the Supreme Court’s decision in Arbaugh,
to clarify that Vaughn sets forth the correct rule.
We begin by recognizing that federal courts have broad
adjudicatory authority over “all civil actions arising under the
Constitution, laws, or treaties of the United States.” 28 U.S.C.
§ 1331. Because of this extensive power, jurisdictional dis-
missals in actions predicated on federal questions are “excep-
tional.” Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039
(9th Cir. 2004) (quoting Sun Valley Gasoline, Inc. v. Ernst
Enters., Inc., 711 F.2d 138, 140 (9th Cir. 1983)). In Bell v.
Hood, one of the seminal decisions addressing the contours of
subject matter jurisdiction, the Supreme Court held that a
claim alleged to arise under federal law should not be dis-
missed for lack of subject matter jurisdiction if “the right of
the petitioners to recover under their complaint will be sus-
tained if the Constitution and laws of the United States are
given one construction and will be defeated if they are given
another.” 327 U.S. 678, 685 (1946). Consequently, a federal
court may dismiss a federal question claim for lack of subject
matter jurisdiction only if: (1) “the alleged claim under the
Constitution or federal statutes clearly appears to be immate-
rial and made solely for the purpose of obtaining jurisdic-
tion”; or (2) “such a claim is wholly insubstantial and
frivolous.” Id. at 682-83.
Although seemingly clear in theory, our analysis of subject
matter jurisdiction has been substantially more complicated in
practice. Strictly speaking, “subject-matter jurisdiction” con-
cerns “the courts’ statutory or constitutional power to adjudi-
cate” cases. Steel Co., 523 U.S. at 89; see also Henderson ex
rel. Henderson v. Shinseki, ___ U.S. ___, 131 S. Ct. 1197,
1202 (2011) (“[U]rg[ing] that a rule should not be referred to
as jurisdictional unless it governs a court’s adjudicatory
capacity, that is, its subject-matter or personal jurisdiction.”).
LEESON v. TRANSAMERICA DISABILITY 645
The Supreme Court, however, has observed that the term
“ ‘[j]urisdiction’ . . . ‘is a word of many, too many, mean-
ings.’ ” Arbaugh, 546 U.S. at 510 (quoting Steel Co., 523 U.S.
at 90). According to the Court, federal courts have “some-
times been profligate in [their] use of the term.” Id. Indeed,
we “have sometimes mischaracterized claim-processing rules
or elements of a cause of action as jurisdictional limitations,
particularly when that characterization was not central to the
case, and thus did not require close analysis.” Reed Elsevier,
Inc. v. Muchnick, ___ U.S. ___, 130 S. Ct. 1237, 1243-44
(2010). These cases, which the Supreme Court has referred to
as “drive-by jurisdictional rulings” due to their cursory analy-
sis, have “no precedential effect.” Arbaugh, 546 U.S. at 511
(quoting Steel Co., 523 U.S. at 91).
Acknowledging the muddled state of the case law, the
Supreme Court in Arbaugh squarely addressed the lack of
precision used by federal courts in analyzing the “subject-
matter jurisdiction/ingredient-of-claim-for-relief dichotomy.”12
Id. at 511. After the trial court entered judgment on a jury ver-
dict in favor of an employee in an action involving Title VII
of the Civil Rights Act of 1964, the employer brought a
motion challenging subject matter jurisdiction. Id. at 503-04.
Although the trial court noted the waste of judicial resources
caused by the delay in asserting such a challenge, the trial
court dismissed the action because it concluded that Title
VII’s 15-employee requirement was a jurisdictional prerequi-
site. Id. at 504. The Supreme Court reversed, holding that
12
This is a significant distinction with dispositive consequences. Subject
matter jurisdiction “can never be forfeited or waived” and federal courts
have a continuing “independent obligation to determine whether subject-
matter jurisdiction exists . . . .” Arbaugh, 546 U.S. at 514 (internal quota-
tion marks and citation omitted). Whereas a trial judge may resolve factual
disputes related to subject matter jurisdiction, a trier of fact is responsible
for resolving contested facts concerning an essential element of a claim.
Id. Additionally, “when a federal court concludes that it lacks subject-
matter jurisdiction, the court must dismiss the complaint in its entirety[,]”
including pendant state law claims. Id.
646 LEESON v. TRANSAMERICA DISABILITY
Title VII’s employee numerosity limitation is not a jurisdic-
tional requirement; therefore, it cannot be raised defensively
in a post-trial motion. Id. The Court reasoned that the limita-
tion related to the substantive adequacy of a Title VII claim
because “the 15-employee threshold appears in a separate pro-
vision that ‘does not speak in jurisdictional terms or refer in
any way to the jurisdiction of the district courts.’ ” Id. at 515
(quoting Zipes v. Trans World Airlines, Inc., 455 U.S. 385,
394 (1982)). The Court articulated a bright line rule:
If the Legislature clearly states that a threshold limi-
tation on a statute’s scope shall count as jurisdic-
tional, then courts and litigants will be duly
instructed and will not be left to wrestle with the
issue . . . [b]ut when Congress does not rank a statu-
tory limitation on coverage as jurisdictional, courts
should treat the restriction as nonjurisdictional in
character.
Id. at 515-16 (footnote omitted).
In Reed Elsevier, the Supreme Court further examined the
scope of federal court subject matter jurisdiction, this time
with respect to the Copyright Act. The Court concluded that
§ 411(a) of the Copyright Act, which requires copyright regis-
tration of original works of authorship, “is a precondition to
filing a claim that does not restrict a federal court’s subject
matter jurisdiction.” 130 S. Ct. at 1241. In so holding, the
Supreme Court applied the same approach that it followed in
Arbaugh. The Court explained that § 411’s registration
requirement “is not clearly labeled jurisdictional, is not
located in a jurisdiction-granting provision, and admits of
congressionally authorized exceptions.” Id. at 1247. There-
fore, it is properly construed as a claim-processing rule.
The Supreme Court again endeavored to clarify the distinc-
tion between jurisdictional prerequisites and claim-processing
rules in Shinseki. There, the Court held that a 120-day dead-
LEESON v. TRANSAMERICA DISABILITY 647
line for filing a notice of appeal with the Court of Appeals for
Veterans’ Claims does not have “jurisdictional” conse-
quences. Shinseki, 131 S. Ct. at 1200. The Court concluded
that the relevant provision “does not speak in jurisdictional
terms,” the provision is located in a completely separate sub-
chapter entitled “Procedure,” and construing the provision to
restrict veterans’ benefits is inconsistent with the pro-veteran
administrative scheme. Id. at 1204-06.
With the benefit of recent Supreme Court precedent, we
examined the scope of federal court subject matter jurisdiction
arising from claims involving the Individuals with Disabilities
Education Act (“IDEA”). Payne v. Peninsula Sch. Dist., 653
F.3d 863 (9th Cir. 2011) (en banc). Because the plaintiffs had
not first sought relief through an administrative due process
proceeding, the district court dismissed their IDEA claims for
lack of subject matter jurisdiction. Id. at 866. Overturning our
previous cases to the contrary, we held that the IDEA’s
exhaustion requirement is an affirmative defense, not a juris-
dictional requirement. Id. at 870-71. Three factors —derived
from recent Supreme Court cases—guided our analysis. First,
the provision “is not clearly labeled jurisdictional.” Id. at 870
(quoting Reed Elsevier, 130 S. Ct. at 1247). Second, it “is not
located in a jurisdiction-granting provision.” Id. at 870-71
(quoting Reed Elsevier, 130 S. Ct. at 1247). Finally, no other
reasons necessitated that the provision be construed as juris-
dictional. Id. at 870.
With that framework in mind, we return to the federal stat-
ute currently before us. ERISA authorizes a participant or
beneficiary to initiate a civil action in state or federal court to
recover benefits, enforce his or her rights, or clarify his or her
rights under the terms of an ERISA plan. 29 U.S.C.
§§ 1132(a)(1)(B), (e)(1). A separate section entitled “Defini-
tions” provides that:
[t]he term “participant” means any employee or for-
mer employee of an employer, or any member or
648 LEESON v. TRANSAMERICA DISABILITY
former member of an employee organization, who is
or may become eligible to receive a benefit of any
type from an employee benefit plan which covers
employees of such employer or members of such
organization, or whose beneficiaries may be eligible
to receive any such benefit.
29 U.S.C. § 1002(7). The Supreme Court has interpreted
§ 1002(7) to include a former employee who has “a colorable
claim that . . . she will prevail in a suit for benefits.” Firestone
Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117 (1989).
Because federal jurisdiction existed in Firestone Tire, the
Court did not have occasion to explore the contours of partici-
pant status and ERISA subject matter jurisdiction.
[2] In Vaughn, a former employee alleged that he was enti-
tled to lost benefits caused by his employer’s breach of the
fiduciary duty to invest prudently the assets of a defined con-
tribution pension plan. 567 F.3d at 1023. Vaughn’s employer
argued that Vaughn lacked statutory standing because he had
failed to allege sufficient facts to satisfy ERISA’s definition
of the term “participant.” Id. at 1024. The district court dis-
missed the action for lack of subject matter jurisdiction. Id.
On appeal, we held that “a dismissal for lack of statutory
standing is properly viewed as a dismissal for failure to state
a claim rather than a dismissal for lack of subject matter juris-
diction.” Id. In so holding, we relied on two cases from our
sister circuits that addressed the issue. See id. (citing Lanfear
v. Home Depot, Inc., 536 F.3d 1217, 1221-22 (11th Cir. 2008)
(concluding that statutory standing under ERISA involves the
merits of the action, not subject matter jurisdiction) and
Harzewski v. Guidant Corp., 489 F.3d 799, 803-04 (7th Cir.
2007) (“Except in extreme cases . . . , the question whether
an ERISA plaintiff is a ‘participant’ entitled to recover bene-
fits under the Act should be treated as a question of statutory
interpretation fundamental to the merits of the suit rather than
a question of the plaintiff’s right to bring the suit.”)).
LEESON v. TRANSAMERICA DISABILITY 649
[3] In Harris v. Amgen, Inc., former employees of Amgen,
Inc. initiated an action against Amgen, Inc.’s directors and
officers for breach of their fiduciary duties in the operation of
two ERISA retirement plans. 573 F.3d 728, 731 (9th Cir.
2009). The district court concluded that one of the employees
lacked statutory standing as a plan participant because he had
withdrawn his assets from the plan. Id. Citing Vaughn, we
again reiterated that whether a plaintiff has statutory standing
in an ERISA action is a merits-based determination, not a
subject matter jurisdiction issue. Id. at 732 n.3.
[4] After surveying recent Supreme Court precedent and
examining the relevant provision, we conclude that Vaughn
and its progeny reached the correct outcome. We recognize
that several of our cases prior to Vaughn treated participant
status as a prerequisite to subject matter jurisdiction. See
Freeman v. Jacques Orthopaedic & Joint Implant Surgery
Med. Grp., Inc., 721 F.2d 654, 655-56 (9th Cir. 1983) (hold-
ing that the district court lacked subject matter jurisdiction
because the plaintiff was not a participant in the plan as
defined in § 1002(7)); Harris v. Provident Life Accident Ins.
Co., 26 F.3d 930, 934 (9th Cir. 1994) (concluding that “a fed-
eral court has no jurisdiction to hear a civil action under
ERISA that is brought by a person who is not a ‘participant,
beneficiary, or fiduciary.’ ” (quoting Franchise Tax Bd., 463
U.S. at 27)); Curtis, 53 F.3d at 1027 (holding that “a plain-
tiff’s standing under section 1132(a)(1) is a prerequisite to
ERISA jurisdiction.”). Applying the approach set forth in
Arbaugh, however, we conclude that these cases failed to ade-
quately consider the “critical difference[s] between true juris-
dictional conditions and nonjurisdictional limitations on
causes of action . . . .” Reed Elsevier, 130 S. Ct. at 1244
(internal quotation marks and citations omitted) (alteration in
original). In deciding these cases, our court did not have the
benefit of the Supreme Court’s clarification on the proper
scope of jurisdictional rulings as articulated in Shinseki, Reed
Elsevier, and Arbaugh. Accordingly, in light of Vaughn, they
650 LEESON v. TRANSAMERICA DISABILITY
represent the type of “drive-by jurisdictional rulings” that lack
any precedential weight. Arbaugh, 546 U.S. at 511.
First, the only limitation to invoking federal court jurisdic-
tion under § 1132(a)(1)(B) relates to the categories of individ-
uals entitled to initiate a civil action in state or federal court.
Franchise Tax Bd., 463 U.S. at 21. As explained above, par-
ticipants are among those parties authorized to bring suit
under ERISA. 29 U.S.C. § 1132(a)(1)(B). Like Title VII’s
employee numerosity requirement, the definition of “partici-
pant” “appears in a separate provision that ‘does not speak in
jurisdictional terms or refer in any way to the jurisdiction of
the district courts.’ ” Arbaugh, 546 U.S. at 515 (quoting
Zipes, 455 U.S. at 394). Section 1002(7) serves to identify
those plaintiffs who may be entitled to relief, not to limit the
authority of federal courts to adjudicate claims under ERISA.
Second, nothing in the jurisdiction-conferring provision
requires that a plaintiff must assert anything more than a col-
orable claim that he or she is a participant in order to assert
a claim under ERISA. Our earlier cases imported an addi-
tional requirement—that a plaintiff must also actually prove
that he or she is a participant to obtain access to federal court.
In light of Arbaugh, however, “we are reluctant to infer such
a restriction where Congress has not made it explicit.” Payne,
653 F.3d at 870.
[5] Finally, we can discern no other reason for importing
§ 1002(7)’s definitions into ERISA’s jurisdiction-conferring
provisions. To conclude otherwise would contravene clearly
established precedent. Bell, 327 U.S. at 685 (explaining that
“the right of the petitioners to recover under their complaint
will be sustained if the Constitution and laws of the United
States are given one construction and will be defeated if they
are given another.”). If the district court concludes that Lee-
son is a plan participant, he may be entitled to relief. If, on the
other hand, the district court concludes that Leeson is not a
plan participant, his claim fails. See 29 U.S.C.
LEESON v. TRANSAMERICA DISABILITY 651
§ 1132(a)(1)(B). Because Leeson’s ERISA claim rises and
falls on the district court’s determination of participant status,
the construction of the term “participant” involves a merits-
based determination, even if it results in a dismissal. As a
result, he has a “right” to bring suit in federal court. Bell, 327
U.S. at 685.
[6] We recognize that this conclusion requires us to over-
rule our prior statements to the contrary. This is appropriate
because the current case falls within one of our exceptions to
the general rule that a three-judge panel may not overrule a
prior three-judge panel opinion. Miller v. Gammie, 335 F.3d
889, 899 (9th Cir. 2003) (en banc). We have held:
that in circumstances . . . where the reasoning or the-
ory of our prior circuit authority is clearly irreconcil-
able with the reasoning or theory of intervening
higher authority, a three-judge panel should consider
itself bound by the later and controlling authority,
and should reject the prior circuit opinion as having
been effectively overruled.
Id. at 893. We have also specifically noted that drive-by juris-
dictional rulings lack precedential force. See Gospel Missions
of Am. v. City of Los Angeles, 328 F.3d 548, 554 (9th Cir.
2003) (“[W]e would not give precedential effect to a ‘drive-
by’ jurisdictional determination by our or a higher court . . . .”
(quoting Steel Co., 523 U.S. at 91)); Bell v. Bonneville Power
Admin., 340 F.3d 945, 952 (9th Cir. 2003) (“‘[D]rive-by juris-
dictional rulings’ are not precedential.” (quoting Steel Co.,
523 U.S. at 91)). In light of the above discussion, intervening
Supreme Court precedent compels us to conclude that partici-
pant status is an element of an ERISA claim, not a jurisdic-
tional limitation. Therefore, the reasoning applied in Arbaugh,
Reed Elsevier, and Shinseki requires us to overrule Freeman,
Harris v. Provident Life Accident Insurance Co., and Curtis,
to the extent that they held that participant status as defined
652 LEESON v. TRANSAMERICA DISABILITY
in § 1002(7) is a prerequisite to federal court subject matter
jurisdiction.
[7] Accordingly, we conclude that the district court errone-
ously dismissed Leeson’s case for lack of subject matter juris-
diction. By asserting a colorable claim that he is a plan
participant, Leeson has satisfied the threshold for establishing
federal court subject matter jurisdiction. The issue of partici-
pant status goes to the merits of his claim and not to the sub-
ject matter jurisdiction of the district court. In this context, the
district court should not have attempted to resolve the issue of
participant status when ruling on Transamerica’s motion to
dismiss under Rule 12(h)(3). Rather, because Leeson’s partic-
ipant status relates to the merits of his claim, the district court
should have addressed it at the summary judgment stage or at
trial.
IV
On remand, as we directed in our prior disposition, unless
the district court determines that another plan applies, it shall
apply the 1997 Restatement Plan. Further, if the district court
determines that Leeson was a plan participant, it shall comply
with our prior mandate and review de novo whether Trans-
america improperly terminated Leeson’s LTD benefits under
the 1997 Restatement Plan (or other governing plan, as deter-
mined by the district court). In light of the limited nature of
our holding, Leeson is not foreclosed from raising the equita-
ble principles of estoppel and waiver to bar Transamerica’s
challenge to his eligibility as a plan participant. Leeson is
likewise free to argue that Transamerica is foreclosed from
raising an entirely new eligibility argument, when it failed to
do so in the administrative process. We express no views on
the merits of any of these issues.
VACATED and REMANDED.
Leeson shall recover his costs on appeal.
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951 F.2d 350
NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit.UNITED STATES of America, Appellee,v.Shirley JACKSON, Appellant.
No. 91-5135.
United States Court of Appeals, Sixth Circuit.
Dec. 20, 1991.
1
Before KENNEDY and BOGGS, Circuit Judges; and EDGAR, District Judge.*
2
EDGAR, District Judge.
3
This case presents a search and seizure issue. Appellant Jackson ("Jackson") contends that an affidavit for a search warrant was defective and insufficient to establish probable cause to search her apartment. Jackson asserts that her judgment of conviction must be reversed and remanded because the district court erred in denying her motion to suppress the incriminating evidence seized as a result of the execution of the search warrant. We AFFIRM the judgment of conviction.
4
On November 12, 1988, a police officer submitted his affidavit for a search warrant to the General Sessions Court in Shelby County, Tennessee, which stated in relevant part:
5
Personally appeared before me, H.D. Williams and made oath that he has good ground and belief, and does believe that a female black, approximately 32 years old, 5'6", 160 lbs., medium complexion, with the first name of Shirley, with blond tinted hair, is/are in possession of the following described property, to wit: cocaine ... upon the following described premises, to wit: an apartment complex more commonly known as 1736 # 2 Baroness, the same being located in Memphis, Shelby County, Tennessee and his reasons for such belief are that affiant has on November 12, 1988, the affiant talked with a reliable informant of Memphis, Shelby County, Tennessee who has given the affiant other information in the past which has been found to be true and correct and which has resulted in several narcotic arrests and drug seizures. This reliable informant has been inside the above described apartment and has seen the above described person storing and selling cocaine inside this apartment.
6
He therefore asks that a warrant issue to search the person and premises ... where he believes said cocaine is/are now possessed, contrary to the Laws of Tennessee.
7
Based on this affidavit, the state judge issued a search warrant. When the police executed the warrant, they found cocaine inside Jackson's apartment. Jackson was indicted by a Federal Grand Jury along with two co-defendants for aiding and abetting one another to possess 51 grams of cocaine with intent to distribute in violation of 21 U.S.C. § 841(a)(1).
8
Jackson filed a pretrial motion to suppress, as evidence, the cocaine seized pursuant to the warrant. Jackson argued that the affidavit for the search warrant was defective and insufficient to support a finding of probable cause under the Fourth Amendment of the United States Constitution because the affidavit makes no reference to the date or time when the informant was alleged to have seen cocaine inside the apartment. In denying the motion to suppress, the district court determined that the affidavit, when viewed in its entirety, was not fatally defective. While noting that it would have been a better practice for the affiant to have included the date and time when the informant actually observed the cocaine in the apartment, the district court, citing United States v. Smith, 783 F.2d 648 (6th Cir.1986), found that this defect was not sufficient to justify granting the motion to suppress.
9
We will forego an independent analysis of whether the "totality of the circumstances" justified the state judge in finding probable cause to issue the warrant under Illinois v. Gates, 462 U.S. 213 (1983). Instead, our focus is on the question of whether the police officer acted reasonably and in good faith reliance on the search warrant. United States v. Leon, 468 U.S. 897 (1984). We review this matter de novo. United States v. Simpkins, 914 F.2d 1054, 1057-58 (8th Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 997, 112 L.Ed.2d 1081 (1991); United States v. Bowling, 900 F.2d 926, 930 (6th Cir.), cert. denied, --- U.S. ----, 111 S.Ct. 109, 112 L.Ed.2d 79 (1990).
10
The Supreme Court in Leon, 468 U.S. 897, held that the suppression of evidence obtained through a search warrant should be ordered on a case-by-case basis and only in those unusual cases where suppression will further the purposes of the judicially created exclusionary rule. The exclusionary rule should not be applied in such a manner as to deter objectively reasonable law enforcement activity. Moreover, the exclusionary rule does not bar the government's use in its case-in-chief of evidence obtained by a police officer who acted in reasonable reliance on a search warrant issued by a neutral, detached judge even though the warrant is ultimately found to be unsupported by probable cause. In Leon, the suppression of evidence on account of a deficient affidavit1 and the judge's erroneous probable cause determination was found to be inappropriate because the affidavit provided sufficient factual information to create disagreement among thoughtful, competent judges as to the existence of probable cause. Id. at 926.
11
A police officer's reliance on the judge's probable cause determination must be objectively reasonable. Leon outlines four situations where the exclusionary rule still applies to suppress evidence obtained pursuant to a warrant lacking probable cause: (1) where the judge in issuing the warrant is misled by information in an affidavit that the affiant knew was false or would have known was false except for his reckless disregard of the truth; (2) where the issuing judge wholly abandons his or her judicial role; (3) where the affidavit is so lacking in indicia of probable cause as to render official belief in its existence entirely unreasonable or (4) where the warrant is so facially deficient that the executing officers cannot reasonably presume it to be valid. Id. at 923, 926.
12
None of these four circumstances exist in the present case. Defendant has failed to demonstrate that the actions of the police officer in submitting his affidavit and executing the search warrant were not objectively made in good faith. The affidavit does not lack sufficient indicia of probable cause under the facts and circumstances of this particular case such as to render official belief in the existence of probable cause entirely unreasonable. Although it would indeed have been a better practice for the affidavit to specify the date or time when the informant saw the cocaine in Jackson's apartment, both the police officer-affiant and the state judge who issued the search warrant could have, for example, reasonably and in good faith relied upon this Court's decision in Smith, 783 F.2d at 652, to conclude that the affidavit in question adequately supported a finding of probable cause.
13
There is nothing in the affidavit which indicates the information provided was stale. The affidavit states that the informant had seen the storing and selling of cocaine within the apartment which indicated continuous, ongoing criminal activity and also that the affiant believed cocaine "is/are now possessed" by Jackson in the apartment. An assessment of timeliness and whether information is too stale to establish probable cause depends in substantial part on the nature of the criminal activity. Where the affidavit recites facts indicating continuous, ongoing criminal activity, the passage of time becomes less critical to a finding of probable cause. United States v. Shomo, 786 F.2d 981, 983-84 (10th Cir.1986); United States v. Johnson, 461 F.2d 285, 287 (10th Cir.1972). This is especially true in cases involving the sale and distribution of controlled substances such as cocaine. See, e.g., Simpkins, 914 F.2d at 1059; United States v. Fama, 758 F.2d 834, 838 (2d Cir.1985); United States v. Landis, 726 F.2d 540, 542 (9th Cir.), cert. denied, 467 U.S. 1230 (1984); United States v. Foster, 711 F.2d 871, 878 (9th Cir.1983), cert. denied, 465 U.S. 1103 (1984).
14
The exclusion of seized evidence at trial is an extreme remedy designed to deter improper police conduct. There has been no showing of any police misconduct in this case. If a mistake was made in determining probable cause, it was made by the state court judge who issued the warrant. "Penalizing the officer for the [issuing judge's] error, rather than his own, cannot logically contribute to the deterrence of Fourth Amendment violations." Leon, 468 U.S. at 921. We do not believe that the affidavit here was so clearly insufficient to support a finding of probable cause as to preclude the officers from reasonably relying in good faith on the warrant and to justify suppression of the evidence seized.
15
Accordingly, the district court's denial of the defendant's motion to suppress and the judgment of conviction are AFFIRMED.
*
The Honorable R. Allan Edgar, United States District Judge for the Eastern District of Tennessee, sitting by designation
1
The affidavit in Leon was found to be defective by the lower courts because the information provided by an informant was too stale to support a finding of probable cause. Id. at 685-86
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IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
May 6, 2002 Session
JACKIE D. DILLARD v. MEHARRY MEDICAL COLLEGE, ET AL.
Appeal from the Circuit Court for Davidson County
No. 95C-3712 Hamilton V. Gayden, Jr., Judge
No. M2001-02038-COA-R3-CV - Filed July 9, 2002
The jury returned a verdict for the defendant surgeon and hospital in this medical malpractice action.
The plaintiff argues on appeal that the trial court committed reversible error at several stages of the
trial, including jury selection, witness testimony and jury instructions. We affirm the trial court.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
Affirmed and Remanded
BEN H. CANTRELL, P.J., M.S., delivered the opinion of the court, in which WILLIAM C. KOCH , JR.
and D. MICHAEL SWINEY, JJ., joined.
Ann Buntin Steiner, Nashville, Tennessee, for the appellant, Jackie D. Dillard.
Bryan Essary, Nashville, Tennessee, for the appellee, Meharry Medical College.
E. Reynolds Davies, Jr. and John T. Reese, Nashville, Tennessee, for the appellee, Reginald
Coopwood, M.D.
OPINION
I. GALL BLADDER SURGERY AND A MALPRACTICE COMPLAINT
On November 7, 1994, Jackie Dillard was admitted to Metropolitan General Hospital in
Nashville with symptoms of abdominal pain. She was diagnosed with gallstones, and scheduled
the same day for surgical removal of her gall bladder (cholecystectomy). Reginald Coopwood, M.D.,
performed the surgery, using a laparoscopic procedure: that is, one involving small incisions in the
abdomen into which the surgeon inserts and manipulates a miniature television camera and small
surgical tools. Dr. Coopwood was assisted by William Garrett, M.D. During the operation, Ms.
Dillard’s common bile duct was severed in two places, resulting in pain and suffering, additional
surgery, and potential long-term damage to her liver.
Ms. Dillard filed a malpractice complaint on November 2, 1995, which included a claim by
her husband for loss of consortium. Drs. Coopwood and Garrett were named as defendants.
Meharry Medical College and the Metropolitan Government of Nashville and Davidson County were
also named, under the doctrine of respondeat superior. Ms. Dillard claimed that Dr. Coopwood had
initially misidentified her common bile duct (which is supposed to be protected during this
operation) believing it to be the cystic duct (which is normally ligated); that as a result, he ligated
and cut the common bile duct; that he failed to perform a cholangiogram, an x-ray that would have
enabled him to properly identify the anatomy of the surgical area; that because he failed to diagnose
the injury he caused, he cut the common bile duct a second time; and that he failed to convert from
a laparoscopic procedure to an open one, in order to repair the damage.
The trial court dismissed Metro Government from the lawsuit on March 4, 1996. Mr. Dillard
voluntarily non-suited his claim on November 18, 1997. Dr. Garrett was non-suited without
prejudice on September 19, 2000. A five-day trial against the Dr. Coopwood and Meharry Medical
College began on March 5, 2001.
Both parties introduced expert testimony to support their respective positions. Dr. Kelly
Wright, the liver transplant surgeon who repaired the damage to Ms. Dillard’s biliary system,
appeared for the plaintiff. He testified that Dr. Coopwood had violated the standard of care by
making a second cut on the common bile duct, despite uncertainty about the correct identification
of the biliary structures visible on his laparoscope. Dr. Charles Herbst, a retired gastrointestinal
surgeon from North Carolina, testified that under the circumstances of this case, the standard of care
required the use of a cholangiogram.
General Surgeon Dr. Robert Ikard appeared for the defendants. He testified that Dr.
Coopwood had met the standard of care, and that inadvertent injury to the common bile duct was a
recognized (although rare) complication of cholecystectomy, and that although it was slightly more
common in laparoscopic procedures, open procedures carried other risks. He also testified that
cutting the common bile duct a second time did not increase the risk or worsen the damage Ms.
Dillard suffered, and that the standard of care in 1994 did not require intraoperative cholangiography
prior to cutting duct structures.
Following closing arguments, the jury returned a verdict for the defendants. The trial court
entered a judgment in accordance with the verdict on March 15, dismissing the action. Ms. Dillard
filed a Motion for New Trial on April 12, in which she argued that the trial court had erred in
numerous ways, including not dismissing two jurors for cause who were acquaintances of the
defense counsel, admitting misleading testimony offered by the defendant doctor, and giving
erroneous jury instructions.
On April 16, defendant Meharry Medical College filed a Motion for Discretionary Costs,
asking the court to charge the plaintiff with $5,000 of such costs. An itemized and verified bill of
costs listed $4,229 in fees charged by Dr. Ikard for trial preparation and trial testimony. The
plaintiff’s attorney subsequently filed an Amended Motion for New Trial. She argued that the fee
-2-
Dr. Ikard received for testifying constituted newly discovered evidence, justifying a new trial. On
August 13, 2001, the trial court denied the plaintiff’s Motion for New Trial and the defendant’s
Motion for Discretionary Costs. This appeal followed.
II. JURY SELECTION
Ms. Dillard’s attorney argued on appeal that errors by the trial judge forced her to waste her
peremptory challenges, resulting in a jury that was skewed against her client’s interest. The factual
predicate for this claim arose when the members of the jury venire were asked if they knew any of
the parties or their attorneys. Two potential jurors answered that they did.
Both knew defense attorney Reynolds Davies, and one knew defense attorney Jack Reese as
well. Further, one juror testified that he considered Mr. Davies to be his friend, and that he and his
family saw the Davies family socially three or four times a year. The other testified that he and Mr.
Davies had been in school together at Montgomery Bell Academy, but that he didn’t see the attorney
very often.
Ann Buntin Steiner, the plaintiff’s attorney, asked both potential jurors if they would feel
strange if they had to rule on a case where Mr. Davies represented one of the parties, and they said
they would not. The trial judge also asked them if they could be fair to both sides despite their
acquaintanceship with Mr. Davies, and they both indicated that they could. At the conclusion of voir
dire, the plaintiff’s attorney moved the court to dismiss the two jurors for cause, but the judge
refused. Ms. Steiner then used two of her peremptory challenges to remove them from the jury.
It is a basic principle of the jury system that a litigant is entitled to a jury composed of
persons free from bias or prejudice. Wolf v. Sundquist, 955 S.W.2d 626, 629 (Tenn. Ct. App. 1997);
Durham v. State, 188 S.W.2d 555 (Tenn. 1945). Upon learning of friendship or personal
acquaintanceship between a prospective juror and one of the parties or attorneys in a case, further
questioning of the juror is a necessary step to determine whether he or she can deliberate on the case
without bias. The judge in this case questioned the two prospective jurors on the possibility of bias,
and determined that they need not be excluded for cause.
The plaintiff’s attorney correctly points out that challenges for cause should be granted in all
circumstances where bias exists, not only those where the juror recognizes and acknowledges his
bias. See State v. Morris, 24 S.W.3d 788 (Tenn. 2000). She argues that both prospective jurors gave
equivocal answers to questions about possible bias. Specifically, when asked whether his
acquaintance with attorney Reynolds Davies would affect his ability to be fair to both sides, one juror
answered, “I don’t believe so.” The other, when asked if he thought he could be fair to both sides,
said, “I think so.”
The ultimate determination on the question of juror bias remains within the sound discretion
of the trial court. Mallard v. Tompkins, 44 S.W.3d 73 (Tenn. Ct. App. 2000); Carney v. Coca-Cola
Bottling Works of Tullahoma, 856 S.W.2d 147 (Tenn. Ct. App. 1993). One reason the trial judge
-3-
is afforded such discretion is that he or she is able to observe the demeanor of the potential juror as
he answers questions about possible bias, and is thus in a better position than the reviewing court
to evaluate the answers. Carney v. Coca-Cola Bottling Works of Tullahoma, supra. While the two
challenged jurors did not answer as firmly as the plaintiff’s attorney thought was required, we believe
that the trial court did not abuse its discretion when it declined to dismiss them for cause.
Further, one important distinction between this case and other cases in which the alleged bias
of jurors was an issue on appeal is that the two challenged jurors in this case did not actually serve
on the jury. As we stated above, Ms. Steiner was able to eliminate them by using two of her
peremptory challenges.
At a later point in the jury selection process, the court recessed, and when the jury venire
returned, two of its members had changed seats. The plaintiff’s attorney claims that as a result she
used her last remaining peremptory challenge against the wrong juror, and that although she brought
her error to the attention of the trial judge in a timely way, he refused to grant her an additional
peremptory challenge. She was thus unable to eliminate one juror that she found objectionable.1
During oral argument, Ms. Steiner was asked what evidence she had that the jury that was
finally selected was biased against her client. She could only say that she felt that her initial instinct
was correct, and that the one juror she was unable to eliminate on peremptory challenge turned out
to be against her client. We have no way of evaluating her statement, but we do not believe that she
has established a sufficient basis to overturn the jury verdict.
III. A MOTION TO STRIKE
The defense counsel asked Dr. Coopwood on direct testimony how many laparoscopic
cholecystectomies he had performed prior to operating on Ms. Dillard. He answered that it was
somewhere between 80 and 120. The attorney then asked the doctor whether he had ever cut the
common bile duct during any of these operations. Dr. Coopwood answered in the negative.
Ms. Steiner stated on appeal that she had wanted to object to the testimony as being in
violation of the Tennessee Rules of Evidence, but withheld her objection because of the lateness of
the hour. The following day, she attempted to introduce into evidence seven malpractice complaints
that had been filed against Dr. Coopwood. After a jury-out hearing, the judge declined to allow her
to introduce the allegations in those complaints. Ms. Steiner then moved that Dr. Coopwood’s
1
The defendant argues that there is no proof in the record that Ms. Steiner had used up all her peremptory
challenges. After oral argument in this case, the plaintiff’s attorney filed a M otion to Sup plement the R ecord with the
trial judge’s jury seating list and peremptory challenge list, two documents which on their face indicate that she used all
the peremptory challenges she was permitted. The defendant responded by arguing that the motion should be denied
because the do cuments lacked proper authenticatio n. W e reserved our ruling, pending this opinion. Since we do not
believe that the plaintiff is entitled to reversal of the jury verdict, regardless of whether her attorney used up all her
perempto ry challenges, we find it unnecessary to rule on her mo tion.
-4-
response to his attorney’s question the day before be stricken. The trial court again declined to grant
her motion.
Ms. Steiner argues that the trial judge’s refusal to strike Dr. Coopwood’s answer constituted
reversible error because Rule 404 of the Tennessee Rules of Evidence declares that “evidence of a
person’s character or a trait of character is not admissible for the purpose of proving action in
conformity with the character or trait on a particular occasion.” Rule 404 goes on to say, however,
that such evidence may be admissible for other purposes, so long as its probative value is not
outweighed by the danger of unfair prejudice.
While it may be something of a stretch to characterize a doctor’s prior surgical results as
character evidence, there is some validity to the argument that the evidence was presented for the
inadmissible purpose of proving that Dr. Coopwood was a careful surgeon. Defense counsel
contends, however, that Dr. Coopwood’s testimony was admissible under Rule 404, because it was
presented to prove the validity and efficacy of the doctor’s surgical method for identifying the
anatomy of the biliary area, a method which had been earlier criticized as deficient by the plaintiff’s
expert witnesses.
We note that decisions as to the admissibility of evidence (like decisions on jury selection)
are within the sound discretion of the trial judge. Overstreet v. Shoney’s, 4 S.W.3d 694 (Tenn. Ct.
App. 1999). We also agree with defendant’s argument that the plaintiff waived any possible
objection to Dr. Coopwood’s statement by failing to state her objection in a timely way. Rule
103(a)(1) of the Tennessee Rules of Evidence declares that error may not be predicated upon a ruling
which admits evidence, unless a timely objection or motion to strike is made. See Wright v. United
Services Automobile Association, 789 S.W.2d 911, 914 (Tenn. Ct. App. 1990). Before raising her
motion to strike, the plaintiff’s attorney waited until the following day, and until after the trial court
declined to allow her to introduce allegations of malpractice made in other cases.
It is well-established that a party must complain and seek relief immediately after the
occurrence of a prejudicial event, and may not save an infirmity in the proceedings as an "ace in the
hole" to be used in the event of a later unfavorable decision. Harwell v. Walton 820 S.W.2d 116
(Tenn. Ct. App. 1991); Gotwald v. Gotwald, 768 S.W.2d 689 (Tenn. Ct. App. 1988). We therefore
do not believe that the trial court abused its discretion by declining to grant the plaintiff’s Motion
to Strike Dr. Coopwood’s testimony.
IV. JURY INSTRUCTIONS
The plaintiff’s attorney argues that several portions of the instructions that the trial judge
delivered to the jury are contrary to the controlling law. Before we discuss her arguments, we must
note that a particular instruction must be considered in the context of the entire jury charge, Johnson
City v. Outdoor West, 947 S.W.2d 855 (Tenn. Ct. App. 1996), and that the charge will not be
invalidated if it fairly defines the legal issues involved in the case, and does not mislead the jury.
Otis v. Cambridge Mutual Fire Insurance Company, 850 S.W.2d 439 (Tenn. 1992).
-5-
The trial court instructed the jury that “[t]he duty of a physician is to exercise his best
judgment regarding treatment, and he is not guilty of medical malpractice if he chooses a course of
treatment supported by other physicians in good standing.” Ms. Steiner notes that the Tennessee
Medical Malpractice Act requires physicians to act with ordinary and reasonable care in accordance
with the recognized standard of acceptable professional practice in their profession and specialty.
See Tenn.Code.Ann. § 29-26-115. She argues that it is erroneous to imply that a doctor cannot be
found guilty of malpractice if he simply proves that other doctors may have chosen the same course
of treatment that he did.
Ms. Steiner’s statement of the law is correct, but her discussion of the jury instructions is
incomplete. The trial transcript reveals that the trial judge fully explained the elements of a
malpractice claim in accordance with Tenn. Code. Ann. § 29-26-115, and the plaintiff’s burden of
proving each of those elements by a preponderance of the evidence. While the challenged
instruction standing alone would be misleading, it is not so within the context of the entire
instruction given by the court.
The plaintiff’s attorney also objects to the judge’s instruction that “foresight, not hindsight
is the standard by which one’s duty of care is to be judged.” This instruction is consistent with
Tennessee negligence law in general, see Doe v. Linder Construction Co., 845 S.W.2d 173 (Tenn.
1992), as well as with the form of negligence called malpractice. Alessio v. Crook, 633 S.W.2d 770,
775 (Tenn. Ct. App. 1982). In malpractice cases, the standard of care against which the actions of
a defendant doctor are measured is, “[t]he recognized standard of acceptable professional practice
in the profession and the specialty thereof, if any, that the defendant practices in the community in
which the defendant practices or in a similar community at the time the alleged injury or wrongful
action occurred.” Tenn. Code. Ann. § 29-26-115(a)(1) (emphasis added).
Finally, the plaintiff’s attorney objects to the trial court’s use of the expression “honest
mistake” in the following instructions:
A physician does not guarantee the cure of his patients, but after a careful
diagnosis, a physician is not liable for damages to his patient from an honest mistake
in determining the character of treatment to be administered or in determining the
necessity of an operation.
A physician will not be held liable for honest mistakes in judgment but only
for negligence, negligent failure to meet the standard required by the profession in
the community.
A physician does not guarantee the cure of his patients. Presuming careful
diagnosis, a physician is not liable for damages resulting from an honest mistake in
determining the character of treatment to be administered.
-6-
Plaintiff’s attorney directs our attention to a case from another jurisdiction, McKinnis v.
Women and Infants Hospital of Rhode Island, 749 A.2d 574 (Rhode Island 2000), which criticizes
the use of terms such as “honest mistake” and “bona fide error” in jury instructions dealing with
medical malpractice, because they defy rational definition. Although this court has previously
upheld jury instructions almost identical to the above quotation, Patton v. Rose, 892 S.W.2d 410,
415 (Tenn. Ct. App. 1994), we agree that “honest mistake” has the potential for being misleading,
because in the context of the law of medical malpractice, a doctor can be negligent without being
dishonest.
In the McKinnis case, the Rhode Island Supreme Court found the entire jury instruction to
be inadequate and misleading, not merely the “honest mistake” language. The court reversed the
verdict for the defendant primarily because the trial judge never gave the jury an adequate
explanation of negligence, but only described various factual and legal scenarios in which negligence
was found not to lie against medical defendants. During its deliberations, the jury asked for
clarification on the definition of negligence for doctors and nurses, but were rebuffed by the judge.
In contrast, the judge in the case before us gave the jury a full explanation of the elements of
negligence under the medical malpractice statute. Thus, even if the judge’s use of the challenged
term was in error, in the context of the entire jury charge, it has to be considered harmless.
V. THE AMENDED MOTION FOR NEW TRIAL
Ms. Steiner asked Dr. Ikard at the beginning of his testimony whether he was charging a fee
for reviewing the records and serving as an expert in this case. Dr. Ikard answered that he was. The
plaintiff’s attorney then asked him his rate of compensation and how much he had charged to date.
Dr. Ikard answered that he did not know. Under cross-examination, he was asked if he charged $525
per hour for giving his deposition, and he again answered that he didn’t know, explaining that he
doesn’t do the billing. Under close questioning, he admitted that he was a personal friend of Ed
Davies, one of the defense attorneys, and that he had testified several times in cases where Mr.
Davies was the attorney.
During his closing argument, Mr. Davies referred to the fees Dr. Wright and Dr. Herbst
received for their court appearances, and used the expressions “hired witnesses” and “paid
witnesses,” and “big fees for testifying,” thus implying that their testimony should not be given
credence. In speaking of his own witness, Mr. Davies said that “Dr. Ikard doesn’t have to come here
to defend Dr. Reginald Coopwood, Dr. Ikard doesn’t need the money.” Ms. Steiner argues that
these statements misled the court and the jury, and that the newly discovered evidence as to Dr.
Ikard’s $4,429 fee constitutes grounds for a new trial.
We note that the plaintiff’s attorney had the opportunity to impeach the testimony of Dr.
Ikard in regard to his fee, and that she managed to do that to some extent. Further, she began her
closing argument by addressing the question of Dr. Ikard’s fees and his relationship to Mr. Davies.
She told the jury that Dr. Ikard charged $525 per hour for giving his deposition, and reminded them
of Dr. Herbst’s testimony that he was donating his considerable fee to charity. Nonetheless, Ms.
-7-
Steiner contends that the discovery of the total amount of Dr. Ikard’s fee constitutes newly
discovered evidence, justifying the grant of her Motion of New Trial.
There are several problems with this argument. First, a new trial is not warranted on the basis
of newly discovered evidence that goes to a collateral matter only. Crain v. Brown, 823 S.W.2d 187
(Tenn. Ct. App. 1991). Clearly, Dr. Ikard’s fee is a collateral matter, which has very little to do with
the primary issues in this case.
Second, it must be shown that the new evidence that is offered was not known to the moving
party prior to trial, and could not have been known to her through the exercise of reasonable
diligence. Seay v. City of Knoxville, 654 S.W.2d 397 (Tenn. Ct. App. 1983). It appears to us that
the plaintiff could have discovered the amount of Dr. Ikard’s fee prior to trial if she felt this fact to
be of sufficient importance.
Third, a new trial can be granted on the basis of newly discovered evidence only when the
introduction of such evidence at a subsequent trial would most likely result in a different outcome.
Wright v. Quillen, 909 S.W.2d 804 (Tenn. Ct. App. 1995); S.M.R. Enterprises v. Southern
Haircutters, 662 S.W.2d 944 (Tenn. Ct. App. 1983). In light of Ms. Steiner’s opportunity to
impeach Dr. Ikard, and to argue that like Dr. Wright and Dr. Herbst, he was also paid for his
testimony, it seems highly unlikely that a jury’s knowledge of the exact amount of his fee would lead
to a different result.
Finally, when considering the matter of granting a new trial, the trial judge is vested with
broad discretion. Esstman v. Boyd, 605 S.W.2d 237 (Tenn. Ct. App. 1979). Our courts do not favor
the grant of a such a trial on the basis of newly discovered evidence, and look upon such motions
with suspicion. Brown v. University Nursing Home, Inc., 496 S.W.2d 503 (Tenn. Ct. App. 1972).
The trial judge clearly did not abuse his discretion in declining to order a new trial.
VI. THE MATERIAL EVIDENCE RULE
The appellant argues that we should grant her a new trial because the verdict was against the
weight of the evidence. We needn’t spend much time on this argument, because she is invoking the
wrong standard of review. A jury verdict that has been approved by the trial court will not be
reversed on appeal so long as there is material evidence in the record to support that verdict. Tenn.
R. App. P. 13(d); Washington v. 822 Corp., 43 S.W.3d 491(Tenn. Ct. App. 2000); Poole v. Kroger
Co., 604 S.W.2d 52 (Tenn. 1980). In the present case, the record contains competent expert
testimony that the plaintiff’s injury was not the result of malpractice. The jury was not obligated to
believe this testimony, but it was entitled to do so. The plaintiff’s argument is without merit.
-8-
VII.
The judgment of the trial court is affirmed. Remand this cause to the Circuit Court of
Davidson County for further proceedings consistent with this opinion. Tax the costs on appeal to
the appellant, Jackie D. Dillard.
_________________________________________
BEN H. CANTRELL, PRESIDING JUDGE, M.S.
-9-
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15 F.3d 1090NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.
Glenn D. THESENVITZ; Donald Heberlein; James E. Berwick;Donald E. Palmer; Kenneth L. Wilson, et al.,Plaintiffs-Appellees,v.KAISER ENGINEERS HANFORD CO., Defendant-Appellant,andKaiser Engineers Hanford Retirement Plan; AdministrativeCommittee for the Kaiser Engineers HanfordRetirement Plan, Defendants.
No. 92-36592.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted Jan. 5, 1994.*Feb. 8, 1994.
Before: WRIGHT, CANBY, and T.G. NELSON, Circuit Judges.
1
MEMORANDUM**
FACTS AND PROCEDURAL HISTORY
2
Plaintiffs-Appellees are a group of former employees of Kaiser Engineers Hanford Company (KEH). KEH had contracted with the Department of Energy to perform certain tasks at the Hanford Nuclear Reservation in Washington, which had previously been performed by the Jones Construction Company (Jones).
3
KEH took over most of Jones' work force and also assumed liability for Jones' pension plan and profit sharing plan by amending its own pension plan. The amendment provided a formula for determining benefits upon early, voluntary retirement. The formula provided increased benefits for Jones' prior employees who retired prior to April 1, 1989. Employees who did not elect to retire risked involuntary layoffs. All the appellees are former KEH employees who have qualified for and elected early retirement, except Norma Stark, who sues as the personal representative of the estate of her husband, Larry Stark, who was such a former KEH employee prior to his death.
4
KEH provided the eligible employees with information about the amount of pension benefits they would receive if they elected early retirement. Despite repeated requests, KEH refused to release documents or other information that would have allowed the appellees to check the calculations themselves. Unfortunately, the estimates were in error as a result of misuse of certain data relating to the Jones plan. The mistake resulted in promised benefits in most cases of at least double, and in one case, triple, the amount now calculated to be correct. There is no question about the fact that appellees relied on the overstated benefits in making their decisions to accept early retirement. They relinquished jobs that they could have retained with full compensation for additional years, and made substantial changes in their life-styles. Since May, 1990, the appellees have all been receiving reduced benefits based on correct calculations.
5
Appellees sued KEH, the KEH Retirement Plan and the Administrative Committee for the Plan under ERISA, seeking the higher benefits, both past and future. The district court dismissed the Plan and its Administrative Committee, holding the appellees were currently receiving all the benefits to which they were entitled under the Plan. Appellees did not appeal this ruling.
6
The district court entered judgment against KEH on a theory of equitable estoppel, ordering KEH to pay the difference between the erroneously calculated amount and the amount of benefits to which each of the appellees was actually entitled under the Plan. KEH appeals the judgment of the district court. We reverse and remand.
DISCUSSION
7
The appellees did not identify any specific provision of ERISA under which they brought their suit, nor did the district court identify the specific ERISA provision pursuant to which it ruled for appellees. On appeal, appellees have identified 29 U.S.C. Sec. 1132(a)(1)(B) and 29 U.S.C. Sec. 1132(a)(3)(B)(i) and (ii).
8
The parties agree that this case is controlled by the recent case of Watkins v. Westinghouse Hanford Co., Nos. 91-36195 and 91-36233 (9th Cir. Dec. 29, 1993). In that case, this court held that neither of those ERISA sections will support an award of compensatory damages on a theory of equitable estoppel. See slip op. at 14594, 14609-14612.
9
Accordingly, the judgment of the district court is REVERSED and the case is REMANDED to the district court with instructions to enter judgment for defendants. No costs or attorneys fees allowed.
*
The panel unanimously finds this case suitable for decision without oral argument. Fed.R.App.P. 34(a) and Ninth Circuit Rule 34-4
**
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3
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944 F.2d 910
NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.UNITED STATES of America, Plaintiff-Appellee,v.Jose ALCORTA, Defendant-Appellant.
No. 89-50440.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted Feb. 4, 1991.Decided Sept. 20, 1991.
Before BROWNING, D.W. NELSON and REINHARDT, Circuit Judges.
1
MEMORANDUM*
2
Agent Capra's disputed hearsay testimony, even if inadmissible, was "logically harmless to defendant beyond any reasonable doubt," United States v. Beckett, 724 F.2d 855, 856 (9th Cir.1984) (quoting United States v. Rea, 532 F.2d 147, 149 (9th Circ.1976)). The informant did not actually say Alcorta had knowledge of the cocaine; the jury would have had to infer knowledge from the informant's statement Alcorta was to load and transport cocaine. That same inference could be drawn from the fact Alcorta was arrested in the act of transporting cocaine in his truck. The government did not argue Agent Capra's testimony about the tip in closing argument or rebuttal to prove Alcorta's knowledge that the boxes in the truck contained cocaine. The government relied, instead, on impeachment of Alcorta's testimony to the contrary.
3
We review for clear error the district court's determination that because Alcorta was not subjected to custodial interrogation before the search of the boxes in the truck, the statements he made to the DEA agents at that point were admissible even though he was not given Miranda warnings. See United States v. Eide, 875 F.2d 1429, 1433 (9th Cir.1989). Alcorta was sitting in the cab of his truck in a parking lot when seven DEA agents who had him under surveillance moved in with their guns drawn and ordered him out of the truck. One agent opened the door of the truck and pulled him out. After finding no weapons on Alcorta, the agents holstered their weapons and informed him he was suspected of cocaine possession. Alcorta was never handcuffed. Under prior Ninth Circuit decisions, the district court's finding that Alcorta was not subjected to a coercive environment necessitating Miranda warnings was not clear error. See, e.g., United States v. Gregory, 891 F.2d 732, 735 (9th Cir.1989) (defendant not in custody when agents holstered their guns and conducted a brief interview with defendant in his home); United States v. Hudgens, 798 F.2d 1234, 1236-37 (9th Cir.1986) (lack of handcuffs and other physical restraints and short (45 minute) interrogation supported finding of no custody); United States v. Woods, 720 F.2d 1022, 1030 (9th Cir.1983) (brief questioning of appellants by officers in cocktail lounge was not custodial "simply because they were under investigation for a narcotics violation and were not free to leave"); United States v. Bautista, 684 F.2d 1286, 1292 (9th Cir.1982) (interrogation not custodial where defendants, despite being handcuffed, were not confronted with evidence of guilt).
4
The trial court's determination that Alcorta voluntarily consented to the search of the truck was not clearly erroneous. See United States v. Lindsey, 877 F.2d 777, 783 (9th Cir.1989) (determination of voluntariness of consent to search reversed only if clearly erroneous). A request to search need not be preceded by Miranda warnings to be valid. United States v. Ritter, 752 F.2d 435, 438 (9th Cir.1985). There was no evidence of coercive force by DEA agents, other than the initial drawing of their guns to stop Alcorta. See United States v. Alfonso, 759 F.2d 728, 741 (9th Cir.1985) (holstering of guns and absence of handcuffs relevant to finding of voluntary consent). The agents informed Alcorta immediately of the subject of investigation and that he was not obliged to consent to the search.
5
AFFIRMED.
*
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3
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727 S.E.2d 405 (2012)
STATE
v.
COBB.
No. COA11-1586.
Court of Appeals of North Carolina.
Filed July 3, 2012.
Case Reported Without Published Opinion.
No Error.
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ILLINOIS OFFICIAL REPORTS
Appellate Court
Baker v. Harper, 2012 IL App (3d) 110343
Appellate Court THOMAS G. BAKER, SHARON L. BAKER, and MICHAEL W.
Caption BAKER, Plaintiffs-Appellees, v. VICTORIA J. HARPER, Fulton
County Treasurer and Collector, Defendant-Appellant.
District & No. Third District
Docket No. 3-11-0343
Filed March 9, 2012
Held Where plaintiffs purchased 163.61 acres of a 225.29-acre parcel of
(Note: This syllabus farmland and the new parcel was assessed as “rural, vacant, non-farm”
constitutes no part of property with a value of $165,250 and taxes of $15,372.22, plaintiffs filed
the opinion of the court an action claiming that the new property should have been assessed as
but has been prepared farmland, and the trial court entered summary judgment for plaintiffs, the
by the Reporter of appellate court vacated that judgment and dismissed the appeal by the
Decisions for the county treasurer and collector, since plaintiffs failed to exhaust their
convenience of the administrative remedies by not appealing the assessment to the board of
reader.)
review and the trial court’s judgment was therefore void.
Decision Under Appeal from the Circuit Court of Fulton County, No. 10-TX-47; the Hon.
Review William C. Davis, Judge, presiding.
Judgment Judgment vacated and appeal dismissed.
Counsel on John Clark, State’s Attorney, of Lewistown (Patrick Delfino, of State’s
Appeal Attorneys Appellate Prosecutor’s Office, of counsel), and Christopher E.
Sherer (argued), of Giffin, Winning, Cohen & Bodewes, P.C., of
Springfield, for appellant.
Steven B. Morgan (argued), of Perbix & Morgan, of Havana, for
appellees.
Panel PRESIDING JUSTICE SCHMIDT delivered the judgment of the court,
with opinion.
Justices O’Brien and Wright concurred in the judgment and opinion.
OPINION
¶1 Defendant, Victoria J. Harper, Fulton County treasurer and collector, appeals the trial
court’s grant of summary judgment to Thomas G. Baker, Sharon L. Baker and Michael W.
Baker (Taxpayers) on their tax objection complaint. Taxpayers claimed that the tax notice
was defective, invalidating the tax and negating the need for exhaustion of administrative
remedies. The trial court agreed and granted summary judgment. Defendant now appeals.
¶2 FACTS
¶3 In 2008, Taxpayers purchased 163.61 acres of a 225.29-acre parcel. The original 225-acre
parcel was assessed as farmland in 2008. A new tax parcel was created for Taxpayers. The
taxes assessed on the new property in 2009 were $15,372.22. In 2008, the real estate tax for
the original 225.29 acres was $240.
¶4 Taxpayers received a 2009 assessment notice. It stated that the new property would be
assessed at $165,250 and that the prior year’s assessed value was $0. The notice further
identified the fact that the new parcel was classified as “rural, vacant, non-farm” property.
The notice also stated that Taxpayers had the right to appeal the assessment to the Fulton
County Board of Review (the Board). Taxpayers did not file an appeal with the Board.
Instead, they filed a complaint in the circuit court of Fulton County, claiming that the new
property should have been assessed as farmland, as the original parcel had been assessed.
¶5 Defendant filed a motion to dismiss, asserting that the trial court lacked jurisdiction due
to Taxpayers’ failure to exhaust their administrative remedies. The trial court denied the
motion, as well as defendant’s motion to reconsider. It held that exhaustion of remedies did
not apply due to the defective notice sent to Taxpayers.
¶6 Taxpayers moved for summary judgment, which the trial court granted. Defendant
appeals.
-2-
¶7 ANALYSIS
¶8 Defendant raises two general arguments. First, that the trial court did not have
jurisdiction to hear the tax objection due to Taxpayers’ failure to exhaust administrative
remedies. Second, she argues that even if the trial court had jurisdiction, its grant of summary
judgment was improper where the Property Tax Code (the Code) (35 ILCS 200/1-1 (West
2010)) states that a failure to give notice required by the Code does not invalidate a tax.
¶9 Taxpayers argue that the exhaustion of administrative remedies requirement is not
applicable here due to defendant’s failure to give proper statutory notice. They also argue that
defendant’s failure to properly notify them of the increase renders the tax invalid.
¶ 10 “Where a circuit court determines jurisdictional issues without hearing testimony, we
review the court’s determination de novo.” In re Marriage of Seffren, 366 Ill. App. 3d 628,
634 (2006).
¶ 11 I. Jurisdiction
¶ 12 “A reviewing court must ascertain its jurisdiction before proceeding in a cause of action,
regardless of whether either party has raised the issue.” Secura Insurance Co. v. Illinois
Farmers Insurance Co., 232 Ill. 2d 209, 213 (2009). Here, to decide our jurisdiction, it is
first necessary to determine whether the trial court had jurisdiction. The notice of appeal was
timely filed, but “[i]f [the] trial court did not have jurisdiction, the parties cannot confer
jurisdiction on a reviewing court merely by taking an appeal.” (Internal quotation marks
omitted.) KT Winneburg, LLC v. Calhoun County Board of Review, 403 Ill. App. 3d 744, 747
(2010).
¶ 13 Section 23-10 of the Code states: “An objection to an assessment for any year shall not
be allowed by the court *** if an administrative remedy was available by complaint to the
board of appeals or board of review under Section 16-55 or Section 16-115, unless that
remedy was exhausted prior to the filing of the tax objection complaint.” 35 ILCS 200/23-10
(West 2010). “A failure to give any notice required by this Code shall not impair or affect
the validity of any assessment as finally made.” 35 ILCS 200/24-25 (West 2010).
Additionally, “No error or informality in the proceedings of any of the officers connected
with the assessment, levying or collection of the taxes, not affecting the substantial justice
of the tax itself, shall vitiate or in any manner affect the tax or the assessment thereof.” 35
ILCS 200/21-185 (West 2010).
¶ 14 Taxpayers argue that they are exempt from having to exhaust their administrative
remedies due to defendant’s failure to provide them with proper notice under section 12-30
of the Code. 35 ILCS 200/12-30 (West 2010). Section 12-30(a) requires that a notice “shall
be mailed *** to each taxpayer whose assessment has been changed.” Id. “The notice sent
under this Section shall include *** [t]he previous year’s assessed value after board of
review equalization[;] *** [and] [c]urrent assessed value and the date of that valuation.” 35
ILCS 200/12-30(b) (West 2010). Taxpayers’ position is that the notice did not comply with
these requirements since the previous year’s assessed value was listed as $0 on the notice
they received.
¶ 15 Taxpayers admit that an administrative remedy was available to them, but they argue the
-3-
notice they received was defective, exempting them from the requirement of exhausting
administrative remedies.
¶ 16 Defendant points out that there are a number of statutory exceptions to the rule of
exhaustion of administrative remedies. She then argues that since Taxpayers cannot avail
themselves of any of these enumerated exceptions, the circuit court did not have jurisdiction.
Taxpayers agree that they are not entitled to the possible statutory exceptions. However,
Taxpayers respond that they are exempt from the requirement to exhaust administrative
review for a reason not addressed by defendant. They rely on the case of People v. Jennings,
3 Ill. 2d 125 (1954). The Jennings court recognized a constitutional right to notice when
property is assessed for taxation and held that the exhaustion of administrative remedies rule
was inapplicable when a statutory provision requiring notice to taxpayers was not strictly
complied with. Id. at 127-28, 130.
¶ 17 The issue in Jennings was whether a failure to publish the personal property assessments,
as required by statute, invalidated the tax. Id. at 126. The court noted that in a previous case
it had stated, “ ‘Every tax-payer, under the constitution and laws of this State, has a right to
notice when his property is assessed for taxation, with an opportunity to be heard upon the
justness of the taxation. To this end statutory provisions are made for such notice and
hearing. These provisions are for the protection of the tax-payer, they are mandatory, they
must be strictly complied with, and a disregard of them will render the tax illegal.’ ” Id. at
128 (quoting Heidenway v. Harding, 336 Ill. 606, 611 (1929)). The court went on to say that
even though the legislature had provided that “ ‘no error or informality in the proceedings
of any of the officers connected with the assessment, levying or collection of the taxes, not
affecting the substantial justice of the tax itself, shall vitiate or in any manner affect the tax
or the assessment thereof[ ]’ (Ill. Rev. Stat. 1953, chap. 120, par. 716[ ]),” the tax was invalid
due to the failure to give notice. Jennings, 3 Ill. 2d at 129. The court explained that such an
exception applied “only where there has been an attempt to comply with the law but the
attempt is not effective on account of some informality or clerical error.” Id. at 129.
¶ 18 Taxpayers argue that the previously assessed value should have been the assessed value
of the original tract in the previous year, multiplied by the ratio of acres in the new property
to the acres in the original property (163.61 ÷ 225.29 = .726; .726 × $240 = $174.24). In the
alternative, Taxpayers argue that the notice should have had “N/A” listed as the previous
year’s assessment.
¶ 19 Defendant’s position is that there was no previous year’s assessed value; the property,
having been split from a larger tract, was a new property that had no previously assessed
value. In the alternative, defendant argues that even if the assessed value should have been
computed as described by Taxpayers, the failure to include it is merely a clerical error.
¶ 20 We note that Taxpayers provide no authority for the proposed method of determining the
previous assessed value. Such a simplistic view of property assessment is not realistic. When
a property is subdivided, it may be that the value of the new properties will be in direct
proportion to the new property’s size as compared to the original property’s size, but it surely
is not in every case. Such a formula would ignore the reality that 90% of the value in a
property may be found in only 10% of its area. The better view is that the new property
-4-
simply did not have a prior assessed value. It had never been assessed.
¶ 21 In regard to Taxpayers’ alternative argument, we fail to see any difference between
indicating the previous year’s assessment was “$0” or “N/A.” Either way, Taxpayers were
put on notice that defendant believed the property in question had no previously assessed
value. Defendant’s decision to use either option is not an error; even if it were, it is at most
a clerical error that does not deprive Taxpayers of notice and, therefore, does not excuse their
failure to seek administrative remedies.
¶ 22 There is no error in the notice mailed to Taxpayers; they are not excused in failing to
exhaust their administrative remedies. Their tax objection cannot proceed due to their failure
to seek relief from the Board. 35 ILCS 200/23-10 (West 2010).
¶ 23 The requirement that Taxpayers exhaust their administrative remedies before filing a tax
objection is jurisdictional. See Winneburg, 403 Ill. App. 3d at 751. Because we find
Taxpayers were not exempt from seeking relief from the Board, the trial court lacked
jurisdiction. Id. at 752. Since the trial court lacked jurisdiction, its judgment is void.
Steinbrecher v. Steinbrecher, 197 Ill. 2d 514, 531 (2001). Our authority is limited to vacating
the trial court’s judgment and dismissing this appeal. People v. Flowers, 208 Ill. 2d 291, 307
(2003); Kyles v. Maryville Academy, 359 Ill. App. 3d 423, 431-32 (2005). We vacate the trial
court’s judgment.
¶ 24 Now, having found that the trial court had no jurisdiction–and after having vacated its
order as void–we are left without jurisdiction to do anything else except dismiss this appeal.
Flowers, 208 Ill. 2d at 307; Winneburg, 403 Ill. App. 3d at 752.
¶ 25 CONCLUSION
¶ 26 For the foregoing reasons, the judgment of the circuit court of Fulton County is vacated
and this appeal is dismissed.
¶ 27 Judgment vacated and appeal dismissed.
-5-
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625 F.Supp.2d 845 (2008)
UNITED STATES of America, Plaintiff,
v.
Kendra HUBEL, Defendant.
No. 8:07CR264.
United States District Court, D. Nebraska.
December 30, 2008.
*846 Maria R. Moran, Assistant United States Attorney, Omaha, NE, for Plaintiff.
SENTENCING MEMORANDUM
JOSEPH F. BATAILLON, Chief Judge.
This Sentencing Memorandum supplements findings made on the record at defendant's sentencing hearing on December 12, 2008.
I. BACKGROUND
Defendant was charged with conspiracy to distribute and possess with intent to distribute 50 grams or more of methamphetamine in violation of 21 U.S.C. §§ 841 and 846. That offense carries a statutory mandatory minimum sentence of five years to a maximum of forty years.
Pursuant to a cooperation plea agreement, she entered a plea of guilty to the charge. 21 U.S.C. § 841(b)(1)(B). In the plea agreement, the parties agreed that the defendant should be held responsible beyond a reasonable doubt for more than 50 grams but less than 200 grams of a mixture or substance containing a detectable amount of methamphetamine. The government agreed to move for a three-level downward adjustment for acceptance of responsibility under U.S.S.G. § 3E1.1(a). The parties further agreed that the defendant was not subject to either an upward or downward adjustment in the offense level pursuant to U.S.S.G. § 3B1.1 or 3B1.2 and that the defendant did not possess a firearm or other dangerous weapon in connection with the offense under U.S.S.G. § 2D1.1(b)(1). The government further agreed to take her cooperation into consideration in connection with either U.S.S.G. § 5K1.1, 18 U.S.C. § 3552(e), or Fed.R.Crim.P. 35(b).
The United States Office of Probation (hereinafter, "the Probation Office") prepared a Presentence Investigation Report (hereinafter, "PSR") that calculated the defendant's sentence under the United States Sentencing Guidelines ("Guidelines"). Filing No. 71, PSR. The facts outlined in the PSR are gleaned from the prosecutor's version of events. Id. at 4. The PSR relates that a cooperating witness contacted the defendant's codefendant, Timothy Noer, to purchase methamphetamine. Id. Officers observed Noer *847 selling the cooperating witness 26.8 grams of methamphetamine and later arrested Noer. Id. Noer identified Hubel as his supplier. Id. The defendant submitted the following version of events to the Probation Office: "I have a methamphetamine addiction, which I supported by selling drugs for my boyfriend who supplied drugs for my use." Id. at 5.
The Probation Office identified U.S.S.G. § 2D1.1(a)(3)(c)(7) as the applicable base offense level provision under the Guidelines and determined that defendant's base offense level should be 26 under that provision. Id. at 11. It determined that the defendant met the criteria for application of the "safety valve," U.S.S.G. § 5C1.2(a)(1)-(5), and reduced the offense level by 2 levels. Id. at 6. The Probation Office then subtracted three levels for the defendant's acceptance of responsibility under U.S.S.G. § 3E1.1, resulting in a total offense level of 21. Id. at 7. It then determined that defendant's criminal history category was I, as the result of 1 criminal history point assessed for negligent child abuse. Id. at 7-8. Under the Guidelines, the defendant's sentencing range of imprisonment is 37 to 46 months.
The government adopted the findings in the PSR. Filing No. 45. Hubel objected to the PSR and moved for a downward departure under U.S.S.G. § 5K2.0 based on her age, her mental condition and aberrant behavior, or a variance under 18 U.S.C. § 3553. Filing No. 51. At her first sentencing hearing on January 4, 2008, defendant moved for a continuance to complete her treatment. Filing No. 57, Transcript of Sentencing Proceeding. The court received evidence of defendant's progress in drug rehabilitation treatment at NOVA Therapeutic and Santa Monica Place. Id. at 6. The government had no objection to the continuance for completion of treatment and stated that the defendant had provided "good" and "truthful information" in her safety valve interview and that she was "on the right path." Id. at 17-18, 20. The court continued the defendant's sentencing to facilitate her further cooperation and to allow her to complete her drug rehabilitation treatment. Id. at 20. With no objection from the government, the matter was again continued to allow the defendant, who had then completed treatment at Santa Monica Place half-way house, to pursue treatment at the Poppleton three-quarter way house and to reside there for six months. Filing No. 63, Motion for Continuance; Filing No. 65, Minute Entry.
The defendant now moves for an outside-Guidelines sentence by reason of her extraordinary rehabilitation.
II. DISCUSSION
A. Law
The Sentencing Guidelines are no longer mandatory. United States v. Booker, 543 U.S. 220, 260-61, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005). In Booker, the Supreme Court held that the mandatory Sentencing Guidelines system violated the Sixth Amendment. Booker, 543 U.S. at 226-27, 125 S.Ct. 738. In the Booker remedial opinion, the Supreme Court determined that the constitutional violation would be cured by modifying the federal sentencing statute to make the Guidelines effectively advisory. Id. at 245, 125 S.Ct. 738. Consequently, the range of choice in sentencing dictated by the facts of the case has been significantly broadened. Gall v. United States, 552 U.S. 38, ___, 128 S.Ct. 586, 602, 169 L.Ed.2d 445 (2007) (finding a sentence outside the Guidelines to be reasonable); Kimbrough v. United States, 552 U.S. 85, ___, 128 S.Ct. 558, 570, 169 L.Ed.2d 481 (2007) (noting that courts may vary from Guidelines ranges based solely on policy considerations, including disagreements *848 with the Guidelines); Rita v. United States, 551 U.S. 338, ___, 127 S.Ct. 2456, 2465, 168 L.Ed.2d 203 (2007) (holding that a district court may consider arguments that "the Guidelines sentence itself fails properly to reflect § 3553(a) considerations"); Cunningham v. California, 549 U.S. 270, 286, 127 S.Ct. 856, 867, 166 L.Ed.2d 856 (2007) (stating that judges are no longer tied to the sentencing range indicated in the Guidelines but are obliged to "take account of" that range along with the sentencing goals Congress enumerated in 18 U.S.C. § 3553(a) of the Sentencing Reform Act). District courts must therefore "give respectful consideration to the Guidelines," but are permitted "`to tailor the sentence in light of other statutory concerns as well.'" Kimbrough, 552 U.S. at ___, 128 S.Ct. at 570 (quoting Booker, 543 U.S. at 245-246, 125 S.Ct. 738); Gall, 552 U.S. at ___, 128 S.Ct. at 596 (stating "[t]he Guidelines are not the only consideration, the district judge should consider all of the § 3553(a) factors"). These cases "mean that the district court is free to make its own reasonable application of the § 3553(a) factors, and to reject (after due consideration) the advice of the Guidelines." Kimbrough, 552 U.S. at ___, 128 S.Ct. at 577 (Scalia, J., concurring).
The Sentencing Reform Act "contains an overarching provision instructing district courts to `impose a sentence sufficient, but not greater than necessary' to accomplish the goals of sentencing, including `to reflect the seriousness of the offense,' `to promote respect for the law,' `to provide just punishment for the offense,' `to afford adequate deterrence to criminal conduct,' and `to protect the public from further crimes of the defendant.'" Kimbrough, 552 U.S. at ___, 128 S.Ct. at 570 (quoting 18 U.S.C. § 3553(a)). The statute further provides that "in determining the appropriate sentence, the court should consider a number of factors, including `the nature and circumstances of the offense,' `the history and characteristics of the defendant,' `the sentencing range established' by the Guidelines, `any pertinent policy statement' issued by the Sentencing Commission pursuant to its statutory authority, and `the need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct.'" Id. (quoting 18 U.S.C. § 3553(a)). A sentencing judge has greater familiarity with an individual case and individual defendant than the Commission or the appeals court and is "therefore `in a superior position to find facts and judge their import under § 3353(a)' in each particular case." Id., 552 U.S. at ___, 128 S.Ct. at 574 (quoting Gall, 552 U.S. at ___, 128 S.Ct. at 597).
Although the Guidelines remain "the starting point and the initial benchmark" in determining a sentence, the district court "may not presume that the Guidelines range is reasonable," but must "make an individualized assessment based on the facts presented." Gall, 552 U.S. at ___, 128 S.Ct. at 596-97. "[A]fter giving both parties an opportunity to argue for whatever sentence they deem appropriate, the district judge should then consider all of the § 3553(a) factors to determine whether they support the sentence requested by a party." Id., 552 U.S. at ___, 128 S.Ct. at 596. If the court decides that an outside-Guidelines sentence is warranted, the court must consider the extent of the deviation and ensure that the justification is sufficiently compelling to support the degree of the variance. Id. The Supreme Court rejects, however, the notion that "`extraordinary' circumstances [are required] to justify a sentence outside the Guidelines range" and rejects "the use of a rigid mathematical formula that uses the percentage of a departure as the standard for determining the strength of the justifications *849 required for a specific sentence." Id. at 595.
Congress established the Sentencing Commission ("the Commission") "to formulate and constantly refine national sentencing standards," in fulfillment of its important institutional role. Kimbrough, 552 U.S. at ___, 128 S.Ct. at 574; Rita v. United States, 551 U.S. at ___, 127 S.Ct. at 2464. When operating within that institutional role, the Sentencing Commission "has the capacity courts lack" and can "`base its determinations on empirical data and national experience, guided by a professional staff with appropriate expertise.'" Kimbrough, 552 U.S. at ___, 128 S.Ct. at 574 (quoting United States v. Pruitt, 502 F.3d 1154, 1171 (10th Cir.2007) (McConnell, J., concurring)). In formulating the Guidelines, the Commission developed and used data on past practices and recidivism. See United States Sentencing Commission, Fifteen Years of Guidelines Sentencing (Nov.2004) ("Fifteen-Year Assessment") at 14; U.S.S.G. § 1A.1, intro. comment., pt. A, ¶ 3; Kimbrough, 552 U.S. at ___, 128 S.Ct. at 567. Gall, 552 U.S. at ___, 128 S.Ct. at 594 (noting that the Guidelines are "the product of careful study based on extensive empirical evidence derived from the review of thousands of individual sentencing decisions"). Based on these sentencing statistics, the Commission established the offense levels for each crime, linked to a recommended imprisonment range. Fifteen-Year Assessment at 14. Accordingly, in many cases the Guidelines represent a reasonable estimation of a fair sentencing range. See Kimbrough, 128 S.Ct. at 574.
For policy reasons, and to conform to statutory mandatory minimum sentences, the Commission did not employ its characteristic empirical approach when setting the Guidelines ranges for drug offenses. Kimbrough, 552 U.S. at ___, 128 S.Ct. at 567; Fifteen-Year Assessment at 15, 72-73. Instead, the Commission attempted "to accommodate and, to the extent possible, rationalize mandatory minimum provisions established by the 1986 Anti-Drug Abuse Act" by anchoring the Guidelines to the mandatory minimum sentences. United States Sentencing Commission, Special Report to Congress: Mandatory Minimum Penalties in the Federal Criminal Justice System (August 1991), accessed at www. ussc.gov/reports.htm (hereinafter, "Mand.Min.Rep't"), Summary at ii; Rep't at 17 n. 58.
The Commission thus adopted "the 1986 [Anti-Drug-Abuse] Act's weight-driven scheme." Kimbrough, 552 U.S. at ___, 128 S.Ct. at 567; see Chapman v. U.S., 500 U.S. 453, 461, 111 S.Ct. 1919, 114 L.Ed.2d 524 (1991) (stating that the Anti-Drug Abuse Act of 1986 provided for mandatory minimum sentences based on the weight of various controlled substances according to a "market-oriented" approach, creating a penalty scheme intended to punish large-volume drug traffickers severely). "The 1986 Act uses the weight of the drugs involved in the offense as the sole proxy to identify `major' and `serious' dealers."[1]Kimbrough, 128 S.Ct. at 567. The resulting *850 Guidelines ranges for drug trafficking offenses are driven by the quantity of drugs, and keyed to statutory mandatory minimum sentences based on weight. Gall, 128 S.Ct. at 594 & n. 2; Neal v. United States, 516 U.S. 284, 291-92, 116 S.Ct. 763, 133 L.Ed.2d 709 (1996) (noting that in spite of "incongruities between the Guidelines and the mandatory sentencing statute," the Commission developed Guidelines to parallel the mandatory minimum sentences set out in 21 U.S.C. § 841(b)(1), using the quantities and sentences derived from the statute and "[t]he weight ranges reflect the Commission's assessment of equivalent culpability among defendants who traffic in different types of drugs...").
Noting that larger drug dealers were subject to a mandatory minimum of ten years for a first offense and twenty years for a subsequent conviction for the same offense, the Sentencing Commission stated that "[the Act] sought to cover mid-level players in the drug distribution chain by providing a mandatory minimum penalty of five years." Id. at 10. Later, in "[p]erhaps the most far-reaching provision of the Omnibus Anti-Drug Abuse Act of 1988," Congress made the mandatory minimum penalties that were previously applicable to substantive distribution and importation/exportation offenses apply also to conspiracies to commit those substantive offenses, increasing "the potential that the applicable penalties could apply equally to the major dealer and the mid- or low-level participant." Id. at 10.
The fairness of the Guidelines is heavily dependent on fair and reasonably consistent charging policies in the Department of Justice. Fifteen-Year Assessment at 23-24. To that end, prosecutors have been directed to "charge and pursue the most serious, readily provable offense or offenses that are supported by the facts of the case, except in limited, enumerated circumstances."[2]Id. at 24. Empirical evidence shows that charging and plea bargaining practices continue to introduce significant disparities into the sentencing regime. Fifteen-Year Assessment, Executive Summary at xii. The Commission has acknowledged that often "the value of a mandatory minimum sentence lies not in its imposition, but in its value as a bargaining chip to be given away in return for the resource-saving plea from the defendant to a more leniently sanctioned charge." Mand. Min. Rep't at 14-15. The Commission also acknowledges that "[s]ince the power to determine the charge of conviction rests exclusively with the prosecution for the 85 percent of the cases that do not proceed to trial, mandatory minimums transfer sentencing power from the court to the prosecution" and "to the extent that prosecutorial discretion is exercised with preference to some and not to others," disparity is reintroduced into the system. Mand. Min. Rep't at 1; see also Fifteen-Year Assessment at 89 (noting that research over the past fifteen years has "consistently found that mandatory penalty statutes are used inconsistently in cases in which they appear to apply").
With respect to the type of sentence imposed, the Supreme Court recognizes *851 that custodial sentences are qualitatively more severe than probationary sentences of equivalent terms. Gall, 552 U.S. at ___, 128 S.Ct. at 595. Nevertheless, offenders on probation are subject to several substantial restrictions on their liberty, including provisions requiring that they may not leave the judicial district, move, or change jobs without notifying their probation officer or the court, that they report regularly to their probation officer, permit unannounced visits to their homes, refrain from associating with any person convicted of a felony, refrain from excessive drinking, and submit to drug testing. Id. A sentence of probation rather than incarceration can work to promote the sentencing goal of respect for the law by illustrating a rejection of the view that the law is merely a means to dispense harsh punishment without taking into account the real conduct and circumstances involved in sentencing. Gall, 128 S.Ct. at 599.
In the Eighth Circuit, "precedents prior to Gall `routinely' rejected as unreasonable those variances that resulted in a sentence of probation when the guidelines recommend a term of imprisonment," but the appeals court now recognizes that a sentence of probation is permissible for a drug trafficking offense that calls for imprisonment under the advisory Guidelines under certain compelling circumstances. United States v. Lehmann, 513 F.3d 805, 809 (8th Cir.2008) (finding that evidence that a defendant's incarceration would have a very negative effect on the emotional development of a defendant's young son, is the sort of "compelling family circumstance" that would justify probation for a drug trafficker with a Guidelines range of 30-37 months' imprisonment); United States v. McFarlin, 535 F.3d 808, 809-10 (8th Cir.2008); United States v. Shy, 538 F.3d 933, 938 (8th Cir.2008).
Because the Sentencing Commission accounted for ordinary post-offense rehabilitation in providing an adjustment for acceptance of responsibility under U.S.S.G. § 3E1.1, a defendant's rehabilitation must be exceptional enough to be atypical in order to warrant a departure on that basis. See United States v. Rogers, 400 F.3d 640 (8th Cir.2005). However, factors that were discouraged or prohibited as departure factors under the mandatory Guidelines may be considered in connection with the § 3553(a) analysis. United States v. Lazenby, 439 F.3d 928, 933 (8th Cir.2006). "[P]re-Booker departures and post-Booker variances are not the same" and there may be "cases that would not justify a departure under the Guidelines but which are appropriate for a variance" as well as "cases in which a combination of a Guidelines departure and other § 3553(a) factors may produce a lower reasonable sentence than a departure alone." United States v. Robinson, 454 F.3d 839, 842 (8th Cir.2006). A defendant's post-arrest rehabilitation "is relevant in evaluating the § 3553(a) factors". Shy, 538 F.3d at 938 (affirming a variance to probation for extraordinary post-arrest rehabilitation, noting that rehabilitation was genuine and the defendant was a positive contributor to society); McFarlin, 535 F.3d at 811 (affirming variance to probation based on health and extraordinary post-arrest rehabilitation).
B. Analysis
1. Initial Guidelines Calculation
The court adopts the findings in the PSR and finds that defendant's base offense level under the Guidelines is 21, her criminal history category is I and her Guidelines sentencing range is 37 to 46 months.
*852 2. Departure
The court grants the defendant's motion for a downward departure. For the reasons discussed below in connection with the 3553(a) factors, the court finds the defendant's rehabilitation is exceptional enough to be atypical and warrants a departure under U.S.S.G. § 5K2.0.
3. 18 U.S.C. § 3553(a) Factors
Hubel moves for an outside-Guidelines sentence by reason of her extraordinary post-arrest rehabilitation. In consideration of the sentencing factors set forth in 18 U.S.C. § 3553(a), the court finds that a sentence of time served, followed by a term of supervised release of five years, is sufficient, but not greater than necessary to accomplish the goals of sentencing in this case.
With respect to the nature of the offense and the circumstances of the crime, the court notes that drug distribution is a serious crime. However, this case involves distribution of small quantities of methamphetamine. The defendant's crime did not involve weapons or violence. The evidence shows that the defendant sold drugs at the behest of her boyfriend, who used her to shield himself from prosecution. There is no evidence of any far-reaching conspiracy and the defendant has cooperated with the government and provided significant assistance. Ms. Hubel was involved in the enterprise for only one month.
The court has also considered the history and characteristics of the defendant. See 18 U.S.C. § 3553(a)(1). Ms. Hubel is presently 23 years old. She had an unstable home life as a child and was the victim of sexual abuse. She has had a long-standing addiction to methamphetamine, which she began using at age 13. She has been involved in several manipulative and abusive relationships with men. She has successfully completed an inpatient drug abuse treatment program at NOVA, as well as a rigorous treatment at Santa Monica Place and then Poppleton House. In this court's experience, very few defendants successfully complete the NOVA program and even fewer successfully complete the rigorous treatment program at Santa Monica Place. Hubel has exhibited responsibility for her actions and has shown self-reliance. Also, she has exposed herself to considerable risk in cooperating with the government. She has no criminal record other than a charge of child neglect that was a result of her addiction. As a result of that conviction, her parental rights were terminated and her son, who is now four and a half years old, has been adopted by her sister. She is now making efforts to establish a relationship with her son. Under the circumstances, Ms. Hubel should be held as an example to similarly situated offenders that rehabilitation is the important objective in their lives.
The court finds this sentence satisfies the general purposes of sentencing, including the need for the sentence imposed to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense. Ms. Hubel was incarcerated for a short period of time and then entered the residential program at NOVA. The residential program at NOVA is a rigorous program with a substantial restriction of freedom. The fact of her arrest and incarceration will deter others from engaging in similar conduct. The deterrent effect of any further incarceration would be of marginal value. Because Ms. Hubel appears to appreciate the gravity of her offense, has made substantial gains in overcoming her addition, has refrained from using drugs or alcohol, and has participated in counseling and mental health treatment, there does not appear to be a great need to protect the public from Hubel's further crimes. The *853 court's imposition of a five-year period of supervised release that includes stringent conditions of supervision, continued participation in her drug-abuse program and random drug tests, ensures Hubel's adherence to a law-abiding lifestyle. Moreover, the court has the authority to incarcerate Hubel in the future should she fail to comply with the terms of supervised release.
This sentence also fulfills the need to provide the defendant with needed educational or vocational training, medical care, or other correctional treatment in the most effective manner. See 18 U.S.C. § 3553(a)(2). Ms. Hubel's recovery is ongoing and incarceration at this time would interfere with her rehabilitation.
With respect to the "the kinds of sentences available," 18 U.S.C. § 3553(a)(3), the court has the authority to impose a sentence that does not include continued incarceration in certain circumstances. This is a case that presents compelling circumstances that call for a sentence outside the advisory Guidelines. The court has considered the Sentencing Guidelines, but, because they were promulgated pursuant to Congressional directive rather than by application of the Sentencing Commission's unique area of expertise, the court affords them less deference than it would to empirically-grounded Guidelines. See Kimbrough, 552 U.S. at ___, 128 S.Ct. at 574-75. The Guidelines' quantity-driven, "market-oriented" approach is not a proxy for culpability in every case, nor does it always correlate to the purposes of sentencing under 18 U.S.C. § 3553(a). Drug quantity is only an accurate measure when it corresponds to a defendant's position in the typical hierarchy that characterizes most drug conspiracies. Where the defendant falls in this hierarchy is an important factor in the court's assessment of a defendant's ultimate culpability. Although the quantity-based system was designed to punish bigger distributors more harshly, charging practices and the government's control over the number and amount of controlled buys from undercover or cooperating agents can result in an erroneous impression that a long-term, small-quantity distributor is a large-quantity distributor. Here, there is no dispute that the defendant was only a low- to mid-level distributor. She was an addict recruited by her manipulative boyfriend to act as a go-between in drug transactions. She provided significant cooperation to the government.
Hubel's co-defendant, who provided no cooperation to the government and had a criminal record, was sentenced to 84 months' imprisonment. To sentence Ms. Hubel to a sentence within the Guidelines range in this case would not accurately reflect the court's assessment of the defendant's culpability. In consideration of the need to avoid unwarranted disparity in sentencing, the court finds that a sentence of time-served followed by lengthy supervised release is in line with the sentences of other low-level drug-distribution conspirators with similar levels of culpability who have shown extraordinary rehabilitation.
The court finds the evidence establishes that Hubel's rehabilitation has been extraordinary. The government agrees that the defendant has done very well since her arrest and is "on the right path." Not all defendants who are provided the option of chemical dependency treatment take advantage of the opportunity to the extent that Ms. Hubel has. It is unusual for the government to concur that a defendant has shown extraordinary rehabilitation. Also, it is rare that a drug offender will complete drug treatment programs as demanding as these. The court appreciates the difficulty of a defendant's overcoming a *854 long-standing addiction, especially to methamphetamine. Ms. Hubel's case is one of the unusual cases in which the court can envision a positive result. Ms. Hubel is now employed and is functioning as a productive member of society. The court finds that Hubel's efforts at recovery and rehabilitation are atypical and exceptional and the court will accordingly grant the defendant's motion for a variance from the Guidelines sentencing range. The court finds a sentence to time served, followed by a term of supervised release of five years is appropriate in this case.
III. CONCLUSION
The court finds that to sentence this defendant to the term recommended under the Guidelines would violate the Sentencing Reform Act's "overarching" instruction that the court impose a sentence sufficient, but not greater than necessary, to accomplish the goals of sentencing. For the reasons stated above, the court finds defendant Kendra Hubel should be sentenced to time served, followed by five years of supervised release. A Judgment of Conviction in conformity with this Sentencing Memorandum will issue this date.
NOTES
[1] Although both the mandatory minimum statutes and the Guidelines calibrate punishment of drug traffickers according to quantity, the Supreme Court has acknowledged that mandatory minimum sentences are both structurally and functionally at odds with sentencing guidelines and the goals the Guidelines seek to achieve, noting that "the guidelines produce a system of finely calibrated sentences with proportional increases whereas the mandatory minimums result in `cliffs.'" Neal, 516 U.S. at 291, 116 S.Ct. 763 (1996). Nonetheless, the Supreme Court has continued to affirm the scheme, leaving it to Congress to correct its disparities. Id.; United States v. LaBonte, 520 U.S. 751, 764, 117 S.Ct. 1673, 137 L.Ed.2d 1001 (1997).
[2] In this court's experience, the Department of Justice does not always "charge and pursue the most readily provable" (beyond a reasonable doubt) crime, especially in drug prosecutions, with the result of introducing more disparity in the system. See Booker, 125 S.Ct. at 782 & n. 11 (Stevens, J., dissenting in part) (gathering authorities and noting that "a prosecutor who need only prove an enhancing fact by a preponderance of evidence has more bargaining power than if required to prove the same fact beyond a reasonable doubt").
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336 F.Supp. 474 (1971)
Irving N. SIDMAN and Celia C. Sidman, Plaintiffs,
v.
The UNITED STATES of America, Defendant.
No. 66 Civ. 1148.
United States District Court, S. D. New York.
November 9, 1971.
Morton M. Cohen, New York City, for plaintiffs.
Whitney North Seymour, Jr., U. S. Atty., S. D. N. Y., for defendant; Daniel H. Murphy, II, Asst. U. S. Atty., of counsel.
LASKER, District Judge.
Plaintiff moves for summary judgment on his complaint pursuant to Rule 56 of the Federal Rules of Civil Procedure, seeking a refund of certain income taxes paid by him on income received by plaintiff Irving N. Sidman ("taxpayer")[1] for the years 1959 and 1960. Defendant argues in its answering memorandum that the complaint should be dismissed. There is no factual *475 dispute. The issue is whether payments received by Irving Sidman upon termination of his employment qualify for exclusion as sick pay under § 105 of the Internal Revenue Code of 1954. (26 U.S.C. § 105).
The record establishes the following facts: Sidman had been a full-time employee of the United Jewish Appeal until December 13, 1958, when he suffered a severe heart attack, rendering it impossible for him ever to work again. He was maintained on the payroll of his employer until November 1, 1959, at which time he requested payment of his "retirement allowance." In accordance with the terms of the United Jewish Appeal Field Union Contract, Sidman was paid $9,190.00 on October 15, 1959, and $9,185.00 on January 6, 1960.
He excluded $100 of salary received per week for each week in the period January 1 through October 31, 1959. He did not exclude any part of the $9,190.00 severance payment received in 1959. In his 1960 return, taxpayer did not claim any sick pay but included as income the full $9,185.00 payment received in 1960.
Thereafter Sidman timely filed a claim for refund on the basis that the severance payments received in 1959 and 1960 were excludible sick pay (to the amount of $800 in 1959, as he had already taken $4,400.00 for the period his salary was continued in that year, and to the amount of $5,200.00 in 1960). At first, the government rejected taxpayer's claim on the ground that the payments did not fall within exclusion (d) of § 105 because taxpayer had reached the voluntary retirement age of his company (age 60) and hence was not "absent from work on account of . . . sickness." However, in light of adverse rulings in Commissioner of Internal Revenue v. Winter, 303 F.2d 150 (3d Cir. 1962), and Stewart v. United States, 313 F.Supp. 195 (W.D.Pa.1970),[2] the government conceded that the taxpayer was "absent from work" within the meaning of § 105(d), since he had not yet reached the ordinary retirement age of his company. Commissioner of Internal Revenue v. Winter, supra, 303 F.2d at 152.
The government now argues in its answering memorandum that, even conceding that the taxpayer was absent from work because of sickness, he may still not exclude such payments because he was not paid pursuant to a "wage continuation plan," in accordance with the requirements of § 105(d) of the Code. The government contends that taxpayer received "severance pay" which, by definition, is paid by reason of termination of the employment relation and not by reason of the "continuation" of such relation.
We agree with the government that the payments received by the taxpayer are not excludible under § 105(d) because he was not paid pursuant to a "wage continuation plan." However, finding the rationale of Winter, supra, persuasive, we do not adopt the government's position that termination of employment necessarily disqualifies a taxpayer from excluding payments received after termination of employment. We state the issue differently: whether the provisions of the United Jewish Appeal Field Union Contract, pursuant to which taxpayer was paid, constituted a "wage *476 continuation plan" within the meaning of the statute. We hold that they do not. The taxpayer has failed to prove by a preponderance of the evidence that the payments fall within the "wage continuation plan" exception of § 105.
Section 105(a) states the general rule:
"Except as otherwise provided in this section, amounts received by an employee through accident or health insurance for personal injuries or sickness shall be included in gross income . . ."
Section 105(d) carves out an exception to the general rule:
"Gross income does not include amounts referred to in subsection (a) if such amounts constitute wages or payments in lieu of wages for a period during which the employee is absent from work on account of personal injuries or sickness; but this subsection shall not apply to the extent that such amounts exceed a weekly rate of $100."
While there is no definition of "wage continuation plan" provided in the statute, Treasury Regulation § 1.105-4(2) (i) (1964) states that a "wage continuation plan" means an accident or health plan as defined in Treasury Regulation § 1.105-5(a).[3]
The regulation states that a "plan" may be either "insured or noninsured," meaning that the plan need not be funded by an insurance company but may be funded by the employer himself. See H.R.Rep. No. 1337, 83d Cong., 2d Sess. A33 (1954). U.S.Code Cong. & Admin.News, p. 4025. But it is clear from Treasury Regulation § 1.105-5(a) that the plan in question must be in the nature of insurance or indemnification against illness or injury. At the least, a "plan" must contain the general indicia of insurancethat is, a contract by which one party undertakes to indemnify another against loss arising from an unknown or contingent event. Law Dictionary, Ballantine's 1938 Ed., p. 660. Epmeier v. United States, 199 F.2d 508, 509-510 (7th Cir. 1952), and cases cited therein. By reading sections 105(a) and 105(d) together (as they must be since subsection (d) simply carves an exception from the general case dealt with in subsection (a)), it is clear that a "wage continuation plan" is subsumed under the general category of "accident or health insurance." Moreover, the phrase "in lieu of" in subsection (d) indicates that the payments to be excludible must be for the purpose of compensating the employee while he is unable to earn income and must pay substantial medical expenses.
The legislative history of the section also indicates that the exclusion provisions of § 105(d) were intended to apply to plans which insure or indemnify the employee for losses caused by his illness. The "sick pay" exclusion was first effectuated in § 22(b) (5) of the Internal Revenue Code of 1939, which provided that compensation for injuries or sickness were excludible if received through accident or health insurance or workmen's compensation acts. The Internal Revenue Service's position with regard to this section was that employees who received benefits under a formal insurance *477 policy were allowed to exclude such payments under § 22(b), while employees who received benefits on a less formal self-insured plan were not allowed to do so. Rev.Rul. 208, 1953-2 Cum.Bull. 102. Recognizing this distinction as an inequity, the Seventh Circuit in Epmeier v. United States, supra, and later the Supreme Court in Haynes v. United States, 353 U.S. 81, 77 S.Ct. 649, 1 L.Ed.2d 671 (1957), interpreted "health and accident insurance" broadly to include plans which, though lacking the formal indicia of an insurance policy, were, nevertheless, "an undertaking by one person for reasons satisfactory to him to indemnify another for losses caused by illness." Haynes v. United States, supra, at 83, 77 S.Ct. at 650. At the same time Congress took note of the inequitable distinction. Consequently, in 1954, § 105(d) was enacted to permit payments made directly by an employer under an uninsured plan to be excluded in the same manner as payments under an insured plan. For a discussion of the legislative history of § 105 see "What Is A `Plan' Under Internal Revenue Code Section 105(d)," 28 Ohio State L.Journal at 483 (1967). Thus it seems clear that throughout the history of the "sick pay" exclusion rule, both the courts and Congress have recognized the necessity for the employee to be paid under a plan which provides insurance against sickness or injury.
With this background, we turn our attention to the United Jewish Appeal Union Contract itself. The pertinent provisions are as follows:
"The United Jewish Appeal, Inc. recognizes that the obligation to pay severance pay for accrued services through December 31st, 1954, as provided for in the attached Code of Personnel Practices, devolves upon the corporation and shall survive the dissolution of its annual appeal.
"Pursuant to an agreement between the union and the United Jewish Appeal, Inc., the following Code of Personnel Practices of the United Jewish Appeal, National Office for the Field Staff is adopted for the year 1954.
"I. A. EMPLOYMENT DISMISSALS, PROBATIONARY PERIOD, SEVERANCE PAY.
. . . . . .
"Employees of more than two years of service, dismissed for any reasons except malfeasance, shall receive one month's notice plus severance pay at the rate of one month per year for each year of service up to a maximum of eighteen months.
"Employees of more than seven years' service, or employees who shall have reached the age of sixty (60) years, dismissed for any reasons except malfeasance, shall receive one month's notice plus severance pay at the rate of one and one-half months' pay per year for each year of service up to a maximum of twenty-seven months.
"Upon the death of any employee accumulated severance pay at the rate of one month's pay per year for each year of service up to a maximum of eighteen months for employees of less than seven years' service, and at the rate of one and one-half months' pay per year for each year of service up to a maximum of twenty-seven months for employees of more than seven years' service, shall be paid in addition to the insurance referred to in Paragraph VIII to the beneficiary or beneficiaries named in such insurance policies.
. . . . . .
"Severance pay in accordance with the above schedule, i. e., one month per year for each year of service for employees of less than seven years' service and one and one-half months per annum for employees of more than seven years' service or who have reached the age of sixty (60) years, shall be payable to any employee of more than two (2) years of service who shall leave the employ of the United Jewish Appeal, Inc. as a result *478 of permanent and total disability or such illness on his part or on the part of his spouse or children as incapacitates him for service in the field. . . .
. . . . . .
"V. SICK LEAVE
"It has been the practice of the United Jewish Appeal, Inc. to give fair consideration to cases of illness, accident or other emergencies and to provide such compensation and/or care as the circumstances warrant. The United Jewish Appeal, Inc. herewith announces that it will continue such practice in as just and generous amount."
Subparagraph nine of Paragraph I.A of the contract specifices that payment shall be made to an employee "who shall leave the employ of the United Jewish Appeal, Inc. as a result of permanent and total disability or such illness on his part or on the part of his spouse or children as incapacitates him for service in the field." While at first blush this provision might indicate that the benefits of subparagraph nine are intended to compensate or insure the employee against illness, after examining the contract as a whole we think that it does not. The condition of illness or injury appears to have relevance only as a necessary condition precedent for the operation of the benefits of the contract. Illness or injury acts merely as a triggering mechanism to set in operation the formula outlined in subparagraph nine.
This interpretation of the contract is supported by the following:
First. Paragraph three of the "Preamble," which immediately precedes and refers to Paragraph I.A (entitled "Employment Dismissals, Probationary Period, Severance Pay"), pursuant to which taxpayer was paid, states that the severance payments to employees are for "accrued services." The preamble, which is not inconsistent with the operational provisions of the contract, makes it clear that the purpose of severance payments is to reward the employee for past service. No mention is made in the preamble of compensating the employee for illness or injury.
Second. The entire context of Paragraph I.A must be read as a whole, and when so viewed the thrust of the paragraph is to confer severance pay upon retiring employees for past services and not to compensate or insure against sickness or injury. The title of the section ("Employment Dismissals, Probationary Period, Severance Pay") supports this conclusion. Furthermore, the formula for determining the retirement benefits of subparagraphs two and three, which grant severance pay upon the employee's dismissal or death, is the same formula that is used in determining severance pay for those employees who have departed because of sickness or injury. Thus, while it is true that the taxpayer qualified for benefits because he became permanently disabled, what he received was retirement benefits and not insurance benefits.
Third. The taxpayer suffered his heart attack on December 13, 1958, after which he was never to return to work. From December 13, 1958, until October 31, 1959, however, he continued to receive his regular salary. On November 1, 1959, taxpayer terminated his relationship with his employer and received his severance pay in two lump sums. We outline these matters once again to highlight the significant fact that the form of payments changed after October 31, 1959 with the concurrent separation of taxpayer from the payroll. This is strong evidence that taxpayer was no longer receiving "sick pay" but some other form of benefit, and which, for exclusion purposes, destroyed the necessary relation between sickness and absence from work.
The case of Stewart v. United States, 313 F.Supp. 195 (D.C.1970), upon which plaintiff relies, does not compel a contrary conclusion. The issue there, as in the case at hand, was whether payments received by the taxpayer were made pursuant *479 to a wage continuation plan; nevertheless, the court's holding was predicated on the fact that the taxpayer was eligible for both "early retirement" and "disability retirement." Under such circumstances, the taxpayer was allowed to treat the benefits received as disability benefits for exclusion purposes, notwithstanding the fact that he had elected to receive "early retirement" benefits. Here the parties agree that the only provision under which the taxpayer could have been paid was the severance pay provision.
Nor is Commissioner of Internal Revenue v. Winter, supra, conclusive as to the issue before us. The sole question before the Third Circuit was the construction of the term "retirement age." The opinion does not deal with the question whether the pension plan constituted a wage continuation plan.
Accordingly, the government's motion to dismiss the complaint is granted. The plaintiff's motion for summary judgment is denied.
It is so ordered.
NOTES
[1] The taxpayer is Irving N. Sidman. Mrs. Sidman is joined because they filed a joint return.
[2] After the Internal Revenue Service lost in the above cases, it conceded pending cases involving the same issue and then published Treasury Decision No. 6888, which changed Regulations § 1.105-4 to bar, for the purposes of exclusion under § 105(d), disability benefits once an employee was eligible for voluntary retirement and without reference to the customary retirement age. Treasury Decision No. 6888 was promulgated pursuant to the Revenue Act of 1964 P.L. 88-272, C.B. 1964-1 (part 2), and the statute was, by its terms, effective for taxable years beginning after December 31, 1963. Therefore, neither the statute nor the regulations promulgated under it could be found to control the years 1959 and 1960, which are involved in the case before us.
[3] The relevant part of § 1.105-5(a) reads as follows:
". . . In general, an accident or health plan is an arrangement for the payment of amounts to employees in the event of personal injuries or sickness. A plan may cover one or more employees, and there may be different plans for different employees or classes of employees. An accident or health plan may be either insured or noninsured, and it is not necessary that the plan be in writing or that the employee's rights to benefits under the plan be enforceable. . . . It is immaterial who makes payment of the benefits provided by the plan. For example, payment may be made by the employer, a welfare fund, a State sickness or disability benefits fund, an association of employers or employees, or by an insurance company."
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320 B.R. 880 (2005)
In re Mohsen MANOUCHEHRI, Debtor.
No. 03-12672.
United States Bankruptcy Court, N.D. Ohio, Eastern Division.
November 17, 2004.
*881 Priscilla Schnittke, Knevel & Associates Co. LPA, Cleveland, OH, for Debtor.
MEMORANDUM OF OPINION AND ORDER
RANDOLPH BAXTER, Chief Judge.
The matter before this Court is Mohsen Manouchehri's ("Debtor's") motion to reconvert a Chapter 7 case to a Chapter 13 proceeding. The Chapter 7 Trustee filed an objection on the basis that 11 U.S.C. § 706(a) of the Bankruptcy Code ("Code") prohibits the Debtor from reconverting his Chapter 7 case to a Chapter 13 case, coupled with allegations of the Debtor's misconduct. This Court acquires core matter jurisdiction over the present controversy pursuant to 28 U.S.C. § 157(a) and (b), § 1334, and General Order Number 84 of this District.
* *
On March 6, 2003, Debtor filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code. Sometime after filing, but prior to the scheduled meeting of creditor's pursuant to § 341, the Debtor, without Court approval, disposed of two automobiles in his possession. Debtor transferred a 1999 Mercury Villager to his former wife as part of a property settlement in a state court divorce proceeding. Debtor sold another vehicle, a 1999 Honda Accord, for $10,000.00 and used the proceeds to buy a replacement automobile for himself.
Subsequently, the Debtor filed a "Notice of Voluntary Conversion to Chapter 7" to convert his Chapter 13 case into a Chapter 7. The § 341 meeting was held on August 19, 2004 wherein the Trustee expressed an intent to pursue avoidance of the transfer of the Mercury Villager to the former wife under § 549 of the Code. Thereupon, the *882 Debtor filed a "Motion to Convert Case From Chapter 7 to 13", essentially asking this Court to reconvert his case to Chapter 13 proceedings. At issue, the Court must determine whether reconversion is appropriate.
* * *
The issue presented in this case is partially governed by § 706 of the Bankruptcy Code. Section 706 provides in relevant part:
(a) The debtor may convert a case under this chapter to a case under chapter 11, 12, or 13 of this title at any time, if the case has not been converted under section 1112, 1208, or 1307 of this title. Any waiver of the right to convert a case under this subsection is unenforceable.
11 U.S.C.A. § 706(a) (emphasis added).
The starting point for interpreting the Bankruptcy Code, as with any federal statute, is with the words of the statute itself and their plain meaning. In re Sue M. Oblinger, 288 B.R. 781, 784 (Bankr. N.D.Ohio 2003) citing U.S. v. Ron Pair Enters., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). See also, Patterson v. Shumate, 504 U.S. 753, 757-58, 112 S.Ct. 2242, 119 L.Ed.2d 519 (1992); Toibb v. Radloff, 501 U.S. 157, 160, 111 S.Ct. 2197, 115 L.Ed.2d 145 (1991). Absent any ambiguity, the court must enforce the clearly expressed congressional intent by applying the statute as written without reference to legislative history or pre-Code practice. Oblinger, supra, citing Vergos v. Gregg's Enters., Inc., 159 F.3d 989, 990 (6th Cir.1998). Furthermore, to provide clarity, consistency, and finality in statutory construction the Supreme Court has noted:
"The plain meaning of legislation should be conclusive, except in `rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intention of its drafters.' " Ron Pair Enters., Inc., 489 U.S. at 242, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989).
As noted above, § 706(a) of the Bankruptcy Code appears to limit a debtor's ability to unilaterally reconvert a case if the case has previously been converted from another chapter. The legislative history to § 706(a), however, provides ample clarification:
Subsection (A) of this section gives the debtor the one-time absolute right of conversion of a liquidation case to a reorganization or individual repayment case. If the case has already once been converted from chapter 11 or 13 to chapter 7, then the debtor does not have that right. The policy of the provision is that the debtor should always be given the opportunity to repay his debts, and a waiver of the right to convert a case is unenforceable.
S. Rep. No. 95-989, at 94 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5880 (emphasis added).
There exists a split in authority as to whether courts may exercise discretion in reconverting a case pursuant to § 706(a). See, Matter of Johnson, 116 B.R. 224 (Bankr.D.Idaho, 1990), In re Banks 252 B.R. 399 (Bkrtcy.E.D.Mich., 2000).
The Banks decision opines:
The legislative history refers to a "onetime absolute right to convert." It further states that if the case had been previously converted, the debtor does not have that right. (Emphasis added.) The legislative history does not shed light on whether the right that is lost is a right to request conversion in the court's discretion or an absolute right to convert. Indeed, nothing in the legislative history refers to either a strict prohibition against re-conversion by right or against re-conversion in the court's *883 discretion. The legislative history regarding subsection (c) only mentions that it is part of the prohibition against involuntary chapter 13 cases. The legislative history regarding subsection (b) is the only place a which mentions a court's discretionary right to order conversion.
Id. at 402.
Other decisions which have barred reconversion include: In re Vitti, 132 B.R. 229, 231 (Bankr.D.Conn.1991) (Chapter 7 debtor, whose case had been converted from Chapter 13 to Chapter 7, could not convert the Chapter 7 case back to Chapter 13); In re Bryan, 109 B.R. 534, (Bankr.D.D.C.1990) (Debtor whose case was originally in Chapter 11 and was converted to Chapter 7, no longer had the right to convert his case to Chapter 13); In re Hanna, 100 B.R. 591, 594 (Bankr. M.D.Fla.1989) (Debtor who had already converted Chapter 13 case to one under Chapter 7 was barred from reconverting case to Chapter 13); In re Carter, 84 B.R. 744, 748 (D.Kan.1988) (Once a Chapter 11 proceeding was involuntarily converted to a Chapter 7, the debtors lost their right to convert Chapter 7 proceeding to Chapter 13 proceeding); In re Richardson, 43 B.R. 636, 638 (Bankr.M.D.Fla.1984) (Debtors whose Chapter 13 case had been converted to Chapter 7 did not have right to reconvert the case to a case under Chapter 13); and In re Ghosh, 38 B.R. 600, 603 (Bankr. E.D.N.Y.1984) (Debtor could not reconvert to a Chapter 13 case); citing from In re Banks 252 B.R. 399, *400 (Bkrtcy. E.D.Mich., 2000).
In Matter of Johnson, supra, the court opined:
Section 706(a) deals with the right of the debtor, as opposed to the Court, to convert a Chapter 7 case. Subsections (b) and (c) prescribe when the Court may order a Chapter 7 case converted. There are two subsections dealing with court-ordered conversions because of the need to respect the statutory prohibition against involuntary Chapter 12 and 13 cases, while a debtor need not consent to be placed in a Chapter 11 case. The only restriction imposed on the Court in converting a case to Chapter 13 is that the debtor must request it. 11 U.S.C. § 706(c).
Viewing the distinct purposes of the various subsections of Section 706, it is logical to assume that the "reconversion" restriction found in subsection (a) should not operate when conversion is sought under subsection (c). It is reasonable to assume that Congress was unwilling to allow a debtor more than one guaranteed opportunity to unilaterally convert to Chapter 13 from Chapter 7. However, when the court is required to be involved in the conversion process, as is the case in a request to convert under subsections (b) or (c), * * * [t]he decision whether to convert is left in the sound discretion of the court, based on what will most inure to the benefit of all parties in interest."
Id. at 224, 226 (emphasis added).
The Court in In re Wampler, 302 B.R. 601, 604 (Bkrtcy.S.D.Ind.,2003), addressing § 706(a), noted:
An increasing number of courts, however, have rejected this interpretation [one-time absolute right to convert] and have instead concluded that bankruptcy courts have the discretion to deny a motion to convert brought under § 706(a). See e.g., In re Brown, 293 B.R. 865, 870 (Bankr.W.D.Mich.2003); In re Ponzini, 277 B.R. 399, 405 (Bankr. E.D.Ark.2002); In re Thornton, 203 B.R. 648, 652 (Bankr.S.D.Ohio 1996); In re Porras, 188 B.R. 375, 379 (Bankr. W.D.Tex.1995). Some courts have found support for this conclusion in the language *884 of § 706(a). See, e.g., Ponzini 277 B.R. at 404 (Bankr.E.D.Ark.2002) (while the statute provides that a debtor "may" convert, it does not provide that the court "shall" honor that request); In re Starkey, 179 B.R. 687, 691 (Bankr. N.D.Okla.1995) (the phrase "at any time" in § 706(a) was intended to mean "at any stage" of the proceedings, not "regardless" of the circumstances).
Id. at 604.
The Johnson and Wampler holdings present a more practical construction of § 706(a), as suggested by its legislative history and policy rationale. See also, In re Somers Corp., 123 B.R. 35, 37 (Bankr. N.D.Ohio 1990) In re Johnson, 116 B.R. 224, 227 (Bankr.D.Idaho 1990); In re Trevino, 78 B.R. 29, 32 (Bankr.M.D.Pa.1987); and In re Walker, 11 B.R. 803, 805 (Bankr. D.Nev.1987); In re Masterson, 141 B.R. 84 (Bankr.E.D.Pa.1992); In re Hollar, 70 B.R. 337, 338 (Bankr.E.D.Tenn.1987); and In re Sensibaugh, 9 B.R. 45, 47 (Bankr. E.D.Va.1981). This Court also recognizes the delicate balance of competing policies and interests that other jurisdictions have addressed before arriving at their respective constructions of § 706. These policies include the debtor's opportunity to repay debts and the creditor's benefit of payment; weighed against the need to prevent unnecessary expense, disadvantage, and delay caused by a debtor insistent upon multiple conversions between the chapters.
* * * *
Section 706(a) and its attendant legislative history reveal a Congressional intent to grant the bankruptcy courts discretion regarding whether or not to allow conversion between chapters. This inherent grant of authority eliminates a rigid reading of the Code and allows for a result "based on what will most inure to the benefit of all parties in interest." H.R.Rep. No. 595, 95th Cong., 1st Sess. 380 (1977); S.Rep. No. 989, 95th Cong., 2nd Sess. 94 (1978), U.S.Code Cong. & Admin.News 1978, pp. 5787, 5880, 6336.
Furthermore, this view of court discretion is consistent with a recent Sixth Circuit B.A.P. decision which decided whether a case conversion is appropriate on the merits. In that opinion, the Bankruptcy Appellate Panel observed:
The Sixth Circuit has adopted a "totality of circumstances" analysis in evaluating whether the debtor should be permitted to commence a chapter 13 case, [In re] Alt, 305 F.3d [413] at 419 [(6th Cir. 2002)] (quoting Society Nat'l Bank v. Barrett (In re Barrett), 964 F.2d 588, 591 (6th Cir.1992)), and the same analysis should apply in evaluating whether a debtor should be permitted to convert a case to Chapter IS, Thornton, 203 B.R. 648, 652 (Bkrtcy.S.D.Ohio,1996) (emphasis added).
In re Copper, 314 B.R. 628 (6th Cir. BAP 2004) (emphasis added).
* * * * *
As the moving party, the Debtor whose good faith in seeking conversion of this case has been questioned, bears the ultimate burden of proof on the issue. In re Pakuris 262 B.R. 330 (Bkrtcy. E.D.Pa.,2001). The Debtor's only support for his motion to reconvert states, "... that review of income and expenses allows for the conversion." (See Debtor's Motion to Convert, page 1). Interestingly, the Debtor filed no response to the Trustee's allegations of bad faith. The Debtor further responds that "he will be able to work more hours in order to fund his Chapter 13 Plan" and that he is "capable of and has in the past, funded a Chapter 13 Plan. His creditors will benefit from the conversion in that they will get paid through the Chapter 13 Plan." (See Debtor's Response to Trustee's Objection, page 5).
*885 Notwithstanding, the Debtor's motivation for reconverting his ease (on the same day that the Trustee expressed an intent to recover estate assets) is questionable. It is clear that a debtor cannot dispose of estate property without prior court approval. Seeking to reconvert to Chapter 13, with knowledge of the Chapter 7 Trustee's intent to pursue recovery of estate property is a display of bad faith by the Debtor. Herein, it is patently clear and uncontested that the Debtor violated the proscribed language of § 549(a)(1) and (2)(B).[1] At all times during the pendency of a bankruptcy case, a debtor is obligated to cooperate with the trustee regarding the administration of estate assetsnot to take efforts which, effectively, thwart the trustee's ability to perform his statutory duties under § 704.
Throughout the prosecution of a bankruptcy filing, a debtor must exhibit good faith conduct. Such conduct begins with the performance of a debtor's duties as mandated under § 521 of the Bankruptcy Code. [11 U.S.C. § 521] Among those statutory duties are the following:
§ 521. Debtor's Duties. The Debtor shall
(1) file a list of creditors, and unless the court orders otherwise, a schedule of assets and liabilities, a schedule of current income and current expenditures, and a statement of the debtor's financial affairs;
(3) if a trustee is serving in the case, cooperate with the trustee as necessary to enable the trustee to perform the trustee's duties* * *.
(4) if a trustee is serving in the case, surrender to the trustee all property of the estate and any recorded information, including books, documents, records, and papers, relating to property of the estate* * *.
[11 U.S.C.A. § 521(1), (3), (4)] (emphasis added).
Estate property under the Bankruptcy Code is defined, in pertinent part, under § 541:
* * * Such estate is comprised of all the following property, wherever located and by whomever held:
(1) * * * [A]ll legal or equitable interests of the debtor in property as of the commencement of the case. [11 U.S.C. § 541(a)]
* * * * * *
Herein, the Debtor's petition schedules reveal the existence of the subject vehicles as assets of the Debtor's estate. However, the Debtor's schedules list the 1999 Honda Accord as having a value of $8000.00, this only a short time before he later sold the vehicle, without court approval, for $10,000.00 in order to purchase a newer automobile for himself. It is further noted that the Debtor claimed a $1000.00 exemption in the second automobile that he subsequently disposed of and failed to turn over proceeds to the Trustee. It is remarkable that the Debtor has been represented by counsel throughout the pendency of this case.
The Debtor has failed to adhere to his statutory duties, as described above. Firstly, his failure to turnover the subject vehicle to the Trustee's possession displays a lack of cooperation with the Trustee in *886 violation of both subsections (3) and (4) of § 521 of the Bankruptcy Code. Secondly, the Debtor's disposal of two vehicles without court approval, after acknowledgment in his schedules that the automobiles were property of the estate was improper and was in violation of § 549 of the Code. Clearly, the vehicles are estate property, as defined under § 541(a). Finally, the Debtor's motion to reconvert his case which was filed the same day that the Trustee expressed an intent to recover estate assets evinces the Debtor's disingenuous motivations. Thusly, the Debtor's conduct lacks the requisite good faith.
This Court concurs with the holding in Wampler, supra, 302 B.R. 601 where that Court noted:
Having read the various cases and commentary discussing § 706(a), the Court firmly believes that the statute was intended to give only the honest debtor an opportunity to voluntarily repay his debts via conversion from Chapter 7. Section 706(a) was not intended as a way for the dishonest debtor to abuse the bankruptcy process, perpetrate a fraud or engage in bad faith behavior. Therefore, the Court concludes that it has the discretion to deny a § 706(a) motion to convert upon a showing of bad faith or where conversion is sought for an illegitimate purpose.
Id. at 605.
Accordingly, the Debtor's motion to reconvert his case to Chapter 13 proceedings is hereby denied. Each party is to bear its own costs.
IT IS SO ORDERED.
NOTES
[1] § 549(a):
Except as provided in subsection (b) or (c) of this section, the trustee may avoid a transfer of property of the estate(1) that occurs after the commencement of the case; and (2)(B) that is not authorized under this title or by the court. 11 U.S.C.A. § 549(a)(1) and (2)(B).
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777 F.2d 699
*Janssenv.U.S.
85-3275
United States Court of Appeals,Fifth Circuit.
11/15/85
1
E.D.La.
AFFIRMED
2
---------------
* Fed.R.App.P. 34(a); 5th Cir.R. 34.2.
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503 F.2d 1402
*dMarcantelv.U. S.
74-2541
UNITED STATES COURT OF APPEALS Fifth Circuit
10/31/74
1
W.D.La.
AFFIRMED
*
Summary Calendar case; Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of N
***
Opinion contains citation(s) or special notations
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FOURTH DIVISION
BARNES, P. J.,
RAY and MCMILLIAN, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules/
June 25, 2015
In the Court of Appeals of Georgia
A15A0346. GEORGIA DEPARTMENT OF TRANSPORTATION
v. WYCHE.
MCMILLIAN, Judge.
Defendant Georgia Department of Transportation (“DOT”) appeals the trial
court’s order denying its motion to dismiss the complaint of Plaintiff Mary Wyche,
individually and as surviving mother of Larry J. Bowen, Jr., deceased. Because we
find that Wyche’s claims against the DOT are barred by the doctrine of sovereign
immunity for the reasons that follow, we reverse.
“We review de novo a trial court’s ruling on a motion to dismiss based on
sovereign immunity grounds, which is a matter of law. Factual findings are sustained
if there is evidence supporting them.”1 (Citation and punctuation omitted.) Bd. of
1
“A motion to dismiss on sovereign immunity grounds is based upon the trial
court’s lack of subject matter jurisdiction, and as a result, a trial court is entitled to
Regents of the Univ. System of Ga. v. Canas, 295 Ga. App. 505, 509 (3) (672 SE2d
471) (2009).
So viewed, the record shows that Bowen was killed on the night of May 4,
2005 while employed as a construction worker by Reeves Construction Company.
(“Reeves”). Reeves was performing paving work on Eisenhower Parkway in Macon,
Georgia pursuant to a contract with the DOT for Project No. STP-3201(9). At
approximately 11:20 p.m., Bowen was standing in the area of the intersection of
Eisenhower Parkway and Log Cabin Drive2 when he was struck by a vehicle traveling
south on Log Cabin Drive. He was then struck and dragged through the intersection
by a second vehicle also traveling southbound on Log Cabin Drive. Tragically, he
died at the scene. The drivers later deposed that they were proceeding through a green
light at the intersection, which was “very dark,” and that they did not see any signs
indicating construction work was underway at the intersection. That evening, the only
DOT employee present was Johnny Moss, a field materials inspector, who had just
make factual findings necessary to resolve the jurisdictional issue.” Bd. of Regents of
the Univ. System of Ga. v. Brooks, 324 Ga. App. 15, 16, n. 2 (749 SE2d 23) (2013).
2
That evening, a member of the Reeves paving crew had instructed Bowen to
be in that area to observe the intersection’s traffic signal and direct the equipment
operators, also employed by Reeves, as to when they had the right-of-way to cross the
intersection.
2
arrived to perform asphalt testing and was still stopped at the traffic light at the time
of the accident. Also at the scene was Cedric Howard, an employee of Moreland
Altobelli Associates, Inc. (“Moreland”), which was under contract with the DOT to
perform inspections3 and ensure that Reeves was in compliance with the DOT
contract in all respects, including safety requirements.4
On May 2, 2007, Wyche filed a complaint against the DOT and Moreland,5
asserting claims of ordinary and professional negligence against both defendants,
alleging that their lack of inspection and planning left drivers “without positive
guidance, conspicuous, and unambiguous road signage and appropriate lighting.”
With respect to the DOT, Wyche alleged that the DOT failed to inspect and enforce
its contract with Moreland when it did not provide appropriate signage and lighting
3
Howard testified that DOT employee Moss had no authority to give him job
directions.
4
The contract entered into by the DOT and Moreland provides, in part, that
Moreland “shall utilize effective control procedures to determine and to ensure that
the contractor’s construction of this project is performed in reasonably close
conformity with the plans, specifications, and contract provisions.” The contract
specifically required Moreland to “inspect traffic control and monitor traffic
operations during the normal course of other inspection duties.”
5
Both drivers were also named in the complaint, but were eventually dismissed
with prejudice.
3
at the intersection and failed to oversee and train “its employees and agents as to
appropriate inspection procedures.” The DOT was subsequently granted leave to file
a third-party complaint against Reeves for indemnification under their contract.
In its third-party complaint, the DOT cites Section 150 of the contract’s Special
Provisions, which “as supplemented by the Plans, Specifications, and Manual on
Uniform Traffic Control Devices (MUTCD),” constitutes the project’s “Traffic
Control Plan.” The DOT also cites sub-section 150.01 of the contract, which provides
that Reeves is responsible for “‘furnishing, installing, maintaining, and removing
necessary traffic signs, barricades, lights, signals, cones, pavement markings and
other traffic control devices and shall include flagging and other means for guidance
and protection of vehicular and pedestrian traffic through the Work Zone.’”6
6
The contract further provides that
[Reeves] shall designate a qualified individual as a Worksite Traffic
Control Supervisor (WTCS) who shall be responsible for selecting,
installing and maintaining all traffic control devices in accordance with
the Plans, Specifications and the MUTCD. . . . As the representative of
[Reeves], the WTCS shall have full authority to act on behalf of
[Reeves] in administering the Traffic Control Plan. . . . The WTCS shall
regularly perform inspections to ensure that traffic control is maintained.
4
On March 7, 2014, the DOT filed a motion to dismiss on the grounds of
sovereign immunity. Following a hearing, the trial court denied the motion, and this
appeal followed.
1. In its first enumeration of error, the DOT asserts that the trial court erred in
finding a waiver of sovereign immunity for the negligent acts committed by Reeves
and Moreland, as independent contractors.7 The Georgia Constitution provides that
sovereign immunity extends to the State and all of its departments and agencies. Ga.
Const. of 1983, Art. I, Sec. II, Par. IX (e). This sovereign immunity can only be
waived by a constitutional provision or an Act of the General Assembly that
specifically provides for such waiver. Id. The Georgia Tort Claims Act (“GTCA”) is
one such Act and provides for a limited waiver of sovereign immunity for the torts
7
Although Wyche objects to this enumeration of error because the trial court
did not specifically address this issue in its order , “[l]ong-standing statutory and case
law requires courts to dismiss an action whenever it appears by suggestion of the
parties or otherwise, that the court lacks jurisdiction of the subject matter. The court’s
lack of subject-matter jurisdiction cannot be waived and may be raised at any time
either in the trial court, in a collateral attack on a judgment, or in an appeal.”
(Citations and punctuation omitted.) Ga. Dept. of Transp. v. Kovalcik, 328 Ga. App.
185, 190 (1) (b) (761 SE2d 584) (2014). And we have consistently held that the
sovereign immunity of a State agency “raises the issue of the trial court’s subject
matter jurisdiction to try the case.” Id. Moreover, the DOT raised this issue in its
answer and its motion to dismiss, so we will address the DOT’s argument here. See
id. (finding no equitable argument to preclude review of additional argument on
appeal where sovereign immunity generally was raised below).
5
of State employees while acting within the scope of their employment.8 See OCGA
§ 50-21-20 et seq.; Johnson v. Ga. Dept. of Human Resources, 278 Ga. 714, 715 (1)
(606 SE2d 270) (2004).
In determining whether there has been a waiver of sovereign immunity, we
must keep in mind that, “in acting for the public good and in responding to public
need, state government must provide a broad range of services and perform a broad
range of functions throughout the entire state, regardless of how much exposure to
liability may be involved.” (Citations omitted.) Bd. of Regents of the Univ. System of
Ga. v. Brooks, 324 Ga. App. 15, 17 (1) (749 SE2d 23) (2013). For this reason, our
legislature determined that “the exposure of the state treasury to tort liability must
therefore be limited, and that state government should not have the duty to do
everything that might be done.” (Citation omitted.) Id. And, “the doctrine of
sovereign immunity requires that the conditions and limitations of the statute that
waives immunity be strictly followed.” (Citation and punctuation omitted.) Id.
Moreover, “the party seeking to benefit from the waiver of sovereign immunity has
the burden of proof to establish waiver.” Id. at 16.
8
As a department of the State, the DOT is subject to the waiver, and exceptions
thereto, set forth in the GTCA. See Kovalcik, 328 Ga. App. at 188 (1) (a).
6
Wyche asserts that because the DOT has a nondelegable duty to maintain
traffic safety in construction zones on state highways, the DOT can be held liable for
the actions of contractors like Reeves and Moreland, which should be considered
“employees” under the GTCA. This question has been answered unequivocally under
state law. Although the DOT is tasked with the duty to “plan, designate, improve,
manage, control, construct and maintain a state highway system”9 under the Georgia
Code of Public Transportation, OCGA § 32-1-1 et seq., nothing in that Code prohibits
the DOT from delegating its responsibilities to a private contractor. See Johnson, 278
Ga. at 716 (2) (state departments “have meaningful statutory responsibilities . . . and
they satisfy those responsibilities by exercising reasonable care in the selection and
supervision of their independent contractors”); Comanche Constr., Inc. of Georgia
v. Dept. of Transp., 272 Ga. App. 766, 770 (2) (613 SE2d 158) (2005) (physical
precedent only) (finding no language in the statute that would prohibit the DOT from
delegating its responsibility to a private contractor through a construction contract).
Here, the DOT delegated its responsibilities with respect to Project No. STP-3201(9)
to Reeves and Moreland under their respective contracts, including the responsibility
for traffic control and inspections for contract compliance. And the DOT is correct
9
OCGA § 32-2-2 (a) (1).
7
that corporations and independent contractors doing business with the State are not
included within the GTCA’s definition of “employee.” See OCGA § 50-21-22 (7);
Brooks, 324 Ga. App. at 17-18 (1) (the State is immune from liability if the tort was
committed by a third party). Thus, under the GTCA, the DOT’s sovereign immunity
has not been waived for the negligence committed by independent contractors such
as Reeves or Moreland.10 Id.
Wyche now argues for the first time on appeal that the DOT was not permitted
to delegate its duties to Reeves or Moreland because the State’s project was partially
funded by federal highway funds, and pursuant to 23 CFR § 635.105 (a), the DOT
was required to maintain full authority over the construction project. However, “[a]s
she raises [this] question for the first time of appeal, she presents nothing for us to
consider.” Kumar v. Hall, 262 Ga. 639, 644 (3) (423 SE2d 653) (1992). We also note
that this Court rejected a similar argument in Comanche, and although it is physical
precedent only, we find it persuasive. 272 Ga. App. at 771 (2). The plaintiff in
Comanche also argued that federal regulations placed sole responsibility for traffic
control plans on the DOT, but this Court found that nothing in those regulations
10
We express no opinion here as to any potential liability of either Reeves or
Moreland.
8
necessarily rendered DOT ultimately liable for design decisions related to traffic
control plans. Id. (“23 CFR § 630.1010 (a) (4) (2004) specifically allows a state
highway agency to permit a contractor to develop and use its own traffic control plan
in a roadway project.”). And while the State is required to designate a person who
will have “‘the primary responsibility and sufficient authority for assuring that the
[plan is] effectively administered,’” there is “no reason why this requirement
necessarily elevates DOT’s involvement to something more than inspection and
approval.” Id. (quoting 23 CFR § 630.1010 (b) (2004)). See Ga. Dept. of Corrections
v. James, 312 Ga. App. 190, 194 (1) (718 SE2d 55) (2011) (“Implied waivers of
governmental immunity should not be favored. Thus, even if, pursuant to the cited
statutory provisions, [the third parties] are subject to the DOC’s rules and supervision,
those statutory provisions did not authorize the trial court’s ultimate conclusion that
sovereign immunity was waived.”) (citations and punctuation omitted).
Accordingly, Wyche’s claims against the DOT for negligence relating to the
paving operations on the night of the accident, including the alleged failure to provide
appropriate signage and lighting at the intersection, are actually claims based on the
actions of one or more independent contractors and are barred by the doctrine of
sovereign immunity. See Dept. of Transp. v. Jarvie, 329 Ga. App. 681, 683 (766
9
SE2d 94) (2014) (“GTCA’s waiver of immunity does not include torts committed by
independent contractors, so the DOT is not subject to suit for the conduct of its
contractors, such as negligently designing the . . . area’s traffic plan or negligently
driving the truck which caused [decedent’s] death.”) (citations omitted); Dept. of
Transp. v. Owens, 330 Ga. App. 123, 133-135 (4) (766 SE2d 569) (2014) (under the
GTCA, independent contractor doing business with the State is not a state officer or
employee and the DOT is not be liable for traffic control plans implemented by an
independent contractor).
2. With respect to Wyche’s claims based on the DOT’s own actions, essentially
that it failed to inspect and ensure a proper traffic control plan, the DOT contends that
the trial court erred in finding that the exceptions to the State’s waiver of sovereign
immunity with respect to its inspection powers or functions (OCGA § 50-21-24 (8))
or its licensing powers or functions (OCGA § 50-21-24 (9)) are inapplicable here. We
will address each statutory exception in turn.
(a) To the extent the GTCA sets forth an exception to the waiver of sovereign
immunity, the State and its departments remain immune from suit. See OCGA § 50-
21-24 (setting forth 13 limitations to the State’s waiver of sovereign immunity). One
10
such exception relates to the State’s inspection powers. OCGA § 50-21-24 (8)
provides:
[t]he state shall have no liability for losses resulting from . . .
[i]nspection powers or functions, including failure to make an inspection
or making an inadequate or negligent inspection of any property other
than property owned by the state to determine whether the property
complies with or violates any law, regulation, code, or ordinance or
contains a hazard to health or safety.
And we have held that there is no principled distinction between the DOT’s
inspection of physical property to determine whether it complies with accepted safety
standards and an inspection of construction plans. See, e.g., Magueur v. Dept. of
Transp., 248 Ga. App. 575, 578 (547 SE2d 304) (2001) (“Because the duty allegedly
breached by DOT – i.e., a duty to inspect the construction plans and/or the property
and to advise the county of any safety hazards – falls within OCGA § 50-21-24 (8),
DOT is entitled to sovereign immunity.”).
Here, Wyche’s claims that the DOT was negligent in “approving construction
plans and inspecting the physical property” clearly fall within this inspection
exception. In asserting that the exception is inapplicable here, Wyche argues, and the
trial court agreed, that because the accident occurred on a State-owned highway, the
11
DOT is not immune from suit. The trial court, relying on Ga. Dept. of Transp. v.
Kovalcik, 328 Ga. App. 185 (761 SE2d 584) (2014), which involved an accident on
a State-owned highway after the construction was completed, concluded that the
holding should also apply to this case involving an active construction project.
However, shortly after the trial court entered its order, this Court clarified the
scope of this exception. In Jarvie, we held that the DOT was immune from liability
under the inspection powers exception with respect to monitoring compliance with
the DOT’s conditions (including the submission of a traffic control plan) for approval
of a contractor’s request to stockpile rock in the median as part of a road-widening
project on the interstate. 329 Ga. App. at 684. We found that the factual scenario
presented was distinct from that in Kovalcik, “which involved inspecting a completed
state roadway project with an allegedly hazardously designed curb and left turn
lane[,]” whereas in Jarvie “the DOT’s relevant on-site conduct was monitoring the
method of construction as previously approved.” Id. at 684, n. 14. And we rejected
the plaintiffs’ argument that the DOT’s actions amounted to inspection of State
property and should not be covered by the inspection powers exception, explaining:
the conduct in this case amounts to oversight of construction activities
for purposes of administering the contract, and it does not amount to an
12
inspection of State property for regulatory compliance or safety hazards
as contemplated by the language of OCGA § 50-21-24 (8). Absent a
clear legislative directive, we decline to extend the waiver of sovereign
immunity to include independent contractors’ conduct even if the State
actor in some way attempts to ensure that contractors are operating
safely on a State-approved project.
(Footnote omitted.) Id. at 684.
So too here, to the extent that Wyche contends that the DOT was negligent in
failing to adequately inspect the work performed by Reeves during the course of the
paving project, her claims fall under the inspection powers exception, and the DOT
is immune from those claims. See Jarvie, 329 Ga. App. at 684.
(b) In its order, without otherwise characterizing her claims, the trial court also
concluded that Wyche “does not contend [the] DOT was negligent in any way as to
its licensing power or function.” We disagree.
OCGA § 50-21-24 (9) provides that the State shall have no liability for losses
resulting from its “[l]icensing powers or functions, including, but not limited to, the
issuance, denial, suspension, or revocation of or the failure or refusal to issue, deny,
suspend, or revoke any permit, license, certificate, approval, order, or similar
authorization.” In Owens, C. W. Matthews Contracting Company contracted with the
13
DOT to perform repaving work on portions of I-75/85 in Atlanta. 330 Ga. App. at
124. In the early morning hours of May 16, 2010, while it was still very dark, a dump
truck driver was delivering a load of asphalt to the construction site. Id. The driver
was traveling approximately 15-25 miles per hour in the second lane over from the
right shoulder, which lane was supposed to have been, and which he mistakenly
believed had been, closed to normal traffic. Id. at 124-125. Owens, who was driving
his Jeep in the second lane at 70 miles per hour at the time, struck the dump truck
from behind and was killed. Id. at 125. This Court found that OCGA § 50-21-24 (9)
shielded the DOT from liability for alleged negligence in approving a site-specific
traffic control plan that was in effect on the date of the collision, explaining that “this
exception, by its plain terms, is not strictly limited to decisions related to permits or
licenses. Instead, it also applies as to decisions relating to issuance, denial,
suspension, or revocation of approvals.” (Emphasis in original.) Id. at 137 (4) (b).
Here, Reeves was performing paving work following the DOT’s authorization
granted in the Notice to Proceed issued on April 22, 2003. The DOT’s review and
approval of traffic control plans that were supposed to be submitted by Reeves11 and
11
Wyche contends that Reeves failed to submit a traffic control plan as
required by the DOT contract. But whether the DOT failed to revoke approval of its
authorization after Reeves failed to submit a traffic control plan or Reeves submitted
14
its alleged failure to suspend or revoke its approval thus fall within the licensing
power exception.12 See Murray v. Ga. Dept. of Transp., 284 Ga. App. 263, 266 (2)
(644 SE2d 290) (2007) (physical precedent only) (“the [licensing powers] exception
grants broad immunity for losses resulting from virtually any action the State DOT
could take regarding the authorization” to install a traffic light); Ga. Dept. of Transp.
v. Cox, 246 Ga. App. 221, 225 (540 SE2d 218) (2000) (DOT immune as to claims
arising out of the State’s issuance of the construction permit and the State’s alleged
refusal to timely issue a permit for a traffic signal).
Accordingly, whether Wyche’s claims are characterized as either claims that
the DOT negligently approved Reeves’ paving project or negligently inspected the
project, they are barred under the doctrine of sovereign immunity. See Reidling v.
City of Gainsville, 280 Ga. App. 698, 703 (1) (634 SE2d 862) (2006) (pursuant to
a problematic plan makes no difference in analyzing whether the licensing power
exception applies.
12
We are unpersuaded by Wyche’s attempt to characterize her claim as one that
falls outside the licensing powers exception because she does not fault the DOT’s
original “decision to make or not to make the improvements to the subject
intersection.” Rather, she claims that the DOT “was negligent in failing to enforce the
terms of the . . . contract,” including the portions related to traffic control. Thus, she
is essentially arguing that the DOT should have revoked its authorization for Reeves
to proceed, which claim falls within the licensing power exception. See Owens, 330
Ga. App. at 137 (4) (b).
15
OCGA § 50-21-24 (8) and (9), “sovereign immunity precludes plaintiffs’ claims that
the DOT either negligently approved the disposal site for the excess fill soil or
negligently inspected the site”). The trial court’s denial of the DOT’s motion to
dismiss must be reversed.
Judgment reversed. Barnes, P. J., and Ray, J., concur.
16
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53 So.3d 1043 (2011)
GRINER
v.
STATE.
No. 4D09-1888.
District Court of Appeal of Florida, Fourth District.
February 9, 2011.
DECISION WITHOUT PUBLISHED OPINION
Affirmed.
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138 B.R. 102 (1992)
In re Jack MORE and Janie M. More, Debtors.
Frederick Arthur BARTHLOW, Plaintiff,
v.
Jack MORE and Janie M. More, Defendants.
Bankruptcy No. 90-3569-BKC-3P7, Adv. No. 90-324.
United States Bankruptcy Court, M.D. Florida, Jacksonville Division.
March 19, 1992.
*103 William T. Edwards, Jr., Middleburg, Fla., for plaintiff.
Lester Makofka, Jacksonville, Fla., for defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
GEORGE L. PROCTOR, Bankruptcy Judge.
This adversary proceeding is before the Court upon the complaint filed by Frederick Arthur Barthlow seeking a denial of defendants' discharge pursuant to 11 U.S.C. § 727(a)(2), (3), and (5). A trial of this adversary proceeding was held December 17, 1991. After the closing of evidence, the Court granted the motion to dismiss as to defendant Janie M. More based on Federal Rule of Civil Procedure 41(b) and Federal Bankruptcy Rule of Procedure 7041. Accordingly, only Jack More remains as a defendant in this adversary proceeding. Upon the evidence presented, the Court enters the following Findings of Fact and Conclusions of Law:
FINDINGS OF FACT
Defendant was a shareholder and corporate officer of a business known as 4 J's of Jack's, Inc. Plaintiff lent defendant money which was used to establish the business, procure inventory, and obtain equipment.
Defendant failed to repay the loan, causing plaintiff to file a lawsuit in state court. On December 5, 1989, plaintiff obtained a final judgment against the corporation and the debtors for $26,840.26.
Defendant testified that the corporation was dissolved in December of 1988, although corporate tax returns were required but not filed for the calendar years 1988 and 1989.
Plaintiff stated that over a year prior to the filing of the bankruptcy petition, defendant *104 had "several thousand dollars" worth of what had previously been business inventory in his possession, none of which was disclosed on the bankruptcy schedules. Defendant countered that he owned several hundred dollars worth of supplies from the corporation on the petition filing date and that he included such items under the household goods, supplies, and furnishings section of the B-2 schedule.
Defendant did not list the location of the corporate business books and records in his petition. In addition, he is unsure as to the present location of such books and records.
In addition to his business activities, defendant also owned pre-petition a 1975 Sabre eighteen foot boat. The boat was in extremely poor condition and only worth several hundred dollars.
Defendant sold the boat approximately six months before filing bankruptcy. He testified that the sale was an arms length transaction for several hundred dollars which represented its value. The proceeds of the sale were spent paying the daily living expenses of the debtor before the bankruptcy.
CONCLUSIONS OF LAW
Plaintiff asserts that grounds for denying defendant a discharge exist under 11 U.S.C. §§ 727(a)(2)(A), (a)(3), and (a)(5). These sections provide:
(a) The court shall grant the debtor a discharge, unless
(2) the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, or concealed
(A) property of the debtor, within one year before the date of the filing of the petition;
* * * * * *
(3) the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor's financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case;
* * * * * *
(5) the debtor has failed to explain satisfactorily, before determination of denial of discharge under this paragraph, any loss of assets or deficiency of assets to meet the debtor's liabilities.
1. Fraudulent Transfer or Concealment of Property
Denial of a discharge under § 727(a)(2)(A) requires an objecting party to show that
1) a transfer occurred;
2) that the property transferred was property of the debtor;
3) that the transfer was within one year of the petition; and
4) that at the time of the transfer, the debtor possessed the requisite intent to hinder, delay or defraud a creditor.
In re Peeples, 105 B.R. 90, 93 (Bankr. M.D.Fla.1989). The objector has the burden of proving that the four elements have been met, and the debtor should be denied the privilege of a discharge. Id.; In re Cohen, 47 B.R. 871, 874 (Bankr.S.D.Fla. 1985). See Federal Rule of Bankruptcy Procedure 4005.
In this case, debtor admitted that he had transferred his boat within one year of the petition. However, he claims that the sale, having been conducted at arm's length and for value, was not fraudulent or intended to hinder creditors.
Plaintiff has the burden of proving actual intent to hinder, delay, or defraud creditors, rather than mere constructive intent. In re Reed, 700 F.2d 986, 991 (5th Cir.1983); In re Kindorf, 105 B.R. 685, 689 (Bankr.M.D.Fla.1989). However, actual intent may be inferred from the totality of the circumstances. Id.; Future Time, Inc. v. Yates, 26 B.R. 1006 (Bankr.M.D.Ga.), *105 aff'd without op., 712 F.2d 1417 (11th Cir. 1983).
In assessing circumstantial evidence of intent, courts have traditionally relied upon certain indicia or "badges of fraud." In connection with fraudulent transfers or concealment of assets, the indicia include:
(1) the lack or adequacy of consideration;
(2) the family, friendship or close associate relationship between the parties;
(3) the retention of possession, benefit or use of the property in question;
(4) the financial condition of the party sought to be charged both before and after the transaction in question;
(5) the existence or cumulative effect of a pattern or series of transactions or course of conduct after incurring of debt, onset of financial difficulties, or pendency or threat of suits by creditor; and
(6) the general chronology of the events and transactions under inquiry.
In re Chastant, 873 F.2d 89, 91 (5th Cir. 1989).
In this case, no extrinsic evidence was presented that would indicate the existence of even one of the "badges" of fraud. Plaintiff has failed to carry his burden on the intent element and § 727(a)(2)(A) will not serve to deny defendant's discharge.
2. Failure to Keep Records
Plaintiff alleged that defendant failed to keep appropriate books and records from which his personal and business financial conditions and transactions might be ascertained. This alleged failure is based in part upon defendant's inability to produce or account for the books and records of the now defunct corporation, 4 J's of Jack, Inc., of which he was an officer and shareholder.
The effect of failure to maintain corporate records on an individual's discharge was considered in a case factually similarly to this one. In re Tocci, 34 B.R. 66 (Bankr. S.D.Fla.1983). In that case, the debtors owned and operated a corporate retail appliance store. As in this case, the plaintiff had provided the financing to procure business inventory. The corporation breached the financing agreement and used sale proceeds to pay other business expenses. The diversion of funds was not done fraudulently, but was an effort to keep the business open. Id. at 66.
The court held that ". . . an individual's discharge cannot be denied under this provision because corporate financial records are inadequate where, as is the case here, the corporation is a bona fide separate entity." Id. The objection to discharge had been based solely on debtor's failure to keep adequate corporate financial records; therefore, the objection was overruled and the discharge was granted.
The defendant in the case at bar could not produce or locate the financial records of 4 J's of Jack, Inc. Such failure should not deprive him of his fresh start, particularly where the corporation had been dissolved for nearly two years before the bankruptcy petition was filed.
With respect to the existence and adequacy of defendant's personal financial records, the Court finds that although no such records appear to exist, such deficiency should not deprive defendant of his discharge. The requirement to maintain financial information is intended to protect the interests of creditors by requiring debtors to take such steps as ordinary fair dealing and common caution would dictate to explain their financial condition. In re Trogdon, 111 B.R. 655, 658 (Bankr. N.D.Ohio 1990).
Failure to keep records is not an absolute bar to discharge, as long as the failure was warranted under the circumstances. Rameson Brothers v. Goggin, 241 F.2d 271 (9th Cir.1957). In fact a number of cases exist in which courts have held that no duty to keep books arises. In re Rios, 27 F.Supp. 744 (D.C.N.Y.1939) (Debtor was never in business for himself; but instead received a set salary. This in no way would necessitate his keeping books of account.); In re Goldman, 37 F.Supp. 761 (D.C.N.Y.1941) (clothing machine operator working for weekly wages not engaged in occupation in which bookkeeping is normal *106 practice); Roberts v. W.P. Ford & Son, Inc., 169 F.2d 151 (4th Cir.1948) (salaried employees).
Defendant is a senior clerk at a local community college. As such he is not engaged in an occupation that would require the keeping of financial records. Accordingly, the discharge will not be denied on § 727(a)(3) grounds.
3. Failure to Explain Loss of Assets
Under Federal Rule of Bankruptcy Procedure 4005, plaintiff has the burden of "proving the objection." Thus, the plaintiff has the initial burden of going forward with the evidence and must introduce more than just a mere allegation that the debtor has failed to explain a loss of assets. In re Goldstein, 20 F.Supp. 403 (D.C.N.Y.1937).
In this case plaintiff merely testified that about one year before the bankruptcy was filed he observed "thousands" of dollars of inventory in defendant's possession. This amounts to nothing more than a basic allegation. The evidence on this point is undocumented, uncertain, and insufficient to support a finding that debtor has failed to account for inventory of value. Defendant testified that the remaining inventory, worth several hundred dollars, was in his possession and properly reflected on his schedules. Plaintiff failed to meet his burden under § 727(a)(5).
CONCLUSION
Plaintiff has failed to carry his burden on the objections to discharge under § 727(a)(2)(A), (3), and (5). Consequently, the objections will be overruled and defendant, Jack More, will be granted his discharge.
A separate Final Judgment in favor of defendant will be entered.
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37 So.3d 856 (2010)
BEACH TERRACE ASS'N INC.
v.
DI PAOLO.
No. 2D10-1376.
District Court of Appeal of Florida, Second District.
June 29, 2010.
Decision Without Published Opinion Appeal dismissed.
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42 F.3d 643
U.S.v.Ferguson*
NO. 93-2338
United States Court of Appeals,Eleventh Circuit.
Dec 09, 1994
Appeal From: N.D.Fla.No. 92-04079-TCR-3
1
AFFIRMED.
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510 F.2d 972
Borgv.Weinberger
74-1671
United States Court of Appeals Sixth Circuit
1/8/75
E.D.Mich., 381 F.Supp. 1212
AFFIRMED
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Court of Appeals
Sixth Appellate District of Texas
JUDGMENT
Brendan Xavier Douglas, Appellant Appeal from the 124th District Court of
Gregg County, Texas (Tr. Ct. No. 41,780-
No. 06-15-00067-CR v. B). Opinion delivered by Justice Moseley,
Chief Justice Morriss and Justice Burgess
The State of Texas, Appellee participating.
As stated in the Court’s opinion of this date, we find no error in the judgment of the court
below. We affirm the judgment of the trial court.
We note that the appellant, Brendan Xavier Douglas, has adequately indicated his inability
to pay costs of appeal. Therefore, we waive payment of costs.
RENDERED MAY 6, 2016
BY ORDER OF THE COURT
JOSH R. MORRISS, III
CHIEF JUSTICE
ATTEST:
Debra K. Autrey, Clerk
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598 F.Supp. 1562 (1984)
MOFFAT COUNTY STATE BANK, Plaintiff,
v.
PRODUCERS LIVESTOCK MARKETING ASSOCIATION, Defendant.
No. 82-C-1763.
United States District Court, D. Colorado.
December 17, 1984.
Gregory L. Williams, Rothgerber, Appel & Powers, Denver, Colo., for plaintiff.
*1563 William D. Meyer, Boulder, Colo., for defendant.
ORDER
CARRIGAN, District Judge.
The plaintiff, Moffat County State Bank (the "Bank"), a Colorado corporation, sued Producers Livestock Marketing Association ("Producers"), a livestock sale barn, claiming that Producers converted the Bank's property by selling at auction sixty-eight head of cattle for the account of Thomas E. Seewald which were subject to the Bank's perfected security interest. Producers is a Utah corporation doing business in Colorado. The Bank is claiming $20,313.00, the proceeds from the cattle sale, plus interest from the date of the sale. The Bank and Producers have filed cross motions for summary judgment. Producers has filed a third party complaint against Thomas E. Seewald but that complaint is not in issue here. Jurisdiction is founded on diversity. 28 U.S.C. § 1332(a).
The parties submitted Stipulated Facts and Exhibits setting forth all facts necessary to decide the summary judgment motions. Because there are no genuine issues of material fact, summary judgment is appropriate. Fed.R.Civ.P. 56. The essential facts are as follows:
On July 27, 1981, the Bank loaned $75,232.33 to Thomas E. Seewald of Maybell, Colorado. This loan combined a new advance and a rewriting of existing mature loans previously made to Seewald. Seewald was a cattle rancher in Moffat County, Colorado. To secure its loan, the Bank entered into a security agreement with Seewald designating as collateral certain farm equipment, seventy-nine head of cattle and four horses. The cattle were identified by number, sex, age and brand.
Section 2 of the security agreement provides that the Bank holds a security interest in the listed property "together with all additions, accessions, replacements, substitutions, proceeds and products therefrom including natural increase of livestock and any and all property of similar type or kind now owned or hereafter acquired by the debtor and used for either personal, family or household purposes; farming or ranching operations; or any business in which the debtor is or might be engaged."
Two other provisions of the agreement are relevant. Section 5(4) provides that the "Debtor shall at all times keep the collateral at [Maybell in Moffat County, Colorado] unless notice is given to the Secured Party in advance and the Secured Party consents in writing to the removal to another location." Section 6 provides that the "Debtor shall be in default under this Agreement upon the ... sale of any of the collateral. ..."
Because the Bank had entered into similar arrangements with Mr. Seewald in the past, a financing statement, listing the bank as secured party and Seewald as debtor, and covering "Machinery and Livestock," had been filed with the Clerk and Recorder of Moffat County in 1976. Neither the "proceeds" nor the "products" box of the financing statement was checked. Pursuant to the Uniform Commercial Code ("U.C.C."), as codified at Colo.Rev.Stat. § 4-9-403(2) (1984 Cum.Supp.), a financing statement is effective for five years from the date of filing. In anticipation of the execution of the July 27, 1981 security agreement, and pursuant to Colo.Rev.Stat. 4-9-403(3) (1984 Cum.Supp.), the Bank filed a Continuation Financing Statement with the Moffat County Clerk and Recorder on July 10, 1981.
On October 20 and 21, 1981, without the Bank's knowledge, Seewald sold sixty-eight head of cattle through Producers, a livestock sale barn in Greeley, Colorado. Prior to sale, the cattle were inspected by a Colorado state brand inspector who certified compliance with the livestock bill of sale laws to Producers. According to Producers' sales records, it sold sixty-three head *1564 of cattle for Seewald on October 20, 1981 for a gross sales price of $19,730.56, and five head of cattle on October 21, 1981 for a gross sales price of $1,837.33. The total net proceeds paid by Producers to Seewald for both sales, after deducting commissions and other sale expenses, was $20,313.00. Seewald warranted to Producers that all cattle were free from any liens and encumbrances. Producers made no inquiry and had no actual knowledge of the Bank's asserted security interest in the cattle. Seewald neither remitted any part of the proceeds to the Bank nor informed the Bank of the sale.
In January 1982, the Bank first learned, through an anonymous letter, that Seewald may have sold some of his cattle without informing the Bank or remitting the proceeds to the Bank. By letter of February 19, 1982, the Bank informed Seewald that he was in breach of the security agreement by diverting proceeds from the October 1981 cattle sales and by failing to apply that money to the note principal and interest at the Moffat County State Bank. After contacting public livestock markets across the state, the Bank discovered, in March 1982, that Producers had sold the cattle for Seewald in October 1981. Despite the Bank's repeated demands for payment, neither Seewald nor Producers has remitted to it any part of the proceeds.
In August 1982, the Bank foreclosed on the farm equipment listed in the security agreement. After applying the proceeds of that sale to Seewald's indebtedness, Seewald still owed the Bank approximately $35,000 plus accrued interest. On August 20, 1982, Seewald filed, in the United States Bankruptcy Court for the District of Colorado, a voluntary petition under chapter 7 of the Bankruptcy Code.
The course of dealing and course of performance between the Bank and Seewald with respect to sales of cattle other than the one in dispute are also relevant. Seewald was an agricultural loan customer at the Bank from 1974 through 1982. During that period, Seewald negotiated a number of agricultural loans to finance his cattle breeding operation. The Bank expected Seewald to repay his loans from the proceeds derived from the sale of cattle.
Although the Bank's security agreements with Seewald, including the July 1981 agreement, state that Seewald was required to obtain written consent from the Bank before selling any cattle collateral, the Bank did not transact business with its customers, including Seewald, in that manner. The relevant stipulated facts are as follows:
"14. On more than one occasion, [J. Ted Haddan, the Bank Vice-President] advised Seewald that he was permitted to sell his cattle collateral as he saw fit provided that he brought the proceeds from each sale promptly to the Bank, where Seewald and the Bank would discuss the disposition of such proceeds. This arrangement was applied by the Bank to most of its agricultural loan customers and is typical in the cattle industry.
15. The Bank did not require agricultural borrowers, including Seewald, to have proceeds' checks drawn payable to both the borrower and the Bank, unless the borrower was in default or had otherwise given the Bank cause for concern. Such restriction was not placed on Seewald.
16. In practice, the Bank did not require Seewald or other agricultural borrowers to obtain written consent from the Bank to transport or sell cattle collateral before such transportation or sale. There were two reasons this was not required: (1) requiring written consent would have created an administrative burden for the Bank; and (2) the Bank trusted Seewald and its other agricultural borrowers to bring in the proceeds after any sale.
26. Prior to October 1981, the Bank's policy generally required the loan officer *1565 to field inspect collateral for loans once per year, time permitting. The Seewald collateral was inspected on April 28, 1979 and January 30, 1982 by Haddan. More frequent inspections were not performed due to Haddan's lack of time to perform same.
32. In addition to the October 1981 sales by Seewald at Producers' market, the Bank is aware of cattle sales by Seewald on or about March 9, 1977, June 30, 1977, October 14, 1977, January 10, 1978, October 20, 1980, and December 10, 1981. On none of these occasions did Seewald request specific pre-sale permission from the Bank to sell some of his cattle.
38. If Seewald had brought the proceeds from the October 1981 sales at Producers in to the Bank within a few days after those sales, the Bank would not have considered Seewald in breach of his promissory note or security agreement with respect to those sales."
This is a diversity case. Because all events relevant to the dispute occurred in Colorado, Colorado law governs.
Two issues must be resolved:
A. Did the Bank perfect a security interest in the cattle sold by Producers?
B. Did the Bank authorize sale of the cattle and thus lose its security interest in the collateral under Colo.Rev.Stat. § 4-9-306(2) (1984 Cum.Supp.)?
If the Bank perfected its security interest in the cattle sold by Producers and did not authorize the sale of the cattle, Producers is liable to the Bank for converting the cattle. On the other hand, if the Bank failed to perfect its security interest in the cattle or authorized the sale by Producers, the Bank must bear the loss for Seewald's breach of the security agreement.
The applicable Colorado law is clear and undisputed:
"An auction company that sells property in behalf of another who holds the property subject to a perfected security interest, and the purchaser thereof, are each liable to the holder of the security interest for the fair value of the property sold, regardless of whether the auction company purchaser had actual knowledge of the existence of the security interest or the other's want of authority to sell, in the absence of facts showing acquiescence or consent on the part of the holder of the security interest." Colorado Bank and Trust Company v. Western Slope Investments, Inc., 36 Colo.App. 149, 539 P.2d 501, 504 (1975).
This dispute arises because of the farm products exception to the protection of good faith purchasers rule of the Uniform Commercial Code. Section 9-307(1) of the Code, Colo.Rev.Stat. § 4-9-307(1) (1973), provides:
"A buyer in ordinary course of business (subsection (9) of section 4-1-201) other than a person buying farm products from a person engaged in farming operations takes free of a security interest created by his seller even though the security interest is perfected and even though the buyer knows of its existence."
It is undisputed that the cattle sold by Producers were farm products and that Seewald was a person engaged in farming operations. It is similarly undisputed that Producers was a buyer in the ordinary course of business.
A. Did the Bank Perfect a Security Interest in the Cattle?
The perfection of a security interest is governed by Article 9 of the Uniform Commercial Code, as adopted in Colorado at Colo.Rev.Stat. §§ 4-9-101 et seq. (1973). The Bank argues that it took every step required by the U.C.C. to perfect its security interest in the cattle.
Producers rests on three grounds in asserting that the Bank failed to perfect a security interest in the cattle it sold for *1566 Seewald. First, the Bank inadequately described the livestock in the security agreement. Second, the Bank inadequately described the livestock in the financing statement. Third, the Bank acquired no interest in the cattle because it did not execute a bill of sale for the cattle nor did it take and record an assignment of the cattle brand in compliance with the livestock bill of sale laws, Colo.Rev.Stat. §§ 35-54-101 et seq. (1984).
1. Adequacy of description in the security agreement.
The security agreement identifies the livestock collateral as follows:
"71 cows and calves
1 2yrs heifer
3 yearling (2 steers & 1 heifer)
4 bulls
4 horses
Branded thus (5)
"
In addition to the itemized livestock, the security agreement also extended to "all additions, accessions, replacements, substitutions, proceeds and products therefrom including natural increase in livestock and any and all property of similar type or kind now owned or hereafter acquired by the Debtor and used for either personal, family or household purposes; farming or ranching operation; or any business in which the Debtor is or might be engaged."
Colo.Rev.Stat. § 4-9-110 (1973) sets forth the statutory standard for description of collateral in a security agreement:
"For the purposes of [Article 9 of the U.C.C.], any description of personal property is sufficient if it specifically identifies and itemizes in the security agreement what is described as to consumer goods, and whether or not it is specific if it reasonably identifies what is described as to all other personal property." (emphasis added)
Producers asserts that, in Colorado, a description "reasonably identifies" livestock only if it meets the requirements of the livestock bill of sale laws, Colo.Rev. Stat. §§ 35-54-101 et seq. (1984). Colo. Rev.Stat., § 35-54-101 provides, in pertinent part, that a duly executed bill of sale must describe the animal by sex, age, breed, brands or earmarks, wattle or dewlap, and horned or dehorned. The description of livestock in the security agreement is admittedly not this specific.
Producers' assertion is incorrect. The collateral description requirements of Article 9 of the U.C.C. are not supplemented by the livestock bill of sale laws. The statutory schemes serve different purposes. The livestock bill of sale laws provide a method to transfer title to livestock, while Article 9 provides for the creation and perfection of security interests in personal property, including cattle.
The livestock bill of sale laws were clearly designed to prevent rustling. Cugnini v. Reynolds Cattle Co., 648 P.2d 159 (Colo. App.1981), aff'd, 687 P.2d 962 (1984). The bill of sale accompanying transfer must be sufficiently specific to identify a particular animal. This law is addressed to one specific problemrustlingand does not address the distinct problem of notifying prospective buyers of security interests in the livestock. There is no provision in the livestock bill of sale laws for creating and recording a security interest; the only mechanism for this purpose is that set forth in Article 9 of the U.C.C.
The description of the collateral in the security agreement was adequate to give the bank a valid security interest in all cattle owned by Seewald. The description "reasonably identifies" what is described. Colo.Rev.Stat. § 4-9-110 (1973). That is all that is required.
2. Adequacy of description in the financing statement.
On November 26, 1976, the Bank filed a financing statement with the Moffat County Clerk and Recorder which identified the collateral as "machinery and livestock." Colo.Rev.Stat. §§ 4-9-401 and 402 (1984 Cum.Supp.). Neither the "products" nor the "proceeds" box was checked. On July 10, 1981, the Bank filed a continuation *1567 statement in accordance with Colo.Rev. Stat. § 4-9-403(3) (1984 Cum.Supp.). Producers argues that the Bank only perfected a security interest in the cattle specifically enumerated in the security agreement because it failed to check the "products" of collateral box.[1] This argument is without merit.
A financing statement "is sufficient if it ... contains a statement indicating the types ... of collateral." Colo.Rev.Stat. § 4-9-402(1) (1984 Cum.Supp.). Subsection 4-9-402(8) (1984 Cum.Supp.) further provides that "[a] financing statement substantially complying with the requirements of this section is effective even though it contains minor errors which are not seriously misleading." The Fifth Circuit has held, on facts nearly identical to those at issue here, that the simple description "livestock" is sufficient under U.C.C. § 9-402 (Colo.Rev.Stat. § 4-9-402) to cover natural increases and other additions even in the absence of a specific indication on the financing statement. United States v. Southeast Mississippi Livestock Farmers Association, 619 F.2d 435 (5th Cir.1980). In that case, the court explained:
"Official Comment (2) to § 9-402 of the UCC states that a financing statement is intended to be a system of `notice filing' and nothing more:
What is required to be filed is not, as under chattel mortgage and conditional sales acts, the security agreement itself, but only a simple notice which may be filed before the security interest attaches or thereafter. The notice itself indicates merely that the secured party who has filed may have a security interest in the collateral described. Further inquiry from the parties concerned will be necessary to disclose the complete state of affairs."
619 F.2d at 439.
The court's conclusion in Southeast Mississippi is equally true in this case: "Certainly, any reasonable party examining the financing statements describing [Seewald's] collateral would have been sufficiently alerted to direct an inquiry to the [Bank] to determine what, if any, security interest in the livestock was held by the [Bank]."
It is arguable whether, to be technically correct, the Bank should have checked the "products" box; the security agreement explicitly covered the enumerated livestock "together with all additions, accessions, etc." Regardless, had Producers consulted the financing statement, the Bank's failure to check the box would not have been "seriously misleading." Colo.Rev.Stat. § 4-9-402(8) (1984 Cum.Supp.).
3. Failure to comply with the livestock bill of sale laws, Colo.Rev.Stat. §§ 35-54-101 et seq. (1984).
The Bank was not required to execute a bill of sale under Colo.Rev.Stat. § 35-54-101 nor to take an assignment of Seewald's brand, as Producers asserts, when it took a security interest in Seewald's cattle. As explained above, the livestock bill of sale laws govern passage of title in livestock. The livestock bill of sale laws supplement Article 2 of the U.C.C. as codified in Colorado, Colo.Rev.Stat. §§ 4-2-101 et seq., and, to the extent they are inconsistent with Article 2, supercede it. See Cugnini v. Reynolds Cattle Co., supra. They do not, however, supplement or supercede Article 9 as Producers asserts.
In sum, therefore, I find and conclude that the Bank did perfect a security interest in the cattle Producers sold for Seewald.
B. Did the Bank authorize sale of the cattle and thus lose its security interest?
The second issue is whether the Bank authorized the sale of cattle and thus *1568 lost its security interest in the collateral. Colo.Rev.Stat. §§ 4-9-306(2) (1984 Cum. Supp.) provides:
"Except where this article otherwise provides, a security interest continues in collateral notwithstanding sale, exchange, or other disposition thereof unless the disposition was authorized by the secured party in the security agreement or otherwise, and also continues in any identifiable proceeds including collections received by the debtor." (emphasis added)
The Bank argues that the security agreement did not authorize sale of the cattle and that that agreement governs. It relies on Colorado Bank & Trust Co. v. Western Slope Investments, Inc., supra, 539 P.2d 501, where the court rejected an auction company's waiver defense and held that the company was liable for conversion for selling cattle subject to a security interest held by the plaintiff bank. There the security agreement had prohibited sale of the collateral without prior written consent from the bank, but the bank's loan officer testified at trial that "he had never required a customer to get written approval before the sale of collateral, and that he generally relied upon the honesty of the customer to deliver the proceeds to the bank from such sales." 539 P.2d at 503. On appeal, the court held that this testimony could not support the auction company's waiver defense because when a "usage of trade" is inconsistent with the express terms of the security agreement, the express terms control. Colo.Rev.Stat. §§ 4-1-205(2) and (4) (1973).
In the instant case, however, there is evidence of waiver not only from a "course of dealing" or "usage of trade," but also from the "course of performance" between the parties. Pursuant to Colo.Rev.Stat. § 4-2-208(3) (1973), a "course of performance shall be relevant to show a waiver or modification of any term inconsistent with such course of performance."
The Bank argues that its authorization, if any, was conditioned on Seewald's remitting the proceeds to it, and that Seewald's failure to perform this condition subsequent rendered its consent inoperative. This argument is without merit. The Bank's authorization, if any, was unaffected by Seewald's failure to remit the proceeds of the sale. The Tenth Circuit addressed this issue in First National Bank and Trust Company of Oklahoma City v. Iowa Beef Processors, Inc., 626 F.2d 764, 769 (10th Cir.1980), where it stated:
"Consent to sell in the debtor's own name `provided' the seller remits by its own check to the bank is not a true conditional sales authorization. In essence, such a condition makes the buyer an insurer of acts beyond its control. The bank has made performance of the debtor's duty to remit proceeds to the bank a condition of releasing from liability a third party acting in good faith. IBP could not ascertain in advance whether this condition would be met, as it could if a condition precedent was involved; nor did IBP have any control over the performance of the condition, as long as it paid [the debtor]. A secured party has an interest in protecting its security by conditioning its consent, but it can place conditions that would afford it protection without great unfairness to the good faith purchaser."
The Bank's reliance on Southwest Washington Production Credit Association v. Seattle-First National Bank, 92 Wash.2d 30, 593 P.2d 167 (1979), is misplaced. In that case, the court held that a security interest continued in collateral sold by debtors with consent of the secured party (on condition the debtors remitted the proceeds to the credit association) when the buyer failed to pay the debtors who were then unable to remit the proceeds to the credit association. In that situation there was no unfairness in continuing the security interest because the party liable, the buyer, controlled fulfillment of the condition. In contrast, here Producers, the buyer, paid Seewald, the debtor, for the cattle. It was the debtor who failed to pay the Bank, as in the Iowa Beef Processors case.
*1569 Finally, the Bank argues that it did not authorize or waive its security interest in the cattle because it did not voluntarily and intentionally relinquish a known right. Security National Bank v. Belleville Livestock Commission Co., Inc., 619 F.2d 840, 846 (10th Cir.1979). Although one of the purposes of the Uniform Commercial Code is "to make uniform the law among the various jurisdictions," Colo.Rev.Stat. § 4-1-102(2)(c) (1973), courts have split widely on the question whether the secured party authorized sale of the collateral or waived its security interest in the collateral given very similar fact situations. The fact that so many cases have addressed this issue indicates that the same problem has arisen again and again in farming and ranching communities across the country.
While the security agreement normally prohibits disposition of the collateral without prior written consent from the secured party, the secured party usually does not, in practice, insist upon that written consent. The reason for the practice expressed by the Moffat County State Bank is typical. It would be administratively burdensome to provide a written consent for each sale of collateral. Rather, the Bank relies on the honesty of its agricultural borrowers to bring in the proceeds after a sale of collateral.
Banks and credit associations normally comply with the notice-filing provisions of Article 9 of the U.C.C. as the Bank did here. However, it appears from the numerous reported cases that livestock auction companies and other livestock purchasers often (and perhaps ordinarily) do not make inquiry to determine whether the livestock are subject to a security interest. Producers argued here that to require such an inquiry would be too burdensome; typically, a livestock sale barn auctions hundreds, if not thousands, of animals every day and cannot easily telephone each county clerk to check for financing statements, then place a follow-up call to each secured party to determine whether the animals are collateral and whether consent has been given for the sale.
The leading cases on the issue of authorization and waiver are Clovis National Bank v. Thomas, 77 N.M. 554, 425 P.2d 726 (1967) (holding that the secured party waived its security interest in the collateral cattle),[2] and Garden City Production Credit Association v. Lannan, 186 Neb. 668, 186 N.W.2d 99 (1971) (holding that the secured party did not waive its security interest in the collateral cattle).
In the Clovis line of cases, the courts have characterized the secured party's conduct as express waiver or express consent and have held that the secured party's authorization of the sale releases the auction company or other purchaser from liability to the secured party. First National Bank and Trust Company of Oklahoma City v. Iowa Beef Processors, Inc., supra, 626 F.2d 764; Security National Bank v. Belleville Livestock Commission Co., Inc., supra, 619 F.2d at 846-48 (finding no implied waiver but finding express consent); Ottumwa Production Credit Association v. Keoco Auction Co., 347 N.W.2d 393 (Iowa 1984); Lisbon Bank and Trust Co. v. Murray, 206 N.W.2d 96, 99 (Iowa 1973); North Central Kansas Production Credit Association v. Washington Sales Co., 223 Kan. 689, 577 P.2d 35 (1978) (finding no implied waiver but finding express consent); Anon, Inc. v. Farmers Production Credit Association of Scottsburg, 446 N.E.2d 656 (Ind.App.1983). A persuasive rationale for this result is that "the secured party is in a much better position to protect itself than the buyer because he knows of the debtor and the origin of the product. The buyer, sometimes at remote distances, does not have this knowledge. Therefore, the loss is cast upon the secured party." Anon, Inc., supra, 446 N.E.2d at 660.
Lannan and its progeny, on the other hand, have characterized the secured party's conduct as a mere failure to object or *1570 rebuke the debtor for selling without written consent and have held that such mere inaction does not constitute a waiver. Security National Bank v. Belleville Livestock Commission Co., Inc., supra (finding no implied waiver from bank's failure to object but finding express consent to sale); Wabasso State Bank v. Caldwell Packing Co., 308 Minn. 349, 251 N.W.2d 321, 323 (1976) (see cases there cited from both the Clovis and Lannan lines of cases); First Tennessee Production Credit Association v. Gold Kist, Inc., 653 S.W.2d 418 (Tenn.Ct.App.1983). An important policy rationale underlying these holdings is to facilitate the granting of credit to the capital-intensive agricultural industry. North Central Kansas Production Credit Association v. Washington Sales Co., supra, 577 P.2d at 41.
While I find little distinction in the operative facts between cases where courts have found express consent and others where courts have found only failure to object not amounting to waiver, I must attempt to apply these precedents to the facts here presented. I find that the Moffat County State Bank expressly consented to Seewald's sale of cattle. The Bank expected Seewald to sell his cattle in order to repay his loans. Its vice-president had advised Seewald on more than one occasion that he could sell his cattle collateral as he saw fit provided Seewald promptly brought the proceeds from each sale to the Bank. Stipulation 14. If Seewald had brought the sale proceeds check to the Bank within a few days following the October 1981 sales by Producers, the Bank would not have considered Seewald in default under the promissory note and security agreement. Stipulation 38. It is apparent that the event of default was Seewald's failure to remit the proceeds from the sale, not the sale itself.
As the Tenth Circuit stated in First National Bank and Trust Co. of Oklahoma City v. Iowa Beef Processors, supra, 626 F.2d at 767-68:
"The reality of cattle financing arrangements is that the secured party expects and wants the collateral to be sold continually in order for it to receive payment on the line of credit it has extended. At the same time, however, the secured party is reluctant to give blanket consent to the sales because it would lose its right to go against the purchaser should the debtor default. Consequently, secured parties in this area have tried to protect themselves by placing conditions on sales authorizations."
The court found, however, that consent conditioned on the debtor remitting the proceeds to the bank was not a true conditional sales authorization, as discussed above. The court went on to conclude as follows:
"[T]he policy of the Uniform Commercial Code to promote ready exchange in the marketplace, see Riverside Nat'l Bank v. Law, 564 P.2d 240, 243 (Okl.1977), outweighs the secured party's interest in the collateral under these circumstances. Therefore, we hold that even though the secured party conditions consent on receipt of the proceeds, failure of this condition will not prevent that consent from cutting off the security interest under section 9-306(2)." 626 F.2d at 769.
Producers admittedly did not check the Moffat County records to determine whether the cattle were subject to a security interest but this failure is irrelevant because the Bank gave Seewald actual authority to sell. Even if Producers had checked the Moffat County records and, finding a financing statement, telephoned the Bank, it presumably would have been told that Seewald was authorized to sell his cattle and accept proceeds in his own name as long as he brought the proceeds to the Bank. See First National Bank and Trust Company of Oklahoma City v. Iowa Beef Processors, supra, 626 F.2d at 768.
The tension in the law on the issue of the buyer's liability when the debtor pockets the proceeds from the sale of livestock collateral, as evidenced by divergent case law results on facts apparently indistinguishable in all material respects, arises because the Uniform Commercial Code's *1571 treatment of security interests in livestock does not reflect the actual practice in the trade.
Section 9-307 of the U.C.C., Colo.Rev. Stat. § 4-9-307 (1973), provides that "[a] buyer in the ordinary course of business ... other than a person buying farm products from a person engaged in farming operations takes free of a security interest created by his seller even though the security interest is perfected and even though the buyer knows of its existence." (emphasis added) A number of states have amended this provision to distribute more equitably the rights and responsibilities of lenders holding security interests in livestock, and livestock buyers, including auction companies. See 3 Uniform Laws Annotated Master Ed., Uniform Commercial Code § 9-307 (1984 Cum.Annual Pocket Part), reporting Illinois, Nebraska, North Dakota, Ohio, Indiana and Tennessee amendments.
In Ohio, for example, a buyer of farm products in the ordinary course of business takes free of a perfected security interest unless the secured party sends written notice to the buyer before the sale that it claims a security interest in certain described farm products. The secured party may request the debtor to provide a written list of its potential buyers. If the secured party does request such a list, the debtor may not sell farm products to a buyer who does not appear on the list without the prior written consent of the secured party. This system protects both the secured party and the buyer of farm products without unduly burdening either party. The debtor can readily furnish the secured party a list of the sale barns and major purchasers with whom he or she normally transacts business. The secured party can then send a simple notice to each listed purchaser. Each auction company or other purchaser would then maintain its own filing system and could quickly check its own records, when a load of livestock comes in, to determine whether it should make the proceeds check payable only to the seller or jointly to the seller and the secured party.
While other schemes could, of course, be devised, the Ohio legislation illustrates that the Colorado legislature holds the solution to the problem brought to this court by the Bank and Producers. Until the legislature acts, courts will continually be placed in the position of choosing between two innocent parties on the basis of such ill-defined and difficult to apply distinctions as failure to rebuke versus express consent. The resultant uncertainty will continue to spawn litigation in contravention of the policies of the Uniform Commercial Code.
Accordingly,
IT IS ORDERED that summary judgment is granted in favor of defendant Producers Livestock Marketing Association and against plaintiff Moffat County State Bank.
NOTES
[1] In 1977, the U.C.C. was amended to provide that a security interest in collateral automatically continues in identifiable cash proceeds provided that the financing statement covers the original collateral. Colo.Rev.Stat. § 4-9-306(3)(b) (1984 Cum.Supp.). It thus became unnecessary to check a box on each financing statement in order to perfect a security interest in identifiable cash proceeds. The Bank's failure to check the proceeds box in 1976 was thus without significance when the cattle were sold in 1981.
[2] In 1968, New Mexico, by statute, set aside the Clovis rule. N.Mex.Stat.Ann. §§ 55-1-205(3) and (4) (1978).
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962 So.2d 444 (2007)
STATE of Louisiana
v.
Salvador MANGANO and Mabel Mangano.
No. 2007-KK-1777.
Supreme Court of Louisiana.
September 4, 2007.
In re State of Louisiana; Plaintiff; Applying for Supervisory and/or Remedial *445 Writs, Parish of West Feliciana, 20th Judicial District Court Div. A, No. 07-WLFN-12; to the Court of Appeal, First Circuit, No. 2007 KW 1710.
Writ granted. Defendants have failed to show that the spreadsheet sought to be admitted is not hearsay or that it falls within an exception to the hearsay rule. The ruling of the trial court admitting the spreadsheet is reversed and state's objection is sustained.
CALOGERO, C.J., would deny.
KNOLL, J., would deny.
WEIMER, J., would deny.
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} |
#26521-a-LSW
2013 S.D. 70
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
****
BOBBIE M. SEVERSON, f/k/a
BOBBIE M. HUTCHINSON, Plaintiff and Appellant,
v.
KENNETH N. HUTCHINSON, Defendant and Appellee.
****
APPEAL FROM THE CIRCUIT COURT OF
THE SIXTH JUDICIAL CIRCUIT
STANLEY COUNTY, SOUTH DAKOTA
****
THE HONORABLE JOHN L. BROWN
Judge
****
ROSE ANN WENDELL
Pierre, South Dakota Attorney for plaintiff
and appellant.
DAVID W. SIEBRASSE
Pierre, South Dakota Attorney for defendant
and appellee.
****
CONSIDERED ON BRIEFS
ON AUGUST 27, 2013
OPINION FILED 09/25/13
#26521
WILBUR, Justice
[¶1.] Kenneth Hutchinson (Father) and Bobbie Severson (Mother) are the
parents of five children. The trial court awarded primary physical custody of the
children to Father. Mother appeals. We affirm.
FACTS AND PROCEDURAL BACKGROUND
[¶2.] Mother and Father were married in 1997. Five children were born to
the marriage: two daughters, M.L.H. and A.M.H.; and three sons, J.R.H., Z.C.B.H.,
and M.J.H.
[¶3.] In March 2009, Father was removed from the marital home as a result
of an investigation by the Department of Social Services. The investigation
commenced because of Father’s alleged abuse of one of the children. Father
successfully completed the requirements of parenting classes and the allegations of
abuse were eventually found to be “unsubstantiated with concern.”* Also during
* At the permanent custody hearing on August 16, 2012, Father testified on
cross-examination as to his understanding of what “unsubstantiated with
concern” meant:
A. The concerns were not listed. That was the bottom
statement from the DSS report[—]unsubstantiated with
concern.
Q. ([Mother’s counsel]) Well, you met with them, didn’t you, had
meetings with them during that time, during that 18-month
investigation?
A. That’s correct.
Q. And what’s your understanding of what their concerns were?
....
A. The concerns they had were my raising my voice to the
children and use of spanking.
-1-
#26521
this time, Mother obtained a temporary protection order against Father, but that
order was eventually modified to a civil restraining order.
[¶4.] In an effort to salvage their marriage following the Department of
Social Services’ investigation, the couple and the children began to reside together
on the weekends. When efforts to save the marriage failed, Mother filed for divorce
in March 2010.
[¶5.] In September 2010, however, the couple again reconciled and resided
together with their children. This reconciliation period did not last long. The
couple eventually divorced by stipulation and the judgment and decree of divorce
was filed on December 9, 2010. The parties stipulated to joint legal custody with
Mother having primary physical custody of the five children.
[¶6.] Also during that time, Mother was having a relationship with another
man (new husband), whom she eventually married in 2011. Mother’s relationship
with her new husband was often violent. At one point during Mother’s marriage to
her new husband, Mother requested a domestic violence protection order against
her new husband and a temporary protection order was granted. After Mother filed
a motion to dismiss the protection order, the protection order was dismissed.
[¶7.] Several of the children have mental and emotional issues. M.L.H., the
eldest daughter and child, and J.R.H., the eldest son, would often get into verbal
and physical arguments with one another.
[¶8.] Following the domestic violence incident between Mother and Mother’s
new husband, Father sought both emergency and permanent change of custody for
the five children on June 2, 2011. In support of these motions, Father contended
-2-
#26521
that Mother was not parenting the children and not protecting them from Mother’s
new husband’s violent behavior.
[¶9.] At the emergency custody hearing on June 15, 2011, the trial court
heard testimony from Mother and Father and Mother’s friend, Mae Davis. Davis
testified that she had concerns about Mother leaving the children alone during the
day for several hours at a time and overnight so that Mother could travel out of
town to see Mother’s new husband. Davis also stated that Mother would speak
negatively about Father in front of the children. Davis further testified that Mother
knew that her new husband had a criminal record of domestic abuse and terroristic
threats. Davis described the lack of stability and unkempt condition of Mother’s
home. By contrast, Davis testified that Father had a stable, structured, and clean
home environment for the children. Additionally, Davis told the trial court that
Father did not speak negatively about Mother to the children.
[¶10.] At the conclusion of the emergency custody hearing, the trial court
granted temporary custody of the five children to Father. In doing so, the trial court
noted its concerns about Mother’s ability to protect the children from her new
husband and Mother’s choice to leave the minor children alone for several hours at
a time and overnight so that Mother could visit her new husband. The trial court
ordered that Mother have visitation with the children and that a home study be
conducted.
[¶11.] During the time period between the temporary custody trial and the
permanent custody trial, Mother divorced her new husband. Additionally, a few
-3-
#26521
months after Father was awarded temporary custody of the five children, M.L.H.
returned to Mother’s home to reside.
[¶12.] A three-day custody trial was held in August 2012. The parties,
several lay witnesses, a home study evaluator, a psychologist, and a nurse
practitioner testified. The trial court concluded that the testimony of Dr. Andre
Clayborne, the home study evaluator; Dr. Stephan Langenfeld, the psychologist who
conducted psychological evaluations on Mother and Father; and John Erpenbach,
the nurse practitioner who performed a psychological evaluation on Mother, was
“consistent in what they observed and what they recommended.” Dr. Clayborne
conducted a home study evaluation, which thoroughly analyzed the applicable
Fuerstenberg factors, and recommended that Father retain primary physical care of
the five children with Mother having visitation. Dr. Langenfeld testified that
Mother has “generalized anxiety disorder” with “avoidant, dependent and self-
defeating personality characteristics.” He further stated that his “general
impression is . . . she’s got some stuff that’s going to make it more difficult for her to
effectively parent.” Dr. Langenfeld further testified that Father has “obsessive-
compulsive and dependent personality characteristics[,]” but “that [Father] does not
appear to be presenting significant emotional or psychological issues that would
prevent [Father] from parenting.” He also told the trial court that Father presented
an overly positive picture of Father’s current situation, but Father’s response did
not invalidate the test. Finally, Erpenbach testified that Mother’s symptoms were
consistent with a generalized anxiety disorder. Mother had been prescribed
medication for her medical symptoms.
-4-
#26521
[¶13.] Additionally, Carrie Frahm, a friend of the couple, testified that Father
“has some of the most exceptional parenting skills that [she had] ever witnessed”
and that Father was even-tempered and that Father was able to successfully parent
five children by himself. She also testified that she helped clean Mother’s house
and that she and Mother were no longer friends because of Mother’s dishonesty as it
relates to Father and the children. The trial court found Frahm’s testimony to be
the most credible and “her testimony indicate[d] [Father] [was] the more stable and
consistent parent.” And during the custody hearing, the trial court remarked that
Frahm’s testimony was the most credible because “she had the best opportunity to
observe the parties and their interactions with the children[.]”
[¶14.] The trial court ultimately awarded joint legal custody and primary
physical custody to Father. In doing so, the trial court noted that both parents are
fit parents, though neither parent is perfect. The trial court found that while
Father “present[ed] a more calm, stable and consistent demeanor, at least as . . . to
the . . . [c]hildren[,]” “[Father] need[ed] to work on his communication skills[.]” In
discussing Mother’s demeanor, the trial court noted that Mother was “volatile and
emotional in her dealing with issues and that contribute[d] to conflict.” The trial
court also acknowledged its concerns regarding Mother’s prescribed medication and
her consistency in taking her prescribed medication and in attending counseling.
Additionally, the trial court determined that there were no compelling reasons to
separate the siblings.
-5-
#26521
[¶15.] Mother appeals from the trial court’s order granting primary physical
custody of the five children to Father. Mother and Father filed motions with this
Court each requesting appellate attorney fees pursuant to SDCL 15-26A-87.3.
STANDARD OF REVIEW
[¶16.] “We review ‘child custody decisions under the abuse of discretion
standard of review.’” Roth v. Haag, 2013 S.D. 48, ¶ 11, 834 N.W.2d 337, 339-40
(quoting Schieffer v. Schieffer, 2013 S.D. 11, ¶ 13, 826 N.W.2d 627, 633). “An abuse
of discretion is a discretion exercised to an end or purpose not justified by, and
clearly against, reason and evidence.” Id. (quoting Schieffer, 2013 S.D. 11, ¶ 14, 826
N.W.2d at 633). “In the context of reviewing custody decisions, an abuse of
discretion occurs . . . when the trial court’s review of the traditional factors bearing
on the best interests of the child is scant or incomplete.” Id.
[¶17.] Additionally, findings of fact are reviewed for clear error. Schieffer,
2013 S.D. 11, ¶ 15, 826 N.W.2d at 633. We “will overturn the trial court’s findings
of fact on appeal only when a complete review of the evidence leaves this Court with
a definite and firm conviction that a mistake has been made.” Id. (quoting Kreps v.
Kreps, 2010 S.D. 12, ¶ 25, 778 N.W.2d 835, 843). We “give[ ] due regard to the trial
court’s opportunity ‘to judge the credibility of witnesses and to weigh their
testimony.’” Id. (quoting Walker v. Walker, 2006 S.D. 68, ¶ 11, 720 N.W.2d 67, 70-
71).
DECISION
[¶18.] Mother argues that based on the Fuerstenberg factors, the trial court
erred in determining that it was in the best interests of the children that Father be
-6-
#26521
awarded primary physical custody. See generally Fuerstenberg v. Fuerstenberg,
1999 S.D. 35, 591 N.W.2d 798. Specifically, she asserts that until the trial court
awarded Father temporary custody in 2011, the children had always been in
Mother’s primary care and that she had provided for the children’s emotional
issues. She contends that while in Father’s care, the children’s aggression towards
each other had increased and that Father refused to acknowledge that this
aggression was occurring. Mother further argues that Father did not acknowledge
his own violent past; lacked insight into his own personal issues; had not sought
counseling to address his own personal issues; and lacked insight into the children’s
behaviors and needs. Mother asserts that the couple divorced because of the
domestic violence that had occurred in the marital home. Lastly, Mother contends
that “due to the considerable amount of individual issues many of the children
[were] experiencing, especially the ongoing violence between J.R.H. and M.L.H., the
children need to be separated.”
[¶19.] “When determining custody, the court shall be guided by consideration
of what appears to be for the best interests of the child in respect to the child’s
temporal and mental and moral welfare.” Roth, 2013 S.D. 48, ¶ 13, 834 N.W.2d at
340 (quoting Schieffer, 2013 S.D. 11, ¶ 17, 826 N.W.2d at 634). “The trial court
may, but is not required to, consider the following Fuerstenberg factors in
determining the best interests and welfare of the child: parental fitness, stability,
primary caretaker, child’s preference, harmful parental misconduct, separating
siblings, and substantial change of circumstances.” Id. “We encourage trial courts
to take a balanced and systematic approach when applying the factors relevant to a
-7-
#26521
child custody proceeding.” Id. (quoting Schieffer, 2013 S.D. 11, ¶ 18, 826 N.W.2d at
634). “However, ‘a court is not bound to make a specific finding in each category;
indeed, certain elements may have no application in some cases, and for other cases
there may be additional relevant considerations. In the end, our brightest beacon
remains the best interests of the child.’” Id. (quoting Beaulieu v. Birdsbill, 2012
S.D. 45, ¶ 10, 815 N.W.2d 569, 572).
[¶20.] “[S]iblings and half-siblings should not be separated absent compelling
circumstances.” Id. ¶ 15, 834 N.W.2d at 341 (quoting Simunek v. Auwerter, 2011
S.D. 56, ¶ 10, 803 N.W.2d 835, 837). “However, this is not an absolute rule, and
maintaining children in the same household should never override what is in the
best interests of a child.” Id.
[¶21.] Here, the trial court determined both parents to be fit parents, but
noted that neither is a perfect parent. The trial court also found that until the trial
court awarded Father temporary custody in 2011, Mother had been the primary
caretaker of the children and then Father “step[ped] up to the plate” and
“demonstrated his concern and care for the . . . [c]hildren.” These findings were
supported by the testimony of multiple witnesses at the permanent custody hearing.
Frahm, who the trial court found to be the most credible, described Father’s
“exceptional parenting skills” and his even temperament with the children. She
testified that she “admired [Father’s] ability to stay calm and manage that number
of kids[.]” We defer to the trial court’s opportunity to judge Frahm’s credibility and
the weight the trial court afforded to her testimony.
-8-
#26521
[¶22.] Additionally, the trial court found the testimony of the experts to be
“consistent in what they observed and what they recommended.” Indeed, Dr.
Clayborne recommended that Father be granted primary physical care of the five
children. In so concluding, Dr. Clayborne’s home study report analyzed the
applicable Fuerstenberg factors and noted that “the parent who [was] currently
equipped to provide the children with the necessary structure [was Father].” Dr.
Langenfeld also supported this conclusion in stating that his “general impression [of
Mother] is . . . she’s got some stuff that’s going to make it more difficult for her to
effectively parent.” The trial court also acknowledged each party’s faults and
discussed ways to address these faults with each party.
[¶23.] Further, the trial court found no compelling circumstances that would
justify the separation of the siblings. The witnesses’ testimony and exhibits support
this finding. Dr. Clayborne testified that he observed a bond between the siblings
and that he did not recommend the separation of siblings. Additionally, Frahm
testified that upon J.R.H.’s return home from in-patient therapy, J.R.H. was
“[c]ompletely different” and he “was just happy” and “looked fantastic.” Because she
requested the separation of the children, it was Mother’s burden to show compelling
circumstances. Mother has not met her burden. Here, the record does not support
the separation of siblings and, again, we give due regard to the trial court’s
opportunity to judge credibility of the witnesses and the weight afforded to their
testimony.
[¶24.] As noted above, “[w]e encourage trial courts to take a balanced and
systematic approach when applying the factors relevant to a child custody
-9-
#26521
proceeding.” Id. ¶ 13, 834 N.W.2d at 340 (quoting Schieffer, 2013 S.D. 11, ¶ 18, 826
N.W.2d at 634). And, while we do not require that there be a specific finding in
every category, because, “indeed, certain elements may have no application in some
cases, and for other cases there may be additional relevant considerations[,]” we do
remind trial courts of their duty to thoroughly examine the applicable Fuerstenberg
factors. See id. (quoting Beaulieu, 2012 S.D. 45, ¶ 10, 815 N.W.2d at 572). Here,
the extent of the findings from the trial court concerning the applicable factors was
fairly meager. However, the trial court relied upon Dr. Clayborne’s
recommendation and home study report, which did thoroughly examine the
applicable Fuerstenberg factors. Accordingly, the trial court did not abuse its
discretion in determining that it was in the best interests of the children that
Father be awarded primary physical custody.
[¶25.] We deny both parties’ requests for appellate attorney fees.
CONCLUSION
[¶26.] The trial court did not abuse its discretion in determining that it was
in the best interests of the children that Father be awarded primary physical
custody. We affirm.
[¶27.] GILBERTSON, Chief Justice, and KONENKAMP, ZINTER and
SEVERSON, Justices, concur.
-10-
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241 S.W.3d 913 (2007)
In re Sandra K. CLAPP, M.D., Napoleon M. Burt, M.D., Thomas Yeh, Jr., M.D., Children's Medical Center of Dallas, Beverly Dearman, R.N., Brenda Darling, R.N., Isabel Carrillo, L.V.N., M.R.T., and Kim Phillips, R.N., Relators.
No. 05-07-01109-CV.
Court of Appeals of Texas, Dallas.
December 20, 2007.
*914 Joseph A. Turano, Strasburger & Price, LLP, Frisco, James K. Peden III, Strasburger & Price, P.C., Dallas, TX, for Relator.
Edward Walter Sampson, Law Office of Joseph E. Ashmore, Jr., PC, Hutton Wesley Sentell, Dallas, TX, for Respondent.
M. Kenneth Patterson, Patterson and Wagner, L.L.P., San Antonio, Stan Thiebaud, Stinnet, Thiebaud & Remington, Stephen W. Johnson, Johnson Robinson Fifield, P.C., Dallas, TX, for Real Party In Interest.
Before Justices WHITTINGTON, FITZGERALD, and LANG-MIERS.
OPINION
Opinion by Justice LANG-MIERS.
Relators Sandra K. Clapp, M.D., Napoleon M. Burt, M.D., Thomas Yeh, Jr., M.D., Children's Medical Center of Dallas, Beverly Dearman, R.N., Brenda Darling, R.N., Isabel Carrillo, L.V.N., M.R.T., and Kim Phillips, R.N., filed two petitions[1] for *915 a writ of mandamus, seeking relief from the same order requiring relators to appear for pre-suit oral depositions under Texas Rule of Civil Procedure 202 (Rule 202). Relators contend that the trial court abused its discretion by ordering pre-suit oral depositions of physicians and health care providers in connection with, a potential health care liability claim. We agree. We conclude that the trial court's order granting the oral depositions of relators in this case is an abuse of discretion for which relators have no adequate remedy by appeal. We conditionally grant the petitions for a writ of mandamus.
BACKGROUND
Seven-year-old Porter Schorr had a history of congenital heart disease. On February 16, 2006, pediatric cardiologist Clapp performed a cardiac catheterization procedure on Porter at Children's Medical Center of Dallas. After that procedure, Porter experienced cardiac arrest. He was resuscitated and remained on life support for several days. He was later diagnosed with severe hypoxic brain injury, which eliminated the possibility of a heart transplant. His parents decided to remove life support and Porter passed away on February 24, 2006.
In May 2007, Porter's father, Geoffrey Schorr, filed a petition pursuant to Rule 202 to investigate a potential claim or suit. In that petition, Schorr seeks to depose three doctors (Clapp, Burt, and Yeh) and four nurses at Children's Medical Center of Dallas (Dearman, Darling, Carrillo, and Phillips) in order to "elicit testimony . . . as to the events regarding their treatment of Porter Schorr." Schorr also asks to depose the custodian of records in charge of angiogram recordings at Children's Medical Center of Dallas, "to obtain videographic and electronic medical records" concerning Porter's treatment, and "to review the entire original, unaltered medical chart of Porter Schorr." Finally, Schorr asks for
a copy of the Hospital and/or Physicians and/or Nursing Policies and Procedures and/or standing orders that were in effect on or about February 16, 2006 up to and including the present date pertaining to the treatment of sudden cardiac failure and/or the institution of cardiac life support in the catheterization laboratory, including all equipment available 'in the catheterization laboratory where Porter Schorr underwent his balloon aortic valvotomy procedure to facilitate cardiac life support, that are in the possession of respondents and/or the possession of Children's Medical Center Dallas.
Schorr's petition states that he "needs to depose these witnesses and obtain the requested information in order to determine whether to file suit" and that the requested information is the only way to determine whether wrongful medical conduct occurred. In his supporting brief, Schorr lists the information and records he obtained before filing the petition and, states that the information and records are "neither adequate nor sufficient for [Schorr] to determine who may have been negligent much less to be able, to file a `health care liability claim'" (under the Texas Medical Liability Act (TMLA), chapter 74 of the Texas Civil Practice and Remedies, code). Schorr also lists examples of the specific information he seeks to obtain.[2]
*916 In June 2007, the trial court granted Schorr's petition, ordered two-hour depositions of relators, and ordered that relators produce eleven different categories of documents (to the extent they were in relators' possession). Clapp filed a motion for reconsideration,[3] in which she argues the discovery is prohibited under section 74.351(s) of the Texas Civil Practice and Remedies Code, and the order exceeds the scope of permissible discovery under Rule 202 because that rule only allows for oral or written depositions, not the production of documents. In August 2007, the trial court issued a revised order eliminating the document-production requirement and ordering relators' oral depositions for a maximum of two hours each, limited "to only fact-based discovery related to the incident in question (what happened, what procedures were followed, what the hospital, nursing, and doctor procedures are regarding the procedure, etc.)." This original proceeding followed.
STANDARD OF REVIEW
Mandamus relief is available when the trial court abuses its discretion or violates a legal duty and there is no adequate remedy at law, such as by appeal. In re Dana Corp., 138 S.W.3d 298, 301 (Tex.2004) (orig.proceeding) (per curiam) (citing Walker v. Packer, 827 S.W.2d 833, 839 (Tex.1992) (orig.proceeding)). A trial court abuses its discretion if it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law, or if it clearly fails to correctly analyze or apply the law. In re Cerberue Capital Mgmt., L.P., 164 S.W.3d 379, 382 (Tex.2005) (orig.proceeding) (per curiam). "If an appellate court cannot remedy a trial court's discovery error, then an adequate appellate remedy does not exist." In re Dana Corp., 138 S.W.3d at 301.
DECISIONS OF OTHER COURTS ON THIS ISSUE
Several intermediate appellate courts in this state have addressed the issue of whether chapter 74 precludes pre-suit oral depositions of physicians and health care providers under Rule 202. Some courts have concluded that a party is entitled to take pre-suit oral depositions of physicians and health care providers to investigate potential health care liability claims. See In re Allan, 191 S.W.3d 483, 488 (Tex. App.-Tyler 2006, orig. proceeding [mand. pending][4]) (pre-suit oral depositions of *917 physicians and health care providers under Rule 202 not prohibited by chapter 74 because that chapter only applies after suit is filed); In re Kiberu, 237 S.W.3d 445, 449-50 (Tex.App.-Fort Worth 2007, orig. proceeding [mand. pending] ) (same). Conversely, other courts have concluded that a party is not entitled to take pre-suit oral depositions of physicians and health care providers to investigate potential health care liability claims. See In re Raja, 216 S.W.3d 404, 409 (Tex.App.-Eastland 2006, orig. proceeding [mand. pending]) (pre-suit oral deposition of physician not allowed under Rule 202 because anticipated claim is health care liability claim in which pre-report oral depositions of physicians and health care providers would be precluded under chapter 74); In re Mem'l Hermann Hosp. Sys., 209 S.W.3d 835; 839 (Tex.App.-Houston [14th Dist.] 2006, orig. proceeding) (same); see also In re Temple, 239 S.W.3d 885, 889-90 (Tex.App.-Texarkana Nov.8, 2007, orig. proceeding) (chapter 74 precludes pre-suit oral deposition of physician concerning standard of care during knee replacement surgery, but does not preclude oral deposition of physician concerning "a negligence or products liability cause of action against the knee joint manufacturer").
Schorr argues that his Rule 202 request does not conflict with the discovery restrictions in chapter 74 because those restrictions only apply after a lawsuit is filed, relying on the Tyler Court of Appeals's opinion in In re Allan. Relators argue that Schorr's Rule 202 request is ancillary to the anticipated lawsuita health care liability claim under the TMLAand his request for oral depositions is governed, and prohibited, by the TMLA, relying on the Houston (Fourteenth District) Court of Appeals's opinion in In re Memorial Hermann, Hospital System. We agree with relators.
SCOPE OF RULE 202 DISCOVERY
Rule 202 generally permits a party to petition a court for an order authorizing the taking of a deposition to perpetuate or obtain testimony for use in an anticipated suit or to investigate a potential claim or suit. TEX.R. CIV. P. 202.1. A Rule 202 proceeding to conduct pre-suit discovery from a party against whom a claim is contemplated is ancillary to the contemplated claim; it is "in aid of" and incident to the anticipated claim. See Mem'l Hermann Hosp. Sys., 209 S.W.3d at 839 (citing Office Employees Int'l Union Local 277 v. Sw. Drug Corp., 391 S.W.2d 404, 406 (Tex.1965) and IFS Sec. Group, Inc. v. Am. Equity Ins. Co., 175 S.W.3d 560, 562 (Tex.App.-Dallas 2005, no pet.)).
ANALYSIS
It is undisputed that Schorr's Rule 202 request is in aid of a contemplated health care liability claim under the TMLA. Consequently, we must also consider the TMLA, which governs the contemplated claim, in determining Schorr's ability to obtain the requested discovery. Mem'l Hermann Hosp. Sys., 209 S.W.3d at 839. Our primary objective in interpreting a statute, in this case the TMLA, is to ascertain and give effect to the legislature's intent. Sultan v. Mathew, 178 S.W.3d 747, 749 (Tex.2005). The legislature's intent is determined, when possible, by reading the language, used in the particular statute and construing the statute in its entirety. Helena Chem. Co. v. Wilkins, 47 S.W.3d 486, 493 (Tex.2001). We may *918 also consider other factors, including the objective sought to be obtained, legislative history, and consequences of a particular construction. Id. (citing TEX. GOV'T CODE ANN. § 311.023 and Ken Petroleum Corp. v. Questor Drilling Corp., 24 S.W.3d 344, 350 (Tex.2000)).
The legislature clearly stated its intent in enacting chapter 74.[5] Additionally, the legislature expressly limited discovery in claims governed by chapter 74 by staying discovery until an expert report[6] is filed, except as follows:
acquisition by the claimant of information, including medical or hospital records or other documents or tangible things, related to the patient's health care through:
(1) written discovery as defined in Rule 192.7, Texas Rules of Civil Procedure;
(2) depositions on written questions under Rule 200, Texas Rules of Civil Procedure; and
(3) discovery from nonparties under Rule 205, Texas Rules of Civil Procedure.
TEX. CIV. PRAC. & REM.CODE ANN. § 74.351(s) (Vernon Supp.2007). And chapter 74 controls when there is a conflict with "another law, including a rule of procedure or evidence or court rule." Id. § 74.002(a). As a result, we conclude that pre-suit (i.e., pre-report) discovery of physicians and health care providers pursuant to Rule 202 is permitted only to the extent that pre-report discovery is permitted in a claim governed by chapter 74. Mem'l Hermann Hosp. Sys., 209 S.W.3d at 840.
Because pre-report oral depositions of physicians and health care providers are not allowed under section 74.351,[7] the pre-suit *919 oral depositions that Schorr requested are not permitted under Rule 202. "To conclude otherwise would allow a Rule 202 petitioner to avoid the carefully crafted report requirements and discovery stay set out in section 74.351, subverting the legislature's stated intent in passing the statute." Mem'l Hermann Hosp. Sys., 209 S.W.3d at 839.
CONCLUSION
We conclude that the trial court's order is an abuse of discretion because it permits discovery to be conducted contrary to the prohibitions stated in chapter 74. Consequently, we conditionally grant the petitions for a writ of mandamus and order the trial court to vacate its. August 10, 2007 order. The writ will issue only if the trial court fails to act in accordance with this opinion.
NOTES
[1] Relator Sandra K. Clapp, M.D., filed a petition in cause no. 05-07-01109-CV. Relators Napoleon M. Burt, M.D., Thomas Yeh, Jr., M.D., Children's Medical Center of Dallas, Beverly Dearman, R.N., Brenda Darling, R.N., Isabel Carrillo, L.V.N., M.R.T., and Kim Phillips, R.N., filed their own petition six days later in cause no. 05-07-01118-CV. Because all relators seek mandamus relief from the same order and make similar arguments, this Court consolidated the proceedings into cause no. 05-07-01109-CV.
[2] Schorr's list comprises these questions:
1. Where are, the videographic records and/or angiogram recordings, in any format, of Porter Schorr's catheterization procedure and balloon aortic valvotomy?
2. Who has a copy of the videographic records. and/or angiogram recordings, in any format, of Porter Schorr's catheterization procedure and balloon aortic valvotomy?
3. Where is the evidence documenting Dr. Sandra Clapp's intraoperative measurements to determine the appropriate balloon size for the balloon aortic valvotomy?
4. Where are the intraoperative tracing strips, in any format, of Porter Schorr's catheterization procedure and balloon aortic valvotomy?
5. Where are the intraoperative pressure recordings, in any format, of Porter Schorr's catheterization procedure and balloon aortic valvotomy?
6. What happened during Porter Schorr's catheterization procedure and balloon aortic valvotomy that caused him to go into cardiac arrest?
7. What guidelines, protocols, procedures and standards were in place to address sudden cardiac arrest in the catheterization lab at Children's Medical Center Dallas?
8. What advanced cardiac life support equipment was readily available in the catheterization lab at Children's Medical Center Dallas to address sudden cardiac arrest?
[3] Relators state in their briefing that the trial court heard, "multiple motions to reconsider." Only Clapp's motion is in our record.
[4] The real parties in interest in Allan subsequently petitioned the Texas Supreme Court for writ of mandamus to overturn the Tyler court's decision. That proceeding, styled In re Jorden, No. 06-0369, was argued before the supreme court on September 26, 2007.
[5] In 2003, the Texas Legislature found there was "a medical malpractice insurance crisis in Texas" and that "this crisis has had a material adverse effect on the delivery of medical and health care in Texas, including significant reductions of availability of medical and health care services to the people of Texas and a likelihood of further reductions in the future." See TEX. CIV. PRAC. & REM.CODE ANN. § 74.001 historical and statutory notes 5 and 6 (Vernon 2005). To address this crisis, the legislature enacted the TMLA, codified as chapter 74 of the Texas Civil Practice and Remedies Code. TEX. CIV. PRAC, & REM.CODE ANN. § 74.001-74.507; see also In re Raja, 216 S.W.3d at 407 (stating section 74.351 is legislature's "principle tool" to reduce frequency and costs of health care liability claims).
[6] Under chapter 74, a party who files a health care liability claim must file an expert report or reports addressing liability and causation as to each defendant within 120 days after the original petition is, filed. See TEX. CIV. FRAC. & REM.CODE ANN. §§ 74.001(a)(13) (defining "health care liability claim"), 74.351 (Vernon Supp.2007) (describing expert report requirement).
[7] In In re Allan, the Tyler Court of Appeals traced and relied on the legislative history of section 74.351(s) and concluded that the statute's stay of discovery did not preclude a Rule 202 deposition of a potential medical malpractice defendant. In re Allan, 191 S.W.3d at 488-89. The court explained that although the original draft of that section specifically precluded a Rule 202 deposition of a physician or health care provider for the purpose of investigating a health care liability claim, subsequent versions altered this provision and the final version "did not limit, restrict, or prohibit Rule 202 depositions to investigate potential claims involving health care providers." Id. at 487-88. The Allan court concluded that this history indicated a legislative intent to allow Rule 202 depositions of health care providers to investigate a potential claim. We respectfully disagree with that conclusion, for the same reason that the Eastland Court of Appeals disagreed:
We recognize that House Bill 4's language was altered during the 2003 legislative session in both the House and Senate and that language that specifically addressed the applicability of Rule 202 was ultimately replaced with a provision that is silent on Rule 202's applicability. . . . House Bill 4's legislative history is a relevant factor, but the specific changes identified by the Tyler Court occurred at, various times during the session and were promulgated by various legislators or committees. Speculation as to why they altered the bill's language cannot override consideration of the express language that the entire legislature did ultimately adopt. While consideration of legislative history is appropriate, we believe the issue can and, therefore, should be resolved using the statute's language and the legislature's stated findings and purpose.
In re Raja, 216 S.W.3d at 407 (internal citation omitted).
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48 Wn.2d 417 (1956)
294 P.2d 418
THE STATE OF WASHINGTON, on the Relation of Don Eastvold, as Attorney General, Plaintiff,
v.
THE SUPERIOR COURT FOR SNOHOMISH COUNTY, Thomas R. Stiger and Edward M. Nollmeyer, Judges Thereof, Respondents.[1]
No. 33361.
The Supreme Court of Washington, Department One.
February 23, 1956.
The Attorney General, Don Miles, Edward E. Level, and Newell Smith, Assistants, for relator.
Lycette, Diamond & Sylvester, for respondents.
FINLEY, J.
The basic question in this case is whether certain eminent domain proceedings (initiated by the state highway department to acquire property for highway purposes) are valid.
The background of the matter and the questions involved are as follows: The state highway department sought and obtained an order of public use and necessity respecting certain property. Neither the department nor the property owner sought a review of the order within the period as allowed by statute.
Subsequently, just prior to the trial which was for the purpose of ascertaining the amount of damages to be awarded to the property owner, the state highway department determined that it would not be necessary to take all of the property as originally contemplated and as embraced in the order of public use and necessity theretofore obtained. The department filed an amended property description in the cause, which eliminated approximately nine tenths of an acre. Thereupon, at the commencement of the trial on the question of damages, counsel for the property owner objected to the efforts of the department to amend the property description and to take nine tenths of an acre less than the amount of property originally contemplated and as embraced in the order of public use and necessity. *419 The trial judge offered to continue the matter for the convenience of the attorney for the property owner and for the protection of the interests of the property owner; but when counsel for the property owner declined the offer, the trial judge permitted the lawsuit to proceed. In effect, the trial judge permitted amendment of the property description or the pleadings whereby the state would acquire nine tenths of an acre less than originally contemplated.
Both sides presented evidence regarding the lesser amount of property to be taken by the highway department. The department offered evidence that the damages suffered would be lessened by the construction of a cattle guard, or underpass, in any one of three locations, depending upon the choice or option of the property owner. The jury rendered a verdict and awarded damages to the property owner.
Thereafter, on motion of the property owner, the trial judge, by order, granted a new trial. The reasons given for so doing were (a) that he had erred in permitting the amendment to the property description or the pleadings whereby the state would acquire nine tenths of an acre less than originally contemplated and embraced in the order of public use and necessity, as originally obtained by the department; (b) that he had erred in permitting the introduction of evidence regarding the offer of the department to construct a cattle guard, or underpass, at one of three locations, depending upon the option of the property owner.
The department petitioned for a review by writ of certiorari, and the matter is now before us. The questions are: (1) whether the order granting the new trial is reviewable by certiorari; (2) whether the amendment of the property description or the pleadings was properly and validly permitted by the trial court; (3) whether it was proper for the state to introduce evidence that a cattle guard, or underpass, would be constructed in one of three possible locations, depending upon the option or choice of the landowner.
The theory upon which the state highway department is seeking certiorari is that a nonappealable order has been entered, depriving the state highway department of valuable *420 rights, and that the state will be without a remedy unless review can be obtained by certiorari.
[1] We held in State ex rel. Eastvold v. Superior Court, 45 Wn. (2d) 48, 272 P. (2d) 624, that, under appropriate circumstances, the trial court may grant a new trial in condemnation proceedings. However, it is well settled that in such proceedings neither side may appeal until a final judgment for damages has been entered. Longview, Portland & Northern R. Co. v. Seattle, 128 Wash. 642, 223 Pac. 1058; State v. Prindle, 169 Wash. 311, 13 P. (2d) 425. Furthermore, the only matters then reviewable are errors respecting the propriety and justness of the award. RCW 8.04.150; Coats-Fordney Logging Co. v. Grays Harbor Logging Co., 100 Wash. 491, 171 Pac. 241; State ex rel. Northwestern Electric Co. v. Superior Court, 27 Wn. (2d) 694, 179 P. (2d) 510.
[2] If certiorari is denied in the case at bar, the case is likely to be retried. The alleged errors in granting the new trial would not be reviewable in an appeal arising out of the second trial. The state would be without an adequate remedy. We hold that certiorari lies. The motion to quash the writ is denied.
We believe that considerable liberality or leeway should be permitted in the amendment of pleadings under circumstances such as those involved in the instant case. This seems particularly appropriate when an objecting party is offered an opportunity for a continuance to combat any disadvantage occasioned by surprise, or otherwise; and especially, when a lesser amount of property is to be taken than was originally contemplated, and there is no clear indication that a property owner will be significantly harmed by allowing the amendment. Our view as to this aspect of the matter is further strengthened by the fact that the department could abandon the eminent domain proceeding in toto. State ex rel. Troy v. Superior Court, 38 Wn. (2d) 352, 229 P. (2d) 518; State ex rel. Struntz v. Spokane County, 85 Wash. 187, 147 Pac. 879; State ex rel. Peel v. Clausen, 94 Wash. 166, 162 Pac. 1; South Carolina State Highway *421 Department v. Bobotes, 180 S.C. 183, 185 S.E. 165, 121 A.L.R. 1; Lewis, Eminent Domain (3d ed.), § 955; 121 A.L.R. 12.
In the case at bar, it is true that the highway department (condemner) did not seek to abandon its entire claim. However, we believe that the right to abandon the entire claim necessarily includes the power to abandon, by amendment, a portion thereof. In re Mt. Vernon Ave., 111 N.Y.S. 895, 127 App. Div. 650, affd. 193 N.Y. 658, 87 N.E. 1123; Yolo Water & Power Co. v. Edmands, 50 Cal. App. 444, 195 Pac. 463; People v. Superior Court, 47 Cal. App. (2d) 393, 118 P. (2d) 47, 120 P. (2d) 655; Thompson v. Janes, 151 Tex. 495, 251 S.W. (2d) 953. See, also, 5 A.L.R. (2d) 724, § 2, Waiver or relinquishment of part of land. In discussing a similar problem in People v. Superior Court, 47 Cal. App. (2d) 393, the court said:
"The contention that petitioner may not abandon condemnation proceedings as against any one parcel of property without abandoning the entire project is without substance. If, after the institution of a condemnation action, a plaintiff should determine that a certain parcel of land is not necessary in the operations contemplated, there is no law to prevent an abandonment of proceedings against the land in question."
In the recent case of Thompson v. Janes, supra, the Texas court held that a condemner has the right by trial amendment to dismiss the action as to a portion of the land involved. In the course of the opinion, the court stated:
"The condemning agency is accorded the right to dismiss as to a portion of the land when it decides that its purpose may be accomplished with less land than was initially sought."
[3] We hold that it was not error in the instant case for the trial court to allow the amendment of the property description and to permit the department to take less property than originally contemplated.
[4] Respondents contend that the trial court improperly admitted evidence of the construction plans, because nothing was contained in the petition or in the order adjudicating *422 public use which in any way referred to underpasses or easements or rights to the use thereof. It is not necessary, however, that the order adjudicating public use be accompanied by specifications or plans showing the exact nature of the proposed construction. In State ex rel. Union Lbr. Co. v. Superior Court, 70 Wash. 540, 127 Pac. 109, the court said:
"That no specifications accompany the decree is no objection. The decree determines only the legal right; it does not attempt to indicate the facts to be determined before that right can be exercised. That inquiry and ascertainment may be left to the trial, and the jury can there determine the damages to be paid under a particular and designated use, to be shown by plats, designs, or other appropriate specifications, which become part of the record, and may be appropriately referred to in the final decree or judgment."
Respondents argue further that they are entitled to full and just compensation for the taking of and the damage to their land by the state highway department; and that promissory statements by the department pertaining to the construction of a cattle underpass and suggesting future use that may be made of the land by its owners are inadmissible. In support of this argument, they cite State ex rel. Polson Logging Co. v. Superior Court, 11 Wn. (2d) 545, 119 P. (2d) 694; and State v. Smith, 25 Wn. (2d) 540, 171 P. (2d) 853. The Polson case involved a promise by the condemner to gravel and maintain a roadway for the possible future use of the condemnee. In holding that such a promise did not affect the amount of the damages to be awarded, the court said:
"An unaccepted promise to do something in the future in case certain emergencies arise cannot affect the character or the extent of the rights acquired and cannot be considered as affecting the amount of damages to be awarded." (Italics ours.)
The Smith case involved proceedings by the state to condemn land used as a reservoir site by the condemnees. The state offered evidence to the effect that it would construct a new reservoir on another piece of land in which the condemnee had no interest, but would be given the right to *423 take water therefrom. We held the proffered stipulation inadmissible on the grounds that the condemner must take the rights which he seeks to appropriate unconditionally, and must make full compensation in money for what he takes.
Clearly, the Polson and the Smith cases are not controlling in the case at bar. We are not concerned here with a conditional promise to do something in the future or an offer to pay something in lieu of money. Nor are we concerned with an attempt on the part of the condemner to reduce the damages to the landowner by tendering an interest in property apart from the property sought to be condemned. The landowners are being compensated in money for all rights which they are losing. The effect of constructing the cattle guard in one of the three locations is to reserve in the landowner a proprietary right in the land.
[5] The right to take property in condemnation cases, subject to certain easements of the landowner, so as to minimize his damages, is in accordance with the weight of authority. See 26 L.R.A. 751; 7 A.L.R. (2d) 392, § 6, Distinctions between promissory statements and binding stipulations, reservations, or limited condemnation. It is also in harmony with the fundamental principle that no greater estate or interest should be taken than reasonably necessary for contemplated public necessity or use.
"The law does not favor the taking or damaging of property for a public use beyond the necessities of the case, and if damages may be avoided by a waiver or stipulation definite and certain in its terms, which will fully protect the rights of all parties concerned, there is no reason why such a stipulation should not be received and acted upon." Tacoma Eastern R. Co. v. Smithgall, 58 Wash. 445, 108 Pac. 1091.
Finally, the respondents question the authority of the district engineer or the attorneys for the petitioner to bind the state as to the construction of the cattle guards. The district engineer is an employee and official of the state highway department. He is competent to testify relative to the construction plans. RCW 43.27.020 (4).
*424 [6] The commitments of the attorney general and his assistants are binding upon the state. RCW 43.10.030; RCW 43.10.060.
[7, 8] Clearly, a party to an action is bound by the stipulations and agreements which are entered into by his counsel in open court as a part of the proceedings in the cause. It must be presumed that, when the attorney general appears for the state and makes representations in a condemnation proceeding, he acts within the scope of his authority.
Respondents contend that the result, suggested by the foregoing, is inconsistent with our holding in Othello v. Harder, 46 Wn. (2d) 747, 284 P. (2d) 1099, where we held that the mayor of a municipal corporation of the fourth class is clothed with no authority to speak for or to bind the town or the town council in a condemnation proceeding, unless specifically authorized to do so by ordinance. We do not agree with respondents' contention. Our decision in the Othello case involved an interpretation of particular statutory provisions which are not involved in the case at bar.
[9] For the reasons stated, the third question is answered in the affirmative.
We find no merit in the contentions of respondents. It is our best judgment that the action of the trial court in granting the new trial should be reversed, and that the case should be remanded for further necessary proceedings involving the entry of judgment by the trial court on the verdict of damages as rendered by the jury. It is so ordered.
SCHWELLENBACH, DONWORTH, ROSELLINI, and OTT, JJ., concur.
March 21, 1956. Petition for rehearing denied.
NOTES
[1] Reported in 294 P. (2d) 418.
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164 F.Supp.2d 994 (2001)
EFS NATIONAL BANK, Plaintiff,
v.
AVERITT EXPRESS, INC., Defendant/Counterplaintiff, Third-party Plaintiff
v.
Motor Cargo, Third-party Defendant.
No. 00-CV-3201-V.
United States District Court, W.D. Tennessee, Western Division.
August 31, 2001.
*995 J. Richard Buchignani, Esq., Georgia A. Robinette, Carmalita Carletos, Wyatt Tarrant & Combs, Memphis, TN, for EFS National Bank, plaintiffs.
Kenneth M. Bryant, Joseph Y. McCoin, Miller & Martin LLP, Nashville, TN, for Averitt Express, Inc, Motor Cargo, defendants.
James Allen, Memphis, TN, pro se.
ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT
VESCOVO, United States Magistrate Judge.
The plaintiff, EFS National Bank ("EFS"), filed this lawsuit seeking damages under the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 14706, for lost cargo which was transported in interstate commerce by the defendant motor carrier, Averitt Express, Inc ("Averitt"). Before the court[1] is the motion of the plaintiff EFS for summary judgment pursuant to Federal Rule of Civil Procedure 56. EFS claims that the undisputed material facts show that it has established each element of its claim for damages for the full value of the lost cargo under the Carmack Amendment.
The defendant Averitt filed a cross-motion for summary judgment claiming that it is entitled to summary judgment because it transferred the cargo to Motor Cargo, the third-party defendant, who is liable for the plaintiff's loss,[2] and also because it properly limited its liability to an amount less than the full amount of the loss. Third-party defendant, Motor Cargo, filed a partial motion for summary judgment seeking to limit its potential liability to an amount less than the sum claimed by EFS. For the reasons that follow, EFS's motion is denied, and both Averitt's and Motor Cargo's motions are granted.
*996 I. UNDISPUTED FACTS
The following facts are undisputed for purposes of the summary judgment motions filed by both parties. EFS is in the business of processing Visa and Master Card transactions for grocery stores and other merchants. Averitt is a motor carrier with the federally mandated authority to haul freight in interstate commerce. EFS hired Averitt to deliver certain cargo from Memphis, Tennessee, to Safeway grocery stores in Pleasonton, California. On August 9, 1999, EFS tendered for delivery to Averitt three pallets of cargo, which consisted of T330 Point of Sale Terminals, printers, Sentinel Pin Pads, and cables. Two pallets contained the printers, and one pallet contained the Point of Sale Terminals, pin pads, and cables. Averitt then tendered all three pallets to Motor Cargo, another carrier, to transport the goods to their final destination. When the cargo arrived in California, one pallet, the pallet containing the Point of Sale Terminals, pin pads, and cables, was missing.[3] EFS estimated that the lost cargo was worth a total of $57,750, and it filed a loss/damages claim form with Averitt claiming a loss of that amount.[4] EFS also spent approximately $300 to ship replacement goods to Safeway in an expedited fashion. EFS claimed it was entitled to a total of $58,050 for the loss.
Averitt refused to pay the full value of the lost cargo, asserting that its Rules Tariff 100, Item 780-10, which was in effect at the time of the shipment, limited its liability to $25 per pound, for a total liability of $17,900. Item 780-10 of the Rules Tariff 100 provides that:
1. Articles tendered with an invoice value exceeding $25.00 per pound per package will be considered to be of extraordinary value. Such articles will not be accepted for transportation. Articles inadvertently accepted with an invoice value exceeding $25.00 per pound per package will be considered to have been released by the shipper at $25.00 per pound per package.
2. In the event of loss of and/or damage to any shipment, carrier's liability will not exceed $25.00 per pound per package, subject to a maximum liability of $250,000.00 per shipment.
(Ex. C, Pl.'s Mem. in Supp. of Mot. for Summ. J.)
According to the affidavit of Averitt cargo claims manager Gary Whitaker, Averitt provided EFS with one of its standard bill of lading forms, and EFS itself prepared and completed the blank bill of lading that Averitt provided. (Whitaker Aff. ¶ 5-6, Ex. A, Def.'s Cross-mot. Opp. Br.). EFS has not offered sworn testimony or other extrinsic evidence to rebut Whitaker's testimony in this regard in any documents submitted to the court, and thus, this fact is undisputed.
The bill of lading provides:
RECEIVED, subject to individually determined rates or contracts that have been agreed upon in writing between the carrier and shipper, if applicable, otherwise to the rate classifications and rules that have been established by the carrier and are available to the shipper, on request. Subject to the terms of the *997 B.O.L. contract on the reverse side of this form.
(Ex. D, Pl.'s Mem. in Supp. of Mot. for Summ. J.). EFS never requested a copy of Averitt's tariff, even though the tariff noting the $25.00 per pound limited liability was readily available and would have been provided to the plaintiff at any time according to Whitaker's affidavit.
The following language also appears on the bill of lading:
NOTE: (1) Where the rate is dependent on value, shippers are required to state specifically in writing the agreed or declared value of the property as follows: Linear Feet: _______ Total Cube: _______ Declared Value: $______ RVNX $___ per _______. This is to certify that the named materials on this document are properly classified, described, packaged and labeled and are in proper condition for transportation according to the applicable regulations in the Department of Transportation.
NOTE: (2) Liability Limitation for loss or damage on this shipment may be applicable. See 49 U.S.C. § 14706(c)(1)(A) and (B).
(Id.) EFS failed to insert a declared value of the goods in the designated blanks on the bill of lading.
Finally, the back of the bill of lading provides:
The property described below, in apparent good order, except as noted (contents and condition of contents of packages unknown) marked, consigned, and destined as shown on the front of this document, which carrier agrees to carry to destination, if on its route, or otherwise to deliver to another carrier on the route to destination. It is mutually agreed, as to each carrier of all or any of said property over all or any portion of said route to destination, and as to each party at any time interested in all or any of said property, that every [sic] services to be performed hereunder shall be subject to all the terms and conditions of the Uniform Bill of Lading set forth in the National Motor Freight Classification 100-X and successive issues. The shipper hereby certifies that he is familiar with all the terms and conditions of the said bill of lading, including those on the back hereof, and the said terms and conditions are hereby agreed to be the shipper and accepted for himself and his assigns.
(Id.)
II. ANALYSIS
Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." LaPointe v. United Autoworkers Local 600, 8 F.3d 376, 378 (6th Cir.1993); see also Osborn v. Ashland County Bd. of Alcohol, Drug Addiction and Mental Health Servs., 979 F.2d 1131, 1133 (6th Cir.1992) (per curiam). The party moving for summary judgment has the burden of showing that there are no genuine issues of material fact at issue in the case. LaPointe, 8 F.3d at 378. This may be accomplished by demonstrating to the court that the nonmoving party lacks evidence to support an essential element of its case. Barnhart v. Pickrel, Schaeffer & Ebeling Co., 12 F.3d 1382, 1389 (6th Cir.1993).
In response, the nonmoving party must present "significant probative evidence" to demonstrate that "there is [more than] some metaphysical doubt as to the material facts." Moore v. Philip Morris Companies, 8 F.3d 335, 339-40 (6th Cir.1993). When a summary judgment motion has *998 been properly made and supported, "an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but ... by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
In this instance, the parties have filed cross-motions for summary judgment. The standard for evaluating the merits of a summary judgment motion, however, does not change based simply on the existence of cross-motions. Taft Broadcasting Co. v. United States, 929 F.2d 240, 248 (6th Cir. 1991) (citing Home for Crippled Children v. Prudential Ins. Co., 590 F.Supp. 1490, 1495 (W.D.Pa.1984)). Instead, "[t]he court must evaluate each parties' motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration." Mingus Constructors, Inc. v. United States, 812 F.2d 1387, 1391 (Fed. Cir.1987). Further, the court is not "required to grant summary judgment in favor of one party or another simply because cross-motions have been filed ...." Wayman v. Colonial Penn Life Ins. Co., 805 F.Supp. 525, 534 (E.D.Tenn.1992). The court may not treat cross-motions for summary judgment as if a stipulated record existed and the case was submitted for a final determination. B.F. Goodrich Co. v. United States Filter Corp., 245 F.3d 587, 592 (6th Cir.2001) (citing Taft Broadcasting, 929 F.2d at 248).
In deciding a motion for summary judgment, "this court must determine whether `the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Patton v. Bearden, 8 F.3d 343, 346 (6th Cir.1993) (quoting Anderson, 477 U.S. at 251-52, 106 S.Ct. 2505). The evidence, all facts, and any inferences that permissibly may be drawn from the facts must be viewed in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). However, "[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for plaintiff." Anderson, 477 U.S. at 252, 106 S.Ct. 2505.
The sole issue in all three summary judgment motions is whether Averitt effectively limited its liability in accordance with the Carmack Amendment. Under the Carmack Amendment, as a general rule, motor carriers are liable for the actual loss of or damage to freight it is carrying. 49 U.S.C. § 14706(a)(1). An exception to the rule is found at 49 U.S.C. § 14706(c)(1)(A). The exception allows carriers to limit their liability "to a value established by written or electronic declaration of the shipper or by written agreement between the carrier and the shipper if that value would be reasonable under the circumstances surrounding transportation." 49 U.S.C. § 14706(c)(1)(A).[5] To *999 limit its liability to an amount less than the actual value of the lost or damaged goods, the Carmack Amendment requires only that the carrier provide to the shipper upon request "a written or electronic copy of the rate, classification, rules, and practices upon which any rate applicable to the shipment, or agreed to between the shipper and the carrier is based." Id. § 14706(c)(1)(B).[6]
Relying on two Sixth Circuit cases, Toledo Ticket Co. v. Roadway Express, Inc., 133 F.3d 439 (6th Cir.1998) and Trepel v. Roadway Express, Inc., 194 F.3d 708 (6th Cir.1999), EFS argues that Averitt's Tariff 100 does not limit Averitt's liability. To limit liability, EFS insists, a carrier must give the shipper a fair opportunity to choose between two or more levels of liability and must obtain the shipper's written agreement as to his choice of liability, and Averitt provided no such notice, nor did it obtain the shipper's agreement to limit liability. EFS submits that the only notice Averitt provided to EFS of a limitation of liability was contained in the bill of lading, and under the Sixth Circuit's holding in Toledo Ticket, this language fails as a matter of law to provide EFS with the required opportunity to choose between two levels of liability. Thus, according to EFS, Averitt may not rely on the language included in the bill of lading or on Rules Tariff 100, Item No. 780-10 to limit its liability.
The Carmack Amendment was initially enacted in 1906 and codified at 49 U.S.C. § 11707. Under the ICC Termination Act of 1995, which was effective January 1, 1996, the Carmack Amendment, was revised, recodified, and replaced by 49 U.S.C. § 14706, et seq. The section of the pre-1996 Carmack Amendment which governed a carrier's ability to limit its liability provided in relevant part:
(a) The Interstate Commerce Commission may ... authorize a carrier ... to establish rates for transportation of property under which the liability of the carrier for that property is limited to a value established by written declaration of the shipper, or by a written agreement ....
(b)(1) Subject to the provisions of paragraph (2) of this subsection, a motor common carrier ... may, subject to the provisions of this chapter ... establish rates for the transportation of property ... under which the liability of the carrier ... for such property is limited to a value established by written declaration of the shipper or by written agreement between the carrier ... and shipper if that value would be reasonable under the circumstances surrounding the transportation.
(2) Before a carrier or freight forwarder may establish a rate for any service under paragraph (1) of this subsection, the Commission may require such carrier or freight forwarder to have in effect and keep in effect, during any period such rate is in effect under such paragraph, a rate for such service which does not limit the liability of the carrier or freight forwarder.
49 U.S.C. § 11730.
In Toledo Ticket, the Sixth Circuit rejected a carrier's argument that it gave the shipper a reasonable opportunity to choose between levels of liability when it included *1000 language on its bill of lading very similar to that used by Averitt in this case. The court held that the language used on the bill of lading was insufficient to give the shipper a fair opportunity to choose between levels of liability, explaining that a carrier must provide both reasonable notice of any options that would limit liability and the opportunity to obtain information about the options that "will enable the shipper to make a deliberate and well-informed choice." Toledo Ticket, 133 F.3d at 442. The Sixth Circuit held in Toledo Ticket that section 10730, allowing carriers to limit liability, was "a very narrow exception to the general rule ... requiring that the carrier be liable for the actual value of the shipper's property," Id. at 442 (citations omitted), and for a carrier to limit its liability pursuant to section 11730, it had to satisfy four requirements: (1) the carrier had to maintain approved tariff rates with the ICC; (2) it had to give the shipper a fair opportunity to choose between two or more levels of liability; (3) it had to obtain the shipper's written agreement as to his choice of liability; and (4) it had to issue a receipt or bill of lading prior to moving the shipment. Id. (citing Rohner Gehrig Co. v. Tri-State Motor Transit, 950 F.2d 1079, 1081 (5th Cir.1992); Hughes v. United Van Lines, Inc., 829 F.2d 1407, 1415 (7th Cir. 1987)).
Section 14706(c)(1)(A) of the current version of the Carmack Amendment which allows carriers to limit their liability contains language nearly identical to the pre-1996 version. It provides that the carrier may
establish rates for the transportation of property ... under which the liability of the carrier for such property is limited to a value established by written or electronic declaration of the shipper or by written agreement between the carrier and shipper if that value would be reasonable under the circumstances surrounding the transportation.
However, the current version of the Carmack Amendment provides that "[i]f the motor carrier is not required to file a tariff with the Board, it shall provide ... on the request of the shipper, a written or electronic copy of the rate classification rules and practice ...." 49 U.S.C. § 14706(c)(1)(B) (emphasis added). The old version did not contain a provision stating that the carrier had to provide a copy of the rate classification rules only on the request of the shipper. The legislative history of the revised Carmack Amendment reveals that the intent of Congress in amending the statute was to "return to the pre-TIRRA situation where shippers were responsible for determining the conditions imposed on the transportation of a shipment ...." H.R. Conf. Rep. No. 104-422, at 223 (1995), reprinted in 1996 U.S.C.C.A.N. 850. In more detail, the House of Representatives Conference Report No. 104-422 states in pertinent part:
The intention of this conference agreement is to replicate, as closely as possible, the practical situation which occurred prior to the enactment of the Trucking Industry Regulatory Reform Act of 1994 (TIRRA), which replaced the requirement that tariffs be filed with the ICC for individually determined rates. Prior to the enactment of TIRRA, carriers had the ability to limit liability as a part of the terms contained in the tariff. By signing a bill of lading which incorporated by reference the tariff, the shipper was deemed to have agreed to the tariff and its conditions and terms. However, the carrier was under no obligation to specifically notify the shipper of the conditions and terms of the tariff. It was the responsibility of the shipper to take an affirmative step to determine what was contained in the tariff-usually through the retaining of a tariff watching *1001 service. An unintended and unconsidered consequence of TIRRA was that, when the tariff filing requirement was repealed, carriers lost this particular avenue as a way of limiting liability. This provision is intended to return to the pre-TIRRA situation where shippers were responsible for determining the conditions imposed on the transportation of a shipment.
The two Sixth Circuit cases relied upon by the plaintiff, Toledo Ticket Co. v. Roadway Express, Inc., 133 F.3d 439 (6th Cir.1998) and Trepel v. Roadway Express, Inc., 194 F.3d 708 (6th Cir.1999), were based on events which transpired prior the 1995 amendments to the Carmack Amendment even though the dates of the opinions postdate the amendments. There is no current Sixth Circuit case interpreting the Carmack Amendment post-1995.
Given the recent changes in the law, the four factors used by the Sixth Circuit in earlier cases interpreting the pre-1996 Carmack Amendment may no longer be completely relevant. The requirement that the carrier must maintain approved tariff rates with the ICC cannot possibly apply because the ICC Termination Act of 1995 eliminated the ICC itself. See Siren, Inc. v. Estes Express Lines, 249 F.3d 1268, 1271 (11th Cir.2001) (stating that "[t]he ICC Termination Act ... eliminated the ICC ...."); Schweitzer Aircraft Corp. v. Landstar Ranger, Inc., 114 F.Supp.2d 199, 201 (W.D.N.Y.2000) (recognizing that a tariff no longer need be filed under ICCTA).
It is unclear whether the second and third requirements, that the carrier must give the shipper a fair opportunity to choose between two or more levels of liability and that the carrier must obtain the shipper's written agreement as to his choice of liability, should still apply. See Nieman Marcus Group, Inc. v. Quast Transfer, Inc., No. 98C3122, 1999 WL 436589 at *4, (N.D.Ill. June 21, 1999) (recognizing that "[s]ince the statutory scheme no longer contains a provision regarding offering different rates for different levels of liability limitation, it is unclear whether providing a reasonable opportunity to choose between levels of liability should still be a requirement for enforcing a limitation liability"). These two requirements, to some extent, are contrary to the congressional intent behind the new law. The legislative history indicates that Congress intended to make it the shipper's responsibility to ask for a copy of the relevant rate classification rules from the carrier. See Norpin Mfg. Co. v. CTS Con-Way Transp. Servs., 68 F.Supp.2d 19, 24-25 (D.Mass. 1999) (stating that "[i]t appears to be the intent of the ICCTA, as revealed by the legislative history, to continue to hold shippers to constructive knowledge of tariffs under certain circumstances" and that "as the legislative history also makes clear, a shipper has the affirmative duty to request the applicable tariff ...").
The Carmack Amendment as amended allows a carrier to limit its liability "to a value established by ... written agreement between the carrier and shipper ...." 49 U.S.C. § 14706(c)(1)(A). The Eleventh Circuit recently found that the bill of lading, which the shipper prepared and both parties signed, was a sufficient "written agreement" under the statute to allow a carrier to enforce its tariff since the bill of lading made reference to the tariff's liability-limiting provision. Siren, Inc. v. Estes Express Lines, 249 F.3d, 1268, 1271-73 (11th Cir.2001). The Eleventh Circuit specifically found that when the shipper was the one to fill out the bill of lading, it was not necessary to "protect shippers from themselves." Siren, 249 F.3d at 1271. According to the affidavit of Gary Whitaker, cargo claims manager with *1002 Averitt, EFS completed the bill of lading form and submitted it to Averitt. (Whitaker Aff. ¶ 5-6, Ex. A, Def.'s Cross-mot. Opp. Br.) Considering each motion for summary judgment independently, EFS has the burden to demonstrate that this particular fact is material and in dispute. EFS has not rebutted Whitaker's affidavit and has failed to offer additional proof on this matter.
On the bill of lading, EFS failed to complete the section listing the declared value of the goods. The bill of lading noted in two areas that the carrier's liability might be limited. Averitt's Rules Tariff 100 was in effect on the date of the incident giving rise to this litigation. The tariff clearly limits Averitt's liability to no more than $25.00 per pound per package. EFS failed to request a copy of the tariff. The bill of lading is a sufficient written agreement by both parties allowing Averitt to limit its liability to the terms stated in Tariff 100. Accordingly, the court finds that Averitt's liability is limited to $17,900, as determined by the tariff. Applying the appropriate summary judgment standard and taking Whitaker's affidavit as undisputed, there is no genuine issue as to any material fact, and, therefore, Averitt is entitled to a judgment as a matter of law that its damages are limited to $17,900.
Averitt's argument that it is not liable at all for the plaintiff's loss because third party defendant, Motor Cargo, was responsible for the loss of the cargo after Averitt tendered the goods to Motor Cargo fails as a matter of law. Section 14706(a)(1) provides that the carrier who issues the bill of lading and any other carrier who actually delivers the cargo are both liable to the recipient of the bill of lading:
A carrier providing transportation or service ... shall issue a receipt or bill of lading for property it receives for transportation under this part. That carrier and any other carrier that delivers the property and is providing transportation or service ... are liable to the person entitled to recover under the receipt or bill of lading.
49 U.S.C. § 14706(a)(1). Accordingly, the court finds that Averitt and Motor Cargo are jointly and severally liable to the plaintiff for the loss of cargo in the amount of $17,900.
III. CONCLUSION
For the foregoing reasons, EFS's motion for summary judgment is denied. Averitt's motion for summary judgment is granted to the extent it seeks to limit its liability to $17,900 but is denied to the extent it seeks to avoid liability altogether. Motor Cargo's motion for partial summary judgment seeking to limit its liability to $17,900 is granted.
IT IS SO ORDERED.
NOTES
[1] The parties have consented to the trial of this matter before the United States Magistrate Judge.
[2] Averitt did not brief its argument that it should not be held liable for the plaintiff's loss because Motor Cargo, the third party defendant, was responsible for losing the plaintiff's goods and is liable for the plaintiff's loss instead of Averitt.
[3] The missing pallet contained 210 boxes of T330 Point of Sale Terminals, 210 boxes of Sentinel Pin Pads, and one box of cables.
[4] EFS attached to the loss/damages claim form invoices detailing the amount paid by EFS for the equipment lost in the shipment which included $37,800 for Point of Sale Terminals (210 lost at $180 per terminal), $14,700 for pin pads (210 lost at $70 per pin pad), and $5,250 for connector cables (210 lost at $25 per cable).
[5] In relevant part, section 14706(c)(1)(A) reads as follows:
[A] carrier providing transportation or service ... may ... establish rates for the transportation of property ... under which the liability of the carrier for such property is limited to a value established by written or electronic declaration of the shipper or by written agreement between the carrier and shipper if that value would be reasonable under the circumstances surrounding the transportation.
[6] Section 14706(c)(1)(B) provides that
If the motor carrier is not required to file its tariff with the Board, it shall provide ... to the shipper, on request of the shipper, a written or electronic copy of the rate, classification, rules, and practices upon which any rate applicable to a shipment, or agreed to between the shipper and the carrier is based. The copy provided by the carrier shall clearly state the dates of applicability of the rate, classification, rules, or practices.
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901 F.2d 1111
Fahnbullehv.I.N.S.*
NO. 89-4370
United States Court of Appeals,Fifth Circuit.
APR 11, 1990
1
Appeal From: I.N.S.
2
AFFIRMED.
*
Fed.R.App.P. 34(a); 5th Cir.R. 34.2
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Opinion issued October 23, 2003
In The
Court of Appeals
For The
First District of Texas
____________
NO. 01-02-00873-CV
____________
LINDA PUGH, Appellant
V.
DR. JOSE A. MONTES, SR., INDIVIDUALLY, JOSE A. MONTES, SR.,
M.D., P.A., CARIETY MEDICAL SUPPORT SERVICES, INC. AND YOUR
MEDICAL SERVICES, INC., Appellees
On Appeal from the 295th District Court
Harris County, Texas
Trial Court Cause No. 2000-42683
MEMORANDUM OPINION
This is an appeal from a no-evidence summary judgment signed on July 29,
2002. Notice of appeal was timely filed on August 13, 2002. The clerk’s record was
filed on October 10, 2002.
On September 13, 2002, a month after the notice of appeal was filed, appellant
filed an affidavit/declaration of indigence in the trial court. An affidavit of indigence
must be filed with or before the notice of appeal. See Tex. R. App. P. 20.1(c)(1).
The court of appeals may extend the time for filing an affidavit of indigence if within
15 days after the deadline for filing the affidavit of indigence, the appellant files an
extension motion in the appellate court. See Tex. R. App. P. 20.1(c)(3). Appellant’s
affidavit of indigence is ineffective to allow her to proceed without advance payment
of costs because it was filed after the deadline of August 28, 2002, and after any
extension allowed under Tex. R. App. P. 20.1(c)(3).
Appellant has not paid the appellate filing fee of $125 or the $10 filing fee for
each of the three motions she has filed in this Court. See Tex. R. App. P. 5; Order
Regarding Fees Charged in Civil Cases in the Supreme Court and the Courts of
Appeals, Misc. Docket No. 98-9120 (Tex. Jul. 21, 1998).
On May 8, 2003, we ordered that unless by June 9, 2003, appellant paid such
filing fees to the Clerk of this Court, or requested the trial court clerk to file a
supplemental clerk’s record containing a timely filed affidavit of indigence with the
trial court in accordance with Tex. R. App. P. 20.1, the appeal would be dismissed.
See Finley v. J.C. Pace Ltd., 4 S.W. 3d 319, 321-22 (Tex. App.Houston [1st Dist.]
1999) (order); Negrini v. Smith, Nelson & Clement P.C., 998 S.W. 2d 362, 363 (Tex.
App.–Houston [1st Dist.] 1999, no pet.).
June 9, 2003 has passed and appellant has not paid the $125 filing fee or the
filing fee for the motions she has filed.
Accordingly, the appeal is dismissed. See Tex. R. App. P. 5, 42.3(b).
PER CURIAM
Panel consists of Justices Hedges, Nuchia, and Keyes.
| {
"pile_set_name": "FreeLaw"
} |
472 U.S. 115 (1985)
ATKINS, COMMISSIONER OF THE MASSACHUSETTS DEPARTMENT OF PUBLIC WELFARE
v.
PARKER ET AL.
No. 83-1660.
Supreme Court of United States.
Argued November 27, 1984
Decided June 4, 1985[*]
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT
*116 Samuel A. Alito argued the cause for the federal respondent in No. 83-6381 in support of petitioner in No. 83-1660. With him on the briefs were Solicitor General Lee, Acting Assistant Attorney General Willard, Deputy Solicitor General Geller, Leonard Schaitman, and Bruce G. Forrest. Ellen L. Janos, Assistant Attorney General of Massachusetts, argued the cause for petitioner in No. 83-1660. With her on the briefs were Francis X. Bellotti, Attorney General, *117 and E. Michael Sloman and Carl Valvo, Assistant Attorney General.
Steven A. Hitov argued the cause for Parker et al. in both cases. With him on the briefs was J. Paterson Rae.[]
JUSTICE STEVENS delivered the opinion of the Court.
In November, and again in December 1981, the Massachusetts Department of Public Welfare mailed a written notice to over 16,000 recipients advising them that a recent change in federal law might result in either a reduction or a termination of their food-stamp benefits. The notice did not purport to explain the precise impact of the change on each individual recipient. The question this case presents is whether that notice violated any federal statute or regulation, or the Due Process Clause of the Fourteenth Amendment. Unlike the District Court and the Court of Appeals, we conclude that there was no violation.
In an attempt to "permit low-income households to obtain a more nutritious diet through normal channels of trade,"[1] Congress created a federally subsidized food-stamp program. The Secretary of Agriculture prescribes the standards for eligibility for food stamps,[2] but state agencies are authorized to make individual eligibility determinations and to distribute the food stamps to eligible households, which may use them to purchase food from approved, retail food stores.[3] The eligibility of an individual household, and the amount of its food-stamp *118 allotment, are based on several factors, including the size of the household and its income.[4] Certifications of eligibility expire periodically and are renewed on the basis of applications submitted by the households.[5]
Prior to 1981, federal law provided that 20 percent of the household's earned income should be deducted, or disregarded, in computing eligibility.[6] The purpose of the earned-income disregard was to maintain the recipients' incentive to earn and to report income. In 1981 Congress amended the Food Stamp Act to reduce this deduction from 20 percent to 18 percent.[7] That amendment had no effect on households with no income or with extremely low income, but caused a reduction of benefits in varying amounts, or a complete termination of benefits, for families whose income placed them close to the border between eligibility and ineligibility.[8]
On September 4, 1981, the Department of Agriculture issued regulations providing for the implementation of the change in the earned-income disregard and directing the States to provide notice to food-stamp recipients.[9] That directive indicated that the form of the notice might comply with the regulations dealing with so-called "mass changes,"[10]*119 rather than with the regulations dealing with individual "adverse actions."[11]
In November, the Massachusetts Department of Public Welfare (Department) mailed a brief, ambiguously dated notice to all food-stamp recipients with earned income advising them that the earned-income deduction had been lowered from 20 percent to 18 percent and that the change would result in either a reduction or a termination of their benefits. The notice was printed on a card, in English on one side and Spanish on the other. The notice stated that the recipient had a right to request a hearing "if you disagree with this action," and that benefits would be reinstated if a hearing was requested within 10 days of the notice.[12]
On December 10, 1981, petitioners in No. 83-6381 commenced this action on behalf of all Massachusetts households *120 that had received the notice. They alleged that the notice was inadequate as a matter of law and moved for a temporary restraining order. On December 16, 1981, after certifying the action as a class action, and after commenting that the "notice was deficient in that it failed to provide recipients with a date to determine the time in which they could appeal," the District Court enjoined the Department from reducing or terminating any benefits on the basis of that notice.[13]
The Department, in compliance with the District Court's order, mailed supplemental benefits for the month of December to each of the 16,640 class members. It then sent out a second notice, in English and Spanish versions, dated December 26, which stated in part:
" * * * IMPORTANT NOTICE READ CAREFULLY
* * *
"RECENT CHANGES IN THE FOOD STAMP PROGRAM HAVE BEEN MADE IN ACCORDANCE WITH 1981 FEDERAL LAW. UNDER THIS LAW, THE EARNED INCOME DEDUCTION FOR FOOD STAMP BENEFITS HAS BEEN LOWERED FROM 20 TO 18 PERCENT. THIS REDUCTION MEANS THAT A HIGHER PORTION OF YOUR HOUSEHOLD'S EARNED INCOME WILL BE COUNTED IN DETERMINING YOUR ELIGIBILITY AND BENEFIT AMOUNT FOR FOOD STAMPS. AS A RESULT OF THIS FEDERAL CHANGE, YOUR BENEFITS WILL EITHER BE REDUCED IF YOU REMAIN ELIGIBLE OR YOUR BENEFITS WILL BE TERMINATED. (FOOD STAMP MANUAL CITATION: 106 CMR:364.400).
"YOUR RIGHT TO A FAIR HEARING:
"YOU HAVE THE RIGHT TO REQUEST A FAIR HEARING IF YOU DISAGREE WITH THIS ACTION. *121 IF YOU ARE REQUESTING A HEARING, YOUR FOOD STAMP BENEFITS WILL BE REINSTATED.. . . IF YOU HAVE QUESTIONS CONCERNING THE CORRECTNESS OF YOUR BENEFITS COMPUTATION OR THE FAIR HEARING PROCESS, CONTACT YOUR LOCAL WELFARE OFFICE. YOU MAY FILE AN APPEAL AT ANY TIME IF YOU FEEL THAT YOU ARE NOT RECEIVING THE CORRECT AMOUNT OF FOOD STAMPS."[14]
Petitioners filed a supplemental complaint attacking the adequacy of this notice, and again moved for a preliminary injunction. In October 1982, the District Court consolidated the hearing on that motion with the trial on the merits and again ruled in petitioners' favor. The District Court found that there was a significant risk of error in the administration of the food-stamp program, particularly with the implementation of the change in the earned-income disregard, and that the failure to provide each recipient with an adequate notice increased the risk of error. In essence, the District Court concluded that the December notice was defective because it did not advise each household of the precise change in its benefits, or with the information necessary to enable the recipient to calculate the correct change; because it did not tell recipients whether their benefits were being reduced or terminated; and because the reading level and format of the notice made it difficult to comprehend.[15] Based on the *122 premise that the statutorily mandated reduction or termination of benefits was a deprivation of property subject to the full protection of the Fourteenth Amendment,[16] the court held that the Due Process Clause had been violated.[17]
As a remedy, the District Court ordered the Department "to return forthwith to each and every household in the plaintiff class all food stamp benefits lost as a result of the action taken pursuant to the December notice" between January 1, 1981, and the date the household received adequate notice, had its benefits terminated for a reason unrelated to the change in the earned-income disregard, or had its file recertified.[18] The District Court also ordered that all future food-stamp notices issued by the Department contain various data, including the old and new benefit amounts, and that the Department issue regulations, subject to court approval, governing the form of future food-stamp notices.[19]
The United States Court of Appeals for the First Circuit agreed with the District Court's constitutional holding, indicated *123 its belief that Congress could not have "intended a constitutionally deficient notice to satisfy the statutory notice requirement," and thus affirmed the District Court's holding that "the December notice failed to satisfy the notice requirements of 7 U. S. C. § 2020(e)(10) and 7 CFR § 273.12(e)(2) (ii)." Foggs v. Block, 722 F. 2d 933, 939-940 (1983).[20] The Court of Appeals held, however, that the District Court had erred in ordering a reinstatement of benefits and in specifying the form of future notices.[21]
Petitioners in No. 83-6381 sought review of the Court of Appeals' modification of the District Court's remedy, and the Department, in No. 83-1660, cross-petitioned for a writ of certiorari seeking review of the holding on liability. We granted both the petition and the cross-petition, and invited the Solicitor General to participate in the argument. 467 U. S. 1250 (1984). We conclude that the notice was lawful, and therefore have no occasion to discuss the remedy issue that the petition in No. 83-6381 presents. Because there would be no need to decide the constitutional question if we found a violation of either the statute or the regulations,[22] we first consider the statutory issue.
I
The only reference in the Food Stamp Act to a notice is contained in § 2020(e), which outlines the requirements of a state plan of operation. Subsection (10) of that section provides that a state plan must grant a fair hearing, and a prompt determination, to any household that is aggrieved by *124 the action of a state agency. A proviso to that subsection states that any household "which timely requests such a fair hearing after receiving individual notice of agency action reducing or terminating its benefits" shall continue to receive the same level of benefits until the hearing is completed.[23]
The language of the proviso does not itself command that any notice be given, but it does indicate that Congress assumed that individual notice would be an element of the fair-hearing requirement. Thus, whenever a household is entitled to a fair hearing, it is appropriate to read the statute as imposing a requirement of individual notice that would enable the household to request such a hearing. The hearing requirement, and the incidental reference to "individual notice," however, are by their terms applicable only to "agency action reducing or terminating" a household's benefits. Therefore, it seems unlikely that Congress contemplated individual hearings for every household affected by a general change in the law.
The legislative history of § 2020(e)(10) sheds light on its meaning. As originally enacted in 1964, the Food Stamp Act contained no fair-hearing requirement. See 78 Stat. 703-709. In 1971, however, in response to this Court's decision *125 in Goldberg v. Kelly, 397 U. S. 254 (1970), Congress amended the Act to include a fair-hearing provision,[24] and in the Food Stamp Act of 1977, § 2020(e)(10) was enacted in its present form.[25] The legislative history of the Food Stamp Act of 1977 contains a description of the then-existing regulations, which were promulgated after the 1971 amendment, and which drew a distinction between the requirement of notice in advance of an "adverse action" based on the particular facts of an individual case, on the one hand, and the absence of any requirement of individual notice of a "mass change," on the other.[26] That history contains no suggestion that Congress intended to eliminate that distinction; to the contrary, Congress expressly recognized during the period leading to the enactment of the Food Stamp Act of 1977 the distinction between the regulatory requirement regarding notice in the case of an adverse action and the lack of such a requirement in the case of a mass change.[27] Read against this background, the relevant statutory language which does not *126 itself mandate any notice at all but merely assumes that a request for a hearing will be preceded by "individual notice of agency action" cannot fairly be construed as a command to give notice of a general change in the law.[28]
Nor can we find any basis for concluding that the December notice failed to comply with the applicable regulations. Title 7 CFR § 273.12(e)(2)(ii) (1984) provides:
"(ii) A notice of adverse action is not required when a household's food stamp benefits are reduced or terminated as a result of a mass change in the public assistance grant. However, State agencies shall send individual notices to households to inform them of the change. If a household requests a fair hearing, benefits shall be continued at the former level only if the issue being appealed is that food stamp eligibility or benefits were improperly computed."
This regulation reflects the familiar distinction between an individual adverse action and a mass change. The statement that a notice of adverse action is not required when a change of benefits results from a mass change surely implies that individual computations are not required in such cases. The two requirements that are imposed when a mass change occurs are: (1) that "individual" notice be sent and (2) that it "inform them of the change." In this case, a separate individual notice was sent to each individual household and it did "inform them of the change" in the program that Congress had mandated. Since the word "change" in the regulation *127 plainly refers to the "mass change," the notice complied with the regulation.[29]
II
Since the notice of the change in the earned-income disregard was sufficient under the statute and under the regulations, we must consider petitioners' claim that they had a constitutional right to advance notice of the amendment's specific impact on their entitlement to food stamps before the statutory change could be implemented by reducing or terminating their benefits. They argue that an individualized calculation of the new benefit was necessary in order to avoid the risk of an erroneous reduction or termination.
The record in this case indicates that members of petitioners' class had their benefits reduced or terminated for either or both of two reasons: (1) because Congress reduced the earned-income disregard from 20 percent to 18 percent; or (2) because inadvertent errors were made in calculating benefits. These inadvertent errors, however, did not necessarily result form the statutory change, but rather may have been attributable to a variety of factors that can occur in the administration of any large welfare program.[30] For example, *128 each of the named petitioners, presumably representative of the class, see Fed. Rule Civ. Proc. 23(a), appealed a reduction in benefits. None identified an error resulting from the legislative decision to change the earned-income disregard. But even if it is assumed that the mass change increased the risk of erroneous reductions in benefits, that assumption does not support the claim that the actual notice used in this case was inadequate. For that notice plainly informed each household of the opportunity to request a fair hearing and the right to have its benefit level frozen if a hearing was requested. As the testimony of the class representatives indicates, every class member who contacted the Department had his or her benefit level frozen, and received a fair hearing, before any loss of benefit occurred. Thus, the Department's procedures provided adequate protection against any deprivation based on an unintended mistake. To determine whether the Constitution required a more detailed notice of the mass change, we therefore put the miscellaneous errors to one side and confine our attention to the reductions attributable to the statutory change.
Food-stamp benefits, like the welfare benefits at issue in Goldberg v. Kelly, 397 U. S. 254 (1970), "are a matter of statutory entitlement for persons qualified to receive them." Id., at 262 (footnote omitted). Such entitlements are appropriately treated as a form of "property" protected by the Due Process Clause; accordingly, the procedures that are employed in determining whether an individual may continue to participate in the statutory program must comply with the commands of the Constitution. Id., at 262-263.[31]
*129 This case, however, does not concern the procedural fairness of individual eligibility determinations. Rather, it involves a legislatively mandated substantive change in the scope of the entire program. Such a change must, of course, comply with the substantive limitations on the power of Congress, but there is no suggestion in this case that the amendment at issue violated any such constraint. Thus, it must be assumed that Congress had plenary power to define the scope and the duration of the entitlement to food-stamp benefits, and to increase, to decrease, or to terminate those benefits based on its appraisal of the relative importance of the recipients' needs and the resources available to fund the program. The procedural component of the Due Process Clause does not "impose a constitutional limitation on the power of Congress to make substantive changes in the law of entitlement to public benefits." Richardson v. Belcher, 404 U. S. 78, 81 (1971).
The congressional decision to lower the earned-income deduction from 20 percent to 18 percent gave many food-stamp households a less valuable entitlement in 1982 than they had received in 1981. But the 1981 entitlement did not include any right to have the program continue indefinitely at the same level, or to phrase it another way, did not include any right to the maintenance of the same level of property entitlement. Before the statutory change became effective, the existing property entitlement did not qualify the legislature's power to substitute a different, less valuable entitlement at a later date. As we have frequently noted: "[A] welfare recipient is not deprived of due process when the legislature *130 adjusts benefit levels . . . . [T]he legislative determination provides all the process that is due."[32]
The participants in the food-stamp program had no greater right to advance notice of the legislative change in this case, the decision to change the earned-income disregard level than did any other voters.[33] They do not claim that there was any defect in the legislative process. Because the substantive reduction in the level of petitioners' benefits was the direct consequence of the statutory amendment, they have no basis for challenging the procedure that caused them to receive a different, less valuable property interest after the amendment became effective.
The claim that petitioners had a constitutional right to better notice of the consequences of the statutory amendment is without merit. All citizens are presumptively charged with knowledge of the law, see, e. g., North Laramie Land Co. v. Hoffman, 268 U. S. 276, 283 (1925). Arguably that presumption may be overcome in cases in which the statute does not allow a sufficient "grace period" to provide the persons affected by a change in the law with an adequate opportunity to become familiar with their obligations under it. See Texaco, Inc. v. Short, 454 U. S. 516, 532 (1982). In this case, however, not only was there a grace period of over 90 *131 days before the amendment became effective, but in addition, every person affected by the change was given individual notice of the substance of the amendment.[34]
As a matter of constitutional law there can be no doubt concerning the sufficiency of the notice describing the effect of the amendment in general terms. Surely Congress can presume that such a notice relative to a matter as important as a change in a household's food-stamp allotment would prompt an appropriate inquiry if it is not fully understood. The entire structure of our democratic government rests on the premise that the individual citizen is capable of informing himself about the particular policies that affect his destiny. To contend that this notice was constitutionally insufficient is to reject that premise.[35]
The judgment of the Court of Appeals is reversed.
It is so ordered.
*132 JUSTICE BRENNAN, with whom JUSTICE MARSHALL joins as to Part I, dissenting.
When the Massachusetts Department of Public Welfare (Department) implemented the 1981 statutory reduction in food stamp benefits for persons with earned income, it sent out form notices telling over 16,000 recipients that their benefits would be "reduced . . . or . . . terminated" without specifying which. App. 5. The notices contained no information about any particular recipient's case. The District Court declared the notices unlawful under the Due Process Clause as well as the relevant regulation and statute "because. . . [they] did not contain the individual recipient's old food stamp benefit amount, new benefit amount, or the amount of earned income that was being used to compute the change."[1] The Court of Appeals agreed, finding the notices statutorily and "constitutionally deficient" because they "failed to inform." Foggs v. Block, 722 F. 2d 933, 940 (CA1 1983). The Court today reverses, finding that "individual computations" are not required by regulation, statute, or Constitution. Ante, at 126. I disagree with the Court's interpretation of all three authorities. Accordingly, I dissent.
I
Title 7 CFR § 273.12(e)(2)(ii) (1985) requires that "when a household's food stamp benefits are reduced or terminated as a result of a mass change . . . [s]tate agencies shall send individual notices to households to inform them of the change."[2]*133 When Congress reduced the statutory earned-income deduction in 1981, the Secretary of Agriculture ordered state agencies implementing the change to provide the "individual notices" required by this regulation. 46 Fed. Reg. 44722 (1981). Both courts below held, however, that the vague form notices in this case failed to fulfill the "individual notice" requirement. 722 F. 2d, at 940; Pet. App. 98. Although the phrase apparently has never been administratively defined,[3] I believe the logic of the regulation, as well as its history and evident function in the administrative scheme, requires inclusion of precisely the sort of individualized information found necessary by the District Court.
First, the sentence in § 273.12(e)(2)(ii) that requires "individual notices" of mass changes is immediately followed by a second requirement:
"If a household requests a fair hearing [after receiving a mass change notice], benefits shall be continued at the former level only if the issue being appealed is that food stamp eligibility or benefits were improperly computed." 7 CFR § 273.12(e)(2)(ii) (1985) (emphasis added).
*134 The Court quotes this language, ante, at 126, and then ignores it. It seems apparent, however, that an aggrieved food stamp recipient cannot possibly contend in good faith, let alone demonstrate, that his request for a hearing is based on a claim that his benefits have been "improperly computed" if the only notice he receives tells him nothing at all about the computation or new amount of the benefit.[4] Moreover, state agencies cannot possibly exercise their discretion under this regulation to decide not to continue benefits if the requestor cannot rationally specify his appeal grounds.[5] Unless this final provision of the mass change regulation at issue is to be rendered effectively meaningless, the individual notices mandated for a mass change must include the minimum of individualized data necessary for a recipient to surmise, at least, that his benefits have been miscalculated. That minimum amount of data is all that the District Court required in these cases.[6]
*135 A careful examination of the history of § 273.12(e)(2)(ii) also suggests that "individual notices" mean notices containing some individualized information. The Secretary's food stamp regulations originally required that, "[p]rior to any action to terminate or reduce a household's program benefits," state agencies had to give each household "in detail the reasons for the proposed action." 7 CFR § 271.1(n) (1972) (emphasis added). This notice requirement made no exception for "mass changes" in the law. In 1974, however, the Secretary granted state agencies the option of providing "general notice" of mass changes, either by a notice "mailed to all recipients," 39 Fed. Reg. 25996 (1974), or by pervasive publicity.[7] The form notice used in these cases presumably would have met this "general notice" requirement if general notice had been all that was required in 1981. In 1978, however, the Secretary subdivided the mass change regulation to address different types of changes. 43 Fed. Reg. 47915-47916 (1978). Subsection (e)(1) paralleled the 1974 mass change regulation, permitting notice of certain state and federal adjustments by pervasive publicity, "general notice mailed to households," or "individual notice." Subsection (e)(2) was new, however, and required "individual notices to households to inform them of the change."[8] Although the *136 difference between "general notices mailed to households" and "individual notices" was never defined by the Secretary, he directed that notice of the 1981 earned-income deduction change be given pursuant to subsection (e)(2), thereby requiring "individual" as opposed to "general" notice.
In the absence of some contrary indication, normal construction of language requires the conclusion that the Secretary employed different terms in the same regulation to mean different things. See Crawford v. Burke, 195 U. S. 176, 190 (1904); R. Dickerson, The Interpretation and Application of Statutes 224-225 (1975). And it is clear that the difference between the two types of notice must lie in their informational content, "general" versus "individual," because both types of notice must be mailed to individual households.[9] "General notices mailed to households" required no more than a form letter of identical content mailed to each of a large number of affected households; in contrast, "individual notice" going to many households must imply some more particularized, "individual" content.
Finally, the Court argues that the regulatory decision not to require a "notice of adverse action" for mass changes "surely implies" a decision to forgo "individual computations" as well. Ante, at 126. No such implication is logically required, however. The Court apparently fails to understand that "notice of adverse action" is a technical term of art used in the food stamp regulations to describe a special type of *137 notice containing other information besides "the reason for the proposed action."[10] Thus when the Secretary proposed § 273.12(e)(2)(ii) in 1978, he distinguished "individual" mass change notice from a "notice of adverse action" by noting the information that a mass change notice need not contain:
"Although households are not entitled to a notice of adverse action for mass change[,] the regulations propose that States send households an individual notice which informs the household of the change but does not grant the household continuation rights if the household appeals the State agency action. In this way, households are advised of the change and can adjust household budgets accordingly." 43 Fed. Reg. 18896 (1978).[11]
Nothing was said to suggest that individual computations were not required in either type of notice. Indeed, by stating a purpose of providing affected households sufficient information so that they could adjust their budgets, the plain implication is to the contrary: each household was to be notified of mass changes in individual terms. It is difficult *138 to imagine how one could otherwise adjust one's household budget "accordingly."[12]
As far as I can tell, there has been no contemporaneous or consistent administrative interpretation of the regulation at issue; indeed, there has been no interpretation at all. Based on the language, function, and history of the regulation itself, however, any logical implication to be drawn is that the "individual notice" required by § 273.12(e)(2)(ii) comprehends some amount of individualized benefit data.[13] Conscious as well of the constitutional questions otherwise raised, I would affirm the judgment below on this ground alone.[14]
II
I can agree with the Court that the relevant statutory section, 7 U. S. C. § 2020(e)(10), may not of itself require "individual *139 computations." The Court goes beyond this holding, however, to suggest that § 2020(e)(10) permits no notice at all of reductions based on legislated changes in benefit levels. Ante, at 126. Because all parties concede that some form of notice was required, the Court's broader statutory discussion is unnecessary to its decision. I find the Court's suggestion to be an erroneous reading that will cause needless confusion for food stamp administrators and recipients alike.
Although the Food Stamp Act of 1964, 78 Stat. 703, as amended, 7 U. S. C. §§ 2011-2029, is federally supervised, it is administered largely by separate agencies of the States.[15] Thus reductions in food stamp benefit levels, even if federally mandated, can be implemented only by state agencies. Section 2020(e)(10) requires that when a state agency acts, it must provide "for the granting of a fair hearing and a prompt determination thereafter to any household aggrieved by the action of the state agency under any provision of its plan of operation . . ." (emphasis added). It further mandates continuation of the prior level of food stamp benefits pending decision for "any household which timely requests such a fair hearing after receiving individual notice of agency action reducing or terminating its benefits" (emphasis added). As the Secretary acknowledges, the plain language of § 2020(e)(10) "presupposes the existence of notice." Reply Brief for Federal Respondent 11. The Court's conclusion that § 2020(e)(10) "does not itself mandate any notice at all," ante, at 125-126, is thus true only in the formalistic sense that words of command are not used. A congressional presupposition that notice will be sent, expressed in a statute directed to state agencies, can have no different legal effect than would a straightforward command.
*140 No distinction between types of "agency action" mass or individual appears in the language of § 2020(e)(10), and the statute's legislative history demonstrates that no distinction was intended. The controlling House Report explained that after Goldberg v. Kelly, 397 U. S. 254 (1970), fair hearings would be required in all cases where a food stamp claimant will be "aggrieved" by any agency action, "whether it be a termination or reduction of benefits, a denial of an application for benefits, or other negative action. . . ." H. R. Rep. No. 95-464, p. 285 (1977). The Report went on to recite Congress' understanding that notice of all such "negative actions" was normally provided in all cases,[16] and indeed, such was the administrative practice in 1977. Although "notices of adverse action" were not always required, the 1977 regulations required some form of notice even for "mass changes." 7 CFR §§ 271.1(n)(2) and (3) (1977). Congress was thus well aware of, and legislated on the basis of, the contemporaneous administrative practice of providing notice of mass changes, and must be presumed to have intended to maintain that practice absent some clear indication to the contrary. Haig v. Agee, 453 U. S. 280, 297-298 (1981).[17]
Aside from language and legislative history, the logic of the statutory scheme is distorted by the Court's suggestion *141 that notice is not required when mass reductions result from legislation. Notice is, of course, "an element of the fair hearing requirement" of § 2020(e)(10), ante, at 124, because it allows recipients whose benefits will be reduced or terminated to determine whether or not to request a fair hearing. Cf. Joint Anti-Fascist Refugee Committee v. McGrath, 341 U. S. 123, 171-172 (1951) (Frankfurter, J., concurring) ("No better instrument has been devised for arriving at truth than to give a person in jeopardy of serious loss notice"). Congress expressed its view in 1977 that there would be little occasion to claim a fair hearing when legislative changes in benefit levels were implemented: "Hearings would, of course, be unnecessary in the absence of claims of factual error in individual benefit computation and calculation." H. R. Rep. No. 95-464, at 289 (emphasis added).[18] Similarly, Congress directed that if in the course of a fair hearing "a determination is made that the sole issue being appealed is . . . not a matter of fact or judgment relating to an individual case," then benefits need not be continued under the proviso of § 2020(e)(10). Id., at 286 (emphasis added). These very statements, however, demonstrate Congress' understanding that households affected by mass changes could request a fair hearing, and were entitled to a hearing if their claim was, among other things, miscalculation of benefits.[19] The Court does not discuss these legislative remarks. But congressional *142 discussion of guidelines for winnowing appeals simply makes no sense if no notice at all of mass reductions was intended.
Notice of reductions in benefit levels is thus the necessary predicate to implementation of the statutory fair hearing requirement. Indeed, the Court apparently accepts this view, stating that "whenever a household is entitled to a fair hearing, it is appropriate to read the statute as imposing a requirement of individual notice that would enable the household to request such a hearing." Ante, at 124. It is clear, however, that Congress intended and the regulations guarantee that mass reductions rightfully may be appealed if the claim is miscalculation. Yet the Court concludes there is no statutory "command to give notice of a general change in the law." Ante, at 126. This conclusion may generally be correct with regard to enactment of changes in the law, see Texaco, Inc. v. Short, 454 U. S. 516 (1982), but the plain terms of § 2020(e)(10) require notice of "agency action" taken to implement the law, if that action will result in "reduc[tion] or terminat[ion] of . . . benefits." Because legislated mass changes, like any other changes, can be implemented only by the action of state agencies, the notice requirement of § 2020(e)(10) is fully implicated in the mass change context.
The unambiguous purpose of the fair hearing and benefit continuation requirements of § 2020(e)(10) is to prevent erroneous reductions in benefits until a claim of error can be resolved. General changes in the law, no less than individual exercises of caseworker discretion, are likely to result in error when implemented, as the facts of these cases indicate and the Court acknowledges. Ante, at 127 ("[E]rrors . . . can occur in the administration of any large welfare program"). Timely and adequate notice permits the affected recipient to surmise whether an error has been made; if the recipient invokes the statutory right to a fair hearing, the agency then determines whether the recipient is correct. That reductions are implemented massively rather than on a case-by-case basis alters not at all this sensible administrative *143 scheme, operating as intended under § 2020(e)(10). By reading the statute not to require any notice at all when reductions or terminations of benefits are the result of agency implementation of a "general change in the law," the Court finds an exception not indicated by the statute, its legislative history, or relevant regulations, and not supported by any logical view of the food stamp administrative process. Federal administrators have required state agencies to give some form of notice of mass changes since before § 2020(e)(10)'s enactment until today. The Court's contrary suggestion, offered in cases where the discussion is unnecessary to the result, will disrupt an administrative scheme that appears to work smoothly without the Court's help.
III
Because food stamp benefits are a matter of statutory entitlement, recipients may claim a property interest only in the level of benefits to which they are entitled under the law, as calculated under whatever statutory formula is provided. Congress may reduce the entitlement level or alter the formula through the normal legislative process, and that process pretermits any claim that Congress' action constitutes unconstitutional deprivation of property. See Logan v. Zimmerman Brush Co., 455 U. S. 422, 432-433 (1982).
Arguing from similar premises, the Court concludes that the food stamp recipients in these cases had no special right to "advance notice of the legislative change" in the earned-income deduction in 1981. Ante, at 130. The recipients, however, have never contended that they had a right to "advance notice" of the enactment of congressional legislation,[20] and I do not intend to argue for that proposition here. "It is *144 plain that sheer impracticality makes it implausible to expect the State itself to apprise its citizenry of the enactment of a statute of general applicability." Texaco, Inc. v. Short, supra, at 550 (BRENNAN, J., dissenting) (emphasis in original).
Instead, these cases involve the implementation of Congress' decision by its agents, the various state agencies that administer food stamp programs across the country. Owing to factors unique to the state agency and having nothing to do with Congress, implementation of the change in Massachusetts resulted in the erroneous reduction of food stamp benefits for a number of households. Ante, at 127; see infra, at 151, and n. 27. Because recipients have a constitutionally cognizable property interest in their proper statutory entitlement levels, it is deprivation of those interests by the state agency, and not the passage of legislation by Congress, that requires our constitutional attention in this case.[21]
*145 By focusing primarily on the "red herring" notice-of-legislative-change issue, the Court avoids explicit application of the multifactored interest-balancing test normally applied in our due process precedents. I understand the Court to make two basic arguments, however, in dismissing the recipients' constitutional claim to individualized notice of the Department's action. The first is to suggest that no notice at all is required when "inadvertent errors" are involved; such errors simply may be "put . . . to one side." Ante, at 127, 128. The second is that the form notice employed here sufficed to "adequately protect" the recipients' interests in any case, because recipients can be presumed to know the law regarding the earned-income deduction change and the notice told them how to appeal. Ante, at 130-131.
My consideration of these arguments is informed by two unchallenged facts. First, although not mentioned by the Court, when the Department sent its form notice and implemented the earned-income deduction change in December 1981, its officials knew that a substantial data entry backlog in its computerized record system meant that its food stamp files contained inaccurate earned-income information for a number of recipients. App. 85-89 (testimony of the Department's Systems Director); id., at 214 (testimony of the Deputy Director of the Department's computerized file system); see also 722 F. 2d, at 938-939; Pet. App. 77-80. Thus the Department knew full well that when it took action to implement the legislative change, the food stamp benefits of a number of recipients were likely to be erroneously reduced or terminated. While the absence of such clear foreknowledge *146 might not make a constitutional difference, its presence here surely sharpens the constitutional analysis.
Second, the officials in charge of the Department's computer systems testified without contradiction that it was "not a problem" to generate a notice containing the individualized information ordered by the District Court, since that information was already contained in the computers, and that the necessary programming might have taken "a few hours." App. 224; see id., at 80-84, 217-227. Thus the District Court's finding, unquestioned by the Court today, was that it was likely that individualized notices could have been provided in December 1981 "without causing any delay" or any "real hardship" to the Department. Pet. App. 74-75, 94.
A
In my view, the Court's offhand discussion of "inadvertent errors" is fogged by an unspoken conceptual confusion in identifying the constitutional deprivation claimed in these cases. In traditional cases arising under the Due Process Clause, a governmental deprivation of property is not difficult to identify: an individual possesses a set amount of property and the government's action either does, or does not, deprive the individual of some or all of it. Where "new" property interests that is, statutory entitlements are involved, however, claimants have an interest only in their benefit level as correctly determined under the law, rather than in any particular preordained amount. Thus, while any deprivation of tangible property by the State implicates the Due Process Clause, only an erroneous governmental reduction of benefits, one resulting in less than the statutorily specified amount, effects a deprivation subject to constitutional constraint. It is the error, and not the reduction per se, that is the deprivation.
Keeping this point in mind, it is readily apparent that this Court's application of the Due Process Clause to governmental administrative action has not only encompassed, but *147 indeed has been premised upon, the need for protection of individual property interests against "inadvertent" errors of the State. Goldberg v. Kelly, 397 U. S. 254 (1970), Mathews v. Eldridge, 424 U. S. 319 (1976), and Memphis Light, Gas & Water Division v. Craft, 436 U. S. 1 (1978), to name but a few examples, all involved administrative decisionmaking presumed to operate in good faith yet subject to normal and foreseeable, albeit unintentional, error.[22] Properly applied, regulations that govern administrative decisions *148 in such cases cannot deprive recipients of property, because a welfare or utility service recipient whose entitlement should be reduced or terminated under relevant statutes can claim no valid interest in continuation. Administrative decisions that affect statutory entitlements may often be correct. But when administrative error that is, the deprivation is foreseeable as a general matter and certain to occur in particular cases, constitutional procedures are interposed to ensure correctness insofar as feasible.[23]
"[A] primary function of legal process is to minimize the risk of erroneous decisions," Mackey v. Montrym, 443 U. S. 1, 13 (1979). Consequently, a foreseeable action that may cause deprivation of property must be "preceded by notice." Mullane v. Central Hanover Bank & Trust Co., 339 U. S. 306, 313 (1950) (emphasis added).[24] As we made clear in Goldberg, 397 U. S., at 267, in statutory entitlement cases the Due Process Clause normally requires "timely and adequate notice detailing the reasons" for proposed adverse administrative action. Such process is constitutionally required whenever the action may be "challenged . . . as resting on incorrect or misleading factual premises or on misapplication of rules or policies to the facts of particular cases." Id., at 268.
*149 Thus, in my view, it is a novel and ill-considered suggestion to "put . . . to one side" unintended but foreseeable administrative errors that concededly had adverse effects on valid property interests. Such errors are at the heart of due process analysis. If the Constitution provides no protection against the visiting of such errors on statutory entitlement claimants, then the development of this Court's "new property" jurisprudence over the past 15 years represents a somewhat hollow victory. The fact that errors inevitably occur in the administration of any bureaucracy requires the conclusion that when the State administers a property entitlement program, it has a constitutional obligation to provide some type of notice to recipients before it implements adverse changes in the entitlement level, for the very reason that "inadvertent" erroneous reductions or terminations of benefits that is, deprivations of property are otherwise effected without any due process of law.[25]
*150 B
Because the errors in these cases cannot merely be ignored, I turn to the central constitutional inquiry: what process was due in light of "the practicalities and peculiarities of the case"? Mullane v. Central Hanover Bank & Trust Co., supra, at 314. Experience demonstrates that balanced consideration of a number of factors is required: the importance of the private interest affected, the risk of erroneous deprivation under the system challenged, the protective value of the different procedures proposed, and the government's interests, including any "fiscal and administrative burdens" created by different procedures. Logan v. Zimmerman Brush Co., 455 U. S., at 434; Mathews v. Eldridge, 424 U. S., at 334-335. These interests are relevant to determining the "content of the notice" as well as its timing and other procedural claims. Goss v. Lopez, 419 U. S. 565, 579 (1975). Although the interests normally relevant to the constitutional due process inquiry are often characterized as "competing," e. g., Cleveland Board of Education v. Loudermill, 470 U. S. 532, 542 (1985), the record makes clear that the Department failed to demonstrate any countervailing interest in not providing individualized notices in this case.
1. Importance of the Interest. The importance of the correct level of food stamp benefits to eligible households cannot be overstated. Designed "[t]o alleviate . . . hunger and malnutrition" and allow poverty level families "to purchase a nutritionally adequate diet," Pub. L. 91-671, § 2, 84 Stat. 2048, the food stamp program by definition provides benefits only to those persons who are unable to afford even a minimally adequate diet on their own. An erroneous reduction or break in benefits, therefore, may literally deprive a recipient "of the very means by which to live." Goldberg, supra, at 264.[26]
*151 2. Risk of Error. Both courts below found that the likelihood of error by the Department in implementing the earned-income deduction change was substantial. 722 F. 2d, at 939; Pet. App. 88-95. The Court does not challenge that evaluation, and it is amply supported by the record. The existence of implementation errors was unchallenged at trial.[27] Because of a severe data entry backlog in the Department's computers during the fall of 1981, an undetermined number of food stamp recipients' files contained erroneous earned-income figures.[28] Thus, although the mathematical operation necessary to implement the statutory change was theoretically simple, its actual performance in Massachusetts necessarily carried with it a high risk of error.
The Department did not challenge the recipients' proof regarding the risk of error at trial, but instead argued as it *152 does here that any such risk was caused not by the statutory change but by its ministerial implementation based on preexisting data in the files. As indicated above, however, it is precisely that implementation, and not the statutory change, that the recipients have challenged throughout. The foreseeable risk of the Department's errors stands unrefuted.
3. Value of Additional Procedures. Adequate notice under the Due Process Clause has two components. It must inform affected parties of the action about to be taken against them as well as of procedures available for challenging that action. Memphis Light, 436 U. S., at 13; Mullane, 339 U. S., at 314. These requirements serve discrete purposes: adequate notice of the action itself permits the individual to evaluate its accuracy or propriety and to determine whether or not to contest it; notice of how to appeal ensures that available error-correction procedures will be effective. In Memphis Light, supra, the second component was examined, and I have no doubt that the Court today correctly concludes that recipients of the mass change notice here were adequately informed of the "procedure for protesting." 436 U. S., at 15; see ante, at 128.
These cases are the converse of Memphis Light, however, and the subtle yet vital failure of the notice here is that it completely failed to inform recipients of the particular action proposed to be taken against them by the Department.[29] The *153 notice included only a single vague statement about some impending impact on food stamp benefits: due to Congress' action, recipient's benefits would "either be reduced . . . or . . . terminated." App. 5. The defendant in this lawsuit, however, is the Massachusetts Department of Public Welfare, not Congress, and the action of which notice was required was, it bears repeating, not Congress' decision to change the law but rather the Department's application of that changed law to individual recipients.[30] "Central to the evaluation of any administrative process is the nature of the relevant inquiry." Mathews, 424 U. S., at 343. In these cases the administrative inquiry was uncomplicated: what was the current earned income of each recipient, and what should his reduced food stamp benefit be after Congress' change was applied to that figure? The obvious value of notice of those simple factual determinations[31] is that they *154 were the only data that would have enabled each recipient to "choose for himself whether to . . . acquiesce or contest," Mullane, supra, at 314, by filing a benefit-preserving appeal.[32]
The Court ultimately brushes aside any value that individualized notice may have had, stating that "citizens are presumptively charged with knowledge of the law," and asserting that "[s]urely Congress can presume that [a form] notice relative to a matter as important as a change in a food-stamp allotment would prompt an appropriate inquiry if not fully understood." Ante, at 130, 131. This reasoning is wholly unpersuasive. First, I am unwilling to agree that "[t]he entire structure of our democratic government," ante, at 131, rests on a presumption that food stamp recipients know and comprehend the arcane intricacies of an entitlement program that requires over 350 pages in the Code of Federal Regulations to explain and voluminous state manuals to administer. I am more certain that the premises of our polity include minimal protections for the property interests of the poor.
Moreover, in Memphis Light, the Court flatly rejected the argument that the poor can protect themselves without *155 process. The dissent there argued that "a homeowner surely need not be told how to complain about an error in a utility bill." 436 U. S., at 26 (STEVENS, J., dissenting). The Court ruled, however, that "skeletal notice" was constitutionally insufficient because utility customers are "of various levels of education, experience and resources," and "the uninterrupted continuity of [utility service] is essential to health and safety." Id., at 14-15, n. 15. See also Mathews v. Eldridge, supra, at 349 ("[P]rocedures [must be] tailored . . . to `the capacities and circumstances of those who are to be heard' ") (citation omitted). In this case, over 45% of affected food stamp recipients in Massachusetts had not completed high school. App. 127. In such circumstances recipients must be "informed clearly." Memphis Light, 436 U. S., at 14-15, n. 15.
Additionally, this record reveals that the Court's reliance on the protective value of an "appropriate inquiry" is misplaced. The notice here did indeed state that recipients should call their local welfare office if they had "questions concerning the correctness of [their] benefits computation." App. 5. Putting aside the fact that the notice did not inform any recipient of his "benefits computation," the testimony of the representative named plaintiffs at trial was uniformly that the local welfare workers they called about the notice were either unaware of it or could not explain it. Id., at 131 (Zades), 139 (Parker), 149 (Johnson). With no help forthcoming at the local level, the 10-day appeal period was virtually certain to expire before even those recipients who called would receive a specific explanation enabling them intelligently to decide whether or not to appeal.
Finally, the Mathews inquiry simply does not countenance rejection of procedural alternatives because a court finds existing procedures "adequate" in some ad hoc sense, without evaluation of whether additional procedures might have been more protective at little or no cost to the government. Yet the Court discusses neither the protective value of individualized *156 notice in this context nor the burden, if any, that it would impose on the Department.
4. Governmental Interests. The District Court concluded that only four simple facts were necessary to transform this vague notice into one that adequately informed affected individuals about the Department's action in their particular cases: "whether [their benefits] were being reduced or terminated" and "the individual recipient's old food stamp benefit amount, new benefit amount, [and] the amount of earned income that was being used to compute the change." Pet. App. 100. These data were already contained in the Department's computerized files, and the computers could have been programmed to print the individualized information on the form notices with little additional time or effort.[33] The District Court's finding, not questioned by the Court today, was that programming the computer to provide such individual information is "neither a difficult nor burdensome procedure," id., at 75-76, and that had the Department requested that such individualized data be printed on the December 1981 notices, it was likely that it could have been accomplished "without causing any delay . . . ." Id., at 74, 75. This record, therefore, can support no argument that individualized notice would have been a burden for the Department.[34]
*157 IV
The Court's regulatory conclusion is unconvincing, and its statutory dictum is unfortunate. But I am most troubled by the Court's casual suggestion that foreseeable "inadvertent" errors in the administration of entitlement programs may be ignored in determining what protection the Constitution provides. Such administrative error all too often plagues governmental programs designed to aid the poor.[35] If well-meaning mistakes that might be prevented inexpensively lie entirely outside the compass of the Due Process Clause, then the convenience of the administrative state comes at the expense of those least able to confront the bureaucracy. I respectfully dissent.
JUSTICE MARSHALL, dissenting.
I share JUSTICE BRENNAN's view that the logic of the relevant regulation, 7 CFR § 273.12(e)(2)(ii) (1985), requires the sort of notice that the lower courts ordered here. The regulation contemplates a notice that allows families to "adjust household budgets" according to changes in benefit levels, *158 43 Fed. Reg. 18896 (1978), and I fail to see how a notice that does not inform recipients of their new benefit levels can serve this purpose. Given that this interpretation of the regulation disposes of the cases, I find no need to reach the other issues addressed by the Court or by the dissent. I therefore join Part I of JUSTICE BRENNAN'S dissent.
NOTES
[*] Together with No. 83-6381, Parker et al. v. Block, Secretary of Agriculture, et al., also on certiorari to the same court.
[] Neil Hartigan, Attorney General of Illinois, Linley E. Pearson, Attorney General of Indiana, LeRoy S. Zimmerman, Attorney General of Pennsylvania, Bronson C. La Follette, Attorney General of Wisconsin, and F. Thomas Creeron III, Assistant Attorney General, filed a brief for the State of Illinois et al. as amici curiae urging reversal.
Cynthia G. Schneider filed a brief for the National Anti-Hunger Coalition as amicus curiae urging affirmance.
Kenneth O. Eikenberry, Attorney General, and Charles F. Murphy, Assistant Attorney General, filed a brief for the State of Washington as amicus curiae.
[1] 7 U. S. C. § 2011.
[2] § 2014.
[3] §§ 2013(a), 2020(a).
[4] § 2014.
[5] §§ 2012(c), 2014(f), 2015(c).
[6] § 2014(e) (1976 ed., Supp. II).
[7] See 95 Stat. 360, 7 U. S. C. § 2014(e).
[8] The Government states that it is "advised that the reductions involved did not exceed $6 per month for a four-member household if the household remained eligible for benefits." Brief for Federal Respondent 7. It does not indicate where in the record this information is located; nor does it indicate the source of the "advice."
[9] 46 Fed. Reg. 44722 (1981). The regulation provided that the change should begin no later than 90 days from the date of implementation, with October 1, 1981, as the last date for state agencies to begin implementation (absent a waiver).
[10] Ibid. The portion of 7 CFR § 273.12(e) (1985), which discusses the notice required for mass changes, provides in relevant part:
"(e) Mass changes. Certain changes are initiated by the State or Federal government which may affect the entire case load or significant portions of the case load. These changes include adjustments to the income eligibility standards, the shelter and dependent care deductions, the Thrifty Food Plan, and the standard deduction; annual and seasonal adjustments to Social Security, SSI, and other Federal benefits, periodic adjustments to AFDC or GA payments; and other changes in the eligibility criteria based on legislative or regulatory actions.
.....
"(2) . . . (ii) A notice of adverse action is not required when a household's food stamp benefits are reduced or terminated as a result of a mass change in the public assistance grant. However, State agencies shall send individual notices to households to inform them of the change. If a household requests a fair hearing, benefits shall be continued at the former level only if the issue being appealed is that food stamp eligibility or benefits were improperly computed."
[11] The section on adverse actions, 7 CFR § 273.13 (1985), provides in relevant part:
"(a) Use of notice. Prior to any action to reduce or terminate a household's benefits within the certification period, the State agency shall, except as provided in paragraph (b) of this section, provide the household timely and adequate advance notice before the adverse action is taken."
.....
"(b) Exemptions from notice. Individual notices of adverse action are not required when:
"(1) The State initiates a mass change as described in § 273.12(e)."
[12] App. to Pet. for Cert. in No. 83-1660, pp. A. 44-A. 45; App. 3.
[13] App. to Pet. for Cert. in No. 83-1660, pp. A. 45-A. 46.
[14] App. 5. Each recipient was provided with a card that he could mail to obtain a hearing; a recipient could also obtain a hearing by placing a telephone call or by asking for a hearing in person. App. to Pet. for Cert. in No. 83-1660, p. A. 48.
[15] Id., at A. 100. The District Court wrote:
"The risk of erroneous deprivation of benefits is increased in this case by the lack of adequate notice. The December notice did not inform the affected food stamp households of the exact action being taken, that is, whether their food stamp allotment was being reduced or terminated. There was no mention of the amount by which the benefits were being reduced. And finally, the December notice lacked the information necessary to enable the household to determine if an error had been made. Therefore, without the relevant information to determine whether an error had been made, the risk of an erroneous deprivation is increased." Id., at A. 90-A. 91.
[16] The District Court concluded:
"It is clear that the entitlement to food stamps benefits is a property interest subject to the full protection of the Fourteenth Amendment. Goldberg v. Kelly, 397 U. S. 254 (1970). Therefore, given the existence of a constitutionally protected property interest, the question is what process is due." Id., at A. 86.
[17] The District Court also held that the December notice violated the timely notice requirements of 7 U. S. C. § 2020(e)(10) and 7 CFR § 273.12(e)(2)(ii) (1985), App. Pet. for Cert. in No. 83-1660, p. A. 98; that the notice required to implement the earned-income disregard had to comport with 7 CFR § 273.13(a) (1985), App. to Pet. for Cert. in No. 83-1660, p. A. 98, and that the notice violated multilingual notice requirements, id., at A. 104-A. 105.
[18] Id., at A. 101.
[19] Id., at A. 102-104.
[20] However, the Court of Appeals disagreed that the December notice failed to satisfy the notice requirements of 7 CFR § 273.13(a) (1985). Foggs v. Block, 722 F. 2d, at 940.
[21] Id., at 941.
[22] Escambia County, Florida v. McMillan, 466 U. S. 48, 51 (1984) (per curiam) ("normally the court will not decide a constitutional question if there is some other ground upon which to dispose of the case"); Ashwander v. TVA, 297 U. S. 288, 347 (1936) (Brandeis, J., concurring).
[23] Title 7 U. S. C. § 2020(e)(10) provides, in relevant part:
"The State plan of operation . . . shall provide . . .
.....
"(10) for the granting of a fair hearing and a prompt determination thereafter to any household aggrieved by the action of the State agency under any provision of its plan of operation as it affects the participation of such household in the food stamp program or by a claim against the household for an overissuance: Provided, That any household which timely requests such a fair hearing after receiving individual notice of agency action reducing or terminating its benefits within the household's certification period shall continue to participate and receive benefits on the basis authorized immediately prior to the notice of adverse action until such time as the fair hearing is completed and an adverse decision rendered or until such time as the household's certification period terminates, whichever occurs earlier . . . ."
[24] 84 Stat. 2051; see H. R. Rep. No. 95-464, pp. 285-286 (1977); 7 U. S. C. § 2019(e)(8) (1976 ed.) (state agency must provide "for the granting of a fair hearing and a prompt determination thereafter to any household aggrieved by the action of a State agency").
[25] 91 Stat. 972.
[26] See H. R. Rep. No. 95-464, at 285-289 (summarizing the existing rules governing fair hearings).
[27] Id., at 289 ("The Committee bill would retain the fair hearings provision of the law intact and would encourage the Department to enforce its excellent regulations and instructions on the subject. . . . The Department should also be certain that, although its regulations do not require individual notice of adverse action when mass changes in program benefits are proposed, they should require the states to send precisely such notices well in advance when the massive changes mandated by this bill are about to be implemented so that the individuals affected are fully aware of precisely why their benefits are being adversely affected. Hearings would, of course, be unnecessary in the absence of claims of factual error in individual benefit computation and calculation. All states should be overseen to be certain that their individual notices in non-mass change adverse action contexts recite the household's fair hearing request rights").
[28] Prior to the enactment of the Food Stamp Act of 1977, although individual notices of adverse action were not required by the regulations when mass changes in benefits were instituted because of changes in the law affecting, among other items, income standards or other eligibility criteria, see 7 CFR § 271.1(n)(2)(i) (1975), the States were required to "publicize the possibility of a change in benefits through the various news media or through a general notice mailed out with [food stamp allotment] cards and with notices placed in food stamp and welfare offices." § 271.1(n)(3); see also 39 Fed. Reg. 25996 (1974).
[29] It may well be true, as petitioners argue, that the computerized data in the Department's possession made it feasible for the agency to send an individualized computation to each recipient, and that such a particularized notice would have served the Commonwealth's interest in minimizing or correcting predictable error. What judges may consider common sense, sound policy, or good administration, however, is not the standard by which we must evaluate the claim that the notice violated the applicable regulations.
Moreover, present regulations protect the food-stamp household by providing, upon request, the ongoing right to access to information and materials in its case file. 7 CFR § 272.1(c)(2) (1985). Further, upon request, specific materials are made available for determining whether a hearing should be requested, § 273.15(i)(1). If a hearing is requested, access to information and materials concerning the case must be made available prior to the hearing and during the hearing, § 273.15(p)(1).
[30] See App. to Pet. for Cert. in No. 83-1660, pp. A. 50-A. 52 (Cecelia Johnson), A. 53 (Gill Parker), A. 55 (Stephanie Zades), A. 55-A. 56 (Madeline Jones). By hypothesis, an inadvertent error is one that the Department did not anticipate; for that reason, the Department could not give notice of a reduction that was simply the consequence of an unintended mistake.
[31] Thus, in Mathews v. Eldridge, 424 U. S. 319, 332 (1976), this Court wrote:
"Procedural due process imposes constraints on governmental decisions which deprive individuals of `liberty' or `property' interests within the meaning of the Due Process Clause of the Fifth or Fourteenth Amendment. The Secretary does not contend that procedural due process is inapplicable to terminations of Social Security disability benefits. He recognizes, as has been implicit in our prior decisions, e. g., Richardson v. Belcher, 404 U. S. 78, 80-81 (1971); Richardson v. Perales, 402 U. S. 389, 401-402 (1971); Flemming v. Nestor, 363 U. S. 603, 611 (1960), that the interest of an individual in continued receipt of these benefits is a statutorily created `property' interest protected by the Fifth Amendment."
[32] Logan v. Zimmerman Brush Co., 455 U. S. 422, 432-433 (1982); see also United States Railroad Retirement Board v. Fritz, 449 U. S. 166, 174 (1980); Hisquierdo v. Hisquierdo, 439 U. S. 572, 575 (1979); Flemming v. Nestor, 363 U. S. 603, 608-611 (1960).
[33] Cf. Bi-Metallic Investment Co. v. State Bd. of Equalization, 239 U. S. 441, 445 (1915) ("Where a rule of conduct applies to more than a few people it is impracticable that every one should have a direct voice in its adoption. The Constitution does not require all public acts to be done in town meeting or an assembly of the whole. General statutes within the state power are passed that affect the person or property of individuals, sometimes to the point of ruin, without giving them a chance to be heard. Their rights are protected in the only way that they can be in a complex society, by their power, immediate or remote, over those who make the rule").
[34] Thus, even under the position espoused in dissent in Texaco, there would be no merit to the claim in this case. As JUSTICE BRENNAN wrote:
"As a practical matter, a State cannot afford notice to every person who is or may be affected by a change in the law. But an unfair and irrational exercise of state power cannot be transformed into a rational exercise merely by invoking a legal maxim or presumption. If it is to survive the scrutiny that the Constitution requires us to afford laws that deprive persons of substantial interests in property, an enactment that relies on that presumption of knowledge must evidence some rational accommodation between the interests of the State and fairness to those against whom the law is applied." 454 U. S., at 544.
[35] In the case before us, the constitutional claim is particularly weak because the relevant regulations provided that any recipient who claimed that his benefit had been improperly computed as a result of the change in the income deduction was entitled to a reinstatement of the earlier benefit level pending a full individual hearing. 7 CFR § 273.12(e)(2)(ii) (1985). Petitioners do not contend that there was a failure to comply with this regulation. This, of course, would be a different case if the reductions were based on changes in individual circumstances, or if the reductions were based on individual factual determinations, and notice and an opportunity to be heard had been denied.
[1] Order, Foggs v. Block, No. 81-0365-F, p. 2 (Mass., Mar. 24, 1982), reprinted in App. to Pet. for Cert. in No. 83-1660, p. 100 (hereinafter Pet. App.).
[2] The regulation provides in full:
"A notice of adverse action is not required when a household's food stamp benefits are reduced or terminated as a result of a mass change in the public assistance grant. However, State agencies shall send individual notices to households to inform them of the change. If a household requests a fair hearing, benefits shall be continued at the former level only if the issue being appealed is that food stamp eligibility or benefits were improperly computed."
[3] The record contains no evidence that food stamp program authorities have ever advanced a particular construction of the phrase prior to this litigation. Indeed, in his opening brief to this Court, the Secretary did not address the regulatory argument, but contended instead that "any argument, independent of the constitutional argument, that the Massachusetts notice was in violation of the Food Stamp Act or the `mass change' regulations" should be left open to the recipients on remand. Brief for Federal Respondent 44, n. 38. Thus the Secretary's position on the meaning of the "individual notice" regulation was not presented until his reply brief was filed. Because this interpretation apparently has been developed pendente lite, the normal canon requiring deference to regulatory interpretations made by an agency that administers a statute, e. g., Jewett v. Commissioner, 455 U. S. 305, 318 (1982), has no application here. See Motor Vehicle Mfrs. Assn. v. State Farm Mutual Automobile Ins. Co., 463 U. S. 29, 50 (1983) ("[C]ourts may not accept appellate counsel's post hoc rationalizations for agency action"); Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U. S. 402, 422 (1971) (opinion of Black, J.) (rejecting "too-late formulations, apparently coming from the Solicitor General's office").
[4] As the Court of Appeals noted, "[t]hese recipients may have been well informed about their right to appeal, but they did not have enough information to know whether or not to exercise that right." Foggs v. Block, 722 F. 2d 933, 939 (CA1 1983).
[5] Similar delegations of authority elsewhere in the food stamp regulations are likewise called into question by the Court's ruling today. See 7 CFR § 273.15(k)(1) (1985) ("When benefits are reduced or terminated due to a mass change, participation on the prior basis shall be reinstated only if the issue being contested is that food stamp . . . benefits were improperly computed or that Federal law or regulation is being misapplied or misinterpreted by the State agency"); § 271.7(f) ("State agencies shall not be required to hold fair hearings unless the request for a fair hearing is based on a household's belief that its benefit level was computed incorrectly . . . or that the rules were misapplied or misinterpreted").
[6] Apart from its discussion of the regulation, the Court emphasizes the fact that the form notice mailed by the Department in these cases informed recipients that "[y]ou have the right to request a fair hearing if you disagree with this action." Ante, at 128. It seems relatively clear, however, that under 7 CFR § 273.15(k)(2)(ii) (1985) and, perhaps, § 271.7(f), aggrieved households have no "right" to a hearing based merely on disagreement with a change in the law. Perhaps the Court intends either to limit its approval of form notices to circumstances in which a state agency allows appeals and fair hearings no matter what the reason, or to require that appeals must always be permitted if mass change notices are vague. Otherwise, nothing in the Court's opinion would appear to prohibit state agencies from omitting such appeal rights in the future while still providing no more than the uninformative notice approved by the Court today.
[7] "When [a notice of adverse action] is not required . . ., the State agency shall publicize the possibility of a change in benefits through the various news media or through a general notice mailed out with ATP cards and with notices placed in food stamp and welfare offices." 7 CFR § 271.1(n)(3) (1975).
[8] The relevant provisions stated:
"(e) Mass changes . . . .
"(1) Federal adjustments to eligibility standards, allotments, and deductions, State adjustments to utility standards. . . .
"(ii) Although a notice of adverse action is not required, State agencies may send an individual notice to households of these changes. State agencies shall publicize these mass changes through the news media; posters in certification offices, issuance locations, or other sites frequented by certified households; or general notices mailed to households. . . . .
"(2) Mass changes in public assistance. . . .
"(ii) A notice of adverse action is not required when a household's food stamp benefits are reduced or terminated as a result of a mass change in the public assistance grant. However, State agencies shall send individual notices to households to inform them of the change. . . ." 7 CFR § 273.12(e) (1979).
[9] Thus the fact that "a separate individual notice was sent to each individual household," ante, at 126, proves nothing.
[10] In 1981, when the Department acted in this case, a "notice of adverse action" was required to contain "in easily understandable language . . . [t]he proposed action; the reason for the proposed action; the household's right to request a fair hearing; the telephone number and, if possible, the name of the person to contact for additional information; the availability of continued benefits; and the liability of the household for any overissuances received while awaiting a fair hearing . . . . If there is an individual or organization available that provides free legal representation, the notice shall also advise the household of the availability of the service." 7 CFR § 273.13(a)(2) (1981).
[11] The Secretary erred in stating that households affected by mass changes had no right to continued benefits, since the regulations proposed on the same day clearly specified a right to continued benefits "if the issue being appealed is the computation of benefits." 43 Fed. Reg. 18931 (1978). But unlike a notice of adverse action, the proposed mass change notice was not required to inform recipients of that right.
[12] To the extent that the Court suggests that there is a difference between types of action ("adverse" as opposed to "mass") rather than in types of notice, ante, at 126, or that notice is required of "individual adverse action[s]" but not of mass changes, ibid., it is apparent that the Court misapprehends the "familiar distinction between the individual adverse action and a mass change." Ibid. In terms of effect on the individual, there is no difference under either label. The "action" a reduction in benefits is exactly the same. Moreover, households affected in either case must receive "individual notice" and have some right to a fair hearing. The only difference is in the number of recipients affected and the amount of additional information their notices must contain.
[13] It should not go unnoted that just as the concept of "individual notice" silently appeared in the 1978 mass change regulations, the concept of "general" notice has now disappeared from the regulations without explanation. See 46 Fed. Reg. 44712, 44726 (1981) (proposing new § 273.12(12)(e)); 7 CFR § 273.12(e) (1985). It is ironic that although the concept of "general notice mailed to households" has thus passed from the regulatory scheme without a murmur, the majority today reincarnates it under the label of "individual notice," by approving the vague form notices that were used in these cases.
[14] The recipients' petition for certiorari in No. 83-6381, questioning the Court of Appeals' vacation of the District Court's injunctive relief, is not considered by the Court today. See ante, at 123. I need say only that on this record, I do not find that the Court of Appeals exceeded its remedial discretion.
[15] Title 7 U. S. C. § 2020(d) directs that each "State agency . . . shall submit for approval" by the Secretary of Agriculture a "plan of operation specifying the manner in which [the food stamp] program will be conducted within the State in every political subdivision." State agencies are directly "responsible for the administration of the program within [each] State." 7 CFR § 271.4(a) (1985).
[16] "Each household must be notified in a timely manner usually ten days prior to the time the agency's decision will take effect." H. R. Rep. No. 95-464, p. 285 (1977); accord, S. Conf. Rep. No. 95-418, p. 197 (1977) (adopting House bill which requires "State agency notice of reduction or termination of [a household's] benefits").
[17] The Court rests its statutory argument on its view of the regulatory "background," which allegedly included a "distinction between the regulatory requirement regarding notice in the case of an adverse action and the lack of such a requirement in the case of a mass change." Ante, at 125 (emphasis supplied). No such distinction existed, however. The regulations in effect in 1977 plainly stated a requirement of notice of mass changes, 7 CFR § 271.1(n)(3) (1977), as the Court itself notes, ante, at 126, n. 28. Congress' approval of the 1977 administrative practice, therefore, cannot support the Court's suggestion that Congress thereby approved of no notice at all in the mass change context.
[18] We previously have affirmed the view that because the distinction between factual and policy-based appeals is often difficult to identify, the Due Process Clause constrains state agencies to err on the side of allowing hearings in doubtful or ambiguous cases. Carleson v. Yee-Litt, 412 U. S. 924 (1973) (summarily aff'g Yee-Litt v. Richardson, 353 F. Supp. 996 (ND Cal.)).
[19] The Court's statement that "it seems unlikely that Congress contemplated individual hearings for every household affected by a general change in the law," ante, at 124, is thus unobjectionable, but it has no apparent bearing on whether Congress contemplated notice of mass reductions so that fair hearings could be requested in appropriate cases before benefits are cut off.
[20] See, e. g., Brief for Respondents Parker et al. 47, and n. 26 ("This is not a case in which the plaintiffs have challenged the authority of Congress to decrease the amount of [food stamp benefits]." "[T]he plaintiffs seek only to have the admittedly valid change in the program applied correctly to their individual cases"); see also Reply Brief for Respondents Parker et al. 9; Record, Amended Supplemental Complaint ¶ 1 (Jan. 6, 1982).
[21] Unlike the statute analyzed in Texaco, Inc. v. Short, 454 U. S. 516 (1982), the 1981 earned-income deduction change was not "self-executing," and as Texaco held, it is "essential" to distinguish "self-executing feature[s] of [a] statute" from actions taken subsequently to implement the legislative command. Id., at 533. Texaco examined a challenge to a state law providing that mineral interests unused for 20 years automatically would revert to the surface owner unless a "statement of claim" was filed. Id., at 518. Appellants claimed this law would effect an unconstitutional taking of their interests without due process unless they were notified when "their 20-year period of nonuse was about to expire." Id., at 533. While upholding the statute, the Court repeatedly emphasized its "self-executing" character, and carefully noted that the Constitution would govern any action taken later to terminate finally appellants' property interests: "It is undisputed that, before judgment could be entered in a quiet title action that would determine conclusively that a mineral interest has reverted, . . . the full procedural protections of the Due Process Clause . . . including notice . . . must be provided." Id., at 534 (emphasis supplied); see also id., at 535 ("The reasoning in Mullane is applicable to a judicial proceeding brought to determine whether a lapse of a mineral estate did or did not occur, but not to the self-executing feature of" the law); id., at 537 (distinguishing precedents on the ground that "the property interest was taken only after a specific determination that the deprivation was proper"). Texaco thus plainly acknowledged that due process protections were required to prevent erroneous applications of the statute. As I also noted in Texaco, if "[t]he State may . . . feasibly provide notice when it asserts an interest directly adverse to particular persons, [it] may in that circumstance be constitutionally compelled to do so." Id., at 550 (BRENNAN, J., dissenting).
[22] Although the Court does not define "inadvertent errors," its opinion and the facts of these cases indicate that the phrase describes errors made in good faith or unintentionally, rather than errors that could not possibly have been expected. Thus the Court acknowledges that such errors are well known to "occur in the administration of any large welfare program." Ante, at 127; see also Memphis Light, Gas & Water Division v. Craft, 436 U. S., at 18 ("[T]he risk of erroneous deprivation, given the necessary reliance on computers, is not insubstantial") (footnote omitted). Indeed, the testimony indicating that the Department knew that the stale data in its computer system would be used to determine new benefit levels suggests that the Court's characterization of the resulting errors as "inadvertent" is a charitable one.
In a footnote, the Court states that "[b]y hypothesis, an inadvertent error is one that the Department did not anticipate; for that reason, the Department could not give notice of a reduction that was simply the consequence of an unintended mistake." Ante, at 128, n. 30. In light of the Department's testimony and the Court's recognition that administrative errors are well known to occur in welfare programs, I can surmise only that the Court means that the Department did not anticipate which particular individuals would be erroneously affected, for the foreseeability of error against some portion of the class is clear and undisputed. See Brief for State Petitioner 60-61. The Court's further assertion that the Department "could not give notice of a reduction that was simply the consequence of an unintended mistake," is simply misguided. The reductions per se were the consequence of Congress' action, not the Department's, and they were certainly intended. The amount of the reductions was easily calculated, and notice could have been given. Only the Department's miscalculations were in any sense "unintended mistakes." While notice that a particular error would be made was, perhaps, impossible, notice of the reduction was both possible and required, for the very reason that only the recipients could identify particular errors before they took effect.
[23] One need not indisputably prove error before constitutional protections may be invoked; only a foreseeable probability of error need be shown. See, e. g., Board of Regents v. Roth, 408 U. S. 564, 577 (1972) (requiring a "legitimate claim of entitlement") (emphasis added); Fuentes v. Shevin, 407 U. S. 67, 86 (1972) ("Fourteenth Amendment's protection of `property'. . . has never been interpreted to safeguard only the rights of undisputed ownership") (emphasis added).
[24] See also Roller v. Holly, 176 U. S. 398, 409 (1900) ("That a man is entitled to some notice before he can be deprived of his liberty or property, is an axiom of law to which no citation of authority would give additional weight"); Baldwin v. Hale, 1 Wall. 223, 233 (1864) ("Parties whose rights are to be affected are entitled to be heard; and in order that they may enjoy that right they must first be notified").
[25] The Secretary argues that such errors "would likely be detected" after they occurred, "with corrective payments to all." Brief for Federal Respondent 25-26. Since the Department contends that the particular errors committed were unknown to it, however, it is not clear how they would be detected absent specific notice to the recipients. See Vargas v. Trainor, 508 F. 2d 485, 490 (CA7 1974), cert. denied, 420 U. S. 1008 (1975). Because the Department notably does not contend that every error that occurred in this case has in fact been detected, the Court of Appeals' order directing the Department "to check its files to ensure that [it] properly calculated the benefit reduction of each recipient," 722 F. 2d at 941, a remedy suggested by the Department itself, ibid., was appropriate.
More importantly, however, the likelihood of postdeprivation correction is largely irrelevant to the constitutional inquiry regarding notice. Cf. Mathews v. Eldridge, 424 U. S. 319, 340 (1976) (postdeprivation process relevant to whether predeprivation evidentiary hearing is required); but see Cleveland Board of Education v. Loudermill, 470 U. S. 532, 542 (1985) ("some form of pretermination hearing" is generally required). To paraphrase Memphis Light, Gas & Water Division v. Craft, 436 U. S., at 20, "[a]lthough [food stamp benefits] may be restored ultimately, the cessation of essential [benefits] for any appreciable time works uniquely final deprivation," and adequate notice therefore must precede the adverse action.
[26] Census statistics indicate that the median annual income of all households receiving food stamps was less than $6,000 in 1982. Bureau of the Census, Characteristics of Households and Persons Receiving Selected Noncash Benefits: 1982, p. 19 (1984). "The 1984 poverty threshold is $8,280 for a family of three and $10,610 for a family of four." House Committee on Ways and Means, Children in Poverty, 99th Cong., 1st Sess., 196 (Comm. Print 1985). See also Mathews v. Eldridge, supra, at 340 ("[W]elfare assistance is given to persons on the very margin of subsistence").
[27] For example, a random sample of less than one-third of the 16,000 households that received the Department's December 1981 notice showed that 585 households listed as having no earned income nevertheless received the notice. Of these, 211 households experienced a change in their benefit level, although by statutory definition no change should have occurred. Pet. App. 81-82. Thus the Court's statement that Congress' "amendment had no effect on households with no income," ante, at 118, is simply wrong with regard to implementation of the law in Massachusetts.
[28] Data for over 9,000 of the households that received the notice at issue in these cases were contained in the affected computer system. Pet. App. 78. Over two-thirds of the data entries scheduled for this system had not been processed during the relevant period, and the District Court concluded that "it was more likely than not" that the correct earned-income information "for any of the [affected] households . . . was not entered . . . prior to implementation of the change in the earned income disregard." Id., at 79.
[29] The Court finds that the form notice here was adequate simply because it explained how to appeal and, if a recipient contacted the Department, their benefits were not reduced until a hearing was held. Ante, at 128. This rationale ignores the first component of notice that our cases recognize: notice of the proposed action. This notice told recipients only of Congress' change, and did not even identify the Department's action ("reduced or terminated," App. 5), let alone provide sufficient information to evaluate it. See n. 4, supra. By approving a form of notice that encourages recipients to appeal whether they have a reason or not, the Court likely adds to the costs of welfare administration. Moreover, as noted above, n. 6, no regulation required the Department to continue a recipients benefits absent some claim of factual error. Unless the Court intends to impose such a requirement under the Constitution by its decision today, its ground for decision fails to support its constitutional conclusion.
[30] The Secretary was a party in the District Court only on the theory that the mass change regulation was unconstitutional. The District Court did not so hold, however, and its order ran solely against the state agency. The Department's authorities wrote and designed the particular form notice at issue, and only the errors caused by the Department's actions were the subject of challenge. In evaluating the adequacy of the notices, therefore, the value of additional information in preventing the Department's errors is the appropriate focus of analysis.
[31] It is conceded that implementation of the 1981 law required the Department to make these determinations in each individual case. See, e. g., Brief for State Petitioner 65 (implementation "required a computer recalculation of each household's benefits"). I thus fail to understand the Court's suggestion that "[t]his, of course, would be a different case if the reductions were based on . . . individual factual determinations." Ante, at 131, n. 35. The Court might intend to distinguish actions requiring simple mathematical determinations from application of laws requiring greater judgment or discretion on the part of administrators. But we have never before suggested that such a distinction might make a difference, nor does the Court provide any analytical justification for such a conclusion today. Goldberg v. Kelly, 397 U. S. 254 (1970), clearly stated that the procedural protections of the Due Process Clause apply whenever the potential for erroneous decision based on "incorrect or misleading factual premises or . . . misapplication of rules or policies to the facts of particular cases" exists. Id., at 268. See also Yee-Litt v. Richardson, 353 F. Supp. 996 (ND Cal. 1973).
[32] The Secretary reports that households normally receive their first reduced benefit allotment "a few weeks after the notice." Brief for Federal Respondent 37. The form notice here, however, provided that recipients had a right to continued benefits pending a fair hearing only if their request were received within 10 days from the date of the notice. App. 5; see 7 CFR §§ 273.15(k)(1), 273.13(a)(1) (1981). Otherwise, a recipient had only a right to reimbursement for erroneously reduced benefits "as soon as administratively feasible" after prevailing in a fair hearing. 7 CFR § 273.15(r)(2) (1981).
[33] App. 80-84, 217-227. Indeed, prior to trial below the same computer system generated a list of recipients containing precisely the information found necessary by the District Court. Pet. App. 80. In light of this evidence, it is unsurprising that, as the District Court stated, "the Commonwealth [did] not argue the conservation of scarce fiscal resources." Id., at 92-93. See also Philadelphia Welfare Rights Organization v. O'Bannon, 525 F. Supp. 1055, 1060 (ED Pa. 1981) (administrative burden in providing individualized notice of state implementation of the 1981 earned-income deduction change was "negligible").
[34] The District Court also found that individualized notice would "operat[e] to benefit the agency because such a notice should reduce the amount of client visits and phone calls to the agency seeking clarification, reduce the amount of unnecessary appeals, and free up the time of the case-workers for other tasks." Pet. App. 76-77; see App. 95-96 (expert testimony that vague mass change notice throws agency into "administrative chaos"). This finding is due deference in this Court. Although the Court properly rejects such evidence in its discussion of the regulations and statute, ante, at 127, n. 29, our constitutional precedents require that the "fiscal and administrative burdens" of process enter the analysis once it is determined that notice of some kind is required under the Due Process Clause. Mathews, 424 U. S., at 335; see Mullane, 339 U. S., at 317 (considering "practical difficulties and costs" of types of notice).
[35] See, e. g., Hearing on Children, Youth, and Families in the Northeast before the House Select Committee on Children, Youth and Families, 98th Cong., 1st Sess., 51, 53 (1983); Hearings on HEW Efforts to Reduce Errors in Welfare Programs (AFDC and SSI) before the Subcommittee on Oversight of the House Committee on Ways and Means, 94th Cong., 2d Sess. (1976).
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Case: 10-20370 Document: 00511488350 Page: 1 Date Filed: 05/25/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
May 25, 2011
No. 10-20370
Summary Calendar Lyle W. Cayce
Clerk
UNITED STATES OF AMERICA,
Plaintiff-Appellee
v.
LEWIS GILMORE HURST,
Defendant-Appellant
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:09-CV-2022
USDC No. 4:04-CR-355-1
Before KING, BENAVIDES, and ELROD, Circuit Judges.
PER CURIAM:*
Lewis Gilmore Hurst, federal prisoner # 38756-179, filed a motion under
section 2255, of Title 28, United States Code, challenging his 2004 bank robbery
and firearms convictions, which was denied by order entered September 6, 2009.
Hurst did not appeal.
On January 28, 2010, Hurst filed a motion requesting clarification of the
termination of his section 2255 motion. Hurst stated that, on January 26, 2010,
*
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: 10-20370 Document: 00511488350 Page: 2 Date Filed: 05/25/2011
No. 10-20370
he had received a copy of the docket sheet indicating that his motion had been
“closed” and “terminated.” Hurst stated that this was the first correspondence
that he had received from the court with regard to the section 2255 motion.
Hurst stated, “If my motion has been denied and/or dismissed, I ask that this
motion be allowed to serve as my notice of intent to appeal.” Hurst attached a
copy of the document he received on January 26, 2010, which is a copy of the
civil docket sheet, and which states plainly that documents should be filed in the
criminal case only. Strangely, the document indicates that the case was
“terminated” on November 18, 2009, rather than on September 6, 2009, which
was the date of entry of the order denying the section 2255 motion. The
document does not state expressly that an order was entered denying the section
2255 motion. On February 7, 2010, the district court entered an order
“clarifying” that the section 2255 motion had been denied, although no date was
mentioned.
On March 17, 2010, Hurst filed a motion requesting that the order
dismissing the section 2255 motion be re-entered to enable him to file a timely
notice of appeal. Hurst stated in a sworn declaration that he first learned of the
termination of his section 2255 motion on January 25, 2010, when he received
a copy of the civil docket sheet. Hurst declared that he had never received a copy
of the order denying his section 2255 motion, nor was he notified at the time of
the denial of the section 2255 motion that the motion had been denied. The
district court construed the motion as a request for reconsideration, which it
denied. Hurst gave timely notice of his appeal from that order, which was an
appealable final decision. See Rocha v. Thaler, 619 F.3d 387, 399 n.26 (5th Cir.)
(§ 2254 case), clarified on denial of rehearing on other grounds, 626 F.3d 815 (5th
Cir. 2010); see also F ED. R. A PP. P. 4(a)(1)(B); R ULE 11(b), R ULES G OVERNING
SECTION 2255 P ROCEEDINGS.
Hurst has moved this court to compel service of the appellee’s brief, and,
in a subsequent filing, he requests leave to file his reply brief out of time. The
2
Case: 10-20370 Document: 00511488350 Page: 3 Date Filed: 05/25/2011
No. 10-20370
motion to compel is DENIED AS MOOT, and the motion for leave to file the
reply brief out of time is GRANTED.
We have construed Hurst’s March 17, 2010, filing as a Rule 60(b)(6)
motion requesting relief from the order denying the January 28, 2010, motion
for clarification. Under Rule 60(b)(6), in extraordinary circumstances, the
district court may relieve a party from an order or proceeding for any reason that
justifies relief. F ED. R. C IV. P. 60(b)(6). Our review of the district court’s order
denying the Rule 60(b)(6) motion is for an abuse of discretion. Hess v. Cockrell,
281 F.3d 212, 215 (5th Cir. 2002).
Hurst’s argument, liberally construed, is that the district court abused its
discretion in failing to reopen the appellate period. See F ED. R. A PP. P. 4(a)(6).
We hold that the district court abused its discretion in denying the Rule 60(b)(6)
motion and in failing to construe the January 28, 2010, motion for clarification
as a request for relief under Rule 4(a)(6). We note that there is an unresolved
issue of fact as to when Hurst was provided with adequate notice of entry of the
order denying his section 2255 motion. We need not decide, at this juncture,
whether mailing the civil docket sheet to Hurst constituted adequate notice for
purposes of Rule 77(d) of the Federal Rules of Civil Procedure. See F ED. R. A PP.
P. 4(a)(6)(B). The district court’s order denying the Rule 60(b)(6) motion is
VACATED, and the case is REMANDED for further proceedings consistent with
this opinion.
3
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546 N.E.2d 866 (1989)
In re the Marriage of Haroon M. QAZI, Appellant (Petitioner below),
v.
Sabina QAZI, Appellee (Respondent below).
No. 29A02-8802-CV-00060.
Court of Appeals of Indiana, Second District.
November 30, 1989.
Rehearing Denied March 20, 1990.
*867 Michael A. Howard, Pearce & Howard, Noblesville, for appellant.
James R. Fisher, Ice Miller Donadio & Ryan, Indianapolis, for appellee.
SULLIVAN, Judge.
Haroon Qazi (Dr. Qazi) appeals a trial court determination, following remand, regarding the value of certain pension plans. Previously, on appeal of the dissolution decree, the reviewing court determined the plans to be part of the marital estate.
We affirm.
Dissolution was granted to Dr. Qazi and Connie Qazi on July 17, 1984. The trial court's order excluded three pension plans from the marital estate. Nevertheless, one of the plans, belonging to Mrs. Qazi, was awarded to her; the remaining two, of substantially greater value, belonged to Dr. Qazi and were awarded to him. Mrs. Qazi appealed that ruling. On appeal our Third District held that the pension plans were presently vested assets and therefore property which constituted a part of the marital estate. The Third District reversed and remanded, "for reconsideration of the marital estate and any redistribution occasioned thereby." Qazi v. Qazi (1986) 3d Dist.Ind. *868 App., 492 N.E.2d 692, 694, trans. denied (1987) Ind., 503 N.E.2d 894.
On remand, the trial court valued the three plans at $812,500. The court gave Dr. Qazi his two plans, valued at $762,500; Mrs. Qazi received her plan, valued at $50,000 and a case award of $525,000 to be paid over a ten year period. Following the remand hearing, Dr. Qazi instituted an appeal, asserting various errors which we rephrase as follows:
1. Whether the trial court on remand erred in failing to consider a federal income tax liability which was in dispute at the time of the original hearing but determined to be $150,000 on remand;[1]
2. Whether the trial court on remand abused its discretion in using differing valuation dates when valuing the three pension plans;
3. Whether the trial court on remand erred in failing to consider the potential tax consequences for pre-retirement liquidation of Dr. Qazi's pension plans;
4. Whether the trial court on remand abused its discretion in failing to distribute the pension plans "in kind," via a Qualified Domestic Relations Order;
5. Whether the trial court on remand abused its discretion in ordering Dr. Qazi to bear Mrs. Qazi's attorney's fees from the prior appeal; and
6. Whether the cumulative effect of the order of the trial court on remand constituted an abuse of discretion.
I
Dr. Qazi argues that the trial court on remand erred in failing to consider a federal income tax liability of $150,000. Dr. Qazi was in the process of disputing this tax liability with the Internal Revenue Service (I.R.S.) at the time of the original dissolution hearing and therefore the exact amount of the liability could not be determined. Dr. Qazi and his accountant both testified at the original hearing concerning those issues upon which Dr. Qazi and the I.R.S. had agreed and those which were still in dispute. The testimony at the original trial was that the tax liability was primarily the result of disallowance of a tax shelter (investment in a book), failure to report interest income, and disallowance of depreciation and investment tax credit from a limited partnership.
In paragraph 12 of the dissolution decree, the trial court ordered:
"Husband shall hold Wife harmless on all tax liabilities, on any of the transactions on the limited partnerships or corporation taxes heretofore filed severally or jointly, and the Husband shall receive all the interests in the limited partnerships as well as any liabilities thereon." Original Record at 14.
We interpret the court's order as casting the liability for taxes in general upon the Husband.
Subsequent to the entry of this order, Dr. Qazi filed a Motion to Correct Errors alleging that the court failed to consider the disputed income tax liability which, by that time, I.R.S. had determined to be $106,000. The trial court denied Dr. Qazi's motion with respect to his allegation concerning taxes. Mrs. Qazi then instituted her appeal of the trial court's ruling concerning the treatment of the parties' pension plans. See Qazi, supra, 492 N.E.2d 692. Dr. Qazi, however, did not cross-appeal on the denial of his Motion to Correct Errors concerning taxes. The only issue which Dr. Qazi presented in his brief on the first appeal was as follows:
"The Petitioner-Appellee [Dr. Qazi] respectfully submits that the only issue for review is whether or not the Respondent-Appellant [Mrs. Qazi] has demonstrated any abuse of discretion on the part of the trial court in the division of the assets in the dissolution proceeding." (Brief of Appellee at 1, Qazi v. Qazi, supra).
Based on the foregoing facts, we hold that Dr. Qazi has waived his right to challenge the trial court's original allocation of taxes. The liability for taxes was cast to Dr. Qazi and the trial court denied Dr. Qazi's Motion to Correct Errors with respect to this issue. Dr. Qazi could have challenged *869 the court's ruling at the time of the first appeal but chose not to do so. There is no issue before us to now modify the divorce decree with respect to this tax liability.
II
Dr. Qazi alleges error in the trial court's use of the remand hearing date for the valuation of his pension plans, while using the distribution date of September, 1985, in valuing Mrs. Qazi's plan.
The original trial court determined that the parties owned three pension plans. Two, a Defined Benefit Plan and a Money Purchase Plan, were in Dr. Qazi's name. The other belonged to Mrs. Qazi. The original decree listed the values as $415,277 for Dr. Qazi's two plans and $41,000 for Mrs. Qazi's. In response to a Motion to Correct Errors filed by Dr. Qazi, the original trial court deleted the plans and their values from the marital estate and entered a new paragraph simply awarding each party his or her own plan(s).
Mrs. Qazi appealed that decision. On appeal the plans were held to be part of the marital estate and the case was remanded for "reconsideration of the marital estate and any redistribution occasioned thereby." Qazi, supra, 492 N.E.2d at 694. The Third District further instructed that "in placing a value on the plans, the present value should be ascertained." Id.
Evidence presented on remand indicated fluctuations in value of the various plans between the dissolution hearing dates during March and April of 1984 and the remand hearing. In November of 1983, Dr. Qazi's Defined Benefit Plan had been valued at $253,825 and his Money Purchase Plan was valued at $244,722. Mrs. Qazi's Retirement Fund was valued at $50,804 on the date of distribution to her in September, 1985.
Testimony in August, 1987, by Warren Steinborn, Dr. Qazi's retirement plan consultant, put the value of the Defined Benefit Plan at $308,648. On cross-examination, Mr. Steinborn conceded that the value as of the end of July, 1987, could be placed at $312,500. With regard to the Money Purchase Plan, Mr. Steinborn testified that the value as of November 30, 1986, was $441,593. Norman Gurwitz, one of Dr. Qazi's financial advisors, testified on cross that "counting accrued but unpaid interest" from a loan to Dr. Qazi the value of the Money Purchase Plan would be approximately $450,000. Remand Record at 392. The Retirement Fund awarded to Mrs. Qazi had been depleted entirely as of the date of the remand hearing.
After considering the evidence, the trial court made the following determination regarding the value of the pensions:
"4. The present approximate value of the plans, exclusive of additions or contributions made to the plans since the filing of the dissolution petition are as follows:
`Money Purchase Plan' of Haroon Qazi $450,000
`Deferred Benefit Plan' of Haroon Qazi $312,500
`Money Purchase Plan' of Sabina Qazi $50,000"
Remand Record at 84.
This order was entered on October 29, 1987. Dr. Qazi then filed a Motion to Correct Errors alleging that, although the last evidentiary hearing on remand had been held on October 5, 1987, the trial court erred in failing to consider the stock market crash of October 19, 1987, and in not changing the valuations in the order to reflect this. The trial court held a hearing to consider the motion on February 5, 1988. The court denied Dr. Qazi's Motion to Correct Errors.
Dr. Qazi now argues that the trial court's valuation of the respective pension plans was an abuse of discretion. He argues that the trial court should have picked either a date in 1984 at the time of the dissolution hearing and decree or a date after the October 5, 1987, remand hearing in order to reflect the drop in the stock market.
Dr. Qazi cites Eyler v. Eyler (1986) Ind., 492 N.E.2d 1071, for the proposition that the trial court has broad discretion in determining the date to value marital assets. In *870 Eyler, our Supreme Court held that for purposes of determining the date to value marital property, "[t]he trial court has discretion in selecting any date between the date of filing of the dissolution petition and the hearing for purposes of valuation of a marital asset." Id. at 1074. Eyler indicates that the last date the trial court may choose for valuation of a marital asset is the final hearing. However, Eyler did not address a situation such as the present one in which the case has been remanded to the trial court for purposes of valuing and distributing a marital asset. It may be that Eyler could be read broadly to allow the trial court to choose a valuation date up to and including the date of the remand hearing, at least for purposes of the asset which the court has been instructed to consider.
However, the issue of how to interpret Eyler in a case involving a remand hearing has not been squarely presented by Dr. Qazi. Dr. Qazi does not argue that the trial court was confined by the Eyler decision to use the date of the dissolution hearing. He merely asserts that it may have been more equitable to do so. However, he suggests in the alternative that the trial court may properly have chosen a valuation date after the drop in the stock market. Had the trial court followed Dr. Qazi's suggestion, the valuation date not only would have been after the dissolution hearing, it would have been after the remand hearing.
We do not decide whether Eyler holds that in all possible situations the last permissible date for asset evaluation is the date or dates upon which evidence is heard in the dissolution proceeding prior to entry of a dissolution decree. Dr. Qazi has not only not asked us to do so, he has recommended an evaluation date which would not be within such a construction of the Eyler case. Accordingly, he has not demonstrated reversible error with regard to the evaluation dates utilized by the court upon remand.
We therefore confine our review to whether the trial court abused its discretion in valuing Dr. Qazi's assets as of the date of the remand hearing in 1987 while valuing Mrs. Qazi's asset as of the date of distribution to her in 1985. We discern no abuse of discretion in the valuation of Dr. Qazi's assets. The trial court's order concerning the valuation of Dr. Qazi's pension plans is based upon competent evidence presented during the remand hearings primarily by Dr. Qazi's own consultants.
Dr. Qazi's argument regarding the valuation date chosen for Mrs. Qazi's pension plan is more troubling. He implies that the court should have taken into account some appreciation in Mrs. Qazi's plan between distribution to her in 1985 and the remand hearing. However, Dr. Qazi presented no evidence as to what such appreciation might have been. In fact, the evidence as to the amount Mrs. Qazi actually received upon distribution was presented through Dr. Qazi's own witness.
Apparently, Dr. Qazi made no complaint with respect to the valuation dates and amounts until after the stock market dropped which was after the remand hearings had been completed but before the court made its order. Dr. Qazi may not present to the trial court evidence concerning valuation and then later successfully argue that the court abused its discretion by choosing to use the valuations presented.
Therefore, we hold that the trial court did not abuse its discretion in choosing to value the assets as it did.
III
Dr. Qazi asserts error in the trial court's award of two pension plans to him, counterbalancing these with periodic cash payments to Mrs. Qazi. His contention is that the amount of his required payments to Mrs. Qazi exceeds the value of the plans, constituting an impermissible award of future income. Dr. Qazi takes this position based upon his belief that the trial court was required to consider the tax consequences of liquidating the plans prior to Dr. Qazi's reaching age 59 1/2. Dr. Qazi's argument is that because the tax consequences were not considered, they were implicitly allocated to him, thereby lowering *871 the value of the plans to him. Therefore, he reasons, his periodic payments to Mrs. Qazi impermissibly reach future income. He is incorrect.
The tax consequences associated with possible liquidation of Dr. Qazi's pension plans are speculative in nature and were properly disregarded. It has been held that where a trial court's distribution does not require liquidation of pension or retirement plans, any potential tax consequences of early liquidation are speculative in nature and should not be considered in making a distribution. See Harlan v. Harlan (1989) 2d Dist.Ind. App., 544 N.E.2d 553, reh. pending; Porter v. Porter (1988) 1st Dist.Ind. App., 526 N.E.2d 219, trans. denied; Qazi, supra, 492 N.E.2d 692; Wright v. Wright (1984) 1st Dist.Ind. App., 471 N.E.2d 1240, trans. denied; Burkhart v. Burkhart (1976) 169 Ind. App. 588, 349 N.E.2d 707; In re Marriage of Fonstein (1976) 17 Cal.3d 738, 131 Cal. Rptr. 873, 552 P.2d 1169.[2] In this case, the trial court clearly did not require liquidation of the plans and, in fact, carefully fashioned a periodic payment schedule to avoid just such an occurrence.
Dr. Qazi's arguments are reminiscent of those made and rejected in Wright, supra, 471 N.E.2d 1240, 1244-1245:
"Husband goes on to argue that it was error for the trial court to distribute to him his pension and profit sharing plan without taking into consideration the tax consequences thereof. Finding No. 34 states that the court specifically considered the potential tax liability and determined that it was `speculative' and thus incapable of valuation.
Here, the husband was ordered to pay wife $159,373.00 to be paid in installments of $39,373.00 the first year and $24,000.00 per year in the five succeeding years. The evidence before the court was that the parties had a net marital estate in excess of $970,000, over $300,000 of which was in stocks and bonds which were awarded to the husband in the final decree. Husband received over $700,000 in assets pursuant to the decree and the court found him to have an annual income ranging from $135,000 to $195,000 per year.
While husband may or may not have `cashed in' his pension plan, the court did not require him to do so by the terms of the decree. In addition, husband was clearly awarded sufficient assets with which to raise the first installment without invading his pension. Whether husband decides to cash in his pension and incur tax liability is purely a matter of choice. Since it is entirely reasonable that husband may not do so, the trial court was correct in considering the tax liability `too speculative' for valuation."
In the instant case, Dr. Qazi was ordered to pay $525,000 to Mrs. Qazi over a ten-year period, at eight percent per annum. The court fashioned the following payment schedule:
Payment Date Principal Interest Total Due
11/1/87 $35,000 0% $ 35,000
7/17/88 $35,000 8% = $ 2,800 $ 37,800
7/17/89 $35,000 16% = $ 5,600 $ 40,600
7/17/90 $60,000 24% = $14,440 $ 74,400
7/17/91 $60,000 32% = $19,200 $ 79,200
7/17/92 $60,000 40% = $24,000 $ 84,000
7/17/93 $60,000 48% = $28,800 $ 88,800
7/17/94 $60,000 56% = $33,600 $ 93,600
7/17/95 $60,000 64% = $38,400 $ 98,400
7/17/96 $60,000 72% = $43,200 $103,200
*872 Remand Record at 86.
Dr. Qazi received pension plans valued at $762,500. He received numerous other assets in the 1984 proceeding including a residence valued then at $325,000, an office building valued then at $178,400, accounts receivable valued then at $100,368, an interest in a Signature Inn valued then at $20,000, miscellaneous items valued then at approximately $120,000, and limited partnerships of "unascertainable" value. Orig. Record at 12-13. Dr. Qazi has income which was determined in 1984 to be "over $200,000 per year for the past several years, and over $160,000 for the past 5 years." Orig. Record at 9. There was testimony at the remand hearing that Dr. Qazi received income in 1985 of $424,783, in 1986 of $590,000, and in 1987 of $222,000.
Thus, a number of options were and are available to Dr. Qazi to enable him to meet his court-ordered payment obligations. These options could include, but are not limited to, liquidation of his pension plans. Clearly the terms of the payment schedule, considered in light of the assets he received, do not dictate this result. Dr. Qazi may choose to meet his legal obligation from his earnings, as he would any other debt, but again he is not required to do so by the terms of the trial court order. The point is that Dr. Qazi was awarded sufficient assets to meet the payment schedule which the trial court fashioned. The method of payment is for Dr. Qazi to determine. There is absolutely no evidence that he is liquidating his pension plans, must liquidate them, or intends to liquidate them. Therefore, the tax consequences are purely speculative and must be disregarded. Fonstein, supra, 131 Cal. Rptr. 873, 552 P.2d 1169. It is true that to the extent that there ever would be tax consequences for pre-retirement liquidation, they are allocated to Dr. Qazi. However, the amount of taxes which he might incur are subject to a number of variables, "the variety of which makes impossible anything more than a speculative approximation of the potential tax liability." Id. 131 Cal. Rptr. at 881, 552 P.2d at 1177. Because the plans, the decision to retire and/or liquidate, and the variables affecting potential tax liability are all under Dr. Qazi's control, the allocation of any potential liability is appropriately placed with him. Id.
IV
It is Dr. Qazi's position on appeal that he would have liked Mrs. Qazi to have been awarded a portion of the pension plans "in kind" via a Qualified Domestic Relations Order. He contends that "when such an equitable vehicle for division of an asset is available to a trial court [as a Qualified Domestic Relations Order] it is surely an abuse of discretion not to divide the asset in kind." Appellant's brief at 22-23. He cites no authority for this position, and indeed we have found none.
Dr. Qazi correctly points out that I.C. 31-1-11.5-11(b)(4) (Burns Code Ed. 1987 and Supp. 1989) authorizes a trial court to, among other things, divide assets such as pension plans "in kind" in a dissolution proceeding. He seems to read into the statute a duty on the part of the trial court to so divide the assets. Dr. Qazi compounds this error by his misinterpretation of the role of the Retirement Equity Act of 1984 vis-a-vis our dissolution statute. He states in his brief:
"Indiana Code 31-1-11.5-11(b)(4) gives the trial court the authority to divide pension plans under a qualified domestic relations order. In doing so, the trial court can divide pension funds `in kind'." Appellant's brief at 21.
The Qualified Domestic Relations Order (QDRO) to which Dr. Qazi refers is authorized under the Retirement Equity Act of 1984 and provides, among other things, that benefits accruing from pension and retirement plans can be allocated to former spouses pursuant to a division of assets under a state domestic relations law. We need not discuss either the QDRO or the Retirement Equity Act at length, because I.C. 31-1-11.5-11, Indiana's domestic relations *873 statute, also allows allocation of pension and retirement plans in kind by virtue of section (b)(4). The operative word here is "allows." For while the statute authorizes such a division, it does not require it. The only requirement that the statute puts upon a trial court is that its distribution be "just and reasonable." I.C. 31-1-11.5-11 (Burns Code Ed. 1987 and Supp. 1989).
A just and reasonable division of assets does not necessarily mean equal or even relatively equal. Porter, supra, 526 N.E.2d 219; Wright, supra, 471 N.E.2d 1240. A trial judge is afforded considerable discretion in dividing the marital estate. A property division pursuant to a divorce decree will only be overturned if it is clearly against the logic and effect of facts and circumstances before the court, or the reasonable, probable and actual deductions to be drawn therefrom. Burkhart v. Burkhart (1979) 169 Ind. App. 588, 349 N.E.2d 707.
The court may either divide assets, including pension and retirement plans, in kind or award them all to one spouse while requiring that spouse to pay "such sum, either in gross or in installments, as may be just and proper." Wright, supra, 471 N.E.2d at 1244. In determining what is just and reasonable, the trial court must consider the following factors:
"(1) The contribution of each spouse to the acquisition of the property, including the contribution of the spouse as homemaker;
(2) The extent to which the property was acquired by each spouse prior to the marriage or through inheritance or gift;
(3) The economic circumstances of the spouse at the time the disposition of the property is to become effective, including the desirability of awarding the family residence or the right to dwell therein for such periods as the court may deem just to the spouse having custody of any children;
(4) The conduct of the parties during the marriage as related to the disposition or dissipation of their property;
(5) The earnings or earning ability of the parties as related to a final division of property and final determination of the property rights of the parties."
Id. at 1244.
In the present case, the court upon remand determined that the long term interests of the parties would be better served if Dr. Qazi were allowed to keep his pension plans and required to pay a cash award to Mrs. Qazi over time. This is similar to a decision made in Burkhart, supra, 349 N.E.2d 707. In that case the trial court allowed the husband to keep shares of stock (which carried transfer restrictions) but ordered that he pay his former wife a substantial cash award over time. The reviewing court held that it was not an abuse of discretion to so divide the property for several reasons, including the avoidance of tax liabilities, and the ability of the husband to maintain a large block of voting shares. Burkhart, supra, 349 N.E.2d 707.
The instant case is similar. As Dr. Qazi points out, a primary concern in the disposition of a retirement account would be the tax consequences of liquidating prior to retirement age. It is not unreasonable for the trial court to assume that allowing Dr. Qazi to keep his plans is one way to avoid that problem. But Dr. Qazi "cannot expect to keep all the marital assets." Id. at 714. The trial court on remand provided for a carefully scheduled cash payment to Dr. Qazi's ex-wife over time which avoided early liquidation of the plans as well as a large drain on Dr. Qazi's assets. We do not find this to be against the logic and facts before the court; there is no abuse of discretion with regard to this issue.
V
Dr. Qazi contends that it was an abuse of discretion for the trial court upon remand to order him to pay Mrs. Qazi's attorney's fees for the prior appeal. We disagree.
I.C. 31-1-11.5-16 (Burns Code Ed. 1987) authorizes a trial court to make an award of attorney's fees. This statute gives broad discretion to the trial court in awarding attorney's fees and such an award will not be reversed except upon a clear showing *874 of an abuse of that discretion. See e.g., Luedke v. Luedke (1985) Ind., 487 N.E.2d 133; Olds v. Olds (1988) 3d Dist.Ind. App., 531 N.E.2d 1219; Chestnut v. Chestnut (1986) 1st Dist.Ind. App., 499 N.E.2d 783; Hunter v. Hunter (1986) 4th Dist.Ind. App., 498 N.E.2d 1278. Husband has not made such a showing here.
Dr. Qazi bases his abuse of discretion claim on the facts that Mrs. Qazi was awarded a condominium, that she is employable although has been under-employed, and that she initiated the prior appeal. These are factors which the trial court may consider in determining with which party to place the burden of attorney's fees, but they are not the only factors the court may take into account. Olds, supra, 531 N.E.2d 1219.
Some other factors which a trial court may properly consider include the relative assets of both parties (Svetich v. Svetich (1981) 3d Dist. Ind. App., 425 N.E.2d 191); the relative ability of the parties to engage in gainful employment (Planert v. Planert (1985) 3d Dist. Ind. App., 478 N.E.2d 1251); and the superiority and availability of funds available to one party relative to the other (Hunter, supra, 498 N.E.2d 1278).
In the Hunter case, an order requiring the husband to pay wife's attorney's fees was allowed to stand even where husband's income had "decreased dramatically" between the initial hearing and trial. Id. at 1295. The award was upheld because there was evidence that the Husband's future earning potential was clearly superior to the Wife's. Id.
In the present case, there was evidence that Husband was a plastic surgeon earning anywhere from $160,000 to $590,000 per year, while the Wife had never worked outside the home and was currently being trained as a cosmetologist. There was evidence from the original hearing that Husband was awarded assets valued at $743,768 (excluding the pension plans and limited partnerships), while Wife was awarded assets worth $259,000 (excluding the pension plans). The remand proceeding resulted in awards to Dr. Qazi of pension plans valued at $762,500 and to Mrs. Qazi of a pension plan valued at $50,000 plus a cash award of $525,000 to be paid over ten years. From these facts it does not appear that the trial court abused its discretion in ordering Husband to bear the cost of attorney's fees for the prior appeal.
VI
Dr. Qazi argues that the cumulative effect of the trial court's order shows an abuse of discretion. Dr. Qazi then submits eleven ways in which the court could have ruled in his favor but instead ruled in favor of Mrs. Qazi. We are not persuaded by this argument.
In a dissolution proceeding, the trial court is required to effect a just and reasonable disposition of the marital property. I.C. 31-1-11.5-11. The actual division of the property is left to the discretion of the court, and we will only reverse if that discretion is abused. Porter v. Porter, supra, 526 N.E.2d at 222.
The trial court is required, under the relevant statute, to consider the economic circumstances of each spouse and the earnings or earning ability of the parties. I.C. 31-1-11.5-11(c)(3) and (5). The trial court is not required to divide the property equally between the parties. Luedke v. Luedke (1985) Ind., 487 N.E.2d 133; Moore v. Moore (1985) 3d Dist. Ind. App., 482 N.E.2d 1176; In re Marriage of Church (1981) 2d Dist. Ind. App., 424 N.E.2d 1078, trans. denied.
In this case, the trial court made the following Findings of Fact at the original proceeding:
"19. The economic circumstances of the parties is such that there is a tremendous disparity of earning ability between the parties... .
23. That no matter how the property is divided, there will be a substantial difference in the parties' economic condition, in that the Husband will be able to continue to acquire and produce an ever-larger estate through his income stream, whereas the Wife will not be able to do so, depleting her assets as she lives." Original Record at 10.
The court upon remand specifically adopted these findings because they were *875 not challenged by either party. Having found that Mrs. Qazi in this case was in an economically inferior position compared to Dr. Qazi, the court did not abuse its discretion in making distribution of the marital assets and by awarding Mrs. Qazi her appellate attorney's fees. Whether viewed individually or cumulatively, Dr. Qazi's allegations do not convince us that the trial court's order constituted an abuse of discretion.
The judgment is affirmed.
BUCHANAN, J., concurs.
HOFFMAN, J., concurs in result as to issues I and II with opinion; dissents as to issue III with opinion; and concurs as to issues IV, V and VI.
HOFFMAN, Judge, concurring and dissenting.
With respect to the first appellate contention raised by Dr. Qazi, I concur in the result reached by the majority. Dr. Qazi waived any error in the trial court's failure on remand to consider the tax shelter liability, because the doctor stipulated that the sole issue on remand was the distribution of the pension plans.
I also concur in the result reached by the majority on the second issue: whether the trial court erred in using the remand hearing date for the valuation of Dr. Qazi's pension plans. I agree that a finding of reversible error may not be predicated upon the court's use of the remand hearing date for valuation, because that date fell within the range of dates suggested by Dr. Qazi as appropriate. Nonetheless, the court erred when it selected the remand hearing date for purposes of valuation.
When the instant cause was remanded with instructions to include the pension plans in the marital estate, this Court offered the following guidance:
"In placing a value on the plans, the present value should be ascertained. Libunao v. Libunao (1979), 180 Ind. App. 242, 388 N.E.2d 574, on petition for reh., 180 Ind. App. 242, 390 N.E.2d 695." Qazi v. Qazi (1986), Ind. App., 492 N.E.2d 692, 694.
The phrase "present value" was not intended to convey the meaning of "value as of this date"; rather, the phrase was employed to preclude redistribution of the marital estate based upon the future value of the plans. Such a reading of Qazi is confirmed by examining the authority cited by the Court, namely Libunao v. Libunao (1979), 180 Ind. App. 242, 388 N.E.2d 574.
Libunao was an appeal from a dissolution of marriage proceeding, in which the trial court divided such marital assets as a pension fund, a profit sharing fund and a Keough plan. Upon reviewing the disposition of assets, this Court stated:
"[W]e hold that the trial court may consider the future value of an asset, but the final distribution must be just and equitable in light of the present vested interest of the particular fund." Id. at 246-247, 388 N.E.2d at 576.
In placing a value on Dr. Qazi's pension plans, the trial court could have selected for purposes of valuation any date between the date of filing of the dissolution petition and the date of the dissolution hearing. Eyler v. Eyler (1986), Ind., 492 N.E.2d 1071, 1074. The lower court's discretion was not expanded by virtue of the fact that the valuation followed a reversal and remand. Cf. Doughty v. State Dept. of Public Welfare (1954), 233 Ind. 475, 121 N.E.2d 645 (Where an appellate tribunal finds a judgment was erroneous and reverses it, the parties must take their places in the trial court at the point where the error occurred and proceed to decision.). The court's use of the remand hearing date for the valuation of Dr. Qazi's pension plans was erroneous, but it does not provide grounds for reversal under the particular circumstances of this case.
I dissent from the majority's disposition of Issue III, concerning the potential tax consequences of early liquidation of the pension plans, for the reasons articulated in my dissenting opinion in Harlan v. Harlan (1989), Ind. App., 544 N.E.2d 553.
NOTES
[1] This tax liability was unrelated to the matter of the pension plans.
[2] We note that I.C. 31-1-11.5-11.1 (Burns Code Ed.Supp. 1988) states:
"The court, in determining what is just and reasonable in dividing property under section 11 of this chapter, shall consider the tax consequences of the property disposition with respect to the present and future economic circumstances of each party."
We interpreted this statute in Harlan v. Harlan, supra, 544 N.E.2d 553, as affirming the rationale of Porter, Wright, and Burkhart that because liquidation is not required, the claimed tax liability was not actually incurred by the disposition. The inference is that only tax consequences necessarily arising from the plan of distribution are to be taken into account.
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679 F.2d 901
Quintanillav.Schweiker
81-5043
UNITED STATES COURT OF APPEALS Ninth Circuit
4/8/82
1
C.D.Cal.
AFFIRMED
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61 B.R. 54 (1986)
In re Harold Dean WALLACE and Joy Faye Wallace, Debtors.
Bankruptcy No. FS 84-256M.
United States Bankruptcy Court, W.D. Arkansas, Fort Smith Division.
March 13, 1986.
*55 Ben T. Barry, Fort Smith, Ark., for debtors.
James Maurice Rogers, Little Rock, Ark., for J.I. Case Credit.
MEMORANDUM OPINION
JAMES G. MIXON, Bankruptcy Judge.
I
FACTS
The debtors, Harold Dean and Joy Faye Wallace, filed a proposed plan of reorganization under the provisions of Chapter 11. J.I. Case Credit Corporation (Case Credit) voted to reject the plan. At the confirmation hearing the parties entered into certain stipulations and agreements depending on the outcome of the Court's decision on whether Case Credit's claim is secured or unsecured. The issue the parties have asked the Court to determine is whether the claim of Case Credit is a secured or unsecured claim. The plan has treated the claim as unsecured.
The debtors are husband and wife, whose names are Harold Dean and Joy Faye Wallace. Since 1982, the debtors have operated their business under the name of Barling Hardware and sometimes under the name of Barling Hardware and Const. The debtors' place of business bears a sign identifying the business as "Barling Hardware." The debtors have never incorporated the business nor has any written partnership agreement been executed.
On July 15, 1983, one of the debtors, Harold Wallace, executed a security agreement in connection with the purchase of a Case Credit 480D loader backhoe, Serial No. 9050732. The security agreement identified the seller as Aces, Inc.,[1] and the buyer as Barling Hardware. The document was signed "Barling Hardware by Chuck Wallace." The security agreement was made to secure a principal debt of $17,941.00. Financing statements were prepared identifying the debtor as "Barling Hardware" and the secured party as "Aces, Inc." The financing statements were executed "Barling Hardware by Chuck Wallace" as debtor. Financing statements were filed with the Secretary of State on August 2, 1983, and with the Circuit Clerk of Sebastian County, Arkansas, Fort Smith Division, on August 2, 1983. Sebastian County, Arkansas, has two county seats, Fort Smith and Greenwood. Ark. Const. art. XIII, § 5; Ark. Stat.Ann. § 17-3202 (Repl.1980). The debtors' residence and place of business were located within the Greenwood district of Sebastian County at all relevant times.
On February 29, 1984, Harold Wallace executed a security agreement in connection with the purchase of a Case Credit 480D loader backhoe with 24-inch bucket, Serial No. 9070911. The security agreement identified the seller as "Aces, Inc.," and the buyer as "Barling Hardware and *56 Const." The security agreement was executed "Barling Hardware and Const. by Chuck Wallace." The security agreement was made to secure a principal debt of $23,250.00. Financing statements were prepared identifying the debtor as "Barling Hardware and Const." and were executed "Barling Hardware and Const. by Chuck Wallace." Financing statements were filed March 8, 1984, with the Arkansas Secretary of State and March 15, 1984, with the Circuit Clerk of Sebastian County, Arkansas, Greenwood District. The bankruptcy petition was filed October 23, 1984.
II
CLAIM OF CASE CREDIT
A debtor-in-possession under Chapter 11 has all of the rights and powers of a trustee. 11 U.S.C. § 1107(a). A debtor-in-possession, therefore, has the status granted a trustee under 11 U.S.C. § 544 of a judgment lien creditor whose lien is perfected under state law as of the commencement of the case. At the moment this petition was filed the debtor-in-possession on behalf of unsecured creditors of the estate had a cause of action to avoid Case Credit's lien unless Case Credit's lien was perfected under state law prior to the petition. In re Shuster, 47 B.R. 920 (D.Minn.1985); 4 Collier on Bankruptcy ¶ 544.01 (15th ed. 1985).
Ark.Stat.Ann. § 85-9-402 (Cum.Supp. 1985) provides in pertinent part:
(1) A financing statement is sufficient if it gives the names of the debtor and the secured party, is signed by the debtor, gives an address of the secured party from which information concerning the security interest may be obtained, gives a mailing address of the debtor and contains a statement indicating the types, or describing the items, of collateral. A financing statement may be filed before a security agreement is made or a security interest otherwise attaches. When the financing statement covers crops growing or to be grown, the statement must also contain a description of the real estate concerned. When the financing statement covers timber to be cut or covers minerals or the like (including oil and gas) or accounts subject to subsection (5) of Section 9-103, or when the financing statement is filed as a fixture filing (Section 9-313) and the collateral is goods which are or are to become fixtures, the statement must also comply with subsection (5).
(7) A financing statement sufficiently shows the name of the debtor if it gives the individual, partnership or corporate name of the debtor, whether or not it adds other trade names or names of partners. Where the debtor so changes his name or in the case of an organization its name, identity or corporate structure that a filed financing statement becomes seriously misleading, the filing is not effective to perfect a security interest in collateral acquired by the debtor more than four (4) months after the change, unless a new appropriate financing statement is filed before the expiration of that time. A filed financing statement remains effective with respect to collateral transferred by the debtor even though the secured party knows of or consents to the transfer.
(8) A financing statement substantially complying with the requirements of this section is effective even though it contains minor errors which are not seriously misleading.
For a financing statement to be valid it must give the name of the debtor and must be signed by the debtor. In re B. Hollis Knight Co., 605 F.2d 397 (8th Cir.1979); In re Answerfone, Inc., 48 B.R. 24 (Bkrtcy.E. D.Ark.1985); Security Tire and Rubber Company v. Hlass, 246 Ark. 1113, 441 S.W.2d 91 (1969).
The financing statements here identify the debtors by their trade names, "Barling Hardware and Barling Hardware and Const," and not by their individual names. This Court is unaware of any Arkansas Supreme Court case or Arkansas Court of Appeal case addressing the issue of whether a financing statement sufficiently describes the debtor. Cases from other jurisdictions *57 which have considered this issue under the Uniform Commercial Code provisions similar to Ark.Stat.Ann § 85-9-402 (Cum.Supp.1985) have held that if a debtor is identified by a trade name on the financing statement rather than a debtor's individual name, and if the difference is seriously misleading, the requirements of Section 9-402 of the Uniform Commercial Code have not been met. In re Thomas, 466 F.2d 51 (9th Cir.1972); In re Hill, 363 F.Supp. 1205 (N.D.Miss.1973); Matter of Fowler, 407 F.Supp. 799 (W.D.Okla.1975) In re Platt, 257 F.Supp. 478 (E.D.Pa.1966). The ability of a financing statement to give notice of a security interest to creditors is the key factor. Matter of Rieber, 740 F.2d 10 (8th Cir.1984). The question is whether these financing statements sufficiently identify the debtors, Harold Dean and Joy Faye Wallace.
Financing statements are indexed according to the name of the debtor. Ark.Stat. Ann. § 85-9-403(4) (Cum.Supp.1985). These financing statements would be indexed according to statute under Barling Hardware or Barling Hardware and Const and not Wallace. Without actual knowledge that Barling Hardware was a trade name for Harold Dean and Joy Faye Wallace, a creditor would have to examine every document filed in the Clerk's office in every business name for the past five years to locate financing statements signed individually by the debtors. Obviously the system could not function under these circumstances. Clearly these financing statements do not sufficiently identify the debtors, Harold Dean and Joy Faye Wallace.
Case Credit cites In re McBee, 714 F.2d 1316 (5th Cir.1983) in support of its position that the financing statement filed under the trade name was not seriously misleading. In McBee the financing statement was filed under the name of "C.K. McBee d/b/a Oakhill Gun Shop." The opinion does not state how the financing statement was indexed, but presumably it was indexed under the trade name, Oak Hill Gun Shop. Despite the inadequacy of individual and tradename relationship, the Court found that use of the trade name, Oak Hill Gun Shop, was sufficient identification of the debtor, C.K. McBee, and, therefore, not seriously misleading.
With great respect to the Court in McBee, the opinion misconstrues the effect of 11 U.S.C. § 544. The Court in McBee considered that "a reasonably prudent creditor as we assume for purposes of the law is the trustee " would have searched the record under the trade name Oak Hill Gun Shop before extending a loan related to that business and a loan collateralized by property of that business. In McBee the court imputed knowledge of facts not disclosed by a search of the index including the fact that the trade name was the name used by the debtor in a business. This incorrectly states the status of the trustee under 11 U.S.C. § 544. This section gives the trustee the status of a judgment lien creditor who has perfected his lien under state law prior to bankruptcy. In re Larter, N.V., 49 B.R. 751 (Bkrtcy.S.D.Fla. 1985); In re Taylor, 43 B.R. 524 (Bkrtcy.N. D.Ala.1984); 4 Collier on Bankruptcy ¶ 544.01 (15th ed. 1985). Section 544 also gives this status to the trustee "without regard to any knowledge of the trustee or of any creditor." 11 U.S.C. § 544(a). Despite § 544, the trustee was given a duty to inquire whether the filing of a security agreement and financing statement of the individual debtor could possibly be filed under a trade name since the trade name was consistently used and well known to other creditors, since the loan was for a business purpose, and since other creditors knew of the recent change in business ownership.
Case Credit also argues that the Court should consider that Barling Hardware is the name of a partnership between Mr. and Mrs. Wallace and validate the financing statement as being one filed in the name of the partnership. There is absolutely no evidence in the record indicating the existence of a partnership. A partnership entity cannot be created retroactively in order to validate an otherwise invalid financing statement.
*58 The filing of the financing statement under the trade name of the debtors is found to be seriously misleading. The lien of Case Credit is determined to be unperfected.
III
CONFIRMATION
For a Chapter 11 plan of reorganization to be confirmed all of the requirements of 11 U.S.C. § 1129(a) must be met except 11 U.S.C. § 1129(a)(8) which provides that each class must accept the plan or be unimpaired. A plan may still be confirmed over the dissent of one or more classes of impaired claims if the plan complies with the cramdown standards set forth in 11 U.S.C. § 1129(b) and all other requirements of 11 U.S.C. § 1129(a).
In addition to any objection raised by creditors, the Court has a mandatory independent duty to determine whether the plan has met all of the requirements necessary for confirmation. In re Coastal Equities, Inc., 33 B.R. 898 (Bkrtcy.S.D.Cal. 1983); In re White, 41 B.R. 227 (Bkrtcy.M. D.Tenn.1984); Matter of Nikron, Inc., 27 B.R. 773 (Bkrtcy.E.D.Mich.1983).
Based on the record, the plan still cannot be confirmed. The Court has no evidence as to whether the class of unsecured creditors (Class IX) accepted or rejected the plan. The stipulation only states that if Case Credit is found to be unperfected that it should be deemed to have voted to reject the plan. The plan does not place Case Credit in a class, although the stipulation places Case Credit in Class IX. The Court must determine if Class IX voted to accept. If it did not, the plan can only be confirmed by the cramdown provisions of 11 U.S.C. § 1129(b)(2)(B)(i) and (ii).
Confirmation is, therefore, denied. The debtors have thirty days from the entry of this Memorandum Opinion and Order of this same date to file a modified plan or the case will be dismissed.
NOTES
[1] The parties stipulated that Case Credit held a valid assignment of the commercial paper from Aces, Inc., in this transaction.
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688 F.2d 836
U. S.v.Phillips
81-1900
UNITED STATES COURT OF APPEALS Fourth Circuit
9/1/82
1
S.D.W.Va.
DISMISSED
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399 F.3d 1225
UNITED STATES of America, Plaintiff-Appellant,v.Roberto GONZALES, Defendant-Appellee.
No. 04-2126.
United States Court of Appeals, Tenth Circuit.
March 1, 2005.
COPYRIGHT MATERIAL OMITTED David N. Williams, Assistant U.S. Attorney, (and David C. Iglesias, United States Attorney, on the brief), Albuquerque, NM, for Plaintiff-Appellant.
John E. Leeper (and Joseph (Sib) Abraham, Jr., with him on the brief), El Paso, TX, for Defendant-Appellee.
Before KELLY, ANDERSON, and LUCERO, Circuit Judges.
PAUL KELLY, JR., Circuit Judge.
1
The government appeals the district court's grant of Defendant Roberto Gonzales's motion to suppress evidence obtained from his home pursuant to a warrant. The government concedes the warrant lacked probable cause, but argues that the good faith exception established in United States v. Leon, 468 U.S. 897, 104 S.Ct. 3405, 82 L.Ed.2d 677 (1984), applies. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.
Background
2
The warrant in this case arose out of a one-car accident where Mr. Gonzales rolled the vehicle he was driving after he had been drinking. Mr. Gonzales was arrested for aggravated driving under the influence of intoxicating liquor or drugs, and transported to the hospital due to the serious injuries he sustained during the accident. The officers then conducted an inventory search of the wrecked vehicle before having it towed from the accident scene. In the course of the search, the officers found a Glock 10mm magazine containing nine live rounds, but no matching weapon. Subsequently, the officers discovered that Mr. Gonzales was a convicted felon, and they also discovered that the vehicle was registered to Honorio Contreras, who had a relationship with Mr. Gonzales's mother and lived at the same location as Mr. Gonzales. App. at 101.
3
Two days after the accident, Detective Filomeno Gonzales1 applied for a warrant to search Mr. Gonzales's residence for firearms and ammunition. App. at 17. The supporting affidavit identified "321 E. Church" as the place to be searched and detailed Mr. Gonzales's accident and the resulting inventory search. The detective also stated that he had two years of law enforcement experience and that he "knows from Police training and experience that firearm [sic] are often kept at the residence as well as in vehicles." Id. at 18. However, the affidavit never specified that 321 E. Church was Mr. Gonzales's residence or that there was any other connection between that location and Mr. Gonzales, the vehicle, or the suspected criminal activity. The affidavit also failed to specify who owned the vehicle.
4
The detective submitted the affidavit to his supervising officer and an assistant district attorney for approval, which was given, and the magistrate2 ultimately issued the warrant. As a result of the search, officers found several firearms and abundant weapon-related paraphernalia, and Mr. Gonzales was indicted for Felon in Possession of Ammunition and Firearms, in violation of 18 U.S.C. §§ 922(g)(1), 924(a)(2).
5
Mr. Gonzales moved to suppress the evidence arguing that the warrant was not supported by probable cause and the deficiency was such that the warrant could not be relied on in good faith. App. at 20. The district court granted Mr. Gonzales's motion finding that there was no probable cause because the "affidavit [did] not set forth evidence linking Defendant's home with suspected criminal activity," Id. at 53, and that the Leon good faith exception did not apply because (1) the magistrate was misled by the officer's failure to state in the affidavit that Mr. Gonzales did not own the vehicle he was driving, and (2) the affidavit was so lacking that any official belief that probable cause existed was unreasonable. Id. at 55-56. The government appealed pursuant to 18 U.S.C. § 3731.
Discussion
6
In reviewing a district court's disposition of a motion to suppress, we accept the factual findings unless they are clearly erroneous, and review questions of law de novo. United States v. Artez, 389 F.3d 1106, 1111 (10th Cir.2004); United States v. Danhauer, 229 F.3d 1002, 1005 (10th Cir.2000). Whether a warrant is supported by probable cause and whether the Leon good faith exception applies are both questions of law. Danhauer, 229 F.3d at 1005.
7
Appellate courts have discretion to address probable cause or to proceed directly to good faith. United States v. Rowland, 145 F.3d 1194, 1206 n. 8 (10th Cir.1998). Here, as the government concedes, the affidavit clearly lacked probable cause as it failed to establish any connection between the place to be searched and Mr. Gonzales or the suspected criminal activity. It is well-settled that for probable cause to exist there must be a "nexus between [the contraband to be seized or] suspected criminal activity and the place to be searched." Id. at 1203-04 (quoting United States v. Corral-Corral, 899 F.2d 927, 937 (10th Cir.1990) (alteration in original)). Thus, we proceed directly to the good faith analysis.
8
Searches conducted pursuant to a warrant are favored, Leon, 468 U.S. at 914, 104 S.Ct. 3405, and, as such, the magistrate's determination that probable cause exists is entitled to great deference. Danhauer, 229 F.3d at 1006. Likewise, officers are generally not required to second-guess the magistrate's decision in granting a warrant. United States v. Tuter, 240 F.3d 1292, 1300 (10th Cir.2001). These principles are clearly in line with the exclusionary rule's purpose of deterring improper police action, rather than punishing errors made by magistrates. Leon, 468 U.S. at 916, 104 S.Ct. 3405. Thus, the Supreme Court in Leon established that evidence obtained pursuant to a warrant that is later found to be defective is not properly excluded when the warrant is relied on by the officers in objective good faith.
9
That said, the deference given to such warrants "is not boundless." Id. at 914, 104 S.Ct. 3405. Indeed, there are four contexts where an officer cannot be found to have relied on a warrant in good faith. Two of these contexts are at issue here: (1) where the magistrate "was misled by information in an affidavit that the affiant knew was false or would have known was false except for his reckless disregard of the truth," and (2) where the supporting affidavit is "so lacking in indicia of probable cause as to render official belief in its existence entirely unreasonable." Id. at 923, 104 S.Ct. 3405 (citations and internal quotations omitted).
10
A. Deliberately or Recklessly False Affidavit
11
Mr. Gonzales argues that the magistrate was misled by the officer's failure to state in the affidavit that Mr. Gonzales was not the owner of the vehicle where the magazine was found. We find this fact irrelevant in these circumstances. While it might be true the magistrate mistakenly assumed Mr. Gonzales owned the vehicle, the affidavit clearly established that Mr. Gonzales was in exclusive control of it as its sole occupant, and in such circumstances, it is reasonable for the magistrate to infer control over the vehicle's contents, regardless of ownership. See United States v. Norman, 388 F.3d 1337, 1340-41 (10th Cir.2004).
12
Further, to establish a lack of good faith where information has been omitted from the affidavit, the defendant must prove by a preponderance of the evidence that the officer acted intentionally or recklessly. Corral-Corral, 899 F.2d at 933 (citing Franks v. Delaware, 438 U.S. 154, 171, 98 S.Ct. 2674, 57 L.Ed.2d 667 (1978)).3 Here, the district court found that Detective Gonzales omitted the information from the affidavit, not out of ill will, but "simply as a result of inexperience." App. at 124. This finding is not clearly erroneous. Thus, the most that can be established is that the officer omitted the information out of "negligence or innocent mistake," which is insufficient to overcome a finding of good faith. Franks, 438 U.S. at 171, 98 S.Ct. 2674.
13
B. Affidavit Lacking Indicia of Probable Cause
14
Mr. Gonzales also argues that the affidavit was wholly lacking in indicia of probable cause because it failed to establish any connection between the place to be searched and the suspected criminal activity — a felon in possession of a firearm. While the government concedes the affidavit was so lacking, it argues that "the purposes served by the [Fourth] Amendment were advanced by the professionalism of the officer in seeking the warrant, and in complying with its command." Aplt. Br. at 11. Specifically, the government asserts exclusion is not proper here because the officer "prepared an affidavit, he had it reviewed by his supervisory sergeant, he had it presented to an assistant district attorney, and only then did he submit it to a magistrate." Id. at 16-17.
15
We agree the detective employed a reasonable process in seeking the warrant; however, this fact alone does not establish good faith reliance. While officers are generally entitled to rely on the magistrate's judgment, they are also required to exercise their own professional judgment. Indeed, law enforcement officials are presumed to have a reasonable knowledge of the law, Leon, 468 U.S. at 919 n. 20, 104 S.Ct. 3405, and we determine good faith in this context by considering whether a "reasonably well trained officer would have known that the search was illegal despite the magistrate's authorization." Id. at 922 n. 23, 104 S.Ct. 3405. Under this standard, when the underlying documents are "devoid of factual support," an officer cannot be said to have relied on them in good faith. Corral-Corral, 899 F.2d at 939; accord Danhauer, 229 F.3d at 1006.
16
Here, Detective Gonzales's affidavit listed the address of the place to be searched in the caption and described the residence with particularity; however, there were no facts explaining how the address was linked to Mr. Gonzales, the vehicle, or the suspected criminal activity, or why the officer thought the items to be seized would be located at the residence. Rather, besides the physical description of the address, the only facts before the magistrate were that Mr. Gonzales was a convicted felon and a Glock 10mm magazine was found in a vehicle in which he was the only occupant. The only attempt at a connection was the detective's assertion that in his experience, "firearm [sic] are often kept at the residence."
17
The Sixth Circuit, sitting en banc, recently addressed a similar situation in United States v. Carpenter, 360 F.3d 591 (6th Cir.2004) (en banc). In Carpenter, officers observed a marijuana patch via helicopter and sought a warrant to search the suspects' residence. In the affidavit, the officers detailed the investigation and specified the address, but they failed to show that the residence belonged to the suspects. 360 F.3d at 593. Despite this failing, the Sixth Circuit held that the officers relied on the warrant in good faith because the affidavit established "a minimally sufficient nexus between the illegal activity and the place to be searched" as the facts provided showed the marijuana patch was growing near the residence and there was a pathway between the residence and the plants. Id. at 596. The court reasoned that while probable cause requires a substantial nexus, good faith is proper whenever there is a minimal nexus. Id.; see also United States v. Van Shutters, 163 F.3d 331, 336-38 (6th Cir.1998) (finding good faith when affidavit failed to identify residence as belonging to suspect, but detailed the officer's counterfeiting investigation and specified the residence was "available" to the suspect).
18
On the other hand, in United States v. Hove, 848 F.2d 137 (9th Cir.1988), the Ninth Circuit held that good faith reliance was lacking where the supporting affidavit failed to provide any connection between the residence subject to search and the suspect or suspected criminal activity. In Hove, officers suspected a woman of sending bomb threats to her ex-husband and sought a warrant to search the place in which they believed she was living. Id. at 138-39. However, none of the facts supporting the officers' belief that the woman lived at the address to be searched were included in the affidavit. In rejecting the government's good faith argument, the court stated, "the affidavit offer[ed] no hint as to why the police wanted to search this residence. The affidavit ... [did] not offer an explanation of why the police believed they may find incriminating evidence there; the affidavit simply list [ed] the ... address as the location to be searched." Id. at 139-40. See also Janis v. Virginia, 22 Va.App. 646, 472 S.E.2d 649 (1996) (holding good faith reliance did not exist where affidavit failed to state facts linking place to be searched with suspected criminal activity).
19
We agree with the Sixth Circuit that good faith may exist when a minimal nexus between the place to be searched and the suspected criminal activity is established. However, this showing is absent here. Like Hove, the affidavit in this case completely failed to explain why the detective believed the items sought would be found at 321 E. Church. And even though we have previously held that courts may properly rely on an officer's experience in finding probable cause, Corral-Corral, 899 F.2d at 937; United States v. One Hundred Forty-Nine Thousand Four Hundred Forty-Two and 43/100 Dollars in U.S. Currency, 965 F.2d 868, 874 (10th Cir.1992), here, the detective's generically stated experience — that "firearm [sic] are often kept at the residence" — was not supported by any facts establishing the residence belonged to or was otherwise linked to Mr. Gonzales. Where we have relied on similar statements, it was clear the place to be searched was the suspect's residence; thus, giving meaning to officer's statement. See One Hundred Forty-Nine Thousand Four Hundred Forty-Two and 43/100 Dollars in U.S. Currency, 965 F.2d at 874 (relying on officer's experience that drug dealers often keep records and transaction information at their residence where it was clear the place being searched was the suspected dealer's house). But where this connection is lacking, as it is here, we find this information, in and of itself, of little value.
20
For good faith to exist, there must be some factual basis connecting the place to be searched to the defendant or suspected criminal activity. When this connection is wholly absent, the affidavit and resulting warrant are "so lacking in indicia of probable cause as to render official belief in its existence entirely unreasonable." Leon, 468 U.S. at 923, 104 S.Ct. 3405. Exclusion is appropriate in such circumstances because "reasonably well-trained" officers, exercising their own professional judgment, will be able to recognize the deficiency. Here, the warrant was "so lacking," and the officer's reliance upon it was not objectively reasonable.
21
AFFIRMED.
Notes:
1
As the Affiant-Detective and the Defendant in this case have the same last name, the Defendant will hereinafter be referred to as "Mr. Gonzales" and the officer as "Detective Gonzales" or "detective."
2
The magistrate judge in this case was not a lawyer. By statute, New Mexico provides that Magistrate Court judges do not have to be licenced attorneys or have formal legal training. N.M. Stat. Ann. § 35-2-1
3
The government asserts that Mr. Gonzales is precluded from making this argument as he failed to make the required showing and request aFranks hearing below. Franks, 438 U.S. at 171-72, 98 S.Ct. 2674 (detailing process for challenging the content of an affidavit supporting a search warrant). However, in light of our resolution of this issue, it is unnecessary to address the government's assertion.
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405 F.2d 215
David H. SCHOENBAUM, Plaintiff-Appellant,v.Bradshaw D. FIRSTBROOK, et al., Defendants, andHarold W. Manley, Louis Pradal, John C. Rudolph, Donald K. Russell, Aquitaine Company of Canada, Ltd., and Paribas Corporation of New York, Defendants-Appellees.
No. 160.
Docket 31408.
United States Court of Appeals Second Circuit.
Argued November 8, 1967.
Decided by a Three-Judge Panel May 29, 1968.
Submitted to the En Banc Court July 31, 1968.
Decided December 30, 1968.
COPYRIGHT MATERIAL OMITTED Sidney B. Silverman, New York City, for appellant.
Whitney North Seymour, Jr., New York City (Simpson, Thacher & Bartlett, and John C. Diller, New York City, on the brief), for appellees Manley, Rudolph and Russell.
Michael M. Maney, New York City (Sullivan & Cromwell, and Marvin Schwartz, New York City, on the brief), for appellees Aquitaine Co. of Canada, Ltd., and Pradal.
David Hartfield, Jr., New York City (White & Case, Thomas A. Butler and Paul J. Bschorr, New York City, on the brief), for appellee Paribas Corp.
Before: LUMBARD, Chief Judge, MEDINA, Senior Circuit Judge,* WATERMAN, MOORE, FRIENDLY, SMITH, KAUFMAN, HAYS, ANDERSON and FEINBERG, Circuit Judges.
HAYS, Circuit Judge:
1
After a panel opinion in this case was issued a petition for rehearing en banc was granted. Additional briefs were submitted including an amicus brief by the Securities and Exchange Commission. On consideration by the full court the order of the district court granting summary judgment for the defendants is affirmed as to the defendant Paribas Corporation and reversed as to the other defendants.
2
The petition for rehearing sought reconsideration only of the issue of whether the defendants were entitled to summary judgment under Rules 12(c) and 56 of the Federal Rules of Civil Procedure. The court en banc has not reviewed the decision announced by Chief Judge Lumbard on the issue of jurisdiction over the subject matter and that decision stands as the holding of the court.
Factual Background of the Controversy
3
This is a stockholder's derivative action on behalf of Banff Oil Ltd., a Canadian corporation. The corporate defendants are Aquitaine Company of Canada, Ltd., and Paribas Corporation. The individual defendants are directors of Banff. Aquitaine is a wholly owned subsidiary of a French corporation, Société National des Petroles d'Aquitaine, which is in turn a subsidiary of an agency of the French government. Paribas is an investment banking corporation, incorporated in Delaware. It is a wholly owned subsidiary of a French banking institution.
4
In February, 1964, Aquitaine acquired control of Banff through a tender offer to Banff shareholders. Aquitaine thereupon designated three of its representatives to sit on Banff's eight man board of directors.
5
In March, 1964, Banff and Aquitaine agreed to conduct joint explorations for oil. The exploratory operations involved in the present case began toward the end of 1964. A test well struck oil on February 6, 1965 and on March 17, 1965 the well was completed.
6
On December 11, 1964, Banff's board of directors voted to offer 500,000 shares of Banff treasury stock to Aquitaine, its controlling shareholder, at $1.35 a share. The closing price of Banff stock on the Toronto Stock Exchange on that day was $1.31 bid and $1.37 asked. Aquitaine claims that the sale of stock was necessary in order to finance Banff's share of the expenses of exploration However it appears that Banff needed only $77,500 for this purpose, whereas the proceeds of the sale amounted to $675,000. On January 5, 1965, the president of Aquitaine wrote to Banff "on behalf of Aquitaine's members of Banff Oil Board" saying "our Chairman and Managing Director * * * has agreed to your * * * proposal." The shares were delivered to Aquitaine on March 16, 1965, the day before the completion of the first well.
7
In November 1965 Paribas negotiated a purchase of 270,000 shares of Banff stock at $7.30 a share, the then current price on the Toronto Stock Exchange.
8
During 1966, after public announcement of the oil discovery, Banff stock traded at prices as high at $18 a share.
9
The complaint alleges, in effect, that the defendants, knowing of the oil discoveries and the consequent increase in value of Banff stock, sold 770,000 shares of that stock to Aquitaine and Paribas at vastly inadequate prices as a result of a conspiracy among them to enrich Aquitaine's "affiliates, business associates and friends" at the expense of Banff and its shareholders other than Aquitaine.
Summary Judgment
10
The district court's grant of summary judgment against the plaintiff was accompanied by a refusal of his request for discovery. This court has indicated that summary judgment should rarely be granted against a plaintiff in a stockholder's derivative action especially when the plaintiff has not had an opportunity to resort to discovery procedures. See, for example, Subin v. Goldsmith, 224 F.2d 753 (2d Cir.), cert. denied, 350 U.S. 883, 76 S.Ct. 136, 100 L. Ed. 779 (1955); Colby v. Klune, 178 F.2d 872 (2d Cir. 1949); Fogelson v. American Woolen Co., 170 F.2d 660 (2d Cir. 1948). The plaintiff typically has in his possession only the facts which he alleges in his complaint. Having little or no familiarity with the internal affairs of the corporation, he is faced with affidavits setting forth in great detail management's version of what actions were taken and what motives led the affiants to take these actions. Since the facts in such a case are exclusively in the possession of the defendants, summary judgment should not ordinarily be granted where the facts alleged by the plaintiff provide a ground for recovery, at least not without allowing discovery in order to provide plaintiff the possibility of counteracting the effect of defendants' affidavits.
11
Indeed in many stockholder's derivative actions there will be issues as to the knowledge, intent and motive which will require a full trial with an opportunity to observe the demeanor of the witnesses, and to conduct cross-examination in open court. In such cases summary judgment cannot be granted even after discovery has been had. See Subin v. Goldsmith, supra, 224 F.2d at 757. See also Poller v. CBS, 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962) ("We believe that summary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles, the proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot."); Cross v. United States, 336 F.2d 431, 434 (2d Cir. 1964); Alvado v. General Motors Corp., 229 F.2d 408, 411-12 (2d Cir. 1955), cert. denied, 351 U.S. 983, 76 S.Ct. 1050, 100 L.Ed. 1497 (1956). (For a discussion of a number of additional cases, see Judge Frank's opinion in the Subin case.)
12
In the present case the plaintiff's allegations constitute a claim that Aquitaine, knowing the true value of Banff stock, used its control over Banff to acquire 500,000 shares at a vastly inadequate price. The allegations have a sufficient factual basis — Aquitaine's control, Aquitaine's knowledge of the oil discovery, the inadequacy of the price paid for the stock — to require at least that the plaintiff be permitted through discovery to develop the evidence to counter defendants' affidavits.
13
Plaintiff's Cause of Action Under Section 10-b and Rule 10b-5 of the Securities Exchange Act of 1934
14
We hold that the complaint states a triable claim under Section 10(b)1 and Rule 10b-52 of the Securities Exchange Act of 1934 against all defendants except Paribas.
15
As to Paribas it appears that the negotiations for the purchase of treasury stock were arm's length negotiations. There is no reason to believe that Paribas was in possession of any information not available to Banff and, more importantly, there is no reason to believe that Paribas was in any position to influence the judgment of the Banff directors by any improper means. Paribas and the purchasers whom it represented were, so far as appears, unconnected with Banff and unable through ownership of Banff stock or otherwise to bring any pressure on Banff to sell its stock at a price below its true value. For these reasons the dismissal of the complaint as to Paribas is affirmed.
16
The case against the other defendants is a far different one.
17
The issuance by Banff of its stock to Aquitaine was a sale of securities within the meaning of Section 10(b) and Rule 10b-5. The stockholders of Banff may bring a derivative action for damages to the corporation suffered by reason of a violation of Section 10(b) and Rule 10b-5. Ruckle v. Roto Amer. Corp., 339 F.2d 24 (2d Cir. 1964); Hooper v. Mountain States Sec. Corp., 282 F. 2d 195 (5th Cir. 1960), cert. denied, 365 U.S. 814, 81 S.Ct. 695, 5 L.Ed.2d 693 (1961).
18
In Ruckle v. Roto Amer. Corp., supra, the corporation proposed to issue shares for an inadequate consideration. The new shares were to be issued to or, at least, to be controlled by the president of the corporation. Certain material information was withheld from one of the directors when the board was called upon to approve the transaction. The issuance of the shares under these circumstances was held to be a fraud upon the corporation within the meaning of Section 10(b) and Rule 10b-5. The court said: "in other contexts, such as embezzlement and conflict of interest, a majority or even the entire board of directors may be held to have defrauded their corporation." 339 F.2d at 29.
19
In the present case it is alleged that Aquitaine exercised a controlling influence over the issuance to it of treasury stock of Banff for a wholly inadequate consideration. If it is established that the transaction took place as alleged it constituted a violation of Rule 10b-5, subdivision (3) because Aquitaine engaged in an "act, practice or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security." Moreover, Aquitaine and the directors of Banff were guilty of deceiving the stockholders of Banff (other than Aquitaine). See Pappas v. Moss, 393 F.2d 865 (3d Cir. 1968).
20
It is argued that the agreement to sell Banff stock to Aquitaine was entered into before the results of the oil exploration were known. However it is by no means clear that the letter of Aquitaine's president dated January 5, 1965 resulted in the formation of a binding contract. Moreover in the absence of an opportunity for discovery procedures it cannot be accepted as true that on January 5, 1964 or at the earlier date in December, 1964 when Banff made the offer to sell, the parties were not in possession of sufficient information as to the true value of Banff stock to make the sale at market price a fraud on Banff. In addition, whether Aquitaine's acquisition of the Banff stock on the eve of the completion of the first oil well constituted overreaching presents an issue to be resolved only after an opportunity for further investigation.
21
The order of the district court is reversed as to all defendants except Paribas and the case is remanded for further proceedings consistent with this opinion.
Notes:
*
Sitting pursuant to 28 U.S.C. § 46(c) (1964)
1
REGULATION OF THE USE OF MANIPULATIVE AND DECEPTIVE DEVICES
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange —
* * *
(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
2
EMPLOYMENT OF MANIPULATIVE AND DECEPTIVE DEVICES
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange.
(1) to employ any device, scheme, or artifice to defraud,
(2) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(3) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,
in connection with the purchase or sale of any security.
22
MEDINA, Circuit Judge (dissenting, with whom LUMBARD, Chief Judge, and MOORE, Circuit Judge, concur):
23
I dissent and adhere to the views expressed in the majority panel opinion of Chief Judge LUMBARD to the effect that, even assuming the contracting parties were possessed of information concerning the oil discovery at the time of the making of the contract to sell to Aquitaine, plaintiff did not make out a case under Rule 10(b)5.
24
The essence of the claim is that, whenever a corporation through action of its directors sells a block of its own stock, a stockholder can maintain an action in the federal courts under Section 10(b) and Rule 10(b)5 by merely alleging that the price was too low or too high, that the directors "knew or should have known" it was too low or too high, sealed with the characterization or opinion of the claimant that this was a "fraud" perpetrated against the corporation. This does indeed open the floodgates. For the result is to transform a simple cause of action against directors for waste or the use of bad judgment in the sale of corporate assets into a federal securities fraud case by judicial fiat. In my opinion the Congress never intended the Securities Exchange Act of 1934 to be intrepreted so broadly as this.
25
We proceeded in the panel opinion upon the assumption that both parties to the transaction of purchase and sale of the Banff treasury stock knew Banff had struck oil because Judge Cooper proceeded upon the same hypothesis. In retrospect it is now apparent that it was a mistake to have made this contrary-to-fact assumption, as it has thrown the whole case out of focus. Accordingly, and in the light of the views expressed in the majority en banc opinion of Judge Hays, it becomes essential to make a more complete statement of the factual background and the issues as framed in the complaint.
26
Confining the discussion to the Aquitaine transaction, as I concur in the disposition of the Paribas charge by the majority, the plaintiff's claim against Aquitaine and the Banff directors as defendants is that at the time of the sale of the Banff treasury stock to Aquitaine the defendants knew that Banff had made a rich strike of oil, that the true extent of the discovery was withheld for about a year so the defendants could make the sale to Aquitaine at a grossly inadequate price "to enrich themelves, business associates, friends and relatives," in order to depress the value of Banff stock on the American Stock Exchange and to maintain the price of the stock at an artificially low level.
27
What is established without a shred of countervailing proof by the summary judgment affidavits on personal knowledge filed by defendants is that the sale was authorized by the Banff directors on December 11, 1964, the offer was accepted in writing by Aquitaine on January 5, 1965, the drilling did not even commence until January 11, 1965 and the first flush of oil appeared on February 6, 1965. The transaction of purchase and sale of the stock was consummated on March 16, 1965, after a short delay caused by tax problems and compliance with the regulations of the American and Toronto Stock Exchanges. These are cold facts supported by documentary proof. The charge of enriching the individual defendants and their business associates, friends and relatives turned out to be just another stab in the dark, as did a similar charge made in the complaint with respect to the Paribas transaction. And thus it now appears that the action taken by the Banff directors and the making of the ensuing contract took place at a time when there was no "inside information" about a rich oil strike and when there was no person anywhere who could know that the first drilling or any drilling in the Rainbow area in the future would be successful.
28
Moreover, information concerning the discovery of oil on February 6, 1965 was released to the public on February 8. On March 18, 1965, after the drilling of the first well was completed on March 17, a further press release was issued stating that no further information would be disclosed in the immediate future; and on April 20 an additional press release announced to the public that the company was taking advantage of the Alberta law permitting it to withhold information concerning its discovery for one year to reduce competition from other companies in bidding on government oil lands in the discovery area. Later other wells were drilled and extensive purchases were made of millions of acres of land in the vicinity and in other places in Canada where it was hoped similar subsurface confirmations existed. Even plaintiff does not suggest that the public or the shareholders of Banff should have been informed of these developments, as such disclosure would have deprived Banff of the undoubted benefits conferred by the Alberta law.
29
What the case thus boils down to is the fact that Aquitaine owned a controlling interest in Banff. And because of this circumstance the majority holds that full discovery proceedings should be permitted to probe the minds of the defendants and lay bare their "motives," because plaintiff has "little or no familiarity with the internal affairs of the corporation."
30
What this amounts to is giving carte blanche to every holder of a few shares in any corporation whose stock is traded on the New York or American stock exchanges to give his imagination full rein in the making of any sort of extravagant charges, no matter how ill founded in fact they may be, and then, when faced with a summary judgment motion based upon personal knowledge and documentary proof, say simply "I know nothing whatever about the matter but hope my lawyer will find something if we conduct extensive discovery proceedings and compel the defendants to produce their complete files." This, while doubtless not so intended, is in my judgment nothing short of a standing invitation to blackmail and extortion. It is perfectly apparent that the expense of such discovery proceedings to the defendants, especially when they are foreigners as in this case, will be enormous; and a plaintiff and his lawyer under these circumstances would seem to have some justification for hoping they will be bought off in one way or another, despite the falsity of the allegations in the complaint. And all this under the aegis of Rule 10(b)5! This does not seem to be a very practical way of reducing congestion in the federal courts.
31
Accordingly, I would affirm the judgment appealed from in its entirety.
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442 Mich. 424 (1993)
502 N.W.2d 192
PEOPLE
v.
BOWMAN
Docket No. 92163, (Calendar No. 3).
Supreme Court of Michigan.
Argued December 8, 1992.
Decided June 22, 1993.
Frank J. Kelley, Attorney General, Thomas L. Casey, Solicitor General, Richard Thompson, Prosecuting Attorney, Michael J. Modelski, Chief, Appellate Division, and Thomas R. Grden, Assistant Prosecuting Attorney, for the people.
*425 State Appellate Defender (by Peter Jon Van Hoek) for the defendant.
PER CURIAM:
The Court of Appeals reversed the defendant's convictions on the ground that this case should have been dismissed because of a violation of the Interstate Agreement on Detainers. We conclude that the Court of Appeals erred, and we therefore reverse the judgment of the Court of Appeals and reinstate the judgment of the circuit court.
I
In November 1977, the Oakland County prosecuting attorney authorized a complaint that charged the defendant with armed robbery,[1] first-degree criminal sexual conduct,[2] and possession of a firearm during the commission of a felony.[3] On the basis of the complaint, the district court issued a warrant for his arrest. The defendant was not apprehended for several years.
In early 1980, the Pontiac Police Department learned that the defendant was incarcerated in Ohio. A Pontiac officer then lodged a detainer, pursuant to the Interstate Agreement on Detainers.[4] A record clerk at the Ohio prison confirmed receipt of the detainer.
The IAD provides that a prisoner against whom a detainer is lodged may request final disposition of the charge that underlies the detainer. IAD, article III(a). Twelve days after the prison record clerk *426 acknowledged receipt of the detainer, the defendant executed such a written request on the proper form and gave it to the appropriate prison authority.
The IAD further provides that a prisoner's request must be forwarded to the prosecuting authorities. IAD, article III(b). However, the defendant's request for final disposition was never sent to the Oakland County prosecuting attorney or to the district court in Michigan.[5]
Approximately fifteen months after requesting final disposition of the Michigan charges, the defendant was paroled in Ohio. He waived extradition, and returned to Michigan to face the charges that were pending against him.
Before and after trial, the defendant repeatedly protested that the IAD had been violated and, therefore, that this case should be dismissed. In particular, the defendant relied upon article III(a) of the IAD, which provides:
Whenever a person has entered upon a term of imprisonment in a penal or correctional institution of a party state, and whenever during the continuance of the term of imprisonment there is pending in any other party state any untried indictment, information or complaint on the basis of which a detainer has been lodged against the prisoner, he shall be brought to trial within one hundred eighty days after he shall have caused to be delivered to the prosecuting officer and the appropriate court of the prosecuting officers' jurisdiction written notice of the place of his imprisonment and his request for a final disposition to be made of the indictment, information or complaint.... [Emphasis added.]
*427 The defendant also relied upon article V(c), which states:
If ... an action on the indictment, information or complaint on the basis of which the detainer has been lodged is not brought to trial within the period provided in Article III or Article IV hereof, the appropriate court of the jurisdiction where the indictment, information or complaint has been pending shall enter an order dismissing the same with prejudice, and any detainer based thereon shall cease to be of any force or effect.
The district court and the circuit court denied the defendant's motions for relief under the IAD. Following a jury trial, he was convicted of armed robbery, first-degree CSC, and felony-firearm.[6]
The Court of Appeals reversed the defendant's conviction. 189 Mich App 215; 471 NW2d 645 (1991). We then granted the prosecutor's application for leave to appeal. 439 Mich 1002 (1992).
II
As indicated, the IAD requires that trial begin within 180 days after a prisoner "shall have caused [the request for final disposition] to be delivered." In People v Fex, 439 Mich 117; 479 NW2d 625 (1992), we were asked to determine the starting point for the 180-day period. Specifically, the issue was whether the 180-day period begins to run on the date the prisoner's request is given to prison authorities, or on the date the request is received by officials of the state where the prosecution is pending.
We held in Fex that "the period runs from the *428 time when the prisoner has caused delivery, which is actual receipt." 439 Mich 120. Fex concerned tardy delivery, and we reserved the question how the IAD should be applied in a case, such as this one, where the request is simply not sent to the receiving state. 439 Mich 123, n 6.
Following submission of the present case, the United States Supreme Court affirmed our decision in Fex. Fex v Michigan, 507 US ___; 113 S Ct 1085; 122 L Ed 2d 406 (1993).
In considering the effect of the United States Supreme Court's Fex opinion, we are mindful that the IAD is a congressionally sanctioned interstate compact,[7] construction of which presents a federal question. People v McLemore, 411 Mich 691, 693-694; 311 NW2d 720 (1981); Cuyler v Adams, 449 US 433, 438-442; 101 S Ct 703; 66 L Ed 2d 641 (1981); Carchman v Nash, 473 US 716, 719; 105 S Ct 3401; 87 L Ed 2d 516 (1985).[8]
In its Fex opinion, the United States Supreme Court affirmed our determination that a prisoner has "caused to be delivered" a request for final disposition only when the request is received by the officials in the prosecuting state. The Court rejected the contention that "a prisoner's transmittal of an IAD request to the prison authorities commences the 180-day period even if the request gets lost in the mail and is never delivered to the `receiving' State...." 122 L Ed 2d 413.
The United States Supreme Court also said in Fex that "the IAD unquestionably requires delivery, and only after that has occurred can one entertain the possibility of counting the 180 days from the transmittal to the warden." 122 L Ed 2d 414. Believing that "[c]ausation of delivery is the *429 very condition of this provision's operation," 122 L Ed 2d 412, n 2, the United States Supreme Court concluded that the statutory phrase "shall have caused to be delivered" is not susceptible "of a reading that would give effect to a request that is never delivered at all." 122 L Ed 2d 415.
III
We reaffirm our holding in Fex that the 180-day period of article III(a) "runs from the time when the prisoner has caused delivery, which is actual receipt." In the present case, the prisoner's request for final disposition was never received by the appropriate authorities in Michigan, and thus the 180-day period did not begin to run. Accordingly, the IAD does not require dismissal.[9]
We thus agree with the United States Supreme Court that, until notified of a request for final disposition, the prosecutor should not be at risk of having the case dismissed. In this case, the Oakland County prosecuting attorney was not the party responsible for the failure to bring this defendant to trial within 180 days of his request for final disposition, and we see no ground upon which to require dismissal of this prosecution.
For these reasons, we reverse the judgment of the Court of Appeals and reinstate the judgment of the circuit court.
BRICKLEY, BOYLE, RILEY, and GRIFFIN, JJ., concurred.
*430 CAVANAGH, C.J. (concurring).
Although I agree with this Court's decision, I would award defendant sentence credit for the period of delay the Ohio correctional facility caused by failing to deliver the appropriate documents to the Michigan prosecutor.
MCL 780.131; MSA 28.969(1)[1] governs charges filed against a defendant who already is incarcerated in a Michigan correctional institution. The statute, similar to the Interstate Agreement on Detainers, requires the prosecutor to bring the defendant to trial within 180 days of receiving notice of where the defendant is incarcerated. When the defendant is incarcerated in Michigan, the statute requires the incarcerating institution to notify the prosecutor that the defendant is incarcerated in its facility. The IAD, however, requires the defendant who is incarcerated outside Michigan to submit notice to the Michigan prosecutor, requesting disposition of the charges.
In People v Hill, 402 Mich 272, 280-281; 262 NW2d 641 (1978), this Court stated that the 180-day period for Michigan prisoners begins to run either when the prosecutor knows or should know *431 of a charge against a Michigan state prisoner, or when the Department of Corrections knows or should know that charges have been filed against one of its inmates. The IAD's 180-day period begins only when the prosecutor receives a defendant's request for disposition of the charges. People v Fex, 439 Mich 117; 479 NW2d 625 (1992), aff'd 507 US ___; 113 S Ct 1085; 122 L Ed 2d 406 (1993).
MCL 780.133; MSA 28.969(3)[2] mandates dismissal of the charges against a defendant incarcerated in Michigan if the 180-day period is violated. The IAD, article V(c), similarly requires dismissal of charges for violating the 180-day period.[3]
This Court promulgated MCR 6.004(D),[4] however.[5]*432 Currently the remedy for violating the 180-day rule depends on who is responsible for failing to meet the deadline. MCR 6.004(D)(2) requires dismissal with prejudice if the prosecutor is responsible for not making a good-faith effort to meet the 180-day deadline. If the Department of Corrections is responsible for failing to notify the prosecutor that the defendant is incarcerated in a state prison, then the defendant is entitled only to sentence credit for the period of delay.
The IAD, article III(b), requires the sending state to promptly forward defendant's request for disposition of charges to the appropriate Michigan prosecutor, but the IAD does not provide a remedy when the sending state fails to comply. The IAD remedy of dismissal is not available because the 180-day deadline does not commence until the Michigan prosecutor receives defendant's request. *433 I believe that if the Michigan defendant receives sentence credit for the period of delay resulting from the failure of the Department of Corrections to notify the prosecutor, then the out-of-state defendant should be accorded the same treatment when the sending state fails to forward defendant's request to Michigan.[6] Therefore, when the out-of-state defendant submits his request for disposition of Michigan charges to the sending state's official, and that official causes delay in forwarding the request to the Michigan prosecutor, the defendant should receive sentence credit for the period of delay.
Accordingly, I would remand for the computation and award of appropriate sentence credit.
LEVIN and MALLETT, JJ., concurred with CAVANAGH, C.J.
NOTES
[1] MCL 750.529; MSA 28.797.
[2] MCL 750.520b(1)(e); MSA 28.788(2)(1)(e).
[3] MCL 750.227b; MSA 28.424(2).
[4] MCL 780.601 et seq.; MSA 4.147(1) et seq. The IAD has also been adopted by nearly every state, the District of Columbia, and the federal government. In Ohio, it appears as Ohio Rev Code 2963.30 to 2963.35. Enacted by Congress, the IAD appears as an appendix to title 18 of the United States Code.
[5] At an evidentiary hearing concerning these events, the Ohio record clerk testified that the Ohio file does not contain the cover letter or the return receipt that would be present if the defendant's request had been properly transmitted to Michigan.
[6] The defendant was sentenced to concurrent life terms of imprisonment, to be preceded by a two-year consecutive term of imprisonment for felony-firearm.
[7] US Const, art I, § 10, cl 3.
[8] See also People v Smith, 438 Mich 715, 728, n 6; 475 NW2d 333 (1991) (opinion of BOYLE, J.).
[9] It has been suggested that an alternative remedy would be to grant sentence credit in Michigan for the time added to the defendant's total incarceration as the result of the inaction of Ohio officials. We decline to adopt that remedy, seeing no statutory basis for it. We observe, however, that the failure of another state's authorities to process promptly an IAD request could be an appropriate consideration as a Michigan judge exercises sentencing discretion.
[1] the department of corrections receives notice that there is pending in this state any untried warrant, indictment, information, or complaint setting forth against any inmate of a correctional facility of this state a criminal offense for which a prison sentence might be imposed upon conviction, the inmate shall be brought to trial within 180 days after the department of corrections causes to be delivered to the prosecuting attorney of the county in which the warrant, indictment, information, or complaint is pending written notice of the place of imprisonment of the inmate and a request for final disposition of the warrant, indictment, information, or complaint. The request shall be accompanied by a statement setting forth the term of commitment under which the prisoner is being held, the time already served, the time remaining to be served on the sentence, the amount of good time or disciplinary credits earned, the time of parole eligibility of the prisoner, and any decisions of the parole board relating to the prisoner. The written notice and statement shall be delivered by certified mail.
[2] the event that, within the time limitation set forth in section 1 of this act, action is not commenced on the matter for which request for disposition was made, no court of this state shall any longer have jurisdiction thereof, nor shall the untried warrant, indictment, information or complaint be of any further force or effect, and the court shall enter an order dismissing the same with prejudice.
[3] Article V(c) states:
If the appropriate authority shall refuse or fail to accept temporary custody of said person, or in the event that an action on the indictment, information or complaint on the basis of which the detainer has been lodged is not brought to trial within the period provided in Article III or Article IV hereof, the appropriate court of the jurisdiction ... shall enter an order dismissing the charges with prejudice.... [MCL 780.601; MSA 4.147(1).]
[4] MCR 6.004(D) states:
(D) Untried Charges Against State Prisoner.
(1) The 180-Day Rule. Except for crimes exempted by MCL 780.131(2); MSA 28.969(1)(2), the prosecutor must make a good-faith effort to bring a criminal charge to trial within 180 days of either of the following:
(a) the time from which the prosecutor knows that the person charged with the offense is incarcerated in a state prison or is detained in a local facility awaiting incarceration in a state prison, or
(b) the time from which the Department of Corrections knows or has reason to know that a criminal charge is pending against a defendant incarcerated in a state prison or detained in a local facility awaiting incarceration in a state prison.
For purposes of this subrule, a person is charged with a criminal offense if a warrant, complaint, or indictment has been issued against the person.
(2) Remedy. In cases covered by subrule (1)(a), the defendant is entitled to have the charge dismissed with prejudice if the prosecutor fails to make a good-faith effort to bring the charge to trial within the 180-day period. When, in cases covered by subrule (1)(b), the prosecutor's failure to bring the charge to trial is attributable to lack of notice from the Department of Corrections, the defendant is entitled to sentence credit for the period of delay. Whenever the defendant's constitutional right to a speedy trial is violated, the defendant is entitled to dismissal of the charge with prejudice.
[5] MCR 6.004(D) was adopted October 1, 1989, to modify People v Hill, supra, which addressed cases involving Michigan prisoners. See People v Taylor, 199 Mich App 549; 502 NW2d 348 (1993); People v Metzler, 193 Mich App 541, 549; 484 NW2d 695 (1992) (CONNOR, J., concurring in part and dissenting in part). In Taylor, the Court of Appeals correctly recognized that MCR 6.004(D) was adopted by this Court and is not in conflict with the statutory provision regarding the 180-day rule. The court rule merely is a modification of our earlier interpretation of the statute addressed in Hill.
[6] Without sentence credit, article III(b) of the IAD would be meaningless. Providing sentence credit here is consistent with how this Court treats Michigan prisoners.
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972 A.2d 136 (2009)
GERYVILLE MATERIALS, INC., Appellant
v.
LOWER MILFORD TOWNSHIP ZONING HEARING BOARD, Lower Milford Township, Lehigh County, Pennsylvania, and Don Weinberger.
No. 1823 C.D. 2008.
Commonwealth Court of Pennsylvania.
Argued March 30, 2009.
Decided May 13, 2009.
*137 Terry L. Parish, Reading, for appellant.
Margo S. Wiener, Allentown, for appellee, Lower Milford Township Zoning Hearing Board.
Emil W. Kantra, II, Center Valley, for appellee, Lower Milford Township.
John B. Rice, Perkasie, for appellee, Don Weinberger.
BEFORE: McGINLEY, Judge, LEAVITT, Judge, and McCLOSKEY, Senior Judge.
OPINION BY Senior Judge McCLOSKEY.
Geryville Materials, Inc. (Geryville) appeals an order of the Court of Common Pleas of Lehigh County (trial court) that affirmed a decision of the Zoning Hearing Board of Lower Milford Township (ZHB) denying Geryville's procedural challenge to the validity of certain of the Township's zoning and subdivision ordinances dating to 1967. For the reasons that follow, we affirm the decision of the trial court.
Geryville is the equitable owner of numerous parcels of land, consisting of 628.483 acres located in an Agricultural-Rural Zoning District in Lower Milford Township (the Township). In 2004, Geryville filed a request with the ZHB for a special exception that would allow it to use the property for quarrying and related activities, including, among other things, bituminous asphalt plant(s), concrete batch plant(s), construction company activities, equipment repair facilities, offices, retail sales, wholesale of stone, landscaping and related products, storage, parking and loading.
However, Geryville applied for, and received, several continuances of the application for a special exception seeking to stay consideration of that application while it brought a substantive challenge to the present zoning ordinance and a request for a curative amendment with the Township's Board of Supervisors.[1] Apparently, while Geryville's substantive challenge was still pending before the Board of Supervisors, our Supreme Court issued its decision in Glen-Gery Corporation v. Zoning Hearing Board of Dover Township, 589 Pa. 135, 907 A.2d 1033 (2006). In that case, our Supreme Court, analyzing the legal application known as the void ab initio doctrine, concluded that a party seeking to pursue a challenge in 2002 to ordinances enacted by Dover Township in 1995 and 1997 based upon alleged procedural defects in the enactment process could maintain such an action, despite statutory language limiting the right of a party to raise a procedural-defect challenge to a period of thirty days following the intended effective date of an ordinance. See 42 Pa.C.S. § 5571(c)(5). The Court noted that such challenge was proper, despite the statutory limitation period, *138 where the legislative body that attempted to enact the ordinances did not strictly comply with the procedural requirements of the Pennsylvania Municipalities Planning Code (MPC), Act of July 31, 1968, P.L. 805, as amended, 53 P.S. §§ 10101-11202.
In its brief to this Court, Geryville notes that, within approximately one week of the Supreme Court's issuance of that decision,[2] it filed the present validity challenges with the ZHB seeking a determination that ten Township land use ordinances (including both zoning and subdivision and land development ordinances) were void ab initio under the Supreme Court's analysis in Glen-Gery.[3]
The ZHB considered Geryville's challenge at numerous hearings.[4] During the course of those hearings, Geryville submitted numerous exhibits concerning the process of enactment relating to the ordinances it sought to challenge. The Township offered the testimony of several residents whose testimony generally indicated that they would not have purchased their property in the Township if the Township had not had a zoning ordinance in effect. The Township also submitted evidence into the record indicating that between 1967 and 2007, the Township had received and acted upon 2,966 permits or applications relating to land use approval under the ordinances in effect throughout this time period.
The ZHB made no specific findings regarding the actual process of enacting the challenged ordinances, other than to indicate that no procedural defects in the enactment procedure rendered the ordinances void ab initio. The ZHB noted that Geryville's claims were very broad and that under Glen-Gery, the void ab initio rule should not be applied where the citizenry has relied upon a law for an extensive period of time. Hence, with regard to any potential procedural defects, the ZHB determined that the reliance by the citizenry rendered the doctrine inapplicable with regard to all of the challenged ordinances. Based upon the foregoing, the ZHB denied Geryville's procedural challenges to the ordinances.[5]
Geryville appealed that decision to the trial court, which engaged in a more thorough evaluation of the individual zoning enactments that Geryville challenged. The Township and a resident, Don Weinberger, intervened before the trial court. The trial court closely examined the numerous specific defects Geryville had raised before the ZHB, and, in general, concluded that, even where Geryville had produced evidence with regard to the various defects supporting its position, the defects that Geryville had established were not so substantial as to constitute a violation of procedural due process. The trial court noted that the Township had established reliance upon the ordinances by citizens in the Township, and that Glen-Gery actually supported the ZHB's decision, noting that to hold the ordinances void ab initio would be unfair to residents and the Township as they had acted in reasonable reliance on the ordinances.
*139 Geryville appealed that decision to this Court, raising the following issues:[6] (1) whether the ZHB's failure to mail its decision within one day of the date of the decision entitled it to a deemed approval of its proposed use of the property; (2) whether the lack of factual findings by the ZHB regarding the specific circumstances surrounding the enactment process of the challenged ordinances entitled it to an order sustaining its challenges to the ordinances; (3) whether the trial court adopted its own factual findings and consequently exceeded its review powers; (4) whether the ZHB's factual findings relating to the enactment process, or lack thereof, reflected a capricious disregard of competent evidence; (5) whether the process used to adopt the challenged ordinances consisted of defects rendering the challenged ordinances void ab initio; (6) whether the ZHB erred in concluding that the reliance suggested by the factual findings provided a sufficient basis upon which to reject the application of the void ab initio doctrine; (7) whether the ZHB Board erred in concluding that certain accepted deviations from statutory notice requirements did not constitute due process violations; and (8) whether an ordinance that is deemed to be void ab initio is capable of being amended.
Geryville first argues that it is entitled to a deemed approval of its validity challenges based upon the fact that the Board did not mail its decision until nearly a week after the date of its decision, an alleged violation of Section 908(10) of the MPC, which provides as follows:
A copy of the final decision or, where no decision is called for, of the findings shall be delivered to the applicant personally or mailed to him not later than the day following its date.
53 P.S. § 10908(10).
Initially, we note that this Section of the MPC has no language regarding the consequence of a municipality's failure to comply. Secondly, we do not view this violation as automatically constituting a departure from the statutory requirement that rises to the level of a constitutional violation. Geryville has not pointed to any consequence of the late mailing that deprived it of due process. This Court has previously considered the same issue and concluded that this section is directory rather than mandatory. Piecknick.
Nevertheless, Geryville seems to suggest that the Court should reconsider this reasoning based upon our Supreme Court's decision in Luke v. Cataldi, 593 Pa. 461, 932 A.2d 45 (2007), which applied the void ab initio doctrine to actions taken by administrative tribunals. However, the facts in that case indicate that the administrative deviation at issue there concerned the due process right to be heard. The right to appeal an administrative decision may implicate a party's procedural due process rights; however, when a failure of an administrative tribunal causes such a violation, the remedy need not be so extreme as to void an otherwise valid adjudication. A failure of the process can be corrected with less extreme remedies. In a case such as this, if an administrative tribunal fails to mail a decision in a timely manner, a party prejudiced by such a failure would have alternative measures to cure this failure.
Geryville next argues that the failure of the ZHB to develop specific factual *140 findings relating to the deficiencies in the enactment process renders the decision one that is not reasoned. Specifically, Geryville argues that Section 908(9) of the MPC, 53 P.S. § 10908(9), requires a zoning board to include findings of fact with reasons for such findings. Based on this argument, Geryville asserts that it is entitled to have the ZHB's decision reversed for non-compliance. However, even if Geryville is correct in arguing that the ZHB failed to develop its factual findings with the necessary specificity, for the reasons that follow, we believe that this error is harmless. Furthermore, even if Geryville were correct in arguing that the ZHB erred by not making certain factual findings, the appropriate remedy would be to remand the case to the ZHB to develop such findings.
With regard to Geryville's argument that the trial court improperly rendered factual findings, we view the trial court's action as simply accepting Geryville's version of the facts for the purpose of analyzing the legal questions concerning the enactment processes relating to the challenged ordinances. In other words, the trial court gave Geryville the benefit of the doubt regarding the evidence it produced. Hence, the real problem Geryville perceived with the trial court's approach to its appeal are the legal conclusions the trial court reached based upon Geryville's evidence.[7]
Geryville next argues that the defects in the enactment process reflected in the record, as well as in the trial court's decision, render the challenged ordinances void ab initio under our Supreme Court's decision in Glen-Gery. Geryville also argues that the reliance of the Township residents considered by the ZHB and the trial court in rejecting the application of the void ab initio doctrine provides an insufficient basis upon which to rely in applying the doctrine. In considering these questions, we will begin by reviewing our Supreme Court's guidance in Glen-Gery.
Glen-Gery involved solely the question of whether the time limitations in the MPC for challenging a procedural defect in the enactment process of an ordinance prohibited a party from later challenging its validity. In 2002, Glen-Gery sought to challenge two ordinances that Dover Township had adopted in 1995 and 1997, respectively. Hence, the two ordinances had been adopted seven and five years, respectively, before the challenge. In general, our Supreme Court held that when a legislative body enacts a law or ordinance, a party may challenge the validity of the ordinance, despite a statute limiting the time period for challenging the enactment process, if the party establishes an alleged procedural defect relating to notice or implicating *141 due process in the enactment process. If successful in such a challenge, the subject law or ordinance is void in its entirety and inoperative, as if it had never existed.
However, the Court did recognize that courts from other jurisdictions sometimes hesitate in applying the doctrine and that this disinclination had "stemmed from the reliance on the part of one party but only where the due process rights of the citizenry will not be violated by its enforcement." Id., 589 Pa. at 145, 907 A.2d at 1038-9. Also, the Court in Glen-Gery noted that "the doctrine is unfair when the void law has caused reliance." Id., 589 Pa. at 145, 907 A.2d at 1039 (citation omitted). Further, the Court stated that "an unconstitutional statute is not absolutely void but its one-time existence is a practical reality upon which people have relied and courts should recognize that reality." Id.
The Court, in discussing the subject of reliance, quoted from its decision in Schadler v. Zoning Hearing Board of Weisenberg Township, 578 Pa. 177, 189, 850 A.2d 619, 627 (2004) (Schadler) as follows:
The Township argues in the alternative that applying the holding of Cranberry Park[, 561 Pa. 456, 751 A.2d 165 (2000)] to this case would engender unsound policy by creating an unreasonable situation in which any ordinance enacted with any sort of technical deficiency would then be forever subject to challenge. We disagree. While it is true that an overly aggressive application of the principles behind Cranberry Park could inject excessive uncertainty into a township's zoning laws, there is no such threat here. The purpose of requiring compliance with the procedural requirements for enacting township ordinances is premised on the importance of notifying the public of impending changes in the law so that members of the public may comment on those changes and intervene when necessary. While we may someday be presented with a case in which a procedurally defective ordinance has been `on the books' and obeyed in practice for such a long time that public notice and acquiescence can be presumed, this is not such a case.
Glen-Gery, 589 Pa. at 146, 907 A.2d at 1039. The Court stated that "reliance is not at issue in the present matter and has not been raised or shown by the board; accordingly, we are left with only the substantial interest in upholding the procedural requirements designed to ensure the citizenry may challenge an ordinance." Id.
Despite these comments relating to circumstances in which otherwise void enactments remain valid, our Supreme Court did not reach the question of whether any reliance in that case would preclude the application of the doctrine. In fact, the Court in Glen-Gery stated that reliance was not an issue. Rather, the single and preliminary question the Court had to answer simply concerned whether the appellant therein could argue that the ordinance was void ab initio. Nevertheless, this dicta is helpful in our analysis.
The word "acquiescence" has been defined as "[a] person's tacit or passive acceptance" or "implied consent to an act." Black's Law Dictionary 23 (7th ed.1999). In the law, a presumption is defined as "[a] legal inference or assumption that a fact exists, based on the known or proven existence of some other fact or group of facts." Id. at 1203. Our Supreme Court also used the word "reliance," which is defined as "[d]ependence or trust by a person, esp. when combined with action based on that dependence or trust." Id. at 1293. Further, detrimental reliance is "[r]eliance by one party on the acts or representations of another, causing a worsening of the first party's position." Id. Of course, this type *142 of reliance refers generally to the principle applied in promissory estoppel cases, and, therefore, does not provide much guidance here.
In considering the language from Schadler and the Supreme Court's reference thereto in Glen-Gery, we understand that our Supreme Court had certain concerns about the application of the void ab initio doctrine, including that: (1) an overly aggressive application of the doctrine could result in excessive uncertainty; (2) the purpose of compliance with procedure is to ensure that the public will be able to make comments regarding proposed changes; and (3) where a presumption may be made that persons interested in the operation of an ordinance have acquiesced to the substance of the ordinance and, despite procedural infirmities, the ordinance has been accepted by property owners and applied by a municipality for a sufficiently long period of time, the application of the doctrine may not be appropriate. Further, the Court in Glen-Gery, while quoting the "acquiescence" language of Schadler, rejected an argument relating to "reliance," and concluded that Dover Township had neither shown reliance nor raised the issue, and, thus, did not delve into the question of how long residents and a municipality must abide by a procedurally defective ordinance to establish either reliance or "presumed acquiescence" such that the courts should not apply the void ab initio doctrine.
We note that, while the Supreme Court in both Schadler and Glen-Gery recognized potential exceptions to the application of the void ab initio doctrine, the Court in Schadler, citing Cranberry Park (in which the ordinance at issue had never been recorded in the township's ordinance book), suggested that, where a municipality fails to record an ordinance in its ordinance book, the ordinance cannot be said to have been "on the books" such as to provide the public with notice that would have enabled the public to acquiesce.[8] In 1995, the General Assembly repealed the former provision of the SCTC relating to recording ordinances, which the Court interpreted in Cranberry Park, and amended the recordation requirement provision to state that "the failure to record [an ordinance] within the time provided [shall not] be deemed a defect in the process of the enactment or adoption of such ordinance." Section 1601 of the SCTC, 53 P.S. § 66601(a). Hence, before the 1995 amendment, under Cranberry Park, our Supreme Court would not perceive any unrecorded ordinance as ever having been "on the books" for the purpose of considering whether acquiescence to an improperly enacted ordinance saved the ordinance from invalidation. Following the amendment noted above, we can reason that interested parties may not rely upon the failure to record as a basis to assert that no acquiescence to a potentially invalid ordinance occurred. However, in the present *143 case, this distinction appears irrelevant, as the only challenge to the recording of the ordinances at issue relates to the two most recent enactments, and that challenge pertains only to the assertion that the Township's seal is not affixed to each page of the ordinance as recorded in the ordinance book. Hence, unlike Cranberry Park, these challenged ordinances were "on the books" in the sense that they had in fact been recorded in the Township's ordinance book.
Consequently, we next turn to the question of whether the notions of either reliance or acquiescence warrant our rejection of Geryville's assertion that the void ab initio doctrine should apply.
In order to reach a presumption that acquiescence has occurred, the Supreme Court indicated, in dicta in Glen-Gery, that the lapse of time of some indefinite amount, coupled with some indication that persons interested in land use in a municipality have obeyed the ordinances purported to have been enacted, would suffice to support a decision electing not to apply the void ab initio doctrine despite evidence of defects in the enactment process. In Schadler, the time between the purported enactment and the date of the challenge was only seven months. Although the ordinance at issue in Cranberry Park had been adopted eight years before the challenge, as the Supreme Court noted, that ordinance had not "been on the books" because the municipality had not recorded the ordinance in the ordinance book.
While the evidence consisting of the residents' reliance upon the existence of some of the ordinances in making decisions to acquire their Township property is compelling, we believe the strongest evidence in support of the Township's position goes to the question of acquiescence. The simple fact that no party has sought before to challenge the procedural process involved with these ordinance is a plain indication that interested parties have obeyed the ordinances. Moreover, in this case, the evidence the Township submitted is much stronger. In fact, the evidence herein does more than support a conclusion that we can "presume" acquiescence has occurred; said evidence actually supports a finding that acquiescence occurred. Indeed, this evidence established that the Township considered and issued nearly three thousand permits in accordance with the various ordinances adopted by the Township.
It takes little imagination to envision the sort of uncertainty that might arise if ordinances that have been applied and accepted for a long period of time are suddenly declared void.[9] In this case, at the time Geryville initiated its action, the challenged ordinances had been adopted approximately thirty-nine, thirty-three, twenty, eleven, six, and three years before, respectively. We cannot determine whether the reluctance of the Court in Glen-Gery to consider the issue of reliance or acquiescence with regard to the five and seven-year old ordinances at issue in that case stemmed from a conclusion that such ordinances had not been "on the books" long enough to reach a presumption that interested persons had acquiesced to the ordinance, thus rendering them valid notwithstanding the procedural defects, or simply that the municipality there had not shown reliance or acquiescence or even raised the issue of whether such potential *144 exceptions existed so as to preclude the application of the void ab initio doctrine.
In Schadler, our Supreme Court stated as follows:
We are aware that the ordinance in Cranberry Park was enacted eight years before the contractor in that case filed its procedural challenge. However, as that ordinance was never subsequently recorded in the township ordinance book, it was never `on the books' in such a way that the public could have had notice of or acquiesced in its terms.
578 Pa. at 190, 850 A.2d at 627, n. 11,. In other words, this language suggests that, where an ordinance is defectively enacted but has been "on the books" for eight years, public notice or acquiescence to the terms of the ordinance could in fact exist so as to preclude application of the doctrine.
With these observations in mind, we have little difficulty concluding that the ordinances Geryville has challenged that are more than eight years old have been "on the books" for a sufficiently long time to support a presumption that notice or acquiescence has occurred despite procedural irregularities. Moreover, the evidence of record, i.e., the nearly three thousand permits issued by the Township as well as the testimony of several Township residents, supports the ZHB's finding of such reliance and/or acquiescence.
The analysis is somewhat more complicated with regard to the newer ordinances, i.e., the two purported to have been enacted in 2000 and 2003. At the time of Geryville's 2006 challenge to these ordinances, they had been "on the books" for a period of only six and three years, respectively. As suggested in Schadler, a period of less than one year is insufficient to establish that public notice or acquiescence of a defectively enacted ordinance has occurred. These two latter ordinances fall within the middle ground between the ordinance at issue in Schadler and the ordinance discussed in Cranberry Park.
We cannot help but be guided by our Supreme Court's recognition in Glen-Gery of the potential chaos that would result within a community if its land use regulations are deemed to be invalid. If we were to reach the result urged by Geryville, we believe that the turmoil that might ensue would cause greater harm to all of those who have an interest in land use in the Township, and who have innocently relied upon the challenged ordinances, than would result by electing not to apply the void ab initio doctrine.[10]
*145 Accordingly, the order of the trial court is affirmed, albeit on alternative grounds as set forth in this opinion.[11]
Judge COHN JUBELIRER did not participate in this decision.
ORDER
AND NOW, this 13th day of May, 2009, the order of the Court of Common Pleas of Lehigh County is affirmed.
NOTES
[1] The parties do not address the results of this substantive challenge and curative amendment request.
[2] The Supreme Court issued its decision in Glen-Gery on September 28, 2006, and the date of filing indicated on Geryville's appeal to the ZHB is October 6, 2006.
[3] Geryville eventually dropped its challenge to the earliest ordinance, Number 21, which was enacted in 1967.
[4] The record indicates that the ZHB considered the challenges at hearings on the following dates: November 29, 2006, January 24, 2007, February 28, 2007, March 28, 2007, and May 23, 2007.
[5] The ZHB issued its decision on June 26, 2007, but did not mail a copy of said decision to Geryville until July 2, 2007.
[6] This Court's standard of review of an order of a trial court affirming a ZHB decision when it takes no additional evidence is limited to considering whether the ZHB erred as a matter of law or abused its discretion. Piecknick v. South Strabane Township Zoning Hearing Board, 147 Pa.Cmwlth. 308, 607 A.2d 829 (1992).
[7] However, we do disagree with the Township's position in this regard. Although there is case law supporting the Township's view that a trial court may make factual findings necessary for deciding the appeal when a zoning board has not made findings, Section 1005-A of the MPC, 53 P.S. § 11005-A, upon which those cases were decided, indicates that a trial court may make findings only where it takes additional evidence or when a zoning hearing board makes no findings. This is the interpretation this Court adopted in Koutrakos v. Zoning Hearing Board of Newtown Township, 685 A.2d 639, 641 (Pa. Cmwlth.1996), wherein it stated that "[t]his statute clearly leads to the following propositions. First, a trial court properly makes its own findings if a record being reviewed by the court does not include findings, which we have determined to be the case here. Second, as is often noted in the case law, the court also acts appropriately in making its own findings if it takes additional evidence. Third, the court generally may be precluded from making its own findings if the record includes findings and the court does not take additional evidence." (Footnote omitted).
[8] Cranberry Park involved an applicant for a grading permit who had begun its grading operations before the municipality acted on the application. When the municipality denied the permit, the applicant asserted that the ordinance had never become effective because of defects in the enactment process. The alleged failure in the enactment process was that the municipality, contrary to Section 1601 of The Second Class Township Code (SCTC), Act of May 1, 1933, P.L. 103, as amended, 53 P.S. § 66601 (previously 53 P.S. § 65741), had never signed, dated, and more pointedly, recorded the ordinance. Based on those failures, the Court held that the ordinance could not have become effective until after recordation. Since the municipality had never recorded the ordinance, it never had an effective date that would have triggered the operation of the thirty-day limitation for procedural challenges. In that case, the municipality had adopted the ordinance in 1987 and the applicant challenged the ordinance eight years later, in 1995.
[9] Similarly, from a reliance perspective, it takes little imagination to envision the sort of inequities/unfairness that would be imposed upon the Township's residents, all of whom innocently relied upon the applicable ordinances in choosing where to live and in seeking the aforementioned permits.
[10] We note that our General Assembly, in an apparent attempt to prevent the application of the void ab initio doctrine as established by the cases discussed herein, recently enacted Section 5571.1 of the Judicial Code, 42 Pa. C.S. § 5571.1 (effective July 4, 2008). Admittedly, this Section is not applicable here as the present case was initiated prior to its enactment. Nevertheless, we will briefly address the same. Section 5571.1 relates solely to appeals from ordinances, resolutions, maps and other municipal enactments. While referencing the thirty-day time period within which to raise questions "relating to an alleged defect in the process of or procedure for enactment or adoption of any ordinance ...," this Section notes an exception for appeals alleging that application of this thirty-day time limitation would result in an "impermissible deprivation of constitutional rights." See Section 5571.1(a)(1) and (c) of the Judicial Code, 42 Pa.C.S. §§ 5571.1(a)(1) and (c), respectively. Furthermore, with respect to appeals filed more than two years after the intended effective date of an ordinance, Section 5571.1(d)(2) specifically creates a presumption that "the political subdivision involved and residents and landowners within the political subdivision shall be presumed to have substantially relied upon the validity and effectiveness of the ordinance" at issue. 42 Pa.C.S. § 5571.1(d)(2). Section 5571.1(e) sets forth the burden of proof on the party seeking to rebut this presumption, essentially indicating that an ordinance will not be found to be void ab initio unless said party establishes that "there was a failure to strictly comply with statutory procedure," that such failure "resulted in insufficient notification to the public of impending changes in or the existence of the ordinance" and that "there exist facts sufficient to rebut any presumption that may exist pursuant to subsection (d)(2)...." See Section 5571.1(e)(2)(i)-(iii), 42 Pa.C.S. § 5571.1(e)(2)(i)-(iii).
[11] Based upon our conclusions above, we need not address the remaining issues Geryville has raised, including the question of whether the trial court and the ZHB erred in concluding that the alleged defects, where established, do not implicate the void ab initio doctrine.
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885 N.E.2d 584 (2005)
355 Ill. App.3d 1198
FIRST NAT BANK OF LACON
v.
NEWELL.
No. 3-04-0538.
Appellate Court of Illinois, Third District.
April 22, 2005.
Affirmed.
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} |
418 F.Supp. 1088 (1976)
Ernest WELCOME, Petitioner,
v.
Leon J. VINCENT, Superintendent, Green Haven Correctional Facility, Respondent.
No. 76 Civil 1562.
United States District Court, S. D. New York.
September 2, 1976.
*1089 Julia P. Heit, New York City, for petitioner.
Louis J. Lefkowitz, Atty. Gen., New York City, for respondent; Joseph W. Henneberry, Asst. Atty. Gen., of counsel.
OPINION
EDWARD WEINFELD, District Judge.
Petitioner, now serving a sentence of twenty-five years to life imprisonment in Green Haven Correctional Facility in Stormville, New York, seeks his release on a federal writ of habeas corpus. He claims he was denied his right to a fair trial under the Fourteenth Amendment by the refusal of the trial judge to allow him to examine a defense witness as to a confession previously made by that witness, and by the alleged perjury of another witness.
Petitioner and two co-defendants were convicted of two counts of murder on March 10, 1970, after a jury trial in the Supreme Court of the State of New York. His conviction was affirmed without opinion by the Appellate Division, First Department on May 2, 1972,[1] and leave to appeal, although initially denied by Judge Burke of the Court of Appeals, was granted by Chief Judge Breitel on March 7, 1974.
In the interim petitioner moved, on May 21, 1973, for a new trial and vacatur of the judgment of conviction,[2] based upon the post-trial recantation of a prosecution witness. The motion was denied by the Supreme Court without an evidentiary hearing on November 7, 1973. The Appellate Division affirmed the denial of petitioner's motion on December 5, 1974, with one judge dissenting and granting permission to appeal to the Court of Appeals.[3] The direct appeal from the judgment of conviction and the appeal from the denial of petitioner's motion for a new trial were consolidated in the Court of Appeals, which dismissed the direct appeal and affirmed the denial of the motion for a new trial on September 24, 1975.[4] It is not disputed that petitioner has exhausted his available state remedies.
The crime of which petitioner was convicted was the murder, on November 2, *1090 1967, of Hyman and Seymour Katz, during a robbery at their real estate office in the Bronx by three men.[5] Petitioner and his co-defendants proceeded to trial under an indictment which charged them and a fourth unnamed person in two counts with common law murder and in two counts with felony murder. The case against petitioner was based on the testimony of three witnesses. Janet Laccorn, an employee of the Katz brothers, was present when the robbery and shooting occurred. She identified one of the robbers, whom she had observed for about thirty seconds, as petitioner. Dolores Marcell, who worked in a store on the street floor of the same building, testified that she came outside when she heard screaming from the Katz brothers' office. She identified petitioner as one of three men she encountered on the street as they were leaving the building from the entrance to the Katz brothers' office. Both witnesses identified petitioner in line-ups and, although Marcell initially pointed to one of petitioner's co-defendants instead of petitioner, in court as well.
Vincent Turner testified that about three weeks after the robbery he was approached in a pool room by petitioner, who asked Turner if he had heard what had happened in the Bronx, and referred to "[t]hem two studs that I burnt." On cross-examination it was brought out that Turner previously had been convicted four times, and that he was then in jail awaiting sentence for five robberies, each of which could lead to imprisonment for up to twenty-five years. Turner testified that although no promise had been made by the state, he did expect some consideration in his sentencing as a result of his testimony.
Petitioner's defense was an alibi, based on the testimony of his girl friend and two friends of his mother that petitioner was at his mother's house at the time the crime occurred, helping prepare for a party the next day. He also called Albert Cunningham as a defense witness. During the investigation of the murders, Cunningham had been questioned by an Assistant District Attorney in the presence of two detectives, and had stated that he participated in the robbery with two persons named Branch and Green and a fourth whom he could not identify. Cunningham told the investigators that while the others went upstairs in the building he remained on the staircase; that when he heard a shot he ran from the building and left the area in a cab; and that he later met Branch who gave him $200 which he guessed "was for that." Cunningham's oral answers, although reduced to writing, were neither signed nor sworn to by him. He was indicted for the murders and brought to trial alone. The confession was ruled admissible against him after a Huntley hearing.[6] However, a mistrial was declared and the charges were dropped when the prosecutor decided that the alleged confession was unreliable and that the wrong man was on trial.
Against that background, Cunningham was called as a defense witness. On direct examination by petitioner's counsel, Cunningham testified that he had been indicted and charged with the Katz murders and that before his arrest and indictment he had had conversations with the Assistant District Attorney and the detectives (T. 1194-95).[7] When petitioner's counsel sought to ask Cunningham what he had said at that time, the court sustained the prosecutor's objection. After sidebar discussion the trial judge indicated that he would permit defense counsel to interrogate Cunningham as to any part he or anybody *1091 else played in the murders, but not as to what Cunningham told others. The judge further ruled that if it appeared Cunningham was a hostile witness, that is, implicated Welcome or his co-defendants, cross-examination of Cunningham would be permitted as to his prior inconsistent statements to the Assistant District Attorney and others, even though such prior statements were not in writing (T. 1216-18).
Upon continued direct examination, Cunningham testified that he drove to the Bronx with Branch and Green and that they were armed with a shotgun and pistols. He testified that they robbed the Katz brothers' real estate office but that he did not know if during the course of the holdup a shooting occurred (T. 1223-24). On cross-examination by the prosecutor, Cunningham retracted his prior testimony, stating that he misunderstood defense counsel and thought his questions referred to the confession a term, incidentally, volunteered by Cunningham.[8] He then categorically denied committing the robbery, knowing anything about the crimes or even knowing the location of the Katz brothers' realty office (T. 1225-28). On redirect, defense counsel, contending among other matters that Cunningham "said there was a confession" and therefore "opened the door" (T. 1229-30), sought to question him about his oral statements to the Assistant District Attorney and the detectives, to establish that these were inconsistent with the answers given on cross-examination. The court refused to allow the inquiry on the ground that Cunningham's testimony had not inculpated Welcome or his co-defendants and that his oral statements were inadmissible hearsay.
Petitioner's first claim is that the trial court's refusal to allow him to question Cunningham about the alleged confession deprived him of a fundamentally fair trial in violation of his right to due process of law. He gives three reasons why it was error to exclude Cunningham's statement: (1) because the prosecutor "opened the door" during cross-examination of Cunningham by asking a question which elicited a response referring to the confession; (2) because once Cunningham retracted the testimony he gave on direct examination, the defendant was entitled to impeach him despite the provisions of section 8-a of the former Code of Criminal Procedure, permitting the use of prior inconsistent statements to impeach a party's own witness only when such statements were made under oath or were in writing subscribed by the witness;[9] and (3) because the confession was a declaration against Cunningham's penal interest. Assuming that petitioner is correct in those contentions, it does not follow that a writ of habeas corpus must be granted. The question presented on this application is not one of the law of evidence but one of constitutional dimensions, to be tested under the due process clause of the Fourteenth Amendment. Thus, at issue is not whether it was evidential error to foreclose petitioner from questioning Cunningham about his out-of-court statements, but whether that ruling deprived petitioner of his right to a fundamentally fair trial.[10]
*1092 Petitioner claims that Chambers v. Mississippi[11] dictates a finding that he was denied due process. In Chambers the defendant, accused of murdering a police officer, attempted to prove that the crime had been committed by a man named MacDonald. MacDonald had given a sworn statement to Chambers' attorneys stating that he and not Chambers had killed the policeman, but retracted the confession before Chambers' trial. At his trial, Chambers was allowed to introduce testimony from eyewitnesses linking MacDonald to the shooting, and to have MacDonald's sworn confession read to the jury. However, when MacDonald, who was called as a defense witness, repudiated his confession upon cross-examination, the court did not allow Chambers' attorney to cross-examine MacDonald as a hostile witness. The court further refused, on the grounds of hearsay, to allow Chambers to present testimony from three witnesses of other out-of-court confessions by MacDonald. The Supreme Court reversed Chambers' conviction.
Chambers did not establish a per se rule that failure to permit cross-examination of a witness about prior statements which, by inculpating the witness, allegedly exculpate the defendant, invariably denies due process. The Court held only that upon the particular "facts and circumstances of this case," the combined effect of all of the trial court's rulings was to deny Chambers "a trial in accord with traditional and fundamental standards of due process," because those rulings made Chambers' defense "far less persuasive" than it would have been had his opportunity to present evidence not been restricted.[12] Crucial to the Court's finding that Chambers was denied due process were the persuasive indications that the hearsay statements offered were reliable. The confessions were volunteered spontaneously to friends within twenty-four hours of the crime; they were corroborated by eyewitness testimony, physical evidence and MacDonald's own sworn confession; they were clearly and devastatingly against MacDonald's penal interest; and MacDonald was present in court for cross-examination concerning the statements. In sum, the rejected evidence "bore persuasive assurances of trustworthiness."[13]
Petitioner claims that his inability to present Cunningham's confession to the jury similarly deprived him of a fair trial. He argues that the reliability of Cunningham's confession is shown in several ways. First, as in Chambers, Cunningham's statement was against his penal interest. Second, the state believed in the reliability of the confession enough to bring Cunningham to trial. Third, the confession was ruled admissible against Cunningham in the Huntley hearing.
However, the indicia that the confession was unreliable are far more compelling. Not only was Cunningham's unsworn confession uncorroborated by any other evidence, but a mistrial was declared and the prosecution against him was dropped for substantial and compelling reasons. As explained to the trial court by the District Attorney of Bronx County (T. 1244-46), police investigation revealed that Branch and Green, the two persons whom Cunningham named as committing the robbery with him, could not have done so since one was out of state and the other in jail at the time. Cunningham was given a polygraph test which indicated he had nothing to do with the robbery. In addition, when he made the statement, according to the District Attorney, Cunningham was a narcotics addict undergoing "the pangs of withdrawal" and "would have admitted anything" (T. 1245-46).
*1093 The statement itself was vague and confused. Cunningham did not identify the building where the robbery took place, except to say that it was a "business type building" in the Bronx. Nor could he state on what day the robbery occurred. Shown a hat and a pair of glasses apparently found by police at the scene of the murders, Cunningham stated that they belonged to the fourth person, whose name he did not know. Finally, instead of being clearly against Cunningham's penal interest, the alleged confession contains no statement that he was present at or saw the shooting or that he actually committed a robbery. Unlike the statement in Chambers, therefore, Cunningham's statement does not persuasively appear to be trustworthy. Under these circumstances the court's refusal to allow examination of Cunningham as to his alleged complicity in the homicides did not impair petitioner's defense to such an extent as to deny him a fundamentally fair trial.
Petitioner's second claim rests on the recantation of Vincent Turner. Over two years after the trial Turner gave an oral statement to petitioner's attorney, which was recorded and transcribed, and signed an affidavit. In those statements Turner said that his testimony relating his conversation with petitioner about "them two studs" that petitioner "burnt" was perjured, given at the behest of one of petitioner's co-defendants who feared that petitioner would testify against him and hoped that strong evidence against petitioner would induce him not to do so.
While the fact that Turner has recanted does not establish that he actually committed perjury at the first trial, since such recantations are justly regarded with great suspicion,[14] the court will assume that Turner did commit perjury. However, that fact by itself does not require that the instant application be granted. Petitioner is entitled to a federal writ of habeas corpus voiding the state court judgment of conviction only upon a showing that the state contrived to deprive him of his right to a fair trial, protected under the due process clause. The deprivation of that right is not established by a mere showing that petitioner's conviction may have been the result in part of perjury by a prosecution witness, unknown to the prosecutor. It is the deliberate, knowing, or even negligent use of false testimony by the prosecution, or the suppression of evidence favorable to the defendant, which so offends the "rudimentary demands of justice" that it deprives an accused of his right to a fair trial and taints his conviction.[15] Accordingly, to establish his claim that Turner's alleged perjury deprived him of a fair trial, petitioner must show that prosecutorial misconduct, whether by design or negligence, was implicated.[16]
*1094 Petitioner concedes that the prosecution had no knowledge of Turner's alleged perjury. However, he claims Turner was "induced to perjure himself and testify favorably for the Prosecution because of the expectation of leniency from the People in his own pending robbery cases," and that "since it was the bargaining practices of the People that induced Turner to perjure himself, the Prosecution, albeit lacking direct knowledge of the perjury, must still be held accountable."
This claim is without merit. To accept it would be effectively to foreclose the use of the testimony of informers, confederates or accomplices who are awaiting sentence or facing possible criminal charges. From time immemorial such testimony has been recognized as necessary to secure the enforcement of criminal laws.[17] It is one thing to say that a defendant is entitled to all information relating to the credibility of a witness and every opportunity to challenge his reliability.[18] But it is quite another matter to suggest a virtual blackout of such evidence and to prevent its use by the prosecution. As long as the defense is afforded a full and fair opportunity to expose flaws in a witness' testimony, the motives he may have to testify falsely, and the other factors which touch upon his credibility, the requirement of due process of law is met. In this case, Turner's motives for fabrication were exposed to the jury and argued at length by counsel.[19] Petitioner has failed to show that knowing use of perjured testimony which constitutes a denial of due process.
The petition for a writ of habeas corpus is dismissed upon the merits.
NOTES
[1] 39 App.Div.2d 841, 331 N.Y.S.2d 995.
[2] See N.Y.C.P.L. §§ 440.10(1)(g) and (h).
[3] 46 App.Div.2d 860, 361 N.Y.S.2d 378 (1st Dept.).
[4] 37 N.Y.2d 811, 375 N.Y.S.2d 573, 338 N.E.2d 328. The Court of Appeals dismissed petitioner's direct appeal on the ground that Chief Judge Breitel had no authority to grant leave to appeal after Judge Burke had denied it, and that therefore the case was not properly before the court.
[5] Since there is no dispute as to the essential facts of the case, no evidentiary hearing need be held. United States ex rel. Rice v. Vincent, 491 F.2d 1326, 1331 n. 3 (2d Cir.), cert. denied, 419 U.S. 880, 95 S.Ct. 144, 42 L.Ed.2d 120 (1974); United States ex rel. Randazzo v. Follette, 282 F.Supp. 2, 8 (S.D.N.Y.1968), remanded on other grounds, 444 F.2d 625 (2d Cir.), cert. denied, 404 U.S. 916, 92 S.Ct. 232, 30 L.Ed.2d 191 (1971); see Procunier v. Atchley, 400 U.S. 446, 451, 91 S.Ct. 485, 27 L.Ed.2d 524 (1971).
[6] People v. Huntley, 15 N.Y.2d 72, 255 N.Y.S.2d 838, 204 N.E.2d 179 (1965).
[7] References are to pages of the trial transcript as printed in the record of petitioner's direct appeal to the Appellate Division.
[8] The prosecutor, during extensive sidebar discussion, emphasized that he had never referred to or mentioned the word "confession," and the court observed that had the prosecutor moved to strike Cunningham's volunteered reference to it, he would have granted the motion (T. 1235).
[9] "In addition to impeachment in the manner now permitted by law, any party may introduce proof that a witness has made a prior statement inconsistent with his testimony, irrespective of the fact that the party has called the witness or made the witness his own, provided that such prior inconsistent statement was made in any writing by him subscribed or was made under oath." Section 8-a has been superseded by N.Y.C.P.L. § 60.35.
[10] United States ex rel. Holliday v. Adams, 443 F.2d 7, 8 n. 1 (2d Cir. 1971); United States ex rel. Sadowy v. Fay, 284 F.2d 426, 427 (2d Cir. 1960), cert. denied, 365 U.S. 850, 81 S.Ct. 814, 5 L.Ed.2d 814 (1961); United States ex rel. Corby v. Conboy, 337 F.Supp. 517, 519 (S.D.N.Y. 1971); United States ex rel. Birch v. Fay, 190 F.Supp. 105, 107 (S.D.N.Y.1961); see also Chambers v. Mississippi, 410 U.S. 284, 302-03, 93 S.Ct. 1038, 35 L.Ed.2d 297 (1973); Dutton v. Evans, 400 U.S. 74, 80-83, 91 S.Ct. 210, 27 L.Ed.2d 213 (1970).
[11] 410 U.S. 284, 93 S.Ct. 1038, 35 L.Ed.2d 297 (1973).
[12] 410 U.S. at 294, 302-03, 93 S.Ct. at 1049. See Maness v. Wainwright, 512 F.2d 88, 90-91 (5th Cir.), reh. en banc granted, 519 F.2d 1085 (5th Cir. 1975), order for rehearing en banc vacated, 528 F.2d 1381 (5th Cir. 1976); cf. United States v. Jenkins, 496 F.2d 57, 69-70 (2d Cir. 1974), cert. denied, 420 U.S. 925, 95 S.Ct. 1119, 43 L.Ed.2d 394 (1975).
[13] 410 U.S. at 300-02, 93 S.Ct. 1038.
[14] United States ex rel. Rice v. Vincent, 491 F.2d 1326, 1332 (2d Cir.), cert. denied, 419 U.S. 880, 95 S.Ct. 144, 42 L.Ed.2d 120 (1974); United States v. Troche, 213 F.2d 401, 403 (2d Cir. 1954); see also Rhinehart v. Rhay, 440 F.2d 718, 721-23 (9th Cir.), cert. denied, 404 U.S. 825, 92 S.Ct. 53, 30 L.Ed.2d 53 (1971).
[15] Giglio v. United States, 405 U.S. 150, 153-54, 92 S.Ct. 763, 31 L.Ed.2d 104 (1972); Brady v. Maryland, 373 U.S. 83, 86-87, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963); Napue v. Illinois, 360 U.S. 264, 269, 79 S.Ct. 1173, 3 L.Ed.2d 1217 (1959); Mooney v. Holahan, 294 U.S. 103, 112-13, 55 S.Ct. 340, 79 L.Ed. 791 (1935).
[16] Burks v. Egeler, 512 F.2d 221, 223-26 (6th Cir.), cert. denied, 423 U.S. 937, 96 S.Ct. 297, 46 L.Ed.2d 270 (1975); Elliott v. Beto, 474 F.2d 856, 857 (5th Cir.), cert. denied, 411 U.S. 985, 93 S.Ct. 2284, 36 L.Ed.2d 963 (1973); United States ex rel. Catanzaro v. Mancusi, 404 F.2d 296, 300 (2d Cir. 1968), cert. denied, 397 U.S. 942, 90 S.Ct. 956, 25 L.Ed.2d 123 (1970); Luna v. Beto, 395 F.2d 35, 41 (5th Cir. 1968), cert. denied, 394 U.S. 966, 89 S.Ct. 1310, 22 L.Ed.2d 568 (1969) (Brown, J., concurring); Johnson v. Bennett, 386 F.2d 677, 679-80 (8th Cir. 1967), vacated on other grounds, 393 U.S. 253, 89 S.Ct. 436, 21 L.Ed.2d 415 (1968); see also United States ex rel. Birch v. Fay, 190 F.Supp. 105, 107 (S.D.N.Y.1961). Under certain circumstances, which may vary from case to case, however, newly discovered evidence that a judgment of conviction is based in part upon material perjured testimony may warrant the granting of a motion for a new trial even when the prosecution was unaware of the perjury. See United States v. Rosner, 516 F.2d 269, 272 (2d Cir. 1975), cert. denied, ___ U.S. ___, 96 S.Ct. 3198, 49 L.Ed.2d ___ (1976); United States v. DeSapio, 435 F.2d 272, 286 n. 14 (2d Cir. 1970), cert. denied, 402 U.S. 999, 91 S.Ct. 2170, 29 L.Ed.2d 166; 406 U.S. 933, 92 S.Ct. 1776, 32 L.Ed.2d 135 (1971); United States v. Marquez, 363 F.Supp. 802, 805-06 (S.D.N.Y. 1973), aff'd without opinion, 490 F.2d 1383 (2d Cir.), cert. denied, 419 U.S. 826, 95 S.Ct. 44, 42 L.Ed.2d 50 (1974).
[17] See Hoffa v. United States, 385 U.S. 293, 311, 87 S.Ct. 408, 17 L.Ed.2d 374 (1966); United States v. Dennis, 183 F.2d 201, 224 (2d Cir. 1950), aff'd, 341 U.S. 494, 71 S.Ct. 857, 95 L.Ed. 1137 (1951); Handschu v. Special Services Division, 349 F.Supp. 766, 769 (S.D.N.Y.1972).
[18] See Giglio v. United States, 405 U.S. 150, 92 S.Ct. 763, 31 L.Ed.2d 104 (1972); Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963).
[19] In addition, it should be noted that Turner's recantation statement belies the factual basis for petitioner's argument. Turner stated that he perjured himself, not in the hope of getting a lighter sentence, but at the request of petitioner's co-defendant.
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899 F.2d 1210
AMERIKOHL MINING, INC., Al Hamilton Contracting and SupplyCo., Inc., and Central Pennsylvania Coal Company,Inc., Plaintiffs-Appellants,v.The UNITED STATES, Defendant-Appellee.
No. 89-1522.
United States Court of Appeals,Federal Circuit.
April 10, 1990.
Donald W. Howser, Pittsburgh, Pa., argued for plaintiffs-appellants. With him on the brief was Frank Mast.
Andrew C. Mergen, Dept. of Justice, of Washington, D.C., argued for defendant-appellee. Richard B. Stewart, Asst. Atty. Gen., John A. Bryson, Celia Campbell-Mohn and Angus E. Crane, Dept. of Justice, of Washington, D.C., were on the brief for defendant-appellee.
Before MAYER, Circuit Judge, BALDWIN, Senior Circuit Judge, and MILLS, Judge.*
BALDWIN, Senior Circuit Judge.
1
Amerikohl Mining, Inc., Al Hamilton Contracting and Supply Co., Inc. and Central Pennsylvania Coal Company, Inc., ("Amerikohl") appeal the decision of the United States Claims Court, Nos. 433-88L, 441-88L and 442-88L, dismissing the appellants' consolidated complaints seeking reimbursement for reclamation fees allegedly paid in excess of the statutory requirement under the Surface Mining Control and Reclamation Act of 1977 ("SMCRA"), 30 U.S.C. 1201, et seq. (1977), for lack of subject matter jurisdiction. See Amerikohl Min., Inc. v. United States, 16 Cl.Ct. 623 (1989). We affirm.
BACKGROUND
2
In 1977, Congress promulgated the SMCRA to "establish a nationwide program to protect society and the environment from the adverse effects of surface coal mining operations." 30 U.S.C. Sec. 1202(a) (1982). Among other things, the SMCRA requires coal mining operators to restore the mined land to a condition which supports the land's original or better use, prevents erosion, preserves topsoil and supports re-vegetation. 30 U.S.C. Sec. 1265(b) (1982). All operators subject to the statute are required to pay a reclamation fee to the Secretary of Interior ("Secretary") for every ton of coal mined, in order to fund the restoration of mined lands.1 30 U.S.C. Sec. 1231 (1982). The original regulation governing the payment of the reclamation fee provided in part that:
3
(a) The operator shall pay a reclamation fee on each ton of coal produced for sale, transfer, or use, including the products of in situ mining.
4
(b) The fee shall be determined by the weight and value at the time of initial bona fide sale, transfer of ownership, or use by the operator.
5
30 C.F.R. 837.11 (1978); 42 Fed.Reg. 62,639, 62,715 (Dec. 13, 1977) (emphasis added).
6
In 1981, the Secretary revised the regulation in order "to clarify the point in time of fee determination, as well as the value and weight parameters for calculating reclamation fees...." 47 Fed.Reg. 28,574, 28,577 (June 30, 1982). The revised regulation stated that:
7
(3) The weight of each ton shall be determined by the actual gross weight of the coal.
8
(i) Impurities, including water, that have not been removed prior to the time of initial bona fide sale, transfer of ownership, or use by the operator shall not be deducted from the gross weight.
9
30 C.F.R. Sec. 870.12(b)(3)(i) (1983) (emphasis in original).
10
The Secretary further amended this regulation in 1988 to allow for the deduction of the excess moisture from the gross weight of coal mined and sold after July 1, 1988.2 This regulation was explicitly not made retroactive. 53 Fed.Reg. 19,718, 19,720.
11
Amerikohl filed complaints in the United States Claims Court against the United States alleging the imposition of an erroneous assessment of fees under 30 U.S.C. Sec. 1232(a)3 and the rules promulgated thereunder, 30 C.F.R. Sec. 870.12(b) (1982). Specifically, Amerikohl sought a refund from the government for fees paid in 1982 under regulations which did not provide for a deduction of materials such as excess moisture, debris and clay, which were not coal. The plaintiffs complained that, because the Secretary's regulations did not provide for the above deductions, the levied fees exceeded the Secretary's statutory authority. They further argued that the deductions for excess moisture allowed under the 1988 amended regulation, 30 C.F.R. Sec. 870.12(b)(3)(i) (1988), should be retroactively applied.
12
In response to Amerikohl's complaint, the United States moved to dismiss the action for lack of subject matter jurisdiction and failure to state a claim upon which relief could be granted.
13
The Claims Court determined that, under 30 U.S.C. Sec. 1276(a)(1) (1982), the United States District Court for the District of Columbia has exclusive jurisdiction to consider challenges to regulations promulgated under SMCRA and granted the government's motion to dismiss the action. Amerikohl, 16 Cl.Ct. at 628.
14
This appeal followed.
ISSUE
15
The only issue is whether the District Court for the District of Columbia has exclusive jurisdiction to hear challenges to rules and regulations promulgated under the SMCRA.
OPINION
16
The issue raised in this appeal requires the interpretation of 30 U.S.C. Sec. 1276(a) (1982), which provides:
Sec. 1276. Judicial review
17
(a) Review by United States District Court; venue; filing of petition; time
18
(1) Any action of the Secretary to approve or disapprove a State program or to prepare or promulgate a Federal program pursuant to this chapter shall be subject to judicial review by the United States District Court for the District which includes the capital of the State whose program is at issue. Any action by the Secretary promulgating national rules or regulations including standards pursuant to sections 1251, 1265, 1266, and 1273 of this title shall be subject to judicial review in the United States District Court for the District of Columbia Circuit. Any other action constituting rulemaking by the Secretary shall be subject to judicial review only by the United States District Court for the District in which the surface coal mining operation is located. Any action subject to judicial review under this subsection shall be affirmed unless the court concludes that such action is arbitrary, capricious, or otherwise inconsistent with law. A petition for review of any action subject to judicial review under this subsection shall be filed in the appropriate Court within sixty days from the date of such action, or after such date if the petition is based solely on grounds arising after the sixtieth day. Any such petition may be made by any person who participated in the administrative proceedings and who is aggrieved by the action of the Secretary.
19
Amerikohl asserts that section 1276(a)(1) should be interpreted to mean that the District Court for the District of Columbia has exclusive jurisdiction over the review of preenforcement proceedings, upon the filing of a petition within 60 days "by any person who participated in the administrative proceedings and who is aggrieved by the action of the Secretary," but that other courts may consider the validity of SMCRA regulations in enforcement proceedings initiated by aggrieved parties who did not participate in the administrative proceedings. The present action for reimbursement of fees is, according to Amerikohl, an enforcement proceeding.
20
Amerikohl arrives at its interpretation of section 1276(a)(1) largely by focusing on statutory construction and the Sixth Circuit's analysis in Holmes Limestone Co. v. Andrus, 655 F.2d 732 (6th Cir.1981), cert. denied, 456 U.S. 995, 102 S.Ct. 2280, 72 L.Ed.2d 1292 (1982). It also asserts that public policy considerations favor its interpretation.
21
This court rejects Amerikohl's interpretation whether it be based upon statutory construction or public policy. It is well-settled law that the plain and unambiguous meaning of the words used by Congress prevails in the absence of a clearly expressed legislative intent to the contrary. See Mansell v. Mansell, --- U.S. ----, 109 S.Ct. 2023, 2030, 104 L.Ed.2d 675 (1989); LSI Computer Sys. v. United States Int'l Trade Comm'n, 832 F.2d 588, 590 (Fed.Cir.1987). Here, the words "shall be subject to judicial review in the United States District Court for the District of Columbia Circuit" are plain and unambiguous. This court acknowledges that the word "shall" is mandatory and not permissive. See United States ex rel. Siegel v. Thoman, 156 U.S. 353, 360, 15 S.Ct. 378, 380, 39 L.Ed. 450 (1894). Hence, it appears from the plain meaning of the language in section 1276(a)(1) that Congress intended the District Court for the District of Columbia to be the exclusive forum for challenging national rules and regulations promulgated under the SMCRA. Moreover, nothing in the legislative history of the SMCRA indicates that Congress intended an interpretation contrary to the plain meaning of these words. Indeed, the legislative history indicates that Congress wished to create with the SMCRA a uniform system of national standards. H.R.Rep. No. 95-218, 95th Cong. 1st Sess., reprinted in 1977 U.S.Code Cong. & Admin.News 593, 595. The establishment of an exclusive forum to review regulations under the SMCRA which are of national scope furthers that goal. Id. at 684.
22
Relying on Holmes Limestone Co. v. Andrus, 655 F.2d 732 (6th Cir.1981), cert. denied, 456 U.S. 995, 102 S.Ct. 2280, 72 L.Ed.2d 1292 (1982), Amerikohl argues that the SMCRA's legislative history does, in fact, suggest a contrary intent. In Holmes Limestone, a case similar to the present one, the court noted that both the Senate and House versions of the bill that was to become the SMCRA, expressly stated that judicial review was to be "only" in the District Court for the District of Columbia, but that the word "only" was deleted in the Conference Committee bill that was ultimately adopted. 655 F.2d at 737. It concluded, as Amerikohl argues now, that the omission of the word "only" from the bill indicates Congress' desire not to limit jurisdiction to the District Court for the District of Columbia. Id.
23
In Drummond Coal Co. v. Watt, 735 F.2d 469, 474 (11th Cir.1984), the Eleventh Circuit responded to the same argument by noting that the Conference Committee Report, H.R.Conf.Rep. No. 95-493, 95th Cong. 1st Sess., reprinted in 1977 U.S.Code Cong. & Admin.News 728, 743, is silent with regard to why Congress omitted the word "only" from the finalized bill. It stated that:
24
Unexplained changes made in committee are not reliable indicators of congressional intent. See Trailmobile Company v. Whirls, 331 U.S. 40, 61, 67 S.Ct. 982, 992, 91 L.Ed. 1328 (1947). Although the omission may represent an intention to vest concurrent jurisdiction, as the government notes, it may represent instead a congressional recognition of the force of the word "shall" and an intention to avoid redundancy. Alternatively, as Justice White suggested in his dissent from the denial of certiorari in Holmes Limestone, the omission may have been completely inadvertent. 456 U.S. 995, 996, 102 S.Ct. 2280, 2281, 72 L.Ed.2d 1292 (1982) (White, J., with Blackmun, J., dissenting).
25
Id. (footnote omitted).
26
Although decisions from other circuits are not binding on this court, we may look to another circuit for guidance and may be persuaded by its analysis. See Woodard v. Sage Prods., Inc., 818 F.2d 841, 844 (Fed.Cir.1987). Here, we wholeheartedly agree with the Eleventh Circuit's analysis in Drummond.4 We further conclude, as did the Claims Court below, that section 1276(a)(1) is "a paradigm of clarity," and that "[i]t is only by plumbing the legislative history that Holmes Limestone found the legerdemain in the removal of 'only' to provide the peg upon which to hang its interpretation that the statute really did not mean to limit judicial review." 16 Cl.Ct. at 626.
27
Amerikohl further argues that, as a matter of public policy, Congress could not have intended section 1276(a)(1) to be the exclusive mode of challenging the validity of regulations under the SMCRA because this section does not make adequate provision for legal review of claims in "enforcement proceedings" by parties who, like itself, did not participate in the original administrative proceedings. In so arguing, Amerikohl directs this court to 5 U.S.C. Sec. 703 (1988) which provides, in part, that:
28
The form of proceeding for judicial review is the special statutory review proceeding relevant to the subject matter in a court specified by statute or, in the absence or inadequacy thereof, any applicable form of legal action.... in a court of competent jurisdiction.... Except to the extent that prior, adequate, and exclusive opportunity for judicial review is provided by law, agency action is subject to judicial review in civil and criminal proceedings for judicial enforcement. (emphasis added).
29
The "applicable form of legal action" emphasized above is, according to Amerikohl, provided by the Claims Court's review of the present claim for a refund, pursuant to 28 U.S.C. Sec. 1491 (1982).5
30
In response to Amerikohl's argument, we note that the alleged distinction between "pre-enforcement and enforcement" proceedings cannot be found by reading the plain language of section 1276(a)(1), nor is this distinction suggested by legislative history. In fact, such a distinction, which permits a suit challenging the SMCRA to be brought in any court, at any time, by any aggrieved party, is contrary to legislative intent. See 30 U.S.C. Secs. 1201(g), 1202(a) (1982). In Commonwealth of Va. ex rel. Va. Dept. of Conserv. v. Watt, the Fourth Circuit specifically addressed this issue in its analysis of section 1276(a)(1) and said:
31
Conflicts among various district courts concerning the validity of the federal regulations would impair or prevent the establishment of nationally uniform minimum standards. Moreover, under the view adopted by the district court and appellees in this case, those opposed to a national regulation could simply ignore the sixty-day statutory time limit preserved for bringing an action in the District of Columbia and obtain relief later in their local jurisdiction. Such reasoning clearly subverts congressional intent.
32
741 F.2d 37, 41 (4th Cir.1984) (footnote omitted).
33
Furthermore, in keeping with legislative intent, 30 U.S.C. Sec. 1276(a)(1) (1982), and not 28 U.S.C. Sec. 1491 (1982) or 5 U.S.C. Sec. 703 (1988), creates the right of judicial review of regulations promulgated under the SMCRA. See H.R.Rep. No. 218, 95th Cong. 1st Sess., reprinted in 1977 U.S.Code Cong. & Admin.News 593, 708. Where "Congress specifically designates a forum for judicial review of administrative action, such a forum is exclusive, and this result does not depend on the use of the word 'exclusive' in the statute providing for a forum for judicial review." Getty Oil Co. v. Ruckelshaus, 467 F.2d 349, 356 (3rd Cir.1972), cert. denied, 409 U.S. 1125, 93 S.Ct. 937, 35 L.Ed.2d 256 (1973) (citing UMC Indus., Inc. v. Seaborg, 439 F.2d 953 (9th Cir.1971)).
34
Thus, regardless of how Amerikohl characterizes the present action, Amerikohl is precluded from challenging the validity of regulations promulgated under section 1276(a)(1) because it is in the wrong court and because it did not participate in the administrative proceedings. Despite the limitations imposed by section 1276(a)(1), Amerikohl may still attempt to obtain the requested refund by petitioning the Director of the Office of Surface Mining Reclamation and Enforcement ("Director") under 30 U.S.C. Sec. 1211(g) (1982) to amend or repeal the 1982 regulation which does not permit a deduction for excessive moisture, dirt, debris and clay in coal weight calculations, or by petitioning the Director to amend the regulation which prohibits the retroactive application of the 1988 regulation, 30 C.F.R. Sec. 870.12(b)(3)(i) and (ii) (1988). See Tug Valley Recovery Center v. Watt, 703 F.2d 796, 800 (4th Cir.1983).
35
As we conclude that the Claims Court correctly decided that it lacked subject matter jurisdiction, we decline to address the other substantive issues presented by Amerikohl in this case. Accordingly, the Claims Court decision is
36
AFFIRMED.
*
Honorable Richard Mills, Judge, United States District Court for the Central District of Illinois, sitting by designation
1
Congress estimated that the cost to reclaim abandoned mines would be between $7 and $10 billion. H.R.Rep. No. 95-218, 95th Cong. 1st Sess. reprinted in 1977 U.S.Code Cong. & Admin.News 593, 667. It stated that with such high costs, "[t]he burden for paying for reclamation is rightfully assessed against the coal industry." Id. at 668
2
The 1988 revised regulation provides in part:
Sec. 870.12 Reclamation fee
(3) The weight of each ton shall be determined by the actual gross weight of the coal.
(i) Impurities that have not been removed prior to the time of initial bona fide sale, transfer of ownership, or use by the operator, excluding excess moisture for which a reduction has been taken pursuant to Sec. 870.18, shall not be deducted from the gross weight.
(ii) Operators selling coal on a clean coal basis shall retain records that show run-of-mine tonnage, and the basis for the clean coal transaction.
30
C.F.R. Sec. 870.12(b)(3)(i) and (ii) (1988)
3
30 U.S.C. Sec. 1232(a) (1982):
Sec. 1232. Reclamation fee
(a) Payment; rate
All operators of coal mining operations subject to the provisions of this chapter shall pay to the Secretary of the Interior, for deposit in the fund, a reclamation fee of 35 cents per ton of coal produced by surface coal mining and 15 cents per ton of coal produced by underground mining or 10 per centum of the value of the coal at the mine, as determined by the Secretary, whichever is less, except that the reclamation fee for lignite coal shall be at a rate of 2 per centum of the value of the coal at the mine, or 10 cents per ton, whichever is less.
4
The Third and Fourth Circuits have also rejected the Holmes Limestone holding on concurrent jurisdiction, based on the court's reasoning in Drummond. See Tug Valley Recovery Center v. Watt, 703 F.2d 796 (4th Cir.1983); United States v. Troup, 821 F.2d 194 (3rd Cir.1987)
5
28 U.S.C. Sec. 1491 (1982) provides that:
(a)(1) The United States Claims Court shall have jurisdiction to render judgment upon any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department.
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Case: 15-50969 Document: 00513441056 Page: 1 Date Filed: 03/28/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 15-50969 FILED
Summary Calendar March 28, 2016
Lyle W. Cayce
Clerk
DERRICK JOHNS,
Plaintiff - Appellant
v.
JOHN P. KAELBLEIN, III,
Defendant - Appellee
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:15-CV-267
Before WIENER, HIGGINSON, and COSTA, Circuit Judges.
PER CURIAM:*
Plaintiff Derrick Johns cofounded DiFusion Technologies, a medical
device and biomaterials manufacturer. At Johns’ direction, DiFusion’s Board
of Directors hired Defendant John Kaelblein as the company’s President and
Chief Operating Officer. In this role, Kaelblein created an amorphous
“Advances” account that combined deductible business expenses, salary
* 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: 15-50969 Document: 00513441056 Page: 2 Date Filed: 03/28/2016
No. 15-50969
advances, and investments, rather than separating and classifying these
corporate expenditures. When DiFusion was later trying to raise capital,
potential investors required more detailed financial information. As part of
restating the financials, Kaelblein, board members, and outside accountants
decided to relabel the “Advances” account as the “Derrick Johns Advance
Account.” According to Johns, however, the funds in that account did not go to
Johns, nor was he aware the account existed. The IRS subsequently began an
investigation into Johns because it believed he was receiving more taxable
income than he reported. Johns alleged the investigation could have been
avoided had Kaelblein provided him with a W-2 form reporting the $642,861
in supposed salary advances from the account. 1
Johns filed this diversity suit alleging the following claims: (1) breach of
fiduciary duty; (2) negligence based on a common law duty and negligence per
se; (3) negligent misrepresentations made to Johns when Kaelblein provided
him with inaccurate W-2 forms; and (4) derivative torts such as conspiracy and
aiding and abetting. The district court dismissed the case for failure to state
any viable claims. Reviewing the complaint, record, and relevant law, we
affirm largely for the reasons stated by the district court.
First, the district court correctly dismissed the breach of fiduciary duty
claim on the ground that Kaelblein did not owe Johns a fiduciary duty. As
President and COO, Kaelblein certainly owed fiduciary duties to the company.
But that does not translate into a duty to Johns as one of the cofounders of the
company. Indeed, as the district court noted, a separate duty to an individual
founder of the company would likely create a conflict. Texas law does not
impose a fiduciary duty under these circumstances. See Crim Truck & Tractor
1 These facts are based on Johns’ allegations, which we must accept as true in
reviewing the case at the pleadings stage. We suspect that Kaelbein, the Board, and the IRS
have a quite different version of events.
2
Case: 15-50969 Document: 00513441056 Page: 3 Date Filed: 03/28/2016
No. 15-50969
Co. v. Navistar Intern. Transp. Corp., 823 S.W.2d 591, 593 (Tex. 1992) (noting
that while “certain informal relationships” may give rise to a fiduciary duty, a
prior business relationship, even a “cordial one, of long duration,” will not
create such a duty).
Second, we affirm the dismissal of Johns’s negligence claim based on a
statutory duty of care which is the only negligence claim he tries to revive on
appeal. 2 The statute Johns invokes, TEX. BUS. ORGS. CODE § 3.105, 3 does not
impose a duty on an officer like Kaelblein; it instead authorizes an officer like
Kaelblein to rely on information provided by others unless he has knowledge
that would make such reliance unreasonable. Id. And no Texas case has ever
recognized that the statute gives rise to a duty under negligence law.
Third, Johns’s negligent misrepresentation claim was correctly
dismissed for failure to plead justifiable reliance. 4 In his response to
Kaelblein’s motion to dismiss, Johns stated in a conclusory fashion that he
“would have taken any number of steps to rectify the situation and avoid an
IRS investigation” had Kaelblein furnished accurate W-2s. Johns left the court
with nothing but conjecture as to what those “steps” might have been.
2 Johns argues for the first time in his reply brief that the economic loss rule does not
apply to his common law duty of care claim and it therefore should not have been dismissed
on those grounds. We will generally not consider an argument raised for the first time in a
reply brief and will not do so here. See United States v. Rodriguez, 602 F.3d 346, 360 (5th Cir.
2010).
3 TEX. BUS. ORGS. CODE ANN. § 3.105 (West 2006).
4 The lack of justifiable reliance was one of two grounds on which the district court
dismissed the negligent misrepresentation claim. It also held that Kaelblein needed to have
a pecuniary interest in the misrepresentation. Kaelblein now concedes that this was error
as Texas law also recognizes a claim for negligent misrepresentation when the challenged
statement is made in connection with one’s employment. See McCamish, Martin, Brown &
Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 791 (Tex. 1999) (noting that a
misrepresentation must be made “in the course of his business, profession or employment, or
in any transaction in which he has a pecuniary interest”) (emphasis added).
3
Case: 15-50969 Document: 00513441056 Page: 4 Date Filed: 03/28/2016
No. 15-50969
Lastly, Johns’s inability to establish any of the above underlying torts
dooms his derivative claims for conspiracy and aiding and abetting. See
Meadows v. Hartford Life Ins. Co., 492 F.3d 634, 640 (5th Cir. 2007) (noting
that “if a plaintiff fails to state a separate underlying claim on which the court
may grant relief” then derivative torts claims also fail).
The district court therefore is AFFIRMED.
4
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994 So.2d 310 (2008)
GLADDEN
v.
STATE.
No. 2D08-3753.
District Court of Appeal of Florida, Second District.
October 22, 2008.
Decision without published opinion. Mand.dismissed.
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RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 05a0155p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
-
No. 03-1904
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DAVID BEARD; THEO DOWNS, as next friend of Peggy
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Shumway; PEGGY SHUMWAY; EDWARD GARIEPY, as
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Nos. 03-1904/1942
next friend of Alyssa Chappa; ALYSSA CHAPPA;
,
TAMARA BLEAU, as next friend of Robert Cook; ROBERT >
COOK; RONALD FORD, SR., as next friend of Ronald -
-
-
Ford, Jr.; RONALD FORD, JR.; NANCY HUSKINSON, as
Plaintiffs-Appellees, -
next friend of Stacy Huskinson; STACY HUSKINSON,
-
-
-
v.
-
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Defendant, -
WHITMORE LAKE SCHOOL DISTRICT,
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CHARMAINE BALSILLIE; BRIAN CARPENTER; JAY MUNZ; -
-
WENDY LEMONS; SUE LANGEN, -
Defendants-Appellants. -
-
-
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No. 03-1942
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DAVID BEARD; THEO DOWNS, as next friend of Peggy
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Shumway; PEGGY SHUMWAY; EDWARD GARIEPY, as
next friend of Alyssa Chappa; ALYSSA CHAPPA; -
TAMARA BLEAU, as next friend of Robert Cook; ROBERT -
-
-
COOK; RONALD FORD, SR., as next friend of Ronald
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Ford, Jr.; RONALD FORD, JR.; NANCY HUSKINSON, as
Plaintiffs-Appellees, -
next friend of Stacy Huskinson; STACY HUSKINSON,
-
-
-
-
v.
-
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WHITMORE LAKE SCHOOL DISTRICT; CHARMAINE
-
BALSILLIE; BRIAN CARPENTER; JAY MUNZ; WENDY
LEMONS; SUE LANGEN, -
Defendants, -
-
-
Defendant-Appellant. -
R. MAYRAND, Officer,
-
N
1
Nos. 03-1904/1942 Beard, et al. v. Whitmore Lake School, et al. Page 2
Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 00-73657—George E. Woods, District Judge.
Argued: January 26, 2005
Decided and Filed: April 4, 2005
Before: GUY and ROGERS, Circuit Judges; DOWD, District Judge.*
_________________
COUNSEL
ARGUED: Timothy J. Mullins, G. Gus Morris, COX, HODGMAN & GIARMARCO, Troy, Michigan,
for Appellants. Matthew E. Krichbaum, SOBLE & ROWE, LLP, Ann Arbor, Michigan, for Appellees.
ON BRIEF: Timothy J. Mullins, G. Gus Morris, COX, HODGMAN & GIARMARCO, Troy, Michigan,
for Appellants. Matthew E. Krichbaum, Richard A. Soble, SOBLE & ROWE, LLP, Ann Arbor, Michigan,
Michael J. Steinberg, Kary L. Moss, AMERICAN CIVIL LIBERTIES UNION, Detroit, Michigan, Scott
S. Yaldo, YALDO & DOMSTEIN, Bingham Farms, Michigan, for Appellees.
_________________
OPINION
_________________
ROGERS, Circuit Judge. The defendants in this 42 U.S.C. § 1983 action appeal the district court’s
denial of their motion for summary judgment based on a defense of qualified immunity. This case stems
from a strip search of over twenty students that occurred after a student in a high school gym class reported
that her prom money had been stolen.1 The plaintiffs in this case include both male and female high school
students who were subjected to the search; the defendants are the teachers who were involved in the search
and the police officer who instructed the teachers to search the female plaintiffs.
The actions of the defendants in this case were unconstitutional. However, at the time the searches
occurred, the law regarding the reasonableness of a strip search under these circumstances was not clearly
established. The denial of summary judgment is therefore reversed.
I. Background
On May 24, 2000, a student in the second-hour gym class at Whitmore Lake High School reported
to her gym teacher, Brian Carpenter, that her prom money had been stolen at some point during the class.
The school principal was absent on the date of the incident, so the acting principal, school teacher
Charmaine Balsillie, was advised of the theft. Balsillie called the police to report the incident and asked
two female teachers, Sue Langen and Wendy Lemons, and one male teacher, Jay Munz, to assist her.
When Balsillie arrived at the gymnasium, the male students were in the boys’ locker room, and the
female students were in the gymnasium. Lemons, Langen, and the female students searched the gymnasium
and the female students’ backpacks. Balsillie then went to the boys’ locker room and told Carpenter that
the police were on their way. At this time, Balsillie noticed Munz heading towards the shower area.
*
The Honorable David D. Dowd, Jr., United States District Judge for the Northern District of Ohio, sitting by designation.
1
According to the plaintiffs’ first amended complaint, the amount of money missing was “a few hundred dollars.”
Nos. 03-1904/1942 Beard, et al. v. Whitmore Lake School, et al. Page 3
Carpenter told Balsillie that they had searched the male students’ backpacks, but had failed to locate the
money. By the time Balsillie exited the locker room, Police Officer Mayrand had arrived.
Munz and Carpenter were the only defendants that participated in the search of the male students
in the boys’ locker room. Carpenter searched book bags and lockers, while Munz searched the boys
individually in the shower room. The search consisted of the boys’ individually lowering their pants and
underwear and removing their shirts.1 The boys were not physically touched. The teachers claim that the
police arrived and came into the boys’ locker room after about one-half of the boys had been searched.
According to the teachers, Mayrand told Carpenter to continue searching the students and that teachers had
“a lot more leeway” than police officers when it came to searching students. About twenty boys were
searched.
Officer Mayrand also spoke to Balsillie and asked if the girls had been searched. According to
Balsillie, Mayrand told her that the boys had been checked in their underwear and that the teachers needed
to check the girls in the same way so as to prevent any claims of gender discrimination. Balsillie and
Langen then took the female students into the girls’ locker room where the girls pulled up their shirts and
pulled down their pants while standing in a circle.2 The girls were never touched and did not remove their
underwear. About five girls were searched. The stolen money was never discovered.
II. Analysis
The defendants appeal the district court’s denial of their motion for qualified immunity in this
42 U.S.C. § 1983 action. The district court found that, at the time the searches occurred, the law clearly
established that “[a] strip search of students for missing money in the absence of individualized suspicion
is not reasonable,” and accordingly denied the teachers’ request for qualified immunity. With respect to
Officer Mayrand, the district court found that the facts, taken in the light most favorable to the plaintiffs,
supported a finding that Mayrand had subjected the female plaintiffs to a constitutional violation by setting
the strip search in motion. The district court therefore denied summary judgment as to both the teachers
and Officer Mayrand.3
The searches performed on the students in this case were unconstitutional. However, at the time the
searches were performed, the law did not clearly establish that the searches were unconstitutional under
these circumstances. The denial of summary judgment is accordingly reversed.
Although the denial of a motion for summary judgment is generally considered interlocutory and
not appealable, a denial based on a determination that the defendant is not entitled to qualified immunity
may be reviewed on appeal. Solomon v. Auburn Hills Police Dept., 389 F.3d 167, 172 (6th Cir. 2004)
(citing Phelps v. Coy, 286 F.3d 295, 298 (6th Cir. 2002)). When reviewing a district court’s denial of
1
The defendants and plaintiffs dispute some of the issues related to this search. The teachers claim that the boys were never
told to remove their clothing; however, this is disputed by the plaintiffs. As we must take the facts in the light most favorable
to the plaintiffs, we will assume that the boys were told to remove their clothing and that they did not do so voluntarily. There
is also a dispute about whether the boys took off their underwear or just their pants. Again, taking the facts in the light most
favorable to the plaintiff, we will assume that the boys took off their pants and underwear.
2
Balsillie contends that she told the girls that if they were not comfortable removing their clothing, then they did not have
to participate. The plaintiffs dispute this fact. Taking the facts in the light most favorable to the plaintiff, we will assume that
the girls did not voluntarily consent to the search.
3
The district court granted summary judgment to one officer, Jennings, who had been present at the school, but was unaware
that the searches were taking place, and to one of the teachers, Lemons, who was not involved in the strip searches. These
decisions are not being reviewed as part of this appeal.
Nos. 03-1904/1942 Beard, et al. v. Whitmore Lake School, et al. Page 4
qualified immunity, all facts are to be taken in the light most favorable to the plaintiffs4 and the only issues
appropriate for review are those that are “strictly legal.” Id. (citing Phelps, 286 F.3d at 299). Because the
availability of qualified immunity is a legal question, we review the decision of the district court de novo.
Id. (citing Thomas v. Cohen, 304 F.3d 563, 568 (6th Cir. 2002)).
The doctrine of qualified immunity protects government officials who perform discretionary
functions from civil liability “insofar as their conduct does not violate clearly established statutory or
constitutional rights of which a reasonable person would have known.” Harlow v. Fitzgerald, 457 U.S. 800,
818 (1982). This court employs a three-part test when determining whether a grant of qualified immunity
is proper:
First, we determine whether, based upon the applicable law, the facts viewed in the light
most favorable to the plaintiffs show that a constitutional violation has occurred. Second,
we consider whether the violation involved a clearly established constitutional right of which
a reasonable person would have known. Third, we determine whether the plaintiff has
offered sufficient evidence to indicate that what the official allegedly did was objectively
unreasonable in light of the clearly established constitutional rights.
Champion v. Outlook Nashville, Inc., 380 F.3d 893, 900-01 (6th Cir. 2004) (citation omitted). If the answer
to all three questions is yes, then qualified immunity is not proper. Id. at 901. In this case, the searches
performed by the defendants were unconstitutional; however, at the time that the searches occurred, the law
did not clearly establish the unlawfulness of the defendants’ actions. We accordingly do not reach the third
prong of the test—whether the plaintiff has offered sufficient evidence that the defendants’ actions were
unreasonable in light of clearly established law.
A. The Searches Violated the Fourth Amendment
The initial inquiry in determining whether a grant of qualified immunity is proper is whether the
facts asserted, taken in the light most favorable to the plaintiffs, establish a constitutional violation. Saucier
v. Katz, 533 U.S. 194, 201 (2001). In this case, approximately twenty male students were searched, in the
absence of individualized suspicion and without consent, in the hopes of locating missing money.
Approximately five female students were searched under similar circumstances, but were also required to
remove their clothes in the presence of one another. Under these circumstances, the searches were a
violation of the Fourth Amendment. Assuming arguendo that Officer Mayrand was aware of these
circumstances when ordering the female students to be searched, his conduct was also unlawful.
As explained by the Supreme Court in New Jersey v. T.L.O., 469 U.S. 325, 341 (1985), a school
search violates the Fourth Amendment when the school undertakes a search of a student that is
unreasonable. In T.L.O., a school official searched a student’s purse for cigarettes after the student had been
caught smoking in the restroom. Id. at 328. Upon searching the purse, the school official found a pack of
cigarettes and rolling papers, which were often used by students to smoke marijuana. Id. A further search
of the purse revealed marijuana, a pipe, plastic bags, a substantial quantity of single dollar bills, an index
card that listed the names of students owing her money, and two letters implicating her in marijuana dealing.
Id. The court held that the Fourth Amendment applies to searches conducted by school authorities, id. at
336-37, but rejected strict adherence to a probable cause requirement. Id. at 341. Rather, the legality of a
school search depends on its reasonableness under all the circumstances. Id. Determining the
reasonableness of a school search involves a twofold inquiry: first, was the action justified at its inception;
and second, was the search reasonably related in scope to the circumstances justifying the search. Id. In
4
The plaintiffs assert that the defendants have failed to concede the facts in the light most favorable to the plaintiffs. Thus,
the plaintiffs argue that this court should dismiss the appeal for want of jurisdiction. However, while some minor factual issues
are in dispute, it does not appear that the resolution of these factual issues is needed to resolve the legal issue before us. Rather,
the legal issue can be resolved while taking all disputed issues in the light most favorable to the plaintiffs.
Nos. 03-1904/1942 Beard, et al. v. Whitmore Lake School, et al. Page 5
general, “a search of a student by a teacher or other school official will be ‘justified at its inception’ when
there are reasonable grounds for suspecting that the search will turn up evidence that the student has violated
or is violating either the law or the rules of the school.” Id. at 341-42. A search is generally “permissible
in its scope when the measures adopted are reasonably related to the objectives of the search and not
excessively intrusive in light of the age and sex of the student and nature of the infraction.” Id. at 342. The
search in T.L.O. was held to be reasonable. Id. at 347. The Court reasoned that school officials had reason
to suspect that the student’s purse contained cigarettes based on the accusation that she had been smoking
in the restroom; the Court also concluded that, after the initial search of the student’s purse revealed
evidence of marijuana, a further search of the purse was justified. Id. at 344-48.
We assume, without holding, that the searches of both the male and female students were justified
at their inception. That is, some search of the persons and effects of students may be warranted when
substantial property has been reported recently stolen. The courts have held that lack of individual suspicion
does not ipso facto render a search unreasonable. In the school context, the T.L.O. court expressly refrained
from so holding. Id. at 342 n.8. See also Skinner v. Ry. Labor Executives Ass’n, 489 U.S. 602 (1989)
(upholding policy of drug testing railway employees who violate safety rules or who are involved in
accidents in the absence of individualized suspicion); Nat’l Treasury Employees Union v. Von Raab, 489
U.S. 656 (1989) (upholding drug testing of customs officials who carry a firearm or work in drug
interdiction in the absence of individualized suspicion); Mich. Dep’t of State Police v. Sitz, 496 U.S. 444
(1990) (upholding sobriety checkpoints performed in the absence of individualized suspicion).
The scope of the searches in the instant case, however, viewing the facts in the light most favorable
to the plaintiffs, does not pass constitutional muster. In making this determination, we are guided by the
Supreme Court’s analysis in Vernonia Sch. Dist. 47J v. Acton, 515 U.S. 646 (1995), which sets forth the
relevant criteria for evaluating searches performed in the absence of individual suspicion. In Vernonia, the
Court held to be reasonable a school’s system policy of randomly drug testing student athletes even in the
absence of individualized suspicion. Id. at 664-65. In so deciding, the Court looked to three factors: (1)
the student’s legitimate expectation of privacy, (2) the intrusiveness of the search, and (3) the severity of
the school system’s needs that were met by the search. Id. In Vernonia, the Court found the drug testing
policy to be constitutional because student athletes had a decreased expectation of privacy by virtue of the
voluntary nature of their participation, the invasion of the students’ privacy was minimal, and the threat to
the school system from unfettered drug use was great. Id. at 654-65.
1. The Scope of the Searches of the Male Students
In light of the factors set forth in Vernonia, the searches performed on the male students in this case
were in violation of the Fourth Amendment. First, the privacy interest here was great. Students of course
have a significant privacy interest in their unclothed bodies. See T.L.O., 469 U.S. at 337-38 (noting that a
“search of a child’s person . . . is undoubtedly a severe violation of subjective expectations of privacy”).
The Supreme Court did note in Vernonia, however, that public school locker rooms “are not notable for the
privacy they afford.” 515 U.S. at 657. The boys were thus not deprived of a privacy interest as much as
if they had been searched, for instance, in an office. However, the scope of the search did exceed what
would normally be expected by a high school student in a locker room. As alleged by the plaintiffs, the
boys were individually and directly examined as they unclothed. Moreover, unlike in Vernonia, the students
did not “voluntarily subject themselves to a degree of regulation . . . higher than that imposed on students
generally.” 515 U.S. at 657. The students here were attending gym class as part of a general school
curriculum. They accordingly did not voluntarily consent to be regulated more closely than the general
student population, as do student athletes who choose to go out for school sports teams. See id.
Second, the character of the intrusion was far more invasive than the character of the urinalyses in
Vernonia, where students remained fully clothed. Also unlike in Vernonia, the searches were likely to
disclose much more than the limited information (presence of drugs) at issue in Vernonia. The boys were
required to lift their shirts and to remove both their pants and underwear.
Nos. 03-1904/1942 Beard, et al. v. Whitmore Lake School, et al. Page 6
Third, the governmental interest, though of some weight, was not as great as in cases like Vernonia.
School administrators have a real interest in maintaining an atmosphere free of theft. But, a search
undertaken to find money serves a less weighty governmental interest than a search undertaken for items
that pose a threat to the health or safety of students, such as drugs or weapons. See Oliver v. McClung, 919
F.Supp. 1206, 1218 (N.D. Ind. 1995) (finding that a strip search for money was not reasonable, but noting
that the same search may have been reasonable if undertaken to find drugs or weapons). In addition, the
lack of individualized suspicion also makes the government’s interest less weighty. The government may
have a comparatively strong interest in searching a particular student reasonably suspected of theft, because
of the likelihood that the search will be successful. Such interest is diluted considerably when, instead of
one, two, or three students, the school officials search over twenty students, without reason to suspect that
any particular student was responsible for the alleged theft. In that case the intrusive search of each
individual is that much less likely to be successful.
The highly intrusive nature of the searches, the fact that the searches were undertaken to find missing
money, the fact that the searches were performed on a substantial number of students, the fact that the
searches were performed in the absence of individualized suspicion, and the lack of consent, taken together,
demonstrate that the searches were not reasonable. Accordingly, under T.L.O. and Vernonia, the searches
violated the Fourth Amendment.
2. The Scope of the Searches of the Female Students
The searches of the female students also violated the Fourth Amendment. Because the searches of
the female students were similar in many respects to those performed on the male students, we only briefly
describe the factors that render the searches unconstitutional. As with the male students, the female students
did not consent to the search, nor was there reason to suspect that any particular student was responsible for
the alleged theft. The approximately five female students were required to lift their shirts and remove their
pants. The girls, however, unlike the males, did not have to remove their underwear. On the other hand,
unlike any allegation in regard to the search of the males, the female students were required to undress in
front of one another. The fact that the searches of the females did not occur in the presence of only school
officials, but rather in the presence of other students, further supports the conclusion that the searches were
unreasonable. See Reynolds v. City of Anchorage, 379 F.3d 358, 365 (6th Cir. 2004) (in analyzing the
reasonableness of a strip search occurring in a juvenile group home, the court found it important that the
search was “conducted in a way designed to minimize its intrusive effect” and that the search took place “in
the presence of only a single staff member”).
The fact that the searches of the females were highly intrusive, the fact that the searches occurred
in the presence of other students, the lack of consent, the absence of individualized suspicion, and the fact
that the searches were undertaken to find money, taken together, demonstrate that the searches performed
on the females in this case were not reasonable. The searches accordingly violated the Fourth Amendment.
3. Officer Mayrand
Assuming arguendo that Officer Mayrand was aware of the numerous factors that rendered the
searches in this case unconstitutional, then Mayrand’s action in ordering the searches of the female plaintiffs
was also unlawful.
Nos. 03-1904/1942 Beard, et al. v. Whitmore Lake School, et al. Page 7
Section 1983, provides, in relevant part, that
Every person who, under color of statute, ordinance, regulation, custom, or usage, of any
State . . . subjects or causes to be subjected, any citizen of the United States . . . to the
deprivation of any rights, privileges, or immunities secured by the Constitution and laws,
shall be liable to the party injured in an action at law, suit in equity, or other proper
proceeding for redress.
42 U.S.C. § 1983 (emphasis added). Assuming arguendo that Mayrand was aware of the circumstances of
the searches which rendered them unconstitutional—i.e., the large number of students searched, the lack
of individualized suspicion, the lack of consent, the highly intrusive nature of searches (including the fact
that the male plaintiffs were forced to remove their underwear and the fact that the female plaintiffs were
forced to undress in the presence of other students), and the fact that the searches were undertaken to find
missing money—then Officer Mayrand’s actions in ordering the search of the female plaintiffs was itself
a constitutional violation.
B. The Law Did Not “Clearly Establish” That The Searches Were Unconstitutional
Although the defendants participated in this constitutionally impermissible search, they are
nevertheless protected from civil liability if their actions did not violate “clearly established statutory or
constitutional rights of which a reasonable person would have known.” Harlow, 457 U.S. at 818. The law,
at the time the searches were conducted, did not clearly establish that the searches were unreasonable under
the particular circumstances present in this case. Accordingly, the defendants are entitled to qualified
immunity.
“When determining whether a right is ‘clearly established,’ we ‘look first to decisions of the
Supreme Court, then to decisions of this Court and other courts within our circuit, and finally to decisions
of other circuits.’” McBride v. Village of Michiana, 100 F.3d 457, 460 (6th Cir. 1996) (citation omitted).
In order for the law to be clearly established as of the date of the incident, the law must “‘truly compel (not
just suggest or allow or raise a question about), the conclusion . . . that what defendant is doing violates
federal law in the circumstances.’” Saylor v. Bd. of Educ., 118 F.3d 507, 515-16 (6th Cir. 1997) (quoting
Lassiter v. Ala. A & M Univ., Bd. of Trustees, 28 F.3d 1146, 1150 (11th Cir. 1994)). An action’s
unlawfulness can be apparent even in novel factual circumstances “‘so long as the prior decisions gave
reasonable warning that the conduct then at issue violated constitutional rights.’” Hope v. Pelzer, 536 U.S.
730, 740 (2002) (citation omitted).
At the time of the search at issue, the prior law involving strip searches of students did not clearly
establish that the defendants’ actions in this case were unconstitutional. The Supreme Court cases on school
searches, T.L.O. and Vernonia, set forth basic principles of law relating to school searches, yet do not offer
the guidance necessary to conclude that the officials here were, or should have been, on notice that the
searches performed in this case were unreasonable. See T.L.O., 469 U.S. at 336-43; Vernonia, 515 U.S. at
652-65.
The Supreme Court has recently instructed that, for purposes of the “clearly established” inquiry,
the analysis “‘must be undertaken in light of the specific context of the case, not as a broad general
proposition.’” Brosseau v. Haugen,___U.S.___, 125 S.Ct. 596, 599 (2004) (quoting Saucier, 533 U.S at
201). Accordingly, cases “cast at a high level of generality,” will only be sufficient to clearly establish the
unlawfulness of the defendants’ actions where the conduct at issue is “obviously” a violation based on the
prior cases. Id. This is not such an obvious case.
In T.L.O., the Court announced that school searches should be subject to a reasonableness standard.
469 U.S. at 341. In determining whether a particular search is reasonable, the Court announced a two-
pronged, multi-factor test that weighs the students’ interest in privacy against the school’s interest in
maintaining a safe learning environment. Id. at 341-43. Yet, the Court did little to explain how the factors
Nos. 03-1904/1942 Beard, et al. v. Whitmore Lake School, et al. Page 8
should be applied in the wide variety of factual circumstances facing school officials today. Accordingly,
T.L.O. is useful in “guiding us in determining the law in many different kinds of circumstances”; but is not
“the kind of clear law” necessary to have clearly established the unlawfulness of the defendants’ actions in
this case. See Brosseau, 125 S.Ct. at 599 (quoting Pace v. Capobianco, 283 F.3d 1275, 1283 (11th Cir.
2002)). In fact, this court has previously recognized that “the reasonableness standard articulated in New
Jersey v. T.L.O., has left courts later confronted with the issue either reluctant or unable to define what type
of official conduct would be subject to a 42 U.S.C. § 1983 cause of action.” Williams v. Ellington, 936 F.2d
881, 886 (6th Cir. 1991). In Vernonia, the Court clarified the situation only to the extent that it found that
some searches undertaken without individualized suspicion are reasonable. Given the lack of a factual
context similar to that of this case, T.L.O. and Vernonia could not have “truly compelled” the defendants
to realize that they were acting illegally when they participated in the searches of the students in this case.
The Sixth Circuit cases involving student strip searches also do not clearly establish the
unconstitutionality of the searches in the instant case. Indeed, in Williams, 936 F.2d 881, and Tarter v.
Raybuck, 742 F.2d 977 (6th Cir. 1984), strip searches of students were found to be reasonable. Although
the officials in each of those cases possessed individualized suspicion as to the particular student searched,
the cases do not clearly state that such individualized suspicion is absolutely necessary to justify such a
search. And while one district court case from this circuit, Cales v. Howell Public Schools, 635 F.Supp. 454
(E.D. Mich. 1985), found a strip search of a student not to be reasonable, the holding of the district court
was that, although the school officials did have reasonable suspicion to suspect the particular student of
violating some school rule, it did not have reason to suspect that the student was violating the rule against
drug usage, the actual object of the search. While the principle of Cales could be argued to be analogous
to a group search, the analogy is not so obvious as to establish clearly the unreasonableness of the group
searches in this case. The Sixth Circuit cases thus simply do not “truly compel” the conclusion that the
searches in this case were not reasonable.
Finally, we recognize that, at the time the searches were conducted, the Seventh Circuit had held that
the strip search of a student in particular circumstances was not reasonable. See Doe v. Renfrow, 631 F.2d
91 (7th Cir. 1980) (nude body search of a 13-year-old girl following an alert by police dog). In addition,
some district courts in other circuits have held student strip searches to be unreasonable in cases more
closely analogous to the instant case. See Bell v. Marseilles Elementary Sch., 160 F.Supp.2d 883, 891 n.9
(N.D. Ill. 2001); Konop v. Northwestern Sch. Dist., 26 F.Supp.2d 1189, 1201 (D. S.D. 1998); Oliver, 919
F.Supp. at 1218; Bellnier v. Lund, 438 F.Supp. 47 (N.D.N.Y. 1977).
These cases were not sufficient to establish clearly the unlawfulness of the defendants’ actions in
this case. In the “rare instance” where it is proper to seek guidance from outside this circuit, the law will
only be clearly established where the cases from outside this circuit “both point unmistakably to the
unconstitutionality of the conduct complained of and [are] so clearly foreshadowed by applicable direct
authority as to leave no doubt in the mind of a reasonable officer that his conduct, if challenged on
constitutional grounds, would be found wanting.” Williams, 936 F.2d at 885. The cases dealing with school
strip searches from courts in other circuits are not “clearly foreshadowed by applicable direct authority,”
and therefore do not clearly establish that the searches in this case were unreasonable.
III. Conclusion
Because the searches in this case did not violate clearly established law, the defendants are entitled
to qualified immunity. The denial of summary judgment is accordingly REVERSED.
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461 F.2d 694
Mark Charles NORLAND, a Minor, by and Through His NextFriend James N. Norland, James N. Norland, andSusan K. Norland, Husband and Wife,Plaintiffs-Appellants,v.WASHINGTON GENERAL HOSPITAL et al., Defendants-Appellees.
No. 20536.
United States Court of Appeals,Eighth Circuit.
Submitted April 12, 1971.Decided May 5, 1972.Rehearing Denied June 6, 1972.
Samuel Langerman, Phoenix, Ariz., for plaintiffs-appellants.
W. W. Bassett, Jr., Fayetteville, Ark., for Empire Fire & Marine Ins. Co.
Richard B. Shaw, Fort Smith, Ark., for James D. Mashburn.
Before JOHNSON, VOGEL and ROSS, Circuit Judges.
PER CURIAM.
1
The appeal is by the plaintiffs in a diversity suit for malpractice under Arkansas law, brought by an infant through his father as next friend, and also by the father and mother in their own right. Recovery was sought against the obstetrician by whom the infant was delivered, against the hospital where the delivery occurred, and against the liability insurance carrier of the hospital (as permitted by Ark.Stat. 66-3240). The court granted dismissal of the action as to the hospital and its insurance carrier, and the jury returned a verdict in favor of the obstetrician.
2
The child's spinal cord was alleged to have been ruptured at a point between the eighth cervical and first thoracic vertebrae in the course of his delivery, and the injury was claimed to have been occasioned by the application of excessive force or traction in effecting emergence of his head. The head was the last part to have extraction, by virtue of the breech position which the fetus had occupied in the womb. Paralysis of the body from the chest down existed, causing the child to become a quadriplegiac.
3
Numerous contentions have been urged for reversal, most of which are without appellate merit. Thus the evidence, in our opinion, did not entitle the plaintiffs to a directed verdict or judgment notwithstanding the verdict on the questions of negligence and proximate cause. The obstetrician admitted generally on the stand that it would not constitute good medical practice for a doctor to apply such an extent of force or traction in delivery as would rupture a child's spinal cord, but he vigorously asserted that no such force or traction had been employed in the situation. He and the assisting nurse detailed the things which had been done, described the manner in which the passage of the head from the orifice had occurred, and testified to the absence of any problem or incident in the entire process, thus attempting to establish that the birth had been one of natural and normal breech delivery. The mother contradicted the testimony of the obstetrician and the nurse as to what had been done and what had occurred, and this conflict was a matter for resolution by the jury. Whether negligence had been involved was further made a question for the jury by some expert testimony that what the obstetrician testified to having done constituted proper and recognized medical practice in the locality and in similar communities as to the situation of breech delivery.
4
Nor can there be said to have been any abuse of discretion on the part of the trial judge in his refusal to put to the jury some voir dire questions which the plaintiffs requested, such as whether the jury understood that the case was a civil and not a criminal one; that the obstetrician's license to practice was not in issue; and that the question was not whether the obstetrician was a capable doctor generally, but whether he had failed to measure up to the standards of proper practice in the particular instance. These questions did not go to the matter of fitness or qualification on the part of the members of the panel to serve as jurors, nor to the existence of capacity and willingness by them to decide the case solely on the evidence and the court's instructions. Rather the questions impress as being intended to have the court accord sanction to these side avenues and so open them up for use in subsequent argument.
5
Neither is there any basis for the charge made that "the climate and mood in which the trial was conducted, the conduct of the prevailing party, and the conduct of the court all joined to deprive the plaintiff of a fair trial". One aspect will suffice in example. The record reflects the exercise by Judge Miller throughout the proceedings of the usual calmness, restraint and fairness which have characterized the trials that have come before us during his many years on the bench. Thus the attack made against his reminder to plaintiffs' outside counsel from time to time, that counsel was continuing to engage in needless repetitions borders on the frivolous when viewed in the channel of the lengthy trial. Similarly, the record affords no sound basis to contend that an emotional display which occurred on the part of the obstetrician while he was on the stand had infected the trial. The court routinely and quietly declared a recess until the doctor regained his composure. The lack of any telling significance in the incident is attested by the fact that neither at the time, nor during the brief recess which was at once declared, did plaintiffs' counsel move for a mistrial. Moreover, this failure, beyond its contemporaneous indication of the lack of any occurring infection, itself left the plaintiffs without any right to engage in a present complaint.
6
Further, there cannot be held to be any error in the court's instruction that "The fact that Mark Norland sustained disability is not of itself evidence of negligence on the part of anyone * * *". Arkansas accords no recognition to the doctrine of res ipsa loquitur as to the practice of medicine or surgery. Adams v. Heffington, 216 Ark. 534, 226 S.W.2d 352 (1950); Routen v. McGehee, 208 Ark. 501, 186 S.W. 2d 779 (1945). And as we have indicated, the testimony in its whole made the situation one where the question of negligence was for the jury.
7
We need not engage in a discussion of all of plaintiffs' other contentions. There are, however, a few which do present a substantial question in the situation. These primarily relate to the testimony of the defendant's expert witnesses. Attack is made against the probative competency of the opinions expressed by some of these witnesses on the nature and cause of the child's condition, as allegedly reflecting mere possibility and not probability in medical viewpoint on their part.
8
The use of the terms "probable" and "possible" as a basis for test of qualification or lack of qualification in respect to a medical opinion has frequently converted this aspect of a trial into a mere semantic ritual or hassle. The courts have come to recognize that the competency of a doctor's testimony cannot soundly be permitted to turn on a mechanical rule of law as to which of the two terms he has employed. Regardless of which term he may have used, if his testimony is such in nature and basis of hypothesis as to judicially impress that the opinion expressed represents his professional judgment as to the most likely one among the possible causes of the physical condition involved, the court is entitled to admit the opinion and leave its weight to the jury. In fact, it appears from some of the testimony in the present record that the usual process for arriving at medical opinion is to engage in "diagnostic impressions" as to the possible causes and then to sift these down to the one that impresses as being the most likely possible one in the situation.
9
This, we believe, was the approach taken by the Arkansas Supreme Court to the question of possible and probable cause in American Life Ins. Co. v. Moore, 216 Ark. 44, 223 S.W.2d 1019 (1949). There a medical witness, a Dr. Munroe, expressed the opinion that the death involved had resulted from a pulmonary embolism occasioned by a leg fracture, but he "admitted the possibility that death was due to some other cause". An opposing medical witness testified that, on the basis of his own experience and the textbook materials existing in the field, it would be utterly impossible for the death to have been occasioned by an embolism from the fracture, since "an embolism never occurs more than three weeks after injury". The Court said that while "an autopsy would have been required to determine the cause of death with certainty", and although Dr. Munroe admitted that it was possible that the death was due to some other cause, "the effect of Dr. Munroe's testimony is that in his opinion the most probable cause of death was a pulmonary embolism attributable to the fractured leg" and that "We are unwilling to say that Dr. Munroe's testimony is conjectural merely because his opinion did not preclude every other possible cause of death". 223 S.W.2d at 1020-1021.
10
On what has been said, we hold that it was proper for the court to admit the testimony of Dr. Burnside and of Dr. Moore in its causal aspect, but that the testimony of Dr. Van Zant in this respect did not from its nature and extent rise above the level of the actual term employed by him-"a possible cause". Dr. Van Zant gave competent testimony on a number of other aspects of the controversy, and his intelligence and competence appeared to be such as to impress that in expressing the opinion that "precipitant labor" was "a possible cause" of the child's condition, he intended to say just that, and not that he regarded "precipitant labor" as necessarily being the most likely one among the possibilities in the situation. Thus his testimony could not be viewed as having sufficiently, on context or ingrediency, crossed the line between possible and probable medical cause.
11
Another aspect on which a substantial question exists goes to the basis on which the hypothetical questions were predicated. A hypothetical question must state all the facts upon which an expert witness is entitled to rely, and his opinion must be given wholly on the basis of the facts so hypothesized. Hulsizer v. Johnson-Breenan Const. Co., 232 Ark. 571, 339 S.W.2d 116 (1969); Arkansas Baking Co. v. Wyman, 185 Ark. 310, 47 S.W.2d 45, 57 (1932). If reference is made in a hypothetical question to some instrument or document, such as a deposition, the part thereof that is intended to constitute an element in the question must itself not only have been introduced in evidence, but must have such specific identification given to the particular facts therein which are meant to be incorporated as to make it clear beyond question that the jury has been informed of all the things upon which the answer of the witness is being based.
12
In the hypothetical question put to Dr. Kelsey to establish that in the things done in the defendant's delivery of the child he had conformed to the standards of practice and care followed and recognized by obstetrical practitioners in the local and similar communities, the witness was permitted to base his answer in part on some depositions to which reference was made; which had not been introduced in evidence but had been read by him; and the parts of which that he was permitted to or did take into account were not made known to the jury.
13
Enough has been said, we think, to indicate that a reversal is required. We take occasion to add that on a new trial we believe that appellants are entitled to somewhat more of an opportunity to go into the area of interest or bias on the part of Dr. Kelsey than they were afforded. Dr. Kelsey was the principal and perhaps the most forceful witness for the defendant. It was obvious from his testimony that he had engaged in a comprehensive study and thorough preparation as to the case. From the questions with which counsel for appellants began his cross-examination, it appeared that he was going to try to romp over as large an area as the court would permit him to do. After he had brought out that Dr. Kelsey and defendant's counsel were members of the same Country Club and had tried to go into what communications had occurred between them, and between Dr. Kelsey and the defendant, the court sustained defendant's objection to such questioning, saying, "I don't think it is necessary to go into all of that * * *". When counsel then asserted that he was entitled to "know [Dr. Kelsey's] full participation and how big it is in this case, how biased or unbiased it is", the court adhered to its previous ruling. But there nevertheless existed some legitimate area for appropriate interrogation in proper probe as to any possibly existing bias. That area should be allowed fair range in the new trial.
14
Clarification is also desirable on such trial as to the second paragraph of the court's instruction No. 7. This paragraph told the jury that in making application of the standard contained in the first paragraph of the instruction, as to when a physician would be guilty of professional negligence, "the only way you may properly learn that standard is through evidence presented in this trial by physicians qualified as expert witnesses, and you may consider only the evidence presented by these expert witnesses in deciding whether the defendant * * * applied the degree of skill and learning which the law required of him". It is argued that this in effect told the jury that it was required to ignore the mother's testimony on what had occurred and what had been done in the delivery room. This arguably possible shadow can readily be eliminated through addition or clarification.
15
As to the part of the appeal taken from the dismissal of the hospital and its insurance carrier, that judgment is entitled to stand. The only possible proximateness that could exist in the relationship of the hospital to the child's injury would inhere in the acts of the nurse who assisted in the delivery. But the acts done by her in the delivery room and its processes were entirely subject to the direction and control of the obstetrician and thus made her as to the hospital, in her part of the delivery process, a "borrowed servant". Within that doctrine, there was under Arkansas law no liability on the part of the hospital to appellants for her actions. McElroy v. Employers Liability Assurance Corp., 163 F.Supp. 193 (W.D.Ark.1958); St. Louis I. M. & S. Ry. Co. v. Yates, 111 Ark. 486, 165 S.W. 282, 285 (1914); Watland v. Walton, 410 F.2d 1, 3 (8 Cir. 1969).
16
Affirmed as to defendants Washington General Hospital and Empire Fire & Marine Insurance Co.; reversed as to defendant James D. Mashburn and remanded for a new trial.
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MEMORANDUM OPINION
No. 04-14-00643-CR
Lonnie PRICE,
Appellant
v.
The STATE of Texas,
Appellee
From the 186th Judicial District Court, Bexar County, Texas
Trial Court No. 2011CR9144
Honorable Maria Teresa Herr, Judge Presiding
Opinion by: Sandee Bryan Marion, Chief Justice
Sitting: Sandee Bryan Marion, Chief Justice
Karen Angelini, Justice
Jason Pulliam, Justice
Delivered and Filed: September 2, 2015
AFFIRMED
Appellant, Lonnie Price, pled no contestto the chargeof burglary of a habitation. On June
11,2013, the trial court signed an Order of Deferred Adjudication, suspended appellant's sentence,
and placed him on community supervision for two years. Later, the State moved to revoke
appellant's community supervision on several grounds, including new offenses of evading arrest
and assault, as well as failure to take a drug test in compliance with the terms of his community
supervision. At a hearing on the motion to revoke, appellant pled "true" to violating a condition
of his community supervision, but he pled "nottrue" to the two new criminal offenses. On June
04-14-00643-CR
17, 2014, the trial court revoked appellant's deferred adjudication community supervision, signed
a Judgment Adjudicating Guilt, and sentenced appellant to twenty years' confinement. On appeal,
appellant's court-appointed appellate attorney filed a brief containing a professional evaluation of
the record and demonstrating that there are no arguable grounds to be advanced. Counsel
concludes the appeal is without merit. The brief meets the requirements of Anders v. California,
386 U.S. 738 (1967). Appellant was informed of his right to review the record and of his right to
file a pro se brief.
Appellant filed apro se brief raising various fact issues related to his arrest for burglary of
a habitation and asking this court to review the case "due to lack of evidence and hearsay."
Appellant did not appeal from the June 11, 2013 Order of Deferred Adjudication. We also note
that the "Trial Court's Certification of Defendant's Right of Appeal" signed after the original plea
agreement states this case"is a plea-bargain, andthe defendant hasNO rightof appeal." Therefore,
we do not consider appellant's pro se complaints related to the Order of Deferred Adjudication.
After reviewing the record, we agree the appeal from the Judgment Adjudicating Guilt is
frivolous and without merit. Accordingly, we affirm the trial court's judgment, and we GRANT
appellate counsel's motion to withdraw. Nichols v. State, 954 S.W.2d 83, 86 (Tex. App.—San
Antonio 1997, no pet.); Bruns v. State, 924 S.W.2d 176, 177 n.l (Tex. App.—San Antonio 1996,
no pet.).'
Sandee Bryan Marion, Chief Justice
DO NOT PUBLISH
1No substitute counsel will be appointed. SeeIn re Schulman, 252 S.W.3d 403, 408 n.22 (Tex. Crim. App. 2008).
Should appellant wish to seek further review of this case by the Texas Court of Criminal Appeals, appellant must
either retain an attorney to file a petition for discretionary review or file a pro se petition for discretionary review.
Any petition for discretionary review must be filed within thirty days from the date of either this opinion or the last
timely motion for rehearing that is overruled by this court. See TEX. R. APP. P.68.2. Any petition for discretionary
review must comply with the requirements of Texas Rules of Appellate Procedure 68.4.
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76 Ill.2d 63 (1979)
389 N.E.2d 1185
THE CITY OF URBANA, Appellee,
v.
THE COUNTY OF CHAMPAIGN et al., Appellants.
No. 51203.
Supreme Court of Illinois.
Opinion filed May 18, 1979.
*64 *65 *66 Thomas J. Difanis, State's Attorney, of Urbana (Joseph D. Pavia, Assistant State's Attorney, of counsel), for appellant County of Champaign.
Greaves, Lerner & Gadau, of Champaign, for appellant R & T, Inc.
Jack Waaler, Corporation Counsel for the city of Urbana, of Champaign, for appellee.
Rudnick & Wolfe, of Chicago (Perry J. Snyderman, Theodore A. Shapero, Theodore J. Novak and Steven H. Jesser, of counsel), for amicus curiae Home Builders Association of Greater Chicago.
Bernard Carey, State's Attorney, of Chicago (Paul P. Biebel, Jr., Deputy State's Attorney, Henry A. Hauser and Morris Alexander, Assistant State's Attorneys, and Daniel Brown, law student, of counsel), for amicus curiae County of Cook.
Appellate court reversed; circuit court affirmed.
MR. JUSTICE UNDERWOOD delivered the opinion of the court:
The city of Urbana sought a declaratory judgment and injunction precluding R & T, Inc. (the developer), from implementing a proposal for a planned unit development (PUD), to be constructed within the 1 1/2-mile zone surrounding the city, until the city had approved the plan as conforming to subdivision standards set out in city of Urbana ordinances. The developer had already obtained approval for the PUD from the County of Champaign, and both the developer and the county asserted that city *67 approval of the development was not necessary. The circuit court of Champaign County agreed and dismissed the complaint; the appellate court reversed and ordered the complaint reinstated for further proceedings (62 Ill. App.3d 869), and we granted the county and the developer leave to appeal.
Defendant R & T, Inc., owns a 50-acre tract of undeveloped land adjacent to the corporate limits of the city of Urbana on which it proposes to construct the PUD. The Champaign County zoning ordinance provides for PUDs as a special use. (Champaign County Zoning Ordinance, sec. 6.3 et seq.) Pursuant to that ordinance the developer submitted its plans to the county and obtained total approval for the project. Thereafter the city informed the developer that notwithstanding county approval the plans must be submitted to the city to insure compliance with city ordinances. The developer refused to seek city approval, and this litigation ensued. The development plan calls for the tract to be bisected by a road which the city asserts will be dedicated as a public street. The developer has asserted in an uncontested affidavit that the tract "has not been divided into lots, nor has a plat of subdivision been prepared, nor is one to be prepared at the present time."
The Illinois Municipal Code enables a municipality to formulate a comprehensive plan for the development of land within municipal boundaries and contiguous areas and to implement the plan by ordinances:
"Every plan commission and planning department authorized by this division 12 has the following powers and whenever in this division 12 the term plan commission is used such term shall be deemed to include the term planning department:
(1) To prepare and recommend to the corporate authorities a comprehensive plan for the present and *68 future development or redevelopment of the municipality. Such plan may be adopted in whole or in separate geographical or functional parts, each of which, when adopted, shall be the official comprehensive plan, or part thereof, of that municipality. This plan may include reasonable requirements with reference to streets, alleys, public grounds, and other improvements hereinafter specified. The plan, as recommended by the plan commission and as thereafter adopted in any municipality in this state, may be made applicable, by the terms thereof, to land situated within the corporate limits and contiguous territory not more than one and one-half miles beyond the corporate limits and not included in any municipality. Such plan may be implemented by ordinances (a) establishing reasonable standards of design for subdivisions and for resubdivisions of unimproved land and of areas subject to redevelopment in respect to public improvements as herein defined; (b) establishing reasonable requirements governing the location, width, course, and surfacing of public streets and highways, alleys, ways for public service facilities, curbs, gutters, sidewalks, street lights, parks, playgrounds, school grounds, size of lots to be used for residential purposes, storm water drainage, water supply and distribution, sanitary sewers, and sewage collection and treatment; * * *." (Ill. Rev. Stat. 1975, ch. 24, par. 11-12-5.)
Pursuant to this statute, the city of Urbana has adopted a comprehensive plan implemented by enactment of a subdivision-control ordinance, applicable within the city and the contiguous 1 1/2-mile zone, prescribing detailed standards for streets, alleys, curbs, sidewalks, drainage systems and sanitary sewers. (City of Urbana Ordinances, ch. 30.) In addition, the city's zoning ordinance contains a section asserted by the city to regulate PUDs within the 1 1/2-mile zone. That section incorporates by reference the street standards of the subdivision ordinance. (City of Urbana Ordinances, art. XXIV, sec. 30.) The city contends that the developer must comply with both its subdivision-control ordinance and its PUD ordinance. Were this PUD subdivided into lots, the city's subdivision ordinance *69 would concededly require city approval. The dispute arises because subdivision of the tract into parcels is allegedly not now contemplated, although the possibility of such action in the future seems apparent from the wording of the developer's affidavit.
The issue of whether the city or the county, or both, may regulate such a unitary development is one of first impression in this court. All parties are agreed that in pure zoning matters the county's zoning ordinance preempts the city's comprehensive plan and zoning provisions within the 1 1/2-mile zone. (City of Canton v. County of Fulton (1973), 11 Ill. App.3d 171.) The parties also agree that in pure subdivision-regulation matters the city's subdivision-control ordinance preempts any county ordinances within the 1 1/2-mile zone. (Krughoff v. City of Naperville (1977), 68 Ill.2d 352; Petterson v. City of Naperville (1956), 9 Ill.2d 233.) The demarcation of authority in the case of a PUD is not so clear, however, because a PUD involves both zoning and subdivision regulations in providing unitary development of sizeable tracts of land. "The technique of planned unit development is the development of land as a unit where it is desirable to apply regulations more flexible than those pertaining to other zoning classifications and to grant diversification in the location of structures and other site qualities." Millbrae Association for Residential Survival v. City of Millbrae (1968), 262 Cal. App.2d 222, 242, 69 Cal. Rptr. 251, 266.
Because the Illinois Municipal Code does not define the term "subdivision," we must look to the purposes of the enabling act (Ill. Rev. Stat. 1975, ch. 24, par. 11-12-5) to determine whether the power there granted municipalities to regulate streets, sidewalks, drainage, sewage, etc., within the 1 1/2-mile zone extends to a development like the one involved here. As this court said in Petterson v. City of Naperville (1956), 9 Ill.2d 233, 245:
*70 "In ascertaining legislative intent, the courts should consider the reason or necessity for the enactment and the meaning of the words, enlarged or restricted, according to their real intent."
The court in Petterson commented on the purpose of the enabling act as follows:
"We believe that the power to prescribe reasonable requirements for public streets in the interest of the health and safety of the inhabitants of the city and contiguous territory includes more than a mere designation of the location and width of streets as plaintiffs seem to contend. The legislature undoubtedly had in mind the complex problems connected with the development of territory contiguous to cities as bearing on the health and safety of all inhabitants within and without the municipality; that in such territory, in the interest of uniformity, continuity, and of public health and safety, the streets should be constructed in such a way as to afford reasonably safe passage to the traveling public and provide reasonable drainage in the interests of health. * * * Considering the expressed object and purpose of the legislation, it is our conclusion that the provisions of the ordinance requiring curbs and gutters and proper drainage are within the powers conferred by the statute." (9 Ill.2d 233, 245-46.)
The statute clearly recognizes that a municipality has a legitimate interest in regulating the development of land near its borders to protect the health and safety of its people. There can be no doubt, of course, that the presence of a sizeable PUD on a city's borders will have substantial impact on the city. This impact is not necessarily eliminated or even diminished simply because the PUD is not divided into separate parcels. In our *71 judgment the touchstone of a city's power to impose subdivision controls is not the division of a tract into two or more parcels but its developmental impact upon existing facilities protecting the health and safety of the municipal residents. We conclude therefore that the present development is a subdivision within the statutory meaning.
Defendants contend the city's PUD ordinance has no effect beyond the city boundaries because it is essentially a zoning ordinance, and zoning in the 1 1/2-mile region is admittedly preempted by the county. Actually the PUD ordinance (City of Urbana Ordinances, art. XXIV) is a part of the Urbana zoning ordinance, and we agree with defendants that its provisions must yield to those of the county's ordinance. (City of Canton v. County of Fulton (1973), 11 Ill. App.3d 171.) Nor do we believe that the fact that the PUD ordinance in section 34.100B4 provides that street construction shall conform to chapter 30 of the Urbana City Code (the subdivision ordinance) or that section 34.98 entitled "Qualification and General Review Criteria" in paragraph B5 contains a catch-all provision "That all other Articles of the Zoning Ordinance, other than those exceptions made in this Article, be met" serves to incorporate therein the provisions of the subdivision ordinance so as to eliminate the definitional barrier to the city's position which exists in that ordinance.
Section 30.2 of the subdivision ordinance (Urbana City Ordinances, ch. 30, sec. 30.2) provides:
"For the purposes of this chapter, the word `subdivision' shall mean the dividing of a tract of land into two or more lots, parcels, or tracts for the purpose, either immediate or future, of sale or building development, including a re-subdivision for any such purpose." (Urbana City Ordinance, ch. 30, sec. 30.2.)
We are not convinced that the city lacks power to extend subdivision controls to the present development, but we simply cannot construe an ordinance which by its terms *72 applies only to land which is divided "into two or more lots, parcels or tracts" as embracing an undivided 50-acre tract.
We hold therefore that the developer is not required to comply with the standards of the city's subdivision ordinance. Should the developer at any future time divide the tract into lots, he would, of course, be required to seek the city's approval notwithstanding the county's prior approval of his PUD plans.
Accordingly the judgment of the appellate court is reversed and the judgment of the circuit court is affirmed.
Appellate court reversed; circuit court affirmed.
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720 F.2d 668
U. S.v.Brown
82-1703
UNITED STATES COURT OF APPEALS Third Circuit
7/12/83
E.D.Pa., Huyett, J.
AFFIRMED
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749 N.W.2d 664 (2008)
STATE
v.
DIAZ.
No. 2007AP1740-CR.
Supreme Court of Wisconsin.
April 14, 2008.
Petition for review denied.
(BUTLER, Jr. J., dissents) (op. filed).
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United States Court of Appeals
For the Eighth Circuit
___________________________
No. 16-1393
___________________________
United States of America
lllllllllllllllllllll Plaintiff - Appellee
v.
Gregory Lynnell Gibson
lllllllllllllllllllll Defendant - Appellant
____________
Appeal from United States District Court
for the Western District of Arkansas - Fayetteville
____________
Submitted: September 23, 2016
Filed: October 21, 2016
[Published]
____________
Before WOLLMAN, BRIGHT, and KELLY, Circuit Judges.
____________
PER CURIAM.
Gregory Gibson pleaded guilty to sex trafficking of a child. In calculating the
advisory Guidelines range, the district court1 applied a two-level enhancement under
1
The Honorable Timothy L. Brooks, United States District Judge for the
Western District of Arkansas.
United States Sentencing Guidelines Manual (U.S.S.G.) § 2G1.3(b)(3)(B) after
determining Gibson used a computer to solicit customers to engage in prohibited
sexual conduct with a minor, and a five-level enhancement under U.S.S.G. § 4B1.5(b)
after determining Gibson engaged in a pattern of activity involving prohibited sexual
conduct. Gibson received a sentence of 144 months of imprisonment, then filed this
appeal arguing the district court erred in applying both enhancements. We affirm.
I
On January 29, 2014, law enforcement officers received a tip indicating a
sixteen-year-old girl was being held as a prostitute at a hotel in Springdale, Arkansas.
The ensuing investigation confirmed the presence of the girl at the hotel; it also
revealed Gibson had placed several advertisements on Backpage.com soliciting men
to engage in sexual conduct with the minor, representing her in some ads to be
nineteen years old and offering "100$ specials." One of the ads featured a picture of
a girl engaged in sexually explicit conduct. In an interview with the police, the girl
denied she was the person pictured in the ad, but acknowledged she had been
engaging in prostitution under Gibson's direction at the hotel since January 24, had
at least eight different "customers," and had engaged in sexual acts with at least three
of the men. She further explained how Gibson had recruited her to participate in the
prostitution even though he knew she was only sixteen. Investigators also discovered
a video on Gibson's cell phone showing him engaged in both oral and vaginal sex
with the girl.
A federal grand jury indicted Gibson with one count of sexual exploitation of
a minor for the purpose of producing child pornography in violation of 18 U.S.C. §§
2251(a) and (e), one count of sex trafficking of a child in violation of 18 U.S.C. §§
1591(a) and (b)(2), and one count of possessing material involving the sexual
exploitation of a minor in violation of 18 U.S.C. § 2252(a)(4)(B). Gibson agreed to
plead guilty to the charge of sex trafficking.
-2-
Prior to sentencing, a probation officer completed a Presentence Investigation
Report (PSR). In relevant part, the PSR recommended a two-level enhancement
because Gibson had used a computer to solicit customers to engage in sexual conduct
with a minor by placing ads on Backpage.com. See U.S.S.G. § 2G1.3(b)(3)(B) ("If
the offense involved the use of a computer or an interactive computer service to . . .
solicit a person to engage in prohibited sexual conduct with the minor, increase by 2
levels."). The PSR also concluded a five-level enhancement applied to Gibson for
engaging in a pattern of activity involving prohibited sexual conduct because he had
committed a covered sex crime but was not subject to the Guideline's Career Offender
provisions. See U.S.S.G. § 4B1.5(b) (providing for a five-level increase "in any case
in which the defendant's instant offense conviction is a covered sex crime, neither §
4B1.1 nor subsection (a) of this guideline applies, and the defendant engaged in a
pattern of activity involving prohibited sexual conduct"); see also id. cmt. n.(4)(B)(I)
(indicating a defendant "engage[s] in a pattern of activity involving prohibited sexual
conduct if on at least two separate occasions, the defendant engaged in prohibited
sexual conduct with a minor").
Gibson objected to both enhancements. The district court overruled the
objections, adopted the PSR's recommendations, and calculated Gibson's advisory
Guidelines range at 235-293 months. After granting a departure and variance not
relevant to this appeal, the district court sentenced Gibson to 144 months of
imprisonment. This timely appeal followed.
II
We apply de novo review to any legal conclusions the district court reached in
applying an enhancement, and review for clear error any factual findings supporting
an enhancement. United States v. Dixon, 822 F.3d 464, 465 (8th Cir. 2016).
-3-
Gibson first argues the district court erred by applying a two-level enhancement
under § 2G1.3(b)(3)(B). Gibson does not deny he used a computer to post ads on
Backpage.com in order to solicit customers – conduct expressly covered by the
guideline – but contends the commentary to the guideline limits the enhancement to
using a computer to communicate directly with a minor. In relevant part, the
commentary states as follows:
Subsection (b)(3) is intended to apply only to the use of a computer or
an interactive computer service to communicate directly with a minor or
with a person who exercises custody, care, or supervisory control of the
minor. Accordingly, the enhancement in subsection (b)(3) would not
apply to the use of a computer or an interactive computer service to
obtain airline tickets for the minor from an airline's Internet site.
U.S.S.G. § 2G1.3(b)(3) cmt. n.4 (emphasis added).
Subsection (b)(3), however, has two subparts. Subpart (A) discusses the use
of a computer as it relates directly to a minor (or a minor's caretaker), the subject
addressed in Application Note 4. See id. § 2G1.3(b)(3)(A) (discussing the use of a
computer to . . . "persuade, induce, entice, coerce, or facilitate the travel of, the minor
to engage in prohibited sexual conduct"). Subpart (B) discusses the use of a computer
as it relates to third parties other than the minor (or a minor's caretaker), a subject on
which Application Note 4 is silent. See id. § 2G1.3(b)(3)(B) (discussing the use of
a computer to . . . "entice, encourage, offer, or solicit a person to engage in prohibited
sexual conduct with the minor"). But because Note 4 refers to all of "Subsection
(b)(3)," not just "(b)(3)(A)," and purports to limit the entire subsection to direct
communications with a minor (or a minor's caretaker), Gibson argues the two-level
enhancement does not apply to his conduct even though the guideline itself refers to
the use of a computer to "solicit a person to engage in prohibited sexual conduct with
the minor." U.S.S.G. § 2G1.3(b)(3)(B).
-4-
When there is a conflict between a guideline and the commentary, it is the
guideline that controls and not vice versa. See Stinson v. United States, 508 U.S. 36,
38 (1993) ("[C]ommentary in the Guidelines Manual that interprets or explains a
guideline is authoritative unless it . . . is inconsistent with . . . that guideline.").
Other circuits have confronted this precise issue, and have held Note 4 is
inconsistent with subpart (b)(3)(B) and therefore does not apply to that portion of the
guideline. See United States v. Hill, 783 F.3d 842, 846 (11th Cir. 2015) ("Because
the application note is inconsistent with the plain language of U.S.S.G. §
2G1.3(b)(3)(B), the plain language of the guideline controls."); United States v.
Cramer, 777 F.3d 597, 606 (2d Cir. 2015); United States v. McMillian, 777 F.3d 444,
450 (7th Cir. 2015); United States v. Pringler, 765 F.3d 445, 454 (5th Cir. 2014);
United States v. Winbush, 524 F. App'x 914, 916 (4th Cir. 2013). These courts
reason that Note 4 is a drafting error intended to apply only to subpart (b)(3)(A), and
cannot mean what it says with respect to subpart (b)(3)(B) because it "would render
Subsection 3(B) inoperable in all but a narrow subset of cases under only one of the
numerous criminal statutes the Guideline covers." Pringler, 765 F.3d at 454.
We join these other circuits in holding that Note 4 is inconsistent with the
guideline itself. Because § 2G1.3(b)(3)(B) itself expressly covers Gibson's conduct,
the district court did not err in applying the two-level enhancement.
Gibson next argues the district court erred by applying a five-level
enhancement under § 4B1.5(b). He contends the two separate occasions the guideline
requires to constitute a "pattern of activity" should not include activity involved in
his instant offense of conviction for sex trafficking, i.e., the multiple occasions he
posted ads on Backpage.com, the multiple occasions the minor engaged in prohibited
sexual conduct at his direction, his production of a sexually explicit video of the
minor, or his own sexual contact with the victim. This argument is foreclosed by our
precedent. See United States v. Rojas, 520 F.3d 876, 883 (8th Cir. 2008) ("We now
-5-
hold that subsection (b) [of § 4B1.5] may apply where there is no prior sex offense
conviction and the only 'pattern of . . . conduct' is conduct involved in the present
offense of conviction"); see also United States v. Wells, 648 F.3d 671, 675 (8th Cir.
2011) ("[O]ne panel of this Court is not at liberty to overrule an opinion filed by
another panel.").
III
We affirm the district court.
______________________________
-6-
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288 F.2d 437
Theodore KONTOSv.THE Liberian S.S. SOPHIE C., her boats, engines, tackle,apparel, etc., Peter Paul Vucetic and John Doe, bothnonresident individually and as Masters, and Southern StarShipping Co., Inc. and Excelsior Shipping co., Ltd., bothforeign corporations or associations, as owners and/oroperators of the Liberian S.S Sophie C., Appellants.George NARIFISv.THE Liberian S.S. SOPHIE C., her boats, engines, tackle,apparel, etc., Peter Paul Vucetic and John Doe, bothnonresidents, individually and as Masters, and Southern StarShipping Co., Inc. and Excelsior Shipping Co., Ltd., bothforeign corporations or associations, as owners and/oroperators of the Liberian S.S. Sophie C., Appellants.
Nos. 13346, 13347.
United States Court of Appeals Third Circuit.
Argued Feb. 9, 1961.Decided March 28, 1961.
Harrison G. Kildare, Philadelphia, Pa., (Rawle & Henderson, Thomas F. Mount, Philadelphia, Pa., on the brief), for appellants.
Sidney J. Smolinsky, Philadelphia, Pa., for appellee.
Before BIGGS, Chief Judge, and STALEY and HASTIE, Circuit Judges.
PER CURIAM.
1
These are appeals from interlocutory orders taken pursuant to Section 1292(b), Title 28 U.S.C. The question presented is whether the court below abused its discretion in retaining jurisdiction of two libels in admiralty in a case involving numerous foreign 'contacts', as that term is used in conflict of laws.
2
After reviewing the record carefully we are satisfied that the result reached by the court below was correct for the reasons stated in Judge Goodrich's able opinion. See 1960, 184 F.Supp. 835. At the time of the argument and decision in the court below shipping articles signed by the appellees were not available. The parties by stipulation have attempted to have the shipping articles nmade part of the record on these appeals. Assuming, despite McAllister v. United States, 1954, 348 U.S. 19, 20-21, 75 S.Ct. 6, 99 L.Ed. 20, that this court would be entitled to receive these documents and to employ them in reaching a decision, we are of the opinion that this is undersirable and that in this instance we should review the judgment of the district court only on the record which it had before it. We perceive no error in the decision of the court below on the basis of the present record. If the shipping articles are found to be relevant by the court below on remand, that court will, of course, determine their effect upon the issue as to whether the suits should be retained. We express no view as to this issue. To the end that the court below may be free to act in the premises we will vacated the interlocutory orders appealed from. If the court below decides that the evidence presented by the shipping articles is of insufficient weight to move its discretion to a contrary result, it will enter interlocutory orders accordingly.
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FILED
COURT OF AP SEA S
DIVISION
2011 APR - 8 AM 8; 53
STATE OF WASHINGTON
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION II
STATE OF WASHINGTON, No. 43855 -1 - II
Respondent,
v.
BRYAN VANCE DUNN, PART PUBLISHED OPINION
Appellant.
JOHANSON, J. — A jury found Bryan Vance Dunn guilty of one count of residential
burglary and three counts of unlawful imprisonment. Dunn argues that ( 1) the trial court violated
his right to a public trial, ( 2) the information was defective as to the unlawful imprisonment
counts, ( 3) the jury instruction defining knowledge was erroneous, ( 4) the prosecutor engaged in
misconduct during closing argument, ( 5) the trial court erred by excluding videos taken on a
victim' s cell phone, and ( 6) the trial court violated Dunn' s right to be present. We address his
arguments regarding the right to a public trial in the published portion of this opinion. Dunn' s
arguments are addressed in the unpublished portion of this opinion. We affirm
remaining
Dunn' s convictions.
No. 43855 -1 - II
FACTS
On May 13, 2012, three minors, J. P., A. P., and M. C., were at J. P. and A.P.' s house.' J.P.
was 14 at the time; A.P., J.P.' s younger sister, was 11; M.C., a close friend of J. P. and A.P., was
13. Shortly after the girls woke up, someone knocked on the door. A.P. answered the door and a
Hispanic man she did not know, later identified as Luciano Cruz, was at the door. A.P. closed
the door and went to ask J. P. what to do. J. P. returned to the living room with A.P. and M.C. and
saw that Cruz and two white men had entered the house and were sitting on the couch. One of
the white men was later identified as Dunn. J.P. repeatedly told the men to leave the house, but
they just laughed at her. Cruz told the girls to go get dressed because they were leaving.
After the girls got dressed, Cruz, Dunn, and the third man took the girls to a two -door car.
The three girls got into the car' s backseat with Cruz. Dunn was driving and the third man sat in
the front passenger seat. Dunn drove to a house on St. John' s Street, where Cruz and the other
man got out of the car and went into the house. The three girls remained in the car and spoke to
each other in Spanish. When Cruz and the other man returned to the car, Cruz was carrying a
plate of food with hot sauce on it. Some hot sauce dripped onto A.P.' s leg, and Cruz wiped it off
with his finger and then licked his finger.
Dunn took everyone to a Burgerville drive -
thru. Dunn then stopped at a house the girls
said was M. C.' s house although it was not M.C.' s house. When the car stopped, Cruz got out;
then all three girls got out, jumped a fence, and ran across a field. The girls ran to a video store
and they called J. P. and A.P.' s older sister to pick them up. About the same time, J.P. was able
We refer to the minor victims by their initials to protect their privacy.
2
No. 43855 -1 - II
to contact her mother, Anita Carvajal, who immediately returned home. Carvajal and the girls
arrived home at approximately the same time and they contacted the police.
Vancouver Police Department officers and detectives responded to Carvajal' s home.
Detective Julie Carpenter interviewed each girl separately. Then the girls directed the detectives
to the St. John' s Street house. A few days later, Detective Edward Letarte met A.P. and J. P. at
school where both girls identified Dunn as the car' s driver. Letarte spoke with each girl
separately. After his arrest, Dunn gave a statement to the police.
The State filed a second amended information charging Dunn with one count of
residential burglary and three counts of unlawful imprisonment. After a CrR 3. 5 hearing, the
trial court found that Dunn' s statement to police was admissible. Dunn also asked to admit cell
Phone videos that J. P. had recorded during the incident. The trial court excluded the cell phone
videos, ruling that the videos lacked relevance, contained nothing that would be helpful to the
jury and that they were relevant only to collateral issues that " would simply distract from the
evidence." Report of Proceedings ( RP) ( Aug. 14, 2012) at 83.
At trial, J.P.; A.P.; and M.C. testified to the facts related above, although there were some
minor discrepancies in their testimony. For example, M.C. and A.P. testified that the girls ran to
the video store, then went to M.C.' s house, then went back to the video store so that J. P. and
A.P.' s older' sister could pick them up. J.P. testified that the girls went to M.C.' s house and then
to the video store. The girls' mothers testified that they never gave anyone permission to take
their daughters anywhere.
Dunn' s statement was played for the jury. In the statement, Dunn said that he had just
met Cruz and was doing some work on Cruz' s truck. He was driving Cruz because Cruz had
been drinking and could not drive. Dunn stated that he picked up the girls from the house and
3
No. 43855 -1 - II
drove them around, first to the St. John' s house, then to Burgerville, and then to the house the
girls identified as M.C.' s house. However, he believed that Cruz had permission to pick the girls
up and take them to M. C.' s house. He did not realize that something was wrong until the girls
ran out of the car and across the field.
Jury voir dire was conducted in open court with Dunn present. After the prospective
jurors were questioned and the attorneys exercised their challenges for cause, the trial court
invited counsel to exercise peremptory challenges and to finalize jury selection at the clerk' s
station. The jury found Dunn guilty of one count of residential burglary and three counts of
unlawful imprisonment. Dunn appeals.
ANALYSIS
Dunn argues that the trial court violated his right to a public trial and his right to be
present by allowing the attorneys to exercise peremptory challenges during a side bar. Following
Division Three' s opinion in State v. Love, 176 Wn. App. 911, 309 P. 3d 1209 ( 2013), we hold
that the trial court did not violate Dunn' s right to a public trial by allowing the attorneys to
exercise peremptory challenges during a side bar.
PUBLIC TRIAL RIGHT
The Sixth Amendment to the United States Constitution and article I, section 22 of the
Washington State Constitution guarantee a defendant the right to a public trial. State v. Wise,
176 Wn.2d 1, 9, 288 P. 3d 1113 ( 2012). We review alleged violations of the public trial right de
novo. Wise, 176 Wn.2d at 9. The threshold determination when addressing an alleged violation
of the public trial right is whether the proceeding at issue even implicates the right. State v.
Sublett, 176 Wn.2d 58, 71, 292 P. 3d 715 ( 2012). In Sublett, our Supreme Court adopted a two -
part " experience and logic" test to address this issue: ( 1) whether the place and process
4
No. 43855 -1 - II
historically have been open to the press and general public ( experience prong), and ( 2) whether
the public access plays a significant positive role in the functioning of a particular process in
question ( logic prong). 176 Wn.2d at 72 -73. Both questions must be answered affirmatively to
implicate the public trial right. Sublett, 176 Wn.2d at 73.
Dunn argues that the trial court violated his public trial right because the trial court
conducted the peremptory challenges portion of jury selection at the clerk' s station. In Love,
Division Three of this court addressed whether challenges during voir dire implicate the public
trial right. There, the court held that neither " prong of the experience and logic test suggests that
the exercise of cause or peremptory challenges must take place in public." Love, 176 Wn. App.
at 920. The public trial right does not attach to the exercise of challenges during jury selection.
Love, 176 Wn. App. at 920. We agree with Division Three that experience and logic do not
suggest that exercising peremptory challenges at the clerk' s station implicates the public trial
right. Accordingly, we hold that the trial court did not violate Dunn' s public trial right and we
affirm.
A majority of the panel having determined that only the foregoing portion of this opinion
will be printed in the Washington Appellate Reports and that the remainder shall be filed for
public record in accordance with RCW 2. 06. 040, it is so ordered.
Dunn makes five additional arguments. First, he argues that the information charging the
three counts of unlawful imprisonment was defective because it did not include the statutory
language defining " restrain." Second, Dunn argues that the jury instructions were erroneous
because the instruction defining knowledge created an improper mandatory presumption. Third,
Dunn argues that the prosecutor committed misconduct during closing argument by misstating
the law. Fourth, he argues that the trial court erred by excluding the video that J.P. recorded on
5
No. 43855 -1 - II
her cell phone during the incident. Fifth, he argues that the trial court violated his right to be
present by allowing the attorneys to exercise peremptory challenges during a side bar. We reject
Dunn' s arguments.
DEFECTIVE INFORMATION
Dunn argues that the information charging him with three counts of unlawful
imprisonment was defective because it did not include the statutory definition of " restrain."
However, the case law on which Dunn relies has been overruled. Under the controlling law, the
information charging Dunn with unlawful imprisonment is not constitutionally defective.
The second amended information charged Dunn with three counts of unlawful
imprisonment as follows:
That BRYAN VANCE DUNN, in the County of Clark, State of Washington, on
or about May 13, 2012 ... did knowingly restrain [ the victim], a human being,
contrary to Revised Code of Washington 9A.40. 040( 1), and /
or was an accomplice
to said crime pursuant to RCW 9A.08. 020.
Clerk' s Papers at 11. Dunn argues that the information is defective under State v. Johnson, 172
Wn. App. 112, 138 -39, 297 P. 3d 710 ( 2012), review granted, 178 Wn. 2d 1001 ( 2013). In
Johnson, Division One of this court held that definitional elements are essential elements of a
crime which must be included in the charging document. 172 Wn.2d at 140.
But after our Supreme Court' s decision in State v. Allen, 176 Wn.2d 611, 294 P. 3d 679
2013), Division One overruled its decision in Johnson. State v. Rattana Keo Phuong, 174 Wn.
App. 494, 545 n. 42, 299 P. 3d 37 ( 2013). In Rattana Keo Phuong, the court held that the
statutory definition of " restrain" is not an essential element of the crime of unlawful
2 The language regarding unlawful imprisonment is consistent throughout all three informations
filed in this case.
6
No. 43855 -1 - II
imprisonment and, thus, does not need to be included in the charging document. 174 Wn. App.
at 545.
Dunn' s argument relies exclusively on the information' s failure to include the statutory
definition of " restrain." But under Rattana Keo Phuong, the information contains all the
essential elements of unlawful imprisonment ( i. e., knowingly restrained). Therefore, the
information was not constitutionally defective. Rattana Keo Phuong, 174 Wn. App. at 544 -45.
JURY INSTRUCTIONS
Dunn alleges that the jury instruction defining knowledge created a mandatory
presumption that relieved the State of its burden of proof. The instructional error is invited error
that Dunn may not challenge on appeal. " Under the doctrine of invited error, even where
constitutional rights are involved, we are precluded from reviewing jury instructions when the
defendant has proposed an instruction or agreed to its wording." State v. Winings, 126 Wn. App.
75, 89, 107 P. 3d 141 ( 2005).
Here, Dunn did not propose the knowledge instruction he now objects to; however, he did
affirmatively agree to its wording. During the discussion regarding jury instructions, Dunn noted
an error in the knowledge instruction. After the error was corrected, Dunn stated he had no other
exceptions to the instructions. By noting an error in the instruction and then stating there were
no additional problems with the instruction, Dunn agreed to the knowledge instruction as given
and, thus, invited the error. Accordingly, we are precluded from reviewing the alleged error.
Although we do not reach the merits of Dunn' s claim, we note that Dunn' s claims
regarding both the jury instructions and prosecutorial misconduct are based on an incorrect
premise. Specifically, Dunn posits that under the unlawful imprisonment statute, Dunn was
7
No. 43855 -1 - II
required to know that taking a child under the age of 16 without a parent' s consent was a crime.
RCW 9A.40. 010( 6). Dunn is mistaken.
The unlawful imprisonment statute requires that the defendant knowingly restrains
another person. RCW 9A.40. 040. Restrain means
to restrict a person' s movements without consent and without legal authority in a
manner which interferes substantially with his or her liberty. Restraint is " without
consent" if it is accomplished by ( a) physical force, intimidation, or deception, or
b) any means including acquiescence of the victim, if he or she is a child less
than sixteen years old or an incompetent person and if the parent, guardian, or
other person or institution having lawful control or custody of him or her has not
acquiesced.
RCW 9A.40. 010( 6). Thus, the State needs to prove that Dunn knew that ( 1) he did not have
lawful authority to restrict the girls' movements ( i. e., Dunn was not the girls' parent or legal
guardian), ( 2) the girls were under the age of 16, and ( 3) the girls' parents had not given their
consent. Dunn did not need to know that these actions were a crime. See RCW 9A.08. 010( 1)( b)
A person knows or acts knowingly or with knowledge when: ( i) he or she is aware of a fact,
facts, or circumstances or result described by a statute defining an offense. ").
Dunn relies on State v. Warfield, 103 Wn. App. 152, 5 P. 3d 1280 ( 2000), to support his
proposition, but Dunn' s reliance on Warfield is misplaced. In Warfield, the defendants were
private citizens who believed that they had the lawful authority to arrest, detain, and transport the
victim based on the victim' s arrest warrant from Arizona. 103 Wn. App. at 155. However, it
was discovered that the misdemeanor warrant had no lawful effect in Washington. Warfield, 103
Wn. App. at 155. The court held that " knowingly" applied to all the elements of restraint, not
Warfield, 103 Wn. App. at 156. Because the
simply the restriction of a person' s movement.
defendants acted under the good faith belief that the Arizona warrant gave them the authority to
arrest, detain, and transport the victim, they did not knowingly act without lawful authority.
8
No. 43855 -1 - II
Warfield, 103 Wn. App. at 159. Warfield does not require that a defendant know that his actions
constitute the crime of unlawful imprisonment.
PROSECUTORIAL MISCONDUCT
Dunn argues that the prosecutor engaged in misconduct during closing argument by
misstating the law. Specifically, Dunn argues that the prosecutor argued that the jury could find
Dunn guilty of unlawful imprisonment simply for intentionally driving the car. Dunn
mischaracterizes the prosecutor' s argument. The prosecutor' s argument, although inartful, was
not improper. Further, Dunn cannot show that an instruction to the jury could not have cured the
error. Accordingly, Dunn' s prosecutorial misconduct claim fails.
To prevail on a prosecutorial misconduct claim, a defendant must show that in the
context' of the record and all the trial circumstances, the prosecutor' s conduct was improper and
prejudicial. State v. Thorgerson, 172 Wn.2d 438, 442, 258 P. 3d 43 ( 2011). To show prejudice, a
defendant must show a substantial likelihood that the misconduct affected the verdict.
Thorgerson, 172 Wn.2d at 442 -43. In analyzing prejudice, we do not look at the comment in
isolation but in the context of the total argument, the issues in the case, the evidence, and the
instructions given to the jury. State v. Yates, 161 Wn.2d 714, 774, 168 P. 3d 359 ( 2007), cert.
denied, 554 U.S. 922 ( 2008). If a defendant fails to object to misconduct at trial, he fails to
preserve the issue unless he establishes that the misconduct was so flagrant and ill intentioned
that it caused an enduring prejudice that could not have been cured with an instruction to the
jury. Thorgerson, 172 Wn.2d at 443. The focus of this inquiry is more on•whether the resulting
prejudice could have been cured, rather than the flagrant or ill-intentioned nature of the remark.
State v. Emery, 174 Wn.2d 741, 762, 278 P. 3d 653 ( 2012).
9
No. 43855 -1 - II
3
Dunn identifies one instance in which he alleged the prosecutor misstated the law:
All I have to show to you is that he himself did it intentionally or his accomplice
did it intentionally. I submit to you that both fit and that' s what I have to prove to
you.
RP ( Aug. 16, 2014) at 40. However, the prosecutor' s statement was not made in relation to the
unlawful imprisonment charge. The prosecutor made the statement while discussing the
elements of the residential burglary charge. To prove residential burglary, the State is required
to prove that the defendant entered or remained unlawfully with the intent to commit a crime.
RCW 9A. 52. 025. In this case, the predicate crime for the residential burglary charge was
unlawful imprisonment ( i. e., removing the girls without permission). The State was explaining
that to meet the required element of residential burglary he had to show that Dunn intentionally
committed unlawful imprisonment ( i. e., intentionally removed the girls from the house without
permission). Although the State' s argument may have been inartful, it was not a misstatement of
the law when considered in the context of the entire argument.
Further, Dunn cannot show that the prejudice from the comment would not have been
cured by an objection and curative instruction. Here, the prosecutor' s statement was a brief
statement made within an extensive closing argument. Had Dunn objected, any prejudice could
have been cured by referring the jury back to the proper elements of the charged crimes.
Accordingly, Dunn cannot meet his burden to show prosecutorial misconduct.
3 At oral argument, Dunn' s appellate counsel argued that she incorporated all the prosecutor' s
closing arguments that she referenced in earlier sections of her briefing into her argument
regarding prosecutorial misconduct. Counsel' s argument is not well taken. Even assuming her
brief adequately assigned error to the additional sections of the State' s closing arguments for the
purposes of prosecutorial misconduct, counsel fails to present any argument supporting her
contention that the additional sections of the prosecutor' s argument were misconduct. RAP
10. 3( a)( 6).
10
No. 43855 -1 - II
EXCLUSION OF CELL PHONE VIDEOS
Dunn argues that the trial court improperly excluded the cell phone videos because they
were relevant to impeach the girls' testimony that ( 1) they were fearful while in the car, ( 2)
inappropriate touching occurred in the car, and ( 3) the girls cowered in the car at the first house.
Further, Dunn argues that the trial court erred by excluding the cell phone videos because they
were of poor quality and there would be difficulty showing them to the jury. Because the videos
were irrelevant, the trial court did not abuse its discretion by excluding the cell phone videos.
We review the trial court' s decision to exclude evidence for an abuse of discretion. State
v. Lord, 161 Wn.2d 276, 294, 165 P. 3d 1251 ( 2007). A trial court abuses its discretion when its
decision is " manifestly unreasonable or exercised on untenable grounds or for untenable
reasons." Lord, 161 Wn.2d at 283 -84.
Criminal defendants have a constitutional right to present evidence in their defense. State
v. Hawkins, 157 Wn. App. 739, 750, 238 P. 3d 1226 ( 2010), review denied, 171 Wn.2d 1013
2011). The evidence must be admissible; there is no constitutional right to present irrelevant
evidence: State v. Lord, 161 Wn.2d at 294. " Evidence tending to establish a party' s theory, or to
or disprove the testimony of an adversary, is always relevant and admissible." State v.
qualify
Harris, 97 Wn. App. 865, 872, 989 P. 2d 553 ( 1999), review denied, 140 Wn.2d 1017 ( 20.00).
Dunn moved for admission of four separate cell phone videos that J. P. recorded on her
4
cell phone. In one of them, the screen is black for almost the entire video. Two of the other
videos are only a few seconds long and, at best, the video establishes the cell phone was either in
4
The cell phone videos were designated as part of the record on appeal. During oral argument
both attorneys stated that they were able to play the video with sound; however, it does not
appear that the video designated with the record contained the proper audio files. Even accepting
Dunn' s allegations regarding the audio as true ( i. e., the girls were giggling and talking), our
analysis regarding the relevance of the videos does not change.
11
No. 43855 -1 - II
the house or in the car. Dunn argued that one of the videos was relevant as impeachment
evidence because it showed the three girls getting in the car after stopping at the St. John' s Street
house when all three girls testified they did not leave the car, although one video shows the girls
getting into the car. However, there is no indication where the car is or when this occurred.
Furthermore, all the girls testified that when Cruz returned from the St. John' s Street house, he
had a plate of food and there was no plate of food in the video. Therefore, it is unknown what
the video shows. Further, the entire video is approximately two minutes long and, at best, shows
the girls getting into the back of a car. There is no dispute that Dunn drove the girls around in a
car. The dispute was whether. Dunn knew or should have known that he did not have the legal
authority to drive the girls. The video was not relevant on this point.
Moreover, the State did not have to prove that the girls were fearful while they were in
the car with Dunn. The State had to prove that Dunn knew he did not have legal authority to
take the girls, that the girls were under the age of 16, and that he did not have the girls' parents'
permission to take the girls. The trial court did not abuse its discretion by finding that the cell
phone videos were irrelevant to the facts at issue in this case.
Dunn points specifically to the trial court' s statement referring to the videos as the
equivalent of a " blurry photograph" and argues that the videos " show far more than a blurry
photograph and demonstrate the girls' casual demeanor in the men' s presence." Br. of Appellant
at 30. The only video in which the viewer can even see the girls only shows one of the girls for a
few brief seconds. The videos do not show the girls interacting with any of the men in the car.
The only thing that can be discerned from the video is that the girls got into the car with the men
and a brief glimpse of a girl' s face. Nothing in the video establishes that the girls had a casual
12
No. 43855 -1 - II
demeanor with the men or that they lacked fear as Dunn suggests. The trial court did not abuse
its discretion by excluding the cell phone video.
RIGHT TO BE PRESENT
Dunn argues that the trial court violated his right to be present by allowing the attorneys
to exercise peremptory challenges at the clerk' s station. Here, the record is unclear whether
Dunn was present when the attorneys exercised their peremptory challenges. Dunn was present
during jury voir dire, and it appears that Dunn' s claim is based on the allegation that he did not
join counsel at the clerk' s station when they exercised their peremptory challenges. At best, this
allegation is supported by the trial court' s statement,
All right, very well. It sounds like we' re ready to proceed with peremptory
challenges. So when you' re ready, Counsel, I' ll ask you to step up to the clerk' s
station and she will be passing a chart back and forth.
RP ( Aug. 13, 2012 Jury Voir Dire) at 95. Although the trial court did not specifically call Dunn
to the clerk' s station with his attorney, there is no indication that he did or did not accompany
counsel when counsel exercised the peremptory challenges. Because the record is unclear
whether Dunn was present at the clerk' s station during the exercise of peremptory challenges, the
claim relies, at least in part, on facts outside the record on appeal. We do not address issues on
direct appeal that rely on facts outside the record. State v. McFarland, 127 Wn.2d 322, 335, 899
P. 2d 1251 ( 1995).
13
No. 43855 -1 - II
Accordingly, we affirm Dunn' s convictions.
Werncur:
ORSWICK, C. J.
LEE, J.
14
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611 A.2d 985 (1992)
Charles W. DeMELLO et al.
v.
DEPARTMENT OF ENVIRONMENTAL PROTECTION et al.
Supreme Judicial Court of Maine.
Argued March 6, 1992.
Decided August 7, 1992.
James D. Bivins (orally), Clifford Goodall, Dyer, Goodall & LaRouche, Augusta, for plaintiffs.
Dennis J. Harnish (orally), Asst. Atty. Gen., Augusta, John F. Barnicle, Brunswick, for defendants.
Before WATHEN, C.J., and ROBERTS, GLASSMAN, CLIFFORD and COLLINS, JJ.
ROBERTS, Justice.
Defendants Department of Environmental Protection (DEP), William G. Reid, Irving Oil Corporation, and Ballard Oil and Equipment Company appeal from the judgment entered in the Superior Court (Kennebec County, Chandler, J.) reversing the dismissal by the commissioner of the third-party damage claim filed by plaintiffs Charles W. DeMello, Linda R. DeMello, and Phippsburg Center Store, Inc., pursuant to the Oil Discharge Prevention and Pollution Control Act, 38 M.R.S.A. §§ 541-560 (1978 & Pamph.1986), and the Underground Oil Storage Facilities and Ground Water Protection Act, 38 M.R.S.A. §§ 561-570 (Pamph.1986). The DEP argues that the commissioner correctly applied the 1987 version of the Underground Oil Storage Facilities and Ground Water Protection Act. We disagree and affirm the Superior Court's judgment.
The DeMellos purchased the Phippsburg Center Store, which is a general store and gasoline service station on Route 9 in Phippsburg. The store had been owned by William Reid from September 1971 to July 1986 and sold gasoline and kerosene stored *986 in three underground storage tanks located on the property. As part of the purchase agreement between the DeMellos and Reid, an escrow account had been established for the removal of an inactive 4,000 gallon storage tank. On removal, a hole was discovered in the tank, and the surrounding soil was contaminated with gasoline. Inspection of other underground oil storage tanks and subsurface soils revealed further contamination and leakage. The DeMellos advised the DEP staff that they would replace the problem tanks with new fiberglass facilities.
In March 1987 the DeMellos filed a third-party damage claim against the Groundwater Oil Clean-up Fund, claiming damages for the cost of removal and replacement of the leaking underground facilities, as well as for lost income. The third-party damage claim named Reid, the former owner, as a responsible party, and was amended in August 1987 to include the diminished value of the property. As amended, the third-party damage claim totaled $130,679.90. In March 1989 the DeMellos further amended the claim to add Irving Oil Corporation and Ballard Oil and Equipment Company as responsible parties, each of whom had delivered or owned gasoline products that were deposited into the leaking underground tanks.
In August 1990 the commissioner dismissed the DeMellos' third-party damage claim against the fund, stating that as responsible parties the DeMellos were responsible for their own damages. The DeMellos filed a complaint pursuant to M.R.Civ.P. 80C, seeking direct judicial review of the dismissal by the commissioner. After a hearing, the court reversed the dismissal of the DeMellos' complaint because the commissioner applied the 1987 amendments which did not become effective until September 29, 1987 (P.L.1987, ch. 491, § 19). The court held that the commissioner's retroactive application of the amendments was impermissible because the 1987 amendments substantively affected the DeMellos' rights, and remanded the case to the DEP for further proceedings. The DEP now appeals.
Because the court was acting in an appellate capacity, we directly review the agency decision for an abuse of discretion, legal error, or findings not supported by substantial evidence in the record. Robinson v. Board of Trustees of Maine State Retirement System, 523 A.2d 1376, 1378 (Me.1987). The DEP first contends that the commissioner's application of the 1987 amendments was not retroactive because, although the DeMellos may have originally filed their claim on March 30, 1987, they did not perfect it until March 22, 1989, long after the effective date of the 1987 amendments. We disagree. Amendments to a complaint relate back to the date of the original pleading. M.R.Civ.P. 15(c). Contrary to the argument of the DEP, 38 M.R.S.A. § 569 does not prohibit the application of Rule 15(c) by analogy. Although the statute prohibits multiple applications, it implicitly permits amendments prior to the time an award is made by expressly prohibiting additional claims after that time. See 38 M.R.S.A. § 569(2)(C) (Pamph. 1986). Consequently, we look to the filing date of the DeMellos' original complaint to determine which version of the statute to apply. See Brown v. Department of Envtl. Protection, 549 A.2d 1138, 1139 n. 1 (Me.1988) (applying 1985 version of statute, not 1987 amendments, because the claims were filed before the amendments took effect).
We do not reach the DEP's further argument that the commissioner's retroactive application of the 1987 amendments was permissible because the amendments did not deprive the DeMellos of a substantive right. Title 1 M.R.S.A. § 302 states in part, "Actions and proceedings pending at the time of the passage, amendment or repeal of an Act or ordinance are not affected thereby." The DeMellos' claim was a "proceeding[] pending" at the time of the 1987 amendments. Although section 302 provides a rule of construction only, we have determined that the rule is controlling "absent clear and unequivocal language to the contrary." See City of Portland v. Fisherman's Wharf Assocs. II, 541 A.2d 160, 162-64 (Me.1988). We find nothing in the 1987 enactment to suggest a legislative *987 intention that the amendments affect pending proceedings.
The DEP relies on our statement in Schlear v. Fiber Materials, Inc., 574 A.2d 876, 878 (Me.1990), that "[t]he canon of construction articulated by section 302 applies only to the question whether retroactive effect will be given to a legislative change in substantive matters; any amendment, repeal, or other change in procedural or remedial law presumptively applies to pending proceedings without any occasion to apply the section 302 canon." Not only is that statement contrary to the plain meaning of the quoted portion of section 302, it is unsupported by the cases cited in Schlear for two reasons. First, the cases cited deal with the application of a legislative change that would affect a "cause of action" that accrued prior to the effective date of the change, and not to proceedings pending on the effective date of the legislative change. See, e.g., Michaud v. Northern Maine Medical Center, 436 A.2d 398, 400 (Me.1981) (citing, inter alia, Batchelder v. Tweedie, 294 A.2d 443 (Me.1972)). Second, the line of authority traces to a series of cases involving the Public Utilities Commission. We had decided in Inhabitants of Webster v. County Commissioners, 63 Me. 27 (1874), however, that the predecessor of section 302 did not apply to PUC proceedings because the statute then referred only to "actions," which we interpreted as meaning "actions in court." Thereafter, following our decision in Dickinson v. Maine Public Service Co., 223 A.2d 435 (Me.1966), wherein we applied our interpretation in Webster, the Legislature amended section 302 by adding the words "and proceedings" after the word "Actions." P.L.1967, ch. 10. Consequently, some of our decisions have failed to properly interpret the amended section 302. Instead, we have focused on the distinction between procedural and substantive changes, applying for the purpose of statutory construction a presumption that the former applied to pending proceedings but not the latter. See Moore v. Moore, 586 A.2d 1235, 1236-37 (Me.1991) (applying presumption that substantive change not applicable to pending motion for change in child support, instead of applying section 302); Commissioner of Dept. of Human Servs. v. Massey, 537 A.2d 1158, 1159 n. 4 (Me. 1988) (refusing to apply section 302 because neither party briefed or argued the issue); Norton v. C.P. Blouin, Inc., 511 A.2d 1056, 1060 n. 5 (Me.1986) (applying procedural change to pending workers' compensation petition without reference to section 302); Sutherland v. Pepsi-Cola Bottling Co., 402 A.2d 50, 52 (Me.1979) (same); Diamond Int'l Corp. v. Philip L. Gadbois & Sons, Inc., 390 A.2d 1061, 1064 (Me.1978) (dictum that change in mechanics' lien law applies to pending actions, relying on cases decided before the original enactment of section 302 in 1870). The language quoted from Schlear, by again focusing on the procedural-substantive distinction, inaccurately states the correct interpretation of the amended language of section 302. Thus we conclude that the plain meaning of section 302 precludes the application of the 1987 amendment to the DeMellos' pending claim, and we affirm the judgment for reasons other than those applied by the trial court.
The entry is:
Judgment affirmed.
All concurring.
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Order Michigan Supreme Court
Lansing, Michigan
January 5, 2017 Robert P. Young, Jr.,
Chief Justice
Stephen J. Markman
Brian K. Zahra
154176 Bridget M. McCormack
David F. Viviano
Richard H. Bernstein
Joan L. Larsen,
VAN JENKINS, Justices
Plaintiff-Appellant,
v SC: 154176
COA: 331320
Washtenaw CC: 15-001068-PD
UNIVERSITY OF MICHIGAN CREDIT UNION
and RIGHTWAY AUTOMOTIVE CREDIT
COMPANY,
Defendants-Appellees.
_________________________________________/
On order of the Court, the application for leave to appeal the July 12, 2016 order
of the Court of Appeals is considered, and it is DENIED, because we are not persuaded
that the questions presented should be reviewed by this Court.
I, Larry S. Royster, Clerk of the Michigan Supreme Court, certify that the
foregoing is a true and complete copy of the order entered at the direction of the Court.
January 5, 2017
t1212
Clerk
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Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
07/31/2020 08:08 AM CDT
- 591 -
Nebraska Supreme Court Advance Sheets
306 Nebraska Reports
STATE v. THEISEN
Cite as 306 Neb. 591
State of Nebraska, appellee, v.
Christine A. Theisen, appellant.
___ N.W.2d ___
Filed July 24, 2020. No. S-19-911.
1. Pleas: Appeal and Error. A trial court is afforded discretion in deciding
whether to accept guilty pleas, and an appellate court will reverse the
trial court’s determination only in case of an abuse of discretion.
2. Judges: Appeal and Error. An abuse of discretion exists if the reasons
or rulings of a trial judge are clearly untenable, unfairly depriving a liti-
gant of a substantial right and denying just results in matters submitted
for disposition.
3. Effectiveness of Counsel: Constitutional Law: Statutes: Records:
Appeal and Error. Whether a claim of ineffective assistance of trial
counsel can be determined on direct appeal presents a question of law,
which turns upon the sufficiency of the record to address the claim
without an evidentiary hearing or whether the claim rests solely on the
interpretation of a statute or constitutional requirement.
4. Effectiveness of Counsel: Appeal and Error. In reviewing a claim of
ineffective assistance of trial counsel on direct appeal, an appellate court
determines as a matter of law whether the record conclusively shows
that (1) a defense counsel’s performance was deficient or (2) a defend
ant was or was not prejudiced by a defense counsel’s alleged deficient
performance.
5. Indictments and Informations. An information must inform the accused
with reasonable certainty of the crime charged so that the accused may
prepare a defense to the prosecution and, if convicted, be able to plead
the judgment of conviction on such charge as a bar to a later prosecution
for the same offense.
6. ____. An information must allege each statutorily essential element of
the crime charged, expressed in the words of the statute which prohibits
the conduct charged as a crime or in language equivalent to the statutory
terms defining the crime charged.
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Nebraska Supreme Court Advance Sheets
306 Nebraska Reports
STATE v. THEISEN
Cite as 306 Neb. 591
7. ____. Where an information alleges the commission of a crime using
language of the statute defining that crime or terms equivalent to such
statutory definition, the charge is sufficient.
8. Indictments and Informations: Due Process. When the charging of a
crime in the language of the statute leaves the information insufficient
to reasonably inform the defendant as to the nature of the crime charged,
additional averments must be included to meet the requirements of
due process.
9. Indictments and Informations: Appeal and Error. An information
first questioned on appeal must be held sufficient unless it is so defec-
tive that by no construction can it be said to charge the offense for
which the accused was convicted.
10. Indictments and Informations. A complaint or information is fatally
defective only if its allegations can be true and still not charge a crime.
11. ____. No information shall be deemed invalid for any defect or imper-
fection which does not prejudice the substantial rights of the defendant
upon the merits.
12. Conspiracy. Expressly alleging an overt act in furtherance of a con-
spiracy cannot simply be stating that the parties committed an overt act.
13. ____. The expressed overt act in furtherance of a conspiracy cannot be
the act of conspiring.
14. Indictments and Informations: Conspiracy. A proper information
charging conspiracy should indicate the offense which is the object of
the conspiracy and expressly allege an overt act conducted in further-
ance thereof.
15. Pleas. To support a plea of guilty or no contest, the record must establish
that (1) there is a factual basis for the plea and (2) the defendant knew
the range of penalties for the crime with which he or she is charged.
16. Criminal Law: Proof. A sufficient factual basis requires that the State
present sufficient facts to support the elements of the crime charged.
17. Conspiracy. Wharton’s Rule, applied when evaluating conspiracy
charges, stands for the principle that an agreement by two persons to
commit a particular crime cannot be prosecuted as a conspiracy when
the crime is of such a nature as to necessarily require the participation
of two persons for its commission.
18. ____. The application of Wharton’s Rule is limited to instances where
the number and identity of persons involved in the conspiracy are the
same as the number and identity of persons required to commit the
underlying substantive offense.
19. ____. There is an exception to Wharton’s Rule that provides a con-
spiracy charge may be filed if more or different people participate in the
conspiracy than are necessary to commit the substantive offense.
- 593 -
Nebraska Supreme Court Advance Sheets
306 Nebraska Reports
STATE v. THEISEN
Cite as 306 Neb. 591
20. Effectiveness of Counsel: Records: Appeal and Error. Whether a
claim of ineffective assistance of trial counsel can be determined on
direct appeal depends upon the sufficiency of the record to address
the claim to determine whether a defense counsel’s performance was
deficient and whether the defendant was prejudiced by the alleged defi-
cient performance.
21. ____: ____: ____. The record on direct appeal is sufficient if it estab-
lishes either that trial counsel’s performance was not deficient, that the
appellant will not be able to establish prejudice, or that trial counsel’s
actions could not be justified as a part of any plausible trial strategy.
22. Effectiveness of Counsel: Appeal and Error. The fact that an inef-
fective assistance of counsel claim is raised on direct appeal does not
necessarily mean that it can be resolved.
23. Effectiveness of Counsel: Records: Appeal and Error. The deter-
mining factor in deciding whether an ineffective assistance claim can
be resolved on direct appeal is whether the record is sufficient to
adequately review the question.
Appeal from the District Court for Madison County: Mark
A. Johnson, Judge. Affirmed.
Mark E. Rappl for appellant.
Douglas J. Peterson, Attorney General, and Austin N. Relph
for appellee.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
Funke, J.
Christine A. Theisen appeals her plea-based convictions
of conspiracy to distribute or deliver a controlled substance
(hydrocodone), conspiracy to distribute or deliver a controlled
substance (tramadol), and child abuse. Theisen assigns the
district court erred in accepting her guilty pleas, because the
charging information contained insufficient allegations of overt
acts and the factual basis was insufficient under Wharton’s
Rule to support the conspiracy offenses. Theisen also claims
she was denied the right to effective assistance of trial counsel,
based upon a failure to properly inform her of the insufficient
- 594 -
Nebraska Supreme Court Advance Sheets
306 Nebraska Reports
STATE v. THEISEN
Cite as 306 Neb. 591
factual basis and application of Wharton’s Rule and upon trial
counsel’s conflict of interest with a material witness for the
State. For the reasons set forth herein, we affirm.
BACKGROUND
Theisen was charged by an amended information with seven
charges, including: conspiracy to distribute or deliver a con-
trolled substance (hydrocodone), conspiracy to distribute or
deliver a controlled substance (oxycodone), conspiracy to dis-
tribute or deliver a controlled substance (tramadol), tampering
with evidence, felony child abuse, and two counts of misde-
meanor child abuse.
Theisen and the State entered into a plea agreement whereby
Theisen would plead guilty to conspiracy to distribute or deliver
hydrocodone and tramadol and to felony child abuse and the
State would dismiss the remaining charges. This dismissal was
noted by an interlineated copy of the amended information
which contained the following remaining allegations:
[Conspiracy to Distribute or Deliver Hydrocodone:]
Theisen, on or about the 1st day of June, 2016, through the
23rd day of August, 2018, in Madison County, Nebraska,
with intent to promote or facilitate the commission of a
felony offense, did agree with another person or persons
that they or one or more of them shall engage in or solicit
the conduct or shall cause or solicit the result specified
by the definition of the offense of delivery or distribution
of the controlled substance hydrocodone. Complainant
further states that [Theisen] or another with whom [she]
conspired with committed an overt act in furtherance of
the conspiracy, to wit: [Theisen] was buying and/or sell-
ing hydrocodone.
....
[Conspiracy to Distribute or Deliver Tramadol:]
Theisen, on or about the 1st day of June, 2016 through the
23rd day of August, 2018, in Madison County, Nebraska,
with the intent to promote or facilitate the commission
of a felony, did agree with another person or persons that
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Nebraska Supreme Court Advance Sheets
306 Nebraska Reports
STATE v. THEISEN
Cite as 306 Neb. 591
they or one or more of them shall engage in or solicit the
conduct or shall cause or solicit the result specified by the
definition of the offense of the delivery or the distribution
of the controlled substance tramadol. Complainant further
alleges that [Theisen] or another person with whom [she]
conspired with committed an overt act in furtherance of
the conspiracy, to wit: [Theisen] was buying and/or sell-
ing tramadol.
....
[Child Abuse:] Theisen, on or about the 1st day of June,
2016 through the 23rd day of August, 2018, in Madison
County, Nebraska, did knowingly and intentionally cause
or permit a minor child, or minor children, specifically
K.S. to be a) placed in a situation that endangered the
minor child’s or minor children’s life or physical or men-
tal health; and/or b) cruelly confined or cruelly punished;
and/or c) deprived of necessary food, clothing, shelter,
or care; and/or d) placed in a situation to be sexually
exploited by allowing, encouraging, or forcing such minor
child to solicit for or engage in prostitution, debauchery,
public indecency, or obscene or pornographic photog-
raphy, films, or depictions; and/or e) placed in a situa-
tion to be sexually abused as defined in Section 28-319,
28-319.01, or 28-302.01; and/or f) placed in a situation to
be a trafficking victim as defined in Section 28-830[.]
The district court was informed of this agreement at a pre-
trial conference, and the court rearraigned Theisen on the three
remaining counts, to which Theisen pled guilty. Following
an advisement of Theisen’s rights, the court asked Theisen
to explain what gave rise to these charges, to which Theisen
answered:
Last year in August, Department of Health and Human
Services became involved in my life, and my children
were removed because I admitted everything. I — I
guess the painkillers stemmed from a back injury and I
became addicted to them, and I was buying and selling
- 596 -
Nebraska Supreme Court Advance Sheets
306 Nebraska Reports
STATE v. THEISEN
Cite as 306 Neb. 591
them to support my habit. There is so much information,
it’s hard to explain.
In response to the court’s questioning regarding whether
Theisen was selling hydrocodone and tramadol between the
dates of June 1, 2016, and August 23, 2018, in Madison
County, Nebraska, Theisen responded, “Yes.”
The court then asked the State to provide the balance of the
factual basis for the charges, and the State explained:
In terms of the child abuse, law enforcement officers
interviewed both the victim, [Theisen’s] mother, as well
as [Theisen’s] other daughter. I think, approximately, vic-
tim was age 17, the other daughter was approximately age
15, I believe, at the time.
They all confirmed that [Theisen] physically and psy-
chologically abused one daughter in particular over an
extended period of time. Would hit her, slap her, essen-
tially force her to do, you know, menial tasks around the
home. Giving her deadlines to get things done rather than
doing those tasks herself, those type of things.
....
[As to the conspiracy to distribute or deliver hydroco-
done and tramadol charges, Theisen] would, as she sort
of said, she would buy and get painkillers and then sell
them as well. Additionally, according to her daughter, she
would actually have them text potential buyers ahead of
time that the sales would be taking place.
They reported — the daughters reported actually
receiving threats back from some of those drug dealers
and purchasers about the sales going on. Additionally, she
would work with others involved in this ring to buy and
sell the drugs.
The court found there was a sufficient factual basis and
accepted Theisen’s guilty pleas. Theisen was sentenced to con-
secutive terms of 6 to 12 years’ imprisonment for conspiracy to
distribute or deliver hydrocodone, 1 to 3 years’ imprisonment
- 597 -
Nebraska Supreme Court Advance Sheets
306 Nebraska Reports
STATE v. THEISEN
Cite as 306 Neb. 591
for conspiracy to distribute or deliver tramadol, and 1 to 3
years’ imprisonment for child abuse.
ASSIGNMENTS OF ERROR
Theisen assigns that the district court erred in accepting
her guilty pleas to the conspiracy charges, because (1) the
charging information was insufficient to establish overt acts
in furtherance of the conspiracy and (2) the factual basis was
insufficient under Wharton’s Rule to establish participation of
two or more persons beyond those actions which are neces-
sary for the commission of the underlying offenses. Theisen
also assigns she received ineffective assistance, because trial
counsel failed to advise her that under Wharton’s Rule, she
could not be convicted of conspiracy, and trial counsel had a
conflict of interest from previous representation of a State’s
material witness.
STANDARD OF REVIEW
[1,2] A trial court is afforded discretion in deciding whether
to accept guilty pleas, and an appellate court will reverse the
trial court’s determination only in case of an abuse of discre-
tion. 1 An abuse of discretion exists if the reasons or rulings of
a trial judge are clearly untenable, unfairly depriving a litigant
of a substantial right and denying just results in matters sub-
mitted for disposition. 2
[3,4] Whether a claim of ineffective assistance of trial
counsel can be determined on direct appeal presents a ques-
tion of law, which turns upon the sufficiency of the record to
address the claim without an evidentiary hearing or whether
the claim rests solely on the interpretation of a statute or
constitutional requirement. 3 We determine as a matter of law
whether the record conclusively shows that (1) a defense
counsel’s performance was deficient or (2) a defendant was
1
State v. Manjikian, 303 Neb. 100, 927 N.W.2d 48 (2019).
2
State v. Tyler P., 299 Neb. 959, 911 N.W.2d 260 (2018).
3
State v. Hood, 301 Neb. 207, 917 N.W.2d 880 (2018).
- 598 -
Nebraska Supreme Court Advance Sheets
306 Nebraska Reports
STATE v. THEISEN
Cite as 306 Neb. 591
or was not prejudiced by a defense counsel’s alleged defi-
cient performance. 4
ANALYSIS
Sufficiency of Amended Information
Theisen was charged, by the amended information, with
conspiracy to distribute or deliver hydrocodone and tramadol.
Under Neb. Rev. Stat. § 28-202(1) (Cum. Supp. 2018), a per-
son is guilty of criminal conspiracy if, with intent to promote
or facilitate the commission of a felony:
(a) He [or she] agrees with one or more persons that
they or one or more of them shall engage in or solicit the
conduct or shall cause or solicit the result specified by the
definition of the offense; and
(b) He [or she] or another person with whom he [or
she] conspired commits an overt act in pursuance of the
conspiracy.
Neb. Rev. Stat. § 29-2014 (Reissue 2016) specifies that
the State must allege overt acts in charging conspiracy, by
stating:
In trials for conspiracy, in cases where an overt act is
required by law to consummate the offense, no conviction
shall be had unless one or more overt acts be expressly
alleged in the indictment, nor unless one or more of the
acts so alleged be proved on trial; but other overt acts not
alleged in the indictment may be given in evidence on the
part of the prosecution.
Theisen assigns the amended information failed to suffi-
ciently allege conspiracy to distribute or deliver hydrocodone
and tramadol. Specifically, Theisen claims the amended infor-
mation failed to allege overt acts conducted in furtherance of
the alleged conspiracy.
[5-8] An information must inform the accused with rea-
sonable certainty of the crime charged so that the accused may
4
Id.
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306 Nebraska Reports
STATE v. THEISEN
Cite as 306 Neb. 591
prepare a defense to the prosecution and, if convicted, be able
to plead the judgment of conviction on such charge as a bar to
a later prosecution for the same offense. 5 As such, an informa-
tion must allege each statutorily essential element of the crime
charged, expressed in the words of the statute which prohibits
the conduct charged as a crime or in language equivalent to
the statutory terms defining the crime charged. 6 Where an
information alleges the commission of a crime using language
of the statute defining that crime or terms equivalent to such
statutory definition, the charge is sufficient. 7 However, when
the charging of a crime in the language of the statute leaves the
information insufficient to reasonably inform the defendant as
to the nature of the crime charged, additional averments must
be included to meet the requirements of due process. 8
[9-11] We have held that an “‘information first questioned
on appeal must be held sufficient unless it is so defective that
by no construction can it be said to charge the offense for
which the accused was convicted.’” 9 And “‘a complaint or
information is fatally defective only if its allegations can be
true and still not charge a crime.’” 10 In addition, “‘[n]o infor-
mation shall be deemed invalid for any defect or imperfection
which does not prejudice the substantial rights of the defendant
upon the merits.’” 11
Under each conspiracy charge, the amended informa-
tion alleged Theisen “did agree with another person or per-
sons” to “engage in or solicit the conduct or shall cause or
solicit the result specified by the definition of the offense of
[delivery or distribution of hydrocodone and tramadol].” The
5
In re Interest of Jordan B., 300 Neb. 355, 913 N.W.2d 477 (2018).
6
Id.
7
Id.
8
Id.
9
Peterson v. Houston, 284 Neb. 861, 868, 824 N.W.2d 26, 33 (2012).
10
Id.
11
Id.
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information further alleged Theisen “or another [person] with
whom [Theisen] conspired with committed an overt act in fur-
therance of the conspiracy, to wit: [Theisen] was buying and/
or selling [hydrocodone and tramadol].”
The language used in the charging information modeled
the statutory language of § 28-202(1)(a) in alleging Theisen
“did agree” with another person or persons to “engage in or
solicit the conduct or shall cause or solicit the result specified
by the definition of the offense.” The information continued
by naming distribution or delivery of hydrocodone and tra-
madol as each count’s underlying offense. The information
likewise modeled the language of § 28-202(1)(b) in alleging
Theisen “or another [person] with whom [Theisen] conspired”
committed “an overt act in furtherance of the conspiracy.”
Accordingly, the information was sufficient to inform Theisen
that the State was charging her with conspiracy under § 28-202
and alleging she engaged with others for the distribution or
delivery of hydrocodone and tramadol.
Theisen further argues that the information was insufficient
to reasonably inform her as to the nature of the crime by
operation of § 29-2014. As quoted above, § 29-2014 requires
a charging document “expressly” allege one or more overt acts
in furtherance of a conspiracy. Theisen contends that § 29-2014
required the State to allege an overt action other than the
underlying offense of distribution or delivery of a controlled
substance. In support of this proposition, Theisen cites State
v. Marco 12 and State v. McKay, 13 a Nebraska Court of Appeals
unpublished opinion.
[12] Contrary to this argument, neither of these opinions
held § 29-2014 requires that the expressed overt acts cannot
be allegations of the underlying crime for which the parties
conspired. Instead, Marco held that an allegation the defend
ant “‘or another person with whom he conspired did commit
12
State v. Marco, 230 Neb. 355, 432 N.W.2d 1 (1988).
13
State v. McKay, No. A-92-057, 1993 WL 13458 (Neb. App. Jan. 26, 1993)
(not approved for permanent publication).
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an overt act,’” without more, failed to expressly allege an
overt act. 14 The case explained that “expressly” alleging an
overt act cannot simply be stating that the parties committed
an overt act. 15
[13,14] Similarly, in McKay, the defendant was charged with
criminal conspiracy. The State’s information alleged that the
defendant
“‘agree[d] with one or more persons that they or one or
more of them would harvest more than one pound of mar-
ijuana and he or another person with whom he conspired
did commit an overt act in pursuance of the conspiracy,
to-wit: Defendant along with [another person] conspired
together to harvest and possess more than one pound
of marijuana.’” 16
The Court of Appeals explained that “[i]t is axiomatic that the
open, manifest, and apparent conduct or overt act of a conspir-
acy which tends to show a preexisting conspiracy . . . cannot
be [the defendant’s and conspirator’s] conspiring together.” 17
Stated another way, the expressed overt act in furtherance of
the conspiracy cannot be the act of conspiring. 18 Instead, a
proper information charging conspiracy should indicate the
offense which is the object of the conspiracy and expressly
allege an overt act conducted in furtherance thereof. 19
Here, the information explicitly alleged overt acts. In addi-
tion to its language mirroring § 28-202(1)(a) and (b) and
alleging Theisen agreed with others to engage in the underly-
ing offenses, the information also alleged “overt act[s] in fur-
therance of the conspiracy, to wit: [Theisen] was buying and/
or selling [hydrocodone and tramadol].” These allegations are
14
Marco, supra note 12, 230 Neb. at 357, 432 N.W.2d at 3.
15
Id.
16
McKay, supra note 13, 1993 WL 13458 at *1.
17
Id. at *2.
18
See id.
19
Id.
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sufficient to satisfy the requirement under § 29-2014 that the
charging document expressly allege an overt act in furtherance
of the conspiracy.
Because the information sufficiently alleged conspiracy
under § 28-202 and expressly alleged overt acts pursuant to
§ 29-2014, the information was sufficient to reasonably inform
Theisen as to the nature of the crime charged and the district
court did not err in accepting Theisen’s pleas.
Sufficiency of Factual Basis
Theisen challenges the sufficiency of the factual basis to
support her convictions of conspiracy to distribute or deliver
hydrocodone and tramadol. On this assignment, Theisen argues
the State failed to establish conspiracy under Wharton’s Rule
by failing to allege participation of two or more persons
beyond those necessary for the commission of the underly-
ing crimes.
[15,16] To support a plea of guilty or no contest, the record
must establish that (1) there is a factual basis for the plea and
(2) the defendant knew the range of penalties for the crime
with which he or she is charged. 20 A sufficient factual basis
requires that the State present sufficient facts to support the
elements of the crime charged. 21
One criminal statute regarding controlled substances explains
that “it shall be unlawful for any person knowingly or inten-
tionally: (a) To manufacture, distribute, deliver, dispense, or
possess with intent to manufacture, distribute, deliver, or dis-
pense a controlled substance.” 22 Under Neb. Rev. Stat. § 28-401
(Supp. 2019), subsection (9) currently defines “[d]istribute” as
“to deliver other than by administering or dispensing a con-
trolled substance” and subsection (12) defines “[d]eliver” as
“the actual, constructive, or attempted transfer from one person
20
State v. Jenkins, 303 Neb. 676, 931 N.W.2d 851 (2019).
21
See id.
22
See Neb. Rev. Stat. § 28-416(1)(a) (Cum. Supp. 2018).
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to another of a controlled substance, whether or not there is an
agency relationship.”
Under § 28-202(1), all that is required for a conviction is
proof that the agreement was entered into and an overt act in
furtherance of the conspiracy was committed. 23 The criminal
act is the agreement itself, and the ultimate act agreed to by the
conspirators need never take place. 24
[17] In evaluating conspiracy charges, we have applied
Wharton’s Rule as an exception to conspirator liability. 25 This
exception stands for the principle that an agreement by two
persons to commit a particular crime cannot be prosecuted as a
conspiracy when the crime is of such a nature as to necessarily
require the participation of two persons for its commission. 26
[18,19] The application of Wharton’s Rule is limited to
instances where the number and identity of persons involved in
the conspiracy are the same as the number and identity of per-
sons required to commit the underlying substantive offense. 27
As such, there is an exception to Wharton’s Rule that provides
a conspiracy charge may be filed if more or different people
participate in the conspiracy than are necessary to commit the
substantive offense. 28
Theisen contends that distributing and delivering controlled
substances necessarily involves multiple people, including the
sellers and buyers of the product. Because of that necessary
involvement, Theisen suggests that she could not be convicted
23
See §§ 28-202 and 29-2014.
24
See id.
25
State v. Utterback, 240 Neb. 981, 485 N.W.2d 760 (1992), disapproved on
other grounds, State v. Johnson, 256 Neb. 133, 589 N.W.2d 108 (1999).
26
Id. See Iannelli v. United States, 420 U.S. 770, 95 S. Ct. 1284, 43 L. Ed.
2d 616 (1975).
27
See Utterback, supra note 25. See, also, State v. Clason, 3 Neb. App. 339,
526 N.W.2d 673 (1994).
28
See Utterback, supra note 25. See, also, Clason, supra note 27, citing
Baker v. United States, 393 F.2d 604 (9th Cir. 1968), and People v. Incerto,
180 Colo. 366, 505 P.2d 1309 (1973).
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of conspiracy. In support of her contention, Theisen directs us
to our holding in State v. Utterback. 29
In Utterback, the issue on appeal concerned the reliability
of an informant and analyzed whether an admission by the
informant that he bought marijuana from a specific individual
was against his penal interests. Since purchasing marijuana
was not a statutorily proscribed act in Nebraska, the court
looked at whether such admission could be used to pros-
ecute for conspiracy to distribute or deliver a controlled sub-
stance. Applying Wharton’s Rule, we found that the informant
could not be charged with conspiracy to distribute or deliver,
because he was the buyer, a necessary party to the underly-
ing crime.
The instant case is distinguishable from Utterback. Here, the
factual basis provided by the State sets forth sufficient facts to
find the participation of conspirators beyond the specific sell-
ers and buyers of the drugs. In the court’s receipt of Theisen’s
pleas, Theisen confirmed that she had sold hydrocodone and
tramadol between June 1, 2016, and August 23, 2018. The
State then explained that Theisen “would actually have [her
daughters] text potential buyers ahead of time that the sales
would be taking place,” that “the daughters reported actually
receiving threats back from some of those drug dealers and
purchasers about the sales,” and that Theisen “would work with
others involved in this ring to buy and sell the drugs.” We note
as well that the police reports contained within the presentence
investigation report further detail the participation of Theisen’s
daughters in the overt act of purchasing controlled substances.
Such participation involved more and different people than
necessary for the delivery and distribution of hydrocodone
and tramadol. Accordingly, Wharton’s Rule does not prohibit
Theisen’s conviction for the conspiracy counts and the district
court did not err in accepting Theisen’s pleas.
29
Utterback, supra note 25.
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STATE v. THEISEN
Cite as 306 Neb. 591
Failure to Advise Theisen
of Wharton’s Rule
Theisen assigns her trial counsel was ineffective for failing
to properly advise her that Wharton’s Rule prohibited her con-
victions on the conspiracy charges.
[20,21] Whether a claim of ineffective assistance of trial
counsel can be determined on direct appeal depends upon the
sufficiency of the record to address the claim to determine
whether a defense counsel’s performance was deficient and
whether the defendant was prejudiced by the alleged deficient
performance. 30 We have said the record is sufficient if it estab-
lishes either that trial counsel’s performance was not deficient,
that the appellant will not be able to establish prejudice, or that
trial counsel’s actions could not be justified as a part of any
plausible trial strategy. 31
For the reasons stated above, Wharton’s Rule did not restrict
Theisen from being charged and convicted of conspiracy to
distribute or deliver hydrocodone and tramadol. Therefore,
Theisen cannot show prejudice from trial counsel’s alleged
failure to properly advise her on the application of Wharton’s
Rule and this assignment is without merit.
Conflict of Interest
Theisen assigns she received ineffective assistance due to
her trial counsel’s representation of a material witness for the
State. Under this assignment, Theisen claims her counsel “pre-
viously represented Brooks Boyer who was a defendant against
[Theisen] in a divorce action which was filed by [Theisen].” 32
Theisen alleges Brooks Boyer “played a very large role in the
criminal investigation being initiated against [her], includ-
ing providing statements and documentary evidence against
30
See Hood, supra note 3.
31
State v. Stelly, 304 Neb. 33, 932 N.W.2d 857 (2019).
32
Brief for appellant at 24.
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[Theisen].” 33 Citing a long-term attorney-client relationship
between trial counsel and Boyer, Theisen argues there existed
an actual conflict of interest which compromised trial counsel’s
ability to adequately and properly represent Theisen.
[22,23] The fact that an ineffective assistance of counsel
claim is raised on direct appeal does not necessarily mean that
it can be resolved. 34 The determining factor is whether the
record is sufficient to adequately review the question. 35
The record on appeal contains no information as to trial
counsel’s alleged representation of Boyer or how that previous
relationship could have affected the representation of Theisen.
Thus, the record is insufficient to review this assignment on
direct appeal.
CONCLUSION
The information expressly alleged overt acts in further-
ance of the charged conspiracy to distribute and deliver
hydrocodone and tramadol, and the factual basis was suffi-
cient to satisfy Wharton’s Rule and support Theisen’s guilty
pleas. Accordingly, we affirm Theisen’s convictions and find
Theisen’s assignment of ineffective assistance of trial coun-
sel for failure to advise her of Wharton’s Rule to be without
merit. However, we conclude the record is insufficient to reach
Theisen’s claim of ineffective assistance due to her trial coun-
sel’s alleged conflict of interest.
Affirmed.
33
Id.
34
State v. Burries, 297 Neb. 367, 900 N.W.2d 483 (2017).
35
Id.
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Highland Crusader Offshore Partners, L.P. v Targeted Delivery Tech. Holdings, Ltd. (2020 NY Slip Op 02991)
Highland Crusader Offshore Partners, L.P. v Targeted Delivery Tech. Holdings, Ltd.
2020 NY Slip Op 02991
Decided on May 21, 2020
Appellate Division, First Department
Manzanet-Daniels, J.
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 21, 2020
SUPREME COURT, APPELLATE DIVISION
First Judicial Department
Rolando T. Acosta, P.J.
Dianne T. Renwick
Sallie Manzanet-Daniels
Barbara R. Kapnick
Lizbeth González, JJ.
653486/16 10600
[*1]Highland Crusader Offshore Partners, L.P., et al., Plaintiffs-Respondents-Appellants,
vTargeted Delivery Technologies Holdings, Ltd., et al., Defendants-Appellants, Xenova Group, Ltd., et al., Defendants, Celtic Pharma Development Services Bermuda, Ltd., Defendant-Respondent.
Appeals and cross appeal from the order, Supreme Court, New York County (Eileen Bransten, J.), entered December 4, 2018, which, insofar as appealed from as limited by the briefs, granted defendant Celtic Pharma Development Services Bermuda Ltd.'s motion to dismiss the complaint as against it for lack of personal jurisdiction, denied the motions of defendants Targeted Delivery Technologies Holdings, Ltd. (TDTH), Celtic Pharma FIX, Ltd., Celtic Pharma FIX Venture, Ltd., Celtic Pharma Management Company, Ltd., Celtic Therapeutics Management LLLP doing business as Auven Therapeutics Management LLLP and as successor in interest to Celtic Pharma Management, L.P. (Auven), and John Mayo to dismiss the complaint as against them for lack of personal jurisdiction, and denied the motions of TDTH, Celtic Pharma Management Company Ltd., and Auven to dismiss claims arising [*2]out of the servicing agreement for lack of standing.
Wiggin and Dana LLP, New Haven, CT (Jonathan M. Freiman of the Bar of the State of Connecticut and State of Pennsylvania, admitted pro hac vice of counsel) and Wiggin and Dana LLP, New York (Steven B. Malech and Michael L. Kenny, Jr.) for Targeted Delivery Technologies Holdings, Ltd., Targeted Delivery Technologies, Ltd., Celtic Pharma Management Company, Ltd., Celtic Pharma Fix, Ltd., Celtic Pharma Fix Venture, Ltd. and John Mayo, appellants and Celtic Pharma Development Services Bermuda, Ltd., respondent.
Milbank LLP, New York (Scott A. Edelman, Alison Bonelli and Will B. Denker of counsel), for Auven Therapeutics Management LLLP, appellant.
Stinson LLP, New York (Kieran M. Corcoran of counsel), for Highland Crusader Offshore Partners, L.P., respondent-appellant.
Reid Collins & Tsai LLP, Austin, TX (Craig A. Boneau of the bar of the State of Texas, admitted pro hac vice of counsel) and Reid Collins & Tsai LLP, New York (William T. Reid, IV and Ryan M. Goldstein of counsel), for Highland Credit Opportunities CDO, Ltd., Highland Credit Strategies Master Fund, L.P., Highlander Restoration Capital Partners Master, L.P., and NexPoint Credit Strategies Fund, respondents-appellants.
MANZANET-DANIELS, J.
On this appeal, we are asked to consider, among other issues, whether jurisdiction may be exercised over defendants by virtue of their close relationship with signatories to the contracts that contain forum selection clauses, notwithstanding that defendants lack minimum contacts with the forum. We find that plaintiffs have sufficiently pleaded allegations of a close relationship between the signatory and non-signatory parties so as to warrant jurisdictional discovery (see Universal Inv. Advisory SA v Bakrie Telecom Pte., Ltd., 154 AD3d 171, 178-179 [1st Dept 2017].Background
Plaintiffs are the majority holders of $156 million in secured notes issued by nonparty Celtic Pharma Phinco, B.V. that were due on June 15, 2012. The issuer was a wholly-owned subsidiary of Celtic Pharmaceuticals Holdings, L.P., a private equity fund (Fund).
The notes were guaranteed by various subsidiaries of Fund and the issuer, including, insofar as alleged here, Celtic Pharma FIX Ltd. and Celtic Pharma FIX Venture Ltd. (together, the FIX entities), Targeted Delivery Technologies Holdings (TDTH), and Targeted Delivery Technologies (TDT).
Celtic Pharma Management, L.P. (CPM) was the private equity fund appointed to service the notes. Celtic Pharma Management Company, Ltd. (Manager) was CPM's general partner. (Defendant CPM has not appealed from the order denying its motion to dismiss. CPM "is now dissolved," according to defendant Stephen Evans-Freke.)
Auven is the alleged successor in interest to CPM; Celtic Pharma Management Development Services Bermuda Ltd. (Vendor) is an alleged guarantor of the notes; and Evans-[*3]Freke and John Mayo [FN1] are alleged to have been personally involved in and to have controlled the structuring of the notes offering.
Plaintiffs allege that defendants orchestrated an "international shell game," known as a "bleed-out," in order to defraud plaintiff noteholders. Plaintiffs allege that the scheme involved self-dealing transactions, parallel businesses, and intercompany transfers that had as their goal the depletion of the assets of the companies within the collateral pool that secured the notes, and the funneling of those assets to related companies outside the collateral pool, so that plaintiffs would be left "holding the bag" with claims for repayment against insolvent shell companies around the globe. Plaintiffs allege that defendants "engineere[ed] a vertically-integrated fraud designed to plunder the proceeds from the Notes for their own personal enrichment." Plaintiffs allege, inter alia, that the servicer (CPM) directed a substantial portion of the proceeds from the notes to Vendor for "development services" and to Manager in the form of inflated management fees that, based on information and belief, were calculated using knowingly inflated valuations of the product portfolio.
Plaintiffs allege that Fund and individual defendants Mayo and Evans-Freke created a "web of overlapping Celtic entities." Plaintiffs note that in addition to serving as managing general partners of Fund, Mayo and Evans-Freke serve or served as two of the issuer's three directors, as managing general partners of the servicer, as managing general partners of Manager, and as directors of Vendor and guarantors. Plaintiffs allege that the individual defendants' "domination" of the issuer was "so all-encompassing" that they simultaneously signed the transaction documents on behalf of the entities on both sides of the transaction. Plaintiffs allege that Fund, Evans-Freke and Mayo were "intimately involved" in the marketing of the notes and "emphasized" their expertise over that of the issuer. Plaintiffs maintain that Fund "unilaterally controlled" the development of the products in the security pool from which plaintiffs were to be repaid. Plaintiffs maintain that the servicer (CPM) was the only entity within the Celtic group that had any employees or actual operations and that the rest of the companies were shell corporations or corporate general partners set up to hold assets and obtain beneficial tax treatment. Plaintiffs quote from the sworn statement of the former general counsel of CPM to the effect that the various companies were operated as "a single enterprise," with Mayo and Evans-Freke "responsible for all operational and management decisions." Plaintiffs allege that Evans-Freke and Mayo "puppeteered" the issuer and its subsidiaries "as if they were all part of a single, consolidated operation."The Agreements
The notes indenture, dated as of January 31, 2007, contains a forum selection clause providing that
"each of the parties hereto agrees that the U.S. federal and State of New York courts located in the Borough of Manhattan, The City of New York[,] shall have jurisdiction to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Indenture and, for such purposes, submits to the jurisdiction of such courts."
Mayo executed the indenture on behalf of the issuer and the "Guarantor[s]." The indenture defines "Guarantors" as "the Issuer Subsidiaries, the Product Subsidiaries, and TDT." The "Product Subsidiaries" are defined as "the Issuer Product Subsidiaries, the TDT Product Subsidiaries and any Additional Product Subsidiary." The latter is defined as "any 75% Owned Subsidiary of Celtic [defined as Fund therein] that acquires any rights or interests (directly or [*4]indirectly) in an Additional Product after the Closing Date." A "75% Owned Subsidiary" is defined to include any entity of which at least 75% is directly or indirectly owned or controlled by a person, by such person and one or more of such person's subsidiaries, or by one or more subsidiaries of such person. An "Additional Product" is "any drug development project acquired, directly or indirectly, by Celtic or any Subsidiary thereof following the Closing Date that is financed by Additional Product Funds or funds from the Issuer Closing Account." "Additional Product Funds" are the funds that noteholders paid to purchase the notes.
On the same date the indenture was executed, the issuer, guarantors, and CPM executed a servicing agreement. The preamble to the servicing agreement states that the parties entered into the servicing agreement for CPM to "perform[] certain services with respect to the Indenture, the Notes and the Guarantees." The servicing agreement obligates CPM to maintain the issuer's bank accounts, prepare distribution reports for the noteholders, and deliver quarterly reports and financial statements to the noteholders.
The servicing agreement is governed by New York law and similarly contains a New York forum selection clause. Evans-Freke executed the servicing agreement on behalf of CPM, the issuer, and various guarantors.The Litigation
The issuer is alleged to have defaulted on its obligations to plaintiffs on June 15, 2012. Plaintiffs commenced this action in 2016, and in 2018 they filed a first amended complaint alleging, inter alia, causes of action for fraudulent conveyance and breach of the indenture and servicing agreements. Insofar as relevant here, plaintiffs allege that the court has jurisdiction over Manager, TDTH, and the individual defendants because they are "closely related" to the signatories of the relevant agreements, and over Vendor, TDTH and the FIX entities as "Additional Product Subsidiary Guarantors."
Various defendants moved to dismiss the complaint pursuant to CPLR 3211. The court held that the individual defendants, TDTH, Fund,[FN2] and the Manager were bound by the forum selection clauses in the relevant agreements and subject to jurisdiction in New York based on the "closely related" doctrine.
The motion court found that plaintiffs had adequately alleged that the FIX entities qualified as "Additional Product Subsidiaries" and were therefore bound by the forum selection clauses.
The motion court found as to Auven that plaintiffs had adequately pleaded successor liability (to CPM) as a basis for jurisdiction, stating that "whether successor liability can successfully be established should be determined after discovery."
The motion court granted Vendor's motion to dismiss on the ground that it was not a direct or indirect subsidiary of a contracting party.
Seven defendants perfected their appeals: Manager, TDTH, the FIX entities, Auven, and Mayo and Evans-Freke who, as previously indicated, has since withdrawn his appeal. Plaintiffs cross-appeal to the extent the court granted Vendor's motion to dismiss for lack of personal jurisdiction.AnalysisForum Selection Clause
Defendants maintain that the assertion of jurisdiction over them based on the "closely related" doctrine was improper, as they lack minimum contacts with the forum. Plaintiffs maintain that minimum-contacts analysis is inapposite where jurisdiction is predicated on consent to a forum selection clause under a "closely related" analysis. A "closely related" [*5]analysis requires that the relation of the parties be such as to make application of the clause foreseeable, rendering a separate minimum-contacts analysis unnecessary.
It is a general principle that only the parties to a contract are bound by its terms (see Tate & Lyle Ingredients Ams., Inc. v Whitefox Tech, USA, Inc., 98 AD3d 401 [1st Dept 2012]). A non-signatory may be bound by a contract under certain limited circumstances, including as a third-party beneficiary or an alter ego of a signatory or where it is a party to another related agreement that forms part of the same transaction (id.).
A non-signatory may also be bound by a forum selection clause where the non-signatory and a party to the agreement have such a "close relationship" that it is foreseeable that the forum selection clause will be enforced against the non-signatory (see generally Freeford Ltd. v Pendleton, 53 AD3d 32, 39 [1st Dept 2008], lv denied 12 NY3d 702 [2009]). The rationale for binding non-signatories is based on the notion that forum selection clauses "promote stable and dependable trade relations," and thus, that it would be contrary to public policy to allow non-signatory entities through which a party acts to evade the forum selection clause (Tate & Lyle, 98 AD3d at 402).
In Tate & Lyle, we applied the "closely related" doctrine where a plaintiff signatory was seeking to enforce a forum selection clause as against a defendant non-signatory. In determining whether a non-signatory is "closely related" to a signatory, we reasoned that the inquiry should focus on whether "the nonparty's enforcement of the forum selection clause is foreseeable by virtue of the relationship between the nonparty and the party sought to be bound" (98 AD3d at 402 [internal quotation marks omitted]). We found that the record demonstrated that the counterclaim defendant, the plaintiff's parent company, was closely related to its wholly-owned subsidiary and a signatory to a licensing agreement and therefore that it was "reasonably foreseeable" that it would be bound by a forum selection clause (id. at 402-403). The CEO of the parent company testified that it was he who made the decision not to return the defendant's technology when the defendant had demanded its return and his decision to continue to use the technology at the subsidiary's plant. It was clear that the entities not only consulted with each other, but also were both involved in the decision-making process from the inception of the agreement through the commencement of the litigation. Thus, the parent could not seriously maintain that it was not reasonably foreseeable that the forum selection clause would be asserted against it.
In Universal Inv. Advisory SA v Bakrie Telecom Pte., Ltd. (154 AD3d 171, 178-179 [1st Dept 2017], we found that jurisdiction could be asserted against a non-signatory defendant based on the "closely related" doctrine, reversing and remanding for further discovery. The plaintiffs in Bakrie alleged that the individual defendants, by virtue of their senior management positions and decision-making authority, and the defendant's parent company, as principal shareholder, had actual knowledge that the subsidiary was insolvent and incapable of meeting its obligations under the notes, yet participated in and promoted the offering. We found this enough, at a preliminary stage, to permit jurisdictional discovery as to the individual defendants' actual knowledge and role in the offering (id. at 179-180; see also Borden LP v TPG Sixth St. Partners, 173 AD3d 442 [1st Dept 2019]).
It is true, as defendants assert, that the motion court did not undertake a separate minimum-contacts analysis. However, the concept of foreseeability is built into the closely-related doctrine, which explicitly requires that the relationship between the parties be such that it is foreseeable that the non-signatory will be bound by the forum selection clause.[FN3]
Thus, courts have recognized that a consent to jurisdiction by virtue of the "close relationship" between the non-signatory and contracting party obviating the need for a separate analysis of constitutional propriety (see Recurrent Capital Bridge Fund I, LLC v ISR Sys. & Sensors Corp., 875 F Supp 2d 297, 306 [SD NY 2012]; Power Up Lending Group Ltd. v Nugene Intl., Inc., 2019 WL 989750, *3 n 3 [ED NY, Mar. 1 2019] ["Since plaintiff has met its burden of making a prima facie showing that [defendant nonsignatory] is closely related enough to the contractual relationships at issue based upon his vertical relationship' with Nugene, such that he is bound by the forum selection clause in the subject Agreements, the exercise of personal jurisdiction over him in this case is consistent with federal due process requirements"] [citation omitted]).
Arcadia Biosciences, Inc. v Vilmorin & Cie (356 F Supp 3d 379 [SD NY 2019]), upon which defendants heavily rely, is distinguishable. The plaintiff in Arcadia Biosciences was attempting to hold a non-signatory future affiliate of the defendant to a forum selection clause. It was not reasonably foreseeable that the future affiliate — formed eight years after the contract had been executed — would be bound by the forum selection clause.
Plaintiffs adequately allege that Mayo, TDTH, and Manager are closely related to signatories such that enforcement of the forum selection clause against them was foreseeable (see e.g. Firefly Equities LLC v Ultimate Combustion Co., 736 F Supp 2d 797, 800 [SD NY 2010]; Bakrie, 154 AD3d at 179). Mayo served as co-managing general partner of Fund (with Evans-Freke) and as one of the issuers' three directors. Mayo and Evans-Freke executed the relevant agreements on behalf of whichever Celtic entity was party to that agreement. Mayo, for example, executed the indenture on behalf of the issuer and 16 named guarantors, as well as an undertaking on behalf of the issuer and Fund. Evans-Freke executed the servicing agreement on behalf of the issuer, the servicer, 16 named guarantors, and Manager. Among other things, the prospectus for the notes advised that the issuer was "highly dependent upon our senior management, particularly Stephen Evans-Freke and John Mayo, [] Celtic's two Managing General Partners," warning that "[i]f we fail to . . . keep senior management, we may be unable to successfully develop the Products, conduct our clinical trials, identify Additional Products and, ultimately, sell our rights and interests in the Products" (see e.g. Firefly Equities LLC, 736 F Supp 2d at 800 [foreseeable that forum selection clause would be enforced against corporate president in his individual capacity where he signed the contract in his representative capacity]).
TDT, which executed the indenture, is a subsidiary of TDTH. The indenture references TDTH throughout, and incorporates as a "Transaction document[]" a subscription agreement between the issuer and TDTH. Thus, enforcement of the forum selection clause against TDTH was foreseeable by virtue of TDTH's ownership interest in and control over TDT and its involvement in the notes offering.
Manager is CPM's general partner and executed the servicing agreement on its behalf (via Evans-Freke as managing general partner). The servicing agreement obligated CPM to "perform[] certain services with respect to the Indenture, the Notes and the Guarantees." Enforcement of the forum selection clause against Manager was foreseeable by virtue of Manager's role as CPM's general partner and CPM's significant role in the transaction. Manager is amenable to personal jurisdiction in any event as the general partner of CPM, which is subject to the clause (see U.S. Bank Natl. Assn. v Ables & Hall Bldrs., 582 F Supp 2d 605, 615-616 [SD [*6]NY 2008]).
Plaintiffs' allegations are thus enough, at this preliminary stage, to permit jurisdictional discovery as to the various defendants' knowledge of and role in the offering (see Bakrie, 154 AD3d at 179-180)."Additional Product Subsidiaries"
"Absent explicit language demonstrating the parties' intent to bind future affiliates of the contracting parties, the term affiliate' includes only those affiliates in existence at the time that the contract was executed" (Ellington v EMI Music, Inc., 24 NY3d 239, 246 [2014]). Where, however, the parties "intend[] to bind future affiliates, they [may] include[] language expressing that intent" (id.; see also Georgia Malone & Co. v E & M Assoc., 163 AD3d 176, 186 [1st Dept 2018] ["The language following the signatures also indicates an intent to bind all future entities related to E & M, its employees and officers, as well as successors"]).
Here, the express terms of the indenture make clear that the parties intended future Celtic entities to qualify as "Guarantors" by virtue of benefitting from the proceeds of the offering. An "Additional Product Subsidiary" is defined as "any 75% Owned Subsidiary of Celtic [defined as Fund therein] that acquires any rights or interests (directly or indirectly) in an Additional Product after the Closing Date" (emphasis added). Similarly, "Additional Product" is defined as "any drug development project acquired, directly or indirectly, by Celtic or any Subsidiary thereof following the Closing Date that is financed by Additional Product Funds or funds from the Issuer Closing Account" (emphasis added). Thus, the indenture explicitly contemplated that if noteholder funds were expended after the closing date by any entity 75% owned by Fund to develop products, that entity would qualify as an "Additional Product Subsidiary," i.e., a "Guarantor[]" under the indenture.
Plaintiffs specifically allege that TDTH and the FIX entities qualify as "Additional Product Subsidiar[ies]." TDTH is at least 75% owned by Fund and owns 100% of TDT, which plaintiffs allege has developed "Additional Products" using "funds that the Notes generated to develop new products," i.e., "Additional Product Funds."[FN4] The FIX entities are wholly-owned subsidiaries of the issuer, which is owned by Fund, and are alleged to have used proceeds from the notes to acquire interests in Additional Products from a company called Inspiration Biochemicals.
Plaintiffs have also adequately alleged, at this stage, that the Vendor is an "Additional Product Subsidiary." The motion court found that Vendor did not qualify as an "Additional Product Subsidiary" because it was not a subsidiary of the issuer. However, the indenture uses the term "Celtic" to refer to Fund, i.e., Celtic Pharmaceutical Holdings, L.P., which sits above the issuer on the organizational chart. Plaintiffs allege that Vendor is more than 75% owned by Fund, and that it acquired rights in "Additional Product[s]" after the issuance of the notes.Liability of Auven as Successor to CPM
If successorship is established, a forum selection clause will bind a contracting party's successor in interest (see Aguas Lenders Recovery Group LLC v Suez, S.A., 585 F3d 696, 701 [2d Cir 2009]). New York recognizes four exceptions to the general rule that an acquiring corporation is not liable for the liabilities of the acquired corporation: (1) a buyer who formally assumes the seller's debts; (2) a buyer who de facto merged with the seller; (3) transactions undertaken to defraud creditors; and (4) where the buyer may be considered a "mere continuation" of the seller (id. at 702).
The hallmarks of a de facto merger include a continuity of ownership; cessation of ordinary business and dissolution of the acquired corporation as soon as possible; assumption by the successor of the liabilities ordinarily necessary for the uninterrupted continuation of the business of the acquired corporation; and continuity of management, personnel, physical location, assets and general business operation (Fitzgerald v Fahnestock & Co., 286 AD2d 573, 574 [1st Dept 2001]). A court will "look to whether the acquiring corporation was seeking to obtain for itself intangible assets such as good will, trademarks, patents, customer lists and the right to use the acquired corporation's name" (id. at 575). The doctrine is based on the principle that a successor who "effectively takes over a company in its entirety should carry the predecessor's liabilities as a concomitant to the benefits it derives from the good will purchased" (id. [internal quotation marks omitted]).
Plaintiffs have adequately alleged, at this preliminary stage, that Auven was the successor to CPM, the servicer (see Fitzgerald, 286 AD2d at 574). Plaintiffs allege that a key element of the "bleed-out" scheme was the creation of successor funds and the transfer of assets and rights otherwise within the collateral pool to those funds. Plaintiffs note that whereas Fund, the issuer, and CPM are now insolvent and/or no longer operating, Evans-Freke continues to operate Auven as a profitable private equity firm focused, like its predecessor, on investing in novel drug development programs.
Plaintiffs cite the following in support of their theory that Auven is carrying on the business of CPM: Evans-Freke co-founded both CPM and Auven. He serves as one of two general partners of Auven and the managing general partner of Manager, which is the general partner of CPM. According to nonparty Averill Powell, the former general counsel to the Celtic Pharma and Celtic Therapeutics groups, Auven's predecessor agreed to "assume costs and liabilities related to the operation of CPM's New York office as of September 2009, including the costs and liabilities associated with salaries and bonuses for [Powers] and other junior carried interest limited partners." They shared overlapping investors, board members, and employees, including key management such as the general counsel, chief accounting officer, and head of clinical development. Plaintiffs allege that upon its formation, Auven did not set up separate payroll for employees who also worked for CPM. Plaintiffs note that Auven registered trademarks for "Celtic," "Celtic Pharma Group," "The Celtic Group," and "Celtic Pharma International," only "rebranding" following the issuer's default on the notes.
Auven argues that it is shielded from liability because Evans-Freke co-founded CPM and Auven with two different co-founders and thus ownership of the entities is not "identical." Continuity of ownership, however, does not mean identity of ownership (see Matter of Abreu v Barkin & Assoc. Real Estate, LLC, 136 AD3d 600, 602 [1st Dept 2016] [sole shareholder in predecessor owned 51% of successor]; Ladenburg Thalmann & Co. v Tim's Amusements, 275 AD2d 243, 248 [1st Dept 2000] [shareholder owned 20% of predecessor and 72% of successor]).
Auven maintains that it adopted bifurcation protocols to keep its operations distinct from those of the other Celtic Pharma entities, citing Evan-Freke's affidavit. Auven raises factual issues not capable of resolution at this preliminary stage. As the motion court found, "whether successor liability can successfully be established should be determined after discovery."Standing under the Servicing Agreement
Plaintiffs are intended third-party beneficiaries of the indenture. Thus, they have standing to enforce the servicing agreement, which is part of the same transaction (see Tate & Lyle, 98 AD3d 401). The two contracts were executed on the same day, and the indenture incorporates the servicing agreement as one of the "Transaction Document[s]" that governs the notes. Indeed, the purpose of the servicing agreement was to implement and service the indenture. The preamble to the servicing agreement makes clear that CPM, the issuer, and the guarantors entered into the servicing agreement in order for CPM to "perform[] certain services with respect to the [*7]Indenture, the Notes, and the Guarantees" (emphasis added).
We have considered and rejected the other arguments for affirmative relief.
Accordingly, the order, Supreme Court, New York County (Eileen Bransten, J.), entered December 4, 2018, which, insofar as appealed from as limited by the briefs, granted defendant Celtic Pharma Development Services Bermuda Ltd.'s motion to dismiss the complaint as against it for lack of personal jurisdiction, denied the motions of defendants Targeted Delivery Technologies Holdings, Ltd. (TDTH), Celtic Pharma FIX, Ltd., Celtic Pharma FIX Venture, Ltd., Celtic Pharma Management Company, Ltd., Celtic Therapeutics Management LLLP doing business as Auven Therapeutics Management LLLP and as successor in interest to Celtic Pharma Management, L.P. (Auven), and John Mayo to dismiss the complaint as against them for lack of personal jurisdiction, and denied the motions of TDTH, Celtic Pharma Management Company Ltd., and Auven to dismiss claims arising out of the servicing agreement for lack of standing, should be
modified, on the law, to deny Celtic Pharma Development Services Bermuda Ltd.'s motion, and otherwise affirmed, without costs.
All concur.
Order, Supreme Court, New York County (Eileen Bransten, J.), entered December 4, 2018, modified, on the law, to deny Celtic Pharma Development Services Bermuda Ltd.'s motion, and otherwise affirmed, without costs.
Opinion by Manzanet-Daniels, J. All concur.
Acosta, P.J., Renwick, Manzanet-Daniels, Kapnick, González, JJ.
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: MAY 21, 2020
CLERK
Footnotes
Footnote 1:Defendant Stephen Evans-Freke withdrew his appeal before oral argument.
Footnote 2:Fund has not appealed from the order denying its motion.
Footnote 3:While the published decision in Bakrie does not discuss due process, the Bakrie defendants made that argument (brief available at 2016 WL 11539017, *47-49). By denying the Bakrie defendants' motion to dismiss, we sub silentio rejected their due process arguments.
Footnote 4:Because the motion court found that TDTH was closely related to TDT, it did not reach the question of whether TDTH qualified as an "Additional Product Subsidiary."
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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
v.
Criminal Action No. 11-224 (BAH)
JENNIFER CABRAL,
Chief Judge Beryl A. Howell
Defendant.
MEMORANDUM OPINION
Pending before the Court are the defendant’s Motion to Remove Lien, see generally
Def.’s Mot. Remove Lien (“Def.’s Mot.”), ECF No. 42, and Supplement to Motion to Remove
Lien (“Def.’s Suppl.”), ECF No. 47. The defendant, who is in compliance with her monthly
restitution obligation of $50, seeks removal of a lien placed on real property in Kansas City,
Missouri, securing the order of restitution entered in this criminal case. For the reasons set forth
below, the defendant’s motions are denied.
I. BACKGROUND
On August 11, 2011, the defendant pleaded guilty to the offense of interstate
transportation of stolen property, in violation of 18 U.S.C. § 2314. Plea Agreement at 1, ECF
No. 6. From October 2006 to March 2010, the defendant “was employed as a payroll manager
by Madison Marquette in the company’s Washington, D.C. office.” Statement of Offense ¶ 1,
ECF No. 5. She “was the primary authorized user of Madison Marquette’s [Automated Data
Processing (“ADP”)] payroll system,” and “had full access to all aspects” of the system. Id. ¶ 3.
Beginning in or about early 2007, and until March 2010, the defendant, “without the knowledge
or approval of her supervisor,” “engaged in a scheme in which she manipulated the data in
Madison Marquette’s payroll system in multiple ways that resulted in substantial unauthorized
1
increases in her compensation.” Id. ¶ 4. At the time of the offense, the defendant “lived with her
(now ex) partner and their son at a home located in Odenton, Maryland,” Def.’s Suppl. Mot.
Remove Lien (“Def.’s Suppl.”) at 2, ECF No. 47, and, thus, her “scheme caused the money she
stole from Madison Marquette [in Washington D.C.] to cross state lines via wire transfers” to the
state of Maryland and elsewhere, Statement of Offense ¶ 16. On February 17, 2011, the
defendant was interviewed by agents with the Federal Bureau of Investigation, during which
interview the defendant “admitted to manipulating the Madison Marquette ADP payroll system
. . . for the purpose of stealing money.” Id. ¶ 17.
On January 11, 2012, following the defendant’s plea of guilty, the defendant was
sentenced to twenty-four months of incarceration, followed by a three-year period of supervised
release. Judgment at 2, 3, ECF No. 34. Pursuant to the Mandatory Victims Restitution Act of
1996 (the “MVRA”), the sentencing Court ordered restitution in the amount of $244,852,
providing that “[t]he defendant shall pay the balance of any restitution owed at a rate of no less
than $50 each month . . . .” Id. at 4, 6. On January 23, 2012, the defendant filed a notice of
appeal in the United States Court of Appeals for the District of Columbia Circuit, without stating
the precise ground for the appeal, Notice of Appeal, ECF No. 30, which appeal was subsequently
dismissed, on June 26, 2012, D.C. Circuit Order, ECF No. 40.
Before self-surrendering to prison, the defendant was permitted to move to Kansas City,
Missouri, “to allow [her] then partner to be closer to her family to help with [their] son during
[the defendant’s] incarceration.” Def.’s Mot. at 1.1 In addition, “[t]o enable [the defendant’s]
partner to purchase a home in Kansas City [by mortgage], the probation office allowed [the
1
The government has represented that it “has not agreed to any of the facts stated in the letter and is
unwilling to accept the proffer of information made by the Defendant, Pro se.” Gov’t’s Suppl. Mem. Opp’n Def.’s
Letter Constr. Mot. Remove Lien & Resp. Suppl. (“Gov’t’s Suppl.”) at 7, ECF Nos. 49–50.
2
defendant’s] name to be placed on the mortgage paperwork” of that home. Def.’s Suppl. at 2.
The defendant’s partner purchased a property located on 102nd Street, Kansas City, Missouri.
Def.’s Mot. at 1. As a result of the defendant’s name being on the mortgage for the Kansas City
residence, the government placed a lien on the property “at the local level.” Gov’t’s Opp’n
Letter Construed as Mot. Remove Lien (“Gov’t’s Opp’n”) at 1, ECF No. 43.
At the time of the acquisition of the Kansas City residence, the defendant and her partner
already owned a home in Odenton, Maryland, which was also subject to a government lien as a
result of the defendant’s restitution obligation. Def.’s Mot. at 1. After the defendant’s release
from prison, in September 2014, the defendant sent the government “information showing the
[Maryland] property . . . was going to be foreclosed unless [the defendant and her partner] could
short sell the unit.” Id. The government “refused to release the lien absent payment of
(approximately) $5,000.00.” Def.’s Suppl. at 2. Neither the defendant nor her partner provided
that money to the government, and the Maryland property was foreclosed upon. Id.
Meanwhile, the “mortgage payments for the Kansas City residence were in arrears.” Id.
The defendant’s partner needed to refinance the Kansas City residence, but was unable to do so
because of the lien, putting the Kansas City residence at risk of foreclosure. Id. In light of this
risk, the defendant sent a pro se letter, dated April 11, 2016, to the Court asking that the lien on
the Kansas City residence be removed. Def.’s Mot. at 1. This letter was construed as a motion
to remove the lien when filed on the docket in this action. See generally Def.’s Mot. 2 After the
government opposed the defendant’s motion, see generally Gov’t’s Opp’n, the defendant filed a
motion for appointment of counsel, see generally Mot. Appt. Counsel, ECF No. 44, which
motion was granted, see Min. Order, dated June 8, 2016. At the direction of the Court, both
2
On the same day the defendant’s letter was filed, her case was reassigned to the undersigned Chief Judge,
since the original Judge at sentencing has retired.
3
parties supplemented their original pleadings. See Min. Order, dated June 21, 2016; Def,’s
Suppl.; Gov’t’s Suppl. Mem. Opp’n Def.’s Letter Constr. Mot. Remove Lien & Resp. Suppl.
(“Gov’t’s Suppl.”), ECF Nos. 49–50. The defendant’s motion is now ripe for consideration.
II. DISCUSSION
The defendant contends that the lien on the Kansas City residence “was illegally placed.”
Def.’s Suppl. at 7. According to the defendant, under the applicable statutes, “a lien may not be
placed immediately upon imposition of an order for restitution, but only when necessary for the
‘enforcement of an order of restitution,’” id. at 3–4 (quoting 18 U.S.C. § 3613(f)), and this
necessity never arose in this case because “Ms. Cabral was current on her monthly payments,”
id. at 4. In response, the government marshals a myriad of counterarguments. Relevant to the
disposition of the instant motion, the government contends that the government is entitled to
place a lien on the defendant’s property and that neither the MVRA nor the Court’s inherent
authority permit the vacating of the lien in question here. The government is correct regarding
its entitlement to a lien and the inappropriateness, on the present record, of this Court vacating or
modifying that lien, and, consequently, the defendant’s motion is denied.
As support for her position, the defendant relies upon United States v. Martinez, 812 F.3d
1200 (10th Cir. 2015). In that case, “the government served writs of garnishment for two of the
defendant’s retirement accounts even though the defendant made timely monthly payments as
required by the order of restitution,” which the court concluded improperly “‘usurp[ed] the
district court’s role in evaluating the defendant’s financial conditions and setting a payment
schedule.’” Def.’s Suppl. at 4 (quoting Martinez, 812 F.3d at 1206). The defendant also relies
upon United States v. Hughes, 813 F.3d 1007 (D.C. Cir. 2016), in which this Circuit held the
government’s seizure of a defendant’s tax refunds improper where the seizure exceeded “the
4
monthly restitution payment amount[, which] was the maximum the government was authorized
to collect,” Def.’s Suppl. at 5, and United States v. Villongco, 2016 WL 3747508 (D.D.C. July
11, 2016), in which this Court held “there was nothing to distinguish Villongco’s case from
Hughes,” Def.’s Suppl. at 5. The defendant contends these cases control the outcome here,
characterizing them as involving a “similar issue” or “almost identical situation.” Id. at 4–5.
While the defendant has correctly described the holdings of these cases, the defendant’s
extension of those holdings to urge removal of a lien is misplaced.
Title 18 provides that “an order of restitution . . . is a lien in favor of the United States on
all property and rights to property of the person fined as if the liability of the person fined were a
liability for a tax assessed under the Internal Revenue Code of 1986.” 18 U.S.C. § 3613(c).
“The lien arises on the entry of judgment and continues for 20 years or until the liability is
satisfied, remitted, set aside, or is terminated,” id., and becomes “valid” “[u]pon filing of a notice
of lien in the manner in which a notice of tax lien would be filed under section 6323(f)(1) and (2)
of the Internal Revenue Code of 1986,” id. § 3613(d). In this way, the statute expressly provides
for the existence of a lien upon “entry of judgment” without regard to whether a defendant is in
default on his or her restitution obligation.
Notwithstanding the plain text of the statute, the defendant suggests that the
government’s filing of a notice of a lien in the absence of a default on a payment order is
improper. See Def.’s Suppl. at 3–5. Noting the statute’s characterization of liens as a method of
“enforcement” of a restitution order, id. § 3613(f), the defendant equates liens with the methods
of enforcement used improperly in Martinez, Hughes, and Villongco, and argues that here, as in
those cases, “there was no need for the government to enforce the restitution order because Ms.
Cabral was current on her monthly payments.” Def.’s Suppl. at 4. Contrary to the defendant’s
5
suggestion, however, all methods of enforcing a restitution order are not created equal. For
example, a federal tax lien “is not self-executing.” Kuretski v. Comm’r, 755 F.3d 929, 932 (D.C.
Cir. 2014) (quoting EC Term of Years Trust v. United States, 550 U.S. 429, 430 (2007)). Rather,
“[a]ffirmative action by the [Internal Revenue Service] is required to enforce collection of the
unpaid taxes.” United States v. Nat’l Bank of Commerce, 472 U.S. 713, 720 (1985); see also
Kuretski, 755 F.3d at 932 (quoting EC Term of Years Trust, 550 U.S. at 430–31). By contrast,
the enforcement mechanisms at issue in Martinez, Hughes, and Villongco involved actual
collection through the seizure of assets, with the result of effectively accelerating restitution
payments contrary to the terms of court-ordered installment payments. It is the collection of
restitution beyond the amount and schedule ordered by a court, not the mere use of an
enforcement mechanism, that “usurp[s] the district court’s role” under the MVRA, Martinez, 812
F.3d at 1206, to prescribe “the manner in which, and the schedule according to which, the
restitution is to be paid,” 18 U.S.C. § 3664(f)(2) (emphasis added). Consequently, the
government is entitled to a lien on the defendant’s property in the amount of the restitution
ordered by the sentencing Court, regardless of whether she has defaulted on her restitution
obligations.3
3
Neither party has submitted a copy of the lien at issue here or specified its terms, but the government’s
arguments suggest the lien is for the full amount of restitution ordered and for which the defendant is accountable
due to her victims’ losses, i.e., $244,852. See Gov’t’s Suppl. at 17–20 (asserting that the full amount of restitution
ordered, rather than the payment schedule, defines the amount of restitution the government may collect). The
government also spills considerable ink arguing that the defendant is not entitled to a modification of the restitution
order in her case pursuant to the MVRA, see Gov’t’s Suppl. at 7–12, but the defendant does not press any such
entitlement, see generally Def.’s Mot; Def.’s Suppl., or directly challenge the lien for failing to reflect the
installment payment limitation in the judgment, see generally id. Thus, the questions whether the lien at issue
conflicts with the schedule of restitution payments in the judgment or whether this Court has authority to direct the
government to modify a lien that may conflict with a restitution order are not considered. Cf. United States v. Perry,
360 F.3d 519, 536–37 (6th Cir. 2004) (concluding district court lacked authority to vacate a victim’s lien pursuant to
the MVRA but noting since “[n]o one can get a lien for more than the value of the supporting judgment,” where
victim’s lien exceeded the victim’s pro rata share of defendant’s restitution order, the defendant could move in the
state court to modify the lien). Consequently, the government’s arguments on these issues need not be addressed.
6
III. CONCLUSION
For the foregoing reasons, the defendant’s Motion to Remove Lien, ECF No. 42, and
Supplement to Motion to Remove Lien, ECF No. 47, are denied. An appropriate Order
accompanies this Memorandum Opinion.
Date: June 13, 2017
__________________________
BERYL A. HOWELL
Chief Judge
7
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701 F.Supp.2d 749 (2010)
Joseph ANTONIO, et al., Plaintiffs,
v.
SECURITY SERVICES OF AMERICA, LLC, et al., Defendants.
Civil Action No. AW-05-2982.
United States District Court, D. Maryland, Southern Division.
March 31, 2010.
*754 Allison Walsh Sheedy, Charles William Frick, Donald Paul Amlin, Joseph Decker, *755 Lauren R. Bates, Matthew W. Dukes, Michele A. Roberts, Steven H. Schulman, Akin Gump Strauss Hauer and Feld LLP, Isabelle Marie Thabault, Mary J. Hahn, Robert Mark Bruskin, Shalini Goel Agarwal, Washington Lawyers Committee for Civil Rights, Washington, DC, for Plaintiffs.
Edward J. Lopata, Gerry H. Tostanoski, Scott Anthony Thomas, Tydings and Rosenberg LLP, Daniel R. Chemers, Gregory Edward Rapisarda, Saul Ewing LLP, Kelly M. Preteroti, Ober Kaler Grimes and Shriver, Joshua R. Treem, Michael Christopher Lind, Schulman Treem Kaminkow and Gilden PA, Baltimore, MD, Joseph P. Moriarty, Kevin L. Keller, Tara L. Chadbourn, Willcox and Savage PC, Norfolk, VA, Harold G. Belkowitz, Ober Kaler Grimes and Shriver, Brent J. Gurney, Allison Hester-Haddad, Kevin Christopher Heffel, Kevin Hyland Moriarty, Lisa J. Cole, Wilmer Cutler Pickering Hale and Dorr LLP, Philip Tucker Evans, John S. Irving, IV, Holland and Knight LLP, Washington, DC, for Defendants.
MEMORANDUM OPINION
ALEXANDER WILLIAMS, JR., District Judge.
Currently pending before the Court are Corporate Defendants' Motion for Summary Judgment (Doc. No. 315), Plaintiffs' Cross Motion for Partial Summary Judgment (Doc. No. 359), Defendant Michael Everhart's Motion for Partial Summary Judgment (Doc. No. 353), Defendant Patrick Stephen Walsh's Motion for Summary Judgment (Doc. No. 320), Defendant Jeremy Daniel Parady's Motion for Partial Summary Judgment (Doc. No. 355), Defendant Aaron Lee Speed, Sr.'s Motion for Summary Judgment (Doc. No. 358), and Defendant Roy T. McCann's Motion for Partial Summary Judgment (Doc. No. 357). The Court has reviewed the entire record, including the pleadings and exhibits, with respect to the instant motions. The Court also held a hearing on these motions on March 16, 2010. For the reasons stated below, the Court will GRANT IN PART and DENY IN PART the Corporate Defendants' Motion for Summary Judgment, DENY Plaintiffs' Cross Motion for Partial Summary Judgment, DENY Defendant Patrick Stephen Walsh's Motion for Summary Judgment, DENY Defendant Jeremy Daniel Parady's Motion for Partial Summary Judgment, DENY Defendant Michael Everhart's Motion for Partial Summary Judgment, DENY Defendant Aaron Lee Speed's Motion for Summary Judgment, and DENY Defendant Roy T. McCann's Motion for Partial Summary Judgment.
1. FACTUAL AND PROCEDURAL BACKGROUND
This case arises out of the now notorious arson of December 6, 2004, in which five men executed a conspiracy to burn homes, most of which were minority-owned, in "Hunters Brooke," a newly developed neighborhood in Charles County, Maryland. The thirty-two Plaintiffs in this case owned, or had contracted to purchase, houses in this neighborhood and participated in their design. They entered into these purchase contracts with two subsidiaries of Lennar Homes, Inc., U.S. Home Corporation, and Patriot Homes, Inc., (collectively, the "Developer"). The individual defendants in this case, Michael Everhart ("Everhart"), Patrick Stephen Walsh ("Walsh"), Jeremy Daniel Parady ("Parady"), Aaron Lee Speed, Sr. ("Speed"), and Roy T. McCann's ("McCann"), (collectively, "Individual Defendants") have all either been found guilty of, or pled guilty to, serious felony criminal charges in federal court arising from their participation in the arson at Hunters Brooke and have all *756 been sentenced to prison by this Court. Plaintiffs brought this ten-count suit against the Individual Defendants, as well as SSA Security, Inc. ("SSA, Inc."), the security guard company, ABM Industries, Inc. ("ABM"), its parent, and Security Services of America, LLC ("SSA, LLC"), its predecessor (collectively "Corporate Defendants").
The Developer hired SSA, Inc. to provide security services at Hunters Brooke, starting on November 12, 2004, until the fires occurred on December 6, 2004. SSA, Inc. employed Defendant Speed and William Fitzpatrick[1] as security guards to work at Hunters Brooke during this period. Pursuant to the Developer's direction, SSA, Inc. assigned a single security guard to monitor Hunters Brooke during non-construction hours, from approximately 6:00 p.m. to 5:00 a.m. In this position, the security guard would station himself in a patrol vehicle at the front of the construction site, prevent unauthorized individuals from entering, and patrol the site periodically.
During this period, Defendant Speed and the other Individual Defendants conspired to burn and damage the homes, and allegedly did so with racial animus against African-American and other minority families who planned to move into the houses. While on duty, Speed created a map of the neighborhood and determined the race of each house owner. Then, on December 3, 2004, while on duty, Speed allowed his co-conspirators to deposit flammable liquids within and around the houses in Hunters Brooke.
On December 6, 2004, the morning of the fires, William Fitzpatrick (an employee of SSA, Inc.) was on duty at Hunters Brooke and left his post early, allegedly before 4:00 a.m. Fitzpatrick has declared that he left his post early because he felt ill, though Plaintiffs indicate that he may have departed early to allow Speed to enter the premises unobstructed. In any case, at 5:12 a.m. he returned his identification light to the SSA Inc.'s office in Waldorf, Maryland.
At some point between midnight and 3:20 a.m. that morning, Defendant Walsh drove to Defendant Parady's house, picked him up, and they then met with the co-conspirators, including Defendant Speed, in a parking lot in Waldorf, Maryland. Fitzpatrick called Speed at 3:20 a.m., and Speed returned his call at 3:21 a.m. Around 4:00 a.m., the arsonists entered the site, and some of them entered the houses, poured accelerants in them, and lit them on fire. The arsonists remained there, pouring additional accelerant, for thirty to forty-five minutes, and saw the homes begin to flame. The Charles County 911 Emergency System received a call reporting the fire at 4:54 a.m. The houses sustained serious damage.
Evidence indicates this arson was racially motivated. The Individual Defendants had uttered statements indicating they were angry that African-Americans were moving into the area. On the night of the fire, one of the Individual Defendants allegedly painted the words "Black Jokers" on a dumpster. Additionally, ninety percent of the homes damaged were owned or under contract to African-Americans or other minorities. Finally, one Defendant stipulated that the arson was racially motivated. (Doc. No. 375, Ex. 5, Parady Stip. Facts.)
After the arson, the Developer offered to compensate Plaintiffs, and used insurance proceeds to make repairs. The insurance companies, as the Developer's subrogees, *757 filed a lawsuit in this Court against the Corporate Defendants on July 22, 2005, in which they sought to recover payments they made to the Developer under the Developer's property insurance policies. The Corporate Defendants settled the case by "making a lump-sum payment to the Developer's subrogees and obtained a release of all claims without admitting" liability. (Doc No. 315.) All of the Plaintiffs eventually closed on their house purchase contracts. But, Plaintiffs continue to be haunted by the arson and suffer emotional injuries, which are accompanied by physical injuries in some cases.
On November 2, 2005, Plaintiffs brought this ten-count suit against Individual Defendants, as well as SSA, Inc., ABM, and SSA, LLC. SSA, LLC is a North Carolina limited liability company formed in 1998 to provide security guard services, but ceased to exist as a corporate entity in 2006. ABM Industries, Inc. is the parent company of ABM Security Services, Inc., a Delaware corporation which acquired SSA, LLC in March of 2004. SSA, Inc. is a California corporation formed in January 2004 as a subsidiary of ABM to provide security services in states previously served by SSA, LLC. At the time of the fire, all Maryland business for ABM was handled by its subsidiary SSA, Inc.
Plaintiffs allege all Defendants violated the Fair Housing Act (Count I), Maryland Fair Housing Law (Count II),[2] 42 U.S.C. § 1982 (Count III), 42 U.S.C. § 1985(3) (Count IV), and brought claims of tortious interference with contract (Count IX) and intentional infliction of emotional distress ("IIED") (Count X). Additionally, against the Corporate Defendants, Plaintiffs allege negligence in hiring, training, and supervision (Count V), negligence (Count VI), violations of Maryland Business Occupations and Professions Code (Count VII), and breach of contract (Count VIII).
Corporate Defendants have moved for summary judgment on all Counts of Plaintiffs' Amended Complaint, all Individual Defendants have moved for summary judgment on Counts IV (42 U.S.C. § 1985(3)), IX (tortious interference with contract), and X (intentional infliction of emotional distress), and Defendants McCann, Everhart, and Speed have additionally moved for summary judgment on the Fair Housing Act claim (Count I), the 42 U.S.C. § 1982 claim (Count III), and on the 42 U.S.C. Section 1985(3) claim (Count IV) on a separate ground. After the filing of these motions, Plaintiffs moved for sanctions against Corporate Defendants for spoliation of evidence, and Judge Day issued a Memorandum Opinion and Order pertaining to this Motion on March 30, 2010.
As a preliminary matter, the Court would like to recognize the attorneys for the excellent briefings in this case. This case presents very difficult issues, and the Court has appreciated the novel and nuanced arguments the parties have presented. The Court has found merit in almost all of the arguments the parties have put before it, and because of the strength of lawyering in this case and the sad subject matter, the Court has struggled mightily over its decision.
2. STANDARD OF REVIEW
Summary judgment is only appropriate if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 323-25, 106 S.Ct. *758 2548, 91 L.Ed.2d 265 (1986). The court must draw all justifiable inferences in favor of the nonmoving party, including questions of credibility and of the weight to be accorded to particular evidence. Masson v. New Yorker Magazine, 501 U.S. 496, 520, 111 S.Ct. 2419, 115 L.Ed.2d 447 (1991) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). When parties file cross-motions for summary judgment, the court must view each motion in a light most favorable to the nonmovant. Mellen v. Bunting, 327 F.3d 355, 363 (4th Cir. 2003). To defeat a motion for summary judgment, the nonmoving party must come forward with affidavits or other similar evidence to show that a genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). While the evidence of the nonmoving party is to be believed and all justifiable inferences drawn in his or her favor, a party cannot create a genuine dispute of material fact through mere speculation or compilation of inferences. See Deans v. CSX Transp., Inc., 152 F.3d 326, 330-31 (4th Cir.1998). Additionally, hearsay statements or conclusory statements with no evidentiary basis cannot support or defeat a motion for summary judgment. See Greensboro Prof'l Fire Fighters Ass'n, Local 3157 v. City of Greensboro, 64 F.3d 962, 967 (4th Cir.1995).
3. ANALYSIS
The Court will first address the Corporate Defendants' and Plaintiffs' Cross Motions for Summary Judgment, and then will separately address the Individual Defendants' Motion for Summary Judgment.
Additionally, while the Court heard arguments with respect to Plaintiffs' Motion for Sanctions Against Defendants SSA, Inc., ABM, and SSA, LLC, the Court is mindful that the Motion pertains to discovery, and thus the Court will take into consideration the relevant portions, if any, of Judge Day's decision on the Motion for Sanctions. The Court will not determine the full scope of his findings in this Opinion. Indeed, at this point it is unclear what particular issues that remain would be covered by the adverse inference Judge Day ordered. To the extent that this case proceeds, the Court may invite the parties to submit briefings on the effect of the adverse inference. Finally, Judge Day authorized further discovery in this case, and the Court agrees it is warranted. As such, the Court will permit the parties to submit a revised scheduling order with respect to the applicable discovery and dispositive motions deadlines.
A. Corporate Defendants' Motion for Summary Judgment and Plaintiffs' Cross Motion for Summary Judgment
Corporate Defendants move for summary judgment on all counts in the Amended Complaint, and on whether ABM and SSA, LLC are proper parties to the suit. The Plaintiffs cross-move for summary judgment on the issue of Corporate Defendants' liability under the Maryland Business Occupations Code (Count VII). First, the Court finds that ABM and SSA, LLC are not proper parties to this suit, and will grant summary judgment on all claims as to them. Three of the Counts in the Complaint can be properly based on Corporate Defendants' direct liability: Two of thesethe negligence in hiring, training, and supervision claim (Count V) and the negligence claim (Count VI) are denied summary judgment because issues of material fact remain pending completion of the limited discovery that has been ordered. Because there is no issue of material fact that the Plaintiffs were merely incidental beneficiaries of *759 the contract between SSA, Inc. and the Developer, the Court will grant summary judgment on the breach of contract claim (Count VIII). The remaining Counts hinge, in part, on a determination of SSA, Inc.'s vicarious liability for the tortious acts of the Hunters Brooke guards, Speed and Fitzpatrick. The Court finds that as a matter of law, Corporate Defendants are not liable for Speed's preparation for arson, but that issues of material fact remain with respect to their liability for Fitzpatrick's early departure from his post. Because neither SSA, Inc. nor any employee acting within the scope of employment acted with the necessary intent or racial animus, and no other basis for vicarious liability applies, the Court will grant Corporate Defendants summary judgment on the Fair Housing Act claim (Count I), the claim for violation of 42 U.S.C. § 1982 (Count III), the 42 U.S.C. § 1985(3) claim (Count IV), the tortious interference with contract claim (Count IX), and the intentional infliction of emotional distress ("IIED") claim (Count X).[3] The common law vicarious liability analysis also applies to the Maryland Business Occupations and Professions Code (Count VII) as the Court finds it codifies traditional principles of vicarious liability. Thus the Maryland Business Occupations and Professions Code claim remains against Corporate Defendants insofar as they are vicariously liable for Fitzpatrick's early departure from his post.
i. ABM and SSA, LLC as Parties
In order for ABM, the parent corporation of SSA, Inc., to be a proper party in this case, the Plaintiffs must demonstrate that there is sufficient cause to pierce the corporate veil. In many jurisdictions, sufficient cause may be demonstrated by showing a high level of control by the parent over the subsidiary, or showing that the subsidiary is simply an instrument for the parent corporation. See, e.g., DeWitt Truck Brokers, Inc. v. W. Ray Flemming Fruit Co., 540 F.2d 681, 685-86 (4th Cir.1976) (noting that Texas, Alabama, South Carolina, and Massachusetts all use an instrumentality rule). "Maryland is more restrictive than other jurisdictions in allowing a plaintiff to pierce a corporation's veil," however. Residential Warranty Corp. v. Bancroft Homes Greenspring Valley, Inc., 126 Md.App. 294, 309, 728 A.2d 783 (Ct.Spec.App.1999). Under Maryland law, the protection afforded a corporate entity will only be disregarded when it is "necessary to prevent fraud or to enforce a paramount equity." Dixon v. Process Corp., 38 Md.App. 644, 654, 382 A.2d 893 (Ct.Spec.App.1978). "Arguments that have urged a piercing of the veil for reasons other than fraud have failed in Maryland courts." Residential Warranty Corp., 126 Md.App. at 307, 728 A.2d 783. While the Plaintiffs seek an application of a control or instrumentality exception, such an exception has been explicitly rejected in Maryland. See, e.g., Dixon, 38 Md.App. at 654, 382 A.2d 893 ("Appellants' invocation of the `instrumentality rule' nevertheless, avails them naught as Maryland law is crystalline `that the corporate entity will be disregarded only when necessary to prevent fraud or to enforce a paramount equity.'") (quoting Bart Arconti & Sons, Inc. v. Ames-Ennis, Inc., 275 Md. 295, 312, 340 A.2d 225 (1975)); Residential Warranty Corp., 126 Md.App. at 307, 728 A.2d 783 ("Despite the proclamation that a *760 court may pierce the corporate veil to enforce a paramount equity, arguments that have urged a piercing of the veil `for reasons other than fraud' have failed in Maryland courts.") (internal citations omitted).
Plaintiffs note several undisputed facts concerning ABM's control over the operations of SSA, Inc; for example, (1) that ABM owns 100 percent of the voting securities in SSA, Inc.; (2) that SSA, Inc. does not hold annual board meetings, keep corporate minutes, or conduct its own auditing; and (3) that all but one of SSA, Inc.'s officers are also officers of ABM. If this case had arisen under a different state's laws, Plaintiffs would be correct that this level of control would be sufficient to justify piercing the corporate veil under the control or instrumentality exception to the corporate veil doctrine. However, as noted above, Maryland has not embraced this exception and liability cannot be attached unless there is fraud or where necessary to enforce a paramount equity. See Bart Arconti & Sons, Inc., 275 Md. at 312, 340 A.2d 225. Plaintiffs respond that ABM is actually directly liable, thus removing the need to pierce the corporate veil, for the events surrounding the fire because ABM "involved itself in the day to day operations of its subsidiary in contracting, training, and rehiring employees, and is responsible for the failures in these areas." (Doc. No. 359 at 81.) However, this contention is simply a re-characterization of Plaintiffs' argument for control-based vicarious liability as a case for direct liability. Thus, this Court finds that ABM is not a proper party to this case as Plaintiffs have not shown or pled fraud or a similar inequity.
Corporate Defendants further argue that SSA, LLC, as a predecessor to SSA, Inc., cannot be held directly liable for its hiring and training of Speed and Fitzpatrick. (Doc. No. 368 at 61.) While both Speed and Fitzpatrick were originally hired by SSA, LLC, neither party disputes the fact that they were terminated and forced to reapply for positions with SSA, Inc. (See id.; Doc. No. 359 at 8.) Corporate Defendants contend that Plaintiffs' argument would result in the undesirable outcome of permanent employer liability for negligence in the hiring of an employee, even after the employee's termination. Corporate Defendants also assert that SSA, LLC no longer did business in Maryland at the time of the arson and thus that Plaintiffs' argument that SSA, LLC could be held liable as it was still providing security services in other states is factually inaccurate. (Doc. No. 368 at 61.)
Plaintiffs argue that SSA, LLC can be held directly liable because it originally hired Speed as a security guard, and that there are disputed facts with regard to the negligence of this hiring. (Doc. No. 359 at 82.) This original act of negligence in the hiring of Speed and Fitzpatrick is a "but-for" cause of the breaches of duty resulting in the fire, according to Plaintiffs. (Id.) Additionally, Plaintiffs contend that SSA, LLC had operations or employees in the State of Maryland at the time of the fire, insinuating that the activities at Hunters Brooke were actually controlled by SSA, LLC. (Doc. No. 259, Attach. B, ¶ 11.)
Plaintiffs cite no case-law with regard to holding predecessor SSA, LLC liable for any claims against the successor. The facts do not indicate that SSA, LLC was involved with the Hunters Brooke property. As such, any potential issues of vicarious liability from the incident in question on December 6, 2004 should be directed at the successor, SSA, Inc. Although a successor is on notice that allegations of liability-producing conduct against a predecessor might ripen into findings of liability, no such notice could exist for a predecessor to be aware of future bad acts *761 by a successor. See, e.g., NLRB v. General Wood Preserving Co., 905 F.2d 803 (4th Cir.1990) (finding a successor liable for the unfair labor practices of the predecessor). Thus, SSA, LLC is not a proper party to the suit as the rehiring of Speed and Fitzpatrick by SSA, Inc. breaks any possible chain of causality for SSA, LLC.
ii. Negligence in Hiring, Supervision, and Training (Count V), and Negligence (Count VI)
The parties make various arguments with respect to the applicability of negligence claims in this case. But, because Plaintiffs may discover more information with respect to Corporate Defendants' alleged negligence in hiring, supervision, and training, and other negligence during the additional discovery Judge Day has ordered, the Court will not grant summary judgment at this juncture. As Judge Day indicated in his Memorandum Opinion, Corporate Defendants should not be allowed to benefit from their spoliation of evidence by asserting there are no disputed issues of material facts for negligence claims when Plaintiffs have not received a fair opportunity for discovery on these claims. It seems clear to this Court that any loss of emails, hard drives, and other electronic documents that might have been generated by the Lanham office, its managers, and corporate supervisors would have been potentially relevant to Plaintiffs' claims of negligence (Count VI) and negligence in hiring, training, and supervision (Count V). Thus, this Court denies summary judgment to Corporate Defendants on the issues of negligence (Count VI) and negligence in hiring, training, and supervision (Count V).[4]
iii. Breach of Contract (Count VIII)
Defendants argue that the Court should grant summary judgment on Plaintiffs' breach of contract claim (Count VIII) because (1) there was no express contract between SSA, Inc. and the Developer and (2) Plaintiffs were not third-party beneficiaries of the contract between SSA, Inc. and the Developer. "In order to recover on a breach of contract claim, a plaintiff must prove that two or more parties formed a contract, that the defendant breached the contract, and that the plaintiff suffered actual damages as a result of the breach." Parlette v. Parlette, 88 Md. App. 628, 640, 596 A.2d 665 (Ct. Spec.App.1991) (citations omitted). Defendants contend that Plaintiffs have not met their burden of showing the existence of a valid contract between the Developer and SSA, Inc., and note that in fact, the Developer and SSA, Inc. had not reached a contractual agreement, though SSA, Inc. had begun providing services at Hunters Brooke pending completion of contract negotiations. (Doc. No. 315 at 45.) Based on the record before the Court, it is clear that there was no written contract. Plaintiffs' assertion that there was a written contract, based only on evidence that SSA, Inc. performed services under an agreed-upon schedule, cannot show otherwise. (Doc. No. 359 at 85.) It is equally clear, however, as it is undisputed that SSA, Inc. performed security services for Corporate Defendants under an agreement, that there is at least some dispute of material fact as to whether an implied contract existed.
*762 Defendants next argue that even if there was an implied contract between the Developer and SSA, Inc., Plaintiffs have failed to make the necessary showing that SSA, Inc. and the Developer intended that Plaintiffs be the beneficiaries of the contract. Though the parties have not briefed the issue of whether it is possible to show third-party beneficiary status under an implied contract, Plaintiffs have cited a case indicating that an oral contract is sufficient to create a third-party beneficiary. See Parlette, 88 Md.App. at 633, 596 A.2d 665 (affirming trial court judgment where court allowed testimony of creation of oral contract). Before bringing a claim under a contract as a third-party beneficiary, a person "must first demonstrate `that the contract was intended for his benefit; and, in order for a third party beneficiary to recover for a breach of contract[,] it must clearly appear that the parties intended to recognize him as the primary party in interest and as privy to the promise....'" Century Nat'l Bank v. Makkar, 132 Md.App. 84, 93-94, 751 A.2d 1 (Ct.Spec.App.2000) (quoting Marlboro Shirt Co. v. Am. Dist. Tel. Co., 196 Md. 565, 569, 77 A.2d 776 (1951)). If it is not clear that the contract is intended for the benefit of that person, then the person is merely an incidental beneficiary, and cannot recover for breach of contract. See id. ("An incidental beneficiary acquires by virtue of the promise no right against the promisor or the promisee. In order to recover it is essential that the beneficiary shall be the real promisee; i.e. that the promise shall be made to him in fact, though not in form.") (internal quotations omitted).
The record clearly shows that the primary purpose of the contract was to protect the Hunters Brooke construction site at night from intruders. An impartial negotiator of the contract declared as much. (Doc. No. 359, Ex. 14, Gaw Decl. at ¶ 10.) Though Plaintiffs have amply demonstrated that they had vested ownership interests in the homes and thus benefited from the protection of the homes, as the Maryland Court of Special Appeals explained in a similar context, "[i]t is not enough that the contract may operate to [their] benefit." Century Nat'l Bank, 132 Md.App. at 94, 751 A.2d 1 (internal quotations omitted). Nor can Plaintiffs' argument that because at least two of the Plaintiffs, Derrick Potts and Terri Rookard, as well as Terri Rookard's four children, had already moved into their homes at the time of the arson, and benefited from the security guard services, the parties intended the Plaintiffs to be the primary beneficiaries of the contract. In sum, because the record shows that the Developer was the primary beneficiary of the contract between SSA, Inc. and the Developer, the Court will grant Corporate Defendants summary judgment on the breach of contract claim.
iv. Maryland Business Occupations and Professions Code (Count VII)
The parties have filed cross-motions for summary judgment on the Maryland Business Occupations and Professions Code Section 19-501 claim. The motions hinge on the question of whether the statute codifies common law vicarious liability principles or holds security guard companies strictly liable for the acts of their on-duty employees.
a. Statutory analysis
The Court believes that both parties have made persuasive arguments respecting the novel issue of the proper construction of this statute. The Maryland Business Occupations and Professions Code governs licensing of security guard agencies. *763 Section 19-501 of the statute provides:
Agency responsible for acts of employees: A licensed security guard agency is responsible for the acts of each of its employees while the employee is conducting the business of the agency.
Md.Code Ann., Bus. Occ. & Prof. § 19-501 (2004). Plaintiffs argue that Corporate Defendants are strictly liable under this statute for all acts SSA, Inc. employees Speed and Fitzpatrick undertook while on duty. Corporate Defendants move for summary judgment on this claim, on the ground that this statute simply codifies common law principles of vicarious liability, and thus does not hold Corporate Defendants liable for any acts Fitzpatrick and Speed committed outside the scope of their employment. Plaintiffs cross-move for summary judgment on this Count, asking the Court to adopt a construction of the statute that would hold Corporate Defendants strictly liable for any acts their employees committed while on duty. Under that interpretation, Corporate Defendants would be liable for any of Individual Defendants' violations of Plaintiffs' civil rights, violations of the Fair Housing Act, negligence, and intentional torts.
No Maryland court has construed this statute, though the Legislature passed it in 1996, and adopted the language at issue in this case from its predecessor, Section 13-601 of the Maryland Private Detectives Act, which was enacted in 1986. Though both parties make compelling arguments in support of their construction, the Court now construes the statute to hold employer security guard agencies liable for any acts of employees that are consistent with common law principles of vicarious liability. Accordingly, the Court grants partial summary judgment to Corporate Defendants on this Count, as the only remaining issue with respect to this Count is the Corporate Defendants' liability for Fitzpatrick's early departure from his post under traditional common law principles of liability.
Principles of statutory construction dictate that this Court must enact the intent of the legislature in interpreting this statute, and should abide by any clear and unambiguous everyday meaning of the plain language of the statute. "The cardinal rule of statutory interpretation is to ascertain and effectuate the intention of the legislature. The first step in determining legislative intent is to look at the statutory language and `if the words of the statute, construed according to their common and everyday meaning, are clear and unambiguous and express a plain meaning, [the Court] will give effect to the statute as it is written.'" Oaks v. Connors, 339 Md. 24, 35, 660 A.2d 423 (1995) (quoting Jones v. State, 336 Md. 255, 261, 647 A.2d 1204 (1994)) (internal citations omitted). Additionally, "[a] plain reading of the statute assumes none of its language is superfluous or nugatory." Bost v. State, 406 Md. 341, 350, 958 A.2d 356 (2008).
The Court believes that both Plaintiffs and Defendants have presented reasonable interpretations of the plain language of this statute, though Defendants' seems more in line with statutory construction rules. Plaintiffs argue that the statute's language imposes a temporal limitation on liability by providing for liability of the security agency "while" the employee conducts the security guard's business. Defendants, on the other hand, offer another reasonable analysis of the statute, contending that liability under the statute is clearly equivalent to traditional theories of respondeat superior or "conduct within the scope of employment or conduct taken on the agency's behalf." (Doc. No. 368 at 16.)
Defendants persuasively argue that Plaintiffs' construction violates the Maryland *764 statutory construction rule against adding or taking away language from the statute because it ignores the statute's express limitation of the agency's liability to the employee's acts that he or she carries out in "conducting the business of the agency." See Bost, 406 Md. at 350, 958 A.2d 356. According to Defendants, intentional torts are clearly not the "business of the agency," and thus the Court cannot construe the plain language of the statute to impose liability for such acts. The Court finds that both parties have presented reasonable interpretations of the statute, and concludes that the statute is ambiguous.
"If the meaning of the plain language [of a statute] is ambiguous or unclear, to discern legislative intent, the court looks to the legislative history, prior case law, the purposes upon which the statutory framework was based, and the statute as a whole." Id. Plaintiffs rely on the legislative history of Title 13 of the Maryland Private Detective Statute as legislative history of Title 19 of the Maryland Security Company Statute, because the relevant language is the same. Maryland Security Guards Act, H.B. 42, 1996 Md. Laws 602 (codified as amended at Md.Code Ann., Bus. Occ. & Prof. § 19-101 et seq.). In 1996 the Legislature "separate[d] the provisions of law governing the certification of security guards and the regulation of security guard services from the Maryland Private Detectives Act." (Doc. No. 381, Ex. 1, Legislative History of House Bill 42 from the 1996 Session of the General Assembly of Maryland at 11 (Bill Analysis).) Because the language in Title 19 originally derived from Title 13, the Court finds it may appropriately rely on the legislative history of that statute, despite Defendants' objections.
The Court agrees with Defendants that this legislative history does not support Plaintiffs' contention that with this statute, the legislature intended to hold security agents strictly liable for the acts of employees. In the Introduction to the Report on Senate Bill 968 (the Bill which became Title 13), the Chairman of the Business Occupations Article Committee listed twelve purposes of the bill, mostly pertaining to the licensing of private detectives, and none of which referred to holding security agencies more highly accountable for the acts of employees. (Doc. No. 359, Ex. 83, Report on Senate Bill 968.) Also in that introduction, the Chairman explained the Legislature did not intend to repeal the common law, noting, "for the most part, the proposals under the bill find their basis in actual law and practice and do not deviate substantially from the current law as it now is applied. There is no attempt under the revision to change existing underlying policy." (Doc. No. 359, Ex. 83, Report on Senate Bill 968.)
Additionally, the Court cannot construe the Legislature's failure to respond to the Maryland Association of Contract Guard Services' ("Association") letter or proposed Amendment as evidence of legislative intent, as Plaintiffs request. Plaintiffs contend that the Legislature's failure to change the statute's language in response to the Association's anticipation of the very dispute before the Court today, shows that the Legislature intended to impose strict liability. The Association proposed that the statute include the words "if the acts are within the scope of employment," rather than "while the employee is conducting the business of the agency," to avoid judicial construction of the statute as imposing strict liability, and the Legislature did not do so. The Court recognizes, as the Maryland Court of Appeals explained, "[o]ne form of legislative history useful in determining legislative intent is amendments proposed but later *765 rejected by the Legislature." State v. Bell, 351 Md. 709, 721, 720 A.2d 311 (1998). But, the cases recognizing this amendment rejection theory have interpreted rejection of bills or amendments proposed by legislators, not lobbyists' letters or informal proposed changes by non-legislators, as Plaintiffs present in this case. The sole case that Plaintiffs cite for the amendment rejection theory, State v. Bell, involved rejection of a formal bill. Even a formal bill rejection is not as informative as legislative history, because it is difficult to deduce with any certainty the reasons for the rejection. See id. at 721, 720 A.2d 311. In this case, one could conclude the legislators rejected the language the Association proposed because they preferred the language they had already created as a codification of the common law, or conclude that they wanted to codify strict liability. The court foresees myriad dangerous possibilities resulting from giving a silent rejection of a lobbyist's suggestions the weight typically reserved for rejection of formal legislative amendments.
Additionally, Maryland courts find, "[i]n construing a statute, it is a long-standing rule of statutory interpretation that the common law will not be repealed by implication. A statute is `not presumed to repeal the common law further than is expressly declared....'" Suter v. Stuckey, 402 Md. 211, 232, 935 A.2d 731 (2007) (quoting Robinson v. State, 353 Md. 683, 728 A.2d 698, 702 (1999); citing Lutz v. State, 167 Md. 12, 172 A. 354, 356 (1934)) (internal citations omitted). "If the common law and the statute are in conflict, however, `the common law yields to the statute to the extent of the inconsistency, and a statute which deals with an entire subject-matter is generally construed as abrogating the common law as to that subject.'" Suter, 402 Md. at 232, 935 A.2d 731 (quoting Lutz, 172 A. at 355-56). Yet, when the legislature is silent on the matter, the courts should not read conflicts into a statute such that it abrogates the common law. Suter, 402 Md. at 232, 935 A.2d 731. A clear conflict between the common law and the statutory scheme must exist for the first exception to the presumption against statutory abrogation of the common law to apply; i.e. there must be a situation in which "the provisions of the law cannot be given full effect without derogation from the common law." Id. at 233, 935 A.2d 731. The second exception to the presumption against statutory abrogation of the common law, when a statute occupies an entire field of law, is exemplified in Robinson v. State, 353 Md. 683, 728 A.2d 698 (1999).
Corporate Defendants argue that the Legislature clearly did not intend to abrogate common law with this statute, because the statute's language is entirely consistent with the common law principles of vicarious liability existing at the time of § 13-601's enactment. This is in keeping with the principle that courts should not read conflict into a statute to abrogate the common law. Suter, 402 Md. at 232, 935 A.2d 731. The wording of Maryland Business Professions and Occupations Code § 19-501 can plausibly be read to mirror the common law, not to clearly conflict with it. Plaintiffs seem to argue that the Legislature intended for this statute to abrogate the common law because there would have been no point to enacting the law had the Legislature simply intended to codify common law. Plaintiffs have not given the Court authority for that proposition, however. Moreover, Maryland's presumption that state statutes enact common law unless they explicitly state otherwise clearly undermines Plaintiffs' argument.
Five other courts have construed similar statutes; three have found these statutes to codify common law principles of *766 vicarious liability. See Borg-Warner Protective Servs. Corp. v. Superior Court, 75 Cal.App.4th 1203, 89 Cal.Rptr.2d 687, 689 (Ct.App.1999) (construing security guard licensing statute as a codification of common law vicarious liability principles); Knouse Foods Cooperative, Inc. v. Burns Int'l Security Servs., Inc., 519 F.Supp. 867, 869 (E.D.Pa.1981) (same); Hoover Ball & Bearing Co. v. Pinkerton's, Inc., 500 F.Supp. 673, 675 (W.D.Mich.1980) (same). Two courts have found statutes to hold security agencies strictly liable. See Simmons, Inc. v. Pinkerton's, Inc., 762 F.2d 591, 595 (7th Cir.1985) (construing security guard licensing statute as a imposing strict liability on security guard agency); Stewart Warner Corp. v. Burns Int'l Security Servs., Inc., 353 F.Supp. 1387, 1389 (N.D.Ill.1973) (same). None of the statutes in those cases are nearly identical to the language at issue in this case, because these statutes all contain "good conduct" language which the Maryland Code does not.
Additionally, the cases that found that the statutes imposed strict liability can be distinguished from this case. The Seventh Circuit found the statute at issue imposed strict liability on a security agency in a similar case in Simmons, but relied heavily on the fact that the statutory language was nearly identical to that in Stewart Warner, which that court had interpreted to impose strict liability. See 353 F.Supp. at 1390. Thus, the court was constrained by the earlier interpretation. Additionally, the Court believes that the absence of the "good conduct" language in Maryland's statute weighs against finding that the legislature intended to impose strict liability on security agencies as the "good conduct" language can easily be interpreted to require a higher standard of liability for the security guard company. The court in the case on which the Simmons decision heavily relied, Stewart Warner, premised its decision on the plain language of the statute and the fact that the legislature had enacted the statute after a case finding that the security agency was not liable for its employee's intentional torts. Like the Borg-Warner court, this Court finds several differences from the situations that the Stewart court adjudicated. First, as explained earlier, the Court "cannot presume that our Legislature intended to change the common law because it did not expressly state such an intention." Borg-Warner, 89 Cal.Rptr.2d at 687. Next, Maryland's statute was not enacted in response to the Court's decision, as the Stewart Warner court found Illinois' statute had been. See Stewart Warner, 353 F.Supp. at 1390 ("The construction urged by defendant would interpret 10b(10) as simply reiterating the common law, thus attributing to the legislature an idle act in adopting 10b(10). In Apex Smelting Co. v. Burns, 175 F.2d 978, 981 (7th Cir.1949), a case involving facts very similar to those here, the court upheld a directed verdict for defendant ... Section 201-10b was subsequently enacted."). Finally, as described above, codification of common law rules is a common practice in Maryland.
While the Court appreciates the rationale for the interpretation Plaintiffs offera security company is best positioned to examine the background of employees and exclude any who display a propensity to commit tortious actsthe Court cannot find a sufficient basis for imposing strict liability in the plain language and legislative intent of this statute. This Count will remain only insofar as the Court finds Corporate Defendants can be held liable under traditional vicarious liability principles.[5]
*767 b. Vicarious liability analysis
Under the Court's construction of the Maryland Business Professions and Occupations Code, to determine if Corporate Defendants are liable under the statute, the Court must assess whether common law rules of vicarious liability impose liability upon them. Any liability for Corporate Defendants will thus be premised on a finding that SSA, Inc.'s employees, Speed and Fitzpatrick, acted within the scope of employment, or that SSA, Inc. ratified Speed and Fitzpatrick's actions. Corporate Defendants argue that because Speed and Fitzpatrick's actions prior to the arson were outside the scope of their employment, Corporate Defendants cannot be held liable on the ground that Speed and Fitzpatrick acted in the scope of employment, and that Plaintiffs' other theories of liability"aided by agency" and ratificationalso fail to establish vicarious liability. First, regarding Defendant Speed, the Court cannot avoid the conclusion that Defendant Speed's alleged on-duty preparations for the arson fell outside the scope of his employment as a security guard. Thus, Corporate Defendants cannot be liable for any of Speed's violations under the "scope of employment" theory of liability. Fitzpatrick's departure from the Hunters Brooke site may be construed as within the scope of his employment, though not if abandoned his post to further the conspiracy to commit arson. Additionally, because Maryland courts do not hold employers vicariously liable merely because the employee was aided in his agency relationship in committing the tortious acts, the Court cannot hold Corporate Defendants liable on that theory. Finally, the Court does not believe there is sufficient evidence generated at this time to support Plaintiffs' claim that Corporate Defendants subsequently ratified Speed or Fitzpatrick's acts to support vicarious liability of Corporate Defendants.
1. Scope of Employment
Corporate Defendants argue that they are not vicariously liable for the arson-related acts of their employees, Speed and Fitzpatrick, based on Plaintiffs'"scope of liability" theory, because the individuals' activities fell outside the scope of their employment. It is well established that, under Maryland law:
"To be within the scope of the employment the conduct must be of the kind the servant is employed to perform and must occur during a period not unreasonably disconnected from the authorized period of employment in a locality not unreasonably distant from the authorized area, and actuated at least in part by a purpose to serve the master." East Coast Freight Lines v. Mayor of Baltimore, 190 Md. 256, 58 A.2d 290, 304 (Md.1948); see also Sawyer v. Humphries, 322 Md. 247, 587 A.2d 467, 471 (Md.1991). Many factors are considered, including whether the act is one commonly done by such servant; the time, place, and purpose of the act; the similarity in quality of the act done to the act authorized; the extent of departure from the normal method of accomplishing an authorized result; and whether the act is seriously criminal. Sawyer, 587 A.2d at 471.
Silvera v. Home Depot U.S.A., Inc., 189 F.Supp.2d 304, 309 (D.Md.2002). Additionally:
Under Maryland law, "the questions of agency and scope of employment are generally questions for the jury." However, "when the servant's deviation from the strict course of his employment or *768 duty is slight and not unusual, the court may determine as a matter of law that he is still executing the master's business, and if the deviation is very marked and unusual it may determine the contrary."
Jordan v. W. Distrib. Co., 135 Fed.Appx. 582, 585 (4th Cir.2005) (quoting Carroll v. Hillendale Golf Club, 156 Md. 542, 144 A. 693, 695-95 (1929)); see also Rusnack v. Giant Food, Inc., 26 Md.App. 250, 263-264, 337 A.2d 445 (Ct.Spec.App.1975) (finding that a security guard who hit a customer while off duty, yet on the premises he was supposed to guard, was not acting in the scope of employment).
Under the above standards, it is clear that Defendant Speed's preparations for arson while on duty fall outside the scope of his employment. Speed's motives in preparing for this arson were undisputedly purely personal, and were in direct contravention of his formal duties to protect Hunters Brooke. His activities in preparation for the arson(1) planting flammable materials in houses, (2) providing access to the site to unauthorized individuals, (3) providing a map of the neighborhood to be used during the arsons, and (4) learning which houses were to be occupied by African-Americanswere plainly in opposition to the protective duties SSA, Inc. hired him to perform as a security guard. (Doc. No. 119, ¶ 59.) Indeed, SSA Inc. expressly prohibited some of these activities, such as security guard entry into the Hunters Brooke houses, as Speed did to plant the fuel. "The Post Orders provided:... (b) patrol the site to insure there are no unwanted guests; (c) post vehicle at the entrance and check every vehicle upon entering site; ... (e) no guard is permitted to enter any house." (Doc. No. 315, Ex. 20.) Speed's encouraging unauthorized individuals to enter the site to plant flammable liquids also directly violated such professional obligations. Similarly, Speed's rendering a map of the neighborhood he guarded, learning the ethnicity of the future occupants of the houses, and distributing this information was purely at his own behest, and these activities clearly undermined SSA, Inc.'s purpose of security provision. Finally, these activities were extreme, unexpected, and renegade, further indicating Speed acted from personal motives.
The fact that Speed was on duty while effecting these preparations does not change their oppositional character. The Court of Appeals of Maryland has explicitly ruled out this logic, explaining: "particularly in cases involving intentional torts committed by an employee, this Court has emphasized that where an employee's actions are personal ... even if during normal duty hours and at an authorized locality, the employee's actions are outside the scope of his employment." Sawyer v. Humphries, 322 Md. 247, 256-57, 587 A.2d 467 (1991) (citations omitted). Nor does the fact that Speed's position as security guard gave him access to the premises require a finding that his arson preparations occurred in the scope of his employment. Indeed, the Fourth Circuit's decision upholding Judge Blake's decision in Jordan, suggests the opposite conclusion. 135 Fed.Appx. at 584. In that case, two employees were transporting currency in an armored vehicle on Interstate 95 in Maryland, "pursuant to their duties as drivers and security guards for Western Distributing Company," when they attempted to drive another vehicle off the interstate on numerous occasions, and aimed a shotgun at the driver. Id. The Fourth Circuit affirmed that these actions were outside the scope of employment as a matter of law, noting "[w]hile it is true that [the employees] committed these acts while on duty, using the truck and guns provided to them by Western, they were in *769 no way attempting to advance Western's interests." Id. Similarly, here, despite the fact that Speed's employment enabled him to be on the Hunters Brooke site, preparation for arson was such a marked and unusual deviation from his employment that as a matter of law, these actions fell outside of his scope of employment, and Corporate Defendants are not liable for them.
Next, whether the Court can determine that as a matter of law, Fitzpatrick was acting outside the scope of his employment when he left his post is a much closer question. Corporate Defendants argue that SSA, Inc. employed Fitzpatrick to maintain his post until the end of his scheduled shift, and that his departure constituted a "frolic," outside the scope of employment. "A variety of factors have been cited as bearing on the determination of whether a particular deviation amounts to a detour or a frolic. `These factors include the time and place of the deviation, its extent with relation to the prescribed route, whether its motivation is in part to serve the master, and whether it is the usual sort of deviation for servants on such a job.'" Karangelen v. Snyder, 40 Md.App. 393, 397, 391 A.2d 474 (Ct.Spec.App.1978) (citation omitted). Corporate Defendants argue that Fitzpatrick's abandonment of his post was a total abandonment and frolic because he did not return, it contravened SSA, Inc.'s purpose in protecting Hunters Brooke, and it was unusual for a security guard to leave his post. Additionally, if Plaintiffs were to prove that Fitzpatrick was part of the conspiracy and that his motive for leaving was to allow the arson to proceed, then his action would even more clearly fall outside the scope of employment.
Plaintiffs have presented enough disputes of material fact to survive summary judgment on the issue of whether Fitzpatrick's negligence in leaving his post was within the scope of his employment. First Plaintiffs state that "Corporate Defendants actually knew and explicitly authorized Fitzpatrick to leave his post early that nightas they had many other nights." (Doc. No. 359 at 51.) Fitzpatrick's declaration states that Bradley Messick, site supervisor, had told him he could leave 30 minutes early that night, and that he actually left a full hour early because he was feeling sick. (Doc. No. 359, Ex. 32, Fitzpatrick Decl. ¶ 13.) Messick confirmed that he authorized Fitzpatrick to regularly leave thirty minutes early so that he could return SSA Inc.'s identification lamp. He states:
[T]hey had an amber construction light that you were supposed to put on top of your car, it just a blinker that's here I am [sic]. And there was no place to store it there, and you had to drive from Indian Head to Waldorf to store it at Gallery Place.
SSA wouldn't pay for the extra travel time to do that, so I told him to leave with enough time to take it to Gallery Place, and that would be his off time, when he left there.
(Bradley Messick Dep., Feb. 14, 2008, Doc. 359, Ex. 31, 78:1-10.) A jury could conclude that at least half of Fitzpatrick's early departure was authorized and performed for a business purpose. It is undisputed that Fitzpatrick called Speed at 5:05 a.m., and then returned his identification light to the SSA, Inc. corporate office at 5:12 a.m. (Doc. 359 at 25.) In light of the fact that Fitzpatrick returned to the corporate office to complete his duty of returning the lamp after whatever he did after he departed his post before 4:00 a.m., a jury could conclude that this departure was merely a detour.
Next, Plaintiffs argue that because Fitzpatrick allegedly attempted to contact Corporate *770 Defendants to inform them he needed a replacement while on duty at Hunters Brooke, the timing and location of Fitzpatrick's actions support the assertion that he was acting within the scope of his employment. They explain, "[t]hat Corporate Defendants were negligent in failing to provide a means by which Fitzpatrick could be replaced does not mean that Fitzpatrick acted outside of his scope of employment when he succumbed to his illness and left his post at Hunters Brooke." (Doc. No. 359 at 52.) The Court agrees that this evidence is relevant as it indicates that Fitzpatrick attempted to follow procedures before leaving earlier than planned.
Finally, Plaintiffs argue that it was foreseeable that Fitzpatrick would leave his post. Insofar as the record indicates that the site supervisor approved Fitzpatrick's early departure, the Court believes there is evidence upon which the Court may conclude Fitzpatrick's early departure was foreseeable.
Because it is typically a jury question whether an employee's action is within the scope of employment, and because Plaintiffs have presented evidence upon which a jury might conclude his departure fell within the scope of his employment, the Court finds that an issue of fact remains as to whether the Corporate Defendants are vicariously liable for Fitzpatrick's early departure. But, to the extent Plaintiffs allege that Fitzpatrick left early intentionally to facilitate the conspiracy to commit arson, the Court finds those actions fall outside the scope of employment. In sum, the Court believes that the evidence is sufficient to hold Corporate Defendants liable for Fitzpatrick's negligence, but not for any intentional tort.
2. Aided by Agency
Next, Defendants contend that Plaintiffs' second theory of vicarious liability, that Speed and Fitzpatrick were able to commit acts leading to arson by way of their employment and thus Corporate Defendants are liable, fails because Maryland courts do not recognize this theory of liability. Plaintiffs contend that even if the Court finds that there is no dispute of material fact regarding whether Speed and Fitzpatrick acted within the scope of their employment, Corporate Defendants may still be liable if Speed and Fitzpatrick were aided in their actions by the agency relationship with Corporate Defendants. Plaintiffs do not cite to Maryland cases applying the "aided by agency" theory, but rather, refer to the Restatement of Agency as the basis for the Court to adopt this theory. "The Maryland Court of Appeals, however, has not endorsed this theory of vicarious liability," however. Lewis v. Forest Pharms., Inc., 217 F.Supp.2d 638, 659 (D.Md.2002). Because Maryland does not follow the "aided by agency" theory for determining vicarious liability, the Court will not find Corporate Defendants vicariously liable on an "aided by agency" theory.
3. Ratification
Finally, Defendants argue that Plaintiffs have not presented sufficient evidence that Corporate Defendants ratified Speed and Fitzpatrick's acts to establish vicarious liability of Corporate Defendants on that theory. In Maryland, "[r]atification requires an intention to ratify, and knowledge of all material facts." Progressive Casualty Ins. Co. v. Ehrhardt, 69 Md.App. 431, 442, 518 A.2d 151 (Ct. Spec.App.1986) (citations omitted). If a principal does not directly state an intent to ratify, such intent:
may be inferred by words, conduct or silence on the part of the principal that reasonably indicates its desire to affirm the unauthorized act. Circumstances that suggest an intent to ratify include: *771 receipt and retention of the benefits of the unauthorized transaction, and a failure to make a timely disaffirmance of the unauthorized acts.
Id. (citations omitted).
The Court finds that Plaintiffs do not point to sufficient evidence to raise a dispute of material fact with respect to whether Corporate Defendants ratified Speed and Fitzpatrick's actions. Plaintiffs contend that Corporate Defendants routinely authorized Fitzpatrick's early departure from his post, failed to discipline him for his negligence in abandoning his post, "actively fabricat[ed] evidence to cover up his early departure, and instruct[ed] Fitzpatrick to lie about the time he left Hunters Brooke and other critical pieces of information when interviewed by federal investigators." (Doc. No. 359 at 60.) But, the record simply does not support these allegations. For the allegation that Corporate Defendants instructed Fitzpatrick to lie to federal investigators, Plaintiffs cite to the criminal case, "United States v. Fitzpatrick, at 44-55," and summarize, "there were several discrepancies in Fitzpatrick's statements throughout the investigation," and to Facts 22, 34 and 35. (Doc. No. 359 at 60 n. 36.) These citations do not indicate that Grafton and Lee knowingly instructed Fitzpatrick to lie to federal investigators. Fact 22 pertains to Speed's hiring, Fact 34 pertains to the execution of the conspiracy, and Fact 35 states that Grafton and Lee instructed Fitzpatrick to lie, but then cites only to the affidavit of a special agent from the Bureau of Alcohol, Firearms, Tobacco, and Explosives ("AFT") who never states that Grafton or Lee told Fitzpatrick to lie. In fact, the record indicates that Fitzpatrick lied to Grafton and Lee. For example, supervisor Messick stated in deposition, "from my understanding, where [Fitzpatrick's] problems with [Lee and Grafton] occurred from, is lying about what time he left. He actually did do it and tell [sic] the FBI he left on time." (Doc. 359, Ex. 31, Bradley Messick Dep.)
Plaintiffs argue that Corporate Defendants ratified the individuals' acts by allowing Fitzpatrick to leave early, and by allegedly attempting to cover up his departure. (Doc. No. 359 at 60-61.) Plaintiffs also state that a jury could reasonably conclude that Corporate Defendants knew within hours that the fires were the result of arson, that the arsons were racially motivated, and that Speed was one of the arsonists. (Id. at 63.) However, the only evidence Plaintiffs cite is one deposition in which an ex-employee of Corporate Defendants states that Corporate Defendants asked him to tell the police that Speed's application had been thoroughly reviewed prior to his hiring, something the employee felt was "a lie." (Id. at 62.) Plaintiffs assert that this evidence indicates a cover-up and ratification of the racially motivated actions of Speed, thus allowing for vicarious liability of Corporate Defendants. But, for ratification to occur, a principal must both intend to ratify, and have full knowledge of the facts they are ratifying. The little evidence of a cover-up that Plaintiffs provide falls far short of this hefty requirement.[6] Accordingly, the Court does not find any basis for holding Corporate Defendants liable for Speed or Fitzpatrick's actions under a ratification theory.
In conclusion, the Court will grant Corporate Defendants partial summary judgment *772 on the Maryland Business Professions and Occupations code, and allow the question regarding Corporate Defendants' liability under the Maryland Business and Occupations Code for acts committed within the scope of Fitzpatrick's employment, i.e. negligence, to remain.
v. Fair Housing Act (Count I), 42 U.S.C. § 1982 (Count III), 42 U.S.C. § 1985(3) (Count IV)
The Fair Housing Act ("FHA"), 42 U.S.C. § 3601 et seq., 42 U.S.C. § 1982, and 42 U.S.C. § 1985(3) (collectively "civil rights statutes") guarantee persons basic rights to be free from discrimination in connection with their enjoyment of property. The FHA creates a policy of fair housing in the United States, makes it unlawful to "make unavailable ... a dwelling to any person because of race," 42 U.S.C. § 3604, and prohibits intimidation, coercion or interference with a person in connection with his or her enjoyment of property. See 42 U.S.C. § 3617. Section 1982 provides that all citizens, regardless of race, shall enjoy the same right to "inherit, purchase, lease, sell, hold, and convey real and personal property." 42 U.S.C. § 1982. Finally, Section 1985(3) creates a cause of action for people who have been deprived of rights or privileges by two or more persons acting in a conspiracy with a class-based animus. See 42 U.S.C. § 1985(3).
Corporate Defendants move to dismiss Plaintiffs' claims under the civil rights statutes on the grounds that Plaintiffs have presented no direct statutory violation, or violation by an employee for which Corporate Defendants could be held vicariously liable. Plaintiffs have presented no evidence indicating that Corporate Defendants directly violated these statutes, and thus the Court cannot find Corporate Defendants liable for any direct violations of these statutes.
Next, the parties agree that the FHA and § 1982 provide for vicarious liability. See Meyer v. Holley, 537 U.S. 280, 285, 123 S.Ct. 824, 154 L.Ed.2d 753 (2003) (internal citations omitted) (finding "when Congress creates a tort action, it legislates against a legal background of ordinary tort-related vicarious liability rules and consequently intends its legislation to incorporate those rules"); Yates v. Hagerstown Lodge No. 212, 878 F.Supp. 788, 798 (D.Md.1995) ("Applying common-law agency principles to the instant Section 1981 claim, Moose International may be found liable for the Lodge's and Jenkins' unlawful acts if, as a principal, it had knowledge of the relevant circumstances and authorized, ratified, or approved the intentional conduct."). Although Corporate Defendants argue that § 1985(3) does not allow for vicarious liability because it requires direct participation in a conspiracy, the Court will assume, without deciding, that it does, since the Court will grant the motion for summary judgment on this Count on another basis.
The Court believes that Plaintiffs have failed to establish that Corporate Defendants are vicariously liable for violation of the civil rights statutes. A showing of discriminatory animus is necessary under all three of these statutes. See Bynum v. Hobbs Realty, No. 00-1143, 2002 WL 31444660, at *3, 2002 U.S. Dist. LEXIS 21473 at *11 (M.D.N.C. Feb. 22, 2002) ("To succeed under [Section 1982], a plaintiff must prove discriminatory intent on the part of the defendant.") (citations omitted); Smith v. Clarkton, 682 F.2d 1055, 1065 (4th Cir.1982) (courts consider four factors in determining whether "a violation [of the FHA] has occurred, namely, ... (2) is there some evidence of discriminatory intent") (citation omitted); Simmons v. Poe, 47 F.3d 1370, 1376 (4th Cir.1995) ("to establish a sufficient cause of action for `conspiracy *773 to deny equal protection of the laws' under section 1985(3), a plaintiff must prove: ... persons ... are motivated by a specific class-based, invidiously discriminatory animus ...") (citation omitted). A plaintiff may demonstrate a discriminatory animus by pointing to direct or circumstantial evidence of discriminatory purpose. See Bynum, 2002 WL 31444660, at *3, 2002 U.S. Dist. LEXIS 21473, at *11. Though Speed's conduct in preparing for the arson clearly indicates a discriminatory intent, the Court has found that his conduct fell outside the scope of employment and was not ratified, and thus cannot provide a basis of liability. Fitzpatrick's conduct, on the other hand, was within the scope of employment insofar as it consisted of authorized early departure from his post to return work property to the corporate office. But, his conduct provides no basis for a finding of discriminatory intent.
The Court has found that Fitzpatrick's action was within the scope of employment only to the extent it was not intended to further the conspiracy to commit arson. Plaintiffs present various facts that they claim raise a dispute of material fact as to whether Fitzpatrick intentionally and deliberately participated in the arson (Doc. No. 359 at 40), including the fact that Speed telephoned Fitzpatrick around 3:00 a.m. and 5:00 a.m. on the morning of the fire. The Court does not believe that these facts contradict ample evidence in the record showing Fitzpatrick abandoned his post because he was ill and was authorized to do so beginning at 4:30 a.m. But, assuming arguendo, that Fitzpatrick departed his post early in order to facilitate the arson, his participation in the conspiracy would fall outside the scope of his employment as it would indicate he acted on purely personal motives, betrayed SSA, Inc.'s purpose of security provision, and his activity was extreme and unexpected. An undermining of Fitzpatrick's security guard duties as severe as facilitating arson also clearly falls outside the range of the sort of ulterior racial motivations accompanying acts clearly taken within the scope of employment in the case Plaintiffs reference. See Mathurin v. Gov't of Virgin Islands, 398 F.Supp. 110, 117 (D.Vi.1975) (finding government liability for police officer's use of force under respondeat superior while acknowledging police officers probably acted with personal and racial motivations as well). In sum, if the Court were to find that the record supported the claim that Fitzpatrick participated in the conspiracy to commit arson, then the Court would conclude that as a matter of law, Fitzpatrick's actions fell outside his scope of employment. Instead, the Court concludes that as a matter of law, the record is insufficient to support the conclusion that Fitzpatrick participated in the racially-motivated arson conspiracy.
Thus, because the record provides no basis for holding Corporate Defendants either directly or vicariously liable for violations of these civil rights statutes, the Court will grant Corporate Defendants summary judgment on Plaintiffs' claims under the FHA (Count I), 42 U.S.C. § 1982 (Count III), and 42 U.S.C. § 1985(3) (Count IV).[7]
vi. Intentional Infliction of Emotional Distress (Count X)
Corporate Defendants move for summary judgment on Plaintiffs' claim for intentional infliction of emotional distress *774 ("IIED"). With regard to the threshold argument, Defendants argue that emotional distress damages are generally not recoverable for injury to property. (Doc. No. 315 at 40) (citing Hoffman v. Stamper, 385 Md. 1, 36, 867 A.2d 276 (2005).) Damages for injury to property can only be recovered when the "act occasioning the injury is inspired by fraud, malice, or like motives." (Doc. No. 315 at 40.) Corporate Defendants argue that Plaintiffs cannot show that Corporate Defendants acted with malice in injuring the property. (Id. at 40.)
Plaintiffs respond that Hoffman permits damages for emotional distress in certain situations where property is involved. (Doc. No. 359 at 93.) Plaintiffs state that Maryland law clearly allows these damages when the injury to property is inspired by malice or like motives. Id. (citing Zeigler v. F St. Corp., 248 Md. 223, 235 A.2d 703, 705 (1967).) Plaintiffs argue the alleged racial motivation of the arson qualifies as malice, thereby allowing them to recover damages resulting from damage to the property. (Doc. No. 359 at 93-94.)
"There is a line of Maryland cases allowing recovery for emotional distress in property damage cases, under certain limited conditions." Abbott v. Forest Hill State Bank, 60 Md.App. 447, 455, 483 A.2d 387 (Ct.Spec.App.1984). Ordinarily there is no recovery for mental suffering related to property damage. Zeigler, 248 Md. at 226, 235 A.2d 703. There are two exceptions: mental suffering inspired by fraud and mental suffering inspired by malice. Id. "To recover, the plaintiff must allege either notice of the mental distress on the part of the defendant or that the act was calculated to cause mental distress." Abbott, 60 Md.App. at 455-56, 483 A.2d 387.
Defendants cite Hoffman, for the proposition that physical injury is required for emotional distress claims. However, the court in Hoffman distinguishes between the requirement of physical injury and physical impact. Hoffman, 385 Md. at 35-36, 867 A.2d 276. Physical impact is not required, and under the physical injury requirement the plaintiff must show that the emotional damages are an injury "capable of objective determination." Id. at 48, 867 A.2d 276. Thus, physical injury has been held to include "depression, inability to work or perform routine household chores, loss of appetite, insomnia, nightmares, loss of weight, extreme nervousness and irritability, withdrawal from socialization, fainting, chest pains, headaches, and upset stomachs." Id. at 34-35, 867 A.2d 276.[8] It appears that the Defendants are seeking imposition of a higher physical impact threshold than is required by case-law. Thus, the Court does not believe that this claim fails as a matter of law on that basis. This claim against Corporate Defendants fails for another reason, however.
Plaintiffs must show four elements to make a prima facie case of IIED: (1) the conduct must be intentional or reckless; (2) the conduct must be extreme and outrageous; (3) there must be a causal connection between the wrongful conduct and the emotional distress; and (4) the emotional distress must be severe. See Harris v. Jones, 281 Md. 560, 566, 380 A.2d 611 (1977). A deficiency on any point is fatal to the entire claim. See Foor v. Juvenile Servs. Admin., 78 Md.App. 151, 174-75, 552 A.2d 947 (Ct.Spec.App.1989). The intentional or reckless action prong *775 requires the plaintiff "to prove that the defendant either desired to inflict severe emotional distress, knew that such distress was certain or substantially certain to result from his conduct, or acted recklessly in deliberate disregard of a high degree of probability that the emotional distress will follow." Foor, 78 Md.App. at 175, 552 A.2d 947.
Corporate Defendants argue that Plaintiffs cannot and have not shown the first requirement of IIED, that is, intentional or reckless conduct by the Corporate Defendants. (Doc. No. 368 at 46.) Defendants note that the only direct conduct alleged by Plaintiffs is a negligent failure to "properly hire, train, supervise and monitor its security guards at Hunters Brooke." (Doc. No. 315 at 41.) This negligence is not enough to pass the standard for intentional or reckless conduct for IIED in Maryland. (Id. at 40-41.) Thus, the Court cannot find Corporate Defendants directly liable for IIED.
The Plaintiffs' only response is that the Corporate Defendants can be held liable under the respondeat superior, aided by agency, or ratification theories of liability for the intentional acts of employees, including IIED. (Doc. No. 359 at 96.) Because the Court has not found Corporate Defendants to be vicariously liable for any of the intentional acts of Speed, and there is no indication that Fitzpatrick intended to inflict emotional distress by leaving early, the Court must grant summary judgment to the Corporate Defendants on this issue.
vii. Tortious Interference with Contract (Count IX)
To make out a prima facie case of tortious interference with contract, "it is necessary to prove both a tortious intent and improper or wrongful conduct." Macklin v. Robert Logan Assocs., 334 Md. 287, 639 A.2d 112, 119 (1994). Any finding that the Corporate Defendants were negligent would not be sufficient to meet the first requirement to establish this tort and Plaintiffs have not presented a sufficient basis to establish intentional conduct by Corporate Defendants. As the Plaintiffs have not presented sufficient evidence that Corporate Defendants' direct action interfered with their contracts, Corporate Defendants are not vicariously liable for Speed's intentional acts, and to the extent Fitzpatrick's acts are found to be intentional, they would fall outside the scope of his employment, the Court will grant Corporate Defendants summary judgment on this claim.
B. Individual Defendants' Motions for Summary Judgment
Defendants Patrick Walsh ("Walsh"), Jeremy Daniel Parady ("Parady"), Roy T. McCann ("McCann"), Aaron Lee Speed ("Speed"), and Michael Everhart ("Everhart") move for summary judgment on Count IV (42 U.S.C. § 1985(3)), Count IX (tortious interference with contract), and Count X (IIED) of Plaintiffs' Amended Complaint. Additionally, Defendants McCann, Everhart, and Speed argue that Plaintiffs have not shown sufficient evidence that their actions were racially motivated, and thus move for summary judgment on the FHA claim (Count I), the 42 U.S.C. § 1982 claim (Count III), and on the 42 U.S.C. Section 1985(3) claim (Count IV), on the ground that there is no dispute of material fact that these Defendants had no racial motivation in committing the arson. All of the Individual Defendants adopt the reasoning and arguments of the Corporate Defendants and Defendant Walsh insofar as they are applicable, and thus the Court will refer to some arguments that Corporate Defendants make. The Court will deny Individual Defendants summary judgment on all Counts.
*776 i. Tortious Interference with Contract (Count IX)
All Individual Defendants move for summary judgment on the tortious interference with contract claim on two grounds: Patriot Homes did not breach its contract, and the contract was not for a business purpose. Tortious interference with contract claims can be brought under two scenarios: first, where "a third party's intentional interference with another in his or her business or occupation induces a breach of an existing contract," and second, "absent an existing contract, [a third party] maliciously or wrongfully infringes upon an economic relationship." Macklin v. Robert Logan Assocs., 334 Md. 287, 639 A.2d 112, 117 (1994) (citations omitted).
The first version of this tort requires a plaintiff to show five elements: "(1) existence of a contract between plaintiff and a third party; (2) defendant's knowledge of that contract; (3) defendant's intentional interference with that contract; (4) breach of that contract by the third party; and (5) resulting damages to the plaintiff." Fowler v. Printers II, Inc., 89 Md.App. 448, 466, 598 A.2d 794 (Ct. Spec.App.1991) (citations omitted). Defendants argue that Plaintiffs cannot show the fourth element of the tortthat Patriot Homes breached its contract with any Plaintiff. It is undisputed that Plaintiffs ultimately closed on the purchases of the homes, although in some cases the closing was later than anticipated. Plaintiffs claim, however, that Patriot Homes breached its contracts with Plaintiffs because it failed to deliver the homes in a "workmanlike manner." (Doc. No. 359.) Corporate Defendants respond that they are not liable for workmanship issues because "(a) ... Plaintiffs had and sought remedies through the warranty process; (b) there is no expert testimony linking any warranty problems to the arson; (c) Plaintiffs' expert on economic loss said that he could not provide sufficient opinion on asset impairment damages; and (d) the Corporate Defendants have settled with the Developer so they can have no liability for workmanship issues on homes that Plaintiffs did not even own at the time of the fire." (Doc. No. 368.)
While the Court finds these arguments convincing, the Court believes that there are disputes of material fact with respect to the issue of whether the contract was breached and whether a warranty process eliminated the possibility of finding that the contract had been breached. Defendants have not pointed to any overwhelming evidence in the record that indicates that these claims have been resolved, and the Court cannot, on this record, conclude as a matter of law that the contract has not been breached under these circumstances. Plaintiffs, on the other hand, have presented thorough records in the form of Plaintiffs' responses to Interrogatories describing problems with their homes after purchase that could possibly be sufficient to permit a finding that the contracts were breached. (See Doc. No. 375, Exs. 24 & 25[9] (describing various problems with the homes at settlement).) Plaintiffs' exhibits indicate, for example, that "siding that had been burned by the fires had not been replaced or repaired" and the "developer never replaced or removed burnt trees and wood from the property." (Doc. No. 375, Ex. 5.) The Court finds that issues of material fact remain regarding whether Defendants caused a breach in the "workmanship" clause of the contract. (Doc. No. 359, Ex. 14.) In light of the fact that breach of *777 only one clause of a contract is sufficient to make out a claim for tortious interference with contract, see Trimed, Inc. v. Sherwood Med. Co., 977 F.2d 885 (4th Cir. 1992), the Court finds a dispute of material fact remains with respect to this issue.
Nor do any of Defendants' other arguments require granting summary judgment on this Count. Defendants concede that their argument that the contract merged with the deed does not eliminate contract terms that were specifically excluded from merger, as the "workmanship" clause was excluded here.
Defendants' second argument in support of summary judgment is that Plaintiffs cannot make out a claim for the second form of the tort, tortious interference with contractual relations, because the Plaintiffs' agreements to purchase homes had no business purpose. Plaintiffs respond that Maryland courts accept contracts for the purchase of homes by private individuals as having a business purpose consistent with the requirements for bringing this claim. The case-law the parties provide is somewhat contradictory. In Ward v. 84 Lumber, 758 F.Supp. 335, 337 (D.Md. 1991), a Court in this district facing the question of whether a personal consumer credit insurance contract had a business purpose, reviewed the scope of this tort, and found that it did not. The Ward court explained, "[s]uch a limitation is consistent with the development of this tort under the common law both of England, whence it originated, and of Maryland.... Indeed, the most recent pronouncement on this tort from the Court of Appeals of Maryland speaks of this branch of the tortwhere there is no frank breach of contractspecifically in terms of an interference with `business relationships.'" Id. at 337 (quoting K & K Management v. Lee, 316 Md. 137, 557 A.2d 965 (1989)). But, a court in this district recently found contracts for the buying and selling of property to fall squarely within the realm of this tort. See Abbott v. Gordon, No. 09-372, 2009 WL 2426052, at *8, 2009 U.S. Dist. LEXIS 68819, at *22 (D.Md. Aug. 6, 2009). That court refused to dismiss a claim for tortious interference with a contract to purchase property for personal use, explaining, "[t]he fact that Plaintiffs may not own a business or may not have purchased the Property as part of their employment does not exclude Plaintiffs from asserting a tortious interference with prospective relations claim.... Because the buying and selling of property is a business relation and involves economic rights, the `lawful business' aspect of this element is satisfied." Id., at *8, 2009 U.S. Dist. LEXIS 68819 at *22-23. The Court finds this a very close question. The history of the tort seems to support Defendants' contention that it is limited to non-personal contracts. But, given that the Abbott court's interpretation of the tort is plausible and based on the plain language of the requirement of a business relationship, the Court is not willing to grant summary judgment on this second form of the tort at this juncture. Thus, the Court will deny Individual Defendants' motion for summary judgment on the tortious interference with contract claim (Count IX).
ii. 42 U.S.C. Section 1985(3) (Count IV)
Individual Defendants argue that the Court must grant them summary judgment on Plaintiffs' 42 U.S.C. § 1985(3) claim because 42 U.S.C. § 1985(3) does not apply to conspiracies to interfere with property rights protected under § 1982. Plaintiffs respond that the Fourth Circuit allows § 1985(3) claims based on the right to purchase and own real property protected by 42 U.S.C. § 1982, and that the Individual Defendants base their argument on a narrow interpretation of a case from the Third Circuit. The Court finds that given *778 this statute's well documented purpose to prohibit race-based discrimination, no binding contrary authority, and a case from this Circuit finding a 42 U.S.C. § 1981 violation may provide the basis for a § 1985(3) claim, the Plaintiffs may base their § 1985(3) claim on a violation of 42 U.S.C. § 1982.
Section 1985(3) is the successor to the Civil Rights Act of 1871, enacted to protect federal and constitutional rights of citizens of the United States. The statute provides:
[I]n any case of conspiracy set forth in this section, if one or more persons engaged therein do, or cause to be done, any act in furtherance of the object of such conspiracy, whereby another is injured in his person or property, or deprived of having and exercising any right or privilege of a citizen of the United States, the party so injured or deprived may have an action for the recovery of damages occasioned by such injury or deprivation, against any one or more of the conspirators.
42 U.S.C. § 1985(3) (emphasis added). Clearly, the plain language of the statute contemplates recovery for injury to property.
In 1971, the Supreme Court reversed a 20-year precedent that § 1985(3) applied only to violations of rights protected from official encroachment, finding that the text required a more expansive interpretation. See Griffin v. Breckenridge, 403 U.S. 88, 102-103, 91 S.Ct. 1790, 29 L.Ed.2d 338 (1971). In Griffin, the Supreme Court reconstrued the statute as protecting only those rights that were legislatively protected from both private and public interference. "In finding that the text required that expanded scope, however, [the Supreme Court] recognized the `constitutional shoals that would lie in the path of interpreting § 1985(3) as a general federal tort law.'" Bray v. Alexandria Women's Health Clinic, 506 U.S. 263, 268, 113 S.Ct. 753, 122 L.Ed.2d 34 (1993) (citations omitted). The Griffin Court found the primary restriction on an over-expansion of the statute would be that a prima facie case would require a showing of class-based discriminatory animus. Griffin, 403 U.S. at 102, 91 S.Ct. 1790. This restriction was clearly intended by Congress, as revealed in the Act's legislative history.
Thus, "in order to prove a private conspiracy in violation of the first clause of § 1985(3), a plaintiff must show, inter alia, (1) that `some racial, or perhaps otherwise class-based, invidiously discriminatory animus [lay] behind the conspirators' action,' and (2) that the conspiracy `aimed at interfering with rights' that are `protected against private, as well as official, encroachment.'" Bray, 506 U.S. at 267-68, 113 S.Ct. 753 (citation omitted). Plaintiffs have developed sufficient evidence to meet these criteria, and Individual Defendants do not appear to dispute the fact that Plaintiffs have made out a prima facie case so long as the Court allows the § 1985(3) claim to be based on a § 1982 claim.
The Court acknowledges that the Supreme Court's decision in Bray left some ambiguity regarding whether § 1985(3) protects only constitutional rights or federal rights as well. As another court has explained, the fact that Justice Powell and Justice Stevens concurred separately in Bray to take the position that § 1985(3) protects only constitutional rights, indicates that such was not the holding of the case. See Spectronics Corp. v. TCI/TKR, Inc., 17 F.Supp.2d 669, 671-672 (W.D.Ky. 1998). Additionally, the unique status of §§ 1981 and 1982 as enabling statutes of the Thirteenth Amendment, the Court concludes that § 1985(3) violations may be based on them. See Witten v. A.H. Smith & Co., 567 F.Supp. 1063, 1070-1072 (D.Md. *779 1983) ("Sections 1 & 2 of the Civil Rights Act of 1866, the predecessors to §§ 1981 & 1982, were enacted pursuant to the Enabling Clause of the Thirteenth Amendment authorizing Congress `to pass all laws necessary and proper for abolishing all badges and incidents of slavery in the United States.'") (quoting Civil Rights Cases, 109 U.S. 3, 20, 3 S.Ct. 18, 27 L.Ed. 835 (1883)). "Judge Miller's reasoning [in Witten] remains sound even post-Bray." Spectronics, 17 F.Supp.2d at 671. "The right conferred by § 1981 to be free from private interference in the making and enforcement of contracts arguably is precisely the sort of federal right which would be among the `few' giving rise to a remedy under § 1985(3)." Id.
Plaintiffs cite two cases that indicate that the Fourth Circuit has not ruled out the possibility of a § 1985(3) claim being based on a § 1982 claim. In Bank Realty, in an unpublished slip opinion, the Fourth Circuit, after finding a Plaintiff showed sufficient evidence of racial animus to make out a § 1982 claim, stated that the lower court had "erred in dismissing the section 1985 and 1986 claims on that basis." Bank Realty v. Practical Mgmt. Tech., 935 F.2d 267, _____ (4th Cir.1991). Thus, though the Fourth Circuit had an opportunity to reject the possibility of a § 1985(3) claim being based on a § 1982 claim, it chose not to. Though both the appellate court and the trial court in Shaare Tefila Congregation never reached the question of whether a Section 1985(3) can apply to a Section 1981 violation, the Fourth Circuit certainly left open that possibility. Shaare Tefila Congregation v. Cobb, 785 F.2d 523, 527 (4th Cir.1986) ("The Congregation cannot base its section 1985(3) claim on sections 1981 and 1982, because, for the reasons discussed in the preceding sections of this opinion, it failed to state causes of action under those statutes."). The Court's decision today is consistent with other decisions from this District. In Witten, a court in this District found that a § 1985(3) claim could be based on a violation of § 1981. 567 F.Supp. 1063, 1070-1072. As Defendants acknowledge, "`[t]he historic interrelationship of §§ 1981 and 1982 have led courts consistently to construe these statutes in tandem,'" and thus the rationale in that case applies to this case as well. (Doc. No. 315 at 14) (quoting Pumphrey v. Stephen Homes, Inc., No. 93-1329, 1994 WL 150947, at *4 (D.Md. Feb. 24, 1994).)
Despite Defendants' contentions to the contrary, the rationale for the Supreme Court's decision in Bray supports this Court's finding that a § 1985(3) claim can be based on a violation of § 1982. While the Supreme Court acknowledged that rights protected against both private and official encroachment were few in number, the Court did not limit those rights beyond the definition it provided. Moreover, the Court noted the possibility of further recognition of rights in that category, stating parenthetically, "we have hitherto recognized only the Thirteenth Amendment right to be free from involuntary servitude, and, in the same Thirteenth Amendment context, the right of interstate travel." Bray, 506 U.S. at 278, 113 S.Ct. 753 (citations omitted). The Bray Court held abortion did not fit within this category of privately and publicly protected rights "since it is much less explicitly protected by the Constitution than, for example, the right of free speech rejected for such status in [United Broth. of Carpenters {and Joiners of America Local 610, AFL-CIO v. Scott, 463 U.S. 825, 103 S.Ct. 3352, 77 L.Ed.2d 1049 (1983)]," and it fell within a broader category of right that was clearly not protected under this statute. Id. That rationale, however, does not apply in this case.
*780 Defendants give great weight to the Third Circuit's statement in Brown that § 1985(3) claims should not be expanded beyond violations of interstate travel or involuntary servitude. See Brown v. Philip Morris, Inc., 250 F.3d 789, 806 (3d Cir.2001). But this Court finds Brown poses no obstacle to this Court allowing Plaintiffs to base a § 1985(3) claim on a § 1982 claim because, aside from being non-binding precedent, that court's statements regarding this issue were dicta. See Brown, 250 F.3d at 806 ("We need not, however, resolve the question whether violations of §§ 1981 and 1982 can support a § 1985(3) claim because Black Smokers have failed to state a claim under either § 1981 or § 1982.") This Court will follow precedent in this District to reach the conclusion that the § 1985(3) claim in this case can be based on a § 1982 violation, see Witten, 567 F.Supp. at 1070-72, and will accordingly deny Individual Defendants' motions for summary judgment on this Count.
iii. Intentional Infliction of Emotional Distress (Count X)
Defendants Walsh and Parady move for summary judgment on the IIED claim on the ground that Plaintiffs have not alleged sufficiently severe emotional distress to meet the fourth prong of the prima facie case of IIED. Defendant Walsh argues that Plaintiffs must show distress so severe that no reasonable man could be expected to endure it, as Maryland law requires a plaintiff to be unable to function, tend to necessary matters, or to conduct daily activities as a result of the distress in order to make out a prima facie case of IIED.
The Court finds, however, that Plaintiffs have presented sufficient evidence of severe emotional distress to survive Defendants' motions for summary judgment on this issue. To meet the fourth requirement of the prima facie case of IIED, a plaintiff must be "unable to function" or "tend to necessary matters," but total disablement or inability to attend to all daily activities is not a requirement. Hamilton v. Ford Motor Credit Co., 66 Md.App. 46, 61, 502 A.2d 1057 (Ct. Spec.App.1986); Figueiredo-Torres v. Nickel, 321 Md. 642, 584 A.2d 69, 74 (1991) (finding that the distress of systemic hypertension, loss of visual acuity, required hospitalization for severe emotional distress, shock and fright to the nervous system, depression, anxiety, obsession, and impairment of one's ability to form intimate relationships with women was sufficiently severe for an IIED claim). A psychologist examined the Plaintiffs, ranked the severity of their impairments, and gave many of them ratings of poor, very poor, or grossly impaired in the categories of social relationships, occupational function, and substance abuse. (Doc. 359, Attachment A.) While the accuracy of such ratings is debatable, it appears Plaintiffs have made enough of a showing to survive a summary judgment motion on this issue. Here, all of the Plaintiffs have testified to or presented evidence of potentially severe injury. Plaintiffs argue that the majority of the Plaintiffs have been diagnosed with post-traumatic stress disorder, anxiety, depression, marriage problems, and other troubles and their psychiatric evaluations bear out their IIED claims. (Id. at 96; see also Id., Ex. 79-D).
Defendants' contention that the symptoms Plaintiffs allegebeing fearful, angry, paranoid, nervous, anxious, suffering from headaches, and having problems sleepingfall short of the level of severity required for an IIED claim, is not consistent with the full spectrum of Maryland cases. Though in Simon v. Union Hosp. of Cecil County, Inc., the court found tremendous stress requiring counseling, depression, *781 and inability to sleep, to be insufficient to meet the severity threshold for an IIED claim, Plaintiffs have cited cases where injuries have sufficed that were at a similar level of severity to those in this case. 15 F.Supp.2d 787, 799-800 (D.Md. 1998). Indeed, the Court is persuaded by the Plaintiffs' response that while Maryland law does require severity of emotional distress, something less than complete emotional disablement is sufficient to satisfy this standard. (Doc. No. 359 at 94.) Accordingly, the Court will deny Defendants summary judgment on the intentional infliction of emotional distress claim.
iv. FHA (Count I), 42 U.S.C. § 1982 (Count III), and 42 U.S.C. Section 1985(3) claim (Count IV)
As described above, see supra p. 772, the civil rights statutes guarantee persons basic rights to be free from discrimination in connection with their enjoyment of property. Individual Defendants Speed, Everhart, and McCann posit that the Court must grant summary judgment on the claims under the civil rights statutes FHA (Count I), 42 U.S.C. § 1982 (Count III), and 42 U.S.C. § 1985(3) (Count IV) because Plaintiffs have not presented sufficient evidence of racial motivation and the FHA does not apply to a third-party arson. Plaintiffs respond (1) Defendants misstate the evidentiary burdens of proving intent, (2) Plaintiffs have presented direct and circumstantial evidence that raises a genuine issue of material fact with respect to whether Defendants' arson was motivated by discriminatory intent, violating the FHA and § 1982, (3) Defendants have failed to rebut evidence of discriminatory intent, (4) based on direct and circumstantial evidence, Plaintiffs have raised a genuine issue of material fact that Defendants' conspiracy to commit arson was motivated by racial animus, violating § 1985(3), and (5) the Fair Housing Act applies to racially motivated arsons. Plaintiffs present ample evidence from which it is possible to conclude all three of these Individual Defendants were motivated by racial animus in participating in this arson, and it is clear the FHA applies in this case. Thus, the Court will deny all Individual Defendants' motions for summary judgment.
a. Racial Motivation
Plaintiffs present ample evidence from which it is possible to conclude all three of these Individual Defendants were motivated by racial animus in participating in this arson. A showing of racial animus is necessary under all three of these statutes. See supra pp. 772-73. As mentioned above, a plaintiff may demonstrate a racial animus by pointing to direct or circumstantial evidence of discriminatory purpose. See Bynum v. Hobbs Realty, No. 00-1143, 2002 WL 31444660, at *3, 2002 U.S. Dist. LEXIS 21473 at *11 (M.D.N.C. Feb. 22, 2002) (citations omitted). If Plaintiffs present circumstantial evidence, they must satisfy the McDonnell Douglas framework for proof. See McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973). "Under the McDonnell Douglas proof scheme the plaintiff must first establish a prima facie case of discrimination. Once the plaintiff establishes a prima facie case, the defendant must respond with evidence that it acted with a legitimate, nondiscriminatory reason. If the defendant makes this showing, the plaintiff must then present evidence to prove that the defendant's articulated reason was pretext for unlawful discrimination." Murrell v. Ocean Mecca Motel, Inc., 262 F.3d 253, 257 (4th Cir.2001) (citations omitted).
Plaintiffs have presented sufficient direct and circumstantial evidence to raise a genuine issue of material fact as to whether Defendants' arson was motivated by discriminatory intent. Plaintiffs' direct *782 evidence first includes Defendant Parady's admission in his plea agreement that the conspiracy targeted Hunters Brooke because Parady "knew or perceived that many of the purchasers of the houses in that development were African-American." (Doc. No. 375, Ex. 5, Parady Stip. Facts.) Defendants Speed and Everhart asserted the Fifth Amendment privilege as to all questions pertaining to planning the arson. (Doc. No. 375, Exs. 8 & 9.) Plaintiffs argue that Speed and Everhart's refusal to testify to confirm or deny critical facts entitles Plaintiffs to an adverse inference at trial, and thus warrants denial of summary judgment. See ePlus Tech., Inc. v. Aboud, 313 F.3d 166, 179 (4th Cir.2002) ("In a civil proceeding, a fact-finder is entitled to draw adverse inferences from a defendant's invocation of the privilege against self incrimination."). Plaintiffs also contend that Speed's admission that he participated in the arson because he was "resentful about the wealth of the residents who he believed looked down at him and his own limited economic and educational status," is a disguised expression of racial animus. (Doc. No. 375, Ex. 1, Speed Stip. Facts.) It is undisputed that the conspirators took a can of black spray paint with them and painted the words "Black Jokers," which a jury could find to be a racial slur, on a dumpster in the neighborhood. Finally, the conspirators regularly made comments derogating racial minorities. Walsh, in the presence of McCann and Everhart, stated "there's too many n* *s moving into Charles County," and "Charles County is starting to end up like P.G. County," which he later explained meant "there's a lot of black people." Speed stated to Everhart and Parady, "n* *s must die." They all routinely used racial epithets such as "n* *s" to refer to African Americans. The Court finds this evidence is sufficient to raise disputes of material fact as to the racial motivation of each Individual Defendant. Indeed, this evidence is unusually direct evidence of racial animus. Though McCann has stated in deposition that he used these slurs benignly, the Court believes that his motivation for using racial epithets is a question of fact for the jury. At the hearing on this Motion, Individual Defendants urged the Court to consider the evidence against each Defendant separately. The Court now finds that because there is evidence that each Individual Defendant used racial epithets, there is a sufficient issue of material fact with respect to each Defendant's racial motivation. Accordingly, on that ground alone, the Court will deny summary judgment to each Defendant.
Even if there was no direct evidence of racial motivation, Plaintiffs have shown sufficient circumstantial evidence of racial motivation to survive a motion for summary judgment. With respect to the circumstantial evidence, Plaintiffs argue that they have established a prima facie case by showing that the arson was more likely than not based, at least partially, on the Plaintiffs' race. See Furnco Constr. Corp. v. Waters, 438 U.S. 567, 577, 98 S.Ct. 2943, 57 L.Ed.2d 957 (1978) ("A prima facie case under McDonnell Douglas raises an inference of discrimination only because we presume these acts, if otherwise unexplained, are more likely than not based on the consideration of impermissible factors.") Plaintiffs have shown (1) they are racial minorities; (2) Defendants knew Plaintiffs were racial minorities; (3) Defendants committed an act of violence against their homes; and (4) Defendants' action interfered with Plaintiffs' rights to purchase their homes.
Defendants have failed to rebut evidence of discriminatory intent, and rather merely attack the credibility of witnesses. Plaintiffs also contend that Speed's "legitimate" nondiscriminatory reason for the arson, *783 that he was disgruntled with the paternity-leave policy, is a pretext. The Court has already found that there is sufficient evidence to raise an issue of material fact as to whether Individual Defendants were motivated by racial animus. Accordingly, the Court finds that Plaintiffs have met their burden of making a prima facie case of discrimination, and Defendants have not presented sufficient evidence to rebut it. Thus, the Court denies Individual Defendants' request for summary judgment on the counts requiring racial motivation FHA (Count I), 42 U.S.C. § 1982 (Count III), and 42 U.S.C. § 1985(3) (Count IV).
b. Applicability of FHA
Defendant Speed argues that courts in the Fourth Circuit have not recognized a civil claim under §§ 3604 and 3617 of the FHA outside the context of traditional housing discrimination. Plaintiffs respond that the Supreme Court recognizes that the "broad and inclusive" language of the FHA requires a "generous construction" of the statute, and the plain language of the statute prohibits arson by making it unlawful to "coerce, intimidate, threaten, or interfere with any person in the exercise or enjoyment of ... any right granted or protected by section ... 3604...." 42 U.S.C. §§ 3604(a), 3617. Courts in the Fourth Circuit have interpreted the FHA to prohibit racially motivated violent property damage. See Johns v. Stillwell, No. 07-63, 2009 WL 1408517, at *11, 2009 U.S. Dist. LEXIS 43330 at *22 (W.D.Va. May 20, 2009) ("[A] reasonable juror could determine that Stillwell's entry upon and taking possession of the property in mid-June, and then discarding and burning Plaintiffs' property, indicates coercion, intimidation, threat, or interference prohibited by § 3617.") Additionally, non-landlords are liable under the FHA and such entities that "make housing unavailable," through such activities as intimidation, have been found to violate the FHA in the Fourth Circuit. See Williams v. Poretsky Mgmt., 955 F.Supp. 490, 495 (D.Md.1996) ("reviewing these cases, few as they may be, it is not difficult to conclude that this court should recognize sexual harassment as actionable under Title VIII [i.e. the FHA]"). In light of this clear precedent supporting the application of the FHA to a racially motivated arson, the Court believes there is a cognizable basis to conclude the FHA applies to this case. Accordingly, the Court will deny summary judgment to Individual Defendants Speed, Everhart, and McCann as to the applicability of the FHA.
4. CONCLUSION
As indicated at the start of this Memorandum Opinion, the arguments presented in the parties' summary judgment motions pose novel and complex civil litigation issues surrounding this highly publicized mass arson case which wreaked havoc on the Hunters Brooke Development in Charles County, Maryland, back in December of 2004. The Court recognizes that its determinations with respect to the motions have altered the scope of the suit, particularly with respect to Corporate Defendants. First, because there is no basis on which to hold SSA Inc.'s parent company, ABM, or its predecessor, SSA, LLC, liable for the actions of SSA, Inc. or its employees, the Court has dismissed those corporate entities from the suit. Next, turning to the theories of Corporate Defendants' direct liability, because there is no dispute of material fact that the Plaintiffs were merely incidental beneficiaries of the contract between SSA, Inc. and the Developer, the Court has granted summary judgment to Corporate Defendants on the breach of contract claim (Count VIII). The other claims based on direct liabilitynegligence in hiring, training, and supervision (Count V) and negligence *784 (Count VI)were denied summary judgment at this stage because issues of material fact remain pending completion of the limited discovery that Judge Day ordered. The remaining Counts hinged, in part, on a determination of SSA, Inc.'s vicarious liability for the tortious acts of the Hunters Brooke guards, Speed and Fitzpatrick. The Court found that as a matter of law, Corporate Defendants are not liable for Speed's preparation for arson, but that issues of material fact remain with respect to their liability for Fitzpatrick's early departure from his post. Because neither SSA, Inc. nor any employee acting within the scope of employment acted with the necessary intent or racial animus, and no other basis for vicarious liability applies, the Court granted Corporate Defendants summary judgment on the Fair Housing Act claim (Count I), the claim for violation of 42 U.S.C. § 1982 (Count III), the 42 U.S.C. § 1985(3) claim (Count IV), the tortious interference with contract claim (Count IX), and the intentional infliction of emotional distress claim (Count X). Regarding the parties' cross-motions for summary judgment on the issue of Corporate Defendants' liability under the Maryland Business Occupations Code (Count VII), the Court construed the statute, which has never before been interpreted by Maryland courts, to codify common law vicarious liability principles. Thus the Maryland Business Occupations and Professions Code claim remains against Corporate Defendants insofar as they are vicariously liable for Fitzpatrick's departure.
Finally, the Court denied the Individual Defendants' motions for summary judgment. The Court believes that a 42 U.S.C. § 1985(3) claim (Count IV) can be based on a violation of § 1982, that there are disputes of material facts as to Plaintiffs' tortious interference with contract claim (Count IX), and sufficient evidence of severity of Plaintiffs' injury to raise a dispute of material fact regarding the intentional infliction of emotional distress claim (Count X). Additionally, the Court found that Plaintiffs had shown sufficient evidence to raise a dispute of material fact as to whether the Individual Defendants' behavior was racially motivated, and thus denied Defendants McCann, Everhart, and Speed's motions for summary judgment on the FHA claim (Count I), the 42 U.S.C. § 1982 claim (Count III), and the 42 U.S.C. Section 1985(3) claim (Count IV).
For the foregoing reasons, the Court will grant in part and deny in part Corporate Defendants' Motion for Summary Judgment, deny Plaintiffs' Cross Motion for Partial Summary Judgment, deny Defendant Patrick Stephen Walsh's Motion for Summary Judgment, deny Defendant Jeremy Daniel Parady's Motion for Partial Summary Judgment, deny Defendant Michael Everhart's Motion for Partial Summary Judgment, deny Defendant Aaron Lee Speed, Sr.'s Motion for Summary Judgment, and deny Defendant Roy T. McCann's Motion for Partial Summary Judgment. A separate Order will follow.
ORDER
For the reasons stated in the foregoing Memorandum Opinion, IT IS this 31st day of March, 2010, by the United States District Court for the District of Maryland, hereby ORDERED that:
1. Corporate Defendants' Motion for Summary Judgment (Docket No. 315) BE, and the same HEREBY IS, GRANTED IN PART and DENIED IN PART, without prejudice to refiling should other relevant information become available through discovery, with the following results:
a. The Fair Housing Act claim (Count I), 42 U.S.C. § 1982 claim (Count III), 42 U.S.C. § 1985(3) *785 claim (Count IV), tortious interference with contract claim (Count IX), the intentional infliction of emotional distress ("IIED") claim (Count X), the breach of contract claim (Count VIII), and the Maryland Fair Housing Act (Count II) are DISMISSED as to Corporate Defendants;
b. The Maryland Business Occupations and Professions Code claim (Count VII), negligence in hiring, training, and supervision claim (Count V), and the negligence claim (Count VI) remain;
c. Defendants ABM Industries, Inc. ("ABM") and Security Services of America, LLC ("SSA, LLC") are dismissed from the suit;
2. Plaintiffs' Cross Motion for Partial Summary Judgment (Docket No. 359) BE, and the same HEREBY IS, DNIED;
3. Defendant Patrick Stephen Walsh's Motion for Summary Judgment (Docket No. 320) BE, and the same HEREBY IS, DENIED;
4. Defendant Jeremy Daniel Parady's Motion for Partial Summary Judgment (Docket No. 355) BE, and the same HEREBY IS, DENIED;
5. Defendant Michael Everhart's Motion for Partial Summary Judgment (Docket No. 353) BE, and the same HEREBY IS, DENIED;
6. Defendant Aaron Lee Speed, Sr.'s Motion for Summary Judgment (Docket No. 358) BE, and the same HEREBY IS, DENIED;
7. Defendant Roy T. McCann's Motion for Partial Summary Judgment (Docket No. 357) BE, and the same HEREBY IS, DENIED; AND
8. Within fourteen (14) days of the entry of this Order, the parties are directed to submit a schedule regarding the remaining discovery and motions deadlines;
9. That the Clerk of the Court transmit a copy of this Order to all counsel of record.
NOTES
[1] The Plaintiffs never sought to bring in Fitzpatrick as a party to the suit, and Fitzpatrick was never criminally charged in connection with the arson.
[2] The Court dismissed this claim. (Doc. No. 193.)
[3] In a footnote (Doc. No. 315 at 12 n. 6), the Corporate Defendants move for summary judgment on the Maryland Fair Housing Act claim (Count II) for the reasons stated in the Court's Memorandum Opinion granting Defendant Speed's Motion to Dismiss Count II (Doc. No. 192). As the reasons for the dismissal of that claim apply to all parties, the Court dismisses Count II as to all parties.
[4] This denial is without prejudice to the Corporate Defendants' right to re-file once discovery is completed.
[5] Depending on further development of this litigation, it may be appropriate for the Court to consider a motion to certify the question to the Maryland Court of Appeals, consistent with Md.Code, Cts. & Jud. Proc. art., § 12-601 et seq.
[6] The Court does not believe that the record, up to this point, supports a ratification theory. To the extent that the further limited discovery Judge Day has allowed provides evidence to support a ratification theory, the Court will consider a motion to reconsider the ratification theory of vicarious liability.
[7] Because the Court finds this ground sufficient to grant summary judgment on this claim to Corporate Defendants, the Court will not address their argument regarding 42 U.S.C. § 1985(3)'s coverage of property rights with respect to them, but addresses this claim with respect to the Individual Defendants. See infra. p. 778.
[8] Note that these are not examples of sufficiently severe emotional distress for an IIED claim. These are simply examples of the physical injury necessary to cross the threshold of emotional injuries arising out of property damage.
[9] In Doc. No. 378, at page 14, Plaintiffs indicate that these documents are Exhibits 15 & 16, but the Court believes it has identified these documents as Exhibits 25 & 26.
| {
"pile_set_name": "FreeLaw"
} |
556 So.2d 1082 (1989)
Ex parte SOUTHERN RAILWAY COMPANY, a corporation.
(In re H.D. MINTZ
v.
SOUTHERN RAILWAY COMPANY, a corporation).
88-838 to 88-876.
Supreme Court of Alabama.
November 21, 1989.
*1083 Charles E. Sharp, Mac B. Greaves and Joel A. Williams of Sadler, Sullivan, Herring & Sharp and Robert D. Hunter of Lange, Simpson, Robinson & Somerville, Birmingham, for petitioner.
Clarence M. Small, Jr. and Norma Mungenast Lemley of Rives & Peterson and Courtney B. Adams of Burge & Wettermark, Birmingham, for respondent.
PETITION FOR WRIT OF MANDAMUS[*]
PER CURIAM.
The petitioners, CSX Transportation, Inc., Burlington Northern Railroad Company. *1084 Illinois Central Gulf Railroad Company, Southern Railway Company, and Norfolk Southern Corporation, are all foreign corporations qualified to do business in Alabama, who were doing business by agent in Jefferson County, Alabama, at the time each of these suits was filed. The respondents are all persons who are nonresidents of Alabama; they are seeking monetary damages under the Federal Employers Liability Act, 45 U.S.C. §§ 51 et seq. (F.E.L. A.), for personal injuries suffered in accidents that occurred outside Alabama.
Each respondent filed a complaint in the Jefferson County Circuit Court after the Alabama legislature had made certain changes in the law relating to venue of actions. The petitioners, as defendants, moved to dismiss these complaints, asserting that dismissal was required either by Amendment 473 to the Ala. Const.1901, or in the alternative, by Act No. 87-182, Ala. Acts 1987. The trial judge denied the motions to dismiss, and the defendants then filed these petitions for writs of mandamus.
Three companion bills were introduced in the 1987 session of the Alabama legislature by the identical 60 co-sponsors. House Bill No. 24 passed the House on April 28, 1987, and the Senate on May 14, 1987, and became Act No. 87-164, Ala.Acts 1987. It proposed an amendment to Article XII, § 232, of the Constitution of 1901. On March 8, 1988, the voters of the State of Alabama approved that amendment to Article XII, § 232, of the 1901 Constitution of Alabama (proclaimed ratified April 1, 1988). Before the amendment, § 232 of the Alabama Constitution provided:
"No foreign corporation shall do any business in this state without having at least one known place of business and an authorized agent or agents therein, and without filing with the secretary of state a certified copy of its articles of incorporation or association. Such corporation may be sued in any county where it does business, by service of process upon an agent anywhere in the state...." (Emphasis added.)
Amendment 473, amending § 232, deleted the language emphasized above and substituted the following emphasized language, so that after the amendment § 232 reads as follows:
"No foreign corporation shall do business in this state without having at least one known place of business and an authorized agent or agents therein, and without filing with the secretary of state a certified copy of its articles of incorporation or association. Any foreign corporation, whether or not such corporation has qualified to do business in this state by filing with the secretary of state a certified copy of its articles of incorporation or association, may be sued only in those counties where such suit would be allowed if the said foreign corporation were a domestic corporation ...." (Emphasis added.)
House Bill No. 25 became Act No. 87-181, Ala.Acts 1987. It was approved on June 11, 1987, and it reads in its entirety as follows:
"AN ACT
"To provide that any court of general jurisdiction shall, for the convenience of parties and witnesses, or in the interest of justice, transfer a civil action to any other court of general jurisdiction in Alabama in which the civil action might properly have been filed; to provide that *1085 any such transferred action shall proceed as though it had been originally filed in the second court; to provide that the right to move for a change or transfer of venue pursuant to this Act is cumulative and in addition to the rights of a defendant under Alabama Code (1975) Section 6-3-20, Section 6-3-21 or Alabama Rules of Civil Procedure; to provide for the repeal of inconsistent laws or parts of laws; to provide for the severability of this Act; to provide that this act shall not apply to any civil action pending on its effective date; and to provide the manner in which this bill becomes law.
"Be It Enacted by the Legislature of Alabama:
"Section 1. Change or Transfer of Venue.
"(a) With respect to civil actions filed in an appropriate venue, any court of general jurisdiction shall, for the convenience of parties and witnesses, or in the interest of justice, transfer any civil action or any claim in any civil action to any court of general jurisdiction in which the action might have been properly filed and the case shall proceed as though originally filed therein. Provided, however, this act shall not apply to cases subject to Section 30-3-5 of the Code of Alabama 1975.
"(b) The right of a party to move for a change or transfer of venue pursuant to this statute is cumulative and in addition to the rights of a party to move for a change or transfer of venue pursuant to Alabama Code (1975) Section 6-3-20, Section 6-3-21 or Alabama Rules of Civil Procedure Rule.
"Section 2. All other laws, or parts of laws, which are in any manner inconsistent with this Act are repealed to the extent that they are inconsistent with this Act.
"Section 3. If any section, clause, provision, or portion of this Act shall be held invalid or unconstitutional by any court of competent jurisdiction, such holding shall not affect any other section, clause, or provision of this Act which is not in and of itself invalid or unconstitutional.
"Section 4. This Act shall not apply to any civil action pending on the effective date of this Act.
"Section 5. This Act shall become effective immediately upon its passage and approval by the Governor, or upon its otherwise becoming law."
Act No. 87-181, Ala.Acts 1987, was codified as Code 1975, § 6-3-21.1.
House Bill No. 26 became Act No. 87-182, Ala.Acts 1987; it became law on June 11, 1987. It amended Code 1975, § 6-5-430, which before the passage of Act No. 87-182 read as follows:
"Whenever either by common law or the statutes of another state or of the United States, a claim, either upon contract or in tort has arisen outside this state against any person or corporation, such claim may be enforceable in the courts of this state in any county in which jurisdiction of the defendant can be legally obtained in the same manner in which jurisdiction could have been obtained if the claim had arisen in this state."
Act No. 87-182 added the following provisos to § 6-5-430:
"... provided, however, the courts of this state shall apply the doctrine of forum non conveniens in determining whether to accept or decline to take jurisdiction of an action based upon such claim originating outside this state; and provided further that, if upon motion of any defendant it is shown that there exists a more appropriate forum outside this state, taking into account the location where the acts giving rise to the action occurred, the convenience of the parties and witnesses, and the interests of justice, the court must dismiss the action without prejudice. Such dismissal may be conditioned upon the defendant or defendants filing with the court a consent (i) to submit to jurisdiction in the identified forum, or (ii) to waive any defense based upon a statute of limitations if an action on the same cause of action is commenced in the identified forum within 60 days of the dismissal."
*1086 Section 6-5-430, as amended by this Act retains the right of the courts of this state to adjudicate claims, either upon contract or upon tort, which arise outside the state against any person or corporation in any county in which jurisdiction over the defendant can be legally obtained. It requires the courts, however, to apply the doctrine of forum non conveniens in determining whether to accept or decline to take jurisdiction of any action based upon a claim arising outside the state. The application of the doctrine of forum non conveniens to a claim arising outside the State of Alabama is new to Alabama jurisprudence. This legislation requires the courts to apply this doctrine to all suits brought on a foreign cause of action, without regard to whether the defendant is a foreign corporation or a domestic corporation or whether the defendant is a resident of the State of Alabama or a non-resident. If the court, in its discretion, determines that the doctrine of forum non conveniens requires it, the court will decline to exercise its jurisdiction and dismiss the action.
Its companion act, Act No. 87-181, provides, not for the dismissal of the cause, but for the transfer of a civil action filed in an appropriate venue "for the convenience of the parties and witnesses, or in the interest of justice." § 6-3-21.1. This has application to causes of action whether they arise within the State of Alabama or outside the state, without regard to whether the defendant is a foreign corporation or a domestic corporation or whether the defendant is a resident of the State of Alabama or is a non-resident. This act contemplates proper venue in more than one Alabama county. It contemplates transfer of venue from a county in Alabama where venue is proper to another county within the state where venue is also proper, but more convenient for the parties and witnesses.
Both statutes proceed from the premise that the courts in which the plaintiff elects to bring suit have jurisdiction of the subject matter and have personal jurisdiction over the defendant. Section 6-5-430 merely requires the trial court to consider whether to accept or decline to take jurisdiction after applying the doctrine of forum non conveniens. After applying that doctrine, the trial court is left with discretion to decide whether to exercise or decline to exercise its jurisdiction.
In making that determination, the court considers the convenience of the parties and witnesses, the location of the evidence, and any other matter in order to assess the degree of actual difficulty and hardship that will result to the defendant in litigating the case in the forum chosen by the plaintiff. If it concludes that justice so requires, it may decline to exercise its jurisdiction and may dismiss the complaint. Section 6-3-21.1, upon motion for change of venue by a defendant, requires a similar determination by the trial court, which may transfer the cause to another county in Alabama in which venue is likewise proper.
Against this constitutional and statutory background, the petitioners argue: "The amending of the Constitution has terminated, withdrawn and ended the jurisdiction of the circuit courts to adjudicate the rights of a foreign corporation qualified to do business in Alabama against [its] will unless the accident happened in Alabama or the plaintiff is a resident of the State of Alabama." The petitioners contend that the amendment to the constitution requires foreign and domestic corporations to be treated identically insofar as venue is concerned. Code 1975, § 6-3-7, provides that suits for personal injuries brought against a domestic corporation must be brought in the county where the injury occurred or in the county where the plaintiff resides, if the corporation does business by agent in the county of the plaintiff's residence. Therefore, the argument goes, because a domestic corporation could compel the dismissal of these suits because they were not commenced in the county where the injury occurred or where the plaintiffs reside, these petitioners are entitled to have the suits dismissed because they are constitutionally entitled to the same treatment as domestic corporations.
We reject this argument. We agree that the constitution as amended extends to foreign corporations the same treatment afforded domestic corporations in determining venue, but we do not agree that a domestic corporation under these facts *1087 would be entitled to have these suits dismissed. The statute limiting venue for personal injury actions against domestic corporations (§ 6-3-7) does not apply to nonresident plaintiffs suing a domestic corporation (or a foreign corporation) on a foreign transitory cause of action. See Louisville & Nashville R.R. v. Laney, 14 Ala.App. 287, 69 So. 993 (1915), and Watford v. Ala.-Fla. Lumber Co., 152 Ala. 178, 44 So. 567 (1907). These two decisions refute the contentions of the petitioners that unless the injury occurs in Alabama or the plaintiff resides in a county in which the defendant does business, Alabama courts have no jurisdiction to adjudicate a transitory cause of action.
Petitioners argue that because § 6-3-7 does not specify venue for a nonresident's action against a domestic corporation based on a foreign personal injury cause of action, the action may not be maintained. The argument confuses jurisdiction and venue.
The circuit courts of Alabama are courts of general jurisdiction in all cases except as may otherwise be provided by law. Alabama Constitution, Amendment 328, § 6.04. The actions involved in this litigation are transitory causes of action and unquestionably may be maintained in Alabama courts by virtue of Code 1975, § 6-5-430, which, until amended by Act No. 87-182, read in pertinent part:
"Whenever either by common law, or the statutes of another state, a claim, either upon contract or in tort, has arisen in such other state against any person or corporation, such claim shall be enforceable in the courts of this state in any county in which jurisdiction of the defendant can be legally obtained in the same manner in which jurisdiction could have been obtained if the claim had arisen in this state."
This part of the statute, like § 6-3-7, has been the law since 1907. This Court has consistently held that under § 6-5-430 the circuit courts have no discretion to accept or decline jurisdiction, Ex parte State ex rel. Southern Ry., 254 Ala. 10, 47 So.2d 249 (1950); Central of Georgia Ry. v. Phillips, 286 Ala. 365, 240 So.2d 118 (1970), and that is true notwithstanding the fact that both parties may reside in a foreign state and that the cause of action accrued outside the State of Alabama. Hall v. Milligan, 221 Ala. 233, 128 So. 438 (1930). Until the 1987 amendment, the statute did no more than restate the common law, which holds that a transitory cause of action may be filed in any court that has in personam jurisdiction of the defendant, regardless of where the cause of action arose or where the parties reside. Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565 (1878). A court has jurisdiction of a claim if it has the power "to entertain and consider the cause and render a binding judgment therein." City Stores Co. v. Williams, 287 Ala. 385, 388, 252 So.2d 45 (1971). That power comes from having both subject matter jurisdiction and in personam jurisdiction. Subject matter jurisdiction refers to the nature of the cause of action and the relief sought. In personam jurisdiction refers to the court's jurisdiction over the particular parties.
A personal injury claim is a transitory cause of action, i.e., it is one that might have arisen anywhere. "The characteristic feature of a transitory action is that the right of action follows the person of the defendant." 21 C.J.S. Courts § 38 at 47 (1940). A transitory cause of action can be instituted in any court that has in personam jurisdiction of the defendant, regardless of where the cause of action arises, and regardless of the fact that both parties may reside in a state other than that in which the cause of action arises. 20 Am. Jur.2d Courts, § 123 at 478 (1965).
We are cited to a line of cases that arguably stand for the proposition that Alabama courts did not have jurisdiction to entertain suits against foreign corporations based upon claims that arose in another state until the adoption of Act No. 47, Ala.Acts 1907, Ex.Sess., p. 67, codified at § 5681, Code 1923, and now at § 6-5-430, Code 1975. We addressed this contention in Ex parte Illinois Central Gulf R.R., 537 So.2d 899 (Ala. 1988), and we observed there that collectively these cases[1] discuss *1088 the authority of the state to obtain in personam jurisdiction over a foreign corporation where the cause of action sued upon arose outside the state. These cases were concerned with the extension of service of process beyond the territorial boundaries of the state.
These concerns have long since been quieted. As the Court said in Ex parte Illinois Central Gulf R.R.:
"A review of these cases reveals that they were based on theories of corporate presence that have long since been discarded. Collectively, they discuss whether an in personam action could be maintained against a foreign corporation under the relevant statutes.
"Illustrative of this line of cases is Iron Age Publishing. In that case the Court said, `No sovereignty ... can extend its process beyond its own territorial limits, to subject either persons or property to its judicial decisions. Every exertion of authority of this sort beyond this limit is a mere nullity, and incapable of binding such person or property in any other tribunal.'
"83 Ala. at 506, 3 So. at 452, quoting J. Story, Conflict of Laws § 539.
"Unlike the practice at the turn of the century, service of process can now be perfected by service on the registered agent of the foreign corporation, in accord with Rule 4 et seq., A.R.Civ.P. In personam jurisdiction exists when the agent has been served and the defendant has `sufficient contacts' with this state. The line of cases following Central Railroad & Banking Co. v. Carr, 76 Ala. 388, 52 Am.Rep. 339 (1884), held that Alabama courts did not have jurisdiction over foreign corporations in claims that arose outside Alabama, principally because service could not be perfected on the defendant. These cases reflected the common conception of the period that corporations `dwelled' in their place of incorporation and could not `migrate' to other states. While such a concept of corporate presence was appropriate in an age when travel was difficult and expensive, it cannot be justified in the current state of convenient and reliable means of communication and transportation. The Committee Comments to Rule 4.2, A.R. Civ.P., state:
"`As a result of this expansion [of in personam jurisdiction], which has come about primarily because of the recognition of the increasing mobility and industrialization of American society which makes travel less of a hardship, service which a few years ago would have been considered obviously insufficient, is now considered valid. It is now generally recognized that if a defendant has certain "minimum contacts" with a forum state, and it is fair and reasonable to exercise jurisdiction under the circumstances, that due process is not violated by subjecting the defendant to jurisdiction in the forum state.'
"See International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), and Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952). The petitioners involved in the present actions conduct business in Alabama, and it is both fair and reasonable to expect that they may be sued in this jurisdiction."
537 So.2d 899, 901-02 (Ala.1988).
There is no question of in personam jurisdiction involved in this case. All of the defendants/petitioners are either qualified to do business in Alabama, and accordingly have a designated agent for service of process, or actually do business by an agent in Alabama upon whom service of process has been perfected. That being so, there is no basis for the argument that the courts of Alabama lack jurisdiction to entertain these F.E.L.A. cases.
We turn now to the question of what is the proper venue for these actions, affording to these petitioners the same rights to which a domestic corporation would be entitled. Section 6-3-7 provides *1089 that either a foreign or a domestic corporation may be sued in any county in which it does business by agent. These corporations were undeniably doing business by agent in Jefferson County at the time the causes of action sued upon arose. Therefore, venue is not improper in Jefferson County.
The suits are being brought under the F.E.L.A. One section of the F.E.L.A., 45 U.S.C. § 56, provides as follows:
"Under this chapter an action may be brought in a district court of the United States, in the district of the residence of the defendant, or in which the cause of action arose, or in which the defendant shall be doing business at the time of commencing such action. The jurisdiction of the courts of the United States under this chapter shall be concurrent with that of the courts of the several states."
The F.E.L.A. venue provisions apply to both domestic and foreign corporations alike. Pursuant to the F.E.L.A., venue is proper in Jefferson County, because these petitioners were doing business in Jefferson County at the time these suits were filed.
Ex parte Illinois Central Gulf R.R., 537 So.2d 899 (Ala. 1988), and Vandergriff v. Southern Ry., 537 So.2d 904 (Ala. 1988), held that foreign railroad corporations were not entitled to dismissal of F.E.L.A. cases based on Act No. 87-182, because § 232 of the constitution granted a "right to sue a foreign corporation in any county where it does business, without reference to any statute." Ex parte Illinois Central Gulf R.R., 537 So.2d 899 at 904. Act No. 87-182 was passed before Amendment 473 to the constitution was adopted and proclaimed ratified. Those cases held that the legislature was without the power to alter the constitutional right to maintain those actions guaranteed by § 232 of the Alabama constitution. The question in those two cases was whether the foreign corporate defendants could invoke the provisions of Act No. 87-182, which require the courts to apply the doctrine of forum non conveniens to determine whether to accept or decline jurisdiction of a claim arising outside the state. Those two cases held that the unamended § 232 of the constitution established venue over foreign corporations and that that section foreclosed the legislature's ability to change venue in a suit against a foreign corporation by the provisions of Act No. 87-182. Thus, Act No. 87-182 was held to have no application to a suit against a foreign corporation, because, before its amendment, § 232 of the constitution prevented it.
The question now becomes: Does the subsequent adoption of Amendment 473 to the constitution now permit Act No. 87-182 a field of operation in a case in which foreign corporations are sued in Alabama on a cause of action accruing elsewhere?
It is generally recognized that
"[a]n act of a legislature not authorized by the constitution at the time of its passage is absolutely void, and, if not reenacted, is not validated by a subsequent amendment to the constitution or by the adoption of a new constitution which merely permits the passage of such an act...."
Bucher v. Powell County, 180 Mt. 145, 589 P.2d 660, 662 (1979), quoting C.J.S. Constitutional Law § 45 (1984) at 141; Porto Rico Brokerage Co. v. United States, 22 C.C.P.A. 236, 71 F.2d 469 (1934); Stockyards Nat'l Bank v. Bauman, 5 F.2d 905, 906-07 (8th Cir.1925); City of Little Rock v. Cavin, 238 Ark. 333, 381 S.W.2d 741 (1964); Banaz v. Smith, 133 Cal. 102, 65 P. 309 (1901); State v. Bates, 305 N.W.2d 426 (Iowa 1981); State v. O'Malley, 342 Mo. 641, 117 S.W.2d 319 (1938); In re Graves, 325 Mo. 888, 30 S.W.2d 149 (1930); State ex rel. Woodahl v. District Court, 162 Mont. 283, 511 P.2d 318 (1973); Whetstone v. Slonaker, 110 Neb. 343, 193 N.W. 749 (1923); Fellows v. Shultz, 81 N.M. 496, 469 P.2d 141 (1970); Paluck v. Board of County Comm'rs, Stark County, 307 N.W.2d 852, 855 (N.D.1981); and State v. Chaney, 23 Okla. 788, 102 P. 133 (1909).
The rationale underlying such a rule is explained in Whetstone v. Slonaker:
"It is held in Finders v. Bodle, 58 Neb. 57, 78 N.W. 480, that an act of the Legislature, passed in violation of the Constitution, is void from the date of its enactment, and
*1090 "`An unconstitutional statute creates no new rights and abrogates no old ones. It is for all purposes as though it had never been passed.'
"It is held by the United States Supreme Court in Norton v. Shelby County, 118 U.S. 425, 442, 6 Sup.Ct. 1121, 1125 (30 L.Ed. 178), that
"`An unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is, in legal contemplation, as inoperative as though it had never been passed.'
"Cooley in his work on Constitutional Limitations (7th Ed.) at page 259, lays down the rule thus:
"`When a statute is adjudged to be unconstitutional, it is as if it had never been. Rights cannot be built up under it; contracts which depend upon it for their consideration are void.... And what is true of an act void in toto is true also as to any part of an act which is found to be unconstitutional, and which, consequently, is to be regarded as having never, at any time, been possessed of any legal force.'"
Id., 110 Neb. at 345, 193 N.W. at 749.
We adhere to this general rule, but Act No. 87-182 was not declared null and void by Ex parte Illinois Central Gulf R.R. and Vandergriff v. Southern Ry. Act No. 87-182 addresses a broader subject than the narrower one addressed in those two cases. That act requires the courts to apply the doctrine of forum non conveniens in all instances where suit is brought in Alabama on a cause of action originating outside the State of Alabama. It is not limited in this regard to suits against foreign corporations, so it had a field of operation after Ex parte Illinois Central Gulf and Vandergriff held that § 232, before its amendment, precluded its application to a suit against a foreign corporation.
Therefore, we must decide whether a subsequent constitutional amendment removing this constitutional restraint now permits application of this legislation to suits against foreign corporations, as well as domestic corporations, where the cause of action arose outside the State of Alabama.
We have been cited to Alabama cases recognizing two exceptions to the general rule that subsequent amendments to a constitution cannot revive a statute that is ineffective because of constitutional deficiencies that existed when the statute was passed. The first exception is applicable where the subsequent constitutional amendment by clear and express terms validates and confirms the statute that had been invalid on account of its failure to comply with constitutional provisions that existed at the time of its passage. Bonds v. State Dept. of Revenue, 254 Ala. 553, 49 So.2d 280 (1950). The second applies where the statute by its very terms does not become effective until a proposed constitutional amendment is adopted. Opinion of the Justices No. 28, 227 Ala. 291, 149 So. 776 (1933); Opinion of the Justices No. 29, 227 Ala. 296, 149 So. 781 (1933).
We now recognize a third exception to the general rule: Where a statute is enacted in anticipation of a constitutional amendment offered simultaneously with it, and the statute and the proposed amendment are debated and considered together in the same session of the legislature, the subsequent adoption of the amendment by a vote of the people will serve to validate the statute. 16 C.J.S., Constitutional Law, § 45 (1984). Here the constitutional proscription that restricted the legislature's authority to make the doctrine of forum non conveniens applicable to foreign corporations has been eliminated by a vote of the people on a constitutional amendment that was introduced in and passed in the same session of the legislature as the act sought to be applied to these foreign corporate defendants. In enacting the proposed amendment, it was widely publicized and generally known that the legislature was addressing the problem that Act No. 87-182 sought to cure. Amendment 473 was initiated by a bill that became Act No. 87-164 in the same session of the legislature. Its sponsors were the same as the sponsors of the bill that became Act No. 87-182. There was implicit in the process a legislative intent to hinge operation of the amendment to § 6-5-430 upon the voters' approval of Amendment 473. Thus the amendment of § 232 removed the limitation *1091 on the legislature's authority, and it became free to direct the trial courts to apply the doctrine of forum non conveniens to suits against foreign corporations.
Accordingly, we hold that § 6-5-430, as amended by Act No. 87-182, requires trial courts of this state to apply the doctrine of forum non conveniens in deciding whether to exercise or decline to exercise jurisdiction over a cause of action accruing outside this state. However, this holding should be applied with caution, and for good reason. The statute mandates that the court take into account "the location where the acts giving rise to the action occurred, the convenience of the parties and witnesses, and the interests of justice," but whether to dismiss the case is discretionary with the court. Only when all factors are positively found to require dismissal should a case be dismissed.
Section 6-5-430 authorizes jurisdiction over foreign causes of action and applies equally to foreign and domestic corporations. Amendment 473 to the constitution makes venue rules the same for domestic and foreign corporations. Therefore, under the present state of the law, foreign and domestic corporate defendants are treated identically under the venue statutes and under the constitution of the State of Alabama. Therefore, there is no violation of the equal protection provisions of the constitution of the State of Alabama or that of the United States.
The petitions for writs of mandamus are due to be, and they hereby are, granted, with instructions to the trial court to either grant or deny the petitioners' motions to dismiss, in its discretion, after applying the doctrine of forum non conveniens as required by § 6-5-430.
WRITS GRANTED.
HORNSBY, C.J., and MADDOX, ALMON, SHORES, ADAMS, HOUSTON, STEAGALL and KENNEDY, JJ., concur.
NOTES
[*] Thirty-eight other petitions for writ of mandamus have been consolidated with this for purposes of writing one opinion. These cases are:
88-839 Ex Parte Southern Railway Company, a corporation (In re: David L. Pharr v. Southern Railway Company, a corporation (CV-88-3771))
88-840 Ex Parte Southern Railway Company, a corporation (In re: Lawrence W. Grooms v. Southern Railway Company, a corporation (CV-88-2973))
88-841 Ex Parte Illinois Central Gulf Railroad Company, a corporation (In re: James L. Rawson v. Illinois Central Gulf Railroad Company, a corporation (CV-88-4439))
88-842 Ex Parte Southern Railway Company, a corporation (In re: Roy S. Loveday v. Southern Railway Company, a corporation (CV-88-7832))
88-843 Ex Parte Southern Railway Company, a corporation (In re: Guy H. Stephens v. Southern Railway Company, a corporation (CV-88-6250))
88-844 Ex Parte Southern Railway Company, a corporation (In re: Dennis J. Moore v. Southern Railway Company, a corporation (CV-88-4958))
88-845 Ex Parte Southern Railway Company, a corporation (In re: Thelbert Draughn v. Southern Railway Company, a corporation (CV-88-2432))
88-846 Ex Parte Southern Railway Company, a corporation (In re: Doyle E. Copeland v. Southern Railway Company, a corporation (CV-88-2552))
88-847 Ex Parte Southern Railway Company, a corporation (In re: George R. Rogers v. Southern Railway Company, a corporation (CV-88-3691))
88-848 Ex Parte Southern Railway Company, a corporation (In re: Whit Davis v. Southern Railway Company, a corporation (CV-88-7258))
88-849 Ex Parte CSX Transportation, Inc. (In re: Frank R. Coleman v. CSX Transportation, Inc. (CV-88-5422))
88-850 Ex Parte Southern Railway Company and Norfolk Southern Corporation (In re: Frank R. Coleman v. Southern Railway Company and Norfolk Southern Corporation (CV-88-4101))
88-851 Ex Parte Burlington Northern Railroad (In re: Wayne Robbins v. Burlington Northern Railroad (CV-88-6860))
88-852 Ex Parte Burlington Northern Railroad (In re: Thomas L. Pate v. Burlington Northern Railroad (CV-88-6729))
88-853 Ex Parte CSX Transportation, Inc. (In re: Ramona K. Bowling v. CSX Transportation, Inc. (CV-88-6200))
88-854 Ex Parte CSX Transportation, Inc. (In re: Kenneth V. Tyre v. CSX Transportation, Inc. (CV-88-7830))
88-855 Ex Parte CSX Transportation, Inc. (In re: Ernest P. Hall v. CSX Transportation, Inc. (CV-88-6900))
88-856 Ex Parte CSX Transportation, Inc. (In re: Herbert A. Troxell v. CSX Transportation, Inc. (CV-88-6894))
88-857 Ex Parte CSX Transportation, Inc. (In re: Dennis L. Miller v. CSX Transportation, Inc. (CV-88-6602))
88-858 Ex Parte CSX Transportation, Inc. (In re: Larry M. Lovett v. CSX Transportation, Inc. (CV-88-6873))
88-859 Ex Parte CSX Transportation, Inc. (In re: Preston D. Eakle v. CSX Transportation, Inc. (CV-88-6983))
88-860 Ex Parte CSX Transportation, Inc. (In re: Henry L. Lewis v. CSX Transportation, Inc. (CV-88-6897))
88-861 Ex Parte CSX Transportation, Inc. (In re: William F. Hemp v. CSX Transportation, Inc. (CV-88-7672))
88-862 Ex Parte CSX Transportation, Inc. (In re: Charles E. Ranscheart v. CSX Transportation, Inc. (CV-88-6898))
88-863 Ex Parte CSX Transportation, Inc. (In re: Timothy R. Wright v. CSX Transportation, Inc. (CV-88-7802))
88-864 Ex Parte CSX Transportation, Inc. (In re: Walter C. Simmons v. CSX Transportation, Inc. (CV-88-6859))
88-865 Ex Parte CSX Transportation, Inc. (In re: Charles Carmen v. CSX Transportation, Inc. (CV-88-6899))
88-866 Ex Parte CSX Transportation, Inc. (In re: John Stillwell v. CSX Transportation, Inc. (CV-88-6896))
88-867 Ex Parte CSX Transportation, Inc. (In re: Elmer E. Fehr v. CSX Transportation, Inc. (CV-88-6895))
88-868 Ex Parte CSX Transportation, Inc. (In re: Paul B. William v. CSX Transportation, Inc. (CV-88-1938))
88-869 Ex Parte CSX Transportation, Inc. (In re: Elias M. Fletcher v. CSX Transportation, Inc. (CV-88-3350))
88-870 Ex Parte CSX Transportation, Inc. (In re: Venancio R. Rupinta v. CSX Transportation, Inc. (CV-88-5466))
88-871 Ex Parte CSX Transportation, Inc. (In re: Gary R. McDaniel v. CSX Transportation, Inc. (CV-88-4273))
88-872 Ex Parte CSX Transportation, Inc. (In re: S.L. Parker v. CSX Transportation, Inc. (CV-88-6249))
88-873 Ex Parte CSX Transportation, Inc. (In re: Randy Chaney v. CSX Transportation, Inc. (CV-88-7685))
88-874 Ex Parte CSX Transportation, Inc. (In re: Harold D. Bowling v. CSX Transportation, Inc. (CV-88-2577))
88-875 Ex Parte CSX Transportation, Inc. (In re: James A. Meade v. CSX Transportation, Inc. (CV-88-7710))
88-876 Ex Parte CSX Transportation, Inc. (In re: Paul A. Cawthon v. CSX Transportation, Inc. (CV-88-4998))
[1] Central Railroad & Banking Co. v. Carr, 76 Ala. 388, 52 Am.Rep. 339 (1884), followed in Louisville & N.R.R. v. Dooley, 78 Ala. 524 (1885); Iron Age Publishing Co. v. Western Union Tel. Co., 83 Ala. 498, 3 So. 449 (1887); Alabama Great Southern R.R. v. Chumley, 92 Ala. 317, 9 So. 286 (1890); Pullman Palace Car Co. v. Harrison, 122 Ala. 149, 25 So. 697 (1898); Dozier Lumber Co. v. Smith Isburg Lumber Co., 145 Ala. 317, 39 So. 714 (1905).
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RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 05a0263p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
Plaintiff/Counter-Defendant-Appellee, -
REPUBLIC/NFR & C PARKING OF LOUISVILLE,
-
-
-
No. 03-5433
v.
,
>
REGIONAL AIRPORT AUTHORITY OF LOUISVILLE AND -
-
Defendant/Counter-Plaintiff-Appellant. -
JEFFERSON COUNTY,
-
N
Appeal from the United States District Court
for the Western District of Kentucky at Louisville.
No. 01-00633—Charles R. Simpson, III, District Judge.
Argued: June 8, 2004
Decided and Filed: June 15, 2005
Before: BOGGS, Chief Judge; MOORE, Circuit Judge; and HOLSCHUH, District Judge.*
_________________
COUNSEL
ARGUED: Robert W. Griffith, STITES & HARBISON, Louisville, Kentucky, for Appellant.
Deborah L. Varner, GEARHISER, PETERS, LOCKABY, CAVETT & ELLIOT, Chattanooga,
Tennessee, for Appellee. ON BRIEF: Robert W. Griffith, Bethany A. Breetz, STITES &
HARBISON, Louisville, Kentucky, for Appellant. Deborah L. Varner, Robert Lockaby, Jr.,
Christopher T. Varner, GEARHISER, PETERS, LOCKABY, CAVETT & ELLIOT, Chattanooga,
Tennessee, Frank P. Doheny, Jr., Kevin M. Norris, DINSMORE & SHOHL, Louisville, Kentucky,
for Appellee.
_________________
OPINION
_________________
BOGGS, Chief Judge. The Regional Airport Authority of Louisville (Airport Authority)
appeals a grant of summary judgment to Republic/NFR & C Parking of Louisville (Republic) on its
claim that it was allowed to terminate its airport parking concession due to financial losses in the
wake of the terrorist attack on September 11, 2001. Because the district court erred in finding that
security restrictions on parking implemented after the attacks constituted “damage” or “destruction”
*
The Honorable John D. Holschuh, United States District Judge for the Southern District of Ohio, sitting by
designation.
1
No. 03-5433 Republic/NFR & C Parking v. Regional Airport Page 2
to the premises that would release Republic from its contractual obligations, we vacate the grant of
summary judgment in favor of Republic. None of the other arguments raised by Republic in defense
to the Airport Authority’s counterclaim for breach of contract is meritorious. We therefore remand
to the district court with instructions to grant summary judgment in favor of the Airport Authority.
I
In June 1999, after a public bidding process, Republic won a five-year contract that gave it
the “right” and “obligation” to operate “premises” at the Louisville International Airport (SDF) that
included the surface parking lot, garage, toll plaza, and the employee parking lot. In return,
Republic agreed to pay the Airport Authority the greater of 1) a monthly minimum guarantee of 85%
of the gross receipts from the same month of the previous year,1 or 2) an amount equal to 93% of
its actual gross receipts for that month. At the beginning of each month Republic paid the minimum
guarantee, and it tendered any difference between that amount and the 93% figure at the end of that
same month. The interest rate for late payment was 1.5% of the balance due.
The parties implemented the agreement smoothly until September 2001, when the attacks
on the World Trade Center and Pentagon resulted in the Federal Aviation Authority (FAA) stopping
commercial air travel for approximately three days. Afterwards, enhanced airport security
restrictions meant that Republic could not use 810 parking spaces, 14.4% of the entire lot, until
November 15th, when the FAA made the spaces available to anyone who was willing to undergo
a vehicle search. Travel at SDF remained below 2000 levels until Republic terminated the contract
in November 2001, although the 17% decrease in travel volume in October 2001 represented an
improvement over the 33% deficit in September.
Under the terms of the contract, Republic owed the Airport Authority $1,101,000 on
October 1, 2001 – the amount of the October minimum guarantee based on the gross receipts from
October 2000. In a letter dated October 15, 2001, Republic stated that it was “not economically
feasible” to pay the full amount because of its revenue losses from the September 11 attacks. The
letter outlined a “relief provision,” modeled on Republic’s other contracts, because it was “fair and
equitable . . . [that] we all share equally in the pain.” Under its plan, Republic took the September
2001 guaranteed monthly figure as a base ($977,400) and reduced it by the projected October
decline in revenue (22%). The “emergency plan” also guaranteed that Republic would cover its
operating costs, including $2,500 for “management services,” although Republic would pay the
Airport Authority “all revenues in excess of the direct on-site operating costs.” Finally, Republic
computed that the Airport Authority should reimburse it for its September operational loss by
allowing Republic to deduct approximately $73,000 from its guaranteed minimum for three months
(October - December 2001). “Upon the belief” that the Airport Authority would find the “proposal
acceptable,” Republic remitted $689,641 instead of the $1,101,000 that the Airport Authority was
owed under the terms of the original agreement. Republic did not invoke any provisions of the
contract itself to justify this reduced payment.
On October 22, the Airport Authority responded that it could not legally accept Republic’s
compromise offer “due to the fact that the current minimum was bid under the franchise provisions
of Kentucky’s Constitution.” The Airport Authority further informed Republic that it was in default
of its payment obligations and that failure to make immediate payment “may result in termination
of your concession and/or pursuit of other remedies the Authority may have.”
Republic terminated the concession agreement on November 2, 2001, “pursuant to Section
19.1, and Subparagraphs B and D thereof, and Section 21.2,” effective December 2, 2001. Section
1
The contract stipulated the minimum amounts for the first year.
No. 03-5433 Republic/NFR & C Parking v. Regional Airport Page 3
19.1B excused performance if the government took over the airport; Section 19.1D allowed
termination if the parking facilities were damaged or destroyed; and Section 21.2 stated that a party
could not be held responsible for breach caused by factors beyond its control. On the same day,
Republic filed suit in the United States District Court for the Western District of Kentucky seeking
a declaratory judgment that its failure to pay the full amounts in October and November was due to
causes beyond its control, and therefore it was not in breach of its agreement with the Airport
Authority.
On November 9, 2001, Republic sent the Airport Authority an additional payment of
$215,862.36 for October, based on actual gross revenues of $1,044,356.93 and the deductions for
revenue loss, operating expenses, and its September shortfall, as outlined above. The payment
represented “100% of the revenue after deducting the actual on-site operating cost for October.”
Republic did not charge the Airport Authority the $2,500 management fee. Because its revenues
were down 20.16% for the first six days of November, Republic reduced its minimum guarantee for
November by that percentage; with the other two reductions for operating costs and the September
loss, the estimated payment totaled $711,457, instead of $982,000 due under the original
arrangement.
In a certified letter dated November 12, the Airport Authority demanded immediate full
payment: an additional $193,373 to settle October; $270,743 more for the November minimum
guarantee; and 1.5% interest on both payments from their respective due dates. The Airport
Authority also informed Republic that it was “making alternative arrangements for the operation of
the public and employee paid parking facilities at Louisville International Airport from and after
December 2, 2001.” On November 26, the Airport Authority filed a counter-claim against Republic
for breach of contract, demanding full payment, compensatory damages, incidental damages, costs,
and pre- and post-judgment interest. The parties then filed simultaneous cross-motions for summary
judgment. On January 9, 2003, the district court granted Republic’s motion, and denied the Airport
Authority’s cross-motion, for summary judgment. This appeal followed.
II
This is a diversity case, governed by Kentucky law. We agree with the district court that the
language of the Concession Agreement is unambiguous. We therefore enforce the agreement strictly
according to its terms and assign the contract language in dispute its ordinary meaning, without
considering extrinsic evidence. Frear v. PTA Indust. Inc., 103 S.W.3d 99, 106 (Ky. 2003). The
district court granted summary judgment to Republic, a decision this panel reviews de novo.
Copeland v. Machulis, 57 F.3d 476, 478 (6th Cir. 1995) (per curiam).
The district court found the language of Section 19.1D of the contract to be a plausible basis
for termination. That provision allows Republic to end the agreement after 30 days in the event of:
The damage or destruction of all or a material part of the Premises used or occupied
by [Republic] hereunder that materially and adversely affects the ability of
[Republic] to perform its obligations hereunder, or damage or destruction of all or
a material part of the Airport or Airport facilities, including access to public roads,
which is necessary to the operation of [Republic’s] business, except to the extent and
in the event such damage or destruction results from acts of negligence of
[Republic].
Republic argued in the court below that the events of September 11 resulted in destruction
or material damage to the parking lot at the Louisville airport because the ensuing security
regulations deprived it of access to 810 prime parking spaces. In addition, FAA warnings about the
No. 03-5433 Republic/NFR & C Parking v. Regional Airport Page 4
dangers of air travel and admonitions to travelers to take public transportation to the airport also
constituted “damage” to the facility. Republic therefore concluded that it could terminate the
contract. The district court found that the dramatic decline in use of the airport after September 11
“resulted in a substantial loss of the value of the parking facilities,” and concluded that “the parking
facility at the airport was damaged in such a way that Republic was unable to perform as required
by the agreement.” It rejected the Airport Authority’s argument that damage was limited to physical
damage, not loss in value, and determined that Republic was entitled to terminate the contract and
only pay a percentage of its actual receipts from September 11 to the day it terminated the contract.
However, a straightforward reading of the contract indicates that damage cannot be construed
to mean simply loss of value. Section 19.1D allows for termination in the event of “damage or
destruction of all or a material part of the Premises used or occupied by the concessionaire . . . .”
The cardinal rule of contract interpretation is that all words and phrases are to be given their
ordinary meanings. Fay E. Sams Money Purchase Pension Plan v. Jansen, 3 S.W.3d 753, 757 (Ky.
Ct. App. 1999). The district court did not consider the meaning of the word destruction. The
dictionary defines it as “the act of destroying” or the “condition of having been destroyed.”
American Heritage Dictionary 493 (4th ed. 2000). In turn, “destroy” is defined as “to ruin
completely; spoil; . . . demolish . . . to render useless or ineffective.” Ibid.
Even assuming, arguendo, that Republic is correct that the contract encompasses intangible
destruction, we cannot see how a drop in revenue of 33% is the equivalent of being “ruined
completely” or “rendered useless or ineffective.” Under Kentucky law, an intervening event must
completely preclude performance before a contract may be rescinded, and this is a difficult standard
to meet. Ky. Lumber & Millwork Co. v. George H. Rommell Co., 78 S.W.2d 52, 55 (Ky. 1934)
(holding that the defendant contracted to furnish millwork to the plaintiff and the fact that its factory
burned down did not excuse performance because the required items could be purchased from
another mill); cf. Juett v. Cincinnati, N. O. & T. P. R. Co., 53 S.W.2d 551 (Ky. 1932) (holding that
the destruction of a railroad bridge absolved the original contractor from repair and maintenance
obligations related to the structure).
Destruction does not have to be total. Roberts v. Comm. Cas. Ins. Co., 168 F.2d 23, 25 (6th
Cir. 1948) (considering a hotel room destroyed by fire, although the rest of the building did not burn,
because destruction is “harm that substantially affects . . . value, and does not necessarily mean
complete demolishment”) (citing Restatement of Torts, § 221). However, no Kentucky court has
construed the term in a purely figurative manner, as one must to include inaccessibility to parking
spaces or loss of revenue in the definition of destroy. Republic itself acknowledged that its
interpretation is based on metaphor when it put the word destruction in quotation marks in its brief:
“Thus, in addition to the ‘destruction’ of 14.4% of non-employee parking capacity at SDF, the
impairment of the usefulness and value of [sic] the remaining parking capacity was damaged and
continued to be damaged, as that term is commonly understood.” Appellee Br. at 25. We therefore
hold that Republic was not entitled to terminate the contract under the “destruction” provision.
We now consider the common meaning of the word “damage” in the context of the contract
in this case. The district court began its analysis with a definition of damage from Webster’s II New
Riverside University Dictionary: “impairment of the usefulness or value of person or property.”
Other dictionaries offer a more expansive definition: “Harm or injury to property or a person,
resulting in loss of value or the impairment of usefulness.” American Heritage Dictionary 458 (4th
ed. 2000); Webster’s New World Dictionary 348 (3d ed. 1988) (“injury or harm to a person or thing,
resulting in a loss in soundness or value”) (emphases added).
The district court rejected the Airport Authority’s contention that damage must be physical,
pointing to the “many intangibles” that can be damaged, such as reputation and good will. However,
even the references to “damage” of intangibles imply some kind of harm to the thing or concept
No. 03-5433 Republic/NFR & C Parking v. Regional Airport Page 5
itself that may not be easily remedied, if at all. The fact that intangibles can be damaged in a non-
physical way does not entail that corporeal structures such as a parking garage can be damaged in
an “intangible” way. The parking facilities at the Louisville airport were essentially the same on
September 13, 2001, when commercial air travel resumed, as they had been on September 10th of
that year. At worst, security regulations made 810 convenient parking spaces, 14.4% of the total,
unavailable and discouraged an indeterminate number of other travelers from driving to the airport.
Only a very strained interpretation of “damage” could lead to the conclusion that simply the
imposition of government regulations designed to make air travel safer after September 11
constitutes a harm that damaged the parking premises, as Republic asserts in its brief. Appellee Br.
at 5.
Furthermore, Republic has not alleged that the parking lot was filled to capacity at any time
during the period leading up to its withdrawal from the contract, implying that Republic did not
suffer any loss of necessary parking spaces due to security restrictions. Republic does not explain
how it simultaneously could not function with a 14% reduction in parking spaces, yet was also
entitled to terminate the agreement because of a significant decrease in customers that resulted in
a 20-30% drop in revenues. Furthermore, there is no evidence in the record that Republic lost
business specifically due to the requirement that some travelers had to walk an extra 300 feet, the
distance between the terminal and the nearest parking space under the FAA restrictions.
Although the district court did not address the issue, it is worth noting that Republic must
show that any damage extended to a “material part” of the parking facilities. Even if we were to
accept Republic’s interpretation of damage, it is hard to see how the loss of at most 14% of the
available parking constitutes “a material part of the Premises used or occupied by [Republic]” and
that the loss “materially and adversely affects the ability of [Republic] to perform its obligations
hereunder.” “Material part” generally means more than 14%. Levinthal v. City of Covington, 49
S.W.2d 574, 579 (Ky. 1932) (considering a “material part” of a bond fund to be “practically half of
the remaining” assets).
For all of these reasons, we conclude that the district court erred in holding that the loss of
14% of the parking spaces at the Louisville airport from September 11, 2001 to November 15, 2001
constituted “damage or destruction of all or a material part of the Premises.” It is hard to avoid the
conclusion that Republic was searching for a way to get out of a contract that was no longer
profitable. However, under Kentucky law, a decline in revenue or profit is not an acceptable basis
on which to terminate a contract. Kane v Hopkins, 218 S.W.2d 37, 40 (Ky. 1949); McGovney &
McKee, Inc. v. City of Berea, 448 F. Supp. 1049, 1057 (E.D. Ky. 1978).
III
The district court stated in its memorandum opinion that “[t]he only circumstance relevant
to this situation [Republic’s termination of the contract] is found in ¶ 19.1D.” We agree with the
district court’s apparent conclusion that none of the other provisions of the contract that allow a
party to terminate the contract applies in this case. We therefore address only briefly some of the
other arguments presented in Republic’s brief.
Section 19.1B allows the contract to be terminated upon the “lawful assumption by the
United States of America . . . of the operation, control or use of the Airport, or any substantial part
or parts thereof . . . a period in excess of ninety (90) days.” The FAA grounded all flights in U.S.
air space after September 11, which arguably would constitute government assumption of airport
operations; but this interference lasted three days, not ninety, so that Section 19.1B does not apply.
Republic argues that blocking off access to 810 parking spaces “constituted an assumption of
operation, control or use of a substantial part or parts of SDF . . . triggering application of Section
19.1B.” Appellee Br. at 5. However, those spaces were available as of mid-November, albeit with
No. 03-5433 Republic/NFR & C Parking v. Regional Airport Page 6
extra security regulations, so that even if we were to accept Republic’s reading, the ninety-day
threshold was not met, meaning that Section 19.1B still does not apply. Finally, government
regulation that makes a venture less profitable than anticipated does not justify non-performance.
Frazer v. Collins, 187 S.W.2d 816 (Ky. 1945).
Finally, Republic relies on Section 21.2 of the contract, which provides that a party shall not
be considered in breach for “any failure to perform any of its obligations . . . due to any cause for
which it is not responsible and over which it has no control.” Republic asserts in its brief that “[t]he
events of 9/11 and their after-effects constituted such a ‘cause’ that excused the Joint Venture’s
continued performance under the Agreement.” Appellee Br. at 6, 57. This is a rhetorical sleight of
hand. The terrorist attack of September 11, 2001 and the ensuing decline in air travel caused
Republic’s unwillingness to pay; its failure to pay was a straight-forward business decision. Nothing
in the record suggests that the attack disrupted Republic’s access to its bank or that it destroyed all
Republic’s assets so that it did not have the funds to pay the required monthly guarantee, the kind
of direct link needed to show causation.
The Airport Authority gave up some of the revenue of its parking lot in exchange for
guaranteed income equal to 85% of the parking revenues of the same month from the previous year.
Appellant Br. at 4. Republic agreed to bear the risk of fluctuations in income. Had air travel
increased, so would have Republic’s profits, and the Airport Authority would not have been able
to increase the percentage of its share because Republic was making more money than the parties
envisioned. “When a contract is plain, unambiguous and fair, not vitiated by fraud nor mistake in
its execution, the courts are not authorized to make for the parties to it a different one, or to construe
it contrary to its express terms.” Johnson v. Edwards, 20 S.W.2d 76, 77 (Ky. 1929) (citation
omitted).
IV
The district court erred when it concluded that “the parking facility was damaged in such a
way as to prevent Republic from meeting its obligations under the agreement.” We therefore
REVERSE the grant of summary judgment to Republic, and REMAND with instructions to grant
summary judgment for the Airport Authority.
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23 Wn. App. 582 (1979)
596 P.2d 1100
THE STATE OF WASHINGTON, Respondent,
v.
LARRY LEE McKEOWN, Appellant.
No. 2914-3.
The Court of Appeals of Washington, Division Three.
June 19, 1979.
*584 Richard L. Cease, Public Defender, and Don Westerman, Deputy, for appellant.
Donald C. Brockett, Prosecuting Attorney, and Terence M. Ryan, Deputy, for respondent.
ROE, J.
On August 23, 1977, Spokane Police Officer Jennings, working undercover, met Steve Burr at a local tavern. They discussed the sale of drugs: Jennings purchased 1 pound of marijuana with an agreement to meet Burr the following evening to negotiate a larger purchase. On August 24, Jennings and Burr met at the same tavern; Burr left and, on his return, stated that "he could do a hundred pounds of marijuana that night." During his absence, Burr had contacted Gerald Leighton about the bulk sale. In subsequently scouting out several taverns for one Gordon (a potential seller), Leighton met defendant/appellant McKeown, who said he possibly knew someone "that had some." After apparently making a phone call, McKeown told Leighton, "I believe I have got some for you."
Leighton and McKeown left the tavern in Leighton's car, and McKeown directed them to Richard Schierman's house. After a discussion about the sale in Schierman's living room, the marijuana was obtained. Arrangements were made with Burr to meet at Sambo's Restaurant on North Division in Spokane. Leighton subsequently testified that McKeown, who was riding with him and 6 pounds of the marijuana, stated, "Let's call it off," or words to that effect. However, the parties proceeded to the Taco Bell parking lot to complete the sale. McKeown got out of the car, stood by Schierman's van and watched the transfer of marijuana from that vehicle to the undercover police van. Detectives *585 from the Spokane Police Department arrived and began arresting those at the scene. McKeown started to walk across the parking lot towards the street when Officer Kennedy stopped him and asked whether McKeown knew any of the arrested persons or what was going on; McKeown answered "No." Kennedy then took McKeown back to the scene where he was placed under arrest.
McKeown was charged with delivery of a controlled substance as an accomplice of Leighton, Burr, and Schierman, and convicted by a jury.
At trial, Officer Kennedy testified to McKeown's parking lot denial. McKeown did not object. Even though no one had requested a CrR 3.5 pretrial hearing, McKeown contends that the trial court erred in allowing the introduction of his denial.
Ordinarily, failure to object to error at trial will preclude appellate review. If the error amounts to an invasion of constitutional rights, then it need not be raised at trial to secure review. State v. Lampshire, 74 Wn.2d 888, 447 P.2d 727 (1968).
[1] CrR 3.5 is a mandatory rule: before introducing evidence of any statement of the defendant, the court must hold a hearing to determine if the statement was freely given and not the product of coercion. State v. Joseph, 10 Wn. App. 827, 520 P.2d 635 (1974). If the defendant acts knowingly and intentionally, he may waive this right. State v. Myers, 86 Wn.2d 419, 545 P.2d 538 (1976). It is doubtful from the record that McKeown made a knowing and intelligent waiver of the hearing, and waiver should not be presumed from his failure to request one. Further, there is no indication that McKeown was ever advised of his right to the hearing. Despite this, remand for a determination of voluntariness is unwarranted.
Although the rule is mandatory,
mere failure to hold a hearing does not make the statement inadmissible. The appellate court may examine the record and make its own determination of voluntariness.
*586 State v. Mustain, 21 Wn. App. 39, 42-43, 584 P.2d 405 (1978); State v. Vandiver, 21 Wn. App. 269, 584 P.2d 978 (1978), and
If a review of the record discloses that there can be no issue concerning voluntariness, rights have not been violated by failure to hold such a hearing.
State v. Vandiver, supra at 272, quoting State v. Toliver, 6 Wn. App. 531, 534, 494 P.2d 514 (1972).
[2] McKeown did not testify at trial. He does not maintain that the statement was made involuntarily, or that it was the product of duress, coercion, promises or inducements of any kind. An independent review of the record reveals that it was freely given under the test stated in State v. Riley, 17 Wn. App. 732, 735, 565 P.2d 105 (1977):
To be admissible, a confession must be voluntary; and the test is whether the officer's behavior overcame the defendant's will to resist and brought about an admission that was not freely self-determined. The probable truth or falsity of the confession is not to be considered. Whether a confession is free and voluntary is not determined by whether the officer's conduct is shocking or the confession is cruelly extorted, but whether it was extracted by any sort of threats, violence, or direct or implied promises, however slight.
See also State v. Lopez, 67 Wn.2d 185, 406 P.2d 941 (1965). Therefore, there is no issue of voluntariness concerning his answer to Kennedy's question.
McKeown claims that the lack of a CrR 3.5 hearing prevented his effective cross-examination to determine if he was in custody and therefore entitled to Miranda[1] warnings at the time he made the statement. Under these facts, McKeown was not in custody when questioned by Officer Kennedy.
[3] The touchstone of admissibility is whether the defendant's statement was given in the course of custodial interrogation. State v. Berkins, 2 Wn. App. 910, 471 P.2d *587 131 (1970). Not every interrogation is custodial within the meaning of Miranda. Our courts have recognized the
right to temporarily detain and interrogate before Miranda warnings are given under circumstances where because of the police presence the citizen is in fact temporarily not free to leave pending questioning.
State v. Webster, 20 Wn. App. 128, 135, 579 P.2d 985 (1978); State v. Baker, 68 Wn.2d 517, 413 P.2d 965 (1966).
In State v. Sinclair, 11 Wn. App. 523, 523 P.2d 1209 (1974), the defendant was riding in a truck which contained a stolen TV. Two officers followed the truck which stopped near defendant's residence. When defendant alit from the vehicle, both officers recognized him, placed him inside the squad car, and questioned him about his age, identity, and the TV. The police ran a "check," discovered an outstanding warrant for Sinclair's arrest on a traffic charge, and then arrested him both for the traffic charge and for grand larceny. The denial of Sinclair's motion to suppress was affirmed on appeal; this court relied on State v. Gluck, 83 Wn.2d 424, 426, 518 P.2d 703 (1974), for the proposition that
where officers entertain a well-founded suspicion not amounting to probable cause, they may stop the suspected person, identify themselves and require the suspect to identify himself and explain his activity without being adjudged to have made a formal arrest.
and held that
A police officer, in the discharge of his routine law enforcement duties prior to having probable cause to believe that a person he seeks to question has committed a crime for which an arrest may be made, may detain and question that suspect concerning his knowledge of the commission of a crime, including one in process of being committed or about to be committed, without the detention or questioning being considered an arrest and without the necessity of the police officer first giving the person questioned Miranda warnings.
*588 State v. Sinclair, supra at 528.[2]
[4, 5] McKeown assigns error to the trial court's denial of his motion to dismiss for insufficient evidence at the close of the State's case. A challenge to the sufficiency of the evidence requires that the evidence be interpreted most strongly against the moving party and in the light most favorable to the opposing party. State v. Bishop, 90 Wn.2d 185, 580 P.2d 259 (1978); State v. Young, 89 Wn.2d 613, 574 P.2d 1171 (1978). Further, a jury verdict can be overturned on review only when there is no substantial evidence to support it. Lamborn v. Phillips Pac. Chem. Co., 89 Wn.2d 701, 575 P.2d 215 (1978). To determine whether the necessary quantum of proof exists, the appellate court need not be convinced of defendant's guilt beyond a reasonable doubt; it need only be satisfied that there was substantial evidence to support the State's case. State v. Green, 91 Wn.2d 431, 588 P.2d 1370 (1979).
[6] Substantial evidence of accomplice liability must be predicated on more than mere physical presence and knowledge of the crime. State v. Renneberg, 83 Wn.2d 735, 522 P.2d 835 (1974). The accomplice must associate himself with the venture and "participates in it as something he wishes to bring about, and by action to make it succeed", State v. Boast, 87 Wn.2d 447, 456, 553 P.2d 1322 (1976).
McKeown relies heavily on State v. Gladstone, 78 Wn.2d 306, 474 P.2d 274, 42 A.L.R.3d 1061 (1970), claiming that *589 there was insufficient nexus with Burr, Leighton, or Schierman to support his conviction. Gladstone is factually distinguishable: there, an undercover agent asked defendant where marijuana could be obtained. Gladstone named one Kent and drew a rough sketch of his location. The subsequent sale was made directly between Kent and the officer. There was no evidence that Gladstone had any agreement, arrangement, or association with Kent to aid or persuade him in the sale of the drug. The Supreme Court reversed Gladstone's conviction as an accomplice in the sale, finding his information to the officer no more than "a statement of opinion and possibly no more than campus gossip, rumor or innuendo."
That vital element a nexus between the accused and the party whom he is charged with aiding and abetting in the commission of a crime is missing. The record contains no evidence whatever that Gladstone had any communication by word, gesture or sign, before or after he drew the map, from which it could be inferred that he counseled, encouraged, hired, commanded, induced or procured Kent to sell marijuana to Douglas Thompson as charged, or took any steps to further the commission of the crime charged.
State v. Gladstone, supra at 310-11.
Here, McKeown directly participated in the sale: unlike Gladstone, McKeown was present at the scene of the sale, after having personally contacted the seller (Schierman) and discussed the sale with Leighton and Schierman. This conduct amounts to more than "a statement of opinion" and establishes a sufficient nexus with the principals involved.
McKeown challenges instruction No. 4, which read as follows:
Before you can find the defendant, LARRY LEE McKEOWN, guilty of Delivery of a Controlled Substance, you must find from the evidence in this case, beyond a reasonable doubt, all of the following elements:
(1) That on or about August 24, 1977, Gerald L. Leighton, Steven P. Burr, and Richard D. Schierman, or *590 any one of them, did unlawfully deliver a controlled substance, marijuana.
(2) That the defendant, LARRY LEE McKEOWN, was an accomplice of either Gerald L. Leighton, or Steven P. Burr or Richard D. Schierman in the unlawful delivery of a controlled substance, marijuana, on or about August 24, 1977.
(3) That the delivery of a controlled substance took place in Spokane County, State of Washington.
(Italics ours.) The jury returned a general verdict; McKeown argues that since the evidence was insufficient to show he aided either Burr or Schierman, the court was required to instruct the jury that a unanimous vote was necessary for a conviction under one of the alternatives.
[7] State v. Metcalf, 14 Wn. App. 232, 540 P.2d 459 (1975), defeats McKeown's argument. There, the court held that
Where, under a penal statute, a single offense can be committed in different ways or by different means and the several ways or means charged in a single count are not repugnant to each other, a conviction may rest on proof that the crime was committed by any one of the means charged....
... The alternative methods of committing a crime are repugnant to one another only if proof of one will disprove the other....
We are mindful, however, that no instruction was supplied advising the jury that a unanimous vote was necessary for a conviction under either alternative. But such an omission does not amount to reversible error when there is sufficient evidence to support a conviction under either alternative.
(Citations omitted.) State v. Metcalf, supra at 238-39, quoting State v. Dixon, 78 Wn.2d 796, 802, 479 P.2d 931 (1971).
As discussed above, there was sufficient evidence in the record to support McKeown's conviction as an accomplice of either Burr, Leighton or Schierman.
Finally, McKeown argues that the trial court erred in failing to give defendant's proposed instruction on the intent required for accomplice liability.
*591 The trial court gave instruction No. 5, which follows the statutory language of RCW 9A.08.020:
A person is an accomplice in the commission of a crime, if, with knowledge that it will promote or facilitate the commission of the crime, he or she either:
(1) Solicits, commands, encourages, or requests another person to commit the crime; or
(2) Aids or agrees to aid another person in planning or committing the crime.
The word "aid" means all assistance whether given by words, acts, encouragement, support or presence. A person who is present at the scene and is ready to assist by his or her presence is aiding in the commission of the crime.
(Italics ours.)
Defendant proposed the following instruction:
It must be shown that the accomplice shared in the criminal intent of the principal and there must be a community of unlawful purpose at the time the act was committed.
Relying on State v. Boast, supra, McKeown maintains that an accomplice is guilty only if he shares in the criminal intent of the principal, and that the instructions as given omitted the intent requirement.
[8, 9] To determine the requisite intent for accomplice liability, it must first be determined what intent is required for liability as a principal. The inquiry begins with State v. Boyer, 91 Wn.2d 342, 588 P.2d 1151 (1979), aff'g 19 Wn. App. 338, 576 P.2d 902 (1978). There, the Supreme Court reconciled several lower court decisions[3] that produced conflicting interpretations of the intent requirement for delivery of a controlled substance, RCW 69.50.401(a). Holding *592 that intent is essential to the crime, the court formulated the mens rea element in terms of "guilty knowledge":
Accordingly, absent express legislative language to the contrary, we find in the context of this statute, its history and language, that guilty knowledge is intrinsic to the definition of the crime itself. Guilty knowledge must be proven beyond a reasonable doubt in conviction of this defendant under the statute.
(Italics ours.) State v. Boyer, supra at 344.
In State v. Gladstone, supra at 312-13, the court quoted from Johnson v. United States, 195 F.2d 673 (8th Cir.1952), in establishing the prerequisites to accomplice liability:
Generally speaking, to find one guilty as a principal on the ground that he was an aider and abetter, it must be proven that he shared in the criminal intent of the principal and there must be a community of unlawful purpose at the time the act is committed. As the term "aiding and abetting" implies, it assumes some participation in the criminal act in furtherance of the common design, either before or at the time the criminal act is committed.
In the same case, the court cited State v. Hinkley, 52 Wn.2d 415, 325 P.2d 889 (1958), to amplify the meaning of "abet":
Although the word "aid" does not imply guilty knowledge or felonious intent, the word "abet" includes knowledge of the wrongful purpose of the perpetrator, as well as counsel and encouragement in the crime.
State v. Gladstone, supra at 314.
"Intent" and "knowledge" were therefore used interchangeably to define the mental state required for liability as an aider and abetter. See State v. J-R Distribs., Inc., 82 Wn.2d 584, 512 P.2d 1049 (1973).
*593 The mens rea of aiding and abetting is guilty knowledge. United States v. McDaniel, 545 F.2d 642 (9th Cir.1976). In instruction No. 5, the trial court charged the jury that an accomplice must act with knowledge that he is promoting or facilitating the commission of a crime. The issue of intent was therefore before the jury.
[10] Further, this instruction follows the statutory language of RCW 9A.08.020, the accomplice statute. Where the law governing a case is expressed in a statute, the court should use the language of the statute in instructing the jury. State v. Workman, 90 Wn.2d 443, 584 P.2d 382 (1978); State v. McKinney, 19 Wn. App. 23, 573 P.2d 820 (1978). A trial court has wide discretion to determine the wording of instructions, and is well within that discretion by instructing in statutory language. We find no abuse of discretion.
Finding no error, the judgment is affirmed.
GREEN, C.J., and McINTURFF, J., concur.
NOTES
[1] Miranda v. Arizona, 384 U.S. 436, 16 L.Ed.2d 694, 86 S.Ct. 1602, 10 A.L.R.3d 974 (1966).
[2] See State v. Haverty, 3 Wn. App. 495, 497, 475 P.2d 887 (1970): Statements of a later charged defendant made during the investigatory stage of a possible crime, and before the arresting officers have knowledge of sufficient facts to constitute probable cause to arrest the defendant, are admissible at trial even though the defendant has not been previously informed of his constitutional rights as described in Miranda. Accord, State v. Webster, supra (defendant placed in "traditional search position" against a squad car and questioned when stolen goods fell out of his shirt; held noncustodial questioning), and State v. Hilliard, 89 Wn.2d 430, 573 P.2d 22 (1977) (defendant, matching description supplied by assault victim, questioned concerning identity and reason for presence in area before Miranda warnings or arrest; held noncustodial interrogation and suppression motion properly denied).
[3] In State v. Smith, 17 Wn. App. 231, 562 P.2d 659 (1977), Division One of the Court of Appeals held that RCW 69.50.401(a) on its face requires intent. In State v. Boyer, 19 Wn. App. 338, 576 P.2d 902 (1978), Division Two of the Court of Appeals disagreed with Smith and apparently held that no mental state was required.
State v. Tuss, 21 Wn. App. 80, 584 P.2d 421 (1978), a later case from Division Two, attempted to harmonize the two opinions by interpreting Boyer: although Boyer disagreed with the statutory interpretation of Smith, the court did recognize that general criminal intent is a required element of a crime which is malum in se, and that delivery of a controlled substance is such a crime.
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Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
No. 04-17-00311-CV
Stephanie INGRAM,
Appellant
v.
Alberto BARRAGAN,
Appellee
From the County Court at Law No. 2, Bexar County, Texas
Trial Court No. 2017CV02091
Honorable Jason Wolff, Judge Presiding
Opinion by: Rebeca C. Martinez, Justice
Sitting: Sandee Bryan Marion, Chief Justice
Rebeca C. Martinez, Justice
Luz Elena D. Chapa, Justice
Delivered and Filed: August 8, 2018
VACATED IN PART, AFFIRMED IN PART
Appellant Stephanie Ingram (“Ingram”) appeals the trial court’s judgment in a forcible
detainer action granting Appellee Alberto Barragan (“Barragan”) possession of a residential
property located in San Antonio, Texas and awarding Barragan unpaid rent. We vacate the
judgment in part and affirm in part.
04-17-00311-CV
BACKGROUND
According to Ingram’s pro se brief, on June 3, 2016, Ingram entered into an agreement to
lease a house owned by Barragan (the “Property”) for one year, or until June 3, 2017. 1 At that
time, “Barragan accepted payment [of] a security deposit of $300.00 and [the] first month[’s] rent
of $950.00” from a third party on Ingram’s behalf.
On March 18, 2017, Barragan initiated a forcible detainer action in the justice court because
Ingram failed to pay rent for February and March 2017. On March 21, 2017, the justice court
entered judgment in Barragan’s favor, awarding him possession of the Property and judgment for
unpaid rent totaling $1,900.
Ingram appealed to the county court at law (the “trial court”). The trial court held a bench
trial on May 4, 2017. Barragan appeared at trial, but Ingram did not. Ingram claims she “ch[o]se
her daughter Siarria Ingram as her representative in court, because [Ingram] was in Austin, Texas
at a Certified Veterans Peer Support Specialist course.” When Ingram’s daughter attempted to
make an appearance at trial on Ingram’s behalf, the trial court explained she could not represent
Ingram because she is not an attorney.
At trial, Barragan testified he was the owner of the Property and Ingram moved into the
Property on June 1, 2016. Barragan testified he and Ingram had a one-year lease agreement in
which Ingram agreed to pay $950 per month in rent. Ingram failed to pay rent for the months of
February, March, April, and May 2017, except for $950 paid into the court registry. After hearing
Barragan’s testimony, the trial court entered judgment ordering that Barragan recover immediate
possession of the Property. The judgment also ordered Ingram to pay $3,800 for unpaid rent
1
Barragan did not file an appellate brief.
-2-
04-17-00311-CV
through May 2017, plus court costs and interest, and ordered the $950 in the court registry be
released to Barragan and applied to the total judgment amount.
On May 12, 2017, Ingram filed a notice of appeal in this court but did not post a supersedeas
bond. On May 17, 2017, Ingram filed a motion to stay execution of the judgment pending appeal
in this court, which we denied because Ingram did not post a supersedeas bond. See TEX. PROP.
CODE ANN. § 24.007 (West Supp. 2016) (“A judgment of a county court may not under any
circumstances be stayed pending appeal unless, within 10 days of the signing of the judgment, the
appellant files a supersedeas bond in an amount set by the county court.”).
On May 18, 2017, Ingram filed a “Motion to Remove Default and Vacate Judgment” in
the trial court, requesting a new trial on the basis that she did not appear at the original trial due to
“inadvertence,” “surprise,” or “excusable neglect.” The record contains a signed order setting the
motion for hearing on May 26, 2017 at 9:30 a.m., but the record does not contain a transcript of
the hearing or an order disposing of the motion.
A writ of possession issued and, according to Ingram, sheriff’s deputies evicted her from
the Property on May 24, 2017.
DISCUSSION
A. Mootness
As an initial matter, we must determine whether this appeal is moot. A forcible detainer
action is intended to be a speedy, simple, and inexpensive means to obtain immediate possession
of property. Marshall v. Hous. Auth. of San Antonio, 198 S.W.3d 782, 787 (Tex. 2006). Judgment
of possession in a forcible detainer action is a determination of the right to immediate possession.
Id. When a tenant is no longer in possession of the property and has not superseded the judgment
of possession, her appeal is moot unless: (1) she timely and clearly expressed an intent to exercise
the right of appeal, and (2) appellate relief is not futile. Id. Appellate relief is not futile if the tenant
-3-
04-17-00311-CV
holds and asserts “a potentially meritorious claim of right to current, actual possession” of the
property. Id. (emphasis added). When a tenant’s lease has expired and she identifies no basis for
claiming a right to possession after that expiration, there is no longer a live controversy between
the parties as to the right of current possession. Id.
In this case, Ingram did not post a supersedeas bond and was evicted from the Property on
May 24, 2017. Although Ingram timely and clearly expressed her intent to appeal by filing a notice
of appeal on May 12, 2017, any appellate relief regarding the right to current possession is futile.
According to Ingram, her lease would have expired in June 2017, and she does not identify any
other basis for claiming a right to current, actual possession of the Property. Therefore, the issue
of possession is moot, and we must vacate the trial court’s judgment of possession. See id. at 788
(“One purpose of vacating the underlying judgment if a case becomes moot during appeal is to
prevent prejudice to the rights of parties when appellate review of a judgment on its merits is
precluded.”); accord Devilbiss v. Burch, No. 04-16-00711-CV, 2018 WL 2418476, at *2 (Tex.
App.—San Antonio May 30, 2018, no pet. h.) (mem. op.) (“[B]ecause the issue of possession is
moot, we must vacate the trial court’s judgment of possession.”).
In addition, although she does not raise it as a separate issue on appeal, Ingram argues the
trial court erred by not setting a supersedeas bond. The record does not reflect that Ingram ever
requested that the trial court set a bond amount, but, in any event, this issue is also moot. See Leal
v. SF Revocable Living Trust I, No. 09-15-00254-CV, 2017 WL 2687506, at *3 (Tex. App.—
Beaumont June 22, 2017, no pet.) (mem. op.) (holding that because appeal is moot, court of appeals
may not consider complaint on appeal that trial court failed to set supersedeas bond); see also
Usatequi v. Meller, No. 04-05-00324-CV, 2006 WL 166436, at *2 (Tex. App.—San Antonio Jan.
25, 2006, no pet.) (mem. op.) (holding appeal moot because tenant did not supersede judgment
and was evicted even though trial court did not set supersedeas bond).
-4-
04-17-00311-CV
Even where the issue of possession is moot, however, we may review issues independent
of possession, such as issues related to a claim for unpaid rent. Devilbiss, 2018 WL 2418476, at
*2; Cavazos v. San Antonio Hous. Auth., No. 04-09-00659-CV, 2010 WL 2772450, at *2 (Tex.
App.—San Antonio July 14, 2010, no pet.) (mem. op.). Accordingly, we address Ingram’s issues
on appeal to the extent they are unrelated to the issue of possession.
B. Representation by a non-attorney in the county court
In her first issue, Ingram argues the trial court erred by not allowing her daughter to appear
and present evidence as Ingram’s “authorized representative” at trial. Ingram relies on section
24.011 of the Texas Property Code, which provides that in eviction suits in the justice court, parties
may represent themselves or be represented by their authorized agents, who need not be attorneys.
TEX. PROP. CODE ANN. § 24.011(a). In an appeal to the county court, however, only an owner of a
multifamily residential property or a property owner that is a business entity may be represented
by a non-attorney agent. Id. § 24.011(b). An individual litigant in county court must represent
herself or be represented by an attorney. See id.; TEX. R. CIV. P. 7 (“A party to a suit may appear
and prosecute or defend his rights therein, either in person or by an attorney of the court.”).
Therefore, the trial court did not err by prohibiting Ingram’s daughter, who is not an attorney, from
appearing and presenting evidence as Ingram’s representative in Ingram’s appeal to the county
court. Ingram’s first issue is overruled.
C. Factual sufficiency
In her second issue, Ingram argues the evidence is factually insufficient to support the
judgment. The judgment in this case awards Barragan: (1) immediate possession of the Property,
and (2) damages for unpaid rent. As discussed above, to the extent Ingram’s second issue pertains
to the judgment of possession, it is moot. See Marshall, 198 S.W.3d at 787. Accordingly, we
-5-
04-17-00311-CV
address the factual sufficiency of the evidence as it pertains to the award of damages for unpaid
rent only.
A claim for unpaid rent may be brought with a forcible detainer action. TEX. PROP. CODE
ANN. § 24.008. In a bench trial in which no findings of fact or conclusions of law are filed or
requested, we imply the trial court made all the necessary findings to support the judgment. Holt
Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 83 (Tex. 1992). We review the factual sufficiency
of the trial court’s implied findings by considering all of the evidence in the record. Ortiz v. Jones,
917 S.W.2d 770, 772 (Tex. 1996) (per curiam). We will set aside the judgment only if the evidence
supporting the implied findings is so weak that the judgment is “clearly wrong and manifestly
unjust.” Flying J Inc. v. Meda, Inc., 373 S.W.3d 680, 691 (Tex. App.—San Antonio 2012, no pet.)
(citations omitted).
Here, Barragan testified he and Ingram had a lease agreement whereby Ingram agreed to
pay Barragan $950 per month to rent the Property. Barragan testified Ingram failed to pay rent for
the months of February, March, April, and May 2017, and he requested judgment for unpaid rent
in the amount of $950 per month for those four months, totaling $3,800. The trial court awarded
Barragan unpaid rent in the amount of $3,800, offset by $950 Ingram had paid into the court
registry.
On appeal, Ingram does not appear to dispute the lease agreement required her to pay $950
per month in rent or that she failed to pay rent from February through May 2017. Rather, Ingram
appears to argue the trial court’s award is contrary to the evidence she claims she would have
presented at trial had she or an attorney appeared on her behalf. Ingram attaches to her brief images
of text messages purportedly exchanged between herself and Barragan, which she contends
support the defense she would have put on at trial. However, we may not consider any documents
attached to a brief that were not filed in the trial court and are therefore not part of the appellate
-6-
04-17-00311-CV
record. Edwards v. Dist. Attorney of Atascosa Cnty., 511 S.W.3d 257, 260 (Tex. App.—San
Antonio 2015, no pet.) (citing TEX. R. APP. P. 34.1). Ingram does not identify any evidence in the
record that is contrary to the award, nor does she show the evidence that is in the record is
insufficient to support the trial court’s judgment. Therefore, we conclude the evidence is factually
sufficient to support the award of unpaid rent to Barragan. Ingram’s second issue is overruled.
D. Retaliation
In her third and fourth issues, Ingram argues Barragan retaliated against her “in order to
regain possession of his property by misleading the appellant, and acting outside of written
agreements between both parties,” as well as “when learning the Appellant acted upon her tenant
rights in protecting herself by filing various motions with the courts.” Ingram relies upon section
92.331 of the Property Code, which prohibits a landlord from retaliating against a tenant under
certain circumstances. TEX. PROP. CODE ANN. § 92.331 (West 2014).
To the extent Ingram’s third and fourth issues relate to the judgment of possession, as
discussed above, we lack jurisdiction to resolve them. However, Chapter 92 of the Property Code
provides that retaliation is a defense to nonpayment of rent in an eviction suit. Id. § 92.335.
Therefore, to the extent Ingram’s issues relate to the award of damages for unpaid rent, we address
the merits.
Nothing in the record demonstrates Ingram raised retaliation as a defense to Barragan’s
claim for unpaid rent in the trial court. Because retaliation is an affirmative defense, we may not
consider it when raised for the first time on appeal. See TEX. R. CIV. P. 94 (requiring pleadings to
affirmatively set forth every “matter constituting an avoidance or affirmative defense”); see also
Rifleman v. Vista Hollow Apartments, No. B14-87-00845-CV, 1988 WL 95215, at *1 (Tex.
App.—Houston [14th Dist.] Sept. 15, 1988, writ denied) (mem. op.) (holding retaliation by
-7-
04-17-00311-CV
landlord is affirmative defense that is waived if not pleaded). Accordingly, Ingram’s third and
fourth issues are overruled.
E. Mitigation
In her fifth issue, Ingram argues Barragan “caused wholly or partly himself from receiving
payment by an agency on behalf of [Ingram].” We construe Ingram’s issue as raising failure to
mitigate damages as an affirmative defense to the claim for unpaid rent. However, nothing in the
record demonstrates Ingram raised this defense in the trial court, so we may not consider it when
raised for the first time on appeal. See TEX. R. CIV. P. 94; see also Austin Hill Country Realty, Inc.
v. Palisades Plaza, Inc., 948 S.W.2d 293, 300 (Tex. 1997) (holding tenant’s contention that
landlord failed to mitigate damages is affirmative defense that must be pleaded). Ingram’s fifth
issue is overruled.
F. Motion for new trial
In her sixth and final issue, Ingram argues the trial court erred “by not reversing the
previous judgment of default eviction; after both parties returned to court in agreement of vacating
the court order.” The clerk’s record contains Ingram’s “Motion to Remove Default and Vacate
Judgement,” which requests a new trial on the basis that Ingram did not appear at the original trial
due to “inadvertence,” “surprise,” or “excusable neglect.” The record contains a signed order
setting the motion for hearing on May 26, 2017 at 9:30 a.m., but nothing in the record indicates
the motion was agreed as Ingram claims or even that the hearing actually took place. There is no
reporter’s record of the hearing, and there is no order disposing of the motion in the clerk’s record.
In addition, the record does not reflect that Ingram requested these items be included in the record
on appeal pursuant to Texas Rules of Appellate Procedure 34.5 and 34.6.
Absent anything in the record to the contrary, we presume Ingram’s motion was overruled
by operation of law. See TEX. R. CIV. P. 329b(c) (providing motion for new trial is overruled by
-8-
04-17-00311-CV
operation of law if not determined by written order within seventy-five days of judgment). When
a motion for new trial is overruled by operation of law, we must determine whether the trial court
abused its discretion in allowing the motion to be overruled. Bank One of Tex., N.A. v. Moody, 830
S.W.2d 81, 85 (Tex. 1992). The trial court does not abuse its discretion unless the defaulting party
establishes all three elements of the test set forth in Craddock v. Sunshine Bus Lines, Inc., 133
S.W.2d 124 (Tex. 1939). Dolgencorp of Tex., Inc. v. Lerma, 288 S.W.3d 922, 926 (Tex. 2009) (per
curiam). Under Craddock and its progeny, a default judgment should be set aside when the
defaulting party establishes: (1) the failure to appear was not intentional or the result of conscious
indifference, but rather the result of accident or mistake; (2) the motion for new trial sets up a
meritorious defense; and (3) granting the motion will occasion no undue delay or otherwise injure
the party taking the default judgment. Id. at 925 (citing Craddock, 133 S.W.2d at 126).
Absent anything in the record indicating Ingram established any of the Craddock elements
either in her motion or in a hearing, we cannot conclude the trial court abused its discretion by
allowing Ingram’s motion to be overruled. Therefore, we overrule Ingram’s sixth issue.
CONCLUSION
Because the issue of possession is moot, we vacate the trial court’s judgment of possession.
We affirm the trial court’s judgment in all other respects.
Rebeca C. Martinez, Justice
-9-
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ACCEPTED
12-14-00294-CR
TWELFTH COURT OF APPEALS
TYLER, TEXAS
1/14/2015 1:13:45 PM
CATHY LUSK
CLERK
FILED IN
12th COURT OF APPEALS
TYLER, TEXAS
1/14/2015 1:13:45 PM
CATHY S. LUSK
Clerk
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Filed 6/28/17; pub. & mod. order 7/28/17 (see end of opn.)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
BEACHCOMBER MANAGEMENT
CRYSTAL COVE, LLC, et al.,
Petitioners,
G054078
v.
(Super. Ct. No. 30-2016-00839339)
THE SUPERIOR COURT OF ORANGE
COUNTY, OPINION
Respondent;
DOUGLAS L. SALISBURY, as Trustee,
etc., et al.,
Real Party in Interest.
Original proceedings; petition for a writ of mandate to challenge an order of
the Superior Court of Orange County, Martha K. Gooding, Judge. Petition granted.
Kohut & Kohut, Ronald J. Kohut, Laura Kohut Hoopis and Kristyn E.
Kohut for Petitioners.
No appearance for Respondent.
Weibtraub│Tobin, Gary A. Waldron, Sherry S. Bragg and Darrell P. White
for Real Parties in Interest.
* * *
Defendants Beachcomber Management Crystal Cove, LLC (Management)
and Douglas Cavanaugh (collectively, Defendants) challenge the trial court’s order
disqualifying the law firm of Kohut & Kohut LLP (Kohut) from continuing to represent
Defendants in the underlying matter. Plaintiffs Douglas L. Salisbury, as trustee of the
DLS Living Trust, Philip de Carion, and Gina de Carion (collectively, Plaintiffs) brought
this derivative lawsuit on behalf of Beachcomber at Crystal Cove, LLC (Company) to
challenge various actions Defendants took as the sole managing member of the
Company.
The duty of confidentiality generally prevents an attorney from continuing
to represent a client if the representation conflicts with the attorney’s representation of a
previous client in a related matter. Once the previous client establishes a substantial
relationship between the successive representations, the court must disqualify the
attorney from continuing to represent the second client because the law presumes the
attorney received confidential information during the first representation that is relevant
to the second.
Here, the trial court concluded disqualification was mandatory based on its
findings that (1) Defendants and the Company have conflicting interests because the
Company is the true plaintiff in this derivative suit that Plaintiffs brought against
Defendants on the Company’s behalf, and (2) Kohut previously represented the
Company concerning some of the issues raised in this suit, and a substantial relationship
2
therefore exists between that representation and Kohut’s representation of Defendants in
this lawsuit.
We conclude the trial court erred because it failed to apply a more specific
line of cases that governs an attorney’s successive representation of clients in a derivative
lawsuit brought on a small or closely held company’s behalf against the insiders who run
the company. Under these cases, an attorney may represent the insiders in a derivative
lawsuit by the company despite the attorney’s previous representation of the company
regarding issues raised in the suit. Unlike the ordinary successive representation case,
these cases recognize the attorney’s representation of the insiders does not threaten the
attorney’s duty of confidentiality to the company because the insiders already are privy to
all of the company’s confidential information. Indeed, any attorney representing the
insiders would discover the company’s confidential information because the insiders are
the source of that information.
Plaintiffs contend these cases do not apply here because the evidence shows
Defendants were neither solely in charge of the Company’s operations nor the sole
repositories of its confidential information. Plaintiffs, however, misconstrue the
underlying rationale of these cases. The critical inquiry is not whether the insiders were
solely in charge or the sole repositories of the company’s confidential information.
Rather, the critical inquiry is whether the insiders possessed or had access to the same
confidential information as the attorney who previously represented the company.
The trial court made no findings regarding this critical question, and
therefore we grant the petition and issue a writ of mandate directing the court to
(1) vacate its order disqualifying Kohut; (2) determine whether the reasoning in these
cases permits Kohut to continue representing Defendants in the lawsuit; (3) determine
whether the additional grounds Plaintiffs raised in their motion support disqualification;
and (4) enter a new order on Plaintiffs’ disqualification motion.
3
I
FACTS AND PROCEDURAL HISTORY
In 2006, Management founded the Beachcomber Café at Crystal Cove,
which the Company owns. The Company is a limited liability company and Management
serves as its managing member with the exclusive right to operate its business. The
Company has five other members who invested in it, but have no right to participate in
the day-to-day operations. These members are Plaintiffs and nonparties Ralph Kosmides,
Edward and Janis Carpenter, and Michael Hoopis. Management is a limited liability
company and Cavanaugh is its managing member with the exclusive right to manage the
Company.
Cavanaugh also operates and owns an interest in several other restaurants
and food service entities, including Ruby’s Diner, Inc., Ruby’s Franchise Systems, Inc.,
Ruby’s Management, LLC, Ruby’s Retail Brands, LLC, Lighthouse Café, and Malibu
Restaurant Group, LLP. Salisbury is an investor in some of these entities, and he has a
long history of questioning Cavanaugh’s actions in managing the Company and these
other entities. In 2009, Cavanaugh hired Kohut to represent him and certain of the
Ruby’s Diner entities regarding Salisbury’s numerous requests for information and
challenges to Cavanaugh’s management. Kohut’s representation included defending
some of the Ruby’s Diner entities and Cavanaugh in a lawsuit Salisbury filed entitled
Salisbury v. Ruby’s Diner (Super. Ct. Orange County, 2011, No. 30-2011-00510153).
In 2011, Management hired Kohut to represent it regarding Salisbury’s
requests for information and challenges to Cavanaugh’s management of the Company.
Since 2011, Kohut regularly corresponded with Salisbury and his counsel about
Cavanaugh’s management of the Company.
It is undisputed Kohut also has represented the Company twice. First,
between April 2010 and November 2011, Kohut represented the Company, Management,
4
and some investors when served with subpoenas in an unrelated lawsuit entitled
DeCinces v. Ruby’s Diner, Inc. (Super. Ct. Orange County, 2009, No. 30-2009-
00124231). Second, during September and October 2010, Kohut advised the Company
about a former employee’s wrongful termination lawsuit, but the Company’s insurance
carrier hired a different counsel to represent the Company in that lawsuit.
Defendants assert these are the only occasions Kohut represented the
Company, and those representations ended by late 2011. The trial court, however, found
Kohut also represented the Company along with Defendants relating to Salisbury’s
inquiries and objections to Cavanaugh’s management of the Company before Plaintiffs
filed this lawsuit.
In March 2016, Plaintiffs filed this lawsuit on the Company’s behalf as a
shareholder derivative action against Defendants. The complaint named the Company as
a nominal defendant and alleged claims for fraud, breach of fiduciary duty, abuse of
control, gross negligence and mismanagement, breach of duty of honest services, unjust
enrichment, declaratory relief, and accounting. Plaintiffs allege Defendants abused their
position as the Company’s managers by diverting Company funds to other Cavanaugh
entities, paying themselves unauthorized management fees, misallocating expenses the
Company shares with other entities, and refusing to provide Plaintiffs complete access to
the Company’s books and records. Defendants hired Kohut to represent them in this
lawsuit, and the Company hired independent counsel, the law firm of Corbin, Steelman &
Specter, to represent it in this lawsuit.
In May 2016, Plaintiffs filed a motion to disqualify Kohut “from any
further participation in this case” based on conflicts of interests arising from its past and
present representation of the Company and Defendants. Specifically, Plaintiffs argued
disqualification was required based on the conflicts of interest arising from (1) Kohut’s
concurrent representation of the Company and Defendants; (2) Kohut’s successive
representation of the Company and Defendants concerning the disputes over the
5
Company’s operations; and (3) the need for Kohut to testify in this lawsuit about the
services it provided to the Company and Defendants.
Defendants opposed the motion, arguing (1) there is no concurrent
representation because Kohut does not represent the Company in this lawsuit and has not
represented the Company in any other matter since late 2011; (2) Kohut’s successive
representation of the Company and Defendants does not require disqualification because
no substantial relationship exists between the firm’s prior representation of the Company
and this lawsuit, and the successive representation rules allow an attorney to continue
representing a company’s insiders in a derivative lawsuit so long as the attorney does not
continue to represent the company; (3) Kohut will not be a witness in this matter on any
issue other than the value of its services, and that testimony is an express exception to the
rule prohibiting an attorney from being an advocate and a witness in the same lawsuit;
and (4) the Company waived any potential or actual conflict of interest arising from
Kohut’s previous or current representation of any party to this action.
The trial court granted the motion in August 2016. The court found the
conflict of interest arising from Kohut’s successive representation of the Company and
Defendants required the firm’s disqualification. The court explained a substantial
relationship existed between Kohut’s prior representation of the Company and its current
representation of Defendants because the two representations involved many of the same
issues concerning the Company’s management raised by Plaintiffs in this lawsuit.
According to the court, two letters Kohut sent to Salisbury’s counsel in October 2015
showed the firm represented both the Company and Defendants regarding Plaintiffs’
complaints. Moreover, a declaration Defendants submitted from Tad Belshe, the
Company’s Vice President of Operations, confirmed Kohut had jointly represented the
Company and Defendants regarding Salisbury’s complaints. The court also found the
conflict waiver the Defendants submitted was ineffective because Defendants failed to
show a disinterested decision maker authorized the waiver. In granting the motion, the
6
court exclusively relied on Kohut’s successive representation of the Company and
Defendants; the court did not address Plaintiffs’ arguments based on the concurrent
representation or witness-advocate rules.
At the same time it granted the disqualification motion, the trial court
sustained Defendants’ demurrer to the declaratory relief claim with leave to amend
because Plaintiffs brought an individual claim regarding Salisbury’s voting rights, not a
derivative claim alleging injury to the Company. The court overruled the demurrer to all
other claims because it found they were derivative claims. Plaintiffs thereafter filed an
amended complaint confirming that Salisbury sought declaratory relief as an individual
claim and all other claims were brought on the Company’s behalf. Based on the amended
complaint, Defendants filed a motion asking the court to reconsider its ruling on the
disqualification motion, and allow Kohut to remain as counsel on the declaratory relief
claim because the Company was not a party to that claim and therefore no conflict of
interest existed. The court denied the motion for reconsideration, but stayed the lawsuit
to allow Defendants to seek appellate review of the disqualification order.
In September 2016, Defendants filed this writ petition seeking a writ of
mandate compelling the trial court to vacate its order disqualifying Kohut and enter a new
order denying the motion to disqualify. Alternatively, Defendants sought a writ of
mandate compelling the trial court to vacate its order denying their motion for
reconsideration and enter a new order granting reconsideration. We issued an order to
show cause why a writ of mandate should not issue.
II
DISCUSSION
A. Legal Background on Attorney Disqualification
“A trial court’s authority to disqualify an attorney derives from the power
inherent in every court ‘[t]o control in furtherance of justice, the conduct of its ministerial
7
officers, and of all other persons in any manner connected with a judicial proceeding
before it, in every matter pertaining thereto.’” (People ex rel. Dept. of Corporations v.
SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1145 (SpeeDee Oil); see
Code Civ. Proc., § 128, subd. (a)(5).)
“Disqualification motions implicate competing considerations. On the one
hand, these include clients’ rights to be represented by their preferred counsel and
deterring costly and time-consuming gamesmanship by the other side. ‘[T]he client has
an interest in competent representation by an attorney of his or her choice [citations] and
perhaps, the interest in avoiding inconvenience and duplicative expense in replacing
counsel already thoroughly familiar with the case.’” (Banning Ranch Conservancy v.
Superior Court (2011) 193 Cal.App.4th 903, 911 (Banning Ranch); see SpeeDee Oil,
supra, 20 Cal.4th at pp. 1144-1145.)
“Balanced against these are attorneys’ duties of loyalty and confidentiality
and maintaining public confidence in the integrity of the legal process. ‘The important
right to counsel of one’s choice must yield to ethical considerations that affect the
fundamental principles of our judicial process.’ [Citation.] ‘The loyalty the attorney
owes one client cannot be allowed to compromise the duty owed another.’” (Banning
Ranch, supra, 193 Cal.App.4th at p. 911; see SpeeDee Oil, supra, 20 Cal.4th at p. 1145.)
“‘“A conflict of interest exists when a lawyer’s duty on behalf of one client
obligates the lawyer to take action prejudicial to the interests of another client; i.e.,
‘when, in behalf of one client, it is his duty to contend for that which duty to another
client requires him to oppose.’”’” (Coldren v. Hart, King & Coldren, Inc. (2015)
239 Cal.App.4th 237, 248, italics omitted.) “California courts have identified two
separate categories in which actual or potential conflicts of interest arise in counsel’s
representation of multiple clients. One is the successive representation of multiple clients
resulting in a conflict of interest, i.e., where the attorney’s representation of the current
client may conflict with the interests of a former client . . . . Under those circumstances,
8
‘the courts have recognized that the chief fiduciary value jeopardized is that of client
confidentiality.’ [Citation.] The other circumstance is the concurrent (or dual)
representation of multiple clients resulting in a conflict of interest . . . , in which ‘[t]he
primary value at stake . . . is the attorney’s duty—and the client’s legitimate
1
expectation—of loyalty, rather than confidentiality.’” (M’Guinness v. Johnson (2015)
243 Cal.App.4th 602, 613 (M’Guinness).) “‘Normally, an attorney’s conflict is imputed
to the law firm as a whole on the rationale “that attorneys, working together and
practicing law in a professional association, share each other’s, and their clients’,
confidential information.”’” (Id. at p. 614.)
“In successive representation cases, where the former client seeks to
disqualify counsel from representing a successive client in current litigation adverse to
the former client’s interest, the former client must ‘demonstrate a “substantial
relationship” between the subjects of the antecedent and current representations.’
[Citation.] A substantial relationship exists where ‘the attorney had a direct professional
relationship with the former client in which the attorney personally provided legal advice
and services on a legal issue that is closely related to the legal issue in the present
representation.’” (M’Guinness, supra, 243 Cal.App.4th at p. 614.) “‘Where the requisite
substantial relationship between the subjects of the prior and the current representations
1
Rule 3-310 of the Rules of Professional Conduct governs an attorney’s
representation of clients with interests that actually or potentially conflict. In pertinent
part, the rule provides: “(C) A member shall not, without the informed written consent of
each client: [¶] (1) Accept representation of more than one client in a matter in which
the interests of the clients potentially conflict; or [¶] (2) Accept or continue
representation of more than one client in a matter in which the interests of the clients
actually conflict; or [¶] (3) Represent a client in a matter and at the same time in a
separate matter accept as a client a person or entity whose interest in the first matter is
adverse to the client in the first matter. [¶] . . . [¶] (E) A member shall not, without the
informed written consent of the client or former client, accept employment adverse to the
client or former client where, by reason of the representation of the client or former
client, the member has obtained confidential information material to the employment.”
9
can be demonstrated, access to confidential information by the attorney in the course of
the first representation (relevant, by definition, to the second representation) is presumed
and disqualification of the attorney’s representation of the second client is mandatory
. . . .’” (Ontiveros v. Constable (2016) 245 Cal.App.4th 686, 696 (Ontiveros).)
“In instances of concurrent representation, ‘[b]ecause a conflict involving
an attorney’s duty of loyalty is “[t]he most egregious” kind of conflict,’ a ‘“more
stringent”’ test is applied. [Citation.] Even if the dual representations ‘may have nothing
in common, and there is no risk that confidences to which counsel is a party in the one
case have any relation to the other matter, disqualification may nevertheless be required.
Indeed, in all but a few instances, the rule of disqualification in simultaneous
representation cases is a per se or “automatic” one. [Citations.]’ [Citations.] This per se
rule is appropriate because ‘[a] client who learns that his or her lawyer is also
representing a litigation adversary, even with respect to a matter wholly unrelated to the
one for which counsel was retained, cannot long be expected to sustain the level of
confidence and trust in counsel that is one of the foundations of the professional
relationship.’” (M’Guinness, supra, 243 Cal.App.4th at pp. 614-615.) “The strict
proscription against dual representation of clients with adverse interests thus derives from
a concern with protecting the integrity of the attorney-client relationship rather than from
concerns with the risk of specific acts of disloyalty or diminution of the quality of the
attorney's representation.” (Forrest v. Baeza (1997) 58 Cal.App.4th 65, 74 (Forrest).)
“Generally, a trial court’s decision on a disqualification motion is reviewed
for abuse of discretion. [Citations.] If the trial court resolved disputed factual issues, the
reviewing court should not substitute its judgment for the trial court’s express or implied
findings supported by substantial evidence. [Citations.] When substantial evidence
supports the trial court’s factual findings, the appellate court reviews the conclusions
based on those findings for abuse of discretion. [Citation.] However, the trial court’s
discretion is limited by the applicable legal principles. [Citation.] Thus, where there are
10
no material disputed factual issues, the appellate court reviews the trial court’s
determination as a question of law. [Citation.] In any event, a disqualification motion
involves concerns that justify careful review of the trial court’s exercise of discretion.”
(SpeeDee Oil, supra, 20 Cal.4th at pp. 1143-1144; see Ontiveros, supra, 245 Cal.App.4th
at p. 696.)
B. The Trial Court Failed to Apply the Proper Legal Standards for Evaluating
Successive Representations Involving a Shareholder Derivative Lawsuit
Defendants contend the trial court erred in disqualifying Kohut based on
the general prohibition against successive representations when the two representations
are substantially related. According to Defendants, the court failed to apply controlling
authority that allows an attorney who previously represented both a closely held company
and its insiders to continue representing the insiders in a derivative lawsuit brought on the
company’s behalf against the insiders. We agree.
A corporate shareholder or member in a limited liability company may
bring a derivative lawsuit on the company’s behalf when the insiders who control the
company refuse to do so. The shareholder or member bringing the derivative lawsuit is
the plaintiff in name only because the lawsuit seeks redress for injury the company
suffered and any recovery belongs to the company. Hence, although the company is
named as a nominal defendant based on the insiders’ refusal to bring the lawsuit on the
company’s behalf, the company is the true plaintiff. (Patrick v. Alacer Corp. (2008)
167 Cal.App.4th 995, 1003-1004; see Blue Water Sunset, LLC v. Markowitz (2011)
192 Cal.App.4th 477, 489 (Blue Water) [applying corporate derivative action principles
to limited liability company].)
The company’s status as the true plaintiff prevents an attorney from
representing both the company and its insiders in a derivative lawsuit that alleges the
insiders breached their duties owed to the company or otherwise injured the company.
Such representation would be an impermissible concurrent representation of clients with
11
conflicting interests. (Ontiveros, supra, 245 Cal.App.4th at p. 696 [“‘Current case law
clearly forbids dual representation of a corporation and directors in a shareholder
derivative suit, at least where, as here, the directors are alleged to have committed
fraud’”]; see Forrest, supra, 58 Cal.App.4th at p. 74.)
Successive representation rules, however, generally do not prevent an
attorney from continuing to represent the insiders in a derivative lawsuit even though a
substantial relationship exists between the attorney’s previous representation of the
company and the attorney’s current representation of the insiders in the company’s
lawsuit against them. (Forrest, supra, 58 Cal.App.4th at pp. 80, 82; see Ontiveros, supra,
245 Cal.App.4th at pp. 699-700; Blue Water, supra, 192 Cal.App.4th at pp. 490-491;
Gong v. RFG Oil, Inc. (2008) 166 Cal.App.4th 209, 217 (Gong).) This separate rule for
derivative lawsuits derives from a recognition that the insiders are the true sources and
possessors of a closely held company’s confidential information. (Forrest, at p. 82;
see Ontiveros, at pp. 699-700; Blue Water, at p. 491; Gong, at p. 217.)
As explained above, client confidentiality is the fiduciary value threatened
by an attorney’s successive representation of separate clients in substantially related
matters. (M’Guinness, supra, 243 Cal.App.4th at p. 613; Forrest, supra, 58 Cal.App.4th
at p. 73.) Once a substantial relationship between the two representations is shown,
courts must presume the attorney received confidential information during the first
representation and the attorney’s disqualification in the second representation is
mandatory. (Ontiveros, supra, 245 Cal.App.4th at pp. 695-696.) This rule “is based on
the need to protect scrupulously against the improper use of confidential information[.]
‘“This is the rule by necessity, for it is not within the power of the former client to prove
what is in the mind of the attorney. Nor should the attorney have to ‘engage in a subtle
evaluation of the extent to which he acquired relevant information in the first
representation and of the actual use of that knowledge and information in the subsequent
representation.’”’” (Forrest, at p. 82.)
12
In a small or closely held company, the functioning of the company and its
insiders typically are so intertwined that any distinction between the company and its
insiders is entirely fictional. The insiders are the repositories and source of all
confidential information an attorney may receive in representing the company. In a
larger company confidential information may be divided among many different people
with no individual or small group possessing it all, but in a closely held company the few
insiders responsible for operating a small company often know all of the company’s
confidential information. In that situation, it would be meaningless to apply the
successive representation rules to prevent an attorney who previously represented the
company from representing the company’s insiders. (Forrest, supra, 58 Cal.App.4th at
p. 82; see Ontiveros, supra, 245 Cal.App.4th at pp. 699-700; Blue Water, supra,
192 Cal.App.4th at p. 491; Gong, supra, 166 Cal.App.4th at p. 217.) As the repositories
and source of the company’s confidential information, the insiders would be able to
provide their new attorney with the same information their previous attorney had, and
therefore disqualifying the original attorney would be a futile act that merely generates
attorney fees as the new attorney gets up to speed. (Gong, at p. 217.) Indeed, in this
scenario, “[c]ounsel’s continued representation of the [insiders] poses no threat to
[c]ounsel’s continuing duty of confidentiality to [the company]” because the insiders
already know all of the Company’s confidential information. (Ontiveros, supra,
245 Cal.App.4th at p. 700, italics omitted.)
For example, Forrest involved a shareholder derivative suit brought by a
minority shareholder in two closely held corporations against a husband and wife who
were the majority shareholders and ran the corporations. The minority shareholder
brought a motion to disqualify the attorney who represented both the corporations and the
majority shareholders in the lawsuit. The trial court granted the motion to disqualify the
attorney from representing the corporations, but denied the motion to disqualify the
13
attorney from representing the majority shareholders. (Forrest, supra, 58 Cal.App.4th at
pp. 68-72.) The Court of Appeal affirmed.
The Forrest court explained the prohibition on concurrent representation of
clients with conflicting interests prohibited the attorney from continuing to represent both
the corporations and the majority shareholders because the lawsuit essentially was a
claim by the corporations against the majority shareholders. (Forrest, supra,
58 Cal.App.4th at p. 74.) But the appellate court also concluded the prohibition on
successive representations in substantially related matters did not require the attorney’s
disqualification from representing the majority shareholders because the continued
representation of those shareholders posed no threat that the attorney would use
confidential information he received from the corporations: “[I]n the factual
circumstances of this case, where [the attorney] has been representing a corporation
comprised of three shareholders solely by virtue of his relationship with . . . the majority
directors/shareholders, it is impossible to conceive of confidential information [the
attorney] could have received from the ‘corporation’ that is different from information he
received from the [majority shareholders].” (Id. at p. 82.) Relying on Forrest, the Courts
of Appeal reached similar results in Ontiveros, supra, 245 Cal.App.4th at pp. 699-700,
Blue Water, supra, 192 Cal.App.4th at pp. 490-491, and Gong, supra, 166 Cal.App.4th at
p. 217.)
Here, seven of the eight causes of action Plaintiffs allege are derivative
claims brought on the Company’s behalf against Defendants for actions Defendants took
as the Company’s insiders. Management is the Company’s sole managing member with
the exclusive right to run the Company and its business. Cavanaugh is Management’s
sole managing member with the exclusive right to run Management as it operates the
Company. Indeed, Cavanaugh actively oversees the Company’s management and
operations. Kohut has represented both Management and Cavanaugh for a number of
years. Although Defendants dispute that Kohut ever represented the Company regarding
14
any of the claims alleged in this lawsuit, the trial court found the firm represented the
2
Company on at least some of the issues before Plaintiffs filed this lawsuit. It is
undisputed Kohut has not represented the Company in this lawsuit and that the Company
has hired independent counsel to represent it. These fundamental facts about this lawsuit
and the relationship among the parties and Kohut support the conclusion Kohut may
continue representing Defendants despite the trial court’s finding a substantial
relationship existed between the firm’s previous representation of the Company and its
current representation of Defendants.
Defendants brought these facts to the trial court’s attention and relied on the
rule established in Forrest and its progeny. Nonetheless, the court disqualified Kohut
from representing Defendants in this lawsuit based on the general successive
representation rule requiring a court to presume confidential information was disclosed
during a prior representation if the two representations are substantially related.
Although the court issued a lengthy written order explaining its ruling, the court neither
acknowledged nor distinguished Forrest or any of the foregoing cases.
Plaintiffs argue the Forrest line of cases establish a narrow rule
inapplicable here because Defendants were not solely in charge of the Company’s
operations and they are not the sole repositories of the Company’s records. According to
2
Defendants contend the trial court erred in finding Kohut represented the
Company on issues raised in this lawsuit. According to Defendants, we should review
the court’s finding on this issue de novo because undisputed evidence shows the court
misinterpreted the two letters and the declaration it relied on to establish Kohut’s
representation of the Company on these matters. Appellate courts, however,
independently review factual issues only when the facts are undisputed and no conflicting
inferences can be drawn from the facts. (Nellie Gail Ranch Owners Assn. v. McMullin
(2016) 4 Cal.App.5th 982, 996 (Nellie Gail).) The letters and declaration the court
identified are ambiguous and support conflicting inferences. We therefore review the
trial court’s finding under the substantial evidence standard and conclude the letters and
declaration support the court’s finding.
15
Plaintiffs, an attorney who previously represented a corporation may represent a
corporate insider in a derivative lawsuit against the insider only “where it is shown that
the nature of the relationship between the corporation and the insider is so intertwined
that there is no possibility that confidential information of the corporation would be
jeopardized.” Plaintiffs misconstrue Forrest and the basis for the rule it establishes.
The rule established by Forrest and applied in subsequent cases supplanted
the generally applicable successive representation rule and now governs in derivative
lawsuits involving a closely held company in which a limited number of insiders are
responsible for the company’s operations and possess or are privy to its confidential
information. Applying a presumption that requires disqualification based solely on the
relationship between the attorney’s representation of the company and his or her
representation of the insiders makes little sense in that situation because the insiders are
the source of the attorney’s information, or at least they possess the same information as
the attorney, and therefore the attorney’s representation of the insiders does not threaten
the attorney’s duty of confidentiality to the Company.
Although Forrest used the terminology “sole repositories of corporate
information to which the attorney has had access” (Forrest, supra, 58 Cal.App.4th at
p. 82), that terminology describes the factual scenario Forrest presented, not the
minimum threshold for the Forrest rule to apply. Rather, the critical inquiry focuses on
the insiders’ role in the company and the information to which they had access and
possessed. It does not matter whether the insiders were the “sole repositories” of
confidential information or that other employees or representatives also had access or
possessed confidential information. Likewise, it is irrelevant that the insiders may have
delegated certain tasks or responsibilities to others. Application of the Forrest rule turns
on whether the insiders had access to the same information as the attorney who
represented both the insiders and the company.
16
On appeal, Plaintiffs contend “the evidence does not establish that the
3
operational functions of the [Company] have been so intertwined with [Defendants ] that
any distinction between them is fictional . . . such that any confidential information
possessed by the [Company] is also possessed by [Defendants].” In support, Plaintiffs
point to (1) the declaration of Tad Belshe, the Company’s Vice President of Operations,
and its description of his responsibilities regarding the Company’s day-to-day operational
issues; (2) the Company’s use of outside accountants to prepare and maintain its financial
records; and (3) Robert Galle’s declaration explaining that Cavanaugh delegated to him
the authority to resolve a dispute with the Company’s investors about a loan Cavanaugh
4
improperly made to another restaurant he owned and operated.
None of this evidence, however, compels the conclusion that in overseeing
and managing the Company’s operations Defendants did not possess all of the
confidential information to which Kohut had access as the Company’s attorneys. That
others may have carried out some tasks under Defendants’ supervision fails to establish
that Defendants did not possess confidential information about those tasks when
Defendants were the ones with the exclusive right to manage the Company. Moreover,
although we ordinarily infer all findings necessary to support the trial court’s decision,
we do so only if substantial evidence supports those inferences (Nellie Gail, supra,
3
In their brief, Plaintiffs use the term “Cavanaugh” to refer to both
Cavanaugh and Management. This terminology is confusing because it suggests
Plaintiffs strictly are referring to Cavanaugh as an individual rather than collectively to
Cavanaugh as an individual and Management. To avoid confusion, we use the term
Defendants to refer collectively to Cavanaugh and Management.
4
Plaintiffs’ also cite a statement in Belshe’s declaration that Cavanaugh is
responsible for the overall and day-to-day creative side of the Company’s business as
evidence that he is not responsible for other aspects of the Company’s business. The
same declaration, however, also states that Cavanaugh oversees the management and
operations of the Company’s entire business, and therefore we do not view the foregoing
statement as evidence supporting Plaintiffs’ contention.
17
4 Cal.App.5th at p. 996), and only when the record shows the court actually performed its
factfinding function on the question for which we would infer findings (Kemp Bros.
Construction, Inc. v. Titan Electric Corp. (2007) 146 Cal.App.4th 1474, 1477 [“‘When
the record clearly demonstrates what the trial court did, we will not presume it did
something different’”]). As explained, the evidence Plaintiffs cite fails to establish
Defendants did not possess the Company’s confidential information, and the record
shows the court failed to determine whether Defendants were insiders subject to the
5
Forrest rule.
We therefore issue a writ of mandate directing the trial court to vacate its
order disqualifying Kohut, to review the evidence regarding Defendants’ role in running
the Company and the confidential information to which they were privy, and to determine
whether Forrest and the cases applying it permit Kohut to continue representing
Defendants in this derivative lawsuit despite the court’s finding that representation is
substantially related to Kohut’s previous representation of the Company. The court also
should determine whether Kohut’s disqualification is required by the prohibition against
concurrent representation of clients with conflicting interests and the potential need for
attorneys with Kohut to testify at trial. Plaintiffs’ motion raised both of these additional
grounds for disqualifying Kohut, but the trial court did not reach these issues because of
its decision to grant the disqualification motion on successive representation grounds.
5
Plaintiffs also argue the Forrest line of cases does not apply because “the
dispute here involves a quarrel between only three of six of the individual members [of
the Company], so the interests of all of the members are not fully represented in this
lawsuit.” We fail to see how the existence of other members has any bearing on whether
Kohut may continue to represent Defendants in this lawsuit, and Plaintiffs failed to
explain this contention. As discussed above, whether the Forrest rule applies turns on the
insiders’ role in the company and the confidential information they possess. The
existence of other members or shareholders who are not parties to the lawsuit has no
bearing on that question.
18
Plaintiffs contend we should uphold the trial court’s disqualification order
based on these alternative grounds, but they fail to brief either of these issues and
therefore forfeited them on appeal. (Keyes v. Bowen (2010) 189 Cal.App.4th 647, 656
[appellant forfeits argument on appeal by incorporating briefs filed in trial court rather
than briefing issue on appeal]; Colores v. Board of Trustees (2003) 105 Cal.App.4th
1293, 1301, fn. 2 [“[I]t is not appropriate to incorporate by reference, into a brief, points
and authorities contained in trial court papers, even if such papers are made a part of the
appellate record”].) Moreover, the authority to disqualify an attorney is vested in the trial
court’s sound discretion based on its superior knowledge of the case and its factual
findings, and therefore the trial court should make that determination in the first
6
instance.
III
DISPOSITION
The petition is granted. Let a writ of mandate issue directing the trial court
to (1) vacate its order disqualifying Kohut from representing Defendants in this lawsuit;
(2) determine whether Forrest and the other cases applying it allow Kohut to continue
representing Defendants in this lawsuit; (3) determine whether Kohut concurrently
represented Defendants and the Company so as to require Kohut’s disqualification;
(4) determine whether Kohut should be disqualified from representing Defendants in this
lawsuit because one or more of its attorneys testify as a witness in this lawsuit; and
6
Because we grant Defendants’ petition and issue a writ of mandate
directing the trial court to vacate its disqualification order, we do not reach Defendants’
alternative request for a writ of mandate directing the court to vacate its order denying
Defendants’ reconsideration motion.
19
(5) enter a new order deciding Plaintiffs’ disqualification motion based on the foregoing
determinations. Defendants shall recover their own costs on this writ proceeding.
ARONSON, J.
WE CONCUR:
O’LEARY, P. J.
FYBEL, J.
20
Filed 7/28/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
BEACHCOMBER MANAGEMENT
CRYSTAL COVE, LLC, et al.,
Petitioners,
G054078
v.
(Super. Ct. No. 30-2016-00839339)
THE SUPERIOR COURT OF ORANGE
COUNTY, ORDER MODIFYING OPINION
AND CERTIFYING OPINION FOR
Respondent; PUBLICATION; NO CHANGE IN
JUDGMENT
DOUGLAS L. SALISBURY, as Trustee,
etc., et al.,
Real Party in Interest.
It is ordered that the opinion filed in the above-entitled matter on June 28,
2017, is hereby MODIFIED as follows:
1. On page 2, the second sentence of the first paragraph, beginning
with “Plaintiffs Douglas L. Salisbury,” delete the words “as the sole” between the words
“Defendants took” and “managing member” and replace them with the word “in,” and
21
delete the words “member of” between the words “managing” and “the Company” so the
sentence reads:
Plaintiffs Douglas L. Salisbury, as trustee of the DLS Living Trust, Philip
de Carion, and Gina de Carion (collectively, Plaintiffs) brought this
derivative lawsuit on behalf of Beachcomber at Crystal Cove, LLC
(Company) to challenge various actions Defendants took in managing the
Company.
2. On page 5, the second sentence of the last paragraph, beginning with
“Specifically, Plaintiffs argued,” delete the word “argued” near the beginning of the
sentence and replace it with the words “based their,” delete the words “was required
based on the conflicts” after the word “disqualification” and replace them with the words
“motion on conflicts” so the sentence reads:
Specifically, Plaintiffs based their disqualification motion on conflicts of
interest arising from (1) Kohut’s concurrent representation of the Company
and Defendants; (2) Kohut’s successive representation of the Company and
Defendants concerning the disputes over the Company’s operations; and
(3) the need for Kohut to testify in this lawsuit about the services it
provided to the Company and Defendants.
3. On page 6, the fourth sentence of the last paragraph, beginning with
“Moreover, a declaration Defendants submitted,” delete the words “regarding Salisbury’s
complaints” at the end of the sentence so the sentence reads:
Moreover, a declaration Defendants submitted from Tad Belshe, the
Company’s Vice President of Operations, confirmed Kohut had jointly
represented the Company and Defendants.
4. On page 12, the first sentence of the first full paragraph, beginning
with “Successive representation rules, however,” delete the word “the” before the word
“insiders” at both locations in the sentence so the sentence reads:
22
Successive representation rules, however, generally do not prevent an
attorney from continuing to represent insiders in a derivative lawsuit even
though a substantial relationship exists between the attorney’s previous
representation of the company and the attorney’s current representation of
insiders in the company’s lawsuit against them.
5. On page 12, the second sentence of the first full paragraph,
beginning with “This separate rule,” delete the words “for derivative lawsuits” following
the words “This separate rule,” delete the word “the” before the word “insiders,” and
delete the words “true sources and possessors” following the words “insiders are the” and
replace them with the word “source” so the sentence reads:
This separate rule derives from a recognition that insiders are the source of
a closely held company’s confidential information.
6. On page 12, the second sentence of the second full paragraph,
beginning with “Once a substantial relationship,” insert the word “therefore” between the
words “the first representation and” and “the attorney’s disqualification” so the sentence
reads:
Once a substantial relationship between the two representations is shown,
courts must presume the attorney received confidential information during
the first representation and therefore the attorney’s disqualification in the
second representation is mandatory.
7. On page 13, the first sentence of the first paragraph, beginning with
“In a small or closely held company,” delete the words “the functioning of the company”
near the beginning of the sentence and replace them with the words “the company’s
operations,” and delete the words “company and its insiders” between the words
“distinction between the” and “is entirely fictional” and replace them with the word
“two” so the sentence reads:
23
In a small or closely held company, the company’s operations and its
insiders typically are so intertwined that any distinction between the two is
entirely fictional.
8. On page 13, the second sentence of the first paragraph, beginning
with “The insiders are the repositories,” insert the word “often” after the words “The
insiders” at the beginning of the sentence so the sentence reads:
The insiders often are the repositories and source of all confidential
information an attorney may receive in representing the company.
9. On page 13, the fifth sentence of the first paragraph, beginning with
“As the repositories and source,” delete the words “the insiders would be able to”
following the words “the company’s confidential information,” and replace them with the
words “insiders could,” and delete the words “be a futile act that merely generates”
between the words “the original attorney would” and “attorney fees” and replace them
with the words “serve no purpose and needlessly generate” so the sentence reads:
As the repositories and source of the company’s confidential information,
insiders could provide their new attorney with the same information their
previous attorney had, and therefore disqualifying the original attorney
would serve no purpose and needlessly generate attorney fees as the new
attorney gets up to speed.
10. On page 13, the last sentence of the last paragraph, beginning with
“The trial court granted the motion,” delete the words “trial court granted” at the
beginning of the sentence and replace them with the words “Court of Appeal affirmed the
trial court’s order granting,” and delete the word “denied” between the words “but” and
“the motion to disqualify” and replace it with the word “denying” so the sentence reads:
The Court of Appeal affirmed the trial court’s order granting the motion to
disqualify the attorney from representing the corporations, but denying the
24
motion to disqualify the attorney from representing the majority
shareholders.
11. On page 14, the first complete sentence at the top of the page, stating
“The Court of Appeal Affirmed,” delete the entire sentence.
12. On page 14, the first sentence of the first full paragraph, beginning
with “The Forrest court explained,” delete the words “a claim” between the words “the
lawsuit essentially was” and “by the corporation against” and replace them with the word
“brought” so the sentence reads:
The Forrest court explained the prohibition on concurrent representation of
clients with conflicting interests prohibited the attorney from continuing to
represent both the corporations and the majority shareholders because the
lawsuit essentially was brought by the corporations against the majority
shareholders.
13. On page 14, the third and fourth sentences of the last paragraph,
beginning with “Cavanaugh is Management’s sole managing member” and “Indeed,
Cavanaugh actively oversees,” delete the words “as it operates the Company” at the end
of the third sentence and replace them with the word “and,” insert a comma before the
new word “and,” delete the period at the end of the third sentence, delete the words
“Indeed, Cavanaugh” at the beginning of the fourth sentence, and delete the word
“oversees” near the beginning of the fourth sentence and replace it with the word
“oversaw” so the combined sentence reads:
Cavanaugh is Management’s sole managing member with the exclusive
right to run Management, and actively oversaw the Company’s
management and operations.
14. On page 15, the second complete sentence at the top of the page,
beginning with “These fundamental facts,” delete the word “fundamental” near the
beginning of the sentence and replace it with the word “undisputed,” and delete the words
25
“the conclusion” between the words “and Kohut support” and “Kohut may continue” and
replace them with the words “Defendants’ argument” so the sentence reads:
These undisputed facts about this lawsuit and the relationship among the
parties and Kohut support Defendants’ argument Kohut may continue
representing Defendants despite the trial court’s finding a substantial
relationship existed between the firm’s previous representation of the
Company and its current representation of Defendants.
15. On page 16, the last sentence of the partial paragraph at the top of
the page, beginning with “Plaintiffs misconstrue Forrest,” delete the words “the rule it
establishes” at the end of the sentence and replace them with the words “its decision” so
the sentence reads:
Plaintiffs misconstrue Forrest and the basis for its decision.
16. On page 16, the second sentence of the first full paragraph,
beginning with “Applying a presumption,” delete the word “the” between the words “his
or her representation of” and “insiders makes little sense,” and delete the words “that
situation” between the words “makes little sense in” and “because the insiders” and
replace them with the words “this context” so the sentence reads:
Applying a presumption that requires disqualification based solely on the
relationship between the attorney’s representation of the company and his
or her representation of insiders makes little sense in this context because
the insiders are the source of the attorney’s information, or at least they
possess the same information as the attorney, and therefore the attorney’s
representation of the insiders does not threaten the attorney’s duty of
confidentiality to the Company.
17. On page 16, the first sentence of last paragraph, beginning with
“Although Forrest used the terminology,” delete the words “factual scenario Forrest
presented” following the words “terminology describes the” and replace them with the
26
words “factual scenario in Forrest,” delete the words “for the” between the words
“minimum threshold” and “Forrest rule to apply” and replace them with the words “to
apply the,” and delete the words “to apply” at the end of the sentence so the sentence
reads:
Although Forrest used the terminology “sole repositories of corporate
information to which the attorney has had access” (Forrest, supra,
58 Cal.App.4th at p. 82), that terminology describes the factual scenario in
Forrest, not the minimum threshold to apply the Forrest rule.
18. On page 16, the fourth sentence of the last paragraph, beginning with
“Likewise, it is irrelevant,” delete the word “Likewise” at the beginning of the sentence
and replace it with the word “Similarly” so the sentence reads:
Similarly, it is irrelevant that the insiders may have delegated certain tasks
or responsibilities to others.
These modifications do not change the judgment.
The Association of Southern California Defense Counsel has requested that
we certify our opinion for publication. It appears that our opinion meets the standards set
forth in California Rules of Court, rule 8.1105(c). The request is GRANTED.
ARONSON, J.
WE CONCUR:
O’LEARY, P. J.
FYBEL, J.
27
| {
"pile_set_name": "FreeLaw"
} |
130 F.3d 1041
45 ERC 1833, 327 U.S.App.D.C. 248, 28Envtl. L. Rep. 20,403
NATIONAL ASSOCIATION OF HOME BUILDERS, et al., Appellants,v.Bruce BABBITT, Secretary, United States Department ofInterior and Mollie Beattie, Director, UnitedStates Fish and Wildlife Service, Appellees.
No. 96-5354.
United States Court of Appeals,District of Columbia Circuit.Argued Oct. 3, 1997.Decided Dec. 5, 1997.
Appeal from the United States District Court for the District of Columbia; No. 95cv01973.
Thomas C. Jackson argued the cause for appellants, with whom Patrick J. Hurd, Arthur S. Garrett III, Martha E. Marrapese, Glen F. Koontz and Alec I. Ugol were on the briefs. Alan K. Marks entered an appearance.
David C. Shilton, Attorney, United States Department of Justice, argued the cause for appellees, with whom Lois J. Schiffer, Assistant Attorney General, and J. Carol Williams, Attorney, were on the brief. John A. Bryson, Attorney, entered an appearance.
William R. Irvin, Kathleen Rogers, Josh Eagle and Michael J. Bean were on the brief for amici curiae Center for Marine Conservation, et al.
Robin L. Rivett and Anne M. Hawkins were on the brief for amicus curiae Pacific Legal Foundation.
Daniel J. Popeo and Paul D. Kamenar were on the brief for amicus curiae Washington Legal Foundation.
Paul M. Terrill, III was on the brief for amicus curiae American Land Foundation.
Before: WALD, SENTELLE and HENDERSON, Circuit Judges.
Opinion filed by Circuit Judge WALD.
Dissenting opinion filed by Circuit Judge SENTELLE.
Concurring opinion filed by Circuit Judge KAREN LECRAFT HENDERSON.
WALD, Circuit Judge:
1
The National Association of Home Builders of the United States, the Building Industry Legal Defense Fund, the County of San Bernardino, and the City of Colton, California brought this action in the United States District Court for the District of Columbia to challenge an application of section 9(a)(1) of the Endangered Species Act ("ESA"), 16 U.S.C. § 1538(a)(1), which makes it unlawful for any person to "take"--i.e., "to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or attempt to engage in any such conduct," 16 U.S.C. § 1532(19)--any endangered species. The plaintiffs sought a declaration that the application of section 9 of the ESA to the Delhi Sands Flower-Loving Fly ("the Fly"), which is located only in California, exceeds Congress' Commerce Clause power and an injunction against application of the section to the plaintiff's construction activities in areas containing Fly habitat.
2
This dispute arose when the Fish and Wildlife Service ("FWS") placed the Fly, an insect that is native to the San Bernardino area of California, on the endangered species list. The listing of the Fly, the habitat of which is located entirely within an eight mile radius in southwestern San Bernardino County and northwestern Riverside County, California, forced San Bernardino County to alter plans to construct a new hospital on a recently purchased site that the FWS had determined contained Fly habitat. The FWS and San Bernardino County agreed on a plan that would allow the County to build the hospital and a power plant in the area designated as Fly habitat in return for modification of the construction plans and purchase and set aside of nearby land as Fly habitat. In November 1995, FWS issued a permit to allow construction of the power plant. During the same month, however, the County notified the FWS that it planned to redesign a nearby intersection to improve emergency vehicle access to the hospital. The FWS informed the County that expansion of the intersection as planned would likely lead to a "taking" of the Fly in violation of ESA section 9(a). After brief unsuccessful negotiations between the County and FWS, the County filed suit in district court challenging the application of section 9(a)(1) to the Fly.
3
The district court held that application of section 9(a)(1) of the Endangered Species Act to the Fly is a valid exercise of Congress' power pursuant to the Commerce Clause. Accordingly, the court entered summary judgment on behalf of the government. See National Association of Home Builders v. Babbit, 949 F.Supp. 1, 2 (D.D.C.1996). Because we also find that the application of section 9(a)(1) of the Endangered Species Act to the Fly does not exceed Congress' Commerce Clause power, we affirm the district court's decision to grant the government's motion for summary judgment.1
I. FACTUAL AND PROCEDURAL BACKGROUND
4
The Delhi Sands Flower-Loving Fly, which lives only in the "Delhi series" soils found in southwestern San Bernardino County and northwestern Riverside County, California, is the only remaining subspecies of its species. The other subspecies, the El Segundo Flower-Loving Fly, is believed to be extinct due to destruction of its habitat through urban development. See Brief of Amici Curiae Center for Marine Conservation, Defenders of Wildlife, Environmental Defense Fund, National Audubon Society, and World Wildlife Fund ("Brief of Amici Curiae for Appellees") at 4. The Fly is also one of only a few North American species in the "mydas flies" family and one of only a few species in that family that visit flowers in search of nectar, thereby pollinating native plant species. See id. at 1.
5
Over 97 percent of the historic habitat of the Fly has been eliminated, and, prior to its listing as endangered, its remaining habitat was threatened by urban development, unauthorized trash dumping, and off-road vehicle use. See Endangered and Threatened Wildlife and Plants; Determination of Endangered Status for the Delhi Sands Flower-Loving Fly, 58 Fed.Reg. 49,881, 49,885 (1993) (codified at 50 C.F.R. pt. 17). There are currently 11 known populations of the Fly, all of which occur within an eight mile radius of one another. See Declaration of Christopher D. Nagano (Apr. 30, 1996) at p 14 ("Nagano Declaration"). The size of the entire population of Flies was recently estimated in the low hundreds. See U.S. Fish and Wildlife Service, Technical/Agency Draft Recovery Plan for the Delhi Sands Flower-Loving Fly 12 (1996).
6
In 1990, after receiving two petitions asking that the Fly be placed on the endangered species list, the FWS began an investigation into whether listing of the Fly as endangered was warranted. Soon thereafter, the FWS found that substantial information had been presented to indicate that the Fly was an endangered species. Two years later, the FWS published its final determination that the Fly is "in imminent danger of extinction due to extensive habitat loss and degradation that has reduced its range by 97 percent." 58 Fed.Reg. at 49,881. The listing of the Fly as endangered triggered the automatic statutory prohibitions of section 9(a)(1) of the ESA, 16 U.S.C. § 1538(a)(1). As a result, commercial trade in the species could no longer occur lawfully and no person could "take" individuals of the species without a permit or an exemption.
7
For several years prior to the listing of the Fly as endangered, the County of San Bernardino had been planning to build a $470 million earthquake-proof "state of the art" hospital to serve as the central emergency medical center for the San Bernardino County area in the event of an earthquake and to serve as a primary burn care center and teaching facility. In July 1992, two years after the FWS had published its notice that sufficient information had been presented to justify listing the Fly as endangered but before the Fly was actually so listed, the Board of the new San Bernardino County hospital acquired the final site parcels for the hospital. The 76-acre site that the board acquired contained habitat of the Fly.
8
In November 1992, the FWS notified the County that the Fly was likely to be listed as endangered, and in May 1993--after the Fly was listed--the FWS advised the County that the hospital site was occupied by the Fly and that construction of the facility as then proposed would likely "take" members of the species in violation of the ESA. The County decided to modify the layout and design of the hospital to eliminate direct and indirect impacts to the Fly and to eliminate the need for a section 10 "incidental take permit."2 One of the modifications to the original design for the hospital included in the plan was to move the hospital 250 feet north to "avoid[ ] direct impact to the entire area identified as occupied or suitable Delhi Fly habitat." Habitat Preservation, Habitat Enchangement [sic] and Impact Avoidance Plan for the Delhi Sands Flower-Loving Fly at the San Bernardino County Hospital Replacement Site 8 (Dec. 1, 1993). This resulted in an 8.35 acre Delhi Fly habitat preserve. Id. The plan also created a 100-foot wide corridor to link two Fly habitat areas and permit interbreeding between Fly colonies.
9
In October 1994, the County approached FWS with a proposal to construct a substation to power the hospital on "the best remaining habitat" for the Fly. See Declaration of Jeffery M. Newman 8 (Apr. 29, 1996) ("Newman Declaration"). The County submitted an application for incidental "take" of the Fly, which would permit it to build on about 4 acres of Fly habitat. To offset this reduction in Fly habitat, the County proposed to acquire and manage a nearby 7.5 acre site as Fly habitat. In November 1995, the FWS issued the section 10 permit for the substation and construction began shortly thereafter. See id. at 9.
10
In November 1995, the County informed FWS of its plans to redesign an intersection near the hospital that the County argues is critical to emergency vehicle access to the new hospital. The FWS determined that the plan, which called for a reduction of the 100 foot wide corridor to an 18 foot wide corridor, a reduction of 70 to 80 percent, would "greatly reduce, if not effectively eliminate, the entire corridor area set aside as a critical part of the County's efforts to avoid a take" of the Fly. Newman Declaration at 7. The FWS advised the County that the redesign of the intersection would probably cause a "take" of the Fly in violation of section 9 of the ESA.
11
On October 20, 1995, the National Association of Home Builders of the United States, the Building Industry Legal Defense Fund, the County of San Bernardino, and the City of Colton, California filed a complaint seeking a declaration that the taking prohibition of section 9 of the ESA was unconstitutional as applied to "takes" of the Fly and asking for an injunction barring application of the provision. An amended complaint later added the California Building Industry Association and the City of Fontana as plaintiffs. On December 6, 1996, the district court granted the government's motion for summary judgment. See National Association of Home Builders, 949 F.Supp. 1. This appeal ensued.
II. DISCUSSION
12
Appellants challenge the application of section 9(a)(1) of the ESA, which makes it unlawful for any person to "take any [endangered or threatened] species within the United States or the territorial sea of the United States," 16 U.S.C. § 1538(a)(1), to the Delhi Sands Flower-Loving Fly. See also Babbitt v. Sweet Home Chapter of Communities for a Great Oregon, 515 U.S. 687, 115 S.Ct. 2407, 132 L.Ed.2d 597 (1995) (upholding agency's interpretation of the term "take" to include significant habitat degradation). Appellants argue that the federal government does not have the authority to regulate the use of non-federal lands in order to protect the Fly, which is found only within a single state. Indeed, they claim that "the Constitution of the United States does not grant the federal government the authority to regulate wildlife, nor does it authorize federal regulation of nonfederal lands." Brief for Appellants at 17.
13
The district court held that the application of section 9(a)(1) of the ESA to the Fly is constitutional. It concluded that the federal government's "limited and enumerated" powers include the power to regulate wildlife and non-federal lands that serve as the habitat for endangered species. The court also concluded that the ESA provides for a regulatory scheme that is within the bounds of Congress' power under the Commerce Clause. The district court thus granted the government's motion for summary judgment. We affirm the district court's decision.
14
Appellants' Commerce Clause challenge to the application of section 9(a)(1) of the ESA to the Fly rests on the Supreme Court's decision in United States v. Lopez, 514 U.S. 549, 115 S.Ct. 1624, 131 L.Ed.2d 626 (1995). In Lopez, the Court held that the Gun-Free School Zones Act of 1990, 18 U.S.C. § 922(q), which made possession of a gun within a school zone a federal offense, exceeded Congress' Commerce Clause authority. Drawing on its earlier Commerce Clause jurisprudence, see especially Perez v. United States, 402 U.S. 146, 150, 91 S.Ct. 1357, 1359-60, 28 L.Ed.2d 686 (1971), the Lopez Court explained that Congress could regulate three broad categories of activity: (1) "the use of the channels of interstate commerce," (2) "the instrumentalities of interstate commerce, or persons or things in interstate commerce, even though the threat may come only from intrastate activities," and (3) "those activities having a substantial relation to interstate commerce ... i.e., those activities that substantially affect interstate commerce." Lopez, 514 U.S. at 558-59, 115 S.Ct. at 1629-30 (citations omitted). Possession of a gun within 1000 feet of a school, the Court explained, clearly did not fit the first two categories. In addition, it could not be regulated under the third category as an activity that "substantially affects" interstate commerce because it was not commercial in nature and was not an essential part of a larger regulation of economic activity. Moreover, the Court explained, Congress had made no findings about the effect of gun possession in school zones on interstate commerce. Thus, concluding that Congress had no rational basis for finding that gun possession within school zones had a substantial effect on interstate commerce, the Court declared the statute unconstitutional. See id. at 567-68, 115 S.Ct. at 1633-34.
15
It is clear that, in this instance, section 9(a)(1) of the ESA is not a regulation of the instrumentalities of interstate commerce or of persons or things in interstate commerce. As a result, only the first and the third categories of activity discussed in Lopez will be examined. In evaluating whether ESA section 9(a)(1) is a regulation of the use of the channels of interstate commerce or of activity that substantially affects interstate commerce, we may look not only to the effect of the extinction of the individual endangered species at issue in this case, but also to the aggregate effect of the extinction of all similarly situated endangered species. As the Lopez Court explained, " 'where a general regulatory statute bears a substantial relation to commerce, the de minimis character of individual instances arising under the statute is of no consequence.' " Lopez, 514 U.S. at 558, 115 S.Ct. at 1629 (quoting Maryland v. Wirtz, 392 U.S. 183, 196 n. 27, 88 S.Ct. 2017, 2024 n. 27, 20 L.Ed.2d 1020 (1968), overruled on other grounds, National League of Cities v. Usery, 426 U.S. 833, 96 S.Ct. 2465, 49 L.Ed.2d 245 (1976), overruled by Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528, 105 S.Ct. 1005, 83 L.Ed.2d 1016 (1985) (first emphasis added)). If a statute regulates "a class of activities ... within reach of the federal power," Perez, 402 U.S. at 154, 91 S.Ct. at 1361, the courts have "no power 'to excise, as trivial, individual instances' of the class," id. Because section 9(a)(1) of the ESA regulates a class of activities--takings of endangered species--that is within Congress' Commerce Clause power under both the first and third Lopez categories, application of section 9(a)(1) to the Fly is constitutional.3
A. Channels of Interstate Commerce
16
Application of section 9(a)(1) of the ESA to the Fly can be viewed as a proper exercise of Congress' Commerce Clause power over the first category of activity that the Lopez Court identified: the use of the "channels of interstate commerce." Lopez, 514 U.S. at 558, 115 S.Ct. at 1629. Although this category is commonly used to uphold regulations of interstate transport of persons or goods, it need not be so limited. Indeed, the power of Congress to regulate the channels of interstate commerce provides a justification for section 9(a)(1) of the ESA for two reasons. First, the prohibition against takings of an endangered species is necessary to enable the government to control the transport of the endangered species in interstate commerce. Second, the prohibition on takings of endangered animals falls under Congress' authority " 'to keep the channels of interstate commerce free from immoral and injurious uses.' " Id. (quoting Heart of Atlanta Motel Inc. v. United States, 379 U.S. 241, 256, 85 S.Ct. 348, 356-57, 13 L.Ed.2d 258 (1964)).4
17
The ESA's prohibition on takings of endangered species can be justified as a necessary aid to the prohibitions in the ESA on transporting and selling endangered species in interstate commerce. In this sense, the prohibition against takings of endangered species is analogous to the prohibition against transfer and possession of machine guns (including purely intrastate possession) of 18 U.S.C. § 922(o), which has been upheld by the Fifth, Sixth, Ninth, and Eleventh Circuits as a regulation of the channels of interstate commerce. In United States v. Rambo, 74 F.3d 948, 951 (9th Cir.), cert. denied, --- U.S. ----, 117 S.Ct. 72, 136 L.Ed.2d 32 (1996), for instance, the Ninth Circuit upheld section 922(o) against a Lopez-inspired Commerce Clause challenge. The court held that the statute was a " 'regulation of the use of the channels of interstate commerce' " because "[b]y regulating the market in machineguns, including regulating intrastate machinegun possession, Congress has effectively regulated the interstate trafficking in machineguns." Id. at 952 (quoting Lopez, 514 U.S. at 559, 115 S.Ct. at 1629-30).5 Thus, section 922(o) is properly classified as a first category regulation because " 'federal regulation of intrastate incidents of transfer and possession is essential to effective control of the interstate incidents of such traffic.' " Id. (quoting United States v. Kirk, 70 F.3d 791, 797 (5th Cir.1995)), aff'd, 105 F.3d 997 (5th Cir.1997) (en banc), cert. denied, --- U.S. ----, 118 S.Ct. 47, 139 L.Ed.2d 13 (1997). In other words, it is necessary to regulate possession of machineguns in order to effectively regulate the interstate traffic in machineguns because it is impossible to sell machineguns in interstate commerce without first possessing them. Similarly, the prohibition on "taking" endangered species is properly classified as a first category regulation because one of the most effective ways to prevent traffic in endangered species is to secure the habitat of the species from predatory invasion and destruction. Therefore, like section 922(o), section 9(a)(1) of the ESA can be properly upheld as a regulation of the use of the channels of interstate commerce.6
18
The prohibition on takings of endangered animals also falls under Congress' authority to prevent the channels of interstate commerce from being used for immoral or injurious purposes. This authority was perhaps best described by the Supreme Court in Heart of Atlanta, 379 U.S. 241, 85 S.Ct. 348, which the Lopez Court cited and quoted in its reference to Congress' power to regulate the use of the "channels of interstate commerce." In Heart of Atlanta, the Supreme Court upheld a prohibition on racial discrimination in places of public accommodation serving interstate travelers against a Commerce Clause challenge. The Court explained that " 'the authority of Congress to keep the channels of interstate commerce free from immoral and injurious uses has been frequently sustained, and is no longer open to question.' " Id. at 256, 85 S.Ct. at 357 (citation omitted) (quoted in Lopez, 514 U.S. at 558, 115 S.Ct. at 1629). It does not matter if the activities that are regulated are of a "purely local character," the Court elaborated, " '[i]f it is interstate commerce that feels the pinch, it does not matter how local the operation which applies the squeeze.' " Id. at 258, 85 S.Ct. at 358 (citation omitted). Thus, the power of Congress over interstate commerce "also includes the power to regulate the local incidents thereof, including local activities in both the States of origin and destination, which might have a substantial and harmful effect upon that commerce." Id. This same principle was elaborated in the seminal case of United States v. Darby, 312 U.S. 100, 61 S.Ct. 451, 85 L.Ed. 609 (1941), which was the only other case cited by the Lopez Court in its description of the first category of activity that Congress can regulate under its commerce power. In Darby, the Court upheld federal wage and hour regulations against a Commerce Clause challenge, noting that such regulations were necessary to prevent states with higher regulatory standards from being disadvantaged vis-a-vis states with lower regulatory standards. In upholding the regulation, the Court explained that "Congress, following its own conception of public policy concerning the restrictions which may appropriately be imposed on interstate commerce," is free to exclude from commerce goods that will have injurious effects in the state in which they are produced or to which they are destined. Id. at 114, 61 S.Ct. at 457. This is true even though the activity prohibited by the regulation at issue in Darby--failure to meet minimum wage and maximum hour requirements--might have had little or no direct effect outside the state in which the goods were produced.
19
This same reasoning that the Supreme Court applied in Darby and Heart of Atlanta is applicable to the case at hand. In those cases as well as here, Congress used its authority to rid the channels of interstate commerce of injurious uses to regulate the conditions under which goods are produced for interstate commerce. In Darby, Congress used this authority to prevent labor exploitation of employees producing lumber for interstate commerce. In Heart of Atlanta, Congress used this authority to prevent racial discrimination by a hotel serving an interstate clientele. Similarly, in this case, Congress used this authority to prevent the eradication of an endangered species by a hospital that is presumably being constructed using materials and people from outside the state and which will attract employees, patients, and students from both inside and outside the state. Thus, like regulations preventing racial discrimination or labor exploitation, regulations preventing the taking of endangered species prohibit interstate actors from using the channels of interstate commerce to "promot[e] or spread[ ] evil, whether of a physical, moral or economic nature." North American Co. v. S.E.C., 327 U.S. 686, 705, 66 S.Ct. 785, 796, 90 L.Ed. 945 (1946). Congress is therefore empowered by its authority to regulate the channels of interstate commerce to prevent the taking of endangered species in cases like this where the pressures of interstate commerce place the existence of species in peril.
20
In his dissent, Judge Sentelle claims that this analysis of Darby and Heart of Atlanta is "far off the mark." Dissenting opinion ("Diss. op.") at 1063. It is his analysis, however, that is inconsistent with the reasoning and results in these cases. In Judge Sentelle's view, the only regulations that would qualify as a proper regulation of the channels of interstate commerce are direct regulations of persons or things that move across state lines. This view is simply not consistent with the Court's decisions in Darby and Heart of Atlanta, which I again note are the only two cases the Lopez Court cited to illustrate its first category of authorized regulation. Neither Darby nor Heart of Atlanta involved a direct regulation of persons or things that moved across state lines. The statute challenged in Darby set wage and hour requirements for lumber factory employees, while the statute in Heart of Atlanta prohibited racial discrimination against hotel customers. Judge Sentelle's argument thus proves too much: If only direct regulation of goods that travel in interstate commerce can be upheld as valid under the channels of interstate commerce prong of Lopez, both of these statutes must fail as well, a result patently inconsistent with the Court's express affirmance of them in Lopez. Therefore, contrary to Judge Sentelle's assertion, see Diss. op. at 1063-1064, the argument that access to the channels of interstate commerce may be regulated in order to prevent injurious local practices that in turn have a substantial harmful effect on interstate commerce either by discouraging such commerce or by inciting a race to the bottom is neither novel nor unduly extensive; indeed, it is the core reasoning of Darby and Heart of Atlanta.
21
B. Substantially Affects Interstate Commerce
22
The takings clause in the ESA can also be viewed as a regulation of the third category of activity that Congress may regulate under its commerce power. According to Lopez, the test of whether section 9(a)(1) of the ESA is within this category of activity "requires an analysis of whether the regulated activity 'substantially affects' interstate commerce." 514 U.S. at 559, 115 S.Ct. at 1630. A class of activities can substantially affect interstate commerce regardless of whether the activity at issue--in this case the taking of endangered species--is commercial or noncommercial. As the Lopez Court, quoting Wickard v. Filburn, 317 U.S. 111, 63 S.Ct. 82, 87 L.Ed. 122 (1942), noted:
23
"[E]ven if appellee's activity be local and though it may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce, and this irrespective of whether such effect is what might at some earlier time have been defined as 'direct' or 'indirect.' "
24
Lopez, 514 U.S. at 556, 115 S.Ct. at 1628 (quoting Wickard, 317 U.S. at 125, 63 S.Ct. at 89).7
25
This interpretation of the Lopez decision is consistent with this court's recent decision in Terry v. Reno, 101 F.3d 1412 (D.C.Cir.1996), cert. denied, --- U.S. ----, 117 S.Ct. 2431, 138 L.Ed.2d 193 (1997). In Terry, we upheld the Freedom of Access to Clinic Entrances Act against a Commerce Clause challenge, concluding that the Lopez decision did not restrict Congress' Commerce Clause power to activity that is "commercial." We rejected the argument that Congress could not regulate protest in front of abortion clinics because protest is an intrastate, noncommercial activity, explaining that "Congress has authority to regulate 'activities that substantially affect interstate commerce.' " Id. at 1417 (quoting Lopez, 514 U.S. at 559, 115 S.Ct. at 1629-30 (emphasis added)). We further explained that in order to be subject to Congress' Commerce Clause power, "[t]he regulated activity--in this case, interfering with abortion clinics--need not be commercial, so long as its effect on interstate commerce is substantial." Id.8
26
Other circuits have also held that a statute need not regulate economic activity directly in order to fall under Congress' Commerce Clause power. For instance, the Fifth Circuit upheld the Freedom of Access to Clinic Entrances Act against a challenge alleging that the Act constitutes an unconstitutional exercise of Congress' Commerce Clause power because it proscribes intrastate, noncommercial activity. United States v. Bird, 124 F.3d 667, 669-70 (5th Cir.1997). Acknowledging that the statute regulates intrastate, noncommercial protest activity, the court held that the statute was a proper exercise of Congress' Commerce Clause power because it had a substantial effect on interstate commerce. The court explained, "[a]fter Wickard--and its reaffirmance in Lopez--there can be no question that Congress is able to regulate noncommercial, intrastate activity that substantially affects interstate commerce...." Id. at 676. Similarly, the Eleventh Circuit recently upheld the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") against a Commerce Clause challenge by the operator of a chemical manufacturing facility that was required to pay for the cleanup of entirely localized environmental contamination caused by the facility. See U.S.A. v. Olin Corp., 107 F.3d 1506, 1510 (11th Cir.1997). The court explained that a statute need not "regulate economic activity directly to satisfy the Commerce Clause" because "Lopez reiterates that a statute will pass constitutional muster if it regulates an activity, whatever its nature, 'that arise[s] out of or [is] connected with a commercial transaction, which viewed in the aggregate, substantially affects interstate commerce.' " Id. (quoting Lopez, 514 U.S. at 561, 115 S.Ct. at 1630-31).
27
A recent Supreme Court decision confirms our holding in Terry, 101 F.3d 1412, that activity need not be commercial in character in order to be regulated by Congress under the Commerce Clause. In Camps Newfound/Owatonna, Inc. v. Town of Harrison, Maine, --- U.S. ----, ----, 117 S.Ct. 1590, 1602, 137 L.Ed.2d 852 (1997), which involved a Commerce Clause challenge to an otherwise generally applicable state property tax exemption for charitable institutions that excluded organizations operated principally for the benefit of nonresidents, the Supreme Court held that the Commerce Clause applies to activity regardless of whether it was undertaken with the intention of earning a profit. Citing its earlier opinion in Edwards v. California, 314 U.S. 160, 62 S.Ct. 164, 86 L.Ed. 119 (1941), in which the Court had held that interstate transportation of indigent persons was "commerce" regardless of whether it was "commercial in character," id. at 172 n. 1, 62 S.Ct. at 166 n. 1, the Court explained that it had "already held that the dormant Commerce Clause is applicable to activities undertaken without the intention of earning a profit." --- U.S. at ----, 117 S.Ct. at 1602. This decision confirms that the proper test of whether an activity can be regulated under the Commerce Clause is not whether the activity is itself commercial or economic but rather whether the activity has a substantial effect on interstate commerce.
28
In evaluating the effect of the regulated activity on interstate commerce, I begin, as we did in Terry, 101 F.3d 1412, with the legislative history of the Act under challenge. As we explained in Terry, "we consider 'even congressional committee findings' regarding the effect on interstate commerce of the regulated activity." 101 F.3d at 1415 (quoting Lopez, 514 U.S. at 562, 115 S.Ct. at 1631).
29
The Committee Reports on the ESA reveal that one of the primary reasons that Congress sought to protect endangered species from "takings" was the importance of the continuing availability of a wide variety of species to interstate commerce. As the House Report explained:
30
... As we homogenize the habitats in which these plants and animals evolved, and as we increase the pressure for products that they are in a position to supply (usually unwillingly) we threaten their--and our own--genetic heritage.
31
The value of this genetic heritage is, quite literally, incalculable....
32
...
33
From the most narrow possible point of view, it is in the best interests of mankind to minimize the losses of genetic variations. The reason is simple: they are potential resources. They are keys to puzzles which we cannot solve, and may provide answers to questions which we have not yet learned to ask.
34
...
35
Who knows, or can say, what potential cures for cancer or other scourges, present or future, may lie locked up in the structures of plants which may yet be undiscovered, much less analyzed? More to the point, who is prepared to risk being [sic] those potential cures by eliminating those plants for all time? Sheer self interest impels us to be cautious.
36
H.R.REP. NO. 93-412, at 4-5 (1973). Similarly, the Senate Report on the precursor to the ESA, noted:
37
... From a pragmatic point of view, the protection of an endangered species of wildlife with some commercial value may permit the regeneration of that species to a level where controlled exploitation of that species can be resumed. In such a case businessmen may profit from the trading and marketing of that species for an indefinite number of years, where otherwise it would have been completely eliminated from commercial channels in a very brief span of time. Potentially more important, however, is the fact that with each species we eliminate, we reduce the [genetic] pool ... available for use by man in future years. Since each living species and subspecies has developed in a unique way to adapt itself to the difficulty of living in the world's environment, as a species is lost, its distinctive gene material, which may subsequently prove invaluable to mankind in improving domestic animals or increasing resistance to disease or environmental contaminant, is also irretrievably lost.
38
S.REP. NO. 91-526, at 3 (1969).
39
This legislative history distinguishes the ESA from the statute at issue in Lopez. In Lopez, the Court noted that "as part of our independent evaluation of constitutionality under the Commerce Clause we of course consider legislative findings, and indeed even congressional committee findings regarding effect on interstate commerce." 514 U.S. at 562, 115 S.Ct. at 1631 (citations omitted). The Lopez Court found, however, that there were no "congressional findings [that] would enable [it] to evaluate the legislative judgment that the activity in question substantially affected interstate commerce." Id. at 563, 115 S.Ct. at 1632. In this case, in contrast, the committee reports on the ESA discuss the value of preserving genetic diversity and the potential for future commerce related to that diversity. See also Tennessee Valley Auth. v. Hill, 437 U.S. 153, 178-79, 98 S.Ct. 2279, 2293-94, 57 L.Ed.2d 117 (1978) (recognizing that one of the primary concerns underlying the Endangered Species Act was concern "about the unknown uses that endangered species might have and about the unforeseeable place such creatures may have in the chain of life on this planet").9
40
These congressional findings, while highly informative, are of course not sufficient by themselves to make the statute constitutional. The courts evaluating Commerce Clause challenges to federal statutes must determine that there was a rational basis for Congress' conclusion that a regulated activity substantially affects interstate commerce. As the Eleventh Circuit recently explained, "Lopez did not alter our approach to determining whether a particular statute falls within the scope of Congress's Commerce Clause authority.... When ruling on a Commerce Clause challenge, we must determine, as always, 'whether a rational basis existed for concluding that a regulated activity sufficiently affected interstate commerce.' " United States v. Wright, 117 F.3d 1265, 1269 (11th Cir.1997) (quoting Lopez, 514 U.S. at 557, 115 S.Ct. at 1628-29); see also Hodel v. Virginia Surface Mining & Reclamation Ass'n, Inc., 452 U.S. 264, 276, 101 S.Ct. 2352, 2360, 69 L.Ed.2d 1 (1981) ("The task of a court that is asked to determine whether a particular exercise of congressional power is valid under the Commerce Clause is relatively narrow. The court must defer to a congressional finding that a regulated activity affects interstate commerce, if there is any rational basis for such a finding.") (citations omitted) (quoted in Terry, 101 F.3d at 1416).
41
Congress could rationally conclude that the intrastate activity regulated by section 9 of the ESA substantially affects interstate commerce for two primary reasons. First, the provision prevents the destruction of biodiversity and thereby protects the current and future interstate commerce that relies upon it. Second, the provision controls adverse effects of interstate competition.10
1. Biodiversity
42
Approximately 521 of the 1082 species in the United States currently designated as threatened or endangered are found in only one state. See Brief of Amici Curiae for Appellees at 20-21. The elimination of all or even some of these endangered species would have a staggering effect on biodiversity--defined as the presence of a large number of species of animals and plants--in the United States and, thereby, on the current and future interstate commerce that relies on the availability of a diverse array of species.
43
The variety of plants and animals in this country are, in a sense, a natural resource that commercial actors can use to produce marketable products. In the most narrow view of economic value, endangered plants and animals are valuable as sources of medicine and genes.11 Fifty percent of the most frequently prescribed medicines are derived from wild plant and animal species.12 Such medicines were estimated in 1983 to be worth over $15 billion a year. See id. at 11. In addition, the genetic material of wild species of plants and animals is inbred into domestic crops and animals to improve their commercial value and productivity. As Amici Curiae explained: "Fortifying the genetic diversity of U.S. crops played a large part in the explosive growth in farm production since the 1930s, accounting for at least one-half of the doubling in yields of rice, soybeans, wheat, and sugarcane, and a three-fold increase in corn and potatoes. Genetic diversity provided by wild plants also protects domestic crops from disease and pest damage." Id. at 12. Similar genetic engineering can be used with animals. For instance, it is not beyond the realm of possibility that the genes of a wild pollinator species like the Fly might be inbred with the honeybee, which currently pollinates most major U.S. crops, to produce a pollinator that is more disease resistant.
44
Each time a species becomes extinct, the pool of wild species diminishes. This, in turn, has a substantial effect on interstate commerce by diminishing a natural resource that could otherwise be used for present and future commercial purposes. Unlike most other natural resources, however, the full value of the variety of plant and animal life that currently exists is uncertain. Plants and animals that are lost through extinction undoubtedly have economic uses that are, in some cases, as yet unknown but which could prove vitally important in the future.13 A species whose worth is still unmeasured has what economists call an "option value"--the value of the possibility that a future discovery will make useful a species that is currently thought of as useless. See Bryan Nolan, Commodity, Amenity, and Morality: The Limits of Quantification in Valuing Biodiveristy, in BIODIVERSITY 200, 202 (Edward O. Wilson ed., 1988). To allow even a single species whose value is not currently apparent to become extinct therefore deprives the economy of the option value of that species. Because our current knowledge of each species and its possible uses is limited, it is impossible to calculate the exact impact that the loss of the option value of a single species might have on interstate commerce.14 See Alan Randall, What Mainstream Economists Have to Say about the Value of Biodiversity, in BIODIVERSITY, supra, at 217. In the aggregate, however, we can be certain that the extinction of species and the attendant decline in biodiversity will have a real and predictable effect on interstate commerce.
45
The few federal courts that have considered post-Lopez Commerce Clause challenges to federal wildlife protection have found that the extinction of animals substantially affects interstate commerce.15 In United States v. Bramble, 103 F.3d 1475 (9th Cir.1996), the Ninth Circuit held that the Eagle Protection Act was a valid exercise of Congress' Commerce Clause power because "[e]xtinction of the eagle would substantially affect interstate commerce by foreclosing any possibility of several types of commercial activity." Id. at 1481; see also United States v. Lundquist, 932 F.Supp. 1237, 1245 (D.Or.1996) (holding that "the possession of eagle parts is an activity which affects a broad regulatory scheme relating to commercial transactions and which, when viewed in the aggregate with similar activities nationwide, substantially affects interstate commerce") (citing Lopez, 514 U.S. at 561, 115 S.Ct. at 1630-31). Similarly, in United States v. Romano, 929 F.Supp. 502, 507-09 (D.Mass.1996), the District Court of Massachusetts upheld the Lacey Act, 16 U.S.C. §§ 3371-78, which prohibits any person from importing, exporting, transporting, selling, receiving, acquiring, or purchasing in interstate or foreign commerce any fish or wildlife taken, possessed, transported, or sold in violation of state or foreign law. Citing Congress' findings that the protection of endangered species protects future commercial activity, the court held that the Act was within Congress' Commerce Clause power. See Romano, 929 F.Supp. at 508.16
46
I join these courts in concluding that the extinction of animals substantially affects interstate commerce. More specifically, I find that the scientific evidence that is currently available provides sufficient support for Congress' conclusion that regulation of the "taking" of endangered animals is within its Commerce Clause power because such takings, if permitted, would have a substantial effect on interstate commerce by depriving commercial actors of access to an important natural resource--biodiversity.
2. Destructive Interstate Competition
47
The taking of the Fly and other endangered animals can also be regulated by Congress as an activity that substantially affects interstate commerce because it is the product of destructive interstate competition. It is a principle deeply rooted in Commerce Clause jurisprudence that Congress is empowered to act to prevent destructive interstate competition. As the Supreme Court explained in Hodel v. Virginia Surface Mining & Reclamation Ass'n, 452 U.S. 264, 101 S.Ct. 2352, 69 L.Ed.2d 1 (1981) ("Hodel v. Virginia"), a case that the Lopez Court cited repeatedly, "prevention of ... destructive interstate competition is a traditional role for congressional action under the Commerce Clause." Id. at 282, 101 S.Ct. at 2363.
48
The case at hand bears a substantial similarity to the three cases in which the Supreme Court best articulated the principle that Congress may act to prevent interstate competition that has a destructive effect: Hodel v. Virginia, 452 U.S. 264, 101 S.Ct. 2352, Hodel v. Indiana, 452 U.S. 314, 101 S.Ct. 2376, 69 L.Ed.2d 40 (1981) ("Hodel v. Indiana"), and United States v. Darby, 312 U.S. 100, 61 S.Ct. 451, 85 L.Ed. 609 (1941). In Hodel v. Virginia, the Supreme Court considered a challenge to the constitutionality of the Surface Mining Control and Reclamation Act of 1977. The Surface Mining Act required mine operators to restore the land after mining to its prior condition, including its approximate original contour, topsoil, hydrologic balance, and vegetation in order to "protect society and the environment from the adverse effects of surface coal mining operations." 452 U.S. at 268, 101 S.Ct. at 2356. An association of coal producers in Virginia challenged the Act, which it claimed "regulat[ed] the use of private lands within the borders of the States," as beyond Congress' Commerce Clause power. Id. at 275, 101 S.Ct. at 2359. The Court held that the Act was a valid exercise of Congress' power under the Commerce Clause because "Congress rationally determined that regulation of surface coal mining is necessary to protect interstate commerce from adverse effects that may result from that activity." Id. at 281, 101 S.Ct. at 2363. Moreover, the Court concluded that "the power conferred by the Commerce Clause [is] broad enough to permit congressional regulation of activities causing air or water pollution, or other environmental hazards that may have effects in more than one State." Id. at 282, 101 S.Ct. at 2363.
49
The parallels between Hodel v. Virginia and the case at hand are obvious. The ESA and the Surface Mining Act both regulate activities--destruction of endangered species and destruction of the natural landscape--that are carried out entirely within a State and which are not themselves commercial in character. The activities, however, may be regulated because they have destructive effects, on environmental quality in one case and on the availability of a variety of species in the other, that are likely to affect more than one State.17 In each case, moreover, interstate competition provides incentives to states to adopt lower standards to gain an advantage vis-a-vis other states: In Hodel v. Virginia, 452 U.S. 264, 101 S.Ct. 2352, the states were motivated to adopt lower environmental standards to improve the competitiveness of their coal production facilities, and in this case, the states are motivated to adopt lower standards of endangered species protection in order to attract development.18
50
The Supreme Court adopted similar reasoning in Hodel v. Indiana, 452 U.S. 314, 101 S.Ct. 2376, 69 L.Ed.2d 40, which was decided on the same day as Hodel v. Virginia, and involved a challenge to different provisions of the same Act. Hodel v. Indiana, 452 U.S. 314, 101 S.Ct. 2376, 69 L.Ed.2d 40, involved a constitutional challenge to the "prime farmland" provisions of the Surface Mining Act, which established special requirements for surface coal mining operations conducted on land that qualified as prime farmland and that had historically been used as cropland. The Court held that the provisions did not violate the Commerce Clause. The Act was adopted, the Court explained, "to ensure that production of coal for interstate commerce would not be at the expense of agriculture, the environment, or public health and safety, injury to any of which interests would have deleterious effects on interstate commerce." Id. at 329, 101 S.Ct. at 2385-86. Moreover, the Court noted, the Act reflected a congressional desire to "protect[ ] mine operators in States adhering to high ... standards from disadvantageous competition with operators in States with less rigorous regulatory programs." Id.
51
The parallels between Hodel v. Indiana, 452 U.S. 314, 101 S.Ct. 2376, 69 L.Ed.2d 40, and the case at hand are again striking. In both cases, the statutes under challenge regulated intrastate activity that is not itself commercial and that can be carried out entirely within a State: the destruction of farmland and the destruction of endangered species. Just as the prime farmland provisions of the Surface Mining Act were adopted to protect agriculture, the environment, and health and safety, injury to which would have deleterious effects on interstate commerce, section 9(a)(1) of the ESA was adopted to ensure that "growth and development," H.R. 37 ("Endangered and Threatened Species Conservation Act of 1973") (Findings, Purpose, and Policy), reprinted at 119 CONG. REC . 25,694, 25,694 (1973), would not be at the expense of the conservation and protection of a variety of species, injury to which would have equally deleterious consequences for interstate commerce.19 Thus, in both cases, the activity at issue may be regulated because it is likely to have destructive effects on interstate commerce.
52
Finally, the Supreme Court's decision in United States v. Darby, 312 U.S. 100, 61 S.Ct. 451, 85 L.Ed. 609 (1941), also concluded that activity could be regulated under the Commerce Clause if it involved destructive interstate competition. In Darby, the Court upheld wage and hour regulations for employees engaged in the production of lumber for interstate commerce. Although the statute "undertakes to regulate wages and hours within the state contrary to the policy of the state which has elected to leave them unregulated," 312 U.S. at 114, 61 S.Ct. at 457, the Court held that the statute was within the Commerce Clause power because it was necessary to control destructive interstate competition. The Court explained that "Congress, following its own conception of public policy concerning the restrictions which may be appropriately imposed on interstate commerce, is free to exclude from the commerce articles whose use in the states for which they are destined it may conceive to be injurious to the public health, morals or welfare, even though the state has not sought to regulate their use." Id. (citations omitted). The Court further explained that "interstate commerce should not be made the instrument of competition in the distribution of goods produced under substandard labor conditions, which competition is injurious to the commerce and to the states from and to which the commerce flows." Id. at 115, 61 S.Ct. at 457.
53
Like Darby, 312 U.S. 100, 61 S.Ct. 451, 85 L.Ed. 609, the case at hand involves a regulation of the conditions under which commercial activity takes place. The statute in Darby regulated the wages and hours of workers in Georgia who were engaged in producing lumber for interstate commerce. Similarly, the statute in this case regulates the taking of endangered species in the process of constructing a hospital, power plant, and intersection that will likely serve an interstate population. In both cases, Congress passed the statute in part to prevent states from gaining a competitive advantage by enacting lower regulatory standards than other states. Congress was aware that no state could be expected to require significantly more rigorous labor standards or endangered species protection than other states, because for each individual state, the cost of providing better working conditions or preserving a species outweighs the benefits even though in aggregate, the benefits of better labor standards and biodiversity outweigh the costs.20
54
As the cases discussed above illustrate, the Court has long held that Congress has the power under the Commerce Clause to prevent destructive interstate commerce similar to that at issue in this case. I therefore find that Congress has the power to prevent interstate competition that will result in the destruction of endangered species just as it has the power to prevent interstate competition that will result in harm to the environment, Hodel v. Virginia, 452 U.S. 264, 101 S.Ct. 2352, the destruction of "prime farm land," Hodel v. Indiana, 452 U.S. at 324, 101 S.Ct. at 2383, or the employment of people under substandard labor conditions,Darby, 312 U.S. 100, 61 S.Ct. 451, 85 L.Ed. 609.
III. CONCLUSION
55
We hold that the section 9(a)(1) of the Endangered Species Act is within Congress' Commerce Clause power and that the Fish and Wildlife Service's application of the provision to the Delhi Sands Flower-Loving Fly was therefore constitutional.21 The district court's decision granting the Government's motion for summary judgment is therefore
56
Affirmed.
57
KAREN LECRAFT HENDERSON, Circuit Judge, concurring:
58
I agree with Judge Wald's conclusion that the "taking" prohibition in section 9(a)(1) of the Endangered Species Act (ESA) constitutes a valid exercise of the Congress's authority to regulate interstate commerce under the Commerce Clause.1 I cannot, however, agree entirely with either of her grounds for reaching the result and instead arrive by a different route.
59
Judge Wald first asserts that section 9(a)(1) is a proper regulation of the "channels of commerce." In support she cites decisions upholding regulation of commercially marketable goods, such as machine guns and lumber,2 and public accommodations.3 In each case, the object of regulation was necessarily connected to movement of persons or things interstate and could therefore be characterized as regulation of the channels of commerce. Not so with an endangered species, as the facts here graphically demonstrate. The Delhi Sands Flower-Loving Flies the Department of the Interior seeks to protect are (along with many other species no doubt) entirely intrastate creatures. They do not move among states either on their own or through human agency. As a result, like the Gun-Free School Zones Act in Lopez, the statutory protection of the flies "is not a regulation of the use of the channels of interstate commerce." 514 U.S. at 559, 115 S.Ct. at 1630.
60
Judge Wald also justifies the protection of endangered species on the ground that the loss of biodiversity "substantially affects" interstate commerce because of the resulting loss of potential medical or economic benefit. Yet her opinion acknowledges that it is "impossible to calculate the exact impact" of the economic loss of an endangered species. Wald Op. at 1053. As far as I can tell, it is equally impossible to ascertain that there will be any such impact at all. It may well be that no species endangered now or in the future will have any of the economic value proposed. Given that possibility, I do not see how we can say that the protection of an endangered species has any effect on interstate commerce (much less a substantial one) by virtue of an uncertain potential medical or economic value. Nevertheless, I believe that the loss of biodiversity itself has a substantial effect on our ecosystem4 and likewise on interstate commerce. In addition, I would uphold section 9(a)(1) as applied here because the Department's protection of the flies regulates and substantially affects commercial development activity which is plainly interstate.
61
First, I agree with Judge Wald that biodiversity is important to our understanding of ESA and its relation to interstate commerce. As Judge Wald's opinion notes:
62
Every species is part of an ecosystem, an expert specialist of its kind, tested relentlessly as it spreads its influence through the food web. To remove it is to entrain changes in other species, raising the populations of some, reducing or even extinguishing others, risking a downward spiral of a larger assemblage.
63
Wald Op. at 1052 n. 11 (quoting Edward O. Wilson, The Diversity of Life 308 (1992)). The effect of a species' continued existence on the health of other species within the ecosystem seems to be generally recognized among scientists. See Stephen M. Johnson, United States v. Lopez: A Misstep, but Hardly Epochal for Federal Environmental Regulation, 5 N.Y.U. Envtl. L.J. 33, 79 (1996) ("It is a fundamental principle of ecology that ecosystems are composed of interdependent parts that play vital roles in preserving the ecosystem. As an ecosystem becomes less diverse, it becomes less adaptable to stresses that are placed on it.") (footnotes omitted); Myrl L. Duncan, Property as a Public Conversation, Not a Lockean Soliloquy: A Role for Intellectual and Legal History in Takings Analysis, 26 Envtl. L. 1095, 1129 (1996) ("[S]cientists have rediscovered that the world cannot meaningfully be broken down into isolated parts, that every part is connected to every other part. Perhaps the strongest statements about interconnectedness come from scientists, scholars, and regulators working in the field of conservation biology who are critical of the species-by-species, reaction-to-crisis approach taken by the Endangered Species Act. They understand that species protection issues cannot be separated from those of ecosystem health.") (footnotes omitted). Some studies show, for example, that the mere presence of diverse species within an ecosystem (biodiversity) by itself contributes to the ecosystem's fecundity. See Yvonne Baskin, Ecologists Dare to Ask: How Much Does Diversity Matter? 264 Science 202 (1994). The Congress recognized the interconnection of the various species and the ecosystems when it declared that the "essential purpose" of ESA, which protects endangered species, is in fact "to protect the ecosystem upon which we and other species depend." H.R.Rep. No. 93-412, at 10 (1973); see also 16 U.S.C. § 1531 (finding that endangered species "are of aesthetic, ecological, educational, historical, recreational, and scientific value") (emphasis added); cf. 16 U.S.C. § 1361(5)(B) (congressional finding in support of Marine Mammal Protection Act of 1972 that "marine mammals ... affect the balance of marine ecosystems in a manner which is important to other animals and other animal products which move in interstate commerce, and that the protection and conservation of marine mammals and their habitats is therefore necessary to insure the continuing availability of those products which move in interstate commerce"). Given the interconnectedness of species and ecosystems, it is reasonable to conclude that the extinction of one species affects others and their ecosystems and that the protection of a purely intrastate species (like the Delhi Sands Flower-Loving Fly) will therefore substantially affect land and objects that are involved in interstate commerce. There is, therefore, "a rational basis" for concluding that the "taking" of endangered species "substantially affects" interstate commerce so that section 9(a)(1) is within the Congress's Commerce Clause authority. See Lopez, 514 U.S. at 557-59, 115 S.Ct. at 1629.
64
The interstate effect of a taking is particularly obvious here given the nature of the taking the County proposes. In enacting ESA, the Congress expressed an intent to protect not only endangered species but also the habitats that they, and we, occupy. See H.R.Rep. No. 93-412, at 10 (1973) (identifying ESA's "essential purpose" as "to protect the ecosystem upon which we and other species depend"); S.Rep. No. 93-307 at 4, U.S.Code Cong. & Admin. News at 2989, 2992 ("Often, protection of habitat is the only means of protecting endangered animals which occur on nonpublic lands."); Babbitt v. Sweet Home Chapter of Communities for a Great Oregon, 515 U.S. 687, 703-09, 115 S.Ct. 2407, 2416-18, 132 L.Ed.2d 597 (1995) (statutory definition of "take" as "harm" encompasses habitat modification). At the same time, the Congress expressly found that "economic growth and development untempered by adequate concern and conservation" was the cause for "various species of fish, wildlife, and plants in the United States hav[ing] been rendered extinct." 16 U.S.C. § 1531(a)(1). It is plain, then, that at the time it passed ESA the Congress contemplated protecting endangered species through regulation of land and its development, which is precisely what the Department has attempted to do here. Such regulation, apart from the characteristics or range of the specific endangered species involved, has a plain and substantial effect on interstate commerce. In this case the regulation relates to both the proposed redesigned traffic intersection and the hospital it is intended to serve, each of which has an obvious connection with interstate commerce. See Terry v. Reno, 101 F.3d 1412, 1416-17 (D.C.Cir.1996) (concluding abortion clinic activities substantially affect interstate commerce); Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 271, 85 S.Ct. 348, 364-65, 13 L.Ed.2d 258 (1964) (concluding that "facilities and instrumentalities used to carry on [interstate] commerce, such as railroads, truck lines, ships, rivers, and even highways are also subject to congressional regulation, so far as is necessary to keep interstate traffic upon fair and equal terms") (emphasis added).5 Insofar as application of section 9(a)(1) of ESA here acts to regulate commercial development of the land inhabited by the endangered species, "it may ... be reached by Congress" because "it asserts a substantial economic effect on interstate commerce." Wickard v. Filburn, 317 U.S. 111, 125, 63 S.Ct. 82, 89, 87 L.Ed. 122 (1942), quoted in United States v. Lopez, 514 U.S. 549, 556, 115 S.Ct. 1624, 1628, 131 L.Ed.2d 626 (1995).6
65
For the preceding reasons I believe that the Department of the Interior's regulation of the County's proposed "taking" of the endangered Delhi Sands Flower-Loving Fly, pursuant to section 9(a)(1) of ESA, is a lawful exercise of governmental authority under the Commerce Clause.7
SENTELLE, Circuit Judge, dissenting:
66
This case concerns the efforts of San Bernardino County, California ("the County"), to construct a hospital and supporting infrastructure for its citizens and other humans. Unfortunately, those efforts discomfit an insect--the Delhi Sands Flower-Loving Fly. According to the parties in this case, there are fewer than 300 breeding individuals of this species, all located within forty square miles in southern California. These flies live as larvae for nearly two years under Delhi Sands, a particular type of grit, apparently found only in those forty square miles of southern California, after which they emerge to feed and breed for two weeks before dying.
67
In 1982, the County began considering construction of a $470 million "state-of-the-art," "earthquake-proof" hospital complex. The day before ground breaking was scheduled to occur in 1993, the U.S. Fish and Wildlife Service ("Service") of the Department of the Interior ("Interior") added the fly to the endangered species list and notified the County that construction of the hospital, on County land using County funds, would harm a colony of six to eight flies and would therefore violate federal law. To prevent being prosecuted by the Service, County officials were forced to move the hospital complex 250 feet northward and to set aside 8 acres of land for the fly, delaying construction for a year and costing County taxpayers around $3.5 million. The Service also imposed a variety of other stringent requirements, including preservation of a flight corridor for the insect which today prevents improvements to a traffic intersection necessary to allow emergency access and avoid "virtual gridlock" when the hospital opens. At one point, the Service threatened to require shutting down the eight-lane San Bernardino Freeway (U.S. 10, one of the most heavily traveled in southern California) for two months every year (I am not making this up). It did later drop this demand. The Service has also impeded several localities from complying with County-mandated weed-control programs which are an integral part of preventing brush fires in the area. Construction planning and projects, including an electrical substation and housing developments, have also been threatened, impeded, or prohibited because of the fly. Local land-use planning, including the authority to balance environmental concerns with development in a way to best serve citizens' interests, has been disrupted; the financial health of the local governments has been impacted; a local enterprise zone has been threatened; and private land development has been impeded.
STATUTORY JUSTIFICATION
68
What business, one might ask, does the federal government have disrupting these activities of the unit of local government, which range from the purely local to the generally local in nature? The government's answer begins with a statutory justification. It acts under the authority conferred upon it by the Endangered Species Act ("ESA"), specifically, section 9(a)(1) of that Act, which makes it unlawful, inter alia, to "(B) take any such species within the United States or the territorial seas of the United States." 16 U.S.C. § 1538(a)(1)(B). Next, one might ask, what does that statute have to do with the regulation of the County's activities in building a hospital and the supporting infrastructure? It is not apparent that the hospital plans to "take" any insects, or any other species. It proposes to construct structures for human use, and the humans using those structures propose to drive automobiles, each of which might disturb the fly, but would not entail anything that most users of the English language would recognize as "taking" the fly. Unfortunately for the County and its citizens, however, the Secretary of the Interior has determined that the word "take" includes within its definition "harm" and, therefore, activities which alter the habitat of an endangered species are covered by the statute prohibiting the taking of that species since the habitat modification might harm it. Even more unfortunately for the County and the citizens, the Supreme Court has agreed with that expansive definition of "take." Babbitt v. Sweet Home Chapter of Communities for a Great Oregon, 515 U.S. 687, 115 S.Ct. 2407, 132 L.Ed.2d 597 (1995). Therefore, we may take it as a given that the statute forbidding the taking of endangered species can be used, provided it passes constitutional muster, to prevent counties and their citizens from building hospitals or from driving to those hospitals by routes in which the bugs smashed upon their windshields might turn out to include the Delhi Sands Flower-Loving Fly or some other species of rare insect. That leaves the question for today as: by what constitutional justification does the federal government purport to regulate local activities that might disturb a local fly?
THE CONSTITUTIONAL JUSTIFICATIONS
69
The Department of Interior asserts that section 9(a)(1)(B) of the ESA, and specifically its use of that section to prohibit activities in southern California which might disturb a fly existing only in southern California, are constitutional under the Commerce Clause. U.S. CONST. Art. I, § 8, cl. 3. That clause empowers Congress to "regulate commerce with foreign nations, and among the several states, and with the Indian tribes." This brings the next question: Can Congress under the Interstate Commerce Clause regulate the killing of flies, which is not commerce, in southern California, which is not interstate? Because I think the answer is "no," I can not join my colleagues' decision to affirm the district court's conclusion that it can.
ANALYSIS
70
The proposition that the federal government can, under the Interstate Commerce Clause, regulate an activity which is neither interstate nor commerce, reminds me of the old chestnut: If we had some ham, we could fix some ham and eggs, if we had some eggs. With neither ham nor eggs, the chances of fixing a recognizable meal requiring both amount to nil. Similarly, the chances of validly regulating something which is neither commerce nor interstate under the heading of the interstate commerce power must likewise be an empty recitation. I recognize that for some decades of jurisprudential development, the Commerce Clause has been used as the justification for the regulation of a plethora of activities not apparently within its text. See, e.g., Wickard v. Filburn, 317 U.S. 111, 63 S.Ct. 82, 87 L.Ed. 122 (1942) (regulating the consumption of home-grown wheat). So wide-ranging has been the application of the Clause as to prompt one writer to "wonder why anyone would make the mistake of calling it the Commerce Clause instead of the 'hey-you-can-do-whatever-you-feel-like clause.' " Judge Alex Kozinski, Introduction to Volume 19, 19 HARV. J. L. PUB. POL. 1, 5 (1995). However, in 1995, the Supreme Court brought an end to the galactic growth of the Clause's application and reminded Congress that the words of that Clause, like the rest of the Constitution, have content, in United States v. Lopez, 514 U.S. 549, 115 S.Ct. 1624, 131 L.Ed.2d 626 (1995). While I would have found the present application of the ESA to be outside the enumerated powers of Congress under the Commerce Clause even in the world before Lopez, after that controlling decision, I think there can be no doubt.
71
In Lopez, the Supreme Court considered the constitutionality of the Gun-Free School Zones Act of 1990, in which Congress made it a federal offense "for any individual knowingly to possess a firearm at a place that the individual knows, or has reasonable cause to believe, is a school zone." 18 U.S.C. § 922(q)(1)(A) (Supp. V 1988). The Court concluded that because "[t]he Act neither regulates a commercial activity nor contains a requirement that the possession be connected in any way to interstate commerce," the statute "exceeds the authority of Congress" to regulate commerce under the Interstate Commerce Clause. 514 U.S. at 551, 115 S.Ct. at 1626. For the same reasons, I would hold that the challenged subsection of the ESA likewise exceeds that authority.
72
First, ESA section 9(a)(1)(B), like the statute challenged in Lopez, does not regulate commerce. In Lopez, the Supreme Court repaired to first principles. It reminded us that the Commerce Clause, unsurprisingly, regulates "commerce," and that "commerce ... is traffic ... it is intercourse ... commercial intercourse between nations, and parts of nations," as relevant here, between states. Id. at 553, 115 S.Ct. at 1627 (quoting Gibbons v. Ogden, 9 Wheat. (22 U.S.) 1, 189-190, 6 L.Ed. 23 (1824)). The Lopez Court then went on to analyze the developments of Commerce Clause jurisprudence through the next 171 years after Gibbons v. Ogden. Specifically, the Court noted such significant developments as the enactment of the Interstate Commerce Act, 24 Stat. 379 (1887), and the Sherman Antitrust Act, 26 Stat. 209 (1890), as amended, 15 U.S.C. § 1 et seq., and the era of federal regulation which they ushered into our jurisprudence. Coupling this with the development of the negative Commerce Clause, see authorities collected in Lopez, 514 U.S. at 554, 115 S.Ct. at 1627, the Lopez Court traced Commerce Clause jurisprudence to NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 57 S.Ct. 615, 81 L.Ed. 893 (1937), and the growing extension of congressional authority to the regulation of essentially intrastate activities that " 'have such a close and substantial relation to interstate commerce that their control is essential or appropriate to protect that commerce from burdens and obstructions' [which] are within Congress' power to regulate." Lopez, 514 U.S. at 555, 115 S.Ct. at 1628 (quoting Jones & Laughlin Steel, 301 U.S. at 37, 57 S.Ct. at 624). Following that through Wickard v. Filburn, supra, the Lopez Court finally analyzed the present state of our commerce jurisprudence.
73
The Court identified "three broad categories of activity that Congress may regulate under its commerce power." Id. at 558-59, 115 S.Ct. at 1629. Under the Lopez analysis, these three categories are: (1) "Congress may regulate the use of the channels of interstate commerce"; (2) "Congress is empowered to regulate and protect the instrumentalities of interstate commerce, or persons or things in interstate commerce, even though the threat may come only from intrastate activities"; (3) "Congress' commerce authority includes the power to regulate those activities having a substantial relation to interstate commerce." Id. (citations omitted). My colleagues and I agree that Lopez recognizes the limitation of the power of Congress to act under the Commerce Clause to these three categories. Opinion of Judge Wald ("Wald Op.") at 1045; Opinion of Judge Henderson ("Henderson Op.") at 1057. They further agree with each other that the federal government's actions in this case come within its Commerce Clause authority as defined in Lopez. They cannot, however, agree as to how it fits within the Lopez analysis.
74
I find this inability to agree unsurprising, as this effort to regulate does not fit any of those categories. First, category (2) of constitutional commerce regulation is definitely unavailable. Judge Wald expressly agrees that "section 9(a)(1) of the ESA is not a regulation of the instrumentalities of interstate commerce or of persons or things in interstate commerce." Wald Op. at 1045. Apparently Judge Henderson agrees sub silentia, as she never asserts the second category of Lopez analysis as a foundation for upholding this application of the Act. That said, we are left with potential justification of the Act only as regulation of the use of channels of interstate commerce or as an exercise of Congress' power to regulate those activities having a substantial relationship to interstate commerce. My colleagues accept differing arguments as to why one or both of those rationales underpins the exercise of federal authority over purely local actions disturbing a purely local fly.
75
Judge Wald first asserts that the action taken by the Service under section 9(a)(1)(B) is a constitutional regulation of "the use of the 'channels of interstate commerce.' " Wald Op. at 1046 (quoting Lopez, 514 U.S. at 558, 115 S.Ct. at 1629). The short disposition of this argument is to say it does not command a majority even without me. Judge Henderson rejects it out of hand, noting, correctly, that all authority offered by Judge Wald in support of the channels-of-commerce rationale upheld regulation "necessarily connected to movement of persons or things interstate...." Henderson Op. at 1057 (citing United States v. Rambo, 74 F.3d 948 (9th Cir.1995); United States v. Darby, 312 U.S. 100, 61 S.Ct. 451, 85 L.Ed. 609 (1941); and Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 85 S.Ct. 348, 13 L.Ed.2d 258 (1964)). As Judge Henderson goes on to note, neither the whole of the endangered species, nor any of the individuals comprising it, travel interstate. The Delhi Sands Flower-Loving Fly is an inveterate stay-at-home, a purely intrastate creature. The Gun-Free School Zones Act, stricken as unconstitutional by the Supreme Court inLopez, involved purely local possession of firearms, objects which do move in interstate commerce, presumably through its channels. The Supreme Court without difficulty determined that that section was "not a regulation of the use of the channels of interstate commerce." Neither is this. It does not purport to be.1
76
Not only do I join Judge Henderson in rejecting any claim that section 9(a)(1)(B) is constitutional as a proper regulation of the channels of commerce, but I would go further than she and note that Judge Wald's supporting analysis of Darby and Heart of Atlanta is far off the mark.
77
As Judge Wald notes, both Darby and Heart of Atlanta concerned congressional efforts to "rid the channels of interstate commerce of injurious uses." Wald Op. at 1048. But, for reasons I have already described, supra n. 1, preventing habitat destruction contributes nothing to the goal of eliminating the fly, or any other endangered species, from the channels of commerce. The fact that activities like the construction of a hospital might involve articles that have traveled across state lines cannot justify federal regulation of the incidental local effects of every local activity in which those articles are employed. Judge Wald seems to be trying to extend Congress' power over the channels of commerce to allow direct federal regulation of any local effects caused by any activity using those channels of commerce. She focuses not on the fly in the channels of commerce, but everything else moving in the channels of commerce that may affect the fly. But this improperly inverts the third prong of Lopez and extends it without limit. Under Judge Wald's theory, instead of being limited to activities that substantially affect commerce, Congress may also regulate anything that is affected by commerce.
78
While Judge Henderson agrees with me that category (1) of Lopez regulation does not support the Department's position, she agrees with Judge Wald that the statutory protection of the flies can be justified under category (3): that is, that it is the regulation of "activities that substantially affect interstate commerce." Lopez, 514 U.S. at 558-59, 115 S.Ct. at 1629-30. Once again, however, my colleagues cannot agree as to a rationale. Before responding to their differing opinions on why the regulation of intrastate fly killing falls within Congress' "power to regulate those activities having a substantial relation to interstate commerce," I pause to further elaborate the Supreme Court's analysis of that category of legitimate regulatory power from Lopez. Because category (3) was the only category which even arguably could have permitted Congress to regulate the purely intrastate possession of firearms considered in Lopez, the Supreme Court afforded it a more thorough analysis than the other two categories and, in so doing, established three areas of inquiry necessitated by a claim of interstate commerce authority under the "substantial effects" category. Thus, in considering whether or not to uphold regulation under that rationale, we must examine whether:
79
-- the regulation controls a commercial activity, or an activity necessary to the regulation of some commercial activity;
80
-- the statute includes a jurisdictional nexus requirement to ensure that each regulated instance of the activity affects interstate commerce; and
81
-- the rationale offered to support the constitutionality of the statute (i.e., statutory findings, legislative history, arguments of counsel, or a reviewing court's own attribution of purposes to the statute being challenged) has a logical stopping point so that the rationale is not so broad as to regulate on a similar basis all human endeavors, especially those traditionally regulated by the states.2
82
None of the rationales offered by my colleagues pass this examination. Judge Wald offers two possible explanations as to why the challenged regulatory activity falls within category (3). First, she puts forth the "biodiversity" rationale. Under this rationale, she argues that the extinction of a species, and the concomitant diminution of the pool of wild species, "has a substantial effect on interstate commerce by diminishing a natural resource that could otherwise be used for present and future commercial purposes." Wald Op. at 1053. As I understand her argument, because of some undetermined and indeed undeterminable possibility that the fly might produce something at some undefined and undetermined future time which might have some undefined and undeterminable medical value, which in turn might affect interstate commerce at that imagined future point, Congress can today regulate anything which might advance the pace at which the endangered species becomes extinct. Judge Henderson rejects this rationale, noting cogently that our colleague admits "that it is 'impossible to calculate the exact impact' of the economic loss of an endangered species," Henderson Op. at 1058 (quoting Wald Op. at 1053). Judge Henderson further notes that "it is equally impossible to ascertain that there will be any such impact at all." Id. She then reasons, and I agree, that we cannot then "say that the protection of an endangered species has any effect on interstate commerce (much less a substantial one) by virtue of an uncertain potential medical or economic value." Id. I would further note that Judge Wald's first rationale fails under each of the subsidiary inquiries of category (3) discussed above.
83
First, the regulation does not control a commercial activity, or an activity necessary to the regulation of some commercial activity. Neither killing flies nor controlling weeds nor digging holes is either inherently or fundamentally commercial in any sense. Like the criminal statute struck down in Lopez, the challenged section of the ESA "by its terms has nothing to do with 'commerce' or any sort of economic enterprise, however broadly one might define those terms." Lopez, 514 U.S. at 561, 115 S.Ct. at 1630-31. In applying that test in Lopez, the Supreme Court noted that "[s]ection 922(q) is a criminal statute" and that "under our federal system, the States possess primary authority for defining and enforcing the criminal law." Id. at 561 & n. 3, 115 S.Ct. at 1631 & n. 3 (citations and internal quotations omitted). The activity regulated in the present case involves local land use, a similar traditional stronghold of state authority.
84
As to the second subsidiary inquiry, the Supreme Court noted in Lopez that the statute before it contained "no jurisdictional element which would ensure, through case-by-case inquiry, that the firearms possession in question affects interstate commerce." Id. at 561, 115 S.Ct. at 1631. Just so with the ESA. Nothing in section 9(a)(1)(B) of the Act or any other governing section requires that the regulated activity affect interstate commerce or provides any jurisdictional nexus supporting such a test. Like the statute in Lopez, it falls outside the authority granted by the Commerce Clause.3
85
Third, the rationale offered by Judge Wald to support this intrastate application of a statute unlimited by either of the other two subsidiary inquiries has no logical stopping point. As Judge Henderson suggests, the rationale dependent upon the purely speculative future impact of an action with no demonstrable impact at all cannot be said to "ha[ve] any effect on interstate commerce (much less a substantial one)...." Henderson Op. at 1058. If it could, then I do not see how Congress could be prohibited from regulating any action that might conceivably affect the number or continued existence of any item whatsoever. A creative and imaginative court can certainly speculate on the possibility that any object cited in any locality no matter how intrastate or isolated might some day have a medical, scientific, or economic value which could then propel it into interstate commerce. There is no stopping point. If we uphold this statute under Judge Wald's first rationale, we have indeed not only ignored Lopez but made the Commerce Clause into what Judge Kozinski suggested: the "hey-you-can-do-whatever-you-feel-like clause." Kozinski, supra.
86
Though Judge Henderson rejects Judge Wald's "biodiversity" rationale, she relies on a related justification of her own, which is to me indistinguishable in any meaningful way from that of Judge Wald. As I understand her rationale, it depends on "the interconnectedness of species and ecosystems," which she deems sufficient for us "to conclude that the extinction of one species affects others and their ecosystems and that the protection of a purely intrastate species [concededly including the Delhi Sands Flower-Loving Fly] will therefore substantially affect land and objects that are involved in interstate commerce." Henderson Op. at 1059. I see this as no less of a stretch than Judge Wald's rationale. First, the Commerce Clause empowers Congress "to regulate commerce" not "ecosystems." The Framers of the Constitution extended that power to Congress, concededly without knowing the word "ecosystems," but certainly knowing as much about the dependence of humans on other species and each of them on the land as any ecologist today. An ecosystem is an ecosystem, and commerce is commerce.
87
Granted, years of jurisprudence have extended that regulatory authority to encompass "activities having a substantial effect on interstate commerce," the third category of Lopez legitimacy, but Judge Henderson's rationale fails the analysis of this third category as completely as does Judge Wald's. I will not rehash the first two subsidiary requirements, because the failure is for precisely the same reasons set forth above. As to the third subsidiary test, it fails for substantially the same reasons as Judge Wald's--it has no stopping point. There is no showing, but only the rankest of speculation, that a reduction or even complete destruction of the viability of the Delhi Sands Flower-Loving Fly will in fact "affect land and objects that are involved in interstate commerce," Henderson Op. at 1059, let alone do so substantially.4 Nothing in the statute certainly necessitates such a nexus, nor has my colleague supplied a reason why this basis of regulation would apply to the preservation of a species any more than any other act potentially affecting the continued and stable existence of any other item of a purely intrastate nature upon which one might rest a speculation that its loss or change could somehow affect some other object, land, or otherwise, that might be involved in interstate commerce.
88
In addition to their biodiversity/ecosystem justifications, each of my colleagues offers a second rationale for justifying Interior's actions under the third category of Lopez regulation. Judge Wald asserts that "[t]he taking of the Fly and other endangered animals can also be regulated by Congress as an activity that substantially affects interstate commerce because it is the product of destructive interstate competition." Wald Op. at 1054. I am not at all certain what that means in relation to the application of the ESA to the building of a hospital and supporting infrastructure in a single intrastate location. She relies on Hodel v. Virginia, 452 U.S. 264, 101 S.Ct. 2352, 69 L.Ed.2d 1 (1981), Hodel v. Indiana, 452 U.S. 314, 101 S.Ct. 2376, 69 L.Ed.2d 40 (1981), and United States v. Darby, 312 U.S. 100, 61 S.Ct. 451, 85 L.Ed. 609 (1940). Although she asserts "striking parallels" between those cases and the present one, I see no parallel at all. In each of those cases, Congress regulated arguably intrastate commercial activities, specifically mining and lumber production for interstate commerce. In each of those cases, the Supreme Court upheld the relevant statutes, noting that the regulated actors would either destroy other commercial activities or be able to unfairly compete with interstate competitors subject to higher regulatory standards protective of other elements of commerce. In the present case neither Congress nor the litigants, nor for that matter Judge Wald, has pointed to any commercial activity being regulated, any commercial competition being unfairly challenged, or any other sort of commerce being destroyed by the taking of the fly. With reference to her other rationale, I saw no stopping point; here, I am not even sure what the beginning point is, let alone the terminus. I do not think a decision upholding the challenged section of the ESA on this rationale can exist in the same jurisprudence as Lopez.
89
Finally, Judge Henderson would justify the challenged section on the basis that "in enacting the ESA, the Congress expressed an intent to protect not only endangered species, but also the habitats that they, and we, occupy." Henderson Op. at 1059. I see no legally significant distinction between this justification and her "ecosystems" justification. The Commerce Clause empowers Congress to regulate "commerce," not habitat. People and animals lived in habitats at the time of the adoption of the Constitution, and we live in habitats now. Because the power to regulate habitats was "not delegated to the United States by the Constitution, nor prohibited by it to the states," that power is "reserved to the states respectively, or to the people." U.S. CONST. Amend. X. For the reasons outlined with reference to the ecosystem justification, the habitat justification fails as well.
90
Judge Henderson would support her view that Commerce Clause authority extends to the regulation of "land inhabited by the endangered species," with the language of Wickard v. Filburn, 317 U.S. 111, 125, 63 S.Ct. 82, 89, 87 L.Ed. 122 (1942), that a subject matter "may ... be reached by Congress" because "it asserts a substantial economic effect on interstate commerce." I do not see the applicability of the Wickard language to our present controversy. The statute in Wickard involved the regulation of the interstate wheat market. The issue in Wickard involved the production and consumption of homegrown wheat. Where Congress has acted to regulate interstate commerce in a commodity, the intrastate production and consumption of that commodity in fact has an obvious effect on the impact of the regulatory scheme. While the effect of one farmer's production and consumption may not by itself be substantial, "his contribution, taken together with that of many other similarly situated, is far from trivial." Wickard 317 U.S. at 127-28, 63 S.Ct. at 90, quoted in Lopez 514 U.S. at 556, 115 S.Ct. at 1628. In discussing Wickard, the Lopez Court rejected the notion that the Wickard precedent establishes that "all activities affecting commerce, even in the minutest degree, may be regulated and controlled by Congress." Lopez 514 U.S. at 558, 115 S.Ct. at 1629 (citation and internal punctuation omitted). It went on to note that the Court in Maryland v. Wirtz, 392 U.S. 183, 88 S.Ct. 2017, 20 L.Ed.2d 1020 (1968), had rejected that expansive reading of Wickard and held that "neither here nor in Wickard has the Court declared that Congress may use a relatively trivial impact on commerce as an excuse for broad general regulation of state or private activities." Id. at 196 n. 27, 88 S.Ct. at 2024 n. 27, quoted in Lopez 514 U.S. at 558, 115 S.Ct. at 1629. Here, there is no general regulatory scheme of interstate commerce in a commodity such that the cumulative effect of purely local state and private activities could substantially affect it. There is no commerce in the Delhi Sands Flower-Loving Fly.
91
An alternate reading of Judge Henderson's second justification with its stress on the effect of the regulation upon the highway and hospital is that she concludes that Congress may regulate purely intrastate activities--e.g., the habitat modification of the fly--where the regulation will then affect items which are arguably in interstate commerce. Again, I do not see the stopping point. Congress is not empowered either by the words of the Commerce Clause or by its interpretation in Lopez to regulate any non-commercial activity where the regulation will substantially affect interstate commerce. The most expansive view of Lopez is that Congress can regulate "those activities having a substantial relation to interstate commerce." Nowhere is it suggested that Congress can regulate activities not having a substantial effect on commerce because the regulation itself can be crafted in such a fashion as to have such an effect.
92
In the end, attempts to regulate the killing of a fly under the Commerce Clause fail because there is certainly no interstate commerce in the Delhi Sands Flower-Loving Fly. The whole effort to employ a clause that empowers Congress to regulate commerce in order to serve a perhaps worthy but wholly non-commercial goal of preserving an endangered fly calls to mind the thoughts of the first great commentator on the Constitution, Justice Joseph Story. Story considered the then-current question of whether the constitutional authority to regulate commerce could be applied to the perhaps worthy "purpose of encouraging and protecting domestic manufactures." He declared,
93
If this were admitted, the enumeration of the powers of congress would be wholly unnecessary and nugatory. Agriculture, colonies, capital, machinery, the wages of labour, the profits of stock, the rents of land, the punctual performance of contracts, and the diffusion of knowledge would all be within the scope of the power; for all of them bear an intimate relation to commerce. The result would be, that the powers of congress would embrace the widest extent of legislative functions, to the utter demolition of all constitutional boundaries between the state and national governments.... The power to regulate manufactures is no more confided to congress, than the power to interfere with the systems of education, the poor laws, or the road laws of the states.
94
Joseph Story, 2 Commentaries on the Constitution § 1075 (1833).
CONCLUSION
95
I dissent from the decision of this court to uphold that regulation.
1
Summary judgment is appropriate when all of the submissions "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." FED.R.CIV.P. 56
2
Under section 10 of the ESA, the Secretary of the FWS may permit a taking of an endangered species otherwise prohibited by section 9(a)(1) if the taking is incidental to carrying out an otherwise lawful activity. No permit may be issued until after the applicant submits a conservation plan, the Secretary offers opportunity for public comment on the plan, and the Secretary finds, among other things, that the taking will be incidental, the impacts of the taking will be minimized to the extent practicable, adequate funding for the plan is available, and the taking will not appreciably reduce the likelihood of the survival and recovery of the species. See 16 U.S.C. § 1539(a)
3
Judge Henderson's concurring opinion expresses the view that the first Lopez category does not apply; as to the third Lopez category, however, I find our reasoning to be substantially similar. We agree that "the loss of biodiversity itself has a substantial effect on our ecosystem and likewise on interstate commerce," Concurring opinion ("Conc. op.") at 1058 (footnote omitted); cf. infra subsection II.B.1, and that "at the time it passed ESA the Congress contemplated protecting endangered species through regulation of land and its development, which is precisely what the Department has attempted to do here. Such regulation, apart from the characteristics or range of the specific endangered species involved, has a plain and substantial effect on interstate commerce," Conc. op. at 1059; cf. infra subsection II.B.2
4
Judge Sentelle unsuccessfully attempts to draw a parallel between the statute at issue in Lopez, which the Supreme Court determined was not a regulation of the use of the channels of interstate commerce, and the statute at issue in this case. In fact, the two statutes are different in material respects. First, § 922(q)'s prohibition against possession of a firearm in a school zone clearly was not necessary to enable the government to control the transportation of firearms in interstate commerce. Yet, as noted above and discussed in greater depth below, the ESA's prohibition against taking endangered species is necessary to enable the government to control the transport of endangered species in interstate commerce. Thus, in this respect, ESA section 9(a)(1) is much more similar to the prohibition against transfer and possession of machine guns of 18 U.S.C. § 922(o), which has been repeatedly found constitutional, than it is to § 922(q). See infra text accompanying notes 5 & 6. Second, § 922(q)'s prohibition against possession of a firearm in a school zone clearly did not fall under Congress' authority " 'to keep the channels of interstate commerce free from immoral and injurious uses,' " Heart of Atlanta, 379 U.S. at 256, 85 S.Ct. at 357, because it regulated possession of firearms within only a very limited area. However, as is again discussed in greater depth below, the ESA's prohibition on taking endangered animals clearly does fall under Congress' authority to keep the channels of interstate commerce free from immoral and injurious uses in cases where the pressures of interstate commerce place the existence of species in peril
5
The other circuits that held that section 922(o) is a proper exercise of Congress' power to regulate the "channels of interstate commerce" employed similar reasoning. See United States v. Wright, 117 F.3d 1265, 1270 (11th Cir.1997) (upholding section 922(o) on the ground that Congress had a rational basis to determine that a total ban on possession of machineguns would have a substantial effect on interstate commerce because "the connection between the elimination of the lawful demand for machineguns and the manufacture, importation, and interstate transfer of these products is obvious and direct"); United States v. Beuckelaere, 91 F.3d 781, 784 (6th Cir.1996) (upholding 19 U.S.C. § 922(o) as a first category regulation because " § 922(o) regulates the 'extensive, intricate, and definitely national market for machineguns' by prohibiting the transfer and possession of machineguns acquired after May 19, 1986") (citations omitted); United States v. Kirk, 70 F.3d 791, 796-97 (5th Cir.1995), aff'd, 105 F.3d 997 (5th Cir.1997) (en banc), cert. denied, --- U.S. ----, 118 S.Ct. 47, 139 L.Ed.2d 13 (1997) (holding that "section 922(o) is a regulation which attempts 'to prohibit the interstate transportation of a commodity through the channels of commerce," because the ban on possession of machineguns controls "the interstate market for machineguns by creating criminal liability for those who would constitute the demand side of the market") (citations omitted). The en banc court in United States v. Kirk, 105 F.3d 997, was equally divided, with eight judges voting to affirm and eight judges voting to reverse the district court judgment. In addition, there were two separate opinions affirming the judgment of the district court. Neither of the affirming opinions directly addresses the issue of whether section 922(o) is a regulation of the "channels of interstate commerce." Therefore, I cite the Fifth Circuit's panel decision not for its precedential value but because I find its reasoning instructive
6
The District Court of Massachusetts used similar reasoning in upholding against a Commerce Clause challenge the conviction of a defendant who purchased a guide and hunted Alaskan wildlife with a false residential hunting license in violation of the Lacey Act. See United States v. Romano, 929 F.Supp. 502 (D.Mass.1996). The court explained that "Congress may employ reasonable means to rid the channels of interstate commerce of illegally taken wildlife." See id. at 509 (citations omitted)
7
Indeed, the case at hand is in many ways directly analogous to Wickard. In both cases, the appellee's activity, growing wheat for personal consumption and taking endangered species, is local and is not "regarded as commerce." Wickard, 317 U.S. at 125, 63 S.Ct. at 89. However, in both cases, the activity exerts a substantial economic effect on interstate commerce--by affecting the quantity of wheat in one case, and by affecting the quantity of species in the other
8
Interestingly, Judge Sentelle, who concurred in the Court's opinion in Terry v. Reno, 101 F.3d 1412, fails to cite the case in his dissenting opinion. Indeed, he appears to assert propositions that are directly at odds with the Court's reasoning in that case. For instance, he claims that ESA section 9(a)(1)(B) is not a permissible exercise of Congress' commerce power because "like the statute challenged in Lopez, [it] does not regulate commerce." Diss. op. at 1062. Yet in Terry v. Reno, this Court clearly indicated that Congress' Commerce Clause power is not limited to regulating commercial activity. Rather, it is limited to regulating activity that has a substantial effect on interstate commerce. See Terry, 101 F.3d at 1417. Were we to apply Judge Sentelle's reasoning in his dissenting opinion here to Terry, it would dictate a result contrary to the Court's holding in that case
9
Despite the Supreme Court's directive in Lopez that a court reviewing the constitutionality of a statute consider congressional findings, see Lopez, 514 U.S. at 557, 562, 115 S.Ct. at 1631, and the extensive case law indicating that the role of a reviewing court is to determine whether there is "any rational basis" for a congressional finding that a regulated activity substantially affects interstate commerce, see, e.g., Hodel v. Virginia Surface Mining & Reclamation Ass'n, Inc., 452 U.S. 264, 276, 101 S.Ct. 2352, 2360, 69 L.Ed.2d 1 (1981); United States v. Wright, 117 F.3d 1265, 1269 (11th Cir.1997), Judge Sentelle totally ignores the extensive legislative history of the ESA
10
Judge Sentelle asserts that these rationales have "no stopping point." See Diss. op. at 1065, 1066. In fact, however, they have very clear and obvious limits. In the case of the first rationale, the argument stops at endangered species. Activities that threaten a species' existence threaten to reduce biodiversity and thereby have a substantial negative effect on interstate commerce. Thus, the biodiversity rationale offered here provides support for the Endangered Species Act only insofar as the Act prevents activities that are likely to cause the elimination of species. In the case of the second rationale, the argument stops at activities that are the product of destructive interstate competition. Under this rationale, interstate competition that is likely to produce destructive results, such as elimination of endangered species' habitat, environmental degradation, or exploitation of labor, can be regulated by Congress. Thus, the destructive interstate competition rationale provides support for the Endangered Species Act only insofar as the Act prevents a bidding down of regulatory standards that is likely to result in the elimination of endangered species' habitat
11
This is a necessarily constrained view of the "value" of biodiversity. Endangered species of course have value beyond the profit they can produce as sources of medicine and genes. For example, tourists travel to see them, scientists study and learn from them, and people get aesthetic pleasure from them. In addition, every species offers some clues to the path of the evolutionary chain that produced it and to the role of certain genes also found in humans. For instance, researchers have recently concluded that basic research into the genes of the common fruit fly " 'can yield crucial clues to human development.' " Jennifer Ackerman, Journey to the Center of the Egg, N.Y. TIMES, Oct. 12, 1997, § 6, at 45 (quoting biologist Christiane Nusslein-Volhard). Moreover, every species has a place in the ecosystem. Extinction of a species can therefore have an important effect on the larger system of which it is a part. As biologist Edward O. Wilson explained:
... The traditional econometric approach, weighing market price and tourist dollars, will always underestimate the true value of wild species. None has been totally assayed for all of the commercial profit, scientific knowledge, and aesthetic pleasure it can yield. Furthermore, none exists in the wild all by itself. Every species is part of an ecosystem, an expert specialist of its kind, tested relentlessly as it spreads its influence through the food web. To remove it is to entrain changes in other species, raising the populations of some, reducing or even extinguishing others, risking a downward spiral of the larger assemblage.
EDWARD O. WILSON, THE DIVERSITY OF LIFE 308 (1992).
12
For example, the venom of a species of South American pit viper led to the discovery of the angiotensin system that regulates blood pressure in human beings. This helped scientists devise a molecule that alters blood pressure and is the preferred prescription drug for hypertension, bringing the pharmaceutical company that manufactures it $1.3 billion a year in sales. BIODIVERISTY II: UNDERSTANDING AND PROTECTING OUR BIOLOGICAL RESOURCES 9 (Marjoie L. Reaka-Kudla et al. eds.1997). Similarly, the saliva of the leech led to the development of the anticoagulant hirudin, which is used to treat hemorrhoids, rheumatism, thrombosis, and contusions and to dissolve blood clots that threaten skin transplants, and a substance derived from the saliva of the vampire bat of Central and South America is being developed to open clogged arteries and thereby prevent heart attacks. See WILSON, supra note 11, at 285-86
13
Some of the most important medical products derive from organisms that were once considered worthless or nearly so. For example, Penicillium mold, which "sparked the concept of antibiotics," was at one time valued only for the flavor it added to blue cheeses. See BIODIVERSITY II, supra note 12, at 9
14
Both Judge Sentelle and Judge Henderson appear to misunderstand this argument. See Conc. op. at 1058; Diss. op. at 1064. Although both quote the statement it is "impossible to calculate the exact impact" of the extinction of a single species, both ignore the second half of the argument: that in the aggregate we can be certain that a decline in biodiversity will have a "real and predictable " effect on interstate commerce. As a result of this omission, both misportray the argument as claiming that the extinction of a single endangered species, by itself, has a substantial effect on interstate commerce. Indeed, Judge Sentelle goes so far as to describe the argument as follows: "because of some undetermined and indeed undeterminable possibility that the fly might produce something at some undefined and undetermined future time which might have some undefined and undeterminable medical value, which in turn might affect interstate commerce at that imagined future point, Congress can today regulate anything which might advance the pace at which the endangered species becomes extinct." Diss. op. at 1064. This is inaccurate. To the contrary, the argument is that because biodiversity has a real, substantial, and predictable effect on both the current and future interstate commerce, "the de minimis character of individual instances arising under [the ESA] is of no consequence." Lopez, 514 U.S. at 558, 115 S.Ct. at 1629. In other words, because we know that in the aggregate the extinction of endangered species will have a substantial effect on interstate commerce, it does not matter that it is "impossible to calculate the exact impact" of the extinction of a single species such as the Fly
15
Prior to Lopez, the federal courts repeatedly concluded that congressional efforts at protecting endangered and migratory species are constitutional under the Commerce Clause. See Andrus v. Allard, 444 U.S. 51, 63-64 n. 19, 100 S.Ct. 318, 325-26 n. 19, 62 L.Ed.2d 210 (1979) (discussing Migratory Bird Treaty Act and noting that the "assumption that the national commerce power does not reach migratory wildlife is clearly flawed"); Leslie Salt Co. v. United States, 896 F.2d 354, 360 (9th Cir.1990) ("Leslie I"), cert. denied, 498 U.S. 1126, 111 S.Ct. 1089, 112 L.Ed.2d 1194 (1991) ("The commerce clause power ... is broad enough to extend [federal] jurisdiction to local waters which may provide habitat to migratory birds and endangered species."), cert. denied, 498 U.S. 1126, 111 S.Ct. 1089, 112 L.Ed.2d 1194 (1991); id. at 361 n. 1 (Rymer, J., concurring) ("Congress does have power under the Commerce Clause to regulate wildlife and endangered species."); Leslie Salt Co. v. United States, 55 F.3d 1388, 1396 (9th Cir.) (declining to reconsider Leslie I), cert. denied, 516 U.S. 955, 116 S.Ct. 407, 133 L.Ed.2d 325 (1995); see also Hughes v. Oklahoma, 441 U.S. 322, 329-36, 99 S.Ct. 1727, 1732-36, 60 L.Ed.2d 250 (1979) (holding that state regulations of intrastate wildlife are within dormant Commerce Clause)
16
The District Court of Hawaii relied on a similar reasoning in an earlier case involving a Commerce Clause challenge to the ESA, Palila v. Hawaii Dept. of Land and Natural Resources, 471 F.Supp. 985 (D.Haw.1979), aff'd, 639 F.2d 495 (9th Cir.1981). In that case, the court pointed to the interstate commerce effects of protecting endangered species to support its decision to uphold the Endangered Species Act. The court explained: "In this context, a national program to protect and improve the natural habitats of endangered species preserves the possibilities of interstate commerce in these species and of interstate movement of persons, such as amateur students of nature or professional scientists who come to a state to observe and study these species, that would otherwise be lost by state inaction." Id. at 995. The court thus concluded that the state's program of preserving herds of "wild" sheep and goats which destroyed the habitat of an endangered bird constituted an unlawful "taking" of the bird by the state. Id
17
See supra subsection II.B.1 for a discussion of how biodiversity affects interstate commerce
18
In his dissent, Judge Sentelle attempts to distinguish Hodel v. Virginia, 452 U.S. 264, 101 S.Ct. 2352, Hodel v. Indiana, 452 U.S. 314, 101 S.Ct. 2376, 69 L.Ed.2d 40, and United States v. Darby, 312 U.S. 100, 61 S.Ct. 451, 85 L.Ed. 609, from the case at hand by asserting that "[i]n the present case neither Congress nor the litigants, nor for that matter Judge Wald, has pointed to any commercial activity being regulated, any commercial competition being unfairly challenged, or any other sort of commerce being destroyed by the taking of the fly." Diss. op. at 1066. Again, this is inaccurate. In addition to arguing that a decline in biodiversity would have a substantial and predictable destructive effect on interstate commerce, see supra subsection II.B.1, this section of the opinion refers repeatedly to the fact that the ESA regulates the conditions under which development takes place, and thereby prevents states from adopting lower standards of endangered species protection in order to attract development (e.g., construction of a hospital, power plant, and intersection)--activity that even Judge Sentelle presumably would admit is commercial in nature
19
See id
20
Indeed, both the House and Senate recognized this as a reason for passing the Endangered Species Act. In its Declaration of Policy, the Senate stated as follows:
... The Congress finds and declares that--
(1) various species of fish, wildlife, and plants in the United States have been rendered extinct as a consequence of economic growth and development untempered by adequate concern and conservation;
....
(5) encouraging the States, through Federal financial assistance and a system of incentives, to develop and maintain conservation, protection, restoration, and propagation programs which meet national and international standards is a key to meeting the Nation's international commitments and to better safeguarding, for the benefit of all citizens, the Nation's heritage in fish and wildlife.
S.1983 ("Endangered Species Act of 1973") (Declaration of Policy), reprinted at 119 CONG. REC . 30,157, 30,157 (1973). Similarly, in its declaration of findings, purpose, and policy, the House stated:
... The Congress finds and declares that one of the unfortunate consequences of growth and development in the United States and elsewhere has been the extermination of some species or subspecies of fish, wildlife, and plants; that serious losses in species of wild animals with educational, historical, recreational, and scientific value have occurred and are occurring ...; that a key to more effective protection and management of native fish and wildlife that are endangered or threatened is to encourage and assist the States in developing programs for such fish and wildlife; and that the conservation, protection, restoration, or propagation of such species will inure to the benefit of all citizens.
H.R. 37 ("Endangered and Threatened Species Conservation Act of 1973") (Findings, Purpose, and Policy), reprinted at 119 CONG. REC . 25,694, 25,694 (1973).
21
In the conclusion to his dissent, Judge Sentelle quotes a portion of Justice Story's Commentaries on the Constitution. See Diss. op. at 1067. Justice Story was undoubtedly an eloquent and brilliant scholar. As Justice Thomas recently noted, however, Justice Story's views "represent only his own understanding" of the Constitution. U.S. Term Limits, Inc. v. Thornton, 514 U.S. 779, 856, 115 S.Ct. 1842, 1880, 131 L.Ed.2d 881 (1995) (Thomas, J., dissenting). Today few would agree with Justice Story's claim that the "power to regulate manufactures" falls outside Congress' Commerce Clause power. Indeed, the Lopez Court clearly established the principle that where activity, including manufacturing activity, "substantially affects interstate commerce, legislation regulating that activity will be sustained." Lopez, 514 U.S. at 560, 115 S.Ct. at 1630
1
It is beyond question that the development San Bernardino County proposes is not only a "discomfit[ure]"of the Delhi Sands Flower-Loving Fly, see Dissent at 1060, but also a "taking" within the meaning of ESA, see Babbitt v. Sweet Home Chapter of Communities for a Great Oregon, 515 U.S. 687, 691, 115 S.Ct. 2407, 2409-10, 132 L.Ed.2d 597 (1995) (upholding Department of Interior's interpretation in 50 C.F.R. § 17.3 of statutory definition of "take" to include "an act which actually kills or injures wildlife," which "may include significant habitat modification or degradation where it actually kills or injures wildlife by significantly impairing essential behavioral patterns, including breeding, feeding, or sheltering"). Further, the extent of inconvenience the County experiences if the unlawful taking is prevented, see Dissent at 1060-1061, is irrelevant so long as the prevention is authorized under the Commerce Clause
2
United States v. Rambo, 74 F.3d 948 (9th Cir.1996); United States v. Darby, 312 U.S. 100, 61 S.Ct. 451, 85 L.Ed. 609 (1941)
3
Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 85 S.Ct. 348, 13 L.Ed.2d 258 (1964)
4
An ecosystem consists of "[t]he organisms in a community plus the associated abiotic factors with which they interact." Helena Curtis & N. Sue Barnes, Biology glossary at G-7 (5th ed.1989)
5
In light of these authorities I cannot agree with my dissenting colleague that "[t]he activity regulated in the present case involves" only "local land use." Dissent at 1064
6
The dissent suggests this justification has no "stopping point" as required by Lopez. See Dissent at 1064-1065; Lopez, 514 U.S. at 564, 115 S.Ct. at 1632. In Lopez the Court was concerned that the "theories" offered by the government would authorize regulation of "all activities that might lead to violent crime, regardless of how tenuously they relate to interstate commerce" and "any activity that it found was related to the economic productivity of individual citizens." Id. The rationale on which I rely permits regulation only of activities (including land use) that adversely affect species that affect, or are involved in, interstate commerce
7
In so concluding, I note that neither the Supreme Court nor any circuit court has used Lopez to strike down an attempted regulation outside the criminal arena. For cases rejecting post-Lopez challenges to noncriminal statutes, see Wald Op. at 1064-1065
1
Judge Wald unsuccessfully attempts to distinguish Lopez by claiming that a prohibition against habitat destruction is "necessary to enable the government to control the transport of endangered species in interstate commerce." Wald Op. at 1046. The fly is not an article of interstate commerce, and does not travel the channels of commerce. The issue before us is not possession or sale of flies, but, essentially, destruction of flies. Congress may have the authority to prevent interstate transportation of flies, and that aspect of the ESA is not challenged here. But preventing destruction of local flies cannot reasonably be held to be either "necessary" or "proper" to keeping the channels of commerce free from their interstate transportation. While prohibiting the local possession and exchange of flies might arguably be necessary to preventing interstate transportation or exchange of flies, prohibiting destruction of fly habitat is not
2
This specific formulation of the inquiries necessary under category (3) is drawn from United States v. Wall, 92 F.3d 1444, 1455-56 (6th Cir.1996) (Boggs, J., dissenting in part). However, each of the points summarized in Judge Boggs's formulation is taken directly from Lopez, 514 U.S. at 559-65, 115 S.Ct. at 1629-33
3
Judge Wald chides me for not discussing Terry v. Reno, 101 F.3d 1412 (D.C.Cir.1996), cert. denied, --- U.S. ----, 117 S.Ct. 2431, 138 L.Ed.2d 193 (1997). See Wald Op. at 1049 n. 8. In Terry, the effect on commercial activity was obvious--persons blocking access to clinics directly affected the business of abortion doctors serving interstate customers. The taking of a purely local fly, a harm without even a remote effect on commerce, cannot be reasonably likened to local activities undertaken with the purpose and effect of directly impeding interstate commerce
4
Indeed, there is nothing in either Judge Henderson's opinion or the record to support speculation that the extinction of the Delhi Sands Flower-Loving Fly would have any effect on any other species
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607 F.2d 997
Mirrav.U. S. Parole Commission
No. 79-2043
United States Court of Appeals, Second Circuit
5/18/79
1
S.D.N.Y.
AFFIRMED
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97 F.3d 1456
NOTICE: Eighth Circuit Rule 28A(k) governs citation of unpublished opinions and provides that they are not precedent and generally should not be cited unless relevant to establishing the doctrines of res judicata, collateral estoppel, the law of the case, or if the opinion has persuasive value on a material issue and no published opinion would serve as well.Gregory D. GRAVES, Appellant,v.Judy McMURRIAN, Sgt.; Officer West, Garland CountyDetention Center; Officer Barkley, Garland CountyDetention Center, Appellees.
No. 96-2320.
United States Court of Appeals, Eighth Circuit.
Submitted Sept. 4, 1996.Filed Sept. 11, 1996.
Before FAGG, WOLLMAN and MURPHY, Circuit Judges.
PER CURIAM.
1
Gregory D. Graves appeals from the district court's1 order granting defendants summary judgment on the ground of collateral estoppel in this 42 U.S.C. § 1983 action. After de novo review of the record and the parties' briefs, we conclude the grant of summary judgment was correct. Accordingly, we affirm. See 8th Cir. R. 47B.
1
The Honorable Bobby E. Shepherd, United States Magistrate Judge for the Western District of Arkansas, to whom the case was referred for final disposition by consent of the parties pursuant to 28 U.S.C. § 636(c)
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42 F.3d 1560
31 Fed.R.Serv.3d 194
Don OLENHOUSE, et al., Plaintiffs-Appellants,v.COMMODITY CREDIT CORPORATION, et al., Defendants-Appellees.
No. 93-3012.
United States Court of Appeals,Tenth Circuit.
Dec. 20, 1994.
1
Karen K. McIlvain, McIlvain Law Office, Madison, KS, for plaintiffs-appellants.
2
Stephen K. Lester, Asst. U.S. Atty. (Jackie N. Williams, U.S. Atty., with him on the brief), Wichita, KS, for defendants-appellees.
3
MOORE, Circuit Judge, LOGAN, Senior Judge, and KANE*, Senior District Judge.
4
KANE, Senior District Judge.
5
This extensive review of an administrative agency case decided on appeal by a district court delineates the standards to which the district court must conform. When acting as a court of appeal, it is improper for a district court to use methods and procedures designed for trial. Moreover, the District Court here permitted the use of a so-called "motion to affirm" as well as a motion for summary judgment in contravention of the established law of this circuit.
6
Because our standard of review is de novo and because we have been required to scrutinize the 1600 page administrative record, we decide as well the merits of the appeal rather than remand. We reverse the District Court's affirmance of the agency's decision.
7
A certified class of Kansas farmers ("Farmers") appeal from the order of the United States District Court for the District of Kansas affirming temporary yield and deficiency payment reductions imposed by the Agriculture Stabilization and Conservation Service (ASCS) under a federal price support program for wheat. Program participants are entitled to deficiency payments when the actual market price for wheat falls below the target price set by the Secretary of Agriculture. Payments may be reduced to reflect a decrease in a farm's expected production, but only if that decrease is the result of causes other than a natural disaster or other condition beyond the producer's control.
8
Due to disastrous rains that destroyed fall plantings and flooded fields, Appellant-Farmers planted their 1987 program wheat after the fall 1986 planting season. The ASCS deemed the late planting a "changed practice" under program regulations, and reduced the yield per acre for which deficiency payments would be made.
9
The Farmers claim the ASCS's action was arbitrary and capricious in that it was the product of an inadequate administrative appeals process and not supported by substantial evidence in the administrative record. They argue the ASCS misapplied the rules and regulations governing wheat program payments by failing to consider fall rains and failing to determine whether late planting was the result of conditions beyond the Farmers' control. The Farmers also argue county and state ASCS representatives misled them into believing late planting would not affect program yields. Finally, the Farmers claim the imposed reductions constituted a taking of contractual property rights without due process in violation of the Fifth Amendment of the United States Constitution.
10
Despite our thorough review of the administrative record, we find it difficult to ascertain exactly what the agency did or did not do in this case.1 The ASCS's initial decision was made by a single individual and was announced by form letter nearly one year after the wheat had been planted. During the course of that year, agency policy regarding the imposition of yield reductions changed numerous times. The basis upon which this individual reduced the Farmers' yields cannot be ascertained; other than finding the Farmers planted their wheat late, the decision is silent as to the rules applied, the factors considered, or the methods used to calculate the reductions. Most significantly, there is no determination by the individual acting on behalf of the agency that late planting was the result of conditions within the Farmers' control.
11
The Farmers appealed this initial decision to the state ASCS committee and then the Deputy Administrator, State and County Operations (DASCO). They asserted the late planting was due to conditions beyond their control and done in reliance on information they received from ASCS officials indicating late planting would not result in reductions. Throughout the appeal process, the Farmers sought information regarding the basis for the reductions imposed and the way they were calculated.
12
Without making any findings of fact or articulating a reasoned basis for its decision, DASCO found "no justification" for relief. DASCO summarily concluded the Farmers were not misinformed and found a determination that late planting was not due to conditions beyond the Farmers' control implicit in the ASCS's action because "the county and state [ASCS] committees are familiar with ... weather conditions for [the Farmers'] area." Aplts.' App. at 49-50.
13
DASCO's extrapolation escaped the scrutiny of the District Court. Instead of reviewing the administrative record itself, the District Court relied on counsel's statements as to what was in the record and material appended to the government's "Motion to Affirm." The District Court selected isolated bits of this second hand "evidence" and concluded the agency's action was supported by the administrative record. Relying on this extrapolation, the District Court interpreted the wheat program regulations to authorize yield reductions notwithstanding the occurrence of a natural disaster, attributing this interpretation to the agency, and affirming the interpretation as the agency's own. See Olenhouse v. Commodity Credit Corp., 807 F.Supp. 688, 692-93 (D.Kan.1992).
14
While it found the Farmers' arguments regarding misinformation "persuasive" and opined they "may have a stronger basis for their contentions than defendants do," the District Court construed its review powers narrowly and concluded the agency's findings were "plausible" and therefore not "arbitrary and capricious." Id. at 690, 693. In doing so, the District Court employed neither the procedure nor the standard of review required when agency action is challenged on appeal to a district court in this circuit.
15
Where questions of due process and sufficiency of the evidence are raised on appeal from an agency's final decision, the district court must review the agency's decisionmaking process and conduct a plenary review of the facts underlying the challenged action. It must find and identify substantial evidence to support the agency's action and may affirm agency action, if at all, only on the grounds articulated by the agency itself. This cannot be done in the context of a motion to affirm, which allows the agency to define the issues on claimants' appeal. The District Court's deviations from established procedure doom its review to prejudicial error.
I. Background
A. Statutory and Regulatory Scheme
1. Overview
16
Neither the parties in their briefs, nor the District Court in its opinions below,2 addressed comprehensively the statutory and regulatory scheme governing the wheat program at issue. Perhaps this is because the patchwork of statutes, public laws, regulations, internal agency guidelines and interpretive rules applicable to United States Department of Agriculture (USDA) price support programs generally, and the wheat program specifically, epitomize bureaucratic muddle. The statutes and regulations alone span hundreds of pages in multiple volumes of the United States Code and Code of Federal Regulations. Programs are administered and funded by different USDA agencies. These agencies rely on internal guidelines and interpretive rules that are revised frequently. Yet we find an understanding of the regulatory scheme essential to an analysis of the issues raised on appeal, so we begin with an overview of the applicable provisions.
17
The Commodity Credit Corporation Charter Act, enacted in 1948 and codified at 15 U.S.C. Sec. 714 (1988), authorizes the Commodity Credit Corporation (CCC) to support farm prices as determined by the Secretary of the United States Department of Agriculture (USDA). Specific price support programs were enumerated by Congress in the Agricultural Act of 1949, 7 U.S.C. Sec. 1421 et seq., which authorizes the Secretary of the Department of Agriculture to deliver price supports under those programs through the CCC. See 7 U.S.C. Sec. 1421(a) (1988).
18
The general administration and supervision of price support programs in the field has been delegated by the Secretary to the ASCS. 7 C.F.R. Secs. 713.2, 1421.2 (1987)3 (feed grain, rice, cotton, wheat and related programs). Thus, the CCC holds the purse strings and the ASCS runs the programs. Different sets of regulations govern the conduct of each. Compare 7 C.F.R. Secs. 1402-1498 (price support regulations for various grain programs applicable to the CCC) with 7 C.F.R. Secs. 700-799 (regulations governing feed grain, rice, cotton, and wheat programs applicable to the ASCS).
19
The ASCS administers price support programs through a network of committees. These committees, and the conduct of the ASCS under all USDA programs, are governed not only by the Agricultural Act of 1949, the CCC Charter Act, and their respective regulatory schemes, but also by the Soil Conservation and Domestic Allotment Act of 1935. 16 U.S.C. Sec. 590h(b) (1988 & Supp.1994) (incorporated by reference and made part of the Agricultural Adjustment Act of 1938 and later amended by the Food Security Act of 1985, Pub.L. 99-198, Secs. 1711, 1712 (1985)); see Garvey v. Freeman, 397 F.2d 600, 604 n. 2 (10th Cir.1968).
20
Three levels of authority exist under the ASCS committee structure. See generally, 16 U.S.C. Sec. 590h(b) (fifth undesignated paragraph) (as amended) (function and election requirements); 7 C.F.R. Secs. 7.1 (selection and functions, generally), 713.2 (grain programs, administration), 1421.2 (grain programs, CCC financing). At the local and state levels, USDA programs are administered by local, county and state ASCS committees. 16 U.S.C. Sec. 590h(b). Local committee members are elected by and from farmers within an administrative area who participate or cooperate in price support programs administered in the area. Id. Members of the local committees nominate and elect a county committee of three farmers who reside in the county. Id. Members of the state committee, who must also be farmers, are appointed by the Secretary. Id. At the federal level, ASCS's Deputy Administrator for State and County Operations (DASCO) supervises state committees. 7 C.F.R. Sec. 7.1. Decisions of the Deputy Administrator constitute final agency action and are subject only to judicial review. 7 C.F.R. Sec. 7.33.
21
The ASCS committee system established by the Soil Conservation Act contemplates that local and county ASCS committees serve as liaisons between the Secretary and individual producers. 16 U.S.C. Sec. 590h(b). The Act specifically requires the Secretary to ensure information concerning changes in federal laws and agricultural programs is communicated in a timely manner to local committees in areas that contain agricultural producers who might be affected by such changes. Id.
2. The Wheat Program
22
Each member of the appellant class of Farmers participated in the 1987 Price Support and Adjustment Program for wheat (the "Wheat Program"). The Wheat Program is authorized by Section 107D(c) of the Agriculture Act of 1949, 7 U.S.C. Sec. 1445b-3 (1988) (as amended by the Food Security Act of 1985, codified in applicable part at 7 U.S.C. Sec. 1308 (1988) and the Farm Disaster Assistance Act of 1987, codified at 7 U.S.C. Sec. 1445b-3(c)(2)(A)). The Wheat Program balances the goals of farm acreage reduction and price support for farmers.
23
In advance of the planting season, the Secretary announces a level of price support (a "target" price) for wheat. 7 U.S.C. Sec. 1426(a); 7 C.F.R. Sec. 713.108(a). Farmers plant their wheat, and apply for entry into the program. Once their application is approved and the contract with the CCC signed, participating farmers are guaranteed the target price for their crop; if the ultimate market price falls below that price, farmers are entitled to "deficiency payments" to make up the difference. See 7 U.S.C. Sec. 1445b-3(c); 7 C.F.R. Sec. 713.108(a), (c). Because a farm's established yield4 and the target price for wheat are established at the time a farmer's request to participate in the program is approved (see 7 U.S.C. Sec. 1426(a)), farmers can estimate their deficiency payment--and under certain circumstances, obtain a percentage of it as an advance5--before their crop is harvested. See 7 U.S.C. Sec. 1445b-2; 7 C.F.R. Sec. 713.104. Farmers rely on these projections and advances to cover operating costs, secure loans and manage cash flow. These programs, and the payments guaranteed under them, thus have become an integral part of the modern farm operation.
24
Participants' entitlement to payment under the program is not without qualification, however. Participation is contingent upon signing a contract with the CCC. 7 C.F.R. Secs. 1421.5 (contract precondition of eligibility under CCC price support programs for grain), 713.50 (contracting procedures under Wheat Program). The contract requires farmers to follow established farming practices and plant their crops in a workmanlike manner. Except as provided in parts 790 and 791 of the Code,6 failure to comply fully with either the terms of the contract or the regulations in part 713 may render a participant ineligible for benefits, see 7 C.F.R. Sec. 713.103(b), or eligible only for reduced benefits. See 7 C.F.R. Sec. 713.6(c)(1) (deficiency payments can be reduced to reflect lower-expected yields if the decrease is the result of a change in farming practice or other condition within the producer's control).
25
It is the manner in which the ASCS determined Appellant-Farmers had failed to comply with program regulations and its imposition of reduced benefits under 7 C.F.R. Sec. 713.6 that forms the basis of this appeal.
3. The role of the county committee
26
Due to the number of farmers nationwide and the diversity of their operations, the Secretary places "enormous reliance" on the decisions of 3,000 local and county committees, which represent the agency at the "root line" of the nation's 2,000,000 farmers. See Esch v. Lyng, 665 F.Supp. 6, 21 (D.D.C.1987) (quoting testimony of DASCO chief Thomas VonGarlem), aff'd sub nom Esch v. Yeutter, 876 F.2d 976 (D.C.Cir.1989). With respect to the Wheat Program, it is the county committee that determines participants' "farm program acreage" and "program payment yields,"7 assesses compliance with program requirements,8 calculates deficiency payments,9 determines what constitutes "changed practices" caused by "conditions beyond the producer's control,"10 and imposes reductions.11
27
This is no small task. The process is highly regulated and requires the county committee to apply a panoply of regulations and internal interpretive rules,12 conduct on-site investigations of farming operations,13 and review and determine variances in eligible acreage or payment yields.14 While these "farmer-commissioners" sit informally, "appraising and assessing the relative rights of their neighbors and themselves in the administration of a program by and for farmers," they wield significant power and shoulder the burden of knowing and implementing a complex statutory and regulatory scheme. Garvey, 397 F.2d at 612 (10th Cir.1968).
28
County committees are guided in their application of program regulations by an ASCS Handbook distributed by the Secretary to individual state committees, which then make the Handbook available to local county committees. ASCS Handbook 5-PA (Rev. 7) (the "Handbook"). The Handbook is an internal reference for use by the state and county committees; it is not distributed to program participants generally. See Jones v. Espy, 1993 WL 102641 (D.D.C.1993) (not reported in F.Supp.) (discussing ASCS Handbook 5-CM, price support program financing). Where instructions in the Handbook conflict with regulations, the regulations control. Id. (citing 7 C.F.R. Sec. 713.2(b), (c)).
29
Based on our review of the Handbook sections provided us on appeal,15 the instructions applicable to the 1987 Wheat Program were revised several times between the time the Farmers planted their wheat (January-March 1987) and the time they were notified yield reductions had been imposed (December 1987). For example, p 414 regarding the imposition of yield reductions was revised at least twice. See Aplees.' Supp.App. at 33-36 (page 329, related to p 414(A), is dated 8-26-86; pages 330 and 331-32, related to p 414(B), are dated 12-3-87 and 1-12-88, respectively). Paragraph 414(B) was also the subject of at least three interpretive notices issued by the Secretary during that period of time, each of which revised agency policy regarding the imposition of yield reductions. Id. at 37-42 (Notice PA-1112 regarding "changed practices" precipitated by fall 1986 weather conditions, dated 1-9-87; superseded by Notice PA-1129, dated 3-20-87; superseded by Notice PA-1189 reinstating previous procedure, dated 11-19-87).
30
The effect these changes had on the agency's decision to impose the yield and deficiency payment reductions at issue is unclear. What is clear, however, is at the time the Farmers were faced with the decision of whether to plant or not plant 1987 program wheat, internal ASCS policy regarding the effect of fall flooding was unsettled.
B. Facts16
31
The Farmers reside in rural areas of Wilson County, Kansas. In September 1986, intending to participate in the 1987 Wheat Program, class representatives Don Olenhouse and Alan Sharp planted hard winter wheat on farms they operate. Admin.R. at 585-86 (Olenhouse testimony before state ASCS committee), 650 (Sharp testimony before state ASCS committee). In September and October 1986 Wilson County received over 20 inches of rain and was declared a disaster area. Aplts.' Br. at 5; see Admin.R. at 586. The wheat planted by Olenhouse and Sharp was destroyed. Admin.R. at 586, 650.
32
Olenhouse was able in late November to replant some of the fields washed away by the rains; he completed his replanting in all but a few "mudholes" by January 1, 1987. Id. at 586-98. Certain of Sharp's fields were dry enough to replant in December, 1986. Id. at 650. Most, however, were not. Id. By late December and early January, there was considerable confusion regarding the effect delayed planting might have on payments under the 1987 Wheat Program. The Farmers were aware winter wheat is generally planted in the fall, but the rains made this an impossibility.
33
Concerned local farmers might "go broke" if they were unable to plant their program wheat, members of the county committee called a special meeting with state officials in Topeka. See, e.g., Admin.R. at 621-22 (testimony of county committee member and Appellant-Farmer Bob Olson). Olson understood the result of that January 13, 1987 meeting to be approval for late planting, as long as program wheat was planted in a workmanlike manner. Id. at 622.
34
Relying on the county committee and information received at the Topeka meeting, the Farmers planted their wheat. See, e.g., Admin.R. at 735, 743, 777 (Farmer letters). They bought seed and fertilizer, kept 27.5% of their otherwise arable acreage fallow as required under the program, and complied with the rest of the program rules and regulations. Id.; see id. at 597-98 (Olenhouse testimony). In March and April, the Farmers' applications to participate in the Wheat Program were approved by the ASCS Executive Director for Wilson County. Admin.R. at 1474, 1483-90, 1500-40, 1544-59, 1565-66, 1569-78 (CCC Contracts for Participation in Price Support Program, Form 447).
35
Many Farmers, including class representative Olenhouse, certified their wheat acres under the program and received advance deficiency payments. Admin.R. at 1500-55, 1503 (Olenhouse). When their wheat showed signs of moisture-related damage from continued rain in the area, Olenhouse, among others, applied for and received full federal disaster credit under the program. Id. at 1313-1318, 1330-1332, 1402-1449, 1491-1499 (CCC Form 574 requests). Neither the advance deficiency payments nor the disaster credits reflected any reduction for late planting. To the contrary, both were commensurate with full program benefits.
36
Wheat is not considered a profitable crop without deficiency payments. See Admin.R. at 595 (Olenhouse testimony). Olenhouse testified he would never have incurred the expense of planting wheat and keeping acreage idle that otherwise could have been planted to more profitable crops such as soybeans, had he been told deficiency payments would be reduced. Id. at 595-97.
37
While county officials were approving the Farmers' applications to participate in the Wheat Program and authorizing full benefits under it, federal and state officials were reviewing and revising ASCS internal policy regarding the imposition of temporary yield reductions for late planting. On January 9, 1987, DASCO distributed Notice PA-1112, which purportedly notified state and county17 ASCS committees that spring seeding may be considered a changed practice for the purpose of temporary yield reductions. See Aplees.' Supp.App. at 37-38. On March 20, 1987, DASCO superseded PA-1112 with PA-1129, which notified committees that changed practices may occur only on part of a farm's planted acreage, and instructed them to calculate temporary yield reductions accordingly. Id. at 39. Paragraph 414(B) of the ASCS Handbook regarding yield reductions was revised to reflect these changes in December 1987. Aplts.' App. at 193. This was only days before the Farmers received notice program yields had been reduced.
38
On May 27, 1987, after the Farmers had planted their wheat, Congress enacted the Farm Disaster Assistance Act of 1987, Public Law 100-45, codified at 7 U.S.C. Sec. 1445b-3(c)(2)(A)(i). This statute permitted Wheat Program participants who did not attempt to replant wheat destroyed in the fall to obtain 33 1/3% of their full deficiency payments. The Farmers could not benefit from this Act. Instead, they continued to comply with program regulations and harvested what wheat they could. Of the wheat planted in Wilson County during the 1986-87 season, only that planted in January was harvested. Admin.R. at 591 (Olenhouse testimony).
39
At some time before December 1987, the Wilson County Committee was disbanded. The State Committee directed Lloyd Johnston to impose temporary reductions on the Farmers' 1987 wheat yields pursuant to a policy implemented by the State Committee "because the Wilson COC failed to establish a reasonable policy as required by 5-PA (Rev. 7), paragraph 414." Admin.R. at 39 (letter from State Executive Director Frank Mosier to Southwest Region Director transmitting the Farmers' case files); see id. at 491-92 (Mosier statements at state committee hearing). Johnston announced the reduction in form letters dated December 30, 1987, which he signed as Acting County Executive Director. Admin.R. at 783-945.
40
The form letters advised the Farmers reductions were being imposed because agency "records indicate (some or all) of the wheat planted on the farm was seeded in (January, February, or March)." See, e.g., Admin.R. at 888 (Olenhouse letter). Johnston stated the revised yields "represent[ ] the production which [sic] normally could be expected for wheat planted during this period if it was [sic] actually carried to harvest." Id. The reductions imposed were as follows: Winter wheat planted in January and February reduced 20% and 35% respectively; winter wheat planted in March reduced 100%; spring wheat planted in March reduced 30%; and spring wheat planted after March reduced 100%. Admin.R. at 39. Johnston's letters to the Farmers did not mention the supervening state committee policy or the basis for the reductions imposed.
C. Appeals Process
41
The Farmers appealed the yield reductions to the state ASCS committee. After a series of informal hearings conducted in February 1988, the state committee generally denied the Farmers' requests for relief. Admin.R. at 1, 237-294 (letters denying Farmers' appeals).18 The committee stated it had considered comments made at the informal hearings and "information received from the Wilson County ASCS Office," and concluded no relief could be granted because the yield reduction "is in accordance with previously established policy and program provisions." E.g., Admin.R. at 272 (Olenhouse appeal). The "previously established policy and program provisions" are not identified or described in the letters. Id.
42
The Farmers then sought review by DASCO. Certain of the Farmers, including Olenhouse and Sharp, participated in an informal telephone hearing before a hearing officer on May 18, 1988. See Admin.R. 5-37 (hearing transcript). DASCO rejected the Farmers' contentions and upheld the state committee's action in a two-page letter dated June 10, 1988. Aplts.' App. at 49-50. This letter constituted final agency action under program regulations.
43
After summarizing the Lloyd Johnston and state ASCS committee letters and the Farmers' contentions on appeal, DASCO concluded as follows:
44
"In our review of your clients' entire case files, including the information provided during the informal telephone hearing, we could find no justification to grant relief. Our review indicates your clients were not misinformed by county office personnel regarding payment yields. The county and state committees are familiar with both normal cultural practices and weather conditions for your area. We have determined both committees used and followed the correct procedures when your clients' yields were reduced. Therefore, your clients' appeal is denied."
45
Aplts.' App. at 50.
II. Appellate Jurisdiction--Notice of Appeal
46
We first address the sufficiency of the Notice of Appeal filed by the Farmers under Fed.R.App.P. 3(c). As interpreted by the United States Supreme Court, Rule 3(c) requires all parties taking an appeal be named individually in the notice so the appellee and the court can determine "with certitude" which parties would be bound by an adverse judgment or held liable for costs or sanctions. See Torres v. Oakland Scavenger Co., 487 U.S. 312, 318, 108 S.Ct. 2405, 2409, 101 L.Ed.2d 285 (1988). Formal identification is a "jurisdictional prerequisite," requiring dismissal of parties not specifically named in a notice of appeal. Id.
47
The issue arose in this case because the phrase "et al." was used to identify the plaintiff class of farmers in the caption of the original Notice of Appeal filed January 7, 1993, and singular "plaintiff's" was used in the body. In a show cause order dated January 29, 1993, the clerk's office advised counsel the Court was considering summary dismissal of the appeal for failure to comply with Rule 3(c), and requested briefing on the issue. Plaintiffs filed a first amended notice of appeal on February 2, 1993, naming Don Olenhouse, Alan Sharp, and John Rubow as plaintiffs "on behalf of themselves and all others similarly situated," (Aplts.' App. at 44-45), and filed a second amended notice of appeal on February 8, 1993, identifying the class as certified in the District Court below. Aplts.' App. at 46-47. We reserved judgment on the jurisdictional issue raised in the show cause order, and now conclude the original notice was sufficient.
48
The Farmers were certified as a class in the District Court with Don Olenhouse, Alan Sharp and John Rubow designated as class representatives. See Olenhouse v. Commodity Credit Corp., 136 F.R.D. 672 (D.Kan1991) (Aplts.' App. at 25-26). Where the phrase "et al." is used to identify members of a certified class, this Court has implicitly recognized an exception to the Torres rule. See Battle v. Anderson, 970 F.2d 716, 719 n. 4 (10th Cir.1992) (dicta) (citing Rendon v. AT & T Technologies, 883 F.2d 388 (5th Cir.1989)).
49
In Rendon, plaintiffs' notice of appeal designated "Gilbert Rendon, et al." as appellants and defendant sought to dismiss the appeal. The Fifth Circuit rejected the defendant's Torres contention that the term "et al." provided insufficient notice of who was seeking the appeal because Rendon was a designated representative of a class that had been certified in the case from which the appeal was taken. 883 F.2d at 398 n. 8. Because Rendon's actions bound the entire class, the Fifth Circuit held the phrase "et al." sufficient to identify the entire class as appellants. Id.
50
While we discourage use of the phrase "et al." to identify any group of appellants,19 we agree where a class has been certified, the phrase provides sufficient notice of who is taking the appeal to satisfy the requirements of Fed.R.App.P. 3(c). The rationale for a class exception to Torres is even more apparent where, as here, the naming of each class member is an impossibility because the precise number and individual identities are unknown.20 We conclude the original notice naming "Don Olenhouse, et al." in the caption is sufficient to notify CCC of the parties taking the present appeal. We therefore have jurisdiction to consider this appeal and address the merits of the Farmers' contentions below.
III. Standard of Review
51
The Farmers seek review of final ASCS action under the Administrative Procedure Act, 5 U.S.C. Sec. 706 (the "APA"). Specifically, they assert (1) the yield and deficiency payment reductions imposed are unsupported by the record; (2) the ASCS failed to comply with the laws, regulations and agency policy provisions governing the Wheat Program, including regulations governing the administrative appeals process; (3) the method for calculating the reductions imposed was arbitrary and capricious; and (4) by offsetting the Farmers' wheat deficiency payments before they had an opportunity to be heard, ASCS violated the Farmers' rights under the 5th Amendment of the United States Constitution.
A. Statutory Limitations on Review
52
Section 701 of the APA provides that agency action is subject to judicial review except where there is a statutory prohibition on review or where agency action is committed to agency discretion as a matter of law. 5 U.S.C. Sec. 701(a)(1), (2), construed in Thomas Brooks Chartered v. Burnett, 920 F.2d 634, 641-42 (10th Cir.1990). The latter provision is not at issue here. There are, however, two statutory provisions applicable to the Wheat Program that purport to limit judicial review: 7 U.S.C. Sec. 1385 and 7 U.S.C. Sec. 1429.
53
Neither party addresses these statutes in their briefs, but we must consider them before reaching the merits of the Farmers' contentions on appeal.21 We specifically hold Secs. 1385 and 1429 do not limit our review in this case. See Garvey v. Freeman, 397 F.2d 600, 605 (10th Cir.1968) (Sec. 1385 did not preclude review of ASCS's determination of wheat farmer's normal yield).
Section 1385 provides:
54
"[T]he facts constituting the basis for any ... payment under the wheat ... program[ ] authorized by [the Agriculture Act of 1949] ... or the amount thereof, when officially determined in conformity with the applicable regulations prescribed by the Secretary or by the Commodity Credit Corporation, shall be final and conclusive and shall not be reviewable by any other officer or agency of the Government."
Further, 7 U.S.C. Sec. 1429 provides:
55
"Determinations made by the Secretary under [the Agriculture Act of 1949] shall be final and conclusive: Provided, That the scope and nature of such determinations shall not be inconsistent with the provisions of the Commodity Credit Corporation Charter Act [15 U.S.C. Sec. 714 et seq.]."
56
(Emphasis original).
57
The essence of the Farmers' claims is the ASCS action violated due process, substantively in the sense of being arbitrary or capricious, and procedurally in the sense of denying minimum safeguards. Neither statute precludes judicial consideration of such claims; rather, consistent with the judicial review provisions of the APA, each prevents the reviewing court from substituting its judgment on the facts for that of the agency. See Esch v. Lyng, 665 F.Supp. 6, 12 (D.D.C.1987), aff'd sub nom. Esch v. Yeutter, 876 F.2d 976 (D.C.Cir.1989) (construing Sec. 1385); Gonzalez v. Freeman, 334 F.2d 570, 575 (D.C.Cir.1964) (Sec. 1429). As we stated in Garvey:
58
" 'No legislative language can deprive a man of a fair hearing in the adjudication of his rights, or of his right to have a court decide whether the administrative agency acted within its jurisdiction; and, whether the agency through a lay tribunal applied the correct rule of law to the facts.' "
59
397 F.2d at 605 (quoting Caulfield v. Dept. Agriculture, 293 F.2d 217, 228 (Wisdom, J. dissenting)); see Sabin v. Butz, 515 F.2d 1061, 1064-65 (10th Cir.1975).
60
We conclude neither 7 U.S.C. Sec. 1385 nor Sec. 1429 limits our review of the agency action at issue in the present appeal.
61
B. Overview of Judicial Review Under the APA
62
Having determined the ASCS's actions are subject to judicial review, we must determine the appropriate standard. The scope of judicial review of agency action under the APA is set forth in the United States Supreme Court's seminal opinion in Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971).
63
Judicial review of both formal22 and informal agency action is governed by Sec. 706 of the APA, which provides that a "reviewing court shall ... hold unlawful and set aside agency action, findings, and conclusions found" not to meet six separate standards. Overton Park, 401 U.S. at 413, n. 30, 91 S.Ct. at 822, n. 30 (citing 5 U.S.C. Sec. 706(2)).23 Informal agency action must be set aside if it fails to meet statutory, procedural or constitutional requirements or if it was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." Id. at 413-14, 91 S.Ct. at 822 (construing Sec. 706(2)(A)-(D), the "generally applicable" standards). Formal agency action must be set aside not only for failing under any of the "generally applicable" standards, but also if the action is unsupported by "substantial evidence" in the hearing record. Id. at 414, 91 S.Ct. at 822 (construing Sec. 706(2)(E)). These standards require the reviewing court to engage in a "substantial inquiry." Overton Park, 401 U.S. at 415, 91 S.Ct. at 823. An agency's decision is entitled to a presumption of regularity, "but that presumption is not to shield [the agency's] action from a thorough, probing, in-depth review." Id.
64
We have held the essential function of judicial review is a determination of (1) whether the agency acted within the scope of its authority, (2) whether the agency complied with prescribed procedures, and (3) whether the action is otherwise arbitrary, capricious or an abuse of discretion. CF & I Steel Corp. v. Economic Dev. Admin., 624 F.2d 136, 139 (10th Cir.1980); American Petroleum Inst. v. EPA, 540 F.2d 1023, 1029 (10th Cir.1976) (citing Overton Park, 401 U.S. at 415-17, 91 S.Ct. at 823-24). Legal principles applicable in the first two determinations are straightforward. Determination of whether the agency acted within the scope of its authority requires a delineation of the scope of the agency's authority and discretion, and consideration of whether on the facts, the agency's action can reasonably be said to be within that range. Overton Park, 401 U.S. at 415-16, 91 S.Ct. at 823-24. Determination of whether the agency complied with prescribed procedures requires a plenary review of the record and consideration of applicable law. See id. at 416-17, 91 S.Ct. at 824. Difficulty arises in connection with judicial review under the "arbitrary or capricious" standard. See American Petroleum, 540 F.2d at 1028.
C. The "Arbitrary or Capricious" Standard
65
The duty of a court reviewing agency action under the "arbitrary or capricious" standard is to ascertain whether the agency examined the relevant data and articulated a rational connection24 between the facts found and the decision made. Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 2866, 77 L.Ed.2d 443 (1983). In reviewing the agency's explanation, the reviewing court must determine whether the agency considered all relevant factors and whether there has been a clear error of judgment. Id. (citing Overton Park, 401 U.S. at 416, 91 S.Ct. at 823); see Sabin v. Butz, 515 F.2d at 1069 (citing Overton Park ). Agency action will be set aside
66
"if the agency relied on factors which Congress has not intended for it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise."
67
Motor Vehicle Mfrs., 463 U.S. at 43, 103 S.Ct. at 2867.
68
In a passage particularly relevant in the present case, the Supreme Court cautions,
69
"the reviewing court should not attempt itself to make up for such deficiencies; it may not supply a reasoned basis for the agency's action that the agency itself has not given."
70
Id. (emphasis added) (citing SEC v. Chenery Corp., 332 U.S. 194, 196, 67 S.Ct. 1575, 1577, 91 L.Ed. 1995 (1947)).
71
Because the arbitrary and capricious standard focuses on the rationality of an agency's decisionmaking process rather than on the rationality of the actual decision, "[i]t is well-established that an agency's action must be upheld, if at all, on the basis articulated by the agency itself." Motor Vehicle Mfrs., 463 U.S. at 50, 103 S.Ct. at 2870. Thus, the grounds upon which the agency acted must be clearly disclosed in, and sustained by, the record. American Petroleum, 540 F.2d at 1029 (construing Motor Vehicle Mfrs.). The agency must make plain its course of inquiry, its analysis and its reasoning. Id. After-the-fact rationalization by counsel in briefs or argument will not cure noncompliance by the agency with these principles. Id. If the agency has failed to provide a reasoned explanation for its action, or if limitations in the administrative record make it impossible to conclude the action was the product of reasoned decisionmaking, the reviewing court may supplement the record or remand the case to the agency for further proceedings. Motor Vehicle Mfrs., 463 U.S. at 34, 50-57, 103 S.Ct. at 2862, 2870-74; Camp v. Pitts, 411 U.S. 138, 143, 93 S.Ct. 1241, 1244, 36 L.Ed.2d 106 (1973); see Thomas Brooks, 920 F.2d at 643-44. It may not simply affirm.
72
In addition to requiring a reasoned basis for agency action, the "arbitrary or capricious" standard requires an agency's action to be supported by the facts in the record. In reviewing the administrative record for factual support, we adopt the analysis articulated by then-Judge Scalia in Ass'n of Data Processing v. Bd. of Governors, 745 F.2d 677, 683 (D.C.Cir.1984), and rule informal agency action will be set aside as arbitrary if it is unsupported by "substantial evidence." This is not to substitute the "arbitrary or capricious" standard applicable to informal agency action under Sec. 706(2)(A) with the arguably more stringent standard of review applicable to formal agency action under Sec. 706(2)(E). It is simply an acknowledgment that
73
"[w]hen the arbitrary or capricious standard is performing that function of assuring factual support, there is no substantive difference between what it requires and what would be required by the substantial evidence test, since it is impossible to conceive of a 'nonarbitrary' factual judgment supported only by evidence that is not substantial in the APA sense."
74
Id. at 684 (emphasis in original).25 Evidence is substantial in the APA sense if it is "enough to justify, if the trial were to a jury, a refusal to direct a verdict when the conclusion to be drawn is one of fact." Id. (quoting Illinois Central R.R. v. Norfolk & Western Ry., 385 U.S. 57, 66, 87 S.Ct. 255, 260, 17 L.Ed.2d 162 (1966)).
75
The government does not address the "arbitrary or capricious" standard of review. Instead, it asserts the yield and deficiency payment reductions at issue were the result of the ASCS's interpretation of its own regulations, which interpretation is entitled to "substantial deference." Aplees.' Br. at 5-6 (citing Renfro v. City of Emporia, 948 F.2d 1529, 1537 (10th Cir.1991), City of Gillette v. FERC, 737 F.2d 883, 885 (10th Cir.1984), Grynberg v. Watt, 717 F.2d 1316 (10th Cir.1983), and City of Aurora v. Hunt, 749 F.2d 1457, 1462 (10th Cir.1984)). The government misses the point. An agency's interpretation of its own regulations may well be entitled to "substantial deference"; but it nevertheless will be set aside if it is the product of a decisionmaking process deemed arbitrary or capricious, or if it lacks factual support. See Data Processing, 745 F.2d at 683-84.
IV. Analysis
A. The District Court's Review
76
As set forth above, the scope of review under the "arbitrary or capricious" standard is narrow, but it is not without dimension. Under this standard, the District Court was required to review the ASCS's decisionmaking process and determine whether the ASCS examined all relevant data and articulated a satisfactory explanation for its action, including a rational connection between the facts found and the choice made. Motor Vehicle Mfrs., 463 U.S. at 43, 103 S.Ct. at 2866. It was also required to conduct a plenary review of the record to ascertain whether the agency's action was supported by "substantial evidence." See Ass'n Data Processing, 745 F.2d at 683-84. We find the District Court failed on both counts.
77
With respect to the factual support for the agency's action, we have held the "substantial evidence" test to impose affirmative duties on a district court: the court must consider conflicts in the record and "define, specifically, those facts which it deems supportive of the agency decision if that is the court's resolution of the matter." Hill v. Morton, 525 F.2d 327, 328 (10th Cir.1975) (citing Nickol v. United States, 501 F.2d 1389, 1391 (10th Cir.1974) and Heber Valley Milk Co. v. Butz, 503 F.2d 96 (10th Cir.1974)); see Overton Park, 401 U.S. at 415, 91 S.Ct. at 823. This requires a plenary review of the record as it existed before the agency. Nickol, 501 F.2d at 1391. The district court may not rely on counsel's statements as to what was in the record; the district court itself must examine the administrative record and itself must find and identify facts that support the agency's action. Heber Valley, 503 F.2d at 98.
78
Although the District Court's order in the present case provides a synopsis of the contested facts on appeal and purports to find support for facts found by the agency, little of the support came from the administrative record. Instead, it came from counsel's briefs and facts asserted for the first time on appeal. Gaps in the articulation of the agency's reasons for its actions were filled on appeal as well. Illustrative examples follow.
79
1. The Agency did not Determine Late Planting was Due to Reasons Within the Farmers' Control.
80
The District Court initially agreed with the Farmers that Wheat Program rules and regulations required the county committee to find "changed practices" and determine the change was due to reasons "within the producers' control" before imposing yield or deficiency payment reductions. Olenhouse, 807 F.Supp. at 692. The administrative record, however, was silent as to any such determination. The District Court tried three ways to supply it or otherwise remedy the defect.
81
First, it speculated the agency had, in fact, made the requisite determination:
82
"In this case, the agency found changed practices that called for yield reductions. The agency knew that a disaster had occurred but obviously felt that fact should not alter its findings."
83
Id. at 691.
84
Next, the District Court supplied the determination itself:
85
"In this case, there were changed practices in that farmers do not normally plant wheat in January and February. These changed practices were the farmers' decisions to make.... Although the earlier flooding was not within the control of the producers, the decision to plant late, or at all, was within their control."
86
Finally, the Court interpreted the ASCS Handbook as having actually done away with the requirement:
87
"[P]laintiffs argue that you [sic] cannot reduce for conditions that are a direct result of a disaster. Plaintiffs arguably misread p 414 of the ASCS Handbook. Paragraph 414 only states that the agency is required to determine whether any of the low production is a result of the disaster. The agency can determine that the lower yields are not a result of the disaster and thereby reduce the yield. An agency's interpretation of its own regulations is given controlling weight unless plainly inconsistent with the regulation."
88
Id. at 693.
89
It is the District Court which "arguably misreads p 414,"26 but that is not the point.27 The salient issue here is none of the explanations or justifications offered by the District Court for the agency's action, including the interpretation of p 414 attributed to the agency, was ever articulated by the agency itself. "An agency's action must be upheld, if at all, on the basis articulated by the agency itself." Motor Vehicle Mfrs., 463 U.S. at 50, 103 S.Ct. at 2870. The District Court noted that reductions were imposed and assumed the agency made the determinations necessary to allow them to be imposed. This attempt to supply a reasoned basis for the agency's action therefore was impermissible and prejudicial. See id. at 43, 103 S.Ct. at 2866 (district court may not make up for deficiencies in agency record by supplying reasoned basis for agency action).
90
2. Factual Basis Upon Which District Court Affirmed Agency Action Product of Post-Hoc Rationalization and Not Supported by the Record.
91
a. Yield Reductions--The Kilgore Affidavit
92
In relying on counsel's statements as to what was in the record and isolated bits of evidence, the District Court failed to identify and define facts supportive of the agency's decision as required by the law of this circuit. See Hill v. Morton, 525 F.2d at 328. Affirmance of agency action cannot rest on such infirm grounds. See Heber Valley, 503 F.2d at 98; Pettyjohn v. Sullivan, 776 F.Supp. 1482, 1485 (D.Colo.1991), vacated and remanded on other grounds, 13 F.3d 406 (10th Cir.1993) (citations omitted). The Court's selective reliance on the affidavit of the Farmers' expert agronomist, Gary Kilgore, is illustrative.
93
As part of the administrative appeals process, the Farmers submitted the affidavit of Kansas agronomist Gary Kilgore. Aplts.' App. at 59-60. The affidavit sets forth the results of research undertaken by Kilgore in which he analyzed wheat yield data for southeast Kansas from 1983 to 1987. Id. at 59 (Kilgore Aff. at 1). Based on this data, Kilgore found "winter wheat planted in January and February can do as well as winter wheat planted in October, November and December, depending on the spring weather," and concluded there was "no scientific basis" for reductions in 1987 wheat yields of 15%-25% for wheat planted in January and 35%-50% for wheat planted in February. Id.
94
The Kilgore affidavit does not support the agency's conclusion that late planting was expected to result in lower yields, and neither the agency nor its counsel relied on it during the administrative process. Once review was sought in the District Court, however, the agency used a selective reading of the Kilgore affidavit to explain the agency's action and provide "support" for the reductions imposed. See Supp.R. II (Defs.' Mem.Supp.Mot. for J. at 4). The District Court adopted, verbatim, the government's post hoc rationalization, stating "defendants submitted evidence that showed wheat planted in November will produce between 74.8% and 83.3% of that planted in October." Olenhouse, 807 F.Supp. at 692 (citing Admin.R. at 62). It used this to conclude there was evidence to support the agency's determination that late planted wheat "would result in yield reductions." Id.
95
The government's reading of the Kilgore affidavit is not only an inadequate basis for review as a matter of law, it is insupportable as a matter of fact. The Kilgore affidavit indeed states that for crop years 1983-84 and 1986-87, wheat planted at Kilgore's experimental station in another Kansas county in October outproduced wheat planted in November. Aplts.' App. at 59. Yet it also states that for crop year 1985-86, wheat planted in January outproduced wheat planted in October. Id. Moreover, had the District Court reviewed other parts of the administrative record, it would have learned that in 1987, the crop year at issue, wheat planted in January outproduced wheat planted in either November or October. See, e.g., Admin.R. at 591 (Olenhouse testimony).
96
Isolated bits of evidence, taken out of context and overwhelmed by other evidence, will not support an affirmance of agency action. By relying on such "evidence," the District Court committed reversible error.
97
b. The Agency's Conclusion that the Farmers were not "Misinformed" Regarding Yield Reductions for Weather-Related Late Planting
98
During the course of their administrative appeals, the Farmers argued they were misled by county and state ASCS officials regarding the effect of late planting. Admin.R. at 24-25, 700-778. They claimed information received at the January meeting in Topeka, the spring approval of their Wheat Program Applications, and the receipt of unreduced advances and disaster credits all indicated they would receive full payment under the program. Id. They asserted that despite numerous requests for clarification, the agency waited until December 1987, nearly one year after the wheat was planted, to notify the Farmers their yields were being reduced. Id. The agency rejected the Farmers' contentions, and summarily concluded they were "not misinformed." Aplts.' App. at 50.
99
The agency made no findings of fact regarding "misinformation" and articulated no explanation for its summary conclusion. In a demonstration of ipse dixit, it simply stated "our review [of the record] indicates [farmers] were not misinformed by county office personnel regarding payment yields." Id. There can be no affirmance of agency action on this record because the record does not permit a reviewing court to assess whether the action was the product of reasoned decisionmaking. Motor Vehicle Mfrs., 463 U.S. at 43, 50, 52-57, 103 S.Ct. at 2866, 2870, 2871-74.
100
There is no basis in the administrative record to support the District Court's upholding of the agency's conclusion that the Farmers were not misinformed. In finding there was support the District Court first relied on defendants' contention that the Farmers received written notice their yields may be reduced in November and December of 1986:28
101
"[A]lthough plaintiffs present many sound arguments for lack of notice, the plaintiffs did have some notice and this court cannot find that the agency's finding of adequate notice was arbitrary and capricious."
102
Id. The administrative record does not support defense counsel's characterization of what it contained. Reading the record correctly, the District Court could not have concluded the November and December "notice" substantially supported the agency's conclusion.
103
The Notice of Yield and Acreage Bases (CCC Form 457) at issue is a standard form sent to all program participants at the beginning of the crop year. See Admin.R. at 819-959. Its purpose is to confirm the number of acres each farmer has in the program and set forth projected yields. Id. The "notice" to which defendants referred is boilerplate language notifying participants generally that program "yield[s] may later be reduced if practices actually carried out are different and would not normally produce the yields established." This language does not, as the government suggested in its briefs to the District Court for the first time on review, purport to notify the Farmers their 1987 yields would be reduced for late planting notwithstanding the fact of fall flooding. See id. Moreover, as these notices were sent months before the Topeka meeting and the Farmers' receipt of unreduced advances and full disaster credit under the Wheat Program, they do nothing to address Farmers' misinformation claim or explain the agency's rejection of it.
104
Second, in rationalizing the agency's action the District Court relied upon and mischaracterized a single page of testimony from the state ASCS committee hearing. Olenhouse, 807 F.Supp. at 692 (citing Admin.R. at 623, testimony of Bob Olson). The District Court characterized Olson's testimony as
105
"evidence ... merely that the county committee did not indicate yield reductions (Admin.R. at 623); there was no evidence that yield reductions could not occur. Thus, because no assertions were given to plaintiffs saying that reductions were impossible, the agency found no misinformation."
106
Id. The testimony cited does not support the meaning ascribed it by the District Court. What Bob Olson said was he could not "remember" whether any member of the state committee at the Topeka meeting indicated farmers would receive reductions if they planted late. Admin.R. 623:15-21. This is not "evidence" of what the Farmers were told or not told by anyone, much less the county committee. Moreover, had the District Court reviewed the rest of the record regarding the Topeka meeting instead of relying on the agency's characterization of an isolated and irrelevant segment of Bob Olson's testimony, it would have discovered every member of the plaintiff class of farmers who attended the Topeka meeting and testified before the state committee swore under oath he was told to "go plant" his wheat and that as long as it was done in a "workmanlike manner," no yield reductions would be imposed. E.g., Admin.R. at 626 (Olson testimony), 634 (Porter testimony); see id. at 734 (Walker letter), 735 (Eisele letter), 743 (McVey letter), 777 (Olenhouse letter).
107
3. The Procedure Used by the District Court was Fundamentally Inconsistent with the Review Process Required under the APA.
108
The District Court's reliance on arguments, documents and other evidence outside the administrative record is due, at least in part, to the illicit procedure it employed to determine the issues for review. The District Court processed the Farmers' appeal as a separate and independent action, initiated by a complaint and subjected to discovery and a "pretrial" motions practice. See Supp.R. II at Tab 5 (District Court Docket Sheet). After the District Court denied a motion filed by defendants seeking to dismiss the Farmers' appeal on grounds the Federal Court of Claims had exclusive jurisdiction and granted Farmers' motion for class certification (see Olenhouse, 136 F.R.D. at 679), defendants sought summary review of the Farmers' appeal by filing a "Motion to Affirm" the agency's action.29 Supp.R. II at Tab 1. This motion was postured as one for summary judgment, supported by a statement of "undisputed facts" as required by Rule 206 of the Kansas Rules of Practice and Procedure and 44 pages of attachments. Id. The following day, the Farmers filed what they denominated a "Motion for Summary Judgment," but which was, in effect, their brief on appeal. See id. at Tab 2. Each side filed a response to the other's motion. Id. at Tabs 3, 4. Defendants appended a copy of their Motion to Affirm (including attachments) to their response to the Farmers' Motion for Summary Judgment. Id. at Tab 4. The appeal was decided on defendants' Motion to Affirm. Olenhouse, 807 F.Supp. at 690-93.
109
This process, at its core, is inconsistent with the standards for judicial review of agency action under the APA. The use of motions for summary judgment or so-called motions to affirm permits the issues on appeal to be defined by the appellee and invites (even requires)30 the reviewing court to rely on evidence outside the administrative record. Each of these impermissible devices works to the disadvantage of the appellant. We have expressly disapproved of the use of this procedure in administrative appeals in the past,31 and explicitly prohibit it now.
110
A district court is not exclusively a trial court. In addition to its nisi prius functions, it must sometimes act as an appellate court. Reviews of agency action in the district courts must be processed as appeals. In such circumstances the district court should govern itself by referring to the Federal Rules of Appellate Procedure. Motions to affirm and motions for summary judgment are conceptually incompatible with the very nature and purpose of an appeal.
111
Based on these and other errors, the District Court misapplied the "arbitrary or capricious" standard applicable to informal agency action. It failed to engage in a substantive review of the record to determine if the agency considered relevant factors or articulated a reasoned basis for its conclusions. Instead, it relied on the post hoc rationalizations of counsel or attempted itself to supply a reasoned basis for agency action without regard to the contents of the administrative record. Any one of these errors would warrant reversal; their cumulative effect mandates it.
112
When a district court fails to conduct the requisite plenary review and make necessary factual findings to support the affirmance of agency action, we may either vacate its order and remand for further proceedings or we may conduct the necessary review ourselves based on the same administrative record considered by the district court. Nickol, 501 F.2d at 1392. Having already obtained and reviewed the administrative record in this case, we choose the latter course.
113
In reviewing the agency's action, we must render an independent decision using the same standard of review applicable to the District Court. Webb v. Hodel, 878 F.2d 1252, 1254 (10th Cir.1989). Once appealed, the District Court's decision is accorded no particular deference. Id.
B. The Farmers' Contentions on Appeal
114
As set forth above, we review informal agency action under the standards set forth in Overton Park and Motor Vehicle Mfrs. We review the record for "substantial evidence." See Data Processing, supra, n. 22 and accompanying text. Because we reverse the agency's action on other grounds, we decline to reach the Farmers' constitutional claim. See generally Rosenberg v. Fleuti, 374 U.S. 449, 451, 83 S.Ct. 1804, 1806, 10 L.Ed.2d 1000 (1963) (federal courts should decline to rule on constitutional issues unless necessary).
115
1. Appellants' Contention the Reductions Imposed were Arbitrary and Capricious.
116
a. Yield Reductions Were Unsupported by the Administrative
Record
117
The Farmers contend the record does not support the yield and deficiency payment reductions imposed by the ASCS and affirmed by DASCO on administrative appeal. Aplts.' Br. at 19. The government disagrees, claiming the reductions were "based on the administrative record." Aplees.' Br. at 9. We find the agency's action unsupported by substantial evidence in the administrative record as it existed before the agency and thus "arbitrary or capricious" under APA Sec. 706(2)(A).
118
Evidence is substantial in the APA sense if it is "enough to justify, if the trial were to a jury, a refusal to direct a verdict when the conclusion to be drawn is one of fact." Id. at 684 (quoting Illinois Central R.R. v. Norfolk & Western Ry., 385 U.S. 57, 66, 87 S.Ct. 255, 260, 17 L.Ed.2d 162 (1966)). "Substantial evidence" is more than a mere scintilla; it must be such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Frey v. Bowen, 816 F.2d 508, 512 (10th Cir.1987) (citing Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971)). Evidence is not substantial if it is overwhelmed by other evidence, Ellison v. Sullivan, 929 F.2d 534, 536 (10th Cir.1990), or if it constitutes mere conclusion, see Ray v. Bowen, 865 F.2d 222, 224 (10th Cir.1989).
119
The Farmers challenge the factual basis of DASCO's conclusion that they were not "misinformed" regarding the imposition of yield reductions for late planting. Aplts.' Br. at 23. They claim DASCO erroneously assumed the reductions at issue were imposed by the Wilson County Committee when, in fact, they were imposed by Lloyd Johnston. Id. at 22. The Farmers contend the committee explicitly determined not to reduce their yields, a determination upon which they relied. Although the administrative record is less than lucid as to what the original Wilson County Committee did, the evidence supports the Farmers', not the agency's, contentions regarding "misinformation" as to how and when yield reductions would be imposed.
120
At the Topeka meeting in early January 1987, the Wilson County ASCS Committee concluded yield reductions would not be imposed if farmers planted their wheat in a workmanlike manner. The Farmers planted, received advances and disaster credit (neither of which was reduced to reflect lower expected yields due to changed practices within the Farmers' control), and otherwise complied with Wheat Program regulations. In December 1987, the State Committee deemed Wilson County Committee's policy permitting late planting without reductions "unreasonable," and directed Lloyd Johnston to reduce participating farmers' yields. See Admin.R. at 39 and text, supra, at 1570-71. According to the Farmers, they had been led down the garden path.
121
We have already determined the District Court erred in affirming DASCO's conclusion that the Farmers had not been "misinformed" because DASCO failed to provide a reasoned explanation for the conclusion or identify the facts considered. See text, supra at 1578-79. We now find DASCO's conclusion is also unsupported by substantial evidence in the record and set it aside on those grounds as well. See id.
122
b. Agency Misapplied Program Rules and Regulations
123
The Farmers assert the ASCS failed to comply with the laws governing the Wheat Program in reducing the Farmers' yields and deficiency payments. Aplts.' Br. at 25. Specifically, they claim the agency failed to consider the weather or determine Farmers' late planting was the result of causes beyond their control as required by 7 C.F.R. Sec. 713.6 and ASCS Handbook p 414(A), and contend the Secretary failed to communicate information regarding the 1987 crop season and changes to p 414 in a timely manner as required under the Soil Conservation Act, 16 U.S.C. Sec. 590h(b). Id. at 25-29.
124
Although DASCO ostensibly considered the Farmers' contentions, it summarily concluded the state and county ASCS committees "followed the correct procedures" when they reduced the Farmers' yields and deficiency payments. By failing to discuss the Farmers' contentions or make any findings of fact, DASCO provided no basis for its conclusion. Under the standard set forth in Motor Vehicle Mfrs., 463 U.S. at 43, 50-57, 103 S.Ct. at 2866, 2870-74, we are unable to affirm because a determination that DASCO's action was the product of reasoned decisionmaking is impossible. Moreover, DASCO's action is not supported by substantial evidence in the record.
125
Failure to consider relevant factors--fall 1986 flooding
126
Before yield reductions may be imposed, 7 C.F.R. Sec. 713.6 requires the ASCS county committee to determine whether any reduction in the current year's yields was "the result of causes other than a natural disaster or other condition beyond the producer's control." As far as can be determined from the record, the county committee made no such determination. District Manager Lloyd Johnston made the original decision to reduce the Farmers' yields on behalf of the county committee. He announced his decision in a letter dated December 30, 1987. See, e.g., Aplts.' App. at 162. He cites "changed practices" in the form of "spring planting" as the reason for the reductions imposed, but makes no mention of weather conditions or the fact the county had been declared a disaster area. See id. Other than Mr. VonGarlem's passing remark in his June 1988 letter on behalf of DASCO that "county and state committee members are familiar with ... weather conditions" in the area, there is no indication in the record that Johnston or any member of Wilson County Committee determined late planting was the result of causes within the Farmers' control. In fact, the record supports the opposite conclusion.
127
Throughout the spring and summer of 1987 (well before they were notified of any yield or deficiency payment reductions for the 1987 crop year), the Farmers applied for federal disaster credit on their 1987 crops. Admin.R. at 1313-1318, 1330-1332, 1402-1449, 1491-1499 (CCC Form 574 requests). Without exception, the reasons given for seeking disaster credit related to the fall rains. See, e.g., Admin.R. at 1412 (Lee Bradford Application, condition affecting crop identified as "late planted due to weather"), 1414 (Carlson Brothers, "wet weather prevented timely planting"), 1472 (Don Olenhouse, "excessive moisture"), 1498 (Dale Sharp, "excessive wetness and/or flooding of acres").
128
In order to receive disaster credit under Wheat Program regulations for prevented planting or failed acreage, there must be a determination by the county committee that the prevented planting or failed acreage was the result of "a natural disaster or other condition beyond the producer's control." 7 C.F.R. Sec. 713.105(b) (prevented planting), (c) (failed acreage). This is the same standard that prevents the imposition of yield reductions under Sec. 713.6(c)(1). Thus, it is axiomatic that any determination by the county committee that the Farmers were entitled to disaster credit under Sec. 713.105 prohibits the county committee from imposing yield reductions under Sec. 713.6.32
129
The opposite occurred in this case. In March through June 1987, the Farmers received approval of their applications for disaster credit. See Admin.R. at 1318-1329, 1343-1384, 1457-1490. Yet in December 1987, their yields were reduced. This agency action cannot be reconciled. Rain-induced "late planting" cannot be the result of conditions "beyond the Farmers' control" for the purpose of disaster credit, but the result of conditions "within their control" for the purpose of yield reductions. We find the agency's contrary conclusion both arbitrary and capricious.
130
Failure to Communicate Changes in Wheat Program Regarding
131
Yield Reductions Under 16 U.S.C. Sec. 590h(b)
132
The Farmers assert the Secretary failed to comply with 16 U.S.C. Sec. 590h(b) by failing to communicate changes in Wheat Program rules and policy in a timely manner. The essence of the Farmers' argument is not the Secretary's alleged failure to comply with the Soil Conservation Act, but the effect that failure had on the Farmers' decision to plant program wheat in the Spring of 1987. We have already concluded the agency's determination that the Farmers were not "misled" by the agency's silence must be set aside as unsupported by the administrative record, and no further elaboration is needed.
133
c. Failure to Observe Minimum Procedural Safeguards
134
The Farmers contend the administrative appeals process in this case was flawed and contrary to ASCS regulations. Aplts.' Br. at 29. Specifically, the Farmers claim the agency kept an inadequate record of the appeals process; failed to acknowledge, incorporate or consider relevant facts presented by individual Farmers, instead reaching generic conclusions announced by form letter; and erroneously rejected their request to confront and cross-examine Lloyd Johnston. Id. at 29-30. The gist of the Farmers' contentions is the agency failed to conduct the appeals process in a manner most likely to obtain the necessary facts, violating their right to a fair hearing and resulting in a decision both arbitrary and capricious. Id. at 30. We agree.
135
Wheat Program regulations make no provision for a hearing on initial determinations by the county committee. They do, however, entitle a dissatisfied program participant to a multi-level appeal of that initial decision, and an informal hearing at each level. 7 C.F.R. Secs. 780.7(a)-(c), 780.8; see Garvey v. Freeman, 397 F.2d at 604; Esch v. Yeutter, 876 F.2d at 992. Where deficiencies in the administrative appeals process call into question whether adjudicative officials considered all relevant factors, agency action will be set aside. Esch, 876 F.2d at 993. Agency action will also be set aside if the administrative process employed violated "basic concepts of fair play." Garvey, 397 F.2d at 612. From what we can determine from the record, the appeals process in this case failed on both counts.
136
Wheat Program regulations require the reviewing authority to conduct informal hearings "in the manner determined by CCC or ASCS to most likely obtain the facts relevant to the matter at issue";33 to provide participants a "full opportunity" to present testimony and documentary evidence;34 to make available upon request "copies of documents, information, or evidence upon which a determination is made or which will form the basis of the determination ... including minutes from county committee or State committee proceedings";35 to prepare, before the hearing, "a written record which [sic] contains a clear, concise statement of the facts as asserted by the participant and material facts found by the reviewing authority";36 and to provide participants with a written notification of the determination that "shall clearly set forth the basis for the determination."37
137
The agency fell short of complying with these regulations in two important respects. As we have already concluded, neither the state committee nor DASCO set forth the basis for their determinations other than to state the Farmers planted their winter wheat in the spring. The agency did not address the fundamental issues raised by the Farmers, namely, that timely planting was impossible due to heavy rains and flooding during the fall planting season; they had been told to "go plant" without risk of reductions; and that Lloyd Johnston failed to make the requisite determination that the reduced yields were due to causes "other than a natural disaster or other condition beyond the producer's control." See 7 C.F.R. Sec. 713.6.
138
Additionally, the agency failed to provide the Farmers with a "full opportunity" to present facts and information relevant to the reductions at the hearing before the state committee. The record indicates the Farmers' counsel asked at the hearing to question Lloyd Johnston, the individual who made the initial determination to reduce the Farmers' yields.38 In response, state ASCS director Bill Mosier told the Farmers' counsel the hearing was "for producers to give input to the state committee, and Mr. Johnston is not available." Admin.R. at 492:4-8. By refusing to make Johnston available, the agency denied the Farmers a "full opportunity" to present relevant facts in violation of 7 C.F.R. Secs. 780.3, 780.9(g).
139
Notwithstanding any specific violation of the appeals regulations, the agency's refusal to permit the questioning of Johnston violated the minimum standards for a fair hearing. In Garvey v. Freeman, we stated the procedural hierarchy for hearings and appeals under 7 C.F.R. Sec. 780 must conform with "basic concepts of fair play," including "a full, albeit informal, discussion of the pertinent issues with the rights of confrontation and cross-examination." Garvey, 397 F.2d at 612 (emphasis added). The Farmers were denied these rights. This denial raises serious questions as to whether the reviewing authorities considered all relevant factors in reaching their decision.
V. Conclusion
140
The decision of the District Court granting the "Motion to Affirm" is reversed and the case remanded. The District Court is instructed to enter judgment in favor of Plaintiffs-Appellants.
*
Honorable John L. Kane, Jr., Senior United States District Judge for the District of Colorado, sitting by designation
1
This point is underscored by the parties' failure to designate the administrative record on appeal. The Farmers included 172 pages of the 1600 page record in their appendix and appellees included none. We supplemented the record on our own to include both the administrative record and the briefs upon which the District Court granted the government's so-called motion to affirm. See Orders dated 9/15/94 (Supplemental Record I) and 9/29/94 (Supplemental Record II)
2
The District Court issued two opinions in this case: Olenhouse et al. v. Commodity Credit Corp. et al., 136 F.R.D. 672 (D.Kan.1991) (Theis, J.) (denying defendants' motion to dismiss for lack of subject matter jurisdiction and granting plaintiffs' motion for class certification); and Olenhouse et al. v. Commodity Credit Corp. et al., 807 F.Supp. 688 (D.Kan.1992) (Kelly, J.) (denying plaintiffs' motion for summary judgment and granting defendants' motion to affirm agency decision). The latter decision is the subject of this appeal
3
All cites to the C.F.R. refer to the 1987 edition applicable here unless otherwise indicated. In 1989, C.F.R. chapter 7, part 713 was redesignated and now appears at 7 C.F.R. Sec. 1413 (1994)
4
This yield, or "farm program payment yield," is a projection of the number of bushels per acre a particular farmer can be expected to harvest under normal conditions using established farming practices. In 1987, the "program payment yield" for a particular farm was the average of its yields for the 1981 through 1985 crop years, excluding the year the yield was highest and the year the yield was lowest. See 7 C.F.R. Sec. 713.6(a)
5
Participants in programs with established acreage limitations may be eligible to receive up to 50% of their anticipated deficiency payments in advance. See 7 U.S.C. Sec. 1445b-2; 7 C.F.R. Sec. 713.104. Participants in the 1987 Wheat Program apparently qualified for advance payments, as several Farmers received them. E.g., Admin.R. at 1503 (Don Olenhouse)
6
DASCO retains equitable power under the regulations to authorize payment of benefits notwithstanding a producer's failure to comply fully with the terms of the contract or applicable regulations. 7 C.F.R. Sec. 791.2. Producers who made "good faith effort[s] to comply" and "rendered substantial performance" may apply to their county ASCS committee for consideration under this provision. Id
7
E.g., 7 C.F.R. Secs. 713.3(l )-(m), 713.4, 713.12
8
E.g., 7 C.F.R. Secs. 713.50-713.53, 713.103, 713.108, 713.6
9
7 C.F.R. Sec. 713.108
10
7 C.F.R. Secs. 713.6 (for the purpose of determining yield reductions), 713.105 (for the purpose of determining disaster credit)
11
7 C.F.R. Secs. 713.6(c) (yield reductions), 713.108(c) (deficiency payment reductions)
12
In determining acreage bases, for example, the county committee must apply requirements set forth at 7 U.S.C. Secs. 1445b-3(c) and 1465, as well as those set out in 7 C.F.R. Secs. 704, 713 and 718. 7 C.F.R. Sec. 713.4
13
See, e.g., 7 C.F.R. Sec. 718.6(b) (compliance audits)
14
See, e.g., 7 C.F.R. Secs. 713.6 (county committee may reduce payment yields), 713.4, .12 (committee may reduce or increase amount of acreage eligible for program benefits), 718.6 (same)
15
The record is limited to three pages of instructions related to p 414 of the Handbook, and three related interpretive "PA Notices." Aplts.' App. 192-93; Aplees.' Supp.App. at 33-42
16
Because we are obligated to undertake an independent review of the agency's action in this appeal, see Thomas Brooks Chartered v. Burnett, 920 F.2d 634 (10th Cir.1990), we are not bound by the District Court's recitation of the facts below. See Olenhouse v. Commodity Credit Corp., 807 F.Supp. 688 (D.Kan.1992). We state at the outset, however, that our efforts are hampered by the less than coherent manner in which the facts have been gathered and presented. The Farmers, for example, support many of their factual assertions with the simple parenthetical "admitted in answer." See, e.g., Aplts.' Br. at 8-12, 14-15. Not only have the Farmers neglected to provide us with a copy of the agency's answer, they concede elsewhere the government actually denied the "facts" asserted but because the record "provides no basis" for the denials, the Farmers would set the facts forth as uncontroverted. See Supp.R. II (Mem.Supp.Pls.' Mot.Summ.J. at 2). The Farmers also fail to provide citation to the record for many of their factual assertions. Citations that are provided often fail to support the assertions made
Although the government fares better in this regard, it also fails to support factual assertions with references to the record, and often overreaches when it does.
17
Although the directive on the face of the Notice requires state committees to distribute it to county committees, Wilson County Committee member and Appellant-Farmer Bob Olson testified the first notice he received was in April 1987, after he and other Appellant-Farmers had planted their wheat. Admin.R. at 623
18
The State Committee revised the 100% reductions for winter wheat planted in March and spring wheat planted in April to 62.5% reductions recognizing those producers "act[ed] on information that a payment would be received if wheat were planted and ... compl[ied] with the [Acreage Reduction Requirement of 27.5%] for the 1987 wheat program." Admin.R. at 480 (excerpts of State Committee meeting minutes related to Wilson County appeals). It also determined where yield reductions were less than 10% of the established yield, the reduction would be disregarded
19
The preferred means of identifying a class of appellants is by naming a designated member "as representative of the class." This practice is specifically endorsed in the recently amended version of Rule 3(c), effective in appeals filed after December 1, 1993. Fed.R.App.P. 3(c) ("[i]n a class action ... it is sufficient for the notice to name one person qualified to bring the appeal as representative of the class")
20
It appears only the ASCS has this information. (Aplts.' App. at 20.) In certifying the plaintiff class of individual wheat producers aggrieved by the ASCS's 1988 yield reductions, the District Court estimated their number to be "at least 50" but commented the precise number could not be ascertained because plaintiffs had no access to the information, which was held by the ASCS. Olenhouse, 136 F.R.D. at 679
21
See Thomas Brooks, 920 F.2d at 641-42 (citing Heckler v. Chaney, 470 U.S. 821, 828, 105 S.Ct. 1649, 1654, 84 L.Ed.2d 714 (1985) (before any review under Sec. 706 may be had, a party must first clear the hurdle of Sec. 701(a))
22
Formal agency action includes action in a case subject to a rulemaking provision of the APA, 5 U.S.C. Sec. 553, based on a public adjudicatory hearing, 5 U.S.C. Sec. 556, 557, or "otherwise reviewed on the record of an agency hearing provided by statute." 5 U.S.C. Sec. 706(2)(E); see Overton Park, 401 U.S. at 414, 91 S.Ct. at 822
23
"To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. The reviewing court shall--
"(2) hold unlawful and set aside agency action, findings, and conclusions found to be--
"(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
"(B) contrary to constitutional right, power, privilege, or immunity;
"(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;
"(D) without observance of procedure required by law;
"(E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or
"(F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court.
"In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party, and due account shall be taken of the rule of prejudicial error."
5 U.S.C. Sec. 706 (1988).
24
This standard should not be confused with the "rational basis" test applied in constitutional challenges to legislation drafted by Congress. See Motor Vehicle Mfrs., 463 U.S. at 43 n. 9, 103 S.Ct. at 2866 n. 9. In Motor Vehicle Mfrs., the Supreme Court stated it does not view the presumption of constitutionality afforded legislation drafted by Congress as equivalent to the presumption of regularity afforded an agency when it acts pursuant to statutory mandate. Id
25
Judge Scalia explained that the "scope of review" provisions of Sec. 706(2) are cumulative. Data Processing, 745 F.2d at 683 (citing Overton Park, 401 U.S. at 415, 91 S.Ct. at 823). For example, action supported by substantial evidence under paragraph (E) may nevertheless be an arbitrary and unexplained departure from agency precedent or the result of inferences arbitrarily drawn from the facts found and thus be reversible under paragraph (A). Id. Similarly, in informal agency action where paragraph (E) has no application, paragraph (A) "takes up the slack, so to speak, enabling courts to strike down as arbitrary agency action devoid of needed factual support." Id. The "arbitrary or capricious" standard of Sec. 706(2)(A) is thus a catch-all, picking up administrative misconduct not covered by the more specific paragraphs. Id
26
Paragraph 414 does not require the agency only to determine whether any of the lower expected production is the result of a disaster; it also requires the agency to determine whether any of the lower production is the result of a "changed practice" that is not the result of a disaster, and requires this determination to be made first. Handbook p 414(A)(2)(c), (B)(2)(b). The agency in this case failed to make the latter, threshold, determination
27
We are not bound in our review by either the District Court's factual findings or its legal conclusions. See Thomas Brooks Chartered, 920 F.2d at 644
28
This contention was set forth for the first time by the government in its Response to Plaintiffs' Motion for Summary Judgment below. See Supp.R. II (Defs.' Resp.Pls.' Mot.Summ.J. at 1)
29
At oral argument before us, counsel for the government advised that he had asked persons in the District Court Clerk's office how to proceed and was advised to follow Rule 503 of the Kansas Rules of Practice and Procedure. That rule relates to the filing of social security appeals under Title 42, United States Code, and provides for the filing of "an appropriate dispositive motion and memorandum." In local parlance the appropriate dispositive motion is called a "motion to affirm." For the reasons discussed herein (see n. 31, infra, and the cases cited therein), this rule and practice are specifically disapproved
30
See Fed.R.Civ.P. 56
31
See Hamilton v. Secretary of Health & Human Svcs., 961 F.2d 1495, 1503-04 (10th Cir.1992) (Kane, J. concurring) (reversing district court's granting of motion to affirm in action to review denial of disability benefits); Heber Valley, 503 F.2d at 97-98 (summary judgment improper in action to review Department of Agriculture milk order); Nickol, 501 F.2d at 1391 (where the determination is under APA Sec. 706, the district court is precluded from entering Fed.R.Civ.P. 56 type summary judgment)
32
The government argues this constitutes double-payment and "farming the program." See Aplees.' Br. at 7. We disagree. A disaster credit under 7 C.F.R. Sec. 713.105 is not the same as a disaster payment under Sec. 713.131. As discussed supra at n. 4, a farmer's yields under the Wheat Program are established by averaging his yields over the previous five years. 7 C.F.R. Sec. 713.6(a). Disaster "credit" is thus necessary to avoid a reduction in a farm's established yield by averaging in a year that was low due to no fault of the producer
33
7 C.F.R. Sec. 780.9(b)
34
Id. at 780.9(g), 780.3 (defining "hearing" under this Part)
35
Id. Sec. 780.9(c)
36
Id. Sec. 780.9(d)
37
Id. at 780.17(a)
38
The fact it was an individual, rather than the county committee, who made the initial decision to reduce the Farmers' yields also concerns us. The statutory and regulatory scheme governing the Wheat Program and USDA programs generally makes clear the tremendous reliance placed on the committee system. See text, supra, at 1568. It explicitly requires field decisions affecting farmers' payments under the Wheat Program to be made by a committee of three local farmers, each of whom participates or cooperates in the same or similar programs. Id
| {
"pile_set_name": "FreeLaw"
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770 F.2d 692
2 Fed.R.Serv.3d 786, Bankr. L. Rep. P 70,703
In the Matter of WHITNEY-FORBES, INC., an Illinoiscorporation, Debtor.Appeal of David COAR, as successor to Avrum Dannen, Trustee.
No. 84-2102.
United States Court of Appeals,Seventh Circuit.
Argued April 18, 1985.Decided Aug. 16, 1985.
Leo Feldman, Teller, Levit & Silvertrust, Chicago, Ill., for plaintiff.
Brian O'Neill, Faegre & Benson, Minneapolis, Minn., for defendant.
Before CUMMINGS, Chief Judge, WOOD, Circuit Judge, and GARZA, Senior Circuit Judge.*
CUMMINGS, Chief Judge.
1
This is an appeal from the district court's reversal of a November 10, 1983, bankruptcy court decision to declare void a 1973 judicial sale of a patent in bankruptcy. The trustee argues that the bankruptcy court's November 10, 1983, decision should be reinstated because relief from the 1973 confirming order is authorized by Fed.R.Civ.P. 60(b)(4) and (6). For the reasons set forth below, we affirm the decision of the district court.
2
* The proceeding to vacate the March 13, 1973, bankruptcy court order confirming the sale of the patent at issue to Albert E. Sloan was instituted in 1982 by former trustee Avrum Dannen for the bankrupt estate of Whitney-Forbes, Inc. ("Whitney-Forbes"). David Coar subsequently was substituted as the trustee. Sloan was the president of Whitney-Forbes at the time of the initial bankruptcy proceedings and in late 1972 he sought to purchase from the bankruptcy estate certain litigation and U.S. Patent No. 3,455,507 ("patent 507" or "the 507 patent"). Trustee Dannen filed an application for leave to sell five causes of action in February of 1973 and notice of their proposed sale was issued to creditors. The 507 patent was not listed in the notice. The order authorizing the sale of the causes of action, however, expressly listed the 507 patent. The order was drafted by Dannen, presented in open court on March 13, 1973, and signed by Bankruptcy Judge Toles. No discussion regarding the patent occurred at the March 13 hearing and all the assets were sold for $250.1
3
There is conflict in the testimony given by Sloan, Dannen and the bankrupt's attorney, Mr. James Nachman, in the instant bankruptcy court proceedings, regarding how the 507 patent found its way into the March 13 order. Dannen stated that Nachman requested him to include the patent in the order, while Sloan testified that he did not speak to Dannen regarding the patent but did request Nachman to procure the asset for him. Nachman testified, however, that he never discussed the patent with Sloan or Dannen and had no idea how it came to be included in the March 13 order. (Tr. 8/22/83, pp. 70-72, 151-153; Tr. 9/19/83, p. 155.) On May 6, 1974, Dannen executed an assignment of the patent, transferring it to Sloan. There is testimony from Dannen, Sloan and the inventor of the patent, Frans Brouwer, that as an unlicensed patent, the 507 patent in 1973 had little or no value, worth at most $250 to $500. (Tr. 8/22/83, p. 186; Tr. 9/19/83, pp. 187, 193.) Several attempts to license the patent and market the underlying invention (a spray-paint gun) had failed (Tr. 9/19/83, pp. 177-220).
4
In the years following the sale, Sloan, Brouwer and others invested substantial time and money to develop and market a spray-paint gun invention, leading to a second patent and, after unsuccessful attempts, a patent licensing and marketing agreement in 1976 with Graco, Inc. Production of a spray-paint gun began two years later based in part on the 507 patent. A dispute between Graco and Sloan arose which culminated in litigation in 1981 and apparently sparked the instant proceedings. In July of 1982 Dannen succeeded in having Bankruptcy Judge Toles reopen the Whitney-Forbes bankruptcy and substituted trustee Coar then petitioned the bankruptcy court to set aside the 1973 confirmed sale of the 507 patent on the ground of fraud by a party and fraud on the court (7/30/82 Application p 13; Tr. 8/22/83, p. 36). The case was subsequently reassigned to Bankruptcy Judge Merrick.
5
Following a trial Bankruptcy Judge Merrick issued an Opinion and Order of November 10, 1983, which relied exclusively on Fed.R.Civ.P. 60(b)(4) to declare the March 13, 1973, order void with respect to the sale of patent 507. From the testimony presented to the court and its review of the circumstances surrounding the March 13, 1973, sale, the court made the following findings regarding the suspicious inclusion of the 507 patent:
6
(1) that intentionally he [Sloan] concealed the existence of patent 507 so that he would not have to bid for it competitively in the event of a liquidation, nor have to bargain with creditors on the basis of it in establishing the terms of a plan of reorganization;
7
(2) that Sloan negotiated with Dannen to have the patent transferred to Sloan in a manner which would avoid public participation or competition; and;
8
(3) that at some point Sloan and Dannen devised an explanation of events which would describe them as being innocent and unaware and would cause the moving party in the scheme of transfer to appear to have been James Nachman.
9
(11/10/83 Order at 32). The court explained that the case essentially involved "collusion between two persons who have fiduciary relationships to the Court and to other parties to the proceeding," but also noted the irregularities of nondisclosure of assets, lack of notice to creditors of a sale of assets and a sale of assets below market value (11/10/83 Order at 33). The court, however, specifically found in its subsequent Opinion and Order of January 6, 1984, that there was no evidence to suggest fraud in the case and clarified that the November 10, 1983, Opinion did not suggest fraud (11/6/84 Order at 16). Finally, the bankruptcy court held that there was no evidence enabling it to determine the value of the patent on March 13, 1973.
10
Sloan appealed the decision to the district court which then reversed the bankruptcy court on June 4, 1984, ruling that as a matter of law the March 13, 1973, sale of the 507 patent was not void within the meaning of Fed.R.Civ.P. 60(b)(4). Judge Kocoras additionally found that the equities in the case, including the extraordinary delay in challenging the sale, did not support a vacating of the sale. The trustee appeals.
II
11
As this Court has recently held, the decision of a court to set aside a confirmed judicial sale in bankruptcy is an extraordinary one and may be permitted only in limited circumstances. See Matter of Chung King, Inc., 753 F.2d 547, 549 (7th Cir.1985). The relevant standard governing the vacating of a judicial sale in bankruptcy is provided by Bankruptcy Rule 90242 entitled "Relief from Judgment or Order," which makes Rule 60, Fed.R.Civ.P.,3 applicable to bankruptcy cases, except in limited circumstances not applicable here. 4B COLLIER'S BANKRUPTCY p 70.98, p. 1183 (14th ed. 1978).
12
Rule 60(b), Fed.R.Civ.P., lists six reasons justifying a court in relieving a party of a judgment, order or proceeding. As noted, the bankruptcy court expressly based its decision to vacate on Rule 60(b)(4) which allows relief where "the judgment is void." The district court was entirely correct in ruling that Rule 60(b)(4) cannot provide a basis for relief under these circumstances. It is clear that relief under Rule 60(b)(4) is granted only in "exceptional circumstances," C.K.S. Engineers, Inc. v. White Mountain Gypsum Co., 726 F.2d 1202, 1205 (7th Cir.1984). The rule "is construed very narrowly and a judgment is normally void only if the rendering court lacked either subject matter jurisdiction or jurisdiction over the parties." Planet Corp. v. Sullivan, 702 F.2d 123, 125 n. 2 (7th Cir.1983). The power of the bankruptcy court in 1973 to confirm the sale of the 507 patent has not been contested. Even gross errors committed by a court in reaching a decision do not render the court's judgment or order void. See In re Texlon Corp., 596 F.2d 1092, 1099 (2d Cir.1979). But an order may be void if the issuing court acted in a manner inconsistent with due process of law, see 11 C. WRIGHT & A. MILLER, FEDERAL PRACTICE & PROCEDURE Sec. 2862, p. 200 (1973), or where the court's action involved a " 'plain usurpation of power.' " Margoles v. Johns, 660 F.2d 291, 295 (7th Cir.1981), certiorari denied, 455 U.S. 909, 102 S.Ct. 1256, 71 L.Ed.2d 447 (quoting V.T.A., Inc. v. Airco Inc., 597 F.2d 220, 224-225 (10th Cir.1979). The trustee points to no case holding that lack of notice of a bankruptcy sale violates due process nor does it appear that due process considerations are apposite in this case. The bankruptcy court's action in 1973 authorizing the sale of the 507 patent at worst amounts to benign neglect and not any intentional usurpation of power.
13
Our review does not end here, however, since it does not appear that the trustee specifically or exclusively requested relief in the bankruptcy court under Fed.R.Civ.P. 60(b)(4). See supra p. 695. Before this Court the trustee appears to argue (with less than remarkable clarity) that wholly apart from any Rule 60(b)(4) argument the bankruptcy court decision to vacate should be reinstated due to the existence of fraud or wrongful conduct by a party (Reply Br. 9, Br. 27) or because of fraud on the court (Br. 28-29). Much of the authority cited by the trustee relates to pre-Bankruptcy Rule 924 caselaw, which, as noted in Chung King, 753 F.2d at 550, is largely consistent with Fed.R.Civ.P. 60(b) and allows a confirmed sale to be overturned in the presence of fraud, error, or similar defect where compelling equities outweigh the interests in finality of judicial sales. See 753 F.2d at 550. In an ordinary situation the trustee would appear to have a sound argument to support the vacating of the sale here since the lack of notice present in this case is the factor most often relied upon to justify the setting aside of a confirmed sale. See id. at 551. This is not an ordinary situation, however, in view of the nearly ten years that have passed since confirmation of the sale. As noted by the district court, the long delay of the trustee in presenting his claim is relevant to the pre-Rule 924 "compelling equities" inquiry (see, e.g., In re Cada Investments, 664 F.2d 1158, 1163 (9th Cir.1981); district court opinion at 6-7), but in light of Rule 9024 it is more appropriate to address the delay issue by direct reference to Fed.R.Civ.P. 60(b).
14
The trustee on appeal appears to characterize his action as a request for relief from an order by motion under Fed.R.Civ.P. 60(b). It is clear that the bankruptcy court so interpreted it. In view of the bankruptcy court's findings regarding Sloan's behavior, supra p. 695, which would appear to raise an issue under Rule 60(b)(3) "fraud * * *, misrepresentation, or other misconduct of an adverse party"), the court's attempt to fit these facts under the clearly inapplicable void judgment Rule 60(b)(4) is perhaps explained by the court's recognition (11/10/83 Order at 35) that any claim based on Rule 60(b)(3) would be untimely because of the requirement of Fed.R.Civ.P. 60(b) that Rule 60(b)(1), (2) and (3) motions be made "not more than one year after the judgment, order, or proceeding was entered or taken." Supra note 3. It is interesting to note that the one-year limitations period set forth in Fed.R.Civ.P. 60(b) arguably may not have been applicable to this case since Bankruptcy Rule 924, which first made the limitations periods applicable to bankruptcy proceedings, did not become effective until October 1 of 1973, whereas the bankruptcy court's order confirming the sale of the 507 patent was entered in March of 1973. It is by no means certain, however, that the Rule 60(b) specific time limitations were not in force prior to October 1, 1973. See 4 C. WRIGHT & A. MILLER, supra, at Sec. 1016, p. 88. It is in any event clear that any motion under Rule 60(b), except for Rule 60(b)(4) (see Taft v. Donellan Jerome, Inc., 407 F.2d 807 (7th Cir.1969)), must be made within a reasonable time, and it is fair to say that such a requirement applied in bankruptcy prior to 1973. See supra note 2; 11 C. WRIGHT & A. MILLER, supra, at Sec. 2866, pp. 228-231.
15
Relevant to the inquiry of reasonable timeliness here is prejudice to the party opposing the motion, see Jackson v. Jackson, 276 F.2d 501 (D.C.Cir.1960), certiorari denied, 364 U.S. 849, 81 S.Ct. 94, 5 L.Ed.2d 73, and more importantly the basis for the moving party's delay. See Smith v. Security Mutual Casualty Co. v. Century Casualty Co., 621 F.2d 1062, 1068 (10th Cir.1980); Central Operating Co. v. Utility Workers of America, AFL-CIO, 491 F.2d 245, 252-253 (4th Cir.1974). Here both of these concerns lead us to conclude that the delay in this case was unreasonable and that the bankruptcy court's decision to vacate the March 1973 order approving the sale of the 507 patent was erroneous. First, as the district court pointed out, the order confirming this sale was presented, signed and docketed in open court. See supra p. 694. Although in view of the circumstances none of the creditors could have been expected to anticipate the transfer of the 507 patent, we do not think it unfair to place a duty on all interested parties to scrutinize final and binding orders confirming sales of assets of the bankrupt. Furthermore, the trustee and the creditors were put on inquiry notice between 1976 and 1978 that the former president of the bankrupt was in possession of an asset of the estate. As noted, supra p. 695, Sloan entered a patent licensing and marketing agreement with Graco, Inc. in 1976 and began production of a spray-paint gun based in part on the patent in 1978. Sloan also spoke publicly in an interview in early 1978 with a marketing journal about his acquisition of the 507 patent from the estate (Br. 7). It was not until four years later that the petitions to reopen and vacate were filed. There is no evidence that Sloan attempted to conceal his activities. The delay involved was unjustified, if not from its inception, certainly from the time Sloan publicly marketed the invention.
16
The prejudice caused by the delay in this case is substantial. It is not contested that a great deal of effort was put forth to refine the patent and market the resulting invention--effort that Sloan and others might not have put forth if they had known they would have to share in the benefits of their toil. With some diligence on the part of the trustee or the creditors, a fair resolution of the problem could have been reached at an earlier time. The delay in the present case was not reasonable and any motions under Rule 60(b) (except 60(b)(4)) were untimely.4
17
If we were to view the trustee's petition as an attempt to bring an independent action for relief from the 1973 order (as is expressly permitted by Rule 60(b), supra note 3), our conclusion would be no different. The doctrine of laches applies to such actions, see Simons v. United States, 452 F.2d 1110 (2d Cir.1971); Lockwood v. Bowles, 46 F.R.D. 625 (D.D.C.1969); 11 C. WRIGHT & A. MILLER, supra, at Sec. 2868, p. 241, and the undue delay outlined above in the present case would amply support a finding of laches.
18
Finally, the trustee's indirect allegations of fraud on the court must be rejected. Fed.R.Civ.P. 60(b) expressly provides that it does not limit the power of a court to set aside a judgment or order for fraud upon the court. Actions to set aside a judgment for fraud on the court are not barred by laches. 11 C. WRIGHT & A. MILLER, supra, at Sec. 2870, p. 250. Fraud on the court involves a particular type of fraud which is "directed to the judicial machinery itself," Bulloch v. United States, 721 F.2d 713, 718 (10th Cir.1983), and which involves circumstances where the impartial functions of the court have been directly corrupted. 11 C. WRIGHT & A. MILLER, supra, at Sec. 2870, p. 254. The cases where it has been found have involved the most egregious conduct involving " 'corruption of the judicial process itself,' " id. at Sec. 2870, p. 255 (quoting Lockwood v. Bowles, 46 F.R.D. at 632), such as bribery of a judge and improper influence with the court. 11 C. WRIGHT & A. MILLER, supra, at Sec. 2870, p. 255.
19
Even assuming that the actions of Sloan and Dannen implicate this particular type of fraud, the bankruptcy court's findings of collusion, supra p. 695, on their own terms do not purport to meet the requisite clear and convincing standard, see DiVito v. Fidelity & Deposit Co., 361 F.2d 936, 939 (7th Cir.1966); Kenner v. Commissioner, 387 F.2d 689, 691 (7th Cir.1968), certiorari denied, 393 U.S. 841, but indicate at best utilization of a preponderance of the evidence test (11/10/83 Order at 31). The court also expressly stated that it did not find fraud and that no evidence was introduced to suggest fraud of any type (1/6/84 Order at 16-17). Under these circumstances a finding of fraud on the court would not be appropriate, and we think the bankruptcy court implicitly so held. Consequently, we rule that any valid claims of the trustee to set aside the March 1973 sale are either untimely or unsupported by the evidence.
The decision of the district court is affirmed.
*
The Honorable Reynaldo G. Garza, Senior Circuit Judge of the United States Court of Appeals for the Fifth Circuit, is sitting by designation
1
There is a dispute among the parties as to whom the order was circulated; although there is evidence that it was circulated to "all parties in interest" (Tr. 8/22/83 at pp. 191-192, Ex. 5 at 13), the trustee claims that the order was circulated only to the attorneys of Whitney-Forbes, whereas Sloan argues that it was distributed to the creditors' committee (oral argument)
2
Rule 9024, promulgated as part of the new Bankruptcy Rules, effective August 1, 1983, states:
Rule 60 F.R.Civ.P. applies in cases under the Code except that (1) a motion to reopen a case under the Code or for the reconsideration of an order allowing or disallowing a claim against the estate entered without a contest is not subject to the one year limitation prescribed in Rule 60(b), (2) a complaint to revoke a discharge in a chapter 7 liquidation case may be filed only within the time allowed by Sec. 727(e) of the Code, and (3) a complaint to revoke an order confirming a plan may be filed only within the time allowed by Sec. 1144 or Sec. 1330.
See 11 U.S.C.A. Rule 9024 (1984).
The Rule originally was issued as Rule 924, effective October 1, 1973, and stated:
Rule 60 of the Federal Rules of Civil Procedure applies in bankruptcy cases, except that a motion to reopen a case or for the reconsideration of an order allowing or disallowing a claim against the estate entered without a contest is not subject to the one-year limitation herein prescribed. This rule does not permit extension of the time allowed by Sec. 15 of the Act for the filing of a complaint to revoke a discharge.
See 11 U.S.C. Appendix--Bankruptcy Rules, Rule 924 (1976).
The Notes of the Advisory Committee recognized the uncertainty over the applicability of part (b) of Rule 60 in bankruptcy proceedings and clarified that the limitations prescribed by Rule 60(b) regarding the availability of relief by motion from a judgment or order are controlling in bankruptcy cases. See 11 U.S.C. Appendix--Bankruptcy Rules, Rule 924 (1976).
3
Rule 60, Fed.R.Civ.P. provides in pertinent part:
* * *
(b) Mistakes; Inadvertence; Excusable Neglect; Newly Discovered Evidence; Fraud, etc. 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; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; 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. * * * This rule does not limit the power of a court to entertain an independent action to relieve a party from a judgment, order, or proceeding, * * * or to set aside a judgment for fraud upon the court. * * * [A]ny relief from a judgment shall be by motion as prescribed in these rules or by an independent action.
4
Thus the trustee's argument that Fed.R.Civ.P. 60(b)(6) justifies the bankruptcy court's decision also must fail
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Order entered February 11, 2013
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-12-00963-CV
CITY OF DALLAS, TEXAS, Appellant
V.
ANTHONY ARREDONDO, ET AL., Appellees
On Appeal from the 199th Judicial District Court
Collin County, Texas
Trial Court Cause No. 199-1743-99
ORDER
The Court has before it appellant’s February 6, 2013 unopposed motion for extension of
time to file its reply brief. The Court GRANTS the motion and ORDERS that any reply brief
be filed by March 13, 2013.
/s/ ELIZABETH LANG-MIERS
JUSTICE
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37 So.3d 864 (2010)
STEWARD
v.
STATE.
No. 2D10-2023.
District Court of Appeal of Florida, Second District.
May 27, 2010.
Decision Without Published Opinion Prohibition denied.
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Docket No. 102430.
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
SUZANNE BAGENT, Appellee, v. BLESSING CARE
CORPORATION, d/b/a Illini Community Hospital, et al., Appellants.
Opinion filed January 19, 2007.
JUSTICE FREEMAN delivered the judgment of the court, with
opinion.
Chief Justice Thomas and Justices Fitzgerald, Kilbride, Garman,
Karmeier, and Burke concurred in the judgment and opinion.
OPINION
Plaintiff, Suzanne Bagent, filed a complaint in the circuit court of
Pike County against defendants, Misty Young and her former
employer, Blessing Care Corporation, doing business as Illini
Community Hospital (Illini Hospital or hospital), under a theory of
respondeat superior. The circuit court entered summary judgment in
favor of Illini Hospital. A divided panel of the appellate court reversed
the judgment. 363 Ill. App. 3d 916. We allowed Illini Hospital’s
petition for leave to appeal. 210 Ill. 2d R. 315(a). We now reverse the
judgment of the appellate court, and remand the cause to the circuit
court for further proceedings.
I. BACKGROUND
The record, which includes Young’s deposition testimony,
contains the following pertinent evidence. In August 2001, Illini
Hospital hired Young as a phlebotomist, i.e., a person trained in
drawing blood. In February 2003, the hospital required employees,
including Young, to attend a training session regarding the Health
Insurance Portability and Accountability Act of 1996 (HIPAA) (Pub.
L. No. 104–191, 110 Stat. 1936) and its privacy provisions. Young
attended the session and signed the hospital’s confidentiality policy
and code of conduct, acknowledging in each document that she
understood and accepted its terms. Attendees at the training session
received a motto to remember: “What you see here, and what you
hear here, remains here.”
Young understood the hospital’s confidentiality rules to mean that
you “[b]asically don’t say anything. Everything is private.” She
understood that the only persons to whom she could give confidential
information were “[d]octors, nurses directly involved with that
patient’s care.” She additionally understood that members of a
patient’s family were not so authorized. Rather, she was “supposed to
tell the family members to get in contact with a nurse that’s taking
care of that patient.”
Young received a fax from a facility that performs tests for Illini
Hospital. The fax contained results of plaintiff’s blood test, which
indicated to Young that plaintiff was pregnant. Young made two
copies, one for plaintiff’s physician and one for hospital records.
On a subsequent weekend night, Young and several of her friends
visited a local tavern. Plaintiff’s sister, Sarah Bagent, was a waitress
there and happened to be one of Young’s best friends. According to
Young’s deposition: “I didn’t plan on going into the bar and trying to
find Sarah, you know. The only thing I was thinking at the moment is,
hi, Sarah, how are you, how is your sister doing?” Young further
recounted her conversation with Sarah as follows:
“Little chitchat here and there, hi, how are you, what’s
going on, how have you been, who are you seeing, stuff like
that. And then how is your sister, Suzanne, and how is she
feeling? And she’s [Sarah] like what do you mean? I’m like I
thought she was pregnant, you know. And she’s like no. And
-2-
from there on out, I told her, I said I’m really sorry. Actually,
I told her I was sorry. I said please don’t tell Suzanne I said
that I told you. Because she told me she’s like how did you
find this out? And she was just asking me more and more
questions. And I’m like, well, I seen her result. I said that I
could get fired for this, I’m really sorry, I didn’t realize that
you didn’t know. I just assumed. And she’s like, no, its okay,
it’s all right. She’s like Suzanne won’t care, blah, blah, blah.”
Young explained that, as soon as she said it, she “instantly knew” that
she had made a mistake.
Further, Young explained her disclosure as follows:
“[T]he only reason why I said something that evening was
because [Sarah] was a friend of mine, and I was assuming that,
one of my best friends and her twin and being sisters, that they
would speak to each other about this. And I just assumed.
And assuming makes an ass out of me.”
That was the only conversation Young had with Sarah. Young
testified in her deposition that they had subsequently avoided each
other.
On October 13, 2003, plaintiff telephoned Connie Schroeder, chief
executive officer of Illini Hospital, to complain that plaintiff’s patient
confidentiality had been violated. Upon investigation, Schroeder
learned that Young had disclosed the information. On December 14,
2003, Young accepted the hospital’s offer of resignation in lieu of
termination.
Plaintiff timely filed a complaint, in which she pled separate counts
not only against Young, but also against Illini Hospital under a theory
of respondeat superior. Plaintiff alleged breach of health-care
practitioner/patient confidentiality, invasion of privacy, negligent
infliction of emotional distress and, against Young alone, intentional
infliction of emotional distress, all based on a violation of the Hospital
Licensing Act (210 ILCS 85/1 et seq. (West 2004)), the Managed
Care Reform and Patient Rights Act (215 ILCS 134/1 et seq. (West
2004)), and article I, section 12, of the Illinois Constitution (Ill. Const.
1970, art. I, §12). Plaintiff also pled common law negligent infliction
of emotional distress and, against Young alone, common law
intentional infliction of emotional distress.
-3-
In its answer, Illini Hospital admitted that Young discovered
certain information about plaintiff from reviewing plaintiff’s medical
records and revealed that information to plaintiff’s sister at a tavern.
Illini Hospital further alleged, however, that when Young revealed the
information, she was acting outside the scope of her employment with
the hospital.
In her answer, Young alleged as follows. At the time the lawsuit
arose, she was an employee of Illini Hospital. Young admitted that, in
the course of her duties, she saw certain medical records pertaining to
plaintiff. Young further admitted that she inadvertently revealed one
of plaintiff’s test results in a private conversation with plaintiff’s twin
sister when asking the sister how plaintiff was feeling.
Discovery adduced the above-recited evidence in the form of
depositions and affidavits with attached documents. Illini Hospital
moved for summary judgment against plaintiff. The hospital
contended, inter alia: that the Illinois Constitution and statutes do not
authorize a private right of action; and that the hospital was not
vicariously liable for Young’s actions because, when Young breached
plaintiff’s confidentiality, she was acting outside the scope of her
employment. Young filed a motion for summary judgment, in which
she joined in the hospital’s summary judgment motion as it pertained
to those counts pled against her. Also, plaintiff moved for partial
summary judgment against Young only on the issue of liability, leaving
the issue of damages for trial.
Following a hearing, the circuit court ruled as follows. The court
entered summary judgment in favor of Illini Hospital and Young on
those counts alleging statutory causes of action, ruling that those
statutes do not authorize a private right of action. Nonetheless, the
court found that a common law right of privacy exists to allow
plaintiff to bring an action against Young for violation of plaintiff’s
common law right to privacy. The court granted plaintiff’s motion for
partial summary judgment against Young regarding whether Young
improperly revealed plaintiff’s confidential information, but the court
ruled that issues as to negligent or intentional infliction of emotional
distress and damages were to be determined at trial.
Further, the circuit court entered summary judgment in favor of
Illini Hospital. The court found that Young’s disclosure to plaintiff’s
sister was not made in the course of or within the scope of Young’s
-4-
employment, and that no jury could find that Young made the
disclosure to serve the purposes of Young’s employer, i.e., the
hospital. In its ruling, the circuit court expressly observed that plaintiff
did not claim that the hospital was directly liable based on any
allegations of negligent hiring or training but, rather, plaintiff claimed
that the hospital was vicariously liable under a theory of respondeat
superior. The court observed that although there could be a cause of
action for negligent hiring or negligent training, by its ruling it was not
addressing or deciding that issue. Also, the court noted that its ruling
would not prohibit or preclude plaintiff from refiling her complaint to
include allegations of negligent hiring or training. The circuit court
expressly found that this was a final judgment as to Illini Hospital, and
that there was no just reason to delay enforcement or appeal of the
judgment. See 210 Ill. 2d R. 304(a).
Plaintiff’s sole contention before the appellate court was that the
circuit court erred in granting summary judgment in favor of Illini
Hospital. Plaintiff argued that the hospital was vicariously liable for
Young’s violation of plaintiff’s common law right to privacy under a
theory of respondeat superior. A divided panel of the appellate court
reversed the summary judgment in favor of the hospital. 363 Ill. App.
3d 916. The appellate court concluded that the disclosure of plaintiff’s
medical information was not the kind of conduct that Young was
employed to perform and that Young was not working as a
phlebotomist at the time of her improper disclosure. 363 Ill. App. 3d
at 923. However, the appellate court concluded that a question of
fact, precluding summary judgment, existed as to whether the purpose
of Young’s disclosure was motivated, at least in part, by a purpose to
serve the hospital. 363 Ill. App. 3d at 923-24. The appellate court
remanded the cause for further proceedings.
Presiding Justice Turner dissented. He opined that no purpose was
served when Young told plaintiff’s sister about plaintiff’s pregnancy.
The dissent opined: “No reasonable jury could find Young’s actions
were even partly motivated by a purpose to serve Illini Hospital.” 363
Ill. App. 3d at 926 (Turner, P.J., dissenting). The dissent reasoned
that, because Young’s conduct was outside the scope of her
employment, Illini Hospital could not be held vicariously liable. 363
Ill. App. 3d at 926 (Turner, P.J., dissenting).
This court allowed Illini Hospital’s petition for leave to appeal.
-5-
210 Ill. 2d R. 315(a). We subsequently granted Cook County and the
Illinois Association of Defense Trial Counsel leave to submit amicus
curiae briefs in support of Illini Hospital. We also granted the Illinois
Trial Lawyers Association leave to submit an amicus curiae brief in
support of plaintiff. 155 Ill. 2d R. 345. We will refer to additional
pertinent background in the context of our analysis of the issues.
II. ANALYSIS
This matter is before us on the grant of summary judgment in
favor of Illini Hospital. The purpose of summary judgment is not to
try a question of fact, but rather to determine whether a genuine
question of material fact exists. Adams v. Northern Illinois Gas Co.,
211 Ill. 2d 32, 42-43 (2004); Gilbert v. Sycamore Municipal Hospital,
156 Ill. 2d 511, 517 (1993). Summary judgment is appropriate only
where “the pleadings, depositions, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a
matter of law.” 735 ILCS 5/2–1005(c) (West 2004).
In determining whether a genuine issue as to any material fact
exists, a court must construe the pleadings, depositions, admissions,
and affidavits strictly against the movant and liberally in favor of the
opponent. A triable issue precluding summary judgment exists where
the material facts are disputed or where, the material facts being
undisputed, reasonable persons might draw different inferences from
the undisputed facts. Although summary judgment can aid in the
expeditious disposition of a lawsuit, it remains a drastic means of
disposing of litigation and, therefore, should be allowed only where
the right of the moving party is clear and free from doubt. Adams, 211
Ill. 2d at 43 (and cases cited therein). If the plaintiff fails to establish
any element of the cause of action, summary judgment for the
defendant is proper. Governmental Interinsurance Exchange v.
Judge, 221 Ill. 2d 195, 215 (2006); Espinoza v. Elgin, Joliet &
Eastern Ry. Co., 165 Ill. 2d 107, 114 (1995). In appeals from
summary judgment rulings, review is de novo. Adams, 211 Ill. 2d at
43; Espinoza, 165 Ill. 2d at 113.
In the present case, the circuit court ruled that plaintiff could
proceed against Young for violation of plaintiff’s common law right
-6-
to privacy, negligent infliction of emotional distress and, which
plaintiff pled only against Young, intentional infliction of emotional
distress. The appellate court held that a genuine issue of material fact
exists whether Illini Hospital is vicariously liable on plaintiff’s
surviving theories.
The general rule is that a person injured by the negligence of
another must seek his or her remedy from the person who caused the
injury. The relation of employer and employee is an exception to this
general rule. Darner v. Colby, 375 Ill. 558, 560 (1941); Metzler v.
Layton, 373 Ill. 88, 91 (1939). Under the theory of respondeat
superior, an employer can be liable for the torts of an employee, but
only for those torts that are committed within the scope of the
employment. Wright v. City of Danville, 174 Ill. 2d 391, 405 (1996);
Pyne v. Witmer, 129 Ill. 2d 351, 359 (1989). Indeed, the employer’s
vicarious liability extends to the negligent, willful, malicious, or even
criminal acts of its employees when such acts are committed within
the scope of the employment. See Mitchell v. Norman James
Construction Co., 291 Ill. App. 3d 927, 932 (1997); Randi F. v. High
Ridge YMCA, 170 Ill. App. 3d 962, 964 (1988); Webb v. Jewel Cos.,
137 Ill. App. 3d 1004, 1006 (1985).
The term “scope of the employment,” used interchangeably with
“in the course of the employment,” refers to a “bare formula,” whose
“very vagueness has been of value in permitting a desirable degree of
flexibility in decisions.” W. Keeton, Prosser & Keeton on Torts §70,
at 502 (5th ed. 1984). The Second Restatement of Agency has
identified three general criteria in determining whether an employee’s
acts are within the scope of employment.
“(1) Conduct of a servant is within the scope of
employment if, but only if:
(a) it is of the kind he is employed to perform;
(b) it occurs substantially within the authorized time
and space limits;
(c) it is actuated, at least in part, by a purpose to serve
the master ***[.]
***
(2) Conduct of a servant is not within the scope of
employment if it is different in kind from that authorized, far
-7-
beyond the authorized time or space limits, or too little
actuated by a purpose to serve the master.’ (Restatement
(Second) of Agency §228 (1958).)” Pyne, 129 Ill. 2d at 360.
These three criteria are generally recognized (see, e.g., 1 J. Lee & B.
Lindahl, Modern Tort Law §7:7, at 7-11, 7-12 (2d ed. 2002); W.
Keeton, Prosser & Keeton on Torts §70, at 502 (5th ed. 1984)), and
Illinois courts look thereto for guidance. Pyne, 129 Ill. 2d at 360. The
Restatement labels section 228 as a “General Statement.” Subsequent
sections elaborate these three criteria. Pyne, 129 Ill. 2d at 360; see
Restatement (Second) of Agency §228, Comment a, at 505 (1958)
(“Sections 229-236 state the circumstances which determine whether
acts can be considered to be within the scope of employment”).
Whether an employee was acting within the course of the
employment depends on the employment contract and the nature of
the relationship, which must exist at the time of and in respect to the
particular facts out of which the injury arose. Plaintiff has the burden
of showing the contemporaneous relationship between the tortious act
and the scope of employment. Pyne, 129 Ill. 2d at 360.
We observe that the parties disagree as to whether the absence of
any one section 228 criterion obviates consideration of the remaining
two. Section 228 lists its three criteria conjunctively in determining
whether conduct is within the scope of employment, but disjunctively
in determining whether conduct is outside of the scope of
employment, both of which suggests that the lack of any one criterion
takes the conduct out of the scope of employment. Further, scholars
have described the three section 228 criteria as requirements, all of
which must be met to conclude that an employee was acting within the
scope of employment. 1 J. Lee & B. Lindahl, Modern Tort Law §7:7,
at 7-11 (2d ed. 2002); W. Keeton, Prosser & Keeton on Torts §70, at
502 (5th ed. 1984). We hold that all three criteria of section 228 of the
Second Restatement of Agency must be met to conclude that an
employee was acting within the scope of employment. To make this
conclusion, a court must consider all of the surrounding
circumstances. Each case must depend on its own facts.
Also, it is well settled that summary judgment “is generally
inappropriate when scope of employment is at issue. [Citations.] Only
if no reasonable person could conclude from the evidence that an
employee was acting within the course of employment should a court
-8-
hold as a matter of law that the employee was not so acting.” Pyne,
129 Ill. 2d at 359; accord Restatement (Second) of Agency §228,
Comment d, at 505 (1958) (“The question whether or not the act done
is so different from the act authorized that it is not within the scope of
the employment is decided by the court if the answer is clearly
indicated; otherwise, it is decided by the jury”).
In the present case, the appellate court analyzed Illini Hospital’s
vicarious liability by way of the three criteria of section 228 of the
Second Restatement of Agency. Regarding the first criterion, the
appellate court concluded that Young’s disclosure of plaintiff’s
medical records was not the kind of conduct Young was employed to
perform. 363 Ill. App. 3d at 922-23. Although Illini Hospital agrees
with this conclusion, plaintiff disagrees, contending that genuine issues
of fact preclude this conclusion.
Plaintiff relies on section 229 of the Second Restatement of
Agency, which elaborates the first criterion of section 228, i.e.,
whether the employee’s complained-of conduct is of the kind he or
she is employed to perform. Section 229 instructs a court to consider
the following factual matters in determining whether the complained-
of act of the employee, although not authorized by the employer, is
nevertheless so similar or incidental to employer-authorized conduct
as to be within the scope of employment. Pertinent matters include:
whether the act is one commonly done by such employees; the time,
place, and purpose of the act; the previous relations between the
employer and the employee; whether the act is outside the enterprise
of the employer or, if within the enterprise, has not been entrusted to
any employee; whether the employer has reason to expect that such
an act will be done; the similarity in quality of the act done to the act
authorized; whether the employer furnished to the employee the
instrumentality by which the harm is done; and the extent of departure
from the normal method of accomplishing an authorized result.
Restatement (Second) of Agency §229(2) (1958).1 These factors refer
primarily to the “physical activities” of employees. Since the phrase
1
Plaintiff concedes that two additional matters are not involved in this
case: the extent to which the business of the employer is apportioned between
different employees; and whether the act is seriously criminal.
-9-
“scope of employment” is used to determine the liability of the
employer for the conduct of the employee, the ultimate question is
whether or not the loss resulting from the employee’s acts should
justly be considered as one of the normal risks to be borne by the
employer. Restatement (Second) of Agency §229, Comment a, at 507
(1958).
The uncontradicted evidence in this case establishes that Young’s
disclosure of plaintiff’s medical record was not the kind of conduct
Young was employed to perform. Young’s discovery deposition and
an affidavit from Kathy Hull, who oriented, trained, and supervised
Young at Illini Hospital, prove that Young’s training as a phebotomist
included drawing blood and keeping records. In a typical day, Young
would draw blood, perform drug screens, conduct filing and billing,
and deliver medical records to physicians’ mail boxes. Young was not
employed to divulge confidential patient information while off duty
and after hours in a tavern. See, e.g., Hargan v. Southwestern Electric
Cooperative, Inc., 311 Ill. App. 3d 1029, 1033 (2000) (holding that
any acts in which employee engaged with intent to woo plaintiff’s wife
away from him during business meetings and trips simply had no
connection to business of employer).
The fact that Illini Hospital expressly forbade Young to reveal
patient information bolsters our conclusion that Young’s disclosure of
plaintiff’s medical records was not the kind of conduct she was
employed to perform. Of course, an act of an employee, although
forbidden, may be within the scope of employment. An employer
cannot avoid vicarious liability for the misconduct of an employee by
telling the employee to act carefully. Restatement (Second) of Agency
§230, Comment c, at 512 (1958). However, it must be remembered
that an act is outside of the scope of employment if it has no
connection with the conduct the employee is required to perform.
Prohibition to perform acts, except those of a certain category, may
indicate that the scope of employment extends only to acts of that
category. Furthermore, the employer’s prohibition may be a factor in
determining, in an otherwise doubtful case, whether the act of the
employee is incidental to the employment. The employer’s prohibition
accentuates the limits of the employee’s permissible action and, hence,
supports a finding that the prohibited act is entirely beyond the scope
of employment. Restatement (Second) of Agency §230, Comment c,
-10-
at 512 (1958).
In the present case, not only was Young’s disclosure of plaintiff’s
medical records not incidental to Young’s employment, but the
hospital plainly forbade Young from so doing. No reasonable person
could conclude that Young’s conduct was the kind she was employed
to perform.
The second broad criterion of whether Young’s disclosure of
plaintiff’s medical information was within the scope of her
employment is whether the disclosure occurred substantially within the
authorized time and space limits. Restatement (Second) of Agency
§228 (1958). The appellate court noted the fact that Young was not
working as a phlebotomist at the time of her improper disclosure.
However, the court ultimately concluded that Young had a continuing
duty to maintain patient confidentiality. The appellate court reasoned:
“The hospital’s training of its employees did not limit the duty
of the employee to maintain confidentiality of patients’
medical information only during working hours. Rather, that
duty, imposed by the hospital in the execution of its duties,
was, according to its own training, to extend to all times and
to all places. In effect, for purposes of patient confidentiality,
Young was on duty 24 hours a day, 7 days a week.” 363 Ill.
App. 3d at 923.
The appellate court then concluded: “An employee entrusted with
confidential information in the course of his or her employment has a
duty not to disclose the information–without limitation as to time or
space.” 363 Ill. App. 3d at 924.
After considering all of the circumstances, it is clear that the first
and third criteria of section 228 of the Second Restatement of Agency
are absent from this case. Accordingly, we need not discuss the
second criterion and do not express an opinion on the correctness of
the appellate court’s analysis with respect thereto.
The third criterion of whether Young’s disclosure of plaintiff’s
medical information was within the scope of her employment is
whether the disclosure was actuated, at least partially, by a purpose to
serve the hospital. Restatement (Second) of Agency §228 (1958). The
appellate court did not, and based on this record could not, hold that
Young’s disclosure was motivated by any conceivable purpose of
-11-
serving the hospital. Rather, the appellate court’s only reference to the
actuation criterion was the following italicized observation: “An
employee entrusted with confidential information in the course of his
or her employment has a duty not to disclose the information–without
limitation as to time or space. The duty not to do so is actuated by the
needs and requirements of the employer.” (Emphasis added.) 363 Ill.
App. 3d at 924.
The appellate court clearly misapprehended the import of the third
criterion of section 228 of the Second Restatement of Agency.
Elaborating on this criterion, section 235 of the Restatement provides
that an act of an employee, i.e., the particular act of the employee that
is at issue, is not within the scope of employment if it is done with no
intention to perform it as part of or incident to a service on account of
which he or she is employed. Restatement (Second) of Agency §235
(1958). Section 235 explains that, rather than “the needs and
requirements of the employer” (363 Ill. App. 3d at 924), it is the state
of mind of the employee that is material. See, e.g., 1 J. Lee & B.
Lindahl, Modern Tort Law §7:7, at 7-12 (2d ed. 2002) (describing
criterion as follows: “The employee was motivated, at least partially,
by a purpose to serve the employer” (emphasis added)). However, it
is only from the manifestations of the employee and the surrounding
circumstances that, ordinarily, the employee’s intent can be
determined. Restatement (Second) of Agency §235, Comment a, at
520-21 (1958).
Applying the correct legal standard to this case, there is no
genuine issue of material fact as to Young’s motivation for disclosing
plaintiff’s medical record. By her own candid admission, Young
disclosed plaintiff’s pregnancy to Sarah, plaintiff’s sister, because
Sarah was both plaintiff’s sister and Young’s friend. Young assumed,
albeit incorrectly, that plaintiff had already related the information to
Sarah. Young was in no way motivated to serve the hospital. As the
dissent correctly reasoned, “nothing in the record supports an
inference that Young was attempting to benefit or serve her employer
when she divulged plaintiff’s medical records. In fact, such disclosure
was in direct contravention to the confidentiality agreements and did
nothing to further the business of Illini Hospital.” 363 Ill. App. 3d at
925 (Turner, P.J., dissenting). We agree and so hold. See, e.g.,
Hentges v. Thomford, 569 N.W.2d 424, 427-29 (Minn. App. 1997)
-12-
(holding that employee-minister was not motivated by purpose to
serve employer-congregation when he accidentally shot parishioner
during deer hunting).
Although summary judgment is generally inappropriate when
scope of employment is at issue, when no reasonable person could
conclude from the evidence that an employee was acting within the
scope of employment, a court should hold as a matter of law that the
employee was not so acting. Pyne, 129 Ill. 2d at 359; Torrence v.
DeFrates, 56 Ill. App. 3d 118, 120 (1978), quoting Boehmer v.
Norton, 328 Ill. App. 17, 24 (1946); see, e.g., Murphy v. Urso, 88 Ill.
2d 444, 464-65 (1981) (upholding grant of summary judgment in
favor of employer where employee acted outside of scope of
employment).
In the present case, after considering the three criteria of section
228 of the Second Restatement of Agency, we uphold the circuit
court’s grant of summary judgment in favor of Illini Hospital. Clearly,
there was no dispute as to the pertinent facts. Regardless of whether
Young was required to maintain patient confidentiality at all times and
places, such that an improper disclosure would occur “within the
authorized time and space” (Restatement (Second) of Agency
§228(1)(b) (1958)), the evidence would still be insufficient to establish
the hospital’s liability. The evidence would not permit any jury to find
that Young’s disclosure of plaintiff’s pregnancy to plaintiff’s sister
was in any way actuated by a purpose to serve the hospital. The only
reasonable inference from the undisputed facts was that Young was
in the tavern for purely personal reasons, unexpectedly met her friend
Sarah, began speaking with Sarah and, in violation of the hospital’s
prohibition, revealed plaintiff’s medical condition. Regardless of
whether Young’s disclosure occurred that night in the tavern, or
during Young’s work hours on hospital property, it cannot be fairly
said that Young was motivated to serve the hospital when she made
the disclosure. We agree with the dissenting justice in the appellate
court that no reasonable jury could so find. 363 Ill. App. 3d at 926
(Turner, P.J., dissenting).
Also, there was no evidence to show that Young’s disclosure was
even incident to the performance of the duties that the hospital
entrusted to her. The only reasonable inference from the undisputed
facts is that Young’s motivation was solely and exclusively personal
-13-
and not related to her position as an employee of Illini Hospital. See,
e.g., Rusnack v. Giant Food, Inc., 26 Md. App. 250, 337 A.2d 445
(1975) (upholding summary judgment in favor of employer, court
discussed all three section 228 criteria, and concluded that employee’s
acts not motivated by purpose of serving employer); Snilsberg v. Lake
Washington Club, 614 N.W.2d 738 (Minn. App. 2000) (same).
III. CONCLUSION
For the foregoing reasons, the judgment of the appellate court is
reversed, the judgment of the circuit court of Pike County is affirmed,
and the cause is remanded to the circuit court for further proceedings.
Appellate court judgment reversed;
circuit court judgment affirmed;
cause remanded.
-14-
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997 So.2d 414 (2008)
IN RE G.R.
A.R.
v.
DEPARTMENT OF CHILDREN AND FAMILY SERVICES.
No. 2D08-3193.
District Court of Appeal of Florida, Second District.
December 19, 2008.
Decision without published opinion. Affirmed.
| {
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} |
363 F.3d 975
Mouloud BELLOUT, Petitioner,v.John ASHCROFT, Attorney General, Respondent.
No. 02-73413.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted February 5, 2004.
Filed April 12, 2004.
Jack Artz, South Pasadena, CA, for the petitioner.
Ethan B. Kanter, Assistant United States Attorney General, Washington, DC, for the respondent.
On Petition for Review of an Order of the Board of Immigration Appeals.
Before KOZINSKI, O'SCANNLAIN, and SILVERMAN, Circuit Judges.
SILVERMAN, Circuit Judge:
1
Mouloud Bellout, a native and citizen of Algeria, petitions for review of the BIA's summary affirmance of the IJ's denial of Bellout's application for asylum, withholding of removal, and protection under the Convention Against Torture (CAT). The IJ found Bellout statutorily ineligible for relief from deportation because he engaged in terrorist activity when he joined "Armed Islamic Group (GIA)," a State Department-recognized terrorist organization, in 1995 and lived in GIA camps in Algeria for three years. Bellout has been removed to Algeria.
2
We hold as follows: First, because the IJ found that there are reasonable grounds to believe that Bellout engaged in or is likely to engage in terrorist activity under 8 U.S.C. § 1158(b)(2)(A)(v), we lack jurisdiction to review the IJ's determination that Bellout is ineligible for asylum by virtue of 8 U.S.C. § 1158(b)(2)(D). Second, substantial evidence supports the IJ's conclusion that Bellout is ineligible for withholding of removal. Finally, substantial evidence supports the IJ's denial of deferral of removal under CAT.
I. FACTS
3
Bellout attempted to enter the United States at Los Angeles International Airport on January 6, 1999, using a fraudulent Belgian passport. After the INS initiated removal proceedings, Bellout applied for asylum, withholding of deportation, and relief under CAT, alleging that he would be tortured by terrorists or police if he returned to Algeria. At his hearing, Bellout testified that he joined GIA in 1995, lived in GIA mountain camps, made friends with other members, read GIA's pamphlets and literature, discussed ideology with other members of the group, and carried weapons and ammunition. When GIA divided into a second group in 1996, Bellout went with the second group — "Algamma El-Salafia Lel-Daawa Wal Ketal." He remained with this group until 1998, when he left Algeria.
4
The IJ found that Bellout was statutorily barred from asylum, withholding of removal and relief under CAT as an alien "who the Attorney General knows, or has reasonable grounds to believe, is engaged in or is likely to engage after entry in any terrorist activity."
5
8 U.S.C. § 1189(a) authorizes the Secretary of State to designate foreign terrorist organizations by providing notice and findings to congressional leaders and publishing the designation in the Federal Register. Unless Congress disapproves the designation, it becomes effective upon publication in the Federal Register. Id. § 1189(a)(2)(B). Although the designation is effective for two years, the Secretary may redesignate a foreign terrorist organization after the two years expire. Id. § 1189(a)(4).
6
The Secretary has designated and redesignated the "Armed Islamic Group (GIA)"1 as a terrorist organization under 8 U.S.C. § 1189. Designation of Foreign Terrorist Organizations, 62 Fed.Reg. 52650 (Oct. 8, 1997); 64 Fed.Reg. 55112 (Oct. 8, 1999); 66 Fed.Reg. 51088 (Oct. 5, 2001); 68 Fed.Reg. 56860 (Oct. 2, 2003). According to the State Department Office of Counterterrorism's 1999 Report of Foreign Terrorist Organizations, GIA is an extremely violent terrorist group that frequently and brutally attacks and kills civilians, journalists, and foreign residents. The Report says that GIA uses assassinations and bombings and favors kidnaping victims and slitting their throats. According to the Report, GIA's activities are not limited only to Algeria; GIA hijacked an Air France flight in December 1994 and is suspected of a series of bombings in France in 1995.
7
Because Bellout had been a member of a State Department-designated terrorist organization, the IJ found that Bellout engaged in terrorist activity and, in the alternative, posed a danger to security in the United States. He was therefore ineligible for asylum. He likewise was ineligible for withholding of deportation. The IJ also concluded that Bellout was not entitled to deferral of removal under CAT because he had failed to establish that he would more likely than not be tortured if he returned to Algeria. The BIA affirmed the IJ's decision, adopting that decision as the final agency determination pursuant to 8 C.F.R. § 3.1(a)(7) (2002).
8
Bellout argues that the IJ erred in finding that he was ineligible for asylum and withholding of removal because he engaged in terrorist activity, and in denying him relief under CAT.
II. ASYLUM
9
An alien is ineligible for asylum if he is inadmissible or removable for engaging in terrorist activity or if "the Attorney General determines" that "there are reasonable grounds for regarding an alien as a danger to the security of the United States." 8 U.S.C. § 1158(b)(2)(A)(iv)-(v). "Terrorist activities" include membership in "a foreign terrorist organization, as designated by the Secretary [of State] under [8 U.S.C.] section 1189." Id. § 1182(a)(3)(B)(i)(V).
10
The asylum statute deprives this court of jurisdiction to review the Attorney General's determination under 8 U.S.C. § 1158(b)(2)(A)(v) that an alien is ineligible for asylum because the alien is inadmissible or removable because of terrorist activity. See 8 U.S.C. § 1158(b)(2)(D). The statute provides:
11
(D) No judicial review
12
There shall be no judicial review of a determination of the Attorney General under subparagraph (A)(v) [ineligibility for asylum because the alien is inadmissable for terrorist activity].
13
Id Thus, this court lacks jurisdiction to review the IJ's determination that Bellout is ineligible for asylum pursuant to § 1158(b)(2)(A)(v) because Bellout is inadmissible or removable because of terrorist activity. Id. This portion of the petition for review is dismissed.
III. WITHHOLDING OF REMOVAL
14
We affirm the IJ's denial of relief if there is reasonable, substantial, and probative evidence to support the decision based on the record as a whole, and we may not reverse the IJ's findings unless the evidence compels a contrary conclusion. INS v. Elias-Zacarias, 502 U.S. 478, 481, 112 S.Ct. 812, 117 L.Ed.2d 38 (1992).
15
An alien is ineligible for withholding of removal if "the Attorney General decides that ... there are reasonable grounds to believe that the alien is a danger to the security of the United States." 8 U.S.C. § 1231(b)(3)(B)(iv).2 Reasonable grounds exist to believe that an alien is a danger to security if the alien "has engaged, is engaged, or at any time after admission engages in any terrorist activity (as defined in section 1182(a)(3)(B)(iv) ...)." Id. §§ 1231(b)(3)(B)(iv) and 1227(a)(4)(B). Terrorist activities include membership in "a foreign terrorist organization, as designated by the Secretary [of State] under [8 U.S.C. §] 1189." Id. § 1182(a)(3)(B)(i)(V).
16
Consistent with the statutory provision for withholding of removal, federal regulation provides for mandatory denial of with-holding of removal under CAT if the Attorney General has "reasonable grounds to believe that the alien is a danger to the security of the United States." 8 U.S.C. § 1231(b)(3)(B)(iv); 8 C.F.R. § 1208.16(d)(2) (2003).3 Thus, if the alien is barred from withholding of removal under § 1231(b)(3)(B)(iv), he is also barred from withholding of removal under CAT. Id.
17
Substantial evidence supports the IJ's conclusion that Bellout engaged in or was likely to engage in terrorist activity because Bellout testified that he was a member of GIA for three years. Because Bellout engaged in terrorist activity, there are reasonable grounds to believe that he is a danger to the security of the United States, and he is ineligible for statutory withholding of removal and withholding of removal under CAT. See 8 U.S.C. § 1231(b)(3)(B); 8 C.F.R. § 1208.16(d)(2).
18
Interpreting a prior version of the asylum statute, we recently held that an alien who engaged in terrorist activity against a foreign country is not necessarily a danger to the security of the United States. Cheema v. INS, 350 F.3d 1035, 1040-41 (9th Cir.2003). Cheema does not control this case because the court's reasoning in Cheema was premised on prior versions of the asylum and withholding statutes. Id. The prior asylum statute barred aliens who engaged in terrorist activity from eligibility for asylum and withholding of removal unless the Attorney General found that there were not reasonable grounds for regarding the alien as a danger to the security of the United States. Id. We held that the Attorney General could not collapse the two-prong statutory test and focus only on terrorist activity. Id. at 1042.
19
However, the statute has changed so there is no longer a two-prong test. The Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA) amended the asylum statute to provide that an alien is ineligible for asylum if the Attorney General decides that there are reasonable grounds for regarding the alien as a danger to the security of the United States or that the alien is inadmissible or removable for terrorist activity. Either ground will support the IJ's denial of asylum. Pub.L. 104-208, § 604, 110 Stat. 3009-691 (1996) (codified at 8 U.S.C. § 1158(b)(2)(A)(iv)-(v)). In addition, the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA) amended the withholding of removal statute to specifically provide that an alien who engages in terrorist activity "shall be considered to be an alien for whom there are reasonable grounds for regarding as a danger to the security of the United States." Pub.L. 104-132, § 413(a), 110 Stat. 1214 (1996) (codified at 8 U.S.C. § 1231(b)(3)(B)(iv)).
IV. RELIEF UNDER CAT
20
Bellout argues that the IJ should have granted him deferral of removal under the Convention Against Torture because, he claims, the police will torture him if he returns to Algeria. Article 3 of the United Nations Convention Against Torture or Punishment prohibits removal to a state where there are substantial grounds to believe the alien would be tortured. Al-Saher v. INS, 268 F.3d 1143, 1146 (9th Cir.2001). Although barred from "withholding of removal" under CAT, Bellout remains eligible for "deferral of removal" under CAT. 8 C.F.R. § 1208.17(a) (2003). We review the denial of relief under CAT for substantial evidence. Zheng v. Ashcroft, 332 F.3d 1186, 1194 (9th Cir.2003).
21
To be eligible for deferral of removal under CAT, Bellout must establish that he "is more likely than not to be tortured" if he returns to Algeria. 8 C.F.R. § 1208.17(a)(2003); see also Zheng, 332 F.3d at 1194. Bellout testified to one incident of abuse by the police in 1994 before he joined GIA. There is no evidence in the record that the Algerian government is aware that Bellout joined GIA or is interested in him. The IJ found that there was no evidence that members of militant groups who leave Algeria will be persecuted or tortured upon return and that Bellout did not meet his burden of establishing it is more likely than not that he will face torture if returned to Algeria. The evidence does not compel a contrary conclusion. Zheng, 332 F.3d at 1194.
22
PETITION FOR REVIEW DISMISSED IN PART AND DENIED IN PART.
Notes:
1
Also known as Groupement Islamique Arme, AIG, Al-Jam'ah al-Islamiyah al-Musallah
2
Section 1231(b)(3) [INA § 241(b)(3)(B)(iv)] provides in relevant part:
(B) Exception
Subparagraph (A) [withholding of removal] does not apply to an alien deportable under section 1227(a)(4)(D) of this title or if the Attorney General decides that —
. . .
(iv) there are reasonable grounds to believe that the alien is a danger to the security of the United States ...
For purposes of clause (iv), an alien who is described in section 1227(a)(4)(B) of this title shall be considered to be an alien with respect to whom there are reasonable grounds for regarding as a danger to the security of the United States.
8 U.S.C. § 1231(b)(3)(B)(iv).
3
The regulation, which applies to withholding of removal under § 1231(b)(3) and CAT, provides in relevant part:
(2) Mandatory denials. Except as provided in paragraph (d)(3) of this section, an application for withholding of removal under section 241(b)(3) [8 U.S.C. § 1231(b)(3)] of the Act or under the Convention Against Torture shall be denied if the applicant falls within section 241(b)(3)(B) [8 U.S.C. § 1231(b)(3)(B)] of the Act .... If the evidence indicates the applicability of one or more of the grounds for denial of withholding enumerated in the Act, the applicant shall have the burden of proving by a preponderance of the evidence that such grounds do not apply.
8
C.F.R. § 1208.16(d)(2) (2003)
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314 F.3d 355
Jill LANSDALE, Plaintiff-Appellant,v.HI-HEALTH SUPERMART CORPORATION, Defendant-Appellee.Jill Lansdale, Plaintiff-Appellee,v.Hi-Health Supermart Corporation, Defendant-Appellant.
No. 01-16017.
No. 01-16018.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted November 6, 2002.
Filed December 19, 2002.
Stephen G. Montoya, Phoenix, AZ, for the plaintiff-appellant.
Bennett E. Cooper, Steptoe & Johnson, LLP, Phoenix, AZ, for the defendant-appellee.
Appeal from the United States District Court for the District of Arizona; Roger G. Strand, District Judge, Presiding. D.C. No. CV 97-02555-RGS.
Before STAPLETON,* O'SCANNLAIN, and FERNANDEZ, Circuit Judges.
OPINION
FERNANDEZ, Circuit Judge.
1
Jill Lansdale obtained a verdict against Hi-Health Supermart Corp. for gender discrimination. See 42 U.S.C. § 2000e-2(a) (Title VII). She appeals the limitation of her damages pursuant to 42 U.S.C. § 1981a and asserts that the statute is unconstitutional.1 We affirm.
BACKGROUND
2
After she was terminated from Hi-Health, Lansdale brought this action and claimed that Hi-Health, through its owner and president, discriminated against her by establishing a hostile environment based upon her gender. The jury agreed and awarded damages of $100,000 for pain and suffering, mental anguish, shock and discomfort, plus $1,000,000 in punitive damages.
3
The district court then applied the limitation in 42 U.S.C. § 1981a and reduced the damage award to $200,000. Lansdale claims that the statutory limitation is un-constitutional and, therefore, appeals from the district court's reduction of the jury award.
STANDARD OF REVIEW
4
We review the constitutionality of the statute limiting damages de novo. See Gray v. First Winthrop Corp., 989 F.2d 1564, 1567 (9th Cir.1993). We would only invalidate the statute for "the most compelling constitutional reasons." Id. (internal quotation marks and citations omitted).
DISCUSSION
5
Lansdale's argument that Congress violated the United States Constitution when it placed a damage cap on Title VII recoveries is presented with great vigor, but lacks virtue. Until it enacted 42 U.S.C. § 1981a as a part of the Civil Rights Act of 1991, no future-looking damages or punitive damages whatsoever were available to those who asserted Title VII claims, regardless of whether those claims were based upon race, color, religion, sex, or national origin. However, damages were available in actions under 42 U.S.C. § 1981 for those who could show that they were denied rights "enjoyed by white citizens." In 1991, Congress decided to grant damages to those whose Title VII rights were violated, but it limited (capped) the amount that could be obtained. For employers like Hi-Health, "[t]he sum of the amount of compensatory damages awarded ... for future pecuniary losses, emotional pain, suffering, inconvenience, mental anguish, loss of enjoyment of life, and other nonpecuniary losses, and the amount of punitive damages awarded under this section, shall not exceed, for each complaining party ... $200,000." See 42 U.S.C. § 1981a(b)(3)(C).
6
Understandably, many plaintiffs were not satisfied with that partial remedy; they wanted to, and were sure they could, recover much more. Thus, they, like Lansdale, challenged the limitation on con-stitutional grounds.
7
We have had occasion to consider and reject some of those challenges. See Hemmings v. Tidyman's Inc., 285 F.3d 1174, 1200-02 (9th Cir.2002). In so doing, we have pointed out the fact that, "[i]n 1991, Congress determined that victims of employment discrimination were entitled to additional remedies. But, as legislative history makes clear, the 1991 Act would not have been passed by Congress but for the inclusion of a ... damages cap." Id. at 1201 (citation omitted). We also ruminated on the legislative process and said:
8
However, Congress has significant power to define and circumscribe self-created causes of action. Indeed, almost two decades ago, the Supreme Court articulated a vital distinction between common law causes of action and actionable rights created by Congress. Specifically, the Court noted that
9
when Congress creates a statutory right, it clearly has the discretion, in defining that right, to create presumptions, or assign burdens of proof, or prescribe remedies.... Such provisions do, in a sense, affect the exercise of judicial power, but they are also incidental to Congress's power to define the right that it has created.
10
Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 83, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982). Title VII epitomizes such a congressionally created right....
11
Id. at 1200. Based upon that, we definitively rejected the claims that Lansdale now makes based upon violation of the Separation of Powers Doctrine and invasion of the province of the jury in violation of the Seventh Amendment to the United States Constitution. Id. at 1200-02.
12
Nevertheless, argues Lansdale, the cap does violate the Equal Protection and Due Process clauses of the United States Constitution.2 But, again, as we said in Hemmings, 285 F.3d at 1200-01, Congress does have the authority to prescribe, and limit, remedies. Beyond that, it is common knowledge that Congress is not required to solve every facet of a societal problem at the same time,3 and we defer to its decisions, even (or especially) compromises allocating the benefits and burdens arising out of our engagement in commercial life. See Ferguson v. Skrupa, 372 U.S. 726, 730, 83 S.Ct. 1028, 1031, 10 L.Ed.2d 93 (1963); see also Lyon v. Agusta S.P.A., 252 F.3d 1078, 1086-88 (9th Cir.2001). "Of course, the legislature must act in a rational manner; that almost goes without saying." Lyon, 252 F.3d at 1086. But there is nothing arbitrary or irrational about § 1981a. It certainly does not set up a facially invalid classification on the basis of gender. On the contrary, it treats all groups within its compass in the same manner. See Madison v. IBP, Inc., 257 F.3d 780, 805 (8th Cir.2001), vacated on other grounds, ___ U.S. ___, 122 S.Ct. 2583, 153 L.Ed.2d 773 (2002). All are subject to its damage cap.
13
Thus, it is clear "that the statute must stand if it bears a rational relationship to any legitimate articulated government purpose." Pollard v. E.I. DuPont de Nemours Co., 213 F.3d 933, 946 (6th Cir.2000), rev'd on other grounds, 532 U.S. 843, 121 S.Ct. 1946, 150 L.Ed.2d 62 (2001); see also Madison, 257 F.3d at 805. It does.4 As we indicated in Hemmings,5 and as other courts have declared: "In a political compromise, the Civil Rights Act of 1991 was limited in the remedies which it would provide due to a belief that unlimited damages for all forms of discrimination would force employers to institute hiring quotas for their own economic safety." Pollard, 213 F.3d at 946. Moreover, "Congress instituted the damages limitation in order to deter frivolous lawsuits and to protect employers from financially crippling awards, and the limitation is rationally related to these legitimate purposes." Madison, 257 F.3d at 805. This case underscores the basis for Congress's concern. While the jury awarded no out of pocket damages, it did award Lansdale $100,000 in damages for pain and suffering, mental anguish, shock and discomfort, and then went on to award her a whopping $1,000,000 in punitive damages.
14
Finally, despite Lansdale's suggestion to the contrary, Congress was hardly required to limit the already existing § 1981 rights of those who claimed that they had been subjected to race discrimination, whether in the workplace or elsewhere, in order to give some additional rights to others. See Pollard, 213 F.3d at 946. It would be middling strange to hold that protecting both genders against race discrimination somehow discriminates on the basis of gender unless the exact same protection is accorded when gender discrimination alone is involved. That appears to be a most unusual mixing of categories.6 Beyond that, we fail to see why Congress cannot show special concern for those who are subjected to race discrimination. In fact, race discrimination has been one of the most disruptive elements in our national life since the founding of our republic, and attempts to overcome all vestiges of that evil have formed "the cornerstone of our entire body of civil rights law." Id. Of all the vile types of discrimination, courts and Congress have treated race discrimination as the most vile of all.7
CONCLUSION
15
Congress made a laudable decision when it expanded the scope of recovery for those who are subjected to discrimination in employment. We cannot say that it also violated the Constitution of the United States when it chose to limit the amount of damages that could be recovered, even if it did not go on to limit damages recoverable under 42 U.S.C. § 1981.
16
It is not at all surprising that Lansdale wants even more than Congress provided; that is just the working out of one of human nature's quotidian drives. However, she must be content with her six figure judgment, faute de mieux.
17
AFFIRMED. The parties shall bear their own costs on appeal.
Notes:
*
The Honorable Walter K. Stapleton, Senior United States Circuit Judge for the Third Circuit, sitting by designation
1
Lansdale asserts a number of other claims and Hi-Health also appeals and asserts additional claims on its own behalf. We address all of those claims in an unpublished memorandum disposition filed this date
2
Of course, the equal protection argument is, of necessity, a due process argument because it is a federal statute that we are dealing withSee Vance v. Bradley, 440 U.S. 93, 94 n. 1, 99 S.Ct. 939, 941 n. 1, 59 L.Ed.2d 171 (1979); Bolling v. Sharpe, 347 U.S. 497, 500, 74 S.Ct. 693, 695, 98 L.Ed. 884 (1954). We will hereafter refer to equal protection principles only. Lansdale cites nothing to the contrary. If she did wish to make a different point, she has waived it by not briefing it. See Brookfield Communications, Inc. v. W. Coast Entm't Corp., 174 F.3d 1036, 1046 n. 7 (9th Cir.1999).
3
See Denver Area Educ. Telecomms. Consortium, Inc. v. FCC, 518 U.S. 727, 757, 116 S.Ct. 2374, 2393, 135 L.Ed.2d 888 (1996).
4
Lansdale has not presented any substantial evidence that Congress intended to discriminate against women when it enacted § 1981a(b)(3). On the contrary, it clearly acted to increase the rights of everyone who brought actions under Title VII, including women. Thus, we do not use intermediate scrutiny in our analysisSee Personnel Adm'r v. Feeney, 442 U.S. 256, 273, 99 S.Ct. 2282, 2293, 60 L.Ed.2d 870 (1979); Navarro v. Block, 72 F.3d 712, 716 (9th Cir.1996); Toomey v. Clark, 876 F.2d 1433, 1436 n. 2 (9th Cir.1989). Were we to do so, we are satisfied that the statute would also pass that level of review for much the same reasons as it passes rational basis review.
5
285 F.3d at 1201
6
It would not key on discrimination between men and women, or between one race and another, but, rather, on discrimination between race and women
7
For example, laws that discriminate on the basis of race are subjected to the highest level of scrutinySee Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 224, 115 S.Ct. 2097, 2111, 132 L.Ed.2d 158 (1995).
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United States Court of Appeals
For the First Circuit
No. 12-1738
UNITED STATES OF AMERICA,
Appellee,
v.
DOMINGO RAMOS-MEJÍA,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Francisco A. Besosa, U.S. District Judge]
Before
Torruella, Selya and Lipez,
Circuit Judges.
Alejandra Bird López on brief for appellant.
Rosa Emilia Rodríguez-Vélez, United States Attorney, Nelson
Pérez-Sosa, Assistant United States Attorney, Chief, Appellate
Division, and Juan Carlos Reyes-Ramos, Assistant United States
Attorney, on brief for appellee.
July 1, 2013
SELYA, Circuit Judge. Defendant-appellant Domingo Ramos-
Mejía asseverates that he did not understand the criminal intent
required as an element of the crime to which he pleaded and that
the district court accepted his guilty plea to that charge without
an adequate factual basis. For these reasons, he urges us to
vitiate his guilty plea. After careful consideration, we reject
the appellant's asseverational array.
The travel of the case is easily traced. A federal grand
jury sitting in the District of Puerto Rico indicted the appellant
on a charge of conspiracy to possess with intent to distribute 5
kilograms or more of cocaine. See 21 U.S.C. §§ 841(a)(1), 846. He
initially maintained his innocence, but later entered into a plea
agreement. In pursuance of that agreement, he pleaded guilty to
conspiracy to possess with intent to distribute at least 3.5 but
less than 5 kilograms of cocaine (a quantity below that originally
charged in the indictment).
The district court accepted the plea and subsequently
imposed a 78-month incarcerative sentence. This timely appeal
ensued.
Before turning to the meat of this appeal, we pause to
note that the plea agreement contained a waiver-of-appeal
provision. This provision purposed to foreclose any appeal as long
as the district court accepted the plea and sentenced the appellant
in accordance with the plea agreement's terms and recommendations.
-2-
But even though the district court sentenced the
appellant within the parameters of the plea agreement, the waiver-
of-appeal provision does not pretermit this appeal. Where, as
here, an appeal challenges the validity of the plea itself, a
waiver-of-appeal provision lacks force. See United States v.
Chambers, 710 F.3d 23, 27 (1st Cir. 2013). After all, if a plea is
invalid, the plea agreement (and, thus, the waiver provision
contained within it) disintegrates.
We begin our discussion of the merits with the
abecedarian proposition that a defendant has no absolute right to
withdraw his guilty plea. See United States v. Mercedes Mercedes,
428 F.3d 355, 359 (1st Cir. 2005). When, as in this case, a
defendant seeks for the first time to withdraw his plea in the
court of appeals, his request will be granted only if he can show
that the district court's acceptance of the plea was plainly
erroneous. See United States v. Davila, No. 12-167, 2013 WL
2631064, at *7-8 (June 13, 2013). Plain error review imposes a
heavy burden on the appellant, who must demonstrate: "(1) that an
error occurred (2) which was clear or obvious and which not only
(3) affected the defendant's substantial rights, but also (4)
seriously impaired the fairness, integrity, or public reputation of
judicial proceedings." United States v. Duarte, 246 F.3d 56, 60
(1st Cir. 2001).
-3-
Against this backdrop, we turn to the appellant's
assertion that his plea was not knowing, intelligent, and
voluntary. Federal Rule of Criminal Procedure 11(b)(1)(G) requires
that a district court, before accepting a guilty plea, "must inform
the defendant of, and determine that the defendant understands,
. . . the nature of each charge to which the defendant is
pleading." This rule functions "to ensure that a defendant who
pleads guilty does so with full comprehension of the specific
attributes of the charge and the possible consequences of the
plea." United States v. McDonald, 121 F.3d 7, 11 (1st Cir. 1997).
The charge to which the appellant pleaded guilty involved
conspiracy to possess with intent to distribute drugs. Proof of
such a charge entails proof of the existence of the charged
conspiracy, the defendant's knowledge of it, and his voluntary
participation in it. See United States v. Nelson-Rodriguez, 319
F.3d 12, 27-28 (1st Cir. 2003). A conspiracy charge requires, at
a minimum, the same degree of criminal intent as the underlying
substantive offense. Ingram v. United States, 360 U.S. 672, 678
(1959). It follows that, for guilt to attach in a drug conspiracy
case, a defendant must have conspired knowingly to possess the
drugs with the intent to distribute them. See United States v.
Echeverri, 982 F.2d 675, 677-79 (1st Cir. 1993).
The appellant asserts that, when he entered his plea, he
was unaware that the government had to prove his knowledge of a
-4-
conspiracy to distribute drugs (as opposed to some other
contraband) and his specific intent to effectuate the object of the
conspiracy (distributing drugs). He suggests that the district
court kept him in the dark by failing sufficiently to inform him
about these matters, preferring instead to read the charge from the
indictment and then inquire whether that was what he had done. The
appellant posits that, by charting such a course, the court
violated Rule 11(b)(1)(G).1
In this case, the change-of-plea colloquy, though not a
textbook model, was adequate. In order to satisfy Rule 11, the
district court need not employ a "specific script, a set of magic
words, or even certain types of inquiries." United States v. Ward,
518 F.3d 75, 83 (1st Cir. 2008). Here, the court assured itself of
the defendant's competence to plead, had the prosecutor summarize
both the plea agreement and the government's available proof, and
obtained the appellant's acknowledgment that those summaries were
accurate. The appellant then confirmed to the court his desire
"[t]o plead guilty [to] what [he was] being accused of."
The court made certain that the appellant had read the
indictment and understood both the charge and the terms of the plea
agreement. The court also verified that the appellant had reviewed
these materials with his attorney. Finally, the court read aloud
1
In support, the appellant also invokes the Due Process
Clause, U.S. Const. amend. V. But this reference adds nothing of
substance to his claim and, so, we do not discuss it further.
-5-
the charge limned in the indictment, and the appellant agreed that
he had knowingly participated in that activity.
This, we think, was enough. Rule 11(b)(1)(G) "does not
require the court to explain the technical intricacies of the
charges in the indictment." United States v. Cruz-Rivera, 357 F.3d
10, 13 (1st Cir. 2004). Under ordinary circumstances, it is
sufficient in a plea colloquy for a district court to "ascertain
that a defendant is aware of the nature of the charge against him
by reading the charge in the indictment to the defendant and
obtaining his competent acknowledgment that he understands the
charge." United States v. Delgado-Hernández, 420 F.3d 16, 26 (1st
Cir. 2005); see United States v. Corporán-Cuevas, 244 F.3d 199, 203
(1st Cir. 2001).
This is not to say that merely reading the formal charge
will be sufficient in every case. The process through which the
court ensures the defendant's understanding of the charge may vary
depending on the attributes of the particular defendant, the nature
of the specific offense, and the complexity of the attendant
circumstances. See Corporán-Cuevas, 244 F.3d at 203; see also Fed.
R. Crim. P. 11 advisory committee's note. One size does not fit
all.
Here, however, the environmental factors were not
extraordinary. This is a run-of-the-mine case, involving a mature
defendant with a history of gainful employment. The appellant was
-6-
facing only a single charge — and that charge was not a complicated
one. Moreover, the circumstances attendant to the charged crime
were straightforward. Given these considerations, we believe that
a reading of the charge sufficed. See, e.g., United States v.
Ramirez-Benitez, 292 F.3d 22, 27 (1st Cir. 2002).
If more were needed — and we doubt that it is — the
record in this case contains other indicia of the appellant's
appreciation of the elements of the charged crime. The plea
agreement contained a factual narrative that described what the
government said it could prove. It further explained that the
appellant was pleading guilty to "knowingly and intentionally
combining, conspiring, and agreeing with others to . . . possess
with intent to distribute" cocaine.2 The word "cocaine" was
underscored and in bold, making pellucid that the charged
conspiracy was one trafficking in drugs, not other goods. The text
of the plea agreement is relevant to this appeal inasmuch as the
agreement explicitly memorialized the appellant's review of it with
his attorney, his satisfaction with his attorney's representation,
the absence of any coercion, and his "full[] understand[ing]" of
the matters described. Absent good cause — and none is present
2
Varying from the language of the indictment, the plea
agreement contained a separate stipulation as to drug quantity.
The stipulation provided that, "for purposes of this plea agreement
[] this defendant shall be accountable for conspiring to possess
with the intent to distribute at least, 3.5 kilograms, but less
than 5 kilograms of cocaine."
-7-
here — a defendant ought to be bound by the statements that he
makes to the district court. See Chambers, 710 F.3d at 29; see
also United States v. Pellerito, 878 F.2d 1535, 1539 (1st Cir.
1989) ("We will not permit a defendant to turn his back on his own
representations to the court merely because it would suit his
convenience to do so.").
This brings us to the appellant's second claim of error.
He contends that the record fails to establish an adequate factual
basis for the mens rea element of the conspiracy charge. In his
view, the record does not evince either his knowledge that drugs
were involved in the conspiracy or his intent to distribute them.
The government's proffered facts, he says, establish only that he
was seen in the vicinity of a meeting and, three months later, in
a vehicle loaded with fake drugs.
This claim of error implicates Federal Rule of Criminal
Procedure 11(b)(3), which requires that, "[b]efore entering
judgment on a guilty plea, the court must determine that there is
a factual basis for the plea." This safeguard "serves to ensure
that the defendant's conduct actually corresponds to the charges
lodged against him." United States v. Jiminez, 498 F.3d 82, 86
(1st Cir. 2007).
The necessary showing, however, is fairly modest. To
satisfy the "factual basis" requirement, the evidence need not
conclusively demonstrate guilt beyond a reasonable doubt. See
-8-
United States v. Pimentel, 539 F.3d 26, 29 (1st Cir. 2008).
Rather, the government need only show a rational basis in fact for
the defendant's guilt. See id.; Delgado-Hernández, 420 F.3d at 27.
In other words, there must be some "basis for thinking that the
defendant is at least arguably guilty." Delgado-Hernández, 420
F.3d at 27 (internal quotation marks omitted).
To meet the "factual basis" standard, the government is
not required to support every element of the charged crime by
direct evidence. See United States v. Marrero-Rivera, 124 F.3d
342, 352 (1st Cir. 1997). A smoking gun is useful, but not
essential.
Of particular pertinence for present purposes, a court
may infer "[t]he factual predicate for the requisite mens rea
. . . from all the evidence alluded to at the Rule 11 hearing."
Id.; see Delgado-Hernández, 420 F.3d at 31. "[A]s long as the
government's proffered facts, conceded by the defendant to be true,
touch all the bases, there is a sufficient factual basis for the
tendered plea." Jiminez, 498 F.3d at 87.
In this instance, the facts proffered by the government
at the change-of-plea hearing (and acquiesced in by the appellant)
revealed that the appellant and two accomplices went to a shopping
center parking lot on or about March 1, 2011. While there, one of
the appellant's companions, Rubén Darío Páez-Fontana (Páez), met
with two other individuals to discuss a potential drug shipment.
-9-
One of these individuals was an undercover Drug Enforcement
Administration (DEA) agent; the other was a confidential source
(CS) working with the DEA. The undercover agent and the CS were
part of a government "sting" operation. During the meeting, Páez
agreed to pay the undercover agent for his help in bringing in by
sea substantial quantities of cocaine and provided sea coordinates
for the exchange point.
After some intervening communications, Páez met again
with the CS. Páez told the CS that, after the drugs were retrieved
at sea and brought to Puerto Rico, he would provide a truck for
land transport. The CS would then stow the drugs in the truck and
return the truck to Páez's henchmen.
The retrieval took place as planned. The CS, accompanied
by undercover law enforcement officers, picked up a load of cocaine
and heroin at the sea coordinates that Páez had provided. Shortly
after the retrievers reached land, the appellant and another of
Páez's associates, Marcelino Medina-Vásquez (Medina), met the CS
with a truck. The CS and his confederates loaded the truck but,
unbeknownst to the appellant and Medina, used ersatz drugs, not the
real drugs that had been retrieved at sea. After the truck was
loaded, the appellant and Medina drove it away, while Páez and a
fourth accomplice followed in another vehicle. In short order, the
authorities stopped both vehicles and arrested all four men.
-10-
These facts were more than adequate to allow the district
court to conclude that the appellant was at least arguably guilty
of participation in the charged conspiracy. Participation in a
drug-trafficking conspiracy can be proved through circumstantial
evidence. See United States v. Bergodere, 40 F.3d 512, 518 (1st
Cir. 1994); Echeverri, 982 F.2d at 677-79. Here, a rational
factfinder could conclude that the appellant was privy to the drug-
trafficking scheme. Drug traffickers do not normally bring
innocent parties to clandestine meetings set up to arrange for drug
deliveries, see United States v. Ortiz, 966 F.2d 707, 711-12 (1st
Cir. 1992); see also Echeverri, 982 F.2d at 677-78, and a
factfinder could reasonably infer that the appellant's presence at
the parking lot meeting was culpable. By like token, a factfinder
could reasonably infer that the appellant's role in delivering the
truck for loading — and leaving in it after the loading had been
completed — was carried out with knowledge of the plot. The fact
that only fake drugs were in the truck at the time of the arrest
does not diminish the force of this inference. See United States
v. Sánchez-Berríos, 424 F.3d 65, 77-78 (1st Cir. 2005).
To say more on this point would be to paint the lily. We
conclude, without serious question, that the version of events
proffered at the change-of-plea hearing was ample to ground
inferences that the appellant knew that the conspiracy was
arranging to import drugs and that he intended to facilitate the
-11-
delivery by his role in transporting drugs. The bottom line, then,
is that there was a suitable factual basis for the appellant's
guilty plea.
We need go no further. For the reasons elucidated above,
we discern no error, plain or otherwise, in the district court's
acceptance of the appellant's tendered guilty plea. The appellant
is not, therefore, entitled to withdraw his plea.
Affirmed.
-12-
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FILED
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
AUG 2 8 2009
NANCY MAYER WHITTINGTON. CLERK
U.S. DISHlleT COURT
LLOYD BELL,
Plaintiff,
v. Civil Action No. 09-1454 (UNA)
STANWOOD DUVAL,
Defendant.
MEMORANDUM OPINION
It appears that The Hon. Stanwood J. Duval, Jr., United States District Judge for the
Eastern District of Louisiana, has ordered plaintiffs commitment to the custody of the Attorney
General for the purpose of psychiatric and psychological examination to determine his
competency to stand trial in a pending criminal matter. See Compi. at 2-3 & Attach. Plaintiff
alleges that Judge Duval "knows that ... plaintiff is compentent to stand trial," and, accordingly,
that the commitment order is invalid. Id. at 3. He demands "restitutional punishment money" in
the amount of $2 million. Id. at 4.
Judge Duval enjoys absolute immunity from liability for damages for acts committed
within his judicial jurisdiction. See Mirales v. Waco, 502 U.S. 9 (1991); Forrester v. White, 484
U.S. 219 (1988); Bradley v. Fisher, 13 Wall. 335,20 L.Ed. 646 (1872). Accordingly, the Court
will dismiss this action with prejudice. See 28 U.S.C. §§ 1915(e)(2)(B)(iii), 1915A(b)(2).
An Order consistent with this Memorandum is issued separately on this same date.
United States District Judge
(~) s
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Filed 7/17/14 In re Jason L. CA1/5
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FIVE
In re Jason L., a Person Coming Under the
Juvenile Court Law.
THE PEOPLE,
Plaintiff and Respondent, A139402
v.
(Alameda County
Jason L., Super. Ct. No. SJ11017903)
Defendant and Appellant.
Minor Jason L. was determined to be a habitual truant and declared a ward of the
court. (Welf. & Inst. Code, § 601, subd. (b).)1 He was placed on home probation with
conditions that he regularly attend school. After finding that Jason continued to be truant
and had engaged in “egregious” conduct which violated the conditions of his probation,
the court modified the conditions to include a weekend custodial program and remanded
Jason into custody for that purpose. Jason contends that the court’s custodial order must
be annulled because the trial court failed to follow required contempt procedures before
utilizing incarceration as punishment. The People concede the point. We agree and
annul the order.
1
All further undesignated statutory references are to the Welfare and Institutions
Code.
1
I. BACKGROUND
As a result of nonattendance at school, Jason and his mother agreed to the terms of
a School Attendance Review Board contract. Jason failed to comply with the contract
terms and was declared habitually truant by his school district. He agreed to participate
in the truancy mediation program with the probation department and Alameda County
District Attorney’s Office. Jason’s school attendance did not improve, and a wardship
petition was filed on November 7, 2011. On January 6, 2012, Jason admitted the
allegations of the petition. He was declared a ward of the court, committed to the custody
of the probation officer, and was to reside in his mother’s home. Among the probation
conditions were requirements that Jason attend classes daily and on time; notify the
probation officer of tardiness, absence, or disciplinary action; report to, and cooperate
with the probation officer, including participation in any recommended counseling
program.
At a February 15, 2013 review hearing, the probation officer reported that Jason
was not passing any of his classes. The court stated that it was “not satisfied” with
Jason’s school attendance and authorized up to 26 special Weekend Training Academy
(WETA) sessions in juvenile hall if Jason was “not complying with what [he] need[ed] to
do.” At a further review hearing on May 31, 2013, it was reported that Jason had
accumulated six unexcused absences, three missed periods, two tardies, and one tardy of
30 minutes or more. Jason was not present when the probation officer conducted a
school visit. The court imposed six out-of-custody WETA sessions. At a July 19, 2013
review hearing, it was reported that Jason had accumulated five unexcused absences,
three missed periods, and one tardy of 30 minutes or more since the last review hearing.
The court found that Jason’s “failure to comply with the court’s orders in terms of going
to school and doing the WETA program” was “egregious.” The court ordered two in-
custody WETA sessions and ordered Jason remanded to complete the first weekend.
Jason’s counsel objected, arguing that Jason had not been provided with an affidavit,
setting out specific charges of contempt of court, had not been given a proper opportunity
2
to prepare a defense to a contempt allegation, and had not been afforded a full evidentiary
hearing.
Jason filed a timely notice of appeal from the dispositional order. He contends
that the juvenile court’s July 19, 2013 dispositional order remanding him into custody
was unlawful and violated his right to due process.
II. DISCUSSION
Despite statutory limitations on placement of habitual truants in secure
confinement during nonschool hours (§§ 207, subd. (a),2 601, subd. (b)), a juvenile court
retains the authority to order the secure confinement of a habitual truant who is found to
be in contempt of court. (In re Michael G. (1988) 44 Cal.3d 283, 287; In re M.R. (2013)
220 Cal.App.4th 49, 53 (M.R).) However, before the juvenile court may order the secure
confinement of a contemptuous habitual truant, the court must comply with the
procedural safeguards provided under Code of Civil Procedure section 1209 et seq. (e.g.,
an affidavit or declaration under penalty of perjury setting forth the grounds for the
contempt and an order to show cause). (M.R., at p. 63.) While contending that the
juvenile court’s order is both moot and nonappealable,3 the People appropriately
acknowledge that the juvenile court failed to comply with the contempt procedures
mandated under Michael G., and do not object to annulment of the juvenile court’s
confinement order. We accept the concession and annul the order.
2
“No minor shall be detained in any jail, lockup, juvenile hall, or other secure
facility who is taken into custody solely upon the ground that he or she is a person
described by Section 601 or adjudged to be such or made a ward of the juvenile court
solely upon that ground, except as provided in subdivision (b) . . . .” (§ 207, subd. (a).)
3
The M.R. court agreed that a similar order entered in that case was technically
moot and nonappealable, but nevertheless reached the merits of the claim by exercising
its inherent discretion to treat the appeal as a petition for extraordinary writ relief. (M.R.,
supra, 220 Cal.App.4th at p. 65; id. at p. 56 [although appeal technically mooted by end
of confinement period, court exercised its “inherent discretion to resolve an issue of
broad public interest that is likely to recur while evading appellate review”].) We do the
same.
3
As an additional basis for reversal, Jason argues that the contempt order was
erroneous because the evidence does not support the court’s finding that Jason’s conduct
was egregious, nor its implied finding that no less restrictive alternative could be
effective. Jason contends that he suffered from a number of corroborated personal,
physical, and emotional problems that adversely affected his attendance. Since we have
annulled the contempt order that Jason appeals from, we need not reach these issues.
III. DISPOSITION
The court’s July 19, 2013 order is annulled.
_________________________
Bruiniers, J.
We concur:
_________________________
Jones, P. J.
_________________________
Simons, J.
4
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150 Ga. App. 303 (1979)
257 S.E.2d 372
PORTERFIELD
v.
THE STATE.
57772.
Court of Appeals of Georgia.
Submitted May 7, 1979.
Decided June 13, 1979.
Robert D. Peckham, for appellant.
Ken Stula, Solicitor, for appellee.
DEEN, Chief Judge.
Billy Ray Porterfield appeals from his conviction by a jury of the offense of solicitation of sodomy.
1. The trial court did not err in refusing to admit the results of a polygraph examination into evidence despite the express stipulation between the state and defense counsel that the results would be admissible when the results of such a test were inconclusive. In State v. *304 Chambers, 240 Ga. 76, 79 (239 SE2d 324) (1977), the Supreme Court held that upon express stipulation of the parties results of such a test are admissible and in that case were "... some evidence, though not direct evidence, of [the accused's] guilt." In the present case, the results were inconclusive, had no probative value whatsoever, and the trial court did not err in granting the state's motion to exclude the test results despite the stipulation. See Hurd v. State, 125 Ga. App. 353 (187 SE2d 545) (1972).
2. The trial court did not abuse its discretion in refusing to grant defendant's motion for a mistrial. The motion was based on the fact that the trial judge had contacted the polygraph operator to inform him of the trial time so he could plan his testing accordingly. The witness then volunteered that he wanted to run another test because the defendant had been taking sleeping pills and had not had much sleep. The witness corroborated the judge's testimony. While it would have been better for the judge to have contacted the attorneys and asked them to inform the witness of the trial time, we do not find that the judge's act was harmful to the defendant.
3. The trial court did not err in refusing to admit the testimony of defendant's witness who was to testify about police harassment of the accused because the testimony was hearsay. "Testimony concerning information acquired solely through books and records kept by a third person is inadmissible, as hearsay." Sabo v. Futch, 226 Ga. 352 (175 SE2d 16) (1970).
Judgment affirmed. Birdsong and Carley, JJ., concur. Shulman, J., not participating.
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83 F.3d 17
UNITED STATES of America, Appellee,v.James H. ABERNATHY, Defendant, Appellant.
No. 95-1720.
United States Court of Appeals,First Circuit.
Heard April 3, 1996.Decided April 30, 1996.
Appeal from the United States District Court for the District of Rhode Island; Hon. Raymond J. Pettine, Senior U.S. District Judge.
Edward F. Grourke with whom Finan & Grourke, Pawtucket, RI, was on brief for appellant.
Sheldon Whitehouse, United States Attorney, for appellee.
Before SELYA, Circuit Judge, ALDRICH, Senior Circuit Judge, and STAHL, Circuit Judge.
BAILEY ALDRICH, Senior Circuit Judge.
1
James H. Abernathy, driving a Massachusetts registered car in Providence, Rhode Island, was stopped by two policemen, one of whom, when he peered into defendant's vehicle, observed the butt of a .45 caliber Colt semi-automatic pistol sticking out from under the driver's seat. Indicted as a result, defendant initially pleaded guilty to two counts: Count I, as a convicted felon carrying a firearm that had been in interstate commerce, in violation of 18 U.S.C. § 922(g)(1); Count II, carrying an arm that had been in interstate commerce with an obliterated serial number, in violation of 18 U.S.C. § 922(k). Defendant was sentenced to 110 months imprisonment followed by three years supervised release on Count I, and to a concurrent 60 months imprisonment on Count II. Over one year later, upon defendant's motion, the entire sentence was vacated in order to reinstate his right to pursue a direct appeal, which had been dismissed for want of prosecution. Thereafter, prior to resentencing, defendant moved to withdraw his plea. The court denied the motion and resentenced defendant to the original terms. This appeal ensued, raising the following points: (1) the lawfulness of the stop; (2) whether defendant should have been allowed to withdraw his pleas on both counts; and (3) the constitutionality of the statutes proscribing his conduct. We affirm on (1) and (3). On (2) we reverse and vacate the sentence with respect to Count II.
The Arrest
2
The officers were in an unmarked car, in plain clothes. Some of the evidence might support defendant's claim that this was an unlawful investigatory stop. Ample evidence, however, supports the district court's finding of a justified traffic violation stop, including testimony that defendant travelled in the wrong lane of traffic and then ran a stop sign. No purpose would be served in discussing the district court's careful analysis and reasonable credibility resolutions. The fact that the officers were on an undercover investigatory narcotics detail does not mean that they could not lawfully make a proper traffic stop.
Withdrawal of the Plea
3
Withdrawal of a guilty plea prior to sentencing may be granted for "fair and just reason." See Fed.R.Crim.P. 32(e) (1994); United States v. Cotal-Crespo, 47 F.3d 1, 3 (1st Cir.), cert. denied, --- U.S. ----, 116 S.Ct. 94, 133 L.Ed.2d 49 (1995). After sentencing, the defendant must show a defect attending the plea that amounts to a "miscarriage of justice," or "an omission inconsistent with the rudimentary demands of fair procedure." United States v. Lopez-Pineda, 55 F.3d 693, 697 (1st Cir.) (internal quotations omitted), cert. denied, --- U.S. ----, 116 S.Ct. 259, 133 L.Ed.2d 183 (1995). Although the United States attaches great significance to the category to which defendant ought to be assigned, whether defendant's plea was knowing and voluntary within the meaning of Criminal Rule 11 is the most significant factor under either standard. United States v. Allard, 926 F.2d 1237, 1243 (1st Cir.1991).
4
With respect to Count I this is a routine case--the court was well warranted in finding no misunderstanding of the charge by defendant, nor was there any other flaw in the plea proceedings. Fed.R.Crim.P. 11(a)-(f).
5
There is a serious question, however, with respect to Count II. From the record, it appears that the court, as well as counsel for both the government and the defendant, understood that the government was not obliged to establish actual knowledge on defendant's part that the serial number had been obliterated at the time of his possession,1 and communicated this misunderstanding to the defendant. We find this failure to apprise defendant of the elements of the charge fundamentally inconsistent with fair procedure in an acceptance of plea proceeding. As the record contains strong support for defendant's claim that he lacked knowledge of the obliteration--at the very least it does not establish otherwise--we cannot say the error was harmless. Compare United States v. Ferguson, 60 F.3d 1, 4 (1st Cir.1995). See Fed.R.Crim.P. 11(h). It follows that defendant has a right to withdraw his plea on Count II.
6
Defendant's tangential suggestion that the court's imposition of a two-level enhancement to his offense level based on the obliteration also requires reversal ignores the fact that this enhancement explicitly applies "whether or not the defendant knew or had reason to believe that the firearm ... had an altered or obliterated serial number." USSG § 2K2.1(b)(4), comment. (n. 19). See United States v. Schnell, 982 F.2d 216, 220-21 (7th Cir.1992); United States v. Williams, 49 F.3d 92, 93 (2nd Cir.1995).
7
Having in mind that the 60-month sentence imposed on Count II was to be served concurrently with the 110 month sentence on Count I, the government has suggested that there may be possible advantages to defendant in not withdrawing the plea. This question is for defendant to determine when returned to the district court, and we express no opinion.
Constitutionality of the Statutes
8
We have recently considered and rejected similar arguments to those raised by defendant challenging the power of Congress under the Commerce Clause to enact the statutes underlying the charges against him, in light of the Supreme Court's ruling in United States v. Lopez, --- U.S. ----, 115 S.Ct. 1624, 131 L.Ed.2d 626 (1995). See United States v. Bennett, 75 F.3d 40, 49 (1st Cir.1996) (challenge to constitutionality of 18 U.S.C. § 922(g)(1) is "hopeless"); United States v. Diaz-Martinez, 71 F.3d 946, 953 (1st Cir.1995) (Lopez does not invalidate 18 U.S.C. § 922(k)).
9
Affirmed in part, reversed in part, and remanded.
1
While, regrettably, some of our prior cases seem unclear, cf. United States v. Chapdelaine, 989 F.2d 28, 33 (1st Cir.1993), cert. denied, --- U.S. ----, 114 S.Ct. 696, 126 L.Ed.2d 663 (1994), United States v. Smith, 940 F.2d 710, 713 (1st Cir.1991), it is indisputable that actual knowledge has been a necessary element of the crime at least since passage of the Firearms Owners' Protection Act, Pub.L. No. 99-308, § 104, 100 Stat. 456, 456 (1986), which modified the attendant penalty provision to require knowing violation of § 922(k) in order for criminal sanctions to attach. 18 U.S.C. § 924(a)(1)(B). See United States v. Hooker, 997 F.2d 67, 72 (5th Cir.1993); United States v. Haynes, 16 F.3d 29, 34 (2nd Cir.1994). See also United States v. De Leon Ruiz, 47 F.3d 452, 454 (1st Cir.1995); United States v. Lanoue, 71 F.3d 966, 983 (1st Cir.1995)
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877 F.2d 971
Vinsonv.NAACP Pres. Watkins (Ted)*
NO. 88-1989
United States Court of Appeals,Fifth Circuit.
JUN 15, 1989
1
Appeal From: N.D.Tex.
2
DISMISSED.
*
Fed.R.App.P. 34(a); 5th Cir.R. 34.2
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J-S21012-18
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
COMMONWEALTH OF PENNSYLVANIA : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
ZACHARIAH MORROW :
:
Appellant : No. 939 WDA 2017
Appeal from the Judgment of Sentence April 27, 2017
In the Court of Common Pleas of Butler County Criminal Division at
No(s): CP-10-CR-0000447-2015
BEFORE: OLSON, J., MURRAY, J., and FORD ELLIOTT, P.J.E.
MEMORANDUM BY OLSON, J.: FILED NOVEMBER 05, 2018
Appellant, Zachariah Morrow, appeals from the judgment of sentence
entered on April 27, 2017, following his guilty plea to one count each of
involuntary deviate sexual intercourse, incest, aggravated indecent assault,
and indecent assault.1 Upon review, we vacate the portion of Appellant’s
sentence deeming him to be a sexually violent predator (SVP) and remand for
additional proceedings consistent with this memorandum.
We briefly summarize the facts and procedural history relevant to this
appeal as follows. The Commonwealth charged Appellant with multiple sexual
abuse and child pornography crimes for conduct that occurred between 2009
and 2015 with his niece, who was six-years-old when the abuse began. On
September 7, 2016, Appellant pled guilty to the crimes as specified above.
____________________________________________
1 18 Pa.C.S.A. §§ 3123(a)(1), 4302, 3125(a)(1), and 3126(a)(7),
respectively.
J-S21012-18
The trial court accepted Appellant’s guilty plea and ordered the Sexual
Offender Assessment Board (SOAB) to conduct an evaluation to determine if
Appellant was an SVP. N.T., 10/7/2016, at 11. The trial court deferred
sentencing until it received the SVP evaluation. Id. The trial court held a
sentencing/SVP hearing on April 27, 2017 wherein the Commonwealth
presented the testimony of a member of the SOAB who opined that Appellant
met the statutory definition of an SVP. N.T., 4/27/2017, at 7. Ultimately, the
trial court found “that [Appellant] meets the criterion to be determined a
sexually violent predator and he will be sentenced as such[].” Id. at 13. The
trial court also sentenced Appellant in accordance to his guilty plea agreement
to an aggregate term of five to 15 years of imprisonment for the four
aforementioned crimes. The trial court notified Appellant that as an SVP he
was required to register “as a tier three sexual offender for [his] lifetime.” Id.
at 17. The trial court gave Appellant written notice of the SVP registration
requirements under “42 Pa.C.S.A. Chapter 97, Subchapter H” (Subchapter H).
See Appellant’s Brief, Exhibit 2. The trial court, however, did not file a
supporting order designating Appellant an SVP. This timely appeal resulted.2
On appeal, Appellant presents the following issues for our review:3
____________________________________________
2 Appellant filed a notice of appeal on May 23, 2017. Appellant and the trial
court timely complied with Pa.R.A.P. 1925.
3 Both of Appellant’s issues implicate the legality of his sentence and, thus,
we may reach them. See Commonwealth v. Golson, 189 A.3d 994, 1003
n.8 (Pa. Super. 2018) (while issues not raised before the trial court are
generally waived for appellate purposes, a challenge to the legality of a
sentence is non-waivable).
-2-
J-S21012-18
I. Whether the sentenc[ing] court erred by finding that []
Appellant met the criteria of a [SVP]?
II. Whether the sentenc[ing] court erred in sentencing
Appellant to an illegal sentence?
Appellant’s Brief at 12.
Appellant’s arguments are inter-related and we will examine them
together. In his first issue, Appellant claims that his SVP designation is illegal.
Id. at 22-27. In the alternative, in his second issue presented, Appellant
contends that sentencing him to a lifetime registration under SORNA4 is illegal
because such punitive requirements exceed his statutorily mandated
maximum aggregate sentence of 45 years. Id. at 27-42.
Pennsylvania courts have examined the jurisprudence surrounding SVP
determinations and the registration requirements under SORNA in two seminal
decisions -- Commonwealth v. Muniz, 164 A.3d 1189 (Pa. 2017) and
Commonwealth v. Butler, 173 A.3d 1212 (Pa. Super. 2017). In Muniz,
our Supreme Court held that SORNA’s Subchapter H registration requirements
constitute criminal punishment. Muniz, 164 A.3d at 1218. Accordingly, our
Supreme Court held that retroactive application of SORNA’s Subchapter H
____________________________________________
4 The Sex Offender Registration and Notification Act, 42 Pa.C.S.A.
§§ 9799.10–9799.41. “SORNA was enacted on December 20, 2011, and
became effective on December 20, 2012. SORNA recently was amended on
February 21, 2018, by H.B. 631, 202 Gen. Assem., Reg. Sess. (Pa. 2018), Act
10 of 2018.” Commonwealth v. Golson, 189 A.3d 994, 1003 (Pa. Super.
2018). The Act was further amended on June 12, 2018, by H.B. 1952, 202
Gen. Assem., Reg. Sess. (Pa. 2018), Act 29 of 2018.
-3-
J-S21012-18
requirements to defendants whose crimes occurred prior to SORNA’s effective
date (December 20, 2012) violated the ex post facto clause. Id. at 1218.
Thereafter,
in light of Muniz, this Court determined that “a factual finding,
such as whether a defendant has a mental abnormality or
personality disorder that makes him ... likely to engage in
predatory sexually violent offenses, that increases the length of
registration must be found beyond a reasonable doubt by the
chosen fact–finder.” Butler, 173 A.3d at 1217 (internal quotations
and citations omitted). The Butler Court further held “section
9799.24(e)(3) of SORNA violates the federal and state
constitutions because it increases the criminal penalty to which a
defendant is exposed without the chosen fact–finder making the
necessary factual findings beyond a reasonable doubt.” Id. at
1218. The Court therefore concluded that trial courts no longer
can designate convicted defendants as SVPs or hold SVP hearings
“until our General Assembly enacts a constitutional designation
mechanism.” Id. The Butler Court directed trial courts to apply
only the applicable tier–based registration period, as those periods
apply based on the conviction itself, and not due to any additional
fact not found, under SORNA's procedures, by the fact–finder. The
Court ultimately reversed the order finding the defendant to be an
SVP and remanded to the trial court for the sole purpose of issuing
appropriate notice of the defendant's tier–based registration
period. Id.
Golson, 189 A.3d at 1002–1003.
In response to our Supreme Court’s decision in Muniz and this Court’s
decision in Butler, as briefly mentioned above, the Pennsylvania General
Assembly passed Acts 10 and 29 of 2018. The express purpose of both
legislative enactments was to cure SORNA’s constitutional defects. See 42
Pa.C.S.A. § 9799.51(b)(4) (“it is the intention of the General Assembly to
address [Muniz and Butler].”) Specifically, our General Assembly modified
Subchapter H’s registration requirements for those offenders convicted of
-4-
J-S21012-18
committing offenses that occurred on or after SORNA’s effective date, i.e.,
December 20, 2012. Our General Assembly also added Subchapter I to Title
42, Part VII, Chapter 97. Subchapter I sets forth the registration
requirements that apply to all offenders convicted of committing offenses on
or after Megan’s Law I’s effective date (April 22, 1996), but prior to SORNA’s
effective date.
Here, the trial court determined that Appellant was an SVP. Based upon
Muniz and Butler, however, the trial court’s designation of Appellant as an
SVP pursuant to SORNA’s Subsection H conflicted with the U.S. and
Pennsylvania Constitutions by exposing Appellant to additional criminal
penalties in the absence of a fact-finder making the required factual
determinations beyond a reasonable doubt.5 Thus, we are constrained to
vacate the trial court’s SVP designation of Appellant. Moreover, we are
required to remand the matter to the trial court for the sole purpose of issuing
appropriate notice of Appellant’s tier–based registration period.
____________________________________________
5 We note that, on July 31, 2018, the Pennsylvania Supreme Court granted
a petition for allowance of appeal in Butler to address the following issue:
Whether the Superior Court of Pennsylvania erred in vacating the
trial court's Order finding [Respondent] to be [a Sexually Violent
Predator (“SVP”) ] by extrapolating the decision in
[Commonwealth v. Muniz, 640 Pa. 699, 164 A.3d 1189
(2017),] to declare SVP hearings and designations
unconstitutional under 42 Pa.C.S. § 9799.24(e)(3).
Commonwealth v. Butler, 2018 WL 3633945, at *1 (Pa. 2018).
-5-
J-S21012-18
This does not end our inquiry, however. We note that the
Commonwealth alleged, and Appellant pled guilty to, criminal conduct that
occurred between 2009 and 2015. Because SORNA was enacted in December
2012, Appellant’s criminal conduct appears to have straddled SORNA’s
enactment date. Thus, on remand, a determination should be made as to
when the crimes occurred for which Appellant pled guilty so as to determine
which registration requirements apply. Moreover, on appeal, the
Commonwealth argues that Act 10 remedied the issues presented in Muniz.
Commonwealth’s Brief at 8-9. Thus, on remand, the Commonwealth may
argue that the trial court consider whether Act 10 and Act 29 (which amended
Act 10) remedied the issues raised in Muniz. Further, the parties may argue
which, if any, registration provision constitutionally applies to Appellant. The
trial court shall then determine whether Act 10 or Act 29 remedied the issues
raised in Muniz and, depending on resolution of that inquiry, which
registration provision applies in this case.6
Finally, we reject Appellant’s second argument that punitive lifetime
registration requirements are illegal because such requisites exceed his
maximum sentence of 45 years. This Court has recently rejected this precise
argument. See Commonwealth v. Strafford, 2018 WL 3717081, at *3 (Pa.
Super. 2018) (SORNA's registration requirements are authorized punitive
____________________________________________
6 We note that the Supreme Court recently granted review, in its original
jurisdiction, to determine the issue of whether Acts 10 and 29 are
constitutional. See Commonwealth v. Lacombe, 35 MAP 2018 (Pa. 2018).
-6-
J-S21012-18
measures separate and apart from a defendant's term of incarceration, the
legislature did not limit the authority of a court to impose registration
requirements only within the maximum allowable term of incarceration, and
in fact, the legislature requires courts to impose registration requirements in
excess of the maximum allowable term of incarceration). As such, Appellant’s
second issue lacks merit.
Judgment of sentence vacated in part. Case remanded for additional
proceedings consistent with this memorandum. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/5/2018
-7-
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9 So.3d 586 (2007)
EX PARTE JOHNNY KIMBRELL.
No. CR-06-0966.
Court of Criminal Appeals of Alabama.
April 20, 2007.
Decision of the Alabama Court of Criminal Appeal Without Opinion. Rehearing denied.
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27 So.3d 636 (2008)
EX PARTE BENNY RAY KING
No. CR-07-1865.
Court of Criminal Appeals of Alabama.
August 4, 2008.
Decision of the Alabama Court of Criminal Appeal Without Published Opinion Mand. pet. dismissed.
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J -A13031-19
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
DAVID HATCHIGIAN IN THE SUPERIOR COURT
OF PENNSYLVANIA
Appellant
v.
PECO/EXELON AND MUNICIPAL
INSPECTION CORPORATION,
Appellees No. 142 EDA 2018
Appeal from the Order Entered December 18, 2017
in the Court of Common Pleas of Philadelphia County
Civil Division at No(s): August 2016 No. 16080065
BEFORE: SHOGAN, J., NICHOLS, J. and STRASSBURGER, J.*
MEMORANDUM BY STRASSBURGER, J.: FILED AUGUST 06, 2019
David Hatchigian appeals pro se from the order entered on December
18, 2017, which dismissed with prejudice the fourth amended complaint he
filed against PECO Energy Cornpany/Exelonl (PECO) and Municipal Inspection
Corporation (MIC).2 Upon review, we vacate the order and remand for
proceedings consistent with this memorandum.
1 "PECO jurisdictional public utility providing electric and gas service in
[] is a
the Commonwealth of Pennsylvania." Preliminary Objections, 10/30/2017, at
24.
'11 According to Hatchigian, PECO "is a subsidiary of the Exelon
Corporation." Fourth Amended Complaint, 8/21/2017, at 22. '11
2 According to Hatchigian, MIC "is a private third -party corporate entity,
approved by PECO to perform electrical inspections and provider of [sic]
certifications" and is located in Philadelphia. Fourth Amended Complaint,
8/21/2017, at 23. '11
* Retired Senior Judge assigned to the Superior Court.
J -A13031-19
This case arises from a dispute between Hatchigian and PECO. We
summarize the facts as set forth by Hatchigian in his fourth amended
complaint. Hatchigian lives in and owns rental property in the city of
Philadelphia. He obtains his electricity from PECO. It is Hatchigian's position
that PECO's "inadequate termination and reconnection procedures leave [him
and others similarly situated] at the mercy of PECO when bargaining [for]
their right to residential electricity."3 Fourth Amended Complaint, 8/21/2017,
at '11 18. Specifically, Hatchigian claimed that PECO "refused a reconnection
pursuant to a certification requirement within the Electric Service Tariff filed
3 Hatchigian initially filed this action on behalf of himself and commenced the
action as a claim in the Philadelphia Municipal Court, where judgment was
entered in favor of PECO. Hatchigian then appealed to the Court of Common
Pleas, where Hatchigian began adding language in the nature of a class action.
See Complaint, 12/1/2016, at 1 (stating that this action is on behalf of
'11
himself and "other customers, landlords, and tenants whose electrical utility
services were terminated without warning, notice, or a hearing"). In his
second amended complaint, Hatchigian added numerous named plaintiffs,
including "John Does 1-20" and "all those similarly situated." Second Amended
Complaint, 5/11/2017, at 1. He maintains the same language in his fourth
amended complaint. See Fourth Amended Complaint, 8/21/2017, at 1.
Confusing matters further, Hatchigian claims this class action is being pursued
under the Federal Rules of Civil Procedure that govern class actions. See
Fourth Amended Complaint, 8/21/2017, at 69 (citing Federal Rules of Civil
'11
Procedure 23(a), 23(b)(2), and 23(b)(3)). Class action lawsuits in
Pennsylvania state courts are governed by Pa.R.C.P. 1701-1717. In any
event, determining whether this case is or is not a class action is not necessary
to our ultimate conclusion, and for ease of reference, we will refer to
Hatchigian as the only plaintiff/appellant.
-2
J -A13031-19
by PECO and on file with the Pennsylvania Public Utility Commission [(PUC)]."4
Id. at '11 50.
According to Hatchigian, "[o]n or about May 18, 2016[,] Hatchigian
received several phone calls from two different tenants complaining that all
electric[al service] was shut off [in their apartments.]" Id. at '11 51. Hatchigian
then contacted PECO, and claimed he was told that "electrical [service] had
been disconnected inadvertently but was in the process of being restored that
same day, with no need for Hatchigian to file for [] exemptions to reintroduce
service." Id. at '11 52. Hatchigian contended that "service was not restored as
promised" and PECO then "claimed that the apartment had been unoccupied
for six months and therefore a certificate from their electrical underwriter firm
was now required." Id. at '11 53. Hatchigian claimed that he "ordered
underwriter certification by [MIC]" and "paid a total of $130 to MIC as a
predicate for PECO's reintroduction of service." Id. at '11 54. Then, according
to Hatchigian, PECO continued to refuse to reconnect electrical service until
4The PUC is a statutory entity created and governed by the Public Utility Code.
See 66 Pa.C.S. §§ 101-3316. Additionally,
A tariff set of operating rules imposed by the State that a
is a
public utility must follow if it wishes to provide services to
customers. It is a public document which sets forth the schedule
of rates and services and rules, regulations and practices
regarding those services.
Sunrise Energy, LLC v. FirstEnergy Corp., 148 A.3d 894, 905 n.14 (Pa.
Cmwlth. 2016) (quoting PPL Electric Utilities Corp. v. Pennsylvania
Public Utility Commission, 912 A.2d 386, 402 (Pa. Cmwlth. 2006)
(emphasis added)).
-3
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Hatchigian arranged for a "re -inspection of all of the electric wiring at the []
apartment." Id. at ¶ 57. Hatchigian contended he complied with all
instructions, but due to the service interruption, he was then in violation of
various Philadelphia municipal codes. Hatchigian averred that due to the units
not having electrical service, despite having made all necessary payments to
PECO, "new tenants were ultimately unable to move into the apartment on
time." Id. at ¶ 59. Hatchigian contended that
[b]y terminating [his] electrical service without warning despite
payment for service, [PECO was] negligent, breached the services
contract and an implied covenant of good faith and fair dealing
therein, violated [his] rights under and tortiously interfered with
[his] leases, violated the UTPCPL,[5] deprived [him] of [his]
property rights via an unconstitutional taking[,] and created a
public nuisance.
Id. at ¶ 64. Hatchigian requested several forms of relief including $100,000
from PECO. Id. at ¶ 131.
PECO filed preliminary objections to Hatchigian's fourth amended
complaint. It is PECO's position that Hatchigian's "underlying cause of action
is the contention that [PECO's] processes and procedures are insufficient and,
by design, these policies and procedures cause damage to utility customers."
Preliminary Objections, 10/30/2017, at ¶ 23. According to PECO, it is the PUC
that regulates the policies and procedures about which Hatchigian complains.
5 The UTPCPL is the Unfair Trade Practices and Consumer Protection Law. See
73 P.S. §§ 201-1 through 201-9.3. The purpose of the UTPCPL "is to protect
the public from-and indeed to eradicate-unfair or deceptive business
practices." Agliori v. Metro. Life Ins. Co., 879 A.2d 315, 318 (Pa. Super.
2005) (internal quotation marks omitted).
- 4 -
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Thus, according to PECO, the PUC was "the appropriate forum for the
adjudication of issues involving the reasonableness, adequacy and sufficiency
of public utility services." Id. at ¶ 33. Therefore, PECO claimed that the PUC
has "primary and exclusive jurisdiction" over Hatchigian's claims. Id. at ¶ 36.
On December 15, 2017, the trial court sustained PECO's preliminary
objections in part, concluding it lacked subject matter jurisdiction over this
matter. Specifically, the trial court concluded that Hatchigian's complaint
"challenges the service termination procedure employed by PECO." Trial Court
Opinion, 8/27/2018, at 4. Although some of Hatchigian's causes of action
sound in tort and contract, "[t]he overall thrust of the [c]omplaint ...
challenges [PECO's] termination procedures." Id. at 5. Accordingly, the trial
court concluded that "the redress [Hatchigian] seeks is exclusively within the
PUC's jurisdiction." Id. at 6. Therefore, the trial court sustained PECO's
preliminary objections on this basis and dismissed Hatchigian's complaint.
Hatchigian timely filed a notice of appeal. The trial court did not order
Hatchigian to file a statement of errors complained of on appeal pursuant to
Pa.R.A.P. 1925, but the trial court filed an opinion explaining its rationale for
dismissing the complaint. On appeal, Hatchigian first claims the trial court
erred in sustaining PECO's preliminary objections and dismissing the fourth
amended complaint for lack of subject matter jurisdiction. Hatchigian's Brief
at 14-52. We review this claim mindful of the following.
On an appeal from an [o]rder sustaining preliminary
objections, we accept as true all well -pleaded material facts set
- 5 -
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forth in the appellant's complaint and all reasonable inferences
which may be drawn from those facts. Where, as here, upholding
sustained preliminary objections would result in the dismissal of
an action, we may do so only in cases that are clear and free from
doubt. Any doubt should be resolved by a refusal to sustain the
objections.
[I]t well -settled that the question of subject matter
is
jurisdiction may be raised at any time, by any party, or by the
court sua sponte. Our standard of review is de novo, and our
scope of review is plenary. Generally, subject matter jurisdiction
has been defined as the court's power to hear cases of the class
to which the case at issue belongs.
Jurisdiction is the capacity to pronounce a judgment of the
law on an issue brought before the court through due process of
law. It is the right to adjudicate concerning the subject matter in
a given case.... Without such jurisdiction, there is no authority to
give judgment and one so entered is without force or effect. The
trial court has jurisdiction if it is competent to hear or determine
controversies of the general nature of the matter involved sub
judice. Jurisdiction lies if the court had power to enter upon the
inquiry, not whether it might ultimately decide that it could not
give relief in the particular case.
Estate of Gentry v. Diamond Rock Hill Realty, LLC, 111 A.3d 194, 198
(Pa. Super. 2015) (internal citations and quotation marks omitted).
We begin with analyzing the trial court's conclusion that the PUC has
primary jurisdiction over the matters set forth in Hatchigian's fourth amended
complaint.
It iswell -settled law that initial jurisdiction over matters
involving the reasonableness, adequacy or sufficiency of a public
utility's service, facilities or rates is vested in the PUC and not in
the courts. Matters relating to the tariff, the necessity of
equipment, deposits and the use of various types of services are
peculiarly within the expertise of the [PUC] and, as such, are
outside the original jurisdiction of the courts. When a utility's
failure to maintain reasonable and adequate service is alleged,
regardless of the form of the pleading in which the allegations are
- 6 -
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couched, it is for the PUC initially to determine whether the service
provided by the utility has fallen short of the statutory standard
required of it. It is equally clear that [t]he courts retain
jurisdiction of a suit for damages based on negligence or breach
of contract wherein a utility's performance of its legally imposed
and contractually adopted obligations are examined and applied
to a given set of facts. [O]nly where the available administrative
remedies are adequate with respect to the alleged injury sustained
and the relief requested should exhaustion of administrative
remedies be required before seeking damages in court.
Morrow v. Bell Tel. Co. of Pa., 479 A.2d 548, 554-55 (Pa. Super. 1984)
(internal citations and quotation marks omitted).
Hatchigian contends that the matters set forth in the fourth amended
complaint "are almost entirely questions of law and statutory construction
which the [trial] court is well versed in adjudicating." Hatchigian's Brief at 18.
Hatchigian further argues that even if the PUC has subject matter jurisdiction
over some of the claims set forth, the trial court should have stayed the court
proceeding, rather than dismissing it in its entirety. Id. at 21.
The Commonwealth Court considered similar issues in Pettko v. Pa.
Am. Water Co. (PAWC), 39 A.3d 473 (Pa. Cmwlth. 2012).6 In that case,
Pettko, on behalf of himself and others similarly situated, filed a complaint in
6We recognize that cases decided by the Commonwealth Court are not binding
precedent on this Court. See Kraus v. Taylor, 710 A.2d 1142, 1144 (Pa.
Super. 1998) ("Although we frequently turn to the wisdom of our colleagues
on the Commonwealth Court for guidance, the decisions of that court are not
binding on this Court."). Pettko was initially appealed to this Court, but this
Court transferred it to the Commonwealth Court. In its opinion, the
Commonwealth Court stated that there was "no basis" for it to assume
jurisdiction over the appeal, but since no party objected to the transfer, it
decided the case. Pettko, 39 A.3d at 476 n.2. Moreover, in its analysis, it
relied upon Pennsylvania Supreme Court and Superior Court cases.
- 7 -
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the Court of Common Pleas of Washington County against PAWC challenging
its "billing practices, including practices relating to certain rate increases
approved by the PUC, and PAWC's alleged practice of rounding up, rather than
down, amounts for various components of its bills." Id. at 475-76. Notably,
Pettko set forth claims for breach of contract, conversion, and violations of the
UTPCPL.
PAWC filed preliminary objections averring, inter alia, that the PUC
"has primary and exclusive jurisdiction over Pettko's complaint." Id. at 477.
The trial court agreed, "dismissed Pettko's complaint, and transferred the
matter to the PUC." Id. Pettko appealed.
On appeal, the Commonwealth Court analyzed first whether the PUC
has primary jurisdiction. In doing so, it set forth the following.
When a trial court calls upon an administrative agency to
exercise its primary jurisdiction and evaluate a particular pertinent
issue, and the agency renders a determination, that adjudicatory
action has a binding, collateral effect upon the trial court's
proceedings, unless a party successfully challenges the
determination through the appeal process. Such determinations
by administrative agencies, therefore, serve more than a merely
advisory function. As we stated in County of Erie v. Verizon
North, Inc., 879 A.2d 357 (Pa. Cmwlth. 2005), under the
doctrine of primary jurisdiction, a trial court may "refrain from
hearing a case" over which it might otherwise have jurisdiction,
"where protection of the integrity of [a] regulatory scheme
dictates that the parties preliminarily resort to the agency that
administers the scheme for the resolution of disputes." County of
Erie, 879 A.2d at 363. "Once the administrative tribunal has
determined the issues within its jurisdiction, then the temporarily
suspended civil litigation may continue, guided in scope and
direction by the nature and outcome of the agency
determination." Elkin[ v. Bell Telephone Co. of Pa., 420 A.2d
371, 377 (Pa. 1980)].
-8
J -A13031-19
Our Supreme Court, however, admonished trial courts not
to abdicate judicial responsibility, and summarized the
circumstances in which the primary jurisdiction doctrine applies,
as follows:
[W]here the subject matter is within an agency's
jurisdiction and where it is a complex matter requiring
special competence, with which the judge or jury
would not or could not be familiar, the proper
procedure is for the court to refer the matter to the
appropriate agency. Also weighing in the
consideration should be the need for uniformity and
consistency in agency policy and the legislative intent.
Where, on the other hand, the matter is not one
peculiarly within the agency's area of expertise, but is
one which the courts or jury are equally well -suited to
determine, the court must not abdicate its
responsibility. In such cases, it would be wasteful to
employ the bifurcated procedure of referral, as no
appreciable benefits would be forthcoming.
Id. (footnote omitted).
Additionally, in County of Erie this Court confirmed the
notion that the nature of the claims a plaintiff brings is not
necessarily determinative of the question of whether the doctrine
of primary jurisdiction applies. In County of Erie, we quoted the
Superior Court's decision in Morrow, [supra], as follows:
"[W]hen a utility's failure to maintain reasonable and adequate
service is alleged, regardless of the form of the pleading in which
the allegations are couched, it is for the PUC, initially, to determine
whether the service provided by the utility has fallen short of the
statutory standard required of it." County of Erie, 879 A.2d at
364 (quoting Morrow, 479 A.2d at 550-51).
Pettko, 39 A.3d at 479-80 (some citations omitted).
On appeal, Pettko claimed that his "UTPCPL and common law claims do
not implicate any regulatory matters within the PUC's subject matter
competency." Id. at 480. He argued that PAWC's conduct was deceptive, and
-9
J -A13031-19
adjudicating such a claim does "not require the exercise of the PUC's
expertise." Id. PAWC countered that Pettko's claims regarding PUC's "power
to regulate the rates a utility charges to a customer and the power to prescribe
regulations and practices with which utilities must comply" implicates the
primary jurisdiction of the PUC. Id. at 481. In addition, both Pettko and PAWC
referenced provisions of the tariff in making their arguments.
The Commonwealth Court analyzed the arguments presented and
concluded
that the question of whether a utility's manner of billing is in
compliance with a tariff is encompassed in the claims relating to
billing practices that Pettko has raised in his complaint.... If the
PUC reviews the tariff and PAWC's billing methodology and
concludes that the billing practices are compliant with the tariff,
the civil matter will be concluded, subject of course to appellate
review of the PUC's decision.
Id. at 482-83.
Thus, the Commonwealth Court determined that the PUC had primary
jurisdiction over the claim. The Commonwealth Court then went on to analyze
whether the PUC also had exclusive jurisdiction over the claim. "[U]nder the
doctrine of exhaustion of administrative remedies, an administrative agency
does not have exclusive jurisdiction unless it has the power to award relief
that will make a successful litigant whole." Id. at 484. The Commonwealth
Court concluded that although relief on some of Pettko's claims could be
provided by the PUC, it also concluded that relief on Pettko's UTPCPL claim
could not be granted by the PUC. The Commonwealth Court stated that, inter
- 10 -
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alia, the Public Utility Code "does not authorize the PUC to remedy fraudulent
conduct (unlike the UTPCPL)."Id. at 485. Thus, although the PUC had primary
jurisdiction over some of the claims set forth by Pettko, it did not have
exclusive jurisdiction over the UTPCPL claim "because the PUC has no power
to award relief, if it is appropriate, for that claim." Id. Accordingly, the
Commonwealth Court affirmed the trial court's order, concluding that the trial
court acted appropriately by transferring the matter to the PUC.
Applying this framework, we now turn to the case sub judice. As set
forth by the trial court, Hatchigian's primary complaint is that PECO either
failed to apply the provisions of its tariff to him and others similarly situated
or that the provisions of the tariff itself were unreasonable. See Fourth
Amended Complaint, 1111 24-33 (alleging that "[s]ection 9.2 of PECO's tariff"
"gives inadequate notice" to customers; and that "PECO's interpretation of
this tariff includes an unreasonable certification requirement"); id. at ¶ 39
(alleging that "PECO's exclusive reliance on computerized systems to execute
its broadly[ -]worded tariff makes the risk of erroneous deprivation [of
electrical service] substantial"); id. at ¶ 41 (alleging that "PECO is able to
collect customer funds pursuant to its tariff with impunity as if it were a public
agency, without any of the constraints in the [P]ublic [U]tility [C]ode;" and
id. at ¶ 46 (alleging that "PECO's one sided interpretation of the tariff
disregards the need to access channels for customer complaint in a meaningful
time and in a meaningful manner"). As the trial court concluded, it is these
J -A13031-19
provisions that form the basis of Hatchigian's complaint. See Trial Court
Opinion, 8/27/2018, at 5 ("The overall thrust of the [c]omplaint ... challenges
[PECO's] termination procedures."). Hatchitgian's additional causes of action
all hinge on whether PECO either misinterpreted its tariff, applied the tariff to
Hatchigian unreasonably, or that the tariff itself is insufficient to provide due
process to PECO's customers.
It is well -settled that determinations regarding the adequacy and
application of a public utility tariff fall within the expertise of the PUC. See
Optimum Image, Inc. v. Philadelphia Elec. Co., 600 A.2d 553, 557 (Pa.
Super. 1991) ("Matters relating to tariff ... are within the particular expertise
of the PUC."); Morrow, 479 A.2d at 550 (same). In his brief, Hatchigian
acknowledges his complaint is two -fold: "(1) PECO and agents interfere[d]
with lease arrangements entered into by the Mandlord and [t]enant classes
and (2) PECO fail[ed] its duty to maintain a reasonable standard of care when
performing the disconnection and reconnection terms of the [s]ervice
[a]greement." Hatchigian's Brief at 31.
Instantly, there can be no doubt that resolution of the standard -of -care
issue will rely extensively upon whether the service agreement is in
compliance with the tariff. Such a determination is within the particular
expertise of the PUC. See State Farm Fire & Cas. Co. v. PECO, 54 A.3d
921, 927 (Pa. Super. 2012) (internal quotation marks omitted) (pointing out
that it is the "PUC's authority to determine the reasonableness of tariffs" and
- 12 -
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that the PUC has the "power to assess whether such provisions are compatible
with the [Public Utility C]ode and policies of the commission and consistent
with its regulatory scheme"). Moreover, to the extent that PECO is in
compliance with the tariff, and the tariff is reasonable, PECO cannot be
unreasonably interfering with a landlord -tenant relationship. Accordingly, we
hold that the PUC has primary jurisdiction over Hatchigian's complaint.
We now turn to consider whether the PUC has exclusive jurisdiction. As
in Pettko, Hatchigian raises a claim that PECO has violated the UTPCPL.
Accordingly, we hold that Hatchigian's UTPCPL claim does not fall within the
exclusive jurisdiction of the PUC, and the trial court erred in dismissing
Hatchigian's fourth amended complaint with prejudice. See Pettko, supra.
In addition to the UTPCPL claim, Hatchigian also raises other claims, such as
an unconstitutional taking and public nuisance. To the extent that the PUC
finds in favor of Hatchigian and provides Hatchigian relief on the claims over
which it has jurisdiction, Appellant may then pursue his remaining claims in
the Court of Common Pleas.
Based on the foregoing, we vacate the order of the trial court and
remand for the entry of an order transferring the case to the PUC.
Order vacated. Case remanded. Jurisdiction relinquished.
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Judgment Entered.
Jseph D. Seletyn,
Prothonotary
Date: 8/6/19
- 14 -
| {
"pile_set_name": "FreeLaw"
} |
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be
regarded as precedent or cited before any
court except for the purpose of
establishing the defense of res judicata,
collateral estoppel, or the law of the case.
ATTORNEYS FOR APPELLANTS: ATTORNEYS FOR APPELLEES:
J. MICHAEL KATZ KEVIN E. WERNER
LISA M. ROSS Merrillville, Indiana
Goodman Katz & Scheele
Highland, Indiana SCOTT PYLE Nov 20 2013, 10:06 am
Calumet City, Illinois
ADAM J. SEDIA
Rubino Ruman Crosmer & Polen
Dyer, Indiana
IN THE
COURT OF APPEALS OF INDIANA
JOHN S. PANIAGUAS, KATHY R. )
PANIAGUAS, WOODROW CORNETT, III, )
and KRISTINE E. CORNETT, )
)
Appellants-Plaintiffs, )
)
vs. ) No. 45A03-1205-PL-244
)
ENDOR, INC. et al.,1 )
)
Appellees-Defendants. )
APPEAL FROM THE LAKE SUPERIOR COURT
The Honorable John R. Pera, Judge
Cause No. 45D10-0310-PL-122
November 20, 2013
MEMORANDUM DECISION - NOT FOR PUBLICATION
KIRSCH, Judge
1
We note that the trial court entered a default judgment against Endor, Inc. on all issues of
causation and liability due to failure to cooperate and provide discovery. However, “[u]nder Indiana
Appellate Rule 17(A), ‘[a] party of record in the trial court or Administrative Agency shall be a party on
appeal.’” Hoosier Outdoor Adver. Corp. v. RBL Mgmt., Inc., 844 N.E.2d 157, 162 (Ind. Ct. App. 2006)
(quoting Ind. Appellate Rule 17(A)). This appeal only concerns the claims against the homeowners in
both Units 1 and 2 who purchased homes from Endor Inc., but due to the lengthy number of appellees
involved and to conserve space in the caption, we only list Endor, Inc. as it is the first party named in the
caption.
This case arises from a dispute between two groups of homeowners of homes in
the same subdivision in Crown Point, Indiana. John S. Paniaguas, Kathy R. Paniaguas,
Woodrow Cornett, III, and Kristine E. Cornett (collectively, “the Paniaguas parties”) own
homes in Unit 1 of the subdivision that were built by the initial developer of the
subdivision, Aldon Companies, Inc. (“Aldon”). The Appellee Homeowners subsequently
purchased homes in the same subdivision, some of which were in Unit 1 and some of
which were in Unit 2, that were built by a second developer, Endor, Inc. (“Endor”). The
Paniaguas parties appeal the trial court’s order that determined that the Appellee
Homeowners’ homes were in compliance with the Restrictive Covenants of the
subdivision, raising the following consolidated and restated issues:
I. Whether the trial court erred in determining that the Paniaguas
parties lacked standing to enforce the Restrictive Covenants against
the homeowners in Unit 2 of the subdivision based on the trial
court’s finding that the Restrictive Covenants only applied to Unit 1
of the subdivision;
II. Whether the trial court abused its discretion in admitting the minutes
of the Endor Architectural Control Committee under the business
records exception to the hearsay rule; and
III. Whether the evidence presented failed to support the trial court’s
finding that all of the homes built by Endor complied with the
Restrictive Covenants.
The Appellee Homeowners cross-appeal and raise the following restated issue:
IV. Whether the trial court erred in not granting them attorney fees
because the Paniaguas parties’ claims were frivolous.
We affirm.
2
FACTS AND PROCEDURAL HISTORY2
Fieldstone Crossing is a single-family residence subdivision located in Crown
Point, Indiana. Aldon was the initial developer for Units 1 and 2 of the subdivision. Unit
1 of Fieldstone Crossing consists of nineteen single-family residences, and its plat was
properly recorded with the Lake County Recorder on October 7, 1992. Unit 2 consists of
eighteen single-family residences, and its plat was properly recorded with the Lake
County Recorder on May 13, 1997. Aldon had initially created four “ABCD” home
models, the Applewood, the Birchwood, the Cherrywood, and the Dogwood, each with
four different elevations for Fieldstone Crossing. Tr. at 339.
Aldon, through its president, Alfred Gomez, Jr., and its secretary, Brad Gomez
(“Gomez”), executed a document titled, “Declaration of Restrictive Subdivision
Covenants of Fieldstone Crossing Subdivision, City of Crown Point, Lake County,
Indiana” (“the Restrictive Covenants”). The Restrictive Covenants were subsequently
recorded with the Lake County Recorder on March 30, 1993 and re-recorded on July 8,
1993 to reflect an amendment. At the time the Restrictive Covenants were recorded, Unit
2 had not been platted, and the language of the Restrictive Covenants stated that the “land
affected by these restrictions and covenants, is annexed hereto and made a part hereof as
Exhibit A,” which is the legal description of Unit 1. Pls.’ Ex. 8, Ex. Vol. 7 at 1053, 1057-
2
Oral argument was heard on this case on August 28, 2013 in Indianapolis. We commend
counsel on the quality of their written and oral advocacy.
3
58.3 Nowhere in the language of the Restrictive Covenants did it state that they applied to
both Units 1 and 2 of Fieldstone Crossing, and Gomez testified that he was under the
belief that the Restrictive Covenants were only meant to apply to Unit 1. Tr. at 290.
One of the provisions contained in the Restrictive Covenants states in pertinent
part:
2. ARCHITECTURAL CONTROL
No home or structure shall be erected, placed or altered on any lot
until construction plans and specifications and the plans showing the
location of the structure have been approved by the Architectural Control
Committee as to quality of workmanship and materials, harmony of
external design with existing structures, and as to location with respect to
topography and finish grade elevation. No fence or wall shall be erected,
placed or altered on any lot unless similarly approved. All buildings such
as recreational buildings, storage sheds, pools, decks, etc. must have written
approval of [the] Committee.
Pls.’ Ex. 8, Ex. Vol. 7 at 1051. The Restrictive Covenants further state that the
Architectural Control Committee (“the ACC”) “reserves the right to enforce compliance
with these covenants.” Id. at 1053. During the time that Aldon owned and developed
Fieldstone Crossing, the ACC consisted of Alfred Gomez, Jr., Gomez, and Aldon, by
Brad Gomez.
In mid-1993, John S. Paniaguas and Kathy R. Paniaguas (together “Paniaguas”)
contacted Aldon’s sales representative regarding building a home in Fieldstone Crossing.
After deciding to build their home in Fieldstone Crossing, they completed a contract for
purchase of a lot in Unit 1 and for Aldon to construct a home on the lot, and Aldon
3
We note that this case contains a voluminous record, consisting of eighteen volumes of exhibits, which are
consecutively paginated. As such, we will refer to exhibits with their exhibit number and with their corresponding
exhibit volume and page number.
4
conveyed the title to the lot to Paniaguas. During the planning stage of building their
home, Paniaguas declined to have their home constructed strictly according to one of the
ABCD model home designs that Aldon had created for the subdivision, and instead,
requested a model that incorporated features used by another developer that were over
and above the standard features offered by Aldon for Fieldstone Crossing. Paniaguas’s
requests, which were approved by Gomez, resulted in Paniaguas having a semi-custom
built home that cost more than any of the other homes that would later be built in Units 1
or 2 of Fieldstone Crossing. Because Paniaguas’s home was to be the first one
constructed in Fieldstone Crossing, Paniaguas wanted to ensure that subsequently built
homes would maintain the aesthetic standards and compliment the value of their home.
Paniaguas believed that the Restrictive Covenants would ensure this since any new
construction would have to be approved by the ACC.
On May 21, 2001, Woodrow Cornett, III and Kristine E. Cornett (together “the
Cornetts”) purchased a nearly completed Aldon home in Fieldstone Crossing. The design
of the Cornetts’ home did not come from the basic Aldon ABCD models, but instead,
came from an Aldon portfolio of twenty-one different home designs. The Cornetts first
viewed and purchased their home after it had been substantially completed by Aldon, and
the Cornetts were limited to selecting options for carpeting, light fixtures, and door
knobs.
Between 1993 and 2002, Aldon constructed, sold, and conveyed its interest in a
total of nine homes in Fieldstone Crossing, including Paniaguas’s and the Cornetts’
homes. On December 11, 2002, Aldon entered into an agreement to sell its development
5
and ownership rights in the remaining twenty-eight, then undeveloped, properties spread
between Units 1 and 2 of Fieldstone Crossing to Endor, Inc. (“Endor”). Pursuant to the
agreement, Endor was to assume responsibility for enforcing the Restrictive Covenants
and to assume control of the ACC. In February 2003, Aldon conveyed its ownership and
development rights to Endor by way of a trustee’s deed. Between 2003 and 2007, Endor
constructed, sold, and conveyed its interest in a total of twenty-eight homes in Fieldstone
Crossing. All twenty-eight of these homes were built upon the lots Endor had acquired
from Aldon.
After completion of the first Endor-built home, the Paniaguas parties and several
other Aldon homeowners, filed a complaint on October 15, 2003 for preliminary
injunction, permanent injunctive relief, and monetary damages against Endor, seeking to
enjoin Endor from constructing additional homes in Fieldstone Crossing and for damages
resulting from the construction of homes in violation of the Restrictive Covenants. On
November 14, 2003, and on January 21, 2004, the trial court held a hearing on the
Paniaguas parties’ request for a preliminary injunction and denied the request on June 16,
2004, finding that the Paniaguas parties failed to demonstrate that an inadequate remedy
at law existed. Appellants’ App. at 411-20. On July 14, 2004, the Paniaguas parties filed
a “Notice of Lis Pendens” on all of the Endor-purchased properties to provide notice of
the pending lawsuit regarding the applicability of the Restrictive Covenants. Id. at 101,
421-35. On October 15, 2004, the Paniaguas parties filed an amended complaint to add
defendants, including Aldon, officers of both Endor and Aldon, and unknown
homeowners who had, at that time, purchased Endor-constructed homes. On January 21,
6
2005, Aldon and its officers, filed a motion to dismiss the claims against them, which the
trial court granted. The Paniaguas parties appealed this order, and on May 18, 2006, this
court affirmed the trial court in a published opinion, Paniaguas v. Endor, Inc., 847
N.E.2d 967 (Ind. Ct. App. 2006), trans. denied.
Over the course of these proceedings, the Paniaguas parties amended their
complaint eight times to add the names of parties they believed were necessary for the
just adjudication of their claims, including successive homeowners who either purchased
their home directly from Endor or from an Endor homeowner (collectively, “the Appellee
Homeowners”) and the members of the Endor ACC. On December 21, 2007, the
Paniaguas parties served a request for the production of documents on counsel for Endor
and the Endor ACC (together, “the Endor Defendants”), and on June 11, 2008, the
Paniaguas parties filed a motion to compel discovery because the Endor Defendants
failed to respond to the request for production of documents. After a hearing, the trial
court issued an order compelling the Endor Defendants to respond to the request for
production of documents. The Endor Defendants responded to the Paniaguas parties’
request with objections to numerous requests as overbroad and unduly burdensome. The
Paniaguas parties filed a second motion to compel discovery, and the trial court again
issued an order compelling discovery from the Endor Defendants. On May 28, 2010, the
Paniaguas parties moved for default judgment against the Endor Defendants, and on July
12, 2010, the trial court entered a judgment of default against the Endor Defendants on all
issues of causation and liability as the sanction imposed for failure to cooperate with and
provide discovery. On August 5, 2011, the Appellee Homeowners filed a motion
7
requesting written findings of fact and conclusions of law pursuant to Indiana Trial Rule
52, which was granted by the trial court. A five-day bench trial was held from August 8
through 12, 2011, and on May 10, 2012, the trial court issued its judgment in favor of the
Appellee Homeowners. The Paniaguas parties now appeal. Additional facts will be
provided as necessary.
DISCUSSION AND DECISION
The Paniaguas parties are appealing from a negative judgment following a bench
trial. Our standard of review in such cases is well settled. We will set aside the judgment
only upon a showing that the judgment is clearly erroneous. Ream v. Yankee Park
Homeowner’s Ass’n, Inc., 915 N.E.2d 536, 540 (Ind. Ct. App. 2009), trans. denied. In
addressing whether a negative judgment is clearly erroneous, we consider only the
evidence most favorable to the prevailing party and do not reweigh the evidence or judge
the credibility of witnesses. Id. However, when a question of law is dispositive, we owe
no deference to the trial court and review the issue de novo. Id. Where, as here, the trial
court enters findings of fact and conclusions based thereon, we apply a two-tiered
standard of review. Troutwine Estates Dev. Co., LLC v. Comsub Design & Eng’g, Inc.,
854 N.E.2d 890, 896 (Ind. Ct. App. 2006), trans. denied. First, we determine whether the
evidence supports the findings, and then we determine whether the findings support the
judgment. Id. We will set aside the trial court’s findings and conclusions only if they are
clearly erroneous. Id. Findings are clearly erroneous if the record contains no facts or
inferences supporting them, whereas a judgment is clearly erroneous when a review of
the record leaves us with a firm conviction that a mistake has been made. Indianapolis
8
City Market Corp. v. MAV, Inc., 915 N.E.2d 1013, 1021 (Ind. Ct. App. 2009) (citing
Garling v. Ind. Dep’t of Natural Res., 756 N.E.2d 1029, 1032 (Ind. Ct. App. 2001), trans.
denied).
I. Standing to Enforce Restrictive Covenants
The judicial doctrine of standing focuses on whether the complaining party is the
proper party to invoke the court’s power. Founds. of E. Chicago, Inc. v. City of E.
Chicago, 927 N.E.2d 900, 903 (Ind. 2010) (citing State ex rel. Cittadine v. Ind. Dep’t of
Transp., 790 N.E.2d 978, 979 (Ind. 2003)), clarified on reh’g. Courts seek to assure that
litigation will be actively and vigorously contested. Id. (citing Schloss v. City of
Indianapolis, 553 N.E.2d 1204, 1206 (Ind. 1990)). “It is generally insufficient that a
plaintiff merely has a general interest common to all members of the public.” Id. (citing
Terre Haute Gas Corp. v. Johnson, 221 Ind. 499, 45 N.E.2d 484 (1942)). “Standing
requires that a party have ‘a personal stake in the outcome of the lawsuit and must show
that he or she has sustained or was in immediate danger of sustaining, some direct injury
as a result of the conduct at issue.’” Id. (quoting Higgins v. Hale, 476 N.E.2d 95, 101
(Ind. 1985)).
Normally, “one not a party to a contract has no standing to enforce it.” City of
Indianapolis v. Kahlo, 938 N.E.2d 734, 741-42 (Ind. Ct. App. 2010) (citing Gregory &
Appel Ins. Agency v. Philadelphia Indem. Ins. Co., 835 N.E.2d 1053, 1058 n.7 (Ind. Ct.
App. 2005), trans. denied), trans. denied. But a third party beneficiary of a contract has
standing to enforce it. Id. For a contract to be enforceable by a third party,
9
it must clearly appear that it was the purpose or a purpose of the contract to
impose an obligation on one of the contracting parties in favor of the third
party. It is not enough that performance of the contract would be of benefit
to the third party. It must appear that it was the intention of one of the
parties to require performance of some part of it in favor of such third party
and for his benefit and that the other party to the agreement intended to
assume the obligation thus imposed. The intent of the contracting parties to
bestow rights upon a third party must affirmatively appear from the
language of the instrument when properly interpreted and construed.
Id. (citing Cain v. Griffin, 849 N.E.2d 507, 514 (Ind. 2006)).
The Paniaguas parties argue that the trial court’s conclusion that they lacked
standing to enforce the Restrictive Covenants against the Appellee Homeowners from
Unit 2 because the Restrictive Covenants only applied to the homes in Unit 1 is erroneous
because it runs contrary to Indiana law and is not supported by the evidence presented.
They contend that the plain language of the Restrictive Covenants shows that they were
intended to apply to both Unit 1 and Unit 2. The Paniaguas parties point to the language
of the title of the Restrictive Covenants, which states, “Declaration of Restrictive
Covenants of Fieldstone Crossing Subdivision, City of Crown Point, Lake County,
Indiana,” as evidence of this. Pls.’ Ex. 8, Ex. Vol. 7 at 1051. They likewise cite to the
preamble of the Restrictive Covenants, which states in pertinent part: “We the
undersigned, being each and all of the owners and developers of Fieldstone Crossing
Subdivision . . . do hereby make, impose, and declare the following restrictions and
covenants pertaining to the use, occupancy, construction, and development of the lands,
lots, and improvements within said subdivision[.]” Pls.’ Ex. 8, Ex. Vol. 7 at 1051. The
Paniaguas parties further assert that the Restrictive Covenants use the phrase “all lots”
throughout the document without any reference to either Unit 1 or Unit 2 and that no
10
reasonable person would differ as to the meaning of such a phrase. The Paniaguas
parties, therefore, allege that the trial court erroneously found an ambiguity where none
existed and improperly considered extrinsic evidence of intent.
A restrictive covenant is an express contract between grantor and grantee that
restrains the grantee’s use of his land. Villas W. II of Willowridge Homeowners Ass’n,
Inc. v. McGlothin, 885 N.E.2d 1274, 1278 (Ind. 2008) (citing Holliday v. Crooked Creek
Vills. Homeowners Ass’n, Inc., 759 N.E.2d 1088, 1092 (Ind. Ct. App. 2001)), cert.
denied, 555 U.S. 1213 (2009). Restrictive covenants are used to maintain or enhance the
value of land by reciprocal undertakings that restrain or regulate groups of properties. Id.
Because covenants are a form of express contract, we apply the same rules of
construction. Drenter v. Duitz, 883 N.E.2d 1194, 1199 (Ind. Ct. App. 2008).
Construction of the terms of a written contract is a pure question of law for the court, and
we conduct a de novo review of the trial court’s conclusions in that regard. Id.
Indiana law permits restrictive covenants, but finds them disfavored and justified
only to the extent they are unambiguous and enforcement is not adverse to public policy.
Id. When courts are called upon to interpret restrictive covenants, they are to be strictly
construed, and all doubts should be resolved in favor of the free use of property and
against restrictions. Id. The covenanting parties’ intent must be determined from the
specific language used and from the situation of the parties when the covenant was made.
Id. Specific words and phrases cannot be read exclusive of other contractual provisions.
Id. In addition, the parties’ intentions must be determined from the contract read in its
entirety. Id. We attempt to construe contractual provisions so as to harmonize the
11
agreement and so as not to render any terms ineffective or meaningless. Id. However,
where the intent of the parties cannot be determined within the four corners of the
document, a factual determination is necessary to give effect to the parties’ reasonable
expectations. Renfro v. McGuyer, 799 N.E.2d 544, 547 (Ind. Ct. App. 2003), trans.
denied.
In the present case, the Restrictive Covenants state, in the preamble, that they
pertain to the use, occupancy, construction, and development of the lots within the
Fieldstone Crossing subdivision, and are entitled “Declaration of Restrictive Covenants
of Fieldstone Crossing Subdivision . . . .” Pls.’ Ex. 8, Ex. Vol. 7 at 1051. However, they
specifically provide, “The metes and bounds legal description of the Fieldstone Crossing
Subdivision, and the land affected by these restrictions and covenants, is annexed hereto
and made a part hereof as Exhibit ‘A.’” Pls.’ Ex. 8, Ex. Vol. 7 at 1053. Exhibit A to the
Restrictive Covenants contains the legal description of Unit 1 and the plat drawing
depicting Unit 1. Pls.’ Ex. 8, Ex. Vol. 7 at 1057-58. The Restrictive Covenants do not
state that they apply to Unit 2 or reference Unit 2 at all. In fact, at the time that the
Restrictive Covenants were filed, in 1993, Unit 2 had not even been platted. The
language of the Restrictive Covenants clearly states they only apply to Unit 1 of
Fieldstone Crossing.
We likewise do not find the Paniaguas parties’ arguments regarding the title and
the use of the words “all lots” to be persuasive because the Restrictive Covenants state
that Exhibit A is the “metes and bounds legal description of the Fieldstone Crossing
Subdivision,” and therefore, “all lots” refers only to the lots in Unit 1. Pls.’ Ex. 8, Ex.
12
Vol. 7 at 1053. We conclude that the language in the Restrictive Covenants clearly and
unambiguously states that they only apply to Unit 1 and not to Unit 2. The trial court was
correct in concluding that the Restrictive Covenants only applied to Unit 1 of Fieldstone
Crossing and, therefore, the Paniaguas parties had no standing to enforce the Restrictive
Covenants against the homeowners in Unit 2.4
II. Admission of Exhibits QQ through LLL
The standard of review for admissibility of evidence issues is abuse of discretion.
Fairfield Dev., Inc. v. Georgetown Woods Senior Apartments Ltd. P’ship, 768 N.E.2d
463, 466 (Ind. Ct. App. 2002), trans. denied. An abuse of discretion occurs only when
the trial court’s action is clearly erroneous and against the logic and effect of the facts and
circumstances before the court. Id. Even if a trial court errs in a ruling on the
admissibility of evidence, this court will only reverse if the error is inconsistent with
substantial justice. Id. at 466-67.
During the trial, the Appellee Homeowners offered into evidence Defendants’
Exhibits QQ through LLL, which were minutes from the ACC while under the control of
Endor that approved the construction of twenty-two Endor homes in Fieldstone Crossing.
These exhibits were offered through the testimony of Dan Clark, Jr. (“Clark”), a
homeowner who, along with others, formed a subsequent ACC after the last of the Endor
homes had been built. The Paniaguas parties objected to these exhibits, and the trial
4
The Paniaguas parties also contend that, if the language of the Restrictive Covenants is found to
be ambiguous, they still had standing to enforce them against the homeowners in Unit 2 because the
evidence showed that Aldon had a common scheme of development for Fieldstone Crossing that all of the
properties would be subject to the same restrictions. Because we have not concluded that the language of
the Restrictive Covenants is ambiguous, we do not reach this argument.
13
court ultimately admitted the exhibits under the business records exception to the hearsay
rule. The trial court found that the exhibits were a record of a regularly conducted
business activity, meeting minutes of the ACC, were properly authenticated, and were
properly admitted through Clark, who was found to be qualified as a witness to
authenticate the exhibits. Appellants’ App. at 848-49.
The Paniaguas parties argue that the trial court abused its discretion when it
admitted Defendants’ Exhibits QQ through LLL under the business records exception to
the hearsay rule because the documents lacked a proper foundation and were inherently
untrustworthy. Without these documents, the Paniaguas parties assert that there was no
evidence that the ACC properly approved construction of the Endor homes. The
Paniaguas parties contend that Clark was not a proper witness to authenticate these
exhibits because he was not a part of the ACC that approved the construction of the
Endor homes, and his subsequently-formed ACC was not a continuation of the previous
ACC as the current ACC did not include all thirty-seven properties as members.
Under Indiana Evidence Rule 803(6), evidence that is determined to be hearsay is
not excluded by the hearsay rule if it is:
A memorandum, report, record, or data compilation, in any form, of acts,
events, conditions, opinions, or diagnoses, made at or near the time by, or
from information transmitted by, a person with knowledge, if kept in the
course of a regularly conducted business activity, and if it was the regular
practice of that business activity to make the memorandum, report, record,
or data compilation, all as shown by the testimony or affidavit of the
custodian or other qualified witness, unless the source of information or the
method or circumstances of preparation indicate a lack of trustworthiness.
The term “business” as used in this Rule includes business, institution,
association, profession, occupation, and calling of every kind, whether or
not conducted for profit.
14
Ind. Evidence Rule 803(6). To admit business records pursuant to this exception, the
proponent of the exhibit may authenticate it by calling a witness who has a functional
understanding of the record keeping process of the business with respect to the specific
entry, transaction, or declaration contained in the document. Rolland v. State, 851 N.E.2d
1042, 1045 (Ind. Ct. App. 2006). The witness need not have personally made or filed the
record or have firsthand knowledge of the transaction represented by it in order to
sponsor the exhibit. Id. Rather, such person need only show that the exhibit was part of
certain records kept in the routine course of business and placed in the records by one
who was authorized to do so and who had personal knowledge of the transaction
represented at the time of entry. Id.
In the present case, Clark testified that he was a member of the current ACC,
which was a continuation of the Endor ACC, and the current ACC assumed control after
the Endor lots were sold and developed. Tr. at 976-77. Evidence was presented that
Exhibits QQ through LLL originated from Endor when they were still a part of the
litigation in response to a request for production from the Paniaguas parties. Id. at 986.
Clark stated that, as a member of the ACC, he was familiar with how the records for the
ACC are kept and that he believed that they were kept in the same fashion when the ACC
was controlled by Endor. Id. at 979, 981. He further testified that it was the practice of
the ACC to keep records for the approval of building homes, such as Exhibits QQ
through LLL, in its regular course of business. Id. at 994. Clark also stated that the
records appeared to be made by one with knowledge of the transactions contained in the
15
records and by someone who had the responsibility to do so and that they were created at,
or around, the time of the transactions represented. Id. Although Clark did not
personally make or file the records or have firsthand knowledge of the transaction
represented in Exhibits QQ through LLL, this is not necessary to sponsor an exhibit and
admit documents under the business records exception. Rolland, 851 N.E.2d at 1045.
Based on the evidence presented, we conclude that the trial court did not abuse its
discretion in admitting Exhibits QQ through LLL under the business records exception to
the hearsay rule.
III. Compliance with Restrictive Covenants
The Paniaguas parties argue that the evidence presented at trial did not support the
trial court’s finding that the ACC acted reasonably in deciding that the Endor-constructed
homes complied with the Restrictive Covenants. They contend that, even if the ACC
minutes are deemed to have been properly admitted, they only show that the ACC acted
arbitrarily and unreasonably in approving the construction of the Endor homes. The
Paniaguas parties further argue that the Restrictive Covenants clearly state that homes
may not be built without the ACC’s approval based on the “quality of workmanship and
materials” and the “harmony of the proposed design with existing structures.” Pls.’ Ex.
8, Ex. Vol. 7 at 1051. They maintain that, because the agreement is to be read as a whole
and viewed in light of the circumstances at the time the Restrictive Covenants were
executed, the standard of quality of workmanship and materials and harmony of design
that should have guided the ACC was that present in the existing structures at the time of
construction of the first Endor home. The Paniaguas parties assert that, at that time, the
16
only structures existing were the Aldon homes, which all had common features of
materials and design that are not present in the Endor homes.
We initially note that, consistent with our previous determination that the
Restrictive Covenants did not apply to the homes in Unit 2, the Paniaguas parties’
argument on this issue is confined to only the homes in Unit 1. In its judgment, the trial
court stated the following:
[T]he terms of the Restrictive Covenants are highly subjective, allowing for
reasonable minds to differ on [what] will comply with them. Again, beauty
is in the eye of the beholder, and the Restrictive Covenants make clear that
the ACC is the only beholder whose opinion matters. The Court finds it to
be of critical importance that the ACC took the time to review and approve
the plans to build each of the Endor homes prior to their actually being
built.
Appellants’ App. at 118. The pertinent part of the Restrictive Covenants in the present
case states:
No home or structure shall be erected, placed or altered on any lot until
construction plans and specifications and the plans showing the location of
the structure have been approved by the Architectural Control Committee
as to quality of workmanship and materials, harmony of external design
with existing structures, and as to location with respect to topography and
finish grade elevation.
Pls.’ Ex. 8, Ex. Vol. 7 at 1051. Therefore, under the Restrictive Covenants, any proposed
construction plans and specifications must be presented and the ACC must approve the
proposed construction plans and specifications. In making the decision as to whether to
approve the proposed construction and specifications, the Restrictive Covenants state that
the ACC is to make its determination based on the “quality of workmanship and
materials” as well as the “harmony of external design with existing structures.” Id.
17
Although this is a subjective standard, the language of the Restrictive Covenants
establishes that the determination of whether proposed construction and specifications
meet this standard and whether to approve the proposed construction is solely the
province of the ACC.
The evidence admitted at trial showed that the plans for the construction of the
Endor homes in Unit 1 were presented to the ACC and that the ACC subsequently
reviewed and approved the plans as evidenced in Exhibits QQ through LLL. At the time
that the first proposed Endor home was presented to the ACC for approval, there were a
total of nine homes existing in Fieldstone Crossing, including the homes of Paniaguas
and the Cornetts. The ACC therefore had to take these nine pre-existing houses into
consideration before deciding to approve the first Endor home; however, both the homes
of Paniaguas and the Cornetts should not have been factored into the consideration as
neither of their homes were built from the ABCD home models for Fieldstone Crossing.
As approval was sought for subsequent Endor homes, the ACC would have necessarily
taken into account all of the previous Endor homes as well as the Aldon homes. The
evidence presented showed that the ACC took the time to review and approve the plans
for the construction of the Endor homes prior to them being built, and we conclude that
the evidence supported the trial court’s finding that all of the homes built by Endor
complied with the Restrictive Covenants.
IV. Cross-Appeal
The Appellee Homeowners argue that the trial court abused its discretion in
denying their request for attorney fees. The award of attorney fees is committed to the
18
sound discretion of the trial court, and we will reverse an award of attorney fees only
upon a showing of an abuse of that discretion. Thacker v. Wentzel, 797 N.E.2d 342, 346
(Ind. Ct. App. 2003). An abuse of discretion occurs if the trial court’s decision is clearly
against the logic and effect of the facts and circumstances before the court. Id.
The Appellee Homeowners contend that the trial court should have granted their
request for attorney fees because John Paniaguas, who is an accomplished patent attorney
and a professional engineer, has continued to pursue this case against the Appellee
Homeowners for “reasons other than to enforce the vague and ambiguous [Restrictive
Covenants] on the neighborhood.” Appellees’ Br. at 40. They assert that, in light of the
circumstances of this case, particularly John Paniaguas’s legal knowledge, he should
have known that this case was unreasonable, groundless, and frivolous, especially by the
time it reached trial. They further claim that in light of the facts and circumstances, it can
be reasonably concluded that Paniaguas has continued to litigate this matter in bad faith
and for reasons beyond their prayer of relief. Therefore, the Appellee Homeowners argue
that the trial court abused its discretion in denying them trial attorney fees, and they
contend that this court should award appellate attorney fees. We disagree.
The Appellee Homeowners have not shown that the Paniaguas parties intended the
filing of this case to be anything but an effort to vindicate their legal rights and, therefore,
have not shown an abuse of process. We also conclude that the Appellee Homeowners
have failed to present any evidence to show that the Paniaguas parties’ claims were
frivolous, unreasonable, or groundless. We therefore conclude that the Appellee
Homeowners have not shown that the trial court abused its discretion in not awarding
19
attorney fees in their favor at trial. We likewise decline to award appellate attorney fees
in favor of the Appellee Homeowners.
Affirmed.
VAIDIK, J., and PYLE, J., concur.
20
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702 F.Supp. 9 (1988)
Marline JACKSON, et al., Plaintiffs,
v.
Richard THORNBURGH, et al., Defendants.
Civ. A. No. 88-1403.
United States District Court, District of Columbia.
December 13, 1988.
*10 David W. DeBruin, Jenner & Block, Washington, D.C., for plaintiffs.
Frederick D. Cooke, Jr., Martin L. Grossman, Paul A. Quander, Jr., District of Columbia Corp. Counsel; Jay B. Stephens, U.S. Atty., John D. Bates, Bradley L. Kelly, Asst. U.S. Attys., for defendants.
MEMORANDUM OPINION OF CHARLES R. RICHEY UNITED STATES DISTRICT JUDGE
CHARLES R. RICHEY, District Judge.
Overcrowding at the prisons of the District of Columbia, primarily at Lorton Reformatory, the District of Columbia's single maximum security prison, is a disaster rapidly becoming a disgrace. The problem has occupied this Court and others on dozens of occasions over several decades, and no end is presently in sight. For the time being, the government of the District of Columbia alone has the power to remedy the problem, but it must do so soon.
In a limited effort to alleviate the problem, the Council of the District of Columbia has passed the "District of Columbia Good Time Credits Act of 1986" (the "Act"). D.C.Code § 24-428, et seq. The Act authorizes the calculation of "good time" credits against the sentences of prisoners who have been convicted by courts of the District of Columbia and who are "imprisoned in a District correctional facility." Both on its face and as applied, the Act has no application to those prisoners convicted by a local court of the District of Columbia who are incarcerated in federal institutions.[1] The Act's net effect, in certain situations, is to reduce the minimum sentence that prisoners at District prisons must serve, and to perhaps cause them to be eligible for parole earlier than they might be otherwise. The Act is different from its federal good time counterpart, which reduces only a prisoner's maximum sentence and therefore has no effect upon a prisoner's eligibility for parole.[2]
The plaintiffs in this case are thirty females, convicted in local District courts, but who are housed in federal institutions around the country.[3] The defendants are the District of Columbia and various federal entities charged with supervising the federal penal system. As against the District, the plaintiffs challenge the constitutionality *11 of the Act under 42 U.S.C. § 1983 insofar as it limits the accrual of good time benefits to prisoners housed in "a District correctional facility." These plaintiffs allege that the Act's self-imposed geographical limitation denies their right to equal protection of the laws under the equal protection component of the Fifth Amendment's Due Process Clause. The plaintiffs also seek a writ of habeas corpus directing the federal defendants to retroactively compute and credit each with the good time credits to which they would have been entitled under the Act had they been housed in a District prison.
The parties have filed cross-motions for summary judgment and judgment on the pleadings. There appears to be no dispute over material facts, and the matter is ripe for a decision on the merits of the plaintiffs' claims. The Court holds that summary judgment shall be granted in favor of the defendants.
DISCUSSION
The Act, in limiting its benefits to those prisoners housed in District prisons, does not violate the constitutional rights of prisoners housed elsewhere. As will be shown, the Act's distinction between prisoners assigned to serve their terms in District prisons and prisoners assigned to the federal system does not discriminate against a suspect class, does not infringe upon a fundamental right, and is "rationally related to a legitimate state interest," City of Cleburne v. Cleburne Living Center, 473 U.S. 432, 440, 105 S.Ct. 3249, 3254, 87 L.Ed.2d 313 (1985). Accordingly, the Act must be sustained.
Before elaborating on this holding, however, it is necessary to dispose of a preliminary issue raised in the plaintiffs' complaint. Plaintiffs' complaint, although not necessarily their subsequent briefing, seeks to characterize this action as one involving gender-based discrimination. The plaintiffs thus seek a standard of review more stringent than that permitted under the "rational basis" test; they seek equal protection review under the line of cases that evaluate gender-based distinctions pursuant to a more searching, "intermediate standard." See, e.g., Craig v. Boren, 429 U.S. 190, 97 S.Ct. 451, 50 L.Ed.2d 397 (1976).
The purported gender-based discrimination in this case arises from the fact that the District of Columbia maintains no facilities for housing women sentenced to prison terms exceeding one year. Accordingly, all women serving terms greater than one year, such as the plaintiffs, are required to be housed in federal prisons, and are for that reason necessarily unable to enjoy the benefits of the Act. The plaintiffs allege in their complaint that this system, operating in conjunction with the Act's geographical limitation, unconstitutionally isolates female prisoners such as themselves for disparate treatment.
However, this Court holds that the Act, whether viewed facially or as applied, does not create a disadvantaged class of female prisoners. Assuming, arguendo, that such a disadvantaged class exists, it has been created, not by the Act, but by the District's failure to provide facilities for women such as the plaintiffs, and relatedly, by the system of assigning certain prisoners to District prisons and certain prisoners to federal prisons. These factors, not the Act, have created the class of which the plaintiffs are members. The Act itself does nothing more than confer a benefit upon a discrete class, membership in which is formally unrelated to gender; other statutory mechanisms, not at issue here, work to exclude females sentenced to terms exceeding one year from membership in this discrete class.
Moreover, the purportedly disadvantaged class here contains considerable diversity; it includes many more potential plaintiffs than simply females sentenced to over one year. Males, sentenced to prison terms of all kinds, are also housed in federal prisons. Simply because a larger disadvantaged *12 class perhaps includes, but is not limited to, a smaller group, it cannot be said that the defining statute discriminates against that smaller group. The existence of diversity in the allegedly disadvantaged class, undeniably present here, simply belies the presumption of discrimination which justifies heightened review, and which is at the heart of the protections of the Fifth and Fourteenth Amendments.[4]
Given that the Act does not define a class entitled to heightened review, it is therefore appropriate to evaluate the Act under the so called "rational basis" test.[5] Under this analysis, a legislative enactment will pass constitutional muster so long as it is rationally related to a legitimate state goal. Lyng v. Castillo, 477 U.S. 635, 106 S.Ct. 2727, 2730, 91 L.Ed.2d 527 (1986); Hodel v. Indiana, 452 U.S. 314, 331-32, 101 S.Ct. 2376, 2386-87, 69 L.Ed.2d 40 (1981); McGinnis v. Royster, 410 U.S. 263, 270, 93 S.Ct. 1055, 1059, 35 L.Ed.2d 282 (1973).
The principal motivating purpose behind the Act was, and is, to reduce the egregious overcrowding problem at the District's prisons. Although there is a dearth of legislative history regarding the Act, what little there is makes clear that overcrowding was the Act's principal focus. Indeed, the Committee that proposed the Act initially was created to avoid the appointment of a special master to address the overcrowding problem at the Lorton facility, a move first threatened by Judge June Green of this Court in Twelve John Does v. District of Columbia, C.A. No. 80-2136 (D.D.C.). Report, Council of the District of Columbia, at 2 (November 13, 1985). Further, the Council's Report opens its discussion of the Act's "Background and Need" by stating that the Act is one of several initiatives intended to address the District's "unprecedented overcrowding problem in its correctional institutions." Id. at 2. Although the scant legislative history does include references to goals other than population control, there can be no doubt that the reduction of overcrowding at Lorton and the District's jails was the moving force behind the Act's adoption. Further, there can be no question, and the plaintiffs do not dispute, that reduction of prison overcrowding is a constitutionally legitimate and perhaps compelling matter for the attention of the District Council. The issue for decision, then, is whether the Act's geographical limitation of its benefits to prisoners housed in District prisons is rationally related to the goal of reducing overcrowding at those institutions.
This Court finds without reservation that the Act is rationally related to this indisputably legitimate goal, and that the Act therefore does not violate principles of equal protection. The District Council bore no affirmative obligation to extend the benefits of the Act to any prisoner, and when it determined to do so, it had every right under the rational basis test to extend those benefits in such a manner as to address only the immediate problem at hand. Plyler v. Doe, 457 U.S. 202, 216, 102 S.Ct. 2382, 2394, 72 L.Ed.2d 786 (1982) ("A legislature must have substantial latitude to establish classifications that roughly approximate the nature of the problem perceived, that accommodate competing concerns both public and private, and that account for limitations on the practical ability of the State to remedy every ill."). The problem before the Council was overcrowding in its own prisons; there can be little question that the Act addresses that problem in a manner that is at once limited, yet sufficiently comprehensive to accomplish its ends. Were the Act to deny its benefits to any prisoner housed in an overcrowded prison within the District's jurisdiction, perhaps equal protection principles *13 would be offended.[6] However, that is not the case here. In this Court's view the Act a limited legislative response that is rationally related to a specific, discrete problem does all that the Fifth Amendment requires.
The Court recognizes that this holding is in direct conflict with a very recent opinion of its counterpart in the Eastern District of Virginia. In Moss v. Clark, 698 F.Supp. 640 (E.D.Va.1988), Judge Ellis held that the Act's geographical limitation violates the Fifth Amendment's equal protection component as it applied to the plaintiff in that case, a male District offender housed at the Federal Correctional Institution at Petersburg, Virginia. In essence, Judge Ellis adopted the argument that the plaintiffs advance here: that the Act's exclusion of District offenders housed in federal prisons is unconstitutionally irrational, because to grant them the benefits of the Act would not have hindered accomplishment of the Act's principal objective population control at the District's prisons. With all due respect to Judge Ellis, this Court declines to follow his reasoning on this question.
In this Court's view, such an approach places an impermissible burden on the District to extend benefits to persons outside the scope of the perceived problem. In a sense, Moss mandates that the Act notwithstanding its clearly expressed objectives be applied in an overinclusive fashion; Moss suggests that the benefits of the Act be extended even to those not involved with the specific malady against which the Act is targeted. However, this Court is more comfortable with the proposition that when a legislature acts to address a problem, and in so doing confers a benefit upon a discrete class, the rational basis analysis cannot, and does not, impose an obligation to confer that benefit upon all who might desire it. So long as the discrete class upon which the benefits have been conferred rationally reflects the nature of the problem as is certainly the case here the rational basis test has been satisfied. See Bowen v. Owens, 476 U.S. 340, 106 S.Ct. 1881, 1887, 90 L.Ed.2d 316 (1986) (in conferring benefits, Congress may "take one step a time, addressing itself to the phase of the problem which seems most acute to the legislative mind") (quoting Williamson v. Lee Optical Co., 348 U.S. 483, 489, 75 S.Ct. 461, 465, 99 L.Ed. 563 (1955)). Even though conferral of the Act's benefits upon federal prisoners would not be inconsistent with the Act's objectives, to impose such an obligation would be, in this Court's view, inconsistent with the principle that the constitution never requires of a legislature that "things which are different in fact ... be treated in law as though they were the same." Plyler, 457 U.S. at 216, 102 S.Ct. at 2394. In this case, there is a rational basis for not granting the benefits of the Act to prisoners sentenced by the District's local courts but housed in federal institutions. Therefore, this Court respectfully declines to follow the decision in Moss.[7]
*14 Because the Act does not isolate a suspect class for discriminatory treatment, does not infringe upon a fundamental right, and because the Act is rationally related to the legitimate, indeed compelling, goal of reducing the disgraceful overcrowding at the District of Columbia's prisons, it does not violate the equal protection component of the Due Process Clause of the Fifth Amendment. Accordingly, as there are no disputed issues of material fact, summary judgment in favor of the defendants in this action is proper. An appropriate order shall issue of even date herewith.
ORDER
Upon consideration of the cross motions of the parties for judgment on the pleadings and for summary judgment, the oppositions thereto and after oral arguments thereon, it is, by the Court, for the reasons set forth in the opinion issued of even date herewith, this 13 day of December, 1988,
ORDERED, that summary judgment in this action shall be entered for the defendants, and the case shall stand dismissed from the dockets of this Court.
NOTES
[1] Under § 24-425 of the District of Columbia Code, all prisoners convicted in the District of Columbia of any offense are transferred to the custody of the Attorney General of the United States. The Attorney General then decides where the prisoner is to be incarcerated. For a thoughtful interpretation of the way in which this provision allocates responsibility for District offenders between the Attorney General and the District, and for an illuminating catalogue of the District's historical unwillingness to face its responsibility to provide even minimally adequate prison facilities, see the opinion of my colleague Judge Hogan in United States v. District of Columbia, ___ F.Supp. ___ C.A. No. 88-2897 (November 10, 1988).
[2] Prior to 1986, the good time credit system for prisoners housed in District prisons was identical to the federal system.
[3] There are a total of 30 plaintiffs. Twenty-nine of the plaintiffs, at the time of the filing of the complaint, were being held in the Federal Correctional Institution at Alderson, West Virginia. One was being held at the Federal Correctional Institution at Pleasanton, California.
[4] In addition to the foregoing, there was uncontroverted evidence that many women sentenced to prison terms exceeding one year are, in fact, housed in the District of Columbia's city jail, where they are able to obtain the benefits of the Act.
[5] Prisoners, as such, do not constitute a suspect class deserving of heightened scrutiny. See Thornton v. Hunt, 852 F.2d 526 (11th Cir.1988).
[6] In their seminal equal protection article, Tussman & tenBroek make the point that a law clearly passes constitutional muster under the rational basis test so long as all of those affected by the law those defined by the legislature as possessing the "trait" are also all of those involved with the "mischief" against which the legislation is directed. Tussman & tenBroek, The Equal Protection of the Laws, 37 Cal.L.Rev. 341, 347-48 (1949). Here, under the Act, the "trait" which, if possessed, triggers application of the Act is residence in a District prison. The "mischief" against which the Act is principally directed is overcrowding in District prisons. Accordingly, it would seem that there is a clear congruence between the Act's reach and the nature of the real-world problem. The Act is therefore constitutionally sound, at least under Tussman and tenBroek's classic analysis. The result might be different if the legislative "trait" were somehow narrower than the mischief, as, for instance, if the Act applied only to prisoners in District prisons serving sentences in excess of five years.
[7] Both the plaintiffs here and Judge Ellis in Moss have also consistently framed the Act's geographic limitation as involving a denial of the "rights" of prisoners sentenced by the District's local courts but housed in federal institutions to the benefits of the Act. However, the Court has difficulty seeing how these prisoners have been denied anything which they possess or are entitled to possess. The Act merely confers a form of special parole benefit upon prisoners housed in District prisons. It does not deny federal prisoners anything to which they are entitled. In any event, even if the Act did deny prisoners sentenced by local District of Columbia courts but housed in federal institutions a form of parole benefit, it is well established that prisoners have no constitutional right to be considered for, or released on, parole. Greenholtz v. Nebraska Penal Inmates, 442 U.S. 1, 99 S.Ct. 2100, 60 L.Ed.2d 668 (1979).
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787 F.Supp.2d 828 (2011)
Ravon OWENS, Plaintiff,
v.
AMERICAN CYANAMID CO., et al., Defendants.
Case No. 07-C-0441.
United States District Court, E.D. Wisconsin.
April 5, 2011.
*830 Peter G. Earle, Law Offices of Peter Earle LLC, Milwaukee, WI, Jonathan D. Orent, Michael G. Rousseau, Motley Rice LLC, Providence, RI, for Plaintiff.
Jeffrey K. Douglass, Robert P. Alpert, Hilary H. Houston, Morris Manning & Martin LLP Altanta, GA, Timothy A. Bascom, Jacob A. Sosnay, Bascom Budish & Ceman SC, Wauwatosa, WI, Collin J. Hite, Jessica A. Brumberg, Jontille D. Ray, Lisa M. Danish, Virginia Leigh Hudson, Christian E. Henneke, Joy C. Fuhr, R. Trent Taylor, McGuirewoods LLP, Richmond, VA, Jonathan J. Strasburg, Michael Best & Friedrich LLP, Brian P. Keenan, James R. Clark, Trevor J. Will, Foley & Lardner LLP, Milwaukee, WI, Cortney G. Sylvester, Courtney E. Ward-Reichard, Michael T. Nilan, Nilan Johnson Lewis PA, Minneapolis, MN, J. Ryan Maloney, James T. Murray, Jr., Michael J. Wirth, Peterson Johnson & Murray SC, Jeffrey K. Spoerk, Cheri L. McCourt, Quarles & Brady LLP, Milwaukee, WI, Timothy S. Hardy, Timothy Hardy P.C., Denver, CO, Anand Agneshwar, Bruce R. Kelly, Philip H. Curtis, William H. Voth, Arnold & Porter LLP, New York, NY, Anthony S. Baish, Godfrey & Kahn SC, Madison, WI, Daniel T. Flaherty, Godfrey & Kahn SC, Appleton, WI, Charles H. Moellenberg, Jennifer B. Flannery, Jones Day, Pittsburgh, PA, Robert S. Walker, Jones Day, Cleveland, OH, for Defendants.
DECISION AND ORDER
LYNN ADELMAN, District Judge.
Plaintiff, Ravon Owens, a minor, brought this negligence/strict liability action in state court seeking damages for injuries allegedly incurred when he ingested white lead carbonate pigment contained in the paint coating the walls of a Milwaukee apartment he spent significant amounts of time in. Defendants, corporations which manufactured white lead carbonate pigment or are the successors of such manufacturers, removed the case based on diversity of citizenship. The parties agree that the case is governed by Wisconsin law. Plaintiff acknowledges that he cannot establish the identity of the particular manufacturer that produced the particular batch of pigment that he believes caused his injuries. Thus, to identify the responsible party or parties he relies on the risk contribution doctrine, which the Wisconsin Supreme Court adopted in Collins v. Eli Lilly Co., 116 Wis.2d 166, 342 N.W.2d 37 (1984) and held was applicable in the lead paint context in Thomas v. Mallett, 285 Wis.2d 236, 701 N.W.2d 523 (2005). Under the risk contribution doctrine, if all products of the type that injured the plaintiff are fungible and present the identical danger, to prove liability the plaintiff need not establish that a particular defendant manufactured the particular item that harmed him but only that the defendant produced the type of product that caused the injury at a time that it could reasonably have caused the injury. Collins, 116 Wis.2d at 195-96, 342 N.W.2d 37. The theory underlying the doctrine is that all the parties that produced the harmful product contributed to the risk that plaintiff would be harmed by it. Defendants contend that to allow plaintiff to use the risk contribution doctrine to prove his case would violate their constitutional rights, and they move for summary judgment. Plaintiff disagrees and cross-moves for partial summary judgment dismissing defendants' affirmative defenses insofar as *831 they are based on defendants' constitutional objections.
The parties have not developed the facts to any appreciable extent. However, for purposes of the pending motions, the facts are not in dispute: from 1990 to 1993, plaintiff spent significant amounts of time in a Milwaukee apartment, the walls of which were coated with paint containing white lead carbonate pigment, and when the paint deteriorated plaintiff ingested flakes and dust containing such pigment. White lead carbonate pigment is toxic, and as a result of ingesting it plaintiff's cognitive development was adversely affected. White lead carbonate was once the predominant pigment used in residential paint, and defendants or their predecessors manufactured it for varying periods of time. Defendant E.I. Dupont Nemours and Company manufactured it from 1917 to 1924; defendant NL Industries from 1907 to 1976; defendant American Cyanamid Co. from June 1971 to December 1972; and defendant Sherwin-Williams Company from 1910 until 1947; defendant Atlantic Richfield Company's predecessors manufactured it from 1936 to 1946 and defendant Armstrong Container Inc.'s predecessors from 1938 to 1971. No defendant or predecessor of a defendant manufactured white lead carbonate in Wisconsin.
As stated, the principal effect of the risk contribution doctrine is to modify the plaintiff's burden of proving liability. To establish liability in the present case, instead of having to prove that a particular defendant produced the particular batch of pigment that harmed him, plaintiff may establish a prima facie case by showing that the defendant manufactured or marketed pigment at a time such that it could reasonably have produced the pigment that harmed him. Thomas, 285 Wis.2d at 320, 701 N.W.2d 523. If plaintiff is able to establish a prima facie case against a defendant, the risk contribution doctrine creates a rebuttable presumption that the defendant produced the pigment that plaintiff alleges harmed him. Id. at 321, 701 N.W.2d 523.
Defendants first contend that the modification of the burden of proof effected by the risk contribution doctrine violates due process. However, outside of the criminal law area, the locus of the burden of proof is not usually an area of constitutional concern. Lavine v. Milne, 424 U.S. 577, 585, 96 S.Ct. 1010, 47 L.Ed.2d 249 (1976). And, in the civil law context, a presumption will be upheld against a due process challenge unless it is arbitrary, i.e., there is no rational connection between the facts to be proved and the fact to be inferred, or if it denies a party a fair opportunity for rebuttal. Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 28-29, 96 S.Ct. 2882, 49 L.Ed.2d 752 (1976); Western & Atl. R. Co. v. Henderson, 279 U.S. 639, 642, 49 S.Ct. 445, 73 L.Ed. 884 (1928).
Under the foregoing standard, allowing plaintiff to use the risk contribution doctrine in the present case would clearly not offend due process. There is nothing arbitrary or irrational either about the risk contribution doctrine or about applying it in the lead paint context. In Thomas, the Wisconsin Supreme Court explained at great length why this was so. The court first pointed out that a plaintiff who has been severely harmed by ingesting white lead carbonate pigment may be entirely innocent and will likely also be unable to prove which manufacturer produced the particular batch of pigment that injured him. Thomas, 285 Wis.2d at 306, 701 N.W.2d 523. The court then noted that all white lead carbonate pigment was functionally interchangeable and that by the 1920s the pigment manufacturers knew or *832 should have known of the harm that their product caused but nevertheless continued to manufacture and promote it. Id. at 307-308, 701 N.W.2d 523. The court went on to explain that as participants in the lead pigment market the manufacturers likely had more information or access to information than the plaintiff and concluded that it was fair and reasonable to modify the burden of proof accordingly. Id. at 308, 309 n. 46, 701 N.W.2d 523.
In addition to not being arbitrary or irrational, the risk contribution doctrine affords a lead paint defendant an opportunity to contest the prima facie case as well as the opportunity to rebut the presumption that flows from a prima facie case. For example, a defendant can eviscerate a plaintiff's prima facie case by showing that the plaintiff could have been harmed by lead from a source other than paint. This is apparently what happened in Thomas after the Wisconsin Supreme Court remanded the case. In addition, a defendant can rebut the presumption created by a prima facie case by showing that it did not produce white lead carbonate pigment during the relevant time period or in the relevant geographical market. Defendants argue that in the present case they will not have an opportunity to rebut because of the long time span during which the pigment that caused plaintiff's injuries could have been manufactured and because they lack records of transactions occurring years ago. However, as the Thomas court explained, a lead paint defendant is in a better position than an injured plaintiff to present evidence relating to its own past operations. Moreover, as between an innocent plaintiff and a defendant who reasonably could have contributed to the plaintiff's injury, it is fairer to place such burden on the defendant. In addition, the risk contribution doctrine gives a lead paint defendant the opportunity to show that even though it may have contributed to the risk that the plaintiff would be injured, for any number of reasons as, for example, that it was less culpable than other defendants or that it had a smaller market share, it did so to a lesser extent than others and thus should be held responsible for a lesser portion of the damages.
Insofar as it modifies the traditional burden of proof, the risk contribution doctrine is not unique. Common law courts have long encountered fact situations where innocent plaintiffs who deserve to be compensated for injuries resulting from the tortious conduct of others face difficult problems of proof. Over time, such courts have balanced the rights of the parties and developed and applied doctrines modifying the traditional burden of proof so as to achieve justice as the Wisconsin Supreme Court did in Collins and Thomas. One example is the doctrine of res ipsa loquitor pursuant to which a jury may infer a defendant's negligence from a plaintiff's injury if it concludes that the injury would not ordinarily occur without negligence on the part of the defendant. As in the case of the risk contribution doctrine, under such circumstances defendant's actions are the most probable cause of plaintiff's injuries. Another example is the doctrine of alternative liability according to which when a plaintiff does not know which one of multiple negligent defendants caused his injury, the defendants bear the burden of establishing causation. See, e.g., Summers v. Tice, 33 Cal.2d 80, 199 P.2d 1 (1948) (shifting the burden to defendants who both negligently fired shots in the plaintiff's direction only one of which hit him).
And courts have routinely upheld modifications of the burden of proof like the risk contribution doctrine against due process challenges. See, e.g., Dick v. New York Life Ins. Co., 359 U.S. 437, 79 S.Ct. 921, 3 L.Ed.2d 935 (1959) (applying state common *833 law rule requiring insurance company defendant to show that death of insured resulted from suicide); Atlantic C.L.R. Co. v. Ford, 287 U.S. 502, 508-509, 53 S.Ct. 249, 77 L.Ed. 457 (1933) (rejecting due process challenge to statute creating presumption that railroad company's failure to give crossing signals was proximate cause of accident); United States v. $94,000.00 in United States Currency, 2 F.3d 778, 783-84 (7th Cir.1993) (rejecting due process challenge to burden of proof in a civil forfeiture proceeding where if the government establishes probable cause for the forfeiture the burden shifts to the owner to prove that the property is not subject to forfeiture); United States v. Santoro, 866 F.2d 1538, 1544 (4th Cir.1989) (reaching the same result and stating that "Congress may alter the burden of proof in a civil proceeding as it sees fit, without Constitutional implications"); United States v. Jessup, 757 F.2d 378, 387 (1st Cir.1985) (rejecting due process challenge to rebuttable presumption in Bail Reform Act of 1984 that a defendant charged with a serious drug offense is a flight risk and danger to the community); Battaglia v. Peabody Coal Co., 690 F.2d 106, 110-112 (7th Cir. 1982) (rejecting due process challenge to presumption of benefit eligibility in Black Lung Benefits Act, 30 U.S.C. § 921(c)(5)).
Defendants next contend that the risk contribution doctrine imposes retroactive liability and thus violates either the Due Process or Takings Clause. This argument fails for a number of reasons. First, the risk contribution doctrine does not impose liability, retroactive or other, nor does it make innocent conduct tortious; it merely modifies the manner in which a plaintiff may prove his case.
Second, defendants fail to cite a single case supporting their contention that a judicially promulgated doctrine relating to the burden of proof in a civil case is vulnerable to a constitutional challenge on retroactivity grounds. Defendants cite only cases involving statutes or judicial decisions in the criminal law area. While retroactive application of a judicial decision attaching criminal penalties to previously innocent conduct involves such due process concepts as the right to fair warning, Rogers v. Tennessee, 532 U.S. 451, 457-59, 121 S.Ct. 1693, 149 L.Ed.2d 697 (2001), such concerns are not present in the civil context. In the civil context, the "law applicable to a particular case does not turn on `whether [the litigants] actually relied on [an] old rule [or] how they would suffer from retroactive application of a new one,'" Harper v. Virginia Department of Taxation, 509 U.S. 86, 95 n. 9, 113 S.Ct. 2510, 125 L.Ed.2d 74 (1993) (quoting James B. Beam Distilling Co. v. Georgia, 501 U.S. 529, 543, 111 S.Ct. 2439, 115 L.Ed.2d 481 (1991)).
Third, even assuming that the risk contribution doctrine imposed retroactive liability and that judicial decisions in the civil law area were subject to constitutional challenge on retroactivity grounds, the doctrine does not violate either the Due Process or Takings Clause. As to the former, a civil statute that imposes retroactive liability will be found to violate due process only if it is "arbitrary and irrational." Usery, 428 U.S. at 15, 96 S.Ct. 2882 (holding that black lung compensation scheme satisfied due process because it was a "rational measure to spread the costs of the employee's disabilities to those who have profited from the fruits of their labor"); see also Central States, SE & SW v. Midwest Motor Express, 181 F.3d 799, 806 (7th Cir.1999) (stating that "when a question of retroactivity is involved" the party claiming a due process violation must show that the provision in question is arbitrary and irrational). As discussed earlier, the Wisconsin Supreme Court explained *834 in great detail in Collins why it adopted the risk contribution doctrine and in Thomas why it applied it in the lead paint context. Nothing about the court's reasoning is arbitrary and irrational. See generally United States v. Monsanto Co., 858 F.2d 160, 174 (4th Cir.1988) (holding that retroactive liability under Comprehensive Environmental Response, Compensation, and Liability Act of 1980, which allocates to the defendant the burden of disproving causation, comports with due process).
Nor does application of the risk contribution doctrine in the lead paint context constitute an unlawful taking. The Takings Clause of the Fifth Amendment bars the taking of "private property ... for public use without just compensation." Defendants cite no authority for the proposition that there can be a judicial taking. In Stop the Beach Renourishment v. Florida Department of Environmental Protection, ___ U.S. ___, 130 S.Ct. 2592, 177 L.Ed.2d 184 (2010), four justices supported this idea, not enough to establish a binding precedent. Defendants also fail to identify any private property which would be the subject of a taking. Even if the risk contribution doctrine actually imposed liability, the imposition of general liability does not constitute a taking of private property. McCarthy v. City of Cleveland, 626 F.3d 280, 286 (6th Cir.2010).
In supporting their retroactivity-based constitutional arguments, defendants rely heavily on Eastern Enterprises v. Apfel, 524 U.S. 498, 537, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998), which involved a challenge to The Coal Act, a statute that required the plaintiff company to provide health benefits to workers whom it had not employed for many years. The Court found the law unconstitutional, stating that when Congress "singles out certain employers to bear a burden ... unrelated to any commitment that the employers made or to any injury they caused, the governmental action implicates fundamental principles underlying the Takings Clause." Id. at 531, 118 S.Ct. 2131. Eastern, however was decided by a four justice plurality. Justice Kennedy concurred, finding that the challenged Act violated the Due Process Clause, and four justices dissented. Thus, the decision is of limited precedential value. See Association of Bituminous Contractors, Inc. v. Apfel, 156 F.3d 1246, 1255 (D.C.Cir.1998) (stating that "the only binding aspect of [the Eastern plurality decision] is its specific result holding the Coal Act unconstitutional as applied to Eastern Enterprises").
However, even if Eastern constituted binding precedent, it would not govern the present case. This is so for several reasons. First, as we have seen, unlike The Coal Act, the risk contribution doctrine does not impose liability but merely modifies the manner in which liability may be proved. Second, as also discussed, unlike The Coal Act, which was enacted by Congress, the risk contribution doctrine was developed by a court in the civil law context. Third, critical to Eastern was the fact that five justices concluded that the plaintiff company had not played a part in causing the problem that the legislation was attempting to solve. As a result, those five justices regarded it as unfair to impose a severe economic burden on the company. In contrast, the reason that the Wisconsin Supreme Court determined that the risk contribution doctrine was an appropriate way to address the problem of injuries resulting from lead paint was that a majority of the justices concluded that the manufacturers of white lead carbonate pigment were the principal cause of the problem. The Court made this point clearly in Thomas:
*835 First, the record makes clear that the Pigment manufacturers "contributed to the risk of injury to the public and, consequently, the risk of injury to individual plaintiffs such as" Thomas. Many of the individual defendants or their predecessors-in-interest did more than simply contribute to a risk; they knew of the harm white lead carbonate pigments caused and continued production and promotion of the pigment notwithstanding that knowledge. Some manufacturers, paradoxically, even promoted their nonleaded based pigments as alternatives that were safe in that they did not pose the risk of lead poisoning. For those that did not have explicit knowledge of the harm they were engendering, given the growing medical literature in the early part of the century, Thomas's historical experts, Markowitz and Rosner, submit that by the 1920s the entire industry knew or should have known of the dangers of its products and should have ceased producing the lead pigments, including white lead carbonate. In short, we agree with Thomas that the record easily establishes the Pigment Manufacturers' culpability for, at a minimum, contributing to creating a risk of injury to the public.
Thomas, 285 Wis.2d at 307-08, 701 N.W.2d 523 (citations omitted).
Citing several cases involving punitive damages, defendants next argue that use of the risk contribution doctrine by plaintiff would violate due process because it would require them to pay damages for harms caused by others. This argument is merely a rephrasing of defendants' argument that the risk contribution doctrine is arbitrary and irrational, and it fails for the same reasons. As discussed, the risk contribution doctrine does not impose liability or the obligation to pay damages on defendants. If any defendants are found liable, damages are apportioned according to comparative negligence, a time honored and perfectly constitutional concept. Thomas, 285 Wis.2d at 322 n. 52, 701 N.W.2d 523. And punitive damages are unavailable in risk contribution cases.
Lastly, defendants argue that allowing plaintiff to use the risk contribution doctrine would discriminate against and burden interstate commerce because at present there apparently are no white carbonate pigment manufacturers or successors thereof in Wisconsin. Defendants' argument fails for several reasons. First, it is unlikely that the dormant Commerce Clause even applies to a judicial decision interpreting a state's tort law. Secondly, defendants present no evidence that the Wisconsin Supreme Court's decision in Thomas was anything other than an even-handed effort to protect a legitimate public interest with only the most incidental impact on interstate commerce.
Therefore, for the reasons stated, defendants' motion for summary judgment will be denied. Defendants have not shown that allowing plaintiff to proceed under the risk contribution doctrine would violate any of their constitutional rights. However, I will also deny plaintiff's motion for partial summary judgment. While it is unlikely that further factual development will add anything to defendants' constitutional arguments, I will not foreclose defendants from asserting them if a basis for doing so emerges. Finally, I will grant the parties' request to stay proceedings pending plaintiff's appeal of Gibson v. Am. Cyanamid Co., 719 F.Supp.2d 1031 (E.D.Wis.2010).
THEREFORE, IT IS ORDERED that plaintiff's motions for summary judgment are DENIED.
*836 IT IS FURTHER ORDERED that defendants' motions for summary judgment are DENIED.
FINALLY, IT IS ORDERED that defendant's motions for leave to file and to stay proceedings are GRANTED.
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429 N.W.2d 730 (1988)
James C. HOWES, Appellant,
v.
NORTH DAKOTA WORKERS COMPENSATION BUREAU, Respondent and Appellee, and
Leingang Steel Siding, Respondent.
Civ. No. 880036.
Supreme Court of North Dakota.
September 20, 1988.
Dietz & Little, Bismarck, for appellant; argued by Stephen D. Little, Bismarck. Appearance by Kathryn L. Dietz, Bismarck.
Hugh P. Seaworth (argued), Asst. Atty. Gen., North Dakota Workers Compensation Bureau, Bismarck, for respondent and appellee.
ERICKSTAD, Chief Justice.
James C. Howes appeals from a district court judgment affirming an order of the North Dakota Workers Compensation Bureau. We affirm.
James Howes was injured on July 10, 1985, when he struck his head on an overhanging steel bar of a horse trailer owned by his employer, Leingang Steel Siding, Inc., of Mandan, North Dakota. Howes was able to finish work after hitting his head, but later became sick and was admitted to the emergency room of a Bismarck, North Dakota, hospital. Howes was hospitalized for five days and was diagnosed as having suffered a craniocerebral trauma.
The Bureau accepted liability in Howes' case, paying medical expenses and disability benefits from July 7, 1985, through July *731 21, 1985. Howes returned to work on July 22, 1985. However, in March of 1986 Howes was released from his employment. Howes attributed his release to a memory loss which he believed was caused by the accident. The Bureau called Howes' employer who apparently indicated Howes was released because of a "poor work attitude/performance."
Howes testified that he experienced mild headaches several times a week and severe headaches "maybe two times a month" after the July 1985 accident. On March 12, 1986, Howes sought medical treatment from Dr. John S. Pate complaining of what the report denominated a syncopal[1] episode. On March 20, 1986, Dr. Pate again examined Howes to follow up on his complaints. In a medical statement sent to the Job Insurance Claims Office dated that same day, Dr. Pate suggested Howes may be having seizures and advised that it would not be wise for him to work.[2]
On April 26, 1986, Howes experienced a severe headache. Howes was admitted to the hospital and remained there for approximately twenty-one days. Howes sought payment from the Bureau for the medical expenses connected with his second (April 1986) hospitalization.
The Bureau denied liability for the April 1986 hospitalization. The pertinent parts of the Bureau's findings set forth in an "Order Denying Further Benefits" dated October 6, 1986 follow:
"III.
"Claimant alleges he sustained a head injury when he hit his head on a bar as he came out of a horse trailer on July 10, 1985.
"IV.
"Claimant's condition was diagnosed as a craniocerebral trauma.
*732 "V.
"The Bureau accepted liability in this case, paid medical expenses, and paid disability benefits from July 7, 1985, through July 21, 1985.
"VI.
"Claimant returned to work on July 22, 1985.
"VII.
"On March 20, 1986, claimant's physician indicated that the claimant may be having seizures and it would be wise for him not to work.
"VIII.
"A medical report dated March 20, 1986, states that the claimant had a head injury in 1981, with symptoms similar to his current symptoms.
"IX.
"The claimant was hospitalized from April 26, 1986, through May 14, 1986, for severe headaches. He underwent psychological testing and evaluations and it was reported that he had no problems with his memory.
"X.
"Claimant's physician indicated that he believed a great deal of the claimant's headaches were related to tension.
"XI.
"Claimant's medical history indicates that he had been having syncopal episodes prior to an automobile accident in October, 1980. The syncopal episodes went away after the claimant started medication.
"XII.
"The greater weight of the evidence indicates that the claimant's current condition is not in any way related to his employment injury on July 10, 1985.
"CONCLUSIONS OF LAW
* * * * * *
"II.
"The claimant has failed to prove that he is entitled to further benefits under the North Dakota Workmen's Compensation Act over and above those previously awarded and paid."
Howes requested and was granted a rehearing before the Bureau. After the Bureau heard testimony from Howes, it affirmed its decision denying further benefits:
"The greater weight of the evidence, including testimony adduced at the formal hearing and medical reports in connection with claimant's medical assessment, indicated that the claimant's continued complaints and hospitalization are not the result of the July 10, 1985, incident in the horse trailer."
Howes appealed the Bureau's decision to the district court, which affirmed the Bureau's decision. On appeal to the district court and this Court Howes raises the following three issues:
"I. THE BUREAU HAD A RESPONSIBILITY TO DEVELOP THE EVIDENCE FURTHER IN THIS CLAIM FOR MEDICAL BENEFITS IN ORDER TO ASCERTAIN THE SUBSTANTIAL RIGHTS OF THE PARTIES.
"II. THE BUREAU FAILED TO CLARIFY INCONSISTENT MEDICAL EVIDENCE.
"III. THE BUREAU'S PROCEDURES DEPRIVED HOWES OF HIS STATE AND FEDERAL CONSTITUTIONAL RIGHT TO DUE PROCESS."
I.
The essence of Howes' first contention is that the Bureau has the evidentiary burden of proving that Howes' 1986 headaches and hospitalization are unrelated to his July 1985 head injury, rather than Howes having the burden of proving that his July 1985 head injury is related to his *733 April 1986 headaches and hospitalization. Howes contends "[t]here is simply no authority for the Bureau's position" that Howes has the burden of proof with respect to connecting the July 1985 head injury to his April 1986 headaches. We disagree.
Section 65-01-11, N.D.C.C., unequivocally states that the claimant "shall have the burden of proving by a preponderance of the evidence that he is entitled to participate" in the fund. Our decisions have consistently recognized that the claimant must show that an "ensuing disability is causally connected to the employment injury." Inglis v. North Dakota Workmen's Compensation Bureau, 312 N.W.2d 318, 322 (N.D.1981); Claim of Bromley, 304 N.W.2d 412, 415 (N.D.1981), citing Kuntz v. North Dakota Workmen's Compensation Bureau, 139 N.W.2d 525 (N.D.1966).
Following Howes' July 1985 head injury, the Bureau accepted liability for medical expenses and disability benefits. Howes returned to work in July of 1985 and did not contact the Bureau for further benefits until after his headaches and hospitalization in April of 1986. Howes insists that he "proved" his case in July of 1985 and wonders "[h]ow many times must he prove his case?" We addressed the subject of Howes' question recently in Hayes v. North Dakota Workers Compensation Bureau, 425 N.W.2d 356, 357 (N.D.1988): "If the Bureau terminates benefits, after initially accepting a claim and paying benefits, the claimant has the burden of proving his or her right to continue receiving benefits." See also Gramling v. North Dakota Workmen's Compensation Bureau, 303 N.W.2d 323, 325-26 (N.D.1981).
II
Howes next contends the Bureau failed to clarify inconsistent medical evidence, and "chose to ignore" Howes' testimony which tended to prove that the April 1986 headache and hospitalization were causally connected to the July 1985 head injury. Howes further contends the Bureau "chose to ignore" a March 1986 statement of Dr. Pate which indicated Howes was experiencing a concussion with blackout spells and impaired memory.[3]
Our decisions have recognized that the adversarial concept has only limited application in determinations related to workers compensation claims. We have recently said that the Bureau is "obligated to consider the entire medical record, and if there is conflicting medical evidence, some favorable and some unfavorable to the claimant, the Bureau must adequately explain its reason for disregarding the favorable evidence in denying benefits." Hayes, supra at 357; see also Weber v. North Dakota Workmen's Compensation Bureau, 377 N.W.2d 571, 574 (N.D.1985) (Bureau did not "adequately address" medical evidence which did not support its findings).
Initially our rule requiring the Bureau to make reasonable efforts to clarify discrepancies in medical evidence arose out of a situation wherein the attending physician's report contained the discrepancy. See Claim of Bromley, supra at 417.[4] In a case following Bromley involving the issue of discrepancies in the medical evidence, the discrepancies were contained within different reports from the same doctor. See Roberts v. North Dakota Workmen's Compensation Bureau, 326 N.W.2d 702, 706 (N.D.1982). In Roberts, the examining physician made two different statements in two different documents about the cause of the claimant's disability. A statement in the first report partially conflicted with a statement in the latter report.
*734 Roberts thus slightly expanded the principle in Bromley to require the Bureau to clarify conflicting evidence from the same individual who provided conflicting evidence in two different written reports. We concluded it is "inappropriate for the Bureau to rely only upon that part of an inconsistent medical report which is favorable to the Bureau's position without attempting to clarify the inconsistency." Roberts, supra at 706.
More recently in Weber, supra at 574, the Bureau was presented with conflicting evidence between two different orthopedic surgeons about the amount of time it would take the claimant to recover from his work related injury. Relying on Bromley, we remanded the case in Weber to "clarify the discrepancies." Weber, supra at 574.
Bromley has apparently been expanded to require the Bureau to attempt to clarify conflicting medical evidence from different physicians. Notwithstanding this expansion we must keep in mind the basic rule which was stated in Bromley by Justice Sand who first enunciated our medical evidence discrepancy rule:
"Normally, it is within the province of the administrative agency, not the courts, to weigh conflicting medical opinions and to resolve these conflicts. Hassler v. Weinberger, 502 F.2d 172 (7th Cir.1974)." Bromley, supra at 417.
We must also keep in mind that pursuant to section 28-32-19, N.D.C.C., we must affirm the Bureau's decision unless its findings of fact are not supported by a preponderance of the evidence or its conclusions are not supported by its findings of fact. Hayes, supra at 356-57, citing Gramling, supra. In determining whether or not an agency's findings of fact are supported by a preponderance of the evidence we do not make independent findings of fact or substitute our judgment for that of the agency, but we determine only whether a reasoning mind could have reasonably determined that the factual conclusions were supported by the weight of the evidence. Power Fuels, Inc. v. Elkin, 283 N.W.2d 214 (N.D.1979). We believe the Bureau's conclusions are supported by a preponderance of the evidence and that the Bureau has adequately addressed conflicting evidence.
Howes was examined by Dr. Pate prior to the April 1986 hospitalization. Pate's assessment, noted in the medical records from that period, indicates a possible concussion disorder.[5] Pate recommended treating Howes' blackout episodes with medication or otherwise seeing Donald M. Larson, M.D., a neurologist, for additional evaluation of the problem. Dr. Larson was consulted during the April 1986 hospitalization.
Howes again saw Dr. Larson when he underwent a "complete medical assessment" which included "psychological, psychiatric, neurologic, physical therapy, occupational therapy, social service and orthopedic evaluations" during March 1987. Howes also had an ophthalmological evaluation in March of 1987.
Howes' neurologic exam was "normal" and the examining physician, Dr. Larson, concluded that Howes' "problems with tension and nervousness ... [have] a considerable bearing on his headaches." D.E. Townes, M.D., found "no ocular explanation for headache and no evidence for any residium from prior traumatic episode."
Dr. Greg S. Peterson, M.D., also examined Howes and concluded:
"Mr. Howes has had a long history of nonspecific `spells' of unknown etiology. His headaches do not appear to be related to his 7-10-85 work related head trauma. There is no evidence of memory loss and the patient's reports of retrograde memory loss are not at all characteristic of patients with head trauma. The headaches that prompted admission to the hospital in April of 1986 would not appear to have any direct relationship to his work related injury. There was no evidence of disability on our evaluation."
Weighing this evidence along with evidence of Howes' prior medical history *735 against Howes' testimony that his April 1986 headache and hospitalization were related to the July 1985 head injury, we believe a reasoning mind could have reasonably concluded that Howes failed to show a causal connection between his July 1985 head injury and his April 1986 headaches.
III
Howes' final contention is that the Bureau's formal hearing process deprives him of due process guaranteed by the state and federal constitutions.
Howes wrote the Bureau asking "[i]f the Bureau intends to rely upon evidence not presented at the pending formal hearing, please provide me with a copy of such evidence and please consider this a request to cross-examine the person[s] furnishing such evidence, pursuant to Section 28-32-07, N.D.C.C." While the Bureau responded that it would "rely on the entire record," Howes apparently anticipated that the Bureau would base its determination, at least in part, on medical reports written by Dr. Larson, and asked the Bureau to depose him. Counsel for the Bureau wrote a letter to Larson and asked whether or not his medical opinion could be determined by answering some written questions relating to Howes' case. By letter the Bureau submitted questions to Larson and Larson responded in a written report. The Bureau apparently made Larson's answers available to Howes pursuant to section 28-32-07, N.D.C.C., which reads in relevant part:
"28-32-07. Consideration of information not presented at a formal hearing. If an administrative agency desires to avail itself of competent and relevant information or evidence in its possession or furnished by members of its staff, or secured from any person in the course of an independent investigation conducted by such agency, in addition to the evidence presented at any formal hearing, it may do so after first transmitting a copy of such information or evidence or an abstract thereof to each party of record in the proceeding, and after affording each such party, upon written request, an opportunity to examine such information or evidence and to present evidence in connection therewith and to cross-examine the person furnishing such information at a further public hearing to be called and held upon at least ten days' notice given by registered or certified mail. Nothing contained in this section prevents any administrative agency from taking notice of any fact or facts set forth in its duly adopted rules or any facts which are judicially noticed by the courts of this state."
Howes contends that as the Bureau used this medical evidence, the Bureau should have afforded Howes the opportunity to cross-examine Dr. Larson either by deposition or at the formal hearing and that the cost of the cross-examination should have been borne by the Bureau. After submitting the questions to Dr. Larson, however, counsel for the Bureau notified Howes that in the past Larson had been reluctant to participate in depositions and doubted he would be more willing to help here. Dr. Larson suggested by letter to the Bureau's counsel that an evaluation by another MedCenter One physician might be the best way to obtain a comprehensive view of Howes' problem. In response to this suggestion, and in light of Dr. Larson's past reluctance to being deposed, the Bureau arranged for the more complete medical assessment which was later accomplished and is earlier referred to herein.
We believe section 28-32-07, N.D.C.C., clearly grants Howes, upon written request, the right to cross-examine the physician at a "further public hearing." However, section 28-32-07, N.D.C.C., does not require the Bureau to pay for the costs of the cross-examination. Who must bear those costs is addressed in section 28-32-09, N.D.C.C., which reads in relevant part:
"28-32-09. Subpoena and attendance of witnesses.... The deposition of a witness or party in any proceeding before an agency may be taken in the same manner and on the same notice as in a civil action pending in the district court. Interrogatories may be sent to any witness or party in any proceeding in the same manner and on the same notice *736 as in an action pending in the district court. A party, other than the administrative agency, must first show good cause before undertaking discovery proceedings, including interrogatories. Any witness who is subpoenaed under the provisions of this section and who appears at the hearing, or whose deposition is taken, shall receive the same fees and mileage as a witness in a civil case in the district court, and such fees shall be paid by the party or agency at whose instance the witness appears or his deposition is taken". [Emphasis added.]
It is within the Bureau's discretion to approve the taking of depositions to be paid for by the Bureau, and each case must be judged on its merits. Hayes, supra at 358; Steele v. North Dakota Workmen's Compensation Bureau, 273 N.W.2d 692, 702 (N.D.1978). In this case the Bureau concluded that the physician's opinion could be obtained "informally" by a written report.
The general rule in workers compensation law is that each party pays his or her own attorney and costs unless a statute specifically provides otherwise. Gross v. Great A. & P. Tea Co., 87 Mich.App. 448, 274 N.W.2d 817, 818 (1979); 3 Larson's Workmen's Compensation Law § 83.20, p. 15-695. Section 65-02-08, N.D.C.C., provides that the Bureau shall pay a claimant's attorney fees incurred "in proceedings before the bureau...." Moore v. North Dakota Workmen's Comp. Bureau, 374 N.W.2d 71, 74 (N.D.1985). Section 65-10-03, N.D.C.C., provides in pertinent part:
"The cost of the appeal and an attorney's fee for the appellant's attorney shall be set by the appellate court and taxed against the bureau unless the appeal is determined to be frivolous. The bureau shall pay such attorney's fee from the bureau general fund. The amount of such attorney's fee shall be determined in the same manner as prescribed by the bureau for attorney fees, and the amount of attorney's fee already allowed in proceedings before the bureau shall be taken into consideration."
The North Dakota Legislature, therefore, specifically requires the Bureau to pay the claimant's attorney's fees and costs on appeal. The costs of taking depositions and subpoenaing expert witnesses for cross-examination, being not a part of the "appeal" process, are not set by the appellate court but are governed by section 28-23-09, N.D. C.C.
Statutes in other jurisdictions have been construed to require the Bureau to pay the claimant's attorney's fees as well as expert witness fees. See Moore v. General Motors Corp., Terex Div., 18 Ohio St.3d 259, 480 N.E.2d 1101 (1985) (relying on statute to allow recovery of fees for expert preparing for and giving deposition); Schauder v. Brager, 303 Md. 140, 492 A.2d 630 (1985) (Workers Compensation Commission has power under statute to approve and modify experts' fees); Cf. Rosenbaum v. Industrial Commission, 93 Ill.2d 381, 67 Ill.Dec. 83, 444 N.E.2d 122 (1983) (statute indicates that the Commission has discretion in deposing experts, and where claimant refused to subpoena because of cost, not an abuse of discretion to refuse to issue dedimus potestatem to secure testimony of claimant's treating physicians).
Section 1-02-02, N.D.C.C., states that "[w]ords used in any statute are to be understood in their ordinary sense, unless a contrary intention plainly appears...." We understand the phrase "attorney's fee" as used in sections 65-02-08 and 65-10-03, N.D.C.C., to mean expenses incurred for the services of an attorney. Section 28-32-09, N.D.C.C., places the expense of witness fees on the party who calls the witness. Therefore, we conclude the Bureau did not abuse its discretion in refusing to pay the cost of deposing Dr. Larson.
Further, we are not convinced the Bureau's "practice" of securing medical statements such as Dr. Larson's opinion deprived Howes of due process under the federal and state constitutions. We discussed the parameters of due process in the context of an administrative proceeding in First American Bank & Trust Company v. Ellwein, 221 N.W.2d 509, 514 (N.D. 1974), cert. denied, 419 U.S. 1026, 95 S.Ct. 505, 42 L.Ed.2d 301, reh'g denied, 419 U.S. 1117, 95 S.Ct. 798, 42 L.Ed.2d 816 (1975):
*737 "What constitutes due process within an administrative proceeding? While recognizing that the adjudicative function of the Board is quasi-judicial in nature, we have never held that the minimal due process that must be afforded participants before an administrative board or agency is synonymous with minimal requirements of due process in a court of law. To do so would be to create a second judicial branch without statutory authority and add to time required in the disposition of administrative decisions." 221 N.W.2d at 514.
More recently in Berger v. State Highway Commissioner, 394 N.W.2d 678, 681 (N.D.1986), we said that a person before an administrative agency cannot demand due process equivalent to that followed in courts, but that a person is entitled to procedural fairness in an administrative hearing.[6]
The fundamental requirements of due process are notice of contemplated action and the opportunity to be heard.[7]Beckler v. North Dakota Workers Compensation Bureau, 418 N.W.2d 770, 773 (N.D.1988) citing Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970) (continuing right to welfare benefits is an entitlement equivalent to a property interest within meaning of Due Process Clause of Fourteenth Amendment of the United States Constitution). A fair hearing includes the opportunity to confront and cross-examine adverse witnesses.[8] Which party bears the *738 expense associated with the right of confrontation requires a balancing of the interests involved.[9] Such a determination is best made by the Legislature.[10]
Howes requested and the Bureau granted a full evidentiary hearing to determine the correctness of its decision to terminate Howes' benefits. Howes was given an opportunity to be heard. Howes also had the opportunity to cross-examine Dr. Larson, albeit at Howes' expense, through the use of a deposition or subpoena to appear at a formal hearing. Section 28-32-09, N.D.C. C. Accordingly, we conclude that neither Howes' state nor federal constitutional due process rights were violated.
For the reasons stated herein, the judgment affirming the Bureau's decision is affirmed.[11]
GIERKE and VANDE WALLE, JJ., concur.
MESCHKE, Justice, dissenting.
I respectfully dissent. Howes was effectively denied opportunity to cross-examine adverse medical experts and did not receive a fair hearing.
James Howes worked in the warehouse for Leingang Steel Siding in Mandan. On July 10, 1985, shortly before 5:00 P.M., he was loading windows into a horse trailer. As he hurried out of the trailer, he struck his head on a bar across the back of the trailer. Dr. Larson, who saw him the next day, described his injury:
"He was not rendered unconscious but he did see stars and apparently took a fairly good blow to the head. He then started having headaches which became progressively worse. He started vomiting about 10 p.m. and then came into the emergency room and was admitted. He had noted some blurred vision last night. He noted increased headache pain by coughing or sneezing."
Dr. Larson diagnosed "craniocerebral trauma." Howes was released from the hospital on July 15 and returned to work on July 22. The Workers Compensation Bureau paid his medical bills and paid him disability benefits for July 11 through July 21, 1985.
Leingang discharged Howes from employment on March 3, 1986. Leingang later reported to the Bureau that he was "released for poor work attitude/performance. Would not keep at his work. Work performance was not significantly different from pre-injury performance vs post-injury."
Howes went to Dr. Pate of the Family Practice Center on March 12, 1986. Dr. Pate reported to the Bureau on March 20, 1986:
*739 "Concussion with blackout spells and impaired memory.
"* * *
"July, 1985
"* * *
"James Howes may be having seizures at this time and it would not be wise for him to work."
On April 26, 1986, Howes was hospitalized for headaches and dizziness with vomiting on April 25. Family Practice Center physicians again referred him to Dr. Larson. Upon his release from the hospital on May 14, 1986, Dr. Larson equivocated in his report to the Bureau:
"After admission, he was followed by the FPC physicians and I was asked to see him in consultation. Felt there may be some vascular component initially and he was placed on Inderal therapy but no changes in his headaches at all. He did have a number of psychological tests and evaluations done and they found no problems with his memory. Overally, [sic] his headaches persisted. He was tried on a great number of therapies including Inderal, biofeedback, steroids, and lastly some Sansert. There was improvement in headache toward the end, but still had some problems. Felt that a great deal of the headaches are related to tension. Although some of the headaches have some vascular components to them. He was discharged on Sansert 2 mg b.i.d., Elavil 25 mg t.i.d. and some Tylenol # 3 to be used every 6 hours PRN for severe headaches. He will be followed in the clinic again in 4 weeks."
On October 6, 1986, the Bureau denied Howe's claim for the March-May 1986 medical expenses. Picking out references in his medical records to a childhood fall at the age of 6 and to his "having syncopal episodes prior to an automobile accident in October, 1980," the Bureau concluded that "the greater weight of the evidence indicates that the claimant's current condition is not in any way related to his employment injury on July 10, 1985."
Howes requested a hearing and sought a deposition of Dr. Larson. Instead, the Bureau wrote Dr. Larson with questions:
"Given Mr. Howes' medical history, complaints and examination results, do you have an opinion as to whether the headaches he presently complains of are `more likely that [sic] not', or `probably' caused by the July 10, 1985 horse trailer incident (hit top of head on crossbar)? If so, what is your opinion?
"Is it just as likely that Mr. Howes' headache complaints are related to some other factor such as some other trauma? seizure disorder? muscle spasm? or even smoking allergy? Please explain if you can. Is there anything else you can add that might help?"
The Bureau also advised Howe's counsel:
"Dr. Larson has, in the past, expressed reluctance to participate in a deposition. I hope he is more willing to help here, but I doubt it."
A few days later, without responding to the questions, Dr. Larson suggested:
"... an evaluation by Doctor Saxvik at Medcenter One may be the best way to obtain a comprehensive view of Mr. Howes' problem."
In late March 1987, the Bureau arranged for Howes to enter Medcenter One as an inpatient for four days of "complete medical assessment," including "psychological, psychiatric, neurologic, physical therapy, occupational therapy, social service, and orthopedic evaluations as necessary." Medcenter One reported to the Bureau on April 8, 1987.
Social Worker Scott D. Boehm concluded that "[t]here does not appear to be any glaring significant psychosocial problem which is interferring with his rehabilitation process." Jeff Lange, Rehabilitation Physical Therapist, concluded that "[d]ue to the fact that this patient states that his headache is generally around a 1-2, and that his severe headaches come only 1-2 times a month, I do not feel that this would significantly interfere with any employment." Dick Elefson, MAC, had no specific recommendations and "deferred" his diagnostic impression. Dr. Townes reported a "normal eye examination. I can find no ocular explanation for headache and no evidence *740 for any residium from prior traumatic episode." Dr. Lampman's assessment was:
"Mild continuous frontal vertical headaches with occasional exacerbations, probably not limiting his occupation. This man did have a report of trauma to the head, but never had a concussion. Therefore this cannot be classified as a postconcussive syndrome. All we have to go on is his description of headache and his occasional requirement for Tylenol with Codeine to relieve flares. As I see it, not much more can be said at this point from a clinical standpoint."
Dr. Larson was again consulted and once more hedged in his report to the assessment team:
"This is a gentleman that presents with some episodes of spells dating back to age 14. Was on Phenobarbitol therapy for a period of time, however, all the EEGs have been normal. He has had several blows to the head, one in an auto accident in October of 1980 and then in 1985 struck his head on a bar across a horse trailer, but not rendered unconscious in that. He continues to complain of headaches and is unresponsive to most forms of therapy.
"Psychological testing in the past have shown some problems with tension and nervousness and feel that this has a considerable bearing on his headaches. I could find no other specific organic reason for the headaches. CT scan of the head and brain done here last few days again is normal. His usage of medicine at the present time is down to practical nothing, taking he indicates about five Tylenol per month. With some of the more severe headaches, may use a few occasional Tylenol # 3, but again the headaches do not seem to be troublesome in that he had been able to work and hold a job then."
Dr. Greg S. Peterson, Medical Director for Medcenter One Rehabilitation, summarized:
"Mr. Howes has had a long history of nonspecific `spells' of unknown etiology. His headaches do not appear to be related to his 7-10-85 work related head trauma. There is no evidence of memory loss and the patient's reports of retrograde memory loss are not at all characteristic of patients with head trauma. The headaches that prompted admission to the hospital in April of 1986 would not appear to have any direct relationship to his work related injury. There was no evidence of disability on our evaluation."
Dr. Peterson concluded:
"(1) Release to work without restrictions.
"(2) Workmen's Compensation does not appear to be responsible for payment for the hospitalization in April of 1986 for evaluation of headaches.
"(3) It does not appear that Workmen's Compensation should be responsible for any future medical bills for headaches unless a new work related head injury occurs."
The Bureau scheduled a "formal hearing." The notice to Howes did not mention cross-examination but directed: "You will present at the hearing all witnesses and evidence known to you" on the issue of "whether the claimant is entitled to any further benefits ... in connection with an alleged injury sustained on July 10, 1985." Strikingly, the notice of the hearing to the employer, the claimant's true adversary, emphasized the right to cross-examine:
"The hearing itself, will consist of presentation of the claimant's own case first, followed by an opportunity for the employer to cross examine. The Bureau, through its legal counsel, will also have a chance to cross examine the witnesses. The direct and cross examination will continue until each party has presented all of its case. Although not required, you may want to retain legal counsel to represent you, especially since the claimant will almost always be represented by the claimant's attorney." (My emphasis).
Counsel for Howes promptly wrote the Bureau:
"[I]f the Bureau intends to rely upon evidence not presented at the pending formal hearing, please provide me with a copy of such evidence and please consider *741 this to be a request to cross-examine the person(s) furnishing such evidence pursuant to Section 28-32-07, N.D.C.C."
Counsel for the Bureau responded:
"Enclosed is an updated copy of the file. The Bureau will rely upon the entire file in addition to evidence adduced at the hearing.
"If you are requesting that persons be subpoenaed, let me know which persons."
At the outset of the hearing on August 5, 1987, counsel for Howes stated:
"If the Bureau intends to rely on medical evidence in the file, to which I have not been allowed an opportunity to examine the expert witnesses, I would request that opportunity prior to a decision."
The Bureau's counsel responded:
"It's my understanding that this case is going to follow the same policy that the Bureau has used in considering the entire record, which includes medical records from various examining doctors, and the like. I believe that [counsel for claimant] has been given access to the entire file.... The Bureau generally has no objection to subpoenaing witnesses, but often denies the payment in connection with cross-examination. And I think that, if anything, that's what's being done here."
Counsel for Howes reiterated:
"I ... maintain that if the Bureau uses evidence, it's the Bureau's responsibility to make thatnot simply the summary of evidence but the source of the evidence available to the claimant for examination at the Bureau's expense, as opposed to the claimant bringing in his own witnesses at the Bureau's expense."
Only Howes testified at the hearing. Howes identified his headaches as following his July 10, 1985 injury and disclaimed any prior continuing symptoms from a childhood fall from a garage at age 6 or from an auto accident at age 15.
On September 14, 1987 the Bureau adhered to its order denying further benefits. The Bureau found:
"IX.
"... During the rehearing process, the Bureau undertook further investigation and review of additional evidence submitted on behalf of Mr. Howes. The Bureau's further investigation included medical assessment by a team of medical experts at Medcenter One.
"X.
"The greater weight of the evidence, including testimony adduced at the formal hearing and medical reports in connection with claimant's medical assessment, indicated that the claimant's continued complaints and hospitalization are not the result of the July 10, 1985, incident in the horse trailer."
Howes appealed. He expressed his issues on appeal in terms of the Bureau's duty to develop and clarify medical evidence and in terms of due process, claiming that the "Bureau's consideration of and reliance upon evidence to which Howes was not afforded the right of cross-examination clearly violated ... due process."
I agree that Howes was effectively denied opportunity to cross-examine adverse medical experts and, therefore, did not have a fair hearing. NDCC 28-32-19(4).
We have no occasion in this case to contemplate the constitutionally dictated scope of a fair hearing. We need only apply the Administrative Agencies Practice Act, NDCC Ch. 28-32, in a uniform manner, consistent for all agencies, and specifically correlated with the mandates of the Workers Compensation Act. The Bureau's procedures are "governed by the provisions of chapter 28-32" and the Bureau must "ascertain the substantial rights of all the parties." NDCC 65-02-11.
The Bureau seeks the power to short-cut evidentiary rules. And, for its actions apart from required trial-type hearings, we have properly recognized that the Bureau may reasonably consider its records without "an occasion to confront witnesses." See, for example, Beckler v. North Dakota Workers Compensation Bureau, 418 N.W.2d 770, 775 (N.D.1988). But, at a *742 trial-type hearing, the Administrative Agencies Practice Act, fairly applied, requires that a claimant be "afforded the same opportunity to present evidence and to examine and cross-examine witnesses as is permitted under section 28-32-06." NDCC 28-32-05(5).
NDCC 28-32-06 makes the practice in district court govern the admissibility of evidence "insofar as circumstances will permit." Thus, a trial-type hearing is mandated by the statute before an employee-claimant can be denied benefits when there are genuinely disputed and material facts. While the Bureau may waive the usual rules of evidence if "necessary to ascertain the substantial rights of all the parties," it can use "only evidence of probative value." NDCC 28-32-06. (My emphasis). Only evidence "offered and made a part of the official record of the hearing" can be considered, "except as otherwise provided in this chapter." Id. No exception is made for hearsay reports of experts without opportunity for cross-examination to test their opinions.
If the Bureau considers anything "in addition to the evidence presented at any formal hearing," it must do more than just give a copy to the claimant. NDCC 28-32-07. The Bureau must "afford" the claimant an opportunity "to cross-examine the person furnishing such information at a ... public hearing ... upon at least ten days' notice." Id. "Afford" means, principally, "to manage to pay for or incur the cost of;... GIVE, FURNISH." Webster's Third New International Dictionary (1971).
Even without problems of procedural unfairness, Howe's claim appears to me to be evidentially close and difficult to weigh. Howes is not entitled to compensation benefits if his headaches in the spring of 1986 came from tensions of his loss of employment. Choukalos v. North Dakota Workers Compensation Bureau, 427 N.W.2d 344 (1988). At the other extremity of consideration, he is not entitled to benefits if his headaches came from a distant childhood incident or from symptoms existing before July 1985. But, if the more recent and apparently more severe "craniocerebral trauma" of July 10, 1985 was a substantial contributing factor to his following headaches, Howes is entitled to benefits. Ordinarily, the proximity and the seriousness of his 1985 work injury would weigh heavily in Howes' favor. The medical team's assessments did not explain why they attributed Howes' headaches after July 1985 to earlier incidents rather than the more recent and more serious trauma. It is plain that a trial-type hearing was essential to sift and weigh the facts and opinions about this claim before it could be fairly denied.
Only the "weight" of paper reports supports the Bureau's decision to attribute Howes headaches to remote incidents, in spite of Howes' testimony disputing the seriousness of those events and disclaiming any continuing effects from them. The Bureau's findings, after the formal hearing, rest entirely on the team's written assessments, and particularly Dr. Peterson's sweeping conclusions for the team.[1] Thus, those uncritiqued and unexplained medical reports are the crucial evidence on this claim.
Full disclosure of the facts is fundamental to fact finding. Cross-examination is essential to full disclosure. Model State Administrative Procedure Act § 10(3); 2 Am.Jur.2d Administrative Law § 424 (1962). This court has often emphasized the crucial importance of cross-examination in a trial-type hearing when an agency sought to deny it. Colgate-Palmolive Company v. Dorgan, 225 N.W.2d 278, 281 (N.D.1974). See also Insurance Services Office v. Knutson, 283 N.W.2d 395, 399 (N.D.1979).
*743 3 Larson's Workmen's Compensation Law § 79.83(a) expresses this importance eloquently:
"Fair play rules include the right of cross-examination, rules against ex parte statements, necessity of having all evidence on the record, and restrictions on determinations made by independent investigation conducted by the tribunal. These rules are based on fundamental notions of fairness. Nothing is more repugnant to Anglo-American traditions of justice than to be at the mercy of witnesses one cannot see or challenge, or to have one's rights stand or fall on the basis of unrevealed facts that perhaps could be explained or refuted." (Footnotes omitted).
Justice Frankfurter, in his renowned concurring opinion in Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 170, 71 S.Ct. 624, 647, 95 L.Ed. 817 (1951) put the principle succinctly: "[A] democratic government must ... practice fairness; and fairness can rarely be obtained by secret, one-sided determination of facts decisive of rights."
The Bureau's position was that Howes had opportunity to cross-examine. The Bureau offered to subpoena any of the physicians but only at Howes expense. The Bureau rationalized this severe course by disclaiming any need for its own or adverse witnesses' testimony at a formal, trial-type hearing. Instead, the Bureau urged that a claimant must obtain the testimony of any medical witness, even those adverse to him, at his own expense. The Bureau relied on NDCC 28-32-09 which says, "Any witness who is subpoenaed" under the Administrative Agencies Practice Act must "be paid by the party or agency at whose instance the witness appears or his deposition is taken."
An expert whose written opinion is adverse does not "appear" at the "instance" of a claimant. An expert's opinion is excludable hearsay and cannot fairly stand alone at a trial-type hearing unless the expert is available and "appears" at the hearing for cross-examination. NDREv 801(c). "[T]he hearsay rule is not a mere technical rule but is a basic rule of exclusion to protect the right of cross-examination." 4 Jones on Evidence § 30:7, p. 343 (1972).[2] "[W]hen a statement is offered to prove the truth of the matter asserted ... there is a lack of the safeguards used to insure credibility of the declarant. It is this lack of an oath and cross-examination of the declarant that warrants the exclusion of evidence as hearsay." Explanatory Note, NDREv 801, North Dakota Court Rules p. 467 (West Publishing Company; 1988).[3]
Expert opinions are not excepted from the hearsay rule. NDREv 802 and 803. Medical experts are not excepted from cross-examination to test the footings of their opinions. NDREv 705. Cross-exam is the predicate for admission of a written report of an expert in a trial-type hearing.
Thus, the rules of evidence, applicable to administrative actions by NDCC 28-32-06, contradict the notion that a claimant must bear the expense of the "appearance" of an adverse witness for cross-examination. The opportunity to test an opposing witness cannot be fairly and effectively denied by imposing the cost and duty of causing his appearance on an adversary. 2 Davis, Administrative Law § 12.9.
I regard the Bureau's position as a callous misreading of the statute. To adopt *744 its position would seriously distort the Administrative Agencies Practice Act. It would allow any agency to shift the cost of bringing an expert witness before it, by simply obtaining a written opinion and relying on it. It is not difficult to visualize that every agency would insist that petitioners were "afforded" cross-examination by the "privilege" of subpoenaing, at their own expense, adverse witnesses whose written reports the agency wants to use. That should not be.
Moreover, the Bureau's position was completely inconsistent with its duties to a claimant under the Workers Compensation Act. The Bureau did nothing for the hearing; only Howes offered evidence. That was not a trial-type "hearing"! Weber v. North Dakota Workmen's Compensation Bureau, 377 N.W.2d 571 (N.D.1985).
Nothing in the Workers Compensation Act shifts the cost burden of probing the reasons for an adverse medical opinion to a claimant. As one would expect of most claimants, Howes was not even "able to afford any more medical bills" for his headaches, let alone expenses for depositions of physicians. The Bureau is statutorily obligated to pay the reasonable attorneys fees and costs of a claimant from its general fund "after action by the bureau which reduces or denies a claim." NDCC 65-02-08.
Furthermore, the Bureau insisted that Howes' attorney agree to "follow the guidelines of the Workmen's Compensation Bureau on payment of attorney fees and costs in my representation of the claimant" with Bureau payment "as the sole and exclusive remuneration" to the attorney. The Bureau may have reasonable discretion to limit depositions and witness examinations in proper cases, for example, where cumulative. See NDREv 403 and Hayes v. North Dakota Workers Compensation Bureau, 425 N.W.2d 356 (N.D.1988). But, it cannot fairly prevent cross-examination by effectively shifting the entire expense of its witness to the claimant. The Bureau cannot thus renege on its duty to provide "sure and certain" relief to claimants who are statutorily excluded from "every other remedy." NDCC 65-01-01.
No administrative agency, not even the Bureau, should be allowed to effectively deny cross-examination in trial-type hearings by shifting the cost of its witnesses to claimants. Therefore, I respectfully dissent. Howes was not "afforded" an opportunity for cross-examination and was not accorded a fair hearing.
LEVINE, Justice, dissenting.
I join in that portion of Justice Meschke's rationale that supports the conclusion that Howes was denied a fair hearing because of his inability to cross-examine, at the Bureau's expense, Dr. Peterson, an expert retained by and relied upon by the Bureau.
However, because Dr. Larson was the claimant's physician consulted at the behest of Howes' physicians and not at the behest of the Bureau, I believe that the claimant, not the Bureau, bears the burden to subpoena or depose Dr. Larson.
I would reverse to afford Howes the opportunity to cross-examine Dr. Peterson.
NOTES
[1] Syncopal episodes involve fainting and other temporary losses of consciousness due to lack of oxygen to the brain. 3A Lawyers' Medical Cyclopedia, § 23.13 (3d ed. 1983).
[2] Medical Statement follows:
"Medical Statement
"NAME James C. Howes SSA No. XXX-XX-XXXX
"TO THE PHYSICIAN:
"We shall appreciate your certification of the results of your examination, as the examining physician of this individual, in answer to the questions below:
"1. Nature of illness or disability (lay terms) concussion with black-out spells and impaired memory.
"2. Patient under my care from 3/5/86 to present.
"3. Date illness or disability occurred July `85.
"4. Date last examined 3/20/86.
"5. If condition due to pregnancy
a. What is the expected date of confinement? No.
b. What was the date of childbirth? No.
"6. Did you advise patient to quit his/her last job because of illness, disability or pregnancy? No.
"7. Has patient been unable to work at any time due to illness, disability or pregnancy? Yes. "If `Yes,' give dates: From 3/3/86 To present.
"8. Has patient been released as able to resume full-time work? No
"If `Yes,' on what date? ___)
"9. If patient must now limit the kind, days or hours per week, or place of work because of his/her health, please explain limitation: James Howes may be having seizures at this time and it would not be wise for him to work.
"3/20/86 s/s J. Pate, M.D.
(Date) (Signature of Physician)
515 E. Broadway
(Address)
Bismarck, ND 58501
(City, State, Zip Code)
"CLAIMANT'S RELEASE
"I herewith consent to the release of the above information to the North Dakota Employment Security Bureau with the understanding that it is for the confidential use of that agency in determining my eligibility for unemployment insurance benefits.
____________________________
Claimant's Signature
"RETURN TO:
"JOB INSURANCE CLAIMS OFFICE BOX 609 MANDAN, ND 58554 (Local Office Address)"
[3] See supra note 2 for text of the medical statement.
[4] In Bromley we stated:
"In this instance the Bureau based its decision upon the part of the report by Dr. Ching supporting its decision but discounted the part of the same report which was inconsistent with its decision without any attempt to obtain a clarification of the discrepancy. This report, as well as the other reports made by Dr. Ching, were received by the Bureau before it made its initial dismissal order. The Bureau could not help notice these discrepancies and should have made reasonable efforts to have them clarified." Bromley, 304 N.W.2d at 417.
[5] The Job Insurance claim form filed by Dr. Pate refers back to July 1985 as the date the disability occurred. See supra note 2 for the full text of this medical statement.
[6] The decisions of the federal courts indicate that a full judicial hearing in conjunction with administrative proceedings has been required only if the interest at stake is protected by due process and if adjudicative facts are in dispute. 2 Davis, Administrative Law Treatise § 12.10 (2d ed. 1979).
[7] In an article written by the late Judge Henry J. Friendly as recently as 1975, Mr. Justice White was quoted as stating, "The Court has consistently held that some kind of hearing is required at some time before a person is finally deprived of his property interests." See Some Kind of Hearing, 123 U Pa.L.Rev. 1267 (1975) (hereinafter Hearing) (quoting from Wolff v. McDonnell, 418 U.S. 539, 557-58, 94 S.Ct. 2963, 2975-2976, 41 L.Ed.2d 935 (1974)).
Judge Friendly, in discussing further due process requirements and the right of participants before an administrative board or agency to cross-examine witnesses, said that the Administrative Procedure Act (APA) enacted in 1946, prescribed trial-type procedures only "when rules are required by statute to be made on the record after opportunity for an agency hearing." 5 U.S.C. § 553(c) (1970). He continued:
"When the question of the scope of this exception finally reached the Supreme Court in United States v. Allegheny-Ludlum Steel Corp. [406 U.S. 742, 757 [92 S.Ct. 1941, 1950, 32 L.Ed.2d 453] (1972) ] and United States v. Florida East Coast Railway Co. [410 U.S. 224, 239 [93 S.Ct. 810, 818, 35 L.Ed.2d 223] (1973) ], not only was the exception given a narrow construction but the opinions (particularly the one in Florida East Coast) opened wide and unexpected vistas for the use of less than full trial-type hearing procedures in business and social regulation." Hearing, supra at 1272-73.
[8] In pointing out that the right of confrontation is the most debated issue in conjunction with executive and administrative proceedings, Judge Friendly noted:
"Since the only provision in the Bill of Rights conferring the right of confrontation is limited to criminal cases, one might think the constitutional right of cross-examination was similarly confined. However, in Greene v. McElroy [360 U.S. 474, 497 [79 S.Ct. 1400, 1413-1414, 3 L.Ed.2d 1377] (1959) ] Chief Justice Warren said that the Court had applied this principle `in all types of cases where administrative and regulatory actions were under scrutiny.'" Hearing, supra note 7, at 1283.
In Goldberg v. Kelly, 397 U.S. 254, 267-68, 90 S.Ct. 1011, 1020, 25 L.Ed.2d 287, 299 (1970), the Supreme Court addressed the constitutional issue with respect to executive and administrative proceedings and held that due process requires timely and adequate notice and an effective opportunity to defend by confronting any adverse witnesses and by presenting arguments and evidence orally.
However, Judge Friendly noted that:
"The absolutes of Greene v. McElroy [360 U.S. 474, 496-97 [79 S.Ct. 1400, 1413-1414, 3 L.Ed.2d 1377] (1959) ] and of Goldberg v. Kelly [397 U.S. 254, 269-70 [90 S.Ct. 1011, 1020-1022, 25 L.Ed.2d 287] (1970) ] with respect to confrontation arguably have now been ended by Wolff v. McDonnell [418 U.S. 539 [94 S.Ct. 2963, 41 L.Ed.2d 935] (1974) ]. There the Court considered whether a prisoner faced with the loss of up to eighteen months in `good time' credits had a constitutional right to confront and cross-examine adverse witnesses. It concluded that, in the special circumstances of the prison, interest-balancing would dictate a right to cross-examination only in a most limited range of cases. In other situations, whether to allow cross-examination was left to the `sound discretion' of the prison authorities." [Citations omitted.] Hearing, supra at 1285-86. Judge Friendly further noted that "the Wolff decision, as well as the case-by-case approach of Gagnon v. Scarpelli [411 U.S. 778, 787-91 [93 S.Ct. 1756, 1762-1764, 36 L.Ed.2d 656] (1973) ] on revocation of probation, are likely to have considerable anti-Goldberg reverberations." See Hearing, supra note 7, at 1288-89.
[9] Judge Friendly suggests:
"It should be realized that procedural requirements entail the expenditure of limited resources, that at some point the benefit to individuals from an additional safeguard is substantially outweighed by the cost of providing such protection, and that the expense of protecting those likely to be found undeserving will probably come out of the pockets of the deserving." Hearing, supra note 7, at 1276.
[10] Courts are good at deciding cases, bad at drafting legislation; typically they see the case at hand and a few others but not the entire spectrum. Hearing, supra note 7, at 1302.
[11] In light of the length, content, tenor and intensity of the dissent some response seems appropriate if not required.
The essence of the dissent seems to be that as the Bureau relies upon Dr. Larson's report and responses to written questions posed by the Bureau, Howes is entitled to cross-examine Dr. Larson at the Bureau's expense to test the truth of his testimony. Actually, however, Howes has the burden of proving he is entitled to benefits pursuant to § 65-01-11, N.D.C.C. See discussion in opinion. Dr. Larson was Howes' own doctor and was not sought out by the Bureau as its own expert to meet Howes' expert testimony.
Incidentally, if we were to require the Bureau to pay for subpoena costs, not only might this further deplete scarce and diminishing funds, but it would also likely introduce a delaying factor into an increasingly complex process and produce or increase a backlog in Workers Compensation cases. These latter consequences point to a need for legislative attention rather than for judicial legislation.
[1] The majority opinion cheerfully recharacterizes "Dr. Larson [as] Howes' own doctor ... not sought out by the Bureau as its own expert...." It is true that Dr. Larson was Howes' treating physician in July, 1985, but it cannot be fairly concluded that "once the claimant's doctor, always the claimant's doctor." Dr. Larson was consulted and paid by the Bureau for the team assessment. His vague report contained no conclusion negativing Howes' claim; Dr. Peterson came up with the harsh conclusions for the team.
[2] See also V Wigmore on Evidence § 1362, p. 3 (1974) and 4 Weinsteins on Evidence ¶ 800(01), p. 800-10 and 11 (1988).
[3] Notes of the Advisory Committee on Proposed Rules [of Evidence] said:
"Emphasis on the basis of the hearsay rule today tends to center upon the condition of cross-examination. All may not agree with Wigmore that cross-examination is `beyond doubt the greatest legal engine ever invented for the discovery of truth,' but all will agree with his statement that it has become a `vital feature' of the Anglo-American system. 5 Wigmore § 1367, p. 29. The belief, or perhaps hope, that cross-examination is effective in exposing imperfections of perception, memory, and narration is fundamental. Morgan, Foreword to Model Code of Evidence 37 (1942)." Introductory Note: The Hearsay Problem, Federal Rules of Evidence, Federal Civil Judicial Procedure and Rules, p. 312-313 (West Publishing Company; 1988).
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Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit
5-21-2008
Garzella v. Dunmore
Precedential or Non-Precedential: Non-Precedential
Docket No. 07-2247
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 07-2247
POLICE OFFICER TONY GARZELLA,
Appellant
v.
BOROUGH OF DUNMORE; DUNMORE BOROUGH COUNCIL;
BOROUGH OF DUNMORE CIVIL SERVICE COMMISSION;
MICHAEL CUMMINGS, individually and as Councilman;
JOSEPH LOFTUS, individually and as Borough Manager;
THOMAS HENNIGAN, individually and as Councilman;
JOSEPH TALUTTO, individually and as Councilman;
LEONARD VERRASTRO, individually and as Councilman;
JOHN BARRETT, individually and as Civil Service Commissioner;
WILLIAM GALLAGHER, individually and as Civil Service Commissioner;
RALPH MARINO, individually and as Civil Service Commissioner;
DUNMORE POLICE ASSOCIATION
(D.C. Civil No. 05-cv-01626)
No. 07-2248
POLICE OFFICER ANTHONY CALI,
Appellant
v.
BOROUGH OF DUNMORE; DUNMORE BOROUGH COUNCIL;
BOROUGH OF DUNMORE CIVIL SERVICE COMMISSION;
MICHAEL CUMMINGS, individually and as Councilman;
JOSEPH LOFTUS, individually and as Borough Manager;
THOMAS HENNIGAN, individually and as Councilman;
JOSEPH TALUTTO, individually and as Councilman;
LEONARD VERRASTRO, individually and as Councilman;
JOHN BARRETT, individually and as Civil Service Commissioner;
WILLIAM GALLAGHER, individually and as Civil Service Commissioner;
RALPH MARINO, individually and as Civil Service Commissioner;
DUNMORE POLICE ASSOCIATION
(D.C. Civil No. 05-cv-01627)
No. 07-2249
POLICE OFFICER JODY SIBIO,
Appellant
v.
BOROUGH OF DUNMORE; DUNMORE BOROUGH COUNCIL;
BOROUGH OF DUNMORE CIVIL SERVICE COMMISSION;
MICHAEL CUMMINGS, individually and as Councilman;
JOSEPH LOFTUS, individually and as Borough Manager;
THOMAS HENNIGAN, individually and as Councilman;
JOSEPH TALUTTO, individually and as Councilman;
LEONARD VERRASTRO, individually and as Councilman;
JOHN BARRETT, individually and as Civil Service Commissioner;
WILLIAM GALLAGHER, individually and as Civil Service Commissioner;
RALPH MARINO, individually and as Civil Service Commissioner;
DUNMORE POLICE ASSOCIATION
(D.C. Civil No. 06-cv-00995)
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
District Judge: The Honorable A. Richard Caputo
Submitted Under Third Circuit LAR 34.1(a)
May 8, 2008
Before: BARRY, STAPLETON, Circuit Judges, and RESTANI,* Judge
*
Honorable Jane A. Restani, Chief Judge, United States Court of International Trade,
sitting by designation.
2
(Opinion Filed: May 21, 2008)
OPINION
BARRY, Circuit Judge
Appellants, Officers Anthony Cali, Anthony Garzella, and Jody Sibio, appeal the
orders of the District Court granting the motions for summary judgment of appellees
Borough of Dunmore (“Borough”) and Borough of Dunmore Police Association
(“DPA”).1
Appellants worked for the Borough as active reserve police officers for 26, 15, and
13 years, respectively. As members of the DPA, their employment with the Borough was
governed by a collective bargaining agreement (“CBA”). On December 31, 2003, the
CBA expired and negotiations were referred to arbitration. Under the resulting arbitration
award, active reserve police officers could be promoted to regular, full-time status upon
passing a civil service exam administered by the Borough of Dunmore Civil Service
Commission (“Commission”).
Under section 714 of the Rules and Regulations of the Commission, “[t]he
minimum passing grade for an examination for any position in the classified service for
which a numerical grade is given shall be a score of seventy (70%) per cent, and each
applicant for any such position shall score at least seventy (70%) per cent on each
1
Appellants do not appeal the grant of summary judgment in favor of the Borough of
Dunmore Council, the Borough of Dunmore Civil Service Commission, and the
individual defendants employed by the Borough, the Commission, and the Council.
3
element of the examination except for those elements which shall be rated Pass/Fail.”
(App. 129-31.) The exam was developed, administered, and scored by Stanard and
Associates, a nationally recognized testing company. According to appellants, the exam
merely required them to achieve an overall score of 70% or above, while appellees argue
that 70% was required on each individual math, grammar, reading, and writing section of
the exam. The exam was administered on May 21, 2005. Garzella received an overall
score of 77% but received 60% on the math section. Cali received an overall score of
72% but received 40% on the math section. Sibio received an overall score of 78% but
received 50% on the grammar section. Based upon these scores, appellants were
informed they had failed the exam. The officers that did pass the exam became regular,
full-time officers at a higher wage, were placed above appellants in seniority, and became
members of the pension plan. However, there was no diminishment of appellants’ pay,
benefits, or employment status.
Appellants asked the DPA to file a grievance on their behalf, but at a membership
meeting on June 14, 2005, it voted not to do so. Members of the DPA were concerned
that if they grieved the exam, they would have to grieve the entire process for everyone,
which might result in the administration of a new exam even for those who had been
successful on the earlier one. On June 23, 2005, appellants filed their own grievance. In
response to that grievance, the DPA arranged a telephone conference with DPA attorney
Thomas Jennings, during which Jennings advised appellants that they could not simply
challenge the scoring of the exam, but had to challenge the exam in its entirety. No
4
further grievance was pursued by appellants. On July 1, 2005, Sibio resigned as an active
reserve police officer.
On January 4, 2006, Dunmore adopted a resolution requiring police officers
employed by the Borough to provide documentation that they were civil service qualified.
The DPA opposed the resolution, arguing that this was a change in employment
conditions that required negotiations, and that the requirement could be prospective only.
On April 24, 2006, the Borough of Dunmore Council (“Council”) vacated the resolution
upon the advice of counsel. Eight days earlier, Cali’s counsel had requested that Cali
receive full-time status. 2
Appellants sought relief under 42 U.S.C. § 1983 alleging violations of procedural
due process with Sibio alleging, as well, a violation of substantive due process.
Appellants Garzella and Cali also claimed that, in violation of the First Amendment, they
had been retaliated against for speaking out against the exam and claimed, in their
amended complaints, that the resolution was passed in retaliation for their having filed the
initial complaints. All three appellants brought claims under state law against the DPA
for breach of the duty of fair representation and against the Borough for breach of the
CBA.
In three separate opinions and orders, the District Court granted summary
judgment on the procedural due process claims on the ground that none of the appellants
2
Cali allegedly provided passing scores from two previous civil service exams but was
not given full-time status. According to the Borough, however, Cali had never completed
the qualification process and was not civil service qualified.
5
had exhausted his administrative remedies under the CBA. The Court granted summary
judgment on the First Amendment retaliation claim of appellants Garzella and Cali on the
ground that neither officer had engaged in speech involving a matter of public concern,3
nor shown any causal link between the initial filing of this action and the passing of the
resolution. The Court declined to exercise supplemental jurisdiction over the state law
claims, and they were dismissed.4 On appeal, appellants argue (1) that the District Court
erred when it dismissed appellants’ procedural due process claims, (2) that they should
have been given the opportunity to refute the determination that they did not pass the
exam, and (3) that Dunmore retaliated against appellants Garzella and Cali by passing and
then rescinding the resolution.
To state a claim a violation of one’s right to procedural due process, a plaintiff
must have taken advantage of the processes that were available, unless those processes
were patently inadequate. Alvin v. Suzuki, 227 F.3d 107, 116 (3d Cir. 2000). A state
cannot be held to have violated due process when a plaintiff has refused to utilize
procedural protections that were available. Id. Here, appellants had several avenues
available but did not take advantage of them. In particular, appellants could and most
3
As to this component of appellant Garzella’s retaliation claim, the District Court found,
in the alternative, that there was no issue of material fact as to whether a causal link
existed between voicing opposition to the exam and “being deemed to have failed the
exam.” A13.
4
The District Court granted summary judgment in favor of the DPA on the constitutional
claims brought against it on the ground that the DPA was a labor union and not a state
actor. The Court granted summary judgment on Sibio’s substantive due process claim that
appellees failed to follow the requisite testing procedures, finding that there can be no
liberty interest in a procedure. Neither of these rulings is appealed.
6
likely should have used the grievance process outlined in Article 18 of the CBA, under
which a police officer, a group of police officers, or the union must file a grievance with
the Council. If the grievance is denied, it must be submitted to binding arbitration within
ten days of the denial of the grievance.5 Appellants argue that it is unfair to require them
to have taken advantage of the grievance procedure when the DPA “abandoned” them by
refusing to pursue the grievance for them. When access to a procedure is blocked or there
is evidence that the procedures are a sham, a plaintiff need not pursue the procedures to
state a due process claim. Id. at 118. Here, however, there is no evidence that appellants
were unable to take advantage of the process without the DPA’s assistance or that the
DPA or any other party would have blocked their attempts to do so.
Assuming exhaustion was not required prior to bringing the § 1983 action,
appellants claim that they had a property interest in being promoted to regular, full-time
status because they passed the exam by scoring above 70% overall and were denied
constitutionally required pre-deprivation notice, explanation of the evidence, and an
opportunity to defend themselves before being stripped of their seniority, denied the
5
Other avenues of relief are also available to police officers under the Dunmore Borough
Civil Service Regulations and the Borough Code. Under section 1401 of the Dunmore
Borough Civil Service Regulations, any employee who has been suspended, removed, or
reduced in rank may make a written demand to the Commission for a hearing within
seven days of any action taken by the Council. Under section 46183 of the Borough
Code, the Commission will allow a person who feels aggrieved by the action of the
Commission in refusing to certify him as eligible after examination to appear with
counsel and the Commission will review its refusal to make such certification. 53 Pa.
Stat. Ann. § 46183. Under section 46191 of the Borough Code, any person suspended,
removed, or reduced in rank may make a written demand for a hearing with the
Commission. Id. § 46191. All parties have an immediate right of appeal to the Court of
Common Pleas of the County. Id.
7
enhanced pay and benefits, and publicly “defamed.” Appellants did not have a property
interest in being given regular, full-time positions as police officers because they did not
have a “legitimate claim of entitlement” pursuant to a state statute or regulation, state or
local government policy, or even a “mutually explicit understanding[].” Stana v. Sch.
Dist. of Pittsburgh, 775 F.2d 122, 126 (3d Cir. 1985). The arbitration award itself did not
create an entitlement to full-time status, but merely provided that full-time status could be
achieved upon passing a civil service exam. Assuming, however, that appellants did have
a property interest, they were not deprived of due process. Appellants had notice of what
was required following the arbitration award. Prior to the exam, appellants received
study guides, and Cali participated in meetings with the Commission regarding the exam.
Following the exam, appellants had a number of avenues available to them to contest the
results, including the grievance process under the CBA. When an adequate grievance and
arbitration process is in place, these procedures satisfy due process requirements. Dykes
v. Southeastern Pennsylvania Transp. Auth., 68 F.3d 1564, 1571 (3d Cir. 1995).
As for the retaliation claim, Garzella and Cali argue that the January 2006
resolution was passed in retaliation for filing their complaints in this action.6 They base
their argument on the fact that Thomas Hennigan, the President of the Council, knew that
they had failed the exam when the Council passed the resolution requiring civil service
6
“Appellants do not challenge the District Court’s conclusion that their speech
complaining of the test was not a matter of public concern. They also do not challenge
the Court’s conclusion that Hennigan was entitled to summary judgment on this claim
because he is immune from suit by virtue of the doctrine of legislative immunity.
8
qualification. They contend that the retaliatory motive is shown by the fact that the
resolution was rescinded only days after the Council discovered that Cali had passed an
exam in the past and was, therefore, entitled to a full-time, regular position. The District
Court correctly granted summary judgment on the retaliation claim because neither
Garzella nor Cali suffered any adverse employment action from the resolution, which was
in effect for four months and never enforced. There was no change in their employment
status by virtue of the resolution, and no reduction in pay or benefits. There is also no
evidence that the resolution was passed and/or rescinded in response to the filing of the
complaints in this action, other than the fact that it was passed five months after the
complaints were filed.
We will affirm the orders of the District Court.
9
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25 F.3d 1048NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit.
Larry Dean DUSENBERY, Petitioner-Appellant,v.UNITED STATES of America, Respondent-Appellee.
Nos. 93-4386, 94-3011.
United States Court of Appeals, Sixth Circuit.
May 17, 1994.
N.D.Ohio No. 92-02163
N.D.Ohio
1
BEFORE: JONES, Circuit Judge; WELLFORD, Senior Circuit Judge, and ENSLEN, District Judge.*
2
Larry Dean Dusenbery appeals a district court judgment denying his motion to vacate sentence filed under 28 U.S.C. Sec. 2255. The case has been referred to a panel of the court pursuant to Rule 9(a), Rules of the Sixth Circuit. Upon examination, this panel unanimously agrees that oral argument is not needed. Fed.R.App.P. 34(a).
3
Pursuant to a plea agreement, Dusenbery pleaded guilty in the district court in June 1986 to possession with intent to distribute cocaine and to tampering with a witness. Dusenbery was sentenced to a cumulative sentence of 12 years of imprisonment with a 6 year special parole term. Dusenbery did not file a direct appeal.
4
Thereafter, Dusenbery filed his motion to vacate sentence alleging: (1) that his guilty plea was involuntary because he was not informed that he faced a 6 year special parole term; and (2) that he received ineffective assistance of counsel because counsel advised him to plead guilty despite a meritorious motion to suppress evidence which was pending in the district court at the time. After petitioner twice was permitted to amend his motion and a transcript of petitioner's sentencing was filed, the government responded in opposition. Petitioner submitted a reply and counsel was appointed for petitioner. Counsel submitted a supplemental brief. Thereafter, the district court denied petitioner's motion as without merit. Two timely notices of appeal were filed by counsel and by petitioner pro se.
5
On appeal, petitioner is proceeding pro se and waives his claim that he was not informed that he faced a 6 year special parole term, but reiterates his claim that he received ineffective assistance of counsel. Also, petitioner contends that the district court should have conducted an evidentiary hearing and should have appointed substitute counsel to represent him. Upon consideration, we conclude that the judgment should be affirmed for the reasons stated by the district court in its memorandum opinion filed December 20, 1993. Essentially, petitioner cannot show a reasonable probability that, but for counsel's alleged error, petitioner would have pleaded not guilty and would have insisted upon proceeding to trial. See Hill v. Lockhart, 474 U.S. 52, 59 (1985).
6
Finally, petitioner's contentions that a hearing should have been conducted and that replacement counsel should have been appointed are without merit. An evidentiary hearing is required only where the record does not conclusively show that petitioner is not entitled to relief. See United States v. Todaro, 982 F.2d 1025, 1028 (6th Cir.) (per curiam), cert. denied, 113 S.Ct. 2424 (1993). Here, the record reflects that petitioner is not entitled to relief. As noted by the district court, petitioner represented his satisfaction with his appointed counsel's representation. Thus, the claim that substitute counsel should have been appointed lacks merit.
7
Accordingly, the judgment of the district court is affirmed. Rule 9(b)(3), Rules of the Sixth Circuit.
ENTERED BY ORDER OF THE COURT
*
The Honorable Richard S. Enslen, United States District Judge for the Western District of Michigan, sitting by designation
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